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UNITED STATES - BAHRAIN

FREE TRADE AGREEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL TRADE

OF THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 6, 2005

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

CHARLES E. GRASSLEY, Iowa, Chairman

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

RICK SANTORUM, Pennsylvania

BILL FRIST, Tennessee

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JAMES M. JEFFORDS (I), Vermont

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

KOLAN DAVIS, Staff Director and Chief Counsel

RUSSELL SULLIVAN, Democratic Staff Director

SUBCOMMITTEE ON INTERNATIONAL TRADE

CRAIG THOMAS, Wyoming, Chairman

MIKE CRAPO, Idaho

TRENT LOTT, Mississippi

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

ORRIN G. HATCH, Utah

OLYMPIA J. SNOWE, Maine

BILL FRIST, Tennessee

JEFF BINGAMAN, New Mexico

MAX BAUCUS, Montana

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Thomas, Hon. Craig, a U.S. Senator from Wyoming, chairman, Subcommittee

on International Trade ........................................................................................ 1

Bingaman, Hon. Jeff, a U.S. Senator from New Mexico ...................................... 2

ADMINISTRATION WITNESS

Donnelly, Hon. Shaun, Assistant U.S. Trade Representative for Europe and

the Mediterranean, Office of the U.S. Trade Representative, Washington,

DC .......................................................................................................................... 2

WITNESSES

Aslaksen, Megan, global trade specialist, Hewlett-Packard Company, Palo

Alto, CA ................................................................................................................. 9

Johnson, Lionel C., vice president and director, International Government

Affairs, Citigroup and co-chair, U.S.-Bahrain Free Trade Agreement Coalition, Washington, DC ........................................................................................... 11

Spangler, Barbara, executive director, Wheat Export Trade Education Committee, Washington, DC ...................................................................................... 12

Baugh, Bob, director, AFL-CIO Industrial Union Council, Washington, DC ..... 13

Hamod, David, president and CEO, National U.S.-Arab Chamber of Commerce, Washington, DC ....................................................................................... 16

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Aslaksen, Megan:

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

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

Baucus, Hon. Max:

Prepared statement .......................................................................................... 26

Baugh, Bob:

Testimony .......................................................................................................... 13

Prepared statement .......................................................................................... 28

Bingaman, Hon. Jeff:

Opening statement ........................................................................................... 2

Prepared statement .......................................................................................... 35

Donnelly, Hon. Shaun:

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

Prepared statement .......................................................................................... 37

Responses to questions from committee members ......................................... 41

Grassley, Hon. Charles E.:

Prepared statement .......................................................................................... 51

Hamod, David:

Testimony .......................................................................................................... 16

Prepared statement .......................................................................................... 53

Special report from the National U.S.-Arab Chamber of Commerce ........... 58

Johnson, Lionel C.:

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 70

Spangler, Barbara:

Testimony .......................................................................................................... 12

Prepared statement .......................................................................................... 74

Page

IV

Thomas, Hon. Craig:

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

Prepared statement .......................................................................................... 76

COMMUNICATIONS

American Maritime Congress ................................................................................. 77

Bahrain Chamber of Commerce and Industry—Apparel Group .......................... 80

Midamar Corporation .............................................................................................. 83

National Electrical Manufacturers Association (NEMA) ..................................... 87

Pharos Capital Group, LLC .................................................................................... 88

(1)

UNITED STATES-BAHRAIN

FREE TRADE AGREEMENT

THURSDAY, OCTOBER 6, 2005

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL TRADE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 2:30 p.m., in

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

(chairman of the subcommittee) presiding.

Present: Senator Bingaman.

OPENING STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM WYOMING, CHAIRMAN, SUBCOMMITTEE ON

INTERNATIONAL TRADE

Senator THOMAS. Welcome. I believe we will go ahead and get

started. We have a vote at 3 o’clock, so this voting messes up our

lives around here, as you know.

At any rate, welcome, all of you, and particularly the members

of the panel. This, of course, is dealing with trade with Bahrain.

Trade, of course, is a very important part of our long-term economy

and building strong relationships.

I think everybody understands that we are going to have trade

in this world, and indeed we need to have trade. Of course, we

need to expand as much as we can, lowering global barriers and

working at all the areas. Ninety-six percent of the people in this

world live outside of the United States, so it plays an important

role for us.

Of course, agreements in WTO are very important and remain a

significant challenge. However, negotiations go on in the bilaterals,

and that is where we are today.

Bahrain, of course, is a very important place. We are not the

largest trading partners in the world, but it is an important one,

both strategically and economically.

The FTA includes market access to U.S. consumers, industrial

and agricultural products, its broad commitment to service areas,

and intellectual property protection, and the things that all of us

preserve.

We would like to make this as strong as we can for both countries, and tough enforcement mechanisms are necessary, of course,

to do that. So, I will not take long because we are anxious to hear

from the panel, so let me call on Senator Bingaman.

[The prepared statement of Senator Thomas appears in the appendix.]

2

OPENING STATEMENT OF HON. JEFF BINGAMAN,

A U.S. SENATOR FROM NEW MEXICO

Senator BINGAMAN. Thank you very much, Mr. Chairman.

I also have a statement that I will put in the record. I do think,

from what I understand, and I am looking forward to learning

more here, that there are some significant advantages to our products going into Bahrain as a result of this agreement.

I am concerned that some of these labor issues remain inadequately addressed. I gather Congressman Cardin raised that in a

hearing in Ways and Means last week. In accord with what I believe he indicated at that hearing, I would like to see that resolved.

But I do look forward to the testimony, and then for further action

by the committee. Thank you.

[The prepared statement of Senator Bingaman appears in the appendix.]

Senator THOMAS. Thank you very much, Senator.

Thank all of you. For all of you who will be testifying, your full

statements will be put into the record. If you could summarize your

statements, why, we would appreciate that very much.

Ambassador Shaun Donnelly, Assistant U.S. Trade Representative for Europe and the Mediterranean, Office of the U.S. Trade

Representative.

Mr. Ambassador, welcome.

STATEMENT OF HON. SHAUN DONNELLY, ASSISTANT U.S.

TRADE REPRESENTATIVE FOR EUROPE AND THE MEDITERRANEAN, OFFICE OF THE U.S. TRADE REPRESENTATIVE,

WASHINGTON, DC

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

I would like to thank you and Senator Bingaman, as well as

Chairman Grassley, Senator Baucus, and the other members of the

committee who have worked with us in partnership on our whole

free trade agenda.

I appreciate the opportunity to discuss the U.S.-Bahrain Free

Trade Agreement with you. The FTA is an important element of

U.S. policy in the Middle East. With this agreement, Bahrain has

made legally binding commitments to liberalize trade with the

United States.

