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31–121—PDF 2006

S. HRG. 109–704

ADMINISTRATION’S TRADE AGENDA FOR 2006

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 16, 2006

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

(II)

C O N T E N T S

OPENING STATEMENTS

Page

Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman, Committee

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

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 3

ADMINISTRATION WITNESS

Portman, Ambassador Rob, U.S. Trade Representative, Washington, DC ......... 6

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 3

Grassley, Hon. Charles E.:

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

Lincoln, Hon. Blanche L.:

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

Portman, Ambassador Rob:

Testimony .......................................................................................................... 6

Prepared statement with attachment ............................................................. 45

Responses to questions from committee members ......................................... 101

Wyden, Hon. Ron:

Letter from Michigan Governor Jennifer M. Granholm ................................ 143

COMMUNICATIONS

Advanced Medical Technology Association (AdvaMed) ........................................ 145

Bumble Bee Foods, LLC .......................................................................................... 153

Coalition for GSP ..................................................................................................... 157

National Retail Federation ..................................................................................... 163

National Electrical Manufacturers Association (NEMA) ..................................... 173

U.S. Chamber of Commerce .................................................................................... 175

(III)

(1)

ADMINISTRATION’S TRADE AGENDA FOR 2006

THURSDAY, FEBRUARY 16, 2006

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 10:45 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senators Thomas, Smith, Bunning, Crapo, Baucus,

Bingaman, Lincoln, Wyden, and Schumer.

OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. Welcome, everybody, and particularly Ambassador Portman.

Today’s hearing is on the administration’s trade agenda for the

coming year. Traditionally, this committee’s first trade hearing of

the year is reserved for a person in Ambassador Portman’s position

as U.S. Trade Representative, because that is the spokesman to

come up here and brief the committee on any of the administration’s trade priorities.

This is also an opportunity for the trade representative to hear

from committee members regarding the priorities that we would

like to see advanced by the administration, and obviously one that

is anticipated by the whole process that we call trade promotion

authority.

I think it is important that we start every year this way, but I

particularly want to thank Ambassador Portman and his staff for

their efforts to rearrange a busy schedule right at this time, permitting his appearance before the committee. Thank you very

much.

The timing of this year’s hearing could not be better, as well.

Last June, our Finance Committee held a hearing on U.S.-China

economic relations. At that hearing, I announced that I would refrain from endorsing any new legislation with respect to China

pending the outcome of Ambassador Portman’s top-to-bottom review of the administration’s trade policies towards China, and China’s response.

The result of that review was released Tuesday, and I look forward to reviewing those results with Ambassador Portman during

today’s hearing.

More and more, bills are being introduced, as everyone knows,

that address our trade relations with China. The top-to-bottom reVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
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view will be an important resource for me as I intensify my efforts

to develop legislation over the next few weeks.

I have grown increasingly frustrated with the lack of progress on

China’s currency issue, so that is one area that obviously I would

be looking into. Other areas needing attention include compliance

efforts, trade enforcement, and trade enhancement so that more

Americans benefit from our trading relationships.

The key point is that China must live up to its commitments and

to its responsibilities as a major beneficiary of the global trading

system, and of course act like the 5,000-year-old society, and mature society, that it is.

I look forward to working with the Ranking Member, Senator

Baucus, in this effort. We may sometimes take different approaches

to similar issues, but in the end I believe that we can develop a

bill that will enjoy broad bipartisan support to advance these very

important goals.

Separately, we have reached a critical juncture in the Doha

Round trade negotiations in the WTO. Realistically, the negotiations must be completed by the end of this year if Congress is going

to implement a Doha trade agreement prior to the termination of

trade promotion authority in July of next year.

Ambassador Portman took a very bold step to reinvigorate the

negotiations last October by tabling an ambitious offer on agriculture, and I still think you did the right thing, Mr. Portman, at

that time, even though I know you took some criticism from some

interests in the United States.

But the United States is a leader, has been for 50 years, in this

area. We have benefitted from the results of other rounds, and we

will benefit from this one. I think the world is expecting the United

States to lead, but if they are expecting us to give more than we

receive, obviously that is not the real world. Taking a step ahead,

as you have done, I think, has been very beneficial.

Unfortunately, though, from your standpoint, our country’s

standpoint, and what we in Congress hope to accomplish by approving a World Trade Organization agreement maybe early next

year, that offer that you put forth has not been matched in ambition by our negotiating partners.

So I would like to be very clear on this point of the U.S. moving

forward and our administration, through Ambassador Portman,

doing that, in a sense, because Congress delegates some authority

to do that.

Congress, which in the end, then, has final approval, will not accept any agreement that fails to provide meaningful market access

for our U.S. agricultural products in developed and developing

countries alike.

For my part, I would be embarrassed to bring anything before

this committee or to put this committee in place to consider those

things if we did not have something that was meaningful in market

access.

In addition, we expect significant progress in harmonizing domestic supports for agriculture. Then we have our manufacturers

and service providers that we have to look out for. They must also

see substantial market access liberalization. The shared benefits of

trade come from open markets, not from protected markets.

3

I also commend you again, Ambassador Portman, on the strong

stance that you have taken with respect to implementing the Dominican Republic CAFTA, particularly with respect to meat and

poultry inspection, the equivalency thereof. This issue is very important to farmers in Iowa, and across our country.

The fact is, recognition of the equivalency of our inspection system for meat and poultry was discussed in parallel with the

CAFTA negotiations, and Congress anticipated that such equivalency would be recognized as part of the CAFTA implementation

process.

I was glad, however, to see El Salvador, as one country, follow

through on that issue recently, and I hope that other CAFTA countries will do so, and do so quickly. Only then will we be able to

share fully in the benefits of free and open trade among these five

or six nations.

The administration continues to make good use of trade promotion authority. I use the implementation of the U.S.-Oman Free

Trade Agreement as an example, part of an ongoing effort by the

administration to establish a Middle East free trade area.

The trade agreement with Oman is a significant building block

towards achieving these important goals. In addition, the President

notified Congress of his intention to enter into a free trade agreement with Peru.

I have already expressed to Ambassador Portman my view that

our trade agreement with Peru—and if there is anybody from Peru

here listening—that this agreement should not be held up.

I mean, I want them to know, as well as you, Mr. Portman, that

this agreement should not be held up, waiting for other Andean

countries. On the other hand, I could say at the same time, the

other Andean countries ought to move along.

So with respect to Colombia, I want to underscore that an agreement will not pass the Senate unless the final package is at least

as good as the CAFTA agreement in regard to agriculture.

In sum, Mr. Ambassador—and I am going to defer to Senator

Baucus now—I cannot go through everything that you could possibly discuss with us, and you probably do not have time to discuss

everything that ought to be discussed.

But here is the point. This is a very important year for advancing both trade liberalization and trade compliance. We have many

important issues before you that, in a sense, is before us—because

I hope you look at yourself as acting as an agent for Congress in

these negotiations—that we have to be considering.

So, we thank you for coming in for this part that is not just a

hearing, but is a very important part of the consultation process.

Senator Baucus?

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman.

Ambassador Portman, welcome. You have been Trade Representative now for, what, about a year?

Ambassador PORTMAN. Eight, 9 months.

Senator BAUCUS. Close to a year.

4

Ambassador PORTMAN. Nine and a half months. It seems like 91⁄2

years, sometimes, sir.

Senator BAUCUS. Well, that is my point. After Doha and CAFTA,

it sort of adds new meaning to baptism by fire.

Ambassador PORTMAN. Yes.

Senator BAUCUS. Well, congratulations.

Ambassador PORTMAN. Thank you.

Senator BAUCUS. I know I speak for all members of this panel,

I think the Congress, and probably most people in the country, by

thanking you for your hard work that you are dedicating to this

job. You have worked very hard, and I think you are doing a very

good job.

But, clearly, as the old saying goes, no good deed goes

unpunished. There is always more to do. I would just like to go

over a couple of points in that regard.

First, clearly, 2006 has many opportunities. There are challenges, but there are also opportunities. I took a trip to China and

India not too long ago, last month, and it was clear to me on that

trip that we need to work even harder to rise to the challenge and

take advantage of the opportunities that these other countries, especially China and India, are presenting to us. And I think to do

so we are going to have to work even more aggressively as Americans, and together, better to enhance American competitiveness.

We want to make sure our kids and our grandkids live as good a

life, basically, as Americans do today.

I compliment you on the part that you are playing to help make

that happen, because trade clearly is an integral part of competitiveness. I am going to be looking at the items in your trade agenda, basically through that prism, that is, the degree to which they

do or do not enhance American competitiveness.

For starters, a more competitive America requires us to focus, I

think, more resources on trade enforcement. I recognize your hard

work, but my honest view is, I do not think you have sufficient resources, with all of your responsibilities.

I congratulate you on your successes, say, with EC and the WTO

biotech case; and China, kraft linerboard; Ukraine, cracking down

on illegal optical media disk manufacturers. I mean, you have some

successes there, and I congratulate you for that.

But, as you also know, there is a very real sense in the Congress

that our trading partners generally do not play by the rules. There

is a sense that we do not do enough in America to make sure that

they play by the rules, and we cannot encourage our farmers, our

ranchers, and our businessmen in our country to embrace international trade unless they have the confidence that the U.S. Government is behind them, and making sure that they are with them

in enforcing our trade laws.

That is why, this afternoon, Senator Hatch, Senator Stabenow,

and I will introduce the Trade Competitiveness Act of 2006. It is

a bill which includes a new Senate-confirmed Chief Trade Enforcement Officer, with new reporting requirements, additional funds,

geared toward helping you in your efforts to enforce commitments

that other countries have made and should be living up to.

It is my thought that the tools provided for in this bill will help

you. It will help make the USTR even more responsible to CongresVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
5

sional concerns about enforcement, because after all, trade is,

under article 1 of the constitution, a legislative responsibility. I am

looking forward to working with you on that bill.

But there are many initiatives that we can take together to promote U.S. competitiveness. The Doha Round, I think, offers a real

opportunity for our farmers, ranchers, manufacturers, and innovators.

But our trading partners must realize they must give in order to

get. We have already offered our trading partners quite a lot, especially on agriculture, and I believe it is high time that they follow

suit.

From the standpoint of U.S. competitiveness, a deal that does not

include substantial reductions in their agricultural tariffs, especially of the EU, India, and others, I think, would be a bad deal.

A deal that does not include meaningful reductions in industrial

tariffs in Brazil, India, and other developing-world countries would

be a bad deal. A deal that does not offer U.S. service providers enhanced market access around the world would be a bad deal. At

the end of the day, clearly, no deal is better than a bad deal.

On our free trade agreements, I congratulate you for beginning

negotiations with Korea. As you know, I have long urged the administration to focus on Korea and other commercially significant

partners in Asia.

If you have lingering questions about whether to begin similar

negotiations with Malaysia, our tenth largest trading partner, I say

to you: go for it!

But to truly enhance the competitiveness of the U.S. economy,

these negotiations must address the real barriers facing U.S. exporters, like Korea’s continued ban on imports of bone-in beef. It

has non-tariff barriers that limit foreign penetration into its auto

market to just 2 percent, and selective harassment of U.S. investors.

Our trade relationship with China is obviously key to American

competitiveness. I appreciate the release of your top-to-bottom review Tuesday and your commitment to put more money and personnel behind this initiative.

I think it is a solid initiative, a solid review. I personally—and

I think I can speak for others—will monitor implementation of your

China strategy very closely.

In the run-up to the upcoming visit of President Hu, I hope that

we can resolve some major bilateral irritants. First among them,

from my perspective, is China’s continued ban on U.S. beef.

I would also encourage you to redouble your efforts with Japan

to overcome their recent technical set-back—I regard it is as a technical set-back. It is more a Customs issue than it is a health

issue—and resume imports of safe, high-quality U.S. beef.

This year also offers us the chance to integrate more countries

into the world trading system. I am pleased to hear that WTO accession talks with Vietnam and Ukraine are under completion. The

Senate has already granted Ukraine PNTR, and I hope that we can

do the same for Vietnam by the August recess.

Perhaps Russia, too, will soon be ready. They are not there yet.

Until Russia addresses its abysmal record of protecting and enforcing intellectual property rights and deals with other concerns of

6

U.S. exporters, there will be little enthusiasm in the Congress to

grant Russia PNTR.

Finally, I hope that 2006 is the year that we finally realize a durable resolution to the dispute involving subsidized Canadian lumber, a problem that continues to undermine the competitiveness of

an important industry in my State, and many other States.

