[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
      ADVANCING U.S. BUSINESS INVESTMENT AND TRADE IN THE AMERICAS

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         THE WESTERN HEMISPHERE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 7, 2018

                               __________

                           Serial No. 115-136

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
        
        
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Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov, 

                      or http://www.gpo.gov/fdsys/
                      

                                 ______
                                 
                  U.S. GOVERNMENT PUBLISHING OFFICE
                   
 30-343 PDF                WASHINGTON : 2018                                        
                                 
                                 
                                 
                                 
                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                LOIS FRANKEL, Florida
SCOTT PERRY, Pennsylvania            TULSI GABBARD, Hawaii
RON DeSANTIS, Florida                JOAQUIN CASTRO, Texas
MARK MEADOWS, North Carolina         ROBIN L. KELLY, Illinois
TED S. YOHO, Florida                 BRENDAN F. BOYLE, Pennsylvania
ADAM KINZINGER, Illinois             DINA TITUS, Nevada
LEE M. ZELDIN, New York              NORMA J. TORRES, California
DANIEL M. DONOVAN, Jr., New York     BRADLEY SCOTT SCHNEIDER, Illinois
F. JAMES SENSENBRENNER, Jr.,         THOMAS R. SUOZZI, New York
    Wisconsin                        ADRIANO ESPAILLAT, New York
ANN WAGNER, Missouri                 TED LIEU, California
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
JOHN R. CURTIS, Utah

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

                 Subcommittee on the Western Hemisphere


                    PAUL COOK, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ALBIO SIRES, New Jersey
ILEANA ROS-LEHTINEN, Florida         JOAQUIN CASTRO, Texas
MICHAEL T. McCAUL, Texas             ROBIN L. KELLY, Illinois
MO BROOKS, Alabama                   NORMA J. TORRES, California
RON DeSANTIS, Florida                ADRIANO ESPAILLAT, New York
TED S. YOHO, Florida                 GREGORY W. MEEKS, New York
FRANCIS ROONEY, Florida

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Mr. Eric Farnsworth, vice president, Americas Society/Council of 
  the Americas...................................................     7
Mr. Neil Herrington, senior vice President for the Americas, U.S. 
  Chamber of Commerce............................................    13
Ms. Kellie Meiman Hock, managing partner, McLarty Associates.....    30

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Paul Cook, a Representative in Congress from the 
  State of California, and chairman, Subcommittee on the Western 
  Hemisphere: Prepared statement.................................     3
Mr. Eric Farnsworth: Prepared statement..........................    10
Mr. Neil Herrington: Prepared statement..........................    16
Ms. Kellie Meiman Hock: Prepared statement.......................    33

                                APPENDIX

Hearing notice...................................................    56
Hearing minutes..................................................    57
Written responses from Mr. Eric Farnsworth and Mr. Neil 
  Herrington to questions submitted for the record by the 
  Honorable Paul Cook............................................    58


      ADVANCING U.S. BUSINESS INVESTMENT AND TRADE IN THE AMERICAS

                              ----------                              


                         THURSDAY, JUNE 7, 2018

                       House of Representatives,

                Subcommittee on the Western Hemisphere,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2:19 p.m., in 
room 2172, Rayburn House Office Building, Hon. Paul Cook 
(chairman of the subcommittee) presiding.
    Mr. Cook. A quorum being present, the subcommittee will 
come to order.
    I would like to now recognize myself for an opening 
statement.
    The Western Hemisphere possesses tremendous opportunities 
for further economic growth and U.S. business engagement. The 
United States already has significant economic interests in 
Latin America and the Caribbean and is the largest single 
source of foreign investment for many countries.
    We are also the top trading partner for most countries in 
the region and have free trade agreements with eleven countries 
and bilateral investment treaties and international investment 
agreements with 19 countries in the region. Yet we are seeing 
hedging in the region from some countries that don't always 
play by the rules, which undermines U.S. economic interest.
    China has significantly increased its outreach to Latin 
America and the Caribbean, offering less stringent investment 
conditions and pledging $250 billion in investment over the 
next decade. However, it accounted for just 1.1 percent of 
foreign direct investment in Latin America and the Caribbean in 
2016 compared with the United States investment of 20 percent.
    I am particularly interested in the future of U.S. economic 
engagement with the Pacific alliance countries of Chile, 
Colombia, Mexico, and Peru. These countries adhere to market-
oriented policies, and taken together, they represent 39 
percent of Latin America's gross domestic product, offering 
U.S. businesses huge opportunities for greater investment in 
trade.
    Chile, Colombia, and Peru are among the world's most open 
economies with almost no restrictions on foreign ownership. 
Half of the 32 economies in the region also implemented at 
least one regulatory reform in the last year alone, making it 
easier for the U.S. companies to do business. Notably, 
Argentina, Brazil, Colombia, and Mexico have made serious 
energy reforms, opening their sectors to investors, making it 
easier to do business.
    The Northern Triangle countries have also taken steps to 
attract foreign investment by creating special economic zones 
and working to integrate their markets. And the Caribbean, the 
Dominican Republic, and Jamaica took actions last year to 
improve their business climates as well.
    Ecuador now has new political leadership and has announced 
its intention to advance more market-oriented policies and 
address rule of law, press freedom, and regulatory framework 
issues. I think there is potential for change in Ecuador and--
as Ecuador, El Salvador and Panama all use the U.S. dollar.
    American businesses have obviously some unique investment 
opportunities in the region. Colombia was recently invited to 
join the Organization for Economic Cooperation and Development, 
OECD, and other Latin American countries are interested in 
joining the OECD as well, which may motivate further reforms.
    While all these opportunities seem promising for the 
region, countries continue to face rampant corruption and 
impunity; high levels of crime and violence; inconsistent 
application of the law, with some laws and policies changing 
from week to week; burdensome regulatory frameworks; unclear 
tax structures; a lack of transparency and accountability in 
government processes; and central banking systems that make 
U.S. business investment difficult.
    Limited digitization and technological innovation, 
preferences for cash payments over credit, labor regulations 
and high levels of unemployment, and foreign restrictions on 
foreign equity ownership also increase U.S. investment 
challenges.
    I have heard from multiple U.S. companies who want to 
expand their presence, create more jobs in the region, which 
will lower migration to the United States and invest in 
communities where they operate. However, these investment 
challenges have made some U.S. businesses think twice about 
long-term investment.
    Presidential elections in Colombia, Mexico, and Brazil in 
the coming weeks and month may also shift political priorities, 
presenting additional obstacles to increased U.S. investment in 
the region and providing tremendous opportunities.
    I want to close by recalling the 57 points in the Lima 
Commitment that countries agreed to at the Summit of the 
Americas in April to reinforce democratic governance and 
anticorruption measures. It is my view that U.S. businesses 
play a critical role in raising standards in the region.
    And in my conversation with regional leaders at the summit, 
it was clear to me that countries see the United States as 
their partner of choice. I believe that our Government State 
Department could be doing more to advance U.S. business 
engagement in the Americas. And I look forward to hearing from 
our witnesses on these issues.
    With that, I will turn to our ranking member for his 
opening statements.
    [The prepared statement of Mr. Cook follows:]
    
