[Senate Hearing 113-360]
[From the U.S. Government Publishing Office]
S. Hrg. 113-360
ADVANCING CONGRESS'S TRADE AGENDA:
THE ROLE OF TRADE NEGOTIATING AUTHORITY
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 16, 2014
__________
Printed for the use of the Committee on Finance
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COMMITTEE ON FINANCE
MAX BAUCUS, Montana, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
RON WYDEN, Oregon MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York PAT ROBERTS, Kansas
DEBBIE STABENOW, Michigan MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHN CORNYN, Texas
BILL NELSON, Florida JOHN THUNE, South Dakota
ROBERT MENENDEZ, New Jersey RICHARD BURR, North Carolina
THOMAS R. CARPER, Delaware JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland ROB PORTMAN, Ohio
SHERROD BROWN, Ohio PATRICK J. TOOMEY, Pennsylvania
MICHAEL F. BENNET, Colorado
ROBERT P. CASEY, Jr., Pennsylvania
Amber Cottle, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Baucus, Hon. Max, a U.S. Senator from Montana, chairman,
Committee on Finance........................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 4
WITNESSES
Cote, David M., chairman and chief executive officer, Honeywell
International, Morristown, NJ.................................. 6
Allen, Jim, president, New York Apple Association, Inc., Victor,
NY............................................................. 8
Stegemann, Elena M., director of international business, NuStep,
Inc., Ann Arbor, MI............................................ 10
Cohen, Larry, president, Communications Workers of America (CWA),
Washington, DC................................................. 12
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Allen, Jim:
Testimony.................................................... 8
Prepared statement........................................... 47
Responses to questions from committee members................ 50
Baucus, Hon. Max:
Opening statement............................................ 1
Prepared statement........................................... 53
Cohen, Larry:
Testimony.................................................... 12
Prepared statement........................................... 56
Cote, David M.:
Testimony.................................................... 6
Prepared statement........................................... 75
Responses to questions from committee members................ 80
Hatch, Hon. Orrin G.:
Opening statement............................................ 4
Prepared statement........................................... 84
Stegemann, Elena M.:
Testimony.................................................... 10
Prepared statement........................................... 87
Responses to questions from committee members................ 98
Communications
Advanced Medical Technology Association (AdvaMed)................ 105
Computer and Communications Industry Association (CCIA).......... 109
National Association of Manufacturers (NAM)...................... 116
United Automobile, Aerospace, and Agricultural Implement Workers
of America (UAW)............................................... 120
(iii)
ADVANCING CONGRESS'S TRADE AGENDA:
THE ROLE OF TRADE
NEGOTIATING AUTHORITY
----------
THURSDAY, JANUARY 16, 2014
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 10:03
a.m., in room SD-215, Dirksen Senate Office Building, Hon. Max
Baucus (chairman of the committee) presiding.
Present: Senators Wyden, Cantwell, Nelson, Menendez,
Carper, Cardin, Brown, Casey, Hatch, Grassley, Crapo, Thune,
Isakson, Portman, and Toomey.
Also present: Democratic Staff: Amber Cottle, Staff
Director; Bruce Hirsh, Chief International Trade Counsel;
Elissa Alben, International Trade Counsel; Chelsea Thomas,
Professional Staff Member; Lisa Pearlman, International Trade
Counsel; and Jason Park, International Trade Counsel.
Republican Staff: Chris Campbell, Staff Director; Everett
Eissenstat, Chief International Trade Counsel; Kevin Rosenbaum,
Detailee; Rebecca Eubank, International Trade Analyst; and
Shane Warren, International Trade Counsel.
OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM
MONTANA, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
Thomas Edison once said, and I quote, ``We often miss
opportunity because it is dressed in overalls and looks like
work.''
Today we have a tremendous opportunity to boost our economy
and create American jobs through trade. Talks are underway with
countries in Europe and across the Pacific. These agreements
will open huge new markets for American exports.
Ninety-five percent of the world's consumers are outside of
the United States. They hold 80 percent of the world's
purchasing power. We need trade deals to reach those consumers.
Why? To create jobs here in the United States, and to
strengthen our economy.
Some people argue that pursuing trade deals is not the
right solution for America's jobs crisis, but here are the
facts. Exports support nearly 10 million American jobs. That
includes 25 percent of all jobs in manufacturing. Those numbers
are increasing. These are good-paying jobs. Workers in
factories that export earn nearly 20 percent more than workers
in factories that do not export. Businesses that export create
jobs more quickly, and they are less likely to go out of
business.
So how can we help create these jobs? How can we get more
American exports into foreign markets? Through trade
agreements. And, to complete trade agreements, we need Trade
Promotion Authority, also known as TPA.
Last week, Senator Hatch and I introduced a bill to renew
TPA. It is called the Bipartisan Congressional Trade Priorities
Act of 2014. Why do we need this bill? For several reasons.
First, we have to level the playing field with our
international competitors. The United States is already open to
trade. Too often, our trading partners are not. The trade deals
we are negotiating will provide new opportunities for U.S.
exports in many countries, and that would mean more jobs here
in the United States.
The fact is dozens of nations are cutting their own deals
with one another as we speak: China, Japan, Korea, just to name
a few. If we do not stay in the game, we will be left on the
sidelines. Our exports will face high tariffs, whereas our
competitors will not. And, frankly, we may not like the look of
some of the deals that other countries--that is, our
competitors--are cutting.
That leads to another reason why the TPA bill is so
important. Labor rights, environmental protection, currency
rules, disciplines for state-owned enterprises--all of these
issues and more will be left out of trade deals if we do not
push for them. We will have forfeited our role as a global
power. We will have lost the chance to shape the rules on
trade.
Some argue that we need to do more, that we need to bring
our policies into the 21st century. The TPA bill does that. It
reflects the bipartisan agreement on labor and environment and
the need to foster innovation and promote access to medicines.
TPA will call for countries to adopt and maintain core
labor standards and environmental commitments, not just enforce
their own laws as they stand. The bill will direct USTR to back
those commitments with the same strong dispute settlement and
remedies that apply to commercial commitments.
The bill ensures that parties to U.S. trade agreements
cannot manipulate their currency. The bill also recognizes the
importance of the Internet. It ensures that trade rules
facilitate legitimate digital trade. And it calls for tougher,
enforceable rules against unscientific barriers to U.S.
agricultural exports.
The bill updates TPA to address several other 21st-century
challenges. These provisions need to be included in trade deals
to win congressional support. This helps guarantee that
America's workers and companies can compete on a fair, level
playing field. What are some of the updates that are in this
bill? Localization barriers to trade that shut out American
companies or force them to surrender intellectual property;
restrictions on the flow of data across borders.
In short, this is not the same old TPA. This strengthened
bill tells the administration and our trading partners the
provisions that need to be included to win congressional
support. As I said, it helps guarantee that America's workers
and companies can compete on a fair and level playing field.
Many in Congress have expressed concerns about lack of
transparency and consultation in trade negotiations. We heard
that message, and this bill addresses those concerns. It sets
significantly stronger rules for the administration to follow
in negotiations, and ensures Congress is a full partner.
The bill gives every member of Congress a strong voice in
the negotiation process. That includes the right to access
information, including classified information. And it includes
the ability to attend all negotiating sessions and serve as an
advisor. These privileges were previously reserved for only
some members. Now they are available for all members of
Congress. Our bill would make these privileges available to
all.
The bill also requires USTR to hold close consultations
with any committee whose jurisdiction would be affected by a
trade agreement. It also requires USTR to prepare new rules of
engagement with Congress, stakeholders, and the public. For
Congress, these rules will ensure detailed and timely briefings
and access to information. For stakeholders, they mean improved
coordination. And for the public, they will boost transparency,
public participation, and collaboration in the negotiation. All
of these improvements are backed by a strong mechanism for
congressional disapproval.
If the trade agreement fails to meet any consultation
requirement, Congress can disallow the final deal from being
considered under TPA procedures. In short, the bill gives
Congress a much bigger role in trade negotiations.
Some have argued we do not need TPA. They say this is not
the right time. But I believe we have an obligation--not just
an opportunity, but an obligation--to show that the United
States leads on world trade. For a trade negotiation to work,
countries need to know that our negotiators are good for their
word. So we need TPA, and we need a TPA that empowers Congress
to play a larger role in negotiations from the beginning.
As I noted at the outset, Thomas Edison said, ``We often
miss opportunity because it is dressed in overalls and looks
like work.'' In order for our job-creating trade agenda to
succeed, we have to act, and we have to renew Trade Promotion
Authority now, as well as Trade Adjustment Assistance. TPA and
TAA have always gone together, and that will be no different in
this case.
Trade bills are always tough, but we work together to get
them done. This committee has a history of rolling up our
sleeves and working together to get a product that will pass
the Senate and the Congress. I am deeply proud of the work we
have done together in my time here as chairman. And I am
confident that that spirit of collaboration will continue in
the days, months, and years ahead.
This bill is not a perfect solution to all the issues we
face, but I know that we can work together and get it done.
[The prepared statement of Chairman Baucus appears in the
appendix.]
The Chairman. Senator Hatch?
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Thank you, Mr. Chairman. I want to thank you
for holding this hearing and also for your leadership on these
trade agreements that are so important for our country and its
future.
Today we are examining the role trade negotiating authority
plays in advancing our Nation's international trade agenda.
Before I begin my remarks, I just want to take a moment to
express my sincere disappointment that the U.S. Trade
Representative did not accept our invitation to testify at this
hearing today. This is an important issue. It should be
important to the administration too. If the administration does
not get more involved in this effort to pass trade negotiating
authority, we are not going to be successful. It is just that
simple.
Put simply, this is not an issue where the President can
lead from behind. With that in mind, I hope we can still have a
productive and informative hearing today.
As any student of government knows, article 1, section 8 of
the U.S. Constitution grants Congress the power, quote, ``to
lay and collect taxes, duties, imposts, and excises,'' and,
quote, ``to regulate commerce with foreign nations.'' Congress
uses this constitutional authority in many different ways.
These ways include creating trade remedies to help U.S.
businesses compete with unfair imports; imposing sanctions on
imports from unfriendly nations, such as Iran; granting
unilateral tariff reductions through approval of bills granting
miscellaneous tariff relief, or through programs such as the
Generalized System of Preferences; implementing reciprocal
trade agreements among countries to reduce tariffs; and,
finally, creating agencies to administer U.S. trade law and
policy, such as the Office of the United States Trade
Representative and the International Trade Commission.
When it comes to negotiating trade agreements with other
countries, however, Congress's capacity to speak with one voice
to foreign nations is inherently limited. Under article 2 of
the Constitution, the executive branch has the authority to
negotiate treaties and international agreements. Throughout
U.S. history, Congress has sought the most effective way to
enhance and effectively utilize its authority over
international trade agreements.
As our world became increasingly globalized at the turn of
the 20th century, the issue became more acute, culminating in
congressional approval of the Smoot-Hawley Tariff Act in 1930.
Now, I do not want to unfairly denigrate Senator Smoot. After
all, Senator Smoot had a highly distinguished career as the
senior Republican Finance Committee leader from Utah. But in
this instance, he and Congressman Hawley got it flat wrong,
although I sincerely do not believe that they should have
gotten the whole blame for the Depression, which some have
tried to lay on them.
The Smoot-Hawley Tariff Act was perhaps one of the most
misguided trade bills ever devised by Congress. It raised
tariffs to unprecedented levels, contributing to the longevity
and severity of the Great Depression.
Franklin Delano Roosevelt recognized the role trade could
play in helping spur economic prosperity and proposed a new
framework under which Congress could effectively regulate
tariffs at home and, in so doing, reduce tariffs overseas and
open up markets for U.S. products, which means jobs in America.
Under the Reciprocal Trade Agreements Act of 1934, Congress
authorized the President to negotiate limited tariff reductions
on a reciprocal basis. That bill has served as the foundation
for every iteration of trade negotiating authority since 1934.
It has been a highly effective tool in reducing trade barriers
overseas and opening up global markets to U.S. goods and
services, all the while retaining Congress's constitutional
authority over trade.
Unfortunately, the last iteration of trade negotiating
authority expired over 7 years ago. Since then, our Nation has
not concluded negotiations on a single new trade agreement.
The Obama administration has launched several new trade
initiatives, including the Trans-Pacific Partnership in the
Asia-Pacific region and the Transatlantic Trade and Investment
Partnership with the European Union. But without trade
negotiating authority, Congress's power to set priorities for
these negotiations and to ensure that our priorities are met is
really limited. That is why Senator Baucus and I, along with
Chairman Camp of the House Ways and Means Committee, recently
introduced the Bipartisan Congressional Trade Priorities Act,
which will renew trade negotiating authority.
Through the strong negotiating objectives outlined in our
bill, Congress has the opportunity to set forth clear
priorities for our negotiations and to articulate standards
that our trade agreements must meet in order to be approved.
These negotiating objectives were developed after close
consultation with many stakeholders. The objectives are updated
to address many of the challenges our workers and job creators
face when competing to export American goods and services
overseas, including problems related to localization barriers,
state-owned enterprises, and currency manipulation.
The bill also maintains objectives seeking high standards
of protection for U.S. intellectual property rights holders and
advances trade negotiating objectives for the digital age.
In addition, the bill expands and enhances Congress's role
in ongoing international trade negotiations through
strengthened consultation mechanisms, including provisions that
require USTR to meet and consult with any interested member of
Congress at any time. It also allows any member of Congress to
be designated as a congressional advisor and to attend
negotiating rounds. Should the administration fail to consult
with Congress or abide by the procedures outlined in the bill,
Congress retains the ability to cut off the authority provided
under our legislation.
