[Senate Hearing 113-312]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 113-312

   THE TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP: ACHIEVING THE 
                               POTENTIAL

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

                                HEARING

                               before the

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 30, 2013

                               __________



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]







            Printed for the use of the Committee on Finance

                               __________

                         U.S. GOVERNMENT PRINTING OFFICE 

88-432-PDF                     WASHINGTON : 2013 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001



                          COMMITTEE ON FINANCE

                     MAX BAUCUS, Montana, Chairman

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

                      Amber Cottle, Staff Director

               Chris Campbell, Republican Staff Director

                                  (ii)














                            C O N T E N T S

                               __________

                           OPENING STATEMENTS

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

                               WITNESSES

Ducker, Michael L., executive vice president and chief operating 
  officer, Federal Express, Memphis, TN..........................     5
McCormick, Ryan, president, Montana Grain Growers Association, 
  Great Falls, MT................................................     7
Ricks, Dave, senior vice president, Eli Lilly and Company, and 
  president, Lilly Biomedicines, Indianapolis, IN................     9
Roenigk, William, senior vice president, National Chicken 
  Council, Washington, DC........................................    11

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:
    Opening statement............................................     1
    Prepared statement...........................................    21
Ducker, Michael L.:
    Testimony....................................................     5
    Prepared statement...........................................    23
Hatch, Hon. Orrin G.:
    Opening statement............................................     3
    Prepared statement...........................................    30
McCormick, Ryan:
    Testimony....................................................     7
    Prepared statement...........................................    33
Ricks, Dave:
    Testimony....................................................     9
    Prepared statement with attachment...........................    38
Roenigk, William:
    Testimony....................................................    11
    Prepared statement with attachments..........................    53

                             Communications

Advanced Medical Technology Association (AdvaMed)................    65
Center for International Environmental Law (CIEL)................    68
Toy Industry Association, Inc....................................    78

                                 (iii)

 
                      THE TRANSATLANTIC TRADE AND
                        INVESTMENT PARTNERSHIP:
                        ACHIEVING THE POTENTIAL

                              ----------                              


                      WEDNESDAY, OCTOBER 30, 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 Carper, Cardin, Brown, Casey, Hatch, 
Thune, and Isakson.
    Also present: Democratic Staff: Mac Campbell, General 
Counsel; Rory Murphy, International Trade Analyst; Bruce Hirsh, 
Chief International Trade Counsel; Chelsea Thomas, Professional 
Staff Member; and Lisa Pearlman, International Trade Counsel. 
Republican Staff: Chris Campbell, Staff Director; Everett 
Eissenstat, Chief International Trade Counsel; and Jeff Wrase, 
Chief Economist.

