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24–928—PDF 2005

S. HRG. 109–215

NOMINATION OF HON. ROBERT J. PORTMAN

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

ON THE

NOMINATION OF

HON. ROBERT J. PORTMAN TO BE U.S. TRADE REPRESENTATIVE

APRIL 21, 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

(II)

C O N T E N T S

OPENING STATEMENTS

Page

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

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

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 2

Bunning, Hon. Jim, a U.S. Senator from Kentucky ............................................. 5

ADMINISTRATION NOMINEE

Portman, Hon. Robert J., a U.S. Representative from Ohio, nominated to

be U.S. Trade Representative ............................................................................. 7

CONGRESSIONAL WITNESSES

Voinovich, Hon. George V., a U.S. Senator from Ohio ......................................... 4

DeWine, Hon. Mike, a U.S. Senator from Ohio ..................................................... 6

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

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

Bunning, Hon. Jim:

Opening statement ........................................................................................... 5

Crapo, Hon. Mike:

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

DeWine, Hon. Mike:

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

Grassley, Hon. Charles E.:

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

Portman, Hon. Robert J.:

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

Prepared statement .......................................................................................... 52

Biographical ...................................................................................................... 56

Responses to questions from committee members ......................................... 64

Santorum, Hon. Rick:

Prepared statement .......................................................................................... 105

Snowe, Hon. Olympia J.:

Prepared statement .......................................................................................... 107

Voinovich, Hon. George V.:

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

COMMUNICATIONS

Ford Motor Co. ......................................................................................................... 109

(III)

(1)

NOMINATION OF HON. ROBERT J. PORTMAN

TO BE U.S. TRADE REPRESENTATIVE

THURSDAY, APRIL 21, 2005

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

The hearing was convened, pursuant to notice, at 10:05 a.m., in

room SD–628, Dirksen Senate Office Building, Hon. Charles E.

Grassley (chairman of the committee) presiding.

Also present: Senators Hatch, Snowe, Thomas, Smith, Bunning,

Crapo, Baucus, Rockefeller, Conrad, Kerry, Lincoln, Wyden, and

Schumer.

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

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. It is my pleasure to welcome Congressman Rob

Portman to the committee today. Congress first mandated the appointment of a person to this position as Special Representative for

Trade Negotiations back in 1962.

Since that time, our Trade Representative has played a very vital

role in shaping much of our international economic policy. Today

it is an important position that requires a unique blend of technical

and political skills for success. In that regard, we are fortunate to

have Rob Portman as the President’s nominee.

Congressman Portman has a strong commitment to public service, having served the people of Ohio in the House of Representatives for the past 12 years. His thoughtful consideration of complex

issues and determination to achieve sound public policy have made

him a very effective leader.

He has played major roles in pensions, taxes, and Internal Revenue Service reform. He is well-known for his leadership in the

fight against drug abuse. As a member of the Ways and Means

Committee, the Subcommittee on Trade, Congressman Portman

has been intimately involved in a number of key international

trade policy initiatives.

There is a long tradition of legislative and executive branch cooperation on international economic policy. The importance of following, and also working together, became very evident after the

passage of the Smoot-Hawley Tariff Act, which helped plunge our

economy into the Great Depression.

In 1934, President Roosevelt recognized that high tariff barriers

were strangling the economy. To spur economic growth, he sought

and received legislative authority to negotiate reductions in tariff

barriers.

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That bill, the Trade Agreement Act, embodied the basic partnership between legislative and executive branches of our government

that we know today as trade promotion authority. It is a partnership that has served the Nation well for the better part of the last

century, and hopefully will continue to do so this century.

But the battle for economic freedom is far from over. We cannot

afford to return to the tyranny of tariffs embodied in SmootHawley. Decisions that we make in the near future on economic

policy will have significant impact for generations to come. They

are decisions that we should not take lightly.

So, strong leadership in the Office of the U.S. Trade Representative is key. Congress will soon be considering free trade agreements

with Central America, the Dominican Republic and Bahrain.

We also have a number of important bilateral and regional negotiations under way that will bring significant benefits to the U.S.

economy, and perhaps most important of all are ongoing negotiations at the World Trade Organization.

Successfully concluding these negotiations, and also ensuring

their implementation, will take a skilled champion of our country’s

economic interests. I am confident that you, Rob Portman, will effectively fill that role.

There is a strong interest in moving your nomination quickly.

There are a number of important events coming up over the next

few weeks, including a meeting of the World Trade Organization

ministers in early May.

I would certainly like to see you confirmed by the Senate before

that time, so you can be on the job there, where America needs to

be well-represented. I look forward to your testimony.

At this time, I call on Senator Baucus for his opening comments.

OPENING STATEMENT OF HON. MAX BAUCUS,

A U.S. SENATOR FROM MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. Good morning, everybody.

It is a pleasure to welcome Congressman Portman. I think we

are all in accordance with the expression of appreciation of you,

Congressman, the future you have ahead of you, and the trust the

country is placing in you. I think you can do a very good job, and

we all wish you very, very well. I trust this will be the first of

many appearances before us.

Congratulations on your nomination. In 12 years in Congress,

you have developed a solid reputation as someone who works

across the aisle to get things done. It is well-known in this town,

and well-appreciated.

We need more people like you here in Washington, more people

who would do that, reach across the aisle. I welcome the opportunity to work with you over the next several years on the very difficult trade issues, and very many of them, that we are going to

have.

Ambassador Zoellick and I had a terrific working relationship. It

was a very solid one. I know that ours will be just as productive.

I also want to congratulate your wife, Jane, and your three children, Jed, Will and Sally. They must be very proud of you. I hope

that they do not blame me or the Chairman, frankly, if your workVerDate 11-MAY-2000 14:59 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 24928.000 SFINANC2 PsN: SFINANC2
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load at the USTR is worse than it might have been over at the

House.

Your nomination comes at a critical point in United States trade

policy. As you know, last week this committee held a hearing on

CAFTA. Many of us expressed serious concerns about that agreement, indicating to me that CAFTA still has a long way to go.

But, more broadly, the CAFTA hearing made me think long and

hard about how we got to where we are. The current environment

on trade seems more difficult than just a few years ago.

In 2002, when we renewed the President’s trade promotion authority after a break of 8 years, I thought we were on our way to

rebuilding the bipartisan and public consensus on trade that we

needed to accomplish, but since then we seem to have lost our way.

There are probably many reasons for this, but three stand out in

my mind. First, we need to enforce the trade agreements we already have. We are not doing so. I believe Congress is losing its

appetite for further trade deals because it is not confident that the

USTR is holding our trading partners to their obligations.

There are reports almost daily about China’s failure to comply

with WTO’s provisions on intellectual property rights. It is a blatant infringement. We all know it, and nothing is being done.

China also maintains burdensome restrictions in the agriculture

and services sector. Key markets in Asia continue to shut out

United States beef without good reason, and trade barriers continue to distort U.S. trade in Brazil, in Japan, Russia, and the European Union.

The United States brought 4 times as many WTO dispute cases

in the 1990s than we have since 2001: 67 versus 12. I think that

is a reflection of a shift in priorities to negotiating, rather than enforcing, existing agreements.

If the United States wants Congress to continue passing new

trade agreements—that is, if the USTR wants Congress to continue

passing new trade agreements—it must do a better job convincing

Congress it is doing all that it can to enforce the agreements that

we already have.

One way is to create a new, senior-level position at USTR responsible for enforcing trade agreements. A chief enforcement officer could be confirmed by the Senate, and therefore held accountable directly by the Congress. I hope that we can work together to

make that happen.

Second, we cannot expect to rebuild a trade consensus until we

do more for those workers and industries whom trade leaves behind. I believe that trade is an overall positive in the United

States. We must never forget that trade causes severe dislocations.

Our failure to address these dislocations is eroding support for a

robust trade agenda.

In my judgment, this administration has not placed a sufficient

priority on trade adjustment assistance programs. For instance, the

President’s budget zeroes out funding for the TAA for Firms program, which virtually everyone agrees has been useful and cost effective.

