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93–794—PDF 2004

S. HRG. 108–477

NOMINATIONS OF JOSETTE SHEERAN SHINER AND

JAMES JOSEPH JOCHUM

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON THE

NOMINATIONS OF

JOSETTE SHEERAN SHINER, TO BE DEPUTY UNITED STATES TRADE

REPRESENTATIVE; AND JAMES JOSEPH JOCHUM, TO BE ASSISTANT

SECRETARY OF COMMERCE, IMPORT ADMINISTRATION

JUNE 26, 2003

(

Printed for the use of the Committee on Finance
COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

DON NICKLES, Oklahoma

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

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

TOM DASCHLE, South Dakota

JOHN BREAUX, Louisiana

KENT CONRAD, North Dakota

BOB GRAHAM, Florida

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

KOLAN DAVIS, Staff Director and Chief Counsel

JEFF FORBES, Democratic Staff Director

(II)
C O N T E N T S

OPENING STATEMENTS

Page

Thomas, Hon. Craig, a U.S. Senator from Wyoming ............................................ 1

ADMINISTRATION NOMINEES

Shiner, Josette Sheeran, to be Deputy, United States Trade Representative,

Reston, Virginia .................................................................................................... 2

Jochum, James Joseph, to be Assistant Secretary of Commerce, Import Administration, Fairfax, Virginia ............................................................................ 4

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Prepared statement .......................................................................................... 15

Bunning, Hon. Jim:

Prepared statement .......................................................................................... 15

Grassley, Hon. Charles E.:

Prepared statement .......................................................................................... 15

Jochum, James Joseph:

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

Prepared statement .......................................................................................... 16

Biographical ...................................................................................................... 18

Responses to questions from Senators Grassley, Baucus, Rockefeller, and

Bunning ......................................................................................................... 22

Shiner, Josette Sheeran:

Testimony .......................................................................................................... 2

Prepared statement .......................................................................................... 27

Biographical ...................................................................................................... 29

Responses to questions from Senators Grassley, Hatch, Baucus, and

Bunning ......................................................................................................... 35

Thomas, Hon. Craig:

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

(III)

(1)

NOMINATIONS OF JOSETTE SHEERAN SHINER, TO BE DEPUTY U.S. TRADE REPRESENTATIVE, RESTON, VA; AND JAMES JOSEPH

JOCHUM, TO BE ASSISTANT SECRETARY OF

COMMERCE, IMPORT ADMINISTRATION,

FAIRFAX, VA

THURSDAY, JUNE 26, 2003

U.S. SENATE,

COMMITTEE ON FINANCE,

Washington, DC.

The hearing was convened, pursuant to notice, at 10:09 a.m. in

room SD–215, Dirksen Senate Office Building, Hon. Craig Thomas

presiding.

Also present: Mr. William J. Moffitt, Owner/Operator, Moffitt Reporting Associates, Mitchellville, Maryland.

OPENING STATEMENT OF HON. CRAIG THOMAS, A U.S.

SENATOR FROM THE STATE OF WYOMING

Senator THOMAS. I apologize for being a little late. We had a couple of votes and they drug out a bit. And we will probably have

some more, so, hopefully, we will be moving along here.

I think it might be appropriate before we begin to mention one

of our friends who has been here for 24 years on the committee,

Bill Moffitt, who is also celebrating his birthday today. So, congratulations, my friend, and thank you for all that you do. We appreciate it.

Mr. MOFFITT. Thank you very much, Senator Thomas. I appreciate your kindness.

Senator THOMAS. The committee this morning will be here to

deal with two trade nominations. I would like to thank the nominees, Ms. Shiner and Mr. Jochum, for being here. We appreciate

that very much. We need to move these nominees as quickly as

possible, so we are pleased to be able to work on that effort. I look

forward to your comments.

I think that it is important certainly that we fill these vacancies,

particularly now where there is as much emphasis as there is on

trade and moving forward on that. The deadline is not far away

and so significant resources are needed to make it successful and

complete in that negotiation.

We are also embarked on one of the most aggressive ambitious

trade agendas in history. And whether it is multinational negotiations or bilateral discussions with Morocco, these are the things
2

that we are most interested in. We need a strong trading relationship, and that creates opportunities for us to reduce barriers and

strengthen our economy.

So, welcome to both of you. Your entire written statements will

be included in the record. And we are going to inform Members

that the record will remain open for written questions through Friday, the 27th.

We will go ahead and proceed then. Ms. Shiner, welcome.

Ms. SHINER. Thank you.

Senator THOMAS. I hope things are going well for you this morning. Please proceed.

STATEMENT OF MS. JOSETTE SHEERAN SHINER, A NOMINEE

TO BE DEPUTY U.S. TRADE REPRESENTATIVE, RESTON, VA

Ms. SHINER. Chairman Thomas, I am honored to appear here before you today as President Bush’s nominee for Deputy United

States Trade Representative.

I would like to begin by offering my sincere thanks to the President for offering me the opportunity to serve the American people.

And I thank Ambassador Zoelick for his excellent leadership and

for the world-class team he has forged at USTR.

And I would like to thank the Congress, the Finance Committee

and their staffs, for the vital partnership they have provided. I am

honored by the trust and confidence placed in me, and, if confirmed, I will do my best to discharge the duties and obligations of

this office with enthusiasm, dedication, and humility.

Three weeks ago, June 6, marked the fifty-ninth anniversary of

D-Day, the day my father, a paratrooper in the 101st Airborne,

jumped from the skies over Nazi-occupied France.

Private Sheeran was separated from his unit and captured by

German troops. He escaped from the prison train, and fought behind enemy lines in occupied France before meeting up with the

liberating American troops. But my father’s commitment to his

country and to public service did not end there. He refused an offer

to return home, choosing instead to continue to fight in the Netherlands and Bastogne.

Back from the war, he served in the FBI, as a 2-term mayor of

West Orange, New Jersey, and as a member of Governor Byrne’s

cabinet. He instilled in me a deep and abiding love for my country,

and the knowledge that our freedoms have been hard earned by

the bravery and blood of others. He has been my hero, a model of

public service and sacrifice, and he would have loved to be here

today.

As someone with a background in business, media and public

policy, it is perhaps not surprising that I entered government expecting to encounter a slow-moving bureaucracy. My 2 years working as Associate USTR have helped prepare me to serve as Ambassador Zoelick’s deputy, and have informed my thinking about how

executive agencies can and should operate. My colleagues at USTR

represent the best of public service: They are tough, hard-working

negotiators, unfailingly good natured, creative, skilled at drawing

out the capabilities and knowledge of others, and they approach

work as problem solvers, people who make things happen for their

country.
3

My colleagues have given me tremendous support. Over the past

few months, I have met with many former USTRs and Deputy

USTRs who have given me the benefit of their experience and advice. Ambassador Zoelick and his deputies—Peter Allgeier, Linnet

Deily, and, of course, Jon Huntsman—have set a high standard of

leadership excellence at USTR.

If confirmed, I pledge to continue this record of achievement and

integrity. I am proud and honored to inherit a fine career USTR

team from Ambassador Huntsman, including Assistant USTRs

Wendy Cutler, Ralph Ives and Florie Liser.

Under the leadership of President Bush, Ambassador Zoelick,

and the Congress, the United States agenda is moving forward at

all levels: global, regional and bilateral. We seek to both ensure

compliance with existing agreements and to open new opportunities for America.

The Doha Development Agenda in the WTO is at the heart of our

efforts. We have advanced bold proposals to eliminate tariffs on

manufactured goods, to open markets for our farmers and ranchers,

and to implement deep cuts in farm tariffs and trade-distorting

subsidies, and open the global market for services.

I believe this agenda represents a once-in-a-generation opportunity for the American businesses and farmers that drive the most

innovative economy in the world.

Over the past two and a half years, we have signed free trade

agreements with Jordan, Singapore and Chile; and are now negotiating new FTAs with Morocco, the Southern African Customs

Union, the Central American Common Market, and Australia. We

helped bring China and Taiwan—more than a billion consumers—

into the World Trade Organization and are assisting other nations,

such as Russia and Cambodia, with their accession to the WTO.

We are making progress on the Free Trade Area of the Americas,

and have launched the Enterprise for ASEAN initiative, and extended a hand of hope and opportunity through expanded preferential trade programs with African and Andean nations.

Opening markets will not be our only challenge in the years

ahead. We are committed to ensuring that nations live up to their

trade commitments.

Most of all, I believe the United States must maintain a positive

commitment to solve problems: a willingness on the part of all parties—negotiators, legislators, businesses, and NGOs—to work toward constructive solutions in the whole range of trade matters.

Before closing, Mr. Chairman, I would like to recognize my

friends, family and colleagues who are with us today. My mother

passed on last year, but her belief in me was a gift from God. My

father and my stepmother, Lena Chang Sheeran, had hoped to be

here today. But my sister is here today.

And my children, who are the light of my life, Nicole, Daniel and

Gabrielle, are right here. They got to vote on this nomination and

whether I should accept it, and they gave me their full support,

knowing the sacrifices that would lie ahead.

Senator THOMAS. Unanimous.

Ms. SHINER. They did, yes. Although maybe we should re-take it.
4

My family, with its roots in Ireland, France, China and Africa,

are a living example of the glorious diversity that is America and

I am deeply indebted to them.

Mr. Chairman, as I have traveled throughout the world during

the past 2 years, I have been proud to represent a nation that is

generous, tolerant and fair. I thank you for this opportunity and

look forward to any questions you may have.

Senator THOMAS. Thank you very much. We will have some questions, but, first, we will have testimony from Mr. Jochum. If you

have family here, we would be happy to have you introduce them.

Mr. JOCHUM. I do, Mr. Chairman. My wife, Rita, is seated behind

me. She has informed me that she is staffing a markup at another

committee at this time, so she may have to run out. I do not think

that is a reflection on what I will be saying, however.

Senator THOMAS. We welcome all of you. We are glad that you

are here.

[The prepared statement of Ms. Shiner appears in the appendix.]

STATEMENT OF JAMES JOSEPH JOCHUM, A NOMINEE TO BE

ASSISTANT SECRETARY OF COMMERCE, IMPORT ADMINISTRATION, FAIRFAX, VA

Mr. JOCHUM. Thank you, Mr. Chairman. It is also an honor for

me to appear before you today as the President’s nominee for Assistant Secretary of Commerce for Import Administration.

Just over 2 years ago, I had the privilege to come before the Senate as the nominee for my current position, Assistant Secretary of

Commerce for Export Administration. And at that time Senator

Grassley graciously introduced me to the Senate Banking Committee.

So, it is with great pleasure that I now appear before the committee that he now chairs. And even though he is not here, I would

like to thank Chairman Grassley for his long-standing friendship

and support of my family and me.

I also thank Secretary Evans for having the confidence in me to

ask me to take another post in the Department of Commerce.

Working for President Bush and Secretary Evans these past 2

years has been an especially gratifying experience and one that I

will never forget.