Beyond substantial trade liberalization, the FTA will help support ongoing economic, political, and social reforms in Bahrain and

signal to other reforming countries in the region the benefits of

pursuing market-liberalizing policies.

The FTA’s imprimatur will also be an important force in encouraging increased foreign direct investment in Bahrain and in creating an economic environment that is conducive to additional employment opportunities for the people of Bahrain.

The administration’s trade agenda is a fundamental part of the

President’s broader efforts to advance reform in the Middle East.

In May, 2003, President Bush announced our goal of creating a

U.S.-Middle East Free Trade Area by 2013.

This trade agenda is one element of a broad, comprehensive approach to address the economic, social, and political challenges that

face the region and U.S. interest in that area.

3

In particular, our trade strategy is predicated on the idea that

sustained economic growth can best be brought to the region

through internally generated reforms and market-based trade liberalizing policies.

The agreement will promote transparency and the rule of law in

this small, but as you said, Mr. Chairman, important partner in

this strategically important region.

Our strategy toward the countries in the region to engage each

of them at their levels of development, to provide them access to

the U.S. market based on reciprocity, and to require that they

adopt high standards for trade and investment, is working.

In addition to the FTA with Bahrain, we have completed FTAs

with Morocco and Jordan, as well as our longstanding Free Trade

Area with Israel. We have signed trade and investment framework

agreements with Qatar, Kuwait, Yemen, and the United Arab

Emirates in 2004.

The strong desire of these countries to conclude FTAs with the

United States leads to more certain market access for goods and

services, high standards for intellectual property, transparency,

and anti-corruption that only such agreements can provide. This

FTA is the model that Bahrain’s neighbors can soon share.

The 9/11 Commission urged the United States to expand trade

with the Middle East in order to ‘‘encourage development, more

open societies and opportunities for the people to improve the lives

of their families, and to enhance prospects for their children’s future.’’

The commission highlighted the FTA with Bahrain, as well as

our FTA with Morocco, as specific examples of positive steps in this

direction. The President and USTR take this recommendation very

seriously. Working in close partnership with the Congress has been

crucial to our success to date.

The Trade Act of 2002 put in place procedures that make it possible to negotiate this type of agreement that not only addresses

the pressing need for engagement in regions such as the Middle

East, but also brings real benefits to American companies and

workers, and to the U.S. economy.

This FTA will benefit U.S. workers, manufacturers, consumers,

farmers, ranchers, and service providers. On the day the agreement

goes into effect, 100 percent of consumer and industrial goods, and

81 percent of U.S. agricultural exports, will enter Bahrain dutyfree.

Under the FTA, Bahrain will open its services market wider than

any previous FTA partner, creating a wide array of opportunities

for U.S. service providers.

The agreement provides for a high level of protection for intellectual property rights, consistent with the standards set in U.S. law.

The FTA calls for state-of-the-art protection for trademarks and

digital copyright protected works, expanded protection for patents

and product approval information, and tough penalties for piracy

and counterfeiting.

The agreement’s Rules of Origin allow for the possibility of

counting the value of inputs from FTA partners in the region in determining whether goods receive preferential tariff treatment.

4

This feature would, down the line, facilitate connecting our bilateral agreements as we move toward building the more integrated

region-wide free trade agreement. It would also encourage trade

among countries in the region, an important, yet currently missing,

ingredient in the region’s development.

With the passage of its 2002 Workers’ Trade Union Law, Bahrain

now has labor laws that give effect to the principles and rights set

forward in the ILO Declaration on Fundamental Principles and

Rights at Work.

The 2002 law now allows workers, including foreign workers, to

form and join trade unions. The FTA’s labor and environment provisions fully meet the negotiating objectives set out in the Trade

Act of 2002, and these agreements are included in the core text of

the agreement.

The FTA also includes important transparency, public notification, and anti-bribery provisions. These provisions will help to improve the business and investment environment in Bahrain by providing more certainty and predictability for firms and individuals

operating and investing there, and promoting the rule of law.

The agreement enjoys widespread support from our trade advisory committees. The Advisory Committee for Trade Policy and Negotiations found the agreement ‘‘is strongly in the interests of the

United States,’’ and noted, ‘‘it is an excellent agreement that will

improve market access for American goods, services, and agricultural products in Bahrain.’’

Committees representing sectors such as services, consumer

goods, and intellectual property have also expressed support. We

recognize, Mr. Chairman, that the Labor Advisory Committee still

has concerns about all U.S. FTAs that we have concluded to date,

and that such concerns relate to the committee’s assessment of this

agreement.

However, the FTA fully meets the guidance that Congress gave

us in the Trade Act of 2002. The International Confederation of

Free Trade Unions has praised Bahrain’s progress on labor rights.

In fact, the Secretary General of the ICFTU has publicly hailed

Bahrain as showing the way for the region, and said ‘‘we will be

encouraging other Gulf States to follow the example of Bahrain in

working towards a truly independent labor movement in the region. We are convinced that the disciplines and consultative mechanisms in the FTA will play a major role in further improving the

labor situation in Bahrain.’’

In conclusion, Mr. Chairman, the U.S.-Bahrain Free Trade

Agreement is a comprehensive, high-quality agreement that will

not only remove trade barriers, but will expand regional opportunities for people in both countries.

The agreement will enhance commercial relations with an economic leader in the Gulf, as well as set the stage for improving

trade relations and expanding openness with other countries in the

region, thereby creating prosperity, opportunity, and hope.

The agreement is an essential building block for the administration’s goal of assisting the countries of the Middle East to build

more market-oriented, liberalized economic regimes, as well as fulfilling the 9/11 Commission’s unanimous recommendation to expand trade links with the region.

5

With your guidance and support, we will continue to pursue the

Middle East Free Trade Area initiative. Working together, we feel

confident that we can build an open trading and investment community with the Middle East that will create opportunity, generate

prosperity, and promote liberty.

I would be very pleased to respond to the questions and comments from the committee.

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

Senator THOMAS. Thank you very much.

You mentioned the Middle East a number of times, and I think

four countries. What, generally, has been the balance of trade with

the U.S. and those four countries since we entered agreements?

Mr. DONNELLY. Mr. Chairman, we have seen growth in both directions in the trade. Generally, I think the balance has stayed

about the same as we had experienced before the free trade agreements.

In the case of Jordan, we have seen, frankly, more exports. The

U.S. exports to Jordan have increased, but not as much as Jordan’s

exports to us. Morocco, we are still at the early stage. Israel, I

think we have seen what we would call proportionate growth in

both directions.

Part of the situation that I think the statistics may not yet totally capture, is the importance of services in this. I think the statistical challenge of capturing the services exports that we are having in this, it is not just a regional question, but a general one. We

think it creates the potential for increased trade in both directions,

and it is certainly our objective to try to see that be a mutually

beneficial process.

Senator THOMAS. The balance of trade has been what, negative

or positive?

