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93–818PDF 2015

NATIONAL SECURITY BENEFITS OF TRADE

AGREEMENTS WITH ASIA AND EUROPE

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

MARCH 17, 2015

Serial No. 114–11

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

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

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

TOM EMMER, Minnesota 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

DARRELL E. ISSA, California 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

REID J. RIBBLE, Wisconsin 

LEE M. ZELDIN, New York 

WILLIAM KEATING, Massachusetts 

BRAD SHERMAN, California 

BRIAN HIGGINS, New York 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Carla A. Hills, co-chairman, Council on Foreign Relations 

(former U.S. Trade Representative) .................................................................... 5

Michael J. Green, Ph.D., senior vice president for Asia and Japan chair, 

Center for Strategic and International Studies ................................................. 11

Daniel S. Hamilton, Ph.D., director, Center for Transatlantic Relations, The 

Paul H. Nitze School of Advanced International Studies, Johns Hopkins 

University ............................................................................................................. 18

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Carla A. Hills: Prepared statement .............................................. 8

Michael J. Green, Ph.D.: Prepared statement ....................................................... 13

Daniel S. Hamilton, Ph.D.: Prepared statement ................................................... 20

APPENDIX 

Hearing notice .......................................................................................................... 40

Hearing minutes ...................................................................................................... 41

(1)

NATIONAL SECURITY BENEFITS OF TRADE 

AGREEMENTS WITH ASIA AND EUROPE 

TUESDAY, MARCH 17, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 2 o’clock p.m., in room 

2172 Rayburn House Office Building, Hon. Ted Poe (chairman of 

the subcommittee) presiding. 

Mr. POE. The subcommittee will come to order. Without objection, all members may have 5 days to submit statements, questions, and extraneous materials for the record subject to the limitation in the rules. I will now introduce myself for 5 minutes for an 

opening statement, and then the ranking member will give his 

opening statement. 

I am from the State of Texas. I live in the Houston area and 

trade is the life blood of my district. Over half of Houston, Texas’ 

economy depends upon the Port of Houston. Many people don’t 

know that, even in Texas. And study after study has shown that 

the more we trade, the more jobs there are in the United States 

for Americans. The Port of Houston is an export port. We export 

everything from fuel to little widgets that make valves in foreign 

countries. Trade is more than just a market access and jobs. Trade 

is a key part of foreign policy. It is also part of, I believe, national 

security. 

One of the biggest reasons why we won the Cold War is because 

our economic model was so much better than that of the Communist system. People around the world compared our economy to 

the Soviet Union’s and could see the difference and where the U.S. 

was the beacon of freedom and free enterprise, the USSR was all 

about government control. And when the U.S. opened up trade 

around the world, USSR closed itself off. 

Countries now in Asia are eager to reduce their economic dependence upon China. They don’t like Beijing’s economic model. 

They would much rather have a region based upon free market 

principles. TPP is our opportunity to move into the region in a free 

market direction and compete with China. It is much better if the 

United States takes the lead in writing the economic rules for the 

21st century in Asia than if China did. China steals intellectual 

property. It has state-owned enterprises that get unfair subsidies 

from the central government and it would not seem to me to be 

wise for the Chinese model to expand in Asia. 

2

The trade agreement written by China is going to be a lot worse 

for American interest than if we write it. If we don’t get TPP accomplished, it is just not an economic price that we pay. We would 

essentially be telling Asia that the United States is not interested 

in Asia. Asian countries will basically have no choice but to look 

to China as a trading partner. 

But there are also other strategic advantages for TPP. The more 

economically connected we become in Asia, the closer cooperation 

opens up in other areas like counterterrorism. For example, Malaysia has had a problem with ISIS supporters. With strong trade, we 

give governments with such types of ISIS problems an incentive to 

work together on those kinds of tough problems and solve them together. TPP is a chance for the United States to show Asia that 

we care. Asia does not have to submit to China’s ways, and know 

that we can work together. But most importantly, TPP is a credit 

for the United States. 

A free trade deal the United States is negotiating with the European Union, known as TTIP, offers similar strategic advantages. 

Even more aggressive than China, Russia took over the sovereign 

territory of Ukraine. I have met with the Ambassadors of other 

countries in the Baltics. The Bulgarians, and Romanians feel like 

they could be next for Russian aggression. One of the reasons why 

it has been so hard to cooperate with the EU on these issues is that 

Russia uses Europe’s dependence on Russia for energy to blackmail 

Europe. Countries like Latvia, Finland, and Sweden get 100 percent of their natural gas from Russia. Twelve countries in the EU 

get over half their natural gas from Russia, so Russia threatens 

Europe to get to them to do what Moscow wants. 

Right now in the United States there is more natural gas than 

we can use, but the United States Government will not allow 

American companies to export natural gas. The only exceptions are 

for companies exporting to a country with whom we have a free 

trade agreement or companies that get special approval from the 

Department of Energy. 

The Department of Energy approval process has been slow, so 

slow that drillers have stopped drilling because they know they 

can’t sell it. The long-term solution to this problem is to get American companies sell natural gas around the world, but, in the 

meantime, if we get TTIP done that also means we can export LNG 

eventually to every country in the European Union and Russia 

would no longer have a stranglehold over Europe. No longer would 

Europe be reluctant to get tougher with Russia and their aggression. This is just one strategic advantage of TTIP. I think there are 

others. 

Finally, TTIP and TPP could help push the world toward greater 

liberalization. Formal global trade negotiations in Doha are on 

hold, but together TTIP and TPP represent 90 percent of the 

world’s GDP. These pacts help set the global standard. And countries who do not want to be left out would have to agree to the 

tough standards set by these agreements in order to enjoy the benefits. 

Trade agreements have a geopolitical effect far beyond trade 

itself. I will now yield to the ranking member, Mr. Keating from 

Massachusetts, for his 5-minute opening statement. 