Finally, our bill ensures that Congress retains clear
authority over the scope of the implementing bill, as well as
enhancing congressional oversight over ongoing trade
negotiations. It is a carefully crafted and balanced package
which will enable Congress to more effectively utilize its
constitutional authority to open global markets for U.S. goods
and services and grow our economy even better than it does
today.
While I am, once again, disappointed that Ambassador Froman
did not accept our invitation to testify today, I am pleased
that we have a number of witnesses representing a broad range
of views to help us discuss Congress's role in advancing
international trade negotiations.
So, Mr. Chairman, I look forward to the testimony of our
witnesses today. I want to thank you again for all of your hard
work, both on this legislation itself and in helping us prepare
for today's hearing. And this is a bill I hope we can get
through before you leave for China. It would be a great
capstone to your very, very good career while you are here.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. I am going to have to ask the demonstrators,
those holding the signs, to bring them down. I think it would
be inappropriate, frankly, for this committee to allow a
contest of who has the best signs during a congressional
hearing. So I am going to have to ask you all to bring your
signs down and listen to the hearing, because, if you do not
bring your signs down, we are going to have to ask that you be
removed. So, please, just bring your signs down. Otherwise,
there will be a competition on signs, and I do not think that
would be appropriate here.
I see one sign still up. Thank you very much. Now, I will
introduce the witnesses.
We are pleased to begin our hearing today with Mr. David
Cote, who is chairman and chief executive officer of Honeywell
International in Morristown, NJ. Following Mr. Cote is Mr. Jim
Allen, president of the New York Apple Association in Victor,
NY. Our third witness is Ms. Elena Stegemann, director of
international business of NuStep, Incorporated, located in Ann
Arbor, MI. The fourth witness is Mr. Larry Cohen, president,
Communication Workers of America.
Thank you all for coming. We deeply appreciate your effort,
both in preparing your remarks and taking the time to come
here, because I know you are all deeply committed to trying to
figure out the best solution for this issue. Obviously, it is
to pass the TPA.
I will begin with you, Mr. Cote.
STATEMENT OF DAVID M. COTE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, HONEYWELL INTERNATIONAL, MORRISTOWN, NJ
Mr. Cote. Chairman Baucus, Ranking Member Hatch, and
distinguished members of the committee, thank you for the
invitation today. It is my pleasure to appear on behalf of
Honeywell, the Business Roundtable, and Trade Benefits America,
a coalition of about 160 associations and companies that
support passage of 21st-
century Trade Promotion Authority legislation.
In order to meet the challenges and seize the opportunities
in the global economy, the United States needs policies to
ensure American companies and workers are the most competitive
in the world. A pro-growth trade policy, including passage of
TPA, is an area where government can create an environment
where jobs can be created. I therefore commend you, Mr.
Chairman and Ranking Member, for working with House Ways and
Means Committee Chairman Dave Camp to develop legislation to
significantly improve TPA to address today's trade issues.
With more than 95 percent of the world's population and
about three-quarters of world GDP outside of the U.S., economic
growth and jobs increasingly depend on the expanded trade and
investment opportunities available worldwide. By strengthening
and passing TPA, a key enabler for trade agreements, Congress
can help complete 21st-century agreements that U.S. companies
need to be competitive.
The global economic world has changed significantly over
the last 20 years and will change even more in the next 20.
Twenty years ago, there were only about a billion people
involved in the global economy, basically the U.S., Europe, and
Japan. Today there are about 4 billion people participating in
the global economy with the addition of China, India, and
numerous other countries that have recognized that a robust
private sector is essential for their prosperity.
Now, this is a good phenomenon for the world, because we
now have at least 4 billion people thinking about how to make
things better and how to improve productivity. An improved
standard of living comes from productivity, the ability to
innovate and invent, and the ability to have free flow of
ideas, of people, of goods, and of money.
So, as a country, we need to recognize, first, that we are
in a different global economy than we were 20 years ago;
second, that the global economy will move forward with us or
without us; and three, that in all our political arguments,
there is truth on both sides, and we need to pull together
toward a common objective.
While the negative effects of trade are sometimes more
obvious, they are more than outweighed by its positive effects
overall on jobs. And trading nations from the Phoenicians to
the Hanseatic League to the Dutch, the British, and the U.S.
have done well.
According to research provided by the Business Round Table,
trade and U.S. trade agreements have helped support American
growth and jobs. U.S. companies, including Honeywell, have
capitalized on opportunities that trade agreements have
created.
Honeywell is a $39-billion industrial company with more
than 130,000 employees. Since 2002, we have grown sales by more
than 75 percent from a base of about $22 billion. During that
time, we also grew sales outside the U.S. from 41 percent of
total sales to 54 percent of our total sales. In other words,
while sales in the U.S. during those 10 years grew about 33
percent, sales outside the U.S. more than doubled.
Since the vast majority of the world's GDP is outside the
U.S. and many developing countries are growing faster than the
U.S., we need to be there. The rest of the world is moving, and
we are not.
There are legitimate concerns about labor and environmental
laws--helping those disrupted by trade--and adherence to
agreements. So we need to work together to achieve the best
balance of both. This will become especially important over the
next 20 years, because the geographic composition of world GDP
will be changing substantially. As you can see in the chart
provided with my testimony, by 2030, the percentage of world
GPD generated from the U.S. will decline from 26 percent to 24
percent. Other developed countries will decline from 39 percent
to 29 percent of world GPD. And importantly, developing
economies will grow from 35 percent to 47 percent of world GPD.
In other words, in 20 years what we think of as developing
countries will account for about half of the world's GDP. That
is a big deal, and we need to be in there forging relationships
now.
If the U.S. is not in the vanguard of pursuing new
agreements, we risk falling behind other countries that are
pursuing agreements of their own. We also surrender the
opportunity to negotiate new rules to address trade barriers
and issues that did not exist previously. And that is why it is
crucial for the U.S. to continue to aggressively pursue new
agreements and for Congress to pass the improved Trade
Promotion Authority.
So thank you for the opportunity to testify, and I look
forward to answering any questions the committee may have.
The Chairman. Thank you very much, Mr. Cote.
[The prepared statement of Mr. Cote appears in the
appendix.]
The Chairman. I see signs back there. One more time, if I
see the signs up, I am going to have to ask the police to
remove you.
Mr. Allen, you are next.
STATEMENT OF JIM ALLEN, PRESIDENT, NEW YORK
APPLE ASSOCIATION, INC., VICTOR, NY
Mr. Allen. Good morning. Thank you, Chairman Baucus,
Ranking Member Hatch, and distinguished members of the Senate
Committee on Finance. I am honored to be invited here today to
speak with you about the importance and the value of Trade
Promotion Authority in the execution of free trade agreements.
My name is James S. Allen, and I am president of the New
York Apple Association. I have the pleasure of representing
close to 700 commercial apple growers in the State of New York.
In my 14 years as president, I have worked very closely with
our past and present apple leaders, serving on Senator
Clinton's, Senator Gillibrand's, and Senator Schumer's many
different ag advisory committees and related task forces.
At the risk of sounding provincial, I would like to take
the opportunity to recognize the honorable Charles Schumer for
his unyielding support of the apple industry in New York State.
He is often referred to as the Senator Farmer from Brooklyn.
We take apple growing very seriously here in New York
State, and we are presently the second-largest apple-growing
State in the Union, pumping over $300 million dollars a year
into our economy. The leader in production is Senator
Cantwell's State of Washington. And number three is held by
Senator Stabenow's home State of Michigan. Pennsylvania and
California round out the top five.
But today I want to speak to you with an industry message
with an industry voice, echoing concerns of all the major apple
producing States across the country.
The United States is the world's leading exporter of ag
products, reaching a value of $140 billion a year and providing
nearly 1 million U.S. jobs. It is well-known that soy beans,
corn, and wheat are the top three, but fruit and fruit products
is number four, reaching $7.82 billion. Fresh apples represent
well over $1 billion in trade to over 70 countries.
The four mentioned apple-exporting States rely on export
markets to help balance the domestic supply levels and to
expand their markets. For New York State, the close to 1
million cartons exported greatly enhance our overall apple
business; for Washington State exports, close to 40 million
cartons a year, which is close to 32 percent of their total
production.
I would be remiss if I did not point out that the Market
Access Program, MAP, which is authorized in the Farm Bill,
plays a major role in our export programs and underscores the
importance of the Farm Bill.
In the world apple market, all U.S. apples generally
compete on the same playing field. And when it comes to trade
agreements and Trade Promotion Authority, as an industry, we
work closely together to benefit all U.S. apple growers. It is
safe to say that a trade barrier that impedes Washington apple
exports would adversely affect New York, Michigan, and
Pennsylvania in the same way.
My counterpart, Todd Fryhover, president of the Washington
Apple Commission, makes a good point, and I agree, when he
states that trade agreements provide a platform for all
participants to address the wants and the needs of potential
exporting countries, while extending the same benefits to
importing countries for the betterment of consumers. Without
trade agreements, the status quo remains the same and
consistent and is adverse to the principles of free trade.
Ultimately, free trade is best for every economy, and FTAs open
the door for increased commerce.
The U.S. apple industry supports renewing the TPA for two
reasons, the first being timing. Trade agreements are being
negotiated every day between countries, and, because TPA is not
authorized, the U.S. lags behind in our ability to effectively
negotiate and quickly execute trade agreements. Secondly,
authorizing TPA provides the negotiators the ability to act
within the parameters set forth by Congress, while being a
credible negotiating party. It is difficult to image our
negotiators returning to Congress with the risk of potential
amendment.
TPA provides the detail in negotiating objectives and a
strong consultations process which allows for an up and down
vote on agreements. A great example of a successful free trade
agreement that previously passed under TPA is CAFTA. U.S. apple
exports into those countries are now treated equally as the
other trading countries are. TPA could allow us to conclude
trade talks that similarly level the playing field in Europe
and Asia.
As U.S. Trade Representative Michael Froman said last week,
we need to open markets, support U.S. jobs, and increase
exports of products made in America. The TPA will help
accomplish this. Apple growers urge Congress to support updated
TPA legislation so that they can grow markets and supply
nutritious and delicious apples to new markets around the
world.
Mr. Chairman, Ranking Member Hatch, and distinguished
members of this panel, thank you for allowing me the
opportunity today to discuss the importance of TPA for American
apple growers. And I would close with just one simple question,
and that is: Have you had your apple today?
Thank you.
The Chairman. Thank you, Mr. Allen, very much.
[The prepared statement of Mr. Allen appears in the
appendix.]
The Chairman. Ms. Stegemann, you are next.
STATEMENT OF ELENA M. STEGEMANN, DIRECTOR OF INTERNATIONAL
BUSINESS, NUSTEP, INC., ANN ARBOR, MI
Ms. Stegemann. Chairman Baucus, Ranking Member Hatch, and
distinguished members of the committee, my name is Elena
Stegemann, and I am the director of international business at
NuStep, located in Ann Harbor, MI.
I am very pleased to testify today on behalf of my company,
as well as 3 million small businesses, State and local chambers
of commerce, as well as large companies that are members of the
U.S. Chamber of Commerce and its national federation. We
strongly support the Bipartisan Congressional Trade Priorities
Act of 2014, which will renew TPA.
TPA is vital because economic growth and job creation at
home depend on our ability to sell American goods and services
to the 95 percent of the world's customers living outside of
the U.S. NuStep designs and manufactures recumbent cross-
trainers to make exercise possible for users who are unable to
access regular exercise equipment due to injury, medical
conditions, or other physical limitations.
We manufacture our product in a beautiful state-of-the-art
facility in Ann Arbor. We supply our products to thousands of
rehab centers across the U.S., but we also have sales in more
than 25 other countries now.
Why does trade matter to NuStep or to our country? In a
word, it comes down to jobs. Our biggest challenge as a Nation
is to get Americans back to work, and we believe trade can help
do that.
Let me tell you a bit about our company's experience with
international trade. NuStep began to focus on exporting in
2009, when our country faced a terrible recession. Our CEO and
owner, Dick Sarns, saw the decline in our domestic sales and
decided to go look for new customers abroad. Since then, our
international sales have almost quadrupled. Exports today
account for nearly 20 percent of our unit sales. Our success as
an exporter was even recognized with the President's ``E''
Award at a White House ceremony in May of 2012, definitely a
career highlight for me.
Today NuStep employs nearly 100 people, which is twice as
many as when I started in 2009, and about 20 of our employees
are involved in our international business. But all of our
people are proud of the fact that our products are shipped all
over the world. So you might be wondering, how do you take a
small company from a small town in Michigan and go global?
Well, with a lot of enthusiasm and a lot of help.
The first step was to create a job for someone like me. I
was hired to help develop the international business for our
company. And today, our international sales are growing in many
countries. However, the playing field for trade is not always
level. While our market is generally open, U.S. exports face
foreign tariffs that often soar into double digits, as well as
the thicket of non-tariff barriers.
Now, as you have heard, I am not from Washington. But, as
we have already heard today, TPA will require Congress and the
White House to work together on trade agreements. Well, that
does not sound like a radical notion to me.
And those trade agreements will tear down the foreign
barriers that shut out products made by companies like mine,
and I think it makes a world of sense. So where are the big
opportunities? Asia is currently my company's biggest export
market, because 2 billion Asians have joined the middle class
in the past 20 years. We are very pleased to see containers
full of our beautiful products headed to Japan and a growing
number now going to other countries in Asia.
TPP will get rid of many of the barriers that make it hard
for us to compete in some Asian markets. Also, the Trade
Priorities Act will guide American negotiators to ensure that
TPP protects intellectual property and trade secrets.
Even though we are not a high-tech company, NuStep has made
big investments in producing high-quality, innovative products,
and it would be simply devastating for us to have our know-how
stolen because we either did not have a trade agreement in
place or because the agreement lacked strong protections that
we need.