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    Mr. Sires. Thank you, Mr. Chairman, for holding this 
important hearing, and thank you to all our witnesses for 
joining us today.
    Today, we are here to talk about opportunities and 
challenges for American businesses around the Western 
Hemisphere. I have long said that the U.S. can and should be 
doing more to enhance engagement with our friends in the 
Western Hemisphere. Deepening our economic ties is one of the 
best ways to improve relations, create jobs, and bring us 
closer to our neighbors.
    We should work together to make sure that the United States 
is the preferred partner of choice of our allies. A large part 
of that engagement is making sure that all companies invested 
in the hemisphere are playing by the same rules. Ensuring rule 
of law, consistency, and stability is key to having a climate 
that forces economic growth and creates jobs.
    American businesses can help strengthen democratic values 
by promoting best practices for labor rights, environmental 
standards, and transparency in financial management. That is 
just one of the reasons so many in the region have been working 
to promote anticorruption initiatives like the CICIG and the 
MACCIH around the region.
    These anticorruption efforts promote transparency and 
stability, two key ingredients to economic development. 
Unfortunately, we see politically motivated attacks against 
these efforts every day, weakening anticorruption institutions 
only to hinder economic growth and prevent job growth.
    It is this economic growth and security that can also 
tackle the root causes of migration, preventing families from 
fleeing their homes in dangerous conditions in search of a 
better life. Sadly, corruption and security issues aren't the 
only obstacle to advancing U.S. investment and trade in the 
Americas.
    Both the rhetoric and the decisions made by the Trump 
administration are putting U.S. businesses and jobs at risk. 
Bombastic comments insulting our friends and allies does 
nothing but make U.S. seem like an untrustworthy partner. 
Imposing punishment tariff raises the cost of doing business 
for everyday Americans and drives uncertainty and instability.
    While China is investing billions and building inroads 
throughout Latin America, the President is busy punishing our 
friends to play to his political base. He is practically 
driving the rest of the world into the arms of the Chinese. At 
every turn, the President threatens to end agreements or blow 
up trade negotiations. This is no way to protect American jobs, 
American families, or American interests.
    I am eager to hear from the witnesses how they feel the 
administration's recent actions and their impacts on U.S. 
businesses abroad. I look forward to hearing what Congress can 
do to promote American investment and best practices around the 
region. Thank you, and I yield back the balance of my time.
    Mr. Cook. Thank you, sir.
    Before I recognize you to provide your testimony, I am 
going to explain the lighting system in front of you. You each 
have 5 minutes to present your oral statement. When you begin, 
the light will turn green. When you have a minute left, the 
light will turn yellow. And when your time is expired, the 
light will turn red. I ask that you conclude your testimony 
once the red light comes on.
    By the way, I used to dream about strange things. Now I 
dream about these lights at night. And I am sure you do too 
after all the testimonies that you have done.
    Anyway, after our witnesses testify, members will have 5 
minutes to ask questions. I urge my colleagues to stick to the 
5-minute rule to ensure that all members get the opportunity to 
ask questions.
    Our first witness to testify will be Mr. Eric Farnsworth, 
the vice president of the Council of the Americas. Prior to 
this, Mr. Farnsworth worked at the U.S. Department of State, in 
the Office of the U.S. Trade Representative, and was appointed 
as the senior adviser to the White House Special Envoy for the 
Americas.
    Our second witness to testify is Mr. Neil Herrington, the 
senior vice president for the Americas at the U.S. Chamber of 
Commerce. Mr. Herrington also serves as executive vice 
president of the Association of American Chambers of Commerce 
in Latin America and the Caribbean, the acronym AACCLA. If you 
can pronounce that one, you get extra points. Prior to joining 
the chamber, Mr. Herrington worked at the State of California 
Office of Trade and Investment, the U.S. Trade Representative, 
Raytheon, and General Motors.
    And our last witness to testify will be Ms. Kellie Meiman 
Hock, a managing partner at McLarty Associates. Prior to this, 
Ms. Hock worked at the Office of U.S. Trade Representative, 
served as a Foreign Service officer with the U.S. Department of 
State. She is also a member of the Council on Foreign Relations 
and the Inter-American Dialogue.
    Mr. Farnsworth, you are now recognized.

  STATEMENT OF MR. ERIC FARNSWORTH, VICE PRESIDENT, AMERICAS 
                SOCIETY/COUNCIL OF THE AMERICAS

    Mr. Farnsworth. Mr. Chairman, thank you very much. Good 
afternoon to you, Mr. Ranking Member, and members. And before I 
start with my testimony, may I congratulate you on your opening 
statements. Those were powerful, and we look forward to 
responding to some of the questions that you have put out there 
already.
    It is a privilege to appear before you again in this 
subcommittee. The news that the Trump administration has 
decided to move forward with steel and aluminum tariffs on 
Canada and Mexico, as well as Europe, with the possibility of 
additional future tariffs, coupled with cancellation of U.S. 
participation in the Trans-Pacific Partnership and an 
aggressive effort to reformulate and recast NAFTA have roiled 
hemispheric trade and economic relations.
    These actions have introduced a significant element of 
uncertainty into the trade and investment calculus, along with 
a normal and anticipated emerging market risks in Latin America 
and the Caribbean basin. And increasing uncertainty is, to be 
blunt, bad for business.
    As the United States retrenches, others are quick to fill 
the void with China in the lead. China would still be a major 
presence in the Americas, of course, as it is in other emerging 
markets globally, even under a more traditional U.S. approach 
to trade. But Washington's recent actions are accelerating 
preexisting trends. We may soon reach an inflection making 
impossible a return to the status quo ante.
    Within this framework, absent a policy shift, there are, 
nonetheless, any number of things that can be done to advance 
U.S. commercial interests in the hemisphere to the extent that 
we are inclined to prioritize them. The first is simply to be 
present.
    The Vice President's announcement Monday that he will soon 
travel to the region for the third time in less than a year is 
very welcome news. And effective commercial diplomacy also 
requires that the United States have diplomats and senior 
officials in place to promote our interests day-to-day, 
including the Assistant Secretary of State for the Western 
Hemisphere. Personnel are policy, and it is difficult to have 
an effective policy or to advocate for U.S. business without 
strong people in place.
    Second, we should refrain from affirmatively taking steps 
that would actually reduce the regional U.S. business presence. 
A perfect example is the ongoing effort to excise investor 
State dispute settlement provisions within NAFTA, which would 
cause U.S. energy and other investors to reevaluate their 
investment plans going forward.
    Rule of law remains imperfect in Mexico, as it does across 
much of the region, and investors will be less likely to commit 
significant additional resources without greater judicial 
certainty. But Mexico's hydrocarbon reserves will remain, thus 
opening the door wider to greater sectoral investment from 
China, Russia, and other extra-regional actors.
    The same is true with other provisions being pushed by the 
United States in ongoing NAFTA negotiations, including dispute 
resolution, government procurement, and the 5-year sunset 
clause.
    Third, as the region develops alternatives to the United 
States, we have to contend more actively for regional commerce. 
Competition is fierce and we must, as a result, compete. But 
unless Washington is willing to engage with the region broadly 
on the basis of true partnership, we will lose ground to others 
with a different approach.
    I also believe that we need to get a better handle on how 
our scarce aid resources are spent. Indeed, we should increase 
rather than decrease foreign assistance, and we should use such 
assistance to prioritize trade facilitation and business 
climate reforms.
    Working with Latin American and Caribbean partners to 
address insufficient infrastructure, weak rule of law and 
anticorruption, inadequate workforce development, and 
deteriorating personal security, among others, would help 
create conditions attractive for greater U.S. commercial 
engagement and sales.
    Finally, we face a challenge from China and other nations 
who use development finance more effectively than current 
authorities allow the United States to do. We need to up our 
game in this area. Prompt passage of the bill to act, for 
example, establishing an enlarged and enhanced U.S. 
international development finance corporation would help 
address this, and there are other good ideas out there as well.
    Mr. Chairman and members, thank you again for the 
invitation to appear before you on the subcommittee today, and 
I look forward to having the opportunity to answer your 
questions.
    [The prepared statement of Mr. Farnsworth follows:]
    
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    Mr. Cook. Thank you very much.
    Mr. Herrington, you are now recognized.

