U.S. GOVERNMENT PRINTING OFFICE

63–650 WASHINGTON : 2000

TRADE RELATIONS WITH EUROPE AND THE NEW

TRANSATLANTIC ECONOMIC PARTNERSHIP

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

JULY 28, 1998

Serial No. 105–107

Printed for the use of the Committee on Ways and Means

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(II)

COMMITTEE ON WAYS AND MEANS

BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

JIM BUNNING, Kentucky

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHILIP S. ENGLISH, Pennsylvania

JOHN ENSIGN, Nevada

JON CHRISTENSEN, Nebraska

WES WATKINS, Oklahoma

J.D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY HULSHOF, Missouri

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

BARBARA B. KENNELLY, Connecticut

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

A.L. SINGLETON, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON TRADE

PHILIP M. CRANE, Illinois, Chairman

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

AMO HOUGHTON, New York

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JENNIFER DUNN, Washington

WALLY HERGER, California

JIM NUSSLE, Iowa

ROBERT T. MATSUI, California

CHARLES B. RANGEL, New York

RICHARD E. NEAL, Massachusetts

JIM MCDERMOTT, Washington

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records

of the Committee on Ways and Means are also published in electronic form. The printed

hearing record remains the official version. Because electronic submissions are used to

prepare both printed and electronic versions of the hearing record, the process of converting

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process

is further refined.

(III)

C O N T E N T S

Page

Advisory of July 14, 1998, announcing the hearing .............................................. 2

WITNESSES

Office of the U.S. Trade Representative, Hon. Charlene Barshefsky, U.S.

Trade Representative ........................................................................................... 18

U.S. Department of Commerce, Hon. David L. Aaron, Undersecretary of Commerce for International Trade ............................................................................. 35

CSC Biotechnology Committee and Corn Refiners Association, Inc., Kyd D.

Brenner ................................................................................................................. 107

European-American Business Council, Willard M. Berry .................................... 79

Foreign Sales Corporation Coalition, Jeremy O. Preiss ....................................... 114

Goodyear Tire and Rubber, Isabel Jasinowski ...................................................... 99

Grocery Manufacturers of America, Inc., Mary C. Sophos ................................... 89

Institute for International Economics, Ellen L. Frost .......................................... 67

Monsanto Company, Robert L. Harness ................................................................ 101

National Foreign Trade Council, Jeremy O. Preiss .............................................. 114

Qualcomm Incorporated, Kevin Kelley .................................................................. 119

Smith, Hon. Robert F., a Representative in Congress from the State of Oregon, and Chairman, Committee on Agriculture ............................................... 6

Transatlantic Business Dialogue, P. Vincent LoVoi ............................................. 58

United Technologies Corporation, Jeremy O. Preiss ............................................ 114

Warner-Lambert Company, P. Vincent LoVoi ....................................................... 58

SUBMISSIONS FOR THE RECORD

American Automobile Manufacturers Association, American Forest & Paper

Association, Fertilizer Institute, Manufacturing Jewelers and Silversmiths

of America, Inc., Rubber Manufacturers Association, and Toy Manufacturers of America, joint statement ........................................................................... 134

American Chamber of Commerce in Japan, Glen S. Fukushima, statements ... 135

American Council of Life Insurance, statement .................................................... 146

American Forest & Paper Association, statement ................................................ 148

America Online Incorporated, William W. Burrington, statement ...................... 155

California Cling Peach Growers Advisory Board, statement and attachments . 163

Chiquita Brands International, Cincinnati, Ohio, statement .............................. 177

Coalition to Defend the FSC, statement ................................................................ 184

European Telecommunications Standards Institute, Karl Heinz Rosenbrock,

Sophia Antipolis, France, letter and attachments ............................................. 190

JBC International, James Clawson, letter ............................................................ 202

Lighthizer, Robert E., Skadden, Arps, Slate, Meagher & Flom, LLP, Washington, DC, statement .......................................................................................... 207

Underwriters Laboratories Inc., Gordon Gillerman, letter .................................. 215

U.S. Chamber of Commerce, Willard A. Workman, statement ............................ 219

Wine Institute, Robert P. Koch, letter ................................................................... 224

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TRADE RELATIONS WITH EUROPE AND THE

NEW TRANSATLANTIC ECONOMIC PARTNERSHIP

TUESDAY, JULY 28, 1998

HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON TRADE, Washington, DC.

The Subcommittee met, pursuant to notice, at 11 a.m., in room

1100 Longworth House Office Building, Hon. Philip M. Crane,

(Chairman of the Subcommittee) presiding.

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Chairman CRANE. Will everybody please take a seat so we can

get underway here? We are going to be on an irregular and somewhat tight time constraint because of the services over in the Capitol Building.

Our first witness that I want to welcome is our chairman of the

House Agriculture Committee, Bob Smith, from the State of Oregon, and we will have you on, Bob, until they break us for that

forum in the Capitol, which I think is going to be about 11:30.

And I want you to know that you have my admiration for your

leadership in reducing trade barriers to U.S. agriculture exports

and for the key role you’re playing in maintaining the pressure for

fast-track trade legislation. I know that we both agree that the

trade agenda with the European Union, particularly in the agriculture arena will be severely damaged if Congress and the President aren’t successful in enacting H.R. 2621, the Ways and Means

fast-track bill. You have been working diligently, I know, to bring

more of your committee members onboard, and we applaud your efforts.

The focus of today’s hearing is trade with Europe and the new

transatlantic economic partnership initiative, which was announced

by the two trading partners at the May 18 summit meeting. Europe is not quite our largest export market, but the totality of the

bilateral trade and investment relationship makes Europe perhaps

our most important economic partner.

The reality of globalization and economic independence is illustrated by the large two-way flow of investment dollars between the

U.S. and Europe. Three million U.S. workers are employed in European-owned factories, while another 1.1 million U.S. workers manufacture products that are directly exported to Europe.

Witnesses today will address prospects for further trade liberalization under the auspices of the new Transatlantic Economic Partnership, TEP, and the companion private sector initiative, the

Transatlantic Business Dialogue. Much of the potential for success,

it seems to me, lies in the area of achieving harmonization of

standards and mutual recognition agreements for regulatory procedures.

Later, I will also welcome Ambassador Barshefsky, who will testify after you, Bob, and after our break. I appreciate her desire to

keep the U.S. trade agenda moving forward in the absence of fasttrack negotiating authority.

However, I would caution that we must not let the TEP or any

other bilateral talks deflect attention from the primary need to secure fast-track negotiating authority. Nor should we allow leverage

to be diverted from our goal of achieving a successful result in the

WTO negotiations on agriculture, which are set to begin in December of 1999.

And with these comments, I will yield to our Ranking Member,

Mr. Matsui.

Mr. MATSUI. Thank you very much, Mr. Chairman. I have a

statement, and because of the time constraints and the fact that we

will have a vote, or at least a call of the House, in about a half

hour, I’d like to submit my statement for the record, and just welcome, obviously, Chairman Smith from the Committee on AgriVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 E:\HEARINGS\63650 pfrm08 PsN: 63650
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culture and, of course, USTR Ambassador Barshefsky and David

Aaron, as well.

Thank you, Mr. Chairman.

Chairman CRANE. And with that then, we shall yield to you for

your presentation, Bob.

STATEMENT OF THE HON. ROBERT F. SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON, AND

CHAIRMAN, COMMITTEE ON AGRICULTURE

Mr. SMITH of Oregon. Thank you, Mr. Chairman, and gentlemen.

It is a privilege to be here to say hello to you and discuss for a moment agriculture’s thoughts about the European Union and international trade.

Mr. Chairman, as you well know, in 1996, the Congress changed

agriculture from the previous 60 years of support and subsidy to

a program of marketplace. And it was significant that we now are

going to challenge farmers in America to use the marketplace to

sell their goods and not the government. In doing that, of course,

there were in this case, this year, great problems that developed,

because commodity prices are down and there are all kinds of discussions about what we should do about low commodity prices.

Should we revive the old subsidy idea, or should we stay on the

track that we have established? And that is to find markets for our

farmers’ production.

Now, heretofore, farmers relied on two markets. One was a subsidy from the government and the other was, of course, what they

could get from their product. But since we have deprived them and

we are phasing them out over the years—in the year 2002, there

will be no more subsidies—then it becomes our responsibility in

government to provide them with the markets, which they are not

capable of doing, nor should they.

So it was part of our bargain in 1996 that the government provide the market and the farmers produce as best they could do so.

That brings us to this whole question of what do we do about trade

and markets for farmers. And I want to emphasize the essential responsibility for this Congress not only to pass fast track, but to

pass full funding of IMF, and as we did, lift sanctions on Pakistan

and India, as well as normal relations with China.

But on fast track especially, historically this country has been a

leader in international trade. And we believe in free trade principles. In the Uruguay Round, it was the United States that led the

argument that there should be no barriers against products flowing

from one country to another, no trade barriers. And we should go

to tariffication rather than other problems we had in trade. So we

were the leader.

Now it becomes our responsibility to pass fast track, it seems to

me, and give this President the opportunity to enter into agreements with other countries and to open trade for our products. It

is happening all around us. Bilateral negotiations are going on.

MERCOSUR is working out programs in South America; the European Union is identifying bilateral relationships with countries.

Canada is doing so; so is Mexico.

If we do not pass fast track, we will certainly injure this country’s opportunity in the 1999 revisitation of the WTO to act for agVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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riculture, certainly, but for the rest of this country in a positive

manner.

The European Union, Mr. Chairman, having taken my committee

to Germany and Belgium and France recently, the European Union

is our second-largest agricultural partner. In fact, last year we did

about $10.5 billion with them, and we imported about $7.5 billion

from them. It’s a good market for agricultural products, but it still

has very, very many problems and many barriers to our exports.

For instance, it’s a well-known fact that the European Union

subsidized heavily. I always carry this chart with me, Mr. Chairman and members, wherever I go, be it Europe or Asia or anywhere else, because it shows graphically the difference between

subsidization of the European Union and our own subsidy programs. In fact, it shows about $47 billion of European subsidies to agri- culture products, while our subsidy program is $5.3 billion and

then phases out totally in the year 2002. So if we continue on, we

can see that the European Union has huge subsidies and ours are

phasing out. That gives us a strong position in the 1999 revisitation, but it is still a fact.

And any way you want to cut it, we are suggesting to the European Union that rather than subsidize their crops and their commodities heavily, which distorts the world price and the market

internationally, we don’t want to quarrel with them about how

much money they send to farmers, if that means that they maintain the environment that they have been farming for thousands

of years, as they say. They have a greater sensitivity than we, they

say, to the land.

I point out to them our CRP programs and others, but we suggest that they decouple the program and pay their farmers as

much as they want to pay them for the protection of the land and

let the commodity go on the world market. That does two great

things for Europe, the European Union. It takes care of their farmers and it reduces the cost of living in Europe dramatically. And

then it gives the rest of the world an opportunity to compete in a

world free trade system.

So we have suggested that to them, and Mr. Fisher, by the way,

has attempted to start down that line not totally, but he is considering it, at least. I must say, he is not too popular, by the same

token.

Any way you want to divide it up, the European Union heavily

subsidizes against our products. For instance, there is another way

of measuring this thing. It is the Organization for Economic Cooperation and Development, another measurement. By this measure, the European Union outspends the U.S. by more than three

and a half to one for products.

We know that exports currently are 30 percent of the United

States farm cash receipts. We produce more than we can consume

in this country and therefore, exports, we know, are essential to

not only prosperity, but success of U.S. farmers and ranchers.

When we look to the WTO decisionmaking in 1999, we know that

it’s an important precedent for TRQ’s, for tariff rate quotas, as

well, another problem that we face, of course, in international

trade. In 1999, we believe with the proper tools, the United States

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can negotiate for further reduction of tariffs. We think we can open

new markets, we can address unfair trade practices around the

world. Of course, other issues that we have in great debate these

days are biotechnology products that you know about, BT corn,

Roundup Ready soybeans, et cetera. And future negotiations depend upon our ability to give ourselves the proper tools like fast

track and other opportunities.

So, Mr. Chairman, I thank you for this brief moment with you.

I think it is important to remember that basically our opportunity

to import is very little or restricted. In other words, there are very

few barriers against products coming into the United States. The

barriers we have are with our trading partners, and we still have

problems with Canada and Mexico, but especially with the Europeans.

And the European Union is a very, very large market and we

ought to be tough in negotiating in 1999 to open the markets to not

only agriculture products, but all the products we produce in this

country. I thank you very much for the time.

[The prepared statement follows:]

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Chairman CRANE. Thank you very much, Mr. Chairman. Let me ask you a question, though, upfront about that $47 billion subsidy

of agriculture in the European Union. If you’ll just put those farmers on a direct pay dole and eliminate their subsidies, aren’t all of

our consumers buying their agricultural products taking that hit?

Mr. SMITH of Oregon. Well, we don’t think so, because we believe,

for instance, that we are the most competitive nation in the world

in foodstuffs. Let me give an example. Today, wheat is probably

worth $3 a bushel. If you were in France at a farm that I visited

within the last few months, you would be receiving about $8 a

bushel. If you had a cow in the United States worth $600, that cow

is worth $1200. We don’t mind the competition, Mr. Chairman. We

just want the chance.

I’d like to distribute this, Mr. Chairman, if I may, or ask the

clerk to leave in front of the members——

Chairman CRANE. Are those extra copies that you have there,

Bob?

Mr. SMITH of Oregon. Yes.

Chairman CRANE. Oh, yes, please. Will one of the staff do that?

Is there a danger that negotiating with the EU on standards in

the transatlantic economic partnership could diminish our leverage

for achieving a successful launch of the WTO agriculture negotiations?

Mr. SMITH of Oregon. I don’t think so. I don’t mind a bilateral

discussion with the emphasis as long as agriculture is included. If

you recall, the first discussion we had in a bilateral basis with the

European Union did not include agriculture. I don’t think that you

strain our opportunity in the WTO by talking to the European

Union independently at all, as long as everybody is at the table.

Chairman CRANE. The U.S. has won two landmark WTO dispute

settlement cases against the EU on beef hormones and bananas. In

my view, a failure by the EU to implement these decisions would

undermine the credibility of the WTO dispute settlement system to

the detriment of the U.S. and the EU. Are we seeing a disturbing

pattern on noncompliance on the part of the EU?

Mr. SMITH of Oregon. Well, I’m glad you mentioned that, Mr.

Chairman. I have that in my prepared remarks, and I hope you

emphasize and reemphasize that with Ms. Barshefsky because you

are absolutely correct. If the WTO doesn’t follow through with finality on beef hormones and bananas, then there is no purpose for

a World Trade Organization whatsoever.

They’ve ruled; they’ve found in all their judicial capacity that the

European Union is violating these two issues. It has to come to finality, otherwise, as you intimate, the review of the Round will

simply be a review of what hasn’t happened. And we certainly don’t

need that. We don’t need to look back and rehash these things that

have already been decided. We ought to be looking ahead to the future.

So you are right on point and I hope you will emphasize that

with Ms. Barshefsky.

Chairman CRANE. Thank you. Mr. Matsui.

Mr. MATSUI. Thank you, Mr. Chairman. I just want to follow up

to Mr. Smith on your question. Bob, how are the discussions going

with the EU now on the beef hormone issue and the issue of baVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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nanas. Are you satisfied at this time in terms of whether they are

going to implement or not?

Mr. SMITH of Oregon. No, I am not satisfied at all. In fact, I

raised my voice when I was in Paris and Berlin and Belgium to

those officials in the European Union because they seemed to continue to delay the implementation by one hook or another.

Now, the banana issue we understand will be resolved by January of 1999. The hormone issue, they say, well, we have to have

a new review which may take two to three years. We don’t understand that. So I think we must keep the pressure on, because that

is unacceptable. And I mentioned it, and I think we ought to say

as a government, that is unacceptable.

Mr. MATSUI. Well, thank you, I appreciate this. Obviously, we

have a lot of work to do. We have attempted to abide by the WTO

rulings. The Fuji film case is a great example of that. Obviously,

Kodak is being hurt by that, but we are doing certain things and

we are certainly not violating the terms of the ruling. We would

hope that the EU would follow the same kind of provisions we are.

But thank you.

Mr. SMITH of Oregon. I thank the chairman.

Mr. MATSUI. Thank you.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman. Bob, good to see you.

Mr. SMITH of Oregon. Thank you.

Mr. HOUGHTON. Just two questions. One, if you were given a fair

chance, literally, in terms of this market, what would this mean in

terms of dollars? What are we talking about? Is it billions? Is it

hundreds of millions?

Mr. SMITH of Oregon. Are we talking about the European Union

now?

Mr. HOUGHTON. Yes, right, EU.

Mr. SMITH of Oregon. Well, as I mentioned, we are selling them about $10 billion in agricultural products. They are buying about

$7.8 billion from us. The European Union is largely self-sufficient.

They export very small amounts, maybe in the neighborhood of 10

percent.

Because they think they are so self-sufficient, they raise these

barriers. They are doing what we did 60 years ago with Smoot

Hawley and others. They think they are self-sufficient, therefore,

there is no reason to reduce barriers to incoming products. Well,

they’ll find out they are wrong. It is costing them a huge amount

of money.

So the amount of money that is a possibility to export to the European Union is in the billions. We export about $60 billion worth

of goods today in agriculture. That could possibly double if they

would allow us to be competitive.

Mr. HOUGHTON. It would double just in the EU.

Mr. SMITH of Oregon. I think it could be very, very important.

Mr. HOUGHTON. All right. Now, let me just ask you the second

question. We were meeting with a group of English and German

parliamentarians and talking about science in general. We talked

about information technology, environment. One of the things was

genetic engineering, and I think you mentioned this before. It

seems as if we are brewing for a trade war over that.

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Do you have any other comments you’d like to make?

Mr. SMITH of Oregon. Well, they are very sensitive about anything ‘‘genetically modified.’’ Genetically modified organisms are

being debated today. In fact, France brought two genetically modified corn programs forward and they’re arguing and debating today

whether they should continue to do that.

We say to them simply, look, defend whatever right your consumer has and you believe they have. We have been debating the

question of labeling. I think the ultimate answer for the European

Union and others who are sensitive is some sort of a fair kind of

labeling. We know that, for instance, a tomato paste that was labeled ‘‘may have genetically modified organisms,’’—something like

that, I don’t know the language exactly—but it was offered in England and the GMO had no legs. The tomato paste, in fact, sold in

more volume than it did before.

So I think there are ways to do this without interrupting what

we know is great progress. I mean, biotechnology has improved volume some 30 percent in the generation of products, so it is the future.

Mr. HOUGHTON. I guess, Bob, the thing I am worried about is

they have taken sort of an idealistic stance on genetically manufactured products, that you could see that $7 billion evaporate just on

ideology.

Mr. SMITH of Oregon. Well, we are not sending them any——

Mr. HOUGHTON. No, but the way we are going now.

Mr. SMITH of Oregon. Oh, the future may look very dismal, you

are correct. But they are going to have to cope with this issue, and

they are going to do it, because as I mentioned to Mr. Fisher, I

said, look, I hope you go about doing exactly what you are doing

because we’ll outcompete you, we’ll outsell you, and you’re going to

be in the dark ages of food production in the world. And he smiled

at me and agreed, because that is the future and they know it.

Mr. HOUGHTON. Thank you very much.

Chairman CRANE. Mr. McDermott.

Mr. MCDERMOTT. Thank you, Mr. Chairman. Do I understand

that under the WTO, the agricultural subsidies will phase out by

2002?

Mr. SMITH of Oregon. That’s correct.

Mr. MCDERMOTT. So it’s a fait accompli; it’s going to happen.

Mr. SMITH of Oregon. Well, not under the WTO. Under our passage of the bill in 1996, that phased out all subsidies by the year

2002.

Mr. MCDERMOTT. But that’s really coincident with——

Mr. SMITH of Oregon. Coincident with it, yes.

Mr. MCDERMOTT. Okay. Now, I listened to your talk about the

need for fast track, and not understanding the mind set of people

who voted against it from agricultural areas in the first place, I

wonder what argument you would make to them that would change

their point of view.

I mean, I find it difficult philosophically to deal with the idea

that you want the government out of everything but at the same

time you want the government to create markets where they go out

and negotiate for you. So I am interested in how you make that arVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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gument to those people in agricultural areas who turned fast track

down in the past.

Mr. SMITH of Oregon. Well, as the chairman has agreed and Mr.

Archer, I approached that issue like you did, and I realized that agriculturists are very suspicious of what has happened in the past.

If you have bad markets, you blame NAFTA and you blame the

WTO, and how could we bring them along.

I have suggested, and the chairman has agreed, that language be

added to the authorization for fast track which will allow the Agriculture Committee of the House and of the Senate and anyone else

who is interested to be brought along, as is the Ways and Means

Committee of the House and Finance Committee of the Senate, to

be brought along in these negotiations as they are building so that

no one is left in the dark. It will not be done in the dark of night,

as is suspicioned, and then dumped on us in the last minute.

Beyond that, the Agriculture Committee of the House and the

Senate will have an opportunity to see the agreement before it is

finally penned, before it is finally completed and signed. Therefore,

if it is alien to agriculture, then likely no administration will bring

an agreement to this Congress for confirmation if the agriculture

community isn’t satisfied with it, because they’ll defeat it.

Therefore, for the first time, agriculture people in America have

a chance to be brought along, to watch as the negotiation is taking

place and to view the document before it is penned, which gives

them a great deal of satisfaction and protection that they have

never had before so that they can come along today and say, yes,

we can support fast track under those conditions and we do. That

is why you’ll see a big difference there. There are only 12 members

of my committee that were supporting fast track last year when we

finally dumped it. Now there are many more.

Mr. MCDERMOTT. So it’s a kind of modified fast track in that

they would have the ability to say to the administration, don’t sign

this agreement that you have worked out with the WTO?

Mr. SMITH of Oregon. As you do. The same language that allows

the Ways and Means Committee and the Finance Committee would

merely be offered to the Agriculture Committee, the same language

exactly.

Mr. MCDERMOTT. Explain to me the concept of how the government creates markets. You sort of suggested that the trade-off was

you get rid of subsidies and the government will provide markets.

Mr. SMITH of Oregon. I meant that the government has to be a

representative of farmers in trade negotiations, in opening markets

for our goods around the world. That’s our future. Agriculture certainly does not want to take our domestic market for granted, but

the future for agriculture is in trade. The future, because we are

so efficient in our production, and we have such safe food and it

is so efficiently produced, we can compete anywhere. All we need

is an opportunity.

So the government must be our ambassador to open markets.

That’s what I meant.

Mr. MCDERMOTT. Thank you.

Chairman CRANE. Ms. Dunn.

Ms. DUNN. I am glad you are here, Chairman Smith. On behalf

of the wheat farmers in Washington State, we want to thank you

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very much for your leading that effort to get rid of the Pakistan

sanctions. And I am very happy that we have decided that we will

have that vote on fast track this fall. I think that is vitally important, certainly for your interest, but for the interests of all of us

who purchase products from other nations.

We want to be able to buy at competitive prices and I think fast

track, in giving the President the negotiating authority without the

role of the Congress at the table, with the role of the Congress to

vote up or down on it, I think that is going to be very important

for us. And I believe that if we do this right this time, we can come

up with those six or seven votes that we were not able to secure

the last time and put fast track back in action.

But in the area of sanctions, I did want to take advantage of this

opportunity, since we don’t see you before this committee too often,

I would like to ask you to take a look at the whole area of sanctions

for us generally and tell us what your sense is now on their effectiveness as a tool of foreign policy, how they hurt or help the agriculture community and where you would like to see us go.

Mr. SMITH of Oregon. Well, thank you very much. I tend to lean

towards those who believe that sanctions against agricultural products are not effective against governments. They might be effective

against allowing people to starve, which I don’t think is really any

benefit from our policy point of view.

So I am one of those who believes that we ought to eliminate agricultural sanctions from any sanctions that this government might

use, because I don’t think it is beneficial. I don’t see how depriving

Pakistan, for example, of wheat, advances our opportunity to punish them for setting off a nuclear device.

It certainly punishes American farmers to be assistants of Australians and Canadians who are standing there at the door to take

the market. But if you are really trying to punish a nation, I don’t

understand why it is a punishment to a nation to deprive them of

agricultural products.

Ms. DUNN. Thank you very much. Thank you, Mr. Chairman.

Chairman CRANE. Well, with that, we thank you very much, Bob,

for your presentation and appearance here today. This is a quorum

call and we will stand in recess subject to the call of the Chair at

a quarter to with our Trade Representative Charlene Barshefsky.

[Recess.]

Chairman CRANE. Would everyone please take seats. We shall resume the committee hearing and we have with us now our next

witness, the Honorable Charlene Barshefsky, our noted U.S. Trade

Representative. We appreciate your being here with us this morning. It is a little chaotic with scheduling, as you know, because of

the events planned over in the Capitol Building, but we do certainly have time without interruption for your presentation.

So I yield at this point to the distinguished Ms. Charlene

Barshefsky.

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STATEMENT OF HON. CHARLENE BARSHEFSKY, U.S. TRADE

REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE

Ms. BARSHEFSKY. Thank you, Mr. Chairman. Good morning. Let

me thank you for calling this hearing on American trade relations

with the European Union.

My testimony, which I will submit for the record, addresses the

state of our trade relationship with the EU today, the transatlantic

partnership launched by President Clinton, our trade disputes with

the EU, the EU’s expansion, and other issues.

But let me begin by putting these issues in some context. A

strong economic relationship with Europe is of fundamental importance to American workers, businesses, and agricultural producers.

And in a larger sense, it is a necessary complement to a strong security relationship with Europe if we are to guarantee peace and

prosperity in the next century.

Our trade and economic policy thus seeks the following goals: A

close strategic economic relationship with Europe; fair market access in Europe for American companies; removal of impediments to

mutually beneficial trade and investment; ensuring that the growth

and deepening of the European Union does not lead to the exclusion of American business; the integration of new market democracies in Central Europe, Southeastern Europe, and the former Soviet Union into the regional and international economic institutions

of the West; further development of the multilateral trading system; and the promotion of shared values.

In these areas, we build on an already strong relationship. In 1997, our goods exports to the European Union were $141 billion,

supporting 1.3 million jobs. Services exports to the EU were $77

billion, nearly a third of our worldwide total. And despite the perception of Europe as a mature market, our growth opportunities remain high. In 1997, for example, our goods export to the EU grew

by $13 billion, more than our total goods exports to China. Our direct investment in each other’s economies exceeds $750 billion, almost perfectly balanced. The EU’s investment in America

now supports three million jobs. This is particularly important in

manufacturing where one in every 12 U.S. factory workers is now

employed by a European firm.

Through the transatlantic agenda announced in 1995, we have

found ways to further improve this relationship, including the negotiation of a mutual recognition agreement that will reduce regulatory barriers facing sectors worth about $60 billion in annual

two-way trade, including medical devices, telecom equipment, and

pharmaceuticals. We have also concluded agreements on customs

cooperation and shortly, on veterinary equivalency.

And at the U.S.-EU summit in London last May, we launched an

effort to bring this economic relationship to a new level, the Transatlantic Economic Partnership will address some of the key problems in U.S.-European trade relations. It will seek to solve problems that affect both partners, and it will find areas in which we

can cooperate at the WTO and in third markets.

Thus, the initiative will engage the EU pragmatically and constructively to realize the remaining untapped potential of transatlantic markets, head off disagreements before they become crises,

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and enter into the new century with a further strengthened and

mutually beneficial trade relationship.

We have identified seven key areas on which to focus our efforts.

First, agriculture, including food safety procedures and the transparency of regulatory processes in, for example, the biotechnology

area. The TEP is, of course, only part of our efforts on behalf of

agriculture.

If I might digress for a moment, as we approach WTO negotiations in 1999 on agriculture, issues including implementation of existing WTO commitments, State Trading Enterprises, eliminating

export subsidies, ensuring that farmers and ranchers can use safe,

advanced scientific techniques, including biotechnology, transparency in regulatory policy, and further market access commitments clearly need attention.

The EU’s common agricultural policy presents a major challenge

in a number of these areas, including extensive import protection,

direct commodity-specific price support policies, and export subsidies.

Second, we will address in the Transatlantic Economic Partnership, government procurement, a $200 billion market in the EU

where small and medium-sized businesses face particular difficulties.

Third, technical standards, where we are examining ways to reduce mutual barriers and standards while maintaining our high

level of health and safety protection.

Fourth, services, the area in which we can both expand market

opportunities and bring on small common interests to boost the

coming WTO negotiations.

Fifth, intellectual property rights, where we can work on a number of areas, including worldwide enforcement. We have already

begun with a successful effort to raise patent protection in Bulgaria

and Cyprus. Sixth, electronic commerce, a market projected to grow to $300

billion in the U.S. alone by 2001; and finally, increased public participation in debates on trade policy, including labor, environmental, consumer groups and other important interests with the

aim of promoting shared values.

For example, we wish to seek common approaches to trade in the

environment and the international promotion of core labor standards, as well as transparency at the WTO.

In the months to come, we—and the EU—in consultation with

Congress and other interested parties, will formulate a specific action plan to achieve the Transatlantic Economic Partnership’s

goals. This will include identifying specific areas for negotiation, as

well as areas for WTO cooperation.

At the same time that we announce this initiative, our present

relationship with the EU is by no means free of disputes. We will

not tolerate failure to comply with trade agreements or WTO rules,

and we will use our own laws and our rights at the WTO to ensure

that American trade interests are respected.

Thus, for example, we have used special 301 procedures a number of times this year against the EU to ensure protection of our

intellectual property rights, and we are effectively using WTO dispute settlements.

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Our active WTO complaints against Europe involve income tax

subsidy cases against five EU member states and intellectual property rights against four member states. In two cases involving agricultural policy, specifically the EU import regime on bananas and

the EU ban on beef from cattle grown with bovine growth hormone,

WTO dispute settlement panels and the appellate body have ruled

in favor of the United States. The European Union has an obligation to respect these results and we will insist on rapid and full implementation.

The European Union has likewise initiated WTO cases against

us. We will defend our interests in all of these. The challenge to

our FISC tax provision, for example, is extremely troubling. The

FISC rules were enacted over 14 years ago to settle a dispute with

the EU, and to conform U.S. tax rules to our international obligations. In addition, there is no commercial harm to the EU. This

case, as in all others, will be defended vigorously.

Let me conclude with two subjects we face in the future. First,

the EU is deepening its single market through the adoption of the

euro, and further regulatory harmonization and expanding to take

in new members.

With respect to the euro, we have a strong interest in a stable

and prosperous Europe. The more the single currency helps ensure

that stability and prosperity, the more welcome that project will be.

We support the integration of Central and Eastern European countries into the Western political and economic institutions.

However, we are in close contact with the EU and bilaterally,

with Central and Eastern European countries, to ensure that the

process of European integration does not reduce market access for

Americans.

Second, we will seek cooperation from the European Union as the

World Trade Organization admits new members and embarks on

new negotiations. We have had good cooperation thus far on ensuring the accession of China and Russia to the WTO on commercially

meaningful terms. However, U.S. and EU interests in future accessions may not always coincide, and we will ensure that our rights

and interests are fully protected.

The core of the negotiations to begin next year in the WTO will

be the WTO’s built-in agenda. In this, as in all areas, we will seek

the cooperation of the EU as talks proceed.

Mr. Chairman, our trade relationship with Europe is already one

of the major forces for global prosperity. While we have disputes

with the EU, which we are working to resolve, this should not obscure the bigger picture. Strengthening the U.S. and EU relationship will open new opportunities to millions of American workers,

businesses, and agricultural producers; and in the larger sense, it

will ensure that the wise policies the United States adopted after

the Second World War remain in place after the Cold War, laying

the foundation for a more peaceful and prosperous world in the

next century.

Thank you very much, Mr. Chairman, for having this hearing,

and I look forward to your questions.

[The prepared statement follows:]

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Chairman CRANE. Well, we appreciate your appearance here,

Madame Ambassador, and we are grateful to you. There is something I would like to put to you that is not necessarily immediately

germane to your presentation, but it is something that is a matter

of concern to a lot of us. That has to do with the renewal of fast

track. You indicated that now is not the time to consider fast track.

My concern, especially with regard to agriculture, is whether it

is fair to make U.S. farmers and ranchers wait until next year before we start consideration of it. Secondly, I think it is impairing

our strength in international trade relations for Congress not to

have renewed that authority for the President.

And as you know, there is a growing commitment on the part of

at least the House leadership, and hopefully the Senate too, that

we might bring fast track up. Chairman Bob Smith indicated that

if we make some accommodation to the Agriculture Committee,

that he thinks he can pick up roughly 24 to 30 Members of his

members. Originally, the count there was only about 12. And if

that were so and we retained the numbers that we had last year

going into November, that would be enough to put us over the top.

What are your views on that?

Ms. BARSHEFSKY. Well, first of all, as you know, Mr. Chairman,

the administration strongly supports fast-track authority. We were

disappointed that the bill had to be pulled in November, but that

was the most prudent course at the time.

There is no question that fast track is essential and vital. If we

look at the European Union alone, we see that Europe is now in

the process of approving pre-trade agreement negotiations to begin

with MERCOSUR—that’s Brazil, Argentina, Paraguay and Uruguay, Chile and Mexico. This is obviously not in our interest inasmuch as we will not be a member of any of those pacts unless we

have adequate authority to proceed with our own array of free

trade agreements in this hemisphere, as well as around the world.

Having said that, we don’t wish to see fast track be brought up

to lose. And at this juncture, we don’t believe that the votes are

there either on the Republican side or on the Democratic side. I appreciate the efforts that the Chairman of the House Agriculture

Committee is making, but at this point, we don’t perceive that the

votes are there at this juncture.

From the administration’s point of view, we would like to see

those pieces of trade legislation that can move forward before the

election move forward. For example, the Africa bill, which you have

cosponsored and been so instrumental on; CBI parity, which you

were also instrumental on; shipbuilding, and several other areas;

GSP, several other areas. We’d like to see those move forward because we believe that there is quite strong bipartisan support for

those, and then take up fast track post-election.

Chairman CRANE. Well, I’m sure you followed our vote on renewal of normal trade relations with China. Going into that debate,

we had a fear that while we were reasonably confident we could

prevail, we anticipated a dropoff in the vote totals from last year.

In the end, we actually got an increase.

And if the fast-track vote were taken up in September and the

primaries are essentially all behind us, those who are paranoid

about labor union money being poured into their opponent’s camVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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paign kitty, except for general election fears, should not be all that

exercised, it seems to me.

And those that are going to anticipate that kind of reaction in

general elections are going to get it anyway. I have talked to our

ranking minority member on the Trade Subcommittee, and he feels

reasonably confident that he can retain the numbers he had last

year. Now, the burden then is on us to try and increase the numbers that we had, and ideally Bob can increase his a little, too.

That would help.

But if we were to get a pretty strong head count that looked like

we could prevail, and we communicated that to you, then you guys

ought to make a full court press from your end of Pennsylvania Avenue also. We will keep you updated on that and let you know.

Let me ask you a question on the Transatlantic Economic Partnership initiative. Are you certain that it won’t diminish leverage

the U.S. will have in the WTO negotiations on agriculture where

we can discuss the reduction of export subsidies in domestic support payments, something that when Bob was making his presentation, he pointed out that the EU spends almost $47 billion in

agiculture subsidies, in contrast to our $5 billion.

What Bob suggested is that they put all of their farmers on a

dole and make direct cash payments to them and eliminate those

subsidies, but I believe that stiffs us on any of their subsidied agriculture products coming in here. We are going to have to pay more,

wouldn’t we?

Ms. BARSHEFSKY. Right. Well, let me just say that the Transatlantic Economic Partnership and any talks under it will in no

way prejudice our leverage in agriculture discussions in the WTO

in 1999. And were we or I to perceive any remote possible diminution in our leverage for WTO talks, we would not negotiate those

issues in the Transatlantic Economic Partnership.

The 1999 WTO talks in agriculture are absolutely critical. But at

the same time, to the extent some of our bilateral irritants can be

resolved through the Transatlantic Economic Partnership, I’d like

to go ahead and try and resolve those or try to reduce the nature

of those disputes in advance of heading into the 1999 talks.

Let me give you one example. We have a persistent problem with

Europe with respect to trade in bioengineered or genetically-modified products. These disputes threaten to impair the bilateral relationship to a significant degree. At this juncture, we are awaiting

approval from the French government of certain GMO varieties of

corn which the European Union has already approved. And we

have indicated to the French government in the strongest terms,

including by the President and the Vice President, that undue

delay by the French will not be tolerated.

If we were able, in the context of the Transatlantic Economic

Partnership, to even reform the process by which the regulatory

process by which GMO varieties are considered, that would go a

long way to helping lessen the unpredictability created by the current climate and the current lack of discipline on the EU regulatory process.

That, it seems to me, would be worthwhile to try and accomplish

and would in no way endanger our leverage in the 1999 talks and

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would provide more immediate relief to our farmers who everyday

plant more and more using GMO’s.

So we will not do anything that impairs our leverage, but where

we can resolve disputes that are essentially bilateral in character,

we’d like to move forward on those and successfully pursue them

in the context of the Transatlantic Economic Partnership.

Chairman CRANE. Given the similarity in our economies, it has

always been surprising to me how rarely the U.S. and the EU are

able to cooperate in the WTO. Where could coordination between

the U.S. and the EU and the WTO be improved?

Ms. BARSHEFSKY. I think there are a number of areas. First of

all, your observation is very well taken. My observation is that

when the U.S. and the EU fight in the WTO, most of the rest of

the countries take a pass and just watch the fun. That’s terribly

counterproductive. It disempowers the United States, and it actually disempowers Europe.

So we do need to find ways to cooperate better since we do share

so many common interests. Certainly in services trade, where the

U.S. and Europe are the world’s largest services suppliers and largest services exporters, we should be doing more to cooperate so that

we set very high standards for market openness in services trade

through the WTO.

In areas of WTO transparency, that is, giving credibility to the

WTO through more open and transparent processes, including the

dispute settlement process, we and Europe have a shared history

of due process, of transparency in our legal regimes. That shared

history should be brought to bear on WTO practices and on the

practices of other large, multilateral institutions.

Those are two examples of areas where we and Europe should

do much more to cooperate and much less to fight.

Chairman CRANE. What’s your timetable for agreeing on a specific action plan for the TEP with the EU?

Ms. BARSHEFSKY. I think we are looking at this fall. We should

have a specific plan in terms of areas for negotiation, areas for cooperation, and so on, sometime in late September or October. And

that is our current scheduling.

Chairman CRANE. Very good. I will now yield to our distinguished colleague, Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman. I am a little out of

breath here, just having come back and I am sorry I did not hear

the testimony. But it is always good to see you, Ms. Barshefsky.

I just wanted to ask you a particular question. We approved here

on the committee in October of last year a bill to extend trade authorities procedures with respect to reciprocal trade agreements.

This was on fast-track legislation. And we offered an amendment

on ensuring that the administration—let me just read this thing,

because the question really is do you think it is a good idea and

whether we should reinsert it. ‘‘Preserve the ability of the United

States to enforce rigorously its trade laws, including the antidumping and countervailing duty laws, and avoid agreements

which lessen the effectiveness of domestic and international disciplines.’’ I won’t go on.

But I have always felt that something like that is important to

at least inscribe in law. I don’t know how you feel about it.

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Ms. BARSHEFSKY. I think it is very important at every opportunity to make clear to our trading partners that the U.S. will vigorously enforce its trade laws, including the anti-dumping and

countervailing duty laws; but also, of course, the full range of other

laws that we have, whether super 301 or special 301 or regular 301

or Section 1377 for telecommunications and so on and so forth.

To the extent that there is any doubt about that at all, then by

all means, these issues should certainly be inscribed, whether in

fast-track legislation or elsewhere. This administration, putting

aside the anti-dumping and countervailing duty laws, which tend

largely to be private remedies, has brought over 85 enforcement actions against our trading partners, including 41 WTO cases.

So we are not at all shy about enforcing our trade laws. I think

it is absolutely critical that we use all the tools Congress has given

us, and reenforcing of that by Congress, I think is a good idea.

Mr. HOUGHTON. Thank you very much. Thank you, Mr. Chairman.

Chairman CRANE. Mr. Neal.

Mr. NEAL. Thank you, Mr. Chairman. I apologize for being late,

but the ceremony in the rotunda is just coming to conclusion.

Ambassador Barshefsky, beyond the fact that I think there is

general agreement that you have done a terrific job during your

tenure as our Trade Representative in every quarter of the globe,

I have a specific question I would like to raise with you.

It addresses the new transatlantic agenda. My question is how

can this new partnership help Northern Ireland, which Bill Clinton

has invested so much in, and many of us who have been longstanding players in that conflict are so grateful to him for. Do you

have any specific recommendations?

Ms. BARSHEFSKY. Well, this is an issue I think we will be looking

at. As you know, the Department of Commerce has been heading

an effort with respect to Northern Ireland—and perhaps Under

Secretary Aaron can testify to this when he comes on up—but the

Commerce Department has looked, for example, at matchmaking

between the U.S. and Northern Ireland companies to try to spur

investment in Northern Ireland and spur business and strategic alliances.

In addition, the U.S. has been instrumental in setting up a fund

for new startup businesses for Northern Ireland, and there are a

number of other efforts that are ongoing, and I think Under Secretary Aaron can speak to those.

The question from time to time has been raised, should the U.S.

do a free trade agreement of some sort with Northern Ireland. I am

not aware that the Irish government or the government of the

United Kingdom or the European Union have expressed an interest

in this. And of course, Northern Ireland is a subcentral entity, if

you will, which complicates the situation.

But I think from our point of view, we are pleased to look at all

possible options. As you rightly point out, the President has been

very instrumental with respect to the peace process in Northern

Ireland. And to the extent that creating a stronger economic base

in Northern Ireland will help that process, and we believe it will,

we want to do everything that we can to encourage that.

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So we would look forward to working with you. Certainly, I

would suggest that perhaps Under Secretary Aaron can speak to

this issue also when he comes on up.

Mr. NEAL. Again, a note of gratitude. It is this administration

that has elevated peace in Northern Ireland internationally and

drawn attention to it, again from every sector of the world, and we

are grateful for your interest. Thank you, Mr. Chairman.

Chairman CRANE. Well, again, I want to express appreciation to

you, Madame Ambassador, for appearing here today. Because of

the disruptions resulting from the murders that took place in the

Capitol, it has led to change in everybody’s schedule, but we felt

that we probably ought to go forward with the hearing because of

people having made the accommodations to be here.

Wait a second. I have one more member here that I will recognize before we say goodbye, and that is Mr. Portman.

Mr. PORTMAN. Thank you, Mr. Chairman, and thank you, Madame Ambassador, for being here. I know this is a hard day for all

of us on this side, and for you not to have the attention of the

members, I apologize for that.

I did have a question. I am sorry I had to miss your testimony,

but I think I have a pretty good idea of what you talked about in

relation to WTO and the EU. It relates to the beef hormone case,

the banana case, to see where we are. I apologize again if you have

gotten into this in any detail.

But my question basically to you is where are we in terms of our

litigation against the EU. You and Peter Shear have done a tremendous job, and I want to commend you publicly for that, for your

work in litigating against the banana policy of the EU based on the

WTO case and the two GATT cases which preceded it.

My sense is that the EU is almost institutionally unable or unwilling to comply with the WTO case, and that this is indeed a test

case, and indeed has implications well beyond the hormone issue

or the banana issue. Both cases are test cases. The banana case is

sort of first-in, first-out, and therefore needs a focus.

With all the important interests that are at stake in this case,

I guess my question to you is what can the U.S. do to stop European implementation of their new proposed regime, which I think

is worse than the existing regime. Which is ironic that after the

WTO case, they then push through a regime that is even more

harmful to U.S. interests.

It is my understanding that there is an EU–WTO deadline of

January 1, 1999. How can Congress, this subcommittee in particular, but Congress in general, help you to achieve our objective

of keeping the EU from implementing its new proposed banana arrangement and ensure full compliance with the WTO case?

Ms. BARSHEFSKY. Let me respond to both the banana and the

beef hormone issue. You are quite right that the deadline for compliance by the EU with the panel’s ruling in the banana case is

January 1, 1999, and we expect full implementation by the EU by

that time, which means a WTO-consistent banana regime, first off.

That is most important. Second, and equally important, assurances

that the Lomay rights, or the rights granted under the Lomay Convention, for example, for the Caribbean and others, are fully respected.

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The EU, as you know and as you have indicated, has come forward with a new banana licensing regime which we believe to be

more discriminatory than the regime that it replaces. We have told

the Commission this. We have indicated this, and I have indicated

this personally to every one of the member States.

The process we are now engaged in is to see if we can get the

original panel to reconvene in essentially emergency session to take

a look at this new regime and to render an opinion before the deadline for compliance on its WTO consistency.

We are very confident that in that proceeding, we will prevail,

and the regime as proposed will be viewed WTO-inconsistent. We

are holding Europe to the January 1, 1999 deadline for compliance.

And we certainly hope Europe revisits the regime it has put forward well before that date.

With respect to beef hormones, the EU has left on the clock ten

and a half months in which to comply. We have been working very

closely with our industry. The EU, as you know, wanted four years

to comply with a panel ruling indicating that its ban on our beef

exports was WTO-inconsistent. We went to arbitration. This is

after winning the panel decision and the appellate body decision.

We then went to arbitration because the EU didn’t get the point

apparently the first two times, to make clear that they had the normal 15-month period in which to comply, which now on the clock

leaves about 10 and a half months.

That ban needs to be lifted. It is WTO-inconsistent. No further

scientific studies need to be done. Sufficient science exists, both in

the United States and in the EU, and it is time for the EU to get

on with the process of full compliance.

Here again, we are going to stick with the WTO-imposed deadline of May 1999 for full compliance. Obviously, if there is not full

compliance, we will take action at that point.

Mr. PORTMAN. Again, if you have any recommendations as to

how this Congress can be helpful, I think we would like to entertain those. Personally, I am frustrated by both of those cases, and

I think the record is clear that the Europeans are not likely to comply without the United States government continuing to litigate it

strongly, and in particular—and I know this is something that

makes some of your trade lawyers shudder—but threatening retaliation.

I think the banana case, it is a 301 case, and the beef hormone

case has been dragged on. I personally believe that if you were to

come to this Congress and lay out your case, that you would get

strong support, not just for the compliance procedures under the

new WTO, which are rather muddled as I read them, but for retaliation procedures.

I just think it is better to go ahead and make our case very

strongly. I commend you for your quote that was in your most recent press release. ‘‘The United States will not hesitate to exercise

its full rights under WTO. Our rights include withdrawal of concessions on EC goods and services.’’ I think we have to not only make

the threat, but I think we then have to stand by it if the Europeans

continue to be in noncompliance, which is such an obvious position

that they have put themselves in with this latest proposal, particularly.

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I would urge you to be aggressive on it, both with regard to continued litigation, which you are doing, but also not to be shy to

come to this Congress. I think under 301—again, I know that many

in the trade community hesitate to exercise that because it is unilateral, but sometimes you have to use unilateralism in order to enforce multilateralism, which is really what this is. I hope that you

will do that.

Again, if you have any comments today as to how we could be

helpful, I would love to hear them. I know the chairman is a strong

free trader, as am I and most members of this subcommittee and

committee, thank goodness. But is tough for us to always be out

on point, whether China MFN, now China NTR, or whether it is

fast track or whether it is WTO, when in cases like this, where we

are so obviously in the right, we cannot achieve our results.

It is going to be more and more difficult for those of us who are

free traders to prevail here politically. So if you have any thoughts

today as to what this Congress or this committee could do to help

you. And do you have any response to my suggestion?

Ms. BARSHEFSKY. Well, let me say simply at this point that we

would be very pleased to work with you. We have told Europe that

we will not hesitate to retaliate with respect to bananas and with

respect to beef hormones if we reach the point at which they fail

to comply on the deadline for compliance.

And let me make one comment about that. Under WTO rules,

countries normally are granted a period in which to comply with

WTO rulings. And that period is normally 15 months. The United

States was chief among those who argued for a period within which

compliance could take place because of our concerns that were we

to lose a case, and were we to have to come back to Congress for

authority to undertake an action or perhaps revise regulatory rules

or such other activity, we would need about that amount of time

within which to complete our own work.

So in the current case, the EU is not, in either bananas or hormones, beyond its due date for compliance. In both cases, we made

clear the 15-month rule stands. In hormones, the EU thought they

should fall outside the general rule and instead take four years.

And of course, an arbitrator took our view and said, no, 15 months

is normal; you can do this within 15 months. And the clock on both

bananas and hormones is ticking under those rulings.

Because that time period within which to comply is one that we

ourselves have utilized for the full 15 months just recently, it is my

view that it would not be appropriate to undertake retaliatory action during a ruled legal period of compliance.

However, once that period of compliance is done, if there has not

been full compliance, then we should and will avail ourselves of all

tools, including very, very likely retaliation.

Mr. PORTMAN. Thank you very much, and thank you, Mr. Chairman, for the indulgence. I would just make one final point, which

is once they implement this new regime, it may be more difficult

as a practical matter to alter that regime and to get to a GATT and

WTO compatible regime. Therefore, I feel strongly that the threat

of retaliation backed up by not just press releases, but perhaps

even some indication of what that retaliation might be and therefore, a sense that it is real, is going to be necessary.

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I would hope that we go beyond the compliance procedures,

which as I read them, really could end up with us going back full

circle again through a process of appeals and almost a never-ending series of European appeals, and instead move to a much more

aggressive threat of retaliation and then following through on that

threat if necessary. And I hope it would not be necessary.

Thank you very much, Mr. Chairman, and again, Ambassador

Barshefsky, thanks for your outstanding work on this litigation.

Ms. BARSHEFSKY. Thank you.

Chairman CRANE. Well, we thank you, Mr. Portman. Again, let

me express appreciation to you for being with us, Charlene, and

apologize for the circumstances, which are beyond our control.

But we appreciate your being here and spending the time with

us. And to follow up on what Rob Portman was talking about, we

look forward to working with you in all fronts involving trade. But

I’d like to sit down and talk to you further, after Labor Day about

fast track renewal.

And with that, we will let you be excused, and again, thank you.

Ms. BARSHEFSKY. Thank you so much, Mr. Chairman.

Chairman CRANE. And our next witness is the Honorable David

L. Aaron, Under Secretary of Commerce for International Trade

with the U.S. Department of Commerce.

And it is my understanding that we don’t anticipate interruptions again until approximately 2:30. But we do have two panels

after the testimony of Mr. Aaron and we routinely ask folks to try

to summarize in their verbal presentation within five minutes

roughly, and then all written testimony will be made a part of the

permanent record.

With that, you may proceed, Mr. Aaron.

STATEMENT OF HON. DAVID L. AARON, UNDERSECRETARY OF

COMMERCE FOR INTERNATIONAL TRADE, U.S. DEPARTMENT

OF COMMERCE

Mr. AARON. Thank you very much, Mr. Chairman. Let me begin

by commending you for holding this hearing. The European Union

(EU) is one of our most important commercial partners, as Ambassador Barshefsky pointed out. The EU buys over $1 trillion of

goods and services made by U.S. firms, making it more than twice

as large a market for American companies as Canada and three

times as large as Japan. Furthermore, the EU is an important ally

in opening markets to the rest of the world.

But, like all good things, there is room for improvement. This

hearing will help us focus needed attention on the opportunities

and the challenges of this critical relationship.

With your permission, I’d like to focus my remarks today on

Commerce’s partnership with industry and the Transatlantic Business Dialogue (TABD) and the commercial challenges we face in

the coming year.

As this committee is aware, the Commerce Department has

played a pivotal role in building government support for the TABD,

the unprecedented process of bringing U.S. and European CEO’s

into a dialogue with top trade officials on both sides of the Atlantic

that has enormously contributed to reducing trade barriers and to

further opening markets.

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Recent successes include the Mutual Recognition Agreements, or

MRA’s, and the Information Technology Agreement. The TABD has

also been highly effective in increasing government attention in

areas such as the EU-specified risk material ban, metric labeling,

and electronic commerce.

I want to emphasize the strong and innovative leadership of the

TABD by the U.S. and EU chairs, Lodewijk deVink of WarnerLambert and Juergen Schrempp of Daimler Benz. Their leadership

has been the driving force for this year’s successes.

Secretary Daley will lead the U.S. Government delegation to the

4th TABD conference in Charlotte, North Carolina in November.

Three issues gaining momentum for this year’s conference are electronic commerce, implementing and concluding additional MRA’s,

and metric labeling. These are all positive developments.

But important issues remain to be resolved, including the EU’s

implementation of its data privacy directive, its policies on genetically-modified organisms, the accession agreements with Central

and Eastern Europe, and the third generation wireless telecommunications equipment discussion.

Europe has been very active in developing its privacy policy. Its

directive on data privacy mandates a comprehensive regulatory approach to privacy that applies to all industry sectors. Were the EU

under this directive to consider the United States’ system not to

provide an adequate level of data protection, the effects on data

flows between the United States and Europe could be severe. For

example, a multinational company could be prohibited from transmitting any data from its European operations to the United States

and to other overseas locations.

In March, I began bilateral discussions with my European Commission (EC) counterpart, John Mogg. We established the twin

goals of ensuring effective data protection and avoiding any disruptions in data flows. This dialogue is an important step in avoiding

any adverse effects of the EU directive that might occur on trade

when it is implemented in October.

With the announcement of the Online Privacy Alliance, the Better Business Bureau Online, and Trustee last week, I believe all

the elements of effective private sector privacy policies are in place.

The way is now open for the EU to decide that U.S. companies that

sign on to those policies meet its privacy requirements.

The marketing of genetically-modified organisms in the EU is another important issue. The EU, the major market for U.S. agricultural products, has a slow and unpredictable process for approving

products developed through advanced biotechnology.

Although technically a success, the delayed approval of three

corn products resulted in a loss of $200 million in U.S. exports this

year. The EC is trying to make up for lost sales by opening up

more corn tenders this year and next. We plan to work closely with

the EU in the coming months to develop a more timely and transparent approval process.

As the EU expands, we are actively working to safeguard the interests of U.S. companies. Two areas, broadcast quotas and import

tariff rates, are particularly troublesome. Some countries have

adopted the most restrictive interpretation of EU broadcast directives. For example, all programming in Poland must have at least

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50 percent European content, and Romania’s draft legislation lacks

any flexibility whatsoever.

On tariffs, the EU association agreements grant preferential

treatment to EU products, while maintaining the higher MFN

rates for U.S. products. This preferential treatment calls into question the GSP eligibility of some Central and Eastern European

countries. We are working to identify the products most directly affected, and look forward to the ITC study due next year. We are

also working bilaterally and multilaterally to address these concerns.

In our meetings with the Europeans last week, we discussed the

EU’s third generation wireless standards development in Europe

and its relationship to the International Telecommunication

Union’s (ITU) third generation or 3(g) standards development process. The EC assured us that they will not preclude member States

from licensing multiple 3(g) technologies, though they clearly stated a preference and a goal of having one common standard operating throughout Europe.

We intend to follow the EU process closely, as we are concerned

that it is premature to recommend any specific standard for third

generation at this time. Third generation wireless standards are of

critical importance to us, both in regard to future technology, as

well as their impact on the current market for wireless technology.

We believe that all ITU members should support any and all 3(g)

standards which meet the ITU requirements.

These, Mr. Chairman, are just some of the priorities we see for

the near term to further build the transatlantic marketplace. In addition to the TABD, Secretary Daley and I have ongoing dialogues

with trade officials from the European Commission, Germany and

France.

There is no question that the EU represents important commercial opportunities for U.S. companies, and in general, we can expect

the EU to work with us productively in the world economy. In

many ways, this extended open-ended commercial cooperation is a

new way of opening markets and liberalizing trade. We look forward to working with this committee to shape the future of the

U.S.-EU relationship.

Before closing, I’d like to call to the committee’s attention the

ratification of the OECD Antibribery Convention. This Convention

will enter into force in 1998 only if it ratified by five of the ten

largest OECD economies. We hope to have Senate ratification of

the Convention in August and congressional action on the implementing legislation in this Congress. U.S. leadership is essential.

Thank you, Mr. Chairman. I’d be happy to answer any of your

questions.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Mr. Aaron. Does the administration support Europe’s move to a single currency, the euro? Is this

development in the interest of the U.S., and do you see any downside? Is there any possibility that a single currency will reduce the

role of the dollar in the world’s economy?

Mr. AARON. Thank you for that question, Mr. Chairman. We

think the advent of the euro is a very important step in European

unification, a process which we have supported for several decades.

As for its effect on U.S. business, we think that there will be important advantages for U.S. exporters, particularly small and medium-sized exporters who will no longer have to deal with a multiplicity of currencies and can price their products not just in dollars,

but in the local EU context.

This will also help them simplify their distribution systems in

Europe and perhaps rely on a single agent or distributor instead

of having to have multiple distributors for different parts of Europe. So we see some particular advantages in this as far as U.S.

small- and medium-sized businesses are concerned.

The Commerce Department is trying to help our small and medium-sized businesses get prepared for the euro by holding a series

of conferences. We have 13 scheduled between now and the end of

October in different parts of the country to share with our small

and medium-sized business clients all of the details of how the euro

will go into effect, what they have to be thinking about, what opportunities are presented to them by the advent of this development.

As for its impact on the U.S. currency, the dollar, as a reserve

currency, we think that any change that takes place in the reserve

currency holdings of other countries will take place only gradually;

and our Treasury Department does not have any undue concern

about this process.

Indeed, there is a possibility that if other countries, particularly

Asian countries, move to adopt the euro as part of their portfolio,

our European countries will see with us a greater coincidence of interest in opening up the Asian markets. And the reason for that

being, of course, that it could have an impact on the euro’s strength

itself. If it becomes a reserve currency for Asia, they will have an

interest in making sure those Asian markets are open too.

Chairman CRANE. Are all of the members of the EU in favor of

the euro currency?

Mr. AARON. Well, only 13 countries of the 15 are at the present

time planning to join the euro. At this stage, I believe, in addition

to the United Kingdom, I think Denmark is standing aside. Of

course, Switzerland will still have its own currency because it is

not a member of the EU. And the Eastern European countries that

are candidate members of the European Union will continue to

maintain their currencies.

But it will be an enormous internal market and we believe that

U.S. companies will be well-poised to take advantage of it. In some

respects, our companies may be better positioned to take advantage

of it than even European countries, because we’ve been looking at

Europe as a single market for a long time. And just as we benefited

enormously when Europe created the so-called single market by

means of reducing its various barriers between trade among the

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countries, so we think American companies stand to gain significantly from the reduction of this remaining trade barrier which is

the different currencies that now exist in the EU.

Chairman CRANE. Thank you. Mr. Neal.

Mr. NEAL. Thank you, Mr. Chairman. Mr. Aaron, you heard Ms.

Barshefsky say you had all the answers in Northern Ireland.

Mr. AARON. I wish she would say that more often, actually.

Mr. NEAL. She was very skillful in suggesting that you were the

man that held that knowledge. Let’s talk for a second, if we can,

about the Transatlantic Business Dialogue and economic development in Northern Ireland.

I understood the point that she raised about some resistance in

the Republic of Ireland and in the United Kingdom to a free trade

accord similar to what is practiced in other quarters. Are those

problems that can be overcome, or should we be looking past that

to other solutions on how we might assist this fragile peace agreement?

Mr. AARON. Well, let me tell you what we are trying to do about

it since Secretary Daley visited there a month or so ago. He

brought 16 companies there, including 8 Fortune 500 companies

and they have established, I think, a number of important business

leads that we believe will result in both investment and business

relationships between Northern Ireland and the United States.

We are supporting the Northern Irish effort. They are going to

come to the United States and visit 11 different cities in an effort

to secure greater business relationships, including investment, for

Northern Ireland. We are facilitating that through our domestic

field offices here in the United States, and believe that we can put

together a really terrific program for them. This is, of course, one

of the most important things that can happen, that this peace process be buttressed by greater foreign investment.

We are also expanding our commercial service operation in

Northern Ireland. We will have a larger staff there so we can both

encourage and recruit more U.S. businesses to do business in

Northern Ireland.

In addition, while Secretary Daley was in Northern Ireland, he

signed some cooperative arrangements on the scientific side with

the Northern Irish authorities for monitoring the oceans in the region. This will be a NOAA-related project from the Department of

Commerce that we think can be very important.

The thing that people have to recognize is that Northern Ireland

is superbly poised to be a high technology center. It has terrific

educational opportunities. They have strong universities. They

have a very well-educated population. And not to make light of it,

but the possibility of a sort of a silicon bog in Northern Ireland is

really a very realistic possibility and we are looking for mechanisms to tie together that interest in Northern Ireland with high

tech cooperation with our own Silicon Valley.

Finally, we will be establishing a trade mission with software

and high technology to support that effort which will be taking

place early next year. And of course, the President will be visiting

Northern Ireland in early September and hopefully, we are looking

for opportunities there as well to bring some commercial support

to that mission.

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Mr. NEAL. Thank you. Thanks, Mr. Chairman.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman. Mr. Aaron, good to

see you. Thank you very much for being here.

I’d like to hone in a minute on this MRA or the Mutual Recognition Agreement. You know, for years, the basic barrier has been

one of setting standards, and it has been a real problem and the

Europeans have not given in to this. Now you say that you have

an MRA. First of all, is it working? Secondly, it only involves certain products, computers, telecommunications, pharmaceuticals,

things like that. They are a whole raft of other products outside

that. What is going to happen with them?

Mr. AARON. Well, we believe that there is an opportunity for further mutual recognition agreements to cover other areas. In particular, we are moving forward with one on automobile standards.

As you probably know, our automobile industry has been concerned

about the potential for the proliferation of standards which will

keep our automobiles, our parts and so forth, out of other countries.

In recent weeks, in the last month really, the United States has

come to an agreement in the UN context, but supported by the

Transatlantic Business Dialogue, to reach agreement on automobile

standards. So we are very encouraged by this development and we

see that as an important breakthrough as well.

In addition to this, we see off-road equipment standards as being

very important. We think that there’s an important possibility in

automobile tires. We think there are some important opportunities

in chemicals. So there is a whole range of areas where mutual recognition agreements could be useful and helpful to us.

For example, we think that the current mutual recognition

agreement, which covers computers and telecommunications equipment, pharmaceuticals, medical devices, electrical equipment, electromagnetic interference, and recreational boats will be an enormous boon particularly to small and medium-sized businesses who

have to depend on third parties to do their certification.

What this means is that if U.S. businesses certify once in the

United States under a system that the Europeans accept, then they

don’t have to do it again in Europe to gain access to the Europe

an Market. This also applies to European businesses wanting to

gain access the U.S. market. The can certify in Europe to U.S.

standards with no need to duplicate this testing in the United

States. As Charlene pointed out, this covers $60 billion in trade

across the Atlantic, and will probably reduce the cost of products

on both sides by about $1 billion a year.

So these are what I call the homely issues of international trade,

but as homely as they are, they are extremely important from the

standpoint of serving our consumers.

Mr. HOUGHTON. Well, what you are saying is it is working, it will

be expanded, and it will help the United States?

Mr. AARON. I believe that’s correct, sir.

Mr. HOUGHTON. Good. Thanks very much.

Chairman CRANE. Mr. Jefferson.

Mr. JEFFERSON. Thank you, Mr. Chairman. In an effort to overcome U.S. export regulatory access problems to EU, we’ve negotiated some Mutual Recognition arrangements under which the EU

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certifies or inspects or tests products and sends them to us, and we

do the same thing to them on a mutually agreeable basis. What insurances do we have, really, that they will test, inspect, and certify

products and send to us in which will be comparable to what our

internal agencies would require of products that go on the market

for safety and quality and whatever?

Mr. AARON. Right. I think it’s very important to recognize that

these mutual recognition agreements do not constitute any lowering of our standards whatsoever, and, indeed, in sensitive areas

of health and safety, laboratory testing for pharmaceuticals and so

forth, we have arrangements for us to actually inspect and, in effect, certify for ourselves that the procedures and the medical and

pharmaceutical laboratory practices that are going on, are, in fact,

up to our standards. So, I think that there’s a very strong builtin safeguard here which our FDA insisted upon.

Mr. JEFFERSON. So, you say you set standards, and you make

sure that the testing facilities are up to our standards, but can you

be sure that the day-by-day testing that is done, is there some random way to look at the results of what the EU inspectors and testers actually do?

Mr. AARON. Yes. This inspection of the laboratories, doesn’t just

happen once—it continues. I’m not an expert in FDA procedures,

but my understanding is that European products will be treated

the same as U.S. products. That would fall outside the scope of this

agreement and would be conducted the way the FDA believes is appropriate.

Mr. JEFFERSON. Well, you know, there’s a big preoccupation with,

as there should be, with food safety, and that’s a question that I

guess you’ve answered as best you could, but it still leaves lingering doubts in the mind of the public, and I think it needs some

reassuring there.

But let me ask you something else. Do you believe——

Mr. AARON. Let me add that we do not have an MRA on food

safety. We have an MRA on pharmaceuticals, and we have one on

biologics safety and health issues.

Mr. JEFFERSON. There are some what? I missed what you said

at the end, I’m sorry. There are some what sort of certification

processes with respect to food.

Mr. AARON. For phytosanitary regulations that we have between

the United States and Europe.

Mr. JEFFERSON. Do you believe that the Transatlantic Economic

Partnership will help facilitate our negotiations with the EU on the

broader U.S.-EU trade agenda issue?

Mr. AARON. Yes, I do. I think that we have set up a monitoring

and coordinating process within our own government here, which

I share, which looks at all the issues and proposals that the TABD

has put forward, and at last year’s Rome conference the TABD put

forward about 130 proposals. By the end of this year, TABD wants

the U.S. Government to have implemented about 50 percent of

them. We will have about 30 that we’ve, frankly, told them are

non-starters; that just are either impractical or they off the list.

And that leaves a residue of a number of important suggestions

that we will be working on, many of them in the context of the new

Transatlantic Economic Partnership. Others we will continue to

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work bilaterally the way we did the MRA under the New Transatlantic Agenda. We’re going to keep all of them very active, and

the TABD is making an important contribution to all of it.

Mr. JEFFERSON. The last thing, of the items you have concluded,

the 50 or so, which are the biggest ones you think will have the

greatest impact for our country? And of the ones you think you

may not get done, which of those do you think would make the biggest difference if you were to get them done?

Mr. AARON. I think the most important issues that we have on

the table now relate to recognition of genetically-modified organisms. And there, we really have to go to the larger question of the

role of science-based decisions in dealing with scientific progress as

it affects food, pharmaceuticals, and all sorts of areas where public

health and safety are involved. There is an increasing tendency in

Europe to not regard science as even a relevant consideration in

these decisions. It’s sort of policy by public opinion. We recognize

the trauma that the Europeans went through over the Mad Cow

disease issue, and we realize the impact that this had on public

opinion, especially with regard to the scientific community and the

regulatory community in Europe. But, nonetheless, the fact of the

matter is that public policy decisions ought to be based on sound

science as best as possible. Right now that’s not happening, and it’s

not happening in a transparent manner.

So, I think the most important thing we can do given the size

of our agricultural trade and the impact on everything from food

to cosmetics to medical devices that are implanted in people’s bodies, is to get a more regularized and sensible arrangement to deal

with these issues. Establishing such an arrangement would have

the most positive impact.

I would note that we have a series of negotiations coming up in

the WTO as well as in our bilateral relationship with the Europeans that ought to significantly liberalize trade across the Atlantic. This is the largest trading relationship. It is the most important trading relationship in the world. We and the Europeans are

more alike than anybody else, and we ought to be able to come to

important agreements where we have erased almost all of the barriers to trade across the Atlantic. That’s the objective in the New

Transatlantic Agenda, and I hope that can be fulfilled.

Chairman CRANE. Mr. Portman.

Mr. PORTMAN. Thank you, Mr. Chairman, and a couple of quick

questions. One, just building on the standard setting that has already been discussed by Mr. Houghton and others. It has to do

with standard setting on wireless technology. The WTO, as you

know, has an agreement; a number of States are all committed not

to pass laws that create technical barriers to trade and particularly

not allow their standard setting body to set standards that are designed, in fact, to create barriers to trade.

In the case of wireless technology, ETSI, which is the EU standard setting body for this technology, has come up with one standard, I understand. It’s a single standard that effectively shuts out

many of the American or other technologies from the European

marketplace, and it’s difficult to see, other than for trade reasons

to protect their own wireless market, why they would do that. Has

this been investigated? Are you all looking into whether they’ve

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violated the WTO agreement on technical barriers to trade through

the ETSI standard setting?

Mr. AARON. Yes, we are looking into that quite carefully, and, indeed, we have been in the process of negotiating and discussing

this issue with the EU including in discussions just last week. The

EU would like to have a single standard, but they are not going

to require that their member States have only a single standard.

That’s their position at the present time.

Our view is that multiple standards should be allowed, and the

marketplace should decide which of these standards is sufficient or

appropriate. There are several different standards. As you know,

there are several second generation standards—GSM, TDMA and

CDMA—and there’s the advanced third generation standards,

which are being discussed. Competitive business pressures are

being brought to bear on the European standard setting organization, ETSI. We are in the scrum dealing with these issues as well;

trying to keep this process as open as possible.

At this point, we are not taking the position that setting a single

standard would be a violation of a WTO obligation, but we are

looking at that carefully to make sure that this standard-setting

process is not creating a barrier to trade.

American businesses are taking a number of different positions

on these standards issues. From a governmental standpoint, we

want to press for the most open arrangement possible.

Mr. PORTMAN. With regard to the Central European accession

negotiations ongoing—I understand those are your phase-out of

tariffs over time—does that concern you as it relates to U.S. exports that those Central European countries would be getting preferential treatment as compared to U.S. products coming in, and is

that something that the U.S. Government should be involved with?

Mr. AARON. Yes. We have taken this issue up both with the European Commission and with the countries concerned. These countries have all signed association agreements with the EU. Each of

these agreements has a schedule of tariff reductions that will bring

the affected countrys tariffs in line with the European common external tariff.

We have no objection to that, but we do have an objection to

these countries giving the Europeans a tariff preference before they

are members of the European Union. Ironically, once these countries become members of the European Union, they’ll be bound by

the European Union’s tariffs which are quite a bit lower than their

own. The only interests advantaged by this process are European

businesses which are given lead time to consolidate their position

in the market before they face outside competition. This is unfair,

and we have raised this with these countries. Also, it may not be

possible for them to receive GSP if they continue these kinds of

preferential tariffs.

Mr. PORTMAN. And that’s a decision made by those individual

countries and not by the EU?

Mr. AARON. That’s correct. In other words, what they do with

their own external tariff, apart from the EU, is at the purview of

these countries.

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Mr. PORTMAN. That’s something that they would have the power

to act on in order to sustain their GSP treatment of the United

States, but that’s a lever we have.

Mr. AARON. That’s right. They have the power to not discriminate against us.

Mr. PORTMAN. I want to thank you for your testimony.

Chairman CRANE. Mr Aaron let me say that you are particularly

adept at using the acronyms of trade.

Mr. AARON. I’ll go through the ABC’s of that with you, Mr.

Chairman, any time you’d like.

Chairman CRANE. That’s quite alright, Mr. Aaron. [Laughter.]

We thank you for your testimony here today. We appreciate your

responses and, again, apologize for the irregularities in our proceedings. We will excuse you now and invite our first panel, P.

Vince LoVoi, vice president, government affairs and public policy,

Warner-Lambert; Isabel Jasinowski, vice president, government relations, Goodyear Tire and Rubber; Ellen Frost, Senior Fellow, Institute for International Economics; Willard M. Berry, president,

European-American Business Council; Mary Sophos, senior vice

president, government affairs, Grocery Manufacturers of America.

And if you folks will take seats, we will follow our five-minute

rule and that is if you will please try and hold your oral presentations to five minutes. All written statements will be made a part

of the permanent record, and, with that then, we shall proceed in

the order I introduced you. Mr. LoVoi.

STATEMENT OF P. VINCENT LoVOI, VICE PRESIDENT, GOVERNMENT AFFAIRS AND PUBLIC POLICY, WARNER-LAMBERT

CO.; AND U.S. WORKING CHAIR, TRANSATLANTIC BUSINESS

DIALOGUE; ACCOMPANIED BY ISABEL JASINOWSKI, VICE

PRESIDENT, GOOD YEAR TIRE AND RUBBER CO.; AND

GROUP ONE WORKING CHAIR, STANDARDS AND REGULATORY POLICY, TRANSATLANTIC BUSINESS DIALOGUE

Mr. LOVOI. Thank you, Mr. Chairman. Mr. Chairman, members

of the subcommittee, I am Vincent LoVoi, vice president of the

Warner-Lambert Company. I’m testifying today as the U.S. working Chair of the Transatlantic Business Dialogue. I am accompanied by Ms. Isabel Jasinowski, vice president of the Goodyear

Tire and Rubber Company who manages the TABD Standards and

Regulatory Policy Group. I ask that her prepared comments be entered the record immediately following mine.

Mr. Chairman, the TABD is a unique business-like process where

American and European business leaders develop joint policy recommendations to improve the U.S.-EU marketplace. Over the past

three years, we have worked closely with the U.S. Government and

European Commission to address a broad range of specific issues.

The TABD’s pragmatic issue-driven process has made it possible

for a variety of industries to engage officials and achieve meaningful results. We sincerely commend the U.S. Department of Commerce for its leadership vision and responsiveness.

And, Mr. Chairman, we do not need to tell this subcommittee

why our participating companies believe the European market is so

important. This panel has focused on that subject for years and

rather than repeating facts and figures from your own record, Mr.

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Chairman, I’ll simply commend the subcommittee’s foresight and

underscore the TABD support for that view. This is particularly

true given world events over the past year.

The TABD supports the Transatlantic Economic Partnership initiative while encouraging negotiators to be mindful of the pragmatic results-oriented TABD approach. The theoretical should not

get in the way of the practical. Real economic growth and real

problems solved, rather than negotiating points scored, should

measure its success. The TABD is heartened by USTR’s commitment to an aggressive timetable and actions planned for the TEP.

We believe that many of the recommendations should be ready for

implementation prior to the year 2000, and we applaud USTR’s implied endorsement of this view. Indeed, TABD urges Government

to implement agreements immediately upon completion.

Many TABD recommendations are addressed head on by the

Transatlantic Economic Partnership. Let me emphasize, however,

that we particularly support the stated aim to improve regulatory

cooperation in such areas as manufactured goods and to reduce unnecessary regulatory impediments. Mutual recognition and harmonization of standards have been the hallmark of TABD since its inception.

TABD also encourages governments to continue working on recommendations by our participating companies that do not fall within the corners of the proposed negotiations. An important example

of such initiative is the pressing need for this Congress this year

to act on legislation to implement the OECD convention on bribery

and corruption.

Before closing, Mr. Chairman, let me note that President Clinton, Prime Minister Blair, and President Santer commended the

TABD as a new paradigm for advancing trade dialogue in their

joint communique at the London Summit. They encouraged other

constituencies to engage in parallel transatlantic dialogues.

The TABD is both appreciative and honored by this characterization. We echo the call for parallel dialogues. We have already met

at the staff level with the potential organizers of some of these efforts and would be pleased to share our experience with anyone

committed to free trade in an open and harmonious transatlantic

marketplace.

In conclusion, Mr. Chairman, the TABD supports the Transatlantic Economic Partnership initiative. We believe that properly

focused negotiations can simultaneously advance both those issues

identified within the TABD scope as well as other TABD priorities.

Thank you, Mr. Chairman.

[The prepared statement follows:]

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Chairman CRANE. Thank you.

Ms. Frost.

STATEMENT OF ELLEN L. FROST, SENIOR FELLOW, INSTITUTE

FOR INTERNATIONAL ECONOMICS

Ms. FROST. Thank you, Mr. Chairman, for this opportunity. I

have just written a short commentary on what we know about the

Transatlantic Economic Partnership thus far and where it might go

from here. With your permission, Mr. Chairman, I would like to

submit that commentary for the record.

Chairman CRANE. Without objection, so ordered.

Ms. FROST. I will confine my verbal remarks today to a few brief

observations about the global and domestic challenges facing the

transatlantic powers. At the outset, I want to make it clear that

I fully support the Transatlantic Economic Partnership, especially

its regulatory component, and I greatly admire the achievements of

the Transatlantic Business Dialogue.

My concern is that the Transatlantic Economic Partnership may

not be sufficiently ambitious. There are at least two reasons why

negotiators should aim high. First, agreements between the United

States and the European Union send a signal to the rest of the

world about whether or not the two powers are serious about taking further steps towards a rule-based, market-oriented, global

economy. The Partnership should back up its words with action.

For the last 50 years, progress towards multi-lateral trade liberalization has depended heavily on agreements between Washington

and Brussels. While other countries have become important players, future progress within the WTO presupposes some form of

transatlantic consensus. It is hardly reasonable to expect other

countries to make politically difficult choices to open their economies if the transatlantic powers do not continue to set an example.

The Partnership announcement asserts that the United States

and the European Union will give ‘‘priority’’ to pursuing their objectives through the WTO and that their primary goal is multilateral

liberalization. This is good news, but thus far neither the European

Union as a whole nor the Clinton administration has publicly committed itself to a clear-cut and truly ambitious WTO agenda in the

form of either a ‘‘Millennium Round’’ or anything else. At best, certain pioneering agreements may emerge from the partnership that

can serve as models for future WTO negotiations.

Second, the Transatlantic Economic Partnership has acquired

new urgency because of the Asian economic crisis and its effect on

the rest of the world. In the United States, the crisis is likely to

shave one-half to one percentage point from the 1999 economic

growth rate and to boost the U.S. merchandise trade deficit with

the Asia to levels that undermine domestic support for trade.

Recognizing the value of economic competition in stimulating recovery, members of APEC have reaffirmed their commitment to

open trade and investment by 2010/2020, but no such commitment

exists across the Atlantic. With the important exception of regulatory initiatives, the Transatlantic Economic Partnership is so limited that it runs the risk of diminishing the post-war tradition of

transatlantic leadership within the global trading system, leaderVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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ship that has contributed so much to Asian and global economic

growth.

Despite these two imperatives, the need for multilateral leadership and the Asian crisis, a transatlantic initiative does not appear

to be a high priority either in Brussels or in Washington at this

time. During a recent trip to Brussels, I found that too many other

events and evolutions are competing for policy-level attention. Here

in Washington, aside from Africa and the Caribbean basin, the

Clinton administration does not appear to be focusing much on

trade as a national priority or using the ‘‘bully pulpit’’ to communicate its benefits.

Fast track is still in limbo, which inevitably undermines our

credibility in the context of APEC, the Federal Trade Area of the

Americas (FTAA), and the WTO. I do not have to tell Members of

Congress why this is so. It is because trade has become a divisive

issue in domestic politics, particularly within the Democratic Party.

That brings me to my final point. Trade is a divisive domestic

issue in part because it leaves some people behind. It follows that

building support for trade calls for more effective efforts to help

those people adjust to global competition.

Several months ago, the Institute for International Economics

held a conference on restarting fast track. Several leading Congressional opponents of fast track made it clear that they fully understand the benefits of trade to the American economy as a whole.

They are holding fast-track hostage, they said, in order to draw attention to those who lack the skills and resources to compete.

I am no expert in this area, but I imagine that Congress and the

administration should be talking about such things as the portability of pensions and health care, local public-private partnerships centered on community colleges, consolidated and flexible adjustment assistance designed to achieve a better match between

training and jobs, dissemination of lessons learned, and a range of

other measures that take advantage of the flexibility and creativity

of our economic system. Some of these tools are in place, but taken

together and explained in the context of global competition, they

could help reassure Americans about their economic future.

My conclusions are that the Transatlantic Economic Partnership

is worthwhile, but that it has not lived up to its name as yet. It

has not risen to the challenges I described: setting an example of

global leadership by signaling a serious commitment to trade liberalization, devising trade initiatives to cope more effectively with

the Asian crisis, and addressing domestic concerns.

If the United States and the European Union want to reassert

global economic leadership in a serious way, they should consider

adopting a broad vision and a strategy with an overall deadline for

open trade and investment. An exclusive commitment to external

monetary policy cooperation would also be timely. Experience with

APEC demonstrates that the mere existence of a commitment to

open trade and investment by a date certain generates momentum.

A broad commitment of an APEC variety would capture political

attention and add political momentum to this unfulfilled partnership. On a more detailed level, the follow-on action plan now being

negotiated could provide much needed momentum to both bilateral

and global initiatives.

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Thank you very much, Mr. Chairman, for giving me this opportunity to present my views.

[The prepared statement and attachment follows:]

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Chairman CRANE. Thank you, Ms. Frost.

Mr. Berry.

STATEMENT OF WILLARD M. BERRY, PRESIDENT, EUROPEANAMERICAN BUSINESS COUNCIL

Mr. BERRY. Thank you, Mr. Chairman and members of the committee for the opportunity to testify. I’m Willard Berry, president

of the European-American Business Council. The Council is the one

transatlantic organization that regularly provides actionable information on policy development and works with officials in both U.S.

and Europe to secure a more open trade and investment climate.

A number of witnesses today have remarked on the size and the

extent of this remarkable economic relationship, and it’s also important to point out that it has an impact on nearly every congressional constituency.

Perhaps, the most remarkable aspect of our trade and investment relationship with Europe is that it is balanced, free of the

long-term deficits that have characterized our relationship with

Asian countries, in particular. Today, economic relations with Europe—between Europe and the U.S. are stronger than they have

ever been. Trade and investments continue to grow; long-standing

disputes are being addressed; there is more cooperation than ever

before in the WTO and other multi-lateral fora.

The Transatlantic Economic Partnership demonstrates that governments on both sides of the Atlantic are committed to a positive

agenda to increase trade and investments for our mutual benefit.

Obviously, we have many points of friction, but that is inevitable

in an economic relationship of this size. The Council hopes that

while we try to manage the disputes, we do not let them characterize or define the relationship. For too long, problems in agriculture held up progress on other trade issues. Even now, disputes

over the EU banana regime, hormone ban, and EU approval of genetically-modified food products have soured relations between the

governments. Various U.S. sanctions measures—the Helms-Burton

law in particular—have been particularly damaging, threatening to

disrupt EU-U.S. cooperation in the WTO and endangering other

trade initiatives.

We strongly support the TEP initiative announced in May. The

EABC and its members caution, however, that these efforts should

not detract from ongoing work in other fora. The EU and U.S. have

correctly tried to structure the TEP so that it will be supportive of

ongoing and future negotiations in the WTO. EABC, a strong supporter of the WTO, expects that EU-U.S. coordination, in order to

promote WTO work, in agriculture services and other sectors will

be a substantial benefit from the TEP. We see the TEP as complimenting the Transatlantic Business Dialogue. In fact, our expectations is with the U.S. and the EU who will use TABD recommendations as the basis for their negotiating objectives in relevant areas

of the TEP. EABC also hopes that the U.S. and the EU will begin

negotiations under the TEP as soon as possible. Increased cooperation on multi-lateral issues will be most useful if it has a positive

impact on new WTO negotiations to be launched in 1999 and 2000.

Many bilateral aspects of the TEP could be concluded in a short

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time which would build support for the process within the business

community.

I’d like to turn to sanctions. The proliferation of economic sanctions in the U.S. continues to strain the EU–U.S. relationship. The

Clinton administration and the European Commission have

reached an agreement on expropriated property and secondary boycotts that is meant to settle the dispute over Helms-Burton and

ILSA. EABC strongly urges Congress to amend Helms-Burton so

that the President can waive Title IV which requires that executive

visas be denied for companies investing in expropriated property in

Cuba. Congress’ cooperation in this matter would allow the U.S.

and EU to continue their cooperation in addressing the issue of illegal expropriation without using ineffective, unilateral sanctions.

EABC also recommends that Congress enact the Crane-Hamilton-Lugar bill to reform the process of considering new economic

sanctions. Because of the concern of increasing local and State government initiated sanctions, we encourage Congress to discourage

efforts by State and local governments to enact sanctions measures

and to maintain its role in the conduct of foreign policy.

Two issues I would like to briefly address which present problems currently in the relationship are online privacy and biotechnology. The EABC is a member of the Online Privacy Alliance

which was mentioned by Under Secretary of Commerce. I would

like to say that this issue we are beginning to address through a

constructive dialogue between the administration and the EU and

industry. Based on these efforts, we are cautiously optimistic this

issue can be addressed without a disruption in trade or data flows.

On biotechnology, the current dispute on the EU’s failure to approve some genetically-modified corn which is blocking all U.S.

corn exports to EU demonstrates the need for timely, predictable,

and science-based regulatory processes, recommendations which

are being advanced under the TABD. Thank you, Mr. Chairman,

for the opportunity to testify.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Mr. Berry.

And our final witness, Ms. Sophos.

STATEMENT OF MARY C. SOPHOS, SENIOR VICE PRESIDENT,

GOVERNMENT AFFAIRS, GROCERY MANUFACTURERS OF

AMERICA, INC.

Ms. SOPHOS. Thank you, Mr. Chairman, for the opportunity to

testify before the subcommittee. My name is Mary Sophos, and I

am the senior vice president of government affairs of the Grocery

Manufacturers of America. GMA is the world’s largest association

of food, beverage, and consumer product companies with U.S. sales

of more than $430 billion. GMA members employ more than 2.5

million workers in all 50 States. We believe the Transatlantic Economic Partnership announced earlier this year, offers a excellent

opportunity to reduce regulatory barriers between the United

States and the European Union as well as provide a foundation

from our comprehensive reductions in both tariff and non-tariff

trade barriers in the next WTO round.

GMA has initiated discussions among interested associations and

corporations in the processed food and consumer product sector in

response to the administration’s request for comments to a system

identifying specific issues for the TEP agenda.

We plan to engage actively in the TEP process along with our

European counterparts, CIAA and initially have identified three

key areas for discussion. First, in the area of biotechnology, U.S.

negotiators should focus on two key issues, establishing a clear

methodology and a predictable timeline for approvals of biotech

products. Several GMA members are pioneers in the area of biotechnology and have experienced significant problems in obtaining

timely approvals for products in the EU. As a starting point, U.S.

negotiators should look to the work of the Transatlantic Business

Dialogue. GMA agrees completely with the TABD Working Group

on biotechnology, but U.S. efforts should focus on the making the

relevant U.S. and EU regulatory processes transparent, predictable, and compatible. My written testimony provides additional details.

Second, U.S. negotiators should work to eliminate barriers for

food additive approvals. U.S. products exported to the EU frequently must be reformulated to comply with European food additive regulations which are quite restrictive. We would recommend

an approach similar to that being suggested by the TABD for biotechnology.

Third, eco-labels continue to pose a non-tariff trade barrier to

manufacturers seeking to import into the EU and its members

countries. Labels like those currently being awarded in the EU are

generally not based on sound science but are awarded on subjective

criteria developed by local stakeholders. As such, they generally reflect local cultural value and environmental concerns and discriminate against international competition. The USTR has continually

acknowledged the discriminatory nature of the EU program by

placing it in its 1997 and 1998 national trade estimate reports. The

EU has promised bilateral discussions on this topic but they have

yet to occur.

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GMA hopes that the U.S. will take up other issues with the EU

during TEP talks such as metric-only labeling requirements, packaging issues involving extended producer responsibility; product

formulation requirements and nutritional claims.

Turning to the question of specific WTO complaints involving the

U.S. and the EU, I would like to reaffirm GMA’s view that overall

the dispute settlement process established under the WTO works

quite well. With respect to the two U.S.–EU disputes involving food

products, specifically bananas and beef hormones, GMA is pleased

that the WTO dispute panel found in favor of the U.S., and expect

the EU to implement its recommendations within the 15-month

time period established through WTO arbitration. Moreover, it is

important to remember that safeguards have been built into the

dispute settlement process in the event the U.S. is dissatisfied with

the remedy proposed by the EU, and we encourage the U.S. to use

them if necessary.

Mr. Chairman, the TEP is a valuable process which GMA strongly endorses, first, to provide the forum for removing regulatory impediments in areas of highest interest to industry. Second, like the

early liberalization process within APEC, the TEP can help build

momentum leading up to multi-lateral negotiations such as the

1999 agriculture round. Mr. Chairman, I appreciate the opportunity to appear before you and would welcome any questions you

might have.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Ms. Sophos. My first question is

to you, Mr. LoVoi. Did the leaders of TABD have any concerns over

how the TEP initiative was conceived and is now operating?

Mr. LOVOI. Two parts to your question. The conception, there

was some concern. There was—when the European Commission

initially proposed the new Transatlantic Marketplace Agreement,

there was—and I mention it in my statement—our concern that we

didn’t want the theoretical to get in the way of the practical. We

were a little bit concerned it was too theoretical. TABD is very,

very practical in its biases. We’re pleased with the TEP proposal

as it stands right now.

The second part of our question, its operation, it’s too early to

tell. You know, it’s very much being born as we speak, so we’ll reserve judgment on that.

Chairman CRANE. Ms. Jasinowski, we didn’t ask you to testify,

but I’d like to put a question to you. I understand Goodyear Tire

is serving as Chair of the Standards and Regulatory Working

Group of the TABD. Could you tell us a little bit about this work

and its importance to U.S.–EU trade?

Ms. JASINOWSKI. Thank you, Mr. Chairman. Goodyear’s CEO,

Sam Gibara is the principal for Working Group I, which is also the

Standards and Regulatory Working Group. There was a lot of dialogue among the members that were here and under Secretary

Aaron over this important work. We like to think of ourselves as

the ‘‘French truffle’’ of trade, often overlooked but extremely valuable. And let me give you an example of that. We ran some numbers, Mr. Chairman, with respect to the U.S. exports to the EU of

the members states on this subcommittee and of the $128 billion

worth of the U.S. exports to Europe in 1996, $61.5 billion of U.S.

exports are represented on this Subcommittee, among the States

and local communities. So, obviously, it’s to the advantage of businesses and communities in the United States to reduce the costs,

the redundant costs in the standard setting practice, to our exports,

to make them more competitive abroad. Some studies have shown

that up to 15 percent of additional costs is added to U.S. exports

by redundant testing. Now, I want to quickly add that it isn’t a

question of whether businesses either here or in Europe should be

regulated. We concur that businesses should be regulated in terms

of meeting the conditions of health, safety, and environmental protection. The question is, how to regulate most efficiently and that

is what the working group is all about. We have 16 active sectors

in Working Group I, including aerospace, automotives, transportation services, automotive parts including tires, pharmaceuticals,

and agribiotech, so it’s an extremely active working group and our

work is important. Thank you, Mr. Chairman, for the opportunity

of giving you a brief overview of our work.

Chairman CRANE. Thank you. And the next question, I’d like to

put to Ms. Frost. How ambitious is the TEP initiative and would

you characterize it as broad-trade strategy or is it limited to seeking the resolution of a few trade problems?

Ms. FROST. It’s broader than seeking the resolution of a few discreet problems and it is potentially ambitious. But its language on

many topics is distressingly vague, especially when compared with

the earlier initiative proposed by Sir Leon Britain in March of this

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year. I share the desire of my fellow witness from the TABD for

concrete commitments, and it is in that area that I find the TEP

somewhat too vague.

For example, earlier this year, the Britain initiative proposed

zero industrial tariffs by 2010; that’s pretty concrete. The TEP

says, by contrast, that they will explore the feasibility of their progressive elimination on a timetable to be agreed. Politically speaking, that’s as far as they could go. I don’t intend to criticize the negotiators. What I’m calling for, in effect, is a high-level political

commitment on both sides, so that negotiators can go further than

this rather vague language in the follow-on action plan.

I think the TEP does reflect a strategic commitment to the WTO.

I’m just looking for a few more details.

Chairman CRANE. Mr. Berry, you warn in your testimony that

the U.S. and the EU should be careful to ensure that TEP doesn’t

undermine the TABD. Can you explain where there’s a danger that

this might happen.

Mr. BERRY. What I would be referring to is essentially what Mr.

LoVoi mentioned is that there are, particularly in the regulatory

area, some very concrete proposals. I think they’re driven by some

very practical interests in getting issues resolved, and I think the

TEP put in certain situations, perhaps could be used as a way of

postponing action because of some larger goal. Now, the way it is

actually set up over the proposal that Ellen mentioned that Sir

Leon first came out with. Now, he had envisioned a huge package

where success in one area might be contingent upon success in another area which is not the way the TABD works, and that’s the

kind of thing that we were concerned about; that progress in one

area not be held up because they want to get something in another

area before.

Chairman CRANE. Mr. Sophos, what issues has TABD focused on

that were out of the TEP initiative between government?

Ms. SOPHOS. Well, from a food perspective, the TABD has been

engaged in the biotechnology efforts for some time. However, TABD

doesn’t really engage in any of the other food areas. So, we were

very pleased to see a rather more expansive agenda in the TEP for

agriculture and has engaged in trying to enumerate some of those

area beyond what traditionally have been the focus of the TABD

discussion.

Chairman CRANE. And a final question for the entire panel:

What does the TABD propose in the way of resolving the serious

dispute with the EU over extraterritorial trade sanctions? Anyone

want to volunteer?

Mr. LOVOI. Yes, I’d be happy to, Mr. Chairman. The sanctions

issues has been under discussion for some time within the TABD.

The European business partners, obviously, are less concerned as

our U.S. partners. Generally, the view is the Lugar-Hamilton approach and others, as well, of approaches is the wisest, and the

TABD has encouraged Congress to look at that as a possible resolution.

Chairman CRANE. I’ve been told that we have unilaterally imposed more sanctions in the last 4 years than we have—well, half

of all the sanctions in the previous 80 years have occurred in the

last 4 years, and, unfortunately, it’s one of those God, motherhood,

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and apple pie initiatives, but people don’t stop to think of what the

repercussions might be.

Mr. BERRY. Mr. Chairman, if I could add, actually, the first set

of recommendations which came out at the TABD meeting in Seville had a unanimous position shared by European and American

representatives there opposing unilateral extraterritorial sanctions.

So, there has been a consistent policy at some point to the objection

of the U.S. who were embarrassed and found it difficult to address,

but there has been a real strong position from the very beginning

from the TABD.

Chairman CRANE. Anyone else want to speak to the question?

Well, if not, let me express my appreciation to you all. I’m sorry

for the chaos here today, but we’re grateful for your appearance

and we look forward to ongoing communication with you all. Please

don’t ever hesitate to let us know what’s the latest input from your

perspective. And with that, I will permit this panel to disappear.

Our next panel is Robert Harness, director, government affairs,

Monsanto Company; Kyd Brenner, vice president, Corn Refiners

Association; Jeremy Preiss, chief international trade counsel,

United Technologies corporation, and finally, Kevin Kelley, senior

vice president, external affairs, Qualcomm Incorporated.

And let me welcome our final panel and please try and conform

to our general guidelines of oral presentations of five minutes or

less. All printed statements will be made as part of the permanent

record.

We shall proceed first with Mr. Harness.

STATEMENT OF ROBERT L. HARNESS, DIRECTOR,

GOVERNMENT AFFAIRS, MONSANTO CO.

Mr. HARNESS. Thank you, Mr. Chairman. My name is Robert

Harness. I’m director of government affairs for Monsanto Company.

We applaud your interest in trade issues, particularly for holding

this hearing focused on the European Union.

As you know, over the next 50 years the world’s population is

going to grow significantly with most of the growth in developing

countries where many of the world’s most fragile natural resources

exist. Food production over this same period of time will need to

triple.

Biotechnology offers the potential to gain tremendous agricultural productivity and to enhance nutrition with environmentally

sustainable farming practices.

We’re committed to making the technology broadly available to

all farmers. But meeting the increased global food demand requires

a trade policy which enables all agricultural interests to succeed.

In our effort to help meet the world’s food needs using the best agricultural technology, U.S. agriculture could be derailed by trade

barriers.

Clearly, unfortunately, there are nations using non-tariff, nonscience based-barriers to trade, to slow down trade and agricultural

commodities and foods that have been developed through biotechnology. If these trade barriers are allowed to proliferate, the result will be a very chilling effect on the biotech industry and on

U.S. agriculture.

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So, turning to the specific problems that we’ve faced in the EU,

there are three general areas of concern. They are: one, the operation of the EU regulatory approval biotech products versus more

than 30 in the United States.

The European regulatory process had not produced a single product approval in well over a year. On March 18, the European commission completed the approval of three corn products and one oil

seed rape product, however, two of the approvals had not yet received the final administrative approval required to complete the

effort that would come from the French government.

This is after over 2.5 years of really painstaking process and

multiple scientific reviews. The result has been a significant trade

interruption. The pending corn approvals are a good example of the

problems companies face in Europe. U.S. and EU industry leaders

have urged the European commission to make the biotechnology

product approval process more predictable and transparent, such

as the process we currently experience in the United States.

Through the Transatlantic business dialog, which you’ve heard

about through the last panel, there has been an effort to reduce

trade barriers in this area. A number of specific recommendations

were made, including four dealing specifically with the regulatory

process.

First, the clarity and consistency be incorporated into the regulatory programs and that specific guidance be issued; second, that

a common road map for regulatory approvals be adopted; third,

that product data requirements be harmonized between the two

sides, and fourth, that a common time-line for decisionmaking be

used.

The second trade issue is product labeling, which is a matter of

ongoing debate in Europe and one which has significant potential

to impact trade. In the United States, food labels are used to inform the public of nutritional and safety differences in food they

eat. Foods produced through biotechnology are not singled out as

a specific category for labeling.

The policy debate in Europe is based on the use of a food label

to inform consumers of the presence of ‘‘a product of’’ biotechnology,

regardless of whether the food is different from a safety or nutritional standpoint.

We fully support the science-based approach to food labeling used

by the U.S. FDA. While we recognize that the labeling programs

can be used to provide information to consumers, such information

and process must not be allowed to create non-science based segregation requirements in commodity crop markets that will lead to

trade disruptions and significant cost increases for consumers.

The third and final point is the public awareness and confidence

in biotechnology. Broad acceptance of biotechnology requires that

consumers be given relevant and accurate information about the

foods they eat. Public confidence in the regulatory system is also

important in gaining acceptance of biotechnology. In the end, gaining broader public acceptance naturally means less chance of trade

issues, and industry and government must work together on this

important effort.

So, in conclusion, Mr. Chairman and members of the committee,

we appreciate your interest in reducing trade barriers around the

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globe. As you meet with your European colleagues or discuss these

matters here in the United States, I urge you to raise these issues.

It’s important to seek meaningful changes in the EU regulatory

system to make it operate successfully and to seek ways to build

public awareness and confidence in agricultural biotechnology.

In terms of the upcoming WTO round focusing on agriculture, we

ask the U.S. to address the issue of biotechnology to achieve a

greater degree of transparency and harmonization in every nation’s

regulatory regime.

Thank you very much, Mr. Chairman. I appreciate the opportunity to be here.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Mr. Harness.

Mr. Brenner.

STATEMENT OF KYD D. BRENNER, VICE PRESIDENT, CORN REFINERS ASSOCIATION, INC. ON BEHALF OF THE CSC BIOTECHNOLOGY COMMITTEE

Mr. BRENNER. Thank you, Mr. Chairman. I’m Kyd Brenner, vice

president of the Corn Refiners Association. I’m here today on behalf of the CSC Biotechnology Committee which is comprised of the

American Soybean Association, the Corn Refiners Association, the

National Corn Growers Association, the National Cotton Council,

the National Oilseed Processors Association, and the U.S. Grains

Council.

These groups share a common concern about the trade impact of

differences in worldwide regulatory processes for the approval of

biotechnology products. To date, the most serious trade problems

we have encountered have been in the European Union.

We are here today to express our support for the Transatlantic

Economic Partnership, which we see as an excellent opportunity to

address these problems.

America’s farmers and processors have rapidly adopted the new

technology of transgenic crops, and this year, 25 to 30 percent of

U.S. corn, cotton, and soybeans, will come from transgenic varieties. The U.S. has an effective and efficient regulatory system that

enjoys the trust of consumers. This is not the case in the European

Union. The EU approval process for new biotech products is

lengthy, non-transparent, and unpredictable.

I’d like to emphasize that the regulatory process is the source of

many of the problems more than the substance of the regulations.

In the United States, regulatory approval can be achieved in about

a year. Some products have been in the EU pipeline for well over

two years and are still not fully approved. This disparity in time

frames creates trade problems. Crops approved and planted in the

U.S. can’t be exported to Europe until they receive EU approval.

However, it is not feasible, on any large scale, to segregate crops

in bulk in commodity handling and transportation systems. Therefore, our Europeans markets remain at risk as long as the approval

processes are on entirely separate tracks.

This is exactly the problem U.S. corn growers encountered this

year. U.S. growers stand to lose sales of about $200 million because

of the delay in regulatory processes in Europe. Repetition of these

problems year after year will only exacerbate the problem, jeopardizing nearly $4 billion in U.S. soy, corn, and cotton exports.

The TEP can provide a vehicle for some long-term solutions for

this problem, and we agree that biotechnology should be a high priority item on its agenda. The important ingredient, in our belief,

for progress on these issues is political will. Regulatory officials in

the U.S. and Europe have been discussing these issues for years.

However, regulatory officials cannot resolve the issues if the political will to find a solution is lacking.

If the cooperation demonstrated at the May summit is extended

to discussions on biotechnology under the TEP, we believe the process can be substantially improved without undermining legitimate

national objectives of protecting public health and safety.

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While harmonization of world processes would be a long-term

goal and would help to eliminate many problems, we have no illusions that harmonization can be achieved quickly. Given the short

time frame envisioned for the TEP, we think the greatest benefit

would come from rapid agreement on several points.

First, a documented commitment to work toward harmonization

in biotechnology based on principles of sound science, transparency,

predictability, and timeliness.

Second, development of a common and publicly available tracking

system for products in the approval process would be immensely

helpful for producers and processors who are not the actual applicants in the biotechnology regulatory system.

And last, an early warning system to let commercial partners

know if there are any unexpected delays in the regulatory process,

including a reasonable expectation of how long it should take a

product to move through the approval system. Agreement on these

points would certainly not solve our problems, but would help build

confidence among the interested parties.

Mr. Chairman, we believe the TEP does offer an excellent opportunity progress on biotechnology regulatory development, and we

are certainly prepared to support the initiative in any way we can.

Thank you.

[The prepared statement follows:]

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Chairman CRANE. Thank you.

Our next witness is Mr. Preiss.

STATEMENT OF JEREMY O. PREISS, CHIEF INTERNATIONAL

TRADE COUNSEL, UNITED TECHNOLOGIES CORP., ON BEHALF OF THE NATIONAL FOREIGN TRADE COUNCIL AND

FOREIGN SALES CORPORATION COALITION

Mr. PREISS. Thank you, Mr. Chairman. I appreciate the opportunity to testify here today. My name is Jeremy Preiss, and I’m the

chief international trade counsel for United Technologies. I’m here

today representing United Technologies, the National Foreign

Trade Council and the FSC Coalition, an umbrella group of large

and small companies seriously concerned about the European

Union’s WTO challenge to the foreign sales corporation, or FSC,

tax provisions.

In earlier testimony today, we heard how the Transatlantic Economic Partnership’s proposed trade liberalization program will create many economic benefits. The goals of the TEP are no doubt

laudable, and it’s undeniable that greater trade and investment liberalization will yield economic gains for both the United States and

European Union. But the good will and cooperative spirit accompanying the TEP initiative are at odds with the EU’s pursuit of a

misguided WTO challenge to the FSC tax provisions.

The companies I represent here today have a difficult time reconciling the forward-looking goals of the Transatlantic Economic

Partnership with the EU’s unwarranted attack on the FSC. Because the EU’s WTO challenge distorts the FSC tax provisions, I

believe it’s important to review briefly what the FSC is and what

it is not.

First, as all of you know, the FSC program was drafted and enacted by Congress in 1984 expressly to conform to a detailed GATT

ruling that articulated the proper relationship between different

systems of taxation and international trade rules. The FSC replaced the Domestic International Sales Corporation or DISC,

which, along with the tax practices of three European countries,

had previously been found to be a prohibited export subsidy under

GATT rules.

Despite the great care that Congress and other U.S. officials took

to ensure that the FSC was, and still is, consistent with applicable

trade rules, the EU has decided after more than 13 years to challenge the program. Curiously, it has taken the EU considerable

time to acquire the view that the FSC is inconsistent with the

GATT and WTO rules. And, at the same time, the EU has not

shown how their commercial interests have been disadvantaged by

the FSC.

The intent of the FSC and the DISC before it is to give U.S. exporters tax treatment comparable to the treatment provided to

their foreign competitors who benefit from European territorialstyle tax systems. The territorial tax system generally exempts all

income earned outside the country from income tax, and all exports

from value-added, and other consumption taxes.

In contrast, the U.S. worldwide tax system generally taxes all

the income of U.S. companies, regardless of where it is earned.

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The EU would have the WTO believe that the FSC is an unfair

subsidy. This is simply untrue. In fact, the FSC merely applies the

same principle of territorial income taxation long enjoyed by EU

companies to U.S. exporters who choose to establish a qualifying

foreign sales corporation outside the United States. And by permitting U.S. exporters to exempt a portion of their export-related income from taxation, the FSC neutralizes some, though not all, of

the tax advantages that European companies receive under their

territorial tax systems. In short, the FSC attempts to level the tax

playing field on which U.S. exporters and foreign exporters compete.

Before I go any further, I’d like to underscore an obvious, yet

very important point. The U.S. companies concerned about the

EU’s challenge to the FSC are not taking issue with the WTO, an

institution we strongly support. Rather, we’re taking issue with the

EU’s actions. The WTO did not, on its own initiative, seek to adjudicate this dispute. Rather, it’s the EU that has sought to shoehorn a highly complicated, highly technical tax matter into the dispute settlement process of a multilateral trade organization.

In doing so, the EU has ignored more appropriate fora where tax

issues such as this have traditionally been handled. The EU’s challenge to the FSC has the potential to bog down the WTO in the

technicalities of tax policy. And the EU precedent may spur additional WTO challenges to other countries’ tax policies. Indeed, the

tax policies of many member States of the EU are vulnerable to the

same trade arguments and theories the EU is now advancing

against the FSC. The U.S. trade representative has identified at

least five such States: Belgium, France, Greece, Ireland, and the

Netherlands.

I think that we can all agree that making the review of tax policy

a regular part of the WTO’s diet would be neither good for the

WTO, nor tax policy. It’s a result we’re working hard to avoid, in

conjunction with the office of USTR.

In sum, the EU’s challenge to the FSC is deeply flawed and could

produce unintended, adverse consequences for both the WTO and

for tax policy. And, to paraphrase recent comments by Ambassador

Barshefsky, the EU’s challenge cannot help but significantly detract from joint U.S.–EU efforts to explore greater cooperation in

the trade and economics spheres.

Thank you again for the opportunity to speak here today and I’d

be happy to answer any questions you may have.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Mr. Preiss.

Mr. Kelley.

STATEMENT OF KEVIN KELLEY, SENIOR VICE PRESIDENT,

EXTERNAL AFFAIRS, QUALCOMM INC., SAN DIEGO, CA

Mr. KELLEY. Thank you, Mr. Chairman. My name is Kevin Kelly

and I am Senior Vice President for External Affairs of Qualcomm

Incorporated. Based in San Diego, Qualcomm is a leader in digital

wireless telecommunications and the chief developer of Code Division Multiple Access—CDMA—the world’s fastest growing wireless

technology. On behalf of Qualcomm, I would like to thank you for

providing me with this opportunity to testify before you today regarding the Transatlantic Economic Partnership.

Qualcomm applauds the Administration for its role in forming

the TEP and forging closer ties with the European Union. We support the goals outlined in the joint statement announcing the TEP,

especially those designed to reduce technical barriers to trade and

open markets to new services for the benefit of consumers and enterprises.

We would suggest that the wireless communications sector is a

good place for the U.S. and the EU to begin this process. Why is

this sector so important? Currently, over 200 million wireless

phones are in use around the world, and that number is expected

to exceed 1 billion by the year 2005. As this industry expands,

more companies, more employees, more investment, will be needed

to keep pace with this demand.

In that sector, however, the EU, for years, has closed its market

to all but one wireless technology, one that happens to be manufactured mainly by large European concerns. Europe’s exclusionary industrial policy has created an impossible environment for developers of alternative wireless technologies now wishing to compete

in the European market.

Now, the EU is on the verge of passing legislation that would

perpetuate its exclusionary policy by barring competition from alternative U.S. technologies for the next generation of wireless communications. As a starting point, we believe that the administration’s ability to work with the EU to overcome this flagrant of protectionism will signal whether the U.S. and the EU are truly committed to an economic partnership. Specifically, the administration

needs to take immediate steps to encourage the EU not to pass the

pending legislation.

The pending decision would adopt an exclusionary wireless

standard set by the European Telecommunications Standards Institute, ETSI. ETSI’s next generation wireless standard is based on

Qualcomm’s CDMA technology. ETSI’s acceptance of CDMA technology is a testament to the CDMA’s superior capabilities or other

standards, including those now used exclusively in Europe.

Qualcomm supports, and actually prefers, the idea of a single

CDMA standard for 3(G), and is willing to accept technical alterations that improve its capabilities as long as the standard is compatible with current CDMA systems. The ETSI standard, however,

adopts technical features that offer no substantial improvements

and appears to be specifically designed to make it incompatible

with both current and next generation CDMA systems.

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In other words, the legislation would mandate use of CDMA

technology, while simultaneously barring CDMA’s developers from

effectively participating in the European market. Obviously, the

pending legislation and its underlying policy of protectionism are

directly at odds with the stated goals and objectives of TEP, and

if implemented, raise serious questions as to the Europeans’ willingness to forge a meaningful economic partnership with the U.S.

The ETSI process and the EU-proposed legislation raise serious

questions about the EU’s compliance with its obligations under current bilateral and multilateral trade agreements, let alone its commitment to the TEP. The EU has an obligation under the Technical

Barriers to Trade Agreement to ensure that no standard is set or

any regulation passed that would create an unnecessary obligation

to trade.

ETSI’s adoption of a standard that lacks technical or economic

advantages over a competing standard and, unlike the alternative,

is incompatible with most existing standards, is an action that creates an unnecessary barrier to trade in violation of the TBT. Even

more troubling is the EU’s active consideration of legislation to

mandate the standard for the entire community, again in contravention of its obligations under the TBT.

Mr. Chairman, if the EU is not willing to adhere to the agreedto principles laid out by the WTO, what are we to think about the

EU’s commitment to the TEP? If the TEP is to mean anything,

then the EU must immediately reverse its course regarding the

pending legislation and work with the U.S. to allow fair consideration and open competition among existing technologies. If the TEP

is to be a success, it must alter the status quo, end protectionism,

encourage competition. Only then, will Europe and the United

States be true economic partners.

Once again, thank you for the opportunity to testify.

[The prepared statement follows:]

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Chairman CRANE. Thank you, Mr. Kelley.

Mr. Harness, what are your concerns about non-science based

segregation and labeling requirements?

Mr. HARNESS. Well, I think the primary concern, Mr. Chairman,

is that any kind of labeling proposal should be science-based. It

shouldn’t create any kind of arbitrary distinction that would require segregation without a basis for segregating and differentiating.

The concern would be that if a non-science based approach forced

segregation, first of all, it probably isn’t possible in the U.S. system

for commodity products. Secondly, if it were to be made possible,

it would be extremely expensive and the cost would be past the relative system and our technological advantages in agriculture would

be lost in terms of the economic efficiencies that would be eaten up

by such a costly process.

So, in some, the cost and feasibility of such a non-science based

approach would bother me a lot.

Chairman CRANE. Mr. Brenner, is the goal of associating a greater degree of transparency and harmonization of regulations related

to biotechnology products better addressed in bilateral negotiations

with the EU or with the WTO agricultural talks?

Mr. BRENNER. Mr. Chairman, I think, it’s something that I think

should be addressed in both forums. We have a current and very

serious problem with the EU and we have an opportunity to address that in a short-term fashion before the WTO process fully

gets into gear on the technical side.

Certainly, we’re not pre-judging where this issue is going to end

up in the WTO. There are a number of different avenues they may

follow there. But, perhaps we could get some early sign using the

TEP process of things which were achievable, not just with the EU,

but around the world.

Chairman CRANE. Mr. Preiss, it seems to me that Europe’s challenge to the FSC tax structure is a violation of a longstanding understanding we’ve had with the Europeans going back to 1984,

when we changed the DISC tax arrangements specifically to respond to their trade concerns. Why did Europe wait 13 years to

challenge the FSC?

Mr. PREISS. It’s difficult, Mr. Chairman, to say what exactly is

running through the mind of a EU policymaker. But the fact that

the EU has waited 13, almost 14, years after the FSC was put in

place to challenge the program does invite the very question you

have asked and certainly invites speculation as to whether there

might be ulterior motives behind their challenge.

One ulterior motive that has been advanced that is that the EU

is frustrated with having recently lost two high profile WTO cases

to the United States, both of which were discussed earlier today—

the bananas case and the beef hormones case. With the challenge

to the FSC, therefore, the EU is trying to even the score with the

United States at the WTO or, at least, be more proactive in litigating at the WTO instead of constantly being on the defense.

Chairman CRANE. Mr. Kelley, as international standards become

increasingly critical on world trade, many observers worry that European standards entities are more and more dominating in controlling international standards-setting bodies, and that this will

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put U.S. exporters at a distinct disadvantage. In your opinion,

what should the U.S. Government do to address European domination in the international standards area?

Mr. KELLEY. Well, Mr. Chairman, I think that is exactly the

issue we’re talking about the third generation standard. What the

U.S. Government should do is exactly what it started to do regarding this issue. Just raise the consciousness of the European regulators and let them know that we are aware of what they’re doing

and we’re not going to stand for it.

Another thing that they should consider doing is being stronger

advocates of U.S. standards in these international markets, and

make sure that these foreign markets are open to U.S. standards.

A perfect example of that is what’s going on in China, now with

the existing second-generation standards. The Europeans have

done a wonderful job of selling their standard into China. We are

trying to get the administration to open the Chinese market to our

technology, and we’re having some success. But we need to continue to encourage the United States to make sure they advocate

U.S. standards abroad.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Yes, thanks, Mr. Chairman.

Very briefly, Mr. Kelley, in terms of the Transatlantic Economic

Partnership—really, the question is, what are you doing? And also,

what are you doing with USTR? So that’s number one. Can I go

through the questions first?

As far as Mr. Preiss is concerned, I agree with you that the FSC,

eliminating arguable GATT issues, but to increase the tax benefit

that it defers, I think you are absolutely right on there. Mr. Harness my impression is that the European community—and I’ve only

really taken soundings with the English and the Germans—are

worried about Monsanto because you have such a strong competitive edge. You’ve put so much research, you’ve done such a great

job in this area, that you may be setting the standards for everyone

there. You may want to comment about that.

As far as Mr. Brenner is concerned, you talked about the EU approval process for biotech products, it’s a non-transparent and unpredictable, but we had the Under Secretary of Commerce here and

he felt that things were moving along pretty well, and that there

was much more exposure and sun light involved here. You might

like to comment briefly on those.

Anyone—Mr. Brenner.

Mr. BRENNER. We’ll do this in reverse order. Yes, not to contradict the Under Secretary, I believe the process itself on paper,

and the way products move through it, is still quite unpredictable.

Certainly, in the last year we have had a number of changes in the

process and deviations as products were moving through. I would

certainly agree we may be turning a corner. There are certainly

people in the commission and in many of the member States who

fully recognize that the process they have been using is not functioning, and they’re sincerely committed to try to make a better

process. They do have some procedural reforms underway, which

will take some years to complete.

So, I think, working with those people to recognize the problems

through the TEP, among other things, is a way of helping to ensure

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we are turning a corner there. I feel were right at the edge of it,

we’re not around it yet.

Mr. HOUGHTON. Thank you.

Mr. HARNESS. Well, certainly there can be no doubt that agricultural biotechnology has been controversial in Europe and we, Monsanto, have been in the middle of that controversy. We’re not trying

to set the standards for anyone except to meet the standard that

we think is the most important, and that is to provide technology

that will help produce food for everyone on the planet.

We do think the technology has enormous benefits for the future.

The initial products are aimed at the farmer. Subsequent products

are going to have—not just by Monsanto, but by other companies

as well—are going to have consumer benefits, nutritional enhancements, and other benefits that really are going to, I think, be significant for people around the world.

So, just about every new technology has its challenges, some in

the technology area alone, some with public acceptance, and I think

that’s what we’re experiencing here.

Mr. HOUGHTON. I guess the only thing I was saying is that my

impression is that it’s sort of an emotional issue. And that, rather

than going at it from a governmental or legalistic standpoint, there

is an awful lot of personal contact in reducing the perceived threat.

I think you’re in a wonderful position. You’ve done a great job.

You’ve got a fabulous company. But, there is that concept that you

are going to sort of overwhelm the market.

Mr. HARNESS. I don’t think we’ve done as good a job on that in

terms of reducing the public concerns. And I think it’s an effort

that really requires a partnership between us and the food companies that bring the food to the consumer with the governments

themselves; the food companies are doing a lot on this. We’re doing

things. I don’t think we’ve reached the public in Europe with all

of the right messages in all of the right ways yet, but that certainly

is a priority for us.

Mr. HOUGHTON. Good. Thank you.

Mr. PREISS. I appreciate your statement of support for the FSC,

Mr. Congressman. I also was heartened by Ambassador

Barshefsky’s earlier testimony where she said that USTR and

would vigorously defending the FSC at the WTO. My hope, of

course, is that, ultimately, we will not have a final WTO adjudication of the FSC, I hope that the Europeans will come to understand

that pursuing this challenge at the WTO is not a prudent course

of action and, therefore, they will ultimately relent. But it is important to know, however, that we have our allies on this committee

and in Congress generally.

Thank you.

Mr. HOUGHTON. Thank you. Mr. Kelley.

Mr. KELLEY. I guess your question, you asked what are we doing

with the USTR? We are doing a number of things——

Mr. HOUGHTON. And also on your own.

Mr. KELLEY. Certainly on our own. With regard to the USTR, the

international standards setting process in telecommunications is a

complex one. The first thing that we have to do is to make sure

that everybody understands the process and how various companies such as our are able to participate in that process. In parVerDate 11-MAY-2000 11:26 Aug 10, 2000 Jkt 064777 PO 00000 Frm 00136 Fmt 6633 Sfmt 6602 E:\HEARINGS\63650 pfrm08 PsN: 63650
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ticular, with respect to the ETSI process in Europe, we tried to participate, first, as a U.S. company and were told we could not participate because we are a U.S. company and ETSI was only available to European companies. That is in direct contrast to the standards setting bodies in the United States where anyone can participate. So, we were forced to open a European subsidiary just to participate in that process. The European companies do not have to do

that to participate in the United States. So, getting this kind of

process into the USTR is certainly something that we are doing.

Second of all, we’re trying to suggest methods to them that they

can suggest to their European counterparts that can open this

process and make more open and free, like the U.S. process. And

we’re doing this not only with the USTR, we’re doing it with the

Commerce Department, the State Department, the Federal Communications Commission.

In addition, as I mentioned, we have opened an office in Europe.

We are participating as much as we are being allowed to in the

standards setting process over in Europe, and we continue to expand these efforts. We’re also doing this in Asia and South America.

Mr. HOUGHTON. Thank you very much.

Thank you, Mr. Chairman.

Chairman CRANE. Well, I want to thank our panelists again, and

apologize to you for the disruptive kind of day it’s been, and reassure everyone that the official record will remain open, Mr. Kelley,

for anyone’s contribution for two weeks.

With that, the committee stands adjourned.

[Whereupon, at 2:10 p.m., the hearing adjourned subject to the

call of the Chair.]

[Submissions for the record follows:]

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