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73–597 PS 2001

TRADE IN FINANCIAL SERVICES:

CURRENT ISSUES AND FUTURE DEVELOPMENTS

HEARING

BEFORE THE

SUBCOMMITTEE ON

INTERNATIONAL MONETARY POLICY AND TRADE

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

JUNE 26, 2001

Printed for the use of the Committee on Financial Services

Serial No. 107–30

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa

MARGE ROUKEMA, New Jersey, Vice Chair

DOUG BEREUTER, Nebraska

RICHARD H. BAKER, Louisiana

SPENCER BACHUS, Alabama

MICHAEL N. CASTLE, Delaware

PETER T. KING, New York

EDWARD R. ROYCE, California

FRANK D. LUCAS, Oklahoma

ROBERT W. NEY, Ohio

BOB BARR, Georgia

SUE W. KELLY, New York

RON PAUL, Texas

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

DAVE WELDON, Florida

JIM RYUN, Kansas

BOB RILEY, Alabama

STEVEN C. LATOURETTE, Ohio

DONALD A. MANZULLO, Illinois

WALTER B. JONES, North Carolina

DOUG OSE, California

JUDY BIGGERT, Illinois

MARK GREEN, Wisconsin

PATRICK J. TOOMEY, Pennsylvania

CHRISTOPHER SHAYS, Connecticut

JOHN B. SHADEGG, Arizona

VITO FOSSELLA, New York

GARY G. MILLER, California

ERIC CANTOR, Virginia

FELIX J. GRUCCI, JR., New York

MELISSA A. HART, Pennsylvania

SHELLEY MOORE CAPITO, West Virginia

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

PATRICK J. TIBERI, Ohio

JOHN J. LAFALCE, New York

BARNEY FRANK, Massachusetts

PAUL E. KANJORSKI, Pennsylvania

MAXINE WATERS, California

CAROLYN B. MALONEY, New York

LUIS V. GUTIERREZ, Illinois

NYDIA M. VELA ́ ZQUEZ, New York

MELVIN L. WATT, North Carolina

GARY L. ACKERMAN, New York

KEN BENTSEN, Texas

JAMES H. MALONEY, Connecticut

DARLENE HOOLEY, Oregon

JULIA CARSON, Indiana

BRAD SHERMAN, California

MAX SANDLIN, Texas

GREGORY W. MEEKS, New York

BARBARA LEE, California

FRANK MASCARA, Pennsylvania

JAY INSLEE, Washington

JANICE D. SCHAKOWSKY, Illinois

DENNIS MOORE, Kansas

CHARLES A. GONZALEZ, Texas

STEPHANIE TUBBS JONES, Ohio

MICHAEL E. CAPUANO, Massachusetts

HAROLD E. FORD JR., Tennessee

RUBE ́ N HINOJOSA, Texas

KEN LUCAS, Kentucky

RONNIE SHOWS, Mississippi

JOSEPH CROWLEY, New York

WILLIAM LACY CLAY, Missouri

STEVE ISRAEL, New York

MIKE ROSS, Arizona

BERNARD SANDERS, Vermont

Terry Haines, Chief Counsel and Staff Director

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

DOUG BEREUTER, Nebraska, Chairman

DOUG OSE, California, Vice Chairman

MARGE ROUKEMA, New Jersey

RICHARD H. BAKER, Louisiana

MICHAEL N. CASTLE, Delaware

JIM RYUN, Kansas

DONALD A. MANZULLO, Illinois

JUDY BIGGERT, Illinois

MARK GREEN, Wisconsin

PATRICK J. TOOMEY, Pennsylvania

CHRISTOPHER SHAYS, Connecticut

GARY G. MILLER, California

SHELLEY MOORE CAPITO, West Virginia

MIKE FERGUSON, New Jersey

BERNARD SANDERS, Vermont

MAXINE WATERS, California

BARNEY FRANK, Massachusetts

MELVIN L. WATT, North Carolina

JULIA CARSON, Indiana

BARBARA LEE, California

PAUL E. KANJORSKI, Pennsylvania

BRAD SHERMAN, California

JANICE D. SCHAKOWSKY, Illinois

CAROLYN B. MALONEY, New York

LUIS V. GUTIERREZ, Illinois

KEN BENTSEN, Texas

(III)

C O N T E N T S

Page

Hearing held on:

June 26, 2001 .................................................................................................... 1

Appendix

June 26, 2001 .................................................................................................... 29

WITNESSES

TUESDAY, JUNE 26, 2001

Farmer, Thomas L., General Counsel, Bankers’ Association for Finance and

Trade ..................................................................................................................... 10

Judge, Steve, Senior Vice President, Government Affairs, Securities Industry

Association ............................................................................................................ 11

O’Connor, Peter, Executive Vice President, ACE INA, on behalf of the

American Insurance Association ......................................................................... 8

Weisbrot, Mark, Co-Director, Center for Economic and Policy Research ........... 14

APPENDIX

Prepared statements:

Bereuter, Hon. Doug ........................................................................................ 30

Oxley, Hon. Michael G. .................................................................................... 63

Sanders, Hon. Bernard ..................................................................................... 65

Waters, Hon. Maxine ........................................................................................ 70

Farmer, Thomas L. ........................................................................................... 79

Judge, Steve ...................................................................................................... 84

O’Connor, Peter ................................................................................................ 72

Weisbrot, Mark ................................................................................................. 94

ADDITIONAL MATERIAL PROVIDED FOR THE RECORD

Bereuter, Hon. Doug:

Foreign Trade in Financial Services: Background Information, CRS

memo, March 26, 2001 ................................................................................. 33

Foreign Trade in Financial Services: Bilateral and Regional Agreements

and Relations: CRS memo, April 27, 2001 .................................................. 40

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TRADE IN FINANCIAL SERVICES:

CURRENT ISSUES AND FUTURE

DEVELOPMENTS

TUESDAY, JUNE 26, 2001

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTERNATIONAL MONETARY

POLICY AND TRADE,

COMMITTEE ON FINANCIAL SERVICES,

Washington, DC

The subcommittee met, pursuant to call, at 2:35 p.m., in room

2128, Rayburn House Office Building, Hon. Doug Bereuter,

[chairman of the subcommittee], presiding.

Present: Chairman Bereuter; Representatives Roukema, Castle,

Manzullo, Biggert, Capito, Sanders, Waters, Carson, and Sherman.

Chairman BEREUTER. The hearing will come to order. I regret we

are getting such a late start. But the good news is that we expect—

no assurances, but we expect that we’ll be uninterrupted now for

2 hours. The Subcommittee on International Monetary Policy and

Trade meets in open session today to examine financial services

trade. The subcommittee will hear from private sector witnesses

who will testify about financial services trade as it pertains to insurance banking and securities.

This hearing will be the beginning of this subcommittee’s and the

full committee’s examination of this important subject. The word

‘‘trade’’ was actually added to this subcommittee’s title. It had not

been a part of the title before. And I am convinced that financial

services exports have a substantial benefit for the American people

and for American firms. And if this subcommittee and committee

doesn’t pursue it, then we are neglecting our responsibilities.

In fact, on July 11th, U.S. trade representative, Robert Zoellick,

will brief the Members of the Financial Services Committee at the

full committee level on pending issues and financial services trade,

and he addressed some of those issues in a meeting this morning

here on Capitol Hill. The Financial Services Committee has jurisdiction over trade as it pertains to financial services. This is quite

important as U.S. cross-border trade and financial services have recently grown quite significantly.

U.S. cross-border transactions, of course, are between resident

U.S. companies and foreign consumers. In the year 2000, U.S.

cross-border exports of financial services equaled $20.5 billion,

which is an increase of 261⁄2 percent relative to 1999. Moreover, unlike the current overall U.S. trade deficit, U.S. financial services

trade had a positive balance of $8.8 billion in the year 2000. It is

2

important, I think, to note that these statistics do not even include

the activities of the affiliates of U.S. companies, which are physically located in a different country.

I want to call my colleagues’ attention to two memoranda addressed to this Member from the Congressional Research Service,

at my request, and I think they provide good background for us as

we prepare to explore this subject. And I want to particularly commend Patricia Workman and William H. Cooper for the work they

have done on these memoranda and for their offer of further assistance.

[The information referred to can be found on page 33 in the

appendix.]

Before introducing our distinguished panel of witnesses, I would

like to briefly stress the following three issues that are quite important in today’s hearings. First, U.S. policy toward foreign financial

institutions, barriers to financial services trade and current efforts

to open financial service markets. I am interested in the thoughts

of our witness panel on these three particular subjects, as well, of

course, as on other relevant subjects and issues. First, the U.S.

uses a policy of national treatment for foreign financial institutions

that have a presence in the U.S.

National treatment allows foreign-owned financial institutions

and U.S. domestically owned financial institutions to be treated the

same. In fact, under the Financial Reports Act of 1988, the Secretary of the Treasury must provide to Congress a quadrennial

study of changes and laws that affect national treatment of foreign

banks and security firms in the United States.

Second, U.S. financial service firms do confront many types of

trade barriers. For example, Japan, until recently, restricted sales

of foreign insurance companies of life and non-life insurance. Another example, the Brazilian government denies foreign marine

cargo insurers the ability to compete for that business. I am interested in other specific examples which restrict foreign markets’ access to U.S. financial institutions. But I think you could just give

us an unlimited amount of such examples.

Third, even with these trade barriers, there are current efforts

to open up financial service markets, which my colleagues are all

aware of. Financial service trade is part of the larger framework

of the World Trade Organization (WTO) negotiations on trade and

services. The General Agreement on Trade in Services (GATT)

within the WTO was concluded in 1997. As a result of a financial

services agreement, it included member commitments to provide

national treatment and market access to foreign providers of financial services.

Moreover, in the year 2000, a new round of service negotiations

of course began in the World Trade Organization (WTO). Furthermore, the Free Trade Areas of the Americas, (FTAA), is another example of an effort to open up the financial services market. In June

of 1998, nine negotiating committees, including one for financial

services, were established under the 34 nations in the Western

Hemisphere. Due to the prospective emerging markets, the U.S. financial services sector could benefit greatly from the FTAA.

Lastly, this Member believes that giving the President Trade

Promotion Authority, (TPA), would provide new opportunities for fiVerDate 11-MAY-2000 07:34 Oct 12, 2001 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 73597.TXT HBANK1 PsN: HBANK1
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nancial services trade. While the U.S. continues to be the global

leader in financial services, this position could be threatened by the

lack of a TPA. Currently, the European union has free trade agreements with 27 countries, while the U.S. has only two such free

trade agreements which are signed into law. The TPA would greatly enhance the credibility, I think, of the U.S. negotiating position

in both the WTO and the FTAA.

On May 10th, President Bush provided Congress an outline of

his 2001 legislative agenda, including the TPA. In addition, I, of

course, would note, Representative Phil Crane introduced the TPA

bill, HR 2149 which currently has 89 co-sponsors.

To assist the subcommittee examining these issues I am pleased

we will have the opportunity to hear from our distinguished panel

of private witnesses.

First Mr. Peter O’Connor, the Executive Vice President of Global

Government Affairs and New Markets for ACE INA, will testify on

behalf of the American Insurance Association (AIA). ACE INA,

which has offices in 50 countries, is one of the world’s largest providers of property and casualty insurance. Mr. O’Connor has 30

years of international management experience.

Second, the subcommittee will hear from Thomas L. Farmer, the

General Counsel of the Banker’s Association for Finance and

Trade, (BAFT). This association, which represents internationally

active financial institutions and companies, promotes the expansion

of financial service markets worldwide. Mr. Farmer has had a distinguished career, which includes being a founding member of the

Overseas Development Council and the former General Counsel of

the Agency for International Development.

Third Mr. Steve Judge will testify on behalf of the Securities Industry Association, SIA. The SIA represents nearly 700 security

firms, including investment bankers, broker dealers and mutual

fund companies. SIA member firms are active in both U.S. and foreign markets. Mr. Judge has been the head of the Securities Industry Association since 1993. Prior to joining SIA, he was a congressional staff member for more than 13 years.

In addition, Dr. Mark Weisbrot, the Co-Director of the Center for

Economic and Policy Research in Washington, DC will testify. Dr.

Weisbrot has written different publications on trade and

globalization. In addition, he is the author of a weekly column on

economic and policy issues that is distributed to newspapers by the

Knight Ridder Tribune media services.

We welcome the distinguished panel to our hearings, and without

objection, your written statements will be included in their entirety

in the record. But first, I turn to the distinguished Ranking Member of the International Monetary Policy and Trade Subcommittee,

Representative Bernie Sanders from Vermont for any comments

that he might have.

Mr. Sanders.

[The prepared statement of Hon. Doug Bereuter can be found on

page 30 in the appendix.]

Mr. SANDERS. Thank you very much, Mr. Chairman, and welcome to our guests. And I thank you for holding this important

hearing. I think the first point that I would make is that while it

is very important to be talking about financial services and trade,

4

we should understand, as Mr. Weisbrot will tell us, I suspect in a

few moments, that our net exports of financial services currently

total about $8.8 billion. Now that sounds like a lot of money. But

even if this were to double in the next few years, the increase

would only reduce our current account deficit by about two percent.

So I think it is important to look at the issue of financial services

within the context of our entire trade policy.

I happen to be one of the Members in the Congress who believes

that our current trade policy overall is a disaster. And it is worthy

of a lot more discussion than we presently hear. It is quite incomprehensible to me that in a time when we have this year, a trade

deficit of over $400 billion, a record-breaking trade deficit, that we

hear very, very little about that issue.

We have, as many of you know, presidents in recent years,

whether it is currently President Bush or President Clinton or

President Bush’s father, the former President, they were all very

strong free trade advocates. And what very often President Clinton

and the others would tell us is that for every $1 billion in U.S. exports, we gain about 14,000 jobs. And that is true.

But unfortunately, they didn’t do the other side of the equation. What happens when you have a $400 billion trade deficit? How

many jobs do you lose? And the answer is obviously, that we lose

many, many jobs. And, in fact, using the same accounting principles that President Clinton and others have used, we have lost

over 1.4 million good-paying, manufacturing jobs since last year

alone, and 6.3 million manufacturing jobs overall due to our failed

trade policies.

So while today we will hear, in fact, that trade regarding financial services has been a positive for the United States, we cannot

not put that in the overall context of our trade policies in general,

which, to my mind, are a disaster. In terms of the North American

Free Trade Agreement, (NAFTA), in terms of China, as all of you

know, we have an $8.38 billion trade deficit with China. Let us talk

about that as we discuss renewing most-favored-nation status for

China, which I suspect will be coming before Congress in July.

In terms of NAFTA, we have now a $24.2 billion trade deficit

with Mexico. Before NAFTA, as a matter of fact, that used to be

a surplus. We have a $50 billion trade deficit with Canada, which

has more than doubled since NAFTA. So I am not quite clear how

people keep telling us that NAFTA, or most-favored-nation status

and free trade with China has been this great success. And that

is only in terms of job loss. But there are other aspects to the economy when you are looking at huge trade deficits, and that is the

pressure on wages.

There was a recent poll, a study that came out, which indicated,

lo and behold, guess what, the middle class has not been doing particularly well, despite the great economic boom. In fact, the average

American today is working longer hours for lower wages than was

the case 25 years ago before the great economic boom. And if you

are looking at people who do not have college degrees, young entrylevel workers without a college education saw their average real

wage plummet by 28 percent between 1979 and 1997, because

many of the jobs that traditionally had gone to high school graduates are now being done in China and in Mexico.

5

So Mr. Chairman, I will be brief. And with your permission,

would like to enter my full comments into the record. But the bottom line is, we cannot just look at financial services and say ‘‘Hey,

free trade is great.’’ Now I understand that we don’t have jurisdiction for these other issues within this subcommittee.

But my own view is we have got to be honest. Our current trade

agreements are not working for the average American worker, for

the vast majority of our people. Yes, they are working for multinational corporations who love the idea of being able to gain access

to China and Mexico and every other country on earth where they

can hire labor at very, very low wages, take American jobs, bring

them abroad. But, I think, Mr. Chairman, I applaud you for holding this hearing, and I understand the limitations of our jurisdiction. But I am one who believes that our current trade policy has

been a disaster for American workers. We need to rethink it. And

with your permission, Mr. Chairman, I would submit my remarks

for the record.

Chairman BEREUTER. Thank you, Mr. Sanders. Without objection, the gentleman’s entire statement and other Members’ opening

statements which they may have will be a part of the record. Hearing no objection, that will be the order. Are there Members that

wish to be heard in opening statement?

[The prepared statement of Hon. Bernard Sanders can be found

on page 65 in the appendix.]

Mr. SHERMAN. Yes, Mr. Chairman.

Chairman BEREUTER. I see Mr. Sherman. Under the rule, Ms.

Waters and Mr. Sherman are entitled to 3 minutes each.

Ms. Waters.

Ms. WATERS. Thank you very much, Mr. Chairman. I appreciate

this hearing and I appreciate the fact that you organized this hearing on Trade and Financial Services and your willingness to allow

the Members of the subcommittee to express our concerns regarding the direction of our Nation’s trade policies. President Bush has

placed the passage of Trade Promotion Authority, also known as

Fast Track Authority, at the top of his legislative agenda on international trade. Fast Track Authority may be used for a new round

of World Trade Organization negotiations, as well as negotiations

for a Free Trade Area of the Americas and other regional and bilateral trade agreements. These trade negotiations could have farreaching implications for people in the United States and around

the world.

I am particularly concerned about the impact that trade agreements have on labor, the environment and public health. International trade cannot be expanded at any cost. We must insure

that working people and their families actually benefit from international trade. This will not happen unless individual countries

have laws and policies to improve wages, working conditions, protect the environment and address the needs of their people. Only

then will increased trade result in rising incomes and the improvement of living standards in the United States and the countries in

which we trade.

Let me begin by pointing out that I am not one to demand that

all countries have the same minimum wage or that developing

countries be forced to accept the same labor and environmental

6

laws as the United States. However, labor unions, consumer advocates and environmental organizations must be at the table when

the United States negotiates trade agreements and their legitimate

concerns must be addressed. This will require the participation of

people who represent labor unions and civil society organizations,

and in the developing countries well as the United States.

I am especially concerned about the impact of WTO intellectual

property rules on public health in developing countries. The Trade

Related Aspects of Intellectual Property Rights, the TRIPs Agreement, is one of the international agreements enforced by the WTO.

The TRIPs agreement allows pharmaceutical companies, for example, to demand monopoly prices for medicines for which they have

patents, including medicines for the treatment of HIV and AIDS.

As a result of the TRIPs agreement and pressure from pharmaceutical companies, millions of people in developing countries have

been denied life-saving medicines, because they cannot afford to

pay the prices the pharmaceutical companies demand. A few countries have begun to respond to the HIV/AIDS pandemic by enacting

laws to allow the distribution of generic HIV/AIDS medicines to

their populations. Pharmaceutical companies have responded by

using the WTO and TRIPs Agreement to challenge their laws.

I am not going to continue this statement. I will ask that it be

submitted for the record. But let me just close by saying I am concerned about what is happening also in the Caribbean, our neighbors. And, because I have spent some time there, I have witnessed

the way that we have treated them in terms of their banking laws.

I think there is a lot of room for improvement.

We have a lot of American firms, for example, that are going

down to the Bahamas, but they cannot get the tax credits for holding their conventions there. The conventions that they hold there

are important trade for the Bahamas, for example, because their

economy is built on tourism. And if, in fact, our companies are

going there, the economy is built on tourism, they are our friends

and our neighbors. When we talk about financial services, why

don’t we correct some of the problems that we have created before

we even start to talk about some new ones?

Also, I want to just say this: If we are interested in ‘‘know your

customer’’ rules and laws, we have got to practice what we preach.

Let us not go someplace else demanding what we don’t do here in

the United States. With that, I will yield back the balance of my

time.

[The prepared statement of Hon. Maxine Waters can be found on

page 70 in the appendix.]

Chairman BEREUTER. Thank you, ma’am.

The gentleman and lady’s entire statement under previous unanimous consent requests are included.

The gentleman from California, Mr. Sherman.

Mr. SHERMAN. I commend the Chairman for holding these hearings and commend the gentleman from Vermont, especially, for his

focus on the most enormous trade deficit in the history of mammalian life and the effect that financial services can have on that. You

don’t have to be a member of the Progressive Caucus to see the importance of our trade deficit. At that table 2 years running, Chairman Greenspan has sat there and in response to my questions, has

7

been amazed, as I am, that this trade deficit has gone on so long

without exploding. And predicting that some day, some date that

neither one of us would predict, that it has to come to an end, perhaps a crashing end.

The financial services area is one area where we have some competitive advantages and might be able to get some of that trade

deficit reversed. But financial services are perhaps unique among

the products in the world. If you have a competitive advantage in

widgets, you export widgets and it helps your trade deficit.

In contrast, financial services, while it can produce tens of thousands of jobs here in the United States, could also be the vehicle

for exporting hundreds of billions of dollars in capital. And I think

it is important that we look at what we can do to keep capital in

the United States. We had a $1.3 trillion tax cut in this country,

adopted in large part to increase the amount of capital available

for the expansion of American business, not to simply lead to the

export of capital from the United States to other countries.

In addition, you have the enormous effect our financial services

industry can have on some of the most horrific human rights problems around the world. Slavery, obviously, had an enormous impact on our economy. That was a century-and-a-half ago. Today,

slavery is being practiced in Sudan and this House had the fortitude to close off Sudan and those companies that do business

with Sudan from the U.S. capital markets, particularly the New

York Stock Exchange.

And I think that this subcommittee ought to look for other opportunities where it does have an impact on our business, but is there

anybody in this room that would want to gain an economic advantage by supporting or participating in slavery in Sudan? I don’t

think so.

So I commend the Chairman for holding these hearings and

think that as we go through the process, we need to ask is our involvement in international financial markets going to help us with

the trade deficit and is it going to reflect American values, particularly in dealing with some of most extreme human rights violations? I think, though, that I join with the gentleman from

Vermont in saying we need a more comprehensive—outside the jurisdiction of this subcommittee—review of how a country that once

ran the world’s greatest trade surplus is now running the world’s

greatest trade deficit. I yield back.

Chairman BEREUTER. I thank the gentleman. And without any

further ado, we will proceed with the witnesses. Because I think

some of the major benefits will come from the questioning to the

witnesses. I am going to ask the witnesses to summarize, in effect,

to meet a 5-minute limitation. I regret doing that, but I think it

is probably essential for the benefit of our deliberations.

First we would like to hear from Mr. Peter O’Connor, Executive

Vice President of ACE INA testifying on behalf of the American Insurance Association.

Mr. O’Connor.

8

STATEMENT OF PETER O’CONNOR, EXECUTIVE VICE PRESIDENT, GLOBAL GOVERNMENT AFFAIRS AND NEW MARKETS

FOR ACE INA, ON BEHALF OF THE AMERICAN INSURANCE

ASSOCIATION

Mr. O’CONNOR. Thank you, Mr. Chairman, and other distinguished Members of the International Monetary and Policy and

Trade Subcommittee for holding this important hearing today. I am

providing testimony today on behalf of the American Insurance Association, which represents 370 major U.S. property casualty insurers. Trade in financial services has grown rapidly over the last decade and is now a major component of the U.S. trade policy. And

insurance has been a strong member of that increasingly robust

trade sector. In fact, U.S. financial services exports last year stood

at $17 billion, a 30 percent increase from 1999. Subsidiaries of U.S.

insurers sold over $46 billion of products overseas in 1998.

Liberalization of trade and insurance, combined with the development of open and transparent regulatory regimes, is critical to

the growth of U.S. insurers and to the health of the U.S. insurance

industry overall. But more importantly, it is critical to the ability

of emerging and transitional economies to grow and develop their

economies and provide social safety net protections to their citizens. Insurance is important to any economy for a number of reasons, but I will cite only two. First, insurance is an essential and

vital component of a country’s financial infrastructure. Insurance

companies can be major sources of national income. In collecting

relatively small premiums from their many thousands of insureds,

insurance companies are able to invest large sums locally.

This, in turn, deepens and broadens the domestic financial services marketplace, which generates higher savings rates and therefore greater economic development. Insurers are also the largest

purchaser of Government bonds, which are used to finance infrastructure projects such as schools, hospitals, roads, and power

plants.

Second, insurance supports beneficial increases in overall trade

and investment and creates jobs, both in the U.S. and in the

emerging market. American companies, including small- and medium-size enterprises, are more likely to export to and enter foreign markets if they have access to specialized products and services that they require and U.S. insurers provide. Increased sale of

U.S. products overseas translates to more jobs being created back

home to supply the overseas demand. Countries around the world,

both developed and developing, are recognizing the important role

of a healthy and competitive insurance marketplace in their economy.

As a result, U.S. insurance company investment and sales outside our country have increased substantially over the last decade.

The insurance industry has been increasingly active in a number

of public policy areas to promote expanded international trade. U.S.

insurers strongly support the efforts of U.S. trade officials and

many Members of Congress to expand trade in both the multilateral and bilateral arenas. But our focus in both realms is clear:

greater market access for our business and greater regulatory

transparency for our products.

9

On the multilateral front, the U.S. insurance industry strongly

supports the Bush Administration’s efforts to initiate a broad trade

round within the World Trade Organization, beginning at its ministerial in Doha, Qatar in November. While the 1997 commitments

are valuable, U.S. insurers are ready to build on those commitments and work with U.S. negotiators to gain further access to

those markets and improve regulatory conditions.

Specifically, the U.S. insurance industry has rallied behind a proposed model schedule that urges countries to make improvements

to their 1997 market access commitments, but also to address domestic regulatory issues that effectively act as barriers for U.S. insurers. On the bilateral front, the U.S. insurance industry has been

strongly supportive of U.S. trade agreements to expand trade in all

areas, including insurance with countries that welcome foreign investments and trade. We are particularly supportive of the U.S. bilateral trade agreement with Vietnam and have lobbied for its passage in Congress. The insurance industry supports ongoing trade

negotiations with other countries, both developed and undeveloped,

including the European Union, Japan and India.

Our recent focus has been on emerging markets that have long

maintained less developed insurance systems, but now appear committed to creating modern and competitive insurance sectors, including China, India and Vietnam.

Based on the market opening commitments China made in its

1999 accession agreement with the U.S. and reaffirmed earlier this

month, the industry was strongly supportive of permanent normal

trade relations for China last year. We remain committed to normal trade relations for China this year, when Congress votes on

that measure to maintain its current trade status until China becomes a full WTO member.

Finally, AIA and its member companies, as well as others in the

insurance industry, strongly support the enactment of the Trade

Promotion Authorities, known as TPA. We believe the stronger the

mandate the President has to enter into trade agreements, the

more likely it is the U.S. will be able to negotiate agreements that

provide greater benefits to the U.S. economy and consumers.

All of these separate ongoing trade issues involving many countries around the world ultimately address different market barriers

and economic circumstances that are unique in each country. But

our goal with each issue is the same, to further open each market

so that U.S. investors can fairly compete there.

In conclusion, Mr. Chairman, a healthy and productive global insurance infrastructure is vital to a prosperous, innovative and

growing global economy. AIA, ACE INA and others in the insurance industry have been proud to play a role in expanding insurance sales abroad and in the process benefiting consumers, economies, and global living standards.

We look forward to working with you and all Members of the

subcommittee on the major policy and trade challenges of this year.

We appreciate having the opportunity to testify before you today

and would be happy to answer any of your questions that you may

have.

[The prepared statement of Peter O’Connor can be found on page

72 in the appendix.]

10

Chairman BEREUTER. Thank you Mr. O’Connor.

We will now hear from Mr. Thomas Farmer, General Counsel,

Bankers’ Association for Finance and Trade. Mr. Farmer, you may

proceed.

STATEMENT OF THOMAS L. FARMER, GENERAL COUNSEL,

BANKERS’ ASSOCIATION FOR FINANCE AND TRADE

Mr. FARMER. Thank you, Mr. Chairman. You have our written

statement. It is brief, and I am sure you have a chance to read it

now or later, and I won’t go into that statement in any detail. I

will try to respond more directly to some of the issues that you and

your colleagues have raised. Let me make one diversion here in anticipation of my colleague from the SIA.

Chairman BEREUTER. Bring the mike a little bit closer.

Mr. FARMER. Let me just say that I have just read his statement,

and I wish to associate our association with what he has said. We

have worked together on a lot of these issues, and we are quite

close to them. Let me make a special reference to two issues that

are in his statement that are not even alluded to in ours, which

concern unilateral sanctions, and again, I think that is something

that is worth discussing later. And then the brief reference to the

adequacy finding by the European Union, (EU), on privacy issues.

Again, that is an important issue and he has presented it very

well.

Let me also say that we are very pleased that a number of Members of your subcommittee and the full committee have already expressed their views on that issue. And we hope to be able to work

with you on resolving that before very long. Let me go ahead and

address one of the issues that I have alluded to that the Chairman

brought up, which is national treatment, which is an important

principle and the Bankers’ Association for Finance and Trade,

(BAFT), has supported that for many years.

I have had the privilege of working on that very issue for at least

20 years. And I have to tell you, it is a very blunt instrument, because it is really not in the interest of the U.S. to close its markets

to foreign institutions for the reasons that I have mentioned in our

statement. The depth and liquidity of the U.S. financial markets is

very much supported and strengthened by the ability of foreign

banks to get full national treatment in this country.

And this subcommittee, over the years, has passed legislation

which has consistently, and we are very pleased about that, treated

foreign institutions on the same basis as American institutions,

and that is one of the reasons why our markets, the U.S. financial

markets, are as deep and as liquid and as well-functioning. And

one of the contentions we have made is that to a large extent, the

vitality of the U.S. economy results from the lower cost of capital,

the breadth of instruments that are available, and the access of foreign investors and lenders to the U.S. capital markets.

Almost consistently, the U.S. has benefited from the ability of

foreign capital to operate in this country, whether it comes here

through our institutions through their foreign head offices or from

foreign-owned institutions through their local offices. This has been

very successful, and we have made a lot of progress, and the U.S.

Treasury has played a key role in persuading other countries, inVerDate 11-MAY-2000 07:34 Oct 12, 2001 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 73597.TXT HBANK1 PsN: HBANK1
11

cluding Japan, to which you made references, and Canada, to

which I made reference, to open up their markets to American financial institutions. The persuasive element in those negotiations,

and I have seen them up close, has not been so much the threat

that we will exclude them from our markets, but the fact that our

markets are working better than their markets, and that it is in

their interest to permit foreign-owned institutions into their markets.

Canada is maybe one of the prime examples of that. The U.S.

Government has had this debate with the Canadians for a long

time. Even in NAFTA, the Canadians did not want cross-border

branching, and therefore it isn’t part of NAFTA. But then in 1995,

the Canadian government began to worry about the shrinkage of

the Canadian capital market, the impact on the Canadian economy

and their conclusion was, to a large extent, this was due to the fact

that the Canadian government had made Canadian markets unattractive to foreign banks and so they reversed course.

And in 1997, in the General Agreement on Trade in Services,

(GATS), they made a commitment to open up their markets to

cross-border branching and then they did that. In this example, the

function of the U.S. market has worked in a number of cases. I

think Mr. Judge will agree with me also on the Japanese bilateral

negotiations. Again the Japanese concluded that really it was in

their interest to open up their markets. And I think that is the way

to proceed in those negotiations, to have the principle of national

treatment, but to realize its limitations, and importantly, to keep

the openness of our markets as a glowing example of what really

helps the economy, and the economy of the U.S.

So I would emphasize that I am not qualified—I am not an economist—to discuss trade imbalances generally, and certainly my

charter doesn’t run to that. But I would like to suggest that the

attractiveness of U.S. markets, U.S. financial markets, has resulted

in, partly through the structure of these markets, has resulted in

a large inflow of foreign capital over the years.

I don’t have any figures that compare the outflow or the inflow,

but my guess is that on balance, there is more of an inflow. In any

case, I think it has helped us deal with what is admittedly a very

difficult situation, which is the trade imbalance. So I’d like to address those points.

[The prepared statement of Thomas L. Farmer can be found on

page 79 in the appendix.]

Chairman BEREUTER. Thank you, Mr. Farmer.

We’d like now to hear from Mr. Steve Judge, Senior Vice President for Government Affairs, Securities Industry Association.

STATEMENT OF STEVE JUDGE, SENIOR VICE PRESIDENT,

GOVERNMENT AFFAIRS, SECURITIES INDUSTRY ASSOCIATION

Mr. JUDGE. Chairman Bereuter, Mr. Sanders, Members of the

subcommittee, thank you for the opportunity to present the securities industry’s views on trade issues that affect the financial services industry. The U.S. capital markets are the deepest, most

transparent and most innovative in the world. The securities industry’s unique function, matching those who have capital with those

who will use it productively and advising clients and investors on

12

how to manage their investments, are vital to world’s economic

growth.

The U.S. financial services sector’s continued strength depends

upon access to foreign markets. It is critical that we continue to

pursue access to all markets worldwide. Increased competition improves efficiency and provides consumers with the broadest range

of products and services at the lowest cost. Countries that erect

barriers to entry, not only harm our ability to provide the products

and services our customers demand, but also inhibit growth and innovation in their own economy.

The products and services that U.S. financial services firms offer

are eagerly sought by foreign individuals, institutions and governments. In fact, financial services exports topped $20.5 billion with

a record trade surplus of $8.8 billion. Over the last decade, the U.S.

capital markets have seen their share of the global pie shrink. Approximately 80 percent of the world’s Gross Domestic Product,

(GDP) and half of the world’s equity and debt markets are located

outside the U.S.

So obviously, many of the best future growth opportunities lie in

non-U.S. markets. It is a long-established U.S. policy to promote

economic growth through open markets. The Securities Industry

Association, (SIA), supports efforts to eliminate the protectionist

barriers through WTO financial services negotiations and through

bilateral and regional pacts.

SIA strongly believes that substantial liberalization of financial

services markets can only be realized if countries improve regulatory transparency. Lack of transparency and implementation and

application of regulations frustrates markets’ access in the same

way as does tariffs.

Over the last 2 years, SIA has undertaken a major effort to increase regulatory transparency. We published a paper identifying

the principles on which transparent regulatory systems are built.

This effort has received the support of U.S. financial services regulators and we have worked with APEC, the OECD, IMF, WTO regulators in North America, Europe, Asia and Latin America. Indeed,

just earlier today, SIA spoke to members of the International Organization of Securities Commissions on the importance of transparent regulation. And we will give a major presentation of this

paper to their annual meeting on Friday in Copenhagen.

We are urging our trade negotiators to incorporate these transparency principles in future agreements. These principles would

eliminate preferential access to regulatory proposals, require public

availability of proposed regulations, provide an adequate public

comment period on new regulations, and mandate the enforcement

of regulations on a non-discriminatory basis.

SIA strongly supports the inclusion of financial services in the

year 2000 round. We believe this is a tremendous opportunity to

build upon the 1997 WTO accord. Though that agreement did not

achieve the elimination of all the barriers that the securities industry sought, it did create a strong basis for further liberalization.

SIA’s objectives for the upcoming round are to expand on the 1997

commitments, transform voluntary liberalizations undertaken since

1997 into binding commitments, and to reject offers that do not

fully grandfather existing investments and operations.

13

We are extremely supportive of the Administration’s efforts to

forge trade accords with Chile and Singapore, and the free trade

area of the Americas. These targeted negotiations provide an opportunity for groundbreaking financial service agreements, and

they must set a high standard against which future agreements

will be measured.

SIA supports Trade Promotion Authority for the President as an

essential tool in negotiating favorable trade agreements. We have

been actively seeking a declaration from the European Union, (EU),

that Title V of Gramm/Leach/Bliley, in combination with the Fair

Credit Reporting Act and other U.S. laws and rules, constitutes

adequate protection for personal data handled by the U.S. finance

services sector for purposes of the EU data protection directive.

Such a determination is critical for the U.S. financial services sector by guaranteeing that the uninterrupted flow of data will insure

continued investor and market confidence.

The privacy debate in the United States will continue to evolve.

A U.S./EU agreement on adequacy does not preclude further developments and privacy law in either the U.S. or in Europe. An EU

adequacy determination would, however, allow U.S. financial services firms to comply with the extensive legal regimes already in

place on both sides of the Atlantic without the threat of costly and

disruptive data stoppages.

SIA is increasingly concerned about proposals to seek to use the

U.S. capital markets to achieve foreign policy goals. U.S. capital

markets attract investors and companies from all over the world,

and regularly serve as a safe haven in times of crisis. Denying access to U.S. capital markets is not an effective tool for addressing

complex foreign policy issues. Doing so could seriously disrupt investor confidence, both domestic and foreign in U.S. markets and

jeopardize our continued vibrancy. If issuers are denied access to

our markets through unilaterally imposed sanctions they may simply find capital in other markets where U.S. firms are less likely

to be competitive.

As the world leader in providing innovative services and products, U.S. financial service firms are essential to job creation and

economic growth in the United States and worldwide. Access to foreign markets is more necessary than ever to help firms meet their

customer’s demands. Your leadership will be a critical factor in deciding the framework for ongoing negotiations within the WTO and

other upcoming market-opening trade accords.

Once again, I thank you for your efforts in the past and for the

opportunity to testify today. SIA stands ready to work with you as

an active participant in these important discussions.

[The prepared statement of Steve Judge can be found on page 84

in the appendix.]

Chairman BEREUTER.Thank you very much, Mr. Judge.

Now we will hear from Dr. Mark Weisbrot, the Co-Director of the

Center for Economic and Policy Research. Mr. Weisbrot, you may

proceed as you wish.

14

STATEMENT OF MARK WEISBROT, CO-DIRECTOR, CENTER

FOR ECONOMIC AND POLICY RESEARCH

Mr. WEISBROT. Thank you. I would like to thank Chairman Bereuter and the subcommittee for this opportunity to testify on this

issue. The Center for Economic and Policy Research is a non-profit,

non-partisan policy institute and we seek to expand public debate

on issues such as this. I will focus my remarks on the public interest in these agreements, such as the Free Trade Agreement of the

Americas, (FTAA), the General Agreement on Trade in Services,

and NAFTA, and also such legislation as Trade Promotion Authority.

While it is clear there are some gains to be made by U.S. financial firms and banks by the liberalization of trade in financial services, we must weigh these gains against the cost of entering into

and expanding the international agreements by which such liberalization is achieved. You cannot liberalize trade in financial services

without accepting the rest of the agreements, such as the FTAA.

We must also consider the costs and risks associated with liberalization and deregulation, some of which only become apparent after

the fact, as in our own savings and loan deregulation experience

in the 1980s.

On the benefit side, it is argued that the expansion of trade in

financial services can help reduce our trade deficit. As Congressman Sanders already pointed out, there is not going to make very

much difference even if we were to double the $9 billion surplus

that we currently have. It is about 2 percent of our current account

deficit, which is now running at 4.5 percent of GDP, $450 billion

a year. And as Congressman Sherman pointed out, this is a very

serious problem and I am always amazed as an economist by how

little attention it gets in the press. It will have to get some attention soon, because we cannot go on doing this indefinitely. Our foreign debt is now nearly 20 percent of the Gross Domestic Product.

If we keep going at the rate we are going now, it will reach 50 percent in less than 7 years, which is a level that no industrialized

country has ever had. And again, from an economic point of view,

this is at least as serious a problem as a budget deficit of the same

order. In fact, it is more serious, because the money is owed to people and institutions outside the country. And yet, Congress does

take very seriously, and the press does take very seriously, the possibility of a Federal budget deficit 10 and 20 years into the future,

while at the same time this much more important trade and current account deficit is basically ignored.

However, we should be wary of promises that expanding our

trade through agreements such as NAFTA, the proposed FTAA or

the WTO, will reduce our trade deficit, as the proponents of

NAFTA promised back in 1993. Of course prominent economists argued that it was going to expand our trade, which it did, and expand our trade surplus and create a net gain of hundreds of thousands of jobs here, and instead—and I am using figures, they are

only slightly different, because they are in constant 1992 dollars,

from what Congressman Sanders said—but you can see our NAFTA deficit went from $16.6 billion in 1993, quadrupling to almost $62.8 billion in 2000, and of course our overall current account deficit has ballooned.

15

The subcommittee asked whether it would be advisable as part

of the process of expanding trade in financial services to ease the

restrictions on foreign companies that wish to sell securities in U.S.

markets. I just want to mention that we have enough problems

here policing our own securities markets, as was shown in the recent collapse of the bubble in tech stocks, and you have any number of examples.

One I gave here is Priceline, for example, which is now trading

at 18 percent of its peak value. Well, they measured their revenue

in terms of their ticket sales, airline ticket sales and hotel room

sales, the total amount of them. This is one of the many accounting

manipulations that was not stopped by the Securities and Exchange Commission, and partly as result of that, we had a huge

bubble and it burst and millions of Americans are already having

to change or postpone their retirement plans. So I would suggest

that we need to get our own house in better order before we expand

our own markets to more difficult-to-police foreign securities.

Finally, a couple more points if I can. The deregulation of financial services has other risks. We saw this in the Asian financial crisis, which most economists now agree was brought on by an opening up of capital markets in the region, which led to a sudden influx of hot money that flowed right out within the following year

in 1997-1998. And you had a reversal of capital flows, about 11 percent of GDP for South Korea, Indonesia, Philippines, Malaysia and

Thailand. This is what really brought on the crisis and the collapse

of the currencies and the economic collapse in the region, which did

have an effect also in the United States, particularly on certain industries. Steel workers, farmers were particularly hard hit.

So we have to be careful with international deregulation of financial services even on its own terms and apart from the other conditions that are included in these agreements.

I guess I am out of time, but if we do have time I would like to

come back to some of the other conditions that are in these agreements that we should be particularly wary of.

[The prepared statement of Mark Weisbrot can be found on page

94 in the appendix.]

Chairman BEREUTER. Thank you very much. Gentlemen, thank

you very much for your testimony. We very much appreciate it. We

will now move to the 5-minute question rule, and I will begin the

questioning by a question that I want to address to all of you. I

will give you a minute or two to think about it and I would like

to then have brief answers from each of you. I will move to a second question in the meantime. These are the two related questions.

What type of barriers do you believe are the most damaging to

international trade in financial services? And then, second, I want

to ask you which countries are the most restrictive, have the most

restrictive rules for gaining market access? You can give me one,

two or three nominees.

And in the meantime, Mr. Judge, I would like to go to a comment

you had at page 6 related to what you describe as a NAFTA model

for transitions; that is, transition periods, for entry into developing

country markets. And the points that you are making that NAFTA

could be in, that it is sector specific. Is that the primary reason you

cite this or is it something about the transition period model itself?

16

Mr. JUDGE. No, it was the transition model itself. In some negotiations it makes sense to have a transition period to get to a goal

of total market access and that cannot be accomplished immediately.

Chairman BEREUTER. How do you think, for example, the China

WTO access treated your country on transition periods and other

elements that limit or begin to open up your access to securities,

exports, sales?

Mr. JUDGE. Our support for the China agreement was based on

the general benefit to the economy. The securities industry itself

did not receive as favorable a treatment under that as other industries did.

Chairman BEREUTER. It was one of their disappointments in

short, wasn’t it?

Mr. JUDGE. Yes, we were very disappointed in the agreement

reached on securities with China.

Chairman BEREUTER. Now if I could come back and ask each of

you, just doing down the line, Mr. O’Connor, do you want to give

me what are the most damaging barriers to international trade in

financial services?

Mr. O’CONNOR. Well, based on my experience, I think some of the

barriers that are significant are ownership. In some countries there

is a limitation on ownership for foreign companies. India has a limitation of 26 percent, which is very bothersome. Another one is the

product approval process. That has been very problematic in Japan

where foreign companies, until recently anyway, have been subject

to another approval process for their products that was different

than it was for Japanese companies. And then another example, I

think certain countries, China comes to mind here, they have

closed out certain sectors, certain product sectors for foreign companies. Automobile insurance is a closed sector. There were other

sectors, but automobile is one.

Chairman BEREUTER. Let’s deal with the barriers first. Mr.

Farmer, which are your nominees?

Mr. FARMER. Well, we will talk about the barriers first.

Chairman BEREUTER. Yes.

Mr. FARMER. The commercial banking industry I don’t think feels

it has significant barriers to entry in any market that is of real interest to the industry in terms of an economy which would be

worth trying to operate in.

Chairman BEREUTER. Is that because of national treatment giving us more leverage?

Mr. FARMER. That is basically due to the fact that the 1997

GATS agreement made a great deal of progress, and always I mention Canada and Japan being prime examples there. There are barriers in the sense of hurdles to operating successfully in some of

these markets I have mentioned in my statement, where the regulatory structure is such that the risks for operating in those markets make them unattractive. Lack of transparency in the regulatory system, actually the SIA statement on that is quite comprehensive. Lack of ability to have input on regulatory structures,

and the other thing I would say is weakness of the local banking

sector. It really isn’t possible to operate successfully in a country

17

if the local banking sector, as it is, for example, in Russia, simply

doesn’t operate properly.

Chairman BEREUTER. That is interesting. We will have to come

back to that one. I want the other barriers nominated by Mr. Judge

if I may. Excuse me, Mr. Farmer. Mr. Judge.

Mr. JUDGE. Where they exist, ownership and market establishment barriers are still very important, but we found that, as Tom

said, Mr. Farmer said, the 1997 WTO accords removed many of

those. But more important are the lack of transparent regulatory

systems in these countries. That is something that is really a country-by-country, barrier-by-barrier, regulation-by-regulation fight

that we have to make.

Chairman BEREUTER. Thank you very much. I am out of time,

but I want to go to Dr. Weisbrot to see if he wants to suggest the

most egregious or difficult barriers.

Mr. WEISBROT. I can’t speak for the industry, obviously—I think

this is one of the problems with the way this is looked at—some

of the things that are barriers to entry to financial services markets are actually regulatory measures that are necessary to maintain stability in local capital markets. And the example I gave in

my testimony, for example, as to what brought on the Asian financial crisis was a removal of restrictions on foreign borrowing that

allowed banks and corporations there to borrow almost unlimited

amounts from abroad of short-term capital. Of course, this is what

created the instability that led to the currency crashes that brought

with it the whole collapse of the economies in the region, because

you had this enormous influx of short-term capital, which was

pushed very strongly by the U.S. Treasury Department. Prior to

this deregulation it would not have been possible.

Chairman BEREUTER. Thank you very much. That subject about

what caused the financial crisis in Asia is the subject of another

discussion, but my judgment is that is only one of the reasons. The

other was crony capitalism and mishandling of it by the IMF in its

initial stages, but that is for another day.

Mr. Sanders.

Mr. SANDERS. Thank you, Mr. Chairman. I understand we have

representatives from the insurance banking and securities industry

here and you are testifying about financial services, and that is fair

enough. That is your interest. But I would like you to do me a favor

and put another hat on as well. Just pretend that you are not representing a financial services industry, but you are a Member of

the United States Congress that has to look at financial services

and a dozen other things. And if a constituent came up to you and

said, sir, we now know that financial services are running a surplus, Mr. Congressman, but we have an $83 billion trade deficit

with China—I know some of you have mentioned NAFTA. We have now a $24 billion trade deficit with Mexico, whereas before

NAFTA, we had a surplus. We have a $50 billion trade deficit with

Canada, which has more than doubled since NAFTA.

So now you are a United States Congressman and not just a representative of a financial service industry. Tell me what you would

tell a constituent when a constituent said, hey, these are not working for me, because I lost my job or my wages are going down or

my wife lost her job. So how do you feel about the China agreeVerDate 11-MAY-2000 07:34 Oct 12, 2001 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 73597.TXT HBANK1 PsN: HBANK1
18

ment, the NAFTA agreement overall? Overall, not just from your

financial services. Give us some advice as to how we should vote

on these issues.

Mr. O’Connor, if you could briefly respond, Mr. Farmer, Mr.

Judge, Mr. Weisbrot.

Mr. O’CONNOR. Congressman, the insurance industry is a particular industry. It is not a manufacturing industry, it is a service

industry. So I don’t think anybody has lost their job in the insurance industry, because of opening of new markets. I would use the

specific example of China. Right now, the Chinese can sell their

goods in the United States. Basically they have a pretty good free

access to the U.S. marketplace where U.S. companies don’t have

access to selling goods to the same extent in China. I would say the

WTO accession and implementation of a bilateral trade agreement

would reduce the trade deficit with a significant trading partner of

the United States where we have a deficit, and that is China.

Mr. SANDERS. I appreciate that and, as you know, we don’t pick

and choose in general. When we are dealing with NAFTA, you are

not just dealing with insurance, you are dealing with automobiles

and steel and everything else.

So you did not quite answer my question. I am appreciative of

the fact that the financial services industry is running a surplus,

but we can’t pick—well, we can pick and choose, but the approach

we have taken is broad trade policy.

Mr. Farmer, how would you answer that question?

Mr. FARMER. Let me say I am neither a Member of Congress or

an economist.

Mr. SANDERS. For a few minutes you will be a Member of Congress.

Mr. FARMER. I am way over my head. I think a lot depends on

who your constituents are. I would think Mr. Bereuter’s constituents, to the extent they are farmers, are quite happy with NAFTA

and some of the other agreements. In other words, I think there

are balances. Certainly I think if I were an economist, and I am

not, I think you need to look at trade balances on a worldwide

basis, not on a bilateral basis. I know we are running a worldwide

deficit at this point also, but we are running also a capital account

and this is one area where the financial services industry comes in

well. A lot of this is balanced off by the need for, and the willingness of, our creditors to keep holding onto those little green pieces

of paper that we give them, the dollar bills. That is partly due to

the fact that they can invest these papers extremely well in the

United States, thereby helping our capital markets, lowering our

capital costs, and the part of the economy that is driven by them

doing well.

Mr. SANDERS. I have to interrupt you, because we don’t have

much time and I want others to comment. I would say when we

talk about trade or economic policy in general sometimes we miss

the bottom line, and what the bottom line is to me, to be frank, is

how the average citizen is doing. Does this trade policy benefit the

average person? You are right, in some cases a farmer in Mr. Bereuter’s district or my district benefits, but on average when you are running up a $400 billion plus trade deficit I think the evidence

is overwhelming that the average American is not benefiting.

19

Mr. Judge, your view?

Mr. JUDGE. First of all, I might tell other industries to follow the

example of the financial services industry. The financial services

industry seems to have a pretty good example of how this can be

done. I encourage other industries to follow the notion of expanding

markets overseas. I would want to make sure there is a cause and

effect relationship between the enactment of the trade agreement

and the trade deficit that you point out. I am not sure in the absence of these trade agreements that the trade deficit would be all

that much better. In fact, it could be worse. I would make sure I

understood there is a cause and effect relationship there, and I am

not sure there is one there yet.

Mr. SANDERS. Subject for another discussion.

Mr. Weisbrot.

Mr. WEISBROT. I don’t think actually any economist would dispute the relationship between the trade agreements and the deficit.

They might dispute the actual effect of that trade deficit on things

like wages for employment over the long run. But I think what you

would have to say is, first of all, the agreements—NAFTA and the

FTAA, they are deliberately designed to make it easier for U.S. corporations to move their investments elsewhere, direct foreign investment elsewhere. So there is no doubt that they have that effect.

The other effect they have is to push wages down. Here, if you look

at them, is the one probably most important statistic that you can

look at concerning the U.S. economy from the point of view of the

people, and that is the median wage. That is, the real median wage

adjusted for inflation is today the same as it was 27 years ago.

Now this is unprecedented in American economic history. This

means that the majority of the labor force in the United States has

literally not shared in the gains from economic growth over the last

27 years. If you compare that to the previous 27 years, the typical

wage increased by 80 percent. The difference between 80 percent

and zero is huge, and a good part of that again, economists would

argue how much, but a sizable part of that is due to our international commercial agreements and exchanges.

Mr. SANDERS. Thank you all.

Chairman BEREUTER. The time of the gentleman has expired.

There were three Members here at the beginning of session. Mrs.

Roukema was here at the beginning of the first session. First, we

will hear from Mrs. Roukema, Mr. Castle, Mrs. Biggert, and then

order of appearance under the committee rules.

Mrs. Roukema.

Mrs. ROUKEMA. I don’t quite know where to begin here, but I

have listened very carefully to what you have to say. And coincidentally I might tell you that I and Mr. Bereuter were at a policy

hearing this morning where Trade Ambassador, I’m sorry, Bob

Zoellick, our Trade Negotiator for the Bush Administration, was

speaking, and we had noted the Trade Promotion Authority which

a couple of you referenced. That has been evidently pointed out as

something that Congress has to do. I don’t know how high a priority you rank that. But I would like to know if you want to comment on the Trade Promotion Authority. I would be happy to hear

that, but I would like to know what do you think our Trade Rep,

Mr. Zoellick, should be doing now for your industry, and I heard

20

you say you need more transparency country to country. And you

did talk about some of the damaging barriers to financial services.

What should the Trade Rep be doing with the Administration and

through the Administration with your industry?

Mr. O’CONNOR. I think the Trade Representative should be addressing these barriers that we mentioned earlier.

Mrs. ROUKEMA. I’m sorry? Should be?

Mr. O’CONNOR. Addressing.

Mrs. ROUKEMA. Has there been any movement in that direction

in the correspondence? There has been correspondence and dialogue.

Mr. O’CONNOR. Yes. There is an open communication link between our industry anyway and the U.S. Trade Representative,

and we constantly advise. This is a moving target. As we go forward, we constantly advise what are the remaining barriers and

what the problems are. Transparency continues to be a problem

and we make our proposals to USTR and have frequent meetings

with them, and they are very serious about us helping the financial

services industry, particularly insurance, address these issues with

the offending countries.

Mrs. ROUKEMA. Either you or anyone else, please amplify on

that, but at the same time tell me, has there been any action taken

besides communication and discussions?

Mr. FARMER. Could I? Let me say the way the U.S. Government

is structured in financial services outside of insurance, the principal responsibility, negotiating responsibility is not with Mr.

Zoellick, but with the Secretary of the Treasury. We have worked

very closely with the Treasury over the years through various administrations and they have been very actively negotiating on

these very issues with foreign governments.

My reference to Canada and Japan reflect mostly the efforts of

the U.S. Treasury to get the regulatory structures improved in

these countries, and that has continued to go on. And I would say

the Treasury also is working with the IMF, which is beginning to

give technical assistance to countries that don’t understand regulation. And so through the Treasury/IMF channel there has been a

lot going on.

As you know, the current Treasury is just getting into place for

various reasons, and we are looking forward to even more activity

by them when they get their top people in place.

Mrs. ROUKEMA. Thank you.

Yes, Mr. Judge.

Mr. JUDGE. First of all, we strongly support TPA, and we think

it should be a high priority. Second, I think the U.S. Government

should be encouraging that the WTO Financial Services Round to

remove further barriers. I think Mr. Farmer pointed out the good

relationship between USTR and the Treasury, and Treasury’s responsibility for banking and securities and USTR’s responsibility

for insurance and other financial services.

The last Administration, and the previous Administration, have

done a very good job working with the industry in trying to identify

our major concerns and addressing them. I think so far the rhetoric

out of the Administration has been very positive on these issues,

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and so we look forward to working with them in the next year or

two and developing those negotiating positions.

Mrs. ROUKEMA. Excuse me. You said the rhetoric has been good,

but has there been action as well?

Mr. JUDGE. I don’t mean that pejoratively. The public statements

have been very positive is a better way of saying that. My rhetoric

was flawed there.

Mr. FARMER. The senior political officials of the Treasury are not

yet in place and it is not fair to judge the Treasury performance

on the last few months.

Mrs. ROUKEMA. Mr. Weisbrot.

Mr. WEISBROT. We are against the Trade Promotion Authority,

and we think, first of all, the Constitution confers upon the legislative branch the authority to regulate commerce with foreign nations. It is a relatively recent development that it has been shifted

more and more to the executive branch, and I think one of the

problems of it is you have these commercial agreements that are

negotiated that do neglect the public interest, as Congresswoman

Waters was pointing out, in terms of environmental health, public

health and of course the effect on workers.

Mrs. ROUKEMA. Excuse me, I wasn’t quite sure. What did you say

about Trade Promotion Authority? Whose responsibility did you say

it is?

Mr. WEISBROT. Congress should have the responsibility, the main

responsibility, for trade and commercial agreements.

Mrs. ROUKEMA. You are saying we should be pushing that immediately?

Mr. WEISBROT. No, I think what Trade Promotion Authority does

is it shifts that authority to the executive branch by allowing Congress to have only an up or down vote on that. So it really takes

most of the power away from Congress on that.

Mrs. ROUKEMA. But you are the minority on that?

Mr. WEISBROT. I don’t know if I am the minority in the country.

Mrs. ROUKEMA. I mean on the panel.

Thank you very much.

Chairman BEREUTER. The gentlelady from Illinois, Mrs. Biggert,

is recognized.

Mrs. BIGGERT. Thank you very much, Mr. Chairman. I have a

question. What areas do you want to see addressed in the next

round of negotiations? I will start with Mr. O’Connor.

Mr. O’CONNOR. I will pick up on that and also respond to Congresswoman Roukema’s question further. AIA, the industry association that I represent, has identified 150 barriers, trade barriers,

entry barriers, market barriers, and that list is being prepared and

it will be transmitted to USTR. And that will be also on the agenda

for the Doha Ministerial, which will take place this fall.

Mrs. BIGGERT. Are you optimistic that there will be progress

made on these fronts?

Mr. O’CONNOR. In some areas. That is a long list. But there are

some priority areas. I think I mentioned a couple of them earlier,

and we are hopeful that there will be progress.

Mrs. BIGGERT. OK. About 10 years ago, the U.S. financial services industry was quite concerned with the development of the EU

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and how that would affect the ability of U.S. firms to compete. So

what has been the experience of the financial sector with the EU?

Mr. FARMER. Let me say on banking it has been excellent. There

have been lengthy negotiations with the EU, again very strongly

assisted by the U.S. Treasury, and the end result has been that

U.S. financial institutions are treated the same way as European

institutions just as we treat them over here. I would say on the

whole within the G–7 countries now there is a reciprocity of the national treatment and equal access to each others’ institutions that

is exemplary.

The EU privacy directive is another matter. It is a misunderstanding we think on the part of the Europeans as to what our privacy regime consists of, and that is understandable. It is very new.

It is very complex, and I think we are just beginning to understand

ourselves how it is working and how effective it is.

Mrs. BIGGERT. Then just another general question is what are

the benefits to the U.S. financial services firms when new markets

are opened to their services and how does this help our economy?

Mr. JUDGE. How does it help our economy? It helps in several

ways. First, when new markets are opened up, U.S. firms are able

to provide services to that economy that they were unable to provide before. That provides revenue for U.S. firms.

Second, it means the economies in those countries are more competitive, they are more advanced. It provides us the ability to export other goods into that country that they may not have been

able to purchase before. They may not have had the income or they

may not have had the need for those goods and services produced

by United States manufacturers.

Third, we provide export financing for those exports into that

country. There are several ways in which greater access by U.S.

firms to those countries increase U.S. economic interests.

Mrs. BIGGERT. Thank you. Thank you, Mr. Chairman.

Chairman BEREUTER. Thank you very much, Mrs. Biggert.

The gentleman from Illinois, Mr. Manzullo, is recognized.

Mr. MANZULLO. Thank you very much. Unfortunately, the people that were criticizing you for only having an $8 billion trade surplus

do not realize that the trade surplus for all services is $80 billion.

And that is engineering, architectural, legal, I think about 17 different areas that all become part of what we know as trades and

services. For years I have belonged to a group called the Transatlantic Business Dialogue that entered into a memorandum of understanding on policy standards which would open up the way in

EU, for more American service sectors. I wonder if you could comment? There are continued negotiations for transparency in each of

those 17 areas.

Mr. Farmer, you already stated that things couldn’t be any better

in banking in Europe. But is there any improvement in our relations in the EU for banking? And then Mr. Judge for securities and

Mr. O’Connor on insurance.

Mr. FARMER. Well, I would just say that basically leaving aside

our current debate on the privacy issue, the important thing is not

to disrupt the good relationship that is now working. And these are

capital markets which we think are doing well, and the Europeans

are beginning to get to a Europe-wide financial market, which

23

doesn’t yet exist, and when it does, I think it is going to be very

beneficial for our firms as well. I don’t think we have any real disputes or differences of views between ourselves.

Mr. MANZULLO. We will leave that alone, then. Good.

Steve.

Mr. JUDGE. Well, I think Tom is right that this is an evolving

relationship between the United States and Europe. As they have

greater common markets, there are fewer country-by-country differences, and so that is an advantage. We do have different regulatory systems, and we have to learn how each of the different systems work. They need to learn about ours and we need to learn

about theirs.

On balance, I think the relationship between the United States

and the EU is as good as any relationship in the world, but clearly

there are areas we can work on, and we are working on them. They

have begun efforts in several areas, privacy, capital adequacies. We

have an ongoing dialogue with the EU at present on some of their

new initiatives and that we expect to continue. So those are areas

we have to work on. On balance, it is a pretty good relationship.

We have some issues at present.

Mr. O’CONNOR. The U.S. insurance industry and the trade associations, working together with the Europeans, have come up with

a model schedule which deals with an ideal form of regulation,

transparent regulation, that we would like to have adopted as

much as possible around the world, so that we have to start to

have a global scale, a global model of regulation that we can all follow. A lot of progress has been made on that and we have good

support from the Europeans as well.

Mr. MANZULLO. Would that apply to China also?

Mr. O’CONNOR. Yes.

Mr. MANZULLO. I know we have Met Life in our district and they

have been trying to get into China for a considerable period of

time.

The other question I have is more of a comment. Bob Vastine,

who is with the Coalition of Service Industries—I think you are all

part of that—wrote an article in the Keough Journal several

months ago where he states that when we pierce markets initially

with the service industry that the merchandise sector will follow

behind that. And I would like your comments on that.

Mr. JUDGE. I think that is a very good point, that it is many

times the easiest way in which to enter a market, the first entrant

being the financial services industry. But doing so, you bring in the

tools with which other parts of the economy and other parts of the

U.S. economy can export into that country. You have the financing

for the export, you have the financial infrastructure in place to

make those exports possible. So I think in many ways we in the

financial services sector are the door opener for many trade relationships.

Mr. MANZULLO. Could Ex-Im Bank have any role in providing

more financial services for exports?

Mr. FARMER. I would not say that, but I think obviously to the

extent that our customers, our exporters are able to export better

with Ex-Im financing, thereby the economy benefits. I don’t think

that it directly benefits the financial services sector other than its

24

ability to effectively serve and provide export financing, especially

for small business, which is more dependent because of its risk profile for Ex-Im support than maybe some of the others.

Mr. O’CONNOR. On the insurance side, certainly the availability

of insurance products from foreign insurance companies in a new

opening market helps ease the entry for manufacturing companies

who are entering into a market and want to have insurance coverage that provides the similar type coverage that they will be getting in the U.S. So that does help encourage investment overseas.

Mr. MANZULLO. Thank you very much.

Chairman BEREUTER. I thank you.

I do have a couple more questions, and we will take questions

from other Members if they wish. First of all, you all have excellent

testimony.

Mr. O’Connor, I particularly was struck by the five reasons you

cite why insurance is important to any economy. I think that is

very succinct and it seems to me out of enlightened self-interest insurance sectors ought to either be developed in those countries or

they should permit American and other developed country insurance companies to come there if they want their economy to thrive.

I think that is a very interesting citation of five simple reasons

why it is important that insurance must exist for an economy to

thrive.

I am struck, as I listen to you—particularly the three representatives of the financial services sector, how Mr. Farmer has fewer

concerns and complaints. It seems to me it must relate to the fact

that there is a banking system in every country, crude or as inadequate as it may be; whereas insurance is not really available in

any substantial area of some developing countries, or it does not

cover the areas of insurance that we would cover in this country.

The same is true with securities. And so we can make national

treatment work as leverage to assure that American banks doing

business abroad in a different country, or within the EU market

areas, are treated equally; national treatment in turn if we give

them national treatment in this country.

So we lack that leverage. I don’t know if you, Mr. Judge, or you,

Mr. O’Connor, have anything to suggest to us as to how we can

have more leverage for insurance and securities. If you do, I would

like to hear it now or later. What can we do to better arm the

USTR to make sure we get a good deal for your sectors?

Mr. JUDGE. One of the key things that we have found in discussing trade opportunities with other countries is that it is important that they understand that it is in their own best interest to

allow freer access by U.S. financial services firms, banking, insurance and securities into their markets, that that increases their

economic efficiencies, that that increases the opportunities for

growth. One thing I think that is important is their own self-interest, and we have to educate them about that.

In terms of leverage, we have a very open market and we do not

support negotiations of restricting our market in order to provide

leverage over other countries and financial services. We think that

probably has some short-term and long-term problems in it. But

what is important is that banking tends to be the first industry

that is out there. And in order to have a good securities market you

25

have to have an accumulation of assets to have an efficient securities market. I think the same is probably true for insurance. You

need to have a basis first of a good commercial banking market.

Mr. O’CONNOR. I think the greatest leverage that we have in our

industry is the fact that we generate—let me put it another way.

We mobilize savings within a country so we can generate a tremendous pool of funds that haven’t been generated before that would

be invested in state bonds, government bonds, which I said earlier

in my testimony would then be invested in infrastructure projects

such as schools, hospitals, highways, railways, airports. I think

that is significant leverage. And as countries see that the U.S. has

had a lot of experience in mobilizing capital and putting that capital to work to build infrastructure, when the new markets see that

message and understand that message, I think that is terrific leverage, because they are all very concerned about building a modern infrastructure as quickly as possible.

Chairman BEREUTER. Japan has historically been one of the most

difficult countries for the insurance sector, for foreign insurance

companies to leap to clear. Do you think that has contributed in

any fashion to their financial problems? For example, the Japanese

people right now are putting their money into the post offices there

as their major savings outlet. And as you know, the interest rates

that are paid there are basically just storing their money. Do you

have any suggestions as to whether or not this is a major impediment or cause of their financial problems? Or would that be an exaggeration?

I am searching for a good rationale why we can convince the Japanese they have to bring their barriers down.

Mr. O’CONNOR. The reason for the problems in the Japanese

economy, particularly in the insurance sector, which is really troubled, there is a flight to quality to the State postal savings system.

I think the significant part of that problem was created by a lack

of transparency in regulation, and I would say that regulation is

a problem there.

Chairman BEREUTER. Am I imagining things or have you in your

sector made a breakthrough in Korea lately? Did I read you finally

had success for opening up markets in South Korea, in the Republic of Korea?

Mr. O’CONNOR. It is not on our priority list. At least in our industry, on the P and C side, we have been active for many years. It

is a difficult market to do business in, but we don’t see a significant

barrier at this time.

Chairman BEREUTER. I would like to supply all four of you with

copies of two memoranda that are prepared for the Members here

by the Congressional Research Service, particularly the last one

dated April 27, which looks at the potential impact on the financial

services sector of agreements in Jordan and Singapore and Vietnam, and I know one of you specifically mentioned your interest in

Vietnam. Is that you, Mr. Judge?

Mr. JUDGE. I mentioned Singapore.

Chairman BEREUTER. Singapore, and they also look at Chile.

Dr. Weisbrot, I can’t help engaging you a little bit here in light

of what you said with respect to your lack of support for Trade Promotional Authority, and I think it is beyond my capacity to turn

26

you around on that today, but I would make this comment and invite you to respond to it if you wish.

The reason we granted President Ford Fast Track Authority,

which is now named Trade Promotional Authority, as you probably

know, was related to the fact that you are absolutely right that

under the Constitution Congress has the authority to regulate foreign commerce, but the problem we ran into is that countries or

groups of countries were unwilling to proceed with trade negotiations, because they realized they could sit there all day, and finally

after months, perhaps work out agreements with the United States

Trade Representative and then Congress could come along and second-guess them. So that was not the end of the line when they finally shook hands across the table as to what the agreement could

be. And so we delegated to the President, every President until the

President’s party failed him in the House, to give President Clinton

Trade Promotion Authority for then-called Fast Track Authority.

We always gave the President that ability. And the assurance we

gave to the countries across the table from us in those trade negotiations is that Congress couldn’t change it. They could vote up or

down, but they couldn’t amend it and it would be handled expeditiously in 90 days. So we reached Fast Track Authority only because we reached an impasse with trade negotiations. They were

unwilling to let that negotiation be second-guessed by Congress

when it finally came to us, since both Houses have to approve that

kind of agreement, that kind of a treaty.

So what alternative do we really have, given the unwillingness

of other countries to engage us in trade negotiations under the old

arrangement?

Mr. WEISBROT. Well, I have two or three answers to that.

Chairman BEREUTER. OK.

Mr. WEISBROT. First of all, I do hear the story a lot, but I do also

see examples of a story when the U.S. negotiators are taken seriously without the Fast Track Authority. You did see the Multilateral Agreement on Investment was negotiated from 1994 to 1997,

and it was about 90 percent complete, according to people who

were involved in the negotiations, and it did eventually collapse,

but it had nothing to do with the United States not being taken

seriously, and I don’t remember any country or anybody in any

other country in negotiations raising the issue that the United

States did not have Fast Track Authority to negotiate with the 28

other members of the Organization for Economic Cooperation and

Development in which the treaty was being negotiated. And that

was a major treaty. That was every bit as powerful as NAFTA or

the proposed FTAA in terms of things that were being negotiated.

So I think it clearly is possible to negotiate without the Fast

Track Authority.

Chairman BEREUTER. You can negotiate, but you can’t conclude.

Mr. WEISBROT. Like I said, it was never an issue, and they could

have concluded. If it was not for the opposition from over 600 nongovernmental organizations all around the world who mounted an

enormous campaign against that agreement, I think it would have

been concluded. I don’t think it would have fallen apart as a result

of the authority of the United States not being respected there to

negotiate that agreement.

27

The other thing is if you look at the agreements you are talking

about where back in the seventies you are talking about the GATT,

for example, General Agreement on Tariffs and Trade, where the

issue being negotiated was really just tariffs and some non-tariff

barriers to trade, mainly just tariffs. And now these trade agreements are enormously much more powerful. That is why I don’t

call them trade agreements. I always call them commercial agreements, because it is a misnomer to call NAFTA or the FTAA a

trade agreement, because the provisions of those agreements that

have the most impact on society and the economy of the member

countries are, in fact, the non-trade parts of those agreements.

So the agreement, for example, that Congresswoman Waters

mentioned on intellectual property rights, which is included in

NAFTA and the WTO and will be included in the FTAA, and of

course the investor-to-State dispute resolution mechanism of

NAFTA, which gives corporations for the first time ever the right

to directly sue governments for regulations, environmental or any

other kind of regulations that infringe on their profits, that is an

enormous change that affects every aspect of our regulation. There

has already been environmental regulation, both in Canada and it

is now threatening environmental regulation in California of the

gasoline additive MTBE, which California tried to ban and it is

now being challenged by a Canadian company. There are a number

of examples of these cases, and of course there are all the cases in

front of the WTO. Basically these agreements have reached into a

broad area that affects public health and safety enormously, much

more than the General Agreement on Tariffs and Trade did, and

to tell Congress they have only an up or down vote on these issues

to me is just a terrible abdication of responsibility.

Chairman BEREUTER. Well, if I had an alternative that was

workable, and you haven’t given us one.

Mr. WEISBROT. I think Congress——

Chairman BEREUTER. And it is not just agreements. I admit to

you, in fact, that recent agreements like NAFTA are very broad in

their implications. They are trade related, they are commerce related. They are international commerce related. But they are

broad, I will give you that. They have an effect on our society as

well as the other partners of society. But it is not just the trade

agreements of the seventies. We didn’t have to go. We weren’t

forced by our negotiating partners to go to some new arrangement

until 1974. And then from 1974, from 1994 to 1996, I think it was

1994, we had all these Presidents successively given this grant of

power by Congress, saying you do your best to conclude the deal

and you can be assured that your trade partner knows that proposed agreement that we finally have inked is not going to be

changed. It may go down entirely, but it is not going to be changed.

It is not that they do not respect us. They know that the man who

is sitting at the table does not have the final authority. We uniquely have given our parliamentary body, in this case the Congress,

the final say because of our Constitution. So tell me an alternative.

Mr. WEISBROT. Can I suggest one? One would be for Congress to

set the guidelines, to set out a series of goals and say this is what

we want the executive to negotiate in these agreements.

Chairman BEREUTER. Yes, that can certainly be done.

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Mr. WEISBROT. And then they know beforehand this is what they

are supposed to negotiate, and then they resolve the problem you

are referring to, where other countries might worry that the Congress is not going to approve that agreement. Then you will have

a real congressional input from a body that is much more accountable to the public than the USTR.

Chairman BEREUTER. That is certainly a reasonable suggestion

on your part. Just how far do you take it? Do you take it to the

point of micromanagement, where in effect it is impossible for negotiation to proceed? But it doesn’t have to be taken to that point.

So I accept your suggestion that we can be more detailed in the

guidelines that we give to our trade negotiators and you can even

differentiate between what they will do on bilateral versus multilateral.

Mrs. Capito, you have the last word if you would like.

Mrs. CAPITO. No, I don’t have any questions.

Chairman BEREUTER. I would like to thank you very much.

I believe we have just barely scratched the surface. I am very interested in this subject. I believe we can make progress and we can

assist you and therefore reduce the trade deficit that we have by

enhancing the level of services, especially the financial services,

that we are able to export abroad. And I know Chairman Oxley is

particularly interested that the subcommittee and committee make

progress in this area.

So for the first time in anybody’s memory this House of Representatives is going to focus on trying to make sure that financial

service exports are more successful. Thank you, gentlemen, for your

testimony.

[Whereupon, at 4:09 p.m., the hearing was adjourned.]

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A P P E N D I X

June 26, 2001

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