Our trade adjustment program continues to exclude service

workers, even though they increasingly face the same risks of trade

displacement as manufacturing workers. If you want to build politVerDate 11-MAY-2000 14:59 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 24928.000 SFINANC2 PsN: SFINANC2
4

ical support for further trade agreements, we have to do more to

ease the transition of trade-displaced workers in industries.

Finally, trade agreements are becoming less relevant to U.S.

commercial interests. We have been choosing free trade agreement

partners based on foreign policy and using the scarce resources at

USTR to negotiate agreements without much commercial relevance

to the economy.

Congress created USTR’s predecessor, the Special Trade Representative, to remove trade policy from the State Department—

this was back in the early 1960s—so that commercial, and not foreign, policy interests would drive U.S. trade policy.

It is hard to muster the enthusiasm necessary to get a trade

agreement through Congress when that agreement offers negligible

benefits to the U.S. economy. We need to start targeting our resources toward economics, toward economies, larger economies like

Korea and Taiwan, that will yield more benefits to our farmers,

ranchers, and workers. That will make it easier to appreciate the

positives that are associated with any particular trade agreement.

Let me end on a positive note. There are challenges, to be sure,

but I know you are up to the task. USTR is a fantastic organization. I know of no organization in town that I respect more than

USTR. I have the greatest respect for your soon-to-be colleagues.

The dedication and professionalism of the staff at USTR is inspiring. It is unsurpassed. You are lucky to have them, and they are

lucky to have you. I look forward to working with all of you.

Thank you, Mr. Chairman.

The CHAIRMAN. Yes. Colleagues, Senator Voinovich has to go

chair a hearing at 10:30. Protocol would be Bunning, DeWine, and

then Voinovich. Could I take Senator Voinovich, first?

Senator BUNNING. According to age, or whatever way you want

to do it. [Laughter.]

The CHAIRMAN. Yes. Senator Voinovich?

STATEMENT OF HON. GEORGE V. VOINOVICH,

A U.S. SENATOR FROM OHIO

Senator VOINOVICH. I want to thank my colleagues for letting me

do this and allowing me to get to my hearing on time.

I thank you, Chairman Grassley, Senator Baucus, and members

of the Finance Committee. It is an honor to be here today to introduce my good friend, Rob Portman.

Congressman Portman is an excellent choice for the job of U.S.

Trade Representative, and I strongly urge the committee to speedily confirm his nomination.

He has represented the Second District of Ohio in Congress for

the past 12 years. Mr. Chairman, you went into all of the things

that he has done, so I will not repeat them all.

Prior to his election to Congress, Rob was an associate in the

Washington law firm of Patton Boggs, specializing in international

trade law. He then returned to Cincinnati to work as a partner in

the law firm of Gradenhead & Richey. From 1989 to 1991, he

served in President George H.W. Bush’s White House as Associate

Counsel to the President, and then Director of the White House Office of Legislative Affairs.

5

He has been a good friend and colleague for many years. We

have collaborated on legislative matters going back to my days

when I was governor of Ohio, including unfunded mandates relief,

and, more recently, the Cuno legislation and the Senate version of

Portman-Cardin.

I have complete faith that he will serve our Nation as our Trade

Representative with the intelligence, enthusiasm, and strength

that have marked his time in Congress. So many on Capitol Hill

and in the White House understand, if you want to get something

done, get Rob Portman involved.

Additionally, he has excellent interpersonal skills and treats people with dignity and respect. He is a good man with a wonderful,

understanding wife, Jane, and three children. I just want to publicly thank Jane and Rob’s children for the sacrifice that they have

made so he can serve in public office and for the sacrifices they are

going to make in his new capacity.

He has a record of working in a bipartisan manner, which is essential to promoting new trade laws. He will also be a tireless advocate for American exports. As a free trader, Rob understands

that free trade and fair trade go together, and that you cannot

have one without the other.

As someone who has long been concerned about human capital

issues, I am especially pleased by the President’s choice of Congressman Portman. Rob understands the vital role recruitment, retention and training play in the operation of an effective government office. Too often, we forget it is the people who carry out the

laws we in Congress pass that determines the success or failure of

those laws. Rob understands how important a team is.

I look forward to working with Rob, particularly in regard to how

the USTR has now been implementing the Strategic Targeting Organized Piracy program called STOP! that Bob Zoellick implemented last November to dramatically improve the enforcement of

our trade laws.

I am confident that Rob will bring strong leadership to the USTR

and will be able to properly balance the role of USTR with the competitiveness of our State of Ohio, our Nation, and a changing world

that is very, very competitive.

I urge his speedy confirmation, and I thank my colleagues in the

Senate, and you, Mr. Chairman, for giving me an opportunity to

speak first.

The CHAIRMAN. Senator Bunning?

OPENING STATEMENT OF HON. JIM BUNNING,

A U.S. SENATOR FROM KENTUCKY

Senator BUNNING. Thank you, Mr. Chairman.

I am honored to have the opportunity to introduce my good

friend, Rob Portman, to the committee today.

As my colleagues all know, Rob has served in the House of Representatives for over 10 years, representing the Cincinnati area district just across the river from where I live in Kentucky.

We also served together for 4 years on the House Ways and

Means Committee and worked on everything from trade to pensions to health care, even constituent casework.

6

Just as importantly, Rob and I, and our wives, Mary and Jane,

have spent many hours together, more of them than we can count,

talking as we sat on planes going back and forth between Washington and Cincinnati, which as I always like to remind Rob, the

Cincinnati Airport is in Northern Kentucky. [Laughter.]

Over the past few years or so, I have gotten to know Rob

Portman as well as any member of Congress. I can tell my colleagues wholeheartedly that President Bush could not have picked

a better man to trust with the important responsibilities that come

with being the U.S. Trade Representative.

Rob is one of the smartest guys on the Hill. He works hard. He

is destined for great things. He is going to do a fine job as our

Trade Representative. I cannot think of anyone that I would rather

have representing our country to the world, and I urge my colleagues to act favorably and quickly on his nomination.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Bunning.

Now, Senator DeWine?

STATEMENT OF HON. MIKE DeWINE,

A U.S. SENATOR FROM OHIO

Senator DEWINE. Mr. Chairman, Senator Baucus, members of

the committee, recently I traveled through the Second Congressional District in Ohio, Congressman Portman’s district, and I was

in all seven counties. I think we are all used to congressmen being

popular and people liking their own congressman.

Well, I will tell you, Mr. Chairman, I have really never seen anything like this. Congressman Portman is held in such great respect,

esteem, and affection in his own congressional district, and it is bipartisan. It is not a Republican thing, it is a bipartisan thing.

I do not think that should really come as a shock to those of us

who work with him on Capitol Hill, because as Senator Baucus

pointed out, that is the way Rob has operated here on Capitol Hill.

He has operated that way in the House of Representatives. He

has operated that way when he has dealings with us in the Senate.

It has been in a very bipartisan way.

His attitude has been, how do we fix this? How do we get it

done? How do we accomplish this? So, I share the feeling that my

friend from Kentucky, Senator Bunning, has: I cannot think of anyone, frankly, Mr. Chairman, who would do a better job as our new

Trade Representative.

This is such a very, very important job. I think he is an ideal

person for this job. He clearly has the great confidence of the President of the United States. We all know that.

He has established a working relationship with those of us in the

Senate, and with his House colleagues on both sides of the aisle.

He has the background, as a former international trade lawyer,

and has experience working with these issues on the House Ways

and Means Committee. So clearly, he is ready for this job and is

the right person for the job.

I think, also, if I could put on my hat from the State of Ohio,

being from the State of Ohio also is going to help him. We, in Ohio,

have a very complex economy—an economy that is immensely

7

helped by trade, and yet is also impacted every day by trade. People in Ohio are very sensitive to that.

I think, as Rob has traveled not only in the Second District, but

around the State of Ohio, he has seen that and has become sensitive to that, and I think that will help him in this job.