Europe is another big market for us. We are proud that our
products are gaining popularity in such markets as Germany,
where consumers have very high standards and where we face
intense competition. Regulatory cooperation is another big
focus of the Transatlantic Trade and Investment Partnership.
NuStep is committed to complying with regulatory standards
everywhere that we do business. But anything our trade
negotiators can do to streamline regulatory compliance for U.S.
exporters would be a huge help for a small business like
NuStep.
In conclusion, I have had the privilege during my travels
of meeting with business owners and decision makers all around
the world. And I have met with people who use our products and
whose lives are transformed by them. On one such visit to a
care home in Britain, I had the privilege to witness the first
time that a wheelchair-bound man saw his legs move in a very
long time. I was so proud of the fact that a small company from
Michigan had made this product and made this moment possible
for him. As an exporter, it is a huge honor for me to represent
our country abroad.
During my travels, many people refer to me as the lady from
America, and I am very happy to see that being an American is a
door-opener. People are hungry for our products, and we are
hungry for more trade.
On behalf of small exporters like NuStep, I urge you all to
support TPA and the trade agreements it can make possible.
Thank you.
The Chairman. Thank you, Ms. Stegemann.
[The prepared statement of Ms. Stegemann appears in the
appendix.]
The Chairman. Mr. Cohen?
STATEMENT OF LARRY COHEN, PRESIDENT, COMMUNICATIONS WORKERS OF
AMERICA (CWA), WASHINGTON, DC
Mr. Cohen. Thank you, Chairman Baucus and members of the
committee. I am here today not only as president of the 700,000
members of the Communication Workers of America, but as part of
a broad citizens coalition with more than 30 million members
quite concerned about where we are going in this Nation on
trade, as well as fast-track or Trade Promotion Authority.
When we come to see any of you in your offices, we are as
likely to be there with Public Citizen or the Sierra Club or
Food and Water Watch. We are a community organization, as we
are with the AFL-CIO, and it is in that spirit that I am here
today.
We recognize that we are living in a global economy, but we
must ensure that our trade framework serves our national goals,
and we must measure those results. We cannot delegate the
responsibility to achieve those goals to private or secret
negotiations or appointed officials without meaningful,
democratic control.
This hearing is timely, coming on the 20th anniversary of
the North American Free Trade Agreement. As the administration
seeks to negotiate two more massive trade pacts that would
dwarf NAFTA, Congress must establish negotiating priorities and
enforceable consultations by the administration.
Key are the following: one, we must document that any new
trade deal will not add to the nearly $1-trillion annual trade
deficit. When do we start to measure the results of 20 years of
these trade deals in fast-track authority? No other nation has
trade deficits like this, and, while we respect this body in
deliberating over budget deficits, every economist, Economics
101, knows there is a direct relationship between trade
deficits and budget deficits.
Second, we must document the likely net effect on
employment. These micro-examples are wonderful, and we applaud
them. But what is the net effect? What has the net effect been
of 20 years of these trade deals? What has happened to our
jobs, our communities, the North Philadelphia that I grew up
in, the Cleveland that I can picture right now? Devastation
throughout those communities; nowhere near the replacement in
jobs for the more than 700,000 jobs lost from NAFTA alone. Even
the Korea trade agreement that was supposed to bring new jobs--
in fact, we have lost 40,000 more jobs since its passage.
We can take micro-examples, like telecom equipment. There
is no telecom equipment made in this country at all. And yet
what do we have today? What did we have when we grew up? We had
Bell Labs, we had Western Electric, we had Lucent. Every one of
those hundreds of thousands of jobs is gone, and yet we are the
biggest consumer of those products. And yet China, which stayed
on to enterprise ZTE and Huawei, and European companies that
are promoted by their nations, whether Alcatel or Siemens, or
Ericsson or Nokia, are thriving.
Third, we must document the effect on pay and the standard
of living. Since NAFTA, in these 20 years, average weekly take-
home pay in the United States has declined by more than $100.
It is directly related.
I could tell you story after story where CEOs say to me, it
is gravity. We have to move the jobs or you have to cut the
pay. And so we have high-tech jobs, like Internet help jobs, at
$10 an hour in Goldsboro, NC, and we cannot raise the pay
despite collective bargaining.
We must ensure, fourth, that consumer protection
regulations by Federal, State, and local governments are not
diminished. We are quite concerned about that in terms of the
text that I have read on Trade Promotion Authority that we are
considering here today. Most U.S. consumer groups are concerned
that trade agreements can be used to degrade our food safety
protection. Allowing for fast-track consideration of TPP would
further jeopardize the safety of food consumed in the U.S., as
food standards, country-of-origin labeling, and other laws
could be undermined.
Fifth, we must ensure that all trading partners comply with
International Labor Organization principles and conventions.
Most countries have ratified eight core conventions. Sadly, the
United States has only ratified two. Amazingly, those
conventions--child labor protection, freedom of association--
require a two-thirds vote of this body. Yet, this fast-track
authority would provide that a multilateral trade bill covering
a billion people would go through with a majority vote.
We need to take those ILO conventions and put them in the
fast-track authority.
Sixth, we must ensure that environmental standards are not
degraded and are enforceable. If recent leaks in news reports
are correct, the USTR may be backing down on some key issues,
like internationally recognized pollution controls and logging
regulations. We need to make improvements in global environment
issues, not negotiate a retreat.
Seventh, we should ensure that social goals on the
environment, labor rights, and consumer protection are
enforceable, at least at the same level as other sections. We
cannot have a democratic society if corporations have access to
superior remedies to address their concerns.
And finally, we must ensure that Congress plays a
meaningful role. We applaud those members of the committee who
have written to the USTR demanding exactly that.
Thank you.
The Chairman. Thank you very much, Mr. Cohen.
[The prepared statement of Mr. Cohen appears in the
appendix.]
The Chairman. I would like to ask Mr. Cote, Mr. Allen, and
Ms. Stegemann, in your companies, your businesses, what are
some of the opportunities that you see we could pursue here
with TPA and the trade agreements to further help your
companies export overseas?
That is, what are some of the barriers that you face today?
I might say, just for example--it is not your business--but
Malaysia, for example, has a 40-percent tariff on tires, and we
have a big export business in the United States that exports
tires overseas. But they have a 40-percent duty on American
tires, and Malaysia is doing an agreement with other countries,
which means other countries nearby, Indonesia and others, will
not have to face that same 40-percent tariff.
There are really two parts to that question. One, we are
looking for opportunities. But, second, if we do not pursue
opportunities under TPA, other countries will do their
agreements and give an advantage to their companies.
But in your industries, what are some of the areas where
you see barriers that could be addressed with TPA and TPP, for
example? Any of you.
Ms. Stegemann. I will take that. It is a great question. I
am thinking about the TPP agreement. There are a lot of
countries involved.
For a small company like us, as I mentioned, we are very
committed to meeting very high regulatory standards in every
market that we participate in.
Because the countries are so varied in their approach to
regulatory requirements, from Canada to Japan to Australia to
Singapore, they all have a different take on requirements in
our industry. It is very difficult for us, with very limited
resources and a limited budget, to stay abreast of regulatory
requirements as they develop and change in every country.
For every country we export to, we have to ask ourselves,
``What are the latest requirements? What do we need to do to
stay compliant?''
So, if the negotiators on both sides can take a look at how
we can make things more efficient, easier for a small company
to understand what the regulatory requirements are in the TPP
member countries, so that we have some kind of a simplified
approach, if you will, an ability to meet very high regulatory
standards, that would be a great help for us.
The Chairman. Mr. Allen?
Mr. Allen. Thank you very much for asking that question,
Senator.
I would refer back to CAFTA as an example, once again. Once
that trade agreement was settled, it put U.S. apples on the
same playing field as the other importing countries from the
southern hemisphere. By removing the tariffs and removing some
of those barriers, our business into that part of the world
grew very quickly.
I think it is very important that we are able to compete on
a level playing field in different markets. Traditionally,
unfortunately, what has happened is that we are confronted with
a lot of barriers, such as phytosanitary and protocol issues,
that are built to keep us out of those markets. And I believe
that the trade agreements should address and can address them,
but being mindful that we need to make sure that we protect our
markets with the products coming into this country the same way
that we are being asked to protect foreign markets.
The Chairman. Mr. Cote?
Mr. Cote. I would say those are two very good, specific
examples. I would have to get back to you with some of our more
specific examples. But I would say we are a net exporter and
have been for a long time, and, to the extent that tariff
barriers are reduced, it makes it easier for us to increase the
capability of our exports.
The Chairman. I would like to ask all of you--I do not have
much time left here--the degree to which you are concerned that
if we do not do this, that is, if we do not have a solid Trade
Promotion Authority and, therefore, negotiate solid trade
agreements, like the Trans-Pacific Partnership, that we will
lose the opportunity to set higher standards, because those
other countries negotiating agreements are not going to set
high standards.
A good example would be right now, for example, Mexico and
Japan have concluded a trade agreement 2 years after the last
TPA expired, and that contained no commitments on labor
standards or rights. It contained no provisions on environment,
which, obviously, is of interest to the United States in trying
to set standards in agreements.
In addition, I might say China is now negotiating their own
deal with Japan and Korea, and that surely will not address
currency manipulation, another issue that is very, very
important to this country, certainly members of Congress, but
also this country and companies as they do business overseas.
So to what degree are you concerned, panelists, that a
failure to negotiate this agreement, to conclude an agreement,
will tend to result in the United States missing an opportunity
to set higher standards?
Let me put it differently. If those agreements other
countries are negotiating have low labor standards, low
environmental standards, the United States will still do
business in those countries, but under low labor standards and
low environmental standards and no currency manipulation
provisions.
So to what degree is that a concern? Because, if we do not
do these agreements and other countries do theirs, it helps
their people but does not include standards which are important
to the United States.
I do not have much time. In fact, my time has expired. You
can think about that. I will ask you on my next round.
Senator Hatch?
Senator Hatch. Thank you.
Mr. Cote, a number of op-eds in prominent papers across the
country are calling upon the administration to more actively
engage in ensuring prompt passage of TPA. For example, the
Chicago Tribune wrote that, quote, ``The President made no push
for TPA in his first 4 years. Recently, he has spoken out about
the need for it, but he has not twisted arms on Capitol Hill.
If TPA is the high priority that it should be for the
administration, Obama needs to demand it from members of both
parties.''
The Washington Post recently wrote that, quote, ``The GOP
is demanding that the President himself advocate fast-track
aggressively. It's not an unreasonable request. Mr. Obama could
start by giving the issue a prominent mention in his State of
the Union Address.''
Do you agree that the renewal of Trade Promotion Authority
should be a top priority for President Obama this year?
Mr. Cote. I absolutely agree it ought to be a top priority,
not just for the President, but for the Congress. And I really
think that there is not enough recognition in the country about
how much the economic world has changed over the last 20 years,
with the fall of the Berlin Wall, and how much it is going to
change over the next 20 years. And that shift, where developing
countries are going to become half of world GDP, and the fact
that other countries are creating agreements and this is our
best opportunity to start to influence how those economies
develop--it would be a shame if we would miss that opportunity.
I really think that that is a huge trend that we need to be
addressing as a country, as part of our global competiveness.
Senator Hatch. Thank you. As you know, intellectual
property is increasingly critical to the U.S. economy. In my
own home State of Utah, it is the lifeblood of our industries,
from information technology to the life sciences. Like many
businesses in Utah, I know that Honeywell has a long history of
innovation and depends on strong intellectual property
protections.
As I said in my opening statement, our bill maintains
negotiating objectives that seek the high standards found in
U.S. law. So let me ask you this question. Can you please
discuss why it is so important for innovative job-creating
businesses such as yours to have these high IPR standards as a
benchmark for U.S. trade agreements?
Mr. Cote. Yes. It is a huge deal for us. And to your point,
technology is one of the ways we differentiate all of our
businesses.
If a country wants innovation, if the world wants
innovation, it has to be protected or people stop innovating,
because it just gets stolen. To the extent that you can help to
improve IP standards around the world, that is absolutely
wonderful for any company that is trying to innovate.
Senator Hatch. Well, thank you.
Mr. Cohen, I respect you for your advocacy on behalf of
your members, but I just want to mention a few things to you.
One of my really dear friends, in the early part of my
service here in the Senate, was none other than Irving Brown,
who was the international vice president of the AFL-CIO and, of
course, the head of our tripartite negotiators at the ILO in
Geneva, Switzerland. In fact, at one time, he asked that I come
over and help him with a particular problem that could have
resulted in the United States leaving the ILO.
In all my discussions with Irving--and I used to stop in
Paris, and we would get together. We had a very close
relationship, and I had nothing but great respect for him. I
thought he was one of the greatest people I ever met.
But he seemed to appreciate the importance of international
trade in creating jobs in America, and I think Mr. Cote would
certainly agree that this is a way of creating jobs, not
hurting jobs. Naturally, some jobs do go, but by and large, it
is much better for us.
I do not see anybody there at the AFL-CIO today of Mr.
Brown's caliber. Of course, he was unique, there is no question
about that, and one of the truly great people, and yet hardly
anybody in America knows anything about him. But he actually
headed our tripartite delegation over in Geneva, Switzerland,
at the ILO, the largest U.N.-affiliated organization, and
everybody respected him. Our tripartite delegation consisted of
business, management, and government.
This international vice president of the AFL-CIO, who saved
Europe from communism, like I said, was one of the greatest men
who ever lived. It seemed to me he was pretty solidly in
support of really good trade agreements.
You are a very intelligent man. Why is it that the unions
cannot see that there are a lot of high-paid jobs that come
from really effective international trade?
Mr. Cohen. So, we support global trade, number one, and our
own union is--most of our members are high-tech and work in a
global economy----
Senator Hatch. Right.