Mr. Chairman, as this committee knows, the work of the agency

that I have been nominated to lead, Import Administration, is critically important to the well being of our economy.

While the benefits of free trade are well documented, and indeed

this administration strongly supports a free trade agenda, it is

clear that some of our trading partners continue to employ unfair

trade practices. Accordingly, Congress has provided the Department of Commerce with the statutory tools to address those practices that threaten American jobs.

If confirmed by the Senate, I will faithfully execute the authority

granted by Congress to protect the interest of American workers.

I believe that my experience in implementing U.S. export controls

for the last 2 years has prepared me well to continue to lead a regulatory agency charged with administering the laws of the United

States as Congress intended.
5

I also pledge to work closely with Congress, and particularly this

committee, on the important issues that arise in implementing our

trade remedy laws. As a former staff member in the Senate and as

a current member of the administration, I know the importance of

seeking your advice and counsel on decisions and policies that may

affect your constituents.

In closing, I would like to thank again my wife, Rita, and also

my baby daughter, Elena, who is not here today, for their support

of my desire to continue serving in the administration. As we all

know, the support and love of our families is the most important

element of our success, and I would not undertake this new challenge without them by my side.

Mr. Chairman, thank you again and for the Finance Committee

staff for organizing this hearing and holding the hearing today.

And I would be happy to answer any questions the committee may

have.

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

Senator THOMAS. Thank you. Thank you both very much.

Let me start out with three standard questions that are asked

of every nominee.

And I ask that each of you respond to these separately if you

will, please.

First, is there anything that you are aware of in your background

that might present a conflict of interest with the duties of the office

to which you have been nominated?

Ms. SHINER. No, there is not.

Mr. JOCHUM. No.

Senator THOMAS. Second, do you know of any reason, personal or

otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities to the office for which you

have been nominated?

Ms. SHINER. No.

Mr. JOCHUM. No.

Senator THOMAS. Third, do you agree without reservation to respond with any reasonable summons to appear and testify before

any duly constituted committee of Congress if you are confirmed?

Ms. SHINER. Yes.

Mr. JOCHUM. Yes, I do.

Senator THOMAS. That is the tough one.

Well, great. We are so glad that you are here.

By the way, the chairman has submitted several questions for

each of you, and we will see that you get those. And we would like

to have you answer them as quickly as possible.

[Senator Grassley’s questions appear in the appendix.]

In the meantime, Ms. Shiner, U.S. trade deficits for goods and

services have grown at an increasing rate over the last decade. In

1992, it was $38 billion, last year it was nearly $420 billion.

Some believe that this abrupt increase is due to the strong U.S.

dollar and a strong economy, however, some believe that this is due

to unequal openness of trade regimes. So, is there a connection between trade liberalization and trade deficits?

Will our free trade agreements increase our trade deficit or bring

it down?
6

Ms. SHINER. Mr. Chairman, I know there is tremendous concern

about the deficit, and we have been having an extensive dialogue

with the committee about. The large deficit is due to, in part, our

stronger economy. We are buying more than our trading partners

in Europe and Asia, and foreigners are investing here because of

the strength of the American economy.

On the macro economic level, we need our trading partners, like

Japan and Europe, to make the kind of economic decisions that will

allow them to grow more so that they will also be buying more

American goods and have a strong growing economy that will allow

for that.

At the same time, in the micro economic aspects of trade, such

as trade facilitation, opening the markets, providing opportunities,

creating jobs here, at all those levels we think it becomes more important with the trade deficit that we pursue vigorously the kind

of openings and enforcement that will enable us to continue to

grow our trade and continue to grow the trade and export part of

our economy.

So, we feel that this makes Doha all the more essential. We need

the kind of broad liberalization that can happen, especially in the

areas of agriculture, that would benefit our farmers, and we also

need, frankly, countries like Japan, who are key trading partners,

but need to show the kind of leadership in Doha that would help

their economy grow and help the rest of the world pick up the pace

that we need to see.

Senator THOMAS. Does it seem to you that as we make these

agreements that people with whom we have agreements have more

restrictions than we do and, therefore, contribute to our trade deficit situation?

Ms. SHINER. Mr. Chairman, obviously we are frustrated at the

undue barriers that often stand in the way of American goods

around the world. And certainly for me, this is a top priority, especially with countries like China, newly seated to the WTI, that

have thousands of laws and regulations they need to change, and,

frankly, making sure that our producers, our farmers, get a fair

shot in these markets is absolutely essential.

As we tell our trading partners, we welcome their trade, but we

expect our producers to get a fair shot. And as you know, productby-product we have got to wrestle to make sure that they are playing fair. And so we will continue to do that. But we also think that

Doha has a good opportunity to bring down some of the structural

barriers that still exist in areas like agriculture, and others, and

services, that will benefit us.

In addition, in areas like intellectual property, frankly, some of

our very good trading partners have not had strong enough enforcement. And so we are working with them and with countries

like China to really try to stem the flow of the illegal production

of our goods and the stealing of our intellectual property.

Senator THOMAS. Some people here—and, of course, it is in our

law and so on—feel that we have free trade agreements and they

freeze up a little bit. It is free trade agreements, assuming that it

is not quite the same on both sides, so it is a difficulty.

Mr. Jochum, recently the Commerce Department released a policy paper designed to move Canada toward a more market-based
7

system of selling timber. However, we hear the administration may

be willing to accept an interim arrangement that includes quotas.

A quota is the most distortive market measure that could be introduced. How will you make sure the final negotiated settlement

does not continue to negatively impact U.S. lumber consumers and

new home purchases?

Mr. JOCHUM. Mr. Chairman, as you know, the lumber dispute is

a long-standing dispute I guess over a couple of decades. And my

future undersecretary, Grant Adonis, has taken a personal interest

in trying to set a road map so that we can get out of this endless

cycle of litigation over Canadian lumber and really guide the Canadians to a more free market system, as you noted. And, of course,

one question in that context will be, what do we put in place between now and the point where we can actually certify that the Canadians have a free market system for buying their timber?

I know that offers have been exchanged between the parties,

meaning the Canadian provinces and the U.S. lumber industry,

with the Commerce Department acting as a conduit for that.

I take the point that a quote arrangement is trade distorting,

and I do not think we would want to put in place something in an

interim basis that is worst than the system we currently have.

But I think the way to make sure that we do not put such an

agreement into place is to continue to consult closely with both of

the parties and also with Congress on what arrangement we inevitably end up with.

Senator THOMAS. It is sort of interesting. I guess stumping

drakes have something to do with it.

Mr. JOCHUM. Right.

Senator THOMAS. And I was surprised to know, frankly, that

some of the domestic producers in this country are big operators in

Canada.

Mr. JOCHUM. That is right. We have a lot of cross-border business, and so we have people on both sides of the border on both

sides of the issue.

Senator THOMAS. Yes. It is interesting.

Ms. Shiner, you are responsible for a region in the world that

contains nearly 75 percent of the world’s population, four and a

half billion people apparently. It appears they would be diverse, the

number of people living in the area. What challenges or opportunities do you see, particularly in Asia?

Ms. SHINER. Mr. Chairman, we see Asia as a crucial market and

a crucial partner in global trade liberalization. Actually, APEC and

the Asian nations are often our strongest allies at the global level

for liberalizing the broad trading regime.

And we also feel that in Asia we have been able to establish how

developing nations can, through trade, become part of the global

economy, and that they have set an example that we hope to extend to our neighbors through the FTAA and Latin America, and

to Africa, to countries like the Southern African Customs Union

that we are negotiating our first free trade agreement with.

In Asia, our priorities are, first, on the global level, really ensuring that we can open agricultural markets, and with key trading

partners like Japan, ensure that they open some of their very

closed markets also. And so we are disappointed that they have not
8

shown more leadership on this in Doha, but we are working with

them to encourage them to work with us to achieve bold liberalization in Doha.

Second, on a regional level, we are working with Asean, which,

as you know, has many different levels of development in their

economies. It stems from Thailand and Singapore and Indonesia to

Vietnam, which is just really getting its first step up on the global

trading system in Cambodia.

And so we are working through a variety of means, including our

TIFAs, Trade and Investment Framework Agreements, to resolve

outstanding disputes, to begin the dialogue about the kind of regulations and systems we need in place in those governments in order

to have fair trade and open trade with them. In addition, as we

can, we are looking to graduate some of these economies into a

fuller trade partnership with the United States.

And so, as you know, we just have signed the first free trade

agreement with Asia and Singapore. This really is a model of broad

and deep liberalization, and the kind of measures that we think

will provide for a model for future free trade agreements in every

area, including e-commerce and intellectual property. So, we are

looking, you know, to whom?

And I look forward to talking with the committee about other

partnerships we should try to form with free trade agreements in

the region. A number of people are interested in Thailand. We have

talked to them about the kind of reforms we need to see in intellectual property and other areas before we can do that. But that is

an important market for our farmers and for our agricultural community.

We are negotiating with Australia, which is a leader in the region of free trade and a strong ally of the United States across the

board. So, we look forward to trying to bring countries into the rule

of law, the rules-based trading system, as we have with China and

Democratic Taiwan in our recent efforts to help them accede to the

WTO. And then hold them to their commitments.

And we need trade capacity building to help enforce those commitments and help them gain the expertise they need doing that

and making sure that they can meet those commitments.

Senator THOMAS. Interesting. Singapore is interesting.

We talked a little about it when the deputy was here, where

most of the trade comes into Singapore. It goes through there. It

is not developed there. So, the pattern is made with Singapore.

Does that fit Taiwan and Thailand and the others as well?

Ms. SHINER. Yes. I think a number of the stronger economies in

the region are trying to figure out how to position as China comes

into greater economic power and with the troubles in Japan.

So, I know that Singapore envisions itself as a hub of services

and as a consenter of e-commerce and technology and innovation.

We have certainly found that in our partnership with them, and it

is why we are especially pleased that the standards set in the FTA

will be ones that could be replicated there.

Thailand, they are very innovative in areas like life sciences and

biotechnology. They are doing research. We found that we can really develop strong partnerships with them in a number of these

areas. And we are working with Taiwan also on how we can work
9

closer together, how we can work on intellectual property enforcement and other things, and try to set an example for the region

that would be strong and positive.

Senator THOMAS. I see.

Mr. Jochum, I know you have described this, but just succinctly,

your office is going to be working out trade agreements in trying

to do their work. What is your mission? What is your task?

Mr. JOCHUM. Well, the mission of Import Administration is to enforce the trade remedy laws. So in some ways we are sort of flip

side of what Ms. Shiner will be asked to do. For example, I think

she eloquently described the market opportunities that exist in

China for U.S. exporters.

The flip side of that is we have U.S. producers in this country

who are under a lot of pressure at times from imports coming from

China, particularly those that are unfairly traded.