3

Mr. KEATING. Thank you, Chairman Poe, for holding today’s 

hearing. And while I believe that there is a link between trade and 

national security, I do not think that this correlation should outweigh other serious concerns. For example, when the existential 

need to counterbalance China exists, the fact remains that several 

of the countries participating in the Trans-Pacific Partnership, or 

TPP, negotiations remain stark violators of core international 

standards. In fact, despite claims that this agreement will better 

protect workers, at least four of the major countries included in 

TPP are already out of compliance with the international labor organizations’ core labor standards. 

In Mexico, Malaysia, Vietnam, and Brunei, workers face on-going 

and systematic abuse with each of them out of compliance. I am 

additionally skeptical of the TPP agreement that goes without 

meaningfully addressing currency manipulation, protecting domestic manufacturers, banning commercial whaling, and ensuring 

transparency. 

Further, I am still unsure of what benefits this agreement would bring to the U.S. Just last week, a record breaking $3-billion deficit 

with Korea was announced by the Census Bureau. These deficits 

equate to job losses and as we approach the 3-year anniversary of 

the signing of the U.S.-Korea free trade agreement, the numbers do 

not bode well for the future of TPP. Quite frankly, there is still a 

lot left to be desired with TPP and I am not sure the potential national security benefits are worth the sacrifice to American families. 

Yet, one trade agreement, if negotiated with global standards in 

line, may provide new means to uphold the norms that underpin 

the international trading system. The Transatlantic Trade and Investment Partnership, or TTIP, has remarkable potential to promote economic growth and create jobs throughout the United 

States and European Union. Since this agreement is between two 

economies that share a strong commitment to the rule of law, 

transparency, and free markets, it can help elevate health, safety, 

labor, and environmental standards worldwide. Beyond trade and 

investment, TTIP, also has significant strategic implications. The 

importance of the Transatlantic Alliance has been underscored by 

Russia’s invasion of Ukraine, its increasing hostility toward neighboring states, and the continued decline of fundamental rights and 

a rule of law under the Putin regime. 

The strengthening ties between the United States and the EU 

that would result from TTIP would only complement the united 

front that the U.S. and the EU have maintained throughout the 

Ukraine crisis. TTIP would highlight the virtues of the Western 

model and send a powerful signal to Putin and other authoritarian 

regimes that the United States and Europe remain as united as 

they ever were. 

Further, our commitment to higher standards and basic democratic principles is the basis for our prosperity, and that prosperity 

is our best defense against governments that seek to destabilize 

international order. 

To conclude, Mr. Chairman, I think that the trade discussions 

cannot be black and white. They should be as varied as the countries and standards and the opportunities represented in agreeVerDate 0ct 09 2002 13:03 Apr 14, 2015 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\031715\93818 SHIRL
4

ments themselves. And I look forward to today’s discussion and 

with that, I yield back. 

Mr. POE. I thank the gentleman. The chair will now recognize 

the gentleman—I started to say UCLA, but I better say just California, Mr. Issa, for his opening statement. One minute per member. 

Mr. ISSA. Thank you, Mr. Chairman, and Ambassador, I did fail 

to mention you are LA born, so perhaps UCLA is legitimate. I am 

not going to get in the middle of that. 

Chairman, I thank you for this important hearing. And in brief, 

I agree more with Mr. Keating’s comments than I normally would. 

The fact is you cannot look at trade agreements in the light only 

of the trade or all of them being equal. We do have to look at labor 

laws, rule of law, and of course, the global war on terror slash 

whatever other names you want to put on it. We have to look at 

defense cooperation. We have to basically even the playing field 

with all of our trade agreements. Most of our trade agreements, including the one that I testified as a civilian which was NAFTA during the Bush and early Clinton years, were, in fact, about two of 

our closest neighbors on which we had very few of these other 

issues to decide. But I look forward to hearing from our witnesses. 

I join with the chairman and the ranking member in saying that 

global free trade is essential. We need to compete with China, but 

we also need to compete with people that we can rely on in a number of areas. I thank the chairman for his indulgence and yield 

back. 

Mr. POE. The chair will yield a minute to the other gentleman 

from California, Mr. Sherman. 

Mr. SHERMAN. Trade is critically important. That is why we have 

to get it right which is hard to do when those in power in our country benefit so much whenever we get it wrong. We are told that we 

should be proud of the trade rules because we wrote them. Yes, we 

wrote these trade rules and now we should be as proud of them as 

the citizens of Madrid are of the Spanish flu. We made the trade 

rules so that we will be making nothing else in the United States. 

This deal is so bad economically, they are trying to sell it on national security grounds. But what does it do? It entrenches China 

two ways. First, we have given up on currency manipulation. Why? 

Just because we don’t mention currency manipulation does not 

mean the Chinese are cheating less. I have only been married a 

few years, but I am told that I shouldn’t——

Mr. POE. Don’t go there. Just don’t go there. 

Mr. SHERMAN. I shouldn’t use that line with my wife. ‘‘Honey, I 

am cheating less’’ probably wouldn’t do me any good. Second, because of the rules of origin, we are going to see products 50, 60, 

and really 80 and 90 percent made in China with free access to the 

United States’ market, and us getting no access there. It is time 

for us to stand up for American security that includes our economic 

security. It is time for us not to juxtapose these bad deals against 

the status quo, but these bad deals and the status quo against fair 

trade, against real results-oriented trade agreements designed to 

bring our trade deficit to zero within 10 years. I yield back. 

Mr. POE. The chair recognizes Mr. Perry for a minute. 

5

Mr. PERRY. I thank the chairman for holding this important 

hearing. I don’t know if the record should reflect that the gentleman from California just admitted that he is cheating, but it 

seems like in a way——

Mr. SHERMAN. Less. Less. 