STATEMENT OF MR. NEIL HERRINGTON, SENIOR VICE PRESIDENT FOR THE 
               AMERICAS, U.S. CHAMBER OF COMMERCE

    Mr. Herrington. Mr. Chairman, thank you very much for the 
opportunity to be here today, Ranking Member Sires. I think I 
would echo Eric's comments. I think you both framed our 
discussion today very, very well as we move this conversation 
forward.
    Among the multiple bilateral business councils and 
initiatives we operate, the chamber is proud to be home to the 
50-year-old Association of American Chambers of Commerce of 
Latin America and the Caribbean, or ACCLA, that is the acronym. 
It is a mouthful.
    As we discuss ways to improve the economic climate in the 
Americas for U.S. investment, it is no exaggeration to say that 
ACCLA is its face. The 24 AmChams across the hemisphere that 
comprise ACCLA's network boasts 20,000 member companies that 
collectively account for more than 80 percent of U.S. 
investment across the region.
    For years, ACCLA member companies have identified weak rule 
of law as the number one challenge facing U.S. companies doing 
business in the region. In response, the chamber has been at 
the forefront of promoting adherence to rule of law as key to 
government's ability to increase investment in trade and help 
drive sustainable economic growth throughout the region.
    To bring greater attention to the importance of rule of 
law, 5 years ago, the chamber's Americas Program developed the 
Global Business Rule of Law Dashboard. What was once a regional 
initiative today covers 70 markets around the world and tracks 
five core factors critical to business success: Transparency, 
predictability, stability, accountability, and due process.
    We have found that where these factors are present, 
investment thrives, economies grow, jobs are created, and 
prosperity follows. Conversely, in markets where these factors 
are weak or absent, corruption thrives, informality reigns, 
investment dollars flee, and tax revenues plummet.
    In December, we published the third edition of the Global 
Business Rule of Law Dashboard, and one of its key findings was 
that the Americas region is lagging significantly behind, 
earning the lowest average score of any region in the world.
    In spite of this, there are reasons for optimism. The 
Odebrecht scandal, perhaps of its sheer audacity in scope, has 
had a silver lining. It has helped galvanize the attention of 
both the region's leaders and citizens on the need for urgent 
action. Issues of impunity are being addressed as the Latin 
American political and business class are being held 
accountable for the first time in recent memory.
    As countries across the region carry out elections for new 
leaders, in 2018, we are also seeing hundreds of millions of 
citizens prioritize Canada's commitments to rule of law. And 
just 2 months ago, at the Summit of the Americas in Lima, the 
region's governments underscored the imperative of regional 
adherence to the rule of law by making democratic governance 
against corruption the overarching theme of the event, as you 
acknowledged, Mr. Chairman.
    The chamber was proud to be in Lima serving as the U.S. 
Secretary for the Americas Business Dialogue, or ABD, an 
initiative that seeks to advance a high-level public/private 
dialogue on regional economic development.
    Integral to this year's efforts were recommendations that 
ABD put forward to the regional heads of state demonstrating 
the private sector's commitment to promote transparency and 
integrity in business dealings throughout the region that 
included adoption of comprehensive corporate codes of conduct, 
regional implementation of good regulatory practices, and 
commitment to supporting permitting best practices 
certification for public officials.
    While developments like these are encouraging, they are 
only a start. Many challenges remain. We remain deeply 
concerned about Venezuela where Maduro's tyrannical regime must 
be held accountable, as well as the growing crisis in 
Nicaragua, where the Ortega regime continues to flaunt the rule 
of law.
    Areas like the Northern Triangle of Central America remain 
plagued by violence, insecurity, corruption, and threats to 
democracy. In short, when it comes to strengthening hemispheric 
adherence to rule of law, the stakes for the U.S. and all 
countries in the region are enormous.
    Also imperative is the need for the U.S. to maintain its 
leadership in promoting a rules-based global trading system in 
our hemisphere that strengthens rule of law and provides a 
level playing field for American companies. We should not cede 
our leadership on trade in the region and instead need to 
expand our economic and commercial engagement. The stakes are 
too high to do otherwise.
    One need look no farther than Canada and Mexico, which are 
the two largest markets for U.S. exports that together support 
more than 14 million U.S. jobs. That is why the status of NAFTA 
negotiations is of such great concern to the chamber and our 
member companies, and we have been very vocal about that.
    Beyond the sheer enormity of the North American economic 
relationship, the outcome of NAFTA impacts U.S. policy across 
the Americas, which is home to 12 of the 20 FTA partner 
countries that the United States possesses and is a destination 
for close to 45 percent of U.S. exports.
    Just like with rule of law, certainty in trade policy is 
key to success. We are facing uncertainty and potential 
division with allies at precisely the time when certainty and 
collaboration are required to confront a challenge to U.S. 
regional trade leadership from China. The chamber shares many 
of the administration's concerns with China's unfair trade 
practices and industrial policies. But that said, global, 
steel, and aluminum tariffs do little to address the real issue 
of China's overcapacity. Instead, they risk alienating some of 
our strongest global allies at precisely the moment when a 
coordinated global strategy to counteract China's trade and 
industrial policies is needed. The U.S. Government needs a 
robust strategy to help U.S. companies counter the growing 
economic influence in the region.
    With this, I thank you again. Mr. Chairman, Ranking Member, 
members of the committee, I thank you very much for the 
opportunity to appear here today, and I look forward to taking 
your questions.
    [The prepared statement of Mr. Herrington follows:]
    
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    Mr. Cook. Thank you, Mr. Herrington.
    Ms. Meiman Hock, you are now recognized.

STATEMENT OF MS. KELLIE MEIMAN HOCK, MANAGING PARTNER, MCLARTY 
                           ASSOCIATES

    Ms. Meiman Hock. Thank you so much.
    Mr. Cook. Did I pronounce that correctly?
    Ms. Meiman Hock. In Spanish, yes, Meiman Hock, but in 
English, Meiman Hock.
    Mr. Cook. Anywhere in between so I don't offend anybody?
    Ms. Meiman Hock. It is all good. I answered it all.
    Thank you, Mr. Chairman, thank you, Ranking Member Sires 
and the rest of the distinguished members of the subcommittee 
for inviting me to testify here today.
    Economically, 14 million American jobs depend on trade with 
Canada and Mexico. By far, these are the largest export markets 
for the United States. Rather than offshoring to Asia, critical 
supply chains have remained in North Korea, enhancing our 
ability to compete.
    Keeping State, Commerce, and USTR fully funded in 
appreciation of the importance of commercial diplomacy is a 
strategic imperative, particularly for small- and medium-sized 
enterprises. Ensuring that U.S. companies from traditional 
manufacturing to agriculture to services to high-tech can 
access markets, are fairly treated, can compete effectively for 
government contracts, and have their intellectual property 
protected are key aspects of commercial diplomacy.
    The U.S. has long reinforced the need for transparency and 
commitment to rule of law. And countries' desire to attract 
U.S. investment has often motivated economic reform. Membership 
in the WTO, achieving a free trade agreement, or OECD accession 
have provided further motivation to improve investment climate.
    However, we find ourselves at a moment today where U.S. 
credibility to speak on the importance of compliance with WTO 
and FTA commitments is at an all-time low. Positing that 
Canada, our long-time ally in conflict after conflict, creates 
a national security threat to the United States due to its 
steel and aluminum sales here, particularly if you consider 
that the United States has a $2 billion surplus with Canada on 
those same items, is nothing short of incredible.
    The equivalent charge against Mexico under section 232 is 
equally difficult to understand given our long history of 
collaboration on security, counternarcotics, and antiterrorism. 
The initiation of a national security investigation on autos 
last month further diminishes U.S. standing.
    This action opens the door for our trading partners to 
limit U.S. exports of virtually anything in the name of 
national security. Global concern over food security leaves 
U.S. farmers at risk, to say nothing of U.S. technology 
companies in an era of digital warfare.
    So, instead of successfully modernizing the NAFTA last 
week, the United States initiated a trade war, one which seems 
to have snatched the possibility of a successful NAFTA reboot 
from our grasp, at least for now.
    Mexican and Canadian retaliation are already in train. U.S. 
farmers, ranchers, and factories depend on exports to Canada 
and Mexico, and they will suffer. Beyond the impact on NAFTA, 
our actions have sent a stark signal that the United States is 
no longer a reliable partner.
    To be clear, concern over the misguided use of section 232 
and unilateral trade actions should not be a partisan issue. If 
these were policies that actually helped the American farmer 
and worker succeed, you would see overwhelming support from 
both sides of the aisle. This is not the case.
    My concern is that the United States is damaging its 
ability to forge new commercial agreements and to enforce 
existing ones through this behavior. Should the President 
decide to withdraw from NAFTA, the U.S. Government's ability to 
positively impact investor climate in the Americas will 
deteriorate further, leaving the field open for Chinese and 
other investors and further damaging U.S. credibility.
    I would argue forcefully for regaining that credibility 
with the U.S. Congress standing up against the policies that 
are leading to a deterioration of U.S. alliances. This is how 
we can rebuild our ability to defend U.S. economic interests. 
In the meantime, however, as the chairman noted, we may 
leverage OECD accession to pursue U.S. business goals in the 
hemisphere, given the high number of countries that are 
currently pursuing membership.
    The U.S. should insist applicants immediate the OECD's high 
standards through enactment of needed reforms prior to granting 
accession. Some opportunities to do so, if I may say, were 
missed in Colombia's case, given the haste to issue the OECD 
invitation in the waning weeks of the current administration. 
It will be important that we not repeat that mistake in the 
case of Argentina, Brazil, and Peru.
    In my written testimony, I covered priority areas to be 
evaluated in OECD accessions, including tax, customs, and 
regulatory policy, as well as rule of law considerations. I 
would highlight that, across the region, and as Neil noted, we 
find renewed zeal for tackling corruption. At the same time, 
overregulation and poor implementation of these efforts can 
inadvertently stifle enterprise and destroy the formalizing 
role of U.S. companies with high compliance standards.
    Central American countries are at a particularly critical 
moment in this anticorruption battle. My written testimony 
addresses some concerning activities in Guatemala despite 
progress being made there. U.S. and multilateral technical 
assistance is crucial to ensure collaboration with the private 
sector to expand formality and bring violators to justice.
    In closing, I would stress the critical role that the U.S. 
Government can and should play to promote a level playing field 
and rule of law throughout the Americas. I would urge this 
committee to take affirmative steps to persuade the Trump 
administration to put American farmers, ranchers, and workers 
first, dissuading the administration from taking further 
unilateral positions on trade and investment that prevent the 
United States from opening overseas markets and promoting rule 
of law in the Americas and beyond.
    I thank you again for the opportunity to testify, and I 
look forward to your questions.
    [The prepared statement of Ms. Meiman Hock follows:]
    