Finally, on a personal note, I have worked with Rob, as have my

two colleagues, on many projects. The Underground Railroad in

Cincinnati is something near and dear to his heart.

I have also seen him work on something that you are probably

not familiar with, but I think really is typical of Rob Portman. He

saw that there was a drug problem in his district, as every one of

us has a drug problem in our State or our district, and he wanted

to do something about it.

He established a very, very unique and grassroots program in his

congressional district that he can be very, very proud of, that really

should be a model for the country as something that is working

and working very, very well.

He is, as my colleagues have pointed out, a family man. To know

Rob Portman, you just think of family. Jane is here, and we appreciate the sacrifice that Jane is going to make, as well as his children Jed, Will and Sally. But this is a real team, a real family, and

these are just great people—great human beings.

So, let me conclude with a quote from the Cleveland Plain Dealer, which recently talked about Rob’s nomination: ‘‘He understands

the scale of global competition, the challenges it presents, and the

necessity of the United States to be a successful competitor. President Bush has chosen one of Ohio’s most competent and promising

political figures to carry the Nation’s trade message abroad.’’

Mr. Chairman and members of the committee, I certainly could

not agree more. This is a wonderful pick, magnificent pick, by the

President of the United States. We know that Rob will do a great

job, and I am just delighted to be here to join my colleagues in recommending him to this committee.

Thank you very much.

The CHAIRMAN. I thank all of my colleagues for the introduction.

We are now going to go to the designee, Mr. Portman, for his

opening statement. I would like to have your wife be acknowledged

by the members of the committee. So would your wife, Mrs.

Portman, stand, please? Thank you.

Congressman PORTMAN. Does she need to be sworn in, Mr.

Chairman? [Laughter.]

The CHAIRMAN. I understand your children cannot be here, but

Senator Baucus has spoken about your family so I will not repeat

that.

Would you proceed, please?

STATEMENT OF HON. ROBERT J. PORTMAN,

TO BE U.S. TRADE REPRESENTATIVE

Congressman PORTMAN. Thank you very much, Mr. Chairman. I

appreciate your opening remarks, as well as those of Ranking

Member Baucus. When you talked about some of the issues that I

have worked on—IRS reform, pensions, the anti-drug efforts—I realized I have worked on all of those with you, and with Senator

Baucus closely on retirement savings. So, we have a good relationVerDate 11-MAY-2000 14:59 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 24928.000 SFINANC2 PsN: SFINANC2
8

ship going back on a bipartisan basis of getting things done for the

people we represent, and I look forward to continuing that.

I also want to give special thanks, of course, to my colleagues

from the Senate: Mike DeWine, who just spoke, Jim Bunning, and

George Voinovich. Those were overly gracious introductions. I hope

I can live up to them, or close to it. I also want to thank them, of

course, for their friendship and their encouragement over the

years.

I also want to acknowledge Jane Portman, who is behind me,

who is my partner in all things, and she will be a great partner

in this as well.

Chairman Grassley, Ranking Member Baucus, and members of

the committee who are with us here today, I am very honored to

be before you as President Bush’s nominee to be our next U.S.

Trade Representative.

I have had, as you know, a number of meetings with Senators,

including all of the Senators here on the panel this morning, and

a majority of the Senate Finance Committee.

We have had very constructive discussions of trade policy issues,

and I am very grateful for the time I was given, and for the very

helpful input that I was given at each of those meetings.

As a member of the Ways and Means Committee, I have had the

opportunity, as you have had over the years, to work very closely

with the U.S. Trade Representative’s Office, and, like you, I have

raised tough issues with USTR from time to time.

If confirmed, I will now experience that from the other side, on

the receiving end. In fact, as a nominee, today I may be experiencing some of that.

But I have to tell you, as Senator Baucus said, it is a top-flight

organization. And whether it was Ambassador Mickey Kantor or

Ambassador Charlene Barshefsky during the Clinton administration, or Ambassador Bob Zoellick in the last 4 years, I have always

been impressed with the professionalism, with the skill, and with

the responsiveness of USTR and its staff.

I seek to follow in the footsteps of a very bright and very capable

negotiator, and that is Bob Zoellick, who is a friend of mine, a

friend of many of yours. I believe Bob Zoellick deserves great credit

for the substantial progress the administration has made over the

last 4 years, with your help. I hope to be able to work with you

now to be able to meet our new challenges and build on that

progress.

This morning I would like to focus on a few key principles that

would guide my work if I was to be confirmed. I would pursue an

aggressive agenda with a focus on opening new markets, enforcing

our trade agreements, enforcing our trade laws, spreading economic

freedom, and, of course, working in close partnership with the U.S.

Congress.

I believe the first job of the Trade Representative must be to

open markets for American workers and farmers, thereby creating

more, and better-paying, jobs here at home. Already, as you know,

more than 12 million American jobs are supported by exports, and

those jobs pay, on average, 13 to 18 percent more than the average

wage.

9

One in every 3 acres of American farmland is now planted for ex- port, and we enjoy a $9 billion trade surplus, incidentally, in agriculture. One in every five U.S. manufacturing jobs also depends on

exports.

The United States is the world’s largest producer and exporter

of manufactured goods. Trade clearly benefits the economy as a

whole. A recent report by the Institute for National Economics estimates that international trade adds a trillion dollars to our economy annually. That is $9,000 a year for the average American

household.

Trade, both imports and exports, contributes to a higher standard of living for American families. I represent, as Mike DeWine

mentioned, seven counties in southern Ohio. They range from the

inner city, to suburbs, to rural farm communities.

It is a district with a strong manufacturing legacy, many small

businesses, corn and soybean growers, financial services, and global

companies. Throughout the district, exports and an expanded market share for U.S. products and services are key to maintaining

good jobs and to having a healthy, diversified economy. I know the

same is true in each of your States.

Particularly in a time of large trade deficits, we need to redouble

our efforts to open new opportunities for U.S. workers, farmers,

and businesses by accelerating the reduction of trade barriers

around the world.

Many of our trading partners still block our manufactured goods

and farm products, prevent our companies from offering services,

or fail to prevent the theft of our technology and our ideas.

Our recent gains in productivity once again affirm that Americans can compete with anyone in the world, when given a fair

chance. When we have a fair chance in the market, we can compete.

That is why I look forward to the opportunity to join with you

in what has been, as Senator Grassley said, a bipartisan consensus

over the years that we should knock down barriers to trade.

One way to open markets, of course, is through these free trade

agreements like the free trade agreements we have recently completed with Australia, Singapore, Chile, Morocco, and Jordan that

passed Congress with strong bipartisan majorities.

The most recent agreement, of course, is the one negotiated with

the five Central American countries and the Dominican Republic.

I know you had a lively hearing on that topic last week, Mr. Chairman, and I will not get into a lengthy discussion of what I see as

the clear benefits of that agreement.

But I must make the point that the Central America-Dominican

Republic Free Trade Agreement will open new markets for our

workers and farmers that begin to level the playing field with a region that already enjoys mostly duty-free access to our market.

If confirmed, I look forward to working with you to advance free

trade negotiations that are already under way with 11 more countries, and continue the effort to create a Free Trade Area of the

Americas, working in close partnership with our co-chair, Brazil.

I will also be eager to consult with you and your colleagues about

possible bilateral or regional trade negotiations you might think

are appropriate to pursue.

10

One of the reasons free trade agreements are helpful is they set

high standards and help build momentum for what I believe is the

most important trade negotiation of all, and that is the Doha Development Agenda of the World Trade Organization.

The Doha Round, which was launched with the global leadership

of the United States, and strong leadership of the United States

31⁄2 years ago, has the potential to substantially reduce tariff and

non-tariff barriers and begin to level the playing field for our agricultural producers, open new markets for services, and facilitate

the more efficient movement of goods across borders.

Research done by the University of Michigan demonstrates that

lowering global trade barriers by just one-third would boost U.S.

family purchasing power by an additional $2,500 per year. If all

barriers were removed, the amount would equal $7,500 per year.

Worldwide, it could help lift hundreds of millions of people out of

poverty.