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

    The Chairman. The committee will come to order.
    Benjamin Franklin, who helped negotiate the original trade 
treaties between America and Europe more than 2 centuries ago, 
gave the following advice, and I quote: ``To succeed, jump as 
quickly at opportunities as you do at conclusions.''
    Franklin was our first ambassador, becoming the U.S. 
Minister to France in 1776, long before our Nation won its 
independence from Britain.
    He saw an opportunity, an opportunity to build a strong 
relationship with a powerful ally. Thanks to his work, the 
United States and France signed treaties in 1778 that gave our 
young army critical support and laid out the framework for a 
successful trading partnership.
    We are here today because we have another opportunity, an 
opportunity to boost America's economy, an opportunity to 
create thousands of new jobs across the United States. This 
opportunity lies in a new comprehensive trade agreement between 
the United States and the European Union. It is called the 
Transatlantic Trade and Investment Partnership, or TTIP. And it 
is an opportunity we must jump at quickly.
    The U.S. and E.U. already enjoy the strongest economic 
relationship in the world. Together we make up half of global 
GDP and more than a third of global trade. Every day, the 
United States and the E.U. trade $2.7 billion in goods and 
services. We have invested nearly $4 trillion in each other's 
economies. Transatlantic trade supports 13 million U.S. jobs. 
We all know that we need more jobs and better-paying jobs. This 
new opportunity, this new trade and investment agreement, would 
deliver those jobs.
    This new trade agreement could boost exports to the E.U. by 
a third and add more than $100 billion annually to U.S. GDP. It 
could support hundreds of thousands of new jobs in the United 
States.
    Jobs related to exports pay 13 to 18 percent more than the 
national average, and jobs supported by foreign direct 
investment in the United States pay 30 percent more than non-
FDI-supported jobs. When we lower trade barriers, we increase 
exports and attract foreign investment, and we provide 
America's economy the shot in the arm it so desperately needs.
    The benefits of TTIP would ripple across our Nation. For 
example, in my home State of Montana, TTIP could grow exports 
to the E.U. by 19 percent and support nearly 2,400 new Montana 
jobs. Every State would have its own success story.
    How would TTIP do this? It would lower tariffs on our 
enormous bilateral trade, increasing U.S. exports by double 
digits and saving families money on the goods and services they 
buy here at home.
    It would cut red tape and reduce costs for businesses, such 
as automakers that currently face duplicative regulations in 
the E.U. and the United States. And it would spark investment 
in innovation that would bring jobs and growth on both sides of 
the Atlantic.
    We are talking about a landmark opportunity. But for the 
TTIP to live up to its potential, we will first have to tackle 
a number of challenges. For example, we must address the E.U.'s 
unscientific and unjustified barriers to U.S. agricultural 
products, including beef and poultry.
    While in Europe last year, I pushed their leaders to drop 
those barriers. U.S. beef has earned the top safety rating from 
the World Organization for Animal Health. And CODEX, another of 
the world's trusted authorities on food safety, has declared 
U.S. beef production methods to be perfectly safe. It is 
finally time for the E.U. to act.
    I am confident that we can overcome that hurdle and others. 
The more challenges we address in negotiating the TTIP, the 
bigger the gains will be for our two economies, boosting 
exports, attracting new investment, and creating jobs.
    The TTIP is just one part of the most ambitious U.S. trade 
agenda in a generation. Ninety-five percent of the world's 
consumers live outside of the United States. Our trade agenda 
today gives American farmers, ranchers, businesses, and workers 
more opportunities to reach them than ever before.
    It means Dave and Cole Mannix, two proud family ranchers 
from Helmville, MT, can expand their market for some of the 
best-
tasting beef I have ever had. It means global brewers, like 
Anheuser-Busch InBev, can use more Montana malt barley in their 
beer. It means international companies like Siemens can have 
even more reason to work with educational institutions like 
Flathead Valley Community College to develop the skills of 
Montana's workforce.
    Congress needs to be a full partner in the development and 
execution of this agenda, and the best way to do that is to 
pass Trade Promotion Authority and to do it soon.
    The United States has numerous other trade opportunities. 
The Trans-Pacific Partnership, or TPP, is near completion. The 
TPP parties need to know in the clearest terms what Congress's 
priorities are. And Congress needs to set priorities as the 
administration starts negotiating with Europe. We can do that 
through Trade Promotion Authority. I am pleased that President 
Obama has requested TPA and that Ambassador Froman has been 
making the case for TPA.
    It is time for us to do our part. We must introduce a bill 
and pass it quickly. Senator Hatch, let us work together to get 
that done as quickly as possible.
    Ben Franklin counseled us to jump at opportunities. That is 
advice we must heed for very simple reasons. More trade means 
more American jobs, and more trade means a stronger economy. 
More trade means a more secure future. It is that simple.
    So let us jump at this opportunity to expand the world's 
largest trade relationship. Let us do the hard work. Let us 
make sure that TTIP is as meaningful as we can make it.
    [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, for holding 
this hearing.
    As we all know, expanding international trade is vital to 
our economic growth. Unfortunately, the United States has not 
conducted a new free trade agreement since June of 2007. 
Fortunately, the administration has a golden opportunity to 
change that in the near future.
    Negotiations for a small package of trade-enhancing 
measures under the auspices of the World Trade Organization are 
really reaching a critical stage. According to Ambassador 
Froman, negotiations to conclude a Trans-Pacific Partnership 
are also in the, quote, ``end game.''
    Meanwhile, interest in concluding the Trade and Investment 
Services Agreement continues to build. And, of course, there is 
the potential surrounding the Transatlantic Trade and 
Investment Partnership agreement, or TTIP, which we are here to 
discuss today.
    TTIP negotiations are just getting underway. If successful, 
they will build on our already strong economic ties with the 28 
member states of the European Union. Our economic relationship 
with the E.U. is one of the largest and most complex in the 
world. Together, our two economies account for about one-half 
of the world GDP and for nearly a third of world trade.
    Our two markets are already deeply integrated. So, for TTIP 
to reach the full potential, the agreement must reflect an 
unprecedented level of ambition.
    Tariffs between our two economies remain low, but the sheer 
volume of trade means that companies and consumers on both 
sides of the Atlantic are paying vast sums in unnecessary 
tariffs. For example, ICON Health, based in Logan, UT, 
manufactures home exercise equipment. Grown from a small 
company on the campus of Utah State University, ICON now 
employs over 3,000 people and sells its products all over the 
world. Yet, today, they still face tariffs in the E.U. 
averaging 2.7 percent. Elimination of these nuisance tariffs 
would help spur more economic opportunity on both sides of the 
Atlantic.
    On February 12th of this year, Chairman Baucus and I sent a 
letter to Ambassador Kirk outlining our expectations for the 
TTIP negotiations. We highlighted the importance of strong 
market access for U.S. agricultural products, including the 
elimination of unjustified sanitary and phyto-sanitary 
standards. We also called for the agreement to be 
comprehensive, excluding no product or sector from the actual 
negotiations.
    Finally, we called upon the administration to ensure that 
the agreement reflects the highest standards of intellectual 
property rights and does not jeopardize our ability to reach 
high levels of intellectual property protection in other 
negotiations or in other markets.
    All of these goals still hold. But today I want to 
emphasize a few key points. First, for the U.S. economy to 
thrive, strong intellectual property rights protections are 
vitally important. Intellectual 
property-intensive industries support at least 40 million jobs 
and contribute more than $5 trillion to the U.S. economy.
    For me to support a final agreement, it is absolutely 
essential that TTIP reflect the highest standards of 
intellectual property rights protection of any prior agreement. 
Indeed, the standards set in TTIP will be a model for the 
world. So we just have to get it right.
    I also want to emphasize the importance of digital trade. 
The Internet has fundamentally changed the way in which 
consumers shop and businesses deliver their products and 
services. Businesses, especially small businesses, benefit 
through improved efficiency, lower production costs, and access 
to a wider range of markets, while consumers benefit from more 
choices and, I might add, improved access to products and 
services.
    Given the importance of digital trade in the European 
market, there are several barriers to digital trade that I 
believe the agreement must address.
    First, there are barriers that inhibit the free flow of 
digital data, including forced localization policies that, for 
example, require data servers to be located in-country or that 
require utilization of local content or technologies. The final 
TTIP agreement should prohibit these kinds of policies. The 
agreement should also prohibit discriminatory treatment of 
digital products and ensure that all technologies are given the 
chance to compete in the marketplace. In addition, audiovisual 
services must be included.
    Regulatory coherence will also be critical to achieving a 
meaningful agreement. Inconsistent and duplicative regulations 
create enormous cost and inefficiency for U.S. exporters of 
goods and services to the E.U. These negotiations must strive 
for regulatory convergence and coherence to eliminate barriers 
to trade. In particular, we should seek identical standards for 
emerging technologies, such as nanotechnology and Internet 
technologies.
    Finally, no sector should be excluded from our efforts to 
enhance regulatory convergence, including financial services. 
Financial services play an essential role in facilitating trade 
and investment flows between our two regions. Given the central 
importance of the financial sector to every other aspect of 
industrialized economies, I do not see how financial services 
regulation can be excluded from a meaningful TTIP agreement.
    Of course, for this or any trade negotiation to succeed, 
the President must work with Congress to achieve renewal of 
Trade Promotion Authority, as the distinguished Senator has 
said, the chairman of this committee. Senator Baucus and I are 
currently working with our House counterparts to conclude a 
discussion on legislation to renew TPA. Once those efforts 
succeed, I hope that President Obama and his team will actively 
work with Congress to quickly seek Congress's approval.
    Mr. Chairman, I want to thank you again for holding this 
hearing. I look forward to hearing from each one of our 
witnesses today.
    Thank you.
    [The prepared statement of Senator Hatch appears in the 
appendix.]
    The Chairman. Thank you, Senator.
    I am pleased to be here today with Michael Ducker, who is 
the executive vice president and chief operating officer of 
FedEx Express.
    Following him is Mr. Ryan McCormick, president of the 
Montana Grain Growers Association, a grain farmer and small 
business owner near Kremlin, MT.
    Our third witness is Dave Ricks, senior vice president of 
Eli Lilly and president of Lilly Biomedicines.
    Our fourth witness is Mr. Bill Roenigk, senior vice 
president of the National Chicken Council.
    Thank you all so very much for coming. And you are first, 
Mr. Ducker. Go ahead. And you know our rules here. Your 
statements will automatically be included in the record, and 
you have about 5 minutes to tell us what you think.