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    Mr. Cook. Thank you very much.
    What I am going to do now is I am going to yield myself 5 
minutes to ask questions.
    By the way, Mr. Herrington, I don't know if you know it or 
not, but I used to be involved with the chamber of commerce, 
and it was always difficult to raise money. And I don't know if 
it is appropriate, if you want to sell raffle tickets for a 
copy of this hearing, that is something we used to do many 
years ago. But----
    Mr. Herrington. What are the rights on C-SPAN going for?
    Mr. Cook. Anyway, as I said, I will yield myself 5 minutes.
    And I want to raise an issue that I have been personally 
engaged on over the last several months.
    I have encouraged the Peruvian governor--or government to 
resolve the claims of many of my constituents who have invested 
in Peruvian agrarian reform bonds, commonly known as land 
bonds. This issue directly impacts a large pension plan in San 
Bernardino County and thousands of my constituents.
    It is my understanding that the Peruvian Government has 
suggested that it does not have an obligation to pay the debt 
now because it was issued over 50 years ago by a Communist 
regime, even though the Peruvian Supreme Court authorized the 
sale or transfer of these bonds on the secondary market and 
ruled in 2001 that the government must compensate bondholders 
in an amount equal to the current value.
    So are you aware of any precedent or tentative 
international law that would excuse a government from its 
responsibility to pay debt if it were issued over 50 years ago 
or if it were initially only given to Peruvians but later 
authorized for secondary sale? And I will throw it open to the 
panel.
    Ms. Meiman Hock. Thank you, Mr. Chairman. I can take that 
question.
    You know, I am not a lawyer, but I did conduct trade 
negotiations at USTR, and I know that there are very clear 
investment obligations under our free trade agreement with 
Peru. I also understand that, in the case that you have noted, 
there are numerous court decisions stating the contrary to the 
position that you are saying that the Peruvian Government has 
put forward.
    And, I guess, I would harken back to my testimony and only 
urge that, in the consideration of OECD accession for Peru, 
which they are quite interested in, I understand, that this 
issue, as any issue that involves rule of law and transparency, 
be fully addressed before accession is taken place as opposed 
to after.
    Mr. Cook. Yeah. I hope you can see where I am coming on 
this because, you know, my opening speech I talked about how 
important it is, trade, this and that, and then overseas 
investment. And this kind of sends a signal that is completely 
contrary. And, obviously, since I represent San Bernardino 
County, as does my colleague, this is something that we get 
questions about, and we are concerned about.
    Anyone else want to comment on this? No?
    Okay. With that, I am going to yield--my time is expired.
    And the ranking member, you are now recognized.
    Mr. Sires. Thank you, Mr. Chairman.
    You know, we have a very important election going on in 
Mexico. We have Lopez Obrador, who is up 20 to 25 points. He is 
more of a nationalist, and I think the fact that he is up 20, 
25 points is a direct result of what--the rhetoric is coming 
out of the White House regarding trade, regarding people.
    I don't know how--I just think it is not helpful. Once the 
election is over, how do you put this back together, because it 
is going to impact both countries. And China, to me, is just 
waiting in the wings. So it is just foolish to be at this place 
now. And it is nice to be a nationalist and beat up the United 
States, but then you have the rhetoric coming from both sides. 
So it is just a terrible situation.
    Can you talk a little bit about that?
    Mr. Farnsworth. Mr. Sires, thank you for that very 
important question. And, first, we have to see what the results 
actually are on July 1 before we declare the winner, but, yes, 
Mr. Lopez Obrador is ahead in the polls. And I think this would 
fundamentally change or potentially fundamentally change the 
relationship between the United States and Mexico.
    I would say that I think many, if not most, Mexican 
citizens will vote for President based on similar things that 
we might vote for in terms of their own economic conditions, 
their own security conditions, their hope for a better life for 
their families. But I agree with you that the rhetoric coming 
from north of the border is not helpful in that context, 
absolutely right.
    One of the things that has made over the years NAFTA so 
powerful is not just the fact that it ordered the majority of 
trade in North America investment, but it also created bumpers 
which allowed certain behaviors and beyond which certain 
behaviors were not allowed.
    And it was very powerful in the context in the 1990s, for 
example, when Mexico ran into trouble with its peso crisis. And 
some of the instincts of the political class in Mexico that 
would have closed down the Mexican economy, which would have 
been exactly counterproductive, were prevented by NAFTA. And 
Mexico's economy remained open, and they came back to global 
capital markets much sooner than they had during the previous 
crisis in the 1980s.
    I am reviewing that history because NAFTA is precisely the 
tool that one would look to in this circumstance if Mr. Lopez 
Obrador or anybody is elected in Mexico who might take a 
different view in terms of Mexico's relationship with the 
United States. The fact that we have a NAFTA that organizes 
trade and investment but also, in a general way, the bilateral 
relationship in a way that channels some of the conflicts into 
ways that can actually be resolved.
    I think it would be a strategic mistake, therefore, to pull 
out of NAFTA not just because it would hurt the United States 
economically but also because it would challenge our ability to 
keep that relationship with Mexico within the bounds that we 
might find mutually beneficial.
    So the question that you are raising, I think, is 
absolutely right, and I think we have to look at the tools that 
are available to us in the United States to help us build that 
relationship in a positive way and not pull back in a negative 
way.
    Mr. Herrington. You have raised a key question, Ranking 
Member Sires, that not enough people are talking about. I think 
that the prospect of Lopez Obrador Presidency, as Eric said, 
you know, polling is polling, but it is something I think we 
are watching carefully, as the U.S. business community, in 
terms of what the candidate says about his commitments.
    At this point, you know, I think we are encouraged that, I 
think, his words on NAFTA have been relatively moderate. You 
know, a concern we have going forward is respect for ongoing 
reforms in Mexico in which many U.S. companies are deeply 
invested, specifically in telecommunications and energy. He has 
announced he will pursue a review process for that. We don't 
know what that entails, but we are watching carefully and 
consulting with his advisers.
    I think in this space though in terms of--you ask an 
important question in terms of--and I think I want to answer 
this from the private sector role, you know, in terms of, 
irrespective of the two governments, we as a U.S. business 
community and the Mexican business community are 100 percent 
committed to this bilateral relationship.
    As my boss, Tom Donahue, said, in Mexico--sorry, excuse me, 
in Lima, in talking about the bilateral relationship, failure 
is not an option. It is a $500 billion a year bilateral trade 
balance.
    So we run the U.S./Mexico CEO dialogue in which we meet 
twice a year with CEOs and senior executives from a variety of 
companies to try and address the very issues in the bilateral 
relationship that are so imperative to keep the economic engine 
that is U.S./Mexico trade going.
    Mr. Sires. Thank you. My time is up. Thank you very much.
    Mr. Cook. Thank you very much.
    I would like to now recognize the gentleman from Florida, 
Mr. Rooney.
    Mr. Rooney. Thank you, Mr. Chairman.
    I would like to ask for your help, all three of you, to the 
extent you can about a particularly egregious example of 
hostility to foreign direct investment in Guatemala and of 
judicial usurpation of the government's desire to promote 
economic growth.
    Tahoe Resources has invested $1.7 billion in a mine in 
Guatemala, and some court down there has decided that the 
permits that it has are invalid due to indigenous people's 
hostilities, something which I am used to with Panama Canal 
debates here years ago.
    This mine has had thousands of Guatemalan employees, and 
they have laid off a great number of them, and they are about 
to terminate 500 more right now. Even the Bank of Guatemala and 
Jimmy Morales are trying to get the court to act. I am going to 
call the court myself next week.
    We sent a letter, our committee, the chairman did to 
President Morales, both urging him to support CICIG and Ivan 
Velasquez' work, as well as to implement the ILO conventions to 
give a more stable business environment and prevent bad things 
like this. So any advice you all might have, we would deeply 
appreciate.
    I would like to read this in the record, too, the 
chairman's letter, if I could.
    Mr. Cook. So ordered.
    Ms. Meiman Hock. Thank you so much, Congressman Rooney.
    I mentioned Guatemala briefly in my remarks. I think that 
that is definitely a country where we have seen repeated 
challenges with respect to rule of law. I do believe that there 
are some good intentions in the Guatemalan Government to try to 
advance on that score.