Mr. Chairman, there may not be any other single action we could

take together over the next couple of years that would have such

far-reaching and long-lasting benefits as bringing the Doha Round

to a successful conclusion.

The second guiding principle is that trade needs to be a 2-way

street. As I stated, I have seen the benefits of enhanced trade firsthand in southern Ohio. I have also seen the pain of dislocation and

job anxiety due to trade. We must ensure that the benefits of trade

do not become elusive when other nations do not play by the rules.

As President Bush has made clear, as we pursue free trade, we

must also insist on fair trade. We must level the playing field to

ensure that our workers, farmers, and firms get a fair shake.

If I am confirmed, I will consider with a fresh perspective the entire range of enforcement tools available. In enforcing our trade

laws and trade agreements, I will be guided by the facts. I will objectively evaluate all the information available, including the input

that I will seek from you as the representatives of the people we

serve. I will focus on making sure our strategy produces results

that actually help American workers and farmers.

I do not believe we should bring enforcement actions that are

counter-productive or in violation of our international obligations,

but we should use all the tools available to us, from consultation

to litigation.

Negotiation can often lead to a better and quicker result, but

when negotiation fails or stalls, I will not hesitate to take legal action to enforce our rights and to defend American interests.

As the committee is well aware, we have ongoing trade disputes

with the European Union, with our neighbors to the south and to

the north, and with a number of other countries, but here China

deserves special mention. I believe China’s entry into the World

Trade Organization was, and remains, strongly in the interest of

the United States.

By integrating this fast-growing economy into the global trading

system, we have created new opportunities for U.S. goods and services, and we have seen significant expansion of U.S. exports there.

In fact, since China’s WTO accession in 1999, our exports have increased 81 percent.

11

By becoming part of the WTO, China has also been brought into

a rules-based system of international trade which gives us critical

legal rights we did not have before. But we also face major challenges with China.

Our trade deficit with China, as you well know, last year alone was $162 billion. Part of that deficit is because the Chinese do not

always play by the rules. If confirmed, I will work closely with Congress and my administration colleagues to see that our workers,

farmers, and service providers are treated fairly.

Specifically, I will focus on stopping Chinese pirating of U.S. intellectual property, rolling back China’s industrial policies that exclude our products, expanding market access for our goods and

services, and realizing China’s full implementation of its commitments on transparency and distribution rights for American products.

As the committee is aware, the Treasury Department has the

lead in the critical effort to move China to a flexible, market-based

exchange rate. I will strongly support the efforts of Secretary Snow

in this regard, and, when the facts support it, I will work with

other cabinet colleagues to use the China-specific enforcement

tools, such as the China textile safeguards, to protect our markets

from disruption.

I believe, Mr. Chairman, this more aggressive approach will require a new focus at USTR. If confirmed, I will order an immediate

top-to-bottom review of all of our trade issues with China, and I

will shift resources and people, as appropriate, to address these

pressing concerns.

I will also go to Asia early on to demonstrate the urgency of resolving these problems and to deliver a strong message in person

to the appropriate Chinese officials.

A third key principle to guide me is that trade is central to our

freedom agenda. Freer trade leads to more open, transparent markets and undercuts corruption and cronyism. Trade is an underpinning of democracy and freedom, and it is one of the most potent

weapons we have against the scourge of global poverty.

The countries most isolated from the world economy have also

been among the poorest and most repressive on earth. But consider, by contrast, examples like Mexico, Chile, South Korea, the

nations of Central Europe, where trade and economic reform has

bolstered political reform. In Central America, where 20 years ago

the headlines were about chaos and civil war, today new democracies want to trade goods, not guns, across borders.

The initiative to create a Middle East Free Trade Area offers

great promise. I believe it is in America’s interest to strengthen reformers in the region who are expanding political freedom and

want to open their economies.

If confirmed, I will want to start by working with Congress to approve our agreement with Bahrain, to conclude negotiations with

Oman and the UAE, and to deepen our economic relationship with

others in the region.

The final guiding principle, Mr. Chairman, relates to the legislative branch. As U.S. Trade Representative, I would be charged with

managing many important relationships here and abroad. But, if

confirmed, I will have no more important relationship than the one

12

with Congress. As a current member of Congress, I have a personal

appreciation of the importance of meaningful consultation with

Congress on the trade agenda.

Since the 1930s, as the Chairman pointed out, the legislative and

executive branches have worked in close partnership, with the

President negotiating trade agreements that meet the objectives set

by Congress.

I will look forward to working with you on the extension of trade

promotion authority, the trade preference programs, the review of

America’s membership in the World Trade Organization, the identification of new free trade partners and initiatives, and many

other issues. I will also be open to your views, and I will actively

solicit your input and your assistance.

As the representative of the people of Ohio’s Second District, I

know that economic change and foreign competition can be very

difficult. Like you, I have held town meetings and I have looked

into the eyes of workers who have lost a job. I understand many

are anxious about the future.

We cannot ignore these concerns, but I am firmly convinced that

curtailing trade and closing markets is not the right answer to

these concerns. The evidence is overwhelming that free and fair

trade makes our economy stronger and the vast majority of Americans better off.

When a country chooses to close its markets and isolate itself

economically, the people bear the cost. Prices rise, jobs evaporate,

poverty spreads, and other nations close their markets in retaliation.

The answer lies, instead, in opening new markets to create new

jobs, aggressively enforcing our trade laws and trade agreements,

treating sensitive products with care and providing effective trade

adjustment assistance and retraining opportunities for those adversely affected.

Of course, the answer goes well beyond trade policy: a better

trained workforce; making our economy more competitive; encouraging savings. Trade is just one part of the President’s larger economic plan.

We face challenges, but we also face a world of opportunities and

a choice on how to proceed. I believe the right choice is smart economic engagement, tough enforcement, and using trade as a powerful weapon to strengthen our economy and spread freedom. With

your support, I will do just that.

Thank you, Mr. Chairman. I look forward to your questions.

[The prepared statement of Congressman Portman appears in

the appendix.]

The CHAIRMAN. Thank you very much for your opening statement, and particularly with the specificity of your goals and the

principles on which you are going to do your work.

Before we begin with questions, I would like to request that all

members wishing to submit questions for the record do so by 5 p.m.

today. I would also like to have the committee report out the nominee next Tuesday either by an off-the-floor vote, or if we have a

quorum, at the Social Security hearing next Tuesday.

13

With that said, I would move to the first round of questioning.

Five minutes starts for me just as soon as I ask the usual three

questions that we ask every nominee.

Senator BAUCUS. Mr. Chairman?

The CHAIRMAN. Yes?

Senator BAUCUS. Before you proceed, I appreciate your attention

and a vote on Tuesday of next week. I think that is a good idea.

I think it is very important that Mr. Portman be confirmed so he

can take over his new job as quickly as possible.

I know of no objections on this side. I know of no objections in

the Senate, for that matter. There are a couple of wrinkles we have

got to work out, but I think we will work those out. I think we

should try to get him confirmed on Tuesday if we possibly can.

The CHAIRMAN. And I thank you for your cooperation, both with

your statement now and your approving the procedure when I had

a private conversation with you.

There are three questions that we have to ask every nominee,

Mr. Portman, so I would ask you to respond after each one of these

questions.

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

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

which you have been nominated?

Congressman PORTMAN. No, Mr. Chairman.

The CHAIRMAN. Second, do you know of any reason, personal or

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

have been confirmed?

Congressman PORTMAN. No, Mr. Chairman.

The CHAIRMAN. Or been nominated, at this point.

Congressman PORTMAN. No, Mr. Chairman.

The CHAIRMAN. All right. Thank you.

Congressman PORTMAN. Thank you for the confirmation. [Laughter.]

The CHAIRMAN. Third, do you agree, without reservation, to respond to any reasonable summons to appear and testify before any

duly constituted committee of Congress if you are confirmed?

Congressman PORTMAN. Yes, Mr. Chairman.