Mr. Cohen [continuing]. Every single day. I think the
question is, what is the platform that we work off of? And,
again, I speak not only for labor in this case, but a broader
group of environmental and consumer groups. And we are quite
concerned about the platform.
So we need some version of fast-track authority, but we
need to make the standards that you spoke of, ILO standards,
for example, part of our standards. When we go to look at a----
Senator Hatch. But even Irving Brown knew that we could not
sign on to the conventions that the Soviet Union did all the
time, but never lived up to, because we would have to live up
to them, and it would throw a lot----
Mr. Cohen. For example, on TTIP, which this would also
effect, every member of the E.U. has adopted Convention 97. And
the conventions on freedom of association and child labor are
never considered here in this body, and we are saying that
those are the global standards.
Senator Hatch. But is that a reason for rejecting this
bill?
Mr. Cohen. It is a reason to say--excuse me for
interrupting. It is a reason to say that because, apparently,
those require a two-thirds vote, that we can put those
standards in fast-track and say that we support child labor
laws as a global standard, we support the global environmental
standards as a basis of the trade deals, and we support freedom
of association as a basis for these trade agreements, and that
that is enforceable as opposed to saying it is up to each
nation to figure it out.
We are just saying those should be part of fast-track
authority--and the currency manipulation standards--and that
they should be enforceable in the same way that a Honeywell can
go and enforce the standards in a TPP.
So we do not really disagree, except that the standards, in
our view, should be part of the fast-track authority.
Senator Hatch. My time is up, Mr. Chairman. Thank you very
much.
The Chairman. Thank you, Senator.
Senator Carper?
Senator Carper. Thanks, Mr. Chairman.
I want to really thank our friends, our witnesses from
across the country, for being here, for the work that you do
and the leadership that you provide, not only in your own
businesses or your own union, but really for our country.
I am going to ask--I have heard Mr. Cohen speak any number
of times, very convincingly, compellingly. I aspire to be more
like you in the way that I speak.
But I am going to ask our other three witnesses--I am going
to make a statement, and then I want to ask our other three
witnesses to reflect on what we just heard him say and to see
where you think there might be some areas for agreement. I
think this is an important issue for us to push forward. We
need trade. We need free, fair trade, and our economies grow
when we have that free and fair trade. But I just want you to
reflect on what he said and see where there might be some area
for consensus.
While you are thinking about that, I think I have shared
this story once maybe with Mr. Cote, and it goes back--this is
12, 13, 14 years ago--to the White House with President
Clinton, Vice President Gore, the President's cabinet, and 50
Governors from all over the country.
I was privileged to be the chairman of the National
Governors Association at the time. The President spoke, and
then we had an opportunity just to have a conversation, and it
was my job to call in people to ask questions.
I asked the first question, and the question I asked of
President Clinton was, I said, ``Mr. President, over here to
your right is Mel Carnahan from Missouri. He is going to run
for the Senate next year,'' being 2000. I said, ``I am going to
run for the Senate next year. We are both Democrats. One of the
issues that will be raised with us is how we feel about NAFTA.
How do you feel about NAFTA?'' And I said, ``Why should we
support that?''
And Bill Clinton, as you know, he is a pretty good
communicator too. And he smiled, and he said--he went into his
``ah shucks'' mode, and he said, ``Well, Tom,'' he said, ``You
know, in Arkansas, we raise chickens, and in Delaware you raise
chickens.'' And he said, ``There are a lot of countries around
that don't want to let us sell our chickens to them, and we
would like to sell our chickens to those people.''
He said, ``We let them sell their stuff to us. We have
forever. But there are countries around the world that put up
these tariff barriers, these non-tariff barriers.'' And he
said, ``The idea behind a free trade agreement is not so much
to let other countries sell their goods and services to us;
they're already doing it.'' He said, ``The idea behind it is
that we want to sell more of our stuff to them and to get them
to take down their barriers, whether they are tariff barriers
or non-tariff barriers.''
I have never forgotten that conversation. Another thing I
will not forget soon is a visit I had last Monday to Detroit
with Debbie Stabenow. And it was the North American
International Auto Show. I call it the Detroit Auto Show.
If anybody has questions about whether or not the American
auto industry is back, they are back. The top truck of the
year, GM Silverado; top car of the year, Chevrolet Corvette. I
mean, we are rolling, up from about 10 million units to 16
million unit sales this year, record profits, profit-sharing is
up, as you probably heard.
But we still have problems, and one of the problems we have
is South Korea. Last year, they sold over 500,000 cars, trucks,
and vans here. We sold fewer than 5,000 there.
In the negotiations on the Trans-Pacific Partnership that
are underway right now, one of our negotiating partners is
Japan. Last year, God only knows how many cars, trucks, and
vans they sold here. It was a lot. We sold just a fraction of
that over there.
They are still able to sell their stuff to us. We are not
able to sell our stuff to them. And my hope is--with the South
Korea free trade agreement which we negotiated, supported by
the UAW, as I recall, the idea was to be able to get our stuff
sold in those markets, to open up those markets.
Mr. Cote, just, if you can, give us a reflection on what
Mr. Cohen has said that might help us find some consensus here.
Mr. Cote. I see this TPA bill as an opportunity for us to
raise standards around the world. So whether it is work
standards, environmental standards, IP standards, this is an
opportunity for us to engage and raise standards around the
world and, at the same time, reduce the tariff barriers that we
do confront. And I think Elena and Jim did a nice job of
describing that.
In any of these sort of discussions, it is not like we can
unilaterally impose whatever it is that we want to do. The
other side has cards also, and we have to deal with the world
as it is, not with how we might wish it was. This is an
important time for us to be thinking about how we work together
to achieve an increase in standards around the world while
reducing those tariff barriers.
There is an old phrase that I like to use for a lot of
things that says, we cannot let the perfect be the enemy of the
good. And I think, as I take a look at what has been
accomplished in this TPA, it is pretty substantial in terms of
starting to advance standards around the world to more fairly
level the playing field that all of us have to deal with.
So I think it does a very good job of doing that and
considers both sides of the argument.
Mr. Allen. My comment would be that I represent food,
apples, and there is nobody in the world that grows food as
well as we do in the United States. That is why we are the
number-one ag exporter.
Senator Carper. No one eats as well as we do, either, or as
much of it. [Laughter.]
Mr. Allen. That is true. And we grow it----
Senator Carper. In fact, we would be better off if we ate
more apples and maybe used our Apple devices a little less.
Mr. Allen. That certainly works for me.
Senator Hatch. We are all going to eat chicken, I will tell
you that. [Laughter.]
Mr. Allen. But with that in mind, we grow the safest food
in the world, and I think that in itself will help raise the
standards as we negotiate these agreements and get into new
markets. Foreign products will not be able to come into this
country if they do not meet our standards. And the new Food
Safety Modernization Act that is going to be in force soon,
that is going to make sure that happens. So I think, on food,
that would be my response.
Ms. Stegemann. I think that is a great question. And I
agree with Mr. Cohen on certain points, that we have to be
mindful of what kind of standards we are embracing and messages
we are sending. But, as my colleagues have pointed out--and I
think Senator Baucus has alluded to some of that in one of his
questions--is this an opportunity for America to show
leadership to the world in terms of standards? I think the
answer is ``yes.''
As I reflect on some of our activities internationally, the
fact that we have very high internal, almost self-imposed
standards on how we build our products, how we comply with
regulatory requirements around the world, in a way, we are
creating barriers for other companies from overseas that are
not willing to hold themselves to the same standards, and that
is reflected in their products. Once you start using them, you
can tell that they are just not as well-made. They are not as
well thought-out. They fall apart. They may be unsafe to use.
So, again, I think it is an opportunity for us to show
leadership and to set very high standards for the rest of the
world to follow.
Senator Carper. My time has expired. Thank you all very,
very much.
The Chairman. Thank you very much, Senator.
Senator Grassley?
Senator Grassley. Thank you, Mr. Chairman.
Thank you, Mr. Allen, for being a voice for agriculture
here. There is not a lot of voice for agriculture in
Washington, and we need more of it.
I noticed in your testimony that you mentioned the sanitary
and phytosanitary issues that American agriculture products
sometimes face unfairly in foreign countries. Are you satisfied
with the provisions in the base text of the TPA bill on
sanitary and phytosanitary issues?
Mr. Allen. I do not know if I can answer. I am not sure if
I understand the base text at this point in time, but I would
be happy to look at it.
Senator Grassley. Well then, why don't you answer that in
writing for me? Would you, please?
Mr. Allen. Sure. Absolutely.
Senator Grassley. Thank you.
And I would like to ask Ms. Stegemann--and I thank you,
also, for being here. Your testimony that I read--I was
impressed with the success you have had taking NuStep products
into the international market and doing it so quickly.
You ended your testimony by stressing that trade agreements
are not worth the paper they are written on if they are not
enforced. I would like to have you give me a lot of examples,
but I have a follow-up. I would like an example or two where
you think that is not the case.
But the most important part of my question is, are there
specific areas that you are watching closely in the development
of the TPP and TTIP agreements that you believe could have
enforcement concerns?
Ms. Stegemann. I thank you for the question, Senator
Grassley. I would like to take this opportunity to say that one
of the big concerns for us as a small company is intellectual
property.
I did mention that we are not a high-tech company, but at
the same time, we have invested a lot of resources, time, and
money to create a product that is very unique. It is a niche
product. In fact, many of the countries where we have entered,
the new markets that we have brought our product to, it is a
new product category. So we are kind of leading in this health
care segment, and a lot of people are beginning to take notice
and are realizing that we have created a very attractive
business segment for ourselves internationally.
But being a small company, we do not have an in-house legal
team, certainly not anybody who is an expert in international
law. So we rely on our government to negotiate for us trade
agreements that do a very good job of protecting us in the IP
area.
Senator Grassley. I think you are telling me that as far as
these two negotiations going on, TPP and TTIP, you don't have
any particular enforcement concerns at this time. Is that
right? I mean the way that it is being negotiated.
Ms. Stegemann. Correct.
Senator Grassley. I would like to ask any or all of you my
last question. And the chairman touched on this a little bit,
but it is a new concern to me that has not been so much of a
concern in previous TPA debates, and that is currency.
The bill contains provisions related to currency
manipulation for the first time. Like many of my colleagues, I
believe this is an extremely important issue, and trade
agreements might be one of the best means that we have of
getting results.
All of you represent different industries, but I am curious
how important each of you believes addressing currency
manipulation is, for your specific industry. Is it a top issue,
is it part of the top five issues, or maybe it is not a worry
to you at all?
I would just like your opinion on that.
Mr. Cote. Sure. With 54 percent of our sales outside the
U.S., currency is something that obviously has an effect on us
generally. And I would say I am always in favor of a more level
playing field, no matter what it is we are dealing with.
But I would also have to say that the whole issue of
currency manipulation has not really affected any of our
decisions as a company or affected our results in any way. So
it is not even a top 10 concern for me.
Senator Grassley. Mr. Allen?
Mr. Allen. Again, I am not a finance expert as you folks
are.
Senator Grassley. Then I will give you an opportunity to
answer in writing.
Mr. Allen. All right. That would be fine.
Senator Grassley. Ms. Stegemann?
Ms. Stegemann. I would really echo the comments of Mr.
Cote. While it is definitely a consideration--we understand
that currency fluctuations can impact us either up or down,
good or bad--overall, our approach is, we want to be able to
export our products. That is our number-one priority. In my
experience, the effects of currency fluctuations kind of even
themselves out over time. Sometimes you are in the negative,
sometimes you are in the positive.
So, if you take a long-term approach to exporting, your
number-one priority is to be able to participate in the
markets, and the currency stuff, you just kind of deal with it
as it comes.
Senator Grassley. Mr. Cohen?
Mr. Cohen. I would say it is a huge consideration, has huge
consequences in terms of jobs, where production occurs, the
exporting of environmental issues to some other nation; we put
it way at the top. The key is that it has to be enforceable
with major consequences.
I think it is good that it is mentioned in this
legislation, but we believe the consequences of it have to be
enforceable in the same way that any other provision of a trade
agreement would be enforced.
Senator Grassley. Thank you, Mr. Chairman. And thank you,
panel.
The Chairman. Thank you, Senator.
Senator Thune, you are next.
Senator Thune. Thank you, Mr. Chairman. And thank you all
for being here today. I appreciate the opportunity to hear from
all of you about the importance of trade and the importance of
TPA.
I strongly support the push to get Trade Promotion
Authority enacted as soon as possible. There are so many
American manufacturers and farmers and service providers that
can access and benefit from fast-growing economies around the
world.
TPA, at its core, is about building new trade relationships
in a world where 95 percent of the population lives outside the
United States and 80 percent of the purchasing power is outside
the United States, and I use my own State of South Dakota as an
example. Twenty years ago, 11 percent of the jobs in my State
were related to exports and to trade, and now that is 22
percent. So it has literally doubled. One in five South Dakota
jobs depends on international trade.
So you consider a State like mine, which has a small
population, we ranked 13th in terms of agricultural exports--
and it is about $2 billion a year just in oil, seeds, and
grain. So I see this as an opportunity to open even more market
opportunities to our products and to grow those numbers, and I
think this debate is long overdue. My only regret is that it
has taken this long to get here.
Every President literally since Franklin Roosevelt has had
this authority, and I am glad that President Obama has chosen
to request it, even though it has, unfortunately, in my view,
been delayed now for 4 years. So, it is time to get it done.
I wanted to mention one thing, and I guess I would direct
this to you, Mr. Cote. One of the most important benefits of
the TPA legislation that has been introduced by the chairman
and Senator Hatch is the issue, I think, of digital trade. Last
December, Senator Wyden and I introduced the Digital Trade Act,
which modernizes, basically, our trade laws to reflect the
Internet-enabled world in which we now live and do business.