    But to your point, I think doubling down on both bilateral 
and multilateral efforts to do tech training and to really help 
our allies within the Guatemalan Government that see the 
benefit to addressing some of these challenges, we really need 
to build those folks up and give them the tools that they need 
to be sure that U.S. companies are able to favorably operate in 
the country and fairly, more importantly.
    Thank you.
    Mr. Rooney. Thank you. Anybody else have any ideas?
    Eric, I figured you would have some good ideas of how we 
can straighten out the court.
    Mr. Farnsworth. Well, Ambassador Rooney, with a setup like 
that, I am not quite sure how to respond, but nonetheless, 
thank you for the question.
    I will confess to you that I am not familiar with the 
merits of this particular issue, but as you have requested, I 
will be happy to take a look at it and see if there are ideas 
that will be coming forward and be happy to share that with you 
and your staff.
    Mr. Rooney. We would appreciate it, both you and the 
chamber because you all have important voices for business, so 
thank you very much.
    I yield.
    Mr. Herrington. Oh. I am happy to answer that question, 
Congressman Rooney, if you want.
    Mr. Rooney. Sure.
    Mr. Herrington. So we wrote a later to President Morales 
last on this issue, in part and in general in covering the rule 
of law issues writ large in Guatemala but focused on this 
issue. I appreciated the letter that the committee sent to the 
chair and the ranking member's letter also to the President.
    We have--you know, the ILO Convention 169 implementation in 
Guatemala, as the chair and the ranking member asserted, I 
think, is what we have really been pushing hard for on the 
Guatemalan Government. It is important. Really important within 
that is a--obviously a full respect for indigenous rights is 
imperative, but that there be within the convention a very 
robust consultative process that the private sector is able to 
participate in.
    Mr. Rooney. Thank you.
    Mr. Cook. Thank you, sir.
    I will now recognize the gentlewoman from California, Mrs. 
Torres.
    Mrs. Torres. Thank you, Mr. Chairman.
    And thank you to our guests for being here, this very 
important issue that we are discussing today.
    You know, I agree with my colleague that, although over the 
years there have been some conflicts with indigenous 
populations within Latin America, certainly what has happened 
with the land bonds in Peru is just one example of how people 
were taken advantage of and then, ultimately, now the 
government is trying to make right, but at the same time our 
constituents were impacted by the sale of these junk bonds. I 
hope that we are able to bring some relief to the firefighters, 
police officers, and truckers that I represent that have been 
impacted by that.
    Mr. Herrington, because of those conflicts, I have been 
working on a bill here in Congress, Jobs for Tribes, which 
creates a unique opportunity for American Tribes to be able to 
work with indigenous populations of the Americas and trade in 
goods that they each either grow or make within their 
communities. What sort of opportunities do you see for Native 
American Tribes to invest in Latin America?
    Mr. Herrington. I apologize for not being familiar with the 
merits of the bill. However, you know, I will say, at the 
chamber, we are all about investment and commercial promotion 
between the U.S. and across the region. And anecdotally, I can 
tell you there is some really innovative things going on in 
ecotourism and other initiatives in primarily indigenous areas 
of the Americas.
    While I am not a subject-matter expert at the chamber, we 
have a Native American affairs group that deals with Native 
American economic affairs, and we would be happy to come see 
you and talk about that.
    Mrs. Torres. I would love to follow up with you on that 
issue.
    Mr. Herrington. Okay.
    Mrs. Torres. It is something that I have been working on 
very closely. It is a bipartisan bill. It has enjoyed, you 
know, bipartisan support. And I would like to see where we can 
find areas that we can work together to help create jobs, not 
only in these areas where we are seeing the most impact in our 
immigration system but also in areas of the U.S. where we have 
seen that there is lack of opportunities for jobs.
    So matching those together, I think, is important. USAID is 
investing in a lot of these communities. We have seen projects 
where we are eradicating coca, for example, and planting 
chocolate, cocoa. So how do we match those communities in South 
America, for example, the mining of silver and copper, and how 
can we match those indigenous communities with our Tribes here 
to create an environment of manufacturing of goods that could 
benefit, you know, both ends of the spectrum. So I do--would 
love to follow up with you on that issue.
    Ms. Meiman, regarding CICIG, how do you see the Government 
of Guatemala moving forward, from your job's perspective? 
Because I know that it has had a major impact in U.S. companies 
that are investing there. How does U.S. companies--how are they 
able to compete fairly in a place where public corruption is 
rampant?
    Ms. Meiman Hock. No, it is a real challenge, and I would 
say, and I comment in my remarks, that U.S. companies obviously 
hold themselves to a very high ethical standard. You know, we 
have got a CPA, but beyond that, we just have a culture in our 
private sector that, you know, inherently, when we do invest, 
when our companies invest in foreign markets, be it Guatemala 
or wherever, typically that does kind of raise the tide in that 
market just from a rule of law transparency perspective.
    One challenge that I have seen and that I think they are 
trying to grapple with in Guatemala right now is that being 
sure that, as large multinationals, U.S. multinationals, are 
doing business in some of these smaller markets, Central 
America, et cetera, that professionalizing impact that they 
have is appreciated and that it is allowed to flourish.
    Because often, you know, obviously, if you are going to 
operate in a country, you are going to do partnerships and 
deals and contracts with local players who sometimes won't be 
at that same level.
    And so, as you are, you know, as a U.S. company, putting 
your hand down to kind of, you know, raise that level to what 
would be expected for a U.S. multinational, there needs to be 
some latitude there, not a lack of enforcement, not any sort of 
ethical flexibility, but I think that there needs to be a 
construct that allows that to happen without the U.S. company 
running a risk of getting blamed, if you will.
    And that is something I have seen, and it is something that 
I do worry about in the Central American context. But I do 
think again that it is something that, through the work that is 
being done bilaterally and multilaterally, it can definitely be 
addressed. Thank you for the question.
    Mrs. Torres. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Cook. Thank you.
    I would like to now recognize the gentlewoman from 
Illinois, Ms. Kelly.
    Ms. Kelly. Thank you, Mr. Chairman.
    Given the tensions between our Nation and some of our 
neighbors with respect to increasing tariffs, this is such a 
timely and critical conversation. With respect to Canada, for 
example, President Trump has recently stated that Canadian 
steel and aluminum in Canada itself are now national security 
threats to the United States.
    I am very concerned because I represent a district which is 
urban, suburban, and rural, and it is home to numerous steel 
mills, farms, and service industry-based companies, which in 
turn employ hundreds of thousands of my constituents.
    I am concerned about the long-term employment and economic 
implications of imposing higher tariffs. There are reports 
upwards of 400,000 jobs would be lost across agricultural 
services and manufacturing and energy sectors if these tariffs 
are imposed.
    The question for any of you to address, do you believe, as 
the President said, that Canada poses a national security risk 
to the United States? And do you agree with President Trudeau 
that President Trump's starting of a trade war with Canada is 
actually insulting?
    Mr. Farnsworth. Congresswoman Kelly, if I can begin the 
dialogue here, in part because I am originally from Illinois 
and so----
    Ms. Kelly. Good. You know what I think.
    Mr. Farnsworth [continuing]. I wanted to have an 
opportunity to respond to your question. Yeah, exactly. But 
thank you for that important question.
    In a word, no, Canada is not a national security threat to 
the United States. Canada is a strategic ally of the United 
States. Canada is a country with which we have trade disputes 
and have had trade disputes for years because our economy is 
fully integrated with Canada, and the more integrated you are 
the more disputes you are naturally going to have.
    But what makes the relationship with Canada so strong is 
that we share values, including the rule of law. And so when we 
enter into trade disputes we have a process by which we can 
resolve them. And what the recent actions have done is gone 
outside of that process and begun to take unilateral actions in 
a way that, from my perspective, are unhelpful to the broader 
bilateral relationship. That is one side.
    But the other side that you have pointed to quite 
accurately, in my view, is what will be the impact on the U.S. 
economy. Canada and strategic relations and NATO and border 
cooperation and all that in one basket; but the other basket, 
what is it going to mean for the United States and job creation 
in the United States?
    And I am very sensitive to the idea that people in some 