Mr. PERRY. Oh, less. So important, right, exactly. 

Mr. SHERMAN. If China gets our way with it, well, maybe not. 

Mr. PERRY. Generally, when we talk about trade agreements in 

Congress, the media and a lot of people focus on limited, purely the 

economic implications. And while the economics of trade are obviously important, there is a subtle, but unquestionable geostrategic 

value associated with these global economic partnerships. For example, along with the other actions with our partners, the strategic 

value of giving our European allies an alternative to Russian gas 

through American LNG and the now realized cost of not doing so 

cannot be understated. With that, I am pleased to be here to receive your input on this topic of great importance and I yield back. 

Mr. POE. The gentleman yields back. Does anyone else wish to 

be recognized for an opening statement? Ms. Kelly? All right, I will 

now introduce the witnesses that we have before us. 

Ambassador Carla Hills is the co-chair of the Council on Foreign 

Relations and chairperson and CEO of Hills & Company International Consultants. Ambassador Hills has previously served as 

United States Trade Representative and as Secretary of the Department of Housing and Urban Development. 

Dr. Michael Green is senior vice president for Asia and Japan 

chair of the Center for Strategic and International Studies. Dr. 

Green is also associate professor at the Edmund A. Walsh School 

of Foreign Service at Georgetown University. 

And Dr. Dan Hamilton is the Austrian Marshall Plan Foundation professor and director of the Center for Transatlantic Relations at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University. Dr. Hamilton is an award-winning author on the Transatlantic Economy and has previously held 

a variety of senior U.S. Government positions. 

Ambassador Hills, we will start with you. You have 5 minutes. 

STATEMENT OF THE HONORABLE CARLA A. HILLS, CO-CHAIRMAN, COUNCIL ON FOREIGN RELATIONS (FORMER U.S. 

TRADE REPRESENTATIVE) 

Ambassador HILLS. Mr. Chairman, Mr. Ranking Member, and 

members of the committee, I thank you for inviting me to give you 

my point of view on the national security implications of free trade 

agreements and the importance that Trade Promotion Authority 

has on our nation’s ability to conclude effective agreements. 

Our nations’ experience shows that free trade agreements have 

a positive effect on our national security interests. Free trade 

agreements stimulates economic growth. As economist Gary 

Hufbauer at the Peterson Institute for International Economics calculates that the opening of our markets since World War II has increased our nation’s GDP by roughly $1 trillion. That increase in 

economic strength has contributed substantially to our nation’s 

ability to maintain the strongest defense capability in the world. 

6

The opening of markets has also strengthened the economies of 

our major allies and brought us closer together on a number of 

issues. 

Developing countries have benefitted as well. According to studies by Dr. William Cline at the Center for Global Development, the 

removal of trade barriers on goods produced by developing countries has a direct correlation to their success in reducing poverty. 

And according to his calculations, on average, when a developing 

country increases its ratio of trade to its total output by just 1 percent, it achieves a 1-percent reduction in its level of poverty. And 

reducing global poverty through trade agreement not only advances 

our development goals, it creates for us, as did our Marshall Plan, 

new economic opportunities. 

In addition, the negotiation of trade agreements with poorer 

countries helps to avoid or reduce potential national security challenges, for failure to enlarge their economic opportunities makes 

them more susceptible to recruitment by those who would do us 

harm. 

Also impoverished nations often lose the ability to enforce their 

laws or secure their borders, making it more difficult for our Government to deal with security problems like terrorism. And enlarging their opportunities reduces their potential for instability which 

advances our national security interests. 

Continuing to build on our nation’s economic strength through 

strong trade agreements with countries rich and poor will help ensure that we have the necessary resources going forward to support 

equipment, technology, and manpower we need to protect our security interests. 

And Trade Promotion Authority, TPA, is a critical tool to enable 

our Government to negotiate good and strong agreements. Our 

Constitution vests the Congress the power to regulate commerce, to 

levy duties, and it vests the Executive branch with the responsibility for negotiating with foreign governments including issues 

dealing with commercial trade. 

TPA sets up a collaborative process used since 1934 when President Roosevelt signed the Reciprocal Trade Act, as a predecessor 

to TPA, and the Congress has passed a similar bill 18 different 

times since. 

Under these procedures, the President gives Congress notice of 

trade negotiation. Congress may set objectives for the administration and may ask the administration to consult with it during the 

course of the administration and in return, Congress agrees to approve or reject, but not amend the trade agreement that the administration presents. Our negotiators cannot achieve the best trade 

deals if our trade partners expect there will be a second negotiation 

with Congress. Inevitably, they will hold back the key issues that 

we want the most in anticipation of that negotiation with Congress. 

To reach a good trade agreement requires striking a balance on 

a broad range of issues that have differing degrees of importance 

to the governments participating and a single amendment can 

upset that balance and cause the agreement to unravel. What happens beyond our borders for good or bad has an impact here. We 

need to make every effort to take actions that will generate good 

outcomes and minimize the bad and the negotiating of a strong 

7

trade agreement will have positive effects on our nation both economically and with respect to our national security. To achieve that 

benefit requires the Congress to pass Trade Promotion Authority. 

And I thank you. 

[The prepared statement of Ambassador Hills follows:]

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Mr. POE. Thank you, Ambassador. Dr. Green. 

STATEMENT OF MICHAEL J. GREEN, PH.D., SENIOR VICE 

PRESIDENT FOR ASIA AND JAPAN CHAIR, CENTER FOR 

STRATEGIC AND INTERNATIONAL STUDIES 

Mr. GREEN. Thank you, Mr. Chairman. I am here to talk about 

the geostrategic importance of the Trans-Pacific Partnership, TPP, 

but I want to begin by making the point that we are not talking 

about a case with TPP where we need to sacrifice our economic interests in order to advance our geopolitical interests. There are geopolitical advantages that are significant, but it is also likely to be 

a very good economic deal. 