The CHAIRMAN. I would add to that, without your having to answer, that occasionally these sorts of communications we have with

cabinet people like you do not necessarily involve coming before a

committee. They are often by letter.

I have found that very few people answer our letters the first

time. It takes three or four times. The extent to which you can do

it with just one round of correspondence, you would make my job,

and yours, a lot easier.

Congressman PORTMAN. I can appreciate that, Mr. Chairman,

having been on the other end of that.

The CHAIRMAN. Thank you.

Now, would the 5 minutes start? Then we will go in order. After

Senator Baucus it would be this order: Smith, Wyden, Bunning,

Schumer, Crapo, Rockefeller, Thomas, and Lincoln. If that is not

right, I will stand corrected.

My first question deals with CAFTA. Opening up new markets

for U.S. agricultural exports, of course, is a priority for me, as I

14

know it is with you. The fact is, we produce more in this country

than we consume and we need to be able to sell our agricultural

products abroad if we are going to have a viable rural economy.

I want to draw your attention to a recently issued letter by six

former Secretaries of Agriculture, Republican and Democrat. In

this letter, they express strong support for the CAFTA agreement

and note that ‘‘failure to approve CAFTA will have a devastating

effect on U.S. efforts to negotiate trade agreements for U.S. agriculture.’’ They continue, ‘‘The World Trade Organization Doha Development Round would be dealt a serious blow.’’

From our prior meetings, I know that you appreciate the importance of agricultural trade to our economy. Do you agree with the

sentiments expressed in this letter, that failure to approve CAFTA

would harm our agricultural trade agenda? Could you specifically

address the effect that failure to approve the agreement might

have on agricultural negotiations within the World Trade Organization?

Congressman PORTMAN. Well, thank you for your question,

Chairman Grassley. I agree wholeheartedly with that letter, as I

know you do. The CAFTA agreement is with one region of the

world, but it relates to a much bigger issue, which is America’s

leadership in the world on trade.

In particular, as you know, the Central America-Dominican Republic Free Trade Agreement offers agriculture tremendous benefits. It has been estimated that there would be a doubling of our

farm exports in the first year alone that is expected to be $1.5 billion of new agricultural exports to those regions, Central America,

the Caribbean, and the Dominican Republic.

So, it is not only an agreement that is very important to reach

in order to ensure that we keep the momentum building for reducing the unfair subsidies that are around the world, particularly export subsidies on agriculture, which I know is in the interest of

many members of this committee, the Doha Round, and other

agreements, but it is also an agreement, in and of itself, which was

very positive for agriculture and will help us to ensure that America’s farmers get a fair shake, and that we can continue to build

on the agriculture surplus we currently have.

As I mentioned during my opening statement, we do enjoy a surplus in agriculture exports. We deserve that. Our farmers and

ranchers are the best in the world. This agreement would help in

very specific ways with regard to these countries, but also, as you

say, and as the former Secretaries of Agriculture say on a bipartisan basis, this would be very helpful in terms of moving the Doha

agenda forward, and generally helping agriculture in all of our

trade negotiations.

The CHAIRMAN. Now I want to visit with you about China. Since

that country’s accession to the World Trade Organization in 1999,

our trading relationship with China has been very mixed. Today,

China is one of our fastest-growing export markets. In fact, our exports to China are growing at 20 to 30 percent per year, and have

nearly doubled since they joined the World Trade Organization.

But obviously, you hear it every place, in this town and all over

the country, about problems remaining between America and

China on trade. Our exporters must contend with continued theft

15

of intellectual property, unjustified and illegal market access barriers, and a government-controlled exchange rate policy.

What efforts are you willing to undertake to ensure that China,

and all of our trading partners, abide by their international commitments? I hope that you understand that my question reflects

the bipartisanship of that, because Senator Baucus made similar

comments in his opening statement.

Congressman PORTMAN. Well, thank you, Mr. Chairman. I took

note of Senator Baucus’ comments. We had a chance to talk about

those privately. I also took note of your comments. Your question

is absolutely right. China offers opportunities. We have expanded

our exports there, as you indicate. In fact, last year our exports to

China increased by 22 percent.

But that was overwhelmed by imports from China. The fact is,

some of those imports came in because the Chinese are not adhering to their obligations under the WTO. The fact is, we need to do

a better job of enforcing our own trade laws against those Chinese

imports.

Specifically, to answer your question, as I said in my opening

statement, I think we need a tougher approach. I think we need

to hold China to those WTO commitments. As I said earlier, I think

it is very important that we deal with the currency issue. I look

forward to working with Secretary Snow and others to press China

hard on its currency revaluation.

I think enforcement of intellectual property rights is probably the

top priority in terms of what is going on in China today. What

China does with our movies, music and software is pirating, it is

theft.

I think we need to be sure we can open China’s markets to our

U.S. exports and expand opportunities by knocking down these barriers to trade that they have put up. I mentioned that in my opening statement as industrial policy. That includes industrial standards. It includes the way in which they are going about their industrial policies which disadvantage our exports.

It includes, in our case, because we have a surplus in services

and because we have such strength in services, a disadvantage to

us there as well. So, we need to be sure to open up more opportunities for U.S. service providers in China.

We need to target areas such as software procurement. The beef

issue is in China as well. We also know about Japan and Korea.

The BSE beef issue is a big issue. We also need to be sure, as I

said in my opening statement, that the direct sales and distribution

problems are worked out. We have a commitment from the Chinese

to do that and we need to hold their feet to the fire.

Finally, last, but not least, we need to enforce U.S. trade laws

to protect against harmful competition and unfair competition from

China and other economies. As you know, under the safeguards

provisions, which were negotiated as part of China’s accession to

the WTO, a specific provision with regard to textiles, recently there

has been a self-initiation of three specific textile categories by the

U.S. government.

My understanding is, there is a petition in for another seven by

the private sector. That is part of how we need to deal with China.

So, I appreciate your question, Mr. Chairman. I know this is a

16

topic of great concern to the committee. I can assure you, it is a

huge concern of mine.

As a current member of Congress, I have seen this first-hand in

my district among the people in my area, small businesses, some

of the global companies, some of the farmers I have talked about

earlier who have been adversely affected by this relationship with

China that needs to be improved.

The CHAIRMAN. Senator Baucus?

Senator BAUCUS. Thank you, Mr. Chairman.

Congressman, I think CAFTA is in trouble. I think one reason

it is in trouble is because the President himself is not directly involved. In fact, when Congress took up the North American Free

Trade Agreement, then-President Clinton got directly involved. The

White House was very involved in talking to members of the House

and Senate of the importance of that agreement.

So far, the President is absent. I see no sign of the President getting involved in CAFTA. What assurances can you give us that he

is going to get more involved, and do you agree that he needs to

be involved? It is my opinion that he must be involved.

Congressman PORTMAN. Well, thank you, Mr. Baucus. We talked

about this yesterday in our meeting, as you know. I expressed

there that I believe the President will become much more involved

as the legislative process moves forward.

I know how he feels about it. He is passionate about it. He has

not been absent, in the sense that he has talked about it. As recently as yesterday, as you know, he gave a speech to a Hispanic

business group.

He strongly believes, as many members of this panel do, that

when you have a situation where these countries of Central America and the Dominican Republic have basically open access to our

market, because 80 percent of their products come duty-free because of the preference programs we have put in place, and where

we have high tariffs for our products in those countries, it makes

sense. It levels the playing field, it really does.

Senator BAUCUS. I guess I would just urge you to use whatever

influence you can. I understand some people think you have a special relationship with the President. If you do, I urge you to use

it, because otherwise there may not be a CAFTA.

Congressman PORTMAN. I appreciate that, Mr. Baucus.

Senator BAUCUS. Second, I very much appreciated the reference

in your statement to China and the various actions that you intend

to take with respect to China.

I think a lot of people are wondering, gee, that sounds good; is

that really going to happen? Because so many of us—and probably

yourself—have voiced some of these complaints about insufficient

USTR, or insufficient executive branch, attention to China, whether it is IPR, or whatever it might be.