So, the job of Import Administration is to enforce the antidumping code and the countervailing duty statutes so that when

our trading partners engage in unfair trade, either dumping, selling below cost, or their exports are unfairly subsidized, that we can

take action and put on a duty to that extent and level the playing

field for U.S. producers.

Senator THOMAS. I ASKED ABOUT THE TRADE DEFICIT. Does your

role have anything to do with the trade deficit?

Mr. JOCHUM. I guess to the extent that their imports entering

the country, so-called illegally, by unfair means, and our ability to

prevent that from happening, probably would affect the trade deficit. But I do not think it is in the amount of quantities in volume

that would probably have a significant effect on the trade deficit.

Senator THOMAS. So, do you think you have the capacity and the

resources and so on to enforce?

Mr. JOCHUM. My sense of the organization, which obviously I am

not a part of it yet, is that they do a pretty good job of handling

the caseload. I think they have 300 plus employees, and I think

they have a reputation of being professional and competent.

On the enforcement side, most of our enforcement authority is

actually held by the Customs. They would enforce things like

fraudulent circumvention of antidumping orders, misrepresentations responding to a petition, and those things. So, we work very

closely with Customs to enforce our laws.

Senator THOMAS. Customs is a different agency.

Mr. JOCHUM. That is exactly right. In fact, I think Under Secretary Adonas just forged a new working group with the Bureau

of Customs and Border Protection—which is their new name—to

look at the enforcement problems unique to China, because we

have a lot of things in China that happen that seem to be evidence

of fraud and a willingness to circumvent existing orders. So, we

work real closely with Customs, share information with them, and

then they would follow up on the enforcement side.

Senator THOMAS. Do you feel comfortable that the agreements

you make, and so on, are enforced and kept accurately in place?

Mr. JOCHUM. I think enforcement requires vigilance. And so we

need the means and the mechanisms in place to ensure that we

can enforce and that we have access to enforcing these agreements.
10

But it really requires vigilance. And so, product-by-product, situation-by-situation, we watch it closely.

I have to say we have a very close partnership with the Commerce Department, with Under Secretary Aldonas and his team,

and we have been able to work very closely together, and we feel

that the mechanisms we have in place are an important safety

valve when needed. In addition, I will tell you that with China,

President Bush brought up with President Hoo our concerns about

agricultural products and other products.

Ambassador Zoelick has taken a number of trips there to really

underscore our strong sense that it is not only in our interest, but

it is in China’s interest to make sure that as their products come

into the United States our products freely flow there also. And so

we want success stories in China for our businesses and our farmers as much as they have success stories here. I think that will be

very much at the core of all of our tasks in the years ahead.

Senator THOMAS. It was interesting where their agricultural exports were moving up rather strongly before the Asian currency crises. And we have yet to recover from that, I think. Maybe the Canadian mad cow thing will help us a little. I am not sure.

Mr. Jochum, there are approximately 50 cases concerning pending China involvements of dumping products. In a House hearing

recently, U.S. industries had a common concern that the patterns

developed which favors Chinese over U.S. interests, a significant

number of the cases of U.S. interests were zeroed out even in cases

where the facts have not changed.

An example that I am familiar with is the U.S. producer of chemical critical to the circuit board manufacturing being zeroes out in

the case involving a Chinese exporter. It has been going on for several years. The Chinese company duty was dropped from 42 to

zero. Eventually, the penalty will be borne by U.S. companies. And

I do not know that you are familiar with that case. It has something to do with China and soda ash. Are you familiar at all with

that?

Mr. JOCHUM. Not with that specific case. But I am familiar with

the hearing that was held on the House side. I guess a couple of

weeks ago and Under Secretary Aldonas testified. And just by way

of comment, I think China poses a really unique situation for us

in two regards.

One, it is obviously still a non-market economy. So, we have difficulty in determining sales prices and cost of production in that

market because of state interference in the market. So, it often

leads us to construct prices and costs, using a surrogate country.

The other challenge we have in China is that under the Uruguay

Round there is a requirement that we account for new shippers,

which means we could have a duty against one exporter in China,

for example, but if a new company pops up and they start exporting, we are required to take into account whether they would have

a lower duty. And I am not sure that is what accounts for your constituents’ issue.

But I know that Under Secretary Aldonas is very focused on

China as a result of the hearing and even before the hearing, and

that led to this interagency working group with Customs. And it

is also leading to some regulatory changes that are being con-
11

templated. And we would be glad to come up and brief the committee and staff on those changes, specifically on the new shipper

review, which I perceive as a loophole the way it was constructed

previously.

We have limited the option for those exporters to post bonds, and

then sort of export freely into our market. And so I think we have

addressed at least part of the issue already, but I think we do have

some work to go in China to make sure that what we are looking

at is bonafide transactions and not just transactions designed to

circumvent and order that has been in place. And I would be happy

to follow up on the case you specifically mentioned.

Senator THOMAS. I was Chairman of the Subcommittee on the

Asian Pacific Rim in years previous, and so I worked quite closely

with China and Asia.

Mr. JOCHUM. Yes.

Senator THOMAS. And China, I think, has made some real improvements and is moving in the right direction. And there is great

potential there for both of our countries. But it is difficult sometimes to impart.

You also, Ms. Shiner, have responsibility for Africa. Not knowing

much about that, it seems like that is kind of a different would in

terms of trade.

Ms. SHINER. Mr. Chairman, it is a different world in terms of

trade, and mostly it is because Africa has pretty much been excluded from the benefits of global trade. I think this is something

that does not benefit the global economy and global stability, and

I think it is something that the Congress has worked hard to address through things like the African Growth and Opportunity Act.

Through our preferential program with Africa, AGOA, I have to

say that we have caused resolution in thinking in Africa and

helped trigger the progress in thinking about how the world trade

can play in their development. And I think the powerful new idea

that we have been putting on the table with Africa is the powerful

combination of trade and aid.

So, constructing our capacity-building programs to help them

build in the kind of rules and regulations, that will allow them to

build free enterprise in their countries and participate in global

trade. So, we have very much focused our efforts there.

A number of countries like Lesotho and Botswana and Anibia, all

of which we are now negotiating a free trade agreement with, have

been tremendous beneficiaries of AGOA. They have started new industries there. They have been able to create thousands of new

jobs.

And I think it has transformed the thinking there to a marketbased kind of thinking about their economies. So, there are a number of countries setting the pace. We believe that this will lead to

a much more stable continent, with economic leaders there that

can create their own growth, and hopefully break a cycle of aid and

dependency that the new generation of leaders in many of those

countries want to see done.

We have a small but excellent Africa team at USTR. We spend

a lot of time there in teaching and in capacity building on areas

like intellectual property, and why it is in the interest of developing economies to be intellectual property protectors rather than
12

under miners. And a number of these countries have set up model

laws for the continent.

So, we look forward to our first free trade negotiations there with

the five members of the Southern Africa Customs Union. We recently had out 25 of their negotiators, most of who have never been

at the trade-negotiating table. And so, they are now training a new

generation of new negotiators. And I will tell you that in Doha they

were essential new partners in launching this new global round.

When India and others resisted, the Africans came forward and

said, you know what? We need more trade. This continent is committed to trade. And it was those two leaders in Africa that really

turned the tide in Doha. So, we want to work with them. And we

have made it clear that this is an opportunity. We are extending

a hand of partnership. But they have to take the steps. And as

President Bush has said, building an economy that can trade is a

lot of hard work.

It is nothing that anyone can bestow on a country. It is not anything that anyone can give to a country. But a number of these

countries have really come forward and are taking a leadership

role in that.

Senator THOMAS. I mentioned the Singapore thing as the ultimate. Sometimes you wonder. For instance—and I am not suggesting that this would be the case, but I did read something about

it somewhere—let us say we had an agreement with Australia and

not with New Zealand—in fact, I think the trade representative

talked about not doing them together recently—what then would

keep a country that we did not have an agreement with for shipping their goods through one that we do?

Mr. JOCHUM. Well, if there is an issue of whether we have quotas

in place, for example, with one county and a third country shipping

around those quotas through a conduit, that would really be an enforcement issue for Customs. And obviously we do see that. I am

sure Customs has many officers assigned to do that.

We see that more in the context of China, whom we have textile

quotas in place against. There have always been allegations that

they perhaps ship through Singapore, for example.

But really, that is sort of after the trade agreement is negotiated,

a factual case that is really most suited for Customs agents than

try to track that down. And it is often difficult.

We had an issue I think in China recently with garlic, for instance, and the Customs agents somehow figured out how to identify certain pieces of garlic so that they could determine when they

saw the garlic what county it came from.

I think that maybe technology will help us out on this problem

someday and that it is probably the preferred alternative. But I

think that it is often difficult, but it is something that we have

monitored closely.

Senator THOMAS. I think garlic could be one of the easier ones

to track.

Well, one of the real challenges is going to be with the European

Union with regard to accepting agricultural product from the

United States. I think I read this morning that they did not have

much luck yesterday doing some negotiations with regard to agri-
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cultural products. So, Ms. Shiner, that is not in your jurisdiction

apparently, is it?

Ms. SHINER. No, it is not. But I will say that we really do feel

that as we get traction in other regions and countries, it can help

unsettle the protection as impulses in some of these countries. And

so, we are hoping to continue to put the pressure on the Europeans, both on biotechnology and in Doha.

Senator THOMAS. Good. Thank you.

Well, I am very impressed with both of you and your backgrounds and your willingness to do something.

We have some questions here for you, and you may get some others, and I hope you can respond to them as quickly as possible.

And we appreciate very much your willingness to serve and we

appreciate your being here today, and look forward to completing

this process for you. So, thank you all and good luck.

Ms. SHINER. Thank you.

Mr. JOCHUM. Thank you.

Senator THOMAS. The hearing is adjourned.

[Whereupon, at 10:47 a.m., the hearing was concluded.]

(15)

A P P E N D I X

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. MAX BAUCUS

Ms. Shiner and Mr. Jochum, I want to begin by welcoming you and your families

and friends to the Finance Committee. You are to be congratulated for being selected by the President to serve in these important positions. We appreciate your

service to the country. To your families, we recognize that you make the real sacrifices. Thank you for your service to our country as well. Both nominees before us

today have interesting and successful backgrounds that they bring to their positions.

Ms. Shiner has been nominated to be Deputy United States Trade Representative.

She has over twenty years of experience as a successful journalist and businesswoman, but she has worked these last two years at USTR in a high-ranking policymaking position.

Mr. Jochum has been nominated to be Assistant Secretary of Commerce for Import Administration. He currently serves as Assistant Secretary of Commerce for

Export Administration, a position for which he was confirmed by the Banking Committee and the full Senate only two years ago. He will bring a wealth of experience

both in international trade matters and in working with the Congress.

Mr. Chairman, thank you for moving forward with today’s hearing and giving

these nominees prompt consideration by the Finance Committee. I look forward to

working with both of these nominees in the future.

PREPARED STATEMENT OF HON. JIM BUNNING

Thank you, Mr. Chairman.