The recent change in government in Canada may provide a

unique opportunity to achieve that goal. As we all know, everything is an opportunity, however it appears on the surface. I would

just urge you to find that silver lining, that opportunity, and that

change of government in Canada.

You have a lot on your plate. You built a great team with Ambassadors Bhatia, Schwab, and Allgeier, among others, and you

have already proven yourself more than worthy to handle the challenges that you face. I wish you good luck.

Ambassador PORTMAN. Thank you.

The CHAIRMAN. All right. Thank you, Senator Baucus.

Now, Ambassador Portman, your statement. If you have a longer

statement you want to put in the record, it will just automatically

be placed in the record.

Proceed.

STATEMENT OF AMBASSADOR ROB PORTMAN,

U.S. TRADE REPRESENTATIVE, WASHINGTON, DC

Ambassador PORTMAN. Thank you, Mr. Chairman.

I think, instead of a statement this morning, if I could, I would

like to just go through a presentation that you should each have

in front of you. If you do not, please let me know.

[The presentation appears in the appendix on p. 45.]

It may be a little more informal that way, and an opportunity for

me to take some questions even as we go through it. I know some

of you have other commitments, hearings, and votes, and so on,

and I appreciate the fact that so many of you are here.

Senator Baucus talked about a lot on our plate. He is right, there

is a lot on our plate. The Chairman and Senator Baucus both said

that 2006 is an important year. It is an incredibly important year,

and we have lots of opportunities. I look forward to working very

closely with the committee on that.

Some of you I have worked with on specific issues over the last

9 months. I try to stay in close touch with the committee, and I

will continue to make my best effort to do that.

But, obviously, any time there is an interest on behalf of individual members to speak with me or to meet with me, I am more

than open to that.

With regard to the agenda, I thought it might be helpful to start

with, on page 2, just looking at some of the recent milestones. I am

not going to spend a lot of time on this; Senator Baucus has mentioned a couple of our accomplishments on the enforcement side.

But just to say, working together, we have achieved a lot in the

last year. The Chairman talked about reinvigorating the Doha

Round. I believe we did that. I think some of that reinvigoration

has dissipated, frankly, because, as he said, other parties did not

match our offer with equal ambition.

7

But we have made some progress there, including ending export

subsidies by 2013 at the Hong Kong meeting. This was an important accomplishment for our farmers and ranchers.

With regard to FTAs, we have closed two agreements recently.

Oman and Peru were both talked about. I look forward to working

with you on those two. They are good agreements. Of course, we

have passed two, which include seven countries, Bahrain and the

CAFTA-DR.

With India, we have launched a new trade policy forum. We are

meeting again this week at the deputy level, and then I am going

to India in early March to continue the discussions on a bilateral

basis with India. It has been very, very productive, actually, and

we are deepening that relationship.

Many of you were involved with our textile agreement with

China. Our Saudi Arabia WTO accession, it took us 9 years to get

through that. It is the right thing to do to get them into the WTO.

The free trade agreement with Morocco is now implemented.

There are a number of agreements, from the Russia meat agreement to the EU enlargement agreement, we were able to finish this

year. That is one of my big goals, to try to get some of these agreements off the table and completed. Some of these, again, took a

number of years.

The beef market was talked about earlier by Senator Baucus.

We’ve had some successes in the last, even, couple of months, as

you know, with regard to Hong Kong, Thailand, Taiwan, and the

Philippines. With respect to Korea, for the boneless product, as

Senator Baucus said, we still have more work to do there.

With regard to Japan, of course, we do have some serious concerns right now, but I am hopeful that we can get back on track.

I think it is more of a technical set-back, in a sense, and more of

a Customs issue. It is certainly not a safety issue.

I have provided each of you this morning with our Top-to-Bottom

Review. I am not expecting that you have read it yet, since it just

came out this week, but I do believe this is an objective, yet hardhitting, analysis of where we have been and where we ought to go

in terms of China trade policy.

It is something I wanted to do, and committed to you all that I

would make my best effort to do. I hope you will find it helpful.

It does have some specific recommendations, but frankly it was not

so much an exercise to come up with a lot of action items as it was

a review, a top-to-bottom review, of where we are and where we

are going.

[The top-to-bottom review appears in the appendix on p. 73.]

I welcome your input and your ideas, and I know this committee,

as Chairman Grassley has said, will be spending some time looking

at our China trade policy, which is so incredibly important.

In terms of disputes, on the next page of the presentation, Mr.

Baucus walked through some of these. I will not spend any time

going through them individually. But we have had a number of

successes, and I have grouped them in terms of China, agriculture,

and then other cases.

I want to mention one that Senator Baucus mentioned as a success, which is kraft linerboard. We were prepared to file a WTO

case against China on this issue. There are 14 States that send

8

kraft linerboard to China, including States represented around the

table this morning. It is a very important product for us. It is the

corrugated paper inside of cardboard boxes.

We spent several months working with the Chinese on our concerns about their antidumping order. We told them that we were

prepared to take it to the WTO. We then told them we had the case

ready to file, and overnight, after several months of fruitless discussion, they revoked the order.

This was great news for the American industry because we got

the result we wanted, and an immediate result as compared to the

year, year and a half we would have spent at the WTO, then an

appeal, and then implementing the remedy, most likely retaliation.

So this is much more satisfactory.

I just use it as an example of where you can use the WTO process, sometimes very effectively, as leverage, and we will continue

to do that. Incidentally, it would have been only the second case

ever filed in the WTO against China. The U.S. also filed the first

one.

Agriculture. We’ve had a number of successes. We continue to

work hard on implementing some of these successes, including the

biotech case which was mentioned. This is significant, by the way,

not just for the European market, which is very important, but also

to be sure that science is the basis used in resolving these problems

in other important markets around the world.

On the next page, I talk a little bit about what underlies all of

this, and that is something I believe every member here today in

this committee largely supports, which is a proactive trade policy.

It is good for us. It keeps the United States’ economy more productive and competitive.

We are already the most open large economy in the world. It is

in our interests to knock down barriers to trade. This is true in

manufacturing, where we continue to be the world’s largest exporter of manufactured products and where, incidentally, reducing

trade barriers will spur the creation of more and higher-paying jobs

in manufacturing. The number I have here is 13 to 18 percent, on

average, higher wages in jobs related to exports.

It is certainly true on agriculture: 27 percent of farm income, 1

in every 3 acres, is planted for export, critical to the farm economy,

as Chairman Grassley noted.

And then, services. We had another record year in terms of surpluses in services, $56 billion versus $48 billion the year before. We

have a definite comparative advantage for the United States in

services.

So it is in our interests to get proactive out there with a trade

agenda. As Chairman Grassley said, 2006 is going to be an important year for trade liberalization and trade compliance. It should

be, because trade is so important to our economy.

Here is the agenda, on the next page, divided into three areas:

global trade talks, first; second, bilateral and regional trade talks;

and, third, enforcing trade laws.

On the global front, next page, I think Chairman Grassley has

summarized well where we are with regard to Doha. I would simply remind you all of the dates again. By the end of this year we

need to have finished up so that we can send you an agreement

9

early next year, prior to the expiration of trade promotion authority.

There are three major negotiating areas: manufacturing, services, and agriculture. With regard to manufacturing, you will see

on the next page, trade in manufactured goods is very important

to us. Sixty-two percent of our total goods and services exports are

represented by manufactured goods. Incidentally, this is an increase of 82 percent in our exports since 1995, the end of the last

round.

The timing of April 30 is on here because that is when, as we

agreed in Hong Kong, we would have the modalities, meaning a

framework, as to how we are going to deal with reducing industrial

tariffs.

We have been pushing hard, as you know, for reducing tariffs in

the most aggressive way possible in manufacturing. On the next

page, you will see why. The United States has relatively low tariffs

here. Our average tariff in manufacturing is about 3 percent.

If you looked at the global average, you will see it is roughly 30

percent. In the non-OECD countries, meaning many of the emerging markets where we have a great interest, it is higher than that.

We are focused not just on reducing tariffs, by the way, but also

non-tariff barriers. It is very important for us to see work in the

sectoral areas. We think that is the most effective way, processwise, to get some of these improvements. You take one sector and

you find like-minded countries and really reduce those barriers

dramatically.

We have done so in other areas like telecommunications. We

think, in NAMA, or manufactured goods, it is a great opportunity

for us. So that is the U.S. proposal. We have it out there, and we

are aggressively promoting that.

Second is services, moving to the next page. I said earlier this

is a comparative advantage for us. It clearly is. In Hong Kong, we

were able to make some progress in a framework that we think will

provide a more successful way to reduce barriers to services.

This one is a little harder because it is not a matter of quantitative reductions of tariffs; it is regulations, it is caps, it is crossborder restrictions. It is things like telecommunications, financial

services, express delivery, energy services, and so on.

We are working now on what is called a plurilateral process.

This means countries that have an interest, working together in a

particular sector trying to reduce barriers.

By the end of the month I will be able to tell you better what

kind of progress we are making, but the United States, again, is

taking a strong lead here because we believe this is strongly in our

interests, given that we have such a competitive services industry.

We also believe, frankly, it is incredibly important to the benefits

from Doha, because services is such a big part of the economies of

so many countries, including the developing world, where they will

be able to modernize their economies by opening more to the services trade.

The next page shows you how open our service regime is compared to other countries’. Again, this is one reason it is in our interest to be aggressive on this front.

10

It is estimated by some that you could see an increase of as much

as $6,800 for a family of four annually by full liberalization of services. These are pretty amazing numbers. Again, this is because we

do have a comparative advantage, but also an increasing dependence on the service sector.

Third is agriculture, as you see on the next page. I have spent

some time, again, with many of you, including the Chairman and

Ranking Member, who have a strong interest and background in

agriculture, working through these issues. These are very tough

issues, in part because of the political sensitivity around the world

on agriculture. But they have to be at the core of Doha, for three

reasons.

The first reason is, it is a development round. For developing

countries, agriculture clearly is critical. Seventy percent of the people who live in these countries live in rural areas. More than half

of them are involved in agriculture. It is where they see their comparative advantage, to be able to export their agricultural products.

Second, it is an area where there are huge barriers. The largest

barriers in trade are in agriculture, including a 62-percent average

tariff in agriculture. It is where most of the trade-distorting subsidies are. So, it is an area that calls out for reform and liberalization.

Finally, for us, it is critical because we have an offensive interest. We have the most productive farmers in the world and some

of the best farmland in the world. We need to have a more level

playing field.

The agriculture discussion breaks down into basically three pillars: first is reducing tariffs and increasing market access; second

is export subsidies; and third is reducing trade-distorting domestic

support.

With regard to the first one—market access—we have been disappointed that other countries have not been willing to come forward and work with us on reducing tariffs more.

With regard to the second—export subsidies—we have had some

good success recently. In Hong Kong, we agreed to not just eliminate, but to set a date-certain for the elimination of all agricultural

subsidies. We will talk in a second about why that is so important

to our farmers, including beef, fruits and vegetables, wheat, and so

on.

Finally, it is reducing trade-distorting agricultural support. Here,

as the Chairman said, we put an ambitious proposal on the table

to reduce our own trade-distorting support in this country, but

made it conditional upon new market access and the elimination of

export competition.

If you look at the next page, you will see why all three of these

pillars are important to us. First, on market access, the average

tariff in the United States is about 12 percent. The global average

is around 62 percent.

Second, down at the bottom left, you will see the export subsidies. About 89 percent of these export subsidies are European

Union subsidies. Again, the good news is, we have now agreed to

eliminate these and by a date-certain, and to make substantial

progress even before that date-certain.

11

The third area is domestic support. I have shown this slide before to this committee. Other members of the committee have also

shown similar slides about the fact that the United States does not

have the most domestic support.

In fact, the Europeans currently use about 3 times more than we

do. They have the ability to use 4.5 times more, and Japan about

3 times more, as a percentage of their production.

That is why it is in our interests, as the Chairman said, to harmonize support, which is part of the Doha mandate, so that those

who have more support would reduce more and have that ratio become more equal.

The final slide I want to show you on agriculture is the one about

why we are on the spot on trade-distorting support, and that is on

the next page. The black line shows where, after the Uruguay

Round, the European Union is permitted to be, the black bar is

where they are.

The gray is Japan. Again, the gray line is where they are permitted to be under the previous agreement, and the gray bar is

where they are in terms of their actual spending.

The white is us. As you can see, what has happened since the

end of the Uruguay Round is that the Europeans and the Japanese

have reduced their trade-distorting support fairly significantly.

