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66–812—PDF 2010

S. HRG. 111–1004 

U.S. PREFERENCE PROGRAMS: 

OPTIONS FOR REFORM 

HEARING 

BEFORE THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 9, 2010 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

BLANCHE L. LINCOLN, Arkansas 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

CHUCK GRASSLEY, Iowa 

ORRIN G. HATCH, Utah 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

JIM BUNNING, Kentucky 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

JOHN ENSIGN, Nevada 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

RUSSELL SULLIVAN, Staff Director 

KOLAN DAVIS, Republican Staff Director and Chief Counsel 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee 

on Finance ............................................................................................................ 1 

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 12 

WITNESSES 

Norris, Eric, executive director of global marketing, FMC Lithium Division, 

Charlotte, NC ....................................................................................................... 3 

Gresser, Edward, senior fellow and director, Trade and Global Markets 

Project, Democratic Leadership Council, Washington, DC ............................... 4 

Vogt, Jeff, global economic policy specialist, Policy Department, AFL–CIO, 

Washington, DC ................................................................................................... 7 

Simpkins, Gregory, vice president of policy and programs, Leon H. Sullivan 

Foundation, Washington, DC .............................................................................. 9 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Baucus, Hon. Max: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 21 

Grassley, Hon. Chuck: 

Opening statement ........................................................................................... 12 

Prepared statement .......................................................................................... 23 

Gresser, Edward: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 25 

Norris, Eric: 

Testimony .......................................................................................................... 3 

Prepared statement .......................................................................................... 40 

Simpkins, Gregory: 

Testimony .......................................................................................................... 9 

Prepared statement .......................................................................................... 43 

Vogt, Jeff: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 49 

COMMUNICATIONS

AGOA Action Committee ........................................................................................ 63 

American Sugar Alliance ........................................................................................ 69 

Coalition for GSP ..................................................................................................... 74 

Kingdom of Lesotho ................................................................................................. 82 

Lesotho Textile Exporters Association ................................................................... 88 

National Retail Federation ..................................................................................... 92 

Republic of Mauritius .............................................................................................. 97 

Republic of Trinidad and Tobago ........................................................................... 101 

Retail Industry Leaders Association (RILA) ......................................................... 111 

Sugar Alliance of the Philippines ........................................................................... 116 

Trade, Aid and Security Coalition (TASC) ............................................................ 118 

(III) 

(1) 

U.S. PREFERENCE PROGRAMS: 

OPTIONS FOR REFORM 

TUESDAY, MARCH 9, 2010 

U.S. SENATE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 9:35 a.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus 

(chairman of the committee) presiding. 

Present: Senators Wyden and Grassley. 

Also present: Democratic Staff: Bill Dauster, Deputy Staff Director and General Counsel; Amber Cottle, Chief International Trade 

Counsel; Ayesha Khanna, International Trade Counsel; and Chelsea Thomas, Professional Staff. Republican Staff: Stephen Schaefer, Chief International Trade Counsel; Claudia Poteet, International Trade Policy Advisor; and David Ross, International Trade 

Counsel. 

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR 

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE 

The CHAIRMAN. The committee will come to order. 

The book of Luke says, ‘‘From everyone who has been given 

much, much will be required.’’ Our Nation has been given much. 

Every time I go home to Montana or travel around the country, I 

am struck by our fertile soil, our rich natural resources, and our 

talented workforce. 

And we have made much of what we have been given. American 

farmers and ranchers have used our fertile soil to reap bountiful 

harvests and produce delicious American beef. American engineers 

have harnessed our natural resources to bolster our domestic energy supply, and American entrepreneurs have employed our talented workforce to drive this country’s ingenuity and growth. 

We have been blessed, we have been given much, but much is 

also required of us. We must use what we have been given not only 

to help ourselves, but to help others, and our trade preference programs do just that. 

Since 1974, this country has maintained trade preference programs that give developing countries duty-free access to the U.S. 

market. These programs recognize that not every country has been 

given the vast bounty that we have been given, and these programs 

respond by lending a hand, not a handout. The benefits that these 

programs provide encourage investment, boost production, and increase employment to help developing countries help themselves. 

2 

But our preference programs face an uncertain future. Three of 

these preference programs, the Generalized System of Preferences, 

the Andean Trade Preference Act, and the Caribbean Basin Trade 

Partnership Act, expire later this year. One of our preference program beneficiary countries, Haiti, witnessed unprecedented devastation earlier this year. 

We must lend a hand. We must assist Haiti’s earthquake recovery efforts by creating additional incentives for investment in Haiti’s apparel sector. We must also extend our expiring programs, and 

we must begin the larger task of reforming all of our trade preference programs. 

In the 35 years since Congress first passed GSP, the world has 

changed dramatically. Some developing countries, such as India 

and Brazil, have reaped the benefits of trade liberalization but continue to suffer from high unemployment and abject poverty. Others, such as Cambodia and Rwanda, look to export-driven growth 

and foreign investment to provide long-term stability as they continue their heroic recoveries from genocide. And others, such as 

Bangladesh and Afghanistan, struggle with disadvantages arising 

from political instability and lack of infrastructure. 

We must transform our preference programs to reflect this 

change in reality, but as we modify these programs we must also 

remember what successful reform means. Successful reform means 

certainty. Beneficiary countries, investors, and U.S. companies that 

rely on these imports need certainty that the programs will remain 

in place over the long run. Only then can they make the sound production and investment decisions that will lead to increased development and poverty alleviation. 

Successful reform means meaningful and enforceable eligibility 

criteria. We must, for example, ensure that our preference programs encourage strong labor standards, even as they improve economic standards, and we must enforce the eligibility criteria systematically and regularly. 

Successful reform means benefits for the countries that need 

them the most. We must provide generous benefits to leastdeveloped countries like Cambodia that are using economic development to create social and political stability. 

Successful reform means programs that work. We must streamline operational provisions, such as rules of origin, to eliminate the 

current patchwork of rules that are hard to implement and harder 

to enforce. 

So let us come together to speed Haiti’s earthquake recovery, extend our expiring programs, and enact successful preference program reform. Let us remember all that we have been given, and 

let us remember all that is required of us. 

I am now pleased to begin our hearing with Eric Norris, executive director of global marketing, FMC Lithium Division. Following 

Mr. Norris is Ed Gresser, senior fellow and director of the Trade 

and Global Markets Project for the Democratic Leadership Council. 

It is always a great pleasure to see you here, Ed. 

And our third witness is Jeff Vogt, global economic policy specialist in the Policy Department of the AFL–CIO. And finally, we 

welcome Gregory Simpkins, vice president of policy and programs 

at the Leon H. Sullivan Foundation. 