I would like to welcome our guests to the committee today. We appreciate your

willingness to serve the Administration in the capacities for which you have been

nominated.

You are both being considered for positions from which you will have substantial

influence over the trade policies of this country. I know that you recognize the importance of this issue to our economy and will take that responsibility seriously if

you are confirmed. I hope that you will both keep the goal of providing a fair playing

field for American businesses to compete upon, both domestically and abroad, utmost in your mind as you contemplate the responsibilities that these positions entail.

The fair enforcement, implementation, and administration of our trade laws affect

all Americans. I expect, if confirmed, that you will dedicate yourself to the fulfillment of these purposes.

Thank you.

PREPARED STATEMENT OF HON. CHARLES E. GRASSLEY

It is my pleasure to welcome Josette Shiner and The Honorable Jim Jochum to

the Finance Committee today. Ms. Shiner is the President’s nominee for the position

of Deputy United States Trade Representative. Should she be confirmed, Ms. Shiner

will play a key role in formulating U.S. trade policy with Africa and Asia. Assistant

Secretary Jim Jochum is the President’s nominee to succeed Faryar Shirzad as the

Assistant Secretary for Import Administration at the U.S. Department of Commerce. The Assistant Secretary for Import Administration is responsible for administering the U.S. trade remedy laws, and thus, also plays an extremely important
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role in U.S. trade policy. Both of the nominees before us today are well-qualified.

They both have the experience that they will need to handle the jobs for which the

President has nominated them. And I am sure that both of them are eager to get

started in their new roles.

But before I introduce these nominees, I would like to talk about the roles of the

USTR and Import Administration in U.S. trade policy. Let me begin by stating how

important I think the USTR is to farmers, firms, and workers across the United

States. There is no doubt that trade is critical to the American economy. Throughout

the past decade, as much as a quarter of all our economic growth has been attributable to exports. Trade has helped keep inflation low and has spurred competition

and innovation in the American marketplace. Trade has also created good, high-paying jobs. Export related employment, supporting an estimated 12 million jobs, pays

13 to 18 percent above the prevailing wage. In my home state of Iowa, trade is very

important. A significant share of farm produce from Iowa is now destined for overseas markets. For me, the expansion of free trade is critical to the growth of Iowa’s

economy and the growth of the U.S. economy. So, I am glad to see that the President has embarked on an ambitious trade agenda following the passage of Trade

Promotion Authority, and I support USTR’s work to open up foreign markets

throughout the globe.

Import Administration, within the U.S. Department of Commerce, also serves as

important role in U.S. trade policy by enforcing our trade laws to allow U.S. companies and workers to compete on a level playing field. I cannot stress how important

it is that this agency conduct its investigations and reviews with integrity and a

strict adherence to the laws that govern its procedures. That said, I would first like

to welcome Josette Shiner. The President has nominated Ms. Shiner to be Deputy

U.S. Trade Representative, with the rank of Ambassador, within the Executive Office of the President. Ms. Shiner is presently the Associate United States Trade Representative. In that capacity she serves as a chief policy strategist on trade and

globalization issues and oversees numerous negotiating sectors as well as the agency’s communications and outreach operations. Ms. Shiner has a wide-ranging and

strong background in policy, journalism and the private sector. Her present and

past work experience make her a very able candidate for the job in front of her.

I am also very pleased to welcome the nomination of Assistant Secretary James

Jochum. The President has nominated Assistant Secretary Jochum to be the Assistant Secretary for Import Administration at the U.S. Department of Commerce. Assistant Secretary Jochum presently serves as the Assistant Secretary for the Bureau

of Industry and Security at Commerce. In this position he is responsible for safeguarding U.S. national and economic security by administering U.S. export control

laws and formulating export control policy. Before going to Commerce, Assistant

Secretary Jochum worked in the private sector and for Congress. And I can personally attest to Jim’s ability and integrity, as he is a native Iowan and served as my

Legislative Director and International Trade Counsel for a number of years. That

said, I would again like to welcome our nominees to the Committee. I look forward

to your testimony. However, before turning to that, I would ask each nominee to

acknowledge any family members or guests who have come here today and ask

those individuals to stand so we may welcome them here today. With that, let me

turn to my distinguished friend and colleague, the Ranking Member of the Finance

Committee, Senator Baucus.

PREPARED STATEMENT OF JAMES J. JOCHUM

Mr. Chairman, Senator Baucus and Members of the Committee.

It is an honor to appear before you today as the President’s nominee for Assistant

Secretary of Commerce for Import Administration. Just over two years ago I had

the privilege to come before the Senate as the nominee for my current position, Assistant Secretary of Commerce for Export Administration. At that time, Senator

Grassley graciously introduced me to the Senate Banking Committee. So it is with

pleasure that I now appear before the committee that he chairs. I want to thank

Chairman Grassley for his longstanding friendship and support of me and my family.

I also thank Secretary Evans for having the confidence in me to ask me to take

another post in the Department of Commerce. Working for President Bush and Secretary Evans these past two years has been an especially gratifying experience and

one that I’ll never forget.

Mr. Chairman, as this Committee knows the work of the agency that I have been

nominated to lead, Import Administration, is critically important to the well being

of our economy. While the benefits of free trade are well documented and, indeed,
17

this Administration strongly supports a free trade agenda, it is clear that some of

our trading partners continue to employ unfair trade practices. Accordingly, Congress has provided the Department of Commerce with the statutory tools to address

those practices that threaten American jobs.

If confirmed by the Senate, I will faithfully execute the authority granted by Congress to protect the intersts of American workers. I believe that my experience in

implementing U.S. export controls the last two years has prepared me well to continue to lead a regulatory agency charged with administering the laws of the United

States as Congress intended.

I also pledge to work closely with Congress, and particularly this committee, on

the important issues that arise in implementing our trade remedy laws. As a former

staff member in the Senate, and as a current member of the Administration, I know

the importance of seeking your advice and counsel on decisions and policies that

may affect your constituents.

In closing, I would like to again thank my wife Rita—and also my baby daughter,

Elena—for their support of my desire to continue serving in the Administration. As

we all know, the support and love of our families is the most important element

of our success and I would not undertake this new challenge without them by my

side.

Mr. Chairman, thank you again for holding this hearing and I would be happy

to answer any questions from the Committee.
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RESPONSE TO A QUESTION FROM SENATOR GRASSLEY

Question. As you may know, there is a possibility that at the end of this year,

WTO parties may not agree to extend the ‘‘Peace Clause’’ covering agricultural products. If this happens, Import Administration may get a number of filings for agricultural cases. A big issue with these products will be seasonality. How is Commerce

addressing the issue of seasonality at the Doha negotiations?
23

Answer. It is unclear whether the expiration of the Peace Clause will result in

an unusually large influx of agricultural cases. This is because the Peace Clause has

not been interpreted to prevent the filing of agricultural cases by the domestic industry. Indeed, farmers and ranchers have been filing antidumping and countervailing duty petitions during the period in which the Peace Clause has been in effect

(e.g., the wheat countervailing duty case). If I am confirmed, the Department will

continue to treat these cases with care, seriousness and expedition, taking into account the special circumstances in the production of these products.

Consistent with the Trade Act of 2002, one of the Administration’s key negotiating

objectives in the WTO is to develop a position on the treatment of seasonal and perishable agricultural products under the trade remedy laws. The United States has

tabled a paper identifying this issue as an important topic that needs to be addressed in these negotiations.

If confirmed, I will work to develop an international consensus on the appropriate

treatment under the trade laws of seasonal and perishable agricultural products, as

called for in the Trade Act of 2002. I understand that the Department has been consulting closely with industry representatives in order to better understand the problem and seek input in developing an approach that will help to eliminate practices

that adversely affect trade in certain agricultural products. This should help to level

the playing field so that U.S. farmers and ranchers have the same access to import

relief mechanisms as those available in other countries.

RESPONSES TO QUESTIONS FROM SENATOR BAUCUS

Question 1. I would like your views on challenges to U.S. trade laws in the WTO,

both in dispute settlement and in the negotiations. For dispute settlement, I’m

thinking in particular of rulings against the U.S. safeguard measures, the ruling

against the Byrd Amendment, and the recent EU challenge to the practice of ‘‘zeroing.’’ For the negotiations, I’m thinking about the push to adopt the lesser duty rule.

Answer. In the context of the dispute settlement process, it appears that WTO

Panels and the Appellate Body have sometimes imposed their own preferred interpretation of ambiguous provisions of the Antidumping or Subsidies Agreements

upon the United States. These exercises in ‘‘gap filling’’ have as a practical matter

created a number of new obligations for the Department in administering these laws

to which the United States never agreed.

As you know, the Administration disagreed with the decisions of the WTO Panel

and Appellate Body on the Byrd Amendment and, accordingly, exhausted its appeal

rights on this case. A final Panel decision has not been issued on the Section 201

safeguards case, but the Administration will seriously consider all available options

once a decision has been rendered.

With regard to the ‘‘zeroing’’ decision, I understand that the Antidumping Agreement does not establish obligations with respect to the issue addressed by the Panel

and Appellate Body, specifically, how individual dumping margins may be combined

into a single, weighted-average margin. Consequently, the Panel and Appellate Body

should not have addressed this issue. The Administration continues to believe that

the calculation methodology, as administered by the United States, is wholly legitimate.

Regarding the Rules negotiations, I understand that the Department has always

opposed application of a lesser duty rule, and plans to continue this opposition.

Question 2. It seems that recently the United States has more often been a defendant in WTO cases than a plaintiff. Do you think we should be more aggressive

in bringing dispute settlement cases where we have a case to bring?

Answer. Although USTR is the agency within the U.S. government that determines when cases should be brought to the WTO, I am certainly willing to be supportive of the United States bringing more cases as a plaintiff where other WTO

Members impose trade remedies that are not consistent with their WTO obligations.

Of course, each potential action would have to be evaluated based on its individual

merits.

RESPONSES TO QUESTIONS FROM SENATOR ROCKEFELLER

Question 1. Mr. Jochum, I am aware that the Commerce Department is deliberating over a decision on the application of the payment by foreign producers or

their U.S. subsidiaries of 201 duties in antidumping cases. Further, I understand

the Department originally announced its intentions to reverse its position on this

issue in August 2002, and that as a result numerous parties expressed concern

about this policy view.

If confirmed, will the payment by foreign producers or their U.S. subsidiaries of

201 duties be deducted from U.S. price in antidumping investigations and reviews
24

in accordance with U.S. law by the Department? Given your response, please elaborate as to your interpretation of the statutory language.

Answer. I am not aware of a policy pronouncement on this issue in August 2002.