parts of our country are hurting, and they do have questions 
about sustainability of jobs and industry, and that is a 
powerful and important issue, and we cannot ignore it. And I 
know that the members of this subcommittee do not.
    But from my perspective, the way to address that is not to 
favor one or another sector that will have the implication of 
disadvantaging other sectors and where the negative 
implications of the action will actually be greater than the 
positive implications. And so there is a cost-benefit analysis. 
There is a balance, in my view, that has to be struck. And I 
think you are pointing to something that is very, very 
important.
    Having said that, even if we were to pull back from the 
determination that was recently made that Canada is a strategic 
or national security threat, I should say, to the United 
States, we are doing damage to our relationship. And it is not 
going to be easy to restore that, even if today we were to 
decide that, in fact, Canada is not a national security threat 
to the United States, which it is not.
    But my point is that as these bricks in the wall begin to 
build up, you begin to have an understanding from other 
countries that, in fact, they are questioning the reliability 
of the United States as a partner. And once that happens, they 
begin to look for other partners, and we are seeing that happen 
right now in Latin America and right now in Canada.
    And the whole idea that China could replace the United 
States as a partner of choice in Latin America, to me, is 
astounding and, in my view, not accurate but nonetheless 
something that is absolutely happening right now.
    Ms. Kelly. Thank you. I just wanted to, if you guys had 
comments and, as you are commenting, to think about this, how 
do you think these actions impact--I might have missed--you 
might have said it already, the NAFTA negotiations. That is the 
other piece.
    Ms. Meiman Hock. It absolutely puts a chill on the NAFTA 
negotiations. And beyond that, to have the one-two punch of 
then initiating another 232 national security investigation on 
autos, which in the history of not just the 232 statute, which 
comes from the Trade Expansion Act of 1962, but even going back 
to the national security exception in the GATT's post World War 
II time era, we have never done a 232 national security case on 
a completely finished good like autos in the history of the 
trade policy of this country.
    And so to call our good allies--which if you buy into the 
argument that deficits matter, which I personally do not, but 
this administration does, we even have a $2 billion trade 
surplus, as I said, with Canada on these items. And then you 
extrapolate that into an item such as automobiles, which I 
think very clearly--and I will be fascinated to see the 
position of Secretary Mattis on this regard because he will 
have to weigh in, you know, I think that, at that point, we 
really are damaging our credibility as a negotiating partner to 
the extent that it is going to be very difficult to recuperate.
    Ms. Kelly. Yeah. Ford is my biggest employer.
    Mr. Herrington. Yeah. You have the Chicago Assembly Plant, 
I believe, in your district?
    Ms. Kelly. What?
    Mr. Herrington. You have the Chicago Assembly Plant in your 
district? Two.
    So, on that note, and Kellie gave me the perfect segue, so 
if I could quote Tom Donahue on 232 for--now, this is obviously 
for autos and auto parts, the announcement of the commencement 
of a study. But I think he would okay me by saying the same 
thing----
    Mr. Cook. Sir, your time is expired. Thank you.
    I would like to now recognize the gentleman from New 
Jersey.
    Mr. Smith. Thank you, Chairman Cook, and appreciate you 
holding this very important hearing, and Ranking Member Sires.
    I am chairing my own hearing so I can't stay. It is on 
Vietnam human rights.
    With respect to Ecuador, I am concerned that American 
companies have often been treated unfairly by the Ecuadoran 
judicial system. For example, in the case of Merck, a U.S. 
pharmaceutical company, I understand there is a partial final 
award of the international arbitral tribunal that ruled Merck 
has been denied justice in the Ecuadorian legal system.
    I wonder if you could tell us, any of our distinguished 
witnesses, what actions are being taken in Ecuador to ensure 
that the word of the arbitral tribunal is respected by the 
Ecuadoran judicial system and that no further steps are taken 
locally to enforce the justice denying rulings of the Ecuadoran 
courts? Mr. Herrington.
    Mr. Herrington. Yeah, I am happy to address that, 
Congressman.
    You know, the legacy of the Correa regime, the previous 
regime in Ecuador, is troubling so say the least. There were 
very few protections for rule of law. Certainly many of our 
members, Merck being certainly one of them, were challenged 
deeply by some of the policies of that regime.
    I would say that we are quite encouraged, frankly--and I 
know that the staff, the committee's staff took a trip to 
Ecuador last week, so I am interested in their thoughts 
eventually too after the hearing. We are encouraged with the 
steps, the commitments that President Lenin Moreno, the new 
President, has made in the areas of investor protections.
    They have--Ecuador has certainly embraced the fact that its 
foreign direct investment is a key source of economic 
development. That is what we are seeing initially. But there is 
a long way to go. He has got a lot of legacy issues to clear 
up.
    The arbitration issue that I think you accurately put your 
finger on is absolutely essential that if they are going to 
show progress and show that they are serious about making 
Ecuador a more attractive destination for foreign investment, 
that would be an excellent next step to take.
    Mr. Smith. I appreciate that.
    Anyone else?
    Mr. Farnsworth. Mr. Chairman, if I could just add very, 
very briefly, I concur that Ecuador is taking some very 
interesting under the new steps government, and we applaud 
that.
    In this particular case, I think there is room for the 
United States to encourage Ecuador to live up to the terms of 
the bilateral investment treaty that Ecuador has with the 
United States and to live up to any sort of arbitral awards 
that may be made under that treaty. I think that is something 
that we would encourage frankly across the region. Once 
companies enter into arbitration with host governments, if 
there are judgments made, judgments need to be respected.
    Mr. Smith. I appreciate that very much, and thank you for 
your answers and for your advocacy. I yield back.
    Mr. Cook. Thank you very much, Congressman Smith.
    I am now going to turn it back to Congressman Sires. We had 
some time. I was trying to include this, do the balancing act. 
So I recognize the ranking member.
    Mr. Sires. Thank you, Mr. Chairman.
    Mr. Herrington, can you just finish what you were--and I 
will ask you the question afterwards.
    Thank you, Chairman.
    Mr. Herrington. I have to read back because I am going to 
quote my boss, so I better get it right. I think it is 
important to talk to, on section 232, this is specific to autos 
and the auto parts. Obviously, the announcement that the 
Department of Commerce would commence a study on applying 232 
also to autos and auto parts.
    My boss said just last week, to your question, 
Congresswoman: This isn't about national security. The 
administration has already signaled its true objective is to 
leverage this tariff threat in trade negotiations with Mexico, 
Canada, Japan, the European Union, and South Korea. These 
allies provide nearly all U.S. auto imports and are among 
America's closest partners. Neither they nor these imports 
endanger our national security in any way.
    So I think that speaks for itself.
    Mr. Sires. You know, my office--I am from New Jersey. I get 
a lot of pharmaceutical companies in my office constantly 
complaining about Canada. So one of the things that I was happy 
about is at least we are raising the issue that there are some 
differences or discrepancies.
    You know, where do you see, when they negotiate this NAFTA, 
that the pharmaceutical industry fits in? Because it is hurting 
New Jersey. And if the President can include that in his 
negotiations, I think the pharmaceutical industry in New Jersey 
would appreciate what the Canadians are doing. You might want 
to say a couple of things to the Canadians.
    Ms. Meiman Hock. Maybe I will just start quickly, if I may, 
Ranking Member Sires. I think--I have participated in a number 
of the NAFTA rounds, and I know there hasn't been a round for a 
while. But, you know, back when there was, the U.S. would try 
to raise intellectual property, would try to raise market 
access.
    And the response, I think somewhat understandably, from 
Mexico and Canada was, why would we want to talk about 
intellectual property? That is something that is important to 
you, United States of America, when you have on the table a 
removal of investor-state dispute settlement, a government 
procurement policy that goes against our interests, counter 
seasonal, AD/CVD, sunset clause, all of the, as they are 
called, poison pill provisions that the United States has had 
on the table have really prevented us as a country, prevented 
our negotiators from getting to those items, like intellectual 
property rights protection, that are very much in the U.S. 
interest.
    Mr. Sires. It sounds like an excuse to me.
    Ms. Meiman Hock. It is, you know--it is an excuse that is 
too easy for them to make, I guess, would be my concern, you 
know?
    Mr. Sires. Yeah, that is what I think.
    Mr. Herrington.
    Mr. Herrington. Yes. Thank you, Ranking Member Sires.