So I am very pleased that this TPA legislation that we are
discussing today includes a robust section on digital trade,
with provisions addressing nearly all of the issues that are
included in my bill.
I will just say, by way of example, that the TPA bill seeks
to prohibit unjustified barriers to the free flow of data
across borders, as well as forced localization policies that
are designed to favor foreign businesses over U.S. businesses
by compelling those businesses to use local infrastructure,
such as data storage, Internet, or e-mail services.
So I would say, just to you, Mr. Cote, as someone who is a
CEO of a global company, can you comment on how important it is
that we have provisions in our trade agreements that put
American businesses on a level playing field as it relates to
local businesses in foreign markets?
Mr. Cote. In general, I would have to say I am always in
favor of a more level playing field so that we can compete
effectively around the world.
I am not completely conversant with the details of what you
described in the bill, but I would say that I am in favor of
free flow, generally, whether it is goods, services, or digital
trade, on a level playing field, because that will increase
trade and, I think, benefit everybody.
Senator Thune. Thanks.
Mr. Allen--and I assume my colleague from Iowa, Senator
Grassley, has probably already covered this to some extent--but
in your testimony, you discuss barriers that are facing U.S.
agriculture in foreign markets, such as unscientific sanitary
and phytosanitary measures, or what we call SPS measures.
As you may know, the TPA legislation includes provisions to
ensure that SPS commitments by our trading partners will be
enforceable, binding, and subject to effective dispute
settlement. This is especially important in the context of
trade agreements where our trading partners make commitments
that go beyond WTO rules.
So, could you just comment on this particular issue and how
important it is that we have binding and enforceable rules to
prevent unscientific barriers to American agriculture?
Mr. Allen. It is absolutely important. We run into this
scenario often in the apple industry based on insects and
pests. We have an ongoing situation right now with Israel,
which is a great trading partner for the United States and,
specifically, New York State with apples, and we have been
working under a protocol that has been accepted and documented,
and research has proved it for decades. Yet, most recently,
they have tried to change the protocol to make it much more
difficult.
I think under a trade agreement that was negotiated
properly, we would avoid that, because we feel that they are
using that as a barrier, because there is not a lot of data to
reinforce the reasoning behind their request.
Senator Thune. Just very quickly, anybody who chooses to
comment on this, maybe Mr. Cote. The three trade agreements
that we got in 2011 were really important. There was a big push
for a Russia PNTR in 2012. In both cases, it took the active
involvement of the White House. And it has been pointed out
that the trade rep is not here today, but could you just
comment on how important White House involvement is going to be
to enacting TPA?
This is not something, obviously, that Congress, in my
view, can do without active engagement from the executive
branch. Would you care to comment on that?
Mr. Cote. I would have to agree with you. But the executive
branch, along with the Congress, is going to have to work
together to get this done, and I think that is why the USTR has
been very much involved in trying to get something done here,
and we should. Everybody is going to have to work together.
The Chairman. Thank you, Senator, very much.
Senator Thune. Mr. Chairman, I would say I hope they lean
into it, and I really wish we had a trade rep here today. Thank
you.
The Chairman. Thank you, Senator.
Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman.
I want to agree with Senator Thune. This is a good first
step, this hearing on Trade Promotion Authority, but we do need
to hear from the administration, and we need to have them here.
Let me make, first, a couple of comments. I want to ask a
question about scope here.
Trade is critically important. We are in a global economy.
We need to participate in trade. It is impossible for Congress
to negotiate trade agreements. Trade Promotion Authority is a
reasonable request.
But there are two areas here that need to be answered that
a lot of us are uncomfortable with at this stage. One is the
role that Congress plays, because we are delegating our
authority. We have the authority, and we are giving up our
rights to be able to make specific changes, and it is very
important that there is a close working consultation process
and that we do not get off track, and Senator Brown is going to
be talking, I am sure, more about that. He has been our leader
and is trying to bring us together on a reasonable proposal
here. Times have changed, and I think it is important that we
have a clear role that we play with the administration during
trade agreements.
The second is the scope of the expectations. And I have
been in Congress long enough to see the resistance to expanding
the scope. There was strong resistance for us dealing with
labor and environment within a trade agreement, Mr. Chairman,
and we finally got that changed, and now I think it is beyond
question that we should have at least ILO standards in the
countries that we deal with and that there should be
enforceable provisions for labor and environment.
But I raised the issue of, when we started, it was mostly
tariffs. Then we got into non-tariff issues, such as
intellectual property, and we now understand that labor and
environment standards are important. Why? Because America has
strong standards.
I raise the issue that we need to do a better job on good
governance. The countries that we are now entering into trade
agreements with are countries that do not have good governance,
which puts American companies at a strong disadvantage.
And I appreciate the fact that the chairman's bill mentions
corruption and is trying to deal with corruption. I think we
have to be bolder than that. We have been bold enough to
include ILO in the objectives of our trade agreements. There
are international human rights conventions adopted by the U.N.
that deal with protecting the rights of citizens from being
arbitrarily arrested, and the right of privacy, and those types
of issues that are fundamental.
So I would like to see support from particularly the
business community to fight on behalf of American companies for
a level playing field and say, let us be bold. Let us use trade
as an opportunity to advance good governance in the countries
where we want to see more open markets.
So can I get your help to expand the scope of TPA to
include those types of issues so that American companies can
have a more level playing field, so at least our trade
negotiators can attempt to use trade as leverage to improve
good governance, which is critically important if we are going
to have open markets?
I see everybody nodding ``yes.'' Mr. Chairman, I have full
support. So when I offer the amendment I will be able to----
Mr. Cote. My nod meant I was listening. I would have to
say, at the end of the day, I do not know that we can use trade
as a weapon overall in terms of how we get something done, just
because 80 percent of trade is occurring outside the U.S.
I am really concerned sometimes about that. I have kind of
likened this to the elephant who is taking a walk to go get a
drink of water, and we kind of look at it and go, ``Gee let's
put this on the elephant.'' Well, you can get to a point where
you put so much on the elephant, he never makes it to the
water.
I am not advocating against anything here. I would just be
careful that if we put too much on something, we can kill it
before it gets there. And, at the end of the day, I am very
supportive of a level playing field, and I think corruption is
one of the things that kills countries.
Senator Cardin. And all I am asking is that we try, that we
make that part of our objectives.
But I will point out that we heard similar arguments when
the United States took the leadership to use trade to bring
down the Apartheid government in South Africa. And it worked.
Other countries followed our leadership. And I think the same
thing is true in other areas of good governance, including
anticorruption, which I think is critically important to trade.
And I thank you for that.
The Chairman. Thank you, Senator.
Senator Toomey, you are next.
Senator Toomey. Thank you very much, Mr. Chairman. And I
just want to thank you directly--and Senator Hatch and Chairman
Camp--for producing, I think, a very good product here. And I
appreciate your having this hearing.
I want to express my disappointment that the trade rep
could not be here, but I know he has indicated his support for
Trade Promotion Authority, and I do very much hope that the
President will aggressively engage on this, because, as the
chairman has pointed out, this is our lift. It is always
difficult politically to get this done, and we know that the
support with our friends on the other side is at a level which
could use some encouragement, I think.
So I hope the President will engage. I am thrilled that the
Commerce Secretary, Secretary Pritzker, has been a very, very
forceful, outspoken proponent of expanding trade, and I think
that is a very encouraging sign.
Before I get to a specific question, I think it is
important to underscore a macro point here, and that is, over
the last 100 years, America's global leadership in expanding
trade and opening markets has been profoundly and enormously
beneficial for America and for the entire world.
The result is, today we live in the freest trading
environment in at least 100 years, maybe much longer than that.
And the result is that countries around the world have been
encouraged to develop market economies, rule of law, and more
democratic societies. As a result of those things, we have
lifted literally billions of people out of poverty, created
opportunity, raised standards of living, and nowhere more than
in the United States of America, where we have benefitted
enormously from this.
One of the ways that we benefit that we sometimes overlook
is, as we lower barriers to trade and lower the taxes that we
impose on imports, we save our constituents, the consumers,
money. So the single mom who is struggling to raise her kids
and make ends meet benefits when she can go to a store and buy
a product at a lower cost. That is helpful to her, and that is
a direct result of negotiating trade agreements that lower
tariffs. She also has more choices in the goods and services
that are available to her. And there is no question that it
results directly in more exports. We have seen that time and
again, and that means more jobs.
In Pennsylvania, 20 percent of our manufacturing jobs are
tied directly to trade, and they are some of the best jobs we
have in our country and in our State, whether it is making
locomotives in the area at General Electric, or the chemicals
and gases at Air Products, or the technology at Westinghouse,
these are some of the best-paying, most sought-after jobs we
have. And if we lower barriers to trade elsewhere, we will have
more of this growth.
But that is my view of the history. I would like to pose my
first question to Mr. Cote, and it is simply this: all else
being equal, if we pass Trade Promotion Authority and that
leads to completion of some of the big trade agreements that
are currently under negotiation, all else being equal, do you
think that would tend to result in you hiring more workers or
fewer workers at your company?
Mr. Cote. Well, first of all, I agree with the statements
that you made up front, and I do think trade has been--and
economics have been--a force for good, not just in the U.S.,
but in the world. And at the end of the day, to the extent that
our sales increased for any reason, whether it is trade or
something else, that is what causes me to add more employees.
So the answer to that would be ``yes.''
I think you would also get another affect, and that is,
this has the opportunity to increase foreign direct investment
in the U.S., because when foreign companies can export more
easily out of the biggest market in the world, with the energy
advantage that we already have and the rule of law that you
mentioned, I think it helps to encourage FDI into the country.
Senator Toomey. I also think that it is very important, in
the context of these agreements--and I appreciate that several
of the witnesses have mentioned the importance of protection
for intellectual property. That is absolutely essential. It is
our great competitive advantage in the entire world, and it has
to be an important part of all of our trade agreements.
I am particularly concerned that the pharmaceutical
industry be able to sell products that are enormously expensive
to bring to market. The only way that model works and we get
new generations of life-saving drugs, is if we do protect that.
My last question is for Mr. Allen. Pennsylvania ranks
fourth in apple production and apple exports. Of course, our
apples are the best, but we rank fourth in total.
We sent a letter, several of my colleagues and I, because
there has been a significant decline in apple exports to Europe
recently. If we are able to complete the trade agreement with
the Europeans that is under consideration, do you think that
would likely reverse that or at least stop that decline and
perhaps turn that around so that we could start exporting more
apples to Europe?
Mr. Allen. That is a very difficult question.
Unfortunately, the European issue goes much deeper to Minimal
Risk Levels and pesticide levels on certain chemicals. The
European Union has very strict MRL levels, and a lot of them
are very difficult to match. There is a material that we use
extensively that, as of February 1st, we will not be able to
ship into the country. And it is a proven safe material used in
the United States.
So unless the TPA addresses the MRL levels, it probably
will not help it.
Senator Toomey. Well, maybe that is the kind of thing that
the negotiations ought to address. I appreciate that.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Nelson?
Senator Nelson. I had a conversation last year with the
chief negotiator in Brussels for the European Union, and, at
the time, he was cautiously optimistic that we could get an
agreement.
Reflect, any one of you, if you will, on the enormity of
the importance of a European-U.S. agreement that would cover,
in effect, 45 percent of all the trade in the entire world and
what that means to the U.S.
Mr. Cohen. I would say that the negotiations with Europe
are incredibly important. The question is, from the front end,
can we state our objectives, frankly, to go up to the standards
of the European Union on issues like the environment and
workers' rights and labor standards?
So we would see it as an opportunity, actually, to set
higher standards, if that is what our goals and objectives are,
compared to TPP, where, if there are not those same kinds of
standards, American workers will compete with an average wage
in Vietnam of 75 cents an hour, no right of association. The
Vietnamese government told our staff, the negotiators, ``We
have a communist government. We don't need labor standards.''
The question is, what kind of a democracy do we have, and
do we move to higher standards, which still exist in the world
now, or do we unravel what we have?
Senator Nelson. Is there any other comment on that, just
briefly? I have two other things I want to----
Mr. Cote. As you might imagine, I think it is a terrific
thing for us to be doing. The two biggest trading blocs in the
world reducing barriers and increasing the free flow of trade
is, I think, a good thing for both of those trading blocs.
Senator Nelson. Mr. Allen, you represent apples. I
represent oranges. This is one of the few times that you can
compare apples to oranges.
Do you want to comment on all fruit, how it will be
advantaged with such an agreement?
Mr. Allen. Again, it is quite specific. Actually, Europe is
a pretty large apple-producing group of their own. So the apple
exports from the U.S. into Europe are not as high as many, many
other countries.
We compete against their homegrown product, and sometimes
that is rather difficult. And, again, I mentioned the E.U. has
a very strict level of MRLs. It is becoming more and more of an
issue. And perhaps the reason those levels are what they are is
because they want to put that up as a barrier, because they
certainly grow a lot of apples on their own.
By the way, England, the U.K., is a little different,
because that is a good trading partner with the United States,
and especially New York, on apples. But we face the same issues
in the U.K. as we do with the E.U.
Senator Nelson. Mr. Cote, you represent an aerospace
business. I have some passing interest in aerospace. Talk about
the future of aerospace with regard to TPA.
Mr. Cote. Aerospace is one of those industries that is
going to continue to grow, I think, for a long time to come,
because the world is becoming more wealthy on a per capita
basis, and, as it does, more people travel. Businesses become
more global. Families just become more dispersed. So that is
going to continue to grow.
To the extent that we can compete better because we can be
in every single country, that will add to the capability in
which I would say the U.S. far exceeds the rest of the world,
and we would like to keep it that way. And our ability to be
able to sell into these countries with the reduced barriers
would be a wonderful thing for the aerospace industry.