They still have significantly more support than we do.

But with the United States, we have increased and then sort of

leveled off. We increased a little bit with the last farm bill. So, we

are under pressure globally to address this issue, and I think we

have done so very responsibly.

We have stepped up to the plate and done the right thing for

U.S. farmers and ranchers by linking it to market access and export competition. We have also done the right thing in terms of

moving this round forward and taking a responsible position.

I wanted to mention—on the next page—WTO accessions, when

we are talking about the multilateral front, because we are going

to have to deal with some of these issues. The Chairman and Ranking Member mentioned this. I think, Mr. Baucus, you mentioned

the fact that the Ukraine PNTR vote has already occurred, and you

mentioned there might be a vote on Vietnam.

Russia and Kazakhstan are two others. We need to work through

their WTO accession talks on a bilateral basis. Then all four of

these are going to come forward to you for a vote under the Jackson-Vanik legislation on permanent normal trade relations.

The next one is GSP. Just a reminder slide here, that GSP also

expires at the end of this year. I view this as an opportunity for

us to review this program and, I think, to be able to improve it.

The second part of our agenda is the continued outreach on a regional and bilateral basis. On the next page is a chart that I had

put together yesterday that I thought you might find interesting.

We have talked a lot about whether these FTA relationships make

sense for us from a trade perspective. They do. I think this chart

shows it rather well.

If you look at this chart, on the left it shows that our FTA partners account for about 54 percent of U.S. exports. On the right, it

shows they only account for about 15 percent of the world GDP.

12

The reason they do not account for more of the world GDP is because we do not have free trade agreements with the EU, China,

Japan, and India, as you will see on the right there, the largest

economies.

But where we have a free trade agreement, we do quite well.

What I think ought to be our fundamental responsibility at USTR

is expanding opportunities for America’s farmers and workers.

You see the next page puts it in another graph form. As you can

see, exports are increasing, about 10 percent this year, based on

the 2005 figures, but exports to our FTA partners are increasing

by 20 percent. So we have done a good job at opening up these

markets through FTAs. It is an effective way to do so.

Our free trade agreements are the gold standard. They are comprehensive. They require a lot, as we saw in the debate over the

Central American Free Trade Agreement, and as we are seeing

now as we try to work through agreements with Panama, Colombia, and other countries such as Thailand.

We are quite difficult sometimes to deal with because we require

real trade openings, not just in terms of tariffs, but also in terms

of so-called non-tariff barriers, including sanitary and phytosanitary issues in agriculture.

FTA negotiations. Where are we? On the next page, you will see

a kind of summary. Oman is on the Hill. My understanding, Mr.

Chairman, is you have agreed to hold a hearing on Oman the first

week of March, and I thank you very much for that. It is a great

agreement, as you said. We need to move forward with that, following Bahrain as part of our overall MEFTA effort.

Peru has also come up for your review. It is currently in the 90-

day Congressional review process. We would love your input on it.

It is a very strong agreement in terms of market opening. It’s very

good for agriculture, but also good for services and the manufacturing side. I hope you will take a careful look at that agreement.

The Chairman has told us today what his intentions are with regard to Peru, as compared to its Andean neighbors, and I do not

disagree with anything the Chairman said.

In 2006, we do hope to move forward with Colombia. Also, we

hope to move forward with Thailand, Panama, the United Arab

Emirates, and we are continuing to work with Ecuador and other

Andean trade partners. I hope we can make progress there as well

and bring those agreements together as much as possible.

One of the new agreements I wanted to mention is Korea. Many

of you have been involved in encouraging me to move forward on

that. Senator Baucus talked about that. I finally followed his advice, and we made a big announcement here on the Hill.

I think it is the first time we have ever announced a free trade

agreement, Mr. Chairman, on Capitol Hill. We did not announce

the conclusion, all we announced was the launch.

But I want to be sure that, even with the launch, that Congress

is part of it, that we are seeking your input, that, as we work

through our negotiations, we are working very closely with this

committee and staff, and that we end up with an agreement, as

both Senator Baucus and Chairman Grassley have said, that the

Congress can embrace.

13

With Korea—next page—it was quite impressive. We had members from both sides of the Capitol and both sides of the aisle

present, talking about the benefits of deepening our economic ties

with Korea. There was strong support for launching these free

trade talks with our seventh-biggest trading partner, the tenth-biggest economy in the world. This will be the largest free trade agreement, if we are successful—and I believe we will be—since the

agreement with Mexico and Canada 15 years ago.

We have some other agreements we are looking at. Senator Baucus just encouraged me on Malaysia. I will tell you, we have made

great progress with Malaysia. One thing we are doing a little differently is, before we even launch these free trade talks, we are

having some of the more difficult discussions with our trading partners about some of the issues that we have. With regard to Malaysia, we have worked through a number of those issues, including

some tough ones on financial services and some other market access issues.

We did this with Korea. The announcement of Korea on the

string quota with regard to boneless beef, and so on, came prior to

the launch. We hope to have the same result with Malaysia and

hope to be able to deliver some good news to you on a Malaysia

launch soon.

The third area—next page—is enforcing trade laws and strengthening trade agreements. We talked a little about this at the outset.

I just want to go through this quickly, because I agree entirely with

what Senator Baucus said about the fact that we need to be absolutely certain we are enforcing our trade laws and our international rights, and being sure that we are complying with our free

trade agreements and other agreements that we enter into.

Right now, the reason the CAFTA countries have not been fully

implemented is that, frankly, USTR is being a stickler on being

sure that commitments that were made to you are kept, and we

will ensure that happens. I do hope, by the end of this month, incidentally, that we will have two of the six CAFTA countries on

board.

I hope that, shortly after that, we will have an additional two or

three countries. When Costa Rica ratifies the agreement, which I

believe will happen, we will be able to have all six countries on

board and have that agreement fully implemented.

The first one of our tools we use in strengthening our trade

agreements and enforcing our laws is bilateral consultations. We

have had a lot of success here. With the EU, most recently, we

were able to work with them to get an agreement on compensation

for tariffs that were raised as the 10 new members came into the

EU under EU enlargement. That was through bilateral consultations. The beef market openings have come through bilateral consultations.

Second is WTO. The Doha Round itself will help. Remember, it

is universal, covering all sectors, and that is positive. We are also

able, in the Doha Round, to negotiate new rules and new disciplines that can be helpful to us.

WTO accessions. We talked about the accessions, particularly of

Russia, Ukraine, Vietnam, and Kazakhstan. Again, we will use

that as an opportunity to get extra new commitments and gain adVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
14

ditional tools. A good example of that would be the China textile

safeguards. We never would have had that tool if not for the access

negotiation we had when China acceded to the WTO.

Enforcing existing agreements. The TRIPS agreement, the government procurement agreement, the SPS agreement, and the

WTO would all be examples of that.

Third is FTA negotiations. I talked about that a moment ago. We

use our FTA negotiations very directly to get new commitments

and to put new rules in place.

Antidumping and countervailing duties. In the Bush administration, the U.S. has imposed 104 new antidumping orders. By the

way, 28 of those have been against China, making it, by far, the

top country in terms of antidumping orders.

At the same time, we have also had 20 new countervailing duty

orders. It is an important part, again, of our overall agenda. It is

not administered by USTR, it is administered by the Department

of Commerce.

WTO enforcement cases. You will see on the next page, we talk

about some of the highlights of our WTO enforcement measures.

The WTO case on Airbus and Boeing is ongoing. We can talk about

that if you have questions.

It has been called the largest WTO case ever filed. It is a very

important WTO case because it goes to the issue of subsidies. The

WTO has a definition of subsidies, and we want to be sure that definition is complied with.

EC Biotech. We talked about that earlier. Our initial assessment

is very positive on that case, and we are going to be following compliance carefully, as I said.

Kraft linerboard, we talked about this. The Mexico telecommunications case was a positive result this last year, the same with

Japan and apples. The Mexico case with regard to the beverage tax

is the high fructose corn syrup case. We have won at the panel

stage. It is under appeal, but we do expect Mexico to eliminate that

tax.

We talked about the EU GI case. The Korean semiconductors

case is one that some members of this committee have been very

involved with. The appellate body reversed the panel finding, showing that our subsidy determination on the Korean DRAMS was

proper under WTO rules.

Priority enforcement outside traditional dispute settlement is illustrated on the next page. China textiles is a good example of

that. In the top-to-bottom review, we recognized, as you will read,

that our relationship has now moved into a new phase with China.

We think it is a phase where China needs to take on new commitments and responsibilities, and we will be aggressive in pursuing

the appropriate enforcement measures.

Most recently, we sent a transparency request to China under article 63.3 of the WTO with regard to intellectual property. We are

pursuing that and following up on that.

The JCCT is an opportunity every year, with China, to work

through our trade issues. We have a meeting coming up in April,

and we will continue to push the Chinese to live up to their full

commitments and have an aggressive agenda at this April JCCT

meeting.

15

Intellectual property. I wanted to focus on the STOP initiative

for just a second. This is one where we worked closely with the

committee to be sure that we have international outreach with all

of our key trading partners to improve—not just legislation, but

also enforcement.

I think it has been a successful initiative. There is more work to

be done there, particularly working with APEC in Asia. With the

EU-U.S. summit, I think we can do more on a multilateral basis.

Special 301. A brief update there. In Special 301 reports, as you

know, the USTR ranks countries in three categories. First is priority foreign countries, where we have the most troubling results,

and there we have sanctions. Second is a priority watch list, also

a very serious designation. Third is the watch list.

The Ukraine example is a good one. The 301 status that we gave

Ukraine was extremely helpful in order for us to move Ukraine forward. They had been designated a priority foreign country. Because

of that, we were able to curb illegal CD production.

Senator Baucus mentioned this in his comments. We have now

been in a position to be able to terminate the tariff sanctions that

had been imposed against Ukraine. We also conducted an out-ofcycle review in 2005 to monitor our progress, and based on that we

have moved Ukraine now to priority watch list and we have restored their GSP benefits.

In Pakistan, we were able to shut down a number of illegal CD

plants after designating them as a priority watch list country.

Finally, on FTAs, our implementation of the FTAs often means

rewriting legislation, including SPS legislation, intellectual property legislation, and so on. We are being sure we are following

through on that.

That is one reason Morocco was not able to implement as soon

as some of us would have liked, but now Morocco is on board with

good legislation, thanks to us following up on the FTA.

The next page summarizes, again, what the Chairman and Ranking Member said at the beginning: 2006 offers a lot of opportunities

and challenges. We hope to conclude these global trade talks. It is

extremely important to realize this once-in-a-generation opportunity.

Second, we will continue to pursue high-standard bilateral and

regional agreements to provide new market access for U.S. goods

and services. Finally, we will vigorously enforce our trade laws and

our agreements to ensure a more level playing field.

Thank you, Mr. Chairman. I look forward to questions on the

2006 agenda, or other topics.

[The prepared statement of Ambassador Portman appears in the

appendix.]

The CHAIRMAN. All right. We will take our 5-minute rounds now:

Grassley, Baucus, Crapo, Bingaman, Lincoln, Wyden, Schumer,

Thomas, and Smith are the order that we have it. Now, some of

those folks have temporarily stepped out, so if they come back they

will be recognized in the order I just gave.

Before I ask a question, because I want to ask most of my questions on China, in regard to your reference to our working on GSP,

you probably cannot comment on this, but I want to make a point

for myself.

16

That is, I am not anxious to go to work on that for quite a while,

because I want to know that the countries that have benefitted

from that, they have market access, and I would like to see some

reciprocity and showing of appreciation from countries, particularly

more developed countries. I am not talking about the poorest countries of the world.

But I want to make sure that they have some appreciation of

what we have, and market access is very important for us. So, I

see that somewhat intertwined with our negotiations in Doha, just

so you know how I see it.

Ambassador PORTMAN. Thank you.

The CHAIRMAN. You got a letter from Senator Baucus and me

outlining our concerns with respect to China’s compliance record.

We had five areas of particular concern: intellectual property

rights, agriculture, services, industrial policies, and procurement.

I think you gave us some update, but let us have it kind of compiled right here in answer to this question, an update for our committee on the steps China has taken in each of these areas to comply with the rules and norms of international trade that are expected of a mature economy like China.

Ambassador PORTMAN. Well, Mr. Chairman, I think you will find,

if you look at the top-to-bottom review—and I know you are reviewing that now—that your letter is quite consistent with what we

found. We have focused on some of those specific areas in the JCCT

last year, and we intend to do that again this year.

I can report to you that there has been some limited progress

made in terms of intellectual property rights enforcement, but it

has not been adequate. There is still rampant intellectual property

piracy.

This is why, in the top-to-bottom review, as you see, we make it

clear that we need to see more progress, and we will continue to

pursue our rights that we believe we have under the WTO to demand that.

With regard to some of the market-opening commitments that

China made when they entered the WTO, there has been progress

made, and we need to acknowledge that. Yet, still, we believe that

in certain areas they have not even fulfilled their WTO commitments.

One thing the top-to-bottom review makes clear is that we believe we have entered a new phase now that the 4 years of WTO

membership is over, because most of those commitments phased in

by the end of last year, by December of 2005.

Beyond that, though, I will tell you, we also believe that, as a

major trading partner and a very successful trading partner, that

China has responsibilities that go beyond those WTO commitments

to be sure their market is, indeed, open, and that it should remain

open to our services and products as we have opened our market

to theirs.

So there has been some success. There have been some reductions in tariffs, obviously, with the WTO accession, but we need to

see a lot more. With regard to some of the tougher issues, including

some of the regulations and some of what I would call industrial

policy—and we talk about this in the report—we are seeing some

disturbing signs of China policies that are discriminatory as to U.S.

17

exports of services and goods. It is one of the recommendations of

the China top-to-bottom review that we be more proactive in getting better information, so that we can respond to some of these

issues that are not directly related to tariffs, but do relate to China’s industrial policy, regulatory reform, and other issues. So, there

we have some concerns.

As you know, we recommend that there be some new dialogues

on issues like direct sales, standards, subsidies, environmental protection, and labor. We also now have an agreement with China to

enter into a new dialogue on steel, which is a very specific undertaking and very important.

So it is a mixed record, Mr. Chairman. The bottom line is that

we believe that the trade relationship needs to be more balanced.

We believe it needs to be more equitable. We believe it needs to be

more durable in order to be sustainable, in both political and economic terms here on the Hill and with regard to our trade policy.

We believe that we need to make some changes, and that is what

the top-to-bottom review addresses.

The CHAIRMAN. My time is up, so I am going to go to Senator

Baucus. I had a couple of other China questions, but maybe Senator Baucus will cover some of my areas.

Senator BAUCUS. Thank you, Mr. Chairman.

I want to thank you. This last discussion prompted a concern of

mine, namely, does the United States have a China policy? What

is the China policy of the U.S. Government? I understand you have

your top-to-bottom review, and I commend you. You are an extremely important agency, USTR, with our other departments in

the U.S. Government.

The United States has other ‘‘non-trade’’ interests. You know it

has been a perennial problem facing many of us, that administrations—this and past—just do not spend a sufficient amount of time

focusing on our economic agenda, I think at great peril. They are,

rather, too short-sighted, in my judgment, focusing on the issue du

jour, the issue of the week, of the month, and they are not strategic.

Administrations have not been strategic. They have not been

thinking longer-term, what is our China policy overall and how are

the different components integrated or not? How do we work this

all out together? How do we accomplish our economic objectives in

the context of other objectives that, clearly, this country must

have?

So what is our China policy? I get the sense that we really do

not have a China policy. I commend you on your top-to-bottom review with respect to trade with China, trade barriers with China,

but I do not sense we have a China policy, and I sense that other

agencies and other countries take advantage of the United States

because they do not really know what our ‘‘China policy’’ is, and

so it is divide and conquer, play this agency off against another,

play this interest off against another, so that China can continue

to undervalue its R&D, for example. What is our China policy?

Ambassador PORTMAN. Well, first, you should know, Senator

Baucus, that this top-to-bottom review went through an extensive

inter-agency process. Your point is well taken. USTR plays a role

here with regard to trade, and particularly with regard to negotiaVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
18

tion and enforcement, but there are a number of other agencies involved.

One reason this report was not issued more quickly is we took

our time. I think you will find it is a thorough, comprehensive, and,

I think, objective report. But it also takes into account the interests

of other departments and agencies, including the State Department, the Treasury Department, Commerce, Agriculture, and the

National Security Council, and it is focused. But I think you will

see that this is a strategy with regard to trade that is proactive

and that will result in us having a better balance in our trade relationship.

It focuses on enforcement. Again, it focuses on making sure

China is committed to the commitments it has undertaken in the

WTO, but then it asks China to go even beyond those commitments. We believe that further market access, as well as greater

transparency and better application of rule of law, are important,

as China is a mature trading partner.

It talks about China being more constructively involved in the

international trading system. That is now a U.S. policy. That

means that China needs to bear more responsibility that is commensurate with its economic heft and the benefits it is getting from

global trade. China needs to be more constructive in things like the

Doha Round. In the report, we talk about more proactive U.S. policymaking, better informed by better information.

As I said earlier, I do not think we have adequate information

currently that is forward-looking. We have committed to undertake,

within our operation, to have the resources to be able to do that,

thanks to the additional resources you provided us in this last fiscal year budget.

We also talk about strengthening and deepening the U.S. economic and trade relationships in the Asia-Pacific region, something

you have advocated for quite some time. This is now official U.S.

policy.

A direct example would, of course, be our recent decision with regard to Korea, but it is broader than that. It is about deepening

economic relationships, even in addition to free trade agreements

we might or might not want.

Senator BAUCUS. I appreciate that. You are working very hard.

I also think it is very important to show up in Asia, as we are with

Thailand FTAs, and potentially Malaysia.

Ambassador PORTMAN. Vietnam accession.

Senator BAUCUS. And Vietnam accession, and Korea, et cetera.

One thing is clear to me, China is showing up in Asia and these

other countries. In all the trade agreements that they are conducting in other Asian countries, they are protecting themselves for

the future, a little buffer.

They do not know what is going to happen in the future, so they

want to develop all the relationships they can with these countries.

I think we have been late in coming to the game, but finally we

are starting to come. Eighty percent is showing up, just being

there, to let Asian countries know that we are there, let Asian

countries know that we want to be with them.

I was surprised at the degree to which, when I was in India a

few weeks ago, Indians asked, where is America? Where is AmerVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
19

ica? You are not here. I went to the subway in Delhi, for example.

A fancy, new subway. You could even use cell phones in the Delhi

subway.

Sixty percent was financed by Japan, with Korean subway cars.

Where is America? We were not there. They kept asking, where is

America? I found it in Bangalore, India. It certainly needs infrastructure, ports, highways, and airports, and so forth. They kept

asking, where is America? I just think that the more you can be

aggressive in showing up in India too—what I am trying to do is

help you by asking you that question, what is our China policy,

frankly.

I think part of the answer is, if we have a China policy that focuses more on resources, more on economics, the more we could

have the resources to get the job done. Hopefully with this bill I

am talking about, a trade enforcement official will help with a

China policy that focuses more on economics.

I would feel more comfortable if I sensed that we sort of had a

more strategic vision or a more strategic plan with respect to China

rather than just ad hoc reactions, and I would just encourage you

to do what you can to help make that happen.

Ambassador PORTMAN. Thank you.

Senator BAUCUS. Thank you.

Ambassador PORTMAN. Mr. Baucus, let me mention one thing

with regard to India. We currently do about $30 billion of trade

with India. With China, I think it is close to, or maybe this year

in excess of, $300 billion. Not that those two economies are exactly

comparable, but the point is, there is a gap here, even as compared

to China. There is enormous opportunity.

Senator BAUCUS. Frankly, one thought I have is to take advantage of President Hu’s visit, coming here. I remember a few years

ago when Korea was just a terrible actor when it came to non-tariff

trade barriers with respect to beef. They had all these shelf-life restrictions, which basically meant that no foreign beef was coming

into Korea.

Well, the President of Korea was due to come to the United

States, and I organized a letter. A lot of Senators sent a letter to

the President of Korea and said, hey, you had better open up or

indicate how you are opening up, because otherwise if you do not,

there are going to be a lot of Senators on the floor of the U.S. Senate giving Korea a hard time because Korea is not opening up its

market to American beef. And guess what happened? Prior to the

Korean president’s visit, they opened up.

I do not think the President of China wants to be embarrassed,

with a lot of Senators standing on the floor talking about some

issues with respect to China. I do not know. Maybe there is a more

effective way to handle this. But I think I will stop. I am over my

time here.

But the big point is this. No country, altruistically, gives up a

trade barrier. They never do it. A country will only give up a trade

barrier if there is leverage. They do not on their own. There has

to be leverage. We have just got to figure out ways, effectively, to

get that leverage.

Ambassador PORTMAN. Great.

20

Senator BAUCUS. I do not know who is next. Senator Bingaman

is next.

Senator BINGAMAN. Am I next?

Senator SMITH. I have just been handed the gavel.

Senator BAUCUS. Oh, you have the list.

Senator SMITH. I do not know why I got the gavel, but I have

been asked to. So the next, that is present, is Senator Bingaman.

Senator BINGAMAN. Thank you very much. Thank you for being

here, and thanks for all your effort.

Let me change the subject from China for just a minute and talk

about this Peruvian agreement that you have. Before the negotiations were completed on that agreement, I had the chance to meet

with President Toledo.

Because we had just finished the discussion and the debate and

the passage on CAFTA here, I raised the issue with him about

labor rights. I said, look, one of our big problems in getting the

votes to pass CAFTA was that we did not have strong labor provisions in there and we did not have ILO monitoring in there.

Those are things that unions in this country complained bitterly

about, and of course even in some of those countries there was substantial concern that this sort of opens these countries up to exploitation by U.S. firms.

So I said, why do we not put those strong labor provisions in the

agreement? His response, I thought, was interesting. He said, I

have no problem with that. He said, we favor those. He said, ILO

has an office in Lima. We are strongly in favor of that. Our problem is, your administration will not support it. That was a bit of

a shock to me.

I thought the reason we did not include these provisions in these

agreements was because these countries objected. At least in his

case, he was saying they have no problem with it, that our administration objected.

What is our position here? I was concerned, frankly, when I saw

that, once again, in the case of Peru, we are being presented with

an agreement that does not have strong labor provisions in it. It

is just essentially CAFTA provisions.

So, we have the same objections being raised, or we can anticipate that the same objections will be raised with regard to this

agreement, the labor provisions, lack of labor provisions in this

agreement that were raised in the case of CAFTA. I thought we

were going to try to fix that.

Ambassador PORTMAN. It is a fair question. I do not think we are

in the same situation. I also have met with President Toledo, and

I am sure he told you what he told me, which is that they have

very strong labor rights in place and that they, in fact, have ratified all of the core labor standards, and they have a good record

as compared to some of the CAFTA countries.

So under trade promotion authority, as you know, I am required

to say that other countries will enforce their own laws. The question is, what are their laws? I think in Peru, based not just on

what President Toledo has told you and told me, but what our investigation has found is, that they do have good laws in place.

What we need to seek in an agreement is a commitment that they

will enforce those laws.

21

Senator BINGAMAN. I thought, though, there is no restriction on

your ability to say, let us go ahead and put those obligations into

the agreement. I mean, as I say, he seemed to say that is fine, let

us put them in.

Ambassador PORTMAN. You mean the core labor standards?

Senator BINGAMAN. Yes, the core labor standards. He said, let us

include them in the agreement. Let us include a provision that says

the ILO will monitor this. He said that would be a terrific thing

to do. He said that the reason we do not do it is your administration will not support it.

Ambassador PORTMAN. First under TPA, and I actually went

back, partly because of your concern, partly because of, frankly,

your friend and my former colleague Charlie Rangel raising the

issue with me about whether we should change our standards, and

looked at that TPA debate.

As you know, there was an amendment offered specifically to

provide a different route, including putting ILO core labor standards in. It was defeated. Congress made the decision that it would

be to enforce your own laws.

Then the question is, what are the laws? Are the laws laws that

you can support? With the CAFTA countries, there were some concerns on enforcement, as you know.

At that time, we did put in some special provisions that you

worked with us on, including the ILO provisions, which came in

late in the process, but do provide for that monitoring that you

wanted. We can improve these agreements. I think every agreement has been an improvement from the previous one in terms of

our objective here, which is enhancing labor rights.

But I think, with regard to Peru, I do not see it being the same

concerns that we were raised in CAFTA, given their——

Senator BINGAMAN. But is it your position that you do not have

the authority to agree to inclusion of those labor standards as part

of an agreement because of something that was in TPA or just that

you are not required to?

Ambassador PORTMAN. It is certainly not required. The instruction in TPA is that countries are going to be required to enforce

their own laws. The question that has been raised continually, as

you know, in this debate, is whether, when we put into a trade

agreement that other countries must follow certain requirements—

in this case, the eight core labor standards—whether that is something that the United States would be able to commit to.

In that case, there is some question. I think we have ratified two

of the eight conventions here. We do have laws in place, I think,

that cover some of the other conventions. But in these trade agreements, as you know, the general rule is, it is reciprocal. Therefore,

if we ask Peru to do it, we would be asked to do it as well.

I think you, as well as every other member of this committee,

would want to be sure we are not writing labor law in our international trade agreements. I hear that quite a bit with regard to

a lot of issues, including labor.

So it is one of the practical concerns that people have on both

sides of the aisle that we not use the international treaties, or in

this case free trade agreements, or Doha, for that matter, to write

domestic law.

22

Given the way that labor law has been pursued here in this Congress, we have chosen not to ratify those eight core labor standards. It has been a very sensitive issue and you all worked through

it, and you are free to change those laws any time.

But members would not like to see that done in a trade agreement. I think that, Senator Bingaman, is probably the major concern that I have heard expressed by members, some on both sides

of the aisle, and mostly Republicans.

Senator BINGAMAN. My time is up. I will have some additional

questions in the next round. Thank you.

Senator SMITH. Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

Ambassador, welcome. Thank you for our good working relationship. I am going to have a number of questions for you this morning. I think we are going to have a second round.

But I want to start by saying that I am still not satisfied that

enough is being done to protect this country from the theft of intellectual property.

For example, just yesterday I had constituents come in and say

that intellectual pirates show up at officially sanctioned U.S. trade

shows and display products that are knock-offs of U.S. goods.

So let me kind of drive home what I am talking about. We can

have these shows with thousands of vendors, thousands and thousands of people, and yet our government actually does nothing, as

far as I can tell, to try to screen out the intellectual pirates.

Isn’t there something that can be done by USTR and Commerce

to deal with this? As you know, I have been offering suggestions

to you all and Secretary Snow, to publish a ‘‘good guys’’ list so people could vote with their feet.

But this is a disgrace, that the pirates show up at trade shows,

sanctioned by our government, and basically right under our government’s nose, rip off our consumers and our companies. Is there

not something that can be done about this?

Ambassador PORTMAN. I would hope so. I would be eager to get

that information from your constituents. Were these international

trade shows or were they trade shows here in the United States?

Senator WYDEN. Well, I will just give you the newspaper clippings. Here is one from the Seattle Post Intelligencer talking about

companies actually at a show that had 20,000 attendees.

They were essentially trying to get agreements at the shows

themselves for these people not to display knock-offs. This seems

to go on in all these shows. If you are going to get tough, why not

make it tough for the pirates to get a visa to come to the shows?

Would that not be something we could do? If you are a pirate,

you are somebody who has a proven track record of intellectual piracy, let us not give them a visa to come to one of these shows and

rip off our citizens.

Ambassador PORTMAN. So these are trade shows in the United

States where you have foreign companies coming to showcase their

wares and some of those are pirated?

Senator WYDEN. Yes. Yes. Right.

Ambassador PORTMAN. We will look into that. I do think you

have been on top of this issue and promoting more aggressive acVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
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tion on it; certainly through the confirmation process, I heard from

you on that.

I think, if you look at, again, our IP cases, you can see we are

very aggressive on enforcement on this. We will keep up what we

are doing with regard to accessions. Right now, intellectual property is the top issue, with Russia, for instance.

With our FTAs, it is a huge issue for us, and currently is with

some of our negotiations, including with Korea, Thailand, Panama,

and Colombia. So, we spend a lot of time and effort on it, and we

are happy to continue to work with you on some of these specific

concerns, including this one.

Senator WYDEN. Again, you will have trouble explaining that to

a lot of our constituents in the Pacific Northwest, in a trade-sensitive area, when they have to run around at these governmentsanctioned trade shows and persuade people to remove this stolen

property from the floors.

I want to ask you about another question that you and I have

talked about. That is, as a free trade Democrat, as somebody who

voted for CAFTA, it becomes increasingly hard to explain to workers the benefits of these free trade agreements.

I want to ask you about whether you think, from now on, when

companies get tariff reductions—and this could be accomplished

without any legislation; this could be done voluntarily. When companies get tariff reductions as a result of a free trade agreement,

do you think that it would be sensible to expand the winner’s circle, for companies to share a portion of those tariff reductions with

the workers to try to drive home the benefits of free trade?

Understand, I am not proposing any legislation. This is not a

mandate. This is something that companies can do on a voluntary

basis. If you are going to be negotiating a lot of these agreements,

there are going to be tariff reductions, do you think companies

should do that voluntarily?

Ambassador PORTMAN. Well, I assume they do. I mean, the whole

idea is that they will be more profitable because they can access

the 95 percent of consumers who live outside of our borders, where

there is a huge market opportunity in all the sectors we talked

about, agriculture, services, manufacturing, and that makes U.S.

companies more profitable.

It also makes them more productive, by the way, and more competitive, based on all the analysis that has been done. It raises productivity and real wages, so those benefits should be passed along

to their workers. It should also be passed along to our economy in

general through higher tax receipts, and it is.

Trade is clearly beneficial to our economy. Without it going the

other way, raising more barriers to trade or putting in place higher

tariffs, it would be quite detrimental to our economy.

Other countries would retaliate and do the same to us, and it

would not permit us to have the tremendous benefits we get from

exports. It also would not allow U.S. consumers to get the lower

cost and more choices that they get through trade.

Senator WYDEN. My time is up. I would only wrap up by saying

this. You all—and I say this as somebody who votes for these

agreements and has the welts on my back to show for it—say you

understand that workers do not feel they gain from these agreeVerDate 11-MAY-2000 16:28 Dec 13, 2006 Jkt 095484 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 31121.000 SFIN1 PsN: SFIN1
24

ments, they do not accept the general arguments about how free

trade lifts all the boats.

But when it comes to following through on some specific ideas,

and I just gave you one that did not even involve any legislation,

would not be a requirement, but something that on a voluntary

basis companies could do to make a more direct link between trade

policy and worker security, you all have not followed through.

I would like to continue this discussion with you because I will

tell you, if you keep turning out these agreements cookie-cutter

style, like CAFTA, one after another, I do not think the free trade

consensus is going to be easily preserved. You saw how close the

last vote was. I talked to you about these issues the last time. I

have just mentioned a variety of ideas, some of which could be done

without any legislation at all.

If we just sort of blithely walk around and talk about how free

trade is good and everybody ought to recognize it, I do not think

workers are going to have any increased sense of confidence about

how these agreements are good for them.

I am going to, on a second round, ask some more about this.

Ambassador PORTMAN. Just quickly. I would be happy to consider your latest idea on the voluntary measures. My only point

was, it is happening. I could not agree with you more about the

need—and you and I have talked about this—for U.S. corporations

that are involved in global trade to communicate clearly to their

workers—for that matter to their shareholders and their customers—as to the direct benefits that they receive from international trade.

In your State and in my former district in Ohio, there are very

clear examples of this. Without the opportunity for trade, there

would not be the same opportunities for employment and good jobs,

as I said, jobs that pay, on average, higher than typical jobs, 13 to

18 percent higher.

That needs to be communicated and communicated clearly by

those companies who do have a strong interest in being sure that

the United States continues to be engaged in global markets.

The alternative for them is to lose the opportunity to access those

95 percent of potential consumers outside of our shores, and they

cannot be as profitable. They need to communicate that. So, I could

not agree with you more.

The question is, what is the mechanism? And you and I have

talked before about your creative legislative ideas, of sort of tying

a trade bonus into the tax policy. That is a little more complicated,

probably, than is able to be done, but there may be other ways to

do that, as you say, on a voluntary basis. It certainly should be

done.

Senator WYDEN. My time is up. I will have some more questions

on the next round.

Senator SMITH. All right. Thanks, Senator Wyden.

Ambassador Portman, thank you for being here. It is great to

visit with you.

Ambassador PORTMAN. Chairman Smith, thank you.

Senator SMITH. I appreciated you coming to speak with Senator

Feinstein and me.

25

To Senator Wyden’s points, I just simply say, amen. He and I,

with five other of our colleagues, recently went on a mission to

China, Thailand, Vietnam, and Cambodia.

As I think I shared with you the other day, I came away with

a couple of very strong impressions, one of which is that China is

enormous, it is growing, it is a super power, if not on the earth,

certainly in that region.

There was, though, also, a palpable sense of fear on the part of

the lesser-developed countries, specifically Vietnam and Cambodia,

and to some degree Thailand, about China’s influence and dominance in the region and their sense of insecurity militarily. They

appreciate America’s presence in Asia, and they want to have more

opportunities to compete with China for the American market.

It just seemed to me so obvious that it is in our interest to allow

them to compete with China, both for our consumers and also for,

frankly, the spread of our values of democracy and human rights.

There are some people very anxious for us to reach out to them.

I really appreciate the approach you took in Hong Kong in terms

of a policy that will lower duties, eliminate duties to least-developed countries. In the spirit of that, as Senator Feinstein and I discussed with you, we have introduced our Trade Act, which would

do the same thing.

And while I know you are not in a place where you can endorse

our bill, would you agree that that bill is in the spirit of what you

are trying to do anyway? Can you speak to that whole issue of

least-developed countries?

Ambassador PORTMAN. Absolutely. Let me start by thanking you

and Senator Feinstein for taking a leadership role on this issue.

In effect, as I see it, it is permitting countries, in addition to the

AGOA partners that we have that are least-developed countries, to

get some of the same trade benefits that would be in excess even

of GSP treatment.

As you know, under the Doha Development Round, that is one

of the issues that we have discussed. In Hong Kong, we made significant progress to try to address the concerns of some of these

least-developed countries, the poorest of the poor. It is 49 countries,

as identified.

We agreed to have 97 percent of tariff lines covered for all LDCs

at a duty-free level, should the Doha Round come together. It has

a second benefit, frankly. That is, it gives the developing world—

particularly, again, these poorest developing countries—more of a

stake in the success or failure of the round.

Your legislation is entirely consistent with the direction that we

are going. You have done a lot of spade work on this. You have,

as I understand it, about 20 co-sponsors, and I appreciate your

work on it. It is a relatively small amount of trade.

There are some sensitive areas. Textiles is one that you and I

talked about. The 97 percent, we think, handles that sensitivity,

because there are some world-class exporters among these leastdeveloped countries in the area of textiles.

But we think your efforts are very constructive and entirely consistent with the direction that we will go in, if we can bring this

Doha Round to a successful conclusion.

26

Senator SMITH. Ambassador, yesterday we had a hearing in the

Commerce Committee on the Canadian softwood lumber issue.

Your deputy, Susan, was there and did a wonderful job representing you and your shop. I came away from that hearing,

frankly, with a solution to this issue.

Ambassador PORTMAN. I cannot wait to hear it.

Senator SMITH. We keep continuing to try to urge the Canadians

back to the negotiating table to work out a new quota arrangement. Canada maintains, and NAFTA agrees with Canada, that

they do not subsidize stumpage.

WTO has almost always consistently held the opposite. Our producers insist that there is a very real, non-market stumpage rate

that is applicable in Canada.

Currently, Canadian mills are allowed to come into America and

buy logs from us. It seems to me the easy answer is for American

millers to be able to go to Canada and buy logs at their price. That

settles it.

If it is a free market, if there is no subsidy, let us truly make

it equal. Allow American mills to buy Canadian logs at the price

that it is sold to Canadian mills, just like they are allowed to compete in a free market and buy American logs. It is settled. They

get the $5 billion back and we take a major headache away from

your office.

What do you think?

Ambassador PORTMAN. I think it is an intriguing idea. As you

and I have talked, I believe that the issue has become so litigious

and so complicated, partly because of the over 20 lawsuits that are

currently pending, as you know, that sometimes we cannot see the

forest for the trees, to use a lumber analogy.

So, this kind of thinking is very helpful. I do not know that this

is something that would be embraced by all sides, including our

friends in Canada.

Senator SMITH. Well, it would certainly prove whether or not

there is a subsidy.

Ambassador PORTMAN. Yes. And as you know, we strongly believe there is a subsidy, and we believe that has been upheld, including by the WTO, as you said.

I also think we should maybe take a step back and have a more

rational approach to this ongoing dispute. As you know, I have spoken with the new Trade Minister, David Emerson, about this issue

and found him to be very willing to engage, which is positive.

So I feel we have an opportunity now, a window of opportunity

after the election, to be able to work on some of these more creative

ideas to get us out of the endless cycle of litigation that we have

found ourselves in. So, I am actually relatively hopeful.

I also will tell you that I believe that Ambassador Frank McKenna did a good job at the end of his tenure in trying to work with

us on some of these lumber issues, and I think we actually made

some progress, quietly. I hope we can build on that progress now

with the new administration.

Senator SMITH. My time is up.

Ambassador PORTMAN. I will need your continued input on this,

as well as others around the table who are interested and experienced in this ongoing lumber dispute.

27

Senator SMITH. Thank you, Ambassador. Someone has taken the

gavel, so I assume Senator Baucus is in charge.

Senator BAUCUS. I would rather give it back to you. We are very

ecumenical here.

Senator Schumer is next on the list, but I have to leave. I am

not going to take any time here. I just want to follow up on the

point made by the Senator from Oregon on lumber. That is so important, Mr. Ambassador. I am not going to speak at length on it,

but I just want you to know how important it is to me, personally.

Second, on beef. I do not know what we are going to tell our producers back home, that Japan is still not opening up, and Korea

has not. It is a real problem. They know they should.

I have a huge history with Japan on beef. In my judgment,

Japan is being stubborn, being bureaucratic, being protectionist.

This is not a health issue, this is a technical Customs issue. The

sooner Japan opens up, the more easily we will be able to address

some other issues that need to be addressed. So I just urge you to

work very strongly.

Ambassador PORTMAN. Thank you.

Senator SCHUMER. Thank you. I want to thank you, Ambassador,

for being here.

My first question relates to something that has been in the news

lately, which is the Dubai Port acquisition. As you know, Dubai

Ports World, which is a government-controlled United Arab Emirates shipping company, took over P&O Ports. That is one of the

largest port operators in charge of security in my Port of New York,

and others.

Now, CFIUS, which you are on—I presume you sit on that one—

are charged with investigating these take-overs, and somehow,

very strangely, issued, at least according to the company, issued an

approval before the merger actually occurred, which I have not

known them to do very often in the past.

Many of us are very concerned with this. Even if the head of the

company, even if the government of Dubai is at the moment friendly to the United States, the UAE has been a center of terrorism in

the world. The money for the highjackers of 9/11 that so decimated

my city was laundered through the UAE. So a lot of us, bipartisan,

are very concerned.

In fact, we have just sent a letter to all of you on CFIUS to do

a full 45-day investigation. Why did CFIUS forego the additional

45-day investigation in such a complicated and security-sensitive

situation?

In other words, CFIUS often deals with international economic

issues. Sometimes I wonder that homeland security is not their

number one priority, but rather economics, diplomacy, or something else sort of pushes it aside.

So, the first question is, why was the 45-day investigation foregone on something that would seem one of the most sensitive

issues around? How much did they look at the innards of this company and what would protect it? I mean, do you have knowledge,

for instance, of how they check? Do they do background checks on

new employees, how thorough are they, how extensive are they, et

cetera?

28

Ambassador PORTMAN. Senator Schumer, I appreciate your raising that today, and I hope to be in a better position to answer your

questions after I look into this more. I honestly do not have the answer to your questions. There are 12 agencies represented on

CFIUS. The U.S. Trade Representative’s office is one of them. As

you know, it is chaired by the Secretary of the Treasury.

Senator SCHUMER. Yes.

Ambassador PORTMAN. My understanding is that Treasury may

be testifying soon on a quarterly update on CFIUS. In fact, my understanding is that that may occur as soon as today. That is probably the more appropriate place to get the answers to those questions. I just do not know.

Senator SCHUMER. Well, let me ask you. So would you be troubled if the review was not as thorough as it often is?

Ambassador PORTMAN. I would want to be sure the review was

thorough. I agree with you entirely that one of the responsibilities

of CFIUS is to look at the national security question. No responsibility of government is more important than national security. So

based on what you just told me, I am going to look at the 45-day

period issue.

Senator SCHUMER. I would like to ask unanimous consent—I do

not know who the chairman is right here—Mr. Chairman, that I

be allowed to submit to the Ambassador these questions in writing,

and that maybe he be given a week to check it out and get back

to me. Is that all right?

Senator BUNNING. You have unanimous consent to do that.

[The questions appear in the appendix.]

Senator SCHUMER. Thank you, Mr. Chairman.

The second question is on an issue that the Chairman and I have

been very interested in together, which is China currency and the

manipulation of the Chinese yuan by the Chinese government,

which now, more or less, everyone accepts as real. We have different views as to how to change it.

I was truly troubled by your report. It was called ‘‘A Top-to-Bottom Review of U.S.-China Trade Relations.’’ I was just amazed that

one of the 800-pound gorillas in the room, China currency manipulation, was not in the report.

Now, I know it is not your responsibility to negotiate currency

policy, but to not even mention it in a report that is supposedly a

‘‘top-to-bottom review,’’ I think the yuan is the top, the bottom, and

the middle.

It affects every import. We can talk about textiles in China or

we can talk about financial services in China. Everything is affected by currency, obviously, because trade must occur in currency.

So can you tell me how not mentioning the currency issue, even

if you would want to say that this is not our responsibility, how

that made sense? Now, maybe on page 22 or somewhere it is——

Ambassador PORTMAN. No, no. I appreciate it. I knew it was

mentioned somewhere and I just was trying to find it.

Senator SCHUMER. Well, if you have to spend a few minutes

digging through it to find where it is mentioned, it makes my point.

Ambassador PORTMAN. It is on page 9 of the report (see p. 81).

29

Senator SCHUMER. I hear it is in a footnote, according to my

staff.

Ambassador PORTMAN. This is a top-to-bottom review.

Senator SCHUMER. But not an addendum. Thank you.

Ambassador PORTMAN. Not an addendum, at least. This is a topto-bottom review of trade policy. You are right, currency policy is

very distinctly not within the ambit of the USTR. I am reminded

constantly in the inter-agency process, which is appropriate, that

Treasury take the lead and that they speak for us on currency policy.

But notwithstanding that, I did think it was important to be

mentioned in the report, and it is. It is mentioned, by the way, in

a way that you probably have not seen before in a U.S. Government publication, because it says ‘‘China’s exchange rate mechanism also affects China’s trade and plays an important role in the

adjustment of global imbalances.’’

I know that may seem nuanced to you, but certainly with regard

to previous statements from the U.S. Trade Representative’s office,

this is a first. It reflects my strong view that it does play a role

in trade, and it is a view that you have——

Senator SCHUMER. We should do something about it.

Ambassador PORTMAN. Of course we should.

Senator SCHUMER. All right.

Ambassador PORTMAN. The trade deficit is a combination of a lot

of factors. We have talked about this before. Macroeconomic factors, according to every economist I talk to, are the number one factor impacting the deficit, with trade policy being one, and currency

policy being another. I think it is something that ought to be dealt

with, as you have said. We can differ on how we deal with it, but

it is an issue.

Senator SCHUMER. All right. I have a question in writing about

Saudi Arabia’s participation in the Israeli boycott.

Ambassador PORTMAN. I would love to answer that for you. We

have an ongoing discussion with Saudi Arabia about that. When

they joined the WTO, they did not make any exceptions for any

countries, including Israel, and they have a responsibility to treat

Israel as any other member of the WTO.

Senator SCHUMER. Because they have said publicly they are

going to continue the boycott. That would violate WTO rules, in our

Nation’s eyes. Is that correct?

Ambassador PORTMAN. It would, also, in Israel’s eyes. In other

words, as a WTO member, they would have a right there.

Senator SCHUMER. Thank you, Mr. Chairman.

Senator BUNNING. Thank you, Senator Schumer.

I get the chance to ask some questions now.

Ambassador PORTMAN. Mr. Chairman.

Senator BUNNING. I apologize, Mr. Ambassador. I was previously

engaged with Chairman Bernanke in the Banking Committee, and

so was Senator Schumer.

Ambassador PORTMAN. Much more important.

Senator BUNNING. Just to get China in perspective, Senator

Smith led a delegation of six U.S. Senators on a trade mission. Five

of them were on the Trade Subcommittee here on the Finance

Committee.

30

I want you to know that China’s Minister of Trade would not

meet with us, refused to meet with us. We received number six in

line in the Chinese bureaucracy. I suspect, if they will not meet

with six Senators, they do not understand how the process in the

United States works, to the point of the executive branch suggesting and the Congressional branch enacting.

They think that President Bush can just snap his fingers and get

something done. As we found out on the floor of the Senate just

yesterday, that is not the case. So I bring that to your attention

because of the Chinese’s recalcitrant stance on their currency and

their constant violations of WTO rules.

I understand the United States and Vietnam are getting close to

wrapping up their bilateral negotiations in connection with Vietnam’s bid to join the WTO.

One of the remaining outstanding issues is concerning a product

that is very important to my State, bourbon and other distilled

spirits. Vietnam currently maintains an excise tax system that discriminates against imported spirits. This is clearly illegal under

WTO. Its tariffs are also extremely high by international standards, ranging from 65 percent to 100 percent.

In contrast, the spirits tariffs imposed by the United States, the

EU, Japan, are zero for nearly all spirit categories. China’s current

tariffs are only 10 percent.

Can you give me some assurance that these matters will be addressed before Vietnam joins the WTO?

Ambassador PORTMAN. Thank you, Senator. As you know, we are

not done with our accession discussions yet with Vietnam. It is a

two-stage process. It is a bilateral discussion where you can negotiate on issues like the market issues you are talking about now,

and a multilateral process.

You will have a say here because it is a Jackson-Vanik country,

and therefore there will be a vote on PNTR, permanent normal

trade relations. So, you will have the opportunity to judge us on

this, but we are trying very hard to reduce those tariffs on spirits

and beer.

We have not yet finished up the part of the negotiation where

this would be discussed, which is the agriculture negotiations. But

we will continue, and now we will redouble our efforts based on

your strong interest, to aggressively represent the interests of the

Kentucky bourbon makers, and others, who, as you say, have a legitimate reason to be very concerned about these tariffs.

The Vietnam agreement, I think, has moved forward in the last

month. Senator, we had a visit over there about 3 weeks ago in

Hanoi. We saw movement in a number of the areas where we had

concerns, including financial services and intellectual property. But

on agriculture, we still do have some outstanding issues, and this

is one of them.

Senator BUNNING. On another question, we visited Hanoi too and

we actually got to see the trade person, so it was a plus.

Ambassador PORTMAN. Good.

Senator BUNNING. I have been hearing some disturbing reports

from some American companies about corruption in the tax and

court system in Peru. I will need to feel comfortable that the government in that country is willing to treat American companies

31

that invest there fairly before I will be able to support a free trade

agreement with Peru.

Are you comfortable with the transparencies of the government

in Peru, and do you think that American investment there is safe?

Ambassador PORTMAN. That is a good question, given the record

of expropriations. As you may know, we have at least three outstanding cases we are still working through with them. They, of

course, precede this administration, the Toledo administration.

I do believe that transparency and increased focus on due process

and corruption has occurred, and I believe there are improvements.

But to be honest with you, those particular expropriation cases continue to be a concern of ours, and we continue to work with Peru

on that.

I think you will see this is a very strong agreement, because it

will help with regard to the rule of law and transparency, and I

hope that we will also be able to report to you that we have made

the right kind of progress on these specific cases.

Senator BUNNING. My time has expired.

Senator Bingaman, would you like another round?

Senator BINGAMAN. Yes. Thank you very much, Mr. Chairman.

Let me just ask questions on a couple of other issues.

On this China currency issue that Senator Schumer raised and

others have talked about also—and I understand that is not your

responsibility—but the U.S.-China Economic and Security Review

Commission came out with a report in November, as they are required to each year.

They talked about this problem of currency manipulation by

China and said that to prevent or reduce the negative impacts of

these trends, the United States needs to establish and implement

policies that provide course corrections.

I just wanted to ask—in case you have any expertise on this—

what are the available course corrections or steps we could take?

The Treasury Department is authorized to designate a country as

a currency manipulator and essentially report that to the IMF. If

the IMF agrees, then we are in a position to go to the WTO. Is that

the procedure, as you understand it?

Ambassador PORTMAN. Senator Bingaman, it is not, as I understand it, a procedure that has been followed in the past. You say

I may not have the expertise. I do not have the expertise to tell

you whether it is a procedure that would be likely to be successful

from a legal point of view.

My understanding is that it would be an area of first impression

and that the legal options are not at all clear. That is my understanding. I am happy to get back to you in more detail.

Senator BINGAMAN. I would appreciate it if maybe you could tell

me what the legal options are. It seems clear to me that if we are

worried about trade-distorting subsidies, there is nothing that compares to the currency manipulation that is going on, as between

ourselves and China, I mean, as far as impact on our trade balance.

I would be anxious to know what our legal options are. Maybe

we can persuade the Secretary of the Treasury to hire a good lawyer and go at them. I think we need to do something. I think what

32

we have been doing has clearly not worked and we are being

played for a sucker in this circumstance, I believe, very strongly.

Let me mention two others, if I have time. But back in 2003,

Mexico closed its border to the importation of live cattle from the

United States. I have ranchers in New Mexico who would like to

sell live cattle into Mexico.

About every week, we buy about 20,000 live cattle from Mexico,

and that has been going on for a very long period now, but we are

barred from sending any to them. I have spoken to Secretary

Johans about this. I have spoken to Secretary Mayorga in Mexico

City about this.

I was assured by Secretary Mayorga that this was something the

Mexicans were going to fix. I think he told me in early January

that, within a couple of weeks, they would open their border to imports of live cattle from the United States again. That has not happened.

Why can we not just give them a date and say, all right, on the

1st of March if your border is not open to our exports to you, then

our border is no longer open to your exports to us in this field? Is

there something wrong with us using a little bit of leverage to get

this issue fixed?

Again, I feel very much as though we are being played for a

sucker here, just week after week, month after month, year after

year. Our ranchers are being denied the right to sell to them. They

are selling to us in very large quantities.

Ambassador PORTMAN. Senator Bingaman, my understanding is

this is, in part, a breeding stock issue. Correct? This is breeding

stock from the United States.

Senator BINGAMAN. As I say, I think we are denied the right to

sell them any live cattle right now. As I understand it from the

ranchers in my State, they have cattle they want to sell, they have

customers in northern Mexico for that cattle, but the government

of Mexico continues to prohibit the sale.

Ambassador PORTMAN. I will follow up on this. I have raised it

with both the Trade Minister and the Agriculture Minister. My

recollection is that it is in regard to breeding stock. That may be

the same issue, or it may be more of a subset of what you are talking about. I will go back and review what the response was then.

We do have the opportunity, as you may know, to have a bilateral with Mexico and Canada annually as part of our NAFTA

agreement. That meeting is coming up in March in Mexico. I will

commit to you today that, regardless of what I find out in the interim, that in March that issue will be on the agenda.

In terms of their response, you suggest that at a date-certain

that we stop our imports. What is the remedy in a trade dispute

like this?

I would assume that there are ranchers in New Mexico, Texas,

Arizona, and elsewhere who would not want us to put a ban in

place on Mexican cattle because they get an advantage from that.

So I do not know what the remedy is that would be appropriate,

but I agree with you that we do need to use leverage where we

have it.

Senator BINGAMAN. Well, I would appreciate any action you can

take on it and any report you can get back to me.

33

Ambassador PORTMAN. I will.

Senator BINGAMAN. I would appreciate that. Thank you.

Senator BUNNING. Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

Let me ask you about trade in the Middle East, Mr. Ambassador,

and particularly with an approach to produce more prosperity and

advance the cause of peace, which the administration does have

great concern about.

We are essentially going the bilateral route. We are going to

have bilateral agreements with, hopefully, lots of countries. Is

there more that we could do in terms of an alternative, perhaps a

Middle or Near-East free trade agreement that would have these

countries and Israel trading together as opposed to the kind of huband-spoke, kind of bilateral approach? Is that something you have

given some thought to?

Ambassador PORTMAN. I have given that some thought, in the

context of that region of the world not only having relatively little

trade with us as compared to what the potential is—I think there

are 350 million people in the area—but also between themselves.

That is in part because of relatively high barriers between those

countries.

So if you want to get at what you are talking about, and I think

you are right, that more economic prosperity can lead to other

changes in that part of the world that are positive, including more

political freedom that comes from economic freedom, you have to

encourage trade between the countries. So this MEFTA concept,

the Middle East Free Trade Area that you have supported, is in

part about us and increasing our bilateral relationships.

As you know, we have a relationship now with Jordan that has

been quite successful. We believe 40,000 new jobs have been created in Jordan because of the free trade agreement alone. We have

a successful relationship with Israel, Morocco, now Bahrain, soon

Oman, we hope, but we also encourage trade between these countries. So that is part of our strategy with regard to the region, and

our vision is to knock down the barriers.

How we do it is, as you say, on sort of an incremental basis. We

have TIFAs, which are Trade and Investment Framework Agreements, with, I believe, nine countries now in the Middle East.

We continue to promote these TIFAs as a stepping stone to a free

trade agreement, but also as a way to liberalize their economies in

specific areas to open up trade generally, not just to us, but to everybody. So, that is part of our strategy. WTO accessions are also

part of our strategy, the reason we pushed hard to get Saudi Arabia completed.

Last year it was one of my priorities. Saudi WTO accession had

been outstanding for 9 years. It was not without controversy, as

you know, and it continues to have some controversy, as Senator

Schumer just raised. But I think it was very important to get

Saudi Arabia not only under the rules-based WTO system, but also

to open up their economy more, which we were able to achieve

through our bilateral WTO accession agreement, for the very reasons that you state.

So I think it should be part of our strategy. I am happy to look

at that issue of a broader regional agreement. I do not know that

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there is a regional entity that would be appropriate, for example

a regional Customs union, that would be appropriate to engage

with in that regard, but I will look into that.

Senator WYDEN. I would like to continue those discussions. I

think that is constructive because I think, particularly given the

WTO and the fact that the WTO, at least, has tried to put a focus

on making sure that there are not any boycotts of Israel, this

would be an opportunity to look at that.

The second area I wanted to ask you about on this round is steps

that could be taken to make the World Trade Organization more

open and more transparent. This goes to something else that you

and I have talked about, which is that it is very hard for workers

to see what goes on in these proceedings.

Every once in a while the newspaper publishes a picture of the

World Trade Organization, and usually at the start of it there is,

in six different languages, ‘‘Secret,’’ ‘‘Closed,’’ ‘‘Do Not Enter Here,’’

this kind of thing. If I had my way, we would probably talk about

a global C-SPAN or something like that in order to get some exposure for these kinds of discussions.

Is there more that can be done to make the World Trade Organization an open and transparent organization?

Ambassador PORTMAN. There probably is. The United States has

taken the lead in that, as you know, both with regard to the meetings and with regard to the negotiations, but also with regard to

dispute settlement.

I am new in this role, and therefore relationship, with the WTO

from the U.S. point of view, but I can tell you, in the meeting in

Hong Kong it was different, I am told, as compared to previous

meetings, in that many of the non-governmental organizations,

NGOs, were in the convention center rather than outside.

I think, although it creates some interesting situations, including

sort of mini-protests within the building sometimes as you are

going to a press conference, which happened to my colleague——

Senator WYDEN. That happens at my press conferences.

Ambassador PORTMAN. It happens at yours, too. I think it is positive. I think it is why you saw, when we were both at the WTO

meeting in Seattle, where there were demonstrations in the streets

and disrupting the meeting, or Cancun, where there was less activity outside and more genuine dialogue inside.

So I think there have been some improvements made. I need to

get up to speed on the latest proposals to make it even more open.

I think it is in the interests of the WTO and in those of us who

believe in the power of trade to, in fact, lift people out of poverty,

to make sure people know what is going on inside these rooms.

Senator WYDEN. Mr. Chairman, my time is up. I have one additional question. I would be happy to wait until after you are done,

though, if that is your pleasure.

Senator BUNNING. Thank you very much.

I have two questions, Rob. U.S. States, like Kentucky, Ohio, Indiana, are increasingly speaking out against our bilateral trade

agreements and our participation in WTO. Clearly, more outreach

to the States is needed. Does the USTR plan to address this issue?

If so, how?

35

Ambassador PORTMAN. You are right. Not only that, Senator

Bunning, but often the States—and your friend Ernie Fletcher

would be a good example of that—are more focused on export promotion and on the economics of trade than we are here in Washington.

In other words, they are on the front lines; Governors going on

trade missions; Governors looking for foreign investments; Governors looking for export opportunities; and I think there is an opportunity to work with them much more closely.

I will be honest with you. I have not done that adequately in this

job yet. I would like to do more of it. Part of our plan at USTR,

for what it is worth, is to do more outreach with the Governors and

with the States.

Senator BUNNING. That is what I am asking. How are you going

to do it?

Ambassador PORTMAN. Well, there are a couple of ideas we have.

One is the National Governors Association, which gets together periodically. We are going to try to get on their agenda and to talk

to them about our trade policy and get them more actively involved.

My goal, frankly, is to explain what we are doing so that they

can be more supportive of what we are doing, because they should

be, because it is strongly in their interests to knock down barriers

to trade and to help with regard to foreign investment. So, that is

one idea.

The other idea is to go out to the States themselves and spend

more time with the legislatures in the States. We have a lot on our

plate and we have limited resources, but I think it is a priority.

So, if you have any ideas on this, I would love to hear them, but

I think it is a very important aspect of what we ought to be doing

in the U.S. Government. It goes beyond some of the more specific

things I outlined about the multilateral, bilateral, or enforcement

side, which is generally reaching out more to the American people.

Reaching out through the Governors is, I think, a very constructive

and potentially fruitful avenue.

Senator BUNNING. My last question is parochial. I have had numerous complaints from our lumber producers in my State about

problems they are having with the Europeans regarding the exporting of wood pallets to the EU.

Can you tell me what the USTR is doing about this problem?

Ambassador PORTMAN. That is a very good question. It is an

issue that I have raised with the EU. My understanding is, and I

am looking back here to my capable staff to give me confirmation

of this, that just recently—in fact, I think within the last week—

we had a decision made by the EU which was favorable to your

pallet exporters. It has to do with the issue of bark, as I recall.

There was an agreement to extend any prohibition until January

1, 2009.

So, we persuaded the EU to delay implementation of their debarking requirement for wood packing materials until January 1,

2009, and to conduct a review of the issue to determine if de-barking is scientifically justified. We do not think it is scientifically justified.

36

So, we have had a recess success on that that some of your exporters may not even be familiar with, and we are happy to get

that information to you.

Senator BUNNING. Including some of the Senators, and the one

that represents Kentucky.

Ambassador PORTMAN. Yes. We will get that information to you.

Senator BUNNING. All right.

Senator Lincoln, you are on.

Senator LINCOLN. Good. Well, I thank you. I thank the Chairman

for holding this opportunity today.

Ambassador Portman, we are delighted you are here. You were

kind enough to visit with us in the Agriculture Committee last

week. I just want you to know how much I, and I know other members, really do appreciate your willingness to stay in close contact

with us on the Hill.

It means an awful lot to us because we continually hear from our

constituents, and being able to say that we have actually been able

to talk to you means a tremendous amount.

We certainly face a lot of challenges in the global marketplace,

and I, for one, am glad to be able to say that communication and

consultation between USTR and Congress is now as important as

ever, and I think you have elevated that and reinforced it, and I

am grateful to you for that.

As one who really does support free trade, and I think I have a

good record in that when it is good for Arkansas workers and producers, I have to admit that it is getting harder and harder to sell

back home.

That is something that we want to make sure that we are working with you on, to come up with agreements that not only make

sense to us here inside the Beltway, but make sense to people back

home.

There is hardly a day that goes by when a farmer does not call

my office or call my home, because many of them know me personally. Drought, coupled with record prices, input costs, whether it is

gas prices, natural gas, fertilizer costs, they have made this past

crop year one of the most expensive in the recent memory for Arkansas producers and for other producers across the Nation. There

really seems no end in sight.

Earlier this week, I think the Wall Street Journal reported that

USDA estimates net farm incomes will decline by about 23 percent.

I really do think that the average American out there is appreciative of the fact that we produce the safest, most abundant, and

most affordable food supply. I think they also recognize that government has a role to play in partnering with our producers to help

them achieve that.

Yet, quite frankly, the administration seems so unwilling to provide the necessary support in helping our farmers get back on their

feet. Instead, farmers are reading about a new budget proposal

that seeks to cut almost $9 billion from agriculture alone over 10

years.

It is one of the smallest parts of the budget, and yet they are

being asked to give a tremendous amount in terms of shouldering

the burden of deficit reduction and dealing with the enormous

debts we have.