3 

Thank you all for coming. As is our usual practice, I would like 

each of you to summarize your statements, and we will put the entire statement in the record. 

So we will begin with you, Mr. Norris. 

STATEMENT OF ERIC NORRIS, EXECUTIVE DIRECTOR OF 

GLOBAL MARKETING, FMC LITHIUM DIVISION, CHARLOTTE, 

NC 

Mr. NORRIS. Chairman Baucus and members of the Finance 

Committee, my name is Eric Norris. I am the global commercial director at FMC Specialty Chemicals, Lithium Division, based in 

North Carolina. 

FMC Corporation is a 126-year-old diversified U.S. manufacturing company and a leading producer of value-added lithium materials for industrial and consumer use, including lithium-ion batteries. 

FMC is the only integrated producer of lithium products, the only 

domestic producer of lithium products. Approximately 300 jobs in 

North Carolina are directly tied to that manufacturing activity. 

As a member of the Coalition for GSP, we strongly urge the committee to take into consideration the detrimental effect that limitation of the GSP program would have on U.S. manufacturers. In recent years, growth of our lithium business has been driven by the 

increased value of lithium-ion and lithium-polymer batteries, including those being used and currently being considered for use 

and developed for use in electric vehicles. 

The GSP program is key in allowing FMC to use economical 

sources of lithium raw materials in its U.S. manufacturing operations from deposits we have developed in the Andes Mountains in 

Argentina. Our domestic source of economic lithium supply was exhausted in the 1990s, and we now source all of our lithium raw 

material needs from our wholly owned subsidiary in Salta, Argentina. 

Approximately 75 percent of the world’s supply of lithium currently comes from what are called continental brine solars that are 

located in the Andean Mountains in Argentina and Chile, with 

much of the rest being produced in China today. Lithium recovery 

in the United States is not currently economical, although there 

are U.S. sources that are a potential for development. Once imported from Argentina, FMC’s lithium facility in Bessemer City, 

NC processes these lithium materials from Argentina for domestic 

sale and export. 

Mr. Chairman, I would like to make the following three points 

regarding the importance of reauthorizing the GSP program. First, 

the additional cost of importing lithium carbonate and lithium chloride from Argentina without the GSP tariff preference would place 

FMC at a competitive disadvantage. FMC’s major competitors in 

the U.S. market source their lithium from Chile, which has dutyfree benefits under the U.S. FTA. The GSP program, thus, allows 

U.S. operations to compete on a level playing field against the competition. 

Therefore, second, the removal of GSP benefits would result in 

additional cost to the company, not borne by our foreign competitors. Increased duty costs ultimately must be passed on to domestic 

4 

and global customers and/or result in the risk of lost sales to our 

corporation. A loss of the GSP benefit, therefore, would diminish 

the competitiveness of FMC’s lithium products versus those of its 

offshore rivals. 

To put this in perspective, prices recently for lithium in the global market have declined, on the order of 20 percent, putting an 

even more important onus on cost control across the board, including the importance of this GSP preference. 

Third, from our direct experience, I would say that the GSP program has worked well and contains appropriate checks and balances. In the 2006 GSP Annual Review, FMC faced a loss for tariff 

preferences due to the GSP rule that calls for the removal of products from the program when a single country supplies over 50 percent of U.S. imports of a particular item. Since nearly all lithium 

carbonate and chloride is sourced from either Chile or Argentina, 

U.S. import levels are split roughly 50/50 between the two countries. 

At that time, FMC petitioned the GSP Subcommittee and the 

U.S. International Trade Commission in 2007, and after a rigorous 

process the President granted a Competitive Need Limit, or CNL, 

waiver for lithium carbonate and chloride from Argentina. This decision recognized the importance of this duty-free trade to both the 

U.S. and Argentine economies. It also demonstrates that the GSP 

program has appropriate checks and balances. Indeed, a country’s 

GSP benefits for products can be removed where the tariff benefits 

are no longer found necessary. 

In summary, Mr. Chairman, at a time when the U.S. economy 

is fragile and we are just beginning to see the signs of recovery 

from the financial crisis, Congress should not allow preference programs that benefit U.S. manufacturers to expire or limit them 

without sufficient study. In our specific case, the higher costs associated with the tariff would ultimately work their way down to our 

customers and U.S. consumers and jeopardize U.S. manufacturing 

jobs. 

In conducting its review of reforms to U.S. preference programs, 

we urge the Finance Committee to take into account the implications to U.S. manufacturers. We appreciate your consideration of 

these views and allowing us to testify here today, and I would be 

glad to answer any questions. Thank you. 

The CHAIRMAN. Thank you, Mr. Norris. 

[The prepared statement of Mr. Norris appears in the appendix.] 

The CHAIRMAN. Mr. Gresser, you are next. 

STATEMENT OF EDWARD GRESSER, SENIOR FELLOW AND DIRECTOR, TRADE AND GLOBAL MARKETS PROJECT, DEMOCRATIC LEADERSHIP COUNCIL, WASHINGTON, DC 

Mr. GRESSER. Thank you, Mr. Chairman. Thank you for this opportunity to testify on our trade preference programs. 

I begin with two premises. First, as your quote from Luke suggests, we are the world’s wealthiest and most powerful Nation, and 

we should feel some responsibility to help the poor. Second, I believe doing so is a matter of enlightened self-interest, as well as of 

ethics. 

5 

My written testimony highlights three successes of the last decade in poor country trade: Haiti and Cambodia in high-tariff 

clothes, and Ethiopia in zero-tariff birdseed. In each case, we find 

a country, once a failed state and a security challenge, using trade 

to begin reducing deep poverty, help young women find dignified 

work, and help low-income farmers raise income, so they are more 

able to resist radicalism and transnational crime, and also emerge 

as a buyer of American goods. As a group, in fact, the 139 beneficiaries buy a sixth of our manufacturing exports and our farm 

products. 

So to help poor states succeed in trade is to do something good 

in its own right, and also to support some of our economic and security interests. But America’s tariff system is not ideal for the 

purpose. Concentrated in clothes and a few farm products, it is 

often tougher on poor countries than developed nations and oil producers. 

Pakistan is an example, facing a $315-million tariff penalty on 

$3.2 billion worth of bed sheets, towels, and clothes. By comparison, Britain’s $47 billion in airplanes, medicine, oil, and so forth 

get only a $280 million penalty. Other low-income states can face 

even harsher treatment. 

Our six preferences attempt to ease this tilt and also create incentives for beneficiaries to work with us on policy goals outside 

trade. They are modest in scale, covering in total about 1.6 percent 

of our non-oil imports. They are neither guarantees of export success for beneficiaries nor substitutes for multilateral liberalization, 

nor are they full tariff waivers. About 64 percent of our imports 

from beneficiaries came in duty-free last year. By comparison, 57 

percent of Chinese goods and 66 percent of European Union goods 

came in duty-free under the NTR tariffs. 