However, I understand that the issue of how to treat Section 201 duties in the Department’s dumping margin calculations was raised in the final weeks of a recent

antidumping investigation of steel wire rod from Trinidad and Tobago. In that case,

the foreign respondent, the domestic producers and the United Steelworkers of

America all commented on the issue, but the domestic interested parties requested

that the Department allow additional time for more extensive comment on this

farreaching policy determination. The Section 201 remedy at issue in that case was

a tariff rate quota. After examining the facts, the Department found that very few

sales were made above the established quota level and, thus, the amount of Section

201 duties paid was very small. Since any adjustment to reflect payment of Section

201 duties as a cost of sale in that case would have had an insignificant impact on

the final result, the Department opted not to address the matter. However, insofar

as this is also an issue in some other pending investigations, I believe that the Department will invite all interested parties in those cases to comment fully on the

issue, as well as parties not involved in these specific proceedings, so that the question might be more extensively considered in light of the comments made and other

relevant factors.

If confirmed, I will review and consider the arguments made by all sides as to

whether it would be feasible and appropriate to treat Sections 201 duties as a cost

of sale under U.S. law and our international obligations. I am aware that it is the

Department’s statutorily-mandated practice to deduct ‘‘normal’’ U.S. import duties

as an adjustment to the U.S. price. I am also aware that both the Department and

Congress have in the past refrained from providing for the deduction of antidumping countervailing, Section 301 or Section 201 duties, and that this practice

has been affirmed in several cases by U.S. courts based on the rationale that any

such deduction would effectively result in an over-collection of the duties. At the

same time, I know that many are concerned about the potential for duty absorption

practices that could have a deleterious effect on the relief expected from the imposition of unfair trade remedies. I will, therefore, look forward to assessing carefully

the arguments made on this issue.

Question 2. The Department has the sole authority to administer and enforce the

U.S. unfair trade statutes. These laws have been put into place to provide a legal

playing field for manufacturers or farmers to use to challenge unfair trade practices.

One of my concerns is that the Department continues to refrain from applying the

countervailing duty laws to non-market economies and to China specifically. In the

recent DRAMS from Korea countervailing duty case, the Department countervailed

bad loans made by Korean government owned banks to Hynix. In China, government owned banks have made over $500 billion in bad loans to support Chinese exporters.

If confirmed, will the Department change its policy on the application of CVD law

to China? If not, is it fair to Korean producers or U.S. companies that we countervail these practices when they occur in Korea, but do nothing when the same practices occur in China? How can U.S. manufacturers or farmers compete with imports

from China if the U.S. government refuses to countervail clear subsidy programs?

Answer. The Department is committed to addressing market distorting practices

by any government, including the Chinese government. However, China, unlike the

Republic of Korea, is a nonmarket economy and, as such there are no reliable commercial benchmarks in China against which to compare government actions. The

Federal Circuit Court of Appeals ruled in the Georgetown Steel case many years ago

that the CVD law does not apply to non-market economies, on the theory that it

is not possible for a government to distort an economy, by means of subsidies, when

that economy itself is not based on market principles in the first place. Therefore,

despite some reforms in China, I do not believe that the Department intends to

change its policy at the present time on the application of CVD law to China.

Instead, the non-market features of the Chinese economy that justify, under the

rule enunciated by the Court of Appeals, not applying the countervailing duty law

to China, warrants the continued application of an alternative, non-market economy

(factors-of-production) methodology in our antidumping cases involving imports from

China. This non-market-economy antidumping methodology accounts for the unique

circumstances in non-market economies and, to some degree, offsets these circumstances. Specifically, because we cannot rely on prices and costs in China, the

methodology relies on prices and costs from market economies to construct a

marketbased price. Thus, by not using Chinese prices and costs, the Department addresses the marketdistorting practices by the Chinese government.
25

Should the Department make a determination sometime in the future that graduation of China to market-economy status is warranted, based on an analysis of

China’s economy under section 771(18)(B) of the Tariff Act of 1930, as amended, the

countervailing duty law would begin to apply to China on the date such graduation

became effective.

Question 3. You stated in your response of July 8, 2003, that you were ‘‘aware

that both the Department and Congress have in the past refrained from providing

for the deduction of antidumping, countervailing, Section 301 or Section 201 duties,

and that this practice has been armed in several cases by U.S. courts based on the

rationale that any such deduction would effectively result in an over-collection of the

duties.’’ My staff checked with the professional staff of the Finance Committee and

was informed that your answer is probably incorrect in several respects.

In particular, I understand there are no decisions applicable to either Section 301

or Section 201. In fact, the closest past decision in this regard appears to have been

the Commerce Department’s decision in Fuel Ethanol from Brazil, (51 Fed. Reg.

5,572 February 14, 1986), in which the Department of Commerce did deduct duties

temporarily increased on ethanol and published in Chapter 99 (as has been the temporary duty increase on steel products), from U.S. price in an antidumping investigation when the additional Customs duties were paid for by the Brazilian producers or their U.S. subsidiaries.

Accordingly, I ask that you identify, as to each of the four statutes referred to in

your response (antidumping, countervailing duty, Section 301, and Section 201) the:

(1) Commerce Department decisions, (2) actions taken by the Congress, and (3)

court decisions, which support your statement.

Answer. The information that you requested regarding actions applicable to the

deduction of antidumping and countervailing duties in calculating dumping margins

is presented below. Your question correctly states that there have been no corresponding Commerce Department (Commerce) or court decisions applicable to either Section 301 or Section 201 duties. In this respect, my answer dated July 8,

2003 is in error. I apologize for any confusion my original answer has caused and

appreciate the opportunity to clarify my statements and the relevant precedents

that relate to this issue.

With respect to Commerce’s decisions, I have been informed that Commerce has

not deducted antidumping and countervailing duties from U.S. price in calculating

dumping margins since it began administering the antidumping and countervailing

duty laws in 1980, absent clear evidence that the importer was reimbursed for those

duties. One example of a decision declining to deduct antidumping and countervailing duties from U.S. price is Certain Corrosion-Resistant Carbon Steel Flat Products from Korea, 61 Fed. Reg. 18, 547 (1996).

Further, it is my understanding that Commerce has not deducted either Section

201 or Section 301 duties from U.S. price in calculating dumping margins, but has

never specifically addressed this issue in a final administrative decision. As noted

in my original response, I will conduct a comprehensive review of whether Section

201 duties should be deducted from U.S. price in an upcoming antidumping proceeding in which the issue is raised, after inviting all interested parties to submit

full comments on the record. I understand that Commerce’s determination in the

case you cited, Fuel Ethanol from Brazil, involved similar issues to those presented

by the deduction of Section 201 duties from U.S. price, and will take that determination into account in addressing the issue.

With respect to actions taken by Congress, my reference to Congress refraining

from providing for the deduction of duties from U.S. price should have been limited

to antidumping duties. The reference was to a proposal by Representative Regula

for inclusion in the Uruguay RoundAgreements Act that would have required the

deduction of antidumping duties from the U.S. price in calculating dumping margins. This proposal was not included in the Uruguay Round Agreements Act. Moreover, in the Statement of Administrative Action, Congress stated (p. 885) that the

provision for duty absorption inquiries in sunset reviews of antidumping orders was

‘‘not intended to provide for the treatment of antidumping duties as a cost.’’ At the

time that the deduction of antidumping duties was considered by Congress, it is my

understanding that there was no similar proposal calling for the deduction of countervailing duties or Section 301 orSection 201 duties. However, I know that there

is legislation pending in both the House and Senate that would treat countervailing

duties as costs for the purpose of calculating antidumping margins.

With respect to court decisions, the principal relevant Court of International

Trade (CIT) decisions are as follows. In AK Steel Corp v. United States, 988 F. Supp.

594 (CIT 1997), the CIT upheld Commerce’s decision not to deduct antidumping duties and countervailing duties from U.S. price in calculating the dumping margin.

In Hoogovens Staal v. United States, 4 F. Supp. 2d 1213 (CIT 1998), the CIT upheld
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Commerce’s decision not to deduct antidumping duties from U.S. price in calculating

the dumping margin. Similarly, in PQ Corp. V. United States 652 F. Supp. 724 (CIT

1987), Federal Mogul Corp. v. United States, 813 F. Supp. 856 (CIT 1993), and

Outokumpu Copper v. United States, 829 F. Supp. 1371 (CIT 1993), the CIT upheld

Commerce’s decision not to deduct estimated antidumping duty deposits from U.S.

price. To my knowledge, the U.S. courts have not addressed the treatment of Section

301 and Section 201 duties under the antidumping law, and the implication in my

original answer to the contrary was inadvertent.

Again, I appreciate this opportunity to clarify the erroneous statement contained

in my response of July 8, 2003. I hope this response fully answers any questions

or concerns you have on this issue.

RESPONSES TO QUESTIONS FROM SENATOR BUNNING

Question 1. Over the past two years I have worked with steel producers in my

state to ensure that a strong 201 remedy was put into place to provide relief to the

industry. In the 201 proclamation, the President provided room for our government

to readdress instances where import surges may occur from countries not covered

by the 201 remedy. This was put into place to ensure that the 201 program would

not be undermined by a surge in imports from uncovered countries.

I understand that there has been some concern over whether import surges from

these excluded countries—including India and Turkey—are cutting into the real

teeth of the 201 remedy.

What are your plans to address this import surge problem? What are you and

your counterparts at the Dept. of Commerce prepared to do to ensure that this trend

does not continue and what is your time frame?

Answer. The Department is aware of the industry’s concerns over increases in certain steel imports from India and Turkey. I understand that USTR has held consultations with both countries to voice the concerns of both the industry and the Administration over these import increases. The Department continues to monitor

these imports closely and will work with USTR to take whatever steps are appropriate, including the possible application of 201 duties to these products.

The Department currently monitors all steel imports covered by the section 201

remedies through the steel import licensing and surge monitoring program. Under

this program, all imports of Section 201 steel products, including those from excluded developing countries such as the ones you mentioned, must obtain a steel import license. Aggregate information from the steel licenses is reported by section 201

remedy category and country of origin on the surge monitoring website for use by

the Administration, domestic steel industry and interested members of the public.

The system focuses on early identification of import surges, particularly those from

excluded developing countries, that could undermine the relief provided to the industry by the President.

The surge monitor is updated weekly with information obtained from the previous

week’s steel licenses. The Department works closely with USTR to examine and

identify potential surges and evaluate them within the context of market conditions

and other factors to determine whether such import increases are undermining the

section 201 relief.

Question 2. As you know, the way in which a respondent allocates production

costs between subject and nonsubject merchandise in a dumping case can have a

major impact on the accuracy of Commerce’s normal value calculation. A respondent’s treatment of nonsubject merchandise as either a co product or byproduct in

the production process can have a similar impact. Each of these allocations, if not

correctly done, can result in understated normal values and margin determinations

that fail to reflect the actual extent of dumping in any given case. These problems

are even more acute in dumping cases involving Chinese imports, where Commerce

must resort to an NME methodology for determining normal value and where respondents have considerable leeway in reporting factors of production.

I would like to bring to your attention one current Chinese dumping case where

Commerce should be particularly vigilant in analyzing these matters to ensure an

accurate normal value calculation. I am talking about polyvinyl alcohol from China.