Senator Nelson. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Brown?
Senator Brown. Thank you, Mr. Chairman.
Often, when we debate trade agreements, history is
recalled, and revisionist history seems to come into play.
Just a reminder, as my colleagues love to cite Smoot-Hawley
and how that caused the Depression--and Senator Hatch did not
exactly say that, I understand. But keep in mind, when Smoot-
Hawley was passed, we had a trade surplus in this country. And
that is what angered the world so much, that we already were in
a dominant position, then we passed Smoot-Hawley, not that we
had the biggest trade deficit in the history of the world and
then did something.
This is for Mr. Cote, Mr. Allen, and Ms. Stegemann. If you
would answer, then I will have another question for Mr. Cohen.
The country of Australia, with which we have a bilateral
trade agreement, passed a strong public health anti-tobacco
law. Philip Morris, a company domiciled here but having, I
assume, subsidiaries in different places, sued the Australian
government, sued a government, a locally controlled, sovereign
state, democratically elected, that passed a strong public
health law to protect their citizens, particularly children,
against tobacco.
They went all the way to the Australian Supreme Court. The
government of Australia spent a lot of money defending this
against this large, rather profitable tobacco company.
Ultimately, the Australian government won in Australian courts.
But then, after the Supreme Court upheld that Australian public
health law, Philip Morris then sued the Australian government
pursuant to the investment treaty that they had with Hong Kong.
Now, here is my question. Since NAFTA, we have had in these
agreements something called investor state, the first time I
believe ever in trade policy where a company can sue a foreign
government. The foreign government's democratically attained
rules or regulations--a company from outside sues them to
overturn what that sovereign country has done.
My question is this, to the three of you: do we want this
kind of power where a company can go into another country and
sue that country on a food safety or tobacco protection or a
consumer law or a public health law like that?
Are those provisions we want, both for companies in the
U.S. to sue other countries or companies in other countries to
sue us to weaken these laws that are democratically attained
rules and regulations?
Mr. Cote, if you would answer that first.
Mr. Cote. I would say, even though I am not a lawyer, I
generally do not mind opining on the law. But this time, that
is a level of legal complexity that is beyond my capability.
Senator Brown. Well, it is really simple. It is not
complex. Should a company like yours have the right to go into
Guatemala and undertake litigation to weaken their public
health laws, when, first of all, Guatemala probably does not
have a whole lot of money to defend these kinds of rules?
Should that be part of our international trade regiment
generally?
Mr. Cote. My apologies, but I just do not have an answer. I
am not knowledgeable enough to even comment.
Senator Brown. Could you have someone in your corporation
who--I assume you have a legal team that could answer that,
then, please.
Mr. Cote. Unfortunately, I have to have a very good legal
team.
Senator Brown. And I understand that.
Mr. Allen?
Mr. Allen. My gut feeling would be ``no.'' That is only my
personal opinion.
Ms. Stegemann?
Ms. Stegemann. Unfortunately, I do not have any experience
with these matters, legal or tobacco. But you mentioned
Australia, and I was just kind of getting excited because it is
a market that we are beginning to get established in. It is a
great opportunity. I would love to go and visit our distributor
there.
They actually have shown a lot of leadership in health care
for seniors, and that is why it is an important market for us.
They understand why it is important for people of all physical
abilities or disabilities to exercise, and it is a very
attractive market for us, and we are happy that we have a free
trade agreement with them.
Senator Brown. You are a great advocate for your business,
and thank you for that.
Mr. Cohen, I have written two letters to Ambassador Froman,
spoken to him personally, spoken to the President's Chief of
Staff about this, regarding my concerns related to tobacco and
the Trans-Pacific Partnership. I am concerned, from editorials
written in the New York Times to the article you cited and the
environmental issues, that TPP may allow private companies to
undertake legal action against common-sense tobacco regulations
through investor state.
Given past agreements, do you think the U.S. is able to
effectively address labor, environmental, and public health
standards in trade agreements? What standards do you think we
need included, and how do we enforce them?
Mr. Cohen. Well, again, there is a long answer to that, but
the short answer is, we absolutely need them. I think it is
clear what many of those standards are. We have covered many of
them. There are key global standards on the environment, on
workers' rights, on investor state. And, if we are not careful,
we are going to unravel all of those, not only in our own
Nation, where, frankly, we are sinking on every one of those
instead of rising up, but it will be the reverse of what we
heard here, because we will help unravel them in the rest of
the world as well, because of the so-called competition.
We have to level that by looking at what is most important,
what is most important for our children, what is most important
for children in other nations as well. I think the examples you
gave are right on target.
And, no, corporations should not have the right to sue
governments that provide consumer protection. Unfortunately,
TPP and even this Trade Promotion Authority will not stop that,
and TPP will actually encourage it by leveling up.
I cannot help but say one more thing. The multinational
corporation, like a Honeywell, can produce anywhere, and their
challenge is to produce at the highest rate of profit. This is
nothing about Honeywell. This is about any of them. And so, if
we do not set standards, those corporations, in fact, can
produce in Vietnam at a minimum wage of 25 cents an hour and
actually make higher profits.
So, if we do not look at those standards and have them as a
basis for trade, we will continue to run downhill, as we have
done since--and before even--but particularly since NAFTA, and
the pay of all workers in this country is affected, not just
those in tradable sectors, and the living standards of all of
us are affected. And the environment--we have one atmosphere,
and we have to move from the micro--yes, very important--and
look at the macro: how are we all affected, what is the net
result, as you said, of the worst trade deficit that the world
has ever seen, and, actually, how does it affect the budget
deficit? It is quite concrete. Yet, we seem to worry about the
budget deficit and never the trade deficit.
So we would say the trade deficit needs to be thought
through as well when we are doing trade deals.
The Chairman. Thank you, Senator.
Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman.
The Chairman. Actually, Senator Casey was in earlier.
Senator Cantwell. Yes. Thank you.
The Chairman. Senator Casey, you are next.
Senator Casey. Thank you, Mr. Chairman.
Senator Cantwell, thank you very much for allowing the
rules to be enforced. I did not realize that that was the case,
and I am grateful.
How about if I give you like 3 more minutes of my time?
Would that work?
Senator Cantwell. Take as much time as you need.
Senator Casey. But thanks very much. Allow me to do
something which I try not to do, which is--I try to avoid this,
but I do not always comply--to do a broader statement of kind
of how I see some of these issues and then get to the
questions. So I may be limiting my own question time by doing
what I am about to do.
I do not know all the panelists. I know Mr. Cohen, and I
know Mr. Cote. But I am grateful for all of you being here
today and for your testimony, because these are tough issues.
Let me make a broader statement first and then get to Trade
Promotion Authority. One of the reasons that I have a very
substantial degree of skepticism when I approach these issues,
trade agreements generally, Trade Promotion Authority in
particular today, is because it seems to me, the way I view it
and the way I view it from the perspective of what has happened
to Pennsylvania and the country--but I will speak mostly from
the vantage point of Pennsylvania--is we seem to get the short
end of the stick or have gotten the short end of the stick on
trade agreements spanning several administrations and, frankly,
even a generation or two.
It seems one of the reasons we get the short end of the
stick, or our workers do, is because the United States of
America, as I see it, does not have and has not ever had in
recent history a trade policy. It is an area of our national
focus where we deal with the rest of the world. It is unlike
national defense, where there is no country in the world,
unless they are really sleeping, that does not understand what
our priorities are when it comes to national security. When we
walk in the door to every meeting, every negotiation, they know
exactly where we stand. We say we stand for freedom, we stand
for democracy. We are going to not just fight against
terrorism, we are going to find the terrorists before they get
to us. So it is a very clear set of priorities.
But on trade, we walk in the door, our negotiators, for
years now, decades, have walked in the door and said, ``Well,
we don't have a policy that we can tell you about,'' unlike a
company. In Honeywell, you could recite your mission statement
in probably 30 seconds. I will not give you that chance today,
Dave. You know what it is.
But we walk in the door without a policy, number one, but
sometimes a list of concerns: environmental standards, labor
standards, the effect on jobs, as Mr. Cohen has pointed out.
And yet, by the end of the negotiation, we say, that stuff is
really important to us, these concerns are really important,
but, if we want the deal, we will get the deal, and we will get
to those priorities later.
It seems, without a policy that has been arrived at, all
you have are these trade battles when a trade agreement is on
the agenda, and there is a big debate and there is a vote held
and then people go back to their corners, and we have not
resolved the basic issue, which was the lack of a policy. And I
think it is a real failing. I think is a failing of both
parties, and I think we have to try to address that.
Then we come to Trade Promotion Authority, and we just have
a number of concerns that Senator Brown raised with me in a
letter to Mr. Froman, along with Senator Cardin, Senator
Menendez, and Senator Debbie Stabenow. I know these may have
been alluded to earlier, but we say we are now prepared to
support TPA, Trade Promotion Authority, legislation that
resembles the current framework for consultations, and it goes
on from there. So, obviously, anyone who wants to read that
letter can see our concerns.
Here is my question, in the 36 seconds I have left. Do you
view that as a problem? And I will say, parenthetically, that I
think Mr. Cohen's test or set of priorities where we measure,
on pages 2 and 3 of his testimony, he has eight elements. I
think we should try to arrive at some consensus. If it is not
eight, it should be some other number.
There is a lot we agree on, but we never seem to get to
that foundation that will allow us to get a better result at
the end.
Now, we are down to ``yes'' or ``no.''
Mr. Cohen, do you think we need a policy?
Mr. Cohen. Yes, absolutely. I think that is really the key.
We need a policy and clear objectives, whether those eight, as
you said, are modified, that the American people understand,
that are totally transparent and are the basis for Trade
Promotion Authority and, therefore, of our negotiations, and
that those of us who care deeply about those priorities are
involved in a similar way as, say, a multinational corporation
that can produce anywhere in order to meet its mission, which
is about maximizing its profits.
There is no harm in that. It is a question of balancing
that against the popular and public and social priorities that
we would have on a macro basis, looking at the history of these
trade deficits and the devastation that you talked about, not
just at the successes on the export side.
Senator Casey. I know we are over time. Maybe do ``yes'' or
``no,'' and you can supplement it certainly with written
testimony.
Ms. Stegemann. We just want access to the new markets, and
we will take it from there.
Senator Casey. Thank you.
Mr. Allen?
Mr. Allen. Agreed. We need policy so we can expand our
markets.
Senator Casey. Mr. Cote?
Mr. Cote. I like the idea of a policy, but given that it is
a negotiation, it is always important to recognize the group
that we are dealing with has policies also. So there is a
reconciliation or negotiation that has to go on to achieve the
best for both and get a deal that benefits both.
Senator Casey. Thanks very much. Sorry for the long
prelude.
The Chairman. Thank you, Senator, very much.
Senator Cantwell?
Senator Cantwell. Thank you, Mr. Chairman. I thank the
Senator from Pennsylvania for his comments and for his asking
us to pull up a little bit and look at this, because I think
that is what we need to do: to look at this from a
comprehensive perspective and try to move forward.
So I think people have said some very interesting things.
Mr. Cohen, you said we do need some form of a Trade
Promotion Authority. I find that encouraging in the context of
making sure we address all the issues.
Obviously, Mr. Allen, I have certainly appreciated your
focus here today on the apple industry, which employs about
59,000 people in Washington State.
So when I look at this issue, I think about how many
bilateral agreements have been done in the time that we have
not had Trade Promotion Authority. It is something like 83
bilaterals.
So, while we are not moving ahead on what we put on the
table, everybody else is playing this game. It is like we are
not even suited up. They are playing the game. And the end
result has been that they do bilaterals and they reduce
tariffs, which, on apples, can be as much as 10 percent. So
China does a deal with Vietnam. The next thing you know, they
are sending every shipment in for $2,000 to $4,000 less than
what we are doing.
While you can complain about that, and you can say, well,
this agreement or that agreement will catch us up, to me, the
real issue becomes market share, because once you start losing
market share, once you have lost 30 percent market share, it is
a problem. Apples may be one thing--I will say I have been to
China, and I have definitely seen people steal the Fuji,
Washington label and stick it on some other apple just to try
to confuse the marketplace that somehow that quality apple is
being produced by some other country, when it is not.
It is a bigger issue when it comes to technology.
So first, Mr. Allen, if you would comment on the market
share issue and why, as these developing countries have enough
resources to buy apples, we have to keep pace. Otherwise, we
are just competing against a cheaper product and oftentimes an
agreement that basically establishes the marketplace for that
product.
Mr. Allen. Absolutely. And I know you are aware that the
emerging markets are where the growth is: India, Brazil,
Russia, Asia. And one of the biggest concerns in the apple
industry is not necessarily losing a customer in that market,
but the concern is that the other countries are moving in and
taking that market away because of those bilaterals.
And we need to be equal to them, there is no question about
it. Again, I keep going back to CAFTA, and I hope that is not a
dirty word, but when we passed CAFTA, the Washington exports
into that part of the world just multiplied unbelievably. And
New York exports increased. So it was a win-win for the apple
industry, and that is what we need in these new emerging
markets.
Senator Cantwell. Well, I have certainly seen that, where I
have gone on congressional delegation trips and, while there on
military purposes or whatever, talked to them about one of our
products, only to find out they already have a bilateral with
somebody. Then the first thing that the country says to me is,
``Oh, it is really going to be tough, because we have had a
bilateral with so-and-so or so-and-so for so many years now,
and you are never going to beat their price or their
infiltration to the market.''
So it is not just that we are getting beaten on price by
bilaterals. It is the fact that, over time, that market share
loss will really put us behind, and it will be harder to catch
up.
So, Mr. Cote, when it comes to technology, it is a
different story, because technology adoption can solidify even
more someone's usage.