I do not know this, but I sense that your predecessor, Ambassador Zoellick, wanted to do more but was hamstrung. He wanted

to do more not only with respect to China, but I think—I do not

want to put words in his mouth, but I sense from the many conversations that I had with him—that he would like to pursue trade

agreements with larger countries that have much larger commercial value, but he could not.

17

So what are you going to do that is different? What can you say

to assure us that finally we are going to address Chinese intellectual property right infringements or the currency question?

There is a lot of talk around here. The proof of the pudding is

in the eating, so I guess we will have to wait to see what you do

or do not do. But it would help us and help the country have a little more confidence in trade, especially with respect to China, if

you could give that confidence to us.

Congressman PORTMAN. Well, I appreciate that. I have shared

some of that skepticism over the years, as you have indicated. I

have made statements publicly regarding some of these matters,

including the currency evaluation issue and the fact that the yuan

is pegged to the dollar, and the disadvantage I think it has to our

exporters and to some U.S. industries.

So, I understand your point of view. All I can tell you is, not

more talk, but that I will do my best, working with my colleagues.

As you indicate, it is not solely a USTR function. In terms of the

currency issue, Treasury has the lead; in terms of the textile issue

I mentioned, Commerce has the lead; in terms of the countervailing

duty issue, which I am sure we will discuss sometime today, Commerce has the lead. The State Department clearly has a large role

to play, and sometimes the Labor Department.

But I look forward to working with my colleagues and, I think,

bringing a couple of things to this issue. One is my perspective as

a member of Congress. I think I have a little better feel for what

it is like to be in those situations I talked about in my statement

where you are dealing directly with constituents, whether they are

employees of a company that has been disadvantaged by trade or

whether it is a farmer who cannot get an opening for a product.

I think I have an appreciation for that.

Second is, I think a fresh perspective is helpful. I think Bob

Zoellick did a terrific job, and he was a strong negotiator. But I

think it is important now and again to take a step back.

Senator BAUCUS. There is a lot of interest in this body, as you

know, in creating a Chief Trade Enforcement Office at USTR, appointed by the President and confirmed by the Senate. That is because there is such angst in this country and in the Congress about

insufficient attention to enforcement. What is your idea? What is

your reaction to that job, to creating that position?

Congressman PORTMAN. Well, I took careful notes on your opening statement in that regard. As you know, Congress has been active in bringing more focus to China with a China Monitoring Office.

Senator BAUCUS. Why is that not a good idea? Would that help

you?

Congressman PORTMAN. It might be. It is something I am going

to look into. I do think, as I said in my opening statement, we need

an additional focus on China. After a top-to-bottom review, I would

plan to shift some resources, including some people, to that effort.

USTR is not a large organization, as you well know. It is a highly

talented and dedicated organization, as you said, but I think it is

appropriate to shift some of the limited resources to this issue.

18

Senator BAUCUS. Well, I appreciate that. My time is up. But I

just hope you look favorably upon the idea, because I think it will

help you.

Congressman PORTMAN. Thank you.

Senator BAUCUS. It will help you accomplish your goals.

Congressman PORTMAN. I appreciate that. Thank you, Mr. Baucus.

Senator BAUCUS. Thank you.

The CHAIRMAN. Thank you, Senator Baucus.

The next two people would be Senator Bunning, and then Senator Wyden.

Senator BUNNING. Rob, are you concerned about the overall trade

deficit? What do you think is behind it, and what would you do

about reducing it?

Congressman PORTMAN. That is a great question, Senator. I wish

I had the silver bullet for you.

First, thank you very much for your opening statement. It means

a lot to me. I appreciate having you as a neighbor and a legislative

partner on many issues, and I look forward to working with you

on this one.

I think it is a concern. Some economists would argue that our

current account deficit is not a concern because our economy is

strong. I think it is a concern. So, first, I would agree with you and

others that it is something we need to address.

Second, I would say, though, it is not a barometer of our economic strength. There are many barometers. One would be our unemployment rate, which, as you know, is historically very low, 5.2

percent. Another would be our growth, which is historically high,

4.4 percent growth last year. We are on track to have 3.5 to 4 percent growth this year.

Another barometer might be our productivity, which is also relatively high. We have created over 2 million jobs in the last year

in this country. So our economy is strong despite the trade deficit,

but it does not mean it is not a problem. I believe it is a problem.

You asked what has caused it, what has contributed to it. I spent

some time with economists over the past few weeks, since I

thought I might be before this committee. I have spent some time

talking to you all about this.

I am not an economist, and I now know what President Truman

meant when he said ‘‘give me a one-armed economist on the one

hand, on the other hand.’’ But I think there is a consensus that one

of the reasons is that we do have strong growth in this country relative to other economies, and that has fueled strong consumer demand.

So when the big economies in Europe, Japan, and these other

economies are not growing and not absorbing these imports, we are

absorbing more of them. By the same token, our exports are losing

some of these markets because of their relative lack of growth compared to our economy. So it is part of it, clearly.

Another part of it is America is attracting investment right now,

despite our trade deficit. People like to invest here. What the

economists will tell you is, by being a major growth leader of the

world, we are bringing large net inflows of foreign capital into this

country.

19

Another issue, which is a macroeconomic issue, really, is our low

savings rate. That is our National savings rate, our personal savings rate. This is something this committee has focused on as much

as any group in Congress, so it relates very directly to our trade

deficit. It is good this committee is involved with both.

High oil prices have obviously contributed recently to our deficits,

as have Chinese import growth. I think we have to acknowledge

that. There are macroeconomic factors that are probably most important, but the recent increases—dramatic increases, for instance,

in Chinese textile exports to this country—have increased our deficit.

So, adding all this up, Senator, I believe that these other factors

are huge factors. But I also think that trade plays an important

role. The role trade plays is very simple.

We need to expand our exports by opening up markets, as I said

in my opening statement, and we need to put in place tougher enforcement so that the imports that are coming in are fairly entering

our market.

By doing that, expanding exports and stopping unfair imports,

we will have some impact on that trade deficit. The larger macroeconomic factors may not be something I can control; you all have

more control over that, such as the savings rate.

But in terms of trade, I believe that, if confirmed as USTR, I can

play a role in this, with your help. That is, to open up those markets, and tougher enforcement of our trade laws and international

obligations.

Senator BUNNING. You have a history of working in a bipartisan

manner. The Portman-Cardin, and I see your good friend, Ben

Cardin right behind you, being an obvious example of how you

have worked together.

Do you plan to bring that perspective to your job as U.S. Trade

Representative, if you are confirmed?

Congressman PORTMAN. Well, thank you, Senator. I certainly do.

I appreciate you recognizing Mr. Cardin. I did not realize he was

over my right shoulder. That is a little intimidating. [Laughter.] He

is usually on my left. [Laughter.]

But Senator DeWine talked about it, you talked about, Senator

Voinovich talked about it, and Senators Grassley, Baucus, and I

have worked together. The goal is to achieve results for our constituents and the people, and that is what I have tried to do. I have

not always been successful in that.

But working with Ben Cardin, for instance, on everything from

hospice, to Medicare issues, to pensions, to home ownership, and

working with many of you on this committee on both sides of the

aisle, we have been able to get some things done. That would be

my goal here. It is very simple.

I think we as Americans, and as representatives of the American

people, share the same concerns, and that is to have a strong economy and be sure we have a fair trading system.

I think trade has traditionally been a more bipartisan exercise

than almost anything else in this town. I would hope to perhaps

breathe some new life into that old tradition. That would be my

goal, and I look forward to working with you in that regard, Senator Bunning.

20

Senator BUNNING. Thank you, Mr. Chairman.

The CHAIRMAN. Now, Senator Wyden?

Senator WYDEN. Thank you, Mr. Chairman. I do not want to

turn this into a bouquet-tossing contest, but I want to join with the

others in welcoming Congressman Portman. He is going to do an

excellent job.

One of the reasons that I feel good about his appointment is that

I think he shares my view that peddling encyclopedias door-to-door

at this point may look more appealing than trying to sell free trade

agreements to the Congress. He has got an awareness that those

of us who are free traders have of what a challenge this is, and I

appreciate it.