But the preferences are, nonetheless, a valuable part of our trade 

development and security policy. GSP helps many lower-income 

countries, including strategic allies like Indonesia, the Philippines, 

Turkey, and Thailand, compete with larger rivals, and this has 

human benefits as well. 

Thailand’s silver jewelry industry, for example, uses GSP to employ a full-time workforce and tens of thousands of rural people in 

part-time jobs, which create some autonomy for women workers 

and give some farm families some income stability. The Qualifying 

Industrial Zone (QIZ) program is helping Israel integrate with its 

peace partners. HOPE II (the Haitian Hemispheric Opportunity 

through Partnership Encouragement program) nearly doubled Haiti’s industrial employment before the earthquake. 

But the preferences have some problems that make them less effective than they should be. Let me highlight three. First, in general, the system is too complex. Differing rules, eligibility requirements, and product coverage make preferences confusing for importers and less helpful as incentives and policy tools for the U.S. 

Government. 

Second, the system has a geographical gap, largely missing lowincome Asian and Muslim states, and thus doing less to alleviate 

poverty and support security than they should. Our tariff treatment of Pakistan squares poorly with the premise of last year’s forVerDate Nov 24 2008 14:37 Jun 27, 2011 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 R:\DOCS\66812.000 TIMD
6 

eign aid bill that encouraging job creation and growth is essential 

to our effort to fight violent fundamentalism there. 

Cambodia’s case may be especially urgent, as the Asian state hit 

hardest by the crisis and suffering the greatest job loss, and may 

also be especially compelling as a country trying to find a high 

labor standard route to trade success. Afghanistan and Bangladesh 

are in similar positions. 

Third and finally, the African preference program is weakening, 

with the AGOA garment trade down since 2005, and never very 

successful in improving our farm trade relationships. 

With reform, I believe the preference system can come closer to 

its potential. Let me note four ideas. First, simplify the system. 

Leaving the QIZ as a branch of the U.S.-Israel FTA, merge the 

other five programs into one; add the light manufacturers excluded 

from GSP to this program, leaving clothing benefits for leastdeveloped and selected low-income and security-sensitive countries; 

and scrap tariffs on goods no longer made here at all, as Senator 

Cantwell’s Affordable Footwear Act would do for shoes, and Senator Wyden, I believe, has adjusted for outdoor jackets. 

Second, create a single set of conditions, scrapping some outdated 

ones and perhaps creating new criteria evaluating beneficiaries’ 

participation in climate change talks and the willingness of more 

advanced countries to open markets to their poorer neighbors. 

Third, retain a focus on Africa with generous rules and incentives for continental integration, but view garment trade as a 

longer-term goal and focus more immediately on ways to encourage 

farm trade—for example, improving market information in unique 

products like birdseed and shea butter—and help Africa speed up 

its Development Corridors logistics program, both through aid and 

by asking more in financial contribution from resource exporters 

like South Africa and Nigeria. 

Fourth, act quickly to improve HOPE II for Haiti and broaden 

the QIZ. Such a revision would mean, I think, a better system 

which does a bit more to help the very poor and asks a bit more 

from the more advanced beneficiaries. It would still have natural 

limits. Beneficiaries should not view preference, or the American 

market in general, as their sole recourse in trade. Neither can any 

trade policy substitute for peace and political stability, education 

and worker training, efficient logistics, transparency, and anticorruption and other measures essential to development. 

But a better preference system will play its part, and that part 

is important. No nation could do more than ours to ease poverty 

and speed development through trade. As we fulfill this responsibility, we benefit from strength and security in new markets. These 

facts have been the foundation of our preferences since 1974 and 

remain so today. 

Thank you very much. 

The CHAIRMAN. Thank you, Mr. Gresser. 

[The prepared statement of Mr. Gresser appears in the appendix.] 

The CHAIRMAN. Mr. Vogt? 

7 

STATEMENT OF JEFF VOGT, GLOBAL ECONOMIC POLICY SPECIALIST, POLICY DEPARTMENT, AFL–CIO, WASHINGTON, DC 

Mr. VOGT. Chairman Baucus and members of the committee, on 

behalf of the over 11.5 million members of the AFL–CIO, I thank 

you for the opportunity to review the operation of the U.S. trade 

preference programs. While the AFL–CIO is interested in multiple 

aspects of U.S. trade programs, I will focus today on the labor eligibility criteria of the GSP and related preference programs. 

I have submitted for the hearing record written testimony that 

both examines in detail the problems with the current system, as 

well as articulates a reasonable, straightforward proposal for reform based on universal eligibility criteria and a more rational, 

transparent, and consistent process to review violations of those 

criteria. I will be happy to answer any questions you may have 

with regard to that testimony. 

The labor criteria of our trade preference programs are of critical 

importance to the global labor movement. The AFL–CIO, together 

with partner unions and workers in numerous developing countries 

in Latin America, Africa, and Asia, has used this important tool 

several times over the last 25 years. In the best cases, it has 

brought about modest improvements in labor laws or resolution to 

long-pending cases. 

Indeed, our most recent experience with Bangladesh shows that 

GSP can be used to create needed political space for positive 

change. Today, the vast majority of workers in the export processing zones of Bangladesh now have some form of worker representation on the job because of the hard work of local labor organizations that have made use of the political space generated by 

the continuing review of GSP by USTR. Now these workers can 

begin to organize and bargain for their fair share of the gains of 

international trade. 

However, the application of labor rights criteria in trade preference programs has been highly inconsistent over the years. Often 

unrelated geopolitical and foreign policy interests or sensitivity to 

the economic interests of individual corporations has meant that 

clear cases of egregious labor rights violations are never accepted 

for review, or that cases, once accepted, are dropped without evidence of any meaningful improvement in the areas outlined in the 

complaint. 

The lack of clear criteria for the acceptance of petitions, of any 

fixed timelines by when the government must rule on the acceptability of a petition or on the merits, and any obligation that the 

government ever provide a written and public rationale for its actions has allowed the USTR in past administrations to exercise almost unfettered discretion to apply the law. 

Even now, USTR has failed to accept for review two detailed petitions filed by the AFL–CIO. In one case, Sri Lanka, the petitioning unions seek only a hearing of their case and for the U.S. 

Government to engage with the Government of Sri Lanka to adopt 

a comprehensive work plan to enact needed legal reforms and to 

address persistent problems in labor law enforcement. 