But back to Mr. Cohen's point. To me, this issue is also
about Trade Adjustment Authority. It is about better
partnerships. It is about making a more robust system so that
our workforce can be trained. I think one of the biggest
opportunities for us on a global basis is going to be a smart-
grid technology and the adoption of more energy efficient
policies.
But, if Mr. Cohen is losing workers because industry will
not even bother to retrain them using TAA or apprentice
programs--I mean, is that not right, Mr. Cohen? Have we not
seen, at the same time we have seen this growth in opportunity,
a lot of companies laying off?
How could we be laying off electric workers when the
biggest opportunity for us is smarter electrification? So I
guess I would like to ask Mr. Cohen and Mr. Cote, quickly,
their thoughts on just funding more apprentice programs,
funding more training of American workers so that we can
capture these opportunities.
Mr. Cohen. Just in less than 1 minute, I think that that is
critical, but I also think we have to block the low road. So
you had workers at a new Samsung plant in Vietnam rioting this
week because of their conditions there. That low road has to
get blocked. They have to have rights. Otherwise, the American
worker competing with that situation--it is gravity, as a top
CEO said to me. The production will go there if that low road
is not blocked, if we do not use trade as an opportunity to
say, on a global basis, we have to have minimum standards.
Senator Cantwell. Mr. Cote?
Mr. Cote. I mentioned earlier the need for a global
competitiveness agenda for the country, and one of the
fundamentals for that, for me, is training across the board,
and specifically in math and science.
If we believe that productivity comes from innovation, and
innovation is going to continue to be significant for us, if we
take a look and just compare ourselves with China, for example,
in the year 2007, we graduated about 450,000 engineers. China
graduated about a million, and that is with only about a third
of a percent of college-age eligible kids going on to college.
So when that equates, it will be like 500,000 engineers a year
to their 3 million.
We need a much bigger focus on math and science across all
our schools, from the time that kids start in Head Start all
the way until the time they get to high school, whether it is
apprentice programs, how do you just do more, work with
software. It is going to be important across the board.
Senator Cantwell. Thank you. Thank you, Mr. Chairman.
Senator Hatch. Mr. Chairman, can I just point out that half
of our engineering students are foreign students? So we are
really not producing that many engineers, and that is a big
problem.
The Chairman. Senator Menendez?
Senator Menendez. Thank you, Mr. Chairman. Thank you to all
the panelists. I was in and out, because we had other hearings
important to New Jersey.
Mr. Cote, thank you for being here today. Honeywell is a
great American company. We are thrilled that it is
headquartered in New Jersey, and I personally appreciate not
only your corporate, but civic engagement in the State.
Let me ask you this. One of the things I fight for on this
committee and also as the chair of the Senate Foreign Relations
Committee, with others in the world, is intellectual property
rights, because it is no value to have great American ingenuity
create a product and then have it arbitrarily and capriciously
stolen globally and not be compensated for it.
So do you think the intellectual property objectives, as
delineated in the bill, would provide a type of adequate
protection for companies like yours and other American
companies as it relates to intellectual property?
Mr. Cote. I cannot say I am expressly knowledgeable of
exactly what the provisions are in the bill and what they do.
But I would say, in general, I am very supportive of anything
that increases IP compliance around the world.
And, like the discussion we had on corruption, I think the
lack of protection on IP hurts a country over time. And I can
say that we are extremely careful about where we develop IP
around the world, and the safer it is, the greater the chance
that we can protect it. And we do now go to places that do not
protect it.
Senator Menendez. I hear from many American companies and
many New Jersey companies, which have an enormous innovative
capacity, about the nature of how countries, many in trade
agreements that we have--or on WTO and others--ultimately,
still will rather arbitrarily and capriciously go ahead and
constantly violate intellectual property rights.
One of the concerns that I have is, what standards do we
create and what enforcement mechanisms do we have, because, at
the end of the day, regardless of what agreements we enter
into, it is only the enforcement of those agreements that makes
them valuable. Otherwise, as with any law, there is very little
value to the agreement if you do not really seek enforcement.
So that is one of the things I am going to be looking at
here, because I think the distinguished chairman has been
nominated to be the ambassador to China. There is a place that
is probably at the top of the list in the number of entities
that consistently take American products and innovation and
just violate IP left and right. So that is a huge problem.
I want to ask--I know this has been asked in general, and I
think your answer was a consideration as a panel--but a recent
study by the Peterson Institute of Economics estimates that
currency manipulation has cost between $1 million and $5
million and increased the U.S. current account deficit by $200
billion to $500 billion. And, given that currency manipulation
has an impact at least as great as any provision of a trade
agreement and that venues such as the IMF and the G-20 have
failed to resolve this issue to date, would not any true, high
standard, 21st-century agreement have to include some type of
binding provision on currency manipulation to ensure that
benefits from trade that should accrue to the United States are
not undermined by a country's effort to artificially weaken its
currency?
Mr. Cohen. I would underscore that and say that currency
manipulation in TPA, labor standards, environmental standards,
and making it clear that our consumer rights at the Federal,
State, and local level cannot be abridged are really the core
for TPA, as well as the need to anticipate what are the likely
results in terms of jobs, the standard of living, and the
deficit itself that you mentioned for this Nation.
Those should be the core priorities as we move forward.
Senator Menendez. Does anyone else have a view on that?
Mr. Cote. From my perspective, I am all in favor of a level
playing field, in general, on everything, because I really do
believe that with market access and a level playing field,
American companies do a very good job of winning.
That being said, I can say that, while I have to be
conscious of currency, as I mentioned earlier, I would be hard-
pressed to point to a decision I have made or any results in
the company that have been impacted by it. So it is not even on
my, I would say, top 10 worry list.
Senator Menendez. Maybe as an individualized company, I
could understand that. But as a collective--when I see 1 to 5
million jobs, U.S. jobs, and $200 billion to $500 billion lost,
it certainly, even in this town, raises a light for me.
Finally, Mr. Chairman, if I may.
What is the difference between the answer you gave earlier,
Mr. Cote, about these trade opportunities being an opportunity
to raise the standards across the board, including on labor,
and the position that Mr. Cohen has that, yes, we support
trade, but there should be ILO standards. Is there a difference
between your two views?
Mr. Cote. Well, it sounds to me like there is not that much
of a difference in how we are saying it, but there is probably
a difference in terms of how far we would go to implement it,
because I do think it is important to try to raise the
standards around the world. But I also think it is a question
of degree and at what point do you look at something and say,
``This is a walkaway,'' versus, ``Okay, this is something that
I have to work through, and this advances the world, advances
the U.S., and this is as good as we can get at this point.''
So I would say it is more a question of degree.
Mr. Cohen. And I would say that, as important as it would
be to raise standards, we are actually faced here with
unraveling what we have done. So the race to the bottom, as I
have said, gravity takes us there, because in an economic world
workplace, if there are not minimum standards that are
enforceable, that is where you lower production costs and
create profits.
So we must set those minimum standards, is our view. It
does no good to have even a discussion about a higher minimum
wage in this country to have production occur in the U.S.,
Honeywell or anything else. A decision is made. How much does
it cost in Vietnam, and how much does it cost in Trenton or
Camden? That does not do us any good if we are not establishing
some kind of minimums about children doing it, about workers
with no rights doing it.
So we would say, quite passionately, whether it is our
environment, our workforce, or our rights as consumers, we must
maintain and increase those standards or they will sink into
oblivion.
Senator Menendez. Thank you, Mr. Chairman. That may be a
little preview of some of the questions you might get when you
go.
The Chairman. I might have to leave pretty quickly. I would
just put this out, just a reaction, because the legislation
does include the core labor standards, and they are all
enumerated, as you know. And it provides further that they must
be enforced and in the same way that other provisions are
enforced, that commercial provisions are also enforced.
That is at a much higher level than it was in prior TPA.
Mr. Cohen. The key would be those ILO conventions that we
have not adopted or even discussed here, that they be as
enforceable as anything else.
The Chairman. They are in the agreement.
Mr. Cohen. I think, again--I do not want to be
disrespectful--but I think the question is, are they
enforceable in a way that anything else in the agreement would
be enforceable, even though we have not adopted them? That is
the key.
The Chairman. The provisions in the proposed legislation
provide that they are as enforceable as any other provisions,
which were previously more enforceable.
Mr. Cohen. Even if we have not adopted them? So, if the
U.S. has not adopted six of the eight core ILO standards--that
is our concern. But I appreciate the effort, and we are happy
to follow up.
The Chairman. I am reminded of Dave Cote's ``you can't let
the perfect be enemy of the good'' here, because it is a major
advance, and I think, therefore, it should be treated as such.
Senator Wyden?
Senator Wyden. Thank you very much, Mr. Chairman. And I am
glad we have you here for an additional minute, because I
wanted to take just a minute before talking to the panel to
acknowledge your extraordinary record on the trade issue.
The reality is that Chairman Baucus was talking about
global economics long before it became cool. And you held the
position that I hold now, chairman of the Trade Subcommittee,
and you basically moved the entire committee to focus on East
Asia, to focus on Japan.
And in the tradition of your great mentor, Mike Mansfield,
you led. And what has been especially striking is, you showed a
lot of us how to look at the trade toolbox in a creative kind
of way, and I still recall when you brought in U2's Bono to
help get AGOA unstuck and create economic opportunity in
Africa.
So your work is not going to end when you go to China. But
I just want, as we move toward the end of this hearing, to make
sure people are aware and take this opportunity to really
celebrate your exceptional record and your leadership on the
international trade issue.
For the panel, my bottom line today is pretty
straightforward. Democrats and Republicans need to write a TPA
that leads to better trade agreements and, in effect, can
expand the winner's circle in the international trade area so
that Senator Casey's constituents in Pennsylvania do not feel
that they are getting the short end of the stick, and the
agreement works for, for example Oregon, where one out of six
jobs depends on international trade, and the trade jobs often
pay better than do the non-trade jobs because they reflect the
higher level of productivity.
Now, going into this challenge, we must face the reality
that the economic landscape in 2014 is very different than in
2002 when the last TPA was passed.
Senator Thune talked about our work on digital goods. The
Internet is now the shipping lane of the 21st century, and our
workers and businesses face a whole array of new challenges,
particularly in the rise of state-owned enterprises and
aggressive currency manipulation. So TPA is going to have to
reflect these changes and be written so that future trade
agreements, particularly those with Europe and Asia, are well-
shaped.
Now, I heard you talk to Chairman Baucus--and I apologize
for running in and out of the room. I chair the Energy
Committee and had some business there. And I have not heard,
for example, your thoughts with respect to the economic
challenges for your companies in Europe, which is a very big
market. You touched on the challenges with Asia with Chairman
Baucus.
But as we close on this, if you could just highlight--and
let us start with Europe, because I have not heard that
mentioned. What are the big challenges there? And for those of
you who want to pick up again on the discussion with respect to
the challenges in Asia, I would be interested in that. And I
think I have almost enough time to get all four of you in. And
I feel badly, again, for being in and out this morning.
Mr. Cote?
Mr. Cote. When it comes to Europe, I really do think they
are going to have a tough economy for at least another 3 years,
because they still have major issues that they need to address.
And I can tell you the way that we have planned in our own
company is to assume that Europe grows about zero to 1 percent
a year, and I think, unfortunately, that is what they are going
to be dealing with for a while. It is difficult, but that is
what they are going to have to deal with.
Something like this--the agreement that we have talked
about with Europe--would benefit both Europe and the U.S. at a
time when both of us are lagging economically, because we are
also planning in our own company by looking at the U.S. as
being more of a 2.5-percent-type growth country for the next 3
years.
This would do something to elevate both of our economies as
a result of that and be good for the two biggest trading blocs
in the world.
Senator Wyden. Very good.
Mr. Allen? Just go right down the row.
Mr. Allen. Thank you, Senator. Again, with different items,
different markets, there are different situations involved. For
the apple industry nationally, the biggest export markets are
Mexico, Canada, Thailand, Asia, Vietnam--a very emerging
market--and India.
Again, the European market is not that strong because of
their production of apples. So it is tough to answer that
question. It is a market for us, but it is not the emerging and
growing market as the other ones are.
Senator Wyden. Ms. Stegemann?
Ms. Stegemann. In Europe, we see more in terms of
opportunities than challenges. It is a relatively new market
for us. We are entering into a lot of northern and western
European countries. There are great opportunities there, very
high standards.
Of course, I guess one of the challenges for us is being
able to produce a product that meets very high standards for
people who are used to having locally made goods--Germans think
of themselves as exporters, not as importers. So to convince
them that we know how to make a good product in the U.S. takes
a little bit of selling.
I would say in terms of challenges, of course tariffs come
to mind. We manufacture a product that is expensive for us to
make. By the time our distributor buys it from us, they have
paid a lot for it, and then they need to make some money when
they resell it. So, by the time it reaches the end user and
they have paid VAT and tariffs, it becomes much more difficult
for us to get our product into the European market in greater
quantities.
Senator Wyden. My time is up. Mr. Cohen?
Mr. Cohen. I think there are great opportunities to look at
sustainable production and trade based upon, again, leveling up
to many European standards.
It was fascinating to hear Chancellor Merkel, a
conservative, talk about all renewables within 10 years. They
have much higher labor standards than in the U.S. in terms of
freedom of association, collective bargaining rights--
obviously, much higher standards.
They have adopted all eight core ILO standards. So, whether
it is environment or workers' rights, they have much higher
standards. We need to promote those, and they need to be the
goals we talk about in TPA.
Senator Wyden. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
Senator Portman?
Senator Portman. I thank the chairman. And I want to
congratulate you and Senator Hatch and Chairman Camp and the
administration for working together on putting together a good
bill on Trade Promotion Authority.
I know the White House is not here today, so I will speak
for them in saying that they support moving ahead with Trade
Promotion Authority. In fact, they say, in this release I have
in front of me, ``We look forward to working with Democrats and
Republicans alike to pass Trade Promotion Authority as soon as
possible.'' Broad bipartisan support.
So I wish they were here, because they are going to be
needed in order to get this done. Having been a U.S. Trade
Representative, I know that it is required that the executive
branch get engaged, and I know that they are going to. And I
know from talking to Ambassador Froman, he is already talking
to folks on both sides of the aisle.
We have to get this done for our country. It is sad to me
that since 2007, we have not had the ability to open up markets
for the workers, farmers, and service providers that I now
represent in Ohio and around this country. We may disagree on
some of the specifics, but let us be honest: not having this
authority has resulted in other countries completing agreements
without us, sometimes regional, sometimes bilateral, taking
away our market share, and this is a huge problem right now. We
have enough problems in our economy not to have the ability for
us to export the best products, the best services in the world.
Interestingly, when you look at the United States compared
to other countries--exports as a percentage of our GDP--we are
now tied with Ethiopia. There are only 12 countries behind us
in the entire world. We are not punching above our weight. We
are punching below our weight, as they say. We can do a lot
more.
With more exports, we have more jobs. Over a quarter of the
manufacturing jobs in my home State of Ohio are now export
jobs. And we need to access the 95 percent of consumers who
live outside of our borders, as has been said today many times.
This is the first administration since Franklin Delano
Roosevelt not to either have Trade Promotion Authority in place
or some other equivalent prior to the Trade Promotion Authority
being in place. And I was delighted when they asked for it last
year. They were also the first administration in the history of
the United States since FDR not to have asked for it until that
point. They finally asked for it, thank goodness, again, for
the sake of our economy and our workers.
Now, we have to get it done. I was U.S. Trade
Representative. I have spoken on the floor with Senator Baucus
and Senator Hatch about this, but I will tell you, the last
best offer will not be on the table to complete agreements
unless other countries know that we have this ability.
Our system works differently than the vast majority of
other countries, and they need to know that we are not going to
nickel and dime an agreement that is thought over and contested
and carefully negotiated and, in your worlds, whether it is
labor negotiations or whether it is business negotiations, you
see this all the time.
You have to be able to say, okay, this is it--at least to
go to Congress for an up or down vote. Ultimately, Congress has
the ability to turn these things down, and we have come very
close to doing that many times, as you know, and that is fair.
The people's voice needs to be heard. But we cannot compete in
this global marketplace without this authority, and I am
really, again, interested in working closely with the chairman
and the future chairman, who just left, and Senator Hatch and
others, to try to get this done.
There were comments made earlier about how, because we have
a trade deficit, it means that this USTR stuff, the opening of
markets, does not work. Here are the facts. Only 10 percent of
the world's economy is comprised of countries with which we
have a trade agreement--10 percent, that is all--and yet we
send 46 percent of our exports to those countries.
Think about that. We do not have a trade agreement with
China. The talk earlier was about how we have a trade deficit.
Yes, our trade deficit is made up primarily of two things. One
is exports to the United States of energy, and we need to have
a new energy policy for that, which we are making progress on
with domestic sources. And second is trade with China, and it
needs to be on a level playing field.
I fought, with my colleague, Senator Brown, and others, to
help ensure that. I will continue to do that. I believe in
enforcement. I believe it needs to be fair.
But, folks, we cannot say that these things do not work
when you look at the fact that in 2012, we had a $58-billion
manufacturing goods trade surplus with the 20 FTA partners we
have--a $58-
billion trade surplus. They purchased over 10 times more goods
per capita from the U.S. than non-trade partners.
So that information needs to be out there as we talk about
this. I really appreciate your testimony today. All four of you
made important points.
To Dave Cote, because you have a lot of workers in Ohio, at
21 facilities, I just have one question for you. Because you do
travel the world, you talk to a lot of folks about this. As you
are talking to government and business leaders in other
countries, how big a concern is it that we have not been
engaged in trade, and what impact does it have, as a matter of
fact, with your business and the people whom you represent,
your workers, your stakeholders?
Mr. Cote. It is a huge concern, and it is an opportunity
for us as a country, and I think you stated it very well up-
front.
As I said in my testimony, the global economy has changed
significantly over the last 20 years and is going to change
even more significantly in the next 20. And a lot of these
countries that we refer to as developing countries or
developing regions, in 20 years are going to represent almost
half of the global economy.
And, if we are not participating in free trade agreements
with that half of the world economy, that puts us behind a lot
of others who are moving in that direction. So it is important
for our growth as a country and for the prosperity and jobs in
the country for us to be out there doing this. I completely
agree.
Senator Portman. It is an important point, and that is one
reason we need to complete some agreements with some of those
countries.
We mentioned earlier that we do not have an agreement with
China, or Brazil for that matter, or India, countries that are
growing--Malaysia, Indonesia, and so on. So there is an
opportunity here to do more.
Specifically, Mr. Chairman, I do want to mention the health
care tax credit issue. We talked about this when we were
debating the SGR, and, at that time, you indicated that there
would be an opportunity to discuss including this health
coverage tax credit with an extension of TAA, which may well be
part of a TPA discussion.
I offered a bipartisan amendment, along with Senator Brown
and Senator Stabenow, to extend this health care tax credit.
The reason this is so important is that it is critical to
thousands of workers whose pension plans were taken over by the
PBGC, the Pension Benefit Guaranty Corporation, and are now
struggling to pay their health bills, including thousands of
retired Delphi workers in Ohio and across the country.
So I would hope that we could have a commitment as we move
forward with this that we do take the opportunity to also
extend the health care tax credit if we do move forward with
TPA and the likelihood of TAA being involved with that in some
respect.
I know I am over time. I appreciate, again, your testimony
here today and look forward to working with all of you on this
going forward.
Thank you, Senator Hatch.
Senator Hatch [presiding]. Thank you, Senator Portman.
I have to say, we are very lucky to have Senator Portman on
this committee, with his experience as the Trade Representative
of our country. He adds a great deal to this committee, and I
am grateful to have him here.
Let me just ask a couple more questions, and then we will
finish up.
Did you get enough time, Senator Portman? Did you have
enough time? Did you have anything else you would like to ask?
Senator Portman. I am good. Thank you.
Senator Hatch. Ms. Stegemann, let me just turn to you. The
Finance Committee received written testimony from J&J, Johnson
and Johnson, in strong favor of our bill. J&J is a member of
the Alliance for Healthcare Competitiveness, AHC.
A group of 19 leading firms and nonprofits involved in
American health belong to that organization. In their written
testimony, they note that health care is one of the largest and
fastest-growing sectors of the world economy, currently valued
at $6 trillion in 2010 and likely to surpass $8.5 trillion by
2015. They also note that the United States is uniquely
positioned to take advantage of this market if many of the
trade objectives outlined in our bill become law, and it will
be of great advantage to our country.
Now, do you agree that health and rehabilitative services
represent significant export opportunities for the United
States, and do you agree that our bill will help not only large
companies such as Johnson and Johnson, but also smaller
companies such as yours, to access these growing opportunities?
Ms. Stegemann. Absolutely. And thank you for the
opportunity, Senator Hatch, to comment on this.
Yes. Health care, particularly in terms of rehabilitation,
is a growing field. In terms of just demographics, the world is
aging everywhere, not just in the U.S. And so there are growing
opportunities for big and small companies to participate in the
commercial opportunities that this creates.
I also would like to mention that in my experience--and I
have traveled all over the world in the last 5 years with this
job--over and over again, I see how American companies and the
U.S., in general, are actually leaders in terms of addressing
the needs of people with physical disabilities and the aging
population.
So our company is also kind of at the forefront of this. We
have decided to focus on creating a product that addresses the
needs of the aging population and people with special needs.
And the world is looking to us.
Many people whom I have talked to in hospitals and at trade
shows around the world have said, ``We are not like you in the
U.S., where a person in a wheelchair feels comfortable going
out and being seen.'' In many parts of the world, people like
that feel like they have to hide at home.
So we have an opportunity not only to act on the commercial
opportunities that are out there, but also to show leadership
to the rest of the world through the products and services, and
even the legislation, that we have in the U.S. that address and
protect the needs of people in that population.
Senator Hatch. Thank you. I am very grateful to hear your
testimony regarding the benefits international trade has
brought to your company and to other companies of similar size.
I hear a lot of similar stories from small and medium-sized
businesses in my own home State of Utah, and one problem that
many of them face, as you have mentioned, is trade secret
theft. This is a growing problem around the world, and it is
estimated to cost U.S. businesses literally billions of dollars
every year.
Now, our bill specifically addresses this problem by
providing for high standards for the protection of intellectual
property rights, including new objectives prohibiting foreign
government involvement in the theft of trade secrets, limiting
government's ability to collect undisclosed proprietary
information, and directing governments to protect any
undisclosed information they do collect.
So my question to you is: do you agree that it is important
for TPA to address the problems of trade secret theft so that
companies like yours can safely export your equipment overseas?
Ms. Stegemann. Definitely. That is a definite ``yes.'' As I
mentioned before, being a small company, we do not have our own
legal staff. If we are ever faced with any kind of a threat, we
have to go to a third party or to a consultant.
So we really rely on our government and our negotiating
team to look out for the interests of companies like ours that
do not have a global staff. We do not have offices in other
parts of the world with staff who can advise us on legal issues
there. We very much look to our government to have a free trade
agreement that looks out for us specifically in this field.
Senator Hatch. Thank you. This has been a particularly good
panel, as far as I am concerned. All of you contributed much to
this hearing.
Let me just ask one more question of you, Mr. Cohen. I have
enjoyed your testimony, I enjoy you personally, and we do not
agree on some things, but that is okay. But this is more of a
comment than a question, I suppose.
I read your testimony, and sometimes I feel like you and I
are living in an alternate universe. Rather than trade
agreements costing U.S. jobs, company after company comes to me
and tells me that trade agreements helped them create and
retain jobs, both here and abroad.
In fact, I just received a letter from the
Telecommunications Industry Association, where they write that,
``Experience shows that the effects of prior trade agreements
on telecommunications exports are both demonstrable and
dramatic,'' and that, ``although countries having trade
agreements with the United States currently represent only 10
percent of the overseas economy, they account for 35.7 percent
of U.S. exports in telecommunications equipment.''
Now, the National Association of Manufacturers tells a
similar story, noting that, while the 20 countries with which
the United States has concluded trade agreements under TPA
account for just 9 percent of global GDP, they purchase nearly
half of all manufacturing exports.
These statistics clearly show we export more manufactured
goods to our trade agreement partners than to non-trade
agreement partners. These facts seem to fly in the face of your
argument that trade costs jobs, and I simply disagree with your
premise. I personally do not think that welding ourselves off
from the global economy will help our economy grow, and I fear
that if we do not act soon, the U.S. will fall further and
further behind our competitors.
Now, let me just say this. I am going to re-read your
testimony, and I am going to look for what we can do, where we
can find common ground. But I have to say, this agreement goes
a long way toward, I think, creating jobs in America that you
have every privilege in the world of unionizing, and many of
which are unionized.
So, I do not mean to lecture you. I am not trying to do
that. I just want you to be aware that I feel really deeply
about this, and yet I respect a number of the things that you
said as well. And we also run into the risk of, can we impose
our high standards on others, and, of course, the trade union
movement would love to be able to do that, in many respects.
But we would never get an agreement anywhere if we started
doing that.
The reason I mentioned Irving Brown is because he
understood all that, and the whole world listened to him.
Now, hardly anybody knows Irving Brown today, and it is a
doggone crying shame. He was one of the greatest men I met in
my whole time here. And he disagreed with me on a number of
things, but we agreed on a lot too. In fact, because I went
over to Geneva and helped him resolve a major problem that
would have forced us to withdraw from the ILO, the largest
labor organization in the world, the largest U.N.-affiliated
organization, we were quite close.
And I had done a number of other things internationally. I
helped raise money--and helped raise paper, mimeograph
machines, all kinds of things--for Solidarnosc over in Poland,
when Lech Walesa was getting tarnished by the Soviet people,
and helped to develop the National Endowment for Democracy. I
was one of the key people who developed it, was on the board
for the first 2 years, which is composed of three groups:
business, labor, and government.
I will never forget, Lane Kirkland, who was then the head
of the AFL-CIO, said to me, he said, ``Senator, if only you
were as good in domestic policy as you are in foreign policy.''
And I turned to him, and I said, ``Lane, I was thinking
precisely the same thing about you.'' And he laughed. He caught
himself, and then he got a big grin on his face. We had a great
relationship in those years. He also was one of the great
people on our foreign policy.
So I would like you to take back to our friends in the
labor movement--and by the way, I am one of the few guys in the
whole Congress who actually earned an AFL-CIO union card in a
skilled trade. So I will never forget that. But I would like
you to take back to them that this is going to create jobs.
This is going to help them. This is not going to hurt them. And
I do admire, in many ways, their position, though it is very
difficult to implement, of trying to get other countries to be
as fair to their labor employees as we are, and even trying to
get us to be more fair, and I respect that.
But I would like to see organized labor get a little bit
more behind these international trade agreements, because I
think they create more jobs. I do not just think so--I know it
means more jobs. I can make a tremendous case for it.
But just know that I respect you and respect the
leadership, and I appreciate you coming here today and giving
us your point of view.
I particularly appreciate you others as well. I will tell
you, Ms. Stegemann, you represent every small business in
America today that has any chance of exporting.
The apple industry, that is extremely important not just to
New York, but so many other States on the west coast and east
coast.
And of course, for Honeywell, I just have nothing but
admiration.
So we appreciate all of you being here. I want to come down
and shake hands with each of you, and thank you for being here.
With that, we will end this hearing and hopefully get this
bill to the floor.
[Whereupon, at 12:25 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
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Communications
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