    To your point, Canada does not have IP standards 
commensurate with its status as a developed economy nor as a 
hub of innovation, which it is. And its standards need to be 
certainly heightened because of that.
    I think NAFTA--I think Kellie touched on a lot of the core 
here that we have these opportunities in the NAFTA space for 
offensive interest. And this is truly--along with a few other 
areas in the bilateral U.S./Canadian relationship, including 
dairy issues--some folks have certainly issues with the way 
Canada operates its dairy market--that the U.S. has legitimate 
offensive interests that are, frankly, being held hostage to 
these very unconventional proposals that the U.S. has put 
forward in government procurement, the sunset clause, the 
dispute resolution, suite of chapters 11, 19, and 20, et 
cetera, the rules of origin, obviously. So I would just leave 
it right there that the IP chapter actually hasn't really even 
been put on the table because of these issues.
    Mr. Sires. I have 52 seconds.
    Mr. Farnsworth. I won't take that long. But if you bring 
the lens out a little bit further, one of the most powerful 
ways to help the United States address some of the legitimate 
concerns with China on intellectual property is to have a 
unified North America, and that is what NAFTA would allow us to 
do. If we were to come to agreement on intellectual property, 
as well as the other issues we have been talking about, that 
would give us a far wider and deeper platform from which to 
address some of the issues that we face with China.
    Mr. Sires. Thank you, Mr. Chairman, for the extra time.
    Mr. Cook. At this time, I would like to recognize the 
gentleman from Florida, Mr. Yoho.
    Mr. Yoho. Thank you, Mr. Chairman. I apologize for being 
late.
    Thank you for being here and for your testimony. I chair 
the Asia and the Pacific Subcommittee on Foreign Affairs, along 
with being on this one, and I just find our relationships in 
the Western Hemisphere, we need to increase, and we need to 
show a strong force coming out of the United States--business, 
security, all those things. And I know the chairman here, he 
focuses on the same things we do.
    We want economics, trade, national security issues. And I 
think it is imperative that we work through these committees to 
generate policies that make us stronger for our allies and our 
relationships. And we introduced the BUILD Act, which as you 
know, I heard you talk about OPIC and how important and 
valuable that tool is. Well, with the BUILD Act, what we have 
done is we have expanded the lending capacity up from $23 
billion up to $60 billion. In addition, we can partner up with 
private enterprises and work and leverage that capital that 
they have, along with the expertise they have. And we can lend 
in foreign currency, which we weren't able to do before, and 
then we can partner up with foreign countries.
    How do you feel that we can best utilize a vehicle like 
that to build projects in these countries? Mr. Farnsworth, if 
you want to try to tackle that.
    Mr. Farnsworth. Yes, sir. And I appreciate both the 
opportunity to respond and also your and other leadership on 
this important act. I think it is a very important recognition 
that other countries are using tools, particularly in the 
Western Hemisphere, which we simply don't have----
    Mr. Yoho. Right.
    Mr. Farnsworth [continuing]. And we want to increase our 
authorities to be able to do that. One of the key areas that 
Latin America and the Caribbean needs and where the United 
States has great expertise is in infrastructure, and yet we 
have been losing this battle in some ways to China because 
China has a tool that we have not been able to mobilize in the 
same way, and that is development finance.
    China comes not just with projects, but they come with the 
finance to be able to do the projects. OPIC has been a 
successful agency, in my view, but it has been limited. It is 
small and its authorities are limited. So what the BUILD Act 
does is it expands that, gives us the ability to compete more 
effectively with the China bag of money, if you want to put it 
that way.
    What is important about that aspect is not simply though 
the commercial aspect. If you talk to many regional leaders and 
business people, they would prefer a relationship--they would 
prefer the investment from the United States because of 
management, because of quality, because of technology, because 
of anti-corruption, things that they are not necessarily 
getting from China. But if China is the only game in town, they 
have to be the partner, not the preferred partner; they are the 
only partner. So this gives us an opportunity to get back in 
the game, and I want to simply acknowledge that and say that 
this could be a very important tool if the Congress passes it 
soon.
    Mr. Yoho. I appreciate that.
    Mr. Herrington, do you want to weigh in on that?
    Mr. Herrington. Absolutely. Thank you, Congressman Yoho.
    I think the U.S. Chamber is a big supporter of this bill. I 
think we have advocated--one of the things we have advocated in 
my written testimony is for an all--an inclusive, all of U.S. 
Government approach to supporting our exporters and our 
companies that do business in the region.
    I think that this is what the BUILD Act does, and I commend 
you and others who were involved in that. And the best part 
about this is it is a free service to U.S. taxpayers, right to 
companies. And I think that a key issue we are talking about 
today is Chinese influence in the region. And one of the ways 
that China is able to successfully insert itself into our 
region is through basically a state-owned enterprise 
financing--State financing. And our companies and can no longer 
fight with one arm tied behind their back. So I commend you for 
advancing this legislation.
    Mr. Yoho. Well, I appreciate it. Ms. Hock, do you have 
anything to add?
    Ms. Meiman Hock. It might be a bit off topic since it is 
OPIC, but just to endorse also returning Ex-Im to full 
functionality, that is something that we are seeing again and 
again, coming up against Chinese development banks, finance, et 
cetera.
    Mr. Yoho. Right. That was the whole purpose of doing this 
because we had to have something to counter that, and if we are 
not leading in that area, and if we can't complete, there is a 
vacuum created. And nature abhors a vacuum, and that gets 
filled by somebody. And we want to make sure it is somebody 
that values what we do, and with the Western Hemisphere, we 
want to make sure that there are people that are going to 
promote democracies and, you know, the values that we do. And 
so we felt this was a very important issue to do.
    One last thing on energy, we are blessed with an abundance 
of energy in the United States of America, and we are exporting 
now. And we have got bills on the floor to increase the amount 
of LNG. And this is something we feel very critical to send 
down to the Western Hemisphere, to the Caribbean basin, and 
have it as an alternative to number two diesel coming out after 
Venezuela, which is not a friendly regime.
    Mr. Chairman, I am over my time, and I am going to yield 
back and tell you I appreciate it. But that is what we are 
working on. And thank you.
    Mr. Cook. Thank you very much. We are joined by two more 
members from New York. They were late. They were watching 
reruns of the Mets and the Yankees. I understand their 
priorities, but right now, I am going to recognize the 
gentleman from New York, Mr. Espaillat.
    Mr. Espaillat. Thank you, Chairman Cook.
    The world looks different from up here. I am usually down 
there, the southern part of the hemisphere. But thank you for 
what you have contributed to this debate, and I also want to 
ask some questions about China. And the Secretary of State was 
here last week, and I told him, you know: They are eating our 
candy in Latin America and the Caribbean; there is a vacuum of 
leadership there. And, of course, China has come in, and you 
have begun to see companies break from Taiwan. The most recent, 
the Dominican Republican a couple weeks ago. And China is 
coming into the hemisphere, and they are coming in to do public 
projects and roads and bridges and loans and investment. And, 
you know, there is a strong push to replace us as a main 
partner, even though they are so far away, yet politically, 
they are--it is a whole different continent, but they are 
making a strong argument to take over or have a strong 
influence in the region.
    So what are the main obstacles? Is corruption a real 
obstacle for U.S. companies to continue to invest? La mordida, 
the bite they call it. In some countries, they say it is as 
high as 30 percent. And, of course, especially since we have 
very strong anticorruption laws here that are enforced. Is that 
a major problem in investment?
    Mr. Farnsworth. Well, if I could try my hand, Congressman, 
at responding. First, the positive story about China in the 
region, they buy a lot of products from the region, which isn't 
a bad thing necessarily, and in the recession of 2008-2009, it 
was actually China that kept Latin America from falling itself 
into recession. There is legitimate trade; there is legitimate 
investment. So that is something that I think we should frankly 
celebrate because we are not buying all those products, and 
there is no reason why Latin America shouldn't have the 
opportunity to sell to other markets worldwide.
    Having said that, there are broad implications of that, 
both for U.S. business and also frankly for the promotion of 
the U.S. strategic interest in the Western Hemisphere, and I 
think we have seen that develop over the last 10 or 15 years, 
which is really the time period that China has been directly 