Mr. DONNELLY. Mr. Chairman, could I get back to you with official data on that point? I believe it has probably been negative, but

I want to get you the accurate number.

Senator THOMAS. You mentioned, a number of times, agriculture,

which of course is of personal interest. But are we going to be able

to do what is necessary in the Doha arrangement before Hong

Kong in order to get agriculture working?

Mr. DONNELLY. We certainly hope so, and we expect so, Mr.

Chairman. I am not a negotiator in the Doha Round. Obviously, in

the bilateral agreements like the Bahrain agreement, we are addressing some of those same challenges.

But Ambassador Portman, as you know, is committed to this. He

has been consulting widely. He is going off to a key week in Europe

next week with some of his Trade Minister partners, and agriculture is absolutely at the center of the Doha agenda. So, I think

you can rest assured, Mr. Chairman, that it is at the very top of

our agenda.

We do see the global opening we are trying to get in Doha that

goes in parallel with the opening we are trying to get in the bilateral agreements as it relates to agriculture or any other thing.

One important aspect that relates to agriculture in this particular agreement, for many years American companies have been

challenged by some of what we call sanitary and phytosanitary regVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
6

ulations, shelf-life regulations, and so on that have been in place

in some of the countries in the Gulf.

In this agreement, Bahrain has agreed to put in place a sciencebased regulatory system that I think is very important. So we are

not just addressing the tariff levels and so on, like that, but we are

trying to get high standards, as we do in the WTO. But I think

that is one of the important breakthroughs that we find in this

Bahrain agreement that we think sets an example for other countries in this particular region.

Senator THOMAS. All right. Good.

Sometimes it appears, for example in CAFTA, that developing

the relationship is more important actually than the trade aspect

of it.

Mr. DONNELLY. Yes.

Senator THOMAS. How would you react to that with respect to

this agreement?

Mr. DONNELLY. Well, Mr. Chairman, as I said in my statement,

as Ambassador Portman, like Ambassador Zoellick before him, and

the President have said, we think that these free trade agreements

promote both our commercial trade and investment interests, as

well as our more general political and security interests with important partners.

But as you may know, Mr. Chairman, I come from the State Department. I have spent a long time on that side of the house. But

we are not, as an administration, using FTAs to ignore the economic benefits and just do them as political prizes to give to important foreign policy friends.

If you look down the list of countries we have done free trade

agreements with in this region or others, they are all with countries that we consider friends. But the basis is, which countries are

prepared to step up and accept the kind of high-standards agreements that we want to do?

So, yes. Does it help that a country that might be interested in

an FTA is a good friend or a foreign policy ally of ours? Sure it

does. But that does not mean we do an agreement that does not

meet the standards or that the country is not prepared to do the

kind of free trade agreement we insist on.

Senator THOMAS. Is Egypt in the forefront with regard to the

Middle East?

Mr. DONNELLY. Absolutely. As you know, Mr. Chairman, Egypt

is really the geographic, cultural, and many other ways the center

of the Middle East. It is the largest population in that area. It is

also an area, frankly, where we have a strong economic relationship, but many American companies have had problems, many in

the agricultural area, but others.

I think Ambassador Portman has said to members of Congress,

publicly, in addition to the agenda that we have of free trade agreements that we have been working on, we have identified four important, friendly countries that have come to us, requesting that

we do an FTA with them. Those are Egypt, Switzerland, Malaysia,

and Korea. We have not made any decisions on any of those countries. They are all under serious review.

In the case of both the Egypt and Switzerland agreements that

I am in charge of at USTR, we are engaged in a very serious procVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
7

ess that we have set up under, in the case of Egypt, our trade and

investment framework agreement.

We have 14 or 15 bilateral working groups that basically parallel

the chapters you would have in a free trade area agreement,

whether it is agriculture, investment, intellectual property rights,

services, Customs, all these kinds of issues.

And our experts are getting together with their Egyptian counterparts and really going through what would be involved so that

we can make a smart decision on what would be involved, so I can

recommend to Ambassador Portman, and he can recommend to the

President, whether there is a basis for doing that kind of free trade

agreement. So, yes. Sorry. Egypt is very much at the center of our

agenda.

Senator THOMAS. Thank you.

Senator Bingaman?

Senator BINGAMAN. Thank you very much.

Ambassador, have we done a forecast as to what effect entering

this agreement will have on our trade balance with Bahrain? Will

it improve our balance of trade with Bahrain or cause it to deteriorate further?

Mr. DONNELLY. Senator Bingaman, we would like to see our

trade balance with Bahrain improve. We think that this agreement

can provide that. There are no guarantees.

I, frankly, am not sure of the validity of econometric analysis in

terms of what kind of assumptions one makes, but we are confident

that this agreement will open opportunities in industrial, in services, and in agricultural goods. We are basically open to Bahrain’s

exports to us now, so this is, again, a model where we think there

are opportunities.

There are no guarantees, but we believe that it presents an opportunity, particularly factoring the very high level of services commitments: financial services, insurance, package delivery, all of

those areas we think open up an opportunity to try to improve our

trade balance with Bahrain.

Senator BINGAMAN. But you do not have a forecast that says,

here is our trade circumstance with Bahrain today, and here is

what it is going to be 5 years from now, or 10 years from now

under this agreement.

The reason I ask, is that the witness who is on the second panel,

Mr. Robert Baugh, executive director of the AFL-CIO Industrial

Union Council, says in his testimony, ‘‘the agreement will likely

only exacerbate our trade imbalance. It is likely the agreement will

result in a deteriorating trade balance in some sectors.’’ That is

contrary to what you folks forecast, or you do not have a forecast?

Mr. DONNELLY. Senator, I would not claim we have a forecast on

which I would be able to commit on that. I mean, the International

Trade Commission did do an analysis, as they do of these potential

things.

Frankly, they came back and said they anticipated minimal effect on the overall balance, just given the geographical distances

that we are dealing with. But, I mean, our trade balance with Bahrain has gone up and down. We ran a surplus in 2003. We ran a

deficit in 2004.

8

I mean, the total level of trade has run from as much as $500

million in exports in 2003 down to $300 million in 2002. Part of

that, I think, is affected by deliveries of large commercial aircraft,

and so on.

So I am not sure we can give you a scientifically valid projection,

but we will certainly look at Mr. Baugh’s analysis.

Senator BINGAMAN. Let me ask about the labor provisions.

Again, referring to his testimony, he says the agreement is a step

backwards from existing labor rights provisions in the U.S.-Jordan

FTA and in our Generalized System of Preferences program. Is

that consistent with your view of things?

Mr. DONNELLY. No, sir, it is not. We believe that not only are the

labor provisions fully consistent with the guidance in TPA, we

think they are at least as strong, or stronger, than the Jordan provisions.

I am not going to try to tell you, nor would I try to tell Mr.

Baugh, that the labor situation in Bahrain is perfect. We think the

Bahrainis have made considerable efforts in their 2002 law. That

has basically been validated by observers like the ICFTU and the

ILO.

But we certainly see that there is work to be done. My colleague,

the new Assistant USTR for Labor, when he made his first trip

internationally after joining USTR about 6 weeks ago, went out to

Bahrain.

We certainly see the commitments that Bahrain would be making here, the other commitments you have referred to that the Bahraini government is currently reviewing, possible proposals to further strengthen provisions of their law, and the dialogue process

that is set for labor.

Senator BINGAMAN. Let me ask one other question, because I am

about out of time here. This testimony goes on to say, ‘‘in the Bahrain agreement, only one labor rights obligation—that is, the obligation for a government to enforce its own labor rights—is actually

enforceable through dispute settlement.

‘‘All of the other obligations contained in the labor chapter, many

of which are drawn from congressional negotiating objectives, are

explicitly not covered by the dispute settlement system and are

thus completely unenforceable.’’

What is your reaction to that?

Mr. DONNELLY. As I have said, Senator Bingaman, the labor provisions are based on the clear guidance we have gotten from the

Congress in the trade promotion authority legislation. I think the

statement is correct.

Sometimes there is a comparison made to Jordan, but many of

the provisions that some allege are so strong in the Jordan agreement, they are only a requirement to seek to do something, which

a lot of lawyers feel is not a strong legal basis to move for actual

dispute settlement. We feel, as we have done in the CAFTA—and

I realize there is a controversy and different views on this—we

have an agreement that works. We have a system that can, in dispute settlements, focus on real labor problems.

If there are fines imposed or resources, they can be directed to

try to solve the problem. We have work to do with Bahrain, but the

Bahraini authorities have clearly impressed us that they are seriVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
9

ous on the labor agreement, and we feel that there is a strong basis

for moving forward.

Senator BINGAMAN. Thank you, Mr. Chairman.

Senator THOMAS. Thank you, Mr. Ambassador. We appreciate

your being here.

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

Senator THOMAS. I would invite the second panel, please. It includes Ms. Megan Aslaksen, Global Trade Specialist, Hewlett-Packard Company; Mr. Lionel Johnson, vice president and director of

International Government Affairs, Citigroup, and co-chair of the

U.S.-Bahrain Free Trade Agreement Coalition; Ms. Barbara

Spangler, executive director of the Wheat Export Trade Education

Committee; Mr. Bob Baugh, director, AFL-CIO Industrial Union

Council; and Mr. David Hamod, president and CEO, National U.S.-

Arab Chamber of Commerce.

So, we thank you, ladies and gentlemen, for being here. Again,

your full statements will be put into the record. If you could summarize them, why, we would be very pleased about that.

Ms. Aslaksen, welcome. Would you like to begin, please?

STATEMENT OF MEGAN ASLAKSEN, GLOBAL TRADE

SPECIALIST, HEWLETT-PACKARD COMPANY, PALO ALTO, CA

Ms. ASLAKSEN. Thank you. Chairman Thomas, Ranking Member

Bingaman, and members of the subcommittee, my name is Megan

Aslaksen. I work for Hewlett-Packard Company in the Global

Trade-Trade Facilitation Department. I am based at HP headquarters in Palo Alto, CA. Thank you for providing me the opportunity to testify before you today in support of the U.S.-Bahrain

Free Trade Agreement.

Hewlett-Packard is a Fortune 11 company with revenues of nearly $80 billion. We are the world’s largest IT company and the largest IT provider in the Middle East. Our technologies range from

consumer hand-held devices to some of the world’s largest and

most powerful super-computer installations. We have an estimated

150,000 employees and conduct business in more than 170 countries. As a result, we are dedicated to free trade and the reduction

of trade barriers across borders.

Bahrain, as part of the 18 countries composing the Middle East/

North Africa region, represents an area of great potential in both

consumer demand and human capital. For HP and other American

companies, this FTA represents an opportunity to share our innovative, life-enhancing products and services.

The Bahrain FTA forms part of a larger U.S. initiative to improve ties with, and promote stability in, the Middle East region

through the establishment of the Middle East Free Trade Area by

2013. The U.S. has already achieved bilateral agreements with Jordan, Israel and Morocco, and now stands ready to implement its

third FTA in the region, the U.S.-Bahrain FTA. We support U.S.

efforts to expand trading opportunities in the region. The U.S.-Bahrain FTA is a milestone in this process, as it represents the United

States’ first FTA with a Gulf State. We also applaud USTR and

Ambassador Portman for the recent conclusion of the U.S.-Oman

agreement.

10

As we know, the Kingdom of Bahrain is a prosperous country

with an economy primarily based on petroleum production and refining.

However, it is facing the same problems plaguing other Middle

East countries. In an attempt to diversify its economy, Bahrain has

established itself as a center for banking, information technology,

telecommunications, and health care. HP looks forward to winning

congressional support for this FTA so as to allow expanded market

access in the region. Building upon the established U.S.-Bahrain

bilateral investment treaty and trade and investment framework

agreement, this FTA will provide Bahrain greater access to the

U.S. market, which will generate direct investment into the Kingdom. The Agreement will benefit both countries by helping to spur

economic growth and improve employment opportunities.

Comprehensive FTAs provide a wide array of benefits and help

to open doors for HP and other U.S. companies. The Bahrain FTA

secures binding commitments in a number of areas important to

the high-tech sector. For example, under the Agreement, Bahrain

will immediately eliminate import taxes on technology products,

which will increase U.S. high-tech competitiveness in the region.

U.S. exporters like HP will also benefit from commitments by Bahrain to modernize Customs procedures. Benefits include the availability of advanced rulings, publication of laws and regulations on

the Internet, the promotion of the use of automated systems, and

the use of risk assessment systems.

As the leading provider of IT solutions in the region, the Agreement represents an important business opportunity for HP both

abroad and at home. With the diversification of Bahrain’s economy,

HP looks forward to being part of the Kingdom’s future growth. HP

and our customers will stand to benefit from this agreement in the

areas of market access, modernization and transparency of Customs procedures, IPR, and government procurement.

The Agreement also provides U.S. exporters with the broadest

service access of any FTA to date.

IPR, e-commerce, and government procurement provisions will

also benefit U.S. firms. Improved commitments in these areas include governmental use of legitimate software and the requirement

of parties to ratify a number of international IP agreements.

HP strongly supports the establishment of free trade. Working in

partnership with our colleagues in the high-tech sector, trade coalitions, and associations, we advocate the negotiation and implementation of bilateral and regional agreements. We hope that the recent U.S. success to conclude comprehensive FTAs with various

trading partners will foster efforts to reduce tariff and non-tariff

barriers to trade at the regional and multilateral levels.

On behalf of Hewlett-Packard Company, I would like to express

our company’s support for the U.S.-Bahrain FTA and urge prompt

congressional action and approval to strengthen the economies of

the United States and Bahrain. In closing, we believe that this

Agreement will serve as a model for other FTAs in the region, facilitate 2-way trade, and promote regional stability and economic

development.

Again, I appreciate the opportunity to put forth HP support for

the U.S.-Bahrain FTA, and encourage timely congressional action.

11

I would welcome any questions or comments at this time. Thank

you.

Senator THOMAS. Thank you very much.

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

Senator THOMAS. Mr. Johnson?

STATEMENT OF LIONEL C. JOHNSON, VICE PRESIDENT AND

DIRECTOR, INTERNATIONAL GOVERNMENT AFFAIRS, CITIGROUP AND CO-CHAIR, U.S.-BAHRAIN FREE TRADE AGREEMENT COALITION, WASHINGTON, DC

Mr. JOHNSON. Thank you, Mr. Chairman. My name is Lionel

Johnson. I am the vice president and director of International Government Affairs of Citigroup, and I also have the pleasure today of

representing the 75 companies and associations that comprise the

U.S.-Bahrain Free Trade Agreement Coalition.

Even with its vast supplies of natural resources, the Middle East

remains one of the poorest regions of the world, with a youthful

population that sees little prospect of a brighter economic future.

These twin factors lead to destabilizing conditions that may pose

a direct security threat to the United States.

It is our view that liberalized trade with the region offers the

Middle East an alternative path, the path of improved economic

conditions, true integration into the multilateral trading system,

and an enhanced respect for the rule of law.

As these economies grow, it is crucial that American businesses,

workers, and farmers have a seat at the table. If we choose not to

engage economically with the Middle East, our international competitors would be more than happy to do so and to expand trade

relations with this region at our economic expense. Engagement

with the Middle East promises long-term and tangible economic, as

well as security, gains for the United States.

We operate as Citibank in Bahrain and have been present in the

Kingdom since 1969. We were among the first foreign banks to establish business operations in the Kingdom, and we remain firmly

committed to our presence in Bahrain, and believe that the FTA offers an excellent opportunity to grow our business in this important region of the world and to enable us to provide a wider range

of world-class financial services to our Bahraini, as well as our Persian Gulf, customers.

Bahrain’s leaders, including the Minister of Finance, are reformers in a region in search of expanded opportunities for their people

through greater participation in the global economy.

Bahrain’s government officials have often consulted with us and

our private sector partners when considering new laws and regulations that impact our sector. The FTA will help the banking sector

as market access becomes more liberalized.

As the geographical and financial center of the Middle East and

West Asian region, Bahrain is perfectly positioned to serve as the

economic gateway to the Gulf. Through Bahrain, the doors to the

GCC economies are opened, while just across the Gulf region lay

the increasingly important economies of southwest Asia with which

Bahrain has a long a thriving relationship.

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As Bahrain diversifies its economy away from petroleum, the financial services sector has become the second-largest contributor to

Bahrain’s GDP.

There are great opportunities for American financial services and

insurance companies to invest and to expand in Bahrain, as demonstrated by the strong presence of 65 American financial firms already located within its borders.

Again, I want to thank the committee for the opportunity to testify on behalf of Citigroup and on behalf of the U.S.-Bahrain FTA

Coalition in support of this very important agreement.

We believe that it will lead, over time, to increased job creation,

trade expansion, improved technology, deepening of people-to-people ties, and enhancement of long-term economic development in

this region of vital importance to the United States. Thank you,

Mr. Chairman.

Senator THOMAS. All right. Thank you, Mr. Johnson.

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

Senator THOMAS. Ms. Spangler, please?

STATEMENT OF BARBARA SPANGLER, EXECUTIVE DIRECTOR,

WHEAT EXPORT TRADE EDUCATION COMMITTEE, WASHINGTON, DC

Ms. SPANGLER. Thank you. This afternoon I represent the Wheat

Export Trade Education Committee, the U.S. Wheat Associates,

and the National Association of Wheat Growers, the entire wheat

industry of the United States.

I want to thank you, Mr. Chairman, and you, Mr. Bingaman, for

the opportunity to speak today on the importance of this step in

opening the market and expanding opportunities with the State of

Bahrain, and throughout this strategic region.

I wish to begin my remarks, however, by offering my sincere congratulations to Dr. Belooshi on being named Ambassador to the

United States for the State of Bahrain. Ambassador Belooshi has

held his hand out in friendship and cooperation throughout his tenure as Economic Representative to the United States.

I personally look forward to continuing this friendship and the

opportunity to expand trade with the people of Bahrain that I

know he will foster.

Let me begin the other points with two issues that the U.S.

wheat industry takes into account when looking at the market

around the world,st and opportunities that are very important to

us.

First, as you have said, Mr. Chairman, 96 percent of the world’s

consumers live beyond our borders. The 4 percent within the

United States have no way to begin to consume the amount of

wheat that would keep our industry healthy.

Second, we consistently export nearly 50 percent of our total production. As you can imagine, our success or failure hinges on the

ability of U.S. wheat to be exported around the world.

Trade is a vital component for ensuring the financial viability of

our producers. Fair and open trade agreements are key to reaching

our customers outside of the United States.

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American wheat producers look to this region of the world as one

of opportunity, and we support the Bahrain free trade agreement.

With a population nearly that of Washington, DC, Bahrain is not

going to be a major agricultural importer of commodities. With

some exceptions, this has been a duty-free market for most grains.

This FTA will lock in duty-free access for all U.S. wheat, and

most other grains. Upon implementation, 81 percent, as you heard

earlier, of all agricultural exports will be allowed to enter duty-free.

This is a good agreement for American producers. All the others

will be phased in over a 10-year period to zero duty.

Sometimes a trade agreement is more important for forward

movement in developing relationships in the country and throughout the region. The wheat industry views every open door for trade

as an opportunity to establish relations and explore future opportunities. This is one of those doors.

The U.S. wheat industry supports moving forward aggressively

with bilateral agreements such as this one. However, the World

Trade Organization Doha negotiations are the critical link toward

balance in the world trade situation. They are the major key to expanding U.S. wheat trade.

If the U.S. is successful in achieving its longstanding goals in the

WTO, the U.S. wheat industry will be better able to take advantage of the opportunity offered by this free trade agreement.

It is only in the Doha negotiations that export state trading monopolies can be disciplined, and hopefully eliminated. The tradedistorting monopolistic practices of major competitors trading in

Bahrain and throughout the region are a critical impediment to our

ability to secure a fair market share with Bahrain. The issue can

only be resolved through the WTO negotiations.

