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70–867 2011

THIRD IN A SERIES OF THREE HEARINGS ON THE 

PENDING, JOB–CREATING TRADE AGREEMENTS: 

SOUTH KOREA TRADE AGREEMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TRADE 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

APRIL 7, 2011

Serial No. 112–TR3 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON TRADE 

KEVIN BRADY, Texas, Chairman 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

WALLY HERGER, California 

DEVIN NUNES, California 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

JIM MCDERMOTT, Washington 

RICHARD E. NEAL, Massachusetts 

LLOYD DOGGETT, Texas 

JOSEPH CROWLEY, New York 

JOHN B. LARSON, Connecticut 

JON TRAUB, Staff Director 

JANICE MAYS, Minority Staff Director 


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C O N T E N T S 

Page 

Advisory of April 7, 2011, announcing the hearing .............................................. 2 

WITNESSES 

PANEL 1: 

Ambassador Demetrios Marantis, Deputy U.S. Trade Representative, Office 

of the United States Trade Representative .................................................... 9 

PANEL 2: 

William Rhodes, Chairman, U.S.-Korea Business Council; President and 

Chief Executive Officer, William R. Rhodes Global Advisors, LLC; Senior 

Advisor to Citigroup, on behalf of the U.S.-Korea Business Council and 

the U.S.-Korea FTA Business Coalition ......................................................... 37 

John A. Schoch, Jr., President and Chief Executive Officer, Profile Products 

LLC, on behalf of the United States Chamber of Commerce ........................ 45 

Robert Holleyman, President and Chief Executive Officer, Business Software Alliance .................................................................................................... 55 

Ambassador Thomas Hubbard, Senior Director for Asia, McLarty Associates, Former Ambassador to South Korea ...................................................... 63 

SUBMISSIONS FOR THE RECORD 

Beam Global Spirits and Wine Inc ......................................................................... 74 

Accuray Incorporated .............................................................................................. 79 

California Chamber of Commerce .......................................................................... 85 

U.S. Korea Business Council and U.S. Korea FTA Business Coalition .............. 86 

U.S. Chamber of Commerce .................................................................................... 92 

California Coalition for Free Trade ........................................................................ 100 

Wine Institute and Wine America .......................................................................... 103 

The Advanced Medical Technology Association .................................................... 107 

American Manufacturing Trade Action Coalition ................................................. 115 

American Apparel and Footwear Association ........................................................ 120 

U.S. Industrial Fabrics Institute ............................................................................ 121 

California Association of Winegrape Growers ....................................................... 124 

National Cattlemens Beef Association ................................................................... 125 

International Trademark Association .................................................................... 127 

National Skills Coalition ......................................................................................... 129 


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THIRD IN A SERIES OF 

THREE HEARINGS ON THE PENDING, 

JOB–CREATING TRADE AGREEMENTS: 

SOUTH KOREA TRADE AGREEMENT 

THURSDAY, APRIL 7, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON TRADE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:02 a.m., in 

Room 1100, Longworth House Office Building, the Honorable Kevin 

Brady [chairman of the subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Brady Announces Third in a Series of Three 

Hearings on the Pending, Job-Creating Trade 

Agreements: South Korea Trade Agreement 

March 31, 2011 

Congressman Kevin Brady (R–TX), Chairman, Subcommittee on Trade of the 

Committee on Ways and Means, today announced that the Subcommittee will hold 

a hearing on the pending trade agreement with South Korea. This hearing is the 

third in the series of hearings on the pending trade agreements with Colombia, Panama, and South Korea. The hearing will take place on Thursday, April 7, 

2011, in the main Committee hearing room, 1100 Longworth House Office 

Building, beginning at 10:00 A.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A 

list of invited witnesses will follow. 

BACKGROUND: 

On June 30, 2007, the United States concluded a trade agreement with South 

Korea, which is still awaiting Congressional consideration. On December 3, 2010, 

the United States and South Korea agreed to the terms of a supplemental autos 

agreement that will foster greater market access for U.S. automakers. 

On January 25, 2011, the Ways and Means Committee held its first hearing on 

this agreement, along with the pending trade agreements with Colombia and Panama. The South Korea trade agreement was also discussed at the Ways and Means 

Committee hearing with Ambassador Kirk, on February 9, 2011. On March 7th, 

Chairman Camp agreed to Ambassador Kirk’s written request to begin technical discussions on the draft implementing bill, noting that discussions between Congressional and Administration staffs were scheduled for later that day. Technical discussions are ongoing. 

The U.S.-South Korea trade agreement would open new markets to U.S. exports 

and, in turn, benefit American businesses, farmers, workers, and consumers. The 

Obama Administration estimates that implementing the agreement will support 

70,000 jobs in the United States. The independent U.S. International Trade Commission (ITC) has estimated that implementing the agreement would increase U.S. 

exports by at least $9.7 billion. In addition, the tariff cuts alone will add at least 

$10.1 billion per year to U.S. GDP. The benefits of trade agreements are also longlasting. Since 2000, U.S. exports to the 13 countries with which the United States 

has implemented trade agreements have grown almost twice as fast as our worldwide exports. 

South Korea has concluded trade agreements with major trading partners and export competitors of the United States, so U.S. failure to implement our own trade 

agreement with South Korea could severely disadvantage U.S. exporters and jeopardize U.S. job creation. The EU–South Korea trade agreement is expected to enter 

into force on July 1, 2011, removing significant South Korean tariffs for European 

exporters while similar tariffs remain in place against U.S. exports. South Korea 

currently has trade agreements in place with Chile, India, and the ten countries of 

the Association of Southeast Asian Nations (ASEAN). South Korea is also negotiating trade agreements with Canada, Australia, New Zealand, and China. 


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In announcing this hearing, Chairman Brady said, ‘‘South Korea is a dynamic 

market and key ally in the Asia-Pacific region. Opening up the South Korean market for American goods and services is a critical priority for robust U.S. long-term growth. Passing the U.S.-South Korea trade agreement, 

like our agreements with Colombia and Panama, will create good U.S. jobs 

and increase the competitiveness of U.S. exporters. In addition, it will preserve U.S. influence and leadership on the Korean peninsula and in the 

broader Asia-Pacific region. We cannot afford to lose these export opportunities by sitting on the sidelines as South Korea moves forward on trade 

agreements with our major competitors. American workers, farmers, ranchers, manufacturers, service providers, and other exporters will simply be 

left behind. I hope that the Administration will work with this Committee 

to allow Congressional consideration of all three pending trade agreements 

by July 1.’’ 

FOCUS OF THE HEARING: 

The focus of the hearing is on Congressional consideration of the pending trade 

agreement with South Korea. The hearing will address the economic benefits this 

agreement will bring to American businesses, farmers, workers, consumers, and the 

U.S. economy. In addition, the hearing will examine the national security and geopolitical implications of the agreement and will explore developments within South 

Korea that have occurred since the trade agreement was concluded. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by the close 

of business on Thursday, April 7, 2011. Finally, please note that due to the 

change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–6649. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 


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The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available at http:// 

www.waysandmeans.house.gov/. 

f 

Chairman BRADY. Good morning, everyone. I would like to welcome you all, especially South Korean Ambassador Han, to today’s 

Trade Subcommittee hearing on the U.S.-South Korea trade agreement. Today’s hearing is the third in our series of hearings on each 

of the pending trade agreements: Colombia, Panama, and South 

Korea. 

As I have said at each of the previous hearings, I firmly believe 

that we should consider all of the three agreements by July 1st. I 

welcome the Administration’s announcement yesterday that it has 

reached agreement with Colombia. I look forward to quick movement on the action plan and to working with the Administration 

to ensure submission of all three agreements for Congressional consideration by July 1st. All three pending trade agreements are good 

agreements. The time to move forward with all three is now. 

I know that many Democrats share our sense of urgency. With 

respect to the Korea-U.S. trade agreement, we all know that the 

European Union South Korean trade agreement is expected to 

enter into force by July 1st. Implementation of agreements by other 

countries, and continued inaction on our agreement, will result in 

further missed opportunities to create American jobs. In fact, it will 

result in a decline in existing American jobs. We either move forward or we fall backward; the choice is ours. Staying still is just 

not an option. 

The economic benefits of the pending trade agreements are overwhelming. The ITC, International Trade Commission, estimates 

that the three pending trade agreements together would increase 

U.S. exports by at least $13 billion, and add $10 billion to our 

GDP. And President Obama stated that such an increase in U.S. 

exports could support 250,000 jobs. 

These benefits are enjoyed broadly. For example, the American 

Farm Bureau estimates that the U.S. farm exports to South Korea 

could increase by more than $1.8 billion each year. Moreover, 90 

percent of all American companies exporting to South Korea are 

small and medium-sized enterprises. Implementation of the agreement will lead to an additional $2.8 billion in exports for small and 

medium-sized American companies. 

This agreement, like the Colombia and Panama deals, would 

level the playing field for U.S. exporters. The average South Korean tariff for U.S. exporters is more than four times the average 

tariff that South Korean products face in the U.S. market. The 

agreement would address this imbalance. 

The state-of-the-art agreement, like Colombia and Panama, will 

address key non-tariff and regulatory barriers, such as sanitary 

and psytosanitary barriers, requiring strong protection of intellecVerDate Nov 24 2008 05:32 Dec 02, 2011 Jkt 070867 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70867.XXX GPO1 PsN: 70867

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tual property rights, requiring greater regulatory transparency, 

and encouraging greater regulatory harmonization and the use of 

international standards. 

We cannot also overlook the fact that South Korea is a key ally 

in a critical region of the world. The U.S.-South Korea trade agreement is important not only for its economic benefits, but also for 

our national security. Just today I received a letter signed by a 

number of former senior officials in trade and foreign policy, highlighting the key geostrategic role that Korea plays, and urging Congress to pass all three agreements as quickly as possible. 

Without objection, I would like to enter that letter into the 

record. 

[The information follows, The Honorable Mr. Brady:] 


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Chairman BRADY. Now that I have highlighted some of the benefits to the U.S.-Korea agreement, I would like to set the record 

straight on a few points. 

First, Republicans are very excited about moving forward on the 

Korean agreement, just as we are excited to move forward with the 

Panama and Colombia agreements. Our goal is simply to speed up 

the Latin American agreements to catch up with the Korean agreement! There is a sense of urgency for all them, as these trading 

partners are moving ahead without us, to conclude agreements 

with our competitors that do not include us. 

Second, our view is that all three agreements must be considered. It is simply not a Republican view. Key Democrats, such as 

the chairman of the Senate Finance Committee, explicitly agree 

with this view. Strong bipartisan support for all three was also 

very clear from the strong statements of support that were issued 

yesterday in response to the Administration’s welcome announcement about Colombia. 

Third, despite what some are saying, we have already started the 

bipartisan technical drafting work on the Korea agreement with 

this Administration. On March 7th, Chairman Dave Camp agreed 

to Ambassador Kirk’s written request to begin technical discussions 

on the draft implementing bill, noting that discussions between 


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Congressional and Administration staffs were scheduled for later 

that day. Those technical discussions are ongoing, and we are 

awaiting responses to questions that staff on both sides of the aisle 

have raised with USTR. We are working constructively together to 

move forward in a timely manner to ensure that the draft implementing bill is complete and thorough. 

At the same time, I would urge the Administration to work with 

us on this technical work for the Colombia and Panama agreements, too. Both Ambassador Kirk and Ambassador Shapiro have 

made clear that the resolution of any outstanding issues will not 

require changes to the text of the agreement. I believe we should 

start this technical work immediately to ensure that the drafting 

is complete and thorough, and the draft implementing bills are 

ready to go. We cannot waste any more time. 

I would like to welcome all of our witnesses today, and thank 

them for being with us. I look forward to hearing the testimony of 

both panels. 

At this time I would yield to Ranking Member McDermott for the 

purposes of an opening statement. 

Mr. MCDERMOTT. Thank you very much, Chairman Brady, for 

scheduling this hearing. Finally we are discussing a free trade 

agreement that is ready for congressional consideration right now, 

an FTA that will generate more than $10 billion in increasing U.S. 

exports, $11 billion in increased GDP, and as many as 277,000 new 

American jobs. 

The Korean FTA brings economic benefits to each and every 

state in this union. In Texas, where Chairman Brady and Mr. 

Doggett live, estimates indicate that the FTA will increase 27,000 

new jobs in a range of sectors from agriculture to transportation. 

In Washington, where Mr. Reichert and I reside, we catch a lot 

of fish and produce a lot of agriculture and timber. The Korean 

FTA is expected to create 1,500 new jobs in those sectors alone. 

In California, where Mr. Davis and Mr. Herger live, and where 

unemployment is 12.3 percent, it is estimated that the FTA will 

create 26,000 new jobs. 

In Florida, Mr. Buchanan’s state, the state’s citrus growers and 

processors support the FTA, which would phase out steep tariffs on 

U.S. orange juice. And those additional exports would go through 

the port in Manatee he talks about in this committee. 

In Illinois, where Mr. Schock lives, is the second-largest soybean 

producer in the country. And under the FTA, soybean production 

will increase by $565 million to $850 million. 

And we know that Congresswoman Jenkins is very concerned 

about beef. Nebraska, where Mr. Smith’s district is located, is another major producer. Well, under the Korean FTA, beef exports 

are expected to increase by $633 million. 

It is clear that the FTA with Korea would produce a real economic boost, spurring economic growth all over the country. The 

Administration has been ready to move on the FTA for more than 

a month, and yet the Republican majority refuses to move, putting 

all of the FTA potential economic gains in California, Illinois, Florida, Texas, Kansas, Nebraska, and all over the United States, on 

hold. 