I think there are two reasons for that. First, I think trade agreements used to be about knocking down foreign tariffs so that more

of our goods could be sold abroad. Now it looks like they have been

transformed into vehicles for special interests.

The Congressman and I have talked about the fact that the

CAFTA text that is now before the Finance Committee looks like

it was written by the brand-name pharmaceutical companies, and

he knows that we are going to want to change that.

Also, I am going to ask the Congressman this morning about

what we can do to show blue collar workers that trade is beneficial

to them, because I think right now they think free trade helps the

guy in the front office, but not the guy sweating it out on the shop

floor. So, we will ask about both of those things this morning, if

I could, Congressman.

But let me begin by asking you about a matter Senator Smith

and I care a great deal about, and that is the Canadian softwood

lumber debate. That, of course, has been the longest-running battle

since the Trojan War, with petitions filed 1 day, then countervailing duties imposed the next, and then a dispute settlement

panel. All the while, the Oregon mills get hammered and our home

builders holler about the price of lumber.

You could get your name in the history books if you did nothing

else but solve this one, and I would be curious, by way of starting,

with getting your sense of how you want to tackle that particularly

contentious issue.

Congressman PORTMAN. Well, thank you, Senator Wyden. I share

your frustration that this has taken so long. As you know, Ohio

also borders Canada. We do not have the same timber tradition

that you do in Oregon, but it is an issue that I have been somewhat involved in.

I had the opportunity, as you know, to speak also with your colleague, Senator Smith, about this. We talked about that in your

meeting.

I think there is an opportunity here, working, frankly, with you,

Senator Smith, and others who care a great deal about this to try

to reach some kind of a breakthrough, because it seems to me there

is frustration on all sides. It has been litigated to death. It is time

to come up with a settlement. Hopefully that can be negotiated.

I think our stand, though, has to continue to believe that the

United States needs to see an elimination of those subsidies in

Canada. We want a market-based system there. All I can say is,

21

if confirmed, I will consult very closely with you and with the other

stakeholders.

As you and I talked about, some of the stakeholders are at the

point where they would like to see some predictability and some

certainty in this. So, maybe I am naive, Senator Wyden, but I

think, working with some of these stakeholders on both sides of the

border, working with the governments on both sides, we have an

opportunity here.

Jim Peterson, who, as you know is the new Trade Minister in

Canada, has already called me to offer his congratulations, which

was a little premature since I am not confirmed yet.

I was not able to engage in any substantive discussions with

him, but if confirmed, I believe he is a man I can work with. I look

forward to working with you very closely on this one.

Senator WYDEN. Senator Baucus and I, a couple of years ago, introduced legislation called The Working Families Trade Bonus Act,

because what we want to do is deal with this disconnect between

the benefits of free trade and what the blue collar worker sees as

what it means for them.

I just think the bottom line is, we have got to widen the winner’s

circle. I mean, people just do not see on the shop floors of this country how free trade benefits them, and I would like you to spend the

last minute or so I have talking about what you would do about

this disconnect between free trade and the working family in America, and what you would like to see, working with us in the Congress, to do to try to address it.

Congressman PORTMAN. Thank you, Senator. I really enjoyed our

meeting and discussion on that particular item. As you know, I

share your concern there. I have tried, in my own small way in

southern Ohio, as you have in Oregon, to try to be as clear as I

can about the benefits of trade, the challenges of trade, but the

overall net benefit to our workers and farmers.

I am not sure we do a good enough job communicating that. I

have had the chance to look at your legislation, which you kindly

provided me. In fact, I also gave it to my tax counsel, who is taking

a look at it.

We have already had some discussions with the Joint Tax Committee, and on the House side with the Ways and Means Committee folks, and it does have some Treasury Department-type

issues, with revenue issues, and so on, what those implications are.

But I will tell you, I love the concept. I love the idea of better

communicating to people what the true benefits are. Nothing is

more frustrating to me than going to a shop floor in my area with

the context of a company that is heavily involved in exporting, and

often the guys on the shop floor, the blue collar workers I am talking to, do not appreciate the significance of trade. In fact, they are

on the other side of some of these agreements when, in fact, they

directly benefit and their jobs depend on it.

When you get a chance to sit down and talk about it and analyze

the pros and cons, folks understand it. But we need to do a better

job communicating it, and I look forward to working with you on

that.

You have been great at doing that here in the U.S. Senate. I

think there is a challenge right now, frankly, that we not overreact

22

to some of the very real problems we face, and pull up the ladder.

As I said in my opening statement, I think if we isolate ourselves

economically it is not going to help the people we are trying to

help, it will just hurt them.

So we need to be smarter. We need to engage in a much smarter

way and enforce our laws in a tougher way, but we also need to

be sure we are not losing the huge advantages we get from trade.

Senator WYDEN. I look forward to supporting you.

Congressman PORTMAN. Thank you, sir.

Senator WYDEN. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Smith?

Senator SMITH. Thank you, Mr. Chairman.

Congressman Portman, it is a pleasure to see you nominated. I

look forward to advising and consenting on your nomination so that

you are confirmed and in place very soon.

I will not reiterate, but simply echo, my colleague’s comments on

Canadian softwood lumber. I, as a neighbor of Canada—at least,

Oregon is closely that—it has been very disappointing to see our

relationship with our northern neighbor deteriorate at so many levels and so many issues over the past number of years.

But this one has a particular impact on working Oregonians who

have lost, over the last 15 years, about 75,000 timber jobs, for

many reasons, not the least of which, a big part of which, is the

subsidy of Canadian timber.

But for these countervailing and antidumping duty laws that we

have, frankly, we would have no negotiating leverage to get an

agreement. We need an agreement with Canada. They have won

many of these negotiations. We need to acknowledge that.

But on the other hand, there has got to be a better way than the

way it is done now, because it is not fair trade that is going on in

terms of lumber, and lots of people are victimized by it.

So, I will not say any more about that. We have talked about it,

and I appreciate your focus, as a very high priority, on the establishment of a new agreement with Canada on that.

But as I look back now at the WTO votes we made on China, it

is very clear to me that, by any measure, when it comes to intellectual property, WTO and China are not working for these essential

industries in the United States.

I wonder, in retrospect, if we could have another bite at that

apple, how would we negotiate it differently? I do not know whether the Chinese are actually trying to enforce these agreements on

intellectual property, but clearly the levels of piracy are as bad as

ever, as far as I can see.

But that brings me to the next thing we are apt to deal with,

which is Russia WTO. So as we consider that, particularly as it relates to piracy of U.S. movies and music, I have been told that currently, to supply the Russian market, they need 27 facilities.

They now have 36 CD manufacturers, 9 of which, I am told, are

operated on military bases. I just want to get your thoughts. How

could we do that one better than we did the WTO on China? Because no doubt Russia will come forward.

It would be great to see Russia as part of the world trading community, but intellectual property, particularly movies and music,

are some of the last industries that are still very much American,

23

and frankly they are being stolen wholesale, and I do not want to

spread it any more.

But Russia, in terms of piracy, of these issues, is out of control.

I want to highlight to you my concern, and ask for your comment

on that particular issue, as well as China.

Congressman PORTMAN. Well, thank you, Senator Smith. I did

appreciate our conversation about that. I look forward to your leadership on the Canadian softwood lumber issue as well.

You are right. I mean, when you were talking about China, I was

writing down ‘‘Russia,’’ because it is not exclusively a Chinese

issue. With regard to Russia, as you say, we do have the ability,

as they are seeking WTO accession, to continue to raise that issue

and see progress there.

I think it is the top issue we face with regard to their accession.

I could not agree with you more that this is something that has not

worked in the way we would like over the last several years since

China’s accession.

I will say, we do have some success stories. One thing that I am

looking forward to doing is learning how we were successful in

Japan, how we were successful in Korea, in really getting our

hands around this issue and dealing with some very serious piracy

problems we had there. Maybe some members of this committee

were more involved in that over the years than I was and you can

give me some advice.