These are countries, Japan, Vietnam, and others that have not 

traditionally been so open. Now they are stuck. Their old model of 

growth isn’t working and they want to reduce their dependence on 

China. And the leverage is largely with us. We will write the rules 

and the estimates by the Peterson Institute and others are that liberalization through TPP will add 0.4 percent to our GDP, the U.S. 

GDP over the next decade. That is a lot of money. So it is likely 

to be a good economic deal. But let me tell you why it is important 

geostrategically to our interests in Asia. 

First, at CSIS, at my think tank, we did a survey of leading political thought with leaders across Asia. And we asked what they 

thought about President Obama’s promise to rebalance or pivot to 

the Asia Pacific region. And outside of China, well over 80 percent 

said they wanted more of the United States and they supported 

this. But well over half said they had doubts that we could actually 

execute. 

Our ability to pass TPA and TPP, and for the Congress and the 

administration to get this done goes right to the heart of U.S. credibility in the region as a whole. And extends even to how seriously 

our allies take our security commitments and our diplomatic commitments because from their perspective this is so self-evidently in 

our own economic and strategic interests. So it goes right to the 

heart of American credibility. 

Second, a successful TPP deal will anchor our relationship with 

Japan. A deal with Japan is likely to create twice as much trade 

in U.S. exports than a deal without Japan. So it is good for us economically. 

For Prime Minister Abe, this is a critical way to jump start what 

is politically hard for him at home and that is restructuring the 

Japanese economy to grow. And we want the Japanese economy to 

grow and to absorb our imports, but also because Japan is now the 

second largest funder of the IMF, World Bank, most of the international institutions, the United Nations, and the most important 

host of U.S. bases. We have a stake in Japan growing and leading 

because we share common values and because Japan with some exceptions, such as their difficult relationship with Korea and China, 

is quite respected and popular in Asia and the anchor for our presence in the region. 

Third, a successful passage of TPA and TPP will decide who over 

the coming decade writes the rules in Asia. We did another survey 

at CSIS in 2009 and the majority of Asians thought that the most 

important rulemaking and trade liberalizing framework for Asia 

12

would be RCEP, the Regional Comprehensive Economic Partnership, which includes 16 countries and not us. And it is a Chinacentered trade arrangement. That was in 2009. Last year when we 

asked the question what trade architecture or arrangement is most 

likely to set the norms and the rules, the answer by a large margin 

was TPP. We have real momentum, particularly since Japan 

joined. To not pass TPA and TPP would be to slowly pass the baton 

back to others to decide what the rules will be, what the center of 

economic growth or the center of economic norms will be. And obviously, we want that to be us. 

And finally, an interesting thing is happening in China in response to TPP. A few years ago, the Chinese Government argued 

that this was an instrument of the United States to contain China 

and the Chinese lobbied very aggressively in countries like Japan 

and New Zealand and Vietnam to try to block TPP. When Japan 

entered the negotiations, the Chinese position shifted. And so for 

the last 2 years, reformers in China who want changes so that 

China can have a more effective economy, are arguing that they 

can use TPP the way China used the World Trade Organization, 

WTO negotiations, in the 1990s to force change within China. So 

China is not in the TPP negotiations. Notionally, it could be some 

day down the road, but immediately passage of TPA and TPP will 

give us far more leverage, far more purchase as we negotiate difficult issues with China because China will understand this is 

where the region is going and who is making the rules. Thank you. 

[The prepared statement of Mr. Green follows:]

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Mr. POE. Thank you, Dr. Green. Dr. Hamilton, your opening 

statement. 

STATEMENT OF DANIEL S. HAMILTON, PH.D., DIRECTOR, CENTER FOR TRANSATLANTIC RELATIONS, THE PAUL H. NITZE 

SCHOOL OF ADVANCED INTERNATIONAL STUDIES, JOHNS 

HOPKINS UNIVERSITY 

Mr. HAMILTON. Thank you, Mr. Chairman. I was asked to speak 

on the geopolitical implications of the Transatlantic Trade and Investment Partnership, the TTIP, so I will do that. I welcome it because the discussion so far has been very focused on the economic 

elements of this negotiation and there are considerable other geopolitical elements as both you and Mr. Keating mentioned. 

I think it is best to understand the TTIP, not just as another 

trade agreement, but as a way for the United States and Europe 

to reposition themselves for the world we are facing, a world of 

more diffuse economic power, intensified global competition, and 

how do the core nations of the West act and do they act together 

in that way? 

It seems to me there are three broad areas of which there is a 

geopolitical national security element to the TTIP beyond the economics. One is about the transatlantic community itself. The second is how we engage rising powers and whether we do it together. 

And the third is how this will relate to the international rulesbased systems, strengthen it or weaken it. 

On the first issue, the TTIP is potentially a powerful way to reaffirm the bond across the Atlantic based on our economic base, the 

geoeconomic base that we both have, $5.5 trillion economy, 15 million workers owe their jobs to the healthy commerce across the Atlantic. No other commercial artery is integrated as that across the 

Atlantic. We release every year an annual survey of all the jobs, 

trade, and investment. We are going to do that tomorrow. But I can 

tell you, Mr. Chairman, in Texas, the latest data show 300,000 jobs 

directly supported by European investment in Texas and if you 

take the trade, all the indirect effects, we would estimate over 1 

million Texas jobs directly dependent upon healthy commerce with 

Europe. And you mentioned Houston’s export center. Texas exports 

multiple times more to Europe than it does to China. 

The same for Massachusetts, Mr. Keating, about 150,000 jobs are 

directly due to just European investment in Massachusetts. About 

500,000 overall if you put direct and investment together. And I 

could go on. 

There is more for Mr. Sherman, you know, there’s more employment in Los Angeles County by European companies than Asian 

companies. California exports twice as much to Europe as it does 

to China, a West Coast state. 

And for Ms. Kelly in Illinois, 185,000 jobs are directly supported 

by European investment in Illinois and over 500,000 Illinois jobs 

are dependent upon healthy commerce with Europe. 

So it is our geoeconomic base, if you will. It is also traditionally, 

of course, our geopolitical partner on so many issues. And yet, 

there are questions of trust and commitment across the Atlantic 

these days. NATO is perceived in some quarters to be wobbly. TTIP 

would be the other side of the coin of our commitment to Europe 

19

through our military alliance. And I think particularly given the 

issues facing European security these days, it is a vital reassurance 

of the U.S. commitment to Europe. 

It also would reassure Americans who wonder about the European Union and whether it is inward or outward looking that the 

EU would be a very strong outward-looking partner because TTIP 

would essentially make that case. 

The second area is how both of us together relate to rising powers. And Dr. Green mentioned a few of those elements. But I think 

one has to think about this. Those rising powers are each having 

debates on how they relate to the international system. Do they 

challenge it? Do they accommodate themselves to it? And the message we have to those countries as they have those debates is actually quite important. 

In recent years, we have had different messages or muddled messages, European messages, American messages. We don’t have a 

message. So TTIP is a single, strong message about a robust, revitalized West, not defensive, but also not aggressive. It is about upholding standards, not eroding them. And it has an impact on each 

of the countries that we could discuss. Dr. Green mentioned China. 

It is not about isolating China. It is about defining the terms of 

China’s integration, what standards do we talk about? It is about 

Russia. TTIP is essentially a reassertion of Western values, robust 

international law, predictability and commercial contracts, human 

rights, all of that. That is anathema to Vladimir Putin. And he is 

conducting what the KGB used to call ‘‘active measures’’ to subvert 

the TTIP because he understands what it means. So it has a huge 

impact on Russia. It is a symbol of unity. 

The last piece is how we together will relate to the international 

rules-based system. We were the stewards of that system. And so 

the question of the TTIP is can we again establish standards at a 

high level that protect our workers, our consumers and labor, or do 

we allow each of our standards to start to erode because we don’t 

have an agreement? Those are the kinds of things that I believe 

will strengthen the international system rather than subvert it. 

Thank you. 

[The prepared statement of Mr. Hamilton follows:]

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Mr. POE. Thank all of our witnesses. I will yield 5 minutes to 

myself for some questions and then we will move through the panel 

as well. 

Big scheme of things, I believe in free trade and trade with countries throughout the world for all the reasons we have talked 

about. The problem is always, as my friends have said, the devil 

is in the details. There may be something in an agreement that we 

don’t like for a lot of reasons, politically, economically, human 

rights, whatever. We have got TPA that I think, Ambassador, you 

said has been approved 18 times in the last 30, 40, 60, 80 years. 

Ambassador HILLS. Seventy years. 

Mr. POE. Seventy years. Thank you, Ambassador. And then we 

have TTIP and TPP. We start with the Trade Promotion Authority. 

Congress has to approve that and there is some cynicism in Congress because we can’t get much information from the administration. We have asked the administration eight times to testify before 

our Committee on Foreign Affairs. I had spoken with Mr. Froman. 

Michael Froman, in 2013, was the first time he promised me he 

would give me a private briefing. Well, we haven’t had it yet. So 

there is some skepticism or suspicion, if you will, about what has 

taken place because Congress then has the problem of well, do we 

give the administration the TPA, the Trade Promotion Authority, 

even though we are not really getting much information out of the 

administration on what the end game is with these two trade 

agreements? 

Ambassador, can you help us out a little bit about what is going 

on with the administration and whether we should press that issue 

a little more or is that just the way it is? 

Ambassador HILLS. I have to say when I served, I spent a good 

time with my friends on the Hill, both in this body and in the Senate. I found having executive sessions with those who were interested, and often it is hard to get Congress to be interested, an executive session is useful. And I say that because when you are negotiating, whether you are negotiating to buy your house or your car, 

you want to keep your negotiations not public. You don’t want 

them on the front page of the newspaper so the persons you are 

negotiating with know what your strategy is. But Congress and the 

Executive Branch must have a collaborative arrangement. I can tell 

you it works. 

I could not have done the negotiations that we did without my 

friends on the Hill. They understood that it was necessary not to 

publicize so widely what we were trying to get from multiple governments. Because what you want to get from Government A may 

offend Government B, and so any negotiation requires some degree 

of discretion. 

I would encourage you to have executive sessions and I am certainly happy to encourage Mr. Froman to meet more often with 

you. I am shocked that you say you have not seen him since 2013. 

Mr. POE. For a briefing, that is correct. I appreciate that insight 

and going on, moving on to the specifics of the two agreements, let 

me just talk about Europe. 

Dr. Hamilton, anybody else can weigh in on this as well. When 

I visited Ukraine, the President told me that he sure would like to 

see some natural gas coming from the United States. In 2009, I 

31

think, the Russians turned the gas off for 2 weeks in the winter. 

It was cold because I happened to be there for part of that time. 

I understand the economic hostage that the Europeans feel. You 

can hear it in what they say because they are very careful about 

saying things to me, it seems like, to not offend the Russians because they are getting their energy from them. 

So just theory, not the details of an agreement with transatlantic 

partnership, how would that help economically Europe, but also 

help economically the United States if we dealt with energy, for example. 

Mr. HAMILTON. Thank you, Mr. Chairman. Well, you are absolutely right. Energy is a really important part of this relationship. 

The quick answer would be that a TTIP would enable us to go 

around some of those onerous requirements you mentioned, the Department of Energy and so on because if we have a free trade 

agreement with partners, much of that opens up. But it doesn’t 

quite do the job. 