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The EU–South Korea FTA goes into effect on July 1. Each day 

that the congress delays passage of the U.S.-Korea FTA puts U.S. 

businesses and workers at a greater disadvantage, compared to 

their European counterparts. And the Republicans know this. Back 

in 2009, they argued that we should pass the flawed version of the 

FTA, even though the auto provisions weren’t fixed, to make sure 

that we did not fall behind the EU. The Republicans’ own estimates suggest that U.S. workers and businesses would lose $1.1 

billion in exports to Korea, once the EU–Korea trade agreement is 

fully implemented. Well, it is around the corner, my friends. 

So, what is the hold up? Well, it cannot be Colombia any more. 

The President announced yesterday exactly what the Republicans 

have been demanding. If, despite the announcement, the Republicans continue to dither on Korea, then their motivation is just 

plain ugly politics. It is time to end that. There is too much on the 

line. 

So, here is what I suggest. USTR Ambassador Ron Kirk should 

send the draft of implementing legislation to Congress immediately, and request the Ways and Means Committee to do a swift 

review and a mock mark-up. After a reasonable period of consultation—let us say three weeks—the Administration should then formally submit the FTA, implementing legislation so that it could be 

introduced, and fast-track procedures, including the specific time 

lines for consideration, initiated. 

There is no reason that both the House and Senate cannot pass 

this meaningful agreement by Memorial Day, before it is too late 

for American families in business. It is time to get moving. I yield 

back. 

Chairman BRADY. Thank you, Ranking Member McDermott. 

Today we have two panels of witnesses. On our first panel is a witness from the Administration, Ambassador Demetrios Marantis, 

deputy U.S. trade representative from the Office of the U.S. Trade 

Representative. Ambassador, welcome. We look forward to your 

testimony. I would ask that you keep your testimony to five minutes, and your written statement will be made part of the record. 

I do want to take a moment to applaud the President, Ambassador Kirk, and the USTR negotiating team for improving what 

was a very solid agreement with Korea. But working with thenChairman Levin, Chairman Camp, and others in Congress in close 

consultation improved the Korean agreement. That was a significant achievement, and I very much appreciate your work on that. 

At this point I would recognize you for five minutes. 

STATEMENT OF DEMETRIOS MARANTIS, DEPUTY U.S. TRADE 

REPRESENTATIVE, OFFICE OF THE UNITED STATES TRADE 

REPRESENTATIVE 

Mr. MARANTIS. Thank you. Good morning, Chairman Brady, 

Ranking Member McDermott, and Members of the Committee. It 

is a really exciting time to be involved in international trade right 

now, and it is a real honor for me to be here to testify before you 

on the U.S.-Korea trade agreement. 

Let me also welcome Ambassador Han, who is here. He has been 

my partner in crime for the past couple of years, as we have been 

trying to navigate the difficulties that we, together, faced. 


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Congress has the singular opportunity to pass the most economically significant trade agreement in nearly two decades. The U.S.- 

Korea trade agreement will strengthen our trade and investment 

ties to Korea’s $1 trillion economy. It will bind a key ally closer to 

us, anchor our economy to the dynamic Asia-Pacific region, and 

help us keep our edge over international competition. Most importantly, this agreement will create substantial export opportunities, 

establish strong enforcement provisions, and support tens of thousands of new export-oriented jobs. 

The Korea agreement is just the first example of how this Administration has worked to make our trade agreements better. The 

President has underscored his intention to present pending trade 

agreements to Congress once we have adequately addressed key 

outstanding concerns. In December we did so with Korea. This 

week, Panama has taken steps to complete work on outstanding 

tax and labor issues. And later today, the President will announce 

an agreement with Colombia on an action plan to address outstanding labor issues. 

Congress must now work on passing a comprehensive trade policy, one that includes the pending trade agreements, trade adjustment assistance, our preference programs, and permanent normal 

trade relations with Russia. 

The U.S.-Korea trade agreement is ready to move today. The 

President and many of you had serious concerns about the deal 

signed in 2007. We heard you, and we took action. After extensive 

consultations with members of this committee and a wide range of 

stakeholders, the U.S. and Korea agreed last December to make 

Korea’s auto market more fair, open, and transparent. We leveled 

the playing field by addressing key non-tariff barriers in Korea’s 

auto safety and environmental regulations. We encouraged green 

technologies by immediately cutting in half Korea’s tariffs on electric cars, and eliminating these tariffs within five years. We negotiated a tariff structure that will give American auto companies 

and their workers a chance to build more business in Korea before 

U.S. tariffs come down. And we negotiated a new special motor vehicle safeguard. 

These commitments allow us to unlock the economic potential of 

the 2007 agreement. Immediately upon entry into force, this agreement eliminates tariffs on two-thirds of U.S. agricultural exports to 

Korea. Within five years of entry into force, it removes tariffs on 

over 95 percent of consumer goods exports. And it provides significant market access to Korea’s $580 billion services market. 

Underpinning these new export opportunities are the Korea 

agreement’s state-of-the-art provisions to protect and enforce intellectual property rights, reduce red tape, and eliminate regulatory 

barriers to U.S. exports. This agreement contains the highest 

standards for protecting labor rights, promoting the environment, 

and ensuring that key domestic labor and environmental laws are 

enforced. 

Taken together, these additional export opportunities mean more 

jobs for Americans. The tariff reductions on goods alone will lead 

to significant increases in U.S. exports to Korea that will support 

over 70,000 U.S. jobs. More services exports to Korea will support 


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tens of thousands of additional jobs. And fewer non-tariff barriers 

and stronger rules will support even more. 

We remain committed to further opening beef markets across 

Asia, including Korea, consistent with international science. In the 

meantime, the U.S.-Korea agreement, when implemented, will progressively reduce Korea’s 40 percent beef tariff, and enable U.S. 

beef producers to build upon the exponential growth of exports to 

Korea. 

Working with you, this Administration addressed outstanding 

concerns with this agreement. Working with you, we made significant improvements that will have real benefits to our auto industry, its workers, and our economy. And working with you, we can 

now move forward. Now is the time to act on this agreement so 

American families can realize the many benefits of the U.S. trade 

agreement. Working together, let us move this agreement without 

further delay. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Marantis follows:] 


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f 

Chairman BRADY. Ambassador, thank you very much. You have 

set out your testimony, a very strong case for this agreement for 

a number of reasons. There are—I would like to talk about two 

concerns that I have heard raised by critics I would like your help 

in addressing. 

First, some folks are concerned about how the agreement might 

affect the textile industry. I know this agreement includes state-ofthe-art provisions to address major concerns such as trans-shipVerDate Nov 24 2008 05:32 Dec 02, 2011 Jkt 070867 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70867.XXX GPO1 PsN: 70867

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ment, a surge in imports, and enforcement. It also includes a strict 

rule of origin. 

So, the first question is, does this agreement benefit textile and 

apparel manufacturers in the U.S.? And how would the provisions 

I mentioned address concerns raised by them? 

And when you finish that, I would like to ask about the Kaesong 

industrial area, and some of the provisions in the bill, as well. 

Mr. MARANTIS. Thanks, Mr. Chairman. Seventy-five percent of 

U.S. textile and apparel exports to Korea would receive duty-free 

treatment immediately upon implementation of the agreement. 

That is really important, because Korea is becoming a larger destination for U.S. textile and apparel exports. 

Right now, Korea is our tenth largest market. Last year alone, 

our textile and apparel exports to Korea increased by 45 percent. 

So, getting this agreement in force now is very important, particularly when you think about the EU and its textile exports, and the 

competition that we face in that market. 

But as you mentioned, Chairman Brady, textiles is a sensitive 

sectors in the U.S., and there are very important provisions in this 

agreement that address that. 

First, we have delayed staging of certain sensitive products, in 

terms of when the U.S. will reduce its tariffs. In some cases, that 

staging extends as long as 10 years. 

Second, as you mentioned, we have a very important rule of origin that the industry supports strongly, which is the yarn forward 

rule, which basically says products cannot receive preferential 

treatment unless the yarn and the fabric is produced in either 

South Korea or the United States. 

Third, we have a special textile safeguard in the agreement that 

allows us to address instances when increased imports may cause 

serious damage to the industry producing like or directly competitive products. 

And, finally, as you mentioned, the agreement contains very 

strong provisions on trans-shipment. It allows for increased information sharing between U.S. and Korea customs authorities. It allows U.S. customs authorities to conduct verification activities in 

Korea. And if there is ever a problem, CBP, our customs authority, 

has the authority to take penalty actions, including denial of entry 

of goods. And that just builds upon the provisions that CBP already does, in terms of post-import verifications and other mechanisms it uses to prevent trans-shipment. 

Chairman BRADY. Thank you. Very helpful. Second, some have 

expressed concerns that products produced in the Kaesong industrial complex, which is located in North Korea but operated jointly 

by North and South Korean workers, they are concerned they 

would be treated as products originating from South Korea under 

the agreement. I understand that the agreement specifically requires legislative action—in other words, an Act of Congress—before products from Kaesong are permitted to enter the United 

States. 

Please describe what the effect of this requirement is, and please 

describe whether products from Kaesong could receive benefits 

under the agreement. 


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Mr. MARANTIS. Thank you, Mr. Chairman. There has been a lot 

of confusion on this issue. And let me be very clear. Goods produced in Kaesong do not receive any benefits under the U.S.-Korea 

trade agreement. Any change to how Kaesong is treated under the 

agreement would require Congress to pass, and the President to 

sign, legislation. 

So there is nothing in this agreement that provides any benefits 

to Kaesong. In fact, the word ‘‘Kaesong’’ does not even appear in 

the agreement. 

Chairman BRADY. And if there were to be any change that—literally, Act of Congress, signed by a President, before—— 

Mr. MARANTIS. Yes. Any recommendations that—there is a 

committee that is established under the agreement for outward 

processing zones that can make recommendations. Any—if we 

choose to act on those recommendations, the only way to do so is 

to come here and seek legislative authority from Congress. So Congress has the final word. It would have to pass a law, and the 

President would have to sign that law into force. 

Chairman BRADY. Thank you for putting that confusion to rest. 

Appreciate it. 

Ranking Member McDermott. 

Mr. MCDERMOTT. Thank you. I want to begin by apology. I 

moved Mr. Davis from Kentucky to California. That is a severe insult to him, and I apologize publicly. 

[Laughter.] 

Mr. DAVIS. Well, I thank the gentleman for pointing that out. 

I reminded folks that I live in the United States, not in California. 

So I appreciate and thank him. 

[Laughter.] 

Mr. MCDERMOTT. I would like to ask you a question, because 

I think there is a whole lot of misunderstanding about Kaesong. 

And I have been there on one of my trips to Korea. 

And I would like you to explain to the committee what Kaesong 

is really all about and why the South Koreans have created this. 

There is a lot of mythology floating around. It would be nice to 

have somebody give some facts about why they created it, what 

they are doing with it, what the intention is, and so forth. 

Mr. MARANTIS. Sure, I would be happy to. As you mentioned, 

Mr. McDermott, there is a special industrial zone over the border 

in North Korea called Kaesong, which South Korea launched in 

2003, as an effort to encourage reforms in North Korea. And it is 

an industrial complex that produces, you know, a wide variety of 

goods. 

You know, ties between North and South Korea have deteriorated, as we all know. And, as a result of that, South Korea has 

banned new investment in Kaesong since May 2010. 

Mr. MCDERMOTT. And the industries were from South Korea 

and the workers were? 

Mr. MARANTIS. North Korean workers. 

Mr. MCDERMOTT. Who then went back into the community 

with knowledge about how the free enterprise system might work. 

Mr. MARANTIS. Correct. I mean the idea behind Kaesong, you 

know, when it was originally launched, was to help to provide, you 

know, new exposure for North Korean workers as to, you know, 


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business practices in South Korea and, you know, as part of an effort to encourage reforms in North Korea. 

Mr. MCDERMOTT. It was also in anticipation that at some point 

there may be a reunification between North and South Korea, and 

in having workers understand the situation they are coming into. 

It is not like Germany, where there were three West Germans for 

every East German. In this case, it is a huge number of people 

coming into the economy, and they want to try to transition, or at 

least begin the process of transitioning. Is that correct? 

Mr. MARANTIS. Yes, sir. 

Mr. MCDERMOTT. I yield back the balance of my time. 

Chairman BRADY. Thank you, sir. The gentleman from Kentucky is recognized. 

Mr. DAVIS. I thank you, Mr. Chairman. Ambassador, South 

Korea is more than a key trading partner. It is also a key geo-strategic ally in Asia. Currently, there are more than 28,000 American 

troops stationed in the country, and our militaries regularly conduct joint exercises. Our geo-strategic relationship is important, not 

only to counteract the threat from North Korea, but also dealing 

with China’s military ambitions and security, in general, in the Pacific Rim. 

Could you discuss the broader geo-strategic significance of this 

agreement? 

Mr. MARANTIS. Thank you, Mr. Davis. And Korea, as you mentioned, is a critical strategic ally of the United States. And what 

we are doing, as part of the free trade agreement, is helping to bolster the economic pillar of the U.S. strategic relationship. 

A strong, prosperous South Korea is very much in the strategic 

interest of the United States, which is why negotiation, conclusion, 

and ratification, and entry into force of this agreement is a win-win 

for both of us. It is good for both the South Korean economy and 

the U.S. economy. And, as a result, it is a good tool to help bolster 

a very important ally. 

Mr. DAVIS. Thank you. Just as a follow-up, given what you have 

just said, I was wondering if you could also address how this is any 

different from the geo-strategic considerations and importance of 

our partnership with Colombia, particularly given the fighting, its 

narcotrafficking, the influence of Hugo Chavez in the region. 

Mr. MARANTIS. Sure. I personally do not work on Latin America and Colombia issues, so I do not have a lot to say. But you 

know, in a very similar way, Mr. Davis, Colombia is a very—an important strategic ally in the region. And, you know, working on the 

free trade agreement is a way to help, again, strengthen Colombia’s 

economy in a volatile region. 

Mr. DAVIS. Okay. Thank you very much. I yield back the balance of my time. 

Chairman BRADY. Thank you. The chair recognizes Mr. 

Reichert. 

Mr. REICHERT. Thank you, Mr. Chairman. I, first of all, want 

to thank you, Ambassador, and Ambassador Kirk and the entire 

USTR team. And also special recognition to Ambassador Han, who 

we have been working closely with, too. And excited about the upcoming vote to come soon. 


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I want to mention how much of an honor and a pleasure it has 

been to work with the export initiative group, and their commitment to doubling exports, and I think finally recognizing the importance of passing trade agreements to accomplish that goal. As I 

have said many times in our trade hearings, from 1995 through 

2007, I think, is the last time we doubled our exports, and we 

passed 9 trade agreements. So, I think everyone is recognizing the 

value there, the possible loss of jobs if we do not pass these agreements. 

So, I really want to focus on the jobs issue, because sometimes 

there is some misinformation that gets out there, and some opponents, I think, may skew the numbers just a little bit. 

But just with the Korean Agreement, the first estimate was 

70,000 jobs that could be created, as you mentioned in your testimony. Senator Wyden has completed a study that estimates the job 

gain would be almost 280,000, which includes our services industry, which, as you know, is about 80 percent of our economy now. 

So, what is your view on some of the organizations that say we 

are going to lose 160,000 jobs versus the 70,000, the 280,000, the 

loss of market share as the EU and Canada and China and others 

come? We want to sell American. I mean that is the goal, right? 

Sell American across the world. So what do you say to those people 

who are saying that we are going to lose jobs with these agreements? 

Mr. MARANTIS. Thank you, Mr. Reichert. I mean, to start off, 

the study that suggests that there is going to be 160,000 jobs lost 

is just plain wrong. That study does not even use the Korea agreement as a model as it is examining the Korean agreement. It extrapolates from other sources to draw conclusions which we believe 

are not accurate. That study also relies on, you know, what we 

think is not, you know, appropriate methodology, in terms of linking an increase in trade deficits to job losses. 

First of all, the ITC has been very clear that the trade deficit— 

it predicts that our trade deficit, our $4 billion trade deficit that 

we currently have with Korea will be reduced by the agreement by 

anywhere between $3.3 billion and $4 billion. And you know, assuming a link between trade deficits and job losses is not really 

supported by historical evidence. During the Great Depression, a 

time where we had very high employment, we ran trade surpluses. 

In the 1990s, when we were operating at very close to full employment, you know, we ran large trade deficits. 

But to your point, sir, is this agreement is all about jobs. And 

the export opportunities, the $10 billion to $12 billion in annual exports that this agreement is going to create in goods trade alone, 

will produce—a conservative estimate on our part—70,000 jobs. 

And that is just goods trade. That is not when you look at services 

trade and other areas. 

Mr. REICHERT. Well, I appreciate your recognition of that falsehood on the loss of jobs. And one of the things I think that the 

USTR and the export council is looking at is educating people 

across the country as to the benefits of trade. Because even, believe 

it or not, the longshoreman, whose paycheck is 100 percent dependent upon trade, is—or some are against trade. 


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So, the last question I want to ask real quick, you know the environment is very important to all of us, and especially for those of 

us in Washington State it is very important to us. The language 

in the Colombian agreement, Panama agreement, and the Korean 

agreement, aren’t they exactly the same, as it relates to the environment? 

Mr. MARANTIS. Yes, sir. We have the most high standard environmental provisions in Korea, Colombia, Panama, as well as in 

the Peru agreement. And I am happy to go into as much agonizing 

detail as you want. But we are very proud of the text of the environmental—— 

Mr. REICHERT. And Korea has made great progress there, am 

I correct? 

Mr. MARANTIS. Yes, sir. 

Mr. REICHERT. Yes. Thank you, Mr. Chairman. I yield back. 

Chairman BRADY. Thank you. Mr. Neal is recognized. 

Mr. NEAL. Thank you, Mr. Chairman. Mr. Ambassador, it is always easy to talk about the benefits or the shortcomings of trade 

in the generic. It is more difficult, as you know, in the specific. 

But I do think one of the compelling parts of the argument, obviously, is what our competitors are doing to establish free trade 

agreements across the globe. 

And would you comment, perhaps, on what would happen if this 

were to fall by the wayside, given what European Union is now 

doing, in seeking greater opportunities for growth through these 

FTAs? 

Mr. MARANTIS. Thank you, Mr. Neal. Yes, it is a—it would be 

a big problem. I mean the EU trade agreement enters into force on 

July 1st. The longer that agreement is in force with the Korea 

agreement not being in force, the longer EU exporters have a competitive edge over our exporters in that market. And the EU is very 

competitive with us in all sectors: manufacturing, agriculture, and 

services. And it is very hard to regain market share once you lose 

it, or once another competitor actually gets a leg up. 

What is very disturbing, as well, are statistics. Our market share 

in Korea has eroded over the past 10 years. In 2003 we were the 

largest—had the largest import share in Korea at 21 percent. Now 

we are at nine percent. We are behind Japan and China, and the 

EU is very quickly catching up. And if their agreement goes into 

effect and ours does not, we will likely be eclipsed by the EU. 

So, now it is very important that we get this passed, entered into 

force, so that our exporters can take advantage of the huge competitive opportunities that the agreement provides. 

Mr. NEAL. How does this help gain a stronger foothold for the 

United States in Asian markets? 

Mr. MARANTIS. Again, it is a question of, I think, reversing a 

trend of erosion that we have seen, not just in Korea but throughout the Asia-Pacific region. This agreement is critical to that. The 

negotiations we are doing in the trans-Pacific partnership, the 

nine-country regional trade agreement that we are doing in the 

Asia-Pacific is critical to that goal. We need to be in the game very 

seriously in Asia, in the Asia-Pacific region. It is the most dynamic 

part of the world, and it is the part of the world where we stand 


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to gain competitive export opportunities and the jobs that are supported by those export opportunities. 

Mr. NEAL. And lastly, I know that your portfolio does not include South America. But might you speak to the issue of what 

China is attempting to do in much of South America now, particularly in Brazil and other countries? 

Mr. MARANTIS. Sure. Again, we face, you know, in Latin America, as we do in other parts of the world, the risk that China and 

other economies are going to take advantage of opportunities that 

should be ours. You know, we have seen an erosion in market 

share in the Asia-Pacific, as an example, and the potential for that 

is very real in Latin America, as well. 

So, we need to seize, you know, the opportunities that are in 

front of us, get our manufacturers, our service providers, and our 

farmers and ranchers into those markets, so they can sell their 

made-in-America and grown-in-America products. 

Mr. NEAL. I thank you. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you. Mr. Herger is recognized. 

Mr. HERGER. Thank you, Mr. Chairman. And again, I want to 

thank you for representing a state and an area that is very dependent—California—heavy agriculture. In an area that I represent we 

are very grateful for the work that you are doing. 

And I would like to follow up with my friend from 

Massachusetts’s question, if I could. Since our three pending trade 

agreements were signed almost four years ago, our trading partners have rushed ahead of us to negotiate bilateral and regional 

agreements that benefit their exporters and workers to the detriment of ours. The most obvious effect relates to tariff advantages 

that our competitors enjoy over us, which we have seen play out 

in Colombia, causing significant harm to our agricultural exports. 

But there are other effects, as well. For example, the European 

Union has trade agreements that generally require its trading 

partners to adopt protections for geographic indications of origin, 

such as various cheese from the EU and member states. This could 

prevent U.S. companies from producing competing goods outside 

such EU regions from using those same geographical terms when 

marketing or selling their products in EU trading partner countries. This is a particular problem in the South Korean market. 

Mr. Ambassador, could you please discuss what the Administration is going to address this geographic indication market access 

barrier that will be imposed on us by the EU–South Korea trade 

agreement, and more broadly, the effect on our efforts to export 

certain products to these markets? 

Mr. MARANTIS. Thanks, Mr. Herger. I had the pleasure of visiting Sacramento a couple of months ago, and did a great roundtable that your staff put together with agriculture producers in 

your district on Korea and on the TPP agreement. So thank you 

again for that. 

Mr. HERGER. Thank you for coming. 

Mr. MARANTIS. No, it was great. The dairy industry is a great 

example of why this agreement is terrific. You know, the dairy exporters will benefit from reduced tariffs and expanded TRQs. They 

are concerned, as are we, about the geographic indication issue 

that you raised. 


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You know, as you mentioned, in the Korea-EU agreement, Korea 

has agreed to protect certain terms as geographic indication, terms 

that, you know, are used in common parlance, and terms that our 

dairy exporters either use now in Korea or are planning to use in 

Korea. It is an issue. When the EU–Korea agreement concluded— 

we have raised, you know, serious concerns with Korea on that 

issue, and we continue to do so. 

Mr. HERGER. Thank you. The American Farm Bureau estimates 

that agricultural exports to South Korea could increase by $1.8 billion per year if the agreement were implemented. South Korea is 

already the fifth largest export market of U.S. agricultural products. Immediately upon implementation, almost two-thirds of the 

U.S. farm products exports would become duty-free. The agreement 

would also address non-tariff regulatory barriers to agricultural 

trade by creating a specific committee to address sanitary and 

psytosanitary matters, which would encourage greater regulatory 

harmonization and the use of international standards and guidelines. 

Mr. Ambassador, could you please discuss how this agreement, 

like the Colombia and Panama agreements, address specific barriers to U.S. agricultural exports, and which sectors might stand to 

benefit the most? 

Mr. MARANTIS. Yes, sir, with pleasure. You know, as with 

many provisions in this agreement, what is so important in the agriculture sector is that the agreement levels the playing field. 

Right now we face average tariffs in Korea in the agriculture sector of nearly 54 percent, whereas our average tariff in the ag sector 

is 9 percent. So this agreement going into force levels the playing 

field for our farmers and ranchers, and does so in a way that provides incredible export opportunities, you know, throughout the 

sector: beef, you know, almonds, pistachios, cherries, asparagus, 

pork. You name it, it is great for our ag sector. 

But it is not just about tariff barriers. As you mentioned, it is 

also about non-tariff measures. As you mentioned, there is a committee to address sanitary and psytosanitary measures. But another key non-tariff measure that this agreement will work on is 

in the area of transparency. And it is often times very difficult for 

small businesses, for small farmers and small ranchers to really 

have a good sense of what the regulatory environment is in a country, in a trading partner. And that is often a deterrent to actually 

export there. 

This agreement has unprecedented provisions on transparency 

that will help us really get at non-tariff measures that have, in the 

past, impeded our exports. 

Mr. HERGER. Again, thank you. 

Chairman BRADY. Thank you. Mr. Buchanan is recognized. 

Mr. BUCHANAN. Yes. Thank you, Mr. Chairman, for holding 

this important hearing. And thank you, Ambassador, for being here 

today. 

Let me just—I was looking at a letter that—I guess from former 

Secretaries of States, Defense, Commerce, as well as USTA, that 

was placed in the file earlier by Mr. Brady, our chairman. They 

were pointing out a couple of things. 


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One, they said the movement ahead would help us to have a 

leadership position in trade in Asia, but also be a positive effect 

that would go beyond the Korean Peninsula. And what they were 

referring to, they said passage of this could also relieve some of the 

growing concerns that we have about China’s growing influence in 

the region. And I think they are absolutely right. Could you give 

us your thoughts and ideas from that standpoint? 

Mr. MARANTIS. Yes. What a great letter, by the way, you know, 

supported by a whole array of various former officials in different 

communities. 

The issue that you raise with respect to China really deals with 

the importance of our being in the game in the Asia-Pacific region, 

and assuring that we maintain a competitive edge over our competitors. And that is exactly what this agreement does. By leveling 

the playing field in the manufacturing, agriculture, and services 

sector, it allows us to participate more in the Korean market, and 

to reverse the erosion of market share that we have seen in Korea, 

where China has eclipsed us and Japan has eclipsed us as, you 

know, top importers. 

So, this is part and parcel of an overall strategy to increase U.S. 

engagement in the Asia-Pacific region to the benefit of all of us. 

Mr. BUCHANAN. My second point is I was looking at the U.S. 

Chamber. They said that the United States, if we did not—not just 

this, but the others we could lose up to 380,000 jobs and 40 billion 

export sales. And I think they were looking at all three of the trade 

agreements. But what is—a state like—that I represent, Florida, 

one of the positive things in Florida—we have 14 ports—is exports. 

And I think we are up 15 or 20 percent and that continues to grow, 

and people are very concerned about these agreements not getting 

done quickly, because it is going on. 

But what is the net effect, in terms of jobs, or from the Administration’s standpoint, with this new agreement being put in place, 

the Korean Agreement? 

Mr. MARANTIS. This agreement, as you mentioned, it is all 

about jobs, it is all about creating new export opportunities and 

those jobs that are supported by those export opportunities. In 

Florida we are going to see, you know, tremendous benefits in the 

agriculture sector, fruits, vegetables, we are going to see key benefits in the logistics sector, in the transportation sector. We are 

going to see key benefits in the area of machinery, electrical equipment, chemicals, all exports that are important to Florida’s economy. 

So, for Florida, as for other states in the United States, this 

agreement is going to be a huge export boon. And, as a result, it 

is going to be a huge job boon. 

Mr. BUCHANAN. But do you have any numbers that you have 

put together, in terms of the country, the impact it will have, overall, on new jobs or new job opportunities, as a result of getting this 

agreement done? 

Mr. MARANTIS. Yes, sir. We have specific numbers for Florida. 

I do not have them in my head, but we will get them to you right 

after the hearing. 

Mr. BUCHANAN. I am looking for the U.S. Do you have a number—— 


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Mr. MARANTIS. Yes. 

Mr. BUCHANAN [continuing]. Off the top for the U.S.? 

Mr. MARANTIS. For the U.S., for goods alone, a conservative estimate is it will create 70,000 new jobs. It is harder to have a specific number on services, just because the economic data is more 

difficult to analyze. But we estimate that the—that access to Korea’s $580 billion services market, and the new export opportunities that this agreement will create, will produce an additional tens 

of thousands of jobs in the services sector. 

And then there are other job gains to be had by reduction of regulatory barriers and other non-tariff barriers. So there is a significant job—— 

Mr. BUCHANAN. So, Korea alone, we are looking at 100,000- 

plus jobs that this agreement will mean to America. 

Mr. MARANTIS. Yes, sir. And again, we are being conservative. 

Senator Wyden worked with the ITC on a study. The ITC did technical assistance for Senator Wyden. And that study estimates a 

230,000-job benefit from the agreement. 

You know, we are being a little bit more conservative, but our 

number is a minimum. 

Mr. BUCHANAN. Thank you. And I yield back. 

Chairman BRADY. Thank you. Mr. Doggett? 

Mr. DOGGETT. Well, thank you very much. Just on the ITC 

issue that you were just mentioning, so has the ITC done a new 

estimate in contrast with its 2007 estimate concerning the job 

growth that can be expected under this agreement? 

Mr. MARANTIS. No, sir. The ITC—— 

Mr. DOGGETT. Are you requesting them to do so? 

Mr. MARANTIS. We are not, largely because many of the trade 

statistics are basically the same that they were in 2007. 

Mr. DOGGETT. But you do not accept their conclusion that it 

would have a negligible effect on jobs. 

Mr. MARANTIS. Oh, no. We have taken their conclusion that it 

will grow our exports by $10 billion to $12 billion to have the figure 

that the agreement will produce, at a minimum, 70,000 jobs. 

Mr. DOGGETT. Well, I understand, having written this, you believe it will create many jobs. I am just a little confused about what 

part of the ITC you are accepting and what you are not. 

They concluded, before you made these changes in the agreement, that it would have negligible effect on jobs, and it would actually cause a U.S. goods trade deficit. You do not agree with either 

of those conclusions, do you? 

Mr. MARANTIS. Sir, I believe that the ITC report said that on 

the—our bilateral trade deficit, which is a $4.4 billion trade deficit 

now, would be reduced by $3.3 billion to $4 billion, which is consistent with our analysis. 

Mr. DOGGETT. You do not expect to ask the ITC for any re-evaluation or updating of their data? 

Mr. MARANTIS. We do not. 

Mr. DOGGETT. Okay. When do you think we will get the Korea 

trade agreement? 

Mr. MARANTIS. We are ready, as Ambassador Kirk has mentioned. I actually have a draft copy of the implementing bill with 

me. We are ready to engage. We have started engaging in technical 


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discussions. We are ready to engage in technical discussions on the 

actual text. 

Mr. DOGGETT. Is it your testimony that without the changes 

that were secured that you have testified about with some pride 

today, that it would have been a mistake for Congress to ratify the 

Korean trade agreement as originally authored? 

Mr. MARANTIS. I think the changes that we made have enabled 

us to be able to present this to you and unlock the potential of the 

2007 agreement. 

Mr. DOGGETT. So you think that without them it would have 

been a mistake to ratify it? 

Mr. MARANTIS. I think we have made a very good agreement 

better. 

Mr. DOGGETT. So you were for it before you made the changes. 

Mr. MARANTIS. The—I mean there were key outstanding concerns that many members of this committee had. And in order for 

us to be able to go forward, you know, we worked very closely with 

members of this committee and stakeholders throughout the country to address those concerns that—— 

Mr. DOGGETT. And any time during those negotiations of the 

agreement did USTR seek any changes in the investor provisions? 

Mr. MARANTIS. No, we did not. 

Mr. DOGGETT. And the investor provisions are, therefore, exactly as they were negotiated by the Bush administration? 

Mr. MARANTIS. They are very strong and solid investor provisions. 

Mr. DOGGETT. I understand you think they are good, and that 

is why you did not change them. But they are exactly, verbatim, 

what the Bush administration negotiated? 

Mr. MARANTIS. Yes. 

Mr. DOGGETT. And with reference to the comments that President Obama made back during the campaign about seeking to ensure that those provisions were not used to undermine public safety or public interest in forums outside U.S. courts, there are no 

changes that have been made as a result of those policy statements. It is still possible for U.S. health and safety and environmental laws to be challenged in arbitration panels, is it not? 

Mr. MARANTIS. Sir, when this Administration came into office, 

we did an exhaustive review of this agreement, including the investment provisions. 

Mr. DOGGETT. And—— 

Mr. MARANTIS. And based on that review, we are confident 

that we can—— 

Mr. DOGGETT. I understand you have testified you are satisfied 

with it. You have made no changes in it from the Bush era. But 

it is possible to challenge U.S. health and safety laws by a foreign 

investor who thinks that it constitutes a taking—not in our courts, 

but in an arbitration panel. Isn’t that correct? It may not prevail, 

but it is possible for them to do that. 

Mr. MARANTIS. It is possible. We have been subject to very few 

challenges in the past, and we have never lost. 

Mr. DOGGETT. Thank you very much. 

Mr. MARANTIS. Thank you, sir. 

Chairman BRADY. Thank you. The chair recognizes Ms. Jenkins. 


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Ms. JENKINS. Thank you, Mr. Chair. Thank you for holding this 

hearing. 

Thank you for being here. I so appreciate your energy and enthusiasm this morning. Mr. Ambassador, it is clear that the U.S. agriculture producers and exporters will lose valuable markets if these 

trade agreements are not passed, certainly hurting farmers, ranchers, and other workers in the agriculture sector. 

But I think it is also important to focus on all of the businesses 

that support our agriculture sector, ranging from the companies 

that provide machinery, fertilizer, seed, and other supplies to farmers and ranchers, as well as small, local companies that build the 

farmer’s silo and cut his or her hair. 

How do you see these agreements affecting all of these businesses, and really, the entire community in rural America? 

Mr. MARANTIS. That is a great question. I mean this is—this 

issue—we are—by creating the export opportunities that we do in 

this agreement, whether it is in the ag sector or the manufacturing 

sector, we are creating demand for the finished product. And by 

creating demand for the finished product, we are creating demand 

for the downstream product, the small and medium-sized enterprises that supply, you know, large airplanes that we sell to Korea, 

or the suppliers, like you were saying, the feed suppliers that will 

supply our farmers and ranchers. 

So, by creating new export opportunities for the finished product, 

we are creating new opportunities for suppliers and the jobs that 

those suppliers create. 

Ms. JENKINS. Great, thank you. Along that same line, it is 

abundantly clear that the three pending agreements will increase 

exports of U.S. ag products, greatly helping our farmers and ranchers. However, I understand that these agreements will also open 

up markets for processed food products and other goods that incorporate the bounty of America’s farmers and ranchers, and reflect 

the real value added in the United States. 

Could you just please comment on how passing these agreements 

will help these important businesses and their workers, and how 

passing the three pending agreements would help meet the goal of 

the President’s national export initiative to double U.S. exports? 

Mr. MARANTIS. That is a very important point, as well. This 

is—this agreement benefits our raw agricultural exporters, as well 

as exporters of processed products, as well. And the key thing it 

does is that it levels the playing field, so that we have more opportunities to sell to Korea’s $1 trillion market across the board. 

You know, in your state, wheat, soybeans, beef, feed corn, those 

are all products that are going to benefit tremendously from this 

agreement, and will allow us to really boost our relationship and 

our exports to Korea’s gigantic market. 

We are really excited about the opportunities that this presents 

in all of your states and in all of your districts. And to the extent 

to which anyone wants any really specific information on how this 

will benefit your district, your state, you know, sort of down to, you 

know, the most specific level, we are very happy to provide that. 

Ms. JENKINS. Excellent. Thank you. Mr. Chairman, I yield 

back. 

Chairman BRADY. Thank you. Mr. Crowley is recognized. 


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Mr. CROWLEY. Ambassador, welcome. Thank you, Mr. Chairman, and thank you, Mr. McDermott, as well. Let me also thank 

Chairman Camp and Ranking Member Levin for their work on the 

Korean free trade agreement and bringing us to where we are 

today. 

Ambassador, you say you have the draft with you, or a draft with 

you. Has that been issued to the subcommittee? 

Mr. MARANTIS. Not yet. We have been dotting our I’s and crossing our T’s. And we have done that, and we have got a—— 

Mr. CROWLEY. It has not been given to the full committee either, then, if the subcommittee has not got it. 

Mr. MARANTIS. Correct. 

Mr. CROWLEY. What is the intention, in terms of—you brought 

it with you today. Is it going to be shared with the committee 

today? 

Mr. MARANTIS. We are ready to do so whenever the committee—— 

Mr. CROWLEY. Has the committee asked for it? Has the chairman asked for it, or has the chairman of the committee asked for 

it yet, or the leadership of the House asked for it yet? 

Mr. MARANTIS. There have been a number of questions that we 

have been going back and forth on, in terms of how certain provisions will work with both staffs. And I think we have answered 

those questions in the text, and we are ready to share it, you know. 

Mr. CROWLEY. Has anyone asked for it yet? 

Mr. MARANTIS. Not yet. 

Mr. CROWLEY. No one from the House of Representatives has 

asked for the draft? 

Mr. MARANTIS. Not yet. We have been continuing our work on 

it, and we are proud to have it here with us today. 

Mr. CROWLEY. I appreciate that. I just would note that no one 

has asked for it at this point, and it is still out there. So thank you 

for that. 

In terms of—I come from New York City. So, if you could, just 

give me a sense of the financial services end. You talked broadly 

about services. But if you could, specifically talk about the opportunities that this agreement will present for that specific sector, financial services, in Korea. Can you comment on that? 

Mr. MARANTIS. Sure. I mean this agreement provides new market access opportunities in the financial service sector in eliminating many restrictions to supplying those services in Korea that 

existed, whether those restrictions were in the form of capital requirements or a certain percentage that you needed to hold. 

But also in your district, you know, this is a great win for the 

chemical sector, the machinery sector, and the electric equipment 

sector as well, where current tariffs in those areas—I think 80 percent of them—will be eliminated immediately upon entry into force. 

And for your chemicals exporters, they are facing tariffs as high as 

50 percent. 

So, in terms of, you know, on the manufacturing side, there is 

a huge benefit for your district, as well as in the financial services 

sector. 

Mr. CROWLEY. I appreciate it. I wish there was more manufacturing going on in my district than services at this point. But clearVerDate Nov 24 2008 05:32 Dec 02, 2011 Jkt 070867 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70867.XXX GPO1 PsN: 70867

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ly, the services end is very, very important to the city of New York, 

and obviously to the state of New York, as well. 

There has been a great deal of discussion about the lack of movement on trade by the Administration. But we really are in the 

midst of a major trade agenda right now. Would you agree with 

that? 

Mr. MARANTIS. This is an unbelievably exciting time to be involved in international trade. We have got so much going on, 

whether it is in the context of these trade agreements, whether it 

is the trans-Pacific partnership, whether it is the work we are 

doing on enforcement, whether it is the work we are doing to address a lot of the problems we have in our relationship with China. 

You know, there is so much going on that I think everybody at 

USTR’s head is spinning. 

Mr. CROWLEY. So maybe you can dispel some of the rumors 

that there is kind of a quagmire here, we are not moving out, and 

we are stuck in the mud, we are not moving out of this. That is 

kind of not really true. Is that correct? 

Mr. MARANTIS. No, that is incorrect. We have got a lot going 

on in all regions of the world, on all issues from, you know, trade 

expansion to enforcement. 

Mr. CROWLEY. One aspect of trade that I would like to know 

if you have a comment on is the issue of trade adjust—assistance, 

and the lack of movement here. Can you make any comment on 

that? 

Mr. MARANTIS. Yes. We need to engage in a conversation with 

Congress about how we are going to move a comprehensive trade 

agenda forward. You know, that includes the FTAs, but that also 

includes, as you said, trade adjustment assistance, it includes renewal of our preference programs, and it includes securing PNTR 

for Russia. 

Mr. CROWLEY. Do you have any observation about why you 

think TAA has stalled here? 

Mr. MARANTIS. I mean TAA has been a critical component of 

our trade policy for years, and we—— 

Mr. CROWLEY. I know that. But you won’t make any comment 

as to why you think it may have stalled here? 

Mr. MARANTIS. Well, we are looking forward to getting it renewed as quickly as possible. 

Mr. CROWLEY. I thank you, and I yield back the balance of my 

time. 

Mr. MARANTIS. Thank you, Ambassador. Let me understand 

the process. With a trade agreement like this, before the text is 

sent to Capitol Hill, you engage in technical discussions with the 

key committees, where members of both the majority and minority 

party go through, word for word, the agreement, ask questions. 

And, as I understand it—for example, the discussions today from 

both the majority and minority—ask questions, inquire as to how 

the supplemental agreement, you know, coincides with the original 

text. That is the normal process, isn’t it, before the actual text is 

sent to the Hill? 

Mr. MARANTIS. Yes. I mean the great thing about this is this 

is a congressional-executive partnership. And so we will sit down 

together have drafting sessions on what the implementing bill will 


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look like. I mean, again, we have a draft of that here that we are 

looking forward to going through with you, you know, which will 

then lead towards the mock mark-up that this—that the committee 

will have. 

But there are a lot of questions. You know, we, I think, have answers to all of them, and are eager to get rolling. 

Chairman BRADY. Great—— 

Mr. CROWLEY. Will the chairman yield for a moment, Mr. 

Chairman? 

Chairman BRADY. Absolutely. 

Mr. CROWLEY. Just—I brought that subject up because the notion that the Administration is dragging its heels, I wanted to clarify that the Administration is not holding back this agreement, and 

that the House has not yet asked for it. That was the point I was 

trying to make, that the House—that the President and the Administration are not dragging their heels on this. 

Chairman BRADY. Great, and I agree and appreciate that. We 

simply want thorough, complete technical discussions, and follow— 

again, the consultation is very important. Thank you. 

Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman, and thank you, Ambassador, for sharing your expertise and insight with us today. And I 

guess I would—reflecting on the prior statement, it is quite obvious 

that the Administration is advocating for this trade agreement, so 

much so that it leaves a lot of us to wonder exactly what the status 

is, perhaps, of the other two, although there is progress with the 

Colombia trade agreement and I am grateful for that. 

But let me also say that I appreciate USTR. That operation is 

very impressive, in terms of engaging on the issues, and responsive. And I am grateful. 

But if we could look at this issue, I think we have to, in terms 

of looking at all three trade agreements and the synergy that can 

be created, as we speak. As you said, this is an exciting time for 

trade. Let us take advantage of that. 

And it is not just—although I appreciate your speaking to the advantages for American agriculture, and the opportunities associated with this particular trade agreement, as well as the others— 

but, you know, there are other sectors that can benefit, as well. 

Can you speak to the synergy at all, though, about all three 

trade agreements that we are looking at right now? It is not always 

that we have an opportunity like this to send, I think, a terrific 

message, geopolitically or geostrategically, around the world of how 

we can engage, and we appreciate our friends in, often times, hostile regions of the world. Can you speak to that synergy that can 

exist? 

Mr. MARANTIS. Yes. I mean all of these trade agreements are 

about, you know, two primary things: economic growth and job creation. And, you know, I think people think it is trite to say, but 

it is very true: 95 percent of the world’s consumers live outside of 

the United States. And in order for our economy to grow, we have 

got to export to them. And in order for us to be able to create jobs, 

we need to take advantage of those export opportunities. 


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And that is what our trade policy is about, it is about fostering 

economic growth. It is about creating opportunities, and it is about 

creating jobs. 

Mr. SMITH. Thank you. Also, you know, it is interesting—and, 

as I am sure you are aware—and we have heard a little bit earlier 

this morning that often times there is kind of a twisting of information out there of what can be accomplished with various trade 

agreements. 

And we know that we have a global economy, for obvious reasons. And we see U.S. companies perhaps expanding to countries 

overseas, closer to some of those markets that you just highlighted. 

Do you see any of those changes? 

Now, companies are often times criticized for doing so, which is 

unfortunate, because that makes U.S. companies stronger, when 

they can expand closer to various markets worldwide. Can you 

speak to whether or not that would be changed, or viewed any different, with respect to expansion? 

Mr. MARANTIS. No. Thanks for raising that point. I mean I 

think it is important to remember that our investment, U.S. investment in foreign markets is job-creating. Forty-five percent of U.S. 

exports are associated with our firms who are investing overseas. 

Twenty-two million American jobs depend on U.S. firms who have 

investments overseas. That is why the investment provisions of our 

agreements are important, because they level the playing field for 

our investors, who often times face very difficult challenges in the 

legal regimes of foreign markets. 

So, through our investment provisions in these agreements, it actually brings our trading partners up to the very high level of investment protection that we provide domestically for ourselves and 

for foreign investors. 

Mr. SMITH. Okay. Also we have heard a lot about agriculture 

already. Could you perhaps highlight some of the opportunities in 

the manufacturing sector, if you could? 

Mr. MARANTIS. Absolutely. As—generally, speaking broadly, 

you know, the agreement levels the playing field in the manufacturing sector, as it does in the ag sector. Korea’s average tariff in 

the manufacturing sector is around 6.8 percent. You know, ours is 

about two percent—ours is about three percent. So, once the agreement goes into force, you know, 95 percent of Korea’s tariffs will 

be eliminated in the first 5 years of this agreement. And that is 

going to be a huge boon for our manufacturing sector, including in 

the area—you know, our chemicals exporters, our machinery exporters. 

And now that we have been able to do what we did in December, 

this agreement is now better for our auto exporters, who are going 

to have new opportunities to sell, you know, our high-quality U.S. 

cars in Korea’s market. 

Mr. SMITH. Okay. Thank you. And I appreciate those numbers 

that you mentioned, because I think it also points to the fact that 

when tariffs that our companies face there are higher than what 

their companies face here, actually we gain more. So thank you, 

Mr. Chairman. 

Chairman BRADY. Thank you. Mr. Rangel is recognized. 


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Mr. RANGEL. Thank you so much, Mr. Chairman, and thank 

you, Mr. Ambassador. I am so pleased to see that the strong objections that some of us had under previous agreements have been adjusted. 

And I think you are saying in your testimony that there is no 

outstanding issue now that you know of that could cause a large 

number of Members to be critical of it? 

Mr. MARANTIS. Yes, sir. We worked very hard with you, with 

Mr. Levin, Mr. Camp, Mr. Brady, your staffs, to address, you know, 

the key outstanding—one of the key outstanding concerns that was 

out there in the auto sector. And we are so grateful for the work 

that we were able to do together to make this better, and to allow 

for us to be sitting here today, you know, together, urging for passage of this agreement. 

Mr. RANGEL. One of the feelings that a lot Americans have— 

and it is reflected by their representative—is that when you say 

‘‘trade’’ you mean loss of jobs. And I do not think we have done a 

pretty good job, in terms of showing that jobs can and are being 

created. 

You made a very generous offer to the gentlelady from the majority that you would share with her the impact in her district. And, 

as Mr. Crowley said, even though we are from New York City, we 

are concerned with the whole state. 

For the life of me, I do not know why, especially with the Colombian agreement, where there is just so many arguments for the 

jobs that would be created, why none of that is shared with us. Are 

you familiar at all with the Colombian agreement, and where the 

manufactured goods that are needed would be coming from? We 

know the companies names, and of course I do not know where 

they are located. But I have been impressed by the names of the 

manufacturing companies. Wish they were in New York, but nevertheless, if it is the United States, that helps me. 

Do you go through anything like that in your office? 

Mr. MARANTIS. Yes, sir. We are developing—we have, complete 

for Korea, an analysis on a state-by-state, on a sector-by-sector 

basis, that really goes into great detail. We are in the process of 

developing those for Colombia and Panama as well, but they are 

extremely helpful documents. I actually think, for Korea purposes 

today, USTR’s website now has a special page on it, on the Korea 

agreement, that has all of these specific facts on—again, on a sector-by-sector and a state-by-state basis. 

Mr. RANGEL. And the environmental concerns that the Government of Korea—we are satisfied that our automobiles are just as 

safe and environmentally approved as anything that the Koreans 

are producing. Is that right? 

Mr. MARANTIS. Yes, sir. We have very strong—our federal 

motor vehicle safety standards have the highest safety standards, 

you know, in the world. Our environmental regulations are the 

highest standards in the world. And what we have done, in terms 

of safety and environment, is we have ensured that Korea’s regulations do not place a disproportionate burden on our exporters, 

while at the same time ensuring the highest level of safety and environmental protection. 


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Mr. RANGEL. Did you answer the question whether or not we 

can expect the Korean free trade agreement to come by itself, or 

whether it is going to be included with a whole group of agreements? 

Mr. MARANTIS. That is a conversation we need to have with 

Congress, in terms of how we move forward on the President’s comprehensive trade agenda, which includes the pending FTAs, which 

includes trade adjustment assistance, renewal of our preference 

programs, as well as securing PNTR for Russia. 

Mr. RANGEL. Are beef exporters satisfied with the changes in 

the provision, as it relates to exporting of beef? 

Mr. MARANTIS. The Korea agreement addresses the key barrier 

that our beef exporters have faced, which is the 40 percent tariff 

on U.S. beef. You know, implementation of the agreement will 

allow our exporters to build on the phenomenal growth in their 

sales that they have seen over the past few years. Last year I think 

exports increased by 140 percent. 

We still have concerns with respect to beef that Korea has not 

fully opened its market to beef from cattle over 30 months. It is 

something that we are going to continue our work with the Koreans on. 

Mr. RANGEL. Take my word for it. All the work that you could 

possibly do in identifying potential jobs in our communities, in our 

state, and more specifically, in our congressional district, it works, 

and it is needed. 

Thank you so much, Mr. Chairman. 

Chairman BRADY. Thank you, Chairman. Mr. Larson. 

Mr. LARSON. Thank you, Chairman Brady. Ambassador, in your 

testimony you state that the U.S.-Korea trade agreement will result in the removal of tariffs on over 95 percent of made-in-America 

industrial and consumer good exports. Specifically, you cite the 

benefits to the U.S. aerospace industry and its workers. This is especially important to my district, in East Hartford, Connecticut, 

which is the home of a number of aerospace-related companies, including Pratt & Whitney, Hamilton Sundstrand, Command, Aero 

Gear, to name just a few. 

Can you please provide a bit more clarity on how this deal would 

benefit American aerospace industry, and the skilled workers employed in these companies? And further, can you discuss how a 

delay in enacting the deal would impact these aerospace companies? I ask, because the EU’s agreement with Korea will be going 

into place shortly, and many of the world’s top aerospace companies are headquartered in Europe. 

Mr. MARANTIS. Thank you, Mr. Larson. I had the pleasure of 

visiting Pratt & Whitney with your staff about six months ago, and 

so thank you for that opportunity. 

Aerospace is a great example; 92 percent of our aerospace exports will go duty free, upon implementation of the agreement. The 

remaining eight percent will phase out in three years. This is very 

important, as you mentioned, for EU purposes, as well. The EU has 

a very competitive aerospace industry with ours. If their agreement 

goes into effect in July, as it does, as it is, and ours does not go 

into effect for, you know, a long time thereafter, we are going to 

lose a competitive advantage. And EU exporters of aerospace and 


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other products will have a competitive advantage over ours, and 

will get a foothold in Korea’s market. 

That is why it is critically important that we move this agreement to conclusion as quickly as possible to make sure that exporters of aerospace and, you know, all other products are able to really 

get that competitive leg up in Korea’s market before too much time 

passes. 

Mr. LARSON. Thank you, sir. 

Chairman BRADY. The gentleman yields back? Mr. Kind. 

Mr. LARSON. I yield back. 

Mr. KIND. Thank you, Mr. Chairman. Thank you for having this 

hearing. Mr. Ambassador, thank you. And I would like to just commend you and Ambassador Kirk, the entire U.S. TR team, as well 

as the Obama Administration, for slowing the process down a little 

bit with these important trade agreements, and seeing if we can 

get a better deal. And, from my perspective, the additional work 

that went in to some of the, shall we say, loose ends in regards to 

Korea, there was significant progress to where it was and where 

we are today. The same thing is occurring with Colombia and Panama as well, and I think that was exactly what was necessary, in 

order to make, as you describe, good agreements even better. And 

that is how I view this. 

But we also need to be clear that, you know, trade right now in 

a time of tough economic times, in an economy that is under-performing here in the United States, it is a tough sell. I just met with 

numerous labor leaders back in Wisconsin last week who are adamantly opposed to the Korean trade agreement, under the impression that it does not go far enough when it comes to labor standards, environmental standards, those type of things, and they are 

afraid this might result in a race to the bottom. 

If you had an opportunity to address them, what can you point 

to specifically in regards to the Korea trade agreement, as it relates 

to labor and environment, to try to dispel them of this notion that 

it is not as tight or not as good as we could hope to see? 

Mr. MARANTIS. Thank you. This agreement provides the highest level of labor and environmental protection that we have had 

in the history of trade agreements, as does Colombia and Panama, 

as well. 

This agreement requires both parties to adopt and maintain laws 

that are consistent with the five core ILO labor standards. It requires the parties to effectively enforce those laws, as well as laws 

that relate to acceptable conditions of work, like minimum wage. 

It requires parties not to waive or derogate from the provisions to 

achieve a trade or investment advantage. And the standards on the 

environmental side are equally as high. 

We are very proud on what we have done on labor and environment in these provisions. And, you know, working specifically with 

a partner like Korea, who, you know, with an advanced economy 

and advanced labor relations regime, a GDP per capita of $20,000, 

we have got a good partner on this. And, you know, we are looking 

forward to putting these provisions into place, because they provide 

us—when in place, they will provide us with a further mechanism 

to address any labor or environmental-related concerns that should 

arise. 


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Mr. KIND. And I know your office has been responsive to our request, too, as far as more detailed information in this regard. And 

we are trying to do our own economic analysis, as far as the impact 

in Wisconsin. Still a large manufacturing state. We have got many 

large manufacturers in my congressional district, from 3M to train 

company, to Hutchinson Cummins, who all view this as a real net 

positive for them, and the products that are being right in—also 

agriculture production is key to our state. 

But there is one sector that has really been struggling the last 

couple of years, and that is dairy production, our dairy farmers. Is 

there something here in Korea that we can offer the dairy industry 

of America, too, as—— 

Mr. MARANTIS. Yes. It is a great agreement for dairy, in that 

it reduces tariffs and expands tariff rate quotas. For instance, upon 

implementation, our dairy exporters will see duty-free tariff rate 

quotas for a number of products: cheese, butter, certain milk powders. This is a great agreement for dairy. 

And again, like, you know, for other sectors, the sooner we get 

it into force, the sooner they will be able to benefit. 

Mr. KIND. And you said there is—still, hopefully, some progress 

is going to be made on beef. Is there something more tangible you 

can—— 

Mr. MARANTIS. Yes. I mean, on beef, the key thing is when— 

as soon as the agreement goes into force, we begin to eliminate the 

40 percent tariff on beef. And that has really been—that is really 

important, particularly as Australia is in the process of negotiating 

an FTA with Korea. We do not want to have our beef exporters put 

at a competitive disadvantage to Australia. Korea’s tariff is high, 

40 percent. And as it lowers for us before Australia, we are going 

to get a competitive leg up in the market. 

We do continue to have concerns, though, with lingering restrictions on beef and cattle over 30 months. It is something we are 

working on, you know, with Korea, as well as with our other Asian 

trading partners, Japan and China, as well. And we expect to make 

progress. 

Mr. KIND. Let me ask you one final question. We are running 

out of time, but I think in order to have an honest conversation 

with the American people, trade is a two-way street. There are 

going to be benefits flowing the other way. 

Let me ask you a question that you do not hear from many Members of Congress in that, when we are looking at these trade agreements. But what is in it for Korea? Why is Korea interested in entering into this trade agreement when we already have pretty low 

tariffs and pretty easy market access to what they are producing? 

Mr. MARANTIS. We are a very important market for, you know, 

for countries around the world. We are the biggest consumer market. 

What this agreement does for Korea, it really locks in a preferential regime for Korea, for Korean exporters to be able to benefit 

from, you know, the wide consumer market that we have here. So 

we like to call it—again, it is a trite expression to say it is a winwin, but it really is. 


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You know, we get significant benefits in Korea, and Korea gets 

significant benefits, being able to access our huge market more 

competitively than some of its competitors. 

Mr. KIND. Thank you. Thank you, Mr. Chairman. 

Chairman BRADY. Thank you. Mr. Paulsen is recognized. 

Mr. PAULSEN. Well, thank you, Mr. Chairman. And, Mr. Ambassador, let me just start by thanking you and Ambassador Kirk 

and Ambassador Han for all of the success in moving this outstanding opportunity for job growth, which is really what it is 

about, is about jobs and economic growth, but also new sales, new 

customers. And that is the message we all need to communicate 

bipartisanly, to really see this successfully move forward. And I 

know the votes are there. It is going to happen, as well as the opportunity for all three trade agreements. 

Let me just ask you a question really quick, because we focused 

a lot about manufacturing and the services industry, as well. I 

know that U.S. industries that depend on intellectual property 

rights employ millions of American workers and they support very 

high-paying jobs. And it is absolutely estimated now that there is 

a broad range of U.S. industries that depend on intellectual property rights. They count for about 60 percent of U.S. exports and 

drive nearly 40 percent of U.S. economic growth. 

And our trade agreements, including the pending ones now before us, set very high standards for protecting United States intellectual property rights abroad that help support U.S. innovations, 

U.S. entrepreneurship, U.S. competitiveness and jobs. Do you agree 

with this assessment, and could you please give a couple of examples maybe of how these pending trade agreements with South 

Korea and the other agreements protect our intellectual property 

rights to the benefit of U.S. workers and the U.S. economy? 

Mr. MARANTIS. Thanks for raising that. I mean IP is a critical 

chapter of this agreement, as it is with Panama and Colombia, and 

we have some pretty incredible IP protections in this, across industry, you know, in the area of copyrights, trademark patents, as 

well. 

It is—you know, the agreement strengthened deterrents against 

criminal acts of commercial scale piracy. It really beefs up our ability to enforce provisions against piracy, against counterfeiting. It 

goes much farther in the area of combating Internet piracy, as well. 

In the area of trademarks these agreements have state-of-the-art 

provisions that, you know, recognize sound marks and scent marks, 

and also have, again, very strong deterrent and enforcement provisions. It extends the term of protection for certain copyrighted 

works, consistent with U.S. law and emerging international standards. 

I mean I can go on and on. It streamlines and strengthens customs procedures to increase the efficiency of border enforcement, to 

deter, you know, counterfeit products, you know, at our border. 

So these—the intellectual property provisions in the Korea agreement in particular, which I know best, but also in Colombia and 

Panama, are really state of the art. 

Mr. PAULSEN. Well, thank you. And I just raise that because 

that is an issue I often hear from my small manufacturing and medium manufacturing companies back home, not to mention others, 


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that really are concerned about protecting our innovative ideas 

here in the United States. And so this is something that sort of 

gets glossed over. And it is an opportunity to really enhance and 

protect that. So I just want to thank you for that. 

And we heard a lot of examples here from the Members on the 

Committee of how our own individual districts or states will benefit 

under this agreement. And I just know that is going to be the continued case, Mr. Chairman, as you work with the Administration 

on bringing the other agreements forward, as well. Thank you. I 

yield back. 

Chairman BRADY. Thank you. Mr. McDermott is recognized. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I would like to 

reclaim just a moment of my time to clarify something. 

If I understand correctly, we have the Korean FTA draft implementing legislation here. I just want to make it clear the Democrats want you to send it up here today. It is time to move the ball 

and get the FTA moving with this. Let us not play this game about 

who asked who play back and forth. If you have got it, send it. Let 

us move it. 

Chairman BRADY. The excitement is mounting, Ambassador. 

[Laughter.] 

Chairman BRADY. Thank you for being here. I want to thank 

you for your testimony. And thank the Members for their thoughtful questions on both sides of the aisle. And let me note, as well— 

Ambassador knows this—the Members may submit questions for 

the record. And if they do, I hope you will respond promptly. And 

again, thank you for the insight today, and your time. 

I would like to welcome our second panel to step forward today. 

We are joined by four witnesses. 

Our first witness will be Mr. Bill Rhodes, Chairman of the U.S.- 

Korea Business Council. He is also Chairman and CEO of William 

R. Rhodes Global Advisors, and Senior Advisor to Citigroup. He is 

testifying on behalf of the U.S.-Korea Business Council and the 

U.S.-Korea FTA Business Coalition. 

After him we will hear from Dr. John Schoch, President and 

CEO of Profile Products, LLP, who is also testifying on behalf of 

the U.S. Chamber of Commerce. 

Our third witness will be Mr. Robert Holleyman, president and 

CEO of the Business Software Alliance. 

And last we will hear from Ambassador Thomas Hubbard, who 

served as the U.S. Ambassador to South Korea from 2001 through 

2004, and now is Senior Director for Asia at McLarty Associates. 

We welcome all of you, and we look forward to your testimony. 

I would also ask that our witnesses keep their testimony to five 

minutes. 

Mr. Rhodes, your written statement, like those and all the witnesses, will be made part of the record, and you are recognized for 

five minutes. Welcome. 


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STATEMENT OF WILLIAM RHODES, CHAIRMAN, U.S.-KOREA 

BUSINESS COUNCIL, PRESIDENT AND CHIEF EXECUTIVE OFFICER, WILLIAM R. RHODES GLOBAL ADVISORS, LLC, SENIOR ADVISOR TO CITIGROUP, ON BEHALF OF THE U.S.- 

KOREA BUSINESS COUNCIL AND THE U.S.-KOREA FTA BUSINESS COALITION 

Mr. RHODES. Thank you, Chairman Brady, Ranking Member 

McDermott, and Members of the Subcommittee, for giving me this 

opportunity to talk to you and testify on the KORUS FTA, which 

I will refer to as KORUS, going forward. 

I serve as the chairman of the U.S.-Korea Business Council, 

which is an affiliate of the U.S. Chamber of Commerce, and is a 

leading business organization promoting the bilateral U.S.-Korea 

commercial relationship. The Council is secretariat for the U.S.- 

Korea FTA business coalition, which represents nearly 1,000 companies, businesses, and agricultural organizations and chambers of 

commerce that support the approval of the pending trade agreement with Korea. 

I am also senior advisor to Citigroup and president and CEO of 

William R. Rhodes Global Advisors. I am chairman emeritus of the 

Council of the Americas, the Americas Society, and a professor at 

large at Brown University. In wearing all these hats, I am a vigorous proponent of trade liberalization and, in fact, was one of 

those early on who urged the U.S. and Korean governments to 

launch the negotiation of a free trade agreement. 

The approval and implementation of the U.S. economy agreement with South Korea, along with agreements with Colombia and 

Panama are among the most important actions that the U.S. Congress can take to achieve President Obama’s goal of doubling U.S. 

exports in five years, and creating new jobs and economic opportunities in communities across the country, and in building an infrastructure that promotes regional prosperity and stability. 

On that note, I want to applaud the action of the Obama and 

Santos administrations for having reached agreement on the labor 

action plan which will also allow the Colombia FTA to move forward and be considered by Congress. We have also seen important 

progress which has been made on Panama so that agreement can 

also be moved forward in the future. All of these agreements are 

important for American growth and job creation. 

But given the specific hearing today, I want to talk about the 

U.S. business community, and how it sees the Korean agreement, 

specifically, and especially the benefits to U.S. economic and 

geostrategic goals. 

This groundbreaking agreement will bring significant benefits to 

American workers, business, farmers, consumers, and U.S. economy. The scale and breadth of U.S. trade with South Korea, 1 trillion economy with 49 million consumers, that is already the seventh largest U.S. export market and trading partner—this makes 

KORUS the most commercially significant bilateral U.S. trade 

agreement in nearly 2 decades. 

I believe we are close to the finish line on KORUS, but I think 

we can all agree it has been a long and winding course. We recognize that concerns raised by U.S. stakeholders, with respect to cerVerDate Nov 24 2008 05:32 Dec 02, 2011 Jkt 070867 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70867.XXX GPO1 PsN: 70867

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tain measures, and KORUS needed to be addressed in order for the 

agreement to move forward. 

We applaud the tireless efforts of the White House and Blue 

House, the office of, U.S. Trade Representative, and I must say 

Ambassadors Kirk, Marantis, and Wendy Cutler have done a first 

rate job here, and Members of Congress and the Korean trade negotiator counterparts, for identifying the solutions that we have finally come to. 

The new provisions reached in December added powerful new 

momentum for moving the KORUS agreement forward. KORUS is 

the centerpiece of America’s international economic engagement. 

The United States International Trade Commission, USITC, estimated in September 2007 that the agreement could increase U.S. 

exports to $10 billion to $11 billion annually. President Obama has 

said on many occasions that it would add 70,000 U.S. jobs if this— 

when this agreement is approved. 

An updated statement of potential economic effects of the agreement prepared in January of this year, January 2011, by the 

USITC economic staff, at the request of the Senate Finance Committee Trade Subcommittee estimated that the agreement could 

generate as many as 280,000 jobs. Moreover, Korean companies are 

expanding their investment in the United States, and have created 

thousands of American jobs in manufacturing, as well as distribution and supplier networks across our country. 

By reaffirming the openness of the U.S. market and the 

attractiveness of the United States as a destination for investment, 

and by lowering barriers to U.S. exports in the Korean market, 

Korea has the potential to accelerate all these job-creating opportunities that I have mentioned. 

But the agreement cannot solely be quantified in terms of bilateral economic impact. KORUS also has significant implications for 

the U.S. national economic security and geostrategic priorities, 

both in Asia-Pacific and globally. 

[The prepared statement of Mr. Rhodes follows:] 


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Chairman BRADY. Mr. Rhodes, if I may, we are going to adhere 

to the five-minute limit on initial statements. I do have questions 

I would like to ask you when we conclude. 


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And, just for the panel’s information, we have been called to vote. 

I would like to work through Mr. Schoch’s testimony, break for the 

three votes, and then we will reconvene immediately after the last 

vote is taken. 

So, Mr. Rhodes, thank you very much for your testimony. Mr. 

Schoch, you are recognized. 

STATEMENT OF JOHN A. SCHOCH, JR., PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, PROFILE PRODUCTS, LLC, ON BEHALF 

OF THE U.S. CHAMBER OF COMMERCE 

Mr. SCHOCH. Thank you, Chairman Brady, Ranking Member 

McDermott, and distinguished members of the Ways and Means 

Committee on Trade. My name is John Schoch, and I am president 

and CEO of Profile Products LLC, headquartered in Buffalo Grove, 

Illinois. I am testifying today on behalf of the U.S. Chamber of 

Commerce, the world’s largest business federation, representing 

the interests of more than three million businesses of all size, sectors, regions, as well as state and local chambers and industry associations. 

I am pleased to have this opportunity to talk about the important 

benefits of passing the pending free trade agreements for American 

jobs and U.S. economic growth and, specifically, how the U.S.- 

Korea free trade agreement, known as KORUS, will boost Profile’s 

exports and generate greater employment opportunities for our 

company’s manufacturing facilities around the country. 

For over 50 years, Profile Products has been a leading producer 

of the market’s broadest line of erosion and sediment control products, turf establishment products, and complementary accessories 

to control erosion and accelerate seed germination. We also manufacture the industry’s best-selling inorganic soil amendments for 

sports field, golf course, and landscape applications. With approximately 200 employees and 4 manufacturing facilities, 2 sales offices, and personnel domiciled around the country, Profile is able 

to manufacture and market its entire line of products from the 

United States. 

Profile manufacturer its products in four rural towns throughout 

the country: Blue Mountain, Mississippi; Conover, North Carolina; 

Limestone, Tennessee; and Sanger, California. These communities 

understand that the number of people that we employ is directly 

related to the volume of orders our company receives. So, as our 

exports grow, so will the hours of production, and the number of 

employee shifts we need to operate in order to complete those orders. Today I am proud to say that our products are represented 

in more than 50 countries around the world. 

While many Americans believe that trade only benefits large, 

multi-national corporations, the reality is that more than 97 percent of U.S. exporters are small and medium-sized enterprises, or 

SMEs. In 2008, almost 21,000 U.S. companies exported $34.8 billion worth of merchandise to Korea alone. Of the total exporters, 

18,500, or over 89 percent, were SMEs. 

Profile is one of the many U.S. SMEs that benefitted from exporting to Korea’s dynamic market. In fact, Korea is our single 

largest export market, making up 12 percent of our total international sales revenue. Since 2009, Profile has sold more than 


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2,000 tons of our products into Korea. Several golf courses in 

Korea, including the prestigious Jack Nicklaus Signature Golf 

Club, feature Profile’s products. 

As global demand for Profile’s innovative solutions has increased, 

so too has the effect of global sales on our company’s workforce. In 

2010, 13 to 14 percent of our sales came from overseas orders. We 

anticipate that number to grow to 15 to 17 percent of our total 

sales in 2011. If you do the calculation, that means approximately 

28 of our 200 employees are employed as a direct result of the company’s exports. 

While our company has achieved considerable success in Korea 

and other markets, one of the greatest challenges we face is the 

complex array of foreign barriers to American exports. These include both tariff and non-tariff barriers. Free trade agreements like 

the pending trade deal with Korea will remove these barriers and 

create new opportunities and economic benefits for U.S. businesses 

through tariff elimination, greater market access, more efficient 

customs regimes, stronger intellectual property protections, and 

other market-opening provisions. For Profile, this would mean 

being able to sell our products to Korea at a significantly lowerlanded price. Tariffs on our products currently range from three to 

eight percent. With passage of KORUS, those tariffs would be 

eliminated immediately. 

In addition, Korea has been a particularly challenging market for 

Profile, in terms of trademark and patent infringement. KORUS 

will provide protections for intellectual property, similar to those in 

the U.S. 

So, in conclusion, in support of the job-creating market-opening 

deal with Korea and our other trading partners, I respectfully urge 

Congress to boost exports and generate jobs through swift approval 

of the U.S.-Korea free trade agreement, and the pending trade 

deals with Colombia and Panama. The time for action is now. 

Thank you very much for the opportunity to speak today. 

[The prepared statement of Mr. Schoch follows:] 


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Chairman BRADY. Thank you, Mr. Schoch. Mr. Holleyman, Ambassador, if you will hang tight with these votes, I apologize, we 

will be back just as soon as it is over. And the committee is recessed until then. Thanks. 

[Recess.] 

Chairman BRADY. The Subcommittee on Trade will reconvene. 

Thank you again for your patience, all of you. 

Mr. Holleyman, you are recognized for five minutes. 


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STATEMENT OF ROBERT HOLLEYMAN, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, BUSINESS SOFTWARE ALLIANCE 

Mr. HOLLEYMAN. Mr. Chairman, Ranking Member McDermott, 

thank you for holding this hearing today and inviting the Business 

Software Alliance to testify. I am pleased to have this opportunity 

to express BSA’s strong support for speedy approval of the U.S.- 

Korea free trade agreement. 

Reducing software theft and ensuring fair and open access to 

overseas markets are essential to the software industry. We support the KORUS FTA because it advances both of these goals. 

Korea has already demonstrated the capacity and the will to reduce software piracy through sustained high levels of enforcement. 

We expect that once KORUS is implemented fully, these efforts 

will continue and improve, as long as Korea’s implementation of 

one element of KORUS, which I will discuss in a moment, does not 

disrupt our current effective anti-piracy efforts. 

Mr. Chairman and members of this subcommittee, the U.S. is 

just emerging from a deep economic crisis. Our country’s ability to 

export and create jobs is going to be a key factor in our growth. 

The software industry in the U.S. already enjoys a $39 billion trade 

surplus with the rest of the world. And that is not surprising, when 

you consider that $.60 of every dollar spent on software around the 

world comes back to U.S.-based software companies. Our industry 

is well-positioned to contribute even more to the positive side of our 

trade balance for this country. 

The biggest barrier we face today in markets is end user piracy, 

when otherwise legal businesses use software as a tool of production, but do not pay for it. It is vitally important to have strong 

copyright and enforcement provisions in all FTAs. And a number 

of provisions in KORUS help protect the intellectual property of 

U.S. businesses operating in Korea. They include: requiring that 

government agencies use only legal software; protection for temporary reproductions; protection against circumvention of technological measures; and the exclusive right to make works available 

online. 

The KORUS FTA also includes numerous obligations that provide for strong enforcement of intellectual property rights, including statutory damages and service provider liability. Each of these 

elements is also included in the pending agreements with Panama 

and Colombia, which is why we support those agreements as well. 

Korea is a story of progress. Let me take a moment to share a 

little of that story. The BSA and I have been fighting software theft 

in Korea for 20 years. About 10 years ago Korea made an explicit 

commitment to the U.S. that it would conduct a high volume of actions against businesses who use illegal software on a sustained 

basis. Korea’s efforts, as a result of that commitment to the U.S., 

have driven the piracy rate down by nearly 10 points over the past 

decade, while software sales have increased by more than 40 percent. 

A key factor of this progress has been the element of Korean law 

that permits rights holders to bring criminal complaints against 

end user piracy, and withdraw those complaints when there is an 

agreement reached with the offending party. And that element may 

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Software piracy remains a substantial problem in Korea, with 

rates double those here in the U.S. The KORUS FTA must build 

on the successful efforts taking place today under existing law, and 

expand upon those in ways that will continue to bring software 

theft down. Most importantly, Korea must continue to commit to 

maintain vigorous and undiminished criminal enforcement efforts 

against business end user piracy. We urge this committee to help 

ensure that happens. 

In conclusion, the KORUS FTA is an important agreement with 

a major trading partner. It includes world class IPR protections 

and ensures open markets for IT services and Commerce. We urge 

the Congress to approve the KORUS FTA, and also to play a role 

in its successful implementation. Thank you. 

[The prepared statement of Mr. Holleyman follows:] 


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Chairman BRADY. Thank you, Mr. Holleyman. 

Ambassador Hubbard. 


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STATEMENT OF THOMAS HUBBARD, SENIOR DIRECTOR FOR 

ASIA, MCLARTY ASSOCIATES, FORMER AMBASSADOR TO 

SOUTH KOREA 

Mr. HUBBARD. Thank you, Mr. Chairman. It is indeed an honor 

for me to be here today, and I appreciate your inviting me here. 

As a career foreign service officer for nearly 40 years, I spent a 

lot of time in the various foreign affairs and armed services committees. This is the first time I have testified to the Ways and 

Means Committee, and I am honored to be in the big time. 

Chairman BRADY. Well, we are honored to have you here. 

Mr. HUBBARD. My colleagues here today have made very clear 

that the Korea-U.S. free trade agreement is a critical step forward 

for American job creation and ensuring U.S. economic competitiveness in Asia. I would like to stress that this trade agreement is 

also an important investment in the overall U.S.-South Korea alliance at a time when heightened tensions on the Korean Peninsula 

require our solidarity with our allies in the south, and it will also 

be a strong manifestation of the U.S. commitment to remain a 

major presence in Asia. 

Sixty years ago the U.S. stood with the Republic of Korea in 

countering aggression from the Communist north. That bloody conflict, which cost the lives of more than 35,000 Americans, has yet 

to result in a permanent peace. North Korea continues to challenge 

the world through its nuclear weapons programs, and its recent attacks on the south have reminded us of the military threat and 

raised deep concerns throughout northeast Asia. 

The Korean Peninsula remains a very dangerous place. However, 

there has been a successful spectacular success story amidst ongoing tensions. South Korea has risen to be the world’s 14th largest 

economy, a vibrant democracy, and a valued ally for the United 

States in a critical region. 

Moving ahead with KORUS will also be a concrete demonstration 

that the United States is prepared more broadly to lead on trade 

in Asia. This is a signal that all of our partners in the region want 

to see. The economies of Asia are in the process of integration and 

are now trading more with each other than they are with the 

United States. Bilateral and regional free trade agreements are 

proliferating, and the ROK is in the vanguard. We cannot afford 

to wait on the sidelines while the region pursues agreements that 

leave us out. 

KORUS will give us special access to the Korean market, enhancing our ability to compete with China, Japan, and India, and 

Europe, even as it strengthens Korea’s ties to the United States. 

And I think KORUS may also provoke wider liberalization. Approval of KORUS will lend impetus, among other things, to the effort to develop the trans-Pacific partnership and move beyond that 

to an Asia—a free trade zone of the Asia-Pacific. 

But the economic benefits are just part of the equation. Strategic 

interests are also overwhelming at a time when the U.S. is dealing 

with a host of new security threats, including North Korea’s nuclear weapons program. 

This free trade agreement will strengthen our strategic partnership with an important Asian ally that shares our belief in democracy, and has stepped up to the plate with military contributions 


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in various places in the world. One of South Korea’s primary goals 

in seeking the free trade agreement with the United States is to 

broaden and strengthen its relationship with its ally at a time 

when rapid changes in East Asia, including China’s rapid rise, 

have provoked significant changes in power relationships in Asia. 

We strongly share the Republic of Korea’s interest in solidifying 

and broadening this critical alliance. And a failure to approve 

KORUS would be exactly the wrong signal to North Korea and to 

our allies and friends in Asia, who want us to remain strongly engaged. 

As Chairman Rangel knows as well as any of us, Americans and 

South Koreans shared blood together to prevent a Communist takeover of the entire peninsula 60 years ago. We still stand together 

in facing the many challenges from the north. The FTA with Korea 

will strengthen America’s relationship with our long-time ally, and 

enhance our presence and influence in a very critical region. Thank 

you. 

[The prepared statement of Mr. Hubbard follows:] 


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Chairman BRADY. Ambassador Hubbard, thank you so much. 

Appreciate the testimony. 

Mr. Schoch, you are a real-life example of how small business 

can compete and win in these growing markets, and how removing 

those barriers can help make those sales—— 

Mr. SCHOCH. Yes, sir. 

Chairman BRADY.—at a time when every sale counts. 

Mr. SCHOCH. Yes, sir. 

Chairman BRADY. Mr. Holleyman, you laid out both the 

progress that has been made, but also how that has expanded in 

this agreement with intellectual property protections, key to millions of jobs in one of our most dynamic industries growing in 

America. Thank you for that testimony. 

I wanted to ask Mr. Rhodes and Ambassador Hubbard to—both 

of those testimonies build up to the bigger picture on this trade 

agreement. I would like Mr. Rhodes and Mr. Hubbard to sort of exVerDate Nov 24 2008 05:32 Dec 02, 2011 Jkt 070867 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\70867.XXX GPO1 PsN: 70867

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pand on the geostrategic benefits of this. Clearly, South Korea is 

a critical ally. This strengthens the agreement—strengthens that 

relationship. But it also strengthens America as a counterweight to 

China in that region, both in trade and other areas. 

Clearly, Asia-Pacific region is blowing and going. They are moving ahead, whether we are engaged or not. They would like us 

there as a counterweight to China in many areas. But, frankly, 

they are not waiting for us to engage. They are moving ahead without us. 

So, I would like, Mr. Rhodes, Ambassador Hubbard, expand upon 

those—well, how critical it is that this not fail, as an agreement. 

More critically, what the benefits are for us as we move ahead. 

Mr. RHODES. Thank you, Chairman Brady. I think it is critical. 

I think that, given the situation in North Korea, as we have seen 

by the Cheonan and the shelling of the island over the last months 

and the problem of the nuclear situation there, it is critical for 

that. 

Also, I think you pointed out very correctly, China is watching 

this agreement very, very carefully. And so, I think, as a demonstration in that area, I think our allies all over Asia are watching this. And, as you know, there was a thought at one time of putting a northeast Asian economic group together—Japan, China, 

and Korea—which would have left the U.S. out. And so I think it 

is very important, along with this EU Agreement that is coming on 

board, that we stand up with Korea and all the benefits that we 

have all talked about on U.S. exports to Korea. 

So, it is a win-win on both strategic, as well as economic. Thank 

you. 

Chairman BRADY. Thank you, Mr. Rhodes. Ambassador. 

Mr. HUBBARD. Well, Mr. Chairman, several people today have 

mentioned that the United States in 2003 was South Korea’s leading trading partner in the world. Now it is number four, with 

China in the lead. If you go around the East Asia region, you will 

find that China has moved into first place almost everywhere you 

look. And they are uncomfortable with that. 

The other countries of Asia are looking to this agreement as an 

indication of whether the United States is committed to the region, 

whether we are committed to lead on trade liberalization in the region. And they are all hopeful that we will approve KORUS as 

quickly as possible, as a sign of our continued commitment there. 

Chairman BRADY. Right. Great point. Thank you, Ambassador. 

Ranking Member McDermott. 

Mr. MCDERMOTT. Thank you, Mr. President. Mr. Holleyman, I 

do not have any real questions, because we all agree on the need 

to move this thing. But since I have got you sitting here, I have 

got a question. 

I know that you are interested in Korea today, but I am going 

to ask you a question about China. At the end of last year, as part 

of the joint commission on commerce and trade, China’s committed 

to a number of things to address software piracy in China. Just before that meeting, almost every member of the Ways and Means, 

including all the current subcommittee members on the Democratic 

side, wrote a letter expressing the need to ‘‘measure progress on 

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lectual property rights by objective criteria,’’ such as increased exports to and sales in China. 

And almost four months have passed since then. Is there any 

measurable criteria or any statistics you can give us that will help 

us understand if this had any impact whatsoever? 

Mr. HOLLEYMAN. Thank you, Mr. McDermott, for that question. Unfortunately, as of today, there is nothing that I can say, in 

terms of measurements of increased sales from my members that 

I have learned that would tell me that there has been any market 

improvement on the status that existed when Members of the committee sent that letter. 

And I want to thank you for doing that, because that was enormously important. I know that the White House has made this an 

important issue. Your colleagues in the Senate have as well. But 

we have not seen the kind of measurable progress that was expected, I know, by members of this committee, and that was hoped 

for by our industry. 

Mr. MCDERMOTT. Is there anything at all hopeful you can say 

about the relationship with respect to China in this area? 

Mr. HOLLEYMAN. Well, I think the hopeful thing I can say is 

that the nature of the commitments, if fulfilled, should result in 

the kind of increased sales where we are happy for sales. So, this 

is a case where we do not need additional commitments. In fact, 

the commitments around business software are quite specific. What 

we need is full implementation. 

I will also mention one thing in contrast with Korea. Korea has 

undertaken 40 to 50 criminal cases a month on a sustained basis 

against businesses using illegal software, and that has helped 

bring the piracy rate down, and we want to continue to do that. By 

contrast there has never been a criminal action in Korea—I’m 

sorry, in China—against a commercial enterprise using pirated 

software. China would indicate that that is not permitted under 

their law. And so it is not a surprise that the piracy rates in China, 

in terms of percentage of market, are double what they are in 

Korea. And, of course, the value keeps rising as the Chinese market grows. 

So, I think that the continued interest and pressure from this 

committee and from the Administration—I know President Obama 

has personally engaged on this—but to show concrete results from 

China, not just commitments, will be critical. 

Mr. MCDERMOTT. I think it is important for people to understand the Koreans keep their promise and work at it and bring 

cases. And, unfortunately, that is not happening in China. 

I try to understand what their thinking is. Can you explain? Do 

they do it just more slowly, and some day they will do it? Or is it 

simply they make a commitment and then throw it in the waste 

basket and walk out of the room? 

Mr. HOLLEYMAN. Yes, I mean we have certainly seen some efforts around creating budgets for purchase of legal software by the 

government, some administrative enforcement. But there is nothing that is of sufficient magnitude to provide a deterrence in the 

marketplace against businesses using illegal software or, indeed, 

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By contrast, Korea, which used to have periodic campaigns—2 or 

3 months of a crackdown and then they would stop—about 10 years 

ago committed to the U.S. Government that they would do 40 to 

50 end-user software cases a month, and that was sustained. And 

that has been the key to bringing piracy down in Korea, what we 

think is key, going forward, to future progress. We see periodic 

minor campaigns in China, but nothing on a sustained basis. 

And so, Korea, I think, really is the model for what China should 

be doing. 

Mr. MCDERMOTT. Thank you very much. 

Chairman BRADY. Thank you. Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. Ambassador Hubbard, 

KORUS has been strongly endorsed by many experts as a means 

of enhancing our economic and national security relationships between the two countries. President Obama has referred to our relationship with Korea as the lynch pin of a security in Asia policy. 

Considering the United States maintains over 28,000 troops on 

the Peninsula right now, Ambassador, I was wondering if you could 

discuss, from your personal perspective and experience, how the 

passenger of KORUS will strengthen our relationship with this key 

ally, and how trade agreements more broadly—like Colombia and 

Panama—will have significant geostrategic impact, as well. 

Mr. HUBBARD. Thank you, Mr. Davis. I—basically, this agreement, this trade agreement, in my view, will both broaden and 

strengthen the alliance that we have had for the last 60 years. 

You know, military arrangements, military alliances, do not 

stand alone, even when you face a threat as palpable as the North 

Korean threat is to South Korea. They need to be given content 

through people-to-people ties, and we do have wonderful people-topeople ties with Korea. They need to be given content through 

trade relations. They need to be given content through special relationships of all kinds. For example, one of the things that was very, 

very important to Korea in recent years was to get on the visa 

waiver program, as kind of a symbol of their relationship with us. 

Koreans, like other countries, need constant assurances that we 

are with them, that we understand their issues, their problems, we 

value the relationship. And at this stage, passage of this FTA, I 

think, is the best way we can give those assurances. And this is 

really a time when we need it, after the attacks on South Korea 

and the other issues that are concerning them. 

Mr. DAVIS. Would you say that when the United States delays 

on passing agreements after they have been largely negotiated, 

that that can have an adverse effect on our long-term national security and geostrategic goals in a region of the world? 

Mr. HUBBARD. Yes, indeed. I think the Koreans have disappointed in the delays in passing this agreement. Korea is a democracy, a functioning democracy, and I think they understand democracy in our country, and why it has been delayed. But over 

time, you know, a failure to fulfill governmental commitments of 

this kind does have a negative impact on the broader relationship, 

and we should get moving on this. 

Mr. DAVIS. Would you agree that same principle applies in 

the—with the Colombia agreement, as well? 

Mr. HUBBARD. Yes, indeed. 


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Mr. DAVIS. Okay, thank you. 

Mr. HUBBARD. I strongly support that agreement. 

Chairman BRADY. Thank you. The chair recognizes Chairman 

Rangel. 

Mr. RANGEL. Thank you, Mr. Chairman. I do not want to beat 

a dead horse, but no one works more closely with the Koreans than 

I do. And I am certain that they would rather have an agreement 

where they have the votes for it, no matter how long it takes, rather than not to have it. 

Having said that, I think we all agree that it is good for our 

country, it is good for Korea, has all types of economic, political, national security reasons why we should support this agreement, especially after certain provisions were improved so that we can get 

the votes that are necessary in order to get it passed. 

Having said all that, I think all of you would agree with me that 

the major obstacle that we have in the country and in the Congress 

is the belief that this agreement, as all trade agreements, will lose 

jobs. And, of course, most of us believe that the evidence would 

support otherwise. But it is difficult to explain to people without 

showing them what it means to our country, our region, our industries, and of course, our congressional districts. 

So, if I could just say if someone challenged you, Dr. Rhodes— 

and we go down the line—and said that they knew specifically that 

we would lose jobs here, besides saying they are wrong, are you 

able to tell where these jobs will be located to any degree that the 

person walking away—say, ‘‘Well, I will check that tomorrow and 

I will get back to you?’’ 

Mr. RHODES. I think—and you and I have discussed this before—I think at the Chamber we have been very specific on making 

trips throughout the United States to various areas, pointing out 

where job growth will take place. And I think that we could do a 

better job—you can always do a better job—but I think we have 

made a real effort to do so. 

And I was just in Dallas last night, giving a talk to a group. And 

the question came up exactly on that. And so, I think we do have 

facts and figures in areas where these jobs are being created. And 

so, I think our job is to get out there and sell it even more, as you 

and I have discussed in the past. 

Mr. RANGEL. But you would not be able to tell, say, a guy from 

New York exactly where to go for—so that I can go to the recipients of this agreement and tell them, ‘‘Look for an increase in jobs 

in this area.’’ 

Mr. RHODES. We will give you a list. Yes, we do. I will give you 

a list. We will make sure you get a list today. 

Mr. RANGEL. That is great. Is there anyone that can give a little more specifics? Or generally, would you accept what Dr. Rhodes 

has said is the general answer? 

Mr. HUBBARD. I agree with Mr. Rhodes, and will help him put 

that together. 

Mr. RANGEL. You know, I have been impressed with the number of jobs that are going to be made available under the Colombian free trade agreement. 

And just to test the knowledge of the Members of Congress, I 

asked them, ‘‘Do you really believe that Caterpillar and other 


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earth-moving machinery will be one of our greatest exports?’’ They 

said there is no question about it. It is a mining country, and there 

is growth there, and they really want to buy from us. 

Then I ask the next question, ‘‘Do you know where Caterpillars 

are made?’’ Nobody knows. It just seems to me that there is a big 

gap. Because if they were made in my district, you would have 

heard from me, loud and clear, ‘‘Give us a break, give us jobs, let 

us expand.’’ And yet I do not remember anyone ever going to the 

floor, saying—with the exception of those from Michigan with the 

Korean agreement, which took a little time to reach, but we did— 

but I do not remember people saying, ‘‘I do not like trade generally, 

but this agreement is going to help my people in my district.’’ And 

if you have any of those clippings around your office, you can send 

those in to me, as well. 

Mr. Chairman, thank you so much. 

Chairman BRADY. Thank you, Chairman, very much. Mr. 

Reichert, to close this out? 

Mr. REICHERT. Thank you, Mr. Chairman. I want to touch on 

some of Mr. Rangel’s comments. I totally agree with the gentleman 

in his observation that there really needs to be a concerted effort 

regarding education about the number of jobs that are created 

through these agreements. 

And again, as I said earlier in—during the first panel discussion, 

this is all about selling American products. And so, we should all 

in America be about selling American. And, as was also stated earlier, 95 percent of our market is outside our borders. 

So, we should really work hard. And again, this export council 

is looking at ways that we might be able to help in really beating 

the drum on the number of jobs that are created by these trade 

agreements and, of course, the other obvious benefits. 

I would like to touch on with Ambassador Hubbard, first of all, 

thank you for your years of service to our country. And happy to 

have you here today. I am interested in your views on the importance of approving the Korean agreement and solidifying America’s 

presence in the Asia-Pacific region. Mr. Davis touched on it just a 

little bit, as far as security goes. But how does finally coming to 

an agreement with Korea impact our ability to negotiate further 

trade agreements with other countries around the world? 

Mr. HUBBARD. First and foremost, Mr. Reichert, it establishes 

a very good precedent and standard. This is a very high-quality 

agreement. Frankly, it is of higher quality than most of the agreements that have been reached within Asia and within the Asia-Pacific. And so this will be a standard that all other agreements can 

be measured—— 

Mr. REICHERT. Would it also—would this affect our ability in 

the TPP efforts, also? 

Mr. HUBBARD. Yes. Very much so. I think this—you know, I 

think it relates to TPP in a couple of ways. One, our partners in 

the TPP are looking at KORUS as a signal of whether the United 

States can be counted on to do the sensible thing in its own interest. And that will have its impact. 

Secondly, it will help improve the standards of the TPP. I think 

eventually, based on KORUS, that Korea will probably also want 

to join TPP at a later time, as might Japan. 


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Mr. REICHERT. Sure. 

Mr. HUBBARD. And that will all strengthen our posture in Asia. 

Mr. REICHERT. So there is a bright light shining on us right 

now, as to our success, right? 

Mr. HUBBARD. Exactly. 

Mr. REICHERT. Yes, sir. 

Mr. HUBBARD. Exactly. 

Mr. REICHERT. What about intellectual property rights in the 

region? How do you think the Korean agreement might affect those 

as we look at—of course everyone mentions China, it is the most 

obvious offender. 

Mr. HUBBARD. Well, Mr. Holleyman obviously knows more 

about that than I do. But, again, it sets a very good standard. Korea’s enforcement sets a good standard. And you know, I think 

other countries are going to bear that in mind as we move forward. 

Mr. REICHERT. Mr. Holleyman, would you like to respond to 

that, please? 

Mr. HOLLEYMAN. Certainly. The KORUS really provides the 

strongest levels of protection of intellectual property of any U.S. 

free trade agreements. Those are mirrored in substantial part in 

Colombia and Panama. Locking those in place will ensure not only 

tools against fighting piracy, but as new Commerce and services 

come aboard like software as a service and cloud computing, it will 

ensure that that next wave of computing technology has unfettered 

access to the Korean market. 

So, it is critical. What we need on the IP side is to ensure that 

existing practices of high-volume sustained criminal actions against 

the enterprise end users of pirated software, will be maintained in 

Korea going forward, and that existing procedures that allow right 

holders to successfully resolve actions against those corporations 

when they become legal customers can be maintained. And that is 

a key element in implementation, where we urge this committee’s 

continued attention. 

Mr. REICHERT. Great. Thank you. I yield back, Mr. Chairman. 

Chairman BRADY. Thank you, Mr. Reichert. I want to thank the 

Members for their thoughtful questions. 

And let me note for our witnesses how much we appreciate your 

testimony. Members may submit questions for the record. And if 

they do, I hope you will respond promptly. I know you will. 

And our witnesses today, who come from all parts of industry 

and job creation, as well as our geopolitical role, made clear the 

pending trade agreement with South Korea, as well as with the 

pending agreements with Colombia and Panama, offer significant 

benefits. Not moving forward will only harm American interests 

and the ability of American workers, businesses, and farmers to 

compete in these markets as our competitors move ahead. 

As I said earlier, I am excited about moving forward on the 

South Korea Agreement. And just as I am excited to move forward 

with Panama and Colombia, I hope we will continue the constructive bipartisan technical work on the Korean agreement, and begin 

the work on the Latin agreements, to ensure that these draft implementing bills are complete and thorough, and ready to move forward in a timely manner. I strong believe we should consider all 


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three agreements by July 1st, and I hope we will continue to work 

together to make that happen. 

But for now, the committee is adjourned. 

[Whereupon, at 12:45 p.m., the subcommittee was adjourned.] 

[Submissions for the Record follow:] 


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