Yet nearly 2 years later, it remains unclear whether the case will 

be accepted for review. No one in the administration questions the 

petition on its merits. The lack of consistency, we find, over the last 

8 

25 years has substantially undermined the legitimacy of the program. 

A new set of procedures that puts a premium on transparent, 

consistently applied criteria with reasonable time lines and agency 

decision-making based on the merits would go a long way to improve the functioning of the labor provisions, which has been spotty 

at best. I propose a new set of procedures in the written testimony. 

We also need to take a fresh look at the eligibility criteria themselves. Trade preference programs still refer to ‘‘internationally recognized worker rights.’’ There are important differences between 

‘‘internationally recognized worker rights’’ and the ILO Core Labor 

Rights, which, as you know, are deemed the universal minimum 

standard of labor rights adopted by the ILO and its member countries. 

For example, ‘‘internationally recognized worker rights’’ do not 

include the prohibition on discrimination in respect of employment 

and occupation. In addition, the preference programs currently 

refer to a ‘‘minimum age for the employment of children,’’ which is 

weaker than the ILO formulation of the ‘‘effective abolition of child 

labor.’’ 

Further, the labor criteria require only that a country take steps 

to afford these rights. The current preference programs in practice 

require a country to improve labor standards over time but not require a country to have achieved any basic level of compliance in 

order to be eligible. Thus, a country may have horrendous labor 

laws and practices so long as it temporarily and marginally improves after a petition is filed. 

I want to close my comments today by making clear that we do 

not view the goal of filing labor petitions to be the suspension of 

preferences; it never has been. Rather, we file petitions with the 

aim of bringing about demonstrable improvements in the administration of labor justice, and thus improvement in the lives of workers and the economies of beneficiary countries. 

Thus, the approach taken to labor violations should be cooperative, at least initially, and that is why we have proposed that petitions lead first to the adoption of remediation plans with clear 

benchmarks developed by the U.S. Government, with the input and 

continued participation of the petitioners, workers, employers, and 

governments to address and resolve systematic violations of worker 

rights, and of course capacity building to help countries address 

these problems would be greatly needed and appreciated. 

If countries are making real progress based on that plan but 

have not yet met the benchmarks so that they end up in an initial 

review, of course they should be given more time. Of course, the 

threat of suspension or withdrawal of benefits must be retained 

and wielded if governments simply fail to abide by their legal obligations under the preference programs. We do support the preference programs, and with modifications with regard to labor 

rights and other criteria, I think that we could continue to support 

them. 

Thank you very much. 

The CHAIRMAN. Thank you, Mr. Vogt. 

[The prepared statement of Mr. Vogt appears in the appendix.] 

The CHAIRMAN. Mr. Simpkins? 

9 

STATEMENT OF GREGORY SIMPKINS, VICE PRESIDENT OF 

POLICY AND PROGRAMS, LEON H. SULLIVAN FOUNDATION, 

WASHINGTON, DC 

Mr. SIMPKINS. Good morning. I would like to thank Finance 

Committee Chairman Baucus and the rest of the committee for this 

opportunity to testify on the impact of the African Growth and Opportunity Act on behalf of the Leon H. Sullivan Foundation. 

When I attended the August 2009 AGOA Forum in Nairobi, 

Kenya, I heard complaints from African participants that AGOA 

was not as effective as it could be because its term needed to be 

extended and its coverage of products needed to be expanded. U.S. 

Government officials responded that AGOA had already been extended to 2015, and that relatively few of the more than 6,400 tariff lines were being currently used by Africans. 

This disparity is the result of a disconnect on the how and why 

of AGOA that must be corrected. There is joint fault for the incomplete success of AGOA and other trade preference programs. Neither the United States nor African governments have done the 

most effective job of working in concert to achieve our mutually desired goal in this regard. AGOA has been extended several times, 

but the uncertainty of how long it will be in effect has been a disincentive to long-term investment. Our government has made trade 

rules as complex and arcane as tax law. As for sustainable development, officials in our government have lamented that the vertical 

integration in cotton, yarn, cloth, and finished clothing has not 

happened as we expected. However, our process has not fully taken 

into account the impediments that have made such integration all 

but impossible in some circumstances. Meanwhile, we have neglected the African agricultural sector, in which more than 70 percent of Africans work. 

This brings me to the point about capacity building. Each year, 

the Office of the U.S. Trade Representative issues an AGOA report 

that cites hundreds of millions of dollars spent by the U.S. Government on capacity building in support of AGOA. Unfortunately, surprisingly little is spent in imparting a solid understanding of the 

AGOA process directly to African agricultural producers, for example. 

Finally, the last statistics I saw indicated that less than 10 percent of African trade was internal to Africa. In my experience in 

teaching Africans about the AGOA process, I was told by producers 

quite often that they were more interested in selling to Americans 

under AGOA than to their neighbors. These producers did not do 

the calculations necessary to determine whether non-African trade 

was more profitable than inter-African trade. 

Based on the points I have presented, here are the recommendations I would offer. AGOA is based on the Generalized System of 

Preferences, which also is subject to periodic renewal. 

The U.S. Government should make AGOA and GSP permanent, 

subject to review, to remove the reluctance to source products in 

Africa. All of our reasonable requirements can be maintained to determine which countries should continue to benefit from AGOA, 

even as the overall program continues. 

The U.S. Government should support infrastructure programs to 

lower costs for African producers to reach U.S. markets. For examVerDate Nov 24 2008 14:37 Jun 27, 2011 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 R:\DOCS\66812.000 TIMD
10 

ple, the German Marshall Fund and the Hewlitt Foundation are 

working on a Development Corridors program to stimulate the expansion of existing, and the creation of new, transportation structures to allow African products, especially those produced by small, 

older farmers, to be brought to market. 

The U.S. Government should target capacity building on U.S. 

trade rules and processes to the African private sector, African government officials, and African civil society together. Governments 

must understand how to make the playing field level, while the private sector understands the rules under which they must operate, 

and civil society plays the watchdog on the whole process. 

The U.S. Government should eliminate existing product exclusions under AGOA, which are primarily in agricultural products. 

This would have negligible impact on American agricultural competitiveness, but would be of great benefit to African agricultural 

producers, who comprise such a high percentage of African productive capacity. 

Using its taxation authority, the U.S. Government should create 

tax incentives to stimulate economic development by encouraging 

American investment in non-extractive, labor-intensive sectors 

such as the agricultural and hospitality industries in Africa, as 

well as encouraging shipping companies to provide adequate transportation options to African exporters. 

In order to assist in the African process of regionalization, U.S. 

Government aid programs should take into account the regional 

impact of single-country grants and create regional grants to help 

regional economic communities better facilitate the creation of regional markets that are more attractive destinations for U.S. investment in product sourcing and more efficient exporters of African products. 

During the last 12 years, a variety of stakeholders—government, 

civil society, and business—has worked together to make sure that 

AGOA is as successful as possible. Through our continued cooperation, we can remove the obstacles to full utilization of U.S. trade 

preference programs, and AGOA can be made more successful 

broadly than it is currently. 

Thank you. I am prepared to answer any questions the committee may have. 

The CHAIRMAN. Thank you very much, Mr. Simpkins. 

[The prepared statement of Mr. Simpkins appears in the appendix.] 

The CHAIRMAN. Mr. Gresser, you outlined four areas for reform. 

I wonder if you could just very briefly expand on those a little bit. 

Mr. GRESSER. All right. I guess the first area I am thinking 

about is an overall simplification of the program. We have six programs, if you count the QIZ as a preference. Each of them has 

somewhat different qualifications, somewhat different product coverage, somewhat different rules of origin. I think it would be far 

simpler for the buyers of goods here in the United States to deal 

with one program that has consistent rules and consistent eligibility requirements across the full spectrum of preference beneficiaries. 

Second, there is a geographic gap in the programs. They do very 

little to help a group of low-income Asian and majority-Muslim 

11 

states. I would cite, in particular, Cambodia, Bangladesh, Afghanistan, Pakistan, Nepal, and a couple of others. These are often countries that are central to our national security debates in America. 

They are countries that suffer from very deep poverty and would 

benefit a great deal from being able to sell the clothes, home linens, 

those things they produce, duty-free, and compete more effectively 

with China, India, and other big producers. 

Third, I think the Africa program, as Mr. Simpkins was suggesting, needs some rethinking and refocusing on rural industry 

and agriculture. This can include some additional market access. 

But also, I think, when I look at the African agricultural trade profile, I see two things: one is about $25 billion in exports to Europe 

and about $1 billion to the United States, so Africa is quite capable 

of exporting large quantities of farm products, and they do now; 

second, successes often emerging in zero-tariff, non-import sensitive 

products through better market information. 

The one I highlight in the testimony is high-quality birdseed 

from Ethiopia, called niger seed. You can find it in Home Depots 

and things around here. This only became a big Ethiopian export 

after traders from Singapore suggested to the Ethiopians they 

could find a market in the United States. It is a zero-tariff product, 

it is not import-sensitive, and it is now the largest single Ethiopian 

export to the United States. I think there are a lot of products like 

that where better information to farmers and agricultural marketers could increase trade, could help African rural people, without 

really causing trade stress in the United States. 

Finally, I take your point about the need to help Haiti fairly urgently. As I understand it, the garment factories in Haiti came 

through the earthquake fairly well. With some fixing up of the 

port, I would think that the garment industry can be one of the pillars of Haiti’s recovery from this really disastrous and horrible 

event. 

So, that would be my outline of reform: simplification, unification 

of some programs, better market access for Cambodia, for Pakistan, 

for Bangladesh, low-income Asian and Muslim countries, and special attention to Africa and to Haiti. 

The CHAIRMAN. So what do you think explains the geographic 

disparity? How did we get into that? 

Mr. GRESSER. The geographic disparity has two sources. One, in 

1974, when the GSP was created, it excluded clothes, household 

linens, shoes, luggage, handbags, and so forth. These are very hightariff products. At that time, they employed, I believe, about 1.4 

million people in the United States. Since then, tariffs have been 

preserved. They have been kept out of the GSP. Employment has 

gone down to about 0.2 million, so about a 90-percent drop. It is 

no longer really an import-sensitive set of industries. 

We have created CBI, ATPA, AGOA, which have clothing benefits. There has never been a clothing benefit for low-income Asian 

and low-income Muslim countries, with the exception of Egypt, 

under QIZ. These are the things that Cambodia specializes in. 

These are the things that drive the economies of Bangladesh and 

Pakistan. This is the bigger employer that they rely on for growth 

and development. 

12 

We wind up with a system that excludes their main industries 

from the preferences and imposes very high tariff penalties, much 

higher than European countries often get on much larger volumes 

of trade. I think by closing that gap, by giving them textile and 

clothing benefits, you could really help those countries weather 

competition with China, continue to create jobs, especially for 

young women coming from rural areas, and really do a lot of good 

for those countries. 

The CHAIRMAN. Do you know the value of products coming into 

the United States under GSP, total? 

Mr. GRESSER. Yes, I do. It is, last year, about $20 billion, or $21 billion, including oil, and about $13.5 billion not including oil. 

The CHAIRMAN. All right. Now, has that $13.5 billion risen? Is it 

about flat, or fallen off over the years? What is the trend? 

Mr. GRESSER. It dropped considerably last year, because all U.S. 

imports dropped pretty fast. 

The CHAIRMAN. Right. 

Mr. GRESSER. Over time, it is fairly stable. Preferences in general are about 2 percent of non-oil imports to the U.S. The membership has changed. Twenty years ago, it would be about the same 

fraction of trade, but the big sellers would be Mexico, Israel, Singapore, Korea. Those countries have graduated or gone on to become 

FTA partners. Other countries have risen up and become competitive in the GSP products. So the overall volume is about the same. 

The CHAIRMAN. All right. Thank you very much. 

Senator Grassley? 

Senator GRASSLEY. I was not here to give my opening statement, 

so I hope, before I ask questions, I could give my opening statement. 

The CHAIRMAN. Absolutely, Senator. I regret that I have a meeting with Leader Reid in 5 minutes, so you are in charge. 

Senator GRASSLEY. Thank you. I appreciate that. 

The CHAIRMAN. All right. 

OPENING STATEMENT OF HON. CHUCK GRASSLEY, 

A U.S. SENATOR FROM IOWA 

Senator GRASSLEY. This is the third hearing in 3 years that this 

committee is conducting to address the operation and potential reform of our trade preference programs. Now is the time for more 

detailed discussion of potential reform ideas. The chairman and I 

are engaged in detailed discussion with the aim of coming up with 

joint reform legislation. Hopefully we can achieve that. 

We will continue working hard on this because it is a very important priority. Ideally, I would hope that we could introduce and 

mark up a bill by the end of the second quarter of this year, so today’s hearing is timely. The testimony that we received from our 

witnesses, as well as any public comments submitted for the 

record, will inform this joint effort. 

To begin, I would note that the chairman and I are engaged in 

a separate stand-alone effort with our colleagues on the Ways and 

Means Committee to enact Haiti-specific trade preference legislation that will assist Haiti in its long-term recovery. 

While that ongoing effort to help Haiti is urgent, it is not the 

focus of today’s hearing. Instead, our focus today is on the broader 

13 

reform efforts which primarily involve the Generalized System of 

Preferences. We are also examining how GSP operates in relation 

to the Andean Trade Preference Act, the African Growth and Opportunity Act, and the Caribbean Basin Economic Recovery Act. 

I would reiterate some of the elements that I think are essential 

to reform of preferences. A preference program should have firm 

graduation provisions, both on a product-specific and countryspecific basis. The point of graduation is 2-fold. First, graduation 

creates opportunities for other beneficiary developing countries to 

take advantage of the preferences, perhaps not immediately, but 

down the road. 

Second, at a certain point of development, preferences should not 

be extended to advanced developing economies. Instead, we should 

expect and receive more reciprocity in our trading relationships 

with advanced developing economies. 

In addition, preferences should be extended to a trading partner 

based upon clear eligibility criteria, which should be reviewed regularly and transparently. Preferences should be structured so that 

the rules of origin and product coverage promote new trade flows 

to maximize a potential for economic development, particularly 

among least-developed countries. 

I can appreciate calls for a more rationalized distribution of our 

trade capacity building funds so that capacity building works handin-hand with our trade preferences. We should examine ways to accomplish that with the Foreign Relations Committee. But if we can 

craft a reform package that adequately addresses the elements I 

outlined, I can appreciate calls for a longer-term authorization of 

our preference programs. 

As the chairman and I proceed with this effort, I will continue 

to monitor the actions of advanced developing countries that benefit from our unilateral preference programs, particularly in the 

context of Doha Round trade negotiations. If unilateral access to 

the U.S. market impedes progress in realizing meaningful reciprocal market access concessions in the Doha negotiations, we 

should reconsider the extension of such unilateral trade preferences. 

In sum, the reform I have in mind is based upon specific principles, such as simplifying the operation of our trade preference 

programs, expanding the number of eligible countries that actually 

benefits from our trade preference programs, and expecting more 

from countries that benefit from the preference programs, particularly advanced developing countries. 

With these principles in mind, I look forward to the questioning 

of our witnesses. I am going to start with Ed Gresser. 

Given your testimony, you appear to agree with those who believe we should extend textile and apparel benefits to such Asian 

countries as Bangladesh and Cambodia. But as you know, others 

argue that if we take that step we will undo all of the progress that 

sub-Saharan Africa has made under the African Growth and Opportunity Act. So I would ask you to respond to those concerns. 

After you have answered, I would ask Mr. Simpkins for a reaction 

to your answer. 

Mr. GRESSER. Thank you. I think that is a very important, very 

good question. I would make a couple of points. First, the clothing 

14 

business is essentially the lifeline of Cambodia. It is the driver of 

growth and urban employment in Bangladesh. It is important to 

Africa, but not nearly so much. 

The textile and clothing exports to the U.S. are about 60 percent 

of Cambodia’s exports to the world, about 25 or 30 percent of Bangladesh’s, and about 1 percent of Africa’s exports, excluding oil and 

metals. So there is a difference of reliance, and I think the benefit 

will mean more to those low-income Asian and Muslim countries 

than it might to Africa. 

Second, I think that Africa, to succeed in the clothing business, 

has to work hard at logistical efficiencies. The problem AGOA has 

encountered is that the African exporters have not been able to 

provide as much volume and quick delivery to the importers as 

they need. That will take time to fix. 

I think there are good African initiatives under way, through Development Corridors, but I do not think in the interim it is helpful 

to tell Africans that they should not have to compete with other 

low-income countries elsewhere in the world when, in fact, the 

Asian LDCs and Pakistan really rely much more on those businesses than the African countries do. 

The testimony I submitted, and I think Mr. Simpkins echoed this 

in some ways, looked to rural industry and agriculture in a way 

that can refocus AGOA while we work on the logistical industries 

that will help Africa succeed in the textile business. 

Senator GRASSLEY. Mr. Simpkins? 

Mr. SIMPKINS. Theoretically, I do agree with my colleague, Mr. 

Gresser, there should be competition. But the Asian countries, like 

Bangladesh, India, China, already out-compete Africa to a significant extent. If we extend these benefits, these preferential benefits 

to these Asian countries right now, there is no fall-back position, 

which could be agriculture, but the agricultural sector in Africa is 

not really prepared to gin up as sufficiently to create the kind of 

jobs and the kind of wealth creation that we intended AGOA to 

provide. 

I think that we have kind of slept on the agriculture sector, as 

I mentioned in my testimony and I think he has referred to as well. 

In the long run, competition is what we say we want. It is certainly 

what we encourage in our country. But before we can remove this 

benefit that Africa has, which, in effect, giving it to the Asians 

would remove it from the Africans, I think we need to look at how 

Africa would respond in terms of being able to replace the lost jobs. 

Senator GRASSLEY. All right. 

Mr. GRESSER. Just one clarifying statement. I do not suggest providing a preference to China or a clothing preference to India. It 

is limited to the very low-income Asian countries. 

Senator GRASSLEY. All right. I would like to direct a question to 

anybody who could answer it—and you all do not have to tackle it, 

but I would like to have one or two of you—on whether the committee should consider removing petroleum products from the Generalized System of Preferences. Have any of you given that any 

thought that you could share? 

Mr. GRESSER. Personally, as an analyst, the inclusion of the petroleum products makes it very hard to figure out how successful 

the programs are. The petroleum products have specific duties of 

15 

5 cents and sometimes 10 cents per barrel of oil. I do not think 

they affect trade very much. If the committee wishes to remove 

them, I do not think it would damage anyone’s interests in any big 

way, and it would give us a better sense of, how much help are the 

preferences giving to the beneficiaries? 

Senator GRASSLEY. I presume none of the others has given much 

thought to it, so I will go on then. If you do have some thoughts 

on it after you think about it a while and could submit an opinion 

in writing, I would appreciate it. 

Again, to Mr. Gresser, when you testified before this committee 

in 2008, you cautioned against a permanent extension of our trade 

preference programs. You argued that ‘‘making programs fully permanent might mean giving up occasional opportunities to improve 

them and adapt them to changing conditions.’’ In your view, if Congress reforms the GSP program, what would be a reasonable duration for Congress to set? 

Mr. GRESSER. I think durations need to be long enough to give 

importers and investors the sense that the programs will be there 

long enough to matter and to justify the investment. I think in 

cases like that of Haiti, like that of the African Growth and Opportunity Act, longer extensions are important. For more advanced 

countries, I think we would help ourselves by having relatively 

more frequent opportunities to review the program and see how 

they are being used. 

Senator GRASSLEY. Yes. 

Do you want to go ahead, Senator? I have some more questions, 

but maybe you take your 5 minutes and then I will do a second 

round. 

Senator WYDEN. Thank you, Senator Grassley. I appreciate it. 

As chairman of the Trade Subcommittee here on the Finance 

Committee, I am looking forward very much to working with you 

and Chairman Baucus on these issues, and I am glad you are approaching it in a bipartisan way. 

We have an excellent panel here. I have long felt that free trade 

is not an end, it is a means. America’s trade policies ought to be 

designed and tailored so that they are a means to raising living 

standards in our country and elsewhere. All of you have made that 

point today: eliminating tariffs alone is not a development strategy 

in and of itself. We have to make sure that eligibility criteria are 

a central part of our trade preference programs. 

For example, any economic progress that can be achieved in 

Uganda by the African Growth and Opportunity Act, in my view, 

is strongly undermined if its parliament passes a law to jail or execute all of its gay population. So it was appropriate for the Congress to link AGOA eligibility to the protection of human rights, as 

Congress did in 2000 when we passed that law. 

You all may be aware that we have been in contact with Secretary Clinton and with Ambassador Kirk, and they clearly feel 

that the emphasis on the recognition of internationally accepted 

human rights is an important issue as we go forward in our relationship with Uganda and with other countries. 

So let me just go down the row, if I might, starting with you, Mr. 

Simpkins and Mr. Vogt. Should Congress provide trade preferences 

to countries that engage in violations of internationally accepted 

16 

human rights? I do not believe so, and I continue to say that the 

African Growth and Opportunity Act, and HOPE for the Haiti 

issue, I think that they got it right. They got the point across, that 

those approaches should be a model for trade preferences. Let me 

just go down the row, since time is short. We will start with you, 

Mr. Simpkins. Are they a pretty good model? 

Mr. SIMPKINS. Well, when we worked on the original AGOA bill, 

we knew that there were some human rights standards, labor 

standards already imbedded in the underlying GSP. But we 

thought that it was important to add extra verbiage to specifically 

talk about the need for human rights. So, yes, human rights should 

be a primary standard that we use. 

At my foundation, we have the Global Sullivan Principles for 

Corporate Social Responsibility, part of which looks at human 

rights and labor rights. So we feel that it is very important to pursue these goals. The case you mentioned of Uganda, what they 

have done with this law is really unconscionable, because it calls 

for the execution of people who are homosexual and the jailing of 

people who refuse to turn them in to the government. So, it has 

gone way overboard. 

Now, in terms of requiring certain human rights standards, I 

think it is incumbent on us, because of cultural differences, to at 

least provide a warning, to at least explain what we mean when 

we say human rights, what are those human rights, and to provide 

capacity building where possible for people to understand how to 

implement the standards that we are talking about. I do not think 

that it should mean an immediate cessation of all benefits, but it 

should be made clear that we do not stand for the kind of things 

that the Ugandans are doing right now. 

Senator WYDEN. Well said. 

Mr. Vogt? 

Mr. VOGT. I agree with Mr. Simpkins. I believe with all the trade 

preference programs, we should be improving them across the 

board and have a uniform set of eligibility criteria, which I think 

should definitely include human rights, labor rights being among 

internationally recognized human rights, and also agreeing that 

there should be a transparent and effective process to engage with 

countries if there is a human rights issue that arises in the beneficiary country so we can try to resolve the situation cooperatively 

and, if that is not possible, then to be able to use the threat of suspension or limitation of the preferences to advocate for improvements in human rights and worker rights. 

Senator WYDEN. Mr. Gresser? 

Mr. GRESSER. Yes. I share the view. When a country’s government is guilty of grave and systematic human rights abuses, the 

country should not be rewarded. I look at a couple of cases in GSP. 

Zimbabwe, for example, has been kept out of AGOA on human 

rights grounds, but continues to enjoy pretty lucrative GSP benefits. In the western hemisphere, Venezuela is not allowed into the 

Andean program, but likewise is a big GSP user. Those are anomalies, and they should not really happen. You should have, I think, 

across the beneficiaries, a single set of eligibility criteria. 

17 

Senator WYDEN. Mr. Norris? Quickly. Then I am just going to 

make another point for the record, because my time is already up. 

Mr. Norris? 

Mr. NORRIS. As I am not an expert in trade preference programs, 

I cannot render a broad opinion. But certainly intellectually, I cannot argue with what my colleagues have put forth here. 

Senator WYDEN. Thank you. 

Mr. Chairman, thank you for your courtesy. I look forward very 

much to working with you and the chairman as we go forward on 

these issues. 

Senator GRASSLEY. I have some more questions. Are we going to 

quit when I am finished? All right. So I am the last thing between 

you and a cup of coffee. [Laughter.] 

I will go back to Mr. Gresser. What is your reaction to Mr. Vogt’s 

suggestion that petitioners should be able to request suspension of 

trade benefits at the industry level as opposed to the country level? 

If you support the idea, do you believe Congress should amend the 

existing GSP laws to make it more explicit that the President could 

take such a step? 

Mr. GRESSER. In principle, I agree with that point of view. One 

of the problems with the eligibility criteria is that removal of benefits is essentially—especially if it is done across the board—is punishment to, among other people, the workers in those industries. If 

a petitioner is concerned about labor rights in seafood packaging, 

hypothetically, it strikes me as odd, and in a way counterproductive, to punish workers in the clothing industry or the electric wire industry for the flaws of factory managers in seafood. 

So some ability to target suspension of benefits to the offending 

party, I think, is important. To the second part of your question, 

should Congress include this more specifically in legislation, I am 

going to have to ask you for a couple of days to look at the law. 

I do not know enough about the current phrasing to answer it very 

intelligently. 

Senator GRASSLEY. Submit it in writing then. 

Mr. GRESSER. Yes, I will. 

Senator GRASSLEY. Thank you. 

Mr. Vogt, in a footnote to your written testimony you indicate 

that your labor rights proposal could result in an entire country 

losing its preferences because of labor violation in an industry that 

is not itself receiving preferences. Or to put it another way, even 

if the industries receiving preferences adopt and follow the labor 

rules you are proposing, they could lose their preferences. 

Now, maybe my understanding of it is not correct, so tell me 

whether or not I am right or wrong. If so, why is that appropriate, 

in your view? 

Mr. VOGT. I will give you a current example. Currently, there is 

a GSP petition against the government of Uzbekistan. That is a situation in which you have, as a matter of state policy, the government of Uzbekistan forcing school children into cotton fields to pick 

cotton for exports. Cotton is not covered by GSP, but you also have 

a state policy that is violating a core international worker right. 

You typically find that, if you have the government failing to enforce or itself violating the laws in one sector, it is going to be doing 

18 

it in others. It is not usually the case that you have just very bad 

problems with non-compliance in a single sector. 

So I think, in order to put pressure on a country to address problems in a non-GSP eligible sector, you could, as currently is the 

case, either threaten suspension to the entire country, which is 

typically the practice of USTR now, or to imply a threat to other 

sectors that would be dissuasive enough to move the government 

to take action in the sector where the problem is. 

Senator GRASSLEY. All right. 

I have another question for you. Under your proposed modification to the GSP program, developing countries would have 3 to 5 

years to come into compliance with your proposed new labor standards. How many of the 131 GSP-eligible countries currently meet 

those standards, and which countries do not currently meet the 

standards? 

Now, if that is too long of an answer or too imprecise at this 

point, you can submit it in writing, but we would like that information. 

Mr. VOGT. I can give you a brief response now and a more complete response in writing. But I think what we are calling for in 

our proposal is that countries simply commit themselves to the obligations they have already taken as members of the International 

Labor Organization, which is the respect of the International Core 

Labor Standards in their laws, and to enforce those. So point one 

would be that we are not asking for anything in our proposal that 

governments around the world, as members of the ILO, have not 

already taken on board as a commitment. 

I think giving countries, developing countries and least-developed 

countries, a reasonable amount of time to transition—for example, 

to adopt the laws that are necessary to bring them into compliance 

with these international minimum standards, which they already 

have agreed to adopt, a number of years for developing countries 

and perhaps a little bit more leeway for least-developed countries— 

is appropriate. 

Obviously then, once you have the right laws on the books, having the right enforcement mechanisms is another issue. We realize 

that will take time to develop, resources to develop, and of course 

we also recognize that that will take some time and are willing to 

both advocate for the resources and for the time for those countries 

to put those mechanisms into place. 

Senator GRASSLEY. All right. 

Mr. Norris, in your testimony you stated support for the GSP 

Competitive Need Limitation, or as we refer to it, CNL, stating 

that it is a ‘‘balanced’’ approach because it provides flexibility and 

the evaluation of individual circumstances. As you know, there are 

many critics of CNLs that would like to see these limits eliminated. 

Question: do you think eliminating CNLs would concentrate program benefits in one country or a small group of countries? 

Mr. NORRIS. I really do not know if I am in a position to answer 

that from an expert point of view. All I can say is that, from our 

point of view, our situation in the import of lithium into the United 

States, it was an onerous process to go through. We had to go 

through numerous groups to achieve it. But it was important for 

our business, and it achieved an objective of creating the stability 

19 

we would desire for bringing lithium into the United States and 

manufacturing it here and shipping it both within and outside of 

the country. 

Senator GRASSLEY. Well, if you have any thoughts on the broader 

question I asked and you could submit an answer in writing, I 

would appreciate it. 

Mr. NORRIS. Certainly. 

Senator GRASSLEY. Also, for you as well, given FMC Corporation’s experience with the GSP review process, did you find it to be 

transparent? Can you point to any flaws in the review process or 

offer any suggestion for improving the review process? 

Mr. NORRIS. No. I think this program has worked very well for 

us, and I cannot point to anything specifically in the review process 

that could be more transparent or improved upon. Our view going 

forward is to have it remain in effect, have some stability and predictability about it. I think the big issue going forward is the uncertainty associated with that and what that does to how we need to 

operate competitively in the marketplace. 

Senator GRASSLEY. All right. 

Mr. Simpkins, in your testimony you state that the AGOA rules 

of origin are complex. In your view, what rule of origin would be 

most beneficial to the development of sub-Saharan Africa, and 

would it be appropriate to extend that rule of origin to GSP beneficiary countries as well? 

Mr. SIMPKINS. Well, Senator, I think that one of the problems 

that we have, for example, with the third-party fabric, is that I 

know that members of the Senate particularly have been upset 

about the vertical integration. But the Francophone countries, the 

Anglophone countries, the Lusophone countries were all, while they 

were under colonialism, programmed to deal only with other countries of their language groups or the mother country. 

So when independence came, they were not accustomed to working together. Again, as I said in my testimony, in doing training 

in a country like Benin, for example, cotton is a major product of 

Benin. One would think that they would work together with a 

major producing country like Nigeria to produce the fabrics and the 

yarns and the clothing. They do not because they are not programmed to do so. 

The flights between countries in Africa do not exist. There was 

a trade mission from the State of Maryland last year that went to 

Senegal and wanted to go to Cameroon. There are no direct flights. 

So there are a lot of impediments to prevent African countries from 

taking advantage of AGOA benefits. 

Right now, you have to source products, textile products, either 

from the United States or from other African countries. The United 

States is too expensive, the other African countries are not prepared to really do that kind of trade, so we have had to use the 

third-party benefits provision over and over. I realize that that is 

straining the patience of some here who want the Africans to do 

better, but if we want them to do better we have to help them 

make it possible to do better. 

Senator GRASSLEY. Also for you, Mr. Simpkins, what impact 

would the extension of duty-free and quota-free access for leastdeveloped countries have on sub-Saharan Africa, and would you 

20 

support such a proposal, if not in the short term, then perhaps over 

the course of a phase-in period? 

Mr. SIMPKINS. I would say, in the short-term it would be very 

disastrous for Africa, for some of these other producers in developing countries. I mentioned India and China. Of course, they are 

not low-income. Bangladesh, for example, is low-income, but Bangladesh already out-produces the Africans in terms of textiles and 

apparel. 

If you give them the same sort of benefits that the Africans have 

today, the African textile industry will further collapse. It is already shedding jobs. I think phase-in could work if we now help to 

boost the agriculture sector and other sectors in Africa so that jobs 

lost in textiles and apparel can be replaced in other industries. 

Also, to help target what the African textile producers provide, 

for example, certain heritage products. But of course, the Africans 

would have to be more diligent in protecting their intellectual property rights, which I think is the reason why you have countries like 

India producing more Kente cloth than Ghana, which invented it. 

Senator GRASSLEY. All right. 

Mr. Vogt, have you discussed your labor proposals with the governments of any least-developed countries or any other beneficiary 

countries? If so, which countries support your approach and which 

ones might oppose it? 

Mr. VOGT. I have not spoken with any LDC country governments 

on this. But again, to refer to my last point, there is no reason for 

any country that is a member of the ILO to oppose this proposal 

because it is simply requiring them to live up to the obligations 

they have already undertaken as members of the International 

Labor Organization. 

Senator GRASSLEY. I may have some questions to submit in writing to some of you, but that is the end of the questions that we 

have right at this moment. 

So for Senator Baucus, the chairman of the committee, and the 

rest of the committee, I thank you very much for the hard work 

you put into this preparation. 

Thank you very much. 

[Whereupon, at 10:40 a.m., the hearing was concluded.] 

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