37

It seeks to impose further payment limitations, which you and I

have had multiple conversations over in terms of how important

they are to the capital-intensive crops that we grow.

Breaking those contracts with producers that we signed in the

2000 farm bill is devastating. These farmers do not know many of

the things that they are going to be faced with, whether it is gas

prices, whether it is drought, whether it is hurricanes.

They deal with so many variables that they have no control over,

at least we can maintain a contract for the 5 or 6 years that the

farm bill is in place so that they at least have something that is

constant. A contract they have negotiated with their government

should be something that they can depend on.

They do not know which of these trade agreements we are going

to negotiate and pass in the 5-year period that they have under

that farm bill, but they do know that they have a contract with

their government and their government appreciates the fact that

less than one-half of 1 percent of the overall budget goes to assuring the American people that we are going to provide that safe and

abundant food supply.

So, I would just encourage you, Mr. Ambassador, to help weigh

in with us in terms of what agricultural producers do. You have

done a tremendous job, and I am grateful to you for continually

taking the beatings and the fights that have to occur.

Agriculture is not an easy issue when it comes to the trade negotiations, and I know that, and yet I do think it is something that

is very, very important to the American people.

I also know that you face many challenges as the WTO process

continues. The proposal by our administration to cut the amber box

spending by 60 percent in return for equally ambitious tariff and

support reductions for our trading partners has been on the table

for quite some time.

I guess my initial question would be, what, in your opinion,

changes between now and April 30 that is going to compel the EU,

among others, to come to the table with more ambitious proposals,

and are we going to continue to put those ambitious proposals out,

just hoping that others will grab hold of those coattails and come

along with us?

Ambassador PORTMAN. It is a fair question, given the fact that

we missed a couple of deadlines, including last July, and now in

Hong Kong. But I am more optimistic than I was, Senator Lincoln,

the last time we talked about this specific issue because of the

meeting we had in Switzerland last month where we agreed to

come together on services, manufacturing tariffs, and, as I talked

about earlier, agriculture. I think that gives the European Union

the opportunity, and others who are interested in manufacturing

and services, to be more forthcoming on agriculture. In other

words, a balanced package needs to come together that is clearly

in the interests of moving the WTO forward.

More importantly, it is in the interests of having this round

make a difference in terms of global economic growth and development. Finally, with regard to us, it is necessary for us to be able

to sustain the proposal that you talked about.

We need to see the market access come together, and we also

need to see the export competition piece come together, which we

38

did make some progress on in Hong Kong, as you know, with the

elimination of export subsidies.

Senator LINCOLN. My concern is the leverage, though. I do not

understand the leverage that you have.

Senator BUNNING. The Senator’s time has expired.

Senator LINCOLN. I missed the first round. Can I get my first

round back?

Senator BUNNING. Oh. I just got my first round in.

Senator LINCOLN. All right.

Senator BUNNING. Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman.

Mr. Chairman, I would ask, first, unanimous consent that an important statement by Governor Granholm of Michigan about automobiles be placed in the record.

Senator BUNNING. Without objection.

Senator WYDEN. Thank you, Mr. Chairman.

[The letter appears in the appendix on p. 143.]

Senator WYDEN. The last issue I want to talk to you about, Ambassador Portman, is the matter of the Trade Advisory Committees. I am still troubled by the fact that after this Government Accountability Office report that said that consumer and public

health perspectives are not being included in the committee report—in fact, their specific finding was there has been limited or

no participation in the committee system; you and I have been

talking about this—and apparently nothing has changed. There are

not any representatives representing the consumer and public

health perspective on the committee.

As one example, Sean Brown of the Generic Pharmaceutical Association was told in September that he would be appointed. His

security clearance is done and his information has been at the

USTR office since mid-December, and he has called several times,

and nothing has happened. I gather, in the most recent instance,

he was told not to call back any more.

So what is the story on this? I guess I know a slow walk when

I see it, and it sure looks like, after the Government Accountability

Office finding, not much has changed.

Ambassador PORTMAN. Well, I think a lot has changed. I am

going to find out about the specific call that you mentioned and the

fact that we have not moved quickly enough on the representative

from the generic industry.

When you and I talked about this during the nomination process,

you got my attention, and we moved immediately. We have now,

for the first time, as I think you know, a member on this Trade

Advisory group from the generic side, at least the first time in recent memory, and we have a second person coming who I assume

is the person you are talking about.

Senator WYDEN. Can I just be clear on that? Is that person actually sitting at the table now?

Ambassador PORTMAN. That is what I have been told. I will confirm that.

Senator WYDEN. Could we? Because I think that is an important

matter. We were told, and perhaps—you have a staff person there.

Could you inform the Ambassador on that point? Is the representative of that group sitting there now?

39

Ambassador PORTMAN. Yes. I will find out about it. What I have

been told, is we have one person already on, and then another person who is going to be coming on on the generic side.

Then with regard to public health, being responsive to your concerns, you and I focused more on the generic issue initially because

I think that was an obvious gap in terms of the advice that I was

able to get.

But then on public health, we have also moved. My understanding is, we now have a Federal Register notice out advertising

for the public health position or positions, so we are moving forward with both of those. But I will double-check, and if you would

like to have this gentleman give me a call this afternoon, I would

be happy to talk with him.

Senator WYDEN. I will. I appreciate that. As I say, you always

respond to my concerns. I am going to have him call you, number

one.

Ambassador PORTMAN. Have him call me, personally.

Senator WYDEN. But let us be clear on this. As far as I can tell,

there are not any representatives of the consumer and public

health perspective on these committees.

Ambassador PORTMAN. That is correct. We have advertised for

the public health position.

Senator WYDEN. Can we put a deadline on that?

Ambassador PORTMAN. As soon as possible.

Senator WYDEN. Let us put a deadline on it. Let us get it done.

Let us figure out—and I appreciate, Ambassador, your handling of

Mr. Brown. Let us get that resolved, and then let us get some consumer and health folks on this advisory committee.

There is no case for having these kinds of deliberations. I will

just say it again, if you are a free trade Democrat, you cannot go

out to these groups and say, you are going to be shut out and it

is a fair process.

Ambassador PORTMAN. I agree.

Senator WYDEN. It just does not wash. So, I look forward to

working with you on it.

Ambassador PORTMAN. All right.

Senator WYDEN. Thank you.

Senator BUNNING. Now, Senator Lincoln, do you have some more

questions?

Senator LINCOLN. Yes, sir, I do. Thank you very much.

Ambassador PORTMAN. You have given me time to think, now,

about the leverage.

Senator LINCOLN. Well, I will just make a point on that. That is

that I have to think that it makes it more difficult for the U.S. to

gain leverage in these talks when we are encouraging the EU, if

in fact they are seeing this administration reduce the supports unilaterally, which is what is happening in these budgets.

We fight them, and we fight them, and we fight them, but how

in the world are they going to come to the table and be willing to

do the same thing that we are apparently willing to do unilaterally

without them, or at least the President is willing to ask for?

So, I just have concerns on that. I just think there is more, in

a holistic view, that the administration is going to have to take a

40

look at if, in fact, we want to move forward in the trading world

in that respect.

I would like to switch gears just a little bit. I have two last questions. I do not want to keep anyone too late.

USTR recently released its top-to-bottom review of our trade policies with China. As you all know, the steel pipe producers filed a

section 421 import relief last fall, received an affirmative determination from the ITC, and yet the administration, once again, denied relief to our domestic producers.

It is very consistent with what the administration has been

doing. In fact, in each instance where the ITC has issued an affirmative section 421 determination, the President has denied that relief.

So I just have to ask, what role do you see our trade safeguards

playing in our ability to address trade issues with China when our

producers put their faith in these agreements, knowing that there

are remedies that are possibly available to them in instances of unfair trade, but we are unwilling to enforce them?

I mean, we have 70 antidumping proceedings pending against

China, more than any other country right now. I am certainly

pleased that we are vigorously pursuing these orders, but I have

to express my frustration. We have had many discussions about

ways to expedite this process. I have offered my suggestions and

my ideas, and I get absolutely very, very little in return on that.

I still want to look for those ways to achieve it, but right now

it has just been a one-way conversation for me. I would really, really like to ask you to consider the context of reviewing our trade

policies and remedies, particularly in regard to China, but in those

circumstances it is important.

My last question. I will just ask it, then you can answer that as

well. The disciplines on our food aid programs. I do not know, but

you all probably discussed that in my absence here. I just understood that, in the Hong Kong text, the emergency food aid would

be placed in a safe box while in-kind and monetarization food aid

will be disciplined.

I hope that you can elaborate a little bit on the implications of

that text for the integrity of our existing programs, because I think

that is going to be very important, not just for the hunger that exists worldwide, but also for our agricultural producers, too. Thank

you for being here.

Ambassador PORTMAN. Thank you, Senator Lincoln. Just, quickly, within the time. First, on the antidumping cases, as you know,

that is administered by Department of Commerce, not USTR, but

I do have a strong interest in that because it does relate to enforcement of our laws and making sure that imports are traded fairly.

China is the top country where we have actually brought orders,

in other words, where there is an order against a Chinese importer.

There are 28 cases that have now been brought in the Bush administration, making China the top target of our antidumping laws.

We continue to be aggressive in that regard.

Senator LINCOLN. We have talked a lot about Mexico and rice,

and yet we are still seeing that our producers have not gotten the

remedy.

41

Ambassador PORTMAN. And with regard to Mexico and rice, I

talked about that earlier, but that is one of our successes.

Senator LINCOLN. And they still have not complied?

Ambassador PORTMAN. We are working on the compliance on

that every day, and it is very important that we do. But that was

an example where the WTO works, where we can actually get a

good result. We believe Mexico will comply.

On 421, you are right. Of the four cases that the President has

looked at, he does not believe that it was appropriate to move forward. I have been involved, as you know, in the last one quite a

bit, which was the steel pipe case.

If you look at what he was faced with, he did accept the ITC’s

finding that there was market disruption. But then the question is,

will the 421 safeguard be an effective way to deal with that disruption, and is it in the overall economic interest of the United States?

What he found there, and I was part of this process and made

the recommendation, is that there were more than 50 countries,

based on the ITC documentation, that supplied the U.S. market,

and that they were ready and willing to step in and to replace

those curtailed Chinese imports.

So, it was not possible to make the argument that the domestic

producers in your State, Pennsylvania, or elsewhere would receive

the benefit; rather, there would be other importers. In that case,

the data just was not there.

Now, there are three other 421 cases that have come before us:

the Pedestal-1, wire hangers, and pipe fittings. In each case, again,

the analysis has not been there to show that 421 would have been

the right remedy. It does not mean that 421 does not work. It does

not mean that we should not continue to look at 421 cases very seriously, and we will. This office will. So, I would just encourage

your Arkansas constituents, even though I know it must be frustrating for them, that when the facts merit moving forward on

those 421 safeguards, we will.

Look at the China textile safeguards. It is a similar safeguard.

We were very aggressive because there we had the economic data

to support a decision and we could really help our manufacturers.

In the end, we were able to come together with this comprehensive

agreement which helps our manufacturers. In general, it has been

very well-received.

With regard to food aid, this did come up in the Agriculture Committee executive session last week with you. You and I talked

about it a little bit there, and also in response to Senator Crapo’s

question. The United States is adamant that we are not going to

accept cash only in food aid.

With regard to the policy here, we agreed in 2004 that we would

deal with the issue of commercial displacement, which is a trade

issue. That is a perfectly reasonable solution to the concerns that

have been raised globally about food aid.

I believe that the United States not only has the correct position

in terms of the policy here, but I believe there are more and more

countries and non-governmental organizations that are supportive

of where the United States is on this.

A lot of countries are very dependent on our food aid. We are the

largest food aid provider in the world, and we want to continue to

42

be generous. So we are going to stick to our position. We believe

it is the right position.

We believe that the safe box for certain emergencies is absolutely

appropriate, but we also believe that for the rest of food aid, the

criteria ought to be commercial displacement. That does not mean,

based on any analysis that we have seen or done ourselves, that

it ought to be cash only.

Senator LINCOLN. Thank you.

Senator BUNNING. Your time has expired.

I would like to remind members that any questions for the record

should be submitted by tomorrow, Friday, at 6 p.m.

Ambassador Portman, please submit your responses to the committee within a week.

With that, I would like to thank Ambassador Portman for his

testimony and thank the members who appeared at the hearing

today.

The hearing is adjourned.

[Whereupon, at 12:54 p.m., the hearing was concluded.]

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COMMUNICATIONS

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

Æ