But we have been able to make progress in other countries. My

understanding is, even within countries like China and Russia

where the government undertakes to make progress, they have

been quite successful where they care about a particular movie, or

a particular CD, or a particular software application. So, I hope we

can learn from our successes and hope we can redouble our efforts.

The WTO does give us some leverage here, and maybe we have

not used it properly. But I really look forward, Senator Smith, to

working with you on those two specific issues of Russia’s accession

and how we make progress in the process of that, and how we do

a better job with regard to the theft and piracy going on in China.

Senator SMITH. Thank you, Mr. Chairman.

The CHAIRMAN. Senator Rockefeller?

Senator ROCKEFELLER. Thank you, Mr. Chairman.

Good morning, Congressman Portman.

Congressman PORTMAN. Good morning.

Senator ROCKEFELLER. I am very glad to see you here.

My view is a little bit different, and I want to be a little more

philosophical in my approach. I think that we in this country, over

the Bush administration and the Clinton administration, and really

I think you have to go back to the Reagan administration, and I

will give an example of that, where we have talked about being

tough on trade, fair trade, it has got to be a 2-way street, but we

fundamentally have abrogated that philosophy and taken no action,

really, to back it up.

I mean, President Clinton was tough in his talk, but he basically

did a few things on bananas, a few things on beef hormones, and

something about differential and Japanese alcohol, which sort of

did not change the trade balance a whole lot, or the trade deficit.

24

And that was because basically Bob Ruben, who was Secretary

of the Treasury, convinced Gene Speurle and the President that the

world had changed and it was going to be free trade, and that

therefore the whole concept of fair trade has ceased to have meaning because we have ceased as a country to decide to do anything

about it.

Now, I am going to say something which may seem aggressive,

but I think it is an interesting point. You sit here this morning, a

marvelous person seeking to answer questions, and you will, and

should be, confirmed.

But when you give testimony from now on before any committee,

it will not be your testimony. It will be vetted and approved and

changed until it meets the requirements of the Office of Management and Budget, which is another way of saying that it will need

to reflect administration policy.

It will only reflect administration policy. That is a very unfortunate and unfair thing for you, because you could have stronger

ideas about taking the concept of fair trade in a certain direction,

but you will not be able to do it unless you have the administration

willing to let you do it, and I do not think they will be.

Now, that is the reason I talk about Clinton, because it is a bipartisan problem. I have not, and we in West Virginia have not,

because we lost incredibly from so-called unfettered trade.

But I have to go back to Ronald Reagan, because I have a whole

bunch, just like Gordon Smith, of intellectual property, movies,

CVDs, DVDs, Russia, China, military bases. Then we are going to

get tough on the Chinese? Well, the reason we let them into the

WTO was so that they would conform to international rules.

China is the Middle Kingdom. They have been around for 5,000

years. They can out-wait you and your 10 successors and predecessors. You mentioned, yes, they can be effective when they want

to close down on something on the Internet they do not like, and

that is usually something which is taking on their government. I

mean, that is what they are good at. They do not want there to be

a lot of dialogue about the nature of their government.

But on movies and all the IPR stuff that Gordon and others have

referred to, the Chairman and Max Baucus, I do not think they are

going to be particularly responsive to you because they view the

world in terms of centuries, in terms of millennia.

They feel that their destiny is such, and their power is such, and

then the complicating factors of what the State Department has on

their agenda, and they know that essentially you are going to end

up being check-mated by something called administration policy, as

Democratic presidents have been, also.

Now, Ronald Reagan taught us a lesson in taking action on semiconductors back in the 1980s. He did it with Japan at a time that

nobody took on Japan because they were just eating our lunch. I

think we had gone from 96 percent of the market on VCRs to 6 percent, or something of that sort, in a very short time.

Ronald Reagan said, all right, I am putting a tariff on your highest luxury goods that come into the United States unless you, within a period of 3, 4, or 5 months, whatever it is, bring the percentage of American VCR penetration into Japan, or semiconductors,

up to a level of 20 percent. He did it.

25

I received 30,000 letters from enraged sellers of those goods.

These were expensive products; clothes, cars, gadgets, things. People were furious. It went up to 20 percent. The Japanese conformed. They reacted to tough action.

So, yes, we have the ability to do these things, but we have not

shown the will as a country, because Americans are product-driven.

We love bright colors, great shapes, and pretty things, and we do

not look.

I do not know who made this tie; I am not going to look, in fact.

But that is the way we are. The government knows that. The government has a higher order of priority trying to keep peace in the

world, fight a war on terrorism, and trade always comes in second. I would just hope that, in closing, Mr. Chairman, that the $162

billion trade deficit we have with China alone, when in 1995 our

trade deficit with the entire world was $3 billion less than that,

that you will contemplate some of the things I have said and figure

out what you are going to do about it.

I guess that was not a question. [Laughter.]

Congressman PORTMAN. Thank you. Just a brief comment, Mr.

Chairman.

The CHAIRMAN. All right. Before you make your brief comment,

I cannot help but tell the world that everybody knows where the

Rockefeller neckties come from: they probably come from Italy.

[Laughter.] Go ahead.

Congressman PORTMAN. Now he is looking. [Laughter.]

Senator ROCKEFELLER. It says ‘‘Prince of Wales.’’ [Laughter.]

Congressman PORTMAN. I think that is a small town in western

West Virginia. [Laughter.]

Senator ROCKEFELLER. Right near Parkersburg.

Congressman PORTMAN. I just wanted to say, I appreciated our

conversation in your office as well, and I appreciate the warning.

I do think trade has gotten people’s attention in ways, perhaps, it

has not in a long time.

Senator BAUCUS. I am sorry. What was that?

Congressman PORTMAN. Trade has gotten people’s attention. I

think the trade deficit number that you cite has helped to put the

trade agenda on a higher footing with regard to the other issues

that you raise. I think that gives us an opportunity.

The CHAIRMAN. Senator Thomas?

Senator THOMAS. Thank you, sir.

I am delighted you are here. You have got a tough job, and I

know you will do a good job.

I have a couple of little items. They are not as important as ties,

of course, but they do have some impact with us.

We need to be involved in trade, obviously, but it is always a difficult thing. All of us have issues that we are most interested in.

In my State, of course, it happens to be soda ash, sugar, and agriculture. I am surprised sugar has not been mentioned more today,

as a matter of fact, because it is certainly a difficult issue.

Agriculture is tough. I was at the Cancun meetings. The small

countries all want to export agriculture, but they do not have anything else to trade. They do not buy. It is a difficult arrangement.

The European Union also continues to be difficult in terms of agriculture.

26

I think some of the resistance in agriculture, even in the beef industry, is because of our problems getting Asia—Korea, Japan—

back into buying U.S. beef.

What can we do here to move that along? Do you have any feelings?

Congressman PORTMAN. Well, absolutely. First, I enjoyed our

conversation about the agricultural issues, in your role as chairman

of the subcommittee. I look forward to working with you on all the

issues, including the great potential, as you and I shared, about reducing export subsidies in the Doha Round, which could be very

beneficial to the world, but also to U.S. farmers and ranchers who

are so productive.

With regard to the BSE issue, I share your great frustration

there. As USTR, if I am confirmed, that will be a top priority.

Japan, in particular, as you know, has dragged its feet on this

issue. I believe using sound science, our beef is safe. I believe they

ought to open their market.

If they did that, it would have a beneficial effect in other countries; you mentioned Korea, and I mentioned China earlier. So, I

think this is an issue that we need to resolve, we need to resolve

quickly, and we need to use sound science. I think if we apply that

across the board here in this country and in Asia, it would be beneficial to the U.S. cattlemen.

Senator THOMAS. Of course, we have all heard about the problem

with sugar. It is a little different commodity in agriculture and one

that we have basically supported by holding down their production.

I think a lot of people believe that perhaps CAFTA is not as important as the precedent it may set for future negotiations. How do

you feel about that?

Congressman PORTMAN. Well, again, you and I have talked about

the sