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27–400—PDF 2005

S. HRG. 109–383

STATUS OF THE WORLD TRADE

ORGANIZATION NEGOTIATIONS

HEARING

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL TRADE

OF THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

OCTOBER 27, 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, Committee on Finance ................................................ 1

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

ADMINISTRATION WITNESS

Allgeier, Hon. Peter, Deputy U.S. Trade Representative, Office of the U.S.

Trade Representative, Washington, DC ............................................................. 2

PUBLIC WITNESSES

Jarrett, Jim, vice president, Worldwide Government Affairs, Intel Corporation, Santa Clara, CA .......................................................................................... 12

Lang, Craig, president, Iowa Farm Bureau Federation, West Des Moines,

IA ........................................................................................................................... 13

Shafer, Jeffrey, vice chairman, Global Banking, Head of Economic and Political Strategies, Citigroup, New York, NY .......................................................... 15

Gresser, Ed, director, Trade and Global Markets, Progressive Policy Institute,

Washington, DC ................................................................................................... 17

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Allgeier, Hon. Peter:

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

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

Responses to questions from committee members ......................................... 32

Bingaman, Hon. Jeff:

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

Grassley, Hon. Charles E.:

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

Gresser, Ed:

Testimony .......................................................................................................... 17

Prepared statement .......................................................................................... 38

Jarrett, Jim:

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

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

Lang, Craig:

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

Prepared statement .......................................................................................... 61

Shafer, Jeffrey:

Testimony .......................................................................................................... 15

Prepared statement .......................................................................................... 65

Thomas, Hon. Craig:

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

COMMUNICATIONS

American Chemistry Council .................................................................................. 71

Emergency Committee for American Trade .......................................................... 78

International Dairy Foods Association .................................................................. 86

The Montana Farm Bureau Federation ................................................................. 89

R-CALF USA ............................................................................................................ 92

Sweetener Users Association .................................................................................. 101

(1)

STATUS OF THE WORLD TRADE

ORGANIZATION NEGOTIATIONS

THURSDAY, OCTOBER 27, 2005

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

The hearing was convened, pursuant to notice, at 2:05 p.m., in

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

(chairman of the subcommittee) presiding.

Also present: Senators Crapo and Bingaman.

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

INTERNATIONAL TRADE, COMMITTEE ON FINANCE

Senator THOMAS. The hearing will come to order.

Thank you all for being here. I think it is very important for us

to continue to talk about international trade. Certainly, as we come

closer to the WTO meeting and the meetings that are before us, we

need to discuss the issues.

I appreciate very much, Mr. Ambassador, your being here with

us. We’ve talked some about you having more conversation with

Congress bringing up bills for an up or down vote.

In some ways, it seems hard to believe it has only been 2 years

since Cancun. Having been there, I hope the next time around it

is a little more productive.

I do appreciate the efforts of USTR to keep moving forward, especially the efforts of Mr. Portman and his predecessor, Mr.

Zoellick. Without their leadership and involvement, I seriously

doubt we would be where we are today.

I believe there is much to be achieved in Hong Kong. Many negotiating groups are still lacking their member proposals, and I guess

that is one of the real problems, one of the issues, of course, with

WTO, that there are so many countries.

Even though they certainly have differing amounts of involvement in trade, they all have a voice in the decisions, and that

makes it difficult sometimes. It is critical that countries lay out

their positions if success is going to be made there. It is difficult

to imagine how we can accomplish a lot of that in the next several

weeks.

In any event, it is important we continue to aggressively promote

several fundamental concepts I believe that we have talked about

before: to eliminate the trade distortion barriers, to expand access

for U.S. goods and services around the world, to ensure that effecVerDate 11-MAY-2000 14:32 May 16, 2006 Jkt 095484 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 27400.000 SFIN1 PsN: SFIN1
2

tive, transparent enforcement laws are established to prevent circumvention of existing laws, to hold member nations responsible

for failing to honor their trade commitments and, finally, to encourage innovation through strong intellectual property rights protection and enforcement mechanisms.

The United States is the strongest economy in the world. I know

that there are limits to how much muscle we can flex, but, as we

head to Hong Kong, I think we are in a strong position, and I hope

we do not hesitate to use the strength that we have.

We are going to have trade. If we look into the future as to where

we are going, there is going to be trade. Our challenge and our responsibility, I believe, is to ensure that we have trade, to ensure

that it is fair. That is the challenge before us, and it is certainly

a tough one.

Senator Bingaman?

OPENING STATEMENT OF HON. JEFF BINGAMAN,

A U.S. SENATOR FROM NEW MEXICO

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

I am looking forward to hearing the testimony. Obviously there

are a lot of trade-related issues that are on the agenda, and I think

we clearly need to be better informed—I certainly do—about the

status of those, so I look forward to the testimony, and I will have

some questions once we have heard that.

Senator THOMAS. Thank you very much, Senator.

For each of you that will be testifying, your full statements will

be made a part of the record. If we can hold our statements to a

certain amount of time, it will help us to get through.

So, welcome, Ambassador Allgeier. We are certainly glad to have

you here, sir. If you are ready, why do you not go right ahead?

STATEMENT OF HON. PETER ALLGEIER, DEPUTY U.S. TRADE

REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE, WASHINGTON, DC

Mr. ALLGEIER. Thank you very much, Chairman Thomas and

Senator Bingaman, for providing this opportunity to testify today.

I am pleased to be here to discuss the Doha Development Agenda

negotiations and the preparations for the ministerial in Hong Kong

in December.

As you know, this Doha Development Agenda is the central element in President Bush’s strategy to open markets, to reduce poverty, and to expand freedom through increased trade among all

countries.

I would like to describe for the committee today the current situation in the negotiations and hear your views on how best to

achieve our U.S. objectives under the current circumstances.

Unfortunately, I must report that the negotiations are not as advanced as they should be for the ministerial in Hong Kong. If you

will allow me to just briefly focus on the main negotiating areas,

I will expand upon that.

First is agriculture. Without being overly dramatic, I think it is

fair to say that the fate of these negotiations hangs in the balance

because of the lack of progress to date in agriculture, where much

3

of the responsibility for this situation lies with the European

Union.

The Doha mandate, as you will recall, concentrates on three

main areas in agriculture: export competition, domestic support,

and market access. It is our view, and the view I think of nearly

all the delegations in Geneva, that the shape of an agreement in

the first two pillars, in export competition and domestic support,

can be achieved by Hong Kong.

I am not talking about a final agreement; I am talking about a

shape of negotiations going forward. However, that is not the case

for the third pillar, for market access in agriculture.

Just to provide a little bit of background. Earlier this month, the

10th of October, the United States did what many WTO members

had asked. We identified, in clear and precise terms, with numbers,

our level of ambition for the agriculture negotiations, including

with respect to reform of domestic support. We presented a comprehensive package, including market access, to move the WTO agriculture negotiations forward.

I want to stress, however, that our proposal on reducing domestic

subsidies was contingent, is contingent, on the EU and others coming forward with much greater market access, and also with greater reductions in their own trade-distorting subsidies.

Let me discuss these a little bit more in detail. In market access,

in agricultural market access, we are calling for WTO members to

aggressively reduce tariffs. Specifically, we are saying that developed countries should reduce agricultural tariffs between 55 percent and 90 percent, with the 90 percent cuts being applied to the

highest existing tariffs.

We also have proposed that there be a tariff cap of 75 percent,

so that at the end of the implementation period there would be no

agricultural tariff above 75 percent. This is for developed countries.

We have similar benchmarks, if you will, for developing countries.

It is already agreed that there will be some flexibility here for

countries in the form of sensitive products that would be designated. They would not have to cut the tariffs as deeply as the formula would require, but they would have to compensate by having

fairly large tariff rate quotas. We have said that no more than 1

percent of a country’s dutiable tariff lines should be in this category of sensitive products.

In export competition, we have called for the elimination of export subsidies by the year 2010, disciplines on export credit programs, and, of course, on State Trading Enterprises, and food aid

disciplines that would avoid commercial displacement but would

allow food aid for emergencies and for chronically food-short countries to continue without obstacles.

On domestic support, we call for substantial reductions in tradedistorting domestic support, with deeper cuts by those countries

that have the highest subsidies. Obviously, Europe and Japan

would have to cut more deeply than we would.

This proposal that we put forward on October 10 changed the dynamic of the negotiations dramatically and positively. It is generally recognized throughout the WTO that our proposal put the

second pillar, that of domestic support, into ‘‘negotiating shape.’’

Those are the words of Director General Pascal Lamy.

4

So the attention of the negotiations has moved unmistakably to

the third pillar, agricultural market access. We, and the other

members of the WTO, are waiting for the European Union to come

forward with its proposal on how to move the negotiations forward

on market access.

This proposal that they come forward with must not be incremental. It cannot be simply tinkering at the margins. It must be

a proposal that conveys a high level of ambition, a level of ambition

that is comparable to what is already out there for consideration

on export competition and domestic support.

Now, while agriculture may be the engine for the negotiations,

success requires us to secure strong results across the broad range

of issues in the round, primarily in manufacturing and in services.

These two areas are also behind in the negotiations, in large part

because many of the countries that have very high ambitions in agriculture have not been willing to engage seriously enough in the

manufacturing negotiations, known as NAMA, and in services.

Now, in non-agricultural market access, manufacturing goods

trade, the key standard of success there is increased market access

for manufactured goods. Manufactured goods, after all, account for

approximately 75 percent of all goods traded globally.

If we are going to get new trade flows in manufactured goods,

the result of this round has to be that tariffs at the end of the

round are lower than the applied rates that are in existence right

now. So, that is a key standard that we are looking at for the

NAMA negotiations.

The mandate from Doha lays the groundwork for cuts like this,

where there are deeper cuts in the higher tariffs, and also the possibility for sectoral agreements that could bring tariffs in certain

sectors to zero.

In services, services are on a par with agriculture and non-agricultural market access, important for this round and for the United

States. We have been conducting those negotiations under what is

called a request/offer process. It is a bilateral negotiation where a

country makes a request of opening from another country, and the

other country responds with offers. At the end of the day, all of

these offers are multilateralized.

That process has not led, thus far, to the kinds of commitments

that we are seeking, so we are working with other countries who

are interested in services to find complementary negotiating approaches to the request/offer process that would enable us to get

more offers, higher quality offers, especially by key countries—

large countries and developing countries—where services remain

restricted, and also particularly in key sectors of importance to us

and to developing countries, sectors like financial services, telecommunications, energy, express delivery, computer-related services, and so forth.

The other elements of the Doha Round include rules. Here, we

are very clear. We are not going to make changes that would reduce the effectiveness of the trade remedy laws that we have in the

United States.

It is very interesting. Since Doha was launched, even, there has

been more of a trend of other countries, particularly advanced developing countries, using antidumping.

5

What we are finding is, their procedures have far less transparency than we have, and their notion of due process is quite different from our notion of, in fact, what we think is required under

the WTO.

So we do have some, if I can use the term, offensive interests in

rules to get countries to have the same degree of transparency as

we do. Even developed countries such as the European Union do

not have the same degree of transparency that we do.

The other part of the rules negotiation is to strengthen the disciplines on subsidies. There are a number of subsidy practices that

countries use to bolster uncompetitive industries. This is something

that we want to apply stronger disciplines to.

One area in particular that we are promoting is disciplines

against subsidies that contribute to over-fishing, so fish subsidies

is something that has a trade impact that is positive and would

also have an important environmental benefit.

Trade facilitation, which has to do with the Customs procedures,

is something that you mentioned, Senator, from Cancun. Well,

there is not a lot of happiness from Cancun, but one of the things

that resulted was an agreement that we would have a negotiation

on trade facilitation.

This is a very important complement to the traditional tariff reduction formulas. You can reduce the tariffs, but, if you cannot get

your goods through the Customs procedures or it is unpredictable,

then you are also stymied in your trade. So, these trade facilitation

negotiations are an important complement to what we are doing in

the rest of market access.

Now, this is the Doha Development Agenda. Let me just say a

word about development. The core, the key to development in this

negotiation, lies in the three areas that I have mentioned in the

first place: agricultural market access, non-agricultural market access, and services market access and rules.

These are where the real benefits for development will come.

There are a lot of other development issues that are being discussed, but this is what really matters.

Just looking at agriculture, for an example. The World Bank has

estimated that something like 92, 93 percent of the benefits for developing countries from a potential agriculture deal would come

from improved market access as opposed to disciplines on domestic

subsidies and elimination of export subsidies.

Parallel with the negotiations on the development front is the

technical assistance capacity building that is always so important

in helping countries not only to negotiate and implement the agreements, but then to benefit from it.

Of course, Senator Bingaman, this was something that was an

important issue that you highlighted with respect to CAFTA, and

it applies broadly.

Well, in each year since Doha, the United States has contributed

a million dollars to the DDA Capacity Building Trust Fund in the

WTO, but, more significantly, through our bilateral efforts and

other programs that we contribute to, we currently are providing

$1.3 billion in trade capacity building activities worldwide.

So, in conclusion, the DDA does provide us with an opportunity

here that we cannot afford to waste. We can set a vision for the

6

global economy for the next decades and make a very major contribution to development, but we will be able to conclude such an

agreement in 2006 only if we achieve a balanced outcome with results that will benefit all members.

The United States is prepared to lead by example, but we need

to ensure that we secure real gains and market opportunities in

the decades ahead. This means that other countries, both developed

and developing countries, have to contribute to a final agreement.

The core of our trade agenda is promoting open markets and the

rule of law. We continue to pursue those interests in the DDA, and

we appreciate greatly the support and the guidance of this committee in our efforts.

Thank you.

Senator THOMAS. Thank you very much, sir.

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

Senator THOMAS. We will just go into a little session of questions

now.

I, of course, am prejudiced towards agriculture, coming from my

State, being on the Agriculture Committee, and so on. But when

75 percent of our trade is other than agriculture, and, as we hear

reports from Doha and other negotiations that success in Hong

Kong is going to depend on agriculture, how can we let that happen?

Mr. ALLGEIER. Well, agriculture is a bit of a gateway for us to

go through. But we have been very, very clear that, at Hong Kong,

to set the stage for negotiations in 2006, we have to have a comparable level of direction for the non-agricultural market access negotiations, the manufactured goods negotiations, and services.

Actually, there has been quite a bit of work. I do not want to

send the message inadvertently that there is no work being done

on those issues. There is a lot of work and, frankly, on both of them

the United States has shown great leadership.

But we need to have more engagement by more of the countries.

We have been very clear that we have to have robust results in

services, in non-agricultural market access, along with agriculture,

to have a successful Hong Kong ministerial.

Senator THOMAS. Well, I hope that is the case. I am telling you,

we constantly hear that unless we get an agricultural agreement

with the EU, that nothing is going to happen. Can that be the

case?

Mr. ALLGEIER. That is a necessary, but not sufficient, condition

for a satisfactory ministerial and a satisfactory round. You have to

have these other elements.

Senator THOMAS. I guess I am still not making myself clear. The

point that we hear, whether it is right or wrong, is that nothing

else is going to happen until there is an agreement on agriculture.

Is that an overstatement?

Mr. ALLGEIER. No, it is not an overstatement, to date.

Senator THOMAS. You see, that is the point.

It is kind of interesting because, as far as the EU is concerned,

currently on agricultural tariffs we are at 12 percent and they are

at 112 percent. Their proposal keeps them still at 80. I guess I

have trouble figuring it out.

7

In general terms, is the difficulty largely with the large trading

countries in which we have a big market or is it these smaller

countries, maybe you call them developing, and whatever little they

have to export is agriculture? Is that kind of the situation?

Mr. ALLGEIER. Well, there are a couple of things, I think, behind

this. First of all, of course, if you look at the history of the GATT

and then the WTO, agriculture was always left behind.

It was really only in the Uruguay Round that agriculture was

brought more into the set of disciplines and tariff cutting, and so

forth, that had been applied in previous rounds to manufacturing.

So, there is a need to catch up, and that was recognized at the

time of the Uruguay Round when it was agreed that there would

be this ongoing negotiation, the built-in agenda, it was called, to

continue negotiations on services and in agriculture after the Uruguay Round. So that is one reason that agriculture has been highlighted.

The other is, as you are suggesting, for many developing countries—and particularly for developing countries—agriculture is obviously a much larger part of their economy than it is of ours.

Senator THOMAS. Sure.

Mr. ALLGEIER. Now, we also have a real interest in agriculture.

You know the situation with the disparity in the domestic support

between us and Europe.

Senator THOMAS. Sure.

Mr. ALLGEIER. So, all of these forces, I think, are among those

that have pushed agriculture to the forefront of these negotiations.

Senator THOMAS. I understand there is a proposal to provide

duty-free/quota-free access to all products in the so-called ‘‘lesser

development’’ countries. Would any of those beneficiaries have a

current program for developing countries that would be hurt by

this proposal?

Mr. ALLGEIER. We have some concerns there, and a number of

the other countries do. I think the concern is that most of it is with

respect to many of the AGOA beneficiaries. We have seen very impressive results from AGOA in the apparel area. Of course, this

year these AGOA countries are having to cope with the competition

from China.

Now, among the least-developed countries, you have a country

like Bangladesh, which is a very competitive supplier of apparel.

So, we do have some concerns that if we were to give duty-free

treatment to all apparel coming from Bangladesh, or Cambodia, or

Nepal, that that could have, very likely would have, a negative impact on some of these AGOA countries.

Senator THOMAS. All right. My time has expired. I do, I guess,

need to share that, having been in Cancun, I just sometimes feel

like what we are doing, instead of dealing with trade among the

people who are trading, is dealing more with a consortium of smaller countries who are just talking about development for themselves. That is kind of frustrating. It makes you wonder sometimes

if WTO is the place we ought to be. I know it is, but it makes you

wonder.

Mr. ALLGEIER. Well, we share your frustration, believe me.

Senator THOMAS. Senator Bingaman?

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

8

I am having trouble reconciling what our position is in these discussions, trade discussions, and what we are doing here in the Congress. I read your testimony here, that you say ‘‘U.S. proposes the

following specific elements within 5 years.’’ This is under agriculture. ‘‘Reduce overall levels of trade-distorting support by 53

percent for the United States.’’

As I understand the budget reconciliation bill which is about to

come to the Senate floor this next week, the one that was reported

out yesterday out of the Budget Committee, it extends the farm

bill’s commodity subsidy programs for 4 more years, from 2007

through 2011, at current levels.

It also extends this milk subsidy, which is a billion-dollar subsidy

that benefits very few States. I do not know that that is included

in the reconciliation bill. I think that it may be part of the agriculture appropriation. But it is in there, as I understand it.

I guess my question to you is, does the administration support

these actions here in the Congress? It seems, if I were negotiating

for another country, I would say your protestations about cutting

these subsidies sound a little hollow in light of what you are doing

at this very moment in your own Congress.

Mr. ALLGEIER. I think it goes back to the point about our proposal being one that has conditions attached to it. I mean, we have

been very clear with our trading partners that the only way that

we could imagine Congress approving the sorts of changes that

would be required in our agricultural products, our domestic support programs, would be if they were coupled with real, strong,

hard commitments on market access by our trading partners. So

that is basically the way we have presented this, even before this

was put in the budget reconciliation bill.

So our preferred outcome, obviously, would be that we are able

to come back with a package that has enough on market access,

has enough in compressing those domestic supports by Japan and

Europe, that the Congress would say this is a package that is better for American agriculture than the alternative.

Senator BINGAMAN. But until that happens, until you are able to

get that negotiated agreement through this Doha Round, your position is that you support the current levels of subsidy for commodities, and you also support extending this milk program indefinitely. Is that right?

Mr. ALLGEIER. I do not think we are saying that. I think that you

would have to determine what the administration position would

be on these elements within the budget reconciliation package.

Senator BINGAMAN. But you cannot tell us what the position is?

I mean, that was my question: what is the administration position

about the extension of this milk program?

Mr. ALLGEIER. Well, we certainly would prefer to see the Congress have before it what we are able to achieve in the Doha Round

before it makes irrevocable decisions.

Senator BINGAMAN. So you would not support us doing an extension of it at this point.

Mr. ALLGEIER. We would prefer not to see that.

Senator BINGAMAN. And the same with the extension of the commodity provisions in the farm bill? You would prefer that we not

act on those at this time?

9

Mr. ALLGEIER. We would prefer to be able to come back and show

the Congress what we have achieved in the negotiation before they

make irrevocable decisions. There is still time within the current

farm bill. The current farm bill goes through 2007.

Obviously, we are not seeing changes in that during that period,

but we would hope that we would be able to come back to the Congress with a package before they have to make an irrevocable decision.

Senator BINGAMAN. So in this year’s legislation, either the reconciliation bill or the appropriations bills, we should leave those

issues unaddressed, in your view?

Mr. ALLGEIER. We would like to stick with the current situation.

Senator BINGAMAN. This is sort of a very general question that

I probably should know the answer to. But in going into this Doha

Round, do we have an idea as to where we believe this set of recommendations or proposals that we are tabling for consideration,

where they lead us with regard to our trade imbalance with the

rest of the world? I mean, is there an idea? If we could get these

proposals agreed to, the trade imbalance would shrink or expand.

Do we have an idea of that or do we not calculate that?

Mr. ALLGEIER. Well, we do not have precise calculations on it,

one reason being that, frankly, even more important than the market access we get or the changes in subsidy practices, is what is

happening in our economy compared to other economies.

I do not think there is any doubt that, all other things being

equal, economic conditions being equal, we would have a better

chance of reducing the deficit if we are able to open up other markets and we are able to reduce the disparities and subsidies that

our farmers and ranchers are facing vis-a`-vis their competitors.

Senator BINGAMAN. Thank you.

My time is up, Mr. Chairman.

Senator THOMAS. Senator Crapo?

Senator CRAPO. Thank you very much.

Mr. Allgeier, it is my understanding that the G–20 nations, as

well as the United States, and I guess Australia, support the notion that no more than 1 percent of a country’s tariff lines can be

treated as sensitive products, and the EU is pushing for 8 percent.

Is that correct?

Mr. ALLGEIER. That is correct.

Senator CRAPO. I would just like your estimate as to the likelihood of us being able to prevail on the 1-percent level. Does it look

like other nations are starting to line up on one side or the other

of that issue?

Mr. ALLGEIER. Well, I think it is significant that the G–20 has

lined up on that, because there is quite a variety of developing

countries in that G–20. I mean, you would expect someone like Argentina or Brazil to take that point of view, but it is interesting

that other countries that are in there—India, for example—have

agreed with the position of the G–20, and so I think that that is

very helpful.

The thing is, the United States has a broader composition of exports in agriculture than most countries. For many countries, they

are really trading in just a few products. So the more that that sensitive product category expands, the less chance they have of getVerDate 11-MAY-2000 14:32 May 16, 2006 Jkt 095484 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 27400.000 SFIN1 PsN: SFIN1
10

ting the kind of market access they need for their key products. So,

there is a lot of resistance to the EU’s approach of having something as high as 8 percent be sensitive products.

Senator CRAPO. All right. Thank you.

I want to go also to the question of trade remedies and enforcement. In your prepared testimony, you indicate that the United

States is taking an active role in dispute settlement negotiations

with the idea of trying to get more effective dispute settlement procedures in place.

There is a lot of concern out there that the United States may,

in fact, be preparing to agree to something that may weaken our

ability to have effective enforcement measures.

In your testimony, one of the things you noted was that we are

looking at ways to more effectively address errant or unhelpful

panel reasoning. My experience with these panels suggests that

there certainly is a lot of errant and unhelpful panel reasoning.

I just wanted to ask you, where are we headed on this? What is

the U.S. position? How can we be assured that we are going to

have an effective dispute resolution process that does not leave us

at the mercy, frankly, of what I consider to be basically political

panels?

Mr. ALLGEIER. Of course, we have had a lot of victories in panels,

so it is not all one way. But we have some real concerns where,

in our view, panels have not stuck to the proper standards in making these decisions.

So, we are looking for ways of reinforcing or clarifying what the

standards of review are, providing guidance that panels will have

to stick to and not be filling in gaps that they perceive, where they

would like to, in effect, make new obligations.

Senator CRAPO. If we establish those firm, I guess you would call

them rules of law or standards that the panels are expected to comply with, and then you do have an errant panel decision or errant

reasoning on a panel, what are some of the ideas that are out there

to solve that problem? I mean, what I am getting at is, when a

panel just, frankly, blatantly ignores the standards.

Mr. ALLGEIER. Well, of course, that is the reason that we have

supported the whole appellate procedure within the WTO, so that

you do hope to get a greater degree of consistency and adherence

to the standards if you have an appellate body that is a standing

body, and therefore can deal with individual panels. Senator, it is

not an easy thing to fix.

Senator CRAPO. You face the same problem at the appellate level.

Mr. ALLGEIER. Yes. I mean, the advantage there is that you have

a standard pool of members of the appellate body so you can have

a greater degree of consistency in different circumstances than individual panels would provide.

But as I said, it is not an easy thing to do. We think, by highlighting this issue also and bringing it out into the open, it also can

help make panelists more sensitive to it.

Senator CRAPO. Well, I certainly do appreciate the attention that

you have given to it and the effort there. I am hopeful that a

strengthening can be achieved. Certainly if we can all operate

under the same rules and expect to have objective and unbiased

application of those rules, it will tremendously help us.

11

Mr. ALLGEIER. I agree.

Senator CRAPO. Thank you very much.

Senator THOMAS. Thank you, sir.

I have one more sort of parochial question I would like to ask

you. It has to do with global soda ash. The United States has about

a third of the global production. Most of it—80 percent, by the

way— is exports from Wyoming.

It has long been a sector that was specifically targeted for a zeroto-zero global tariff elimination by the government in a number of

different meetings: with the executive branch, the WTO Doha

Round, and the Finance Committee. So, the industry has long supported that.

Considering the high level of tariffs and the movement of tariffs

in China and artificial soda ash in Brazil and so on, does the administration have a plan to address the longstanding issue of zeroto-zero on soda ash?

Mr. ALLGEIER. Yes, Senator. It is true that soda ash has long

been, and continues to be, a priority area for us. I think that is

visible in the various bilateral free trade agreements we have negotiated. For Morocco, Australia, Singapore, Chile, CAFTA, Bahrain,

Oman, we were able to negotiate immediate duty-free for soda ash

in all of those agreements.

Multilaterally, we have been consistently seeking a sectoral

agreement in chemicals, which of course would include soda ash.

What we are looking for there would be to eliminate tariffs in

chemicals, including soda ash.

I think the more that we have countries that are signing on

duty-free through our FTAs, that that should help us in building

a coalition that sees it is in its interest to do that elsewhere.

In fact, we have had strong support from the International Coalition of Chemical Associations, and that includes not only developed

countries that you would expect, Canada, U.S., Europe, Japan, but

also Mexico and the Mercasur countries. We will continue to push

that.

Senator THOMAS. Well, thank you, Mr. Ambassador.

We are going to move on to the rest of the panel. We certainly

look forward to working with you. A number of us plan to be in

Hong Kong, and I hope that we can be helpful there, and are looking forward to it.

Mr. ALLGEIER. We look forward to your support there, and leading up to it, too.

Senator THOMAS. Good. All right. Thank you, sir.

Mr. ALLGEIER. Thank you very much.

Senator THOMAS. All right.

Let us move to our number two panel. Mr. Jim Jarrett, vice

president, Intel Corporation; Mr. Craig Lang, president, Iowa Farm

Bureau Federation; Mr. Jeffrey Shafer, vice chairman, Global

Banking, Citigroup; and Mr. Ed Gresser, director of Trade and

Global Markets, Progressive Policy Institute.

Gentlemen, thank you. As I mentioned, your full statements will

be made part of the record. We will try to see if we can hold to

about 5 minutes apiece and get the story out in that way.

Mr. Jarrett, would you like to begin, sir?

12

STATEMENT OF JIM JARRETT, VICE PRESIDENT, WORLDWIDE

GOVERNMENT AFFAIRS, INTEL CORPORATION, SANTA

CLARA, CA

Mr. JARRETT. Mr. Chairman, thank you for the opportunity to

appear before you today at this important hearing.

My name is Jim Jarrett. I am vice president of Worldwide Government Affairs at Intel Corporation. I am pleased to testify today

on behalf of Intel and the National Association of Manufacturers.

All NAM members, including Intel, are affected directly or indirectly by trade and have a keen interest in the factors influencing

our trade and international economic relations.

Our ability to sell products in foreign markets is a critical part

of what makes us successful. However, while our industry has

grown strongly overseas, we remain committed very much to the

United States.

In the case of Intel, for example, 75 percent of our annual sales

come from outside of the U.S., but 60 percent of our employees—

about 50,000 people—are right here in the U.S. We strongly believe

that a successful completion of the Doha Round represents a remarkable opportunity for continued growth and success of the

world’s economy.

The opportunities for U.S. manufacturers are clear. U.S. exports of manufactured goods last year were $710 billion. Further trade

liberalization should continue to stimulate demand for U.S. products abroad, as we have seen in our sector, information technology.

Our priority in the Doha Round is the liberalization of trade in

industrial goods, which is dealt with through the non-agricultural

market access negotiations, also known as NAMA.

Manufactured goods account for over 70 percent of world merchandise trade, and 87 percent of America’s total merchandise exports. Semiconductor industry exports specifically are the leading

U.S. high-tech industry export, reaching $48 billion in 2004.

WTO NAMA negotiations should aim at achieving the broadest

and deepest possible reductions in tariffs and non-tariff barriers to

trade. We believe there are three critical components to achieving

these objectives.

First, governments must agree on an aggressive tariff-cutting formula that would significantly cut applied tariffs. We have submitted for the record detailed suggestions on the formula and priority markets for tariff cuts. The NAM could not support an agreement that does not reduce bound tariff rates significantly lower

than the tariffs actually applied to our manufactured products

today.

Second, sectoral negotiations should proceed on a parallel track.

This would significantly complement the broad formula discussions

by allowing countries to agree to completely eliminate tariffs in

specific sectors.

This was the approach taken in the 1994 information technology

agreement, in which countries accounting for over 90 percent of

world trade in IT products agreed to eliminate their tariffs in our

sector.

This round offers us the opportunity to consider a sectoral negotiation in electronics that would build on current ITA commitments

and further eliminate tariffs on new electronics products.

13

Finally, we must consider measures to address the growing number of non-tariff barriers to trade. Non-tariff barriers such as conformity-assessment requirements have been rising in importance as

trade-distorting factors. As tariffs are eliminated, non-tariff barriers have the potential to dangerously erode the benefits of trade

liberalization.

NAM and Intel’s key interest in the Doha Round is to achieve an

ambitious outcome in the non-agricultural market access negotiations. We know, though, that such a result is not possible without

a far-reaching agricultural agreement that sharply cuts agricultural subsidies and other market access barriers.

We are extremely pleased with the bold agricultural proposal recently announced by U.S. Trade Representative Portman in Zurich.

As the world’s top-trading nation, the U.S. must continue to take

a leading role in the negotiations to complete the Doha Round.

At this time, however, additional political leadership is needed

from other WTO members, for we are at a critical stage in the negotiations leading up to the Hong Kong ministerial in December.

Mr. Chairman, the NAM, Intel Corporation, and the newly-created American Business Coalition for Doha look forward to continuing to work with you to ensure that our important objectives

are realized in the final outcome of the Doha Round.

Thank you, Mr. Chairman.

Senator THOMAS. Thank you.

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

Senator THOMAS. Mr. Lang?

STATEMENT OF CRAIG LANG, PRESIDENT, IOWA FARM

BUREAU FEDERATION, WEST DES MOINES, IA

Mr. LANG. Yes, sir. Thank you very much for the opportunity,

Mr. Chairman, to present on the part of the American farmer and

rancher to this committee.

I am Craig Lang, a fifth generation farmer from Brooklyn, Iowa

and president of the Iowa Farm Bureau Federation. I currently

serve on the American Farm Bureau Federation board of directors,

and I am a member of the American Farm Bureau Trade Advisory

Committee.

The points about the importance of world trade that I will discuss with you today are Farm Bureau policy; however, I want you

to know that, as a dairy farmer and as a crop farmer of both corn

and soybeans in Iowa, I believe that the World Trade Organization

is the best way to ultimately settle world trade differences.

The Farm Bureau believes that the WTO is important to the future of agriculture in the United States and around the world. The

trade negotiations, standards setting, and dispute-settling functions of the WTO strive to provide a stable and predictable world

trading environment for U.S. agriculture, and for agriculture producers in other places on the globe.

With a production of one-fourth of the U.S. cropland destined for

foreign markets, U.S. agriculture is strongly export-dependent. Our

farmers and ranchers know that the best place to receive the end

price for the crops we raise and the livestock we nurture is at the

marketplace.

14

A marketplace void of the ability to export our goods will lead to

higher consumer prices and higher risk in our ability to provide

consumers around the world with the highest quality of goods.

From a local perspective, export markets are crucial for the Iowa

farmers I represent. Iowa exports more than a billion dollars of

corn and soybeans each year. On top of that, Iowa’s $3.7 billion in

total agriculture exports represents about one-third of our total

farm production. The $3.7 billion is made up of about half of our soybean crop, a

fifth of the 2 billion bushels of corn we raise, and a tenth of the

pork and beef we grow on our farms.

If you want an example of how important trade is in establishing

prices for farmers, we can look at Hurricane Katrina and how it

affected the farm prices we received up the river on the Mississippi

when our corn exports were stopped because of damage to the Mississippi River. We lost 50 cents per bushel on our corn price overnight, and have still not recovered. This is a concrete example of

what exports mean to U.S. agriculture.

Because exports are so critical to U.S. agriculture, we must have

a structure to address the many trade-related issues before the

U.S.

The 148-member WTO operates to provide that structure

through a rules-based environment for continued growth in markets for America’s farmers and ranchers. At this time, it appears

that the WTO is our best chance at resolving differences in global

trade.

The recent discussion around the U.S. proposal of October 10 has

given direction to the current WTO agriculture negotiations. I

might add that our farmers are kind of excited about the opportunity.

The proposal, which seeks to achieve meaningful market access

through major reductions in tariffs while reducing spending on

trade-distorting domestic support programs, incorporates a crucial

linkage between these major areas.

Real trade reform must include substantial, ambitious, and

quantifiable expansion in access to market. We recognize that, to

achieve a successful outcome, the U.S. must do its share in reforming trade-distorting domestic support programs, while developed

and developing countries must do their share in expanding market

access opportunities.

The Farm Bureau will continue to weigh the outcomes of these

negotiations to determine if they provide an overall economic benefit to U.S. agriculture.

The negotiations over market access and domestic support must

be directly linked for any substantive agricultural trade liberalization. While the U.S. is able to use domestic programs to assist producers, most nations use high tariffs.

World agricultural tariffs average 62 percent, but many tariff

lines exceed 100 percent to provide import protection for agricultural producers. Like I mentioned earlier, ours is 12 percent.

Both mechanisms of support tariffs and domestic programs need

to be addressed together to achieve successful negotiation.

In conclusion, the Farm Bureau believes completion of a successful WTO Doha agricultural negotiation is the best way to achieve

15

progress in a wide variety of international agricultural trade concerns.

As a farmer, I am certain the American farm and ranch community can be competitive in a global market. I am confident of this,

but only if we have fair and unrestricted access to markets we have

been denied in the past because of unfair trade barriers.

A final agreement must build on our July, 2004 Framework

Agreement, which calls for substantial improvement in market access, trade-distorting domestic support, and export competition.

The U.S. proposal adds the specifics necessary to have a successful WTO ministerial meeting in Hong Kong in December of 2005,

and we are going into that meeting optimistic. Thank you.

Senator THOMAS. Thank you.

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

Senator THOMAS. Mr. Shafer?

STATEMENT OF JEFFREY SHAFER, VICE CHAIRMAN, GLOBAL

BANKING, HEAD OF ECONOMIC AND POLITICAL STRATEGIES, CITIGROUP, NEW YORK, NY

Mr. SHAFER. Thank you, Mr. Chairman, for the opportunity to

testify today.

I am speaking on behalf of the Coalition of Services Industries,

the CSI, which is the leading business organization dedicated to

the reduction of barriers to U.S. services exports.

Our overriding objective is to obtain commercially significant

trade liberalization in the WTO for services trade. By services

trade, I mean financial and payment services, express delivery and

logistics, telecommunications, energy services, computer and related services, travel and tourism, audiovisual services, and accounting and legal services. It is a broad spectrum.

We believe such liberalization is a vital U.S. national interest,

and we also believe that it will contribute to the economic modernization and growth in emerging markets.

Along with agriculture and goods, services is one of the three

main pillars of negotiation in the Doha Round, so you will have

heard from all three pillars here this afternoon.

The services sector represents the largest part of U.S. employment and of economic output, and the U.S. is also the world’s largest services trader.

But the attention accorded to services in the trade negotiations,

at least until recently, was not equal to that of the other two pillars. WTO members’ participation in the Doha Round services negotiation has been uneven and generally weak, and the talks are

far behind schedule as a result.

There are several reasons for this, and I go into some detail in

my prepared statement, but just let me hit the main points.

First and foremost, an agricultural breakthrough is the key to

the entire Doha Round undertaking. Without this, nothing else will

happen. In that regard, we strongly supported Ambassador

Portman’s bold proposal in Zurich earlier this month, and we were

disappointed by the EU’s response to date.

Second, U.S. business needs a new business travel facilitation

program. A number of important trading partners have made it

clear that their willingness to liberalize in our priority sectors is

16

dependent on the willingness of the United States to discuss business travel facilitation.

This is also an important issue for us because existing programs

simply do not meet our own company’s needs in our capacity to

provide services.

The third point is that a group of developing countries has advocated an emergency safeguard mechanism for services. There are

a number of problems with this concept, and the U.S. has, until

now, taken the position that it is not feasible for services. But the

demanders have taken a firm line, and they are unlikely to abandon this demand. We in the CSI believe it is possible to respond

without sacrificing core U.S. interests.

The fourth point concerns the incentives to negotiate. There is a

fundamental problem in the services negotiations, because there

have been insufficient incentives for members to negotiate.

In some countries, there is simply no domestic constituency advocating liberalization, despite the gains that are there for those

countries. Some developing and less-developed countries just simply do not understand how much they might benefit from liberalization, or they do not have the resources to identify what their

own expert services potential is.

Finally, a point that Ambassador Allgeier stressed, services negotiations are based on a challenging request-and-offer process, which

is adapted from goods negotiation. It requires multiple intensive

negotiating sessions.

Unfortunately, this process has so far not gained traction in the

Doha Round. For this reason, a number of member countries have

advocated complementary approaches that would supplement this

process with benchmarks or guidelines for scheduling.

There are flaws in this approach, but it may help to generate

some momentum, so long as the dialogue on complementary approaches does not become a distraction that keeps us from seeking

liberalization, which is the ultimate objective.

As the one-time U.S. negotiator for financial services in the Uruguay Round, I can tell you that there are no magical shortcuts to

the negotiation process that will bring a solution. It takes hard

work.

What is needed is leadership by the United States, working with

others who are committed to a successful round—and there are

others who are—in order to make meaningful progress in services.

In conclusion, without a decisive push by the U.S. and other key

WTO members, the Doha Round could reach a point where, even

if agreement is reached on agricultural liberalization, there simply

will not be sufficient time left to address services adequately before

the round’s scheduled conclusion. Resources and energy must be directed immediately to avoid this outcome and to achieve a successful conclusion in the services negotiations.

Mr. Chairman, the issues cited above may require some concessions by the United States. These have been offered in agriculture

and they can be offered, we believe, without any sacrifice of vital

U.S. interests in the areas of temporary entry and safeguards.

Continued demonstration of U.S. willingness to engage is the

best way to elicit the needed offers in the sectors of greatest comVerDate 11-MAY-2000 14:32 May 16, 2006 Jkt 095484 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 27400.000 SFIN1 PsN: SFIN1
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mercial value to our service industries. We, therefore, need the

support of Congress in these areas.

In addition, we need clear signals from Congress that services

liberalization is a critical U.S. interest and that no agreement without this is acceptable. With these elements, we will be in a very

good position to press priority countries for substantial liberalization.

An important message that must be continually emphasized is

that services liberalization is, first and foremost, in the interest of

the liberalizing country.

Services such as banking and insurance, telecommunications,

transportation and logistics, legal and accounting, and others form

the infrastructure essential to economic development and are,

therefore, crucial to other areas of the economy.

Countries need to stop viewing services as something to trade off.

Because services are what makes economies work, services liberalization also serves the interests of U.S. farmers and goods exporters by fostering strong markets abroad.

Failure to negotiate commercially meaningful commitments for

services would mean that opportunities would be lost for both U.S.

services providers and for countries that fail to modernize their

services trade.

The U.S. services sector could not support a Doha Round outcome that failed in this respect. We would, however, enthusiastically support a conclusion of the round that moves significantly forward in liberalizing services.

I thank you for your time, Mr. Chairman, and would be glad to

answer any questions you might have.

Senator THOMAS. Thank you.

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

Senator THOMAS. Mr. Gresser?

STATEMENT OF ED GRESSER, DIRECTOR, TRADE AND GLOBAL

MARKETS, PROGRESSIVE POLICY INSTITUTE, WASHINGTON,

DC

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

Ambassador Allgeier set out the goals of the U.S. very capably,

and my colleagues on the panel have dealt in a lot of depth with

manufacturing, with agriculture, and with services.

Let me, as an analyst, try to complement their presentations

with a bit of background, essentially on three points: one, the

WTO’s origins and its role in American policy; two, the work it has

left undone and the new issues it needs to address; and three, the

place of the Doha agenda in both.

The first point. The WTO, though a new institution, is the expression of an American policy now entering its 7th decade. President Roosevelt defined its purpose in launching the first multilateral trade negotiations in 1945, which is the direct ancestor of today’s WTO system.

He believed that the closure of the world economy in the 1930s

had not only prolonged the depression, but intensified the era’s political tensions. He believed that reopening trade could not only

spark growth, but give the great powers a greater stake in one anVerDate 11-MAY-2000 14:32 May 16, 2006 Jkt 095484 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 27400.000 SFIN1 PsN: SFIN1
18

other’s security and prosperity, and so create a stronger basis for

what he called ‘‘the secure and peaceful world we all desire.’’

Sixty years later, after 12 multilateral trade agreements and expansion of the system from 23 countries to the 148 members of the

modern WTO, his view still seems right. Trade has grown rapidly,

from 7 to 25 percent of the U.S. economy, and 11 to 45 percent of

the global economy. This has brought stress and dislocation with

it, but large benefits as well.

As the world’s largest importer and largest exporter, the U.S. is

a leading beneficiary of the open and stable global economy that

the WTO helps guarantee. The world generally is wealthier, is

more able to handle economic shocks like the Asian financial crisis

of 1997 to 1999, and, at least among great powers, wars and crises

seem to have become rarer as the stakes in one another’s security

and prosperity grow.

The second point. These 12 agreements have left much undone.

New issues have also emerged, from technological change and the

evolution of geopolitics, from development and from the concerns of

civil society. The Doha Round is a chance to address some of them,

and the Hong Kong ministerial a critical juncture in it.

Some of these issues reflect American export interests, which are

important at any time, but perhaps especially now. Agriculture has

been dealt with in detail.

In a world of $600-billion-plus in food and agricultural trade, the OECD estimates there are $300 billion worth of trade-distorting

subsidies, tariffs, quotas, and other policies. This makes agriculture

a central concern, not only for the U.S., but for many countries.

The offer that Ambassador Portman has put together really does

deserve some applause.

Services, a newer issue for the trading system, is accelerating

rapidly with the information technology revolution, and may be the

largest long-term U.S. export opportunity. Services exports are now

$300 billion and, based on the trends of the last 15 years or so, are

on a pace to match exports of manufactured goods and other merchandise by the 2020s. For manufacturing, as well, many barriers

remain, especially in the large, middle-income, and developing

states.

Perhaps a bit more controversially, the Doha agenda is a chance

to reform parts of our own trade regime. An example I would like

to highlight is the oldest element of our trade policy, which is the

tariff system.

Over the years, without much attention, this has quietly evolved

into the most regressive element of our tax system, and to a trade

policy that is toughest on the poorest.

A major fact that emerges from even a cursory look at tariff collection is that over half of tariff revenue comes from life necessities:

shoes, clothes, food and basic household goods.

Fully $9 billion of last year’s $22 billion in tariff revenue came

from shoes and clothes alone. For context, cars, steel, semiconductor chips, and airplanes, together, raised only $2 billion, barely

a quarter of what shoes and clothes raised.

This is because most of the post-war trade agreements exempted

these products, along with other cheap and simple household goods,

from tariff cuts, or touched them only lightly, so they retained tarVerDate 11-MAY-2000 14:32 May 16, 2006 Jkt 095484 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 27400.000 SFIN1 PsN: SFIN1
19

iffs 10, 20, and sometimes 30 times those in other goods, even as

employment in these industries has waned.

Furthermore, the cheap goods bought by poor people are systematically taxed at higher rates than the luxury goods bought by

wealthy people.

The case of cheap sneakers is an extreme, but an illustrative

case. These goods carry our highest non-agricultural tariff rate, 48

percent, which is not only passed on to consumers, but is magnified

by retail markets and sales taxes. None are made in the U.S. at

all, and none have been made in the U.S. since the 1970s. While

this is an extreme case, it is not an exceptional one.

An acrylic sweater, for example, carries a 32 percent tariff; a

cashmere sweater, 4 percent. A silver-plated fork has no tariff, and

a very cheap stainless steel fork, 20 percent. A polyester shirt has

a 32 percent tariff, and a silk shirt, 0.9 percent. You can track all

the way through—luggage, clothes, shoes, many of these basic

household goods that families buy—and you will find a very similar

pattern.

This makes the tariff system exceptionally tough on poor families

with children in the United States, above all on single mothers,

whose bills for clothes, food, and shoes are highest compared to salary.

Overseas, it has a similar effect. One finds that Cambodia is hit

harder than any other country in the world by American tariffs,

with an average tariff rate on the goods they sell us of about 16

percent, while the average rate for the world is 1.6 percent.

Pakistan, Nepal, Mongolia, Sri Lanka, and Bangladesh are very

close behind. To give an actual set of numbers, we routinely collect

more money on $2 billion worth of hats, tee shirts, sweaters, and

pajamas from Bangladesh than on $30 billion in French planes,

medicines, computers, wines, and so forth.

Thus, I think the proposal that the administration made in 2002

for worldwide elimination of industrial tariffs is not only good for

American exporters, but will also serve as an effective reform of

American tax policy in the interest of the poor and help some of

the poorest countries in the world, in Asia and the Muslim world

in particular, to grow, develop, and create a better life of their people.

The last point. The Doha Round is, of course, not the only vehicle

for trade policy. Some issues, like Airbus subsidies or Chinese intellectual property rights, are questions of implementation rather

than negotiation of new commitments.

Other issues are basically regional, while, at least in the short

run, reducing the trade deficits and imbalances requires more domestic and international finance than trade negotiations.

But the Doha Round is rightly placed at the center of trade policy. It is the only negotiation involving all of our major trading

partners—Europe, Japan, China, the Indias and Brazils of the

world, Mexico and Canada—and covers 96 percent of U.S. trade,

whereas the FTA program, implemented since 2000, covers about

9 percent of U.S. trade.

The Doha Round is also the main hope for systemic reform of

issues like agriculture and services. It is thus the major opportunity we have, both to secure specific trade objectives like those

20

my colleagues have mentioned, and to serve the large goals highlighted by Roosevelt and each president since the 1940s: broadly

shared global growth, rules that provide stability in crisis, and an

integrated world economy that eases political relations among the

great powers; in effect, its ability to serve as a foundation of the

secure and peaceful world we hope to see in this century at least.

Thank you very much.

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

Senator THOMAS. Thank you very much. I have a couple of questions for you to answer.

I understand what you are saying, but if you wanted to take off

the tariffs we have on tee shirts coming in, could we expect other

people to take them off on the things we export?

Mr. GRESSER. I would hope we would be able to do that.

Senator THOMAS. So you are looking for a balance between the

two partners.

Mr. GRESSER. I think the best way to fix this problem is through

a multilateral agreement that commits all countries.

Senator THOMAS. All right.

Mr. Shafer, you mentioned in your statement about having qualified foreigners come into the country. Do you distinguish this from

our current debate on changing immigration laws to allow more entrants or temporary workers from Mexico?

Mr. SHAFER. It certainly is different from the temporary workers.

We are talking about business people. We are talking about staff

at Citigroup to come to New York for training and go back to where

they came from.

Senator THOMAS. Legally, I presume.

Mr. SHAFER. It would be legal. It would be sponsored by the

firms that have the employees.

Senator THOMAS. I see. Got you.

Mr. Lang, in order to fit into what is being talked about, there

would be a substantial reduction in agriculture subsidies and export subsidies.

Mr. LANG. Correct.

Senator THOMAS. You are saying, if it is balanced, that agriculture folks would be acceptable to that.

Mr. LANG. Yes. As I said, we believe the American farmer and

rancher can be competitive if they have access to a world market,

and we can reduce those barriers to trade our products today.

I think, as we look at the realities ahead of us with the next

farm bill discussion, the deficit, the war, the hurricanes, farmers

are preparing themselves for less direct support from the Federal

Government.

Senator THOMAS. Yes.

Mr. LANG. To go along with that, we need market access, because

it does not make sense to cut our competitive nature.

Senator THOMAS. I see.

I wonder—and I know this is not easy because it is a broad

topic—if you could take 10 seconds to say what would be your highest priority in this market negotiation that we are going into, either just generally or from your industry. What do you think is the

most important single issue?

21

Mr. Jarrett?

Mr. JARRETT. I think it would be improvements in the formula,

the tariff-cutting formula, getting the bound rates down very substantially.

Senator THOMAS. So them giving some, us giving some, trying to

get more commonality. All right.

Mr. Lang?

Mr. LANG. Market harmonization through liberalization of trade

issues.

Senator THOMAS. All right.

Mr. Shafer?

Mr. SHAFER. Market access and transparency, principally in the

very fast-growing, emerging markets.

Senator THOMAS. All right. Very good.

Mr. Gresser?

Mr. GRESSER. I do not think I have that much to add, but I think

a general commitment by the major economies of the world, including the relatively advanced middle-income and developing countries.

Senator THOMAS. Give me a 1 to 10 idea of our opportunities in

this meeting. Are we going to be a 10, which is good, or a 1?

Mr. JARRETT. Well, depending on how well we do in the agriculture area, I think we could have somewhere between a 5 and

10 on the NAMA negotiation.

Senator THOMAS. All right.

Mr. LANG. I am going to say it has to be an 8. It cannot be any

worse than Cancun. [Laughter.]

Senator THOMAS. No. That was a 2. It was a 2. All right. Good.

That is positive.

Yes, sir?

Mr. SHAFER. I think forecasting the outcome is not fruitful, but

saying that there is still the possibility of having a very good outcome, an 8, 9 or 10, and that we have to work and hold other people’s feet to the fire to get there.

Senator THOMAS. Great.

Yes, sir?

Mr. GRESSER. I would say, 7 to 8. I do not think countries will

give up everything when they know the round will go on another

year or so, but I think the chances are there for a very good outcome.

Senator THOMAS. Well, we certainly appreciate it. I think it is

going to be very important that all of us, in our various roles, participate and bring to our negotiators as much support as we can,

as much information as we can, so that this does work out. It is

a difficult task, there is no question about that.

On the other hand, as I indicated to the Ambassador, it seems

to me we are in a pretty strong position, and we ought to flex our

muscles a little bit and try to make it work.

A vote is about to begin. We really appreciate you coming. Please

stay engaged with us and work through this situation to accomplish success in Hong Kong.

Thank you very much. The committee is adjourned.

[Whereupon, at 3:10 p.m., the hearing was concluded.]

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A P P E N D I X

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. PETER ALLGEIER

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Æ