engaged in the Western Hemisphere.
    It is a question fundamentally about corruption? Corruption 
plays a part; there is no question about it. China is not 
subject to FCPA. Chinese, you know, companies aren't 
necessarily listed on the New York Stock Exchange. You don't 
have the same transparency and regulatory requirements, et 
cetera. So that is an issue. But if you talk to U.S. companies, 
that is not necessarily the first thing that they raise in 
terms of their ability to compete.
    They really do raise the issue of development finance and 
the ability of Chinese companies to come in with financing at 
below market rates from the Chinese Government. They do raise 
the issue of Chinese ability to underbid U.S. companies because 
many of the Chinese companies are state-owned enterprises; they 
have government support, et cetera. They may not be bidding--
even at market prices, they might be taking a loss in order to 
get the contract and get the investment and move forward that 
way.
    There are a myriad number of other things. One of the other 
things that may be retarding the United States' ability to move 
forward in the region is the ability of the United States to 
support some of those efforts from the private sector side, the 
U.S. Government. And we have been talking about a little bit to 
this point. And I think the ability to ramp up commercial 
diplomacy at the very senior levels of the U.S. Government 
would really, really help and show Latin America that the 
United States is not just here on a transactional basis or 
commercial basis, but we are here on a partnership basis. And 
that really goes a long way in terms of the Western Hemisphere, 
what in some ways we used to do. I think we have gotten away 
from that a little bit. I would like to see that go forward in 
a similar way.
    Mr. Espaillat. Finally, I spoke to a former President of a 
Latin American country, and he said to me: Well, show me real 
U.S. investment in the hemisphere, you know, that is 
significant right now in the last 20 years. Even the banks are 
no longer there. And, you know, I sort of began to think, and 
he was absolutely right. I think that we need to invest, Mr. 
Chairman, more in the future of Latin America and come back to 
ensure that we continue to be their main partner. So thank you 
for your testimonies.
    Mr. Cook. Thank you very much. At this time, I would like 
to recognize another Congressman from New York, my good friend, 
the gentleman from New York, Congressman Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    I want to kind of pick up from where Mr. Espaillat just 
left off. First, when I think about the CAFTA and, of course, 
the NAFTA, at one time, we were trying to do something in 
regards to a trade deal with all of the Americas, and even TPP, 
where we had various countries in Central and South America 
that would have been a part of that. TPP being important 
because it also kind of put a check on China, you know, to make 
sure they are playing by the rules, et cetera. So it is 
extremely important.
    Can you tell me what you think would have been the negative 
or the positive effects if we had stayed in the TPP and whether 
CAFTA was increasing the investments and opportunities for 
American companies and improving the relationship with those on 
the hemisphere?
    Mr. Herrington. Thank you, Congressman Meeks, I think you 
raise an excellent issue. I think the U.S. Chamber was a very 
vocal supporter of the Trans-Pacific Partnership, TPP, and I 
think you correctly call out a key reason why it was important, 
which was to establish a transpacific trading system that is 
rules based, that whether the U.S. exerts its leadership on 
trade joined by like-minded free market-oriented economies in 
the effort to try and encourage the same sort of adoption of 
policies across Asia and other parts of Latin America that 
weren't necessarily involved.
    The other key thing, though, that I think is really 
important about TPP is, you know, our exporters look to us 
every day, and NAFTA obviously is their priority, but they say 
to us, across numerous sectors, manufacturing, agriculture, 
they are very focused on Asia. Why? Because we project, by the 
year 2030, two-thirds of the world's middle class consumers 
will be in Asia.
    So, when we talk to this administration following the 
announcement to withdraw from TPP, our question is, okay, what 
is your strategy to access these consumers that our exporters 
will desperately need in the future to continue growing?
    Mr. Meeks. So let me then add, and I presume, when you are 
late, you don't know what went on prior to you getting here, 
but I have now likewise concerns in regards to what is taking 
place with the tariffs that the President is currently placing 
on there. And I would love to get your take on the impacts 
these newly imposed tariffs will have on American jobs and 
businesses, both small and large, in our country, and then with 
the retaliations that some of our allies are talking about, I 
would like to get your perspective. Mr. Farnsworth?
    Mr. Farnsworth. Thank you very much. I think that is the 
key question. It is the framing question for how do you promote 
U.S. commerce and business in the region, but the overall 
framework is an atmosphere that is roiled, is the word I used 
in my oral testimony, by the steel tariffs that we have seen 
against Canada and Mexico and Europe and others, and voluntary 
export restraints that Brazil and Argentina have had to comply 
with in the steel context. But also, in terms of the very 
aggressive approach the United States has taken on NAFTA, which 
is not clear if the United States even wants to continue with 
NAFTA, that is a real issue in terms of sustainability for 
investors, the pulling out of the Trans-Pacific Partnership, 
which you also alluded to, we could go on perhaps on some other 
issues.
    But this is a circumstance where once the United States was 
the country that was actually creating the conditions for 
orderly business and commerce in the region, now we have become 
the primary disrupter. And the problem with that is that if you 
are an investor looking in the long term, you can't make 
decisions based on that because there is uncertainty, but it 
provides the conditions that an outside country, like China, 
which we have been talking about, but there are others as well, 
can come in and take advantage, particularly if the state is 
behind some of these investments, as we have been talking about 
in the context of Chinese investments in the region.
    So, from my perspective, this is unhelpful, but despite 
that, there are other issues as well. Even if, as I mentioned 
previously in the testimony, even if the United States were to 
change course today and were to have a policy shift today on 
trade, the damage that is being done is going to take a long 
time to overcome. Supply chains, once they develop elsewhere, 
cannot just be on unwound. They are built, they are developed 
over years. If other countries began to look for partners that 
don't include the United States, whether because of formal 
trade relationships or some other reason, or just the question 
about the sustainability of the relationship with the United 
States, they began to develop those relations with other 
countries. And once those are developed, they are really tough 
and very expensive to break.
    So I think we have to be very, very careful. We can be 
doing these as negotiation issues, or we can be being doing 
them because perhaps we believe in them, but nonetheless, there 
are consequences that go well beyond the United States as well.
    And the final thing I would say, and just concurring with 
my two colleagues on the panel as well, is that there are 
economic consequences to the United States. This will hurt the 
U.S. economy from the job creation perspective, and from the 
ability to grow the economy even after tax reform and some of 
these other things that have been done over the recent months, 
from my perspective, this will be a step back for U.S. economic 
interests.
    Mr. Meeks. Thank you.
    Mr. Cook. Thank you very much.
    One further piece of business. If there is no objection, I 
would like to enter into the Congressional Record testimony 
from Transparency International.
    Pursuant to committee rule 7, the members of the committee 
will be permitted to submit written statements to be included 
in the official hearing record.
    Without objection, the hearing record will remain open for 
5 business days to allow statements, questions, and extraneous 
materials for the record, subject to the length limitations in 
the rules.
    I did want to add, this has been kind of a crazy day. I 
think everybody knows that. The ranking member was saying we 
have like a fly-in day. People are coming in hot-seating it and 
then leaving from one committee, and I want to apologize. We 
were a little late because of votes. It is that time of year. 
We are going to be in--I think the second series of votes is at 
9 o'clock, 2100, for all the military folks out there. So I 
certainly appreciate your flexibility. It is great to have a 
committee here that is so engaging, and I try to get 
everybody--and right now, just a reminder, you know, we have a 
little meeting with the President of Honduras afterwards. But, 
once again, I can't thank you enough for being here.
    And there being no further business, these guys can get 
back to their Yankee games--their New Jersey--there being no 
further business, the subcommittee is adjourned. Thank you.
    [Whereupon, at 3:29 p.m., the subcommittee was adjourned.]

                                     

                                     

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