I would appreciate it, Mr. Jochum, if you could look into this case and let us know

how Commerce has made sure that production costs are not being shifted away from

the subject merchandise and that all byproducts are properly recognized in this

case.

I agree that allocation of production costs between subject and non-subject merchandise, as well as the treatment of non-subject merchandise as either a co-product

or byproduct in the production process, may have an important impact on the normal value calculation. The final determination in the polyvinyl alcohol case to which
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you refer is currently scheduled for August 2003. Because this is an ongoing proceeding in which no final decisions have been made, and because I do not have access to official IA records in my current position, I cannot comment on how Import

Administration will treat production costs and byproducts in this specific case. However, I understand that the issues you have raised have been argued strenuously

in this case, both in briefs and in the hearing. If confirmed before the final determination, I can assure you that I will carefully examine this issue in particular to

ensure that no production costs are improperly shifted away and that all byproducts/co-products are properly recognized.

PREPARED STATEMENT OF JOSETTE S. SHINER

Chairman Grassley, Senator Baucus, and Members of the Committee, I am honored to appearbefore you today as President Bush’s nominee for Deputy United

States Trade Representative.

I would like to begin by offering my sincere thanks to President Bush for affording

me the opportunity to serve the American people. I thank Ambassador Robert B.

Zoellick for his excellent leadership and for the world class team he has forged at

USTR. And I would like to thank the Congress, the Finance Committee and their

staffs, for the vital partnership they have provided. I am honored by the trust and

confidence placed in me, and, if confirmed, I will do my best to discharge the duties

and obligations of this office with enthusiasm, dedication, and humility.

Three weeks ago, June 6, marked the 59’ anniversary of D-Day—the day my father, a paratrooper in the 101st Airborne, jumped from the skies over Nazi-occupied

France to help free Europe from the Axis powers. In that morning of darkness and

danger for Allied soldiers, Private James Sheeran was separated from his unit and

captured by German troops. He escaped from the prison train, and fought behind

enemy lines in occupied France before meeting up with the liberating American

troops.

But my father’s commitment to his country—and to public service—did not end

there. He refused an offer to return home, choosing instead to continue to fight in

the Netherlands and Bastogne. Back from the war, he served in the FBI, as 2-term

mayor of West Orange, New Jersey and as a member of Governor Byrne’s cabinet.

He instilled in me a deep and abiding love for my country—and the knowledge that

our freedoms have been hard earned by the bravery and blood of others. He has

been my hero, a model of public service and sacrifice, and I am proud to have him

here with me today.

As someone with a background in business, media and public policy, it is perhaps

not surprising that I entered government expecting to encounter a slow-moving bureaucracy. My two years working as Associate USTR have helped prepare me to

serve as Ambassador Zoellick’s deputy, and have informed my thinking about how

executive agencies can and should operate. My colleagues at USTR represent the

best of public service: They are tough, hard-working negotiators, unfailingly good

natured, creative, skilled at drawing out the capabilities and knowledge of others—

and they approach work not just as participants, but as problem-solvers, people who

make things happen for their country.

The dedicated professionals at USTR demonstrate more than just skill at the negotiating table; because they are passionate about their work, they often go beyond

their core duties to ensure nations can meet their commitments to the United States

and participate in global trade. For example, when I joined USTR, Rosa Whitaker,

the founding director of USTR’s Africa office, was giving sanitary/phytosanitary

workshops in the bush lands of Tanzania. And Katrin Khulman, from USTR’s Europe office, who led an adventurous all-female delegation of intellectual property experts to Uzbekistan and Armenia to host workshops that ultimately prompted improvements in those countries’ IP laws.

My colleagues have given me tremendous support. Over the past weeks, I have

met with many former USTRs and Deputy USTRs who have given me the benefit

of their experience and advice. Ambassador Zoellick and his deputies—Peter

Allgeier, Linnet Deily, and, of course, Jon Huntsman—have set a high standard of

leadership excellence at USTR. If confirmed, I pledge to continue his record of

achievement and integrity. And I am proud and honored to inherit a fine career

USTR team from Ambassador Huntsman—including Assistant USTRs Wendy Cutler, Ralph Ives and Florie Liser.

Because of its small size—about 200 positions with a small number of ever-essential detailees—the people at USTR are, of necessity, constantly drawing on others

from government and the private sector. My colleagues and I especially appreciate

the advice and direction we receive from the Congress. This guidance is a critical
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part of pursuing a trade agenda that reflects the interests of the American people.

And I have personally come to rely on the professionalism and knowledge of Hill

staffers who work on trade—it has been a pleasure interacting with them.

Under the leadership of President Bush, Ambassador Zoellick, and the Congress,

the U.S. trade agenda is moving forward at all levels: global, regional, and bilateral.

We seek to both ensure compliance with existing commitments and to open new opportunities for America.

The Doha Development Agenda in the WTO is at the heart of our efforts. We have

advanced bold proposals to eliminate tariffs on manufactured goods, to open markets for our farmers and ranchers and implement deep cuts in farm tariffs and

trade-distorting subsidies, and open the global market for services. I believe the

Doha agenda represents a once-in-a-generation opportunity for the American businesses and farmers that drive the most innovative economy in the world: a chance

to open new markets for their goods and services and, at the same time, a chance

to help spur economic and political progress across the developing world. Our challenge is to help usher in a new generation of successes—to write anew the uplifting

story of the Asian tigers in places like Morocco, El Salvador, and Botswana.

Over the past two and a half years, we have signed free trade agreements with

Jordan, Singapore, and Chile; and are now negotiating new FTAs with Morocco, the

Southern African Customs Union, the Central American Common Market, and Australia. We helped bring China and Taiwan—more than a billion consumers—into

the World Trade Organization and are assisting other nations, such as Russia and

Cambodia, with their accession to the WTO. We are making progress on establishing a Free Trade Area of the Americas, have launched the Enterprise for

ASEAN initiative and have extended a hand of hope and opportunity through expanded preferential trade programs with African and Andean nations.

Opening markets will not be our only challenge in the years ahead. We are committed to ensuring that nations live up to their trade obligations. Increasingly, the

United States will need to devote resources to monitoring, enforcing, and ensuring

that others implement their trade commitments. And for the world’s poorest nations

just entering the trading system, we extend a hand of partnership to help them

meet their commitments. We do this through the powerful pairing of trade and aidcapacity building aimed at building open, sustainable economies that generate prosperity for their peoples and commercial opportunities for U.S. businesses.

Most of all, I believe the United States must maintain a positive commitment to

solve problems: a willingness on the part of all parties—negotiators, legislators,

businesses, and NGOs—to work toward constructive solutions in all trade matters,

as we have sought to do in our recent agreements with Chile and Singapore. If confirmed, I will strive to help promote a trading system that encourages all countries

to reach together for higher standards and a better quality of life for all.

Before closing, I would like to recognize the friends, family and colleagues with

us today who have loved, supported and nurtured me throughout my life and career.

My mother passed on last year, but her unfailing belief in me was a gift from God.

My father, Jim Sheeran, and my stepmother, Lena Chang Sheeran, my brother and

sisters and their spouses are my anchors and all traveled far to support me today.

The lights of my life—my three children Nicole, Daniel and Gabrielle—got to vote

on my accepting this nomination, and gave me full support knowing the sacrifices

ahead. My family—with its roots in Ireland, France, China and Africa—are a living

example of the glorious diversity that is America and I am deeply indebted to them.

Mr. Chairman, Senator Baucus, Members of the Committee: as I have traveled

throughout the world during the past two years, I have been proud to represent a

nation that is generous, tolerant and fair. I thank you again for this opportunity

to appear before you and I will be pleased to answer any questions that you may

have.
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RESPONSES TO QUESTIONS FROM SENATOR GRASSLEY

Question 1. U.S. agricultural groups frequently criticize Australia’s SPS measures

and standards as being overly trade restrictive and not science-based. For example,

it is my understanding that Australia’s sanitary rules result in a de facto ban on

the importation of U.S. pork into Australia. Further, Australian beef-aging rules severely restrict U.S. beef exports. Moreover, U.S. cattle producers contend that the

strict sanitary requirements make it nearly impossible to ship breeding bulls to Australia.

Is the administration actively working with Australia to resolve these SPS issues,

and others, prior to the conclusion of the proposed U.S.-Australia Free Trade Agreement?

Answer. The Administration is actively working with Australia to resolve these

issues and is pushing for prompt resolution. Since U.S. agricultural organizations

highlighted concerns with Australia’s sanitary and phytosanitary regime in August

2001, USTR and USDA have held extensive and detailed discussions with Australian officials to move these issues towards resolution. We have made progress on

many of the specific trade issues raised by industry and have developed an ongoing

and constructive dialogue with the Australian government to address these matters.

The issues raised by U.S. industry range from phytosanitary and animal health

barriers to concerns about a non-transparent and confusing Australian regulatory

process. In response, the Administration has formed a team from USTR and the

U.S. Department of Agriculture’s Foreign Agricultural Service and Animal and

Plant Health Inspection Service (APHIS) to focus on these issues. The work of this

team has resulted in several accomplishments and has established a process for resolving key access issues with Australia.
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The following is an update and progress report on the status of the specific trade

issues raised by U.S. industry:

Table Grapes: Following breakthrough negotiations in October 2001, BA issued

a final IRA for California table grapes in February 2002. U.S. grapes were shipped

to Australia for the first time in July 2002. In March 2003, working with USDA,

BA relaxed the restrictions for the 2003 shipping season.

Florida Citrus: BA published an Issues Paper on September 30, 2002, and is expected to publish a preliminary import risk assessment soon.

Sweet Corn Seed: BA released a final IRA in June 2002 allowing entry of U.S.

sweet corn seed under certain conditions.

Feed Corn: BA issued an import policy on October 4, 2002, allowing imports of

U.S. feed corn with heat treatment.

Pork: BA has made issuance of a draft IRA for pork a top priority. A preliminary

import riskassessment is expected to published soon for public comment.

Poultry: BA is expected to issue soon a draft IRA for poultry for public comment.

Beef: BA has proposed elimination of a 30-day aging rule and is expected to finalize the rule soon. This would eliminate all sanitary restrictions for shipping U.S.

beef to Australia.

Apples: USDA has renewed its efforts to obtain access for U.S. apples and submitted a formal request for an import risk assessment in early 2003.

California and Northwest Stone Fruit: USDA has requested that BA handle

this access request on a priority basis.

You reference concern about strict sanitary requirements on imports of U.S.

breeding bulls. This issue has not been brought to our attention by U.S. industry.

We will investigate Australia’s requirements for U.S. breeding bulls.

Many U.S. agricultural groups have also expressed concern about the lack of clarity in the Australian regulatory process. In January 2002, Biosecurity Australia

(BA), the Australian agency responsible for risk analysis and decisions on SPS

issues, released a report identifying specific and transparent SPS regulatory procedures for handling import requests. Following an import request and BA’s decision

to initiate an import risk assessment (IRA), all information related to that request,

including public comments, is available on BA’s website. BA now publishes an

Issues Paper at an early stage in the IRA process inviting comments from all interested parties on the scientific issues to be examined. The Issues Paper is followed

by a draft IRA for public comment and then a final IRA, at which time the decision

is announced on whether to allow imports and under which conditions. Foreign

stakeholders and governments are invited to participate throughout the process. We

believe this process provides important transparency and clear procedures for regulatory decisions based on a risk assessment.

In addition to the steps taken so far, we have also agreed to hold regular teleconferences with BA to stay abreast of all actions related to our priority requests to

ensure that progress continues. USDA is also now holding regular bilateral meetings with BA on plant and animal health issues.

As with our or any other country’s regulatory decision-making process, we cannot

promise that BA’s decisions will always be favorable to the United States. However,

we are committed to keeping a high profile on these important issues, ensure that

progress continues to be made, and to ensure that BA’s decisions are based on

science and in accordance with the WTO Agreement on Sanitary and Phytosanitary

Measures.

RESPONSES TO QUESTIIONS FROM SENATOR HATCH

Question 1. In the past, America has demanded its trading partners to comply

with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of

Intellectual Property Rights (the TRIPS Agreement or TRIPS). As Chairman of the

Judiciary Committee, I believe that the TRIPS agreement should be viewed as a

floor and not a ceiling when negotiating bilateral and multilateral trade agreements.

Ms. Shiner, to that end, what steps have already been taken and what future

steps will be taken at USTR to ensure that Intellectual Property Rights are protected in trade agreements in a manner that ensures that TRIPS will be the floor

and not the ceiling?

Answer. The Chile and Singapore FTAs as well as the proposals we have put forward in our ongoing FTA negotiations provide TRIPS—plus protections for a broad

range of intellectual property, including copyrights, patents, trade secrets, trademarks, and geographical indications and seek to ensure that there are adequate enforcement procedures in place to protect those rights.

The Chile and Singapore FTAs set out an international standard for rules on intellectual property rights (IPR) that clarify and build on those in the WTO TRIPS
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agreement with special emphasis on providing strong protection for new and emerging technologies. The agreements ensure that Chile and Singapore will afford a high

level of IPR protection similar to that provided under U.S. law. Key provisions of

the agreement, such as those on preventing circumvention of anti-piracy devices and

establishing the scope of liability for copying works on the Internet are modeled on

U.S. statutes. We are proposing IP chapters in our ongoing FTA and FTAA negotiations that are as strong as those we negotiated with Chile and Singapore.

General Provisions. The chapter will require Chile and Singapore to ratify or accede to several agreements on intellectual property rights, including the International Convention for the Protection of New Varieties of Plants, the Trademark

Law Treaty, the Brussels Convention Relating to the Distribution of ProgrammeCarrying Satellite Signals, and the Patent Cooperation Treaty. The chapter also includes full national treatment commitments, with no exceptions for digital products.

It also requires each Party to publish its laws, regulations, procedures, and decisions concerning the protection or enforcement of intellectual property rights.

Trademarks and Geographical Indications. The chapter imposes rules with respect to the registration of collective, certification, and sound marks, as well as geographical indications and scent marks. The chapter also imposes rules for domain

name management that require a dispute resolution procedure to prevent trademark cyber-piracy. Each Party must provide full protection for trademarks with respect to later geographical indications by providing a ‘‘first-in-time, first-in-right’’

rule for trademarks.

Copyrights and Related Rights. The chapter articulates rights that are unique to

the digital age, affirming and building on rights set out in several international

agreements, including the WIPO Internet Treaties. For instance, the chapter clarifies that the right to reproduce literary and artistic works, recordings, and performances encompasses temporary copies—an important principle in the digital realm.

It also calls for each Party to provide a right of communication to the public, which

will ensure that authors have the exclusive right to make their works available online. To curb copyright piracy, the chapter requires the two governments to use only

legitimate computer software, setting an example for the private sector. The chapter

also includes provisions on anti-circumvention under which the Parties commit to

prohibit tampering with technology used by authors to protect copyrighted works.

In addition, the chapter sets out obligations with respect to the liability of Internet

service providers in connection with copyright infringements that take place over

their networks. Each Party must also provide copyright protection for the life of the

author plus 70 years (for works measured by a person’s life), or 70 years (for corporate works).

Recognizing the importance of satellite broadcasts, the chapter ensures that each

Party will protect encrypted program-carrying satellite signals. It obligates the Parties to extend protection to the signals themselves, rather than solely to the content

contained in the signals.

Patents and Trade Secrets. The chapter requires patent term extensions to compensate for unreasonable administrative or regulatory delays (including for marketing approval) that occur while granting the patent. To guard against arbitrary

revocation of patents, each Party must limit the grounds for revoking a patent to

the grounds that would have justified a refusal to grant the patent. In addition, the

chapter offers protection against unfair commercial use of test data that a company

submits in seeking marketing approval for certain regulated products. It precludes

other firms from relying on the data for specific periods—five years for pharmaceuticals and ten years for agricultural chemicals. The chapter also limits the exceptions to patent protection.

Enforcement Provisions. The chapter imposes obligations with respect to the enforcement of intellectual property rights. Among these, it requires the Parties, in determining damages, to take into account the value of the legitimate goods as well

as the infringer’s profits. The chapter also provides for damages fixed in advance

(i.e., ‘‘statutory damages’’), at the option of the right holder. Such preestablished

damages help to deter piracy by ensuring an appropriate remedy in cases where,

for instance, records of actual damages are inadequate.

The chapter provides that the Parties’ law enforcement agencies must have authority to seize suspected pirated and counterfeit goods, the equipment used to

make or transmit them, and documentary evidence. Each Party must give its courts

authority to order the forfeiture and/or destruction of such items. The chapter also

requires each Party to empower its law enforcement agencies to take enforcement

action at the border against pirated or counterfeit goods—including those in transit—without waiting for a formal complaint. In addition, the chapter provides that

each Party must make counterfeiting and piracy subject to criminal penalties.
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Question 2. I am concerned over some indications that I have received that suggest the Free Trade Area of the Americas (FTAA) negotiations are moving slowly

with respect to Intellectual Property Rights (IPR). Some have suggested that there

might even be some consideration at USTR to water-down the IPR chapter in this

agreement. Ms. Shiner, can you assure me that IPR will be addressed adequately

in the FTAA Agreement (e.g.: along the lines of the Chile and Singapore Agreements)?

Answer. As noted above, we have proposed language in the FTAA that would be

consistent with the Chile and Singapore FTAs, and the high standards for protection of intellectual property rights that we achieved in those agreements. That has

been our position since we tabled our proposal in 2000. It is important to recognize,

however, that there is a different negotiating dynamic in the FTAA, which covers

35 countries, than in a bilateral context. The complexity of these negotiations means

that they move at a different pace from bilateral negotiations. It also makes it more

difficult to assess the alignment of interests of the various countries involved and

to develop appropriate trade offs to complete the negotiation. Despite these difficulties, it is our intention to negotiate an agreement that strengthens IPR standards

and enforcement in the hemisphere. We will consult with Congress and interested

stakeholders as the process moves forward.

Question 3. As an advocate for free trade, I am encouraged by the choice of Australia as a potential FTA partner. As you are aware, the country of Australia has

a national cultural content mandate for their motion pictures industry where a certain percentage of television programs and movies made in Australia must have native content. I understand that this is an important issue in Australia and that

there are certain parties in the Australian motion picture industry pushing for the

cultural content issue not to be addressed in the FTA negotiations. I think that removing controversial issues from FTAs would be a mistake and could create a terrible precedent for future FTAs. I strongly believe that FTA negotiations must be

comprehensive and not leave out items that might be seen as controversial like cultural content issues. Ms. Shiner, will you give us your assurance that the U.S.-Australia FTA will provide a balanced result for audio visual and motion picture industries?

Answer. The Administration believes that free trade agreements should be comprehensive and that it is not advisable to leave controversial issues out a priori. In

our negotiations with Australia, we are interested in securing balanced provisions

on film, television, and home video entertainment services, that accommodate local

cultural concerns while ensuring that U.S. exporters benefit from trade rules. We

are working closely with U.S. industries affected by this particular, and sensitive,

aspect of these negotiations. Industry has conveyed that it is not, for example, seeking elimination of Australia’s local content quota on broadcast television that you

have mentioned, nor the elimination of existing Australian subsidies in this area.

On the other hand, for example, seeking commitments from Australia that areas of

its market that are currently open, such as the distribution and exhibition of theatrical motion pictures, will continue to remain open are of interest to industry. We

will continue to consult with Congress and interested stakeholders as this process

moves forward.

Question 4. The Trade Promotion Authority Act (section 2108 (b)(8)) specifically

lists price controls and reference pricing as regulatory practices to be considered negotiating objectives for Free Trade Agreements. Australia has a non-transparent

system of reference pricing and similar practices in the pharmaceuticals sector, that

not only fail to recognize the value of innovative products, but often works to limit

or delay access to new medicines to Australian patients. How will you and USTR

plan to address these issues in the U.S.Australia FTA?

Answer. USTR staff has met with Australian government officials to discuss this

issue and the concerns raised by U.S. industry about the Australian government

pharmaceutical reimbursement system. We have sought additional information from

Australia about this system, particularly on how pharmaceutical prices are developed. The Australian government recently sent a senior official from its Department

of Health and Ageing to the United States to discuss in depth its Pharmaceutical

Benefits Scheme and exchange views on transparency, pricing, and other issues related to its national health care policy. As we proceed with the FTA negotiations,

USTR staff is consulting closely with U.S. industry, whose detailed input we are

seeking as we develop our proposal for the U.S.-Australia FTA negotiations. USTR

staff also is working closely with officials at other U.S. agencies, particularly the Department of Health and Human Services and the Food and Drug Administration,

to ensure the development of a U.S. proposal that considers the range of U.S. interests and concerns on this very important and sensitive issue.
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RESPONSES TO QUESTIONS FROM SENATOR BAUCUS

Question 1. As Deputy USTR, I understand you will be responsible for overseeing

USTR’s offices that handle labor and environmental issues. As you know, I am committed to high labor and environmental standards in trade agreements. I would like

to know (1) how you plan to secure these standards in future free trade agreements

USTR negotiates, and (2) how we can improve the assistance we give to countries—

so-called ‘‘capacity building and technical assistance’’—so they can raise their standards.

Answer. Following the guidance in the Trade Act of 2002, we will seek robust environmental and labor packages in future FTAs similar to what we achieved in the

Chile and Singapore FTAs. We will seek to include strong core environmental and

labor obligations, including commitments to maintain high levels of environmental

and labor protection and not to weaken environmental and labor laws to attract

trade or investment, and an obligation concerning effective enforcement of environmental and labor laws that is subject to the trade agreement’s dispute settlement

mechanism. At the same time, we recognize that many of our trading partners may

need assistance to build their capacity to comply with these obligations.

We believe that the political will evidenced by a decision to negotiate a free trade

agreement is a powerful stimulus for enhancing our environmental and labor relationships, and that these FTAs are an excellent opportunity to demonstrate that an

improved commercial relationship can help promote strong environmental and labor

standards in our trading partners. For many countries, considering the connections

between trade and labor and the environment is a new concept. By including core

environmental and labor obligations for the first time as principal negotiating objectives in the body of trade agreements, our FTAs are giving these issues a new visibility, which we believe will help these countries better understand the linkages between trade and their labor and environmental policies. For example, the Chile and

Singapore FTAs include strong core environmental and labor obligations, including

commitments to maintain high levels of environmental and labor protection and not

to weaken environmental and labor laws to attract trade or investment, and an obligation to effectively enforce environmental and labor laws that is enforceable

through the trade agreement’s dispute settlement mechanism.

Trade capacity building stands at the nexus of trade policy and development policy; when successful, such capacity building can contribute to more beneficial trade

agreements for all partners and the acceleration of poverty elimination and economic growth in developing countries. We recognize that many of our trading partners may need assistance to build their capacity to comply with the labor and environmental obligations, and a capacity building component is an integral part of our

discussions in those cases. For example, we have established a specific Trade Capacity Building working group in both the Southern African Customs Union and Central American Free Trade Area negotiations. Over 10 U.S. government agencies, including the Department of Labor, Department of State and the U.S. Environmental

Protection Agency, comprise the U.S. team at these meetings. Among our efforts, we

are designing capacity building programs to strengthen ministries of labor and environment and improve compliance with labor and environment standards.

In addition, as in the Chile and Singapore FTAs, we will also be seeking appropriate environmental and labor cooperative mechanisms in association with the

trade agreements to help target our capacity-building efforts in these areas over the

long term. The Department of State, m consultation with USTR and interested

agencies, is in charge of establishing and overseeing the environmental cooperative

mechanisms; the Department of Labor has the lead in establishing and overseeing

the labor cooperative mechanisms.

We have already begun concrete steps in implementing these undertakings in connection with the Chile FTA. The Department of Labor has begun an active cooperation program with Chile. The program has two initial components: increasing the

investigative capacity of the Labor Ministry to improve compliance with labor laws

(wage hour, child labor, occupational safety and health, equal employment opportunity); and helping to reform Chile’s system for the administration of labor justice.

During the course of our work with Chile, we learned that the Government of Chile

is relatively well-organized and staffed, but that they could maximize their investigative impact with strategic planning. Over-all compliance efforts could also benefit from more flexible mechanisms to decrease backlogs in their labor courts, so the

Department of Labor designed a cooperation program to share our experience with

investigations and administrative tribunals that would expedite legal decisions.

The Department of Labor has submitted a request for proposals and is in the

process of awarding the contract for this work. The estimated duration of the project
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is three years, and the budget is not to exceed $1.2 million. One U.S.-based contractor will be selected to work with a local Chilean institution.

We have also begun cooperating on environmental matters with Chile. The FTA

includes eight initial cooperative projects, such as training on safe handling of agricultural chemicals, capacity building to improve wildlife protection, remediation of

hazardous waste sites in Chile, and helping to implement Chile’s pollutant release

and transfer registry. Chile and the United States, under the leadership of the Department of State, have also signed an Environmental Cooperation Agreement that

will guide future cooperative efforts.

Question 2. I am concerned that the United States may not be paying sufficient

attention to Asia. There are some serious issues to think about, including implementation issues for China andmarket access issues for Japan. I would like your views

on these issues, and also on whether the Administration is considering any free

trade agreements with any of the large economies in Asia.

Answer. The opening of markets in Asia and enforcing existing commitments is

a top priority for the administration. We have a broad and active agenda to ensure

opportunity and fair treatment for American farmers and businesses.

As a crucial ally in Asia, an economically strong Japan is vitally important to the

United States, the region, and the world. We have encouraged them to play a constructive and active leadership role in global trade negotiations, including in crucial

areas of market openings for agricultural and manufactured goods. Under the Economic Partnership for Growth (EPG), established by the President and Prime Minister Koizumi in 2001, our primary objective remains working with Japan to help

it return to sustainable growth while opening markets. To this end, we have recently made significant headway on the regulatory reform front with the conclusion

of a strong report in May under the U.S.-Japan Regulatory Reform Initiative, a key

component of the EPG. Japan, for example, is: implementing measures to promote

the use of e-commerce; introducing competition to an increasingly important segment of the telecommunications sector (fixed-line to mobile phone calling); further

liberalizing its energy sector; and improving the speed and efficiency of approval

processes for medical devices and pharmaceuticals. We are also supporting Prime

Minister Koizumi’s new initiative to promote reform through creation of local ‘‘deregulation zones,’’ which has already led to customs processing improvements for

U.S. express delivery companies in several of Japan’s major air and sea ports.

In addition, we are working to ensure that our agriculture sector gets a fair shake

with Japan. While Japan is the largest overseas export market for U.S. farmers and

ranchers, it continues to maintain significant barriers to its agricultural market.

Japan, for instance, has said it intends later this year to invoke a safeguard measure that would raise tariffs on imported beef. We continue to urge Japan not to take

this step, which would be a highly inappropriate misuse of the measure.

Furthermore, at every available opportunity, we urge Japan to refrain from inappropriately using standards and other administrative requirements to limit farm imports. When discussion fails to achieve progress, we do not hesitate to initiate WTO

dispute settlement procedures. In fact, a WTO panel has just agreed with us that

Japan’s import restrictions on apples has been in breach of its WTO obligations.

Our economic and trade relationship with China is also a primary focus of the

Administration’s economic team and for Ambassador Zoellick in particular. As your

question suggests, we are concentrating efforts on ensuring China’s implementation

of and compliance with its commitments upon acceding to the W70. In the Administration’s first annual report to Congress on China’s WTO Implementation, transmitted on December 11, 2002, we noted that while China has made progress toward

fulfilling many of these commitments, much is left to do.

In order to address these implementation shortcomings, the Administration frequently engages senior Chinese counterparts in Beijing, Geneva, Washington and

elsewhere. This has led to progress in several key areas. President Bush has met

with President Hu and his predecessor on numerous occasions, and at each meeting

has addressed specific concerns on China’s WTO implementation progress. Ambassador Zoellick has also met frequently with his counterparts at the Ministry of Commerce (formerly the Ministry of Foreign Trade and Economic Cooperation) and other

appropriate Chinese leaders, and has had a number of lengthy telephone conversations with Minister Lu Fuyuan.

In early 2003, USTR established an ongoing US-China Trade Dialogue designed

to allow discussion and resolution of bilateral trade issues, discuss areas of cooperation in the Doha Development Agenda, and act as an early warning system for trade

problems before they become sources of broader bilateral friction. USTR will continue the Trade Dialogue with a new set of discussions this fall. In addition to engagement with China, USTR chairs a subcommittee of the Trade Policy Staff Committee (TPSC) dedicated to enforcement of China’s WTO commitments. The TPSC
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Subcommittee meets at least monthly, and is a useful means to coordinate and reinforce policy among the various USG agencies involved in this important exercise.

On the multilateral front, the Administration has been active in promoting compliance by China with its WTO commitments through the WTO committee process,

frequently raising concerns regarding China’s WTO implementation. In addition,

USTR is highly engaged in the Transitional Review Mechanism (TRM) established

by China’s WTO accession protocol, an annual process that reviews China’s WTO

implementation efforts. During the first year of the TRM, the Administration was

active in all 16 Councils and subsidiary bodies of the WTO that were involved in

the TRM, calling on China to be more transparent and assiduous in fulfilling the

terms of its accession protocol. In addition to these efforts, and as noted earlier,

USTR also conducts an annual review of China’s WTO implementation the results

of which are reported to Congress on the anniversary of China’s WTO accession. The

next report to Congress will be issued on December 11, 2003.

To date, China has made progress in resolving our concerns in a variety of areas,

including in some key agricultural and services sectors. We look forward to maintaining a cooperative approach to bilateral trade concerns. However, the Administration is prepared to use the WTO dispute settlement process when China does not

resolve our concerns cooperatively. Similarly, to the extent China’s imports are entering the United States in an unfair or illegal matter, the Administration is fully

committed to utilizing U.S. trade laws to benefit the U.S. economy and its businesses, workers and agricultural producers.

As for FTAs, we are open to the possibility of trade discussions with any economy

that would be in the interest of the United States and our economy, provided that

such discussions are likely to lead to concrete gains for the United States. As you

know, Congress is now considering the Singapore FTA, our first with Asia. We have

launched FTA negotiations with Australia. We are pursuing global liberalization

through APEC and have launched the Enterprise for Asean Initiative to expand

trade and enhance implementation of existing obligations in that region. There are

enormous challenges in considering such agreements with some of the large economies in Asia. For Japan, the primary challenge would be agriculture, a highly protected sector in Japan. In addition, remaining trade and investment barriers in important sectors of the Japanese economy are informal, opaque, and not easily addressed in an FTA. With respect to China, our primary focus is on ensuring China’s

compliance with existing commitments, and those that will be phased in over the

next several years.

Question 3. The Congress has consistently stressed the need for provisions in our

trade agreements that ensure the protection and enforcement of intellectual property rights. I’ve heard troubling reports that USTR might agree to intellectual property rights protections in the FTAA negotiations that are significantly weaker than

the protections contained in the Chile and Singapore agreements that do not adequately cover internet-related intellectual property issues. I would like your views

on this, including whether you might consider such an outcome in the FTAA negotiations.

Answer. In 2000, we tabled a comprehensive text on intellectual property in the

FTAA negotiations that set out an international standard for rules on intellectual

property rights (IPR) that clarify and build on those in the WTO TRIPS agreement

with special emphasis on providing strong protection for new and emerging technologies. Our FTAA proposal is consistent with the high standards for protection of

intellectual property rights that we achieved in the Chile and Singapore FTAs, as

well as the proposals we have tabled in our other ongoing FTA negotiations. It is

important to recognize, however, that there is a different negotiating dynamic in the

FTAA, which covers 35 countries, than in the bilateral context. The complexity of

these negotiations means that they move at a different pace that bilateral negotiations. It also makes it more difficult to assess the alignment of interests of the various countries involved and to develop appropriate trade offs to complete the negotiation. Despite these difficulties, it is our intention to negotiate an agreement that

strengthens IPR standards and enforcement in the hemisphere. We will consult

with Congress and interested stakeholders as the process moves forward.
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Protection of copyrighted goods in the digital realm, especially through such tools

as the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty

(the WIPO Internet Treaties)), is a key goal of our FTAA proposal. By seeking that

the standards reflected in those treaties, as well as those reflected in US law, are

included in the FTAA, we are aiming to ensure that the countries of this hemisphere provide strong protection for new and emerging technologies and new methods of transmitting and distributing products embodying intellectual property.

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