59

tivities by the original Canadian Free Trade Agreement and would
encourage the addition of Chile to NAFTA, as well as other Central
and South American countries as they qualify. Generally, we need
to find a way to encourage other small to medium size firms to ex-
port through enhancing banking regulations and providing low cost
financing of export receivables. For small companies, the bank lines
of credit often will exclude export receivables from your borrowing
base. So some help could be provided there through Congressional
legislation.

As far as internal policies, we would recommend progrowth legis-
lation that encourages savings and investment through reduction of
taxes and a commitment to a balanced budget. Our global competi-
tors benefit by Tax Codes that promote job creating investment and
low interest rates resulting from a balanced budget. Examples are
the resurgence of Italian competitors as a result of the Sabatini
and Tremonti laws making capital investment extremely attractive,
and of course, the Japanese who benefit by accelerated depreciation
and extremely low interest rates. Congress is applauded for finally
passing a product liability bill and the President is roundly con-
demned for vetoing it. Europe passed a much better version of our
bill in the EC in 1992 and our unpredictable tort system has
chased major industries off shore, small aircraft and medical equip-
ment being two examples. Quite frankly, this was one of the rea-
sons we got serious about exporting. We should also be aware of
nontechnical trade barriers. The European Community has enacted
regulations requiring CE registration, a safety requirement very
close to UL, and EMC, electromagnetic compatibility relating to
radio frequency interference. These technical requirements effec-
tively raise trade barriers to U.S. firms endeavoring to export to
the EC. We should encourage agencies like the National Institute
of Standards and Technology and ANSI, the American National
Standards Institute to be pro-active in representing U.S. interests
within the International Standards Organization. Believe me,
you're no less safe using a UL listed product than using one that’s
CE listed and electomagnetic compatibility has limited applicabil-
ity. The United States is renowned for its volunteer support of safe-
ty and standards development and we should make sure that we
take care to utilize this resource in the ISO process.

In sum, continued pursuit of free trade, fair trade, increased
transparency and upward harmonization of international trading
rules is critical to the well being of the United States. We encour-
age Chairman Crane, Congressman Rangel and the rest of the
House Ways and Means Trade Subcommittee to keep up the good
work in furthering this effort, and stand willing to contribute to
our economy and our workers by reaping the fruits of this Commit-
tee’s labors in advancing the goals of a strong international
marketplace.

[The prepared statement follows:]


123

nothing to help the Chinese central government eradicate the problem which it has only
recently had the legal authority to attack.

Another issue often cited by those in favor of withdrawing MEN is China's human
rights record. The year I went to China, 1979, was a year of famine in southern

, Which our Chinese hosts never mentioned at the time they hasted banquets for
nt delegation from the States of Illinois and Arkansas. In this century, the

ble fight achieved by the Chinese citizen has been the right to eat. Now that
basic needs have been achieved, I feel sure that China’s continued economic growth
and intercourse with the Western world is the surest method of adding more rights and
protections for her citizens. ‘The horrors of the cultural revolution could only have
been carried out in a China isolated from the rest of the world. Do you really want to
bring China to the point of isolation once again?

Let us imagine an entirely reverse situation, China decides to grant its own brand of
‘MEN to its trading partners on a selective basis. China’s statesmen, in examining
‘America’s fitness for this honor, bring up America’s horrifying drug problem. “Why
‘can't they solve this wasteful and destructive behavior,” intone their elders, “we did.”
China issues warnings to the US trade officials that unless America’s drug problem is
solved, China will henceforth take retaliatory trade measures.

The US trade officials are stunned. Although they agree that there is a problem, they
have no authority to control it, and moreover they resent a foreign power directing
them in what they regard as a primarily domestic issue. What have the Chinese gained
in this scenario?

Finally, is this the time, with the succession of China’s highest officials in a state of
transition and uncertainty, to pressure Chinese officials and undermine the core of US-
China relations? Is this the time to give the hard-liners an excuse not to deal with the
us?

In closing, the annual ritual in which we are participating today is in danger of
becoming institutionalized and ineffective. My opinion is that MFN status, once
granted to any nation, should not be permanent. A formal revocation procedure, for
acts of war and for other good cause should be established, which could be instituted at
any time. A threat with no specific date would, I think, be much more effective. ‘This
would 1) give the US-China trade relationship a badly needed sense of permanence 2)
give trading partners on both sides a sense of security 3) reduce annual payments to US
China lobbyists 4) distress our European and Japanese competitors and 5) save taxpayer
time and money.

I would like to ask the Congress whether or not any other country has a similar
Procedure, and in an increasingly interdependent and multilateral world, whether we
need this exercise any more. It is time to recognize the myth of a US-China bilateral
trade relationship, divorced of consequences in the outside world. Is there any benefit
accruing to your constituents? If the answer is none, perhaps our limited resources can
be expended elsewhere.


25

confused thinking that we handicapped ourselves and put ourselves
at a disadvantage as a result of N,

Mr. Suapiro. Mr. Chairman, you Shave made the best arguments
and made some of the most important points on this, so I do not
want to repeat them all. But From our standpoint, the case for
doing NAFTA at the outset was compelling. The barriers in Mexico
were much higher than the barriers coming the other way. Most
of the overwhelming number of changes made in Mexico, the lower-
ing of their barriers to our exports the first year of NAFTA, our ex-
ports soared. Last year, despite all the trouble, and this is about
the worst case one could go through, because of NAFTA, exports
did not decline very much and Mexico was not able to go back to
the kind of closed market that it maintained in the past. Interest-
ingly, Mr. Chairman, in addition to the numbers you have indi-
cated, the fact is that the benefits of NAFTA for us, vis a vis other
trading partners in Mexico were quite clear. It was a sharp drop
in European exports to Mexico, and in Japanese exports to Mexico,
but ours stayed pretty firm despite the very serious economic

imy

Phe other thing, thor is that we firmly continue to believe
that Mexico is our neig! a it is a friend, it is a country that we
have to maintain positive relationship with. Our ability to do that
would have been hampered seriously had we not had NAFTA. You
can look at recent events; there have been cases where Mexico has
cooperated in unprecedented ways on law enforcement, for the first
time extradition from Mexico to our country, which has been a
problem for many years, has been cooperative. A week ago they
signed a 5 year agreement with respect to cleaning up and working
together at the border on pollution. So there are still many prob-
lems, but overall we are in a stronger position with NAFTA than
we would have been.

Chairman CRANE. What would be the status, Mr. Ambassador, or
the economic effects rather of termination of most-favored-nation,
kat China with our pending reexamination of this issue in June and

m

Mr. SHAPIRO. Mr. Chairman, the effects would be extraordinarily
serious economically and they would be very serious in terms of our
relationship with China. The most favored nation, does not connote
special treatment. It is basically the treatment we give to all our
trading partners. If we end MFN, most-favored-nation, tariffs fac-
ing Chinese goods would go from” something like an average of 5
percent to 50 percent. Basically it would radically change the trade
relationship, and it would cut off trade. It would be a major setback
in terms of any relationship with China. We have difficult problems
with China that we all acknowledge at the present time, but the
policy that the President wants to pursue and is seeking bipartisan
support in Congress for is a policy of engagement with China, con-
tinuing MFN, but responding in targeted ways with sanctions
where appropriate. That’s what we are trying to do in the intellec-
tual property area. Giving them MFN does not endorse all their
policies. It does not endorse the human rights, trade, or prolifera-
tion policies. Without MFN, we will have a grave, grave problem.

hairman CRANE. One final question. Can you speak to the chal-
lenges that lie ahead for U.S. trade policy? You touched, in your


COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois SAM M. GIBBONS, Florida
BILL THOMAS, California CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ANDY JACOBS, Jr., Indiana
JIM BUNNING, Kentucky HAROLD E. FORD, Tennessee
AMO HOUGHTON, New York ROBERT T. MATSUI, California
WALLY HERGER, California BARBARA B. KENNELLY, Connecticut
JIM McCRERY, Louisiana WILLIAM J. COYNE, Pennsylvania
MEL HANCOCK, Missouri SANDER M. LEVIN, Michigan
DAVE CAMP, Michigan BENJAMIN L. CARDIN, Maryland
JIM RAMSTAD, Minnesota JIM McDERMOTT, Washington
DICK ZIMMER, New Jersey GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Jowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas LF. PAYNE, Virginia
JENNIFER DUNN, Washington RICHARD E. NEAL, Massachusetts
MAC COLLINS, Georgia MICHAEL R. MCNULTY, New York
ROB PORTMAN, Ohio
JIMMY HAYES, Louisiana
GREG LAUGHLIN, Texas
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
PHILLIP D. MOSELEY, Chief of Staff
JANICE Mays, Minority Chief Counsel
SUBCOMMITTEE ON TRADE
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr, Florida SAM M. GIBBONS, Florida
AMO HOUGHTON, New York ROBERT T. MATSUI, California
MEL HANCOCK, Missouri WILLIAM J. COYNE, Pennsylvania
DAVE CAMP, Michigan LF. PAYNE, Virginia
JIM RAMSTAD, Minnesota RICHARD E. NEAL, Massachusetts

DICK ZIMMER, New Jersey
JENNIFER DUNN, Washington

ab


White tess developed countries, in particular, tend to have high tariff bariers tothe products of
the U.S. marine industry, in general our irapression is that non-tariff barriers area greater factor
in restricting trade than tariff barriers. Specifically, complicated and conflicting standards for
products in individual markets as well as non-uniformity between countries are a major
roadblock to international trade. Aco adoption of International Si Organizations
‘Product standards would solve many ofthese problems and US. trade policy should seek that
result — starting with adoption of such standards domestically by the U.S. on an accelerated basis
to both set the example and quicken mutual recognition agreements regarding standards between
bilateral trading partners. While world trade is moving in this direction, itis much slower than it
needs to be and U.S. leadership could accelerate the process,

As indicated previously, reciprocal fre trade and the several subsidiary policies it involves wih
‘maintain and improve the competitive position ofthe United States. The more vigorously that
policy and subsidiary policies are pursued, the greater the benefits to be achieved. In this
connection, the activist role which the late Secretary of Commerce Ron Brown played was quite
helpful — not merely the high visibility trade trips with business leaders, but the day-to-day
aggressive assistance which Commerce Department bureaucrats provided less visible members
oft S ndasty talig inertia macs sch asthe U.S. boating industry. In ese

i activities of the Ce Department have much more
‘Nimatey volved widh be US. industry and much more aggressive and reSponsive.

US. trade poticy also noeds to better consider the needs of small business people. We have dealt
‘with such agencies as the Ex/im Bank, U.S. Trade Representatives office, Commerce
Department and others. With the exception of the Commerce Department, the other agencies are
‘efpf in providing information on their programs — but when it comes to actually responding to
specific requests, the atitude is somewhat, “We'd like to help you but you're too small, we've
only got time for Bocing and Motorola sized issues.” While we certainly want our government
‘helping the international market efforts of those companies, there should be some focus and
resource availabilty for smaller companies and non-high tech companies which can successfully
export, where: are i. i ly and where: of such small

in the internat will also create A\ jobs.

Culture trough ef he wd td tou dig pst oy advantages in
‘order to belp reduce casts to U.S. consumers ~ all of which should make the world a more
prosperous and peaceful place. The means to achieve those goals have certainly become
‘abundantly clear inthe last seven years — embracing free market economics where the
‘marketplace and not governments decide whet is made for whom, by whom, how and at what
rive.

‘The main questions remaining involve how to accelerate the process of free market economics
around the world and those questions largely lic inthe area of reducing goverament involvement
in marketplace matters as well as economic matters broadly. To the extent that government
regulation is necessary and desirable, uniform regulation among countries or reciprocal
recognition of nearly uniform regulation should be a trade policy goal.

Finally, atthe miro economic trade policy level, U.S. trade associations such as the National
Marine Manufacturers Association are good sources for information on specific trade policy
reeds. Collecting the top 10 needs from 300 or 400 trade associations serving industries
involved in international markets would produce 3,000 or 4,000 specific items which could, in
tum, be quickly organized into groups or palicms of lke issues to be acted upon — probably less
than 100 in all. That would be a quick way to develop a very specific trade policy serving well
the needs of 75 percent or better ofall exporting companies in the US.


68

GATS we have managed to set up a working party on professional
services which is an investment for all professional service provid-
ers around the world. This, in itself, is a major development be-
cause it has great long term benefits. One of the major efforts of
this working party is to promote the use of international account-
ing standards around the world. This may sound rather moot or ar-
cane or boring, but the truth of the matter is that investors, capital
providers, pension fund members would all benefit from having the
same set of financial statements that they could compare compa-
nies around the world.

Now, in terms of specific recommendations, I have broken them
down into two categories. The first category contains tactical rec-
ommendations and they are priorities for action. First, this Sub-
committee, all of American business should really work earnestly
to ensure the effective implementation of the Uruguay round which
includes the GATS rules on services. In particular, in the GATS
area we need to complete the sectoral negotiations in telecommuni-
cations, financial services and other service areas.

Second, it would be a big impetus if this Subcommittee encour-
aged the administration to demonstrate real interest in the work-
ing party on professional services. It is really the forerunner to
breaking into global trade in services for professional services firms
by setting up rules that people can play by around the world.

Third, it is important to monitor the other negotiations and ac-
tions that are happening around the world outside of GATS. They
include the multilateral agreement on investment, the Asia-Pacific
Economic Cooperation initiatives, and the free trade area of the
Americas. And, we need to prod the negotiators when their efforts
flag and ensure that their talks do not go off course. Fast track
should be reauthorized as soon as possible.

Strategically for the future, the single most important issue for
this Nation is to begin correlating national palicy with global
trends. Three salient, global trends that affects everyone are one;
the convergence of telecommunications and computers; two, dis-
continuities in governments and other institutions; and three,
globalization of markets and people.

My second strategic recommendation is; we need to develop ways
to measure and account for trading, trading the new form of capital
which is knowledge; the intangibles; the invisibles. We have out-
moded ways of trying to control and protect intellectual property
rights. We need to concentrate on developing new ways to measure
and account for these invisibles.

And third; it is a very obvious fact that the next trade agenda
will be heavily influenced by the issues of competition and invest-
ment. What is not obvious is the fact that if the United States does
not develop the potential of its people, competitive advantages will
be gained by countries that capitalize on the power of technology
to leapfrog competitors. In a word, that spells retraining our
American work force.


79

in China for our phosphate products. We have opened an office in
Hong Kong and are monitoring investment opportunities in port
facilities and bulk blending plants in China. None of these
investments would detract from our operations and employment in
Florida and Louisiana; to the contrary, they would facilitate our
sales to China of product made at home in the U.S.A.

Against this background, Mr. Chairman and Members, you
can appreciate the reasons why IMC Global supports most-favored-
nation treatment for China. At IMC, our workers, joint venture
partners, subsidiaries, suppliers, communities and the ports from
which we export all benefit from trade with China. If the United
States refused to allow China to export to our country on MFN
terms, realistically we would have to expect that China could
reciprocate this treatment. Instead of buying DAP and other crop
nutrients mined and processed in and transported from the U.S. by
American workers, the Chinese could buy instead from our
competitors around the world

Indeed, IMC Global supports the renewal of MFN for
China not only this year, Mr. Chairman and Members, but every
year. We believe the time has come to provide for permanent MFN
treatment, without going through an annual exercise that has
become nonproductive or even counterproductive. The provisions
of U.S. law under which the MFN review is conducted annually
actually pertain only to conditions regarding Chinese emigration,
not to the larger human rights and other issues on which the
debate generally focuses.

While the U.S. has many problems with China, our
company believes that the annual MFN debate destabilizes trade
with China, without providing leverage to resolve any of those
problems. The U.S. would be better positioned to make real
progress toward satisfactory resolutions of various problems with
China if it had a stronger, less uncertain relationship with
China based in permanent reciprocal MFN treatment.

For the same reasons, IMC Global supports what we
understand to be the U.S. position on China's accession to the
World Trade Organization. IMC believes the U.S. should welcome
China's membership in the WTO on commercially acceptable terms.
As an economic powerhouse, China cannot expect and is not
entitled to membership without regard to the obligations and
responsibilities it agrees to undertake. As a still developing
nation, China may merit reasonable transition periods in which to
come into compliance with some obligations and responsibilities.

However, the objective should be clear: the U.S. should
support Chinese membership in the W70 at the earliest date that
China offers commercially acceptable terms. The goal is to
integrate China into the world trading system and thereby to
promote its compliance with the rule of law and its use of
markets. When this goal is achieved, the U.S. will be able to
use the dispute settlement procedures of the WTO, and will have
to rely less on unilateral U.S. actions or threats of action.
Multilateral actions are more likely to be productive and less
likely to be controversial, resulting in relatively more
stability and less disruption to trade for the benefit of all,
including the United States.


15

Testimony before the
Trade Subcommittee of the
House Ways and Means Committee
Ambassador Ira Shapiro
May 20, 1996

Introduction

Mr. Chairman, I appreciate this opportunity to appear today before this Subcommittee. It is
especially a pleasure to come to Illinois to discuss the successes we've had in trade over the last
three years, as well as the challenges which lie ahead. We are beginning to sce positive results
from the President's leadership, with the bipartisan support in Congress, in insisting that other
nations open their markets.

In the first weeks of this Administration, President Clinton set forth a new trade policy, one that
rejected that false choice between unilateral free trade and protectionism. In a speech at
‘American University in February, 1993, “Open and competitive commerce will enrich us as a
nation.” And so, he said, “we must compete, not retreat.” But he also said, “we will continue
to welcome foreign products and services into our markets but insist that our products and
services be able to enter theirs on equal terms.” We favor open trade ~ but with reciprocity.
The days of one-way trade -- when we opened our markets with out insisting on comparable
access to foreign markets ~ are over. This insistence on equal access on equal terms is the basis
of his trade policy and part of an overall strategy to create jobs; raise standards of living; and
ensure fair and frée trade works to the benefit of Americans.

‘The President understands that we live in a changing world. There are essentially four new
realities which mark this changing world, and have an impact on our trade policy.

First, our economic strength begins at home. Recognizing this fact, the President has worked
hard to restore the domestic economy. That meant enacting a smart and tough deficit reduction
plan and reducing the size and scope of government. At the same time, his Presidency is
dedicated to giving the American people the tools they need to prosper in the new economy —
tools like a decent education, safe streets, a government that creates opportunity, not
bureaucracy. At the same time he has called for workers and companies to make the most of
those opportunities. No one can face the challenges of a new century alone. We all must work
together.

Second, the global economy is now a fact of life. Businesses operate internationally, and the
economies of the world are truly interdependent.

‘Third, trade is more important than ever to our economy. Trade now equals over 30 percent of
U.S. GDP, up from 13 percent In 1970. Over eleven million workers in this country owe their
jobs to exports. On average, these jobs pay 13 - 17 percent more than non-trade jobs. Every
billion dollars of exports supports 15,000 jobs. To grow and prosper at home ~- and create high
wage jobs -- we must open the most lucrative markets in the world to U.S. exports. We are six


14

‘The WPPS has begun its work with the accountancy sector. Progress in accountancy will pave
the way for work on the other professions, and progress on the professions will pave the way
for work on other industries in the Council on Trade in Services.

‘The WPPS has the following three part agenda set out in the ministerial decision. “[T]he

Working Party shall concentrate on:

@) developing multilateral disciplines relating to market access so as to ensure that domestic
regulatory requirements are: (i) based on objective and transparent criteria, such as
competence and the ability to supply the service; (i) not more burdensome than necessary
to ensure the quality of the service, thereby facilitating the effective liberalization of
accountancy services;

() the use of international standards and, in doing so, it shall encourage the cooperation with
the relevant international organizations as defined under paragraph 5(b) of Article VI, so as.
to give full effect to paragraph 5 of Article VII;

(©) facilitating the effective application of paragraph 6 of Article VI of the Agreement by
establishing guidelines for the recognition of qualifications.”

If the WPPS succeeds in developing proper regulatory disciplines, the benefits are manifold.
‘These disciplines will stimulate reform in domestic regulation, not solely in measures enforced
“at the border.” In addition, any liberalization achieved is much less likely to be reversed.
Having made international obligations, governments will be reluctant to respond to domestic
Pressures by reversing those decisions.

Finally, these disciplines will move national regulators to common approaches and, in time,
perhaps to harmonization. Since businesses now face widely different regulatory structures
from market to market, such disciplines from the WTO would encourage increased investment
and trade.

‘The chair of the Working Party is Ambassador Leonora Saurel of El Salvador, a dynamic and
highly respected figure in Geneva. The WPPS has met four times. While the United States and
some other parties have been active in pursuing the WPPS's goals, the participation of other
nations has lagged. It is crucial to the credibility and effectiveness of the Working Party that its
efforts on accountancy succeed.

In addition, I believe that success of the WPPS is important not just for the accountancy sector,
not just for professional services, but for the WTO as a whole. Will the rules in the GATS
remain just high sounding words, or will governments take the steps necessary to give those
words positive practical effects of tangible commercial value?

Furthermore, after the unsatisfactory progress over the past few years for all concerned in the
telecommunications, financial services, and maritime sectoral negotiations, the WPPS offers a
wonderful opportunity to demonstrate that the WTO can advance liberalization in services.
Commitment by the US government to the success of the Working Party also demonstrates the
commitment of the US to the multilateral system, a commitment that is being questioned in
some quarters

‘The Way Forward
In addition to sectoral negotiations, the Uruguay Round agreements also call for a new round
of talks on overall commitments in the service sector. Slated to begin in the year 2000, these
negotiations will focus on improvements in existing commitments and the addition of sectors
not already scheduled by countries. Remember, some GATS rules only come into force on
sectors a country inchudes in its schedules.

During the Uruguay Round, many countries were reluctant to schedule certain sectors, ot go
beyond status quo or “standstill” commitments in the sectors they did schedule, due to
uncertainty over how the addition of this “new” service sector to the multilateral system would
fare. Effective, credible implementation of the GATS will be critical to making the case to these
countries for the expansion of their schedules.

‘Of course, there are other areas within the GATS that need additional attention in order for the
full commercial value of the agreement to be realized. For example, in the area of movement of
personnel, more work must be done to give precise definitions to categories of professionals
such as “technicat personnel” and “executives.” In order for companies to take advantage of
such provisions, governments and companies must have a common understanding of which
professionals fall into which categories.


32

avocados and shrimp and tuna, it is apparent to me that NAFTA
has really forced Mexico to come to grips with maturing in the
international market. We are looking forward to more NAFTA suc-
cess stories, and I want to thank you and the President for the per-
sistence in pursuing a congressional adoption of NAFTA and
GA’

Mr. SHAPIRO. I want to thank you and the Chairman for the
steadfast support that we had. It was obviously a difficult political
battle. There are those in the Congress and in the country who still
doubt it, but over time, the fact that it was the right thing to do
and the right course of action for our country and the hemisphere
will become evident. Thank you very much.

Chairman CRANE. Thank you, Mr. Ambassador. I know you are
on a tight time constraint with a flight to make, weather permit-

ting.

‘One quick note to what he had to say about Three Gorges,
though, and those Yangtze cranes. Now, you do want to take care
of the cranes.

Mr. MANZULLO. Yes, take care of the cranes.

Chairman CRANE. Have a good trip, too. Thank you very much.

Now, what I want to do is invite our next panel up and arrange
some priorities in presentations, because I know one of the panel-
ists has a flight to catch, also. And Governor Edgar should be in
here shortly. I would like to now invite Martin Singer, with Motor-
ola; Robert F. Kelley, managing partner of international affairs for
Andersen Worldwide; Marschall Smith, senior vice president, sec-
retary and general counsel of IMC Global, Inc.; and Ron Bullock,
president of Bison Gear and Engineering.

If you gentlemen would proceed, with Mr. Singer going first, and
I do not know that time constraints are on any of the rest of you.
Are you on reall; tight time constraints as far as catching flights?
If not, we'll let Mr. Singer go first. But if you would be so gracious,
when the Governor gets here, to let us put him on and then we can
let him exit, because I know he has tight time constraints.

But with that, Mr. Singer, we would like to hear your remarks.
If you can confine your statement to 5 minutes or less, any printed
statement will be made a matter of the permanent record.

STATEMENT OF MARTIN SINGER, VICE PRESIDENT AND
GENERAL MANAGER, WIRELESS ACCESS AND BUSINESS
DEVELOPMENT, DIVISION, CELLULAR INFRASTRUCTURE
GROUP, MOTOROLA CORP.

Mr. SINGER. Thank you very much.

Good morning, Mr. Chairman and Members of the Subcommit-
tee. My name is Martin Singer. I am the vice president and general
manager of the Wireless Access and Business Development
Division of Motorola Cellular Infrastructure Group. it is a great
pleasure to appear before you on behalf of Motorola. We appreciate
the chance to offer our perspective on the status and future direc-
tion of U.S. trade policy, and we congratulate the Chairman on
reaching out to the business community to solicit our views. I will
offer a few observations on broad themes and will focus my re-
marks on the issue of U.S.-China commercial relations. Let me
begin with some background about Motorola.


108

fallen by as much as $25 billion. Thus, NAFTA provides a degree of certainty to often
unpredictable international trading conditions.

Asis-Pacific Economic Cooperation

‘Market reforms, economic Hberalization, and rising standards af living throughout the
‘Asla-Pacific region present tremeadous opportunities for U.S. and Illinois companies. As a
fre rte Selanne et oom ie ech

frame which APEC's members have sc fot fore implementa of he fue puncpes
‘A capid pace of reform will keep the momentum going strong and will benefit nationals of all
countries involved.

HUGH PRIORITY ISSUES

Corrupt Business Practices

Many of our members are small to mid-size companies that simply cannot afford to
Participate in some of the comupt practices undertaken by many foroiga compas. Foreign

fmakiasoasl expontions may ot only be ale t fin! Si payments, tut ul aso may veceive

favorable tax treatment in their home countries for such reprehensible conduct. This is unfair

transactions. Proper
senicmenaticn of suit avs, agulae survednce and ioverigation, and severe penales for
‘those who violate the law.

Government Procurement Policies

‘We would like to see more fair and opea goverment procurement policies adopted in
a number of countries, particularly in those countries which are moderwizing their
infrastructures. In such countries, the public sector presents tremendous opportunity for
Chicagoland businesses which excel in areas such as telecommunications, energy, and
construction. We strongly oppose the practice of governments in certain countries 10
discriminate against foreign bidders, and we support mmultilatecal efforts such as the WTO
Agroemeat on Goverment Procurement as well as bilateral initiatives to pressure foreign
countries to adopt and implement more transparent and fair procurement policies.

‘Agriculture Promotion

Givea that we represent the “breadbasket" of the U.S., naturally we would like to see
greater promotion of our agricultural industries averseas. High growth in the population and
national income of developing and newly industrialized countries provides significant
opportunities for increased exports ~ of food products as well as the tools, equipment, and
machinery necessary to develop strong local agricultural industries. Once such industries are
established, additional opportunities will develop for U.S. companies in connection with the

, distributing, marketing, and advertising of food products. Midwestern businesses
Pe leedee in these sectors and should play an active role in tis chain of development abroad


39

forming without US participation will not undercut or harm Americas interests ~ hardly the

‘would expect from a superpower that professes to be Interested in
‘writing the rules forts economic future.

io ‘Motorola is participating in several initiatives to ensure that trade relations are
open and fully compete, Ta the Trins-Adantic Business Dialogue (TABD), we are
‘Pursuing initiatives to: expand the use of mutual recognition to reduce

ov of sing and ctyng cls splpmen ede ie buen of
‘export ‘and reduce semiconductor tariffs. We are optimistic about achieving some
progress on all three of these issues.

Promotion and Ad
4s advocacy, export promotion

and the ring US export d ecaves. ove coupaaise companies increasingly
aj «elgulfcast compestive advantage over American finns becaine ofthe extent of
‘support they enjoy from their governments. In addition to ne; for the reduction or
elimination of tant and non-arff buries in foreign markets, there are several steps the US

yvernment must take to American they strive to compete in today’s
Javernational merketpace, : (1) The continued
ro and avonacy eff, ahd 2) Te eiintion of us ives to
exports. These cannot be considered I" activities by the US Government.

‘The support Motorola has received from both the Administration and the Congress has been
2 key factor In many of our successful bids rom Hungary to Hondures, We note in
particular rown's enthusiasm promotion and
advocacy Je Took forward wo continued support fea Kantor and

were exemplary. ym Secretary
his team at the Commerce Department, as well as from Capit Till and from our embasles
‘around the world, to ensure that there is a level playing fleld for American exports.

the

ant oer Areca exc id tad make Arian ext
Tleey fs compere ta ‘our foreign counterparts. These include both the relative
‘paucity of US Government-back trade financing resources and the US export controls that
‘Temain tighter than those maintained by most of our major trading partners.

(On the trade finance front, we are concerned about recent congressional efforts to sharply
ural or in some instances eliminate programs. "Though peshape well Itentloned as means
to address budget constraints, such measures would set US competitiveness back significantly
ata time when greater, not less, support is required.

On export controls, we note the stl highly restive export controls on all of our

telecommuni ‘and computer products that contain a. These controls cost

Motorola marketshare, yet they do not protect nloaal ‘because the customer can

buy similar products fom foreign produces, “The United States needs to eliminate controls

oewily sali narypon td ‘eating encryption as a munitions item subject to the
‘of procedures as exports of tanks and F16 fighter aircraft.

"@ SUCCESS! US wae pic must contine te aggresive enforcement

of US trade laws sled af curbing unfal foreign trade practices, Motorola has ong soug

to assure that companies Tupi the wold compe on ay evel ying ft tae
trade practices rest in a break-down ofthe rules of competion and can destroy even the

best, most efficient companies, particularly in the electronics

‘The growth and prosperity of the US economy has been driven largely by American
innovation and leadership. Therefore, it is essential that the United States have
land nse the tools necessary fo ensure the effective protection of US inellecual property
Highs, ‘This includes both urging oder counties ~ through 301 and other means --
to adopt and enforce effective IPR repimes, and maintaining mechanisms — such as
Secon 337 «to preclude lfinging oducts rom belng iporied ite he US,

In addition, great was made during the Uruguay Round to expand and strengthen
the scopt of the rules ofthe road governing internauional trade. But the Uruguay Round dia
not adres te full range of Issues that conftomt America ca in foreign markets,
such as anti ve practice, Morover not al f ou major wading partir a now
fmembers of the World Trae WTO not all
ave egnod an tothe volumary Semonts of te package, such ate Agrecinent on
Government Procurement. Therefore, it is critical for the United States to retain both its
ability and willingness to utllize Section 301 and other mechanisms as appropriate in order to
address these outstanding issues.

Finally, the Inverteatscuied for companies inthe letyais. is massive,

tile the vardble cans of Therefor, ‘of scale and

Pong at ety sae ote market econ sr, In such an environment,
ign industries can gain tremendous advantages over US companies if they are able to use


64

As far as internal policies, we would recommend pro-growth legislation that
encourages savings and investment through reduction of taxes and a commitment to a
balanced budget. Our global competitors benefit by tax codes that promote job creating,
investment and low interest rates resulting from a balanced budget. Examples are the
resurgence of Italian competitors as a result of the Sabatini and Tremonti laws making
capital investment extremely attractive and, of course, the Japanese who benefit by
accelerated depreciation and extremely low interest rates. Congress is applauded for
finally passing a Product Liability Bill and the President is roundly condemned for vetoing
it! Europe passed a much better version of our bill in the EC in 1992 and our
unpredictable tort system has chased major industries off-shore, small aircraft and medical
‘equipment being two examples. Quite frankly, this was one of the reasons we got serious
about exporting. We should also be aware of non-tariff technical trade barriers. The
European Community has enacted regulations requiring CE registration (a safety
requirement very close to UL) and EMC, electro-magnetic compatibility relating to radio
frequency interference. These technical requirements effectively raise trade barriers to
United States firms endeavoring to export to the EC. We should encourage agencies like
NIST and ANSI to be proactive in representing US interests within the International
Standards Organization. Believe me, you are no less safe using a UL listed product than
using one CE listed and electro magnetic compatibility has limited applicability. The U.S.
is renowned for it’s volunteer support of safety and standards development and we should
make sure that we take care to utilize this resource in the ISO process.

In sum, continued pursuit of free, fair trade, and increased transparency and
upward harmonization of international trading rules is critical to the well being of the
United States. We encourage Chairman Crane and the House Ways and Means Trade
Subcommittee to keep up the good work in furthering this effort, and stand willing to
contribute to our economy and our workers by reaping the fruits of this Committee’s
labors in advancing the goals of a strong international marketplace.


35

nancing, mortgage financing to the employees, funds for community
amenities and a portion of the mortgage payment liability.

Our ability to contribute to positive change in China demands
that ties between the United States and China stabilize and deep-
en over time. Renewal of China’s MFN status this year is the right
short term objective. But over the long term, the United States and
China should take the steps necessary to stabilize and normalize
their commercial ties.

Normalizing these ties would include permanent MFN extension,
China’s accession to the World Trade Organization on commercially
acceptable terms, and additional improvements in bilateral trade
ties through a step-by-step reciprocal process. Motorola’s ability to
compete in China on fair terms is essential, and we call on policy
makers in both nations to do their part to help us accomplish these
vital objectives.

Motorola’s continued ability to create American jobs and sup}
economic growth in the U.S. demands that we compete in markets
around the world. To be successful, we need the U.S. Government
to act as a partner, through market access negotiations, aggressive
export promotion efforts and elimination of U.S. export disincen-
tives, effective enforcement of U.S. trade laws and an enhanced ap-
preciation that actions taken for domestic political purposes can

ave an adverse impact on American companies’ ability to compete
in the international marketplace. Thank you.

[The prepared statement and attachment follow:]


67

In fact, my message here today is to raise the salience of the im-
portance of services in the global economy. If I leave one impres-
sion with you, I hope it is that innovation in services is the key to
competing in the 21st century. My comments will be organized, in
terms of context, first, telling you who I am and why we are very
interested in global trade. And then I will tell the story of our com-
pany which exemplifies my main message, which is that innovation
in services is the key to competing in the 21st century. And then
I will offer some very specific recommendations of how we can
improve our public policy in international trade.

In terms of my perspective, I sit on the Business and Industry
Advisory Committee to the OECD Trade Committee, and the Inter-
national Chamber of Commerce’s Investment and Trade Commis-
sion, and I am also a member of the U.S. Trade Representative’s
Investment and Services Policy Advisory Committee. My job at An-
dersen is threefold. It is to remove barriers to us operating as a
global company. Second, to prevent the erection of any new bar-
riers; and third, to identify issues that affect our operations glob-
ally and begin to shape their outcome.

Andersen is a product of Chicago. It is the fruits of the labor of
6 people who started the company in 1913 on LaSalle Street. Today
we are serving businesses around the world in 76 countries. Those
6 people have grown to 82,000 people worldwide. It is a partnership
so my perspective is from that of an equity owner. We have 2,600
partners worldwide. In Illinois we have 5,600 employees. Many of
those are associated with our world headquarters. Also, on the
roads that lead from O’Hare to St. Charles, there are about 50,000
people from around the world that travel to our education center
in St. Charles, Illinois, which is a facility of 185 acres, accommo-
dating 1,700 people at one time. We bring people from all over the
world to train in our center at St. Charles. It is kind of a reverse
export; they bring money here to spend, which is not normally the
way we look at exports.

The reason I am here is to express our concern about the status
of international trade affairs around the world and the fact that we
seem to have a disproportionate amount of attention and resources
devoted to manufacturing pickles, bacon, gears and motors, and
brooms. We overlook the Tiggest part of our national economy and
the fastest growing part of our economy’s worldwide services.

To give two examples of my promise, just take the commonly re-
ferred to deficit in trade, which about 1 year ago was around 3170
billion. Well, that’s three times the amount of the imbalance in
services trade. The differences are in the arithmetic; the services
imbalance was a surplus and the manufacturing imbalance was a
deficit. In 1958, when I joined the work force, I joined the services
component, which numbered 30 million employees at that time out
of a total of 65 million. In 1992, that 65 million had grown to 120
million American workers, and the number of those in the service
economy numbered 75 million.

Today we recognize that the GATT and all the other trade agree-
ments have really advanced American interests abroad and
brought about many improvements to facilitate world trade. What
is often overlooked is GATT also has another part. It is called
GATS, the General Agreement on Trade and Services. Within


104

Fisncy and counting filles property in conan foreign counts is vexing
problem for Chicagoland businesses. Violations of intellectual property rights place our
Trmnbers ra coun dandvasags in stern to espana sae foe Cartes Without a
‘guarantee of intellectual property protection, we are discouraged from investing or transferring
technology abroad. “Actordingly, buch praciocs must cod We support both bilateral and
multilateral initiatives to pressure our trading partners not only to adopt necessary laws and
regulations, but also to vigorously enforce the principles set forth in initiatives such as the
Umuguay Round TRIPS Agreement — and to do so without delay.

‘Trade and Customs Infrastructures

(One out of every four jobs in Ilinois’ mannfacturing sector is a result of exporting our
‘goods, and one out of every eight jobs in Tinois depends on exports. Given the pore of
exports to our State's economy, we have a great interest in supporting efficient customs
infrastructures in foreiga markets. Obstacles such as complicated tariff systems, uupredictable
customs valuation procedures, and complex rules of origin raise the cost of international trade,
‘This is especially truc in the case of small to mid-size businesses that Jack the resources of major
‘multinational corporations to deal with such issues efficiently. Harmonized tariff schedules and
ules of origin, proper training of foreign customs officials, and the implementation of camet
systems to facilitate the sampling of U.S. goods in foreign markets are a few examples of steps
which would further our interests abroad.

Environment
We suppor the adoption of effecve environmental lws and regulations in the word's
developing and newly industrialized nations. development is threatened and the

desired results, and 10 belp U.S. companies comply with local laws. Environmental objectives
should not, however, be linked to trade and investment goals. A healthy enviroament is
Conducive to increased commerce, but trade sanctions are inappropriate tools to enforce
eavironmeatal policy.
CONCLUSION
1 hope that the views which I have expressed have provided you with an insightful
padeesianding of the concems fl by ur meniber, whom I fc are represecaive of Chicago's

rannacenby te US. sovercialw ceaie new tnd enka sing oppomnais for =
companies in all foreign markets, and would be pleased to assist you in any possible way.
‘Thank you.




45

they can pool product lines and generate entirely new products for
new customers. Whether they export directly, form joint ventures,
contact overseas distributors, or simply sell to overseas subsidiaries
of their current domestic customers, international business devel-
opment make firms stronger global competitors.

Illinois has reaped many benefits from actively participating in
the global economy. For example, approximately one out of eight
jobs is dependent on exports. One out of four Illinois manufacturing
jobs is a direct result of exports. Every dollar of Illinois exports
generates 4 cents in State tax revenue.

The U.S. Department of Commerce estimates that 28,000 jobs in
Illinois were created by trade with Mexico and Canada alone be-
tween 1993 and 1995, over a 23-percent increase during that 2-year
period. Equally impressive, exports and foreign investment ac-
counted for over 625,000 Illinois jobs in 1995. Illinois continues to
be a front runner in exports. In 1995, Illinois moved to fifth place
in direct exports, marking the second consecutive year the state’s
ranking has improved. how health wth

fe saw aggressive exporting show healthy gro in every area
of the world. For example, exports to Canada grew almost 10 per-
cent, over a 38-percent increase to Japan, over 24-percent increase
to the United Kingdom, over 21 percent to Germany, 28 percent to
China and an amazing 80-percent increase to South Korea. Total
exports between 1994 and 1995 increased more than 23 percent,
nearly doubling the national export growth rate of 13 percent.

During my tenure as Governor, I have made exporting assistance
a_cornerstone of our economic development efforts in Illinois.
Illinois exports worldwide have grown dramatically during the last
decade, increasing to $32 billion in 1995, as compared to $18 billion
in 1985.

At this time, I would like to share with the Subcommittee several
companies in Illinois that have enjoyed export-oriented success. Re-
cently, the State of Illinois was instrumental in arranging appoint-
ments with proper government officials to successfully help
Ameritech Corp. secure a 25-year contract and a 30-percent stake
in Hungary’s telephone company. This joint venture created the
largest privatization arrangement in Central and Eastern Europe.
This cooperative project is expected to result in the installation of
over 1.5 million phone lines by the year 2000 in Hungary. In addi-
tion, Ameritech is currently examining privatization in Belgium,
Ireland, and Portugal involving investments between $500 million
and $2 billion. Ameritech is taking steps toward truly becoming a
global telecommunications supplier.

With the assistance of the State of Illinois, the Wrigley Co., a
long-time corporation rooted in Chicago, established Wrigle:
Poland in 1992. Wrigley Poland is the leader in chewing gum prod-
ucts in Poland, with a 57 percent market share. Wrigley plans to
construct a plant in Poland that will make Wrigley one of the top
10 Illinois facilities in the country.

But, large multinational corporations are not the only ones in
Illinois that are thinking global, and this is a very important point.
They are not the only ones succeeding.

Treatment Products, Ltd., makers of car cleaners and waxes, had
been attempting to expand its small presence in Mexico since 1990.


87

‘successful, we much work toward a leadership position in the worldwide cable
television market. It is no longer enough to strive to be a leader in the domestic
market because the products ANTEC makes and distributes are used throughout
the world. Our mission is to lead the world in fiber-coaxial based information

As a growing company, ANTEC had realized significant profits from export
sales, and set up manufacturing operations in foreign countries. Since ANTEC
became a public company in 1993, its international sales have skyrocketed.

ANTEC International has operations in several countries including China;
Hong Kong; Singapore; Australia; Mexico; Brazil; England; Spain; and Canada,
and we believe our international growth will continue. ANTEC goals include
diversifying its domestic customer base and growing its international business, and
we have been quite successful at doing that. In 1993, international sales
represented just about four percent of ANTEC’s business. In two years, the
percentage of international sales grew to 17 percent of the company's total sales.
From 1994 to 1995, ANTEC’ intemational sales increased approximately 120
percent.

The role of trade as a percentage of America's gross domestic product has
increased from about seven percent in 1950 to about 16 percent in 1980, Today,
trade accounts for more than 26 percent of the U.S. Gross Domestic Product
(GDP).

U.S. trade policy must include a commitment to enhance U.S. exports to
continue to provide opportunities for young, growing companies like ANTEC to
compete. We believe U.S. trade policy should have a three-pronged approach
focusing on: removing unilateral disincentives to exports and easing regulatory
burdens (i.e. current U.S. control policies); aggressively promoting U.S. exports
through sophisticated and well-coordinated government export promotion
programs, and strengthening efforts to ensure the fair treatment of U.S. products
and services overseas.

Electronics has led the way in bringing our nation’s economy into the global
marketplace. A number of leading electronics and communications companies
derive more than 50% of their total revenues from export sales. Our industry has
been making strong progress in addressing the challenges of globalization and
international trade, ‘The U.S. electronics industry exported $124 billion in 1995, a
23% increase over its imports in 1994.

Exports today are a major source of profits for American companies and
help provide good-paying jobs for U.S. workers, as well as develop jobs abroad for
people in other countries. In fact, Commerce Department data points out that every
$1 billion of exports result in 22,000 jobs in this country. ANTEC's international
division includes over 100 people and is growing daily. Our international growth
has created new jobs not only for U.S. workers, but also for people who live in the
different countries where we are located.

To help ANTEC and other companies continue growing in the international
market, U.S. foreign policy must change many of its nearly half-century old


UNITED STATES TRADE POLICY
SCHAUMBURG, ILLINOIS
MAY 20, 1996.

‘Thank you, Mr. Chairman, for holding this important hearing on the future of United
States trade policy. I know that trade policy is an important public policy issue for the people of
Ilinois, who depend heavily on intemational commerce for their economic well-being.

I would first like to congratulate you for your outstanding work as Chairman of the Ways
and Means Subcommittee on Trade in the 104th Congress. You have been a tireless advocate for
open markets around the world, not only as Chairman of the Trade Subcommittee but also
throughout your long and distinguished career in Congress. Moreover, as Chairman, you have
continued to operate the Trade Subcommittee in a bipartisan fashion, which has long been the
tradition in the Ways and Means Committee. We can only have a sound and sustainable trade
policy for this country if it is formulated and implemented on a bipartisan basis.

Mr. Chairman, as you well know, the United States is the world's number one trader. We
are the largest exporter of goods ($575 billion in 1995) and the world's largest importers of goods
($750 billion in 1995). We are also the largest international trader of services (with exports of
{$209 billion and a surplus of $62 billion in 1995). International trade, and exports in particular,
are important for the well-being not only of the Illinois economy but of our national economy.

-- In 1995, despite a lange trade deficit of $115 billion (both goods and services), our
merchandise exports were expanding faster than our imports for the first time in recent
years. U.S. exports rose by over 14 percent, which was 7 times more than our GNP growth.
USS. services exports rose by 5 percent.

+ Eleven million workers in this country owe their jobs to exports. On average, these jobs pay
13 to 17 percent more than non-trade jobs. Every billion dollars of exports supports, on
average, 15,000 jobs.

~ On the other hand, imports displace jobs. It has been estimated by a University of Maryland
economist that imports have displaced around 12 million jobs in this country. The jobs they
displace tend to be lower-paying, lower-skilled jobs than export-related jobs.

Thus, exports create better jobs than the jobs that are displaced by imports. Trade tends to
make the economy more efficient as a whole by creating more competition, making the best
products and technology available to consumers at the lowest possible prices, and lowering
costs of inputs to producers.

Trade Policy ic Offi

~The United States is no longer a self-contained economy and depends on trade with the
world. As a mature economy with a low rate of population growth, our best opportunities
for economic growth in the future are in trading with other countries. After all, the United
‘States has only 4 percent of the world's population. That means that 96 percent of the
world's market is outside our borders.

~ Public officials with policy responsibilities for trade have three major challenges:

+ First, we must pursue policies to ensure that foreign markets are as open as ours to trade.
We are generally doing a good job in negotiating agreements to gain access to markets
abroad -- the recent Uruguay Round agreements are an example. We are also giving
greater priority and attention, as we should, to overseeing implementation of those
agreements by our trading partners and enforcement of our rights against violators.


U.S. TRADE POLICY

MONDAY, MAY 20, 1996

U.S. HouSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON TRADE,
Washington, DC.

The Subcommittee met, pursuant to notice, at 10 am., in
Schaumburg Village Hall, 101 Schaumburg Road, Schaumburg,
Illinois, Hon. Philip M. Crane (Chairman of the Subcommittee)
presiding.

{The advisory announcing the hearing follows:]

mM


42

Overview

Motorola is a ‘supplier of advanced telecommunications and electronics equipment
in China today. 9 Product old by ‘Mororolain Ching inca cellular phones page, radio
communications systems, and communications and semiconductor components.

gal of Matra in Cina is sre as lo cooerne developmen
Motorola is undertaking a wide variety of initiatives with both its and customers
to achieve that goal. The company employs nearly 7,000 people in China today. That
number is expected to grow to 14,000 by the year 2000.

Motorola’s long-standing commitment to training and education are evident in China. All
Motorola employees in China receive extensive aining in huruan resource principles of
Participative management, empowerment, motivation, individual dignity and ethics.

A branch of Motorola University (MU) was established in Beijing in 1993 to train

employees, customers, suppliers, and government officials in a range of management,
technical and other areas. MU established a second branch in China, in Tianjin, atthe end
of 1995.

Customers in China include the Minis of Posts and Telecommunications, ions, provincial
‘telecommunications authorities, municipal and other public safety authorities, financial
institutions, educational institutions and private companies.

Motorola opened a representative office in Beijing in 1986 and has. rapid
Bovis uy 180 aa sve pipant in Chin's anon malt
economy. Motorola (China) Electronics, Ltd. (MCEL), a wholly-owned Motorola entity,
was incorporated in March 1992. P.Y. Lai is president of MCEL.

In June 1992, Motorola broke ground on ts fr major manaactarng fli inthe Tanja
Economic

Development A\ (TEDA) area of Tianjin, The fait began operation n
March 1993, Moors Hanjin factory produces calla elephones,
communications components and semiconductor, mostly forsale i and other
markets in Asia.

PrMaret 1095, Motoroia announced is frst joint-venture arrangement in China with
Leshan Radio Factory for the manufacture of discrete semiconductors. Since then,
Motorola also has concluded joint venture arrangements with Nanjing Panda Electronics
‘Group Corporation to produce home computers based on certain PowerPCTM

microprocessors, and with Shanghai Radio Communications Equipment Manufacturing,
Lid. to produce pagers.

Jn Seprember 1995, Motorola amounced plans to build a large capaciy integrated cree
wafer fabrication plant in tbe city of Tian. The plant wil be sn autores obeigheinch
semiconductor wafers with sub-micron line widths by 1997. These products will serve

customers in automotive, communications, personal computers, phon and digital

of its Asia Manufacturing Research Center (AMRC) in Beijing it
Dosomber 1595. fuss the company’s first manufacturing research lb outsige the United ‘7
Stes, Erin 19 ANRC aootced nt mauling teas pre wi
Sormpnvcr Imegrated Manufacuuring System Engineering Research Center at “China!

MIT,” Qinghua University in Beijing.

Jn sition to production facilites in Tianjin, Motorola investment in Chin includes
headquarters offices in Bejing; branch offices in Shanghai, Guangrhou Tian, Harbin,
Mise Baseal a service shop and software center in Beijing, and

Uni training centers in Beijing and Tianjin. Future plans call for openin,
servic offices in fiber 20 das tooo hing $


3

Clearly, for the large majority of service firms, the WTO - GATT’s successor organization and
product of the Uruguay Round— represents the greatest opportunity for liberalization. In fact,
I would argue that the Uruguay Round’s General Agreement on Trade in Services (GATS) is
the single greatest achievement of the Round. The fastest growing ~ and, arguably, the most
important ~ sector of the world economy has been brought into the multilateral trading regime.

At last, there is a framework of rules established for trade and investment in services. Among
the most important of these GATS nules concern:

‘© most-favored nation treatment (MEN),

‘+ transparency of laws and regulation,
+ national treatment,

‘* international payments and transfers,
market access,

‘+ effective dispute settlement, and

‘+ fairness of the regulatory process.

‘The effective implementation of the new GATS rules should be an important goal for future US
trade policy, Mr. Chairman. The multilateral system has been dealing with goods trade for
decades, yet still there are numerous disputes over the rules and their application. Services
trade is a new issue and, I might add, a more complex one than goods trade. Vigilance and
00d faith will be required on all sides in order to secure successful implementation of the
GATS system.

Of particular significance among the new GATS rules is the last ! mentioned, regulatory
fairness. Not only does the GATS recognize that governments often use regulation of a foreign
company’s cross-border activity as a trade barrier, but the GATS also establishes the principle
that regulation of domestic activity has international consequences as well. The GATS lays the
groundwork for regulatory convergence, which will benefit service industries, improve the
quality of regulation, and help consumers and investors.

Perhaps an even more important point about the new framework of services rules is that the
GATS has broadened the definition of “trade” to include movement of capital and people ~
critical issues for services firms. For many service sectors, there is no effective way to enter a
‘new market without investing capital there. In addition, for many service sectors, including
my own, intellectual capital — people — is our primary resource. In some cases, if we can not
get our people across borders, we can not get the job done.

But while the GATS is a tremendous first step toward the liberalization of trade and investment
in services, itis just that — a first step. As you well know, some GATS rules cover only service
sectors specifically included in the agreement by each country. And some service sectors are
not covered at all.

But the deficiencies of the GATS are well known and probably draw more than their share of
the spotlight. Suffice it to say the GATS is a firm foundation, but much more needs to be built.
In fact, further liberalization in services was contemplated by the Uruguay Round agreements.

In the short term, there are sectoral follow-on negotiations arising from the Uruguay Round.
For example, the maritime talks face a June 30, 1996 deadline, while, after initial discussions
proved fruitless, the telecommumications negotiations and financial services talks have been
extended into next year. In professional services, a working party was established to develop
disciplines applying GATS rules to the professions.

Work in each of these sectors will require commitment by the US private sector, by the
Administration, and by Congress in order to achieve success.

Professional Services

(Of these sectoral negotiations, of course, we at Andersen Worldwide are particularly concerned
with the professional services talks. A separate ministerial decision created a Working Party
on Professional Services (WPPS) under the WTO's Council on Trade in Services. The WPPS
will be a “laboratory” for determining whether the GATS rules on domestic regulation can be
given practical meaning. It has been said — with a bit of tongue in cheek -- that the GATS rules
are like a mandate for a fair and equitable tax code, and the WPPS's efforts will be like drawing
up an actual tax code that fits the mandate.


82

tions on China, and I am not sure I understand them enough to
comment.

Mr. RANGEL. Iraq and Libya are not intellectual property rights,
they are more political. How about Cuba?

Mr. SmiTH. IMC does not currently have a policy on Cuba,
Congressman Rangel.

Mr. RANGEL. What policy are we talking about?

Mr. SMITH. Well, we would support free trade and we support
fair trade. To the extent that the U.S. Government would open up
free trade, we’d obviously be very delighted with that.

Mr. RANGEL. And does IMC pay a tariff on the phosphate that
goes to China?

Mr. SMITH. It varies from country to country. My understanding
is that on phosphates into China, there is no tariff.

Mr. RANGEL. Mr. Kelley, what is it that you would have your
country to do to encourage professionals to support the 70 percent
of professional services that are being exported?

Mr. KELLEY. Well, 70 percent of our GDP, it is not all exports,
of course. Public policy needs to be tuned to the importance of the
service economy in the U.S.

Mr. RANGEL. How would that be shown?

Mr. KELLEY. Well, in one perspective, there is a point that you
raised earlier about education. We are really negligent in the area
of education, and we need to shift and build the infrastructure for
services in this economy and part of that would be through edu-
cation, which is a service in itself, and to retrain the people.

Mr. RANGEL. Do you think it is possible that industry could in-
clude that as a part of their trade policy as something that’s going
to be important if we are going to continue the leadership?

Mr. KELLEY. Yes, sir.

Mr. RANGEL. I have never heard anyone testify as you have. It
is always on the agenda. But if we can have it up front, because
you are talking about the skills that would have to be higher in
terms of education and the jobs that we are losing, many similar
jobs in agriculture.

Mr. KELLEY. The big threat as it relates to China and other
countries that have low wage rates, is the fact that if they discover
the use of—and I should direct this to all of you—if they discover
the use of the power of information and technology, they can actu-
ally leap frog us, because they do not have the encumbrance of all
the existing investment and infrastructure, like telecommuni-
cations. They can go straight to wireless, and they can go straight
to computers and help their people realize their potential. We, at
this point, have the advantage but we will lose the advantage if we
do not answer the challenge in education. It is very frustrating. We
are very committed to education. We have a school of the future
project, and we work with a small software company and this is all
pro bono, all pro bono.

Mr. RANGEL. Could you direct me to any literature that has
shown any studies in this area?

Mr. KELLEY. I have already made the note.

Mr. RANGEL. Would you send it to me? Thank you.

[The information was not available at the time of printing.]


US. TRADE POLICY

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION

SCHAUMBURG, ILLINOIS, MAY 20, 1996

Serial 104-86

Printed for the use of the Committee on Ways and Means

a

U.S. GOVERNMENT PRINTING OFFICE
42-690 CC WASHINGTON : 1997

For sale by the U.S. Govemment Printing Office
‘Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-055492-6



108

USS. trade policy should be designed with one objective: to support, in a consistent and sustained
manner, the exports of U S, growers, manufacturers and service firms. To do so, the policy must
be grounded in the harsh competitive realities of the present and those foreseen for the 21st
century, including

Greater China will soon eclipse the U.S. as the world’s largest economy.

Although our nation’s exports of agricultural products, manufactured goods and services will
continue to grow, our share of global trade will continue to decline, as will our ability to
influence other nations’ trade policies.

Regional trade alliances will burgeon and solidify, creating opportunities for members to the
detriment of non-members.

To ensure our economic security into the 21st century, we believe that the U.S. trade advocacy,
promotion and policy functions, currently performed by 19 federal agencies and “coordinated” by
a committee, must be consolidated, streamlined and managed by one agency that speaks to our
trading partners with one consistent voice, That agency's priorities should be to

promote strategic commercial alliances worldwide to provide American exporters with greater
market access and transparent rules for trade and investment,

improve and enhance the quality, scope and delivery of commercial market intelligence,
develop a comprehensive program for promoting U.S. service exports and protecting,
intellectual property rights;

form strategic alliances with our trading partners to combat violations of international trade
practices and intellectual property rights,

# address domestic policies and programs to make U.S. firms more competitive exporters,
negotiate aggressively to remove foreign market barriers for U.S. exporters, particularly with
respect to barriers in the People’s Republic of China, the European Union and Japan; and

seek ways to involve more U.S. firms in international markets.

‘Thank you for this opportunity to present our views




109

Chairman CRANE. Thank you, sir. Let me ask you a question
first, Ms. Jackson. You said two-thirds of your members employ
100 or less. What percentage of that membership is in the foreign
export market?

Ms. JACKSON. Right now, about 10 percent of the small compa-
nies have begun to export.

Chairman CRANE. Are there, in your estimation, significant
opportunities for expansion to those small companies?

Ms. JACKSON. Dramatic. Even with the participation in expan-
sion we have seen so far, there is dramatic opportunity for them.

Chairman CRANE. But, a part of the problem is knowing what all
the procedures are for entering foreign markets. I have heard from
a number of small companies that they are totally perplexed and
consider the procedure too complicated, so they abandon the whole
idea.

Ms. JACKSON. And it also relates to the comment that was made
about the 19 Federal agencies with different roles in the process,
the need to be able to go one place to get information, to take you
from start to finish. it is impossible to do that now. Different inter-
pretations of the same regulations over time are a major problem.

Chairman CRANE. Let me ask the staff. Do you know the 19 dif-
ferent agencies involved?

Staff. I know some of them.

Chairman CRANE. If not, could you get us a list of the 19 dif-
ferent agencies?

Ms. JACKSON. I bet together we could.

{The information was not available at the time of printing.)

Chairman CRANE. Frankly, while I favor the dismantlement of
the Department of Commerce, the trade functions of the Commerce
Department should be preserved, and consolidated under, in effect,
one roof where you could simplify that procedure. It is something
Congressman Rangel would support also.

Mr. RANGEL. Talk with me next year.

Chairman CRANE. OK. Now, Mr. Berman, you were talking about
bribery and corruption. Is that confined to a region in the trading
community? In other words, trade with the EU, is there any signifi-
cant evidence of bribery or corruption involved there?

Mr. BERMAN. Our comments regarding bribery and extortion
really was not region specific. Our members have voiced concerns
about bribery in various countries. Just off the top of my head, we
have not had many issues arise pertaining to bribery in Western
Europe, more in the Asian region.

Chairman CRANE. Is it the least developed countries? Is there a
differential in bribery and corruption in some of the most advanced
countries versus some of the least?

Mr. BERMAN. Not necessarily. We have had some issues arise
with bribery—I should not exclude actually Western Europe—in
some European countries. So more comments have arisen in con-
nection with Asian countries, many of which have arisen in devel-
oping Asian countries, more so than the developed countries. I can-
not really generalize because comments and concerns have been
made in various countries.

Chairman CRANE. Now, procedurally, what do you do, or a com-
pany, what does it do when it finds. it is contending with bribery


30

the Yangtze River dolphins and the Siberian crane, which in the
minds of many people who are experts in aquatic life, would not
be in danger, the Chinese Government, 10 days ago, put out a re-

uest for offers to Norway, France, Germany, Japan, Switzerland,
Canada, and Russia for 4 billion dollars’ worth of capital improve-
ments, purposely excluding the United States.

I have just about had it with the administration. I have made a
real pest of myself on Capitol Hill, again in a hearing, Inter-
national Economy Policy and Trade Subcommittee on which I serve
as vice-chairman along with Congressman Toby Roth. Because for
the administration to whine, and I am not saying you're doing that,
but there is an incessant whining going on over the widening trade
deficit between the United States and China. Then to talk about
China as one of the most protectionist trade regimes, well, I would
submit, Ambassador Shapiro, that Mr. Clinton, the President of the
United States, is one of the most protectionist trades, because he
does not understand international trade in the manner that the
late Commerce Secretary, Ron Brown, understood it. This man was
a real hero to the international business community. Secretary
Brown was light years ahead of the administration.

And here we are, the administration asking for MFN for China.
I have several industries in the district I represent, ranging from
TC Industries in Crystal Lake which makes the blade tips for
Caterpillar to Bergstrom Manufacturing in Rockford which makes
the heating and ventilated air conditioning system. In a meeting
that we had in December with Senator Simon, the administration’s
excuses for not participating in the Three Gorges Dam Project were
so weak. For example, the Department of Justice said that in the
National Security Council interagency working group, which sup-
posedly got together and came up with this consensus not to allow

x/Im Bank to be involved with the financing, that they were
afraid there would be a lawsuit over the extraterritorial application
of the Endangered Species Act. And I turned to the lady from the
Department of Justice and said you were hired by the U.S. Govern-
ment to defend our laws and not to cowardly back away from a
threat of a lawsuit, and to those talking about the violations of the
human rights because there will be displacement of a lot of people.

The erection of the Three Gorges Dam will produce the world’s
largest hydroelectric dam. The energy provided from this dam is
the equivalent of a train 5,000 miles long filled with high sulfur
coal. It is one of the premier projects in the world. And here we
are now with the bids going out. We will see those Komatsu trac-
tors as opposed to Caterpillars at the site. We will see all the for-
eign countries being involved in this project, and the project will
be completed. It is not a maybe, it is not an iffy, it is being built.
This dualistic trade policy in the Clinton administration is blocking
out, in the State of Illinois, hundreds of millions of dollars of ex-
ports. When I hear people, such as yourself, talking about the
Clinton administration and how great it is doing in the promotion
of exports from this country, I simply have to pinch myself to say
there is another side here. We are missing out on one of the largest
exporting opportunities we have.

In addition to that, there is the Freeport Gold Mine expansion
in Indonesia. We found out that the U.S. AID had funded an orga-


becoming a much larger company.

Our continued expansion into foreign markets is however dependent on the
U.S. government's efforts to either encourage or discourage foreign trade. We
believe, along with our trade associations, EIA and TIA, that the U.S. government
must work toward encouraging free and open global markets. We want to be able
to continue to bring our new ideas, products and services to the world market in a
regulatory environment that does not jeopardize our ability to realize profits from
our salesmanship opportunities. It is important to our industry and our company
that we have the ability to compete with companies in the U.S. and other countries
ina free and open global marketplace.

The global communications revolution has and will continue to provide us
with opportunities to compete in offering access to the information superhighway.
Please help rather than hinder us in our efforts by making sure that the U.S.
government supports policies aimed at fostering free and open global markets.


84

TIA, Telecommunications Industry Association, two Washington,
DC trade associations to which ANTEC belongs.

In reviewing our industry's perspective on global trade and its
role in America’s economic future, it is important to set the general
framework of our industry’s economic philosophy. In a sentence, it
can be summarized as this: ANTEC, EIA and TIA all have a deep
belief in free and open global markets. The success of capitalism is
revealed daily across the world and across industry such as ours
that are seeking to provide better products and services that risk
their companies’ capital or their shareholders’ capital in bringing
new ideas and products to the market.

Free and open markets benefit not only large multinational cor-
porations, but also small to medium size companies such as
ANTEC. We believe that for a company to be successful, we must
work toward a leadership position in the worldwide video and tele-
communications marketplace. It is no longer enough to strive to be
a leader only in domestic markets, because the products ANTEC
makes and distributes are used throughout the world, as the MTV,
CNN and possibly even CSPAN video revolution spreads. Our com-
pany’s mission is to be a world leader in fiberoptic coaxial based
information transport technologies and services.

As a growing company, we have realized significant growth from
export sales. We have operations in countries including China,
Hong Kong, Singapore, Australia, Mexico, Brazil, Argentina, the
United Kingdom, Spain and Canada. We believe our international
growth will continue as long as there is a level trade playingfield.
In 1993 our international sales represented only about 4 percent of
our business. In 2 years the percentage of international sales has
grown to 17 percent of our company’s total sales. From 1994 to
1995, ANTEC’s international sales have increased approximately
120 percent and continue at this rate in 1996.

We recognize that trade barriers in the future will likely not take
the form of tariffs, but more likely will be embodied in technical
barriers and differential product standards across borders. The EIA
and the TIA firmly support the development and application of
international standards that are voluntarily agreed to by indus-
tries.

ANTEC and its manufacturing divisions have voluntarily agreed
to comply with the ISO, International Standards Organization,
9001 certification efforts, the standards for products and services
established by the ISO, are widely used throughout Europe and
other parts of the world. We recognize that established standards
add to the quality and value of our products and have added to our
success. We endorse and support government efforts to promote the
voluntary standards process on both domestic and international
levels. We do not support government efforts to set these stand-
ards, as these are likely to stifle the development of new and com-
petitive technologies. ANTEC, we believe, is well-positioned to con-
tinue its growth in the international market, where we believe
growth is encouraged by the liberal regulatory markets of many,
but not all, countries. We expect to see continuous strong growth
for our company in the Asia-Pacific region, in Latin America, and
to a somewhat lesser extent in Europe.


12

We are starting to see the results, Mr. Chairman. In the last 3
years, the United States enjoyed record export growth; 4 percent in
1993, 10 percent in 1994, more than 14 percent last year, the first
year of the Uruguay round, as countries all around the world low-
ered their barriers. We have also returned to being the world’s
largest exporter. Our agricultural exports were up 22 percent in 1
year. But, what is impressive about this showing is the broad
based nature of our trade strength.

We lead the world in sectors as diverse as aircraft and agri-
culture. We set the standard for entertainment, for computers, for
software, for telecommunications, but we have also come back
strong in areas that we were very concerned about during the
1980’s; automobiles, steel, and semiconductors. And the thing that
I need to say at this point is that we would never claim that trade
policy or trade agreements are doing everything. What we have
now is government policy and our efforts converging with the ef-
forts that business, and labor are making to make themselves com-
petitive. So, we are essentially taking down the barriers at a time
when our companies and workers are working hardest to be
competitive.

We are seeing the overall results in low unemployment and
investment-led expansion, perhaps the first in 30 years. It has not
reached everyone and we are not going to stop at this point, but
we are making progress and we are seeing growth. we have been
named the leading economy in the world in terms of competitive-
ness for the last 2 years.

You do not have to look much farther in terms of these policies
than the Midwest, because this State and this region have made
extraordinary Progress in terms of trade. The Washington Post re-
cently reported that the 1990s had been a decade of exports from
this region and foreign investment in the region. And Illinois is one
of the leading examples where you have a state that increased ex-
ports 49 percent in 2 years, to a total of $32.6 billion, running the
gamut from industrial to agricultural products. The story is the
same through much of the Midwest. In Michigan, exports rose 40
percent in 2 years. This week’s Business Week, Mr. Chairman, re-
ported that Michigan is facing a shortage of skilled workers be-
cause the economy is doing that well and much of it is export-led
growth.

Let me just hit a few of the areas that we are specifically inter-
ested in as well, and try to see how they fit into this mosaic. We
have spent a great deal of time, Mr. Chairman, as you know, trying
to open the market in Japan. Japan, for 20 years, has been one of
the leading trade problems facing our country. We have proceeded
on the view that sanctuary markets, closed markets, had no place
in the international system particularly where the second largest
economy in the world was concerned. We are seeing progress from
the more than 20 trade agreements that we have negotiated. Last
year the trade deficit was down 10 percent with Japan. Exports in
Japan rose more than 20 percent last year and today I read in the
Wall Street Journal that trade deficit with Japan had gone down
from more than $6 billion in March 1995 to just over $4 billion in
March 1996 It-is still too much of a deficit and we have got work
to do. We are seeing progress.


54

now in Springfield is dealing with accountability in our schools and
how we can get better results. It is an issue that all the States are
looking at and trying to deal with. I would say, sir, that States
probably are in a better position, State and local authorities, in try-
ing to deal with that than any rules and regulations coming out of
the Federal Government in trying to improve our schools.

Mr. RANGEL. That was going to be my next question. I know you
agree that the private sector has to and is getting more involved
in the question of education, but my next and last question would
have been, do you see the Federal Government and/or the Congress
playing any role at all in being of assistance to the private sector
and the state and local government in reaching the standards that
our Nation will have to raise in order to continue our leadership
in exports?

Governor EpGar. I really believe it should be primarily and I
would say even more than primarily, exclusively the responsibility
of state and local government, who traditionally have been charged
for particularly elementary and secondary education. The Federal
Government traditionally has been more involved in higher edu-
cation through scientific research and that area. But, it would be
better to leave it that way so we do not have to spend a lot of time
trying to sort out just what would be the Federal Government’s re-
sponsibility and also deal with a lot of background noise that has
developed as a result of some of the Federal policies, which are well
intended, but unfortunately it stirred up some controversy in the
hinderlands that we spend an awful lot of time trying to deal with.
We could spend our time better if we were able just to concentrate
on_ making sure we are seeing meaningful reforms in our schools.

So private sector involvement is critical. Maybe they could give
you some thoughts on if there are any Federal actions that could

e taken to encourage or even allow them to do more as far as
being involved with schools at the state or local level. But overall,
my sense is that this is an area that state and local should be left
with. Not that we are perfect, but I think we have been in that
business and it is easier than trying to divide responsibility
between three layers of government.

Mr. RANGEL. Well, please ask your education person to send
something to me to more broadly support the train of thought
which exists now with the majority in Congress. I am the bene-
ficiary of the GI bill, and it is going to take a lot of talking for me
to be convinced that my Governor or mayor could have done for me
what the GI bill had done. By the same token, I really did not
think that Kennedy’s proclamation that we were going to put a
man on the moon was that important until I really saw what it did
to increase the exposure of young people to math and science and
the other benefits that came from the moon walk efforts. So those
are the things that I think of, and I hear more and more people
agreeing with you. And I truly believe that education, increased
education, is going to help us, not only with jobs, but with family
values and with wanted and loved children and with the refusal of
drugs, crime, violence, and the expenditure of jails, for which in
New York we pay $60,000 a year per prisoner. We have one-and-
a-half million people in jail in this country. And I may be wrong,
but I truly believe that education is the key to not only train us


U.S. Chamber of Commerce

Jaternational Division
1615 H Sweet, N.W.
‘Washington, D.C. 20062-2000
‘Phoce:(201) 461-5460

Fax: (200) 463-3116

WHY COMPREHENSIVE ENGAGEMENT IS THE ONLY CHINA POLICY
THAT MAKES SENSE

The U.S. Chamber strongly supports unconditional renewal of China’s MFN status and

comprebensive engagement with China. The United States should not use China’s MFN
status as a means to “send a message” on human rights, intellectual property rights, arms
i or other issues.

‘The policy of comprehensive engagement recognizes our vital interest in maintaining
regional stability, preventing wetpons proliferation, fostering democratic Kees and

. China’s MFN status helps the United States achieve its human rights and
other interests.

Trade provides 2 positive basis for U.S.China dialogue. Trade builds cross-
cultural ties and awareness of American cultural and political values. if China’s
MFN status were revoked, we would erode our economic relationship, harm those
forces in China which are most sympathetic to political reform, and put more
power into the hands of hard-liners who favor stronger governmem control.

‘The best way for the United States to see a prosperous, free China is for U.S.
firms to stay commercially engaged.

. ‘Trade with China is in America’s economic interests.
America’s exports te China continue to grow.
In 1995, U.S. exports wo China wtaled approximately $12 ‘Sp More than
26% from 1994, 4s Chia somius 0develan& w peered ‘of dollars in
areas where U.S. firms are very competitive.
America’s investment in China continess to grow.

‘US. direct business investment ia China for 1994 was $1.7 billion dollars, up 82%
from 1993. Total U.S. investment in China is well over 99 billica.


15

In addition, much of the good work of the Uruguay Round and the WTO remains inaccessible
to many businesses ~ particularly to small and medium-size companies that lack the resources
of most multinationals. Countries such as the US should lead an effort to provide
interpretation of agreements, schedules of services commitments, and tariff schedules, and
improve dissemination of useful materials. Opportunities for US companies are being lost
solely due to a lack of information.

While implementation and expansion of the GATS will remain the focus of services trade
liberalization, we also must take advantage of possibilities that lie in other international
negotiations. For example, now that the GATS has established the “legitimacy” of investment
and movement of personnel as issues for the trading system, we must move to make such
rules apply across all economic activities.

‘The Multilateral Agreement on Investment (MAD, being negotiated among the countries of the
Organization for Economic Cooperation and Development (OECD), is a good place to start. I
understand substantial progress is being made in this ambitious endeavor to broaden
investment rules.

‘There appears though to be a tension arising between those who seek an agreement with high
quality rules, negotiated among OECD countries, then offered to other nations for
membership; and those who seek an agreement with somewhat lower quality rules, but
negotiated among and covering a wider array of countries.

Both sides make good points that need not be irreconcilable. We all agree on the need for the
highest quality rules achievable, At the same time, we must keep in mind that it is not among
the OECD nations that US companies find most of their investment problems. An MAI not
joined by the developing world would not offer much additional value. Helping to find the
proper balance between the quality of rules and the geographic reach of the MAI is another
challenge for this subcommittee.

Other opportunities for progress lie in the multitude of regional agreements proliferating
around the world. As I have said before, our commitment to the multilateral process is firm,
but we see no conflict in pursuing liberalization in regional or bilateral fora. in fact,
arrangements such as the North American Free Trade Agreement (NAFTA) can be laboratories
for services agreements, the lessons of which can be applied in the WTO.

It is disappointing that agreement could not be reached on new fast track authority, even for
the rather narrow purpose of adding Chile to NAFTA. I would urge that this issue be revisited
as soon as possible after the presidential elections.

Fortunately, NAFTA is not the only free trade initiative in this hemisphere. Work on a Free
‘Trade Area of the Americas (FTAA) has been gaining momentum since the Summit of the
Americas in Miami in 1994. In March, trade ministers meeting in Cartagena, Colombia,
launched four new working groups, including one on services. This working group will begin
with necessary spade work, such as cataloging existing agreements that impact services, before
moving on to developing recommendations for reaching an FTAA in services.

As I said, work on the FTAA is in the early stages. The subcommittee should carefully monitor
these proceedings, prodding negotiators when they flag and ensuring that the talks do not go
off course.

Ata similar stage of development is the Asia Pacific Economic Cooperation (APEC) free trade
initiative. Work on services and most issues has just begun. Still, reaching a free trade area
within APEC is an ambitious undertaking with commensurate potential benefits if it is
successful. [am certain that Andersen Worldwide is not the only service firm that views the
Asia/Pacific region as a priority area for growth. As with the FTAA, the subcommittee should
keep a watchful eye on these negotiations.

Conclusion

In conclusion, let me express a worry about the political climate in the US. On Capitol Hill, on
the presidential campaign trail, and in other quarters around the country, the voices of
protectionism are getting louder. Legitimate domestic economic concerns are being miscast by
some as the result of America’s free trade policies. It will require leadership from Congress,
the Administration, business, and others to meet this challenge and win the intellectual
argument.


36

Statement of Motorola Inc.
Before the
Ways and Means Subcommittee on Trade
May 20, 1996
Schaumburg, IIinois

(Good morning, Mr. Charman and meniter ofthe Subcommitios. My ue fp Martin
Singer, and 1 am the Vice Presideat and General Manager of the Witcess Access and Basinces

Division of Motorola's Cellular Infrastructure Group. It is a pleasure to appear
Before you thy ou boul of Motorola.

‘The focus of today's hearig ison the satus and futare direction of US trade policy. We
‘commend you for conducting this hearing, because these are ‘matters that deserve
‘careful deliberation. 1 will offer some general observations on the broad themes su

for discussion, but would like to focus my oral remarks on the timely issue of U:
‘commercial relations,

Let me begin by giving you some background about Motorola.

We Mae pba cri, wn ets 7 cme oc tw le
firmly tn the United and specifically a Tlinols, the location of our corporate
‘headquarters. Motorola is proud to call Schaumburg home of its worldwide headquarters,

Here in Diinois, the infrastructure for cellular systems is made in Arlington Heights and
‘McHenry. Cellular phones and accessories are made in Libertyville, and our newest facility is
Ina. Our Land Products Sector is, in

‘components. Battery packs for wireless products are made in Vernon Hills, while electronic
ballasts are made by Motorola Lighting in Buffalo Grove. The Motorola Computer Group
has a software design center in Ur

American workers and companies. ‘The of being able to trade freely and on fair
terms across i borders’ will become increasingly important as we move toward the

‘The expansion of trade is not a one way street ~ increased trade flows of goods, services and
Jnvestment provides benefits to United States as well as to our trading partners. A few
Motorola statistics wil illustrate the 1988, 36% of Motorola's total revenues were
derived from sales outside the United States. In 1995, that figure was 63% and growing. Over
that period, our worldwide teens pew fom $623 tion f 327 lon. By the year
2000, we anticipate that fully 75% of our total revenues worldwide will result from sales
‘outside the United States.

‘Also, berwenn 1988 and 1995, our employee base grew from 102,000 to over 140,000. Of

the roughly 40,000 new jobs created, taf ‘created outside the United States and half were
crested right here inthis county. AS we have ceated tse new jobs inthe US: the

Proportion of manufacturing jobs relative to the total has remained stable. And we've been

able to eliminate such jobs a8 quality-assurance inspectors and expediters as Motorola's

quality and cycle time have improved, so both the “quality” of the manufacturing jobs and

the total number of jobs in the US have gone up.

‘The number of our employees right herein Ilinols nearly doubled during the 1988-1995
time frame, growing from about 12,000 to more than 23,000. More than 7,000 of
Motorola's employees are located here in Schaumburg today.



48

United States Committee on Ways and Means
Subcommittee on Trade

Testimony of Governor Jim Edgar
State of Illinois

Thank you.

T appreciate very much the opportunity to be with the members of this committee
today to talk about the importance of trade.

In today's business environment ... the world economy is undergoing a
fundamental transformation as the result of globalization.

This movement is so extensive that investment and patterns of trade are being
decisively shaped by companies operating on a global scale and with a global vision.

The world and US. economies are becoming globalized.

There no longer are borders ... as far as trade is concerned.

Changes in remote areas of the world therefore have an economic impact in both
large and small markets thousands and thousands of miles away.

To enhance our competitiveness and preserve our economic power and living
standards ... the United States depends more and more on access to foreign markets for
our products ... services ... and investments.

A strong international trading system and open markets are essential to
maintaining American prosperity.

For many companies ... trade is no longer an option.

It is a necessity.

Trade is an increasingly important engine of economic growth.

In simplest terms ... exporting means concrete opportunities for businesses.

New customers ... new sources of revenue ... decreased business cycle vulnerability
... improved production ... economies of scale and extended product life ~ among others —
are all central to the health of U.S. firms

... and all are provided by growing trade opportunities.

Trade ... however ... is not just a growth strategy.

It is a strategy for survival.

The harsh fact of business life today is that while some American firms may choose
to avoid exporting ... most cannot choose to avoid international competition.

It is almost impossible to identify a product or service produced in the United
States that does not face new competition from international markets.

As a result ... as many of our businesses already have learned ... we can no longer
rely on our home markets for growth

« because our home markets are now an export market for competing firms from
every corner of the world,

There is another reason for the United States to increase its exports ... a reason even
more important to our future than short-term business and job growth.

Being actively engaged in trade makes our businesses - and therefore United States
as a whole - more competitive.


117

International trade has a large role in creating economic growth for U.S. workers and firms — and
that role will grow larger in the future. Just on the face of it, the macro economic considerations
of having the world’s largest economy, the world’s most productive economy and the highest
levels of products and services development in so many different fields gives the U.S. an
immense comparative advantage — which is what international trade is all about. Not to exploit
that tremendous comparative advantage with policies of reciprocal free trade would be a
tremendous disservice to the American people and their economic well being. Those deceitful
demagogues who suggest that high tariffs are necessary to keep out foreign competition and who
would otherwise have us look inward are destructive forces of our economic well being, in my
opinion. A good part of the growth of the recreational boating industry is due to international
trade and, moreover, our international markets tend to be counter-cyclical to the U.S. markets
helping us sustain a higher level of employment when the U.S. economy is in recession.

In the case of the recreational boating industry, the sale of our products depends on the
consumer’ level of discretionary income. Our products are purchased after the necessities of life
are provided for. Thus, our customers are primarily to be found in the economically developed
countries of North America and Western Europe and among the higher income levels in
developing countries. We plan our business strategies accordingly with major emphasis on
developed countries where distribution for our industry is also fairly well developed now.
Notwithstanding, we are making investments in developing economies such as our new boat
show in Mexico -- the first such marketing event of its type in that country. We try to blaze the
trail for our member companies, sometimes quite literally. We try to encoufage the
development of needed industry infrastructure in those countries by providing information,
seminars, forums and general advice to our international colleagues.

We can start by maintaining reciprocal free trade as the bedrock of our international economic
policies and vigorously pursue it. The fact is, people the world around are pretty much the same
and all want to increase their standard of living and enjoy peace and see a better life for their

children. Marketplace economics -- whether characterized as pure capitalism or modified
capitalism free market economics ~- deliver economic prosperity more surely and more widely to
more people than any system the world has seen -- and reciprocal free trade is a major
underpinning.

More than that, reciprocal free trade with that greatest market in the world -- the United States
gives our international friends and would-be friends a closer view of our freedoms and values
which, in my discovery, there are not only curious about, but eagerly embraces once informed.
Thus, they tend to become more like us -- and isn’t that what we should prefer? Nothing will
export our human rights values as a nation better or faster than exporting our goods and services.
How do we explain, for example, that English has become the de facto second language around
the world -- destined within a decade or two to become the first language of the world as more
millions of Chinese learn it? And with the language comes the culture and with the culture the
values. But trade is the engine pulling the train of our values abroad.


53

What are the problems resulting from trade and what solutions
have you directed toward alleviating some of the problems of the
losers?

Governor EpGaR. The area in particular that raised the most
concern was NAFTA. I was a very strong supporter of NAFTA. In
fact, it had very strong bipartisan support here in Illinois. We did
have some losers, there is not doubt. In fact, we had a small very
successful business that for years was prospering, but it was going
to find itself in dire straits competing with Mexican firms. There
is no doubt we have had some Fall off in jobs, but we also know
of other cases where we have seen an increase in job production
because of the result of NAFTA.

What we as a state, and the Federal Government, need to do is
to monitor that and to recognize that you’re going to have some
winners and losers and for those who are losers, try to provide
some technical assistance so they can either find other avenues for
economic opportunity or to assist them in trying to move their
product line where they can be competitive.

I do not think we can ever expect any of these trade agreements
to leave the status quo, and all be positive. There are going to be
pluses and minuses. We have seen in Illinois, particularly from
NAFTA and most of all the other trade agreements, it has been a
positive for the State. Now, the industries in this State or the busi-
nesses are such that, we knew going in, that NAFTA made a lot
of sense. We do not compete with their agricultural goods, we
produce things they cannot compete with. The same is true, for the
most part, in manufacturing. There are a few, as I mentioned, like
the broom manufacturer, who are going to get hurt. But overall our
electronics, our manufactured goods, found themselves with more
of a market. So, Illinois may not be the best example of a State
that had to deal with a lot of adversity because of some of these
trade agreements. we have seen a lot more pluses. But where we
have seen adversity, we tried to assist those companies in training
dollars and whatever else is necessary so that they could retool or
direct their interests to another area.

Mr. RANGEL. Are you satisfied that the state educational system,
with local and Federal support where possible, is able to keep w
with the great demands of high technology that the future will
bring us?

Governor EpGar. We are going to have to continue, in fact, that
is one of the pluses of being part of the global marketplace. It
forces us to do a better job at home. One of the areas we are going
to have to continue to improve on is in the training of our young
people so that they can be competitive in the work place with the
people of other nations. One of the major impetus behind reforms
in our schools is coming from the private sector because they recog-
nize if they are competing in a global marketplace, they have to get
better results. So, I will not tell you that I am satisfied with the
status quo. I feel good that we recognize the need for improvement,
and there seems to be much more of a community support for im-
provement than perhaps a decade or so ago. I think everyone recog-
nizes that we need to continue to improve.

Now, I cannot tell you that I have got all answers on how we are
going to achieve that. In fact, one of the debates we are in right


49

Companies that trade are exposed to new technologies critical to their survival and
growth.

Also, companies that are engaged in trade can form alliances with new overseas
partners with whom they can pool product lines and generate entirely new products for
new customers.

Whether they export directly ... form joint ventures ... contact with overseas
distributors or simply selll to overseas subsidiaries of their current domestic customers,
international business development makes firms stronger global competitors.

Illinois has reaped many benefits from actively participating in the global economy.

For example ...

* Approximately one out of eight jobs in Illinois is dependent on exports.
© One out of four Illinois manufacturing jobs is a direct result of exports.
Every dollar of Illinois exports generates four cents in state tax revenue.

The USS. Department of Commerce estimates that 28,800 jobs in Illinois were
created by trade with Mexico and Canada alone between 1993 and 1995, a 23.4 percent
increase over that two-year period.

Equally impressive, exports ... and foreign investment accounted for 625,300 Illinois
jobs in 1995.

Illinois continues to be a front runner in exports.

In 1995 ... Illinois moved to fifth place in direct exports ... marking the second
consecutive year the state’s ranking has improved.

We saw aggressive exporting show healthy growth in every area of the world.

For example ... exports to Canada grew 9.8 percent ... 38.4 percent to Japan ... 24.3
percent to the United Kingdom ... 21.5 percent to Germany ... 28.1 percent to China ... and
an amazing 80.7 percent to South Korea.

Total exports between 1994 and 1995 increased more than 23 percent ... nearly
doubling the national export growth rate of 13 percent.

During my tenure as Governor ... I have made exporting assistance a cornerstone of
our economic development efforts in Illinois.

Illinois exports worldwide have grown dramatically ... increasing to $32 billion in
1995 from $13 billion in 1985 ... an impressive increase of approximately 150 percent.

At this time, I would like to share with the committee several companies in Illinois
that have enjoyed export-oriented success.

Recently ... the State of Illinois was instrumental in arranging appointments with
proper government officials to successfully help Ameritech Corporation secure a 25-year
contract and 30 percent stake in Hungary's state telephone company.

This joint venture created the largest privatization deal in Central and Eastern
Europe.

This cooperative project is expected to result in the installation of 1.5 million phone
lines by the year 2000 in Hungary.

In addition, Ameritech is currently examining privatization in Belgium, Ireland,
Portugal and Poland involving investments between $500 million and $2 billion.

‘Ameritech is taking steps toward truly becoming a global telecommunications
supplier.

Pe With the assistance ofthe State of Hinois Wrigley Company ... a long-time
corporation rooted in Chicago ... established Wrigley Poland in 1992.



18

TESTIMONY OF MARSCHALL I. SMITH
IMC GLOBAL INC.

Good [morning) [afternoon], Mr. Chairman and Members of
the Trade Subcommittee. My name is Marschall Smith and I am
Senior Vice President and General Counsel of IMC Global Inc., a
corporation headquartered nearby in Northbrook, Illinois.

As our name suggests, IMC Global and its several
subsidiaries and joint venture operations comprise one of the
world's leading producers of crop nutrients for the international
agricultural community. We are a leading producer of potash,
with one facility in New Mexico, and also a producer of nitrogen
for crop nutrients. IMC's joint venture with Freeport McMoRan
Resource Partners, IMC-Agrico, is the nation's largest producer,
marketer and distributor of phosphate crop nutrients.

IMC-Agrico employs about 4500 workers to operate three
phosphate plants in central Florida that export product through
the Port of Tampa, and three phosphate plants in Louisiana that
export product through the Port of New Orleans. Far and away our
leading phosphate crop nutrient product is diammonium phosphate,
or DAP. From ten mines in Florida and Louisiana with over 360
million tons of high quality phosphate rock reserves, we mine the
rock and then process it. In our beneficiation plants, we wash,
clean, size and grade the mined material. Next we react the
material with sulfuric and phosphoric acids, and then granulate
it with ammonia to produce DAP.

We mine about 27 million tons of phosphate rock a year,
and have established a capacity to produce 8 million tons of dry
phosphates, including 6-1/2 million tons of DAP. I share these
facts with you, Mr. Chairman and Members, to underscore how
important DAP is to our phosphate business. Without the People's
Republic of China as a customer, we would be largely out of the
DAP business.

China has five times as many people to feed as the
U.S., but only about half our acreage of arable land on which to
grow crops. In other words, China needs to feed 20 percent of
the world's population, but has only 7 to 9 percent of the
world's arable land. China therefore needs crop nutrients to
make the most productive use of that land. China imports about 5
million tons of DAP annually, with a market value of over 1
billion dollars, to support its agricultural production. of
these 5 million tons, China buys nearly all its product from the
U.S. and of that amount about 40 percent from IMC-Agrico, or
about 2 million metric tons. Over the last three years, U.S.
exports of DAP to China have accounted for between 55 and 60
percent of total U.S. DAP exports.

China is not only our largest DAP market, but also our
fastest growing market. While the global crop nutrient market
fluctuates, China has substantially increased imports of DAP
since 1993. Moreover, prices have risen as well as sales
volumes.

To capitalize on these favorable developments, we have
entered into new, longer term supply contracts with our customers


88

assumptions and should not unduly interfere with efforts to keep markets open.
Keeping markets open abroad is key policy objective for both the EIA and TIA and
we believe it should also be a top goal for U.S. foreign policy. For this reason, for
‘example, EIA supports the continued granting of unconditional Most Favored
Nation (MFN) trading status to China, along with the disassociation of trade policy
from labor and human rights concerns. ANTEC has sales offices in Shanghai and
Beijing and contracts with manufacturers in Shanghai. Our company believes
there is much opportunity to expand our growth in China and would like the U.S.
government to help, rather than hinder us in our expansion efforts.

EIA and TIA endorsed and supported passage of the North American Free
Trade Agreement, NAFTA, and the Uruguay Round of the General Agreement on
Tariffs and Trade, GATT, which established the World Trade Organization, or
WTO. EIA/TIA continue to believe that these agreements are in the best interests
of the U.S. electronics industry as well as the nation. Efforts like these that reduce
the barriers to free and fair trade are essential to the development of our industry
worldwide. ANTEC has expanded its Latin American and Canadian division and
believes NAFTA is a key to helping companies get into or expand in North
American markets.

We recognize that trade barriers in the future will likely not take the form of
tariffs, but more likely be embodied in technical barriers and differential product
standards across boarders. EIT/TIA firmly supports the development and
application of international standard voluntarily agreed to by industry.

For example, ANTEC and its manufacturing division have voluntarily
agreed to comply with ISO 9001 certification efforts, a standard for products and
services established by the International Standards Organization and widely used
throughout Europe. We recognize that established standards add to the quality and
value of our products and have added to ANTEC's profit margin. We endorse and
support government efforts to promote the voluntary standards process on both the
domestic and international levels. We do not support government efforts to set
standards, as these are likely to stifle the development of new and competitive
technologies.

Trade has also become a great stimulus to technological innovation, as
competition in global markets spurs U.S. manufacturers to even higher levels of
performance. For example, ANTEC has been a key player in the development of
the world's first combined voice, video and interactive network by Optus Vision, a
consortium in Australia, This advanced broadband network, which can be looked
at a model for what U.S. cable TV companies have been working on for the past
few years, is touted as the first hybrid fiber-coaxial network built to provide voice,
video and data services. ANTEC has been awarded $90 million in contracts with
Optus Vision to provide several products for the new network, which is expected
to be operational late this year.

ANTEC is well-positioned to continue its growth in the international market
where, we believe, growth is encouraged by the more liberal regulatory markets of
other countries. We expect to see continued growth in the Asia-Pacific area, in
Latin America and in the industrialized European nations. ANTEC believes we
can continue our profitable growth in the international market without necessarily


43

Motorola's. fas combined sales to China and Hong Kong reached $3.2 billion, or nearly

twelve percent of the company’s total worldwide revenues. Motorola's investment of more
than $1 billion makes it the largest U.S. investor in China today.

Motorola’s exports to China from the United States totaled roughly $1.2 billion in 1995,
supporting jobs in many states, including Arizona, Florida, Illinois, and Texas.

Cornerstones

Motorola's operations in China rest onthe same two key beliefs that guide all of Motorola's
operations worldwide ~ respec forthe dignity ofthe individual and uncompromising

integrity in everything we do. These bel mite teamwork and continua learning
forall ina culture of participation. The commitment o teamwork and continual

also are key elements in developing the company's operations in China and its

with the Chinese people.

Motorola has a business code of conduct that all employees worldwide are expocted vo
101d. Motorola has translated its code into Chinese, and this document is used to brief
new hires in China.

In 1994, Motorola University began the Chinese Accelerated Management Program
(CAMP), an intensive management training program for high Hip ctl Chores,
CAMP’s 14-month program includes classroom and on-the-job training, as well as a two
month overseas posting.

In 1995, Motorola University provided more than 600 training days for customers and
government officals and mor than 15,000 uaining dys for pl in China. MU
trained more than 500 of Motorola’s China-based Baglish, and also

Ca ee eo Oe tad Ge Sipe al ed coe ean yees
from 40 Chinese supplier companies.

Motorola brought more than 600 Chinese to its U.S. facilities during each of the last three
years for meetings on Motorola technologies, design meetings with engineers and technical
raining. The company’s business units also provided more than 25,000 training days to
employees at the Tianjin facility through on-the-job training and machine operator training.

In addition to in-house training, Motorola actively supports higher education in China. The

‘company provided an estimated 2,000 scholarships over the last four years for Chinese

students at technical universities, including Qinghua University, Bc ising University.

Boling Posts and Telecommunications University, Tianjin University, Nankai University
and Fudan University.

‘Motorola established three microprocessor/microcontroller labs and five communications
Jabs at universities in China, and will expand this program to 20 universities over the next
five years, The company supplied electronics kits and technical manuals to about 30
{Universities throughout Chins in the past three years.

Motorola also is conrbuting to environmental and community efforts in China today.
Motorola is the largest donor to the Hope Project in China, having given more than
$820,000 to this program that supports elementary schools in rural China,

In November 1995, Motorola became the fist foreign company in Chinato co-sponsor —
with the Tianjin Environmental Protection Bureau -- an environmental protection
symposium that brought together Chinese policymakers, regulators, scholars and
practitioners from throughout the country.

Motorola has begun an employee home ownership program in an effort to attract and retain
the est empl in China Providing a hgh quality ving cavionment. Tie
¥ egies by the Chinese Go VEMMENE, CO’ vers construction financing,
monaag iarcg employees, funds for community amenities and a portion
two buildings covered under

‘mortgage pa} first two this pioncering program
wull be weady for occupancy by the end of 1996.


113

STATEMENT OF JEFF’W. NAPIER, PRESIDENT, NATIONAL
MARINE MANUFACTURERS ASSOCIATION, CHICAGO, IL

Mr. Napier. Thank you, Mr. Chairman. It is my pleasure to be
here, Congressman Rangel. For the record, my name is Jeff Napier,
and I am president of the National Marine Manufacturers Associa-
tion, which is a manufacturing trade group representing over 1,500
manufacturers of primarily recreational, but in some cases, com-
mercial marine products of all types. We have several dozen compa-
nies headquartered here in Illinois. While our industry is generally
characterized as comprised of small businesses, at both the manu-
facturing and retail level, we do have a few. large companies in the
billion dollar range led by Brunswick Corp. of e Forest, Illinois
and Outboard Marine Corp. of Waukegan, Illinois, and our associa-
tion itself is headquartered in downtown Chicago.

Over 70 percent of our 1,500 member manufacturers are involved
in the international marketplace, with the typical member selling
at least 15 percent of its output internationally, in many cases up
to 25 percent. This results in about 15,000 to 20,000 jobs because
of the international marketplace. The trade association that I rep-
resent is itself internationally involved in many international
standards making bodies; international government relations; the
production of boat shows, which is a primary marketing tool for our
industry, both throughout the U.S., with about 8,000 foreign trade
distributors in attendance, and production of boat shows in other
countries like Canada and Mexico, to sell our members’ products
there. Last, but not least, organizing U.S. pavilions in boat shows
all over the world. We work regularly with the U.S. Commerce
Department on some of our international trade issues, also with
the USTR’s office, U.S. embassies and consulates around the world,
and the Ex/Im Bank. In a good year, we will typically export more
than a billion dollars. And while our industry is cyclical, it is one
of the few U.S. manufacturing industries with a favorable balance
of trade, as high as $600 million within the last few years. So,
that’s the size and shape of our industry and its international trade
involvement.

I would like to, Mr. Chairman, if I could, address a few of the

uestions that the Committee posed. I cannot address them all in
the limited time. Let me just say briefly that we actively favored
the passage of NAFTA. We did not benefit as much as we would
like. We made several representations to the USTR for accelerated
phase out of the Canadian and Mexican tariffs and we have what
we consider a fairly slow phase out. Nonetheless, we think that we
will, over time, enjoy significant benefits from both of those
markets.

Regarding Chilean membership in the North American Free
Trade Agreement, we think it is very important for the U.S. to ne-
gotiate Chile’s membership in NAFTA at a very early date. In fact,
it is overdue. If the United States is the chief exponent of recip-
rocal free trade, we must actively encourage those who seek to join
reciprocal free trade group. Chile’s economic resurgence, following
adoption of free market economics, on the first count, deserves to
be applauded and rewarded and that would send a strong message
to the rest of the hemisphere. Second, Chile’s membership in
NAFTA would permit the comparative advantage economics to


122

STATEMENT OF
LYRIC HUGHES, PRESIDENT
T.L.I. INTERNATIONAL CORPORATION
CHICAGO, ILLINOIS

My name is Lyric Hughes, and I am president of T.L.I. Intemational Corporation, ant
international marketing communications firm based in Chicago, Hlinois. TLI has done
business in the People’s Republic of China for 17 years, since my first visit there in
1979. Our mission is to help US companies sell their products and services abroad by
supporting their communications efforts.

Most governments support the efforts of their companies abroad. Only in the US, are
companies doing business with China at the mercy of elected officials in terms of
knowing that the business deal they make today might be undone tomorrow in
Washington, in order to achieve the policy goals of Congress. Since Jimmy Carter and
the grain embargo against the Russians, our worldwide competitors have benefited from
‘our country's misguided attempts to gain political leverage by undermining the private
interests and critical international economic activities of its citizens abroad.

Denying most favored nation status to China would be the wrong sanction, at the
wrong time, punishing the wrong people. Not only the Chinese, but our US firms who
have stayed the course through difficult times, and made investments totaling millions
of dollars, would suffer.

The Japanese are our biggest competitors in China, and Japanese companies do business
in China unhampered by the annual ritual of MFN approval. The same is true of the
Europeans and the Australians,

Let me state clearly that I am not an apologist for the Chinese. Our company is not a
lobbyist for their government; rather we work for US companies who want to do
business in China and around the world. I am not here to claim that the Chinese are
the most wonderful people in the world; rather I will tell you frankly that there are
some frustrating days when I fee! that I never want to do business in China again. Just
as there are other days when I know that I am privileged to be a witness to massive
historical changes within the largest single social group in the world.

There is no doubt in my mind that in time of war, we would be justified in utilizing
whatever weapons we have to defeat our enemy. We are not, however, at war with
China, a country my parents generation fought and died to protect from Japanese
aggression.

Obviously, there are many problems with the US-China relationship. Of biggest
concem to our clients, which include companies both large and small, is the protection,
or lack of protection of their intellectual property. Through our anti-piracy efforts on
their behalf, I have come to understand the complexity of this problem within China, I
have found that high-level officials in China are absolutely sincere in their desire to
stem counterfeiting and other illegal activities, and for very good reason. Piracy not
only discourages investment by foreigners, it also discourages their own people from
building new industries without proper protection under the law.

However, China is a nation of nations, and is really more of a historical ideal than a
fully functioning, centrally governed country. Imagine trying to regulate the activities
of a country with five times as many people from one central capitol such as
Washington. Most of the counterfeiting activities take place far from Beijing, in
southern China. Withdrawing MFN will not hurt these criminals, and it will do



CONTENTS

Advisory of April 26, 1996, announcing the hearing .....

WITNESSES

Office of the United States Trade, Representative Hon. Ira Shapiro, Senior
Counsel and Chief Negotiator for Japan and Canada ..

Andersen Worldwide, Robert F. Kelley ..
ANTEC Corporation, Rolling Meadows, iL, James L. Faust
Berman, Robert S., Rudnick & Wolfe, and Chicagoland Chamber of
Commerce, Chicago, IL
Bison Gear and Engineering Corp., St, Charles, IL, Ronaid D. Bullock
Chicagoland Chamber of Commerce, Chicago, IL, Robert S. Berman
Edgar, Hon. Jim, Governor, State of Illinois ..
Electronics Industry Association, Faust, James L.
Hughes, Lyric, T.L.I. International Corp., IL, and National Couneil for US.
ina Trade
Illinois State Chamber of Commerce, Sally A, Jackson
IMC Global, Inc., Northbrook, IL, Marschall I. Smith
International Trade Association of Greater Chicago, Richard Pauilin
Jackson, Sally A., Illinois State Chamber of Commerce .
Kelley, Robert F., Andersen Worldwide .
Motorola Cor ., Martin Singer .
Napier, Jeff W., National Marine Manufacturers Association, Chicago, IL.
National Association of Manufacturers, Ronald D. Bullock
National Council for US-China Trade, Lyric Hughes .
National Marine Manufacturers Association, Chisago iL, deif W. Napier
Paullin, Richard, International Trade Association of Greater Chicago .
Singer, Martin, Motorola Corp. ..
Small Manufacturers Forum, Ronaid D. Bullock
Smith, Marschall I., [MC Global, Inc., Northbrook, IL
‘Telecommunications Industry Association, James L. F:
T.LL International Corp., Chicago, IL, Lyric Hughes

am


106

To insure our economic security in the 21st century, we believe
that U.S. trade advocacy, promotion and policy functions currently
performed by 19 Federal agencies and coordinated by a committee,
we think these functions need to be consolidated, streamlined and
managed by one agency that speaks to our trading partners with
one consistent voice. We think that one agency’s priorities should
be to promote strategic commercial alliances worldwide, because
these provide American exports with greater market access and
transparent rules for trade and investment.

Second, we think the objective should be approve and enhance
the quality, the scope and the delivery of commercial market intel-
ligence. Three, to develop a comprehensive program for promoting
U.S. service exports and protecting intellectual property rights.
Four, to form strategic alliance with our trading partners to combat
violations of international trade practices and intellectual property
rights. Right now it seems when we have an intellectual property
dispute, for example, with China, that we are the only one out
there pointing at China and saying you have got to change your
ways. Why cannot some of our other western allies get involved in
it? We should be building coalitions.

We should address domestic policies and programs to make U.S.
firms more competitive exporters. For example, port charges, infra-
structure, we have poor roads and highways, the educational infra-
structure that you spoke of so eloquently earlier, Mr. Rangel.

We should negotiate aggressively to remove foreign market bar-
riers for U.S. exporters. We should not be backing down on that.
And we think that the People’s Republic of China, in no particular
order, the European Union and Japan should be key targets for
those negotiations.

Finally, we think that a single agency needs to seek ways to in-
volve U.S. firms in international markets. There have been some
studies out over the last 5 or 6 years that suggest that something
like 10,000 U.S. firms that could export, do not. Well, if they do not
get started, they are not going to get with the program and it is
going to be too late. So thank you very much for your time.

[The prepared statement follows:]


66

Mr. BULLOCK. In our own company, and many of my peers have
similar programs, we have a two-tiered wage structure. that we
have implemented. For the first 21 months of employment we have
a structured program where we are basically taking people into our
work force, providing they can do three things; they are able to
demonstrate literacy, they can pass a fairly simple shop math test,
indicating what used to be about an 8th grade level of mathematics
when I was in school, and third, they can pass a drug screening
test. We take those people in and we have a 21 month training pro-
gram. The new hires also have an opportunity to continue their
education as part of our tuition letter of credit program.

Mr. RANGEL. I am saying, the NAM, are you satisfied that there
are sufficient cushions for those people who are the losers in the
expansion of world trade, that they are taken care of by outfits like

ison?

Mr. BuLLock. If we can encourage greater exporting activity, it
will create opportunities for the people that may be displaced from
other jobs. In addition, exporting increases our total productive out-
put and our productivity. So if we can keep that going, yes, we are
satisfied that we will all be able to provide a number of good train-
ing and educational programs for employees.

Mr. RANGEL. Well, I will have to get in touch with the NAM and
see what you have done on that because we find that those people
that were working, that newer Americans have taken lower skilled
jobs and they find it very difficult, especially those that have
worked ten or 15 years, to be retrained or to start all over. So, that
the NAM is on the right track, but maybe I can get in touch or you
can have someone get in touch with me to see.

Mr. BULLOCK. I will do that. We also have another program that
is called the high performance work place, where we are using sup-
plier networks to increase skill and training requirements over a
wider base. We'll send that material to you.

Mr. RANGEL. And knowing how you support keeping politics out
of trade policy, you would not support our present policy that re-
lates to Cuba, would you, from a trade point of view?

Mr. BULLOCK. From a trade standpoint? The administration’s
policy?

Mr. RANGEL. It would be everyone’s policy now since he has
adopted most of the Republican policies. I think you can go with
a bipartisan, Miami policy, whatever you want to call it.

Mr. BULLOCK. Not an area of my expertise. I really cannot com-
ment on that.

Chairman CRANE. Mr. Bullock, I thank you for your testimony
and sorry you have got to run. But now, we'll yield to Mr. Kelley.
And if you could switch seats with Mr. Bullock for the mikes.

STATEMENT OF ROBERT F. KELLEY, MANAGING PARTNER,
INTERNATIONAL AFFAIRS, ANDERSEN WORLDWIDE

My name is Robert Kelley. I am managing partner for inter-
national affairs for Andersen Worldwide. I must admit that after
hearing about cellular phones and brooms, pickles and gears, it is

a real pleasure to talk about the other 70 percent of our GDP,
services.


52

portant part of whether they are going to be successful and grow-
ing in the years ahead.

Chairman CRANE. Thank you so much, Governor. This is
Congressman Rangel who is our Ranking Minority Member on the

Subcommittee.

Mr. RANGEL. Governor, let me thank you for taking time out, of
your busy schedule, to share your views with us. They are very im-
portant views, and I am convinced that the more Governors can do
to share the importance of trade, which is not always easily under-
stood by voters, the more difficult it is for, not only local, But Fed-
eral officials to demagog the issue because an informed community
can recognize what’s going on.

I agree with you, it is so easy to make a political issue out of
trade, when you're dealing with foreigners as opposed to our flag-
waving Americans, whom we all love and want to protect. It is so
easy to make a foreign country the scapegoat of all our troubles.
I assume that, since you talked about our trade with China, your
view would be similar in relating to our lack of trade with Cuba,
which is being motivated by politics more than by trade issues.

Governor Epcar. I do not think there is any doubt that that is
a major factor. Also, looking at the dependability of your trading
partner, that is a factor that has to be taken into consideration, can
you rely on them, if you reach an agreement. I do not claim to be
an expert on Cuba. I understand some of the emotions as some
Cuban-Americans might feel for the current government in Cuba.
But again, overall we need to be very cautious when we allow pure-
ly political reasons to determine our trade policy. I am not as famil-
iar as maybe some would be on the potential of what that can
mean for jobs and economic opportunity for people in the United
States if we had better trade relations with Cuba.

Mr. RANGEL. Well, it is not so much how much we would benefit,
even though we would and our national integrity is more important
that just monetary benefit. But, when we start imposing sanctions
and secondary boycotts against trading partners after we are al-
ready into these complicated and sensitive trade agreements, then
you can see that it is the politics of the election rather than where
we stand with all of the nations, not just Cuba, but CBI,
Carribbean Basin Initiative countries, Central America, Mexico,
South America, and Europe.

Governor EDGAR. There is no doubt. As you said that, I was
thinking there is other regions in the world where we have done
that and our trading partners have gone away and I am not sure
how effective we have been. So, we have to be realistic when deter-
mining our trade policies, too. To achieve the political end we want
to achieve, may not be obtainable if everybody else is still trading.

Mr. RANGEL. Unless what we want to achieve is electorial votes,
and then that’s a different question.

Governor Epcar. I could assure you, as I know in my state and
I am sure it is in your state, the best thing you can do politically
is show your help and get jobs.

Mr. RANGEL. That’s my next point. Since you have to be a player
and be sensitive to our international trading partners in order to
have your constituents get jobs, have you been able to get a feel
as relates to the labor force who the winners and losers have been.


101

pressure foreign countries to adopt and implement more trans-
parent and fair procurement policies.

Third, we would like to mention agriculture promotion. Given
that we represent the breadbasket of the United States, naturally
we would like to see greater promotion of our agricultural indus-
tries overseas. High growth in the population and national income
of developing and newly industrialized countries provides signifi-
cant opportunities for increased exports of food products as well as
the tools, machinery and equipment necessary to develop local agri-
cultural industries. Once such industries are established, addi-
tional opportunities will develop for U.S. companies in connection
with the packaging, distributing, marketing and advertising of food
products. Midwestern businesses are leaders in these sectors and
should play an active role in this chain of development abroad.

Another sensitive issue which our members have expressed to us
pertains to intellectual property protection. Piracy and counterfeit-
ing of intellectual property in certain foreign countries has been a
tremendous problem for our members. Without a guarantee of in-
tellectual property protection, we are discouraged from investing or
transferring technology abroad. We support bilateral and multilat-
eral initiatives to pressure our trading partners, not only to adopt
necessary laws and regulations, but also to vigorously enforce the
principles set forth in various multilateral initiatives.

One more issue pertains to trade and customs infrastructures. As
Governor Edgar mentioned this morning, exports play a tremen-
dous role in our State’s economy. Consequently, we have a great in-
terest in supporting efficient customs procedures in foreign mar-
kets. Obstacles such as complicated tariff systems, unpredictable
customs valuation procedures and complex rules of origin raise the
cost of international trade for our members. Harmonized tariff
schedules and rules of origin, proper training of foreign customers
officials and the implementation of carnet systems to facilitate the
sampling of U.S. goods abroad are a few examples of steps which
we would encourage.

In conclusion, I hope that the views which I have expressed have
provided you with an insightful understanding of the concerns of
our members, whom I feel are representative of Chicago’s business
community. I have touched upon only a few of our areas of interest,
but we would like you to know that we fully support all initiatives
and efforts undertaken by the U.S. Government to create new and
enhance existing opportunities for U.S. businesses overseas. We
would be happy to help out in any way possible.

[The prepared statement follows:]


26

testimony, on Japan, China, and the WTO, all of which are impor-
tant, but what can you tell us about the administration’s plans for
reinvigorating our negotiations for, not just Chile’s accession to
NAFTA, but the pursuit of the President’s stated objective for hem-
igpheric free trade by 2005, and also the Asia Pacific cooperation
effort.

Mr. Suapiro. As I said, Mr. Chairman, I always manage, despite
the length of my written statements, never to cover everything.
But, we are committed to moving ahead with the agenda of the
Summit of the Americas and free trade in the Americas, which we
have set a goal with 34 nations in this hemisphere for free trade
by 2005. While obviously you and I have talked about this, not
moving on Chile now has been something of a delay, but overall the
free trade in the Americas effort is moving ahead. There are a
number of working groups dealing with the issues and preparing
for time at which trade agreements, at higher and higher levels of
discipline, can be entered.

This is the second most rapidly growing area in the world in
terms of economics. They are our hemispheric neighbors and we be-
lieve it is a critically important region. Frankly, we also believe
that our European and Japanese competitors are working very
hard to try to compete with our foothold in the hemisphere. So, we
are going to keep on moving in the direction of expanded trade be-
cause it is freer and fairer trade. The APEC, Asia-Pacific Economic
Cooperation Forum, process is a longer term process. Asia is the
fastest growing region in the world; great potential, but great chal-
lenges, too. We need to be there fighting to insure that the coun-
tries in Asia do not follow the Japanese model, that as they pros-
per, they open rather than trying to stay closed. So we are going
to continue being engaged in Asia. The President will be at APEC
in Manila at the end of the year and the APEC work continues.

Chairman CRANE. Thank you, Mr. Ambassador.

Mr. Rangel.

Mr. RANGEL. Mr. Ambassador, I do not know how high a priority
trade is on America’s domestic agenda. However, most people who
speak out politically frame trade in the most negative terms—that
the foreigners are taking advantage of American manufacturers.
Certainly, the manufacturers of pharmaceutical products, the re-
cording industry, the movie industry, and the software industry
have claimed that they cannot effectively compete if all of their fe-
search and development is just going to be illegally reproduced
abroad without any of the cost and that they might as well not be
in the country if that country has, as a matter of policy, the idea
that just stealing Americans’ products is going to be a way of life.

Now, with China, we have entered into all types of agreements
with them as well as having China pledge to reduce the barriers
to the introduction of American products there. And even as we
talk, when the President has threatened sanctions against them, as
you said, of $3 billion, their response is that they are prepared to
put sanctions against us. So we are talking about a possible trade
war with China, while many in the United States are concerned
with the violation of human rights, many leaders are concerned
with the reports that they use prison labor for many of the goods
exported all over the world and into the United States. I just want


22

exports to these three countries of semiconductors and other products suddenly faced
higher tariffs. After negotiations under WTO procedures, we succeeded in getting full
compensation, through an agreement by the EU to lower tariffs on a range of
semiconductors and hundreds of other products, for the entire EU market.

This was a long-time objective of our high-technology industries and will strengthen their
ability to export from the United States. The tariff reductions in the agreement will
result in $4 billion in tariff savings by U.S. companies over the next ten years. The
agreement also commits the two parties to attempt to conclude an Information
Technology Agreement that will eliminate tariffs in the information technology sector by
the year 2000. The EU has already implemented these tariff cuts. This negotiation was
more successful than negotiations in earlier EU enlargements, because we had WTO
dispute settlement to back us up and the EU knew that we meant business.

+ Korea meat. Our meat exporters had persistent problems with Korean regulations which
banned sale of meat except within an arbitrary ‘“Shelf life” that was too short to permit
overseas shipments. We used the new WTO rules and the new WTO dispute settlement
procedures, and we consulted with Korea. Korea agreed to fix our problem because they
knew we were prepared to take them all the way through WTO dispute settlement and

win.

. Japan sound recordings. We invoked WTO dispute settlement procedures in response
to Japan’s denial of protection to millions of dollars’ worth of our intellectual property in
sound recordings made between 1946 and 1971. Japan has already offered to change its
law --but unless we are completely satisfied, we are going all the way through the dispute
settlement process. WTO dispute settlement will help us fix this problem not only in
Japan, but in other high-growth export markets in Korea, Taiwan and elsewhere in Asia.

We expect to continue to settle cases ~or pursue them through the dispute settlement process
until we obtain satisfaction --and we will be taking additional cases to the WTO in the coming
weeks. At the same time, we will find ourselves defending U.S. measures in WTO dispute
settlement proceedings, and we will keep the Congress apprised of every development in the
cases brought against us. It would be unrealistic to deny that there are going be to cases in which
WTO panels properly find that a U.S. law or regulation does not comport with WTO rules.
When that happens, we will have to decide, in consultation with Congress, what is the best
course of action to pursue.

The gasoline dispute. As we have already advised the Committee, on April 29 the WTO
appellate body found against us in the dispute brought by Venezuela and Brazil regarding EPA's
regulations on gasoline. While we would have preferred to win that case, I want to emphasize
that (1) that we lost on fairly limited grounds and (2) that there were also important positive
aspects to the findings in that dispute. To be clear, the Clean Air Act was not at issue in that case
but rather one element of EPA’s implementing regulations that treated foreign and domestic
refiners differently. The appellate body recognized that discriminatory treatment might be
justified to deal with EPA’s concems about access to data and enforcement with respect to


105

Chairman CRANE. Thank you, Mr. Berman.
Mr. Paullin.

STATEMENT OF RICHARD PAULLIN, EXECUTIVE DIRECTOR,
INTERNATIONAL TRADE ASSOCIATION OF GREATER CHICAGO

Mr. PAULLIN. Good afternoon. My name is Richard Paullin. I am
the executive director of the International Trade Association of
Greater Chicago. We are an Illinois not-for-profit voluntary busi-
ness association, the largest such association in Illinois, and one of
the largest in the Midwest. Our 520 members represent a range of
materials, merchandise and service providers with interests in im-
port, export, licensing, joint ventures and investments abroad.

As an association, we are dedicated to furthering international
trade by providing a forum for the exchange of practical informa-
tion within the international business community. For over 18
years, Mr. Chairman, we have held regular meetings on the third
Wednesday of each month, practically in this neighborhood, almost
always in a suburban Chicago location near O’Hare.

Over the years, we have counted some of America’s largest cor-
porations as members, but today I am really representing the ma-
jority of our membership, those small and medium size enterprises
struggling to compete in today’s rapidly changing global environ-
ment. In general, these are firms which do not have a 3 or 5 year
strategic plan for international. For them, survival in international
markets usually means closing the deal within the next 3 to 5
months. For them, U.S. trade policy needs to have a single unified
objective and that is to support in a consistent and a sustained
manner, the exports of U.S. growers, manufacturers and service

irms.

To do so, we think the policy must be grounded in the harsh re-
alities of the present and what we foresee into the 21st century.
Three trends in particular kept coming up over and over again as
we talked to our members.

First, greater China will soon eclipse the United States as the
world’s largest economy, profound repercussions not only for the
geopolitics, but for trade and investment as well.

Second, although our Nation’s exports of agricultural products,
manufactured goods and services will continue to grow, our share
of global trade will continue to decline, as will our ability to influ-
ence other nations’ trade policies. We have said earlier this morn-
ing and today, the United States is the world’s largest exporter,
and indeed we used to account for something like 30 or 40 percent
of all world trade, but that was 40 years ago. Today, we account
for roughly 15 percent and it is going to go down as world trade
expands.

The third trend that our members note is that regional trade alli-
ances will continue to burgeon and solidify, creating opportunities
for countries who are members of the alliances and providing dis-
incentives to nonmembers. These alliances including the European
Union, include NAFTA, South America, and whatever is going to
happen out in Asia. We think they are important. We think the
United States needs to engage in more alliance building. We think
that_ we are dragging our feet, frankly, with respect to Chile and


34

a 48 percent share now in the cellular infrastructure market. These
exports support thousands of high wage American jobs at Motorola
and at our supplier companies. around the country. A fact sheet de-
tailing Motorola’s activities in China is included with my written
statement.

Motorola strongly supports China’s most-favored-nation status
without conditions. MFN is not preferential treatment. It is the
cornerstone of any normal bilateral trading relationship.

We are especially grateful for your continued leadership in sup-
port of MFN, Mr. Chairman, as well as the support of other
Members of this Subcommittee. We are heartened by recent indica-
tions that there is growing bipartisan congressional support for
MFN renewal. We understand that, as this hearing is being con-
ducted, President Clinton is affirming his support for MFN renewal
as part of a major address to the International General Meeting of
the Pacific Basin Economic Council, over which Motorola’s vice
chairman and CEO Gary Tooker is presiding.

We would like to believe that this strong showing of bipartisan
support for China’s MFN renewal without conditions would make
it easy to accomplish. But, there are some who would want to use
the MFN debate as an opportunity to express their concerns about
other issues, including human rights, proliferation, security, intel-
lectual property right, market access barriers and so on.

All these issues are important. They demand careful consider-
ation and cannot be dismissed lightly. But, we believe that efforts
to address concerns about such matters through alternative legisla-
tion that would be considered in tandem with China’s MFN re-
newal would be highly counterproductive.

Withdrawal or conditioning of China’s MFN status would invite
retaliation, which would jeopardize Motorola’s exports to and busi-
ness in China. This would give our competitors an unfair advan-
tage in the rapidly expanding Chinese economy and would threaten
Motorola’s ability to compete throughout the Asia-Pacific region.

The annual debate over China’s MFN status puts the U.S.
Government in the position of trying to measure progress in artifi-
cially short increments. Since Motorola first went to China in 1986,
we have seen a rise in the standard of living and improvement in
the human condition in China. In some areas, they still have a long
way to go, to be sure. But, it is important to look at how things
are evolving.

Motorola exposes its Chinese employees to market-driven busi-
ness and management practices and to our core principles of re-
spect for the individual and uncompromising integrity in every-
thing we do. We provide thousands of hours of training to employ-
ees, suppliers and government officials at Motorola University in
Beijing and Tianjin. Motorola is the largest donor to the Hope
Project, which builds elementary schools in rural China. Last fall,
Motorola became the first foreign company to cosponsor an environ-
mental protection symposium that brought together Chinese policy-
makers, regulators, scholars and practitioners, and we are now ex-
ploring other environmental protection and awareness projects
with fellow companies. Finally, Motorola is sponsoring an
Employee Home Ownership Program, which covers construction fi-


115

us work with the Embassies and Consulates around the world with
good results. So we think that Commerce especially does a good job
for us. But in general, a small business has a tough time getting
very much help out of some of the agencies.

In the interest of time, I will conclude my remarks and be happy
to answer any questions.

(The prepared statement follows:]


58

The data on job growth was perhaps the most surprising. Vir-
tually all the decline in average employment was attributable to
rene rting plants. In contrast, the work force at exporting plants

y 17 to 18 percent. Second, the role of small business in this
employment growth was even more surprising. Small exporters had
growth levels 1 to 2 percent higher than average.

Another interesting discovery is that better wages, job growth,
and productivity seem to appear in exporting companies once a
company makes a commitment to exporting, not just after a com-
pany has reached a certain level of exporting. These benefits show
up across the board, demonstrating that the benefits do not just
apply to big multinational firms. For example, our own company,
Bison, has doubled productivity over the past 8 years, introduced
a profit-sharing 401-k program and greatly improved its training
and education outreach program, with 36 employees, or 20 percent
of our direct work force enrolled in college courses since this pro-
gram was launched 18 months ago. This is a record we are very
proud of. We have also been involved, to respond to Congressman
Rangel, in the local school districts. We have had teachers in on 3-
week internships, and as a result, we have come up with a multi-
disciplinary program that we have helped launch in the Downers
Grove school system whereby freshman and sophomore students
have an opportunity to focus on math, science and technology. It
is something that will reap benefits down the road. We see it as
a necessary element in interfacing with our community in order to
be successful in the global marketplace. While all of these improve-
ments cannot be entirely attributed to our exporting, I can tell you
that competing on a global basis certainly sharpens our focus in
both how we are investing in capital equipment and our people. We
now have established a human resources balance sheet to accom-
pany our financial balance sheets.

The U.S. key leadership in the international marketplace must
be maintained. We need to be involved in as many dialogs and ne-
gotiations as possible and appropriate to ensure positive progress
and direction. That is why, for example, passage of fast track pro-
cedures for trade agreements is critical. The NAM supports a clean
and unfettered fast track proposal and urges Congress, in conjunc-
tion with the administration, to work expeditiously toward that
end. Without fast track, the United States looks uncommitted and
rigks losing its credibility as the leader of the international commu-

nit;

With regard to China, the NAM supports the extension of MFN
status for another year, and is encouraging Congress and adminis-
tration to look further ahead toward normalization of this commer-
cial relationship. I might point out that Bison has gear motors on
cellular telephone assembly lines in Tianjin, China, at the Motorola
facility and other Motorola locations around the world. So we see
plenty of opportunities that exist in China for us. Nonetheless,
NAM feels that, and I agree, China must be ready and able to com-
mit to the WTO regime before being accepted as a member.

From a small manufacturer’s standpoint, many U.S. manufactur-
ers are content to pursue the North erican Free Trade area for
sales opportunities as it represents over one third of the world’s
economic activity. Bison was encouraged to increase its export ac-


112

I assume that the Cuban question is so political that your organi-
zations would rather not even dignify it as a trade issue.

Mr. BERMAN. Actually this might be something we can follow up
on. A couple of our members got into the issue of the Helms-Burton
legislation and we are in the process of drafting a paper of our po-
sition on the legislation. We have not obtained the proper clear-
ance, but I would be happy to forward a copy to you as soon as we

10.

Chairman CRANE. If you would yield for a second, Congressman
Rangel. In that same context, there will be that bill coming before
us very soon. That is the International Relations Committee bill?

Staff. The Iran-Libya sanctions.

Chairman CRANE. Take a long hard look at that one, too.

Mr. RANGEL. You have to get involved in these things because if
you do not, we will have a political field day for any constituents
that have a problem with anybody. As for China, anything could
change politically. And then it will be too late to develop a solid
force,

Do you identify with any national groups that you represent?

Ms. JACKSON. The U.S. Chamber of Commerce. We work with
the U.S. Chamber of Commerce very closely on international
issues.

Mr. RANGEL. I do not see them as involved with small busi-
nesses. Do you go to a national meeting with the U.S. Chamber?

Ms. JACKSON. They have representatives here in Illinois that
cover this region as well.

Mr. RANGEL. And you find at your National meetings that small
businesses are on the agenda?

Ms. JACKSON. Yes, very much so. And a number of their publica-
tions are directed specifically to assist small business.

Mr. RANGEL. Well, my community has small business and they
have a problem getting information. They know something big is
going on and they want to be a part of it. We just do not have the
time in the Washington, DC U.S. Chamber Office, and so your
chambers are going to be one of the fastest growing organizations,
at least I hope so, that we have in this country. You have got the
little man to show smaller businesses that they cannot afford to
hire high profile attorneys, how they can get involved and to let us
provide an easier way to share with you information rather than
the complex Tax Code and all those things that scare people off.
There has to be an easier way to provide this information, and I
hope that when you meet with your memberships, you try to get
their ideas, because so many people are just afraid to speak up. If
you could be their spokespeople, we certainly will be responding to
you. This Subcommittee would like to assist the export dealmakers
in getting together. Thank you so much.

Chairman CRANE. Thank you all for your participation and
patience.

Finally, let me ask Jeff Napier and Lyric Hughes to come down
here before us. We are going to wrap up today’s hearing.

All right. We will go with Mr. Napier first and then Ms. Hughes.


6

Every day, the US economy becomes more inextricably linked to global markets. So much of
the growth we have enjoyed has been the result of trade. This is no time to retreat. The US
must lead the movement to further liberalize trade and investment ~ not as a favor to anyone
else, but because it is in our own interests. Mr. Chairman, I know you and other members of
this subcommittee already are fighting the good fight. 1 offer you any assistance wecan
provide.

In the area of professional services, 1 would like to ask for additional help. 1 believe it would be
valuable for this subcommittee to express to the Administration its interest in and support for
the efforts of the WTO's Working Party on Professional Services, especially with the approach
of December's WTO ministerial meeting in Singapore. As I have said, the Working Party is in
danger of faltering, and | believe that its success or failure will have an impact felt far beyond
the offices of firms like mine. 1 look forward to working with you, other members of the
subcommittee and your staffs to ensure that the WPPS is successful.

Finally, the tremendous significance of services to the US economy and to other sectors such as
‘manufacturing must not be underestimated. When you are developing trade policy, whether it
be vis-a-vis the WTO, APEC, the FTAA, the MAI, or another issue, I hope you will consider the
implications of that policy for the service sector.

Thank you Mr. Chairman, and would be happy to answer any questions you might have.


28

country be an important and vital component to successful leader-
ship in the trade area?

‘ou mentioned Michigan was having problems with finding high
tech employees. But, it seems to me that there is a major problem
in America with the low skilled people and some communities hav-
ing little hope for the future also being those most involved in
drugs, violence, crime, and jail. I see a direct relationship between
the low investment in education and high investment in research
and development, but I do not see any attention being paid by our
government or the private sector in bringing up the educational
level in terms of exports.

Could you share with me your observations?

Mr. SHAPIRO. Well, you’re focusing on what is probably the fun-
damental problem facing our country, which is, while we can talk
about and indicate that we have become the most competitive coun-
try in the world, we are generating high wage jobs. ‘at is hap-
pening to the people who are not the beneficiaries, who do not have
the skills and the education to participate. I guess I would answer
it this way. The first is that the trade policy that overall generates
the strongest economy and the strongest economic base is a benefit
to our country. Beyond that, though, there is no doubt that you
have got to take money, government money, and you have got to
have private sector leadership, you have got to directly address the

uestions of education and training and particularly, in those areas
that are the poorest areas.

The President has talked about education and training and infra-
structure since the beginning of the administration. So, I do not see
that those two things are things that one would trade off. I think
you need to do both. I mean the low wage jobs that existed in the
past are not all there, and yet there are jobs in Michigan, manufac-
turing jobs in Michigan, that are going unfilled at the moment be-
cause we are not training people adequately enough to take them.
So, we have to do that as well.

The one thing where I would somewhat disagree with one point

ou made, Congressman, we are not getting out of manufacturing.
We are manufacturing more, we are manufacturing with fewer peo-
ple because that’s the nature of the change, but part of the reason
we are coming back economically strong is that we have a strong
auto sector, machines.

Mr. RANGEL. I misspoke. I meant the type of manufacturing that
required the least amount of education.

Mr. SHapiro. I agree it is a problem, because those entry level
jobs and the lower skilled jobs are not there as much. I went
through an auto plant the other day and they make a lot of cars
with fewer people, as you know. We have got to invest directly in
these problems.

Mr. GEL. My last question is when we were fighting the com-
munists, we had all types of leaders dedicating their lives to break-
ing down the solidarity of the communists as a threat to the free
world. And as we deal with the narcotic problem, we have people
fighting internationally and domestically in that area. I do not find
anyone defending the Department of Education, and in some com-
munities the local school rds are so ineffective and corrupt that
no one would believe that the future of our country should remain


March 12, 1996
BASIC NAFTA DATA
With Final 1995 MISER Data

This table shows Illinois exports in 1993, 1994 (the first year of NAFTA), and 1995. MISER.
reports worldwide Illinois exports grew 20.2% in 1994 and 23.6% in 1995 compared to U.S.
growth rates of 10.2% and 13.8%. After increasing 37.7% in 1994, Illinois exports to Mexico, as
estimated by MISER, were down 25.4% in 1995, and Mexico dropped from our third largest
customer to fifth. The year-to-year rate of change of Illinois exports to Mexico bottomed out in
the second quarter of 1995 (-32.2%) and improved in the third and fourth quarters (-24.2% and -
23.1% respectively). ADM today reported a similar pattern of recovering sales to Mexico.
MISER estimated Illinois exports to Canada grew 17.6% in 1994 and 9.8% in 1995.

The direct export data used here are the MISER Series I data which are tabulated by zip code of
exporter. Both MISER Series I and Series II undercount linois’ agricultural exports. A
correction for the agricultural export undercount was made based on U.S.D.A. export statistics
for Illinois. Services exports for states are not included in either MISER series nor in any other
known, published data. Illinois’ total exports were used to trigger the REMI econometrics mode!
for the state to determine the total employment due to these direct exports. The estimates are the
direct and the indirect jobs (including services involved in producing goods for export) resulting
from total exports.

Agricultural exports represent approximately 7% of the Illinois shipments to Canada and 23% of
the Illinois exports to Mexico

Mlinois’ Exports and Jobs Sustained
(Dollars in Billions)

1993 1994 1995 93-95 Change ‘Percent

Total Expons $22871 $27007 $33.390 $10.519 46.0%
Jobs Sustained by Tot. Exports 464.600 548.400 625,300 160,700 34.6%
Exports to NAFTA $6952 $8434 $8.566 $1.614 23.2%
Jobs Sustained by NAFTA 123.200 155,500 152,000 , 28,800 23.4%
Exports to Canada $5368 = $6.305 $6.926 $1,558 29.0%
Jobs Sustained by CN Exports 91,900 109,700 116,600 24,700 26.9%
Exports to Mexico $1584 = $2.129 $1.640 $.056 3.5%

Jobs Sustained By MX Exports *°31,300 45,800 35,400 4,100 13.1%

wr


* Second, we must devise policies to make the conditions of trade fair and equitable for
U.S. companies and workers. While our past trade agreements have addressed issues
relating to fair competition in trade ~ such as antidumping practices, subsidies, and the
like — we must do a better job on labor and environment issues.

+ Third, we must have domestic policies that will assist those who have been adversely

impacted by trade. In this regard, we must acknowledge that trade creates winners and
-- like any change in the economy -- and that the gain for the winners is much

greater than for the losers. At the same time, our system must help the losers adjust and
transition into new productive activities. This is an area where our policies have been
deficient and must be improved ~ we need better adjustment assistance, job-training, and _
‘education policies if all our people are going to operate successfully in, and benefit from,
the global economy of the future.

Trade Policy Ch for the Private S

-- While public officials have a number of trade policy challenges, the private sector, and
particularly those companies and individuals engaged in trade, also have a number of trade
policy challenges in the future. These challenges are even greater as the public at large and
some politicians increasingly question the benefits to the United States of international trade
and trade agreements.

+ First, the private sector must educate their employees, their customers, their
and their stakeholders about the realities of intemtional trade -- both the benefits and the
costs.

‘Second, the companies that benefit from international trade must take more action in
assisting those who are disadvantaged by international trade by locating new U.S.
production facilities in areas that have been hurt by trade, by hiring and retraining
displaced workers, and by getting actively involved in educational and apprenticeship
programs for the less advantaged of our society.

Finally, the private sector cannot expect the government to be responsible for managing
the transition to a global economy. There must be a true public-private partnership
involved.

‘Conclusion

look forward to discussing these issues with our witnesses today. 1 am particularly
grateful that Governor Edgar has taken time out of his busy schedule to be with us at this
hearing. I would also like to welcome Ambassador Ira Shapiro of the Office of the United States
Trade Representative. Ambassador Shapiro is one of the Clinton Administration's top trade
official and ineraonal trade negoitr. Finally, 1 ook forward to exchanging views wit the
fine people of Illinois who are scheduled to appear before the Subcommittee today.

‘Thank you again, Mr. Chairman.


77

Chairman CRANE. Thank you, Mr. Kelley. Mr. Smith. You might
just switch seats there. In fact, if the two of you could sit fairly
close, just for questions, so you can rotate that mike back and
forth.

STATEMENT OF MARSCHALL I. SMITH, SENIOR VICE PRESI-
DENT, AND GENERAL COUNSEL, IMC GLOBAL, INC, NORTH-
BROOK, IL

Thank you, Mr. Chairman, Congressman Rangel. I am Marschall
Smith, of IMC Global in Northbrook. IMC Global is the U.S. and
probably the world’s largest producer of agricultural crop nutrients.

IMC would like to focus very narrowly this afternoon on U.S. trade
with China.

China is the United States largest and also the fastest growing
consumer of agricultural crop nutrients. Over $1 billion of our pri-
mary product and of billions of dollars more in Chinese imports
took place last year and we expect greater imports in the coming
years,

In order to maintain American leadership in the crop nutrient in-
dustry in China, IMC and the other members of our industry have
entered into long term supply agreements with the Chinese suppli-
ers. The advantage of these long term contracts is job security for
American workers today and showing the Chinese that the United
States can be a dependable long term supplier of what is for China
a vital import. Frankly, the stability of the long term relationship
that is developing is jeopardized by our practice of renewing MFN
status with China on an annual basis. IMC supports permanent ex-
tension of MFN to China, coupled with China’s membership in the
World Trade Organization on commercially reasonable terms. We
fee] that the establishment of those long term secure relationships
with the Chinese will enable the U.S. to focus then on achieving
the sort of trade reform and the sort of reform in the Chinese prac-
tices that we have been advocating and put aside the procedural
wrangling on an annual of renewal or nonrenewal of MFN. That’s
our position.

I hope the brevity of my remarks won’t be taken as a lack of con-
cern. We think it is terribly important to establish sustained rela-
tionship with China and doing away with annual renewal of MFN
will be the important first step.

[The prepared statement follows:]


83

Mr. Smith, I do hope that your organization studies our political
problems in Congress in responding to the political needs of our
constituents with the sanctions because the three that are men-
tioned are very political in nature, but you never can tell where
your importing country is, for very, very political reasons. So, it is
people able to play on the fears of our constituents and a lot of peo-
ple will not let anything stand between them getting reelected. It
may be a little too late to say well, they were not bothering you
at that time, therefore, you did not study it. But if we are going
to be respected throughout the world, we should have a coherent
foreign policy that every country and every manufacturer can de-
pend on. We work hard to be bipartisan because we want to make
certain that our work product would be presumed to have been cre-
ated in the bipartisan way. We get the benefit of the doubt when
we enjoy that reputation, and as we try desperately hard to do it
in legislation, our country should do the same thing as relates to
policy. But I want to thank both of you for very informative testi-
mony. Thank you.

Chairman CRANE. Thank you very much, everyone. With that, we
will stand in recess for approximately 15 to 20 minutes, and recon-
vene at that time with our panel of Sally Jackson, Robert Berman
and Richard Paullin.

[Recess.]

Chairman CRANE. We might reconvene, and is James Faust
here? Mr. Faust, we will have you testify with this next panel, with
Sally Jackson, Robert Berman and Richard Paullin, unless anybody
else has a tight time constraint as far as a plane.

We will let you go first, Mr. Faust. And as I mentioned before,
if you can kind of summarize your comments to keep them within
the 5 minute constraint, all of your printed statement will be a
matter of permanent record, and we will let you proceed.

STATEMENT OF JAMES L. FAUST, EXECUTIVE VICE PRESI-
DENT, ANTEC CORP.; AND PRESIDENT, ANTEC INTER-
NATIONAL DIVISION, ROLLING MEADOWS, IL; ON BEHALF OF
ELECTRONICS INDUSTRY ASSOCIATION, AND TELE-
COMMUNICATIONS INDUSTRY ASSOCIATION

Thank you, Mr. Chairman. My name is Jim Faust, and I am the
executive vice president of ANTEC Corp. We are a Rolling
Meadows-based company which specializes in the design, engineer-
ing and manufacturing of products for the broadband video, voice
and data networks and distribution of products for those indus-
tries. For example, we manufacture and distribute products used in
the cable television networks, such as laser transmitters and re-
ceivers, network interface devices on the sides of homes and the
powering and transmission equipment utilized to transmit video,
audio and data information. ANTEC is an international company
with about 2,000 employees, located in 34 locations, with 1995
sales in excess of $650 million.

also serve as president of ANTEC’s International Division
which leads the company’s efforts in international markets. My tes-
timony today is on behalf of ANTEC, my company, as well as on
behalf of the EIA, the Electronics Industry Association and the


5

I am happy that the Subcommittee on Trade has this opportunity
to receive testimony from our distinguished witnesses on the role
that trade plays in the economy today and the future negotiating
objectives of the United States to open new markets for the benefit
of U.S. firms and workers. It has been estimated that trade will ac-
count for 36 percent of our gross domestic product by the year
2010, up from just 14 percent 25 years ago. Given this trend and
the overall globalization of the world economy, I look forward to
hearing our witnesses discuss priorities for future trade negotia-
tions.

[The opening statement follows:]


111

Mr. RANGEL. The more you get a reputation for providing that
service, the more foreign missions will rely on you and the more
city, state and Federal officials who may be causing problems
would attempt to make it easier. It seems to me that your groups
are the hub, we should rely on you to organize the trade delega-
tions.

Mr. PAULLIN. If I may, in response, we have become the hub by
default because at the Federal and the state levels, at least here
in this area, there is less money and resources. They have left a
vacuum and the marketplace has said to us, there is a vacuum,
move into it.

Mr. RANGEL. This is exactly where I thought you would want
government to stay out of it. Your association would use the mem-
berships dues, to do this. It is my understanding that those who
have these trade sessions have to pay to participate. But our em-
bassies are doing a fantastic job ‘abroad, in the host countries, to
convert them with groups in the United States that they can visit.
If there is anything more that we can do in bringing you into con-
tact with what resources we have in different countries, our embas-
sies have converted to become chambers of commerce for the
United States businesspeople. It is an exciting thing to see.

Mr. PAULLIN. And they do a fantastic job with what they have
got to work with. If I could just point out, we called on, on my little
paper here, for better market intelligence, better commercial intel-
ligence. Worldwide the United States, as I understand it, as of a
couple years ago, we had about 150 commercial officers around the
world. Japan has 150 commercial officers in the United States
alone. If we want to really be serious about promoting our exports,
let's get more people out there promoting them. I know guys in the
embassies, and with what they have got, they do a fantastic job.
They do not have a lot.

Mr. RANGEL. The missions that we do have surprised me. Until
Ron Brown became Secretary, I did not realize how many anchors
we do have in various countries. I thought becoming an ambas-
sador was something, but really we have so many—I do not know.
What do they call those posts?

Chairman CRANE. Foreign commercial officers.

Mr. PAULLIN. Those are the people I am talking about.

Mr. RANGEL. Well, we may need more. But your agencies can
push us to see, in oversight, what more they could be doing and
what additional resources they would want. Do you believe disman-
tling the Department of Commerce would be of any assistance at
all to small businesses?

Mr. PauLLin. I do not have a problem with it. All of those 19
agencies need to be stirred into some new kind of a mix and
streamlined and move most of them out of the United States and
into our embassies, because that’s where the market intelligence is.

Mr. RANGEL. That’s happening. We have to watch very carefully
when Democrats or Republicans, ahead of time, decide what they
are going to do and then find reasons as to why they are going to
do it, but you have a vested interest in all of this and we depend
on you, who work in the trenches with those people that are really
generating the trade, to be hard on us in terms of how we can
make it easy, either by getting involved or withdrawing.



81

Chairman CRANE. I thank you very much for your testimony, and
I agree with your position on going through this drill every year
with China. It is important, as some have already mentioned today,
to recognize that it is not most-favored-nation trade treatment; it
is normal trade treatment. That creates a distortion that confuses,
a lot of people’s understanding of it.

Let me ask you, if MFN for China was terminated this year,
would your company be worried about retaliation by the Chinese
in the fertilizer sector?

Mr. SMITH. We'd be terrifically worried about competition from
other countries. There is Morocco and a number of other suppliers,
who are very competitive, and frankly, the MFN status is vital to
maintain American competitiveness. It is over $1 billion in just one
product, diammonium phosphate. Conceivably that those sales
could be jeopardized, and there are other suppliers around the
world that would love to get into that market.

Chairman CRANE. If China were to become a member of the
World Trade Organization, what sort of market access commit-
ments do you think the USTR should seek on behalf of your sector?

Mr. SMITH. We are really not experts on WTO and I probably
should not comment. Obviously we support Chinese membership
only on terms that the government would find commercially rea-
sonable. We think that the Chinese, in order to obtain WTO mem-
bership, would probably be willing to make some reasonable con-
cessions. But again, we see it as a uniform package. The United
States coming forward with MFN extension on a more sustained
basis we think would be a first step for Chinese WTO negotiations.

Chairman Crane. For you, Mr. Kelley, what are your expecta-
tions for the Singapore Ministerial Meeting that’s scheduled
December 18, with the World Trade Ministers? What do you think
might be achievable for the professional services sector by our
USTR at that meeting?

Mr. KELLEY. It is a very good question. It is one that we have
taken an active role in to make sure that through the International
Chamber of Commerce and other world institutions, that the min-
isters are given a definite commitment to complete the working
party work program by 1997. And pardon me for being rather as-
sertive, but we have taken the position that we are not going to
leave it up to governments or business or anyone else to do this,
because it is something that needs to be done, and we are commit-
ted to having that ministerial decision, and there are papers being
prepared as we speak.

Chairman CRANE. Very good. Mr. Rangel.

Mr. RANGEL. Thank you. Do both of you support the President’s
sanctions against China for violation of intellectual property rights
and agreements?

Mr. SMITH. We certainly support action against China. The
piracy of U.S. trade secrets cannot and should not go on.

Mr. RANGEL. How about Libya and Iraq?

Mr. SMITH. The difficulty with all of that is we need to take ac-
tion, but we also need to show these countries the United States
can be an assured supplier of products. The balance between those
is very difficult. I frankly spent the weekend reviewing the sanc-


107

The
INTERNATIONAL
i) TRADE
L/ ASSOCIATION
of Greater Chicago
P.O. Box 454, Elk Grove Village, Illinois 60003-0454 U.S.A.
Local Tel: 847/985-4109 _U.S. & Canada Toll Free: 800/840-4828 Fax: 847/985-8566

‘THE FUTURE OF U.S. TRADE POLICY
Statement by

Richard Paulin
Executive Director
‘The International Trade Association of Greater Chicago

Before the
USS. House of Representatives Ways and Means Committee
‘Subcommittee on Trade
‘The Honorable Philip M. Crane, Chairman

May 20, 1996
Schaumburg, Hlinois

The International Trade Association of Greater Chicago (ITA/GC) isan Illinois not-for-profit,
voluntary business association and the largest such association in Illinois. Our $20 members
represent a range of materials, merchandise and service providers with interests in import, export,
licensing, joint ventures and investments abroad

As an association, we are dedicated to furthering international trade and commerce by providing a
forum for the exchange of practical information within the international business community. For
over 18 years we have held regular monthly meetings, on the third Wednesday of each month, at a
suburban Chicago location. These meetings feature a technical presentation as well as a
significant opportunity for the exchange of information among attendees,

‘The ITA/GC has become a recognized leader in promoting international commerce. In May
1994, the Association was honored by Illinois Governor Jim Edgar with the first Governor's
Award for Export Awareness and Development. In 1990, the ITA/GC received one of the
country's highest international trade awards, the President's ":” Award for Export Service
According to then U.S. Secretary of Commerce Robert Mosbacher, the ITA/GC received this
Prestigious award irr recognition of outstanding contributions 10 the increase of U.S. trade
abroad.

Over the years, we have counted some of America's largest corporations as members, but today I
am representing the majority of our membership: those small and medium-sized enterprises
struggling to compete in today’s rapidly changing global marketplace. In general, these are firms
which do not have a three-year or five-year strategic plan. For them, survival in international
‘maskets means making the sale within the next three-to-five months.

International trade is vital to our economic security. Exports accounted for almost 25% of U.S,
Gross Domestic Product (GDP) in 1995 and for 30% of real GDP growth in the U.S. over the
last ten years, In llinois, the nation’s fifth largest exporting state last year, exports of $32.6
billion in 1995 were up 23.6% over 1994, supporting approximately 650,000 jobs. One in four
illinois manufacturing jobs is export related

Moreover, from a January 1996 study by the Institute for International Economics and The
Manufacturing Institute, we know that: export-related jobs pay 10-15% more than the average
wage; worker productivity in exporting firms is 20% above the average; exporting firms expand
their employment almost 20% faster than non-exporters, and that small and medium-sized
exporters account for 70% of these results


92

TESTIMONY PRESENTED TO THE SUBCOMMITTEE ON
‘TRADE OF THE HOUSE COMMITTEE OF WAY AND MEANS
ON MAY 20, 1996 AT SCHAUMBURG, ILLINOIS
BY SALLY A JACKSON, PRESIDENT AND CEO
ILLINOIS STATE CHAMBER OF COMMERCE

‘Congressman Crane and members of the Subcommittee on Trade of the House Committee on Ways
and Means, thank you for inviting the Ilinois State Chamber of Commerce to testify before you in
this important field hearing on the status and future direction of U.S. Trade Policy. The Ilinois
‘Chamber is the largest broad-based business association in the State of Ilinois with more than 5,000
members representing all sizes and industry sectors in the Ilinois economy. These companies employ
well over 1 million workers, or one out of every five employees in the State of linois.
Manufacturing, business services, and wholesale and retail trade are the largest sectors in our
membership. Three quarters of our members are small businesses employing fewer than 100
employees.

Tlinois has long been a participant in the international economy. More than 20 years ago, Illinois was
the first state to establish a foreign trade office, which is still operational in Brussels, Belgium. With
our long tradition of agricultural exports, complemented by industrial exports and expanded
increasingly in recent years by business services, that long-term trend in our economy continues to
grow. For several years our annual increases in exports have been running at nearly double the rate
of increase for the nation as a whole. In 1995, Illinois' exports increased 23.6% to a record high
$32 6 billion This compares to an overall national increase in exports of 13.8%. Greater than 1 out
of every’8 jobs in our total workforce are now dependent on international trade. In the manufacturing
sector its greater than 1 out of every 4 jobs, and increasing each quarter. Our top export continues
to be industrial machinery and computer equipment at $8.3 billion. Exports of electronic and
electrical equipment totaling 7 2 billion experienced a 41.7% increase this past year. Other major
sectors inchide chemicals and allied products at $4.4 billion, up 19.1%, agricultural products up
41 2% to $2;3 billion and transportation equipment up 14.3% to $2.2 billion.

The Ilinois Chamber and businesses we represent support the free enterprise system and open
competitive markets. We encourage continued efforts to broaden the successful base of existing trade
agreements including the NAFTA Our members of all sizes and sectors are involved with trade
both import and export; both product and service, in all geographical areas of the global economy
The approaches vary from self-sustained family businesses which explore intemational partners for
supply or sales, to our large multi-national corporations that have a long history of full production
and business engagements in numerous countries in the world

Consider a family-owned business in Bridgepon, Ilinois which packages and distributes a variety of
candy and checkout counter consumer goods They recently established a contact to represent them
in the Japanese market to sell Ilinois produced popcom packaged for retail sale. Their representative
was able to secure adequate orders to fill the first full shipping container, and as they prepared to
conclude the final details of the transaction they discovered that their product was governed by
agricultural export laws as opposed to consumer good laws, and several revisions in their strategy
had to be implemented. The innovation and energy of small business to identify means of expanding
their markets internationally is there. Nonetheless, the variations in specific requirements of existing
trade law and policy are confusing for small companies to learn on their own. Therefore, we see
increases in self-help trade associations developing here in Ilinois on a regional basis so that people
can learn and share experiences and respond more appropriately in their first efforts

Another family-owned small business in Lawrenceville, Illinois, has developed a niche market
specialty telephone product. For more than 10 years they have imported the basic molded plastic
telephone from a supplier in Korea and have prepared the circuitry in their plant here in Illinois. They
found this to be a cost effective and reliable supply source for the last decade. Even the smallest of
businesses are successfully engaging in the identification and sustained use of international partners
to grow their businesses here in Illinois, and provide employment for Illinois workers,

‘Another family-owned business which produces precision telescoping surveyor’s rods and equipment
in Mound City, Illinois, has demonstrated success by competing head-to-head with its top Japanese
competitor to now gamer marketshare worldwide for this niche specialty equipment. This second
generation family business has demonstrated that the existing trade policy of the United States allows
entrepreneurs to create successful markets worldwide even with the toughest competition.


60

Testimony of
Ronald Bullock, President
Bison Gear and Engineering Corporation
on Behalf of the
National Association of Manufacturers
on US. Trade Policy
Before the Subcommittee on Trade

May 20, 1996

My name is Ronald Bullock, President and owner of Bison Gear and Engineering
Corp., Headquartered in St. Charles, IL, and I ‘m here today to testify on behalf of The
National Association of Manufacturers. As Chairman of the Small Manufacturers Forum
representing over 10,000 NAM members with fewer than 500 employees, and also an
exporter, I will try to give a perspective on international trade policy from a small
company’s viewpoint.

Generally speaking, it is the NAM’s position that international trade is essential to
maximizing benefits arising from world productive output and thereby contributing to US
economic growth, as well as enhancing the economic welfare of individuals throughout the
world. The NAM believes that the most effective and efficient basis upon which to
conduct trading relations is a system that enhances the role of free market forces while
minimizing government intervention in trade.

To this end, the NAM strongly supported, and still supports, the implementation of
the NAFTA and GATT/WTO agreements. It is only through transparency,
harmonization, and the elimination of unfair trade practices through these, and other
multilateral arrangements, that we will truly produce a strong and effective worldwide
marketplace.


56

State; Kraft has bought the Del Monte pudding factory in Rochelle;
and Clausen Pickles. Clausen, because of NAFTA, was able to buy
cucumbers cheaper in Mexico. It is just one of the great victory sto-
ries of NAFTA. They produce 100 million pounds of pickles each
year. Clausen has, it is a 70 or 80 percent market share of refrig-
erated pickles. But, that’s another success story because of NAFTA
and one that’s really growing in Rochelle. Rochelle is where Hormel
Foods came in. Hormel is now shipping 60,000 pounds of boned
pork to Japan each week, in addition to producing 1.1 million
pounds of bacon each week. That’s a result of GATT, with the low-
ering of the trade barriers.

So, I want to publicly thank you for your leadership in promoting
NAFTA and promoting GATT because those two treaties have done
absolute total miracles in the 16th Congressional District for our
exports.

Governor EpGar. Thank you, Congressman. I like to comment.
My support has not been alone as far as Governors. One of the
areas that we have strong bipartisan support among the 50 Gov-
ernors is in the area of trade, whether it was for NAFTA or more
recently talking about most favorable nation status for China and
other areas. I think you'll find that both Republican and Demo-
cratic Governors all recognize the importance of trade to their
states and economic growth and that there is that sense that you
try not to succumb to the temptation of demagoguing which is
something no one here has ever done, but others have been known
to do.

Mr. RANGEL. No, we do not get involved in politics.

Governor EpGar. But, it is an area where I truthfully say that
there is very strong bipartisan support among all the Governors on
that, and something that we very much appreciate the action of the
Federal Government, both administrations, and from Congress in
the last few years. We are moving in the right direction, so we look
forward to continuing working with you in the months and the
years ahead as we open up more markets. I am convinced that the
work force in Illinois can compete with anyone on the globe, and
I am sure Congressman Rangel feels the same about the people of
New York. I really believe the American people are up to the task
if we give them the opportunity and hopefully we will.

Chairman CRANE. Governor, I agree wholeheartedly with what
you said, and I wanted to express profound appreciation to you for
making this meeting this morning. And we will let you make your
graceful exit at this point since I know you have got to go down
and straighten things out in Springfield this afternoon.

Governor EpGar. No, no. As Members of the Legislative Branch,
not straighten out, just work together.

Chairman CRANE. On a bipartisan basis.

Mr. RANGEL. Let me join with the Chairman in thanking you
once again, and if we can ever be of any help, feel free to share
with us where Congress is giving you more help than you need.

Governor Epcar. OK.

Chairman CRANE. Thank you, Governor. All right. We will now
proceed with the panel. Ron Bullock, I know you have time con-
straints. If you would give us your testimony next and then if you


18

Clearly we are on the right course. By working together -- Republican and Democrat,
businessman and worker -- we are moving into the future together.

Japan

‘When President Clinton took office, he knew it was long time past to pursue a new trade policy
towards Japan. The President believed that Japan's closed markets harmed the U.S. and the
global economy and that there was no place for sanctuary markets in today’s globalized
economy. He knew that we could no longer just sign an agreement with the Japanese and assume
everything was alright. We must keep up constant, determined pressure on the Japanese to open
their markets.

The President’s new approach to trade with Japan took root in July of 1993 when he traveled to
Japan and we completed the Framework Agreement, a new comprehensive approach to guide our
trade relationship with Japan, covering macroeconomic, sectoral, and structural issues. Overall,
in three years, the Clinton Administration has reached 20 trade agreements with Japan, some
under the Framework, and some not, but all containing the same firm commitment to measurable
results, and alll marked by firm and consistent pressure to open Japan's markets. And the
President has diligently enforced our trade agreements, including those negotiated before this
Administration, as well as our trade laws. President Clinton has sought to open Japan’s markets
using all tools at his disposal: multilateral, regional and bilateral efforts.

‘The Administration’s efforts are working. Last year, the U.S. trade deficit with Japan fell 9.7
percent and, according to Japanese figures, in January fell to its lowest level in 12 years.
Japan's current account surplus declined to less than 2.6 percent of GDP last year, down from
3.2 percent in 1994 and 3.5 percent in 1993. ‘The Framework calls for a highly-significant
reduction in Japan's current account surplus in the medium term. U:S. exports to Japan are
growing at record levels, rising 20.3 percent last year over 1994 levels, which had been the
previous record high. Since the beginning of this Administration, U.S. exports to Japan have
increased by 34 percent.

We are seeing export growth in all major categories: foods, feeds, and beverages (up 15
percent in 1995); autos, auto parts, and engines (up 36 percent); other capital goods (up 22
percent); industrial supplies (up 20 percent); and consumer goods (up 17 percent). These
gains are particularly impressive given the slow growth that the Japanese economy has
experienced for the past several years. In those sectors covered by trade agreements reached
by this Administration (from telecommunications to autos to rice), exports have grown by
more than 80 percent since the President took office -- nearly 2.5 times as fast as overall U.S.
exports to Japan.

Nowhere has the change been more significant than in the automotive sector, the heart of our
trade problems with Japan. For decades, Japan has restricted U.S. cars and auto parts, Last year,
we completed an historic agreement to open those key markets. The result? U.S. exports to
Japan of passenger cars and trucks are up 53 percent through November 1995, compared to the
corresponding period of 1994. U.S. imports of Japanese autos and auto parts have decreased by


AT

way of allowing our private sector to do what they do so well and
that’s create economic opportunity for our people, which means
jobs, which means hope for a much brighter future.

So thank you again for allowing me to share my thoughts with

you.
[The prepared statement follows:]


51

Chairman Crane. Thank you, Governor. Let me ask you a quick
question before I defer to Congressman Rangel.

The implementing legislation of NAFTA and GATT and the
World Trade Organization do not permit preemption of State and
local laws, and I just wondered if you have seen any conflicts in
the international agreements thus far negotiated with our State
laws here in Illinois. How has this affected the lawmaking process
in Springfield, since we have formed these international trade rela-
tionships?

Governor EpGar. I have not seen any major problems. One thing
that has been helpful throughout, both in the Bush and Clinton ad-
ministrations, is that there had been consultation with state
Governors throughout the negotiations of NAFTA and the imple-
mentation to make sure that we had input. Any concerns that we
thought were legitimate would be raised early enough in the proc-
ess so that they could be dealt with. That does not mean that there
are not times when I know there are bills introduced in the Illinois
General Assembly, buy the United States or buy Illinois products
that we think could cause some problems, but for the most part,
there is a growing understanding on the part of legislators, as well
as those in the executive branch, that we have to think more glob-
al, that it is a two-way street and if we start trying to put restric-
tions, we are going to have it done to us. Again, we are fortunate
in Illinois that most of the people involved in policymaking under-
stand that we are part of the global marketplace. We are fortunate
that we have trade delegations come through Illinois on a regular
basis and the countries are very astute. They do not just come and
visit the Governor, they also spend time with state legislators and
local officials. So again, I have not seen any major problems, but
I also will commend the Federal Government that they have been
willing to include us in discussions along the way so we can maybe
predict or eliminate any of those possible bottlenecks.

Chairman CRANE. That’s encouraging and you enumerated some
of our major exporting corporations here. I mentioned in my open-
ing remarks, before you arrived, that 97 percent, according to the
latest figures, of our exports out of Illinois are coming from compa-
nies employing 500 or less. So, it has a vast sweeping range of ben-
efits to our state to an extreme.

Governor Epeakr. If I might comment. One of the things we have
recognized as far as the state in trying to help promote that, with
limited resources, that there is not really a whole lot we can do for
the Motorola’s; they can teach us some things. But, as for the small
and medium size businesses, we think we can provide assistance
and a scenario where government, both at the Federal and State
levels, can provide some technical assistance. It is very important
that we both do our part to help open some doors or assist in the
large corporations, as I mentioned, with Ameritech, and some other
major companies. But particularly back home, to work with those
small and medium size companies and providing them some of the
technical assistance and wherewithal to encourage them to get into
the market. That’s where the real growth is going to be and that’s
where we know the new jobs in Illinois are going to be created,
with the small and medium size businesses. Trade is such an im-


80

Rather, the benefit of a firmer, more predictable
relationship between the United States and China based on
permanent, reciprocal MFN would be its resilience. With our
trading partners who are sure of our reciprocal commitment, we
enjoy mutual confidence that the relationship will withstand even
the most contentious disputes. For example, our relationship
with our largest trading partner, Canada, has withstood repeated
frictions over softwood lumber, broadcasting and print, dairy and
yogurt, wheat and fish. Likewise the U.S.-Japan relationship has
endured successive trade frictions over, for example
semiconductors, film, insurance, glass, beef, citrus, apples
copyright and patent issues, civil aviation, government
procurement and public works, leather goods, and structural
impediments -- a long, long list. Yet our trade, investment and
geopolitical relationship with Japan remains strong and vibrant
in part because it is grounded, structurally, in permanent MEN.

We believe that revocation of MFN from China would
limit the positive influence of the United States in China. If
we extend permanent MFN, on the other hand, we believe that the
United States and individual Americans will have the maximum
opportunity to influence the Chinese people about not only our
market economics, but also our values and beliefs.

In conclusion, Mr. Chairman and Members, IMC supports
permanent MFN for China, and China's WTO membership on acceptable
commercial terms, because we think these developments would
increase positive American influence in China to our mutual best
interest. If we were to condition or revoke MFN for China, or
oppose its entry into the WTO even if it offered satisfactory
commercial terms, we would not only hurt our own economic
interests and workers, but also reduce our opportunity to promote
and influence positive changes within Chinese society

Mr. Chairman and Members, thank you for permitting me
to share the views of my company with you today


13

Here in Illinois, I read recently that Lt. Gov. Kustra had just
been at the Neon plant, where they are making right-hand drive
cars to sell in Japan. And we are seeing, as a result of competition
between our auto companies and the success of our trade agree-
ment with Japan, we are seeing the sale of cars and auto parts in
Japan in significant amounts for the first time. At the same time,
we are seeing the auto compan: ies here in the U.S., Japanese com-
panies, building more cars here rather than in Japan, and using
more parts that are made in the United States. So, the picture is
becoming an increasingly positive one, and the overall result, as
the resi sult of the work of our companies and our workers, is that
for the first time since 1980, the United States was the leading
automobile producer again in 1994, and the same thing happened
in ay

As Congressman Rangel and I were talking on the way over
here, one example struck me as illustrative of the globalization and
the role of trade, as you described it, Mr. Chairman, 5 years ago
Chrysler was selling vehicles in 22 countries around the world.
Today, 5 years later, they are selling their cars in more than 100
countries. That’s a stunning change, and it is a stunning change
in world view that our best companies are taking and it is seeping
down, as you said, to smaller businesses as well. Similarly, our
auto agreement has benefited a great deal, Tenneco, here in the
Illinois area. For more than 25 years they could not get into the
Japanese market but now they are selling, for the first time, Mon-
roe shock absorbers, in 1,400 Toyota dealers, affiliated companies
throughout Tokyo and replacement parts in more than 6,000 serv-
ice stations throughout Japan.

Now, as some have noted, I could go on at great length. I prob-
ably should not. I just want to say three more things briefly. First,
part of the centerpiece of what we were doing was the Uruguay
round and the new World Trade Organization. There was skep-
ticism about the Uruguay round and the World Trade Organiza-
tion, and yet it has both contributed to our export growth in the
first year and it has also led to a very significant ability to use the
dispute settlement system to pressure other countries to keep on
opening their markets. I would be happy to get into that as ques-
tions go on.

Second, I do not want to gloss over the problem areas. We cer-
tainly face difficult challenges around the world, and the most
prominent at the moment is China. We believe, as others do, that
China should be an important part of the international trading sys-
tem, but we believe they need to play by the rules of the trading
system. At the present time, China remains one of the most protec-
tionist trade regimes in the world. They block access to their mar-
ket for many U.S. goods, capital goods, services and others, and
they have engaged in rampant piracy with respect to our intellec-
tual property. As you know, Mr. Chairman, last week we an-
nounced the publication of a $3 billion preliminary retaliation list
because of their failure to carry out the 1995 trade agreement. We
did not take that action lightly or happily, but the concern that
Ambassador Barshefsky, just as Mickey Kantor had before and as
the President has said, if you do not carry out the trade agree-
ments you have entered into, then you’re not going to be credible


55

but to relieve us of some of the financial and social pressures we
are under.

Governor EpGar. We are in total ‘eement on the importance
of education, Congressman. In regard. to the GI bill and other
things you mentioned, as I said, in higher education, there has
been a tradition of the Federal Government involvement. It has
been a positive involvement, and I would not suggest that we end
that. The comment about elementary and secondary schools is a
different debate, not necessarily on the dollars and cents and lim-
ited resources which I recognize you have got to deal with as we
do at the state level. But, the fact that historically elementary and
secondary schools have been left pretty much to the state and local
governments, and I would urge them to continue. Higher education,
as I said, you historically have had more involvement.

Mr. RANGEL. We are out of that, too. We are out of education.
The hallways are filled with college and university professors. The
trustees kind of agree with the majority. Just let government stay
out of it. The Presidents really think differently.

Governor EpGaAR. We will send some information to you, or at
least our viewpoint.

Mr. RANGEL. Because I want to keep this thing bipartisan.

Governor EDGAR. We appreciate you being in Illinois today.

Mr. RANGEL. Thank you. It is my first visit to Illinois. I want to
thank you for giving me this opportunity.

Chairman Enane. It is God’s country. Let me reassure you,
though, Governor, that he learned how to spell, add and subtract
and got all those skills long before the feds were putting any money
into even the GI bill.

Git RANGEL- I learned how to run in Korea long before I got the
ill.

Governor EDGAR. He does not remember, but we have something
else in common. Both our daughters were Cherry Blossom
princesses the same year, a couple years ago.

Mr. RANGEL. That’s right. Under the Democratic administration.

Governor EpGar. I did not realize that.

Chairman CRANE. I would like to yield now to Congressman
Manzullo, my neighbor to the west.

Mr. MANZULLO. Governor, I want to thank you for coming here.
I do not have any questions. You said everything and you have
done everything in your administration that anybody couls ssibly
do toward encouraging companies to settle here in the State of
Illinois and to get involved in exports. I want to take this oppor-
tunity to thank you for being here. I want to thank you for the
leadership and a very unique project at the old Savannah depot.
The Fish and Wildlife Service reached an accord with the State of
Illinois and local development groups so that the 11,000 to 13,000
acres of an abandoned Army ammunitions depot will be turned into
a partnership with conservation and with businesses and hopefully
some of those businesses will be used for exporting.

I just want to share something with you, one of the NAFTA suc-
cess stories that most of you have no idea happened. We have a
Clausen Pickles in Woodstock. Kraft has three factories in my con-
gressional district, the original J.L. Kraft cheese factory in Stock-
ton, which is the largest manufacturer of bulk swiss cheese in the


ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON TRADE
FOR IMMEDIATE RELEASE CONTACT: (202) 225-1721
April 26, 1996
No. TR-23
Crane Announces Field Hearing
on United States Trade Policy

‘Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on Trade of the
‘Committee on Ways and Means, announced today that the Subcommittee will hold a field hearing on
the status and future direction of United States trade policy. This isthe third in a series of hearings
the Subcommittee is holding in 1996 to evaluate progress in United States rade policy. The
bearing will be beld on Monday, May 20, 1996, at 10:00 a.m, at the Schaumburg Village Hall,
101 Schaumburg Court, Schaumburg, Illinois.

Oral testimony will be heard from both invited and public witnesses. Invited witnesses will
include Governor Jim Edgar and Acting United States Trade Representative Charlene Barshefsky.
‘Also, any individual or organization not scheduled for an appearance may submit a writen statement
for consideration by the Committe or for inclusion in the printed record of the hearing.

BACKGROUND:

‘The 103rd Congress proposed legislation implementing the results of two historic trade
‘negotiations, the North American Free Trade Agreement and the Uruguay Round Trade Agreements,
which established the World Trade Organization. These agreements have been beneficial in creating
‘new jobs, stimulating the American economy and raising the standard of living of American

workers. The Committee on Ways and Means has jurisdiction over United States trade policy,
including proposals to extend authority to the Administration for use in negotiating new international
‘rade agreements,

EQCUS OF THE HEARING:

‘The Subcommittee requests that witnesses address the form and content of future trade policy
undertakings as the United States approaches the 21st century. By way of illustration, the
Subcomminte seeks testimony from the public on such issues as:

(© What is the role of international trade in creating economic growth for United States
workers and firms?

.

For companies with business strategies emphasizing future growth through intemational
expansion, which foreign markets present the most opportunity? How do Illinois firms
incorporate international markets in their planning?

.

‘How can the United States ensure that it maintains its historic leadership role in a fast-
changing world economy?

Wish hey wade initiatives and nsinons uch ashe Asia Pai Coopension
Group, the Free Trade Agreement of the Ar and the T
hold the most promise for expanding United States exports over the long term?

‘© How important i it forthe United States to negotiate Chile's membership in the
‘North American Free Trade Agreement?

.

How can the United States best encourage China to participate responsibly in the
intemational trading system?

‘© What should the trade negotiating objectives ofthe United States bein the post-Uruguay
Round environment? Are there trade issues such as international rules governing services,

(MORE)


12

In most industrialized economies, services constitute 60-70% of gross domestic product. These
figures give a clear indication of the importance of services in our economy, and these numbers
also give some indication of the enormous potential in foreign markets for US service
providers, who are among the most competitive in the world.

Between 1958 and 1992, employment in the US doubled from 66 million to 121 million. This
growth was fueled almost entirely by the services sector, which saw its employment grow from
31 million to 74 million.

Itis important to emphasize that these services jobs are not low wage and low skill, despite the
misinformed characterizations being made about them. Since 1970, services job creation has
been particularly robust in relatively high paying sectors such as healthcare, business services
and engineering services. Average wages in these sectors have grown at a faster rate than
average manufacturing wages during that time period. Furthermore, recent studies have
indicated that employment levels in some lower wage service sectors such as restaurants have
shown a decline. In short, it is the service sector that is creating the jobs, and most of them are
high skill, high paying jobs.

Itis true that trade in goods still significantly outpaces trade in services. But allow me to
provide important perspective on this subject. World trade in services exceeds global trade in
computers, telecommunications and office equipment, motor vehicles and parts, and textiles
and apparel combined. However, the attention of Congress, the coverage in the media, and the
resources of US Trade Representative and the Commerce Department devoted to services trade
does not match the attention, coverage, and resources devoted to computers, cars, and textile
trade. With you, Mr. Chairman, I know I am preaching to the converted. It is just frustrating
at times to see so many tails wagging the dog.

And let me be clear, I do not mean to cast US trade policy as a situation of “Services” vs.
“Manufacturing.” Nothing could be farther from the truth. Services and manufacturing are
inextricably linked, and J believe trade policy should be made with that in mind.

Services are “enabiers” of other industries:

© corn must be transported to market ~ a service;

‘+ anew machine tool plant must be financed ~-a service;

‘+ new cars must be advertised --a service;

a sale of coal must have a contract -- a service;

an oil company contemplating a foreign investment must have a feasibility study done--a

service;

‘+ aheavy equipment company must stay in constant contact with its foreign subsidiaries ~ a
service;

‘* acomputer maker hires someone to reengineer its entire operation in order to compete - a
service;

+ a shipment of textiles must be insured — a service; and

* last, but not least, financial statements must be audited — a service.

‘Of course, examples such as these are endless. US trade policy — and economic policy for that
matter ~ must be crafted with these interrelationships in mind. A holistic approach, if you will,
is what is called for.

‘As I mentioned before, US services firms are among the most competitive in the world, and
they also help make other US companies more competitive. Thus, US services firms contribute
positively to overall US competitiveness, to overall US job creation, to overall US productivity,
and to overall US growth.

For those who are concerned with the trade deficit, let me point out that services consistently
runa trade surplus. Last year, for example, the services trade surplus was $63 billion, while
the manufacturing trade deficit was $174 billion.

World Trade Organization (WTO)

I believe that one of the primary reasons services trade has lagged behind goods trade is that
the global trend toward liberalization only recently has begun to encompass trade and
investment in services. The watershed year for services was 1986, with the launch of the
General Agreement on Tariffs and Trade (GATT) Uruguay Round


27

to know how do you sell most-favored-nation treatment for China
to America when it appears as though China has not been a very
friendly country to do business with as it relates to fairness and
standards of mutual respect; other than saying of course, that if we
do not give it to them, there would be grave consequences. But,
how do you explain it to someone who is unemployed or who has
been downsized, who cannot find the low-skilled job and we hear
all of these reports, and not just from troublemongers. How do you
explain why China should be treated equally when the record indi-
cates that they have not treated us fairly?

Mr. SHAPIRO. Congressman, I guess I would answer in several
ways, or make several points. First, in supporting MFN, we are not
in any way turning our eyes away from those problems that you
are identifying. That is why we have the sanctions and that is why
we will continue pursuing the human rights abuses and the abuse
of child labor or prison labor at the same time.

Mr. RANGEL. But, doesn’t it appear to be a reward for China to
be treated like other nations that trade with us, that they have a
mutual respect for our concerns? I know that those issues that we
talk about can never go away but it seems more like a reward for
their failure to obey international principles.

Mr. Sapiro. I do not think it is a reward if you’re continuing
to take action against them where appropriate. And, if we are pro-
viding and continuing to provide the leadership in driving the hard
bargain with them about the terms if they will ever get into the
World Trade Organization, what we are saying, though—and I
agree. I understand that this will not be the easiest sell in the
world. But what we are saying is, we are still better off being en-
gaged with China, and you cannot walk away from the problem
posed by more than 1 billion people in the world economy, or the
problem posed by a government that is not playing by the rules of
the trading system.

Mr. RANGEL. We will leave it there, that it is a difficult sell.
When you have countries that have such low wage standards or
that have indentured servants or prisoners do a lot of the work,
and when you find that in the United States we have basically

‘iven up manufacturing as being one of the key assets that we
ave, and as it has been clearly pointed out, that while we do get

more jobs, those jobs are in high tech areas and the losers are
those people that have marginal skills. One of the things that’s
made our republic so great—I was at Ellis Island last night and as
we listened to how many poor people came to the United States
without education, but had hopes, they had dreams, but most im-

tantly they had low skill jobs where they could hope that their

ids would get a better education and do a lot better than they
would be able to do. Now we find that our school system is not
working the way we want, that there seems to be a connection be-
tween poverty and less education, and there always has been the
connection between less education and low skilled jobs. So if the
school system is not working, and the low-income jobs are not
available, and the leadership in the Congress wants to do away
with the Department of Education, and there are less funds being
appropriated. for education than there is, for jails and peniten-
tiaries, don’t we really need to have the level of education in this


70

TESTIMONY OF ROBERT F. KELLEY
SUBCOMMITTEE ON TRADE OF THE COMMITTEE ON WAYS AND MEANS

MAY 20, 1996
EXECUTIVE SUMMARY

‘* Andersen Worldwide (AW) is the world’s largest professional services firm with over 82,000
employees in 360 offices in 76 countries. Last year, AW revenue topped the $8.0 billion mark,
adoubling in the last five years. This success is in no small part attributable to the recent
global trend toward liberalization of trade and investment.

‘+ Services constitute 60-70% of most advanced economies, demonstrating the importance of
services in our economy and the enormous potential in foreign markets for US service
providers. World trade in services exceeds global trade in computers, telecommunications
and office equipment, motor vehicles and parts, and textiles and apparel combined. Services
are “enablers” of other industries, inextricably linking services with sectors such as
manufacturing. US trade policy must be crafted with these relationships in mind.

* The World Trade Organization (WTO) represents the greatest opportunity for liberalization
in services. The General Agreement on Trade in Services (GATS) is the single greatest
achievement of the Uruguay Round, bringing the fastest growing -- and, arguably, the most
important — sector of the world economy into the multilateral trading system.

‘+ The GATS establishes important trading rules including the principle that regulation of
domestic activity has international consequences, laying the groundwork for regulatory
convergence, which will benefit service industries, consumers, investors and regulators. The
GATS also has broadened the definition of “trade” to include movement of capital and
people - critical issues for services firms

‘+ Liberalization in services will continue in the WTO. In the short term, there are sectoral
negotiations in maritime, financial services, telecommunications and professional services. In
the longer term, a new round of services talks will begin in the year 2000.

‘+ The professional services talks are ongoing in a Working Party on Professional Services
(WPPS). The WPPS has begun its work with the accountancy sector with a three part agenda:
developing disciplines on domestic regulation, promoting international standards and,
establishing guidelines for the recognition of qualifications. The success of the WPPS is
important not just for professional services, but for the credibility of the WTO as a whole.

+ While implementation and expansion of the GATS will remain the focus of services trade
liberalization, we also must take advantage of possibilities that lie in other international
negotiations including the Multilateral Agreement on Investment (MAD), the Free Trade Area
of the Americas (FTAA), and the Asia Pacific Economic Cooperation (APEC) forum. Some
negotiations will require fast track, which should be reauthorized as soon as possible.

‘+ The US must lead the movement to further liberalize trade and investment — not as a favor to
anyone else, but because it is in our own interests. The tremendous significance of services to
the US economy and to other sectors such as manufacturing must not be underestimated.
Trade policy must be made with careful consideration given the implications of that policy
for the service sector.

Recommendations:

‘+ The Subcommittee should work to ensure effective implementation of the Uruguay Round
agreements including: implementation of new GATS rules, completion of sectoral
negotiations in services, and interpretation of WTO materials and their effective
dissemination.

* In particular, the Subcommittee should express to the Administration its interest in and
support for the efforts of the WTO's Working Party on Professional Services, especially with
the approach of December's WTO ministerial meeting in Singapore.

+ The Subcommittee should carefully monitor progress on negotiations such as on the
Multilateral Agreement on Investment, the Asia Pacific Economic Cooperation initiative and
the Free Trade Area of the Americas, prodding negotiators when they flag and ensuring that
the talks do not go off course. Fast track should be reauthorized as soon as possible.


63

With regard to China, the NAM supports the extension of most favored nation
status (MFN) for yet another year, and is encouraging the Congress and Administration to
look further ahead towards normalization of this commercial relationship. Certainly the
US/China relationship is not without its problems, and the business community has been
frustrated by the slow pace China has set in living up to its bilateral agreements.
However, the opportunities that trade with China presents are enormous and virtually
dictate that we work arduously to settle our differences without upsetting the apple cart.
China is the United States’ fastest growing export market already, and we have not begun
to tap its potentials. Nontheless, China must be ready and able to commit to the WTO
regime before being accepted as a member.

From a small manufacturer’s standpoint, many U.S. manufacturers are content to
pursue the North American Free Trade area for sales opportunities as it represents over
‘one third of the world’s economic activity. Bison was encouraged to increase its export
activities by the original Canadian-U.S. trade agreement and would encourage addition of
Chile to NAFTA, as well as other Central and South American countries as they qualify.
We need to find a way to encourage other small to medium sized firms to export through
enhancing banking regulations and providing low cost financing of export receivables.


agreement, insurance. and film.

But overall, we are on the right course. These agreements are working. They are making it easier
for U.S. companies to sell their goods and services in Japan, but they are also providing more
‘opportunities for Japanese consumers. Obviously, our trade agreements are only one factor in
this success. But they have had an impact.

President Clinton knew that the naysayers and pessimists who said that Americans simply can’t
compete in Japan were wrong. President Clinton knew that the problem was that Japan’s markets
were closed.

China

Nowhere are the opportunities and obstacles in this new era of trade relations more apparent than
in the U.S. relationship with China. China is the world’s fastest growing major economy, with
real growth of almost 12 percent last year, and average growth rate of greater than 7% for each of
the past fourteen years. Already possessing the world's largest population, by early in the next
century, China may have the world’s largest economy.

It is an understatement to say that the U.S.-China relationship is complex and multifaceted.
America has a range of issues with China that go far beyond trade. We have a deep and abiding
interest in human rights, and are critical when basic international norms are not met. We have
continuing concerns in areas ranging from non-proliferation to environmental protection. And
increasingly, trade is at the center stage of our relationship.

Unfortunately for the United States, the potential of the China market remains unfulfilled in
many respects. China continues to maintain one of the most protectionist trade regimes in the
‘world. China blocks access to its markets for many U.S. goods -- especially capital goods —
limits investment opportunities, and discriminates against U.S. and other foreign business people
in many other respects. In areas of increasing U.S. comparative advantage — especially services -
~ China keeps its markets closed while Chinese companies scramble to monopolize it.

‘The growing U.S. trade deficit with China symbolizes for most Americans the inequity in our
bilateral trade relationship. if current trends continue, the U.S. trade deficit with China-growing
at a 25% rate per annum -- will hit $38 billion. Wit just a few years, our deficit with China is
‘on pace to surpass our trade deficit with Japan. This is a situation that cannot be sustained.

China must open its markets. Its first step is to ensure compliance with commitments already
made. China is falling short in this regard.

As you are well aware, last week the United States announced the publication of a $3 billion
preliminary retaliation list targeting Chinese exports to the United States. This action, which
set in motion a 30 day clock to gather public comment on the list before any final action
‘occurs, came as a result of China’s failure to enforce satisfactorily our 1995 agreement on


Since 1988, countries containing four-fifths of the world population, or more than 4 billion
people, have either moved or begun the transition from closed markets to become integral
Players in the he global economy. ‘This has created enormous opportunities for
telecommunications, one of the most basic forms of infrastructure. Wireless systems enable

vel 10 leapfrog old technologies and install modern networks very
quickly.

Our mos dramatic growth has been in Asia, where sales represented only about S% of
Motorola's total in 1985, and now account for more than 30%. Latin America

Tapldly growing region with huge potenlalExclng changes also are king place In Eastern
Europe, the Middle East and Africa,

of US Trade
‘way for
worl economy is by pursuing a trade poly that

(1) Persistent efforts ~- through bilateral, plurilateral and multilateral means -- to break down
foreign tariff and non-tariff barriers to market access. While much progress has been made
4n recent years, US goods and services still face significant barriers in many markets;

@ Advocacy and export promotion, inctuding the elimination of exiting US export
and well et 1 thet coonomics and provide sgulficat support thelr
fora ing of vide to
'US must take steps to ensure that lis éxportrs ae playing on a level playing i; and

faip role inthe rapely growing and changing

(3) Aggressive enforcement of US trade laws aimed at curbing unfair foreign trade practices.
{22 cE pares have boca fenoved and International competion incre, the pocalal fee
infringement of al property Highs (PR) and oer unfair Wadlng practices

Let me address each of these issues in turn.

Market Access

‘There are several initiath vay in regions around the world to addtess tariff and non-
tari the Asia-Pacific Economic yn (APEC) forum, the Free
‘Trade Area of the Americas (FTAA) dialogue, and the lantic Business Dialogue
(TABD). "Each ofthese offers an ‘cooperatively with other

‘At he same tm its equally important forthe Unite States tobe teat about what it can

reasonably expect to achieve in each of these fora. Over-ambitious expectations will erode

the credibility of these opportunities, and risk producing lowest-common-denominator

sgl, Through a process of conuliaton wi te vale secr and wit he Congres, US
its priority objectives. in each of these regional negotiations.

Likewise, as the United States develops its objectives for the WTO ministrial to be held in
Singapore later thls year, i is import tobe realitic about ex ‘of what can be

First and foremost, all WTO ‘Agnatorcs should focus on moeangfil hd
eftecive enforcement of thelr Uniguay Round obligations. Where possible efforts to adhere
to negotiated commitments should be accelerated.

1k ls impor o conclude succesfully the as-yet unconcluded WTO aegoiaos in
these negotiations drew Woscas lear tha ihe bai US fe peal
near, it became the bs vequbement for ty
offers from a critical mass of foreign countries had met. Offers to arkets,
particularly from developing countries, eof Sten etal for ineeatona
services, including satellites. Rather than seeing those negotiations fail, however, we have
‘strongly supported the WTO Secretariat's plan to extend the talks until February 1997 and to
implement all final offers on J: Le Ja mondvide bor s atlstencey rose ea
benefit from more open markets and competition worldwide, but a
improved access from a significant number of countries - not just a handful.

While the Uruguay Round agreements should help US companies do business in foreign


57

have to run, we understand. The others hopefully can stay here for
a little while.

STATEMENT OF RONALD D. BULLOCK, PRESIDENT, BISON
GEAR AND ENGINEERING CORP., ST. CHARLES, IL; CHAIR-
MAN, SMALL MANUFACTURERS FORUM; AND ON BEHALF OF
NATIONAL ASSOCIATION OF MANUFACTURERS

Thank you. My name is Ron Bullock. I am president and owner
of Bison Gear and Engineering Corp. We are headquartered in St.
Charles, Illinois. We manufacture electric motors and gear motors.
We have got three facilities in Illinois, and 205 employees located
in Elgin and Downers Grove, as well as St. Charles. I brought
along a catalog. I point out that they are in multiple languages,
they are fully metric, and they highlight the address of a new
assemble-to-order operation that we just started up in Zeewolde, of
the Netherlands.

I am here today to testify on behalf of the National Association
of Manufacturers, and as chairman of the Small Manufacturers
Forum, representing over 10,000 NAM members with fewer than
500 employees. Also, as an exporter, I am in a very good position
to give a perspective on international trade policy from a small
company’s standpoint.

Generally speaking, it is the NAM’s position that international
trade is essential to maximizing benefits arising from world pro-
ductive output and thereby contributing to U.S. economic growth,
as well as enhancing the economic welfare of individuals through-
out the world. The NAM believes that the most effective basis upon
which to conduct trading relations is a system that enhances the
role of free market forces while minimizing government interven-
tion in trade.

To this end, the NAM strongly supported and still supports the
implementation of the NAFTA and GATT World Trade Organiza-
tion agreements. It is only through transparency, harmonization
and the elimination of unfair trade practices through these and
other multilateral arrangements, that we will truly produce a
strong and effective worldwide marketplace.

While many espouse the importance of international trade and
exporting for the United States, many fail to pinpoint exactly what
it is that the United States has at stake in the multilateral trading
system. Through work done by the Institute for International Eco-
nomics in conjunction with the educational and research affiliate of
the NAM, the Manufacturing Institute, two important reports have
been released which provide new insights into the importance of
trade to the U.S. economy. Specifically, these reports examine the
performance of exporting versus nonexporting companies, and doc-
ument that exporting matters to the average American worker and
American company far more than most people realize. Conclusive
data demonstrates that there are distinct differences between ex-
porters and nonexporters in terms of pay, productivity and
performance.

Pay in export plants on the average is 15 percent better. Benefit
levels are 37 percent higher. Productivity is 40 percent greater. Ex-
porting improves companies’ survival rates by 10 percent, and job
growth is 17 to 18 percent greater.


23

foreign refiners. However, it felt that EPA had not adequately explored options available to deal
with these concerns, and that the United States had been more concemed about the costs of the
various regulatory options to domestic refiners than to foreign refiners. We were gratified that
the appellate body ruled in our favor in overtuming the original panel’s excessively narrow
interpretation of the GATT’s exception for conservation measures and that it admonished WTO
panels to stick to the words of the WTO Agreements and not embellish upon them.

This element of the ruling recognizes and reaffirms the balance in the WTO agreements that
provides us access to foreign markets while maintaining our freedom to protect the environment.
and conserve natural resources. We are currently reviewing our options for responding to this
case, in consultation with Congress, and would welcome any input from the Committee. Let me
reassure you that in assessing our options, out bottom line is that the results of this dispute will
‘not compromise this Administration’s commitment to strong and effective implementation of the
‘Clean Air Act.

Telecommunications. At the end of April, the Clinton Administration led a successful effort to
extend multilateral negotiations aimed at opening the global telecommunications market. Vice
President Gore announced last year that the United States would open its telecom market if other
nations would open their markets. Unfortunately, a critical mass of offers had NOT been
reached. Rather than accept a bad deal--- or walk away from the good offers tabled by many
‘countries -- the United States won support for an extension of the telecom talks to February 15,
1997.

The United States took the initiative to forge a consensus on an extension of the talks. The
additional time will allow other nations to improve their market-opening offers and help to
achieve our common goal ~ a global telecom agreement. Such an agreement -- if done right
can unleash the tremendous pent-up demand in most other countries for better and cheaper
telecommunications services.

Much has been accomplished in the talks to date. For example, thirty countries have accepted
pro-competitive regulatory principles — a particularly significant achievement in light of past
domination by monopolies. In addition, ten countries have tabled offers with market opening
roughly equivalent to the U.S. offer. We are cautiously optimistic that the extension will allow
us to obtain access to foreign markets. Many of our trading partners are currently in the middle
of legislative processes that can influence the quality of their offers. Others have legislative
authority to commit to more than they offered in these talks. Still others have made offers that
need sharp, specific improvement. We aim to use the extension period to persuade all of these
countries to bind the full range of market opening possible under their laws, and to change their
laws, if necessary, including the adoption of fair and effective rules of competition.

‘Conclusion

Mr. Chairman, President Clinton believes we can never build walls of fear around our country.
American workers are the most productive and competitive in the world and they are not afraid
of fair, head-on competition. Our choice is not between one way trade and no trade. Our
challenge is to make sure we have two-way trade.

The President has set the nation on a course that will forge prosperity into the next century. He's
done it with his efforts on the economy, in foreign affairs, and with trade. We are moving in the
right direction. But we still have a long way to go and we must all work together to get there. We
must all take responsibility to do our part to forge new opportunities for the American
community. For the President that means he will continue to stand up for the interests of
‘American workers, farmers, and companies. As Americans we must join together to create the
new American Century ~ an era of limitless possibilities. Together, we can build a better future
for our families and ourselves. Thank you. I would be happy to answer any questions.


90

Chairman CRANE. Thank you very much, Mr. Faust. Let me just
ask a quick question. How can governments best facilitate harmo-
nious standards between Europe and the United States?

Mr. Faust. Europe, in particular, is tough for a company like
ours, because they have had standard-setting bodies that work at
somewhat cross-purposes with ours. Of late, we are seeing with the
need to interconnect the world, the ability to meet on a more open
playingfield. So, I would say just to continue the efforts as they are
going on now. We are seeing improvement, but we are not there
yet.

Mr. CHAIRMAN. Progress, but not as fast as you would like.
Congressman Rangel.

Mr. RANGEL. Mr. Faust, have you had a chance to review and
reach any conclusions on our trade policies with Cuba?

Mr. Faust. No. I would say for a company like ours, which builds
infrastructure for telecommunications, if Cuba is open for us to sell
into, we'd be happy to sell into it.

Mr. RANGEL. Are you familiar with the Helms-Burton Act?

Mr. Faust. No, I am not.

Mr. RANGEL. Thank you.

Chairman CRANE. Thank you very much, and have a safe flight.

Now, we will proceed to you, Sally.

STATEMENT OF SALLY A. JACKSON, PRESIDENT AMD CEO,
ILLINOIS STATE CHAMBER OF COMMERCE

Ms. JACKSON. Thank you.

Mr. Chairman and Congressman Rangel, I represent the Illinois
Chamber of Commerce, where I am the president and chief execu-
tive officer. Our 5,000 members are a very large segment of the
Illinois economy. We employ about 23 percent of the total work
force, over 1 million people. They represent all sectors of the econ-
omy; manufacturing, service, wholesale and retail trade, literally
all factors of our economy, and they are predominately small busi-
nesses. Over two-thirds of our members have fewer than 100 em-
ployees. So while many of the large corporations, whom you have
heard from already today, represent that segment of multi-national
interest and capability, we also work closely with those companies
that rely on outside expertise to help them get access to these new
markets. And they are very interested in international trade and
very engaged in the process of developing their own strategies in
order to benefit from international trade.

Illinois has a long tradition of being a part of the international
marketplace, as you heard from Governor Ed; and others. We
were the first State 25 years ago to recognize t important factor
in our economy and opened an international office, the first of any
state, in Brussels, Belgium. And that has given us an opportunity
to use state government, business associations and the private sec-
tor to support the various changes in trade policy in order to access
opportunities for Illinois businesses.

[AFTA recently was a very important change in those laws for
Illinois, with Canada being our number one trading partner,
Mexico number five now. We have monitored the implementation
of NAFTA very carefully. We have overwhelming support in the
Illinois Chamber for NAFTA, and we find, after 2 years of imple-


44

Chairman CRANE. Thank you, Mr. Singer.

Now, if I have been properly informed, the Governor is here.

Governor, would you mind coming up, because I know your con-
straints are tight. We'll have you proceed at this point.

Mr. Singer, I know that you have a flight to catch. So keep an
eye on the clock, and if your constraints are such, we understand.

STATEMENT OF HON. JIM EDGAR, GOVERNOR, STATE OF
ILLINOIS

Governor EDGAR. Thank you, Mr. Chairman. I appreciate this.
Sorry to make you go out of order here. I have got to go back and
meet with the legislative leaders in Springfield, trying to close our
session. I would rather stay here with you.

I appreciate very much the opportunity to be with you today to
talk about a very important issue, and that’s trade. In today’s busi-
ness environment the world economy is undergoing a fundamental
transformation as the result of globalization.

This movement is so extensive that investment and patterns of
trade are being decisively shaped by companies operating on a
global scale and with a global vision. The world and U.S. economies
are being globalized. There no longer are borders as far as trade
is concerned. Changes in remote areas of the world, therefore, have
an economic impact in both large and small markets thousands of
miles away.

To enhance our competitiveness and preserve our economic
power and living standards, the United States depends more and
more on access to foreign markets for our products, services and in-
vestments. A strong international trading system and open mar-
kets are essential to maintaining American prosperity. For many
companies, trade is no longer an option, it is a necessity.

Trade is an increasingly important engine of economic growth. In
simplest terms, exporting means concrete opportunities for busi-
nesses. New customers, new sources of revenue, decreased business
cycle vulnerability, improved production, economies of scale and ex-
tended product life, among others, are all central to the health of
USS. firms, and all are provided by growing trade opportunities.

Trade, however, is not just a growth strategy. It is a strategy for
survival. The harsh fact of business life today is that while some
American firms may choose to avoid exporting, most cannot choose
to avoid international competition. It is almost impossible to iden-
tify a product or service Produced in the United States that does
not face new competition from international markets.

As a result, many of our businesses already have learned we can
no longer rely on our home markets for growth because our home
markets are now an export market for competing firms from every
corner of the world.

There is another reason for the United States to increase its ex-

rts, a reason even more important to our future than short term

usiness and job growth. Being actively engaged in trade makes
our businesses, and therefore the United States as a whole, more
competitive.

Companies that trade are exposed to new technologies critical to
their survival and growth. Also, companies that are engaged in
trade can form alliances with new overseas partners with whom


85

The global video, voice and data communications revolution has
and will continue to provide us with opportunities to compete in of-
fering access to the information superhighway, which believe also,
Congressman Rangel, will help with the educational infrastructure,
certainly here and abroad. Please help; rather than hinder us, in
our efforts by making sure that the U.S. Government supports poli-
cies aimed at fostering the continuation of free and open global
markets. Thank you.
[The prepared statement follows:]


62

Another interesting discovery is that better wages, job growth, productivity, etc.
seem to appear in exporting companies once a company makes a commitment to
exporting, not after it reaches a certain level of exporting. These benefits show up across
the board, demonstrating that the benefits don’t just apply to big multinational firms. As
an example, our own company Bison, has doubled productivity over the past eight years,
introduced a profit-sharing 401-K program and has greatly improved it’s training and
education outreach program, with 36 employees (20%) enrolled in college level courses
since it’s launch 18 months ago. While this cannot entirely be attributed to our
involvement in export activities, I can tell you that competing on a global scale has
brought our investments in both capital equipment and our people into sharp focus. We
now have a human resources balance sheet to accompany our financial balance sheets.

In addition to a strong commitment to the multilateral trading system, the NAM
also believes that bilateral trade agreements in certain instances can help enhance the role
of free market forces while minimizing governmental intervention in trade. Bilateral
agreements by their very nature can better raise the level and detail of mutually acceptable
trade parameters, which can establish strong precedents for future multilateral
negotiations.

The United States’ key leadership role in the international marketplace must be
maintained, We must be involved in as many dialogues and negotiations as possible and
appropriate to ensure positive progress and direction. That is why, for example, passage
of fast track procedures for trade agreement is critical, The NAM supports the passage of
a clean and unfettered fast track proposal and urges the Congress, in conjunction with the
Administration, to work expeditiously toward that end, Without fast track, the United
States looks uncommitted and risks losing its credibility as the leader of the international

community.


86

COMMENTS OF JAMES L. FAUST

EXECUTIVE VICE PRESIDENT, ANTEC CORPORATION &
PRESIDENT, ANTEC INTERNATIONAL,

BEFORE THE SUBCOMMITTEE ON TRADE

COMMITTEE ON WAYS & MEANS
U.S. HOUSE OF REPRESENTATIVES

May 20, 1996
Schaumburg, Illinois

‘Thank you, Mr. Chairman. My name is Jim Faust and I am the Executive
Vice President of ANTEC Corporation, a Rolling Meadows-based company which
specializes in the design and engineering of hybrid fiber-coaxial (HFC) broadband
networks and the engineering, manufacturing, materials management and
distribution of products for these networks, For example, we manufacture and
distribute products for cable TV and telephone company networks such as laser
transmitters, network interface devices for the sides of homes, powering and
transmission equipment. ANTEC is an international company of about 2,000
employees in 34 locations with 1995 sales of over $658 million.

Lalso serve as the President of ANTEC's International Division which leads
the company's efforts in international markets. My testimony today is on behalf of
my own company as well as on behalf of the Electronic Industries Association
(EIA) and the Telecommunications Industry Association (TIA), two Washington,
D.C. area trade associations to which ANTEC belongs.

EIA is a 72 year old national trade organization representing U.S. electronics
manufacturers. Committed to the competitiveness of the American electronics
producer, EIA represents the entire spectrum of companies involved in the design
and manufacturer of electronic components, parts, systems and equipment for
communications, industrial, government and consumer use.

TIA is a full-service national trade organization with a membership of 600
large and small companies which provide communications and information
technology products, materials, systems, distribution services and professional
services in the U.S. and other countries. TIA's member companies manufacture
virtually all of the products used in the modem communications network.

In reviewing our industry's perspective on global trade and its role in
America’s economic future, it is important to set a general framework of our
industry's economic philosophy. In a sentence, it can be summarized as this:
ANTEC, EIA and TIA all have a deep belief in free and open global markets. The
genius of capitalism is revealed daily across the world and across our industry as
those seeking to provide better products and services risk their (or their
shareholder's) capital in bringing new ideas to the market.

Free and open markets benefit not only large, multinational companies, but
also small-to-medium sized companies such as ANTEC, a company looking
beyond its U.S, offices to foreign markets. We believe that for our company to be


121

their intellectual property. Through our antipiracy efforts on their
behalf, through the Chinese media, I have come to understand the
complexity of this problem in China. I found that high level offi-
cials in China are absolutely sincere in their desire to stem coun-
terfeiting and other illegal activities, and they have a selfish reason
to do so. Piracy not only discourages investment by foreigners, but
it discourages their own people from building new industries with-
out proper protection under the law.

But, imagine trying to regulate the activities of a country with
five times as many people as the United States, from one central
capitol such as Washington. Withdrawing MFN will not hurt the
criminals who participate in these activities. It will do nothing to
help the Chinese central government eradicate the program which
it is only in recent history had legal authority to attack.

Another issue often cited in favor of withdrawing MFN, is
China’s human rights record. The year I went to China in 1979,
was a year of famine in Southern China, which our Chinese hosts
never mentioned at the time they hosted banquets for our delega-
tion from the states of Illinois and Arkansas. In this country, the
inalienable right achieved by the Chinese citizen has been the right
to eat. Now that these basic needs have been achieved, I feel that
China’s continued economic growth and intercourse with the west-
ern world are the surest way of gaining more rights and protec-
tions for her citizens. The horrors of the cultural revolution could
only have been carried out while China was isolated from the rest
of the world. Do we really want to bring China the to point of isola-
tion once again?

Finally, is it the time, with the succession of China’s highest offi-
cials in a state of transition and uncertainty, to pressure Chinese
officials and undermine the core of U.S.-China relations? Is this the
time to give the hardliners an excuse not to deal with the United
States? In closing, the annual ritual in which we are participating
today is in danger of becoming institutionalized and ineffective.

I agree with Congressman Rangel’s opinion that we must turn
our focus, I would like to see the hearings next year focus on edu-
cational reform and building a global work force from the ground
up. This Wednesday in Chicago, the Illinois Board of Higher
Education will be focusing on just that activity, and working not
only at the higher educational level. The United States has the
best higher educational institutions in the world, bar none. It is
just very paradoxical that we are under attack for our primary and
secondary systems. We think integrating what we need to do inter-
nationally in bui ding a global work force, will be something that
would be the proper focus of a national debate. We would welcome
continued discussion on that issue. Thank you very much for your
attention.

[The prepared statement follows:]



124

Chairman CRANE. Thank you, Ms. Hughes. Mr. Napier, let me
ask you a quick question. That 50 percent higher tariff on your
products in Chile is so inconsistent with some of the positive steps
they have made in moving toward free trade. Is that a particularly
sensitive industry down there?

Mr. NaPIER. It is sensitive. It is a price-sensitive industry be-
cause the consumer purchases the products with discretionary in-
come. So it is sensitive everywhere. Is it sensitive in Chile? No, not
really. It is trading material for other things. They do not have a
big industry. It is a question of taxing all sorts of imports as heav-
ily as they can under their old regime. They have not gotten
around to changing it yet. We have had some representations
made, but have not really gotten anywhere yet.

Chairman CRANE. Keep me apprised of that one, because we are
still keenly interested on a bipartisan basis in getting Chile into a
free trade relationship with us.

Ms. Hughes, I just want to commend you on your testimony and
your actions in behalf of expansion of our trade relations with
People’s Republic of China. I have mentioned your argument many
times, that what more fundamental human right is there than the
ability to feed, clothe, and shelter your family? The advancement
of free markets and private enterprise over there, what they like
to call Leninist capitalism, the ultimate oxymoron. But, the ad-
vancement of Leninist capitalism is providing the greatest hope
that the Chinese people have ever experienced. So, we do not want
to see it get derailed and unfortunately politics tend to get in the
way at times, in the advancement of our common commitment to
advancing free markets.

With that, I yield to Congressman Rangel.

Mr. RANGEL. I find it so inconsistent to have this view and then
to have this other view that we have with Cuba. I truly believe if
it was not for the private sector, most-favorable-nation treatment
for China would be politically dead. They are communists. They
have killed U.S. troops in Korea. The North Koreans have killed
troops. The North Vietnamese, they are all communists, they have
killed troops. The Cubans have not killed anybody. And they are
not a threat to our national security. Everyone says that a free
marketplace is the best place in order for true democracy to bloom.
And yet, with Cuba, we do not even allow student exchanges or
tourism or the normal things that we believe in the United States
as the showplace of the world. We should just let Cubans see our
dreams and aspirations instead of denying them food and medicine
and hoping that a small group of people in Miami will be able to
cause a revolution, where some ill-prepared people are supposed to
go up against this well trained army. It really shatters me because
of the eloquence of the private sector in really selling a very un-
popular thing, that is, MFN for China, to the American people.
Americans are just trained not to like communists no matter who
they are. Then we see Tiananmen Square and we do not like them
for that. And they are stealing from us. Violating intellectual prop-
erty rights is nothing but theft. We can never compete if all of our
research and development, in medicines and in movies, are stolen;
if all you have to do is get a dubbing machine and sell it for half
the price. It is going to put us out of business. Despite all of these


31

nization called WAHLI, to the tune of $1 million, which is an
Indonesian environmental organization. That organization, funded
with American funds, in turn lobbied OPIC not to allow American
investment in Indonesia. We have got some big problems in inter-
national trade. The biggest problem is that exporting has become
politicized and that is wrong. When Mr. Rangel said, in his opening
statement, that this Congress has become more politicized than
any other Congress, well, perhaps that’s from his perspective be-
cause his party has been in control for 40 years. But in a sense he
was correct, because everybody is politicizing every issue.

If you want to comment on the Three Gorges Project, that’s fine
and maybe beyond the area in which you have been working. It is,
because your expertise is Canada.

Mr. SHAPIRO. Japan and Canada, also some GATT.

Mr. MANZULLO. Right. If you want to comment on it, that’s fine.
I just wanted to make that a part of the record and I do not expect
an administration response from you, but I would like to hear your
thoughts.

Mr. SHapiro. Well, Mr. Manzullo, I would say first that we have,
as an administration, pursued and given a great deal of support to
all kinds of projects around the world. There have been those that
have been criticizing the administration at different times for being
too involved in supporting various company efforts, whether it was
aircraft or telecommunications or other matters.

On Three Gorges, and I appreciate the comment on Secretary
Brown, who obviously was a great leader in the effort to give sup-
port to business around the world. On Three Gorges, I have not

een involved in it and really cannot comment, except to say a
project of that magnitude was studied carefully and not at all the
concerns of Caterpillar and others in Illinois, the genuine concerns
and desire to participate and certainly by no means taken lightly.
But I cannot comment beyond that, because I have not spent the
time on it.

Mr. MANzuLLo. I appreciate that there is a lingering problem
that came over from the Bush administration. The TDA, Trade
Development Administration, and OPIC are not allowed to get in-
volved in China. That obviously is neither a Republican nor a
Democratic type of issue. But, we really have to take a look at
where the United States stands in trade.

I understand there are a lot of problems going on. We in Illinois
fear that if China retaliates against vegetable oils it could hurt
Illinois farmers. Illinois is the largest soybean producer in the
United States and a few years ago China was an exporter of soy
meal. Now they are an importer of soy meal and soy vegetable oil
and that is coming from our state.

I just want to take the opportunity to share with you those
thoughts. I also want to share with you the fact that I was down
in Mexico 2 weeks ago with the Inter-Parliamentary Union with
Mexican Members of Congress and U.S. Members of Congress. Last
year I was in Canada with the Canadian-American Inter-
Parliamentary exchange. We had the opportunity to spend 3 days
with the new Mexican Ambassador to the United States, Jesus
Herzog, who went to the University of Illinois and understands a
lot of our problems. And aside from the fights over tomatoes and


7

I would now like to yield to my distinguished colleague,
Congressman Rangel for an opening statement.

Mr. RANGEL. Thank you, Mr. Chairman, and I ask unanimous
consent that my entire written statement be placed in the record.

Chairman CRANE. Without exception, without objection, so
ordered.

Mr. RANGEL. Mr. Chairman, I am glad to be here with you in
Illinois and also with my colleague, Don Manzullo. New York has
many of the same problems as Illinois and we are greatly depend-
ent on expansion in foreign trade. I want to congratulate you for
the bipartisan way in which you have led the Trade Subcommittee,
notwithstanding the fact that we are presently going through the
most difficult partisan atmosphere in recent history. Nevertheless,
we have had a tradition of bipartisanship in trade and your leader-
ship has really kept it that way, and I want to thank you publicly.

We all recognize that the economic future of the United States
is going to be dependent on how we can expand our markets
abroad. And since we are only 4 percent of the world population,
we have to really develop these markets. Every billion dollars’
worth of exports averages at least the creation of 15,000 jobs here
in America, but the jobs that are being lost have to be of great con-
cern to those people in urban areas and in former manufacturing
areas since the jobs that are being displaced due to globalization
and the emphasis on high tech have been the lower paying, lower
skilled jobs. So it means that we have to ensure that foreign mar-
kets are not only held open, but also that there is a level
playingfield. We want to make certain that nations do not take un-
fair advantage of us by not allowing our products a fair opportunity
to compete. At the same time, our companies who are the bene-
ficiaries of our open trade policy must recognize their responsibility
to insist on higher levels of education for all of our people, as well
as education and retraining for those Americans who are not bene-
fiting from expanded trade.

There will be many more challenges in the future. This is a his-
toric period that we are going through. I am proud to sit on the
Committee and the Subcommittee that’s going to have a lot to say
about the direction in which the world and our country will be
going, and I look forward to discussing these issues with the wit-
nesses that will be here today. In fact, Governor Edgar has taken
time out of his busy schedule to join us. I also would like to wel-
come my friend, Ambassador Ira Shapiro of the Office of the U.S.
Trade Representative. He is one of President Clinton’s top trade of-
ficials and international trade negotiators. And I look forward to
hearing from the people of Illinois, on whom we must depend for
support on a subject that has been exploited by many politicians
as they try to have some Americans believe that if it is foreign, it
has to be wrong.

Mr. Chairman, J thank you for the work that you have done in
the Congress and for inviting me here to the great State of Illinois.

[The opening statement follows:]


46

Stiff Mexican tariffs that ran as high as 20 percent made achieving
that goal impossible for the $6 million Chicago-based company with
25 employees. Six months after NAFTA went into effect, tariffs
started dropping gradually, and the company landed contracts with
almost every major retail chain in Mexico. As a result the company
has hired four new employees, and sales to Mexico have tripled.
That’s a small company, but it underscores the importance of inter-
national trade for small businesses as well as the large companies.

International trade has a direct benefit not only to the companies
actively engaged in trade, but to the communities in which they are
located, and we are learning that trade works both ways. Recently,
Sparta, a community of 5,000 residents in Southern Illinois, an
area of our State where unemployment runs the highest, experi-
enced the closure of a major employer, Spartan Printing. More than
850 residents of Sparta and Randolph County worked at that facil-
ity and found themselves out of work.

Because of NAFTA and the barriers which it has removed, a
major printing and paper distribution company in Mexico is once
again providing and economic security to that small community. It
was able to secure the assets of the company and is planning to
modernize the printing facility and rehire many of the original
employees.

In conclusion, I would like to stress that Illinois is one of the

at world-class trading hubs in the international marketplace.
lohn Deere, Abbott Labs, Motorola, Caterpillar, U.S. Robotics and
many other global giants call Illinois their home because Illinois is
working to maintain a business climate that fosters growth, expan-
sion and trade.

Diversity is our strength, and Illinois products and services are
in demand across the world. We export everything from chemicals
to cosmetics, machinery to metals, and agriculture to architecture.
Today, more than ever, it is the time to compete and not retreat.

Let me in conclusion just echo what the gentleman from Motor-
ola has said in so many words, that it is crucial, if we are going
to continue to see growth in economic trade, that we do not allow
our trade policy to be held captive by political differences we might
experience. A few years ago in Illinois, in the rural parts of our
state, the farmers were very upset when there was a grain embar-
go because of a disagreement with the Soviet Union. The same is
true today when we might have disagreements with nations like
China. We have to be very careful that our disagreements do not
result in our people being penalized because of trade barriers. The
most-favorable-nation status for China is something that we pro-
vide for almost every country on this globe. It is misnamed. It just
means normal trade. But it would have a very negative impact, on
Illinois, as many other states, if we do get into a situation where
we are not able to carry out trade with the world’s largest country.
And that’s true for many other countries around the globe. So
again, I just want to stress that international trade is the key to
I believe our economic well being. It is an area where growth is oc-
curring and it is something that we need to continue to work to ex-
pand, and I would hope that we'll continue to see the Federal
Government, the policies we have seen in the last few years has
helped improve that opportunity and not see barriers put in the


Opening Statement by Chairman Philip M. Crane
Ways and Means Trade Subcommittee
Field Hearing in Schaumburg, Illinois
May 20, 1996

Good morning. Welcome to this hearing of the Subcommittee on Trade of
the Ways and Means Committee on the status and future direction of U.S. trade
policy. It is indeed a great pleasure to welcome my colleague from the House
of Representatives, Congressman Charlie Rangel of New York, to my home
state of Illinois. I am also happy that Congressman Don Manzullo, my friend
from Eagan, Illinois is able to be with us today. He serves as Chairman of the
Small Business Subcommittee on Procurement, Exports, and Business
Opprotunities in the House of Representatives. As the fifth largest exporting
state in the nation, open international markets are critically important to the
creation of high paying jobs in Illinois. By the same token, expanding trade is
vital to our country, which is the world’s greatest exporter.

My purpose in bringing the Subcommittee here to Shaumburg is to focus
on how one successful state approaches the international marketplace, and to
review how important trade is to future economic growth. Finally, I have
requested that witnesses comment on the most important trade issues facing their
firms and associations. We are honored to be joined by Governor Edgar and
Ambassador Ira Shapiro who will share the perspectives of their
Administrations.

I think it is important to put these issues into context by reviewing some
key statistics, which I expect our witnesses will reemphasize in their
presentations.

In 1995 U.S. exports jumped by 14%, reaching a total value of $784
billion. Here in Illinois, we experienced an even bigger surge in export growth,
as our exports rose by 24% over 1994 levels to $33 billion. These exports came
from a broad spectrum of Illinois industries, including industrial machinery and
‘computer equipment, electronics, chemicals, agricultural and food products,
transportation equipment, and many more. The message I want to share with
you today is that exports translate directly into jobs here at home. Indeed, the
U.S. Commerce Department has estimated that every $1 billion in exports
supports 17,000 to 20,000 jobs in the United States. Moreover, it has been
estimated that those jobs pay up to 22% more on average that their counterparts
that produce for domestic consumption,

Although Illinois is home to many of our country’s largest exporters,
including Motorola, Caterpillar, Archer Daniels Midiand, Abbott Laboratories,
and Deere and Company, companies of this size dominate U.S. trade relations
less and less. Increasingly, small businesses are succeeding in selling their
products abroad. Already, the U.S. Census Bureau has determined that 97% of
Mlinois companies that export employ less than 500 employees each.

1 am happy that the Subcommittee on Trade has this opportunity to receive
testimony from our distinguished witnesses about the role that trade plays in the
economy today, and the future negotiating objectives of the United States to
open new markets for the benefit of U.S. firms and workers. It has been
estimated that trade will account for 36% of our gross domestic product by the
year 2010, up from just 14% twenty-five years ago. Given this trend and the
overall globalization of the world economy, I look forward to hearing our
witnesses discuss priorities for future trade negotiations.


40

protected or subsidized positions in their home markets to ‘the capital costs and
woluce, umping ie excess Onto the US tart at tle mace than

‘being driven from the market. Today, Motorola and the US industry are in
theet industries, end US worker ar succesflly Dlldng and exporing thse proaects

We must resist any short-sighted efforts to undermine the effectiveness of these laws. Efforts
to make the laws more susceptible to political or to waive them where the customers
ae hve brn png he Ging cs ign companies comps abou ving

pay fair prices are ‘Regrettably, we believe that this is the so-called
“short supply” ‘would do, and for this reason, opposes tis measure. “AS

on produce temporary
undesired results, but only the existence of a predictable, objective and effective law will
dlscourage forlgn industries from antempking to take advantage ofthe open US market to
‘supplant US businesses fighting to compete in the global economy.

Movoroia has a ken interes n earring that there are sustained positive relation betwoen the

United States and China. Motorola’s US exports to China have grown significantly in

Yous, reaching about $12 tlton in 1995. These exports support thousands of hgh-wage

‘American jobs, at Motorola and at our supplier companies around the country. A fact sheet
‘Motorola's activities in China is included with this statement for your reference.

Ge cea i tT Breen ee WE nation
a witout conditions. MEN isnot preferential treatment. Ii the cornerstone of

normal bilateral trading US extends MFN treatment to imports from
tually al of is wading panes

We me sspectally grateful foc your continued leaderahip in support of MEN extension, Mr
Chairman, as tn support of othex members of tis suboomuitie. We are hearted by
feven! Indications tht there rowing ‘congressional support for MFN renewal.
‘And we undetsand that as Us hearing (s being Contusted the Present ie aftimng Ne
Sapp or MEN renewal wpa fata Aa wes fo he neal Goel Meeting

Pacific Basin Economic Council, over which Motorola's Vice Chairman and CEO Gary
Tooker is presiding.

‘We would like to believe that this strong showing of bipartisan support for China’s MFN

may
they als contribute to Chinese perc that the United States is intent on pursuing an
antagonistic policy of containment. this may be the furthest thing from the truth,
these actions fuel such perceptions, which unfortunately contributes to an endless cycle of
‘mutual misunderstanding.

both can and should play a ive role. Motorola
is trying to convey to Chinese the i of that thelr actions
do have an impact on public opinion worldwide, and that they shouldn't behave as though
thet action Ione area do aot aes ther in other areas, Likewi:
fully ions of their actions. If we treat China as an

‘must understand
chen. wl bane sa enemy, Ne Nou! interests are served by backing into a
confrontation with an emerging world power.


120

Chairman CRANE. Thank you, Mr. Napier. Ms. Hughes.

STATEMENT OF LYRIC HUGHES, PRESIDENT, T.L.I. INTER-
NATIONAL CORP.; AND NATIONAL COUNCIL FOR U.S.-CHINA
TRADE

Ms. HuGHES. Thank you. My name is Lyric Hughes, and I guess
I started on the road to international in 1963 when I was 10 years
old and my father joined U.S.A. and we moved from Skokie to
Tehran. So since that, a little more recently, I have been president
of the International Trade Club of Chicago. I founded Women in
International Trade, which is now a national organization, and
chairman of a group called Education for Global Involvement. And
I am here today as a member of the National Council for U.S.-
China Trade, which supports the permanent normalization of rela-
tions with China in terms of trade. I will focus my remarks on
U.S.-China trade today.

I am president of T.L.I. International Corp. We have been in
business for 20 years, and we are an international marketing com-
munications firm based in Chicago. T.L.I. has done business with
the People’s Republic of China for 17 years, since my first visit
there in 1979. Our mission is to help U.S. companies sell their
products and services abroad by supporting their communications
efforts. We are probably best known for bringing the Super Bowl
to China, which we did when the Bears went over in 1986. More
recently, we also brought the Rose Bowl. By the way, the Super
Bowl idea was an idea of a U.S. Department of Commerce official,
as was my first visit to China in 1979. And without the U.S.
Department of Commerce, I would not be in business today, and we
would not be able to offer the help that we do to American
businesses.

Chairman CRANE. And you are letting them watch the Bulls?

Ms. HUGHES. Yes, we are. Michael Jordan is better known, we
understand, than President Clinton.

Most governments support the efforts of their companies abroad,
and NAFTA, which I worked for, is a good example of how trade
policy can favorably effect U.S. companies. Only in the United

tates are companies doing business in China at the mercy of elect-
ed officials in terms of knowing that the business deal th
today might be undone tomorrow.

Since Jimmy Carter and the U.S. grain embargo against the
Russians, our worldwide competitors have benefited from our coun-
try’s attempts to gain political leverage by undermining the private
interest and critical international activities of its citizens abroad.

Denying most-favored-nation status to China (that is normalized
trade relations) would be the wrong sanction at the wrong time,
punishing the wrong people. Not only the Chinese, but the U.S.
‘firms whom you have heard from today would suffer. Obviously
there are many problems with the U.S.-China trade relationships.
There are many days when I am frustrated, and I swear that I will
never go to China again or do business there. However, we realize
what an important market this is for the United States and that
we must persevere.

Of biggest concern to our clients, which include Fortune 500’s
and very small companies, is the protection or lack of protection of

ey make


19

5.2 percent.

The Big 3 have opened nearly ninety new sales outlets in Japan since the Agreement was
signed, better enabling Chrysler, Ford and GM to sell their vehicles to Japanese consumer.
‘We believe that the Chrysler Neon, which will be sold through these new dealers, has an
excellent chance of selling extremely well in Japan.

T understand that Lt. Governor Kustra this month went down and drove a new right-hand drive
off the Tine at the Chrysler plant at Belvedere. The right-hand drive Neon will be shipped to
eight countries, including Japan. In 1991, Chrysler was selling vehicles in only 22 countries.
Five years later, they are selling their cars in over 100 countries worldwide.

Numerous U.S. parts companies that were previously unsuccessful in Japan now report
significant new contracts and sales opportunities. Tenneco Automotive, headquartered in
Chicago, is certainly one of these companies. Tenneco, which made significant efforts in
Japan for 25 years, will for the first time sell Monroe shock absorbers as in Toyota's 1,400
dealer-affiliated repair shops and as replacement parts in more than 6,000 service stations
throughout Japan.

Other US companies like Ohio-based Dana Corporation have also benefitted. Dana recently
reached a contract with Toyota to be the first U.S. parts supplier to serve as the sole provider
of auto frames to a Japanese company. Dana will manufacture the auto frames for Toyota
Tacoma pickup trucks in Stockton, California.

Toyota, Nissan, and Honda all announced substantial new investments in automotive
production within the U.S., and reached record levels of exports of their vehicles to other
countries. Included in these investments were a $700 million light truck manufacturing plant
by Toyota in Indiana, a $80 million transmission and engine assembly plant in Tennessee by
Nissan, and expansion of engine production capacity by Honda in Ohio. Toyota announced
that in 1998, at least three quarters of their vehicles sold in the US would be made in North
America. Honda announced plans to produce 100% of its Accords and Civics in the United
States by the end of 1996.

We are exporting Big Three cars to Japan, Our auto parts manufacturers are capturing a share of
the Japanese market. And we are seeing is a two-tiered change by the Japanese auto companies:
Japanese auto manufacturers are enlarging their presence here -- making cars here that they used
to make in Japan -- and buying more U.S. parts. Because of the Clinton Administration's
‘commitment to open Japan's market, U.S. companies made commitments to invest there, for
‘example making 17 new right hand drive vehicles. This is a big part of the reason last year the
United States was the number one producer of automobiles in the world, for the first time since
1980.

We still face a great deal of challenges with Japan. We are committed to ensuring that Japan live
up to these agreements, and that they open those markets that are still closed, There are a number
of important trade issues which still must be resolved, such as renewing the semiconductor


14

around the world in opening markets, nor is it acceptable for us to
stand by and have China engage in what is still rampant piracy
of our copyrighted products.

The last thing I would say, Mr. Chairman, is that part of what
the President has done is focused on the importance of developing
nations and markets, and you have been a leader in this area. We
are extremely committed to continuing the progress that has been
made in Latin America and in the Caribbean, in trying to continue
expanded trade and open markets. This is an area that has many
problems and yet, it is an area where so much progress has been
made in recent years toward democratization and toward economic
openness, that we intend to keep on moving in that direction. And
I believe that next year hopefully, from_my standpoint, the
President will be re-elected, but whoever is President, will believe
that continuing the effort toward market opening in Latin America
will be critical.

Mr. Chairman, the last thing I would simply say is that we all
look forward to continuing the work with Congress on a bipartisan
basis. This administration, particularly Secretary Kantor, late
Secretary Ron Brown, the leadership he provided in trade, and all
of us have valued the work that we have been able to do with you
and to keep on working for the American people.

[The prepared statement follows:]


intellectual property, and government procurement which should receive priority attention by
the Congress and the Administration? What are the most significant trade barriers that face
‘United States firms who seek to do business in foreign markets?

© What kind of trade policy will maintain and improve the competitive position of the United
‘States in the world economy?

‘© How does the United States develop a trade policy that best reflects the national interest?

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

to be heard at the hearing must be made by telephone to Traci Altman or Bradley
‘Schreiber at (202) 225-1721 no later than the close of business, Thursday, May 9, 1996. The
‘telephone request should be followed by a formal written request to Phillip D. Moseley, Chief of
‘Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longwonth House
Office Building, Washington, D.C. 20515. The staff of the Subcommittee on Trade will notify by
telephone those scheduled to appear as soon as possible after the filing deadline. Any questions
conceming a scheduled appearance should be directed to the Subcommittee staff at (202) 225-6649.

In view of the time available to bear wi the aay not be
able to accommodate all requests to be heard. Those persons and organizations not scheduled for
‘an oral appearance are encouraged to submit written statements forthe record of the hearing. All
‘persons requesting to be heard, whether they are scheduled for oral testimony or not, will be notified
as soon as possible after the filing deadline.

Witnesses scheduled to present oral testimony are required 10 summarize briefly their written,
statements in no more than five minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY
ENFORCED. The full written statement of each witness will be included in the printed
record.

In order to assure the most productive use of the limited amount of time available to question
‘witnesses all witnesses scheduled to appear before the Subcommittee are required to submit 200
copies oftheir prepared statements for review by Members prior to the hearing

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

‘Any person or organization wishing to submit a written statement forthe printed record of
the hearing should submit at least six (6) copies of their statement, with their address and date of
hhearing noted, by the close of business, Monday, June 3, 1996, to Phillip D. Moseley, Chief of Staff,
‘Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements wish to have their statements
distributed to the press and interested public atthe hearing, they may deliver 200 additional copies
for this purpose tothe site of the hearing atleast one hour before the hearing begins.

FORMATTING REQUIREMENTS:

— or — ete od ny
‘rine ome et a oem iy maa
samen ame ro rm rr

1 Alama an any copenig hr pig men pd ln st magna pape an myo ated td
0 jage monte cnc

2 mney be cd tg. sd cat
sat gett ‘a ena et mi ese vera ye
Ee

3 Aetans aperg ta} — sr Sarcrte re ae omnes

cous = tate a an penne

Pest ee ae
cute greta ma Set pee mea ees ronnsNco Evy
Spence cae wilt ae

cert a ns gt ot ong.
soa cay eran rane ar est pl are ante bE eat

Note: All Committee advisories and news releases are now available over the Internet at
GOPHER HOUSE GOV, under ‘HOUSE COMMITTEE INFORMATION’.


110

or corruption in trying to get into a market? Do you protest to the
USTR or to the Commerce Department?

Mr. BERMAN. I imagine that it would depend on the size and na-
ture of the company involved. Many of our small and mid-size com-
panies that have raised this issue really have not done anything
in terms of conveying the message to the government. Some of
them had to back away from various lucrative markets, just be-
cause they cannot afford the costs, the risks of getting involved in
this kind of practice.

Chairman CRANE. I wish you would encourage them to commu-
nicate that, because it gives us a little bit more negotiating lever-
age. We are trying to expand the concept of free markets. That is
market access here, as well as ours over there. And so if you could
encourage your members to try and give us as much input as they
can.

I will yield to my distinguished Minority Leader.

Mr. RANGEL. I will accept that.

Chairman CRANE. That’s because he was in that majority posi-
tion all that while, it goes to his head.

Mr. RANGEL. I have become used to it. Tell me, how would a
small business cut a deal to export? Where would they go? What
services do you provide to afford opportunity for small businesses
to get access to export deals?

Mr. PAULLIN. None directly. As a voluntary trade association,
what we do is try to bring parties together. So usually that means,
and some of our most successful programs in fact are, we get trade
missions from abroad to meet with our membership and then we
move on and let the businesspeople talk.

Mr. RANGEL. Has the U.S. Department of Commerce set up those
type of trade missions for you here?

Mr. PAULLIN. Probably. It seems in the last 5 years, there are
more and more trade missions that are just here, because this is
the market, and in fact, our Chinese friends would tell us there is
a group in town from some province this week and there was a
group in town last week and there is another group from another
province.

Mr. RANGEL. Would not your associations be the best really to
get a better understanding of the law and things that have to be
done, so that we could hear from you in terms of finding out what
is working and what is not working and foreign missions could get
in touch with you to bring together your membership who have an
interest in that.

Ms. JACKSON. All of us do a great deal of that, and we do it coop-
eratively, too, in many cases. That is one response that has been
necessary because information has not been readily available from
other sources, not only about individual contacts for business, but
also in terms of how to do business. We do support more of the
“How To Do Business” activities, in terms of training and edu-
cation, perhaps than we do identifying specific partners. But this
is a very active area in Illinois, particularly the Chicago region, for
trade delegations. There are reciprocal delegations regularly. We
help hem organize trade missions from Illinois to all regions of the
world.


69

Last, I would hope that the Congress stay the course of support-
ing world trade because it is key to us. Andersen Worldwide would
not be 82,000 people today. It would be 600 people, practicing in
downtown Chicago. But, now we are an $8 billion business that’s
doubled in the last 5 years. And, in no small part, we owe that to
international trade.

My last comment is a philosophical statement. I would hope that
the Congress continues to make political decisions for economic
purposes as opposed to making economic decisions for political
purposes. Thank you.

‘he prepared statement follows:]


24

Chairman Crane. Thank you, Mr. Ambassador. You touched on
the WTO, World Trade Organization, and its trade dispute resolu-
tion process, and said that you could elaborate a little bit more on
that. Could you really get into the question of addressing some of
the specific complaints some American businesses have registered
against foreign trade barriers, and how that process has worked.

Mr. SHapPiRO. Yes, Mr. Chairman. When we fought for the WTO,
we said that the dispute settlement system would give us the op-
portunity to aggressively enforce U.S. rights, and we have done so.
We have taken more complaints to the WTO than any other coun-
try. We have invoked dispute settlement procedures in 12 cases al-
ready, and since that time, we have seen a number of cases that
we have been able to settle on positive terms, that we would not
have been able to settle under the old system because the old sys-
tem was nonbinding. For instance, we were able to invoke dispute
settlement to enforce the EU, European Unions, market access
commitment on grains. For many years agricultural exports and
the European barriers have been quite critical, but we were able
to get a quick settlement there because they knew if we went to
dispute settlement, they would lose and we would be able to
retaliate.

Similarly, we have been able to get quick settlement on the EU,
so called enlargement. When they expand EU, they basically were
able to raise tariffs on certain of our products. They are supposed
to compensate us and they often take a long time to do that, by
lowering tariffs. But in this case, we were able to get full com-
pensation and lower tariffs on hundreds of products, including
semi-conductors because we started dispute settlement.

In the same way, with Korean meat and shelf life restrictions
and with the Japanese law by which they were not giving our
sound recordings full 50 year protection, by starting WTO proce-
dures, we have been able to get settlements or move toward settle-
ments. We have not gotten a final settlement in the sound record-
ings. So we have also brought intellectual property cases against
Portugal, Pakistan, India and Hungary. So, there are a number of
cases where we are moving ahead and using the dispute settlement
aggressively.

hairman CRANE. Mr. Ambassador, there has been a lot of politi-
cal rhetoric, from a variety of sources about the alleged negative ef-
fects of our North American Free Trade Agreement. Now, it is be-
cause many people have not separated that peso devaluation from
what the objectives were of the NAFTA Agreement and it fails to
take into consideration the past history. With the peso devaluation
in 1982, our exports to Mexico dropped to half of what they were
because of the erection of tariff barriers against our products going
into Mexico. This time the drop was less than 10 percent because
they still are continuing to move forward in lowering any kind of
tariff barriers, and in addition to that, it took us 9 years after 1982
before we got into a trade surplus again with them. And last year’s
exports to Mexico were approximately, as I recall, $1.5 billion high-
er than they were before the peso devaluation, so our exports are
still going up. But could you elaborate a little bit on that situation,
because there is a lot of misrepresentation, and a lot of folks are


10

Chairman CRANE. Thank you very much, Congressman Rangel,
and I deeply appreciate your making that trip out from New York
and the weather permitted you getting in this morning. And I
would like to yield to Don Manzullo now for any opening statement
you might like to make.

{Opening Statement of Hon. Donald A. Manzullo follows:]

Mr. MANZULLO. Thank you, Mr. Chairman. It is a real pleasure
to be here this morning. The district that I represent is just to the
west and north of here. It starts at the Mississippi River and runs
all the way across the top of the State of Illinois, to the McHenry-
Lake County border. The 16th Congressional District of Illinois is
responsible for approximately one-third to one-half of Illinois’ ex-
ports. We have 1,800 manufacturing facilities, from the one-person
shop to the Chrysler Neon plant, and we welcome the opening of
a Motorola plant with 5,000 employees in McHenry County. So our
Congressional District is intricately related to trade. In fact, it is
dependent upon trade in terms of accessing those foreign markets.

Mr. Chairman, I look forward to the testimony of the wit-
nesses, especially our leadoff witness, Mr. Shapiro.

Chairman CRANE. Thank you. In introducing Ambassador
Shapiro, I would like to just mention the fact that, and elaborating
on what Congressman Rangel said, he was named by President
Clinton as Senior Counsel and Negotiator in the Office of the U.S.
Trade Representative. He was confirmed by the U.S. Senate on
June 30, 1995, and he has the responsibility for bilateral negotia-
tions with Canada and Japan. He was appointed by. President
Clinton in March 1993 as General Counsel of the USTR. Previously
he was a partner in the Washington office of Winthrop, Stemson,
Putnam & Roberts, specializing in legislative and regulatory prac-
tice and international trade policy. I might note, as a footnote to
that, that he reminded me this morning that he moved up to
Evanston in 1972, at exactly the time I lost Evanston in my origi-
nal district with the reapportionment. I do not know whether there
was any connection or not, Mr. Shapiro, but with that, I yield to
you for your comments.

STATEMENT OF HON. IRA SHAPIRO, SENIOR COUNSEL AND
CHIEF NEGOTIATOR FOR JAPAN AND CANADA, OFFICE OF
THE U.S. TRADE REPRESENTATIVE

Mr. SHapiro. Thank you, Mr. Chairman. I very much appreciate
the opportunity to be here, to come back to Illinois, where I actu-
ally started my professional career more than 20 years ago, to talk
about trade policy, what we think we have accomplished during the
administration, the challenges ahead. And I want to emphasize at
the outset, as you have already indicated, our trade policy, what we
have done and the challenges we still face, has been a very biparti-
san endeavor. Your leadership in the Congress, you and I have
worked closely together on difficult fights over NAFTA and GATT.
We have had great support on both sides of the aisle. Frankly, it
is unfortunate that I de not see Governor Edgar here, because we
would find a fair amount of common ground as well.

One thing that we have discovered in the last few years is that
there is a broad and emerging consensus on a bipartisan basis as
to what U.S. trade policy ought to be, and the President has pro-


29

in their hands. And so, I would just ask for a little direction in
terms of what you describe to be a vacuum in terms of our success
and exports. After the President expresses his feelings about how
important it is, and after exporters respond to questions of how im-
portant it is, I cannot find the leadership in terms of doing some-
thing about it. Could you help me there?

Mr. SHAPIRO. I am not sure I am the best person to help you,
but I did spend time the other night with Secretary Riley who you
know and who I believe would argue that in a lot ways in terms
of goals 2000, in terms of upgrading education, in terms of school
to work transition, and in terms of other areas, we have been, as
an administration, fighting to improve the education system. I
would probably be better off referring to my wife because she is the
educator in the family. But, I do not think any of us think we have
done enough, and in the next 4 years, I am hopeful that this will
be the priority that it ought to be, because obviously, as you and
I discussed on the way over here, we are not going to make the
progress and sustain the progress unless we have the world’s best
education system.

Mr. RANGEL. I will leave it on that, because I have given the
maximum cooperation to my Subcommittee Chairman here because
he has earned it and he deserves it. But, I am going to ask publicly
and privately that he try to assist me in focusing on what we have
to do as a nation to raise our National standards in education, not
just through statements or programs that we open up with work,

ut to set that out as a national goal, as Kennedy did to reach the
moon, so that we can continue, not only to provide the leadership
in the world in trade, but also to improve the standard of living for
every American, which really is what leadership in trade is all
about. So I look forward to working with you, and certainly, Chair-
man Crane, I will be working very hard in trying to see that we
do not get involved in education, but we try to show those who are
the beneficiaries of expanded trade how they have to assume more
of the responsibility. Thank you very much.

Chairman CRANE. Thank you, Congressman Rangel. Let me
thank you also for the bipartisan support for the tax credit for cor-
porations educating employees. Upgrading skills in that manner is
a very positive initiative and it originated from the private sector,
not from government. But I appreciate your support.

Mr. MANZULLO. Thank you very much. I have more of a comment.
than anything. If you want to respond to it, that’s fine, Mr.
Ambassador.

I am very much troubled over the Clinton administration’s dual-
ism in exports. Let me get very specific. In reference to the Three
Gorges Project in China. We met with Mr. Brody, who was the
president of the Ex/Im Bank last November. The administration
pulled the rug on Ex/Im financing for Caterpillar, which was in
process of selling 200 million dollars’ worth of machines to the
Three Gorges Project in China. This is the world’s largest public
works project. The reasons given for that were in the words of Sen-
ator Paul Simon, not sufficient. The Illinois House Members along
with Senator Simon, met with Mr. Brody, and as Senator Simon
said, the project will be built with or without U.S. participation.
Because of the environmental concerns over the Chinese alligator,


98

U.S. Chamber of Commerce

International Division
1615 H Street. NW.
‘Washington, D.C. 20062-2000
ove (202) 463-5460

Fax: (22) 468.3114

"WHY MFN STATUS FOR CHINA"

1 ‘The United States must stick to its policy of engagement.

‘The annual struggles over MFN and numerous threats of sanctions have
undermined efforts to implement a long-term U.S. strategy toward China, and set
back progress on trade and human rights. The United States has pursued a policy
of “engagement” with China since 1973, when President Nixon’s visit led to the
resumption of diplomatic relations. This policy has been followed by Presidents
Nixon, Ford, Carter, Reagan, Bush, and Clinton with bipartisan Congressional
support. Under engagement, the United States and China have recognized that
both nations have an interest in overall cooperation, even though we may differ
on certain issues.

2. China's human rights abuses, particularly imprisonment of prominent political
dissidents, are troubling to all Americans,

But massive sanctions would hurt the cause of human rights: sanctions would cut
off ULS. influence, isolate pro-American Chinese officials, and strengthen the
political standing of Chinese government hard-liners. It is important to take a
long-term perspective of progress on human rights in China.

3. American companies have been and will continue to be forces for positive change
in China.

On the human rights front, the opening of China’s economy to the rest of the
world has been a strong catalyst for local political reform. Through their presence
American companies promote human welfare and the principles of democracy and
free enterprise. To promote further progress on human rights in China, the
United States must remain commercially engaged.

The Chinese people have experienced vast and on-going improvements in
economic freedom, living standards, access to information, and political
expression during the 15 years since relations were normalized. Individual
Chinese are now free to choose their place of work, seek out new
entrepreneurial opportunities, watch foreign television programs, read
Western magazines and newspapers, and express political views in private.



91

mentation, that we have net an increase of 28,800 jobs in Illinois
in that 2-year period, directly tied to NAFTA. And how does that
compare to total job creation here in Illinois during that period?
Well, on average, over the last 5 years, we have seen about 60,000
jobs every year. So, nearly 30,000 in a 2-year period is about 25
percent of our average job growth in total in the State of Illinois.
So it has had an overwhelmingly positive impact. That is even with
the devaluation of the peso and significant falloff in Mexico in the
second year. So we are enthused about the success of NAFTA. The
net impact is significant, and we do have programs and opportuni-
ties. for those workers who are dislocated as a result of jobs lost to
trade.

The Federal Government has supported those programs for
years, through initiatives like the Trade Readjustment Act, the
Trade Assistance Act, and now NAFTA dislocation has been
brought into that realm of assistance. We find here in Illinois, with
increases in international trade, we also see reductions in the lev-
els of unemployment in Illinois. We have been on a downturn the
last 5 years. Forty-five percent of our businesses in the entire State
of Illinois now pay the minimum level of unemployment insurance,
which means they have had virtually no unemployment experience
in the last 4 years. So there is a relationship that’s having a very
positive impact.

I thought you might be interested in some specific examples of
small businesses attempting to get into this market, and I would
like to quickly tell you a couple of those stories.

One of our members in Southern Illinois is in the packaging and
distribution of candy and other products for consumer checkout
counter purchase. They have been very successful expanding in the
United States. Recently they found an opportunity to sell their
products in Japan. They were able to obtain enough orders to fill
an entire shipping crate for sale to Japan and in the process of fi-
nalizing the paperwork, they found that all the original research
and consultation they had been involved with related to a category
of confectionery goods, which is their primary segment, but the
product that was most popular and successful in orders in Japan
was microwave popcorn, which unfortunately is an agricultural
product. So with assistance and advice, they still ended up prepar-
ing all of their documentation inappropriately, created long delays
in their capability to be able to fulfill orders that were real.

So we see small businesses, in this case a business that employs
slightly over 100 employees, struggling to get access. They have the
ability to sell. They have the capability to reach the market, but
they get confused about some of the technical features of our laws,
and that’s the message for small business that I would like to leave
you with; the need for small businesses to access accurate informa-
tion easily in order to support and implement the policies that are
increasingly fairer and fairer for free market open competition. The
Federal Government can and should reduce the paperwork and
make information and support more accessible.

[The prepared statement and attachments follow:]


ll

vided leadership in that regard and I am proud of that. But, it also
converged with the views of many in Congress, many in the private
sector around the country and the Governors as well.

We are beginning, to see, Mr. Chairman, the results from the
President’s policy of insisting that other nations open their markets
to our products and services. When the President was elected he
said that his central commitment was trying to build the strength
of our economy so that we could compete and win the global mar-
ketplace, so our workers and then their children after them coming
into the work force, will have opportunities. That required a good
many changes on the domestic front, ranging from deficit reduction
to increased investment in education and training, and in our
urban areas where there are so many needs that we have not met.
But, it also required a new trade policy.

In the first weeks of his administration, the President sketched
out a new trade policy, one that rejected the false choice, as he put
it, between unilateral free trade on the one hand, and protection-
ism on the other hand. In a speech at American University in
February 1993, he said, “Open and competitive commerce will en-
rich us as a nation and we will compete, not retreat,” but he also
said, “We will continue to welcome the products and services and
investments of other countries into our market, but we will insist
that our products and services be able to enter other countries’
markets on the same terms,” that we favored open trade, but with
comparable access and reciprocal treatment. The days when we
could carry the trading system by importing everybody else’s prod-
ucts but allowing them to keep their markets closed to us were
long gone.

We have pursued that policy I believe consistently and some
would say almost relentlessly in the pursuit of open markets, for
the reasons you all have stated. Exports are crucial to our economic
health and our ability to prosper as a country depends on our abil-
ity to sell our products and services to the 96 percent of the world
that is not within our boundaries. If I had to say one of the keys
here, this is, in fact, the key.

This administration starts its trade policy from the premise and
indeed, from the fact that we have the world’s most competitive
companies, workers, and farmers. We have all the tools and talent
we need to compete in the world, as long as government plays its
role in opening foreign markets, in leveling the playingfield, insist-
ing that other countries play by the same rules, and dealing with,
as Congressman Rangel said, those who are hurt by trade and
those who also need the skills to participate in the global market.
For that reason, the President has pursued the NAFTA, and the
GATT, 200 trade agreements overall, including 21 with Japan.

And there is another premise that guided our policy there. Be-
cause we started with markets that were more open than our com-
petitors, we benefit when we open their markets. We move, not just
toward freer trade, but toward fairer trade, and that has been the
connecting premise between all the things that we have done, get-
ting people to negotiate, to lower their barriers, to enforce our
trade agreements, and basically to clear the way for our competi-
tive companies and workers.


U.S. Chamber of Commerce

Jaternational Division

‘Washington, D.C. 20062-2000
Phooe: (202) 46-5460
Fax: (202) 463.3114

"MFN STATUS FOR CHINA®
IMPORTANT FACTS AND FIGURES

* 1 1995, US. trade with China supported aver 200,000 high-wage jobs in the
United States, plus tens of thousands more jobs in ports, retail establishments, and
consumer goods companies.

© Without MFN, tariffs on about 95 percent of U.S. imports from China
would increase dramatically. American consumers would bear the brunt,
with price increases of 30-50% or higher on many common consumer
goods.

‘* China is among the world’s fastest growing economies, with real growth of
more than 10 percent last year, and an average growth rates over 7% for
each of the past fourteen years.

. Bilateral trade has grown from $2 billion in 1978 to nearly $60 billion in 1995.

© US. exports of goods to China have been growing at more than 20 percent
per year since 1990; total exports of goods and services to China were
approximately $12 billion in 1995, up more than 26% from 1994.

. China must invest over $745 billion in infrastructure development,
according to the World Bank. Loss off MFN will cost U'S. firms dealing in
high-technology equipment, aerospace, telecommunications, petroleum
technology, computers and power generation.

* Cultural links between the United States and China have been growing
dramatically. In 1994, U.S. travellers to China numbered more than
470,000 and nearly 40,000 Chinese students were enrolled in American
Universities.

. U.S. business invested in China $1.7 billion dollars during 1994, up 82%
from 1993. Total U.S. business investment in China amounts to $9 billion.


102

€

‘THE CHICAGOLAND CHAMBER OF COMMERCE
THE UNIFIED BUSINESS VOICE OF GREATER CHICAGO
ONE IBM PLAZA, SUITE 2800 * CHICAGO, ILLINOIS 60611 © (312) 494-6700 » (312) 494-0196

(CHICAGOLAND CHAMBER OF COMMERCE
INTERNATIONAL POLICY COMMITTEB

‘VIEWS ON FUTURE TRADE LIBERALIZATION
AND CURRENT INTERNATIONAL POLICY ISSUES

HEARING OF THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE

MONDAY, MAY 20, 1996
SCHAUMBURG, ILLINOIS

Good morning Ladies and Geutlemen. My name is Robert Berman, and I am an attorney
at Radalce & Wolfe in Chicago. Tama meater of the Chicigolaed Chamber of Commerce,
and the Chair of the Chamber's International Policy Subcommittee, The Chamber represents
more thas 2,000 companies that collectively employ over 1,000,000 individuals in the

Chicago area. Our membership bas a vital interest in the issues which you are
discussing, aid we thank you for the opportunity to share our views with you.

I will spend the next few minutes describing our support for continued progress of trade
liberalization within the regious covered by the North American Free Trade Agreement
((NAFTA") and the Asia-Pacific Economic Cooperation ("APEC") forum. While our members
are interested in secing greater developments in trade and investment relations in other regions,
including South America, Africa, and the European Union, the North American and Asia-Pacific
markets present particularly valuable opportunities for members of the Chicagoland business
community who emphasize future growth through international expansion. After commenting
briefly on NAFTA and APEC, I will highlight certain issues which we consider to be high
priority matters of international policy.

REGIONAL INITIATIVES

‘North American Free Trade Agreement

Strong economic ties within the region covered by NAFTA is undoubtedly in our best
interest. Since NAFTA went into effect, euployment in the U.S. mantifacturing sector has
increased by 225,000 jobs. Both in the U.S. and in Mlinois, Canadian and Mexican markets are
the first and second largest destinations of our exports. The province of Ontario alone buys
more U.S. goods than Japan. As fot [inois, between 1993 and 1994, Ilinois exports to Canada
increased by over 17%. In 1994, exports to Canada azcounted for 24% of the State's total
exports. In 1995, Iinois companies exported approximately S7 billion of goods to Canada, a
large portion of which included automobiles, telecommmunications equipment, various chemicals,
metals and plastics, aircraft, electric generators, and engines.

In 1995, [linois ranked fifth among U.S. states in terms of exports to Mexico, with sales
totaling $1 billion. Mlinois industry sectors whose exports to Mexico experienced large
percentage increases in 1995 include: metal mining (72% increase); lumber and wood products
(55% increase); petroleum and coal products (8% increase); and forestry (4% increase). Such
impressive trends exist notwithstanding Mexico's receat currency crisis. Although total
exports to Mexico may have decreased in 1995 following the peso devaluation, they were sti
higher than pre-NAFTA. Furthermore, without NAFTA, U.S. exports to Mexico could have



We cannot answer that questions with intelligence since our familiarity is limited to the North
America Free Trade Agreement. That agreement has been beneficial in reducing both the
Canadian and Mexican tariffs which were higher than U.S, tariffs for Canadian and Mexican

marine industry products. Tariffs and similar taxes are a major burden on the sale of our

products since our products are price-sensitive and purchased with the consumer’s discretionary
income.

We think it is very important for the United States to negotiate Chile’s membership in the North
America Free Trade Agreement at a very early date,

First of all, as the chief exponent of reciprocal free trade, the U.S. must actively encourage those
who seek to join a reciprocal free trade group. Chile’s economic resurgence following adoption
of free market economics on the first count deserves to be applauded and rewarded with joining
the club -- a recognition which is already overdue, A strong message would be sent to the rest of
the hemisphere.

Secondly, Chile’s membership in the North America Free Trade Agreement would permit the
comparative advantage economics to work more strongly for all countries in the group increasing
economic efficiencies, on the one hand, and lowering economic costs to U.S. businesses and to
consumers in all countries. It is, quite literally, a win/win situation.

At the parochial level, Chile's membership in the North America Free Trade“Agreement would
reduce high Chilean tariffs on U.S. boating products going into that country. There is a
significant demand for our products there, but tariffs in excess of 50 percent make the price of
our products in the marketplace virtually prohibitive. So, the U.S. boating industry would be an
immediate and direct beneficiary of a new market opening with Chile’s membership in the North

‘America Free Trade Agreement. We would expect several millions of dollars of sales to result
almost immediately and the creation of several hundred new American jobs within a few months
of such membership.

We would recommend a two-pronged approach: First, wide commercial contacts with China so
they become integrated into the world’s economic marketplace even more than is the case now
making it harder for China to tun back from the benefits of open marketplaces and world trading
norms.

Secondly, work actively with China’s other developed country trading partners to suggest, as a
group of trading partners, China’s adherence to certain international trading norms ranging from
observance of intellectual property rights to adoption of international product standards and
financial transaction standards. This type of group trading partner initiative vis-a-vis China is
likely to be more productive for all who deal with her rather than letting China play one trading
partner off against another -- including the U.S. ~- while maintaining vague and arbitrary
international trading policies.


65

Chairman CRANE. Thank you, Ron. Are you on a tight time con-
straint right now? Because I have just one question I wanted to di-
rect, and Congressman Rangel may have one and then we could let
you depart And we’ll go to our other witnesses, if that’s agreeable.

Mr. BULLOCK. Thank you.

Chairman Crane. I was more impressed with that 17 to 18 per-
cent higher growth rate in employment by those firms that were
into exports than those that are simply selling domestically. I was
wondering, though, is there any study or indication of job security,
whether those jol 3. are more stable, if you're into the export market
or are they more stable if you’re just producing for the domestic
market?

Mr. BULLock. I believe that tenure and turnover are both im-
proved with exporting companies. I would have to get you a copy
of that particular report.

Also there is kind of a symbiotic relationship between the large
multi-nationals and the smaller companies in exporting. As I men-
tioned, we provide components and equipment that are used by our
larger customers. As those companies rationalize their work forces,
we also provide sourcing services in the way of engineering. We
have 10 percent of our employees who have engineering degrees,
and we provide other services that our larger customers may no
longer have capabilities for keeping in-house. So, there are some
good working relationships that go on between the larger compa-
nies and the smaller companies as well.

Chairman CRANE. That’s encouraging. Congressman Rangel.

Mr. RANGEL. Thank you, Mr. Bullock. I assume that the export-
ing manufacturing company, would have no problem with an
increase in the minimum wage.

Mr. BULLOCK. As a matter of fact, the manufacturing sector, in
general, does not pay the minimum wage. We pay much better
than minimum wage.

Mr. RANGEL. I mean politically speaking, could we depend on
your support for it?

Mr. BULLOCK. Personally speaking, I have no proble: th it.
There has to be some give and take, and our typical start... vage
is probably two and a half to three times the minimum wage. How-
ever, I do feel very strongly, we do need to do some things to im-
prove education and training. Manufacturing, in general, spends
more on education and training than the public education sector.
That is both an encouraging sign, and a sign that the manufactur-
ing community has had to provide this education out of necessity,
because of the poor preparation that we see from the public school
system.

Mr. RANGEL. The private sector is doing more, and without that,
we would not have been able to have the successes we are having

ow.

With the losers in the work force, especially in the manufactur-
ing area, have there been any studies or any ideas that you would
have as to how we could soften the pain of unemployment?

Mr. BULLOCK. Let’s go back to the minimum wage. We do get a
lot of young people that get their first job working for minimum
wage. I know I worked for minimum wage myself, $1.25 an hour.


1

Introduction
Mr. Chairman and distinguished members of the Subcommittee:

My name is Robert F. Kelley. 1 am Managing Pariner--International Affairs for Andersen
Worldwide, which is the coordinating entity for Arthur Andersen and Andersen Consulting
member firms around the globe. I appreciate the opportunity to share my views and
suggestions on:

© the importance of trade and investment in services to the US economy,

‘+ the place of the service sector in future US trade policy, and

the international agreements and negotiations which will have an impact on services.

But first, | want to commend you for holding this hearing on the future of US trade policy.

‘You remain a stalwart supporter of free trade, and the companies, workers, and consumers of
Illinois are direct beneficiaries of your efforts. 1 also would like to thank your staff, not only for
their work in organizing this hearing, but also for their continued diligence and willingness to
work with the private sector.

Andersen Worldwide
Andersen Worldwide is the world’s largest professional services firm, operating from more
than 360 offices in 76 countries. The Arthur Andersen business unit provides accounting,
audit, tax, business advisory, and specialty consulting services to clients. The Andersen
Consulting business unit provides global management and technology consulting services.

Our clients range from the largest of multinationals to medium-size and small enterprises to
individuals. To best serve any of these clients, of course, we must be able to operate in the
world markets in which they operate.

Forty-seven thousand of our over 82,000 people are employed by our member firms outside
the US, while 35,000 work in the US. Closer to home, Andersen Worldwide has roughly 5,600
employees in Illinois ~ the great majority in the Chicago area -- in our headquarters, our
practice offices, our research and development facilities, and our extensive professional
education campus in St. Charles. For this audience I need not belabor the point that these are
high skill, high paying jobs. I might add that our Firm is the top recruiter of graduates from
US colleges and universities.

Last year our revenue topped the $8.0 billion mark, and a look at where these earnings come
from also helps demonstrate how international a firm we are. Of our $8.1 billion in revenue,
$43 billion was earned abroad, while $3.8 billion was earned in the US.

Weare quite proud of the fact that our revenue has doubled in the last five years. We believe
such growth is unique for a professional services firm of our size , and we expect similar strong
results in the next five years. Our success is in no small part attributable to our increased
involvement in markets overseas. While revenues for Andersen Worldwide in the Americas
grew an enviable 17% last year, our Europe/Middle East India Africa practice grew 25% in
US dollar terms and our Asia/Pacific practice grew 28% in US dollar terms.

We have benefited tremendously from the worldwide trend toward liberalization of trade and
investment. Such liberalization helps economies grow and helps our clients grow. When our
clients grow, we grow. An additional benefit from this trend has been an improvement in our
ability to serve these growing clients. We see continued liberalization as vitally important to
our continued success.

‘The Importance of Services
Asa professional services firm, Andersen Worldwide is part of the overall service sector. As
you know, this widely diverse part of the economy also includes telecommunications, financial
Services, transportation, audio-visual services, and others. Broadly speaking Mr. Chairman,
you and all other public servants also are a part of the service sector.

The importance of the service sector would seem to be self-evident, but far too many policy
makers -- and, to be fair, businesspersons, academics and others — continue to think of a
ration’s trade and economy in terms of cars built, wheat exported, and VCRs imported.


16

percent of the world’s population -- and we have the world’s most competitive workers,
companies and farmers. We will prosper by selling our products and services to the other 94
percent of the world.

Finally, in the post-Cold War world, national security and economic security cannot be
separated. The days of the Cold War when we sometimes looked the other way when our
trading partners failed to live up to their obligation are over.

President Clinton has pursued a trade policy to ensure America remains strong in this new era.
‘Over the last three years, President Clinton and his Administration, with the bipartisan support of
Congress, has negotiated nearly 200 trade agreements, including Nafta, which created the largest
free trade zone in the world, the Uruguay Round agreement, the most comprehensive trade
agreement in U.S. history, 21 agreements with Japan, and scores of other key trade agreements to
open foreign markets to U.S. exports. And he has fought hard to ensure our trading partners live
up to their obligations. Enforcing our trade agreements and trade laws is an important feature of
the President's trade policy.

We are starting to see the results. During the last three years, the United States has enjoyed
record export growth -- exports grew 4 percent in 1993, 10 percent in 1994 and over 14 percent
last year, which also was the largest dollar volume growth in exports in U.S. history. We returned
to being the world’s largest exporter. Last year we also hit an all time agricultural export record
of $55.8 billion --that’s a 22% increase over 1994's strong performance. What is impressive is
‘the broad nature of our economic strength. We lead the world in autos and agriculture, in
software and entertainment, in computers and semiconductors.

The USS. trade deficit with Japan fell by nearly 10 percent in 1995. U.S. exports to Japan were up
20 percent last year and 35 percent in the last three years. A study by the Council of Economic
‘Advisors showed that in those sectors covered by recent trade agreements with Japan, exports
have grown by 85 percent since the President took office. Exports to the dynamic economies in
Asia (excluding Japan) and Latin America (excluding Mexico) have risen by 40% and 36%
respectively in the last 2 years (1993 to 1995).

President Clinton has worked hard to help all Americans by building a strong economy. Because
of his efforts -with trade a big part of the picture -- the U.S. economy is thriving. Our economy
has created 8.5 million jobs in the last three years. Unemployment is now 5.4 percent. Recently
the Bureau of Labor Statistics released numbers showing that wages are growing at their fastest
pace in five years. All this growth has occurred while inflation has remained low and stable. The
‘most recent indicator is that the GDP deflator for the first quarter of 1996 was 2.5 percent, about
the same as the increase for the four quarters of 1995. Significantly, this continues to be an
investment-led expansion. Business investment was up 14.5 percent at an annual rate this
quarter. In fact, there has been an historic level of investment under President Clinton, laying
the groundwork for furure growth. Business investment has been up by 11 percent annually

since President Clinton took office, a better record on investment growth than any administration
since John Kennedy was President.


99

‘Unilateral sanctions do not succeed in changing the behavior of foreign
countries, particularly when the target country is an important economic
‘and military power.

In the case of China, the U.S. would be acting alone; the target has a large and
healthy economy; and the economic costs to the U.S. would be high. Based on
these criteria, the prospects for success with China appear minimal at best, and
punitive U.S. sanctions have a high risk of backfiring.

Linkage of China's trade status to emigration, child labor and human
rights has no support among our major competitors.

Europe and Japan are ready and willing to step in and meet China's infrastructure
and technology needs if we invoke economic sanctions.

Revoking MEN is likely to increase, not decrease, the U.S. trade deficit.

China is the fastest-growing market in the world for U.S. exports. Our exports
have doubled in the last five years to over $12 billion, Imports of low-cost
consumer goods, such as textiles, shoes, and toys account for China's trade
surplus. If MFN were revoked, assembly of these goods would not return to the
United States, but instead would likely go to other developing country suppliers in
Asia, such as India, Thailand, Indonesia or Pakistan. In other words, these
consumer goods would stil! be imported, but at a higher price, so there would be
a net deterioration in the U.S. trade balance, and loss of about $12 billion in
American exports to China.

‘The IPR issue is important to American companies, but it should not be
linked to China’s MFN status.

While China has made some progress in meeting its obligations on under the 1995
bilateral accord on IPR protection and market access, we recognize that much
more remains to be done. The U.S. Chamber has and will continue to support
the efforts of our government to improve IPR protection and market access.
China's compliance with the IPR Accord should be a priority in bilateral
negotiations, but loss of MFN will make sanctions meaningless.


21

We did not take the move toward retaliation lightly. U.S. copyright industries alone represent
more than 5 percent of the U.S. work force -- roughly equal to the U.S. auto industry — and
are growing three times as fast as the rest of the economy. The copyright industries contribute
more than $350 billion a year to the U.S. economy, accounting for more than 6% of GDP.
The U.S. computer software industry alone maintains a 75% market share worldwide.

We have worked very hard to solve this problem. We have met dozens of times with the Chinese.
We sincerely hope that we can solve it before the 30 day deadline runs out. We have said all
along that we will enforce our laws if China does not live up to its obligations. We will protect.
our economic interests.

WTO

I'd like to make a few points about the new World Trade Organization, created by the Uruguay
Round. In 1993, President Clinton provided the leadership to complete the Uruguay Round
negotiations. In 1994, Congress passed, with overwhelming bipartisan support, the legislation
implementing the agreement. The Uruguay Round is the centerpiece of the President’s efforts in
trade. The largest, most comprehensive trade agreement in history, the Round opened new
markets to U.S. exports in key U.S. industries, and established a new standard for the multilateral
trading system by ensuring that everyone play by the same rules. The Uruguay Round is a big
part of the reason exports have grown so dramatically. And although the WTO is still in its
infancy, it is working in our interest already, helping to create open and fair trade.

We are using the new WTO rules aggressively to enforce U.S. rights under the Uruguay Round
agreements. The United States has taken more complaints to the new World Trade Organization
(WTO) than any other country — we have invoked WTO dispute settlement procedures in 12

cases since the WTO was established in January 1995. Six of these 12 cases have been initiated
since January of this year, and 4 of those are aimed at enforcing new obligations assumed by our
trading partners during the Uruguay Round negotiations: involving failure by Japan, Portugal

and Pakistan to enact certain laws protecting intellectual property rights, as called for under the
new WTO agreements, and involving Hungary’s failure to limit its agricultural export subsidies.

We have already seen results. The WTO rules and the new dispute settlement rules are already
paying dividends by helping us increase jobs and exports. The new dispute settlement rules
often make it possible for us to enforce WTO agreements without ever having to reach a panel
decision. The fact that the WTO can and will authorize us to retaliate enables us to reach earlier
settlements opening markets for more of our exports.

+ EU grains. Last July we invoked WTO dispute settlement to enforce the EU’s market
access commitments on grains. In only five months we successfully reached a settlement.
‘The grains agreement reduces import charges on rice and provides for review and
consultation on the implementation of the European Union's "reference price system" for
all grains.

. EU enlargement. When the EU enlarged to include Austria, Finland and Sweden, our


50

Wrigley Poland is the leader in chewing gum products in Poland ... with a 57
percent market share.

Wrigley plans to construct a plant in Poland that will make Wrigley one of the top
ten Illinois facilities in the country.

But large multi-national corporations are not the only ones in Illinois that are
thinking global.

And they are not the only ones who are succeeding.

Treatment Products Ltd. “hich makes car cleaners and waxes ... had been
attempting to expand its small presence in Mexico since 1990.

Stiff Mexican tariffs that ran as high as 20 percent made achieving that goal
impossible for the $6 million Chicago-based company with 25 employees.

Six months after NAFTA went into effect ... tariffs started dropping gradually
and the company landed contracts with almost every major retail chain in Mexico.

Asa result ... the company has hired four new employees ... and sales to Mexico
have tripled.

International trade has a direct benefit not only to the companies actively engaged
in trade ... but to the communities in which they are located.

And we are learning that trade works both ways.

Recently, Sparta ... a community of 5,000 residents in Southern Illinois ...
experienced the closure of a major employer ... Spartan Printing.

More than 850 residents of Sparta and Randolph County worked at the facility ...
and found themselves out of work.

Because of the North American Free Trade Agreement and the barriers which it has
removed ... a major printing and paper distribution company in Mexico is once again
providing jobs and economic security to that small community.

It was able to secure the assets of the company and is planning to modernize the
printing facility and re-hire many of the original employees.

Inconclusion, I would like to stress that Ilinois is one of the great world-class
trading hubs in the international marketplace.

John Deere ... Abbott Labs ... Motorola ... Caterpillar ... US. Robotics and many
other global giants call Illinois their home ... because Illinois is working to maintain a
business climate that fosters growth ... expansion ... and trade.

Diversity is our strength and Illinois products and services are in demand across
the world .

We export everything from chemicals to cosmetics ... machinery to metals ... and
agriculture to architecture.

Today more than ever, it is time to compete and not retreat.

Thank you very much.



95

ILLINOIS JOB AND SALARY GROWTH:

Jobs (in thousands)
‘Numeric Growth

Industry Sector 199319941995 1993.94 1994-95 1993.95
Industrial Machinery 137813771392 1 16 14
Electronic Equipment 1066 11381200 70 64 134
Chemical Products 637 28622 old 4 Ls
‘Ag. Products (*) NA N/A NIA NA NA NA
Transportation Equipment § 43.9 48.0, 50.3 ai 23 64
Food Products 952 949950 03 o1
Instruments 36435340 “Ld 13
Fabricated Metals 992 104s 1109 33 64
Primary Metals 4 488 465 06 23
Rubber & Plasucs KO 596 612 16 16 32
Paper & Allied 3S MS SB 10 13 23
Total Top 10 Exporters M37 VS 755.1 158156 34
Total Manufacturing 9331 9521 966.7 190 146 336
Total Jobs S4N29 $5986 13241357 268.1

Average Hourly Earnings (in dollars)

Industry Sector 199319941995
Industral Machinery Weed 140s 1429
Etectrome Equipment 997 1010 1047
Chemical Products W332 C1372 1421
‘Ag. Products (*) NA NIA | NIA

‘Transportation Equipment 1339 a9 15,79

Food Products M49 15S 1189
Instruments 1092 138 1L9T
Fabricated Metals i241 1257 13.00
Primary Metals 138K 1403 1428
Rubber & Plastics to74 1086 11.32
Paper & Allied was” 171210
Total Top 10 Exporters 2s 1244 1281
Total Manufacturing 10s 1225 12.83,

(*) Jobs data for Agricultural Production (crops) are not available from the CES.
Data Source: Current Employment Statistics Program, monthly payroll survey of approximately 11,000
Mlinois businesses

Prepared by Economic information and Analysis, Illinois Department of Employment Security 04/17/96


33

Motorola is the world’s largest producer of cellular telephones,
two-way radios and pagers. We are also one of the largest semi-
conductor companies in the world, and the remainder of our sales
are in related areas of electronics. Total Motorola sales worldwide
have doubled in the past 3 years to $27 billion in 1995.

While Motorola is a global enterprise, with facilities in 70 coun-
tries, our roots are planted firmly in the U.S., specifically in
Illinois. Motorola is proud to call Schaumburg home of its world-
wide headquarters.

Motorola currently employs about 23,000 people in Illinois, with
more than 7,000 of them located here in Schaumburg. The ‘infra-
structure for cellular systems is in Arlington Heights and
McHenry. Cellular phones and accessories are made in Libertyville,
and our newest facility is in Harvard. Motorola’s Land Mobile
Products Sector is headquartered in Schaumburg, where we re-
cently assembled the wireless communication system that will be
used at the Atlanta Olympics. Our Messaging, Information and
Media Sector is also headquartered in Schaumburg, and our
Automotive, Energy and Controls Group is based in Northbrook.
The company also has operations in Lake Zurich, Vernon Hills,
Buffalo Grove and Urbana.

International trade plays a pivotal role in creating and sustain-
ing economic growth fr American workers and companies. A few
Motorola statistics illustrate this point.

In 1988, 36 percent of Motorola’s total revenues were derived
from sales outside the United States. In 1995, that figure was 63
percent and growing: Indeed there are some products, such as the
one I manage for Motorola, that are designed solely for non-U.S.
markets. Over that period, our worldwide revenues grew from
$8.25 to $27 billion and our employee base grew from 102,000 to
more than 140,000.

Of the 40,000 new jobs created, half were created outside the
United States and half were created in this country. Although the
U.S. sales as a proportion to the total worldwide revenues de-
creased from 63 to 37 percent during that period, we still added
20,000 new jobs in the United States.

The best way for the United States to maintain its leadership in
the world economy is by pursuing a trade policy that combines
three elements: persistent efforts to break down foreign tariff and
nontariff barriers to market access. While much progress has been
made, U.S. goods and services still face signif icant barriers in
many markets. Second, advocacy and export promotion, including
elimination of existing U.S. export disincentives. Other countries
recognize the critical importance of trade to the well being of their
economies and provide signifi ficant support to their exporters. Three,
aggressive enforcement of United States trade laws aimed at unfair
foreign trade practices. My written statement addresses these is-
sues in detail, so I will focus the rest of my remarks on one of the
most important relationships the U.S. has today, namely with

ina.

Motorola has a keen interest in ensuring that there are sus-
tained positive relations between the United States and China.
Motorola’s U.S. exports to China have grown significantly in recent
years, reaching about $1.2 billion in 1995. Indeed, we have about


wv

At precisely at the time when are businesses, workers and farmers regained their competitive
edge, the Clinton Administration has fought hard to open markets around the globe. This
concerted effort between the government and businesses, workers and farmers is a large part of
the reason the World Economic Forum in 1995 judged the American economy to be the most
competitive in the world for two years in a row --and up from number five in 1992.

Trade and the Midwest

‘We don’t need to look any farther than right here in the Midwest to gauge our successes -- and
the challenges before us. The President has fought hard to open markets so that workers and
companies in the Midwest can sell their products abroad. But at the same time workers and
businesses in this region have fought hard to regain a competitive edge in the global economy.
Both efforts have paid off.

Remember a decade ago, when, if you said “Midwest,” what came to mind was “Rust Belt.”
Dying factories. Boarded-up factories. Declining populations. But the workers and companies of
this region, the heart and soul of this country, said, “We're not going to give up.” They decided
they were going to tum things around. And they did. It was hard, and a lot of folks suffered, but
the region has bounced back. Now when you say, “Midwest,” what comes to mind is exports,
jobs, and new opportunities.

Trade has a lot to do with the brighter picture in the Midwest. The Washington Post recently said
in a story about the economic revival of the Midwest, “The 1990s have been the decade of
exports from the region and foreign investments in it.” The Wall Street Journal recently reported
that exports sustained the Midwest economy during the recent strike at the GM plant in Dayton.

Take Illinois for example, which is now an export powerhouse. Exports from Illinois rose 49
percent from 1993 to 1995, the largest such increase in the Midwest to a total of $32.6 billion. As
recently as 1991, the last year such data was available, 18 percent of Illinois’ manufacturing jobs
were supported by exports. The range of goods that Illinois sells to the world runs the gamut
from industrial machinery to electronic equipment to food. Illinois is the nation's second largest
agriculture exporter with 3.1 billion dollars of exports.

The story is the same throughout the Midwest. Michigan is the nation’s fourth-leading exporter
of merchandise, and Michigan's exports rose an estimated 40 percent between 1993 and 1995.
Michigan’s merchandise exports alone support an estimated excess of 533,000 jobs in Michigan
in 1995, up 150,000 since 1993.

Most of the credit for this success goes to the workers and companies throughout the Midwest.
But some of the credit must go to the President because he has stood up for the interests of
workers in the Midwest — and across the country. He recognized that it won't do any good to
create an excellent product at a competitive price, whether it is a car, a shock absorber, a bushel
of com, or a piece of medical equipment, if foreign countries keep those products out of their
market. That's why he has fought so hard to open markets and ensure American firms can sell
their goods and services abroad.


61

While many espouse the importance of international trade and exporting for the
US, many fail to pinpoint exactly what it is that the US has at stake in the multilateral
trading system. Through work done by the Institute for International Economics in
conjunction with the educational and research affiliate of the NAM(the Manufacturing
Institute), two important reports have been released which provide new insights into the
importance of trade to the US economy. Specifically, these reports examine the
performance of exporting vs. non-exporting companies, and document that exporting
matters to the average American worker and American company far more than most
people realize. Conclusive data demonstrates that there are distinct differences between
exporters and non-exporters in terms of pay, productivity and performance:

© pay in export plants is, on average 15 percent better;

© benefit levels are 37 percent higher;

© productivity is 40 percent greater;

© exporting improves company survival rates by 10 percent; and
‘» job growth is 17-18 percent greater.

The data on job growth was perhaps the most surprising. Virtually all the decline
in average employment was attributable to non-exporting plants. In contrast, the
workforce at exporting plants grew by 17-18 percent. Second, the role of small business
in this employment growth was even more surprising. Small exporters had growth levels
1-2 percent higher than average.


114

work more strongly for all countries in the group, increasing eco-
nomic efficiencies on the one hand, and lowering economic cost to
U.S. business and consumers in all countries, and it is clearly a
win-win situation.

At the very parochial level, if I may, we note a fairly strong de-
mand for our products, boating industry products, in Chile, but
there is a big problem which is a tariff in excess of 50 percent.
Extending NAFTA to Chile would reduce that tariff and we would
expect almost immediately several million dollars worth of sales,
and the creation of several hundred new American jobs within a
few months.

Regarding the Chinese situation, we think Congress could do a
great service to itself and to the country if we changed the name
of MFN to something else. It would stop it from being such a politi-
cal football, and I am really quite serious about that. It is unfortu-
nate that this has happened, but that would be a step in the right
direction. Beyond that, we would recommend a couple other
measures.

First of all, the widest commercial contacts with China that are
possible will better integrate China into the world’s economic mar-
ketplace, and basically making it harder for China to return to past
relations. So we think that’s quite important. Second, we have to
be a more reliable trading partner. It seems to me that every time
there is an election in the United States, we change the conditions
on which the countries can do business with us internationally, and
that makes it difficult to try to sustain a trade relationship. China
now has the advantage working what amounts to bilateral trading
agreements against each other. That is to say, we and China seem
to be constantly at swords’ points when, in fact, what should hap-
pen is that the western world trading norms, and the developed
country trading norms should, as a group, be pressed with China,
so that it is not just the United States against China. What we are
really after here, it seems to me, and what our trading partners in
other areas of the world should be after, is getting China to adopt
the world trading norms.

Let me say that some of the problems that we have in dealing
with some of the agencies involved in trade in the United States
is that we are frequently given a sympathetic hearing but then told
in a polite way, we would like to help. you but you are really too
small. We would like to help you reach, but you're not tall enough.
So quite often we are very low on the priorities. Well, half of the
U.S. economy is, in fact, small business. It seems to me that some
of these agencies might do well if they had a congressional man-
date to have what amounts to a small business division or depart-
ment within that, to deal with industries like ours. We are an in-
dustry of hustlers internationally but in fact, we could use a little
help in clearing out some of the barriers to trade.

In developed countries, most of the barriers to trade we face are
nontariff. That is to say, complex standards and procedures have
been deliberately used to slow down imports. In the case of the
nondeveloped countries, most of the problems are tariffs. We find
that the Commerce Department has been our biggest ally. The late
Secretary Brown has intervened personally on our behalf with good
results in all cases. Some of the people in Commerce have helped


6

Mr. Chairman and members of the subcommittee, my name is Jeff W. Napier and I am president
of the National Marine Manufacturers Association, a trade group representing over 1,500
manufacturers of recreational boating products of all types including several dozen companies
headquartered here in Ilinois. While our industry generally may be characterized as comprised
of small businesses at both the manufacturing and retail level, we do have a few large companies
led by Brunswick Corp. of Lake Forest, Illinois and Outboard Marine Corp. of Waukegan,
Ilinois. The National Marine Manufacturers Association is itself headquartered in Chicago,
Minois.

Over 70 percent of our 1,500 members are involved in the international marketplace with the
typical member selling at least 15 percent of its output internationally and in many cases up to 25
percent. This is true across virtually all product lines from boats to engines to equipment and
services. The trade association I represent is itself internationally involved in many international
standards making bodies; international government relations; the production of boat shows
throughout the U.S. with many foreign buyers in attendance; production of boat shows in Canada
and Mexico to sell the products of our members as well as organizing pavilions in boat shows
from Singapore and Tokyo to Rio; Amsterdam; Genoa, Italy and Dubai. We'work regularly with
the U.S. Commerce Department on some of our international trade issues and also with the U.S.
‘Trade Representatives on occasion as well as U.S. Embassies and Consulates around the world.

‘The U.S. recreational boating industry typically exports $1 billion in an average year and, while
cyclical, is one of the few U.S. manufacturing industries with a favorable balance of trade -- as
high as $600 million favorable within the last few years. Not bad for an industry of small
company entrepreneurs.

The role of our association in the international marketplace is:

(1) To help our companies achieve distribution by offering exhibitors tunkey
marketing efforts through boat shows. Internationally and domestically shows are
‘a major marketing tool for the industry;

(2) Working to reduce or eliminate tariff’ and non-tariff barriers to trade both by
working through our government and through international boating industry
organizations; and

(3) Working to harmonize international product standards so that our products are
more universally acceptable in international marketplaces and we can enjoy the
economies of scale which come from long production runs.

It should be noted that the U.S. is well situated to enjoy the economies of scale in the making and
selling of boating products for the international marketplace because half the world’s market for
boating products is right here in the U.S. Another 35 percent of the marketplace lies in the
countries of Western Europe with the rest scattered in Japan and the developing countries of
southeast Asia plus a few small markets in Australia, the Middle East and Africa.

We cannot offer detailed intelligent commentary on all of the questions which are the focus of
this hearing, but can address some of them and hope that our comments will be of assistance to
the Committee.


4

Chairman CRANE. Good morning and welcome to this hearing of
the Subcommittee on Trade of the Ways and Means Committee on
the status and future direction of U.S. trade policy. It is indeed a
great pleasure to welcome my colleague from the House of

presentatives, the Ranking Member on our Trade Subcommittee,
my colleague from New York, Congressman Charles Rangel. And I
am also happy that Congressman Don Manzullo, my friend from
Egan, Illinois is able to be with us today. He serves as Chairman
of the Small Business Subcommittee on Procurement, Exports, and
Business Opportunities in the House of Representatives.

As the fifth-largest exporting state in the nation, open inter-
national markets are critically important to the creation of high-
paying jobs in Illinois. By the same token, expanding trade is vital
to our country, which is the world’s greatest exporter. My purpose
in bringing the Subcommittee here to Schaumburg is to fous on
how one successful state approaches the international marketplace
and to review how important trade is to future economic growth.

Finally, I have requested the witnesses comment on the most
important trade issues facing their firms and associations.

We are honored to be joined later this morning by Governor Jim
Edgar. And our first witness who will be testifying is Ambassador
Ira Shapiro, who will share the perspectives of their respective ad-
ministrations. It is important to put these issues into context by re-
viewing some key statistics which I expect our witnesses will re-
emphasize in their presentations.

In 1995, U.S. exports increased by 14 percent, reaching a total
value of $784 billion. Here in Illinois we experienced an even big-
ger surge in export growth, as our exports rose by 24 percent over
1994 levels, to $33 billion. These exports came from a broad spec-
trum of Illinois industries, including industrial machinery and com-
puter equipment, electronics, chemicals, agricultural and food prod-
ucts, transportation equipment and many more.

The message I want to share with you today is that exports
translate directly into jobs here at home. Indeed the U.S. Com.
merce Department has estimated that every $1 billion in exports
translates into 17,000 to 20,000 new jobs in the United States.
Moreover, it has been estimated that those jobs pay up to 22 per-
cent more on the average than their counterparts that produce for
domestic consumption. Although Illinois is home to many of our
country’s largest exporters, including Motorola, Caterpillar, Archer
Daniels Midland, Abbott Laboratories and Deere and Co., compa-
nies of this size dominate U.S. trade relations less and less. In-
creasingly, small businesses are succeeding in selling their prod-
ucts abroad. Already the U.S. Census Bureau has determined that
97 percent of Illinois companies that export, employ less than 500
employees each.


93

[Let's reflect on the results of two years under the North American Free Trade Agreement for Illinois
business. The NAFTA provides Ilinois’ strong manufacturing and agricultural economy with a
competitive advantage in dealing with its first and fifth largest trading partners, Canada and Mexico.
Since the agreement became effective on January 1, 1994, Illinois has experienced an increase of
33,600 manufacturing jobs with 93% of the increase (31,400) occurring in Ilinois' top ten export
industries. In addition to growth in Hlinois' job base, wages have substantially improved since the
‘emergence of NAFTA. The average manufacturing wage in the top ten industries (industries with
substantial exports to Mexico and Canada) has been consistently higher than the average for all
manufacturing. Furthermore, a number of Ilinois top export industries (transportation, industrial
machinery, primary metals, and chemicals) already maintain an average manufacturing wage that is
substantially higher than the norm.

‘A year after NAFTA‘s inception, Illinois experienced a 34% increase in exports to Mexico and a 17%
increase in exports to Canada. Although Mexico faced serious economic adversity in 1995, NAFTA
continued to promote trade, increase economic competitiveness and foster productive investment
within the region. Even with the recent devaluation in Mexico, unlike the 1982 peso devaluation,
Mexico remains fully committed to continuing their economic intregation through trade and
investment liberalization as agreed upon under the NAFTA. Between 1993 and 1995, according to
Illinois data generated by the U. S. Department of Commerce 28,800 Ilinois jobs were sustained
through trade with Canada and Mexico, This is a 23.4% change over a two year period and
demonstrates that NAFTA created prosperity in Illinois despite the severe devaluation of the peso
in Mexico.

NAFTA opens markets for American products that were previously closed in Mexico and Canada

Over the next 15 years, NAFTA will eliminate tariffs completely and remove many of the non-tariff
barriers that have hindered trade among the three countries. This approach will continue to be
successful and we encourage the expansion of the treaty and the approach used to negotiate this
treaty with Chile and others in South America

The Illinois Chamber also wishes to support continuation of “Most Favored Nation Status" for China.
We support a U.S. trade policy that opens markets for U.S. exports, generates more jobs for
‘American workers, and helps lead toward a more open China. Renewal of Most Favored Nation
Status is fundamental to that goal The ability of U.S. companies to compete and prosper in China
and the creation and maintance of U.S. jobs will be undermined if our relationship with China
continues to spiral downward. Last year US companies exported roughly $12 billion in goods and
services to China, These exports supported approximately 200,000 high wage jobs. Imports and
investments sustained many thousands more All of this investment and trade will be at stake without
More Favored Nation Status. We support the U S Chamber's detailed position of unconditional
renewal of China's Most Favored Nation Status, which is found as an attachment to my printed
testimony and incorporated therein

China is vital to America’s economic future and American companies and workers have a huge stake
in future expansion of U.S. trade with China. S. economic sanctions on China would seriously
harm U.S. workers, consumers and high growth industries including chemical, electronics,
agriculture, telecommunications, power generation, petroleum and aerospace. Trade provides a
positive basis for U.S.-China dialogue by building cross-cultural ties and awareness of American
culture and political values. The United States needs to maintain bi-partisan support for a clear,
credible and consistent long-term China policy. The long-term goal of American trade policy should
bea stable U.S.-China commercial framework that opens markets for U.S. exports, generates more
jobs for American workers, and supports positive steps toward a more open China.

‘As we approach the 21st century global economies are taking center stage and nations all over the
world are scrambling to establish economic partnerships. By maintaining a partnership with our
neighbors we will remain competitive in the global markets and ensure economic growth and
prosperity for all Ilinoisans. My expanding that partnership even further, we will be even more
successful

I wish to thank the Subcommittee Chairman Congressman Crane for holding this hearing and
demonstrating the significance of international trade to the Illinois economy which is truly a
microcosm of our nation. Thank you


38

japan

Wire earier, Motorola most dramatic growth hasbeen inthe Ala-Pacific region, where
sales now account for more than 30% of our total revenues. We are actively
‘opportunities in several markets throughout Asia, and welcome the trend In many of these
‘countries towards greater liberalization of their trade, investment and regulatory regimes.

Ja addition to the multilateral effos ongoing through APEC; the US needs to continue on a
llateral basis to address continued market access barriers in several key markets in Asia.

‘ols is parlcularly uve In Japan, Japan remains high pelocty market for Motorola. Our
business there includes semiconductors, pagers, cellular telephones and other wireless
‘communications. Although we have made strides in the Japanese market, they have often
ome about largely as resul of US Government pressure wo eliminate rade bares,
301 and other provisions to combat foreign unfair trade practices have been invaluable in
peje open tn Topanese tat nce whce mula shave wot brs up oe

‘Tee agreements negotiated with Japan have indeed yielded postive results for Motorola, The
‘Semiconductor Trade Arrangement led to

greater lower ‘more comprehensive
service, the number of Subscribers on IDO's Motorola-based analog cellular system grew from
12,000 in March 1994 to more than 600,000 in December 1995.

Other areas have not reached their fll potential however, including J Go t
agency procurement, where the foreign share of the market remains essentially flat despite the
‘procurement gotiated in October 1994, We oa
vigilant US Government monitoring and enforcement of bilateral this to

‘such as
‘ensure that Japan does indeed implement measures and practices that will increase foreign
share.

Sima, in the case ofthe Semiconductor Trade Aran we continue to need a new
fist docade in cxpanding fore wcign marketshare in Jepan, ‘The area agreement expres In
last in ign mi in Japan.

July andthe Tapanese Coveranent att ‘must be convinced to come to the table before that time to
‘negotiate a renewed pact.

las
Latin America have undergone dramatic transformation in recent years,
‘with democracy ecooomle sab  pevatization and fll partilpation in itemtional

Political and commercial circles. ‘The countries in this replon have re-wniten thelr rules, and

‘Some of our hemispheric trading partners, notably Chile, have undergone significant reforms
to Join the US in free rade and investment. “Unforumately, the United States is ot therefor
them, and they are turing elsewhere. For example, MERCOSUR and Chile are entering into
an agreement to zero out their respective tariffs. ‘Bite is he 35th lagen ackng partaot of

‘the United States. Not significant in macro terms, of message does it
send when the US cannot enter into negot ‘a country that has done everything we
Could ask to Uberalze is opine? ‘The United States, regrettably, has lost the upper hand in
‘trade negotiations. This policy-by-default enables us only to hope that new arrangements


125

things that the Chinese do to us, the businesspeople still say, if you
do not allow them to trade with us, it will be worse. It is coura-
geous, if self-serving, for businesspeople to say what they think is
in the nation’s interest that’s their right. But, how so many intel-
ligent and concerned and patriotic Americans can just say, I do not
know about Cuba, I do not know about Helms-Burton, I do not
know anything about what is unpopular for me to know about. You
are depending on a sound nonpolitical trading policy. That’s what
you are begging us for. And we should not do things to get us elect-
ed. We should do things that are in our National interest. And both
sides play the same issue, year after year, decade after decade, and
get a lot of campaign money and all shoot craps for the electorial
vote.

It is not that I feel that strongly about Cuba, but we have got
to do the same thing with Libya, Iran and then I am going to have
to get my list of countries that I just do not like and compete, you
know, just say I have got my list, I will take one of yours, you take
one of mine and then you guys are going to be right in the middle
wondering what has that got to do with trade policy. I hope when
you have your meetings, someone just might raise it. It is not a lot
for everyone to sell or to buy from Cuba, but if you meet with any
of our rice growers, or chicken growers, automobile people, or peo-
ple who grow the beans, they have got a heck of a lot of interest
in opening up trade with Cuba.

But your testimony has really allowed me, at least, to get a bet-
ter feeling of knowing the facts, since I was really taking it for
granted. It is really great to be out here.

As for the boat industry, do you find anything in our present tax
system that you think puts you at a disadvantage in exports?

Mr. NAPIER. No, not since the excise tax was repealed. That
devastated us, if you remember that a few years ago.

Mr. RANGEL. I forgot all about that.

Mr. NaPIER. What it did was it cut our domestic sales so low that
we no longer enjoyed the economies of scale in our manufacturing
which enabled us to be very competitive internationally. Now we
are building back.

Mr. RANGEL. we learned from that. I was thinking more of the
value-added tax.

Mr. NaPIER. It does not affect us that much. Our two biggest
problems are the nontariff barriers to trade in the developed
nations and the tariff barriers in the developing nations.

Mr. RANGEL. Well, thank both of you. You were very informative.

Mr. NapIER. Thank you.

Ms. HUGHES. Thank you.

Chairman CRANE. We appreciate your testimony, and with that,
the Subcommittee stands adjourned.

Thank you, Congressman Rangel.

Mr. RANGEL. Thank you, Mr. Chairman.

{Whereupon, at 2:31 p.m., the hearing was adjourned.)

[e)


100
Chairman CRANE. Very good. Next, Bob Berman.

STATEMENT OF ROBERT S. BERMAN, CHAIRMAN, INTER-
NATIONAL POLICY SUBCOMMITTEE, CHICAGOLAND CHAM-
BER OF COMMERCE

Good afternoon, ladies and gentlemen. My name is Robert
Berman and I practice corporate law at Rudnick & Wolfe in
Chicago. I am here today on behalf of the Chicagoland Chamber of
Commerce, where I serve as the chairman of the Chamber’s
International Policy Committee.

The Chamber represents over 2,000 businesses in the greater
metropolitan Chicago area. Our membership employs over 1 million
individuals in the Chicago region. We have a great interest in the
issues you are discussing today and we appreciate this opportunity
to share our views with you.

When we found out that we would be participating in this hear-
ing, we simply contacted our members and posed some questions
to them. We asked our members are you emphasizing international
expansion in upcoming years, and if so, in which regions? And
moreover, we asked our members to convey to us any messages
they had about problems, obstacles, issues which they have encoun-
tered in doing business overseas.

In a nutshell, the two regions our members focused on in their
responses to us are the regions covered by NAFTA and APEC. The
North American and Asian-Pacific regions show great promise for
our members. As for issues that we would like to convey to you,
I will just go through a few of them very briefly.

The first one is corrupt business practices. Many of our members
are small to mid-size companies that cannot afford, even if so in-
clined, to participate in some of the corrupt practices undertaken
by many foreign competitors. Foreign multinational corporations
may not only be able to afford illicit payments, but also may re-
ceive favorable tax treatment in their home countries for such rep-
rehensible conduct. We support stringent efforts to oppose extortion
and bribery and to persuade foreign nations to disallow tax deduc-
tions for bribes which companies pay to foreign officials in obtain-
ing export contracts. By granting a tax deduction for such ex-
penses, foreign nations encourage corruption and place our mem-
bers at a competitive disadvantage in the global marketplace. The
U.S. Government should pressure foreign nations to establish
transparent procedures relating to the acts of public officials in
commercial transactions. Proper enforcement involves the adoption
and implementation of strict laws, regular surveillance and inves-
tigation, and severe penalties for those who violate the law.

The second issue pertains to government procurement policies.
We would like to see more fair and open government procurement
policies adopted in a number of countries, particularly in those
countries which are modernizing their infrastructures. In such na-
tions, the public sector presents tremendous opportunity for
Chicagoland businesses which excel in areas such as telecommuni-
cations, energy and construction. We strongly oppose the practice
of governments in certain countries to discriminate against foreign
bidders, and we support both multilateral and bilateral efforts to


41

‘Withdrawal or conditioning of China's MEN status would invite retaliation, which would
Jeopardize Motorola's exports to and business in China. This would give our foreign
‘competitors an unfair advantage in the rapidly expanding Chinese economy, and would
threaten Motorola’s ability to compete throughout the Asia-Pacific region.

‘The annual debate over renewal of China’s MFN status puts the US Government in the
difficult position of measuring progress in artificially short increments. Since Motorola first
went to China in 1986, we have seen arise in the standard of living and improvement inthe
human condition in China In some areas, they still have a long way to go, to be sure. But it
is important to look at how things are evolving, not at a snapshot.

Motorola docs nt condone China's scons towards Talwan earls tis year. Likewise, we

Motorola exposes its Chinese employees
to market-driven business and management practices, and to our core principles of for
the individual and ng iterity in everything we do. We provide ens
thousands of hours of training to our own employees, suppliers and government officials at
Motorola Univeraty in Beijing and Tanjo, and through on-the-job training, ‘Motorola isthe
donor to Project, which builds elementary schools in the poorest parts of
rural pers the first foreign company in China to co-sponsor an
eavironmental protection symposium that brought together Chinese policymakers, regulators,

ties between the United States and China stabilize and deepen over time. China’s
MEN status this year is the right short-term objective. But over the long term, the United
‘States and China should strive together to take the steps necessary to and
“oormalize” their commercial ties. By “normalization” we mean ‘changes in US
and Chinese policy that will allow the to enjoy a commercial

regardless of where we stand on other issues. Motorola that stable US-China
commercial relations are in our company's best interest, but importantly, serve the

Normalizing would include ,
China’s accession to the World Trade Or (WTO) on commercially acceptable terms,
and addit {n bilateral trade tes through 2 step

Motorola's comtaved ability to create American jobs and
in the United States demands markets
the Sure. ‘To be success enced te 08
bilateral and multilateral en

ia, Mr. Chairman, we commend you for oo this and thank you for
eine dea ado cvuag a fovaon td implcmestaion Of US trade policy
are conducted with purpose and proper direction.

‘Thank you.