 STATEMENT OF MICHAEL L. DUCKER, EXECUTIVE VICE PRESIDENT AND 
     CHIEF OPERATING OFFICER, FEDERAL EXPRESS, MEMPHIS, TN

    Mr. Ducker. Yes, sir. Chairman Baucus, Ranking Member 
Hatch, and distinguished members of the committee, I do thank 
you for the opportunity to be with you today and to talk about 
TTIP, which we believe is an opportunity of enormous 
importance, and FedEx strongly supports that.
    At FedEx, our business is trade, operating the world's 
largest express delivery network spanning 220 countries and 
territories, linking that 95 percent of global GDP that 
Chairman Baucus just spoke about--all within 72 hours--along 
with other operating companies, creating jobs for more than 
300,000 team members.
    Our network handles more than 10 million shipments on an 
average day, and our customers range from individuals and small 
and medium-sized enterprises to the largest companies. 
Therefore, a trade agreement that creates opportunities for our 
customers to expand their businesses and generates increased 
demand for FedEx services will be an undeniable boon for the 
U.S. economy, as well as for our own company.
    The U.S. and Europe, as you heard, account for close to 
half of global GDP, and our trade already exceeds $1 trillion 
each year. So, liberalizing the rules that govern trade and 
investment in that enormous economic area will inevitably 
result in unprecedented gains in jobs, competitiveness, and 
GDP.
    But the TTIP opportunity, we believe, is even greater than 
that. By instituting ambitious, high-standard, comprehensive 
trade rules, including those which address emerging global 
issues, such as regulatory compatibility, state-owned 
enterprises, data flows, competition policy, and investor-state 
dispute settlement, the TTIP can pave the way for global trade 
in the 21st century to be governed by the shared values and 
mutually agreed regulatory standards of the U.S. and E.U., 
rather than alternative approaches favored by countries with 
different attitudes toward free markets and sensible 
regulation.
    I want to talk about several pillars of TTIP. First of all, 
tariffs. Now, those are the traditional mainstay of trade 
negotiations and maybe the easiest ones to address in TTIP. 
Tariffs are already relatively low, however, in the U.S. and 
the E.U. So it should not be difficult to gain an agreement to 
get rid of those tariffs that remain. Nonetheless, the 
importance of eliminating those tariffs is very significant. 
Because of the enormous volume of trade across the Atlantic, 
even the generally single-digit tariffs still force costs of 
about $6.4 billion a year.
    Second, as the world's largest express delivery carrier, 
the rules to be negotiated that will govern the services sector 
are of particular importance to us. In order for trade in 
services to realize its full potential, TTIP needs to reflect 
principles that are conducive to continued investment, 
competition, and innovation in the services sector. That would 
include full market access, national treatment, as well as 
disciplines to prevent state-owned enterprises from engaging in 
anticompetitive conduct. Because the U.S. and the E.U. both 
have strong global express delivery companies, it represents a 
unique opportunity to agree on high standards in that area that 
can eventually become a global standard.
    Investment is the third area. It already totals about $3.9 
trillion, resulting in $3 trillion in incremental annual sales 
for U.S. businesses and incremental employment for 3.5 million 
U.S. workers. We can take this opportunity of TTIP to enshrine 
the rules which can form the right to establish and operate 
investments on a nondiscriminatory basis and freely transfer 
funds and data, and establish high standards and disciplines 
regarding competition with state-owned enterprises and 
investor-state dispute settlement.
    Regulatory compatibility is the fourth area. It lies at the 
heart of the TTIP negotiations and is likely to be one of the 
most challenging issues to tackle, but it really holds the 
greatest promise for economic gains.
    To be successful, we do not really need fundamental changes 
in our respective regulatory approaches. It is about finding 
areas where unnecessary, redundant regulations or processes can 
be reduced to simplify trade and facilitate it while still 
maintaining very high standards of consumer, investor, and 
environmental protection. And it is about improving regulatory 
cooperation, transparency, and best practices to reduce 
regulatory barriers in the future. The rewards in this area 
could be substantial.
    Improving trade facilitation is another area, and by 
getting rid of unnecessary red tape that raises the cost of 
trading across borders, we think that holds enormous potential. 
There are many things we can do in our border management and 
Customs clearance procedures to make trade simpler, faster, and 
more seamless. And one important example is the de minimis 
level, the threshold below which goods can enter the country 
duty- or tax-free. Ours in the U.S. is $200. And legislation is 
pending in both houses with bipartisan support to raise that de 
minimis level to $800.
    In Europe, the de minimis level is around $200. But, in 
effect, de minimis on VAT is about $30 in most member states 
and as low as $13 in some. That means that companies, as 
Senator Hatch pointed out, selling into Europe will often face 
higher taxes and administrative costs than European companies 
that are selling into the U.S.
    In sum, we believe the TTIP represents an unprecedented 
opportunity to promote economic growth on both sides of the 
Atlantic. Neither side can afford to forego this opportunity. 
And I know, also, the committee is interested in Trade 
Promotion Authority. FedEx fully supports the passage of TPA as 
soon as possible. Given the United States' ambitious trade 
agenda, getting that done quickly will be critical to bringing 
those agreements across the finish line.
    I deeply appreciate the opportunity.
    [The prepared statement of Mr. Ducker appears in the 
appendix.]
    The Chairman. Thank you, Mr. Ducker, very much.
    Mr. McCormick, you are next, and welcome to Washington, DC.

 STATEMENT OF RYAN McCORMICK, PRESIDENT, MONTANA GRAIN GROWERS 
                  ASSOCIATION, GREAT FALLS, MT

    Mr. McCormick. Thanks, Max.
    The Chairman. For the interest of everybody in the room, we 
just saw each other a week ago in Montana.
    Mr. McCormick. Not so long ago, yes, that is right.
    The Chairman. That is right. Thanks very much.
    Mr. McCormick. Chairman Baucus, Ranking Member Hatch, 
members of the committee, my name is Ryan McCormick. I, along 
with my family, operate a successful agribusiness near Kremlin, 
MT.
    On our farm, we raise hard red winter wheat, hard red 
spring wheat, durum, dried peas, and, most recently, mustard. I 
currently serve as the president of the Montana Grain Growers 
Association, am on the Board of Directors for the National 
Association of Wheat Growers, and I am the chairman of NAWG's 
Domestic and Trade Policy Committee, which helps set NAWG's 
policy for international trade.
    In a typical year, U.S. wheat farmers export about 50 
percent of their production. In Montana, we export nearly 80 
percent of our production. To say that trade is important to 
Montana is an understatement. Trade is just as important to 
Montana producers as tractors, fuel, and seed. Not only do we 
depend on trade, the world depends on us as a reliable supplier 
of high quality wheat.
    The U.S. wheat industry supports the swift negotiation and 
ratification of a comprehensive, high standard TTIP. A 
successful TTIP must be completed in a single undertaking, with 
no exclusions or commitment to deal with tough issues at a 
later date.
    First, the TTIP must eliminate all duties on U.S. wheat 
imports. The E.U. reduced the in-quota duty to zero on low- and 
medium-quality wheat in February of 2011. Due to this recent 
action to remove tariffs and taking into account the low U.S. 
tariff, the U.S. should push for complete, immediate, and 
permanent tariff and duty elimination.
    U.S. wheat producers, many from Montana, compete against 
Canada for sales of durum and high-quality wheat. Canada and 
the E.U. just this month completed negotiation of their own 
free trade agreement. The outcome of the Canada-E.U. agreement 
will result in permanent zero wheat duty for Canadian producers 
to be phased in over 7 years. This will lead to future tariff 
differentials and a preference toward Canadian wheat. This 
increases the urgency to finalize this trade agreement so that 
we can stay competitive with our neighbors to the north.
    Second, U.S. wheat producers strongly support science-
based, least trade restrictive regulations. The E.U. and the 
U.S. are viewed as global scientific leaders, and our actions 
on sanitary and phyto-sanitary measures have a broad impact, 
making this a critical area of discussion. Increased 
cooperation on science-based SPS risk assessments, standards, 
processes, and implementations of least trade restrictive 
regulations would benefit U.S.-E.U. bilateral trade and 
positively influence SPS regulations in countries that look to 
the U.S. and the E.U. for guidance.
    Third, the European Union must agree to a more predictable 
biotechnology approval process. The E.U.'s political approach 
in regulating crops enhanced with traits achieved through 
modern biotechnology procedures is a concern to U.S. wheat 
producers. The E.U. biotechnology approval process is slow and 
often influenced more by politics than science. Creating 
uncertainty and deterring new investment in wheat research, the 
slow biotechnology approval process puts future trade at risk.
    Science should be the basis for biotech crop approvals, and 
the E.U. market should provide consumer choice for biotech and 
non-biotech products. Due to the slow approval process, the 
E.U. needs to implement a low level presence policy for food to 
avoid trade disruptions. A workable LLP policy and threshold 
for events approved by U.S. regulators would ensure that trade 
continues even when negligible amounts of approved biotech 
traits are inadvertently present in bulk shipments.
    Finally, we urge Congress to renew Trade Promotion 
Authority. TPA renewal is essential to completion and 
ratification of a comprehensive TTIP agreement, as well as 
completing the Trans-
Pacific Partnership and securing an eventual WTO agreement.
    In conclusion, U.S. wheat farmers welcome the progress that 
has taken place so far in the TTIP negotiations and encourage 
Congress and the administration to work together to negotiate a 
comprehensive, high standard agreement.
    Mr. Chairman, Ranking Member Hatch, members of the 
committee, thank you for allowing me the opportunity to be with 
you today to discuss the importance of this free trade 
agreement to wheat farmers. I would be happy to answer any 
questions you may have. And I wanted to let Max know that 
anytime he wants to, he would be welcome to operate my combine. 
[Laughter.]
    [The prepared statement of Mr. McCormick appears in the 
appendix.]
    The Chairman. Thank you, Ryan, very much. That is an inside 
joke that we talked about last week.
    Senator Hatch. I do not know that I would trust him with 
that expensive equipment. [Laughter.]
    The Chairman. Thank you, Ryan, very much.
    Mr. Ricks?

 STATEMENT OF DAVE RICKS, SENIOR VICE PRESIDENT, ELI LILLY AND 
  COMPANY, AND PRESIDENT, LILLY BIOMEDICINES, INDIANAPOLIS, IN

    Mr. Ricks. Thank you. That is hard to compete with.
    Chairman Baucus, Ranking Member Hatch, members of the 
committee, we very much appreciate the opportunity to address 
the committee today on the TTIP arrangement, a negotiation of 
great importance to Eli Lilly and Company and, we think, the 
entire business community.
    Now, Lilly is a 137-year-old global biopharmaceutical 
company headquartered in Indianapolis, IN--we are Hoosiers. We 
are a truly integrated transatlantic company with significant 
investments in R&D, in people, and facilities in both the U.S. 
and in Europe.
    In addition to our more than 16,000 U.S. employees, our 
investments in Europe help support U.S. jobs, investment, and 
patient programs, including in the great States of Montana and 
Utah.
    Through our membership in a number of industry and 
transatlantic organizations, we have advocated for the TTIP on 
both sides of the Atlantic as a comprehensive and ambitious 
agreement, offering many benefits to our company and our 
employees, to the U.S. economy, and to patients here and around 
the world who rely on our medicines.
    I have a strong appreciation for the benefits of open trade 
and the concerns that occur when it is not there. As the leader 
of Lilly's largest business, spanning from Japan to Europe, 
formerly the head of Lilly's Chinese business and the Canadian 
business, I know how these barriers can affect trade and real 
investment.
    Before commenting on the TTIP, however, it is important to 
first say that Lilly, our industry, and the business community 
believe that legislation to renew the TPA, or the Trade 
Promotion Authority, could provide an important opportunity to 
strengthen and grow the U.S. economy. I would like to 
acknowledge Chairman Baucus and Ranking Member Hatch for their 
leadership on this issue and underscore that the business 
community stands ready to work with you and your staffs on a 
high standard TPA bill.
    On TTIP, we strongly favor an ambitious, comprehensive, and 
high standard trade investment agreement. Lilly and the 
pharmaceutical industry believe that TTIP represents a unique 
opportunity to promote the highest standards of intellectual 
property, market access, and regulation, in particular for IP-
driven sectors in which the U.S. and the E.U. enjoy today a 
global advantage. We believe the two governments should use the 
TTIP arrangement to work together to maintain and grow that 
advantage.
    We believe the agreement must cover industrial goods, food 
and agriculture, services, investment, procurement, protection 
of IPR, and regulatory issues. We believe there should be no 
exclusion of specific sectors or commodities. We believe that 
the TTIP should set the highest possible standards for third 
countries to work toward in the areas of investment, IPR, 
competition policy, and SOEs, and should eliminate forced 
localization. As for the timeline, we would prefer that 
negotiators take the time needed, within reason, to achieve a 
comprehensive agreement rather than rushing to meet a self-
imposed deadline.
    I also want to underscore how critical it is that 
intellectual property rights be included in negotiations. For 
our company, for our industry, and for the broad business 
community, we believe it is essential that this agreement 
maintain and promote effective levels of IPR in the E.U. and 
globally. This is absolutely essential to continued investment 
in research, development, and commercialization of leading-edge 
technologies.
    We believe TTIP should set an ambitious standard for 
pharmaceuticals in the fields of regulatory standards, 
intellectual property protection and enforcement, and market 
access. For Lilly, this agreement represents a significant 
opportunity to address regulatory duplication, increase reward 
for innovation through raising the IPR standards, and address 
serious market access and transparency concerns we have.
    As well, TTIP should improve alignment between the U.S. and 
the E.U. vis-a-vis third countries, to promote a high policy 
standard for pharma and improve access to innovation and new 
medicines throughout the world.
    In conclusion, Lilly, along with the biopharmaceutical 
industry and much of the broader business community, sees TTIP 
as a once-in-a-lifetime opportunity to simplify transatlantic 
business, address longstanding trade issues, create new 
markets, and, most importantly, increase this country's 
competitiveness and improve U.S. jobs here.
    We look forward to working with the committee and Congress 
to ensure that this agreement meets the expectations of the 
business community, creates jobs, and enhances the 
competitiveness of our two economies.
    Thank you for the opportunity to testify today.
    [The prepared statement of Mr. Ricks appears in the 
appendix.]
    The Chairman. Thank you, Mr. Ricks, very much. I appreciate 
that.
    Mr. Roenigk, you are next. Thank you.

 STATEMENT OF WILLIAM ROENIGK, SENIOR VICE PRESIDENT, NATIONAL 
                CHICKEN COUNSEL, WASHINGTON, DC

    Mr. Roenigk. Good morning.
    The Chairman. Good morning.
    Mr. Roenigk. Thank you, Chairman Baucus, Senator Hatch, and 
members of the committee, for the opportunity for the National 
Chicken Counsel to share our thoughts and recommendations 
regarding the Transatlantic Trade and Investment Partnership.
    This is an important hearing and very timely, as our 
negotiators continue to move forward to reach a conclusion and 
a final agreement. So we very much appreciate this opportunity.
    I am Bill Roenigk with the National Chicken Counsel. The 
Counsel represents the vertically integrated companies that 
will produce and process over 95 percent of the chickens in the 
United States this year, and we will produce, as an industry, 
over 9 billion chickens, almost as many packages as Federal 
Express will deliver this year.
    In my written statement, I have outlined how the European 
Union has excluded U.S. poultry from its market since 1997. At 
the same time, I can assure this committee that, if time 
permitted, you would have a long, almost endless list or stream 
of other witnesses from other parts of agriculture who could 
share with you their frustrations and their problems in trying 
to export their commodities and products to the European Union. 
These problems not only restrict or limit, but in our case, 
prohibit our exports to the E.U.
    With tomorrow being Halloween, permit me to note that we in 
U.S. agriculture know the final agreement with the TTIP could 
be a trick or it could be a treat. We, of course, hope that it 
is a treat and not a trick. Time will tell, of course, how the 
final agreement looks to U.S. agriculture.
    The E.U., since 1997, when it implemented the common 
agricultural policy, has used a bagful of scary tricks to 
severely hamper free and fair trade in U.S. agricultural 
products. One of the more irksome tricks in the E.U. bag has 
been the so-called precautionary principle, which, as I 
understand it, the E.U. uses when it is convenient as a call to 
approve an over-abundance of caution regarding food safety and 
similar issues, while, at the same time, having zero risk 
involved.
    Having experienced some of our frustrations, I should note 
that there may be reasons to be hopeful. I am not going to use 
the word ``optimistic,'' but there may be reasons to be hopeful 
with respect to a successful agreement being concluded.
    First, it does appear the E.U. is somewhat willing to fully 
engage in negotiations in a serious way. More specifically, in 
the case of agriculture, we have examples where the E.U. may be 
changing. Export subsidies for poultry were discontinued last 
month. These subsidies or, as the E.U. calls them, export 
restitutions, have been an integral part of the common 
agricultural policy. So it was good to see the export subsidies 
being discontinued.
    Another example in agriculture is the E.U., earlier this 
year, I think in February, approved lactic acid to be used on 
beef as a pathogen reduction treatment. Further, we now 
understand the E.U. is considering peroxyacetic acid as a 
pathogen reduction treatment on poultry. Peroxyacetic acid may 
be a scary name, but basically it is hydrogen peroxide and 
vinegar. And we are hopeful that this process will continue.
    In 1997, the reason we were prohibited from the market was 
because we used hyper-chlorinated water to reduce the bacteria 
on our product. In 1996, U.S. poultry exports to the E.U. 15, 
at that time, totaled about $55 million, making it the 9th-
largest market. If the current 28 countries were in the E.U. in 
1996, our exports would have been $210 million, making the 
E.U., if it existed at 28 at that time, our 3rd-largest market.
    U.S. poultry exports to the E.U., we believe, with a 
successful conclusion of an agreement, could be over $600 
million and would make the E.U. the 3rd-largest market, behind 
Mexico and Hong Kong, China. The E.U. imports about $2 billion 
worth of poultry on an annual basis, so, if we were able to 
secure a market, we believe we would have about one third of 
that.
    When U.S. Trade Ambassador Froman announced a launch of 
TTIP, he said he wanted to do it on one tank of gas. Now, he 
did not mention how big that tank of gas was or whether there 
was 10 percent ethanol in that gas, but I will leave the 
ethanol issue for another day and another hearing. But we are 
hopeful that that tank of gas will move along quickly and we 
will secure an agreement, a good agreement, sooner rather than 
later.
    But at the point where we do have an agreement, we would be 
willing to support that agreement if it does include, as my 
fellow panelists said, inclusive, comprehensive benefits to all 
parts of U.S. business and agriculture. If the agreement does 
not, those of us in U.S. agriculture will need to consider our 
options.
    Before I conclude, I would like to share what my fellow 
panelists said about Trade Promotion Authority. Not only is it 
critical for Congress, for this administration and future 
administrations, but we believe that if it was given to our 
negotiators now, it would strengthen their hand in terms of 
being able to be more successful at the negotiating table.
    Chairman Baucus, Senator Hatch, members of the committee, 
we very much appreciate this opportunity and look forward to 
working with the committee to have a successful agreement.
    I look forward to your comments and questions.
    [The prepared statement of Mr. Roenigk appears in the 
appendix.]
    The Chairman. Thank you, Mr. Roenigk, very much.
    I might say, we were there about a year ago and talked to 
the E.U. folks about lactic acid as a pathogen reduction 
treatment, and we were a bit firm about it, and they backed 
off. And, as you might recall, that was one of the conditions 
we had in entering into negotiations with TTIP.
    Mr. Roenigk. That was a big breakthrough. We appreciate 
that.
    The Chairman. You bet. The point being, if you are fairly 
precise and fairly firm and make it very clear, you are more 
likely to succeed. That was one area where we had some success.
    I tend to think, in trade, that no country altruistically, 
out of the goodness of its heart, ever lowers a trade barrier. 
That is, you need leverage. There has to be an economic 
interest for them to do so. They are not going to do it out of 
the goodness of their heart. No country will.
    So what leverage do we have here? That may be a little bit 
strong and crude, but what do we have that they want to help us 
get what we want? What do we want? We want lower tariffs, we 
want greater access, we want more direct investment in the 
U.S., we want regulatory transparency, scientific standards, et 
cetera. We want that.
    Now, it could well be that many European business people 
want a lot of that too. But what do they want from us that we 
are going to have to think about as we work for what we want?
    Who wants to first address that? Mr. Ducker, do you want to 
take a crack?
    Mr. Ducker. Yes. Yes, Senator. I could take a stab at it. I 
think most of us would agree that global economic growth has 
sort of languished over the last 5 years, and the reason I 
believe that the timing is so opportunistic is that both of 
these large trading blocs want to create job growth.
    And I think that we have already demonstrated in the past 
that the greater the extent that we trade with each other, the 
greater jobs and the better jobs can be created. So I think the 
economic conditions have certainly given us greater leverage. 
Whether it is as a consequence of the DOHA round stalling or 
not, I think that people are taking the opportunity, and trade 
agreements like this one are proliferating. And I think that is 
a pent-up demand, and I think it can increase economic benefits 
on both sides of the Atlantic, and I think there is leverage on 
both sides.
    The Chairman. So your basic point is, world demand is down 
a bit and this can help address that. That is the basic point.
    Mr. Ducker. Absolutely. Only a few times in the last 25 
years has global trade grown slower than global GDP, and, 
usually, it is about 2\1/2\ times the pace. But we are 
significantly below that today, and one of the reasons, I 
think, is the failure of the DOHA round, the multilateral 
trading round, and the fact that we do not have good trading 
rules and a liberal trading environment.
    And I think, in today's world of fast-paced commerce, we 
have to work really hard to get greater transparency, 
regulatory standardization, harmonization, and I think that it 
would increase global trade and, as a result, global GDP.
    The Chairman. So do you think, to some degree, the 
Europeans have the same view, that this will help demand in 
Europe?
    Mr. Ducker. I think they do. My belief is, in discussion 
with some of my longtime colleagues there--and I have been 
managing that in one capacity or another for more than 20 
years--that many of the businesses in Europe want to see 
greater trade with the United States and a free trade agreement 
that is a high standard free trade agreement.
    The Chairman. Who else wants to address that? Mr. Ricks?
    Mr. Ricks. I will jump in. I think in our industry and in 
other intellectual property-based industries, the U.S. and 
Europe lead the world. Our customers are, of course, among each 
other, but increasingly outside of these two economic zones as 
an export opportunity.
    So, in the area of pharmaceuticals, there is not a lot of 
disagreement between companies on that side of the Atlantic and 
companies on this side of the Atlantic about the opportunities 
in TTIP to raise intellectual property rights standards to be 
the highest in the world between the two economies so that, 
vis-a-vis other trade agreements, we can create leverage on the 
rest of the world to raise their standards and reward 
investment in research and development for new medicines.
    The Chairman. I appreciate that.
    Mr. Ricks. The other opportunity is to reduce regulation 
burden, which is--there are many duplications, which cause 
delay and excess cost in the business, and I think everybody 
would be for eliminating those.
    The Chairman. Thank you very much.
    Senator Hatch?
    Senator Hatch. Thank you, Mr. Chairman.
    Mr. Ricks, yesterday it was reported that Ambassador 
Froman, while speaking about the Trans-Pacific Partnership 
negotiations, suggested that there is a tension between 
protecting intellectual property rights for innovative 
medicines and ensuring access to medicines. I cannot disagree 
more. To the contrary, strong intellectual property protections 
spur innovation. They are, therefore, essential for providing 
access to innovative medicines.
    Now, could you please comment on why strong intellectual 
property protection for innovative medicines is important and, 
also, what steps can be taken by these foreign governments to 
ensure access to lifesaving medicines that do not include 
diluting intellectual property rights for U.S. innovators?
    Mr. Ricks. Thank you. Strong intellectual property 
protection is a key issue for us, but it is not a barrier to 
access to innovation in developing markets or anywhere. New 
products come from the incentive to develop them through the 
promise of reward through intellectual property. Without those 
rewards, it is difficult to see where these new medicines would 
come from to begin with.
    On the other hand, there is a lot of evidence that market 
access to medicines does not have to do with intellectual 
property or pricing, but rather the way health systems 
function. In fact, 95 percent of the World Health 
Organization's, quote-unquote, ``essential medicines'' to treat 
populations are generic. There is no intellectual property 
associated with them.
    So, more often than not, you are dealing with issues of how 
drugs get distributed, how care and diagnosis happen in a given 
country, and these are complex issues that have to do with the 
entirety of the health care system, not just a simple issue of 
IPR.
    So we are aligned in the view that intellectual property is 
an important issue for our sector. It is where new medicines 
come from, but it is not related to market access for these 
medicines years after their invention. What is important there 
is collaborating with health systems, governments, and 
regulatory authorities to make sure the health systems work 
around the world.
    Senator Hatch. Let me just add another question. In your 
testimony, you note that trade secret theft is a growing 
problem around the world. We know that China, in particular, is 
systematically stealing critical information from hundreds of 
U.S. companies. Now, this is an area where international 
standards for protection must be improved and where it is 
important for the U.S. and E.U. to work together.
    Can you discuss why it is so important for our trade 
agreements to include strong provisions that safeguard U.S. 
trade secrets?
    Mr. Ricks. Absolutely. And we have been very active in 
trying to strengthen our own company's systems to prevent this 
type of theft. But having a legislative and a regulatory 
framework between the E.U. and the U.S. on this point would be 
critical.
    We both share an interest in knowledge-based industries, 
like the pharmaceutical industry and others. We simply cannot 
afford together to lose or have leakage of this to the rest of 
the world inappropriately and illegally. So we support that.
    I believe there is an opportunity to include that in the 
TTIP arrangement, and we would support that as a key component 
for intellectual property-driven industries like ours.
    Senator Hatch. Thank you.
    Mr. Ducker, in your testimony, you talked about how the 
value-added tax, as levied in European Union countries, can 
significantly drive up the cost of U.S. goods and exports to 
the European Union, especially for small businesses.
    In fact, the Utah company I mentioned in my opening 
statement, ICON, has to deal with this problem when exporting 
their exercise equipment into the E.U. How much of an 
impediment to U.S. exports are value-added taxes in the E.U. 
and should their elimination be a priority for the USTR as they 
negotiate the TTIP agreement?
    Mr. Ducker. Well yes, sir, it should absolutely be a 
priority, and it is an impediment for our exporters. I think I 
mentioned in my verbal testimony that it is not only the de 
minimis value, but on the value-added tax, some of those 
numbers are as low as $30, and it can even go lower on some of 
the newer entrants into the E.U., which means that any good 
that is shipped into Europe that is above the value on the VAT 
of $30 has to file unnecessary forms for a low value-added 
good.
    In many cases, the value and the transaction costs to ship 
a good into the E.U. with these low de minimis standards can 
exceed the cost of the good itself. So we believe that de 
minimis values need to be raised across the board, and we need 
to have some regulatory harmonization between the two trading 
blocs on that.
    So I think it has a big impact on small and medium 
enterprises, in particular terms, because large multinationals 
have the infrastructure in place to deal with more complex 
regulations. The small shippers and customers do not.
    The Chairman. Thank you. Thank you, Senator.
    Senator Carper?
    Senator Carper. Thanks. Again, welcome to all of you.
    Just permit me a little bit to talk about Trade Promotion 
Authority, please. I understand it is not a slam-dunk that we 
are going to get it done. And I am going to ask each of you for 
just a little bit of audience participation.
    If you will, on a scale of 1 to 10, 1 for not very 
important that we get it done, 10 for very important, each of 
you just give me some kind of idea what you think, starting 
with you, Mr. Ducker. Just briefly, just very briefly.
    Mr. Ducker. I believe it is hugely important that we get it 
done, and the reason that I believe it is important is----
    Senator Carper. No, no.
    Mr. Ducker. You want a scale.
    Senator Carper. Yes. Just answer my question.
    Mr. Ducker. Eight out of 10.
    Senator Carper. Thank you.
    Mr. McCormick. I would say similar, 9 out of 10.
    Mr. Ryan. Nine-and-a-half.
    Mr. Roenigk. On a scale of 1 to 10, I would say it is 11.
    Senator Carper. Thank you very much. Those are the scales 
we use. Now give me the best argument, your one single best 
argument, very briefly, against Trade Promotion Authority, best 
argument against, and then rebut it, very briefly, please, same 
order.
    Mr. Ducker. Best argument----
    Senator Carper. Against, that anybody would give. What is 
the best, strongest argument against it, and then rebut it, 
just very briefly.
    Mr. Ducker. I think that anybody would say the best 
argument against it would be the lack of collaboration and 
participation from large groups of people. And I would rebut 
that argument to say that, at the pace that commerce and trade 
deals are moving around the world, that we have to have speed 
to market in this case for U.S. business and U.S. trade.
    Senator Carper. Thanks.
    Mr. McCormick, same question.
    Mr. McCormick. I would say that probably the biggest thing 
is speed, and the reasoned argument against it would be that we 
would make rash decisions too fast, too swiftly. But speed is 
key, especially when Canada has just signed their free trade 
agreement.
    So our neighbors to the north are competing against us. We 
need to have the ability to swiftly come in behind them with 
our own agreement.
    Senator Carper. Mr. Ricks, give us your strongest argument 
against TPA, then rebut it.
    Mr. Ricks. I suppose the argument against it is to make 
sure all interests are well-represented, but I think, when one 
is negotiating, it is important to empower the people at the 
table to make the tradeoffs that are in the best interest of 
the country.
    Senator Carper. All right. Thank you.
    Mr. Roenigk?
    Mr. Roenigk. I would not say it is legitimate, but I think 
they would argue this is a blank check given to Congress. Let 
us see the agreement, and then we will decide whether we want 
to sign the check or not.
    Senator Carper. All right. Good. We raise a lot of chickens 
on Delmarva, in Delaware. There are, I do not know, 300 or 400 
chickens for every person in my State. So this is pretty 
important.
    It used to be we did not export many of them. Today, I was 
talking with Senator Cardin earlier, and I think we export 
about 20 to 25 percent of the poultry that we raise.
    You shared with us some numbers going back, I think, about 
20 years, and I think you said, Mr. Roenigk, that the E.U. was 
number three if you put all those countries together, but our 
number-three market 20-25 years ago. Today, are they still in 
the top 10? I do not think so.
    Mr. Roenigk. We are prohibited from exporting to the E.U., 
so they are not an export market for us. But if we had access, 
we believe that total exports would be $600 million, making 
them the third-largest market.
    So it would be very, very important not just for Delmarva, 
but for the entire industry.
    Senator Carper. You touched on this, but let me ask you to 
drill down on it. Could you just describe for us what the 
current poultry market is like in the E.U. and what other 
factors, besides addressing regulatory barriers, could be 
important to ensure that our poultry industry can achieve the 
kind of potential in the E.U. you have just mentioned to us?
    Mr. Roenigk. Some of the most expensive chicken in the 
world is in the E.U. So it is not an inexpensive place to enjoy 
chicken.
    Senator Carper. Is it the best chicken in the world?
    Mr. Roenigk. The best chicken in the United States--is the 
Senator from Georgia gone? [Laughter.]
    Senator Carper. But we are still here. We are still here 
from Delaware and Maryland.
    Mr. Roenigk. The best chicken in the United States is from 
Delmarva.
    Senator Carper. Thank you. That was good. I have no more 
questions.
    Go ahead, finish your answer.
    Mr. Roenigk. I would just say the most expensive chicken is 
in the E.U., a few other places, but what we need is a climate, 
a regulatory climate, where the food safety and so on is based 
on performance, not on proscriptive regulations--the walls are 
white, but are they the right color white? So we need to get 
away from a proscriptive approach to inspecting chicken and 
some animal health issues, and, hopefully, the agreement will 
address those critical issues.
    Senator Carper. All right. Thank you very much. Thank you 
all.
    The Chairman. Thank you, Senator.
    Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman. Let me thank our 
witnesses.
    I certainly concur in the observations of our witnesses for 
a TTIP agreement that includes the provisions you all have 
said. But let me just inject a little bit of reality here. The 
chairman's comment is that we never achieve what we need to 
easily, that the other side is always looking for something 
else.
    Mr. Ducker, you mentioned the de minimis rule and our tax 
issues. I could expand that. We had our issues with Europe when 
we tried to get a better understanding on and a level playing 
field in corporate taxes, business taxes, and we tried to deal 
with that through some form of credit, only to find that Europe 
challenged us successfully under WTO rules.
    So we do not have a level playing field on business taxes 
with Europe today. And the de minimis rule just underscores the 
challenge for small entities, but it does not deal with the 
underlying core problem that we should harmonize the tax 
agreement so that we have a level playing field in 
international trade. The last time we looked at a global trade 
update, Europe was very difficult on the agricultural sector, 
protecting its high-cost poultry, among other commodities, and 
it ended up we were unable to get an agreement.
    I guess my point is this. I hope we can successfully 
complete a TTIP agreement that does put us on a level playing 
field, and I know that it is going to have to be a give-and-
take. But I hope that your testimonies here today will be 
consistent as we evaluate a TTIP agreement to make sure that it 
is worthwhile and that we are not just yielding to the pressure 
to get an agreement, but that we really do accomplish something 
positive for commerce between Europe and the United States.
    If it is on a level field, I am very confident that 
American producers, manufacturers, and farmers will do just 
fine. But if we continue to make these unilateral concessions, 
then it is not in America's interest and not in the global 
interest.
    So, on the poultry side, we have seen over and over again, 
it is not just the tariff but also the non-tariff issues, and I 
just really want to point out that the numbers you give could 
be much greater if we get science-based safety standards in 
Europe.
    That is going to be one area that I think we really need to 
focus on as we look at the regulatory side. Europe, on 
agriculture, has used many creative ways in order to protect 
their farmers, and I hope you all will be very direct with us 
as to whether this agreement deals with a meaningful change 
that will allow an increase in market penetration by American 
agriculture, including the poultry industry.
    So, Mr. Roenigk, I want you to know, we are going to be 
looking to you to be very clear with us and not just say, any 
trade agreement is okay. We really need to make sure that we 
have a trade agreement that will give us a more level playing 
field.
    Mr. Roenigk. If I could just say so, you have exactly hit 
the nail on the head. The creative ways they have used--it is 
our concern that those creative ways will continue, and that is 
what we have to be very careful about. We have to perhaps 
trust, but verify.
    Senator Cardin. Mr. Ducker, let me just underscore the 
point on the taxes. You mentioned the de minimis rule. I 
understand that. But for any American manufacturer or producer, 
they have to go through that process concerning the European 
VAT tax where there is no comparable burden on a European who 
exports into the United States. Is that fair?
    Mr. Ducker. No. I did not say it was fair. That is why I 
hope we can move the ball forward and advance it with some of 
these common rules in the trade agreement.
    Senator Cardin. The de minimis rule absolutely deals with 
those products that come in under that threshold, but it does 
not do anything for those above that threshold. Why are we not 
more ambitious?
    Mr. Ducker. Well, I think, as far as I am concerned, we can 
be more ambitious with that. We already have a bill moving 
through to raise it to the $800 level, on the de minimis 
levels. But I do not know if it is a part of TTIP at this point 
in time. That matter might be better served in another area.
    Senator Cardin. In another hearing, as the chairman knows, 
I will be bringing up tax legislation to try to give our 
producers and farmers and manufacturers a better break.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator.
    Senator Brown?
    Senator Brown. Thank you very much. And to Senator Hatch 
and to especially the chairman, thanks for holding this hearing 
on this very important issue.
    This is for both Mr. Ducker and Mr. Ricks. With respect to 
investment under TTIP, you advocated for the coalition's 
position that we needed a TTIP that has a ``robust investor-
state dispute settlement mechanism.''
    Why is that necessary in this kind of an agreement when we 
have two well-developed systems to safeguard intellectual 
property? And this is not an agreement with a country that is 
obviously less developed than ours. With the rule of law and 
the sort of sophistication and the intellectual property 
investment that we have developed in all of these countries, 
why is this necessary? And give me examples, if you would, of 
why we need it between the world's two most developed entities, 
if you will.
    Mr. Ricks, do you want to start?
    Mr. Ricks. Absolutely. Thank you, Senator.
    It is necessary because the systems do not work identically 
and sometimes do not work well. I will give you an example 
under NAFTA which my company is working through right now with 
the Canadians.
    We have a situation in Canada where a large number of 
patents on medicines are being thrown out by the courts, we 
think, in violation of the principles of NAFTA and TRIPS in the 
WTO intellectual property regime. We have exhausted all local 
options in the Canadian courts, including going to the Supreme 
Court on this issue, and we now have an investor-state action 
under NAFTA with Canada. This is really our only recourse to 
level the playing field to what we think is a global standard.
    Those types of issues hopefully will not occur with Europe, 
but they could, and there are quite a number of differences in 
the patent system, as well as your rights to intervene and have 
early resolution, in Europe versus the U.S.
    So these investor-state provisions are quite important to 
assure predictability over the long term.
    Senator Brown. Does it concern you, as an American citizen, 
living in a country of laws and democratically reached rules, 
regulations, and statutes, to allow a foreign investor to, in 
essence, challenge, to have the standing to challenge, a 
democratically attained rule or law in this country, sort of 
converse to what you were saying?
    Mr. Ricks. It does not concern me, as long as it is quid 
pro quo; as long as we have the same rights in their system. 
And increasingly, companies like mine are global companies. We 
have an interest in many geographies. I think, if we agree 
under a trade agreement to certain provisions, that it is a 
reasonable standard to have the ability to have that 
enforcement from abroad.
    Senator Brown. These provisions--you mentioned NAFTA, and I 
think NAFTA was the first sort of prototype trade agreement to 
do this--do shift power, in reality, to a corporation to 
challenge a sovereign government, something that we have not 
done previously.
    But thank you for your answer.
    Mr. Ducker, your thoughts?
    Mr. Ducker. Well, I have many similar thoughts, but the 
U.S. Government has been sued many times, and I do not know 
that we have lost any of those suits. And so I think gaining 
some predictability, especially for future agreements, as we go 
through, is an important element of a high quality and 
ambitious trade agreement, and my colleague gave some very good 
examples of it.
    Senator Brown. Anybody else? Do one of the other two of you 
want to comment on that; any thoughts?
    [No Response.]
    Senator Brown. No. Thanks, Mr. Chairman.
    The Chairman. Thank you, Senator.
    One thought here. It seems to me--I would like your 
response--not only is a potential agreement good for all the 
reasons that you have all indicated, but also, it will help set 
world standards so that the United States can more easily trade 
with other countries, say the developing countries, India for 
example, and Brazil and so forth.
    So the degree to which this is very successful, this TTIP, 
helps not only the United States and not only Europe, but also 
helps the United States and Europe in trading with a lot of 
other countries.
    I think, therefore, that we should work very hard to make 
this a very successful agreement that sets very high standards 
worldwide. That is, for our two continents, which will help in 
other areas.
    Thank you very much. You have been very helpful here. Thank 
you.
    I am sorry. Senator?
    Senator Hatch. Mr. Ricks, I am particularly concerned about 
the data exclusivity with regard to biologics. So I would like 
to have you weigh in on that and maybe send me a letter on it.
    Mr. Ricks. We would love to, and we appreciate your support 
on that point.
    Senator Hatch. Send it to the committee so everybody will 
see it, because that is an extremely important thing. And I 
have to say that Senator Kennedy stuck with me on that even 
though he felt the other way, because he knew doggone well it 
was right. And I would like to see us negotiate a much better 
situation there----
    Mr. Ricks. We appreciate that.
    Senator Hatch [continuing]. So that innovation is created 
and we move forward.
    Mr. Ricks. Thank you.
    Senator Hatch. Thank you.
    The Chairman. The hearing record will be open, certainly 
until the end of this week, for other Senators to submit 
questions for the record.
    Thank you very much. I appreciate it. The hearing is 
concluded.
    [Whereupon, at 12:15 p.m., the hearing was concluded.]





                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                                   [all]