Additionally, an important element, as you heard earlier, in this

FTA is the fostering of alliances in the region in a way that they

will carry over to opening trade and to, we believe, WTO negotiations, the only venue where many trade distortions can be resolved.

FTA negotiations have the potential to extend beyond the level

of liberalization we hope to achieve in the WTO. FTAs are WTO,

plus. We go to zero a whole lot faster in FTAs.

This FTA, if approved and implemented, will hopefully serve as

an important link for the more extensive multilateral trade agreements between the U.S. and other countries in the region.

The U.S. must take advantage of opening markets through

agreements such as this one. The wheat industry urges you to

move this agreement through Congress quickly so it can become active.

Thank you. I look forward to your questions.

Senator THOMAS. Thank you very much.

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

Senator THOMAS. Mr. Baugh?

STATEMENT OF BOB BAUGH, DIRECTOR, AFL-CIO INDUSTRIAL

UNION COUNCIL, WASHINGTON, DC

Mr. BAUGH. Mr. Chairman, Senator Bingaman, I would like to

thank you and the members of the committee for having us here

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to testify on behalf of the working people of the United States and

the members of the AFL-CIO.

As you know, we have a great interest in all trade agreements

and our trade policy generally, and we are here today to talk about

Bahrain and its effect upon American workers, and Bahraini workers.

I have submitted my written testimony, and I know the Senator

has already drawn some questions based upon issues we have

raised. I would like to speak a little bit more about those.

We do have serious, ongoing concerns with the basic template we

have in our trade agreements around fundamental labor rights.

The arguments that we are hearing here, and you saw in the testimony, are similar to other things that came up around the CAFTA

agreement, and we are being very consistent in how we think and

talk about these things.

The workers’ rights provisions, we find to be inadequate, ineffective, and weaker than they are under the fundamental human

rights that are respected, and dispute settlement mechanisms for

worker rights and environmental protections are weaker than those

available in the commercial provisions.

At the same time, flawed provisions in services, government procurement, and intellectual property rights will undermine the ability of both governments to protect public health, strong communities, and the environment.

Specifically, I would like to highlight a couple of the issues that

we have with the labor provisions of this agreement. It is true that

the government of Bahrain instituted labor law reform in 2002,

and we applaud the step forward, just as the International Confederation of Free Trade Unions did.

But let us be clear here. Neither they, nor we, are saying the job

has been done. There are serious problems with what has been

done, and what is not being done, under those labor provisions.

They are a step back from the Jordan agreement, and they are a

step back from what we enjoy under our Generalized Services and

Preferences Agreements.

The scope of the right to organize is limited. Public employees do

not have the right to organize under the current labor law. There

is a difference between the king, the crown prince, and the cabinet

on this. There are limits on the right to bargain collectively.

There are limits on the right to strike that go beyond what the

ILO provisions call for in very limited categories of essential services. It is a broad list in Bahrain that there is no right to strike.

The provisions around the right to strike are limited. In fact, if

you end up in arbitration and it does not work, you still do not necessarily have the right to strike, which is a fundamental of labor

law and labor protections throughout the world under the ILO

standards.

There is no enforcement, there is no minimum wage, and there

are guidelines in the government but there is no enforcement of it.

In a country in which two-thirds of the workers are foreign workers, they are extremely vulnerable to nonpayment of wages.

The issue of forced labor has been documented by our own State

Department studies, and others. Again, nonpayment of wages. People that have to pay wages to somebody who got the job, they go

15

there. If they change jobs, they must continue to pay for the work

that they have. They have to pay somebody to have those jobs.

Again, they have failed to offer those protections.

There is no political activity allowed under the law for labor organizations, again, a fundamental of the ILO standards that are

rights of labor movements throughout the world.

Finally, in the process of consultation, which has been required

around this, it is most disturbing that the workers and unions of

Bahrain were not adequately consulted by the government on the

provisions in the agreement. In fact, they never received an Arabic

translation.

It is pretty hard to have a consultation and discussion when you

cannot even have a consultation based upon an agreement written

in your own language. We understand from the USTR that an Arabic translation did not even exist at the time that the Bahrain FTA

was considered and approved by the Bahrainian parliament.

The failure to provide the consultation certainly calls into question the government’s willingness to engage substantially with its

own civil society organizations.

On behalf of our unions and colleagues in the General Federation

of Bahrain Trade Unions, we ask our government to insist on adequate and meaningful consultation with unions and other civil society organizations in this, and all future trade agreements.

Finally, any vote on the FTA must take into account our current

situation. You asked the question earlier about the decline, or what

is the balance of trade. Our record has been pretty bad. We are facing a $700 billion trade deficit next year. We have lost three million manufacturing jobs in the United States. We have increasing

poverty in this country.

The issue of jobs and employment does figure into this, although

we recognize Bahrain is not going to have a major economic impact

in our overall trade balance. The point is, we believe we have to

approach our trade issues consistently.

We believe labor rights are a fundamental—absolute fundamental—in good economic development policy for this Nation, and

for the workers in those countries. We do know that workers who

engage in collective bargaining, who do organize, will raise the per

capita income of the workers of that country, and that is an important step forward.

It is likely, we think, as we said, this will result in deteriorating

trade balances with this country, but I put that in the context of

the much larger trade balance issues we have confronting us across

the board in this country.

The AFL-CIO is not opposed, in principle, to expanding trade

with Bahrain if a trade agreement could be crafted that would promote the interests of working people and benefit the economies of

both countries.

Unfortunately, the U.S. Trade Representative, in our opinion,

has failed to reach such an agreement with Bahrain. Instead, the

labor provisions of the Bahrain FTA make little progress beyond

the ineffective NAFTA labor side agreements we saw before, and

actually move us backward from the labor provisions in our unilateral trade preference programs in the Jordan FTA.

16

Meanwhile, the commercial provisions of the agreement do more

to protect the interests of our multinational corporations than they

do to promote balanced trade and equitable development.

Mr. Chairman, we ask that you reject the Bahrain FTA and urge

the administration to negotiate. We really believe that these issues

we have outlined should be addressed beforehand, before this is put

before the Congress, that we really should have an agreement that

provides the rights and protections that workers deserve in every

country. Thank you.

Senator THOMAS. Thank you.

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

Senator THOMAS. Mr. Hamod?

STATEMENT OF DAVID HAMOD, PRESIDENT AND CEO, NATIONAL U.S.-ARAB CHAMBER OF COMMERCE, WASHINGTON,

DC

Mr. HAMOD. Mr. Chairman, Mr. Ranking Member, and distinguished members of the Senate Finance Committee, thank you for

the opportunity to testify this afternoon.

My name is David Hamod. I serve as president and CEO of the

National U.S.-Arab Chamber of Commerce, a member of the

MEFTA Coalition.

I have had the privilege of visiting Bahrain at least once a year

for the better part of 2 decades, and I can tell you that it is a very

comfortable place to live and do business.

Since its inception nearly 40 years ago, our chamber has been

America’s preeminent organization for promoting trade and investment between the United States and the Arab world. Most of our

members are small- and medium-sized companies exporting to the

Middle East.

This FTA sets the pace for the rest of the Arabian Gulf and is

a strong model for the Arab world as a whole. From the U.S. perspective, there are good things in this agreement for everyone,

whether you are a farmer in Iowa or Montana, a software developer in Utah, a tool manufacturer in West Virginia, or a freight forwarder in Mississippi. I dare say that there are comparable opportunities in Wyoming and New Mexico.

President George W. Bush has stated, ‘‘I will not be satisfied

until every American looking for work can find a job.’’ This FTA

will help to generate new jobs and sustain existing employment

here and in Bahrain. This is important for our fellow Americans at

a time when many in our country are facing economic uncertainty.

It is equally important in Bahrain, because some in the region,

a very tiny minority, would play upon unemployment and hopelessness to fuel extremism and breed terrorism. With this FTA, Bahrain is reaching out to the United States, and we would do well to

extend the hand of friendship in return.

According to Monday’s Wall Street Journal, one of America’s biggest trade competitors, China, is preparing to sign free trade agreements with 25 different nations. With fierce competition like this,

America cannot afford to take our friends, like Bahrain, for granted.

Admiral William Crowe, former chairman of the Joint Chiefs of

Staff, once said that, ‘‘Pound for pound, Bahrain has been about

17

the best ally the U.S. has had in recent times.’’ To the best of my

knowledge, Bahrain has stood with the United States in every

major international conflict our Nation has faced in the past century. This is a remarkable track record and one that we should not

take lightly.

Our chamber recently released a special report on the 2006 outlook for U.S. exports to the Arab world, including Bahrain. With

your permission, Mr. Chairman, I would like to include that report

in today’s hearing record.

[The report appears in the appendix on page 58.]

Mr. HAMOD. In Bahrain, the report states, ‘‘One hundred percent

ownership by foreign firms is encouraged,’’ which helps to explain

why more than 150 U.S. companies have set up operations there.

Bahrain is not America’s biggest market in the region, but with

the FTA in place, that kingdom will be better situated than ever

to serve as a gateway to the Arabian Gulf. Frankly, I would be surprised if our trade balance deteriorated with Bahrain.

In some respects, Bahrain has much in common with Singapore.

Both are island nations that serve as portals to larger markets on

the mainland. Both boast a high quality of life and ultra-modern

infrastructures, and both pride themselves on a well-educated and

easily trainable labor force. Like Singapore, Bahrain ranks high on

the list of free economies, and like Singapore, Bahrain holds great

respect for the rule of law.

Bahrain is undertaking significant economic reform, and the FTA

is the centerpiece of this effort. The agreement raises the bar for

trade and investment rules that enhance market access and bolsters Bahrain’s role as an engine of economic reform in the Arab

world.

With its resourcefulness, determination, and visionary leadership, Bahrain takes on tough jobs and succeeds at them in ways

that bigger nations can only dream about.

In conclusion, the National U.S.-Arab Chamber of Commerce believes that this FTA is good for America and good for Bahrain.

Timely congressional approval of this FTA will send an important

signal about America’s resolve to support economic reform in Bahrain and throughout the Arab world.

Thank you, Mr. Chairman and members of the committee.

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

Senator THOMAS. All right. Thank you all very much. We appreciate your participation.

Ms. Aslaksen, what will this change for HP? You say you are

trading there now. What difference will this trade agreement

make?

Ms. ASLAKSEN. Well, Mr. Chairman, to begin with, FTAs are intended to be a win-win situation. They raise the bar and open the

door. They open the door for increased market access and create a

greater flow of goods and services. They raise the bar by requiring

improved workplace conditions and stronger environmental protections.

So for us, one example of this, and something that affects the

high-tech sector, is that this FTA, upon implementation, will eliminate duties on technology products. For example, digital cameras,

servers and printers that meet the agreement’s specific rules of oriVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
18

gin will enter the country duty-free, upon implementation. Currently, there is a 5-percent duty that is applied to these goods in

Bahrain. Although they are a World Trade Organization Information Technology Agreement (ITA) member, they have not gone to

zero status. So, this advances ITA duty concessions, and also includes zero duty treatment for other items.

Senator THOMAS. So it does make some impact.

Apparently this is a fairly advanced country, technologically.

How does it compare with other Middle Eastern countries?

Ms. ASLAKSEN. With other Middle Eastern countries, sir?

Senator THOMAS. Relatively. Is it more technologically advanced

than Egypt or others?

Ms. ASLAKSEN. Well, my impression, Mr. Chairman, is that this

country has positioned itself as a center for information technology

and telecommunications, so they are more advanced, in my opinion,

than some of the other countries.

Senator THOMAS. I see. All right.

Mr. Johnson, you mentioned that the agreement allows you to

offer a wider range of financial services. What services will you be

able to offer that you cannot offer now?

Mr. JOHNSON. Mr. Chairman, the agreement provides for a

broader liberalization in financial services. For our particular company, having been there since 1969, we have a very well-established presence there, given that time.

But what it does provide is the opportunity for a strengthening

of the services sector, the financial services, in particular, within

that country. I think, more importantly, it positions Bahrain to

play a larger role as a regional financial center for the Middle East

and Gulf region.

As the largest provider of financial services in that region for

ourselves, larger opportunities will go with that. So as we continue

to negotiate FTAs with other countries in the Gulf, we broaden the

network of financial services, in banking, insurance, asset management, and providing services for our international, as well as our

American, customers.

Senator THOMAS. Do you see your company as a Singapore-like

situation, there to serve other surrounding countries?

Mr. JOHNSON. Yes. We are doing that already. Bahrain, for

Citigroup, is a regional hub for a lot of our activity. It is also a

booking hub for our Central, Eastern Europe, as well as our Middle

East and Africa, business. I think there is certainly the potential

for Bahrain to play the same role that Singapore plays in Southeast Asia.

Senator THOMAS. I see.

Ms. Spangler, you indicated, and I am sure properly, that there

is not a great deal of market for wheat. Do you see this then as

an entre into the area? Is that one of your major hopes?

Ms. SPANGLER. Yes. Wheat is well-represented in that region

now. We have a different problem with Bahrain that this actually

is not going to solve. Just, we see it as a major opportunity for

growth in the region.

As you have heard, they are a gateway. We have an infrastructure problem. They do not have mills that can handle our shipVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
19

sized loads that go in, so we are going to have to get our shippers

to repackage our product.

But it is so strategically located, and the milling industry they

have to use our quality products when we can get past this—as I

said, we are also being disadvantaged in this market by the monopoly traders of Australia and Canada.

Senator THOMAS. I see.

Ms. SPANGLER. We see it as an opportunity to expand in the region when we remove some other nontariff barriers.

Senator THOMAS. Is there any debate or discussion about agricultural payments? That seems to be one of the broader issues, like

in the European Union, and so on. Is that an issue here?

Ms. SPANGLER. Not to my knowledge, it is not. We have not

heard it raised in that region.

Senator THOMAS. Do you think it is an issue in trade, generally?

Ms. SPANGLER. It is a huge issue in trade, generally.

Senator THOMAS. Yes.

Ms. SPANGLER. Bahrain is not an agricultural-based country, so

they do have some production, but it is not the type of production

that we would be competing with.

Senator THOMAS. I see. All right.

Mr. Baugh, I understand your concerns. Do you see the trade

agreements as being a way to cause other countries to behave as

we do? Do you think that it is our responsibility to change countries to function as we do?

Mr. BAUGH. Mr. Chairman, we see trade agreements as an opportunity to talk about standards by which we will do trade with

other countries, the rules under which we all play with each other,

what is the level playing field, how does that work.

Labor standards and conditions are part of that. They are a fundamental part of that. The idea is that, when you look at how we

trade, we talk about intellectual property rights, we believe labor

rights bear the same scrutiny and the same weight in our trade negotiations, and the same priority in our trade negotiations, because

that speaks to the interests of working people, here and abroad.

Senator THOMAS. All right. Interesting. It is kind of what we are

faced with in terms of Iraq. It is a different situation, but people

say, well, you just want them to behave the same way we do, and

it is really their country and they have a right to do as they choose.

But I understand what you are saying.

Mr. Hamod, it sounds as if this is a place that is attracting a lot

of U.S. investment, the 150 businesses that you mentioned that we

have there. Is this what we want to do, provide a place for our

businesses to go to operate as opposed to trading from here?

Mr. HAMOD. Mr. Chairman, I believe that the FTA will increase

both trade and investment. Most of my experience over the years

has been on the trade side.

What we have found is that when we open the door for Americans to serve overseas, they get into positions of responsibility

where they buy American, sell American, specify ‘‘American,’’ and

create jobs for other Americans—not exporting U.S. jobs overseas;

to the contrary, generating more exports from the United States.

I would see that happening in Bahrain, not only for Bahrain’s

sake, but among its neighbors there is a boom going on in the reVerDate 11-MAY-2000 17:48 Feb 09, 2006 Jkt 095484 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 25776.000 SFINANC2 PsN: SFINANC2
20

gion. Saudi Arabia recently announced they expect $600 billion

worth of growth over the next decade, and I think Bahrain will be

one of the primary beneficiaries of that boom. We, as the United

States, could also stand to be one of the big beneficiaries if we implemented an agreement along these lines.

Senator THOMAS. I see. Thank you.

Senator?

Senator BINGAMAN. Thank you very much, Mr. Chairman.

Let me try to understand what the impact of this agreement is

on this Arab boycott of Israel. As I understand what currently exists, since Bahrain is a member of the Arab League, there is a boycott on Bahrain trading with Israel, or boycotts on Israeli products.

That is my understanding.

But there has been a commitment by Bahrain to essentially

withdraw from that boycott or begin to trade with Israel, if and

when this free trade agreement goes into effect. Is that your understanding of things, Mr. Hamod? Or if I have misstated it, could you

elaborate or explain what the effect of this is?

Mr. HAMOD. Mr. Bingaman, I do not profess to be an expert on

the boycott, but to the best of my knowledge, Bahrain eliminated

the tertiary and secondary boycott with Israel more than a decade

ago. As far as the primary boycott is concerned, I do not think that

is really an issue in Bahrain.

As far as I know, they have closed the office there that was dedicated to doing that. In my discussions with Bahraini business people, they have told me that, under the right circumstances, they do

not mind doing business with Israel. This FTA may help open the

door for that, in fact.

Senator BINGAMAN. But as far as you know, they are currently

ready and willing to do business with Israel, whether this agreement is ratified or entered into or not.

Mr. HAMOD. Well, I cannot speak for the government of Bahrain

and I cannot speak for the Bahraini business community. But to

the best of my knowledge, I think there is a great deal of interest

in building up business, not only with Israel, but throughout the

world.

Senator BINGAMAN. I have never been to Bahrain, which I regret,

especially after reading your description of it here, Mr. Hamod. But

the description seems to be of a very prosperous economy, a need

for workers to come in, two-thirds of the workforce imported, or immigrants into the country to take the jobs that they do not have

enough local population to fill.

Why would it not be perfectly acceptable to the government of

Bahrain to go ahead and embrace some of these labor rights provisions that Mr. Baugh is talking about in his testimony?

It seems like, it is one thing where you have got a very poor

country, with employers who are not paying decent wages and are

going to have to change their procedures and raise the wage level,

and do a variety of things to recognize workers’ rights.

But here, it seems like the wages are reasonably good and the

workers are reasonably well-treated, the way you describe it. So

why would they not be willing to enter into agreements with us

that would commit them more substantively to labor rights?

21

Mr. HAMOD. Again, Mr. Bingaman, I cannot speak for the government of Bahrain. But it has been my observation over the years

that more and more Bahrainis are entering the workforce, which

I think is a very positive thing.

I am sensitive to the concerns that Mr. Baugh has raised, but as

I see jobs developing in Bahrain, I see many Bahrainis taking

those jobs in hotels, in the service sector, in industry, and a large

percentage of those jobs are going to women. So, I think that is a

step in the right direction. It is my hope that the FTA will build

on that trend.

Senator BINGAMAN. All right.

So you think that there are improvements in working conditions,

that the improvements are occurring even though the obligation to

make those improvements is not contained in this agreement. Is

that what you are saying?

Mr. HAMOD. It is my sense that the situation is getting better

over time. I think every country could stand to improve a bit, Bahrain included. But my sense is that, as the economy expands, it is

creating more opportunities, and the wages are going up.

Senator BINGAMAN. All right. I think that is all I have got, Mr.

Chairman. Thank you very much.

Senator THOMAS. Thank you.

Well, we appreciate very much your participation, and we look

forward to moving on this issue. I have not been to Bahrain. I have

been, however, to Jordan, Kuwait, and Iraq, and that part of the

world needs lots of strengthening.

We have about a half million people in Wyoming, which is similar to Bahrain, so if we can recognize Wyoming’s contribution, I

guess we can recognize Bahrain’s importance to the region. [Laughter.]

In any event, thank you very much. The committee will include

in its record any items you might have that you would like to include, without objection.

I will remind members that the record will remain open until 5

p.m. tomorrow, should there be questions for any of you.

Again, thank you so much. I appreciate your contribution.

[Whereupon, at 3:36 p.m., the hearing was concluded.]

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