My critique of the current TTIP is that there is a discussion 

about a proposed energy chapter, but both sides have not quite embraced it. And it is not only about free flow of energy in the trade 

sense because many on the U.S. side would say well, if we get the 

trade deal it frees up all of those problems, so what is the issue? 

Why do we have to have a chapter? I think it goes more to this 

point about standards and norms. 

If we could agree across the Atlantic on some basic principles 

governing energy trade to strengthen the rules-based order, that 

would become core, global benchmarks. And Ukraine is a good example. We have currently, across the Atlantic, for instance, noncontroversial, a basic principle that when a monopoly owns a pipeline, third parties have mandatory access to that pipeline. That we 

agree. In the United States, we agree. In the EU, it is not a global 

principle. And you can imagine if we could enshrine that as a principle what it would mean for a country like Ukraine because it 

would start to raise the bar in terms of how we engage. So setting 

the bar higher, because of how we work with Europeans is really 

an important part of TTIP. It goes beyond opening up just the 

transatlantic market, but we could do that at the same. That would 

provide huge benefits for U.S. energy producers. 

You see the other argument was about Asian prices being far 

higher than in Europe, but that has now changed. And the political 

signal to those who have to invest in infrastructure over a 5-, 10-

year period happens today. They don’t invest for 5, 10 years if they 

don’t get the political signal now. And that is why the third element of why that is so important. 

Mr. POE. Thank you, Dr. Hamilton. My time has expired. I will 

yield to the ranking member from Massachusetts, Mr. Keating. 

Mr. KEATING. Thank you, Mr. Chairman. TPP is supposed to 

help address the U.S. trade issues with China and China has a 

long-term history of currency manipulation. During the time that 

TPP has been under negotiations at least 60 senators and 230 

members of the House have called for binding currency disciplines 

to be included in the TPP. As far as I am aware, U.S. negotiators 

have not even introduced language related to currency, much less 

secure its approval from other TPP parties. 

32

If the TPP lacks enforceable currency rules, it seems China and 

other manipulators would be free to conduct business as usual. 

How then will TPP be an example of the U.S. writing the rules? 

And is the freedom to game the system by manipulating currency 

really a rule we want to promote? I will let any of the panelists 

address that. 

Mr. GREEN. Thank you. Our goal with China over the long run 

should not be to increase government control of currency. Our goal 

should be gradually for China to move toward more of a marketbased currency so that the value of the renminbi reflects what is 

fair and economically logical. So I would think in our negotiating 

strategy we should be taking measures that encourage that move 

toward market-oriented factors, and in a broad sense TPP and 

TTIP will do that and will reinforce those within the People’s Bank 

of China or within the Chinese system who also think that their 

current policies are a trap for them. They can’t manipulate monetary policy effectively with the current currency strategy that they 

have. It is a longer-term game with China that I think should be 

shaped by market-base rules. 

And the other thing about currency manipulation, I would say, 

is the G7, the G20, the IMF have acknowledged that a lot of us, 

including the United States and Japan, have engaged in monetary 

using to get out of the financial crisis, the economic crisis we were 

all in and in Japan’s case to get out of deflation. And I think that 

is sort of self-policing process that is quite effective in these international financial meetings and organizations. There is legislation, 

of course, for the Treasury Department to report on currency manipulation and that would be an area to focus, I think, if there 

were concerns going forward. 

Mr. KEATING. What would be the harm in having that kind of 

language inserted? Why is that not addressed? Why do you suppose 

that that is not in the agreement? 

Ambassador HILLS. In my own view, the trade agreement should 

try to open the market and create opportunity. We have institutions like the IMF and the G20 that can focus on currency. We 

have been using our currency to try to stimulate our economy. We 

would react poorly in my humble opinion, if other countries or even 

an institution were to tell us that we should back off. So I think 

that our trade agreements, both TPP and TTIP, should seek to 

open opportunities. 

You mentioned jobs in your opening remarks. And I was struck 

by the fact that even with the 28 nations that make up Europe, we 

are losing competitiveness because of regulatory turmoil. And by 

having harmonization, we will help small- and medium-sized businesses that are responsible for 90 percent of the new jobs. There 

are many small businesses in the United States that do not export 

to countries that speak their language, that want their product, because they cannot handle the paperwork. 

Mr. GREEN. I would, of course, agree and the only thing I would 

add is that in these agreements, these kinds of mechanisms are always reciprocal. So we may have a mature and fair and marketoriented sense of whether there is currency manipulation, but our 

partners in these agreements will also have the opportunity to set 

up triggers. And we will lose control of that if we are not careful. 

33

So we have a system with the IMF, the G20, the G7 that is effective that works for us. There is the legislation on treasury reporting, but we want to be careful about accidentally arming our trading partners with things that would be used against us with far 

more devastating effect than we might consider using them ourselves. 

Mr. KEATING. Great. Thank you. I yield back. My time is up. 

Mr. POE. I thank the ranking member. The chair will recognize 

the gentleman from California, Mr. Issa, for his questions. 

Mr. ISSA. Thank you. And it is really a pleasure to have you 

here. 

Ambassador, I will start with you. During the NAFTA era, first 

Canada, then Mexico, I think we discovered something which is 

even when people say they are for free and fair trade, everyone has 

something that is missing that needs to be included. When we did 

Canada, the labor unions didn’t have a problem because the AFL–

CIO moves across those borders transparently. Even though there 

are very strong unions in Mexico, lo and behold, if U.S. unions 

were not welcome, then they objected. 

Moving forward though, we have in the case of Europe, for example, partners who join NATO and pay a very small share. They 

want common defense and in some cases to even join us in defense 

of our world liberties, but they do so at about half as much contribution. These have never been part of trade agreements. In other 

words, we talk about harmonization—and I am concerned—but 

whose harmonization? If it is not explicit within the bill at the time 

that Congress approves it, then are we harmonizing the European 

Union changing laws? That is what I want to get to. 

The European Union is and I will be in Brussels in a couple of 

days, and someone will note that I have said this, but the European Union is an unfair trading partner because they do create 

nontariff trade barriers all the time and they do it systematically. 

Do you believe that the administration can effectively create at 

least an arbitration capability so when they put up nontariff trade 

barriers, time and time again, and we will just use the fact that 

you can’t sell an oil unless you can certify that the container that 

carried the oil, vegetable oil, never had a GMO in it. Okay. Now 

the absurdity of—by the way, it wouldn’t matter if it wasn’t consumed or not, whether it was being frying oil or anything. They 

wanted none of it. 

Those sort of decisions are currently available to the Europeans. 

They use them regularly. Today, they are trying to break up 

Google. They have a number of those. So I guess my question is 

it used to be trade was all about trade. Then it became trade plus 

union considerations under the guise of human rights. Then it became environmental in addition to that. Should we also look at the 

regulatory burdens that may be placed on our companies when 

they do try to export in a low tariff environment and find these 

nontariff trade barriers being erected? Is that something the administration should be putting into trade agreements, at least the 

process? 

Ambassador HILLS. Actually, the focus of the TTIP is to get regulatory harmony and the greatest amount of economic benefit will 

come not from tariff reduction, although you will get some of that. 

34

Because our average tariffs are about 3 percent, we had several 

dozen that are very high. 

Mr. ISSA. Have you ever tried to import a leather jacket? You are 

going to find out that there is like 12 different tariffs we still have 

in place. 

Ambassador HILLS. But the regulatory problem, you know, you 

want to buy a car and you want to sell a car, we have different 

rules for the lights, the steering wheel, the windows going up and 

down. 

Mr. ISSA. Let me get you on that, because that is perfect. You 

were there during the NAFTA negotiations. Mexico agreed to allow 

our automobiles in under specific requirements including an unlimited amount of early automobiles. Mexico has systemically tried to 

prevent those after the fact and today they are preventing the export of older U.S. cars which—some of which have been salvaged 

and so on. There is no question. But they are preventing it in spite 

of an agreement in NAFTA and their guise is that these are polluting. So even in the case of our agreement with Mexico, Mexico 

simply has disregarded elements of the trade agreement and we 

have no enforcement mechanism for it. 

And I bring this up because I support free trade, but I also 

watched China sign on to the WTO and then ignore it; Russia get 

into the WTO and then ignore it. These countries are right now exporting, if you will, more great American movies than we do. The 

problem is they were originally ours. 

Ambassador HILLS. Well, let me focus on your point about Mexico. Our trade with Mexico has gone up five fold. Our small- and 

medium-size businesses——

Mr. ISSA. And I am totally there for that. I came and I argued 

on behalf of the chamber for it. But it is not a question of successes. The question is when they selectively, any trade partner, 

uses a tactic including one explicitly prohibited, do we demand that 

the administration put from past experience arbitration or other 

capability to stop it? Like I say, it doesn’t matter how much you 

trade with Mexico, if you tried to export a few hundred thousand 

cars that are surplus in the U.S., older cars, you will find out Mexico won’t take them even though they signed an agreement saying 

they clearly would. 

Ambassador HILLS. What Mexico has agreed to is to give national treatment. And they do not have a surplus of old cars. The 

same pollution standards——

Mr. ISSA. Ma’am, ma’am. Have you been to Mexico lately? There 

are so many old Volkswagens driving around there, they simply 

don’t want our new old Volkswagens. 

Ambassador HILLS. What I was about to say is that the pollution 

standards for those coming into Mexico and those that are there 

are the same. They are given national treatment. If someone is exporting and feels they are not getting national treatment and they 

are being discriminated against, yes, there must be a mechanism 

for resolving that dispute. That has not been a primary problem 

with Mexico. Our trade has increased. Our investment has increased. In fact, most manufacturers and particularly, small and 

medium size manufacturers, will say that they not only sell things 

35

to one another back and forth across our northern and southern 

borders, they make things together. 

Mr. ISSA. I was only asking you, should in a trade agreement 

there be a mechanism if a company claims that to be true? The fact 

is, it is true and we do have the companies that have found these 

changes that unfairly, essentially after the fact, decide they are no 

longer going to take American cars. 

Ambassador HILLS. Is a mechanism? 

Mr. ISSA. Okay, so you do believe it should be there and it should 

be enforceable? 

Ambassador HILLS. There is a mechanism in all agreements. 

NAFTA has one. The WTO has one. 

Mr. POE. The gentleman’s time has expired. 

Mr. ISSA. Thank you, Mr. Chairman. 

Mr. POE. The chair recognizes the gentleman from California, 

Mr. Sherman, for his questions. 

Mr. SHERMAN. Thank you. All the advocates of these agreements 

talk about exports, but they don’t subtract out imports, so then 

they argue that if we export $1 billion and import $2 billion that 

is great because we have got $3 billion in trade. The fact is if exports create jobs, imports take them away. That is why the change 

in our trade policy that began in the late 1980s has accompanied 

the total destruction of the American middle class. 

We focus just on the jobs we lose. But that is not the sole focus. 

It is keeping wages down. First, an employer says—and the Ambassador was talking about how employers love this because they 

can say we are going to cut wages or we are going to move the jobs. 

We will open up a new plant or the nicer ones say, we have got 

to keep wages low because we face free access to the U.S. market 

from 50-cent-an-hour Vietnam labor. So we have got to keep wages 

low. 

Then some factories shut down. That creates more workers. Supply and demand, that keeps wages down. And then states see that 

wages are down, the supply of workers is up, we had an economic 

crisis, so they become right to work states and then no unions, no 

raises. And so the decimation of the middle class has been accomplished before we even lose many jobs. But of course, we have lost 

millions and millions. So the American people aren’t going to allow 

us to do this unless we fool them and tell them it is about national 

security because they know it hurts our country. 

Now we are told that this is an anti-China system that we are 

creating. Well, wait a minute, the same advocates are the ones who 

advocated the worst trade deal we ever had permanent, most favored nation status with China. So we enter into that agreement 

in the late 1990s. We give away millions of jobs to China which 

strengthens them to the point where in order to repair the geopolitical problem we have to give millions of jobs to China’s neighbors. So first you give the jobs to China, strengthen them, and then 

give the jobs to China’s neighbors to strengthen them. Everybody 

is strong except America and our families. 

Then we are told that we will deprive ourselves of the great 

honor of defending Japanese and Korean islets. They are really 

uninhabited rocks at great expense to the United States. For the 

benefit of countries in the case of Japan, it has spent less than 1 

36

percent of their own money on their national defense. So we will 

lose the chance to spend hundreds of billions of dollars protecting 

islets which, if they have any oil, and they don’t, it is not our oil. 

But everything going on at the Air Force and Navy is how can we 

spend hundreds of billions of dollars in our research and procurement to prepare ourselves to protect these islets and oh, by the 

way, let us give away millions of jobs so that we will have the opportunity and be invited to provide this defense of rocks for free. 

No wonder all of Wall Street is for this deal and all of America 

is against it. Although given the amount of money that has been 

spent to propagandize to the American people, I guess it is not surprising as many as one third could be fooled into supporting this 

agreement. 

My question is we are told that we have got to include Vietnam 

in this agreement. We know we might have to include Vietnam, because that is the 50 cent an hour labor that will make sure we can 

really drive wages down in the United States, but that is not the 

given reason. We are told we have to include Vietnam because we 

will get free access to their markets, but of course, Vietnam has no 

freedom and they have no markets. 

Dr. Green, is there any evidence that by signing this agreement, 

the Vietnamese Government and its Communist Party will not be 

in control of all major exports, $1-billion contracts, $100-million 

contracts of American goods entering Vietnam? Do they lose control 

so that some business person can contradict party policy safely and 

import American goods? 

Mr. GREEN. So this is an important question and I think it is 

good that the ranking member and that you and others are focused 

on it because we have an important stake not only in our economic 

relationship with Vietnam, but with the improvement of governance, human rights, and democracy in these countries. I have been 

disturbed that the U.S. Government spending on governance and 

human rights and democracy has dropped almost in half in the 

past 8 or 9 years. I just mention that because trade is not the answer for all these problems. There are other tools we need to bring 

to this, but I think it is an important question. 

I worked for 5 years in the NSC for President Bush on Asia. 

Went to Vietnam to press these issues. Vietnam reformed about 

halfway, the so-called Doi Moi reforms. So about half of the Vietnamese economy is government dominated and about half is moving toward a much more free market direction. We definitely have 

an interest in terms of economics, strategic relations and human 

rights and democracy in spreading that nongovernmental sector. 

Mr. SHERMAN. Do you think that a business person in Vietnam, 

when they get a call from the Communist Party saying don’t buy 

the American goods, oh yes, we have published our reduction in 

tariffs. Oh, yes, we have signed written agreements, but we are 

telling you on the phone don’t buy the goods, that that businessman is going to call a press conference, denounce the Communist 

Party and announce how he is being pressured? Can you imagine 

that happening in Vietnam? Or is what is much more likely the 

businessman will say, ‘‘Yes, sir. I will buy the German goods if you 

think that is better. I will buy the Chinese goods if you think that 

is better. I will do whatever the party wants.’’

37

Can you point to one case where someone in control of a $100-

million enterprise in Vietnam has stood up and denounced party 

interference in their import and export decisions? And it is never 

going to happen, is it, because they are going to be killed. 

Mr. GREEN. But is there a case where an American CEO has 

stood up and condemned policy in the United States that doesn’t 

directly affect their business? I would say this though——

Mr. SHERMAN. Well, I am talking about something that would affect their business and yes, there are plenty of business people that 

condemn our foreign policy every day from both angles. I hear from 

them every day. I know my time has expired, but the idea that you 

are going to have labor rights in Vietnam, that you are going to 

have free markets in Vietnam, that no one is going to be disappeared in Vietnam, is something you can believe only if you are 

so dedicated to this agreement that your eyes are closed. I yield 

back. 

Mr. GREEN. So I spent time on the ground in Hanoi. 

Mr. POE. Briefly comment or answer that. 

Mr. GREEN. Thank you, Mr. Chairman. I spent time on the 

ground in Vietnam, working to expand the number of house 

churches, to end the prosecution of Catholic bishops and parochial 

schools when in government and we had success. Why? In part because at the time we were negotiating normal trade relations. We 

had considerable leverage (a), and (b) because the Chinese ultimately did not want to fall into China’s orbit. 

So we have leverage and we have an opportunity now to influence this and no, Vietnamese business leaders are not standing up 

and condemning the Communist Party, but many, many more Vietnamese than Chinese are on the internet and in other ways protesting their government as they have more opportunities and more 

choices. 

Mr. SHERMAN. Dr. Green, every single group in America dedicated to human rights in Vietnam says vote no on TTP. I yield 

back. 

Mr. POE. I thank the gentleman from California. He yielded back 

twice, so I will take it the second time. I thank all of you for being 

here. You can see that this is an important issue for all the members up here. Our opinions vary tremendously. We will see how it 

ends up down the road, but thank you for your time and thank you 

for your testimony. The subcommittee is adjourned. 

[Whereupon, at 3:15 p.m., the subcommittee was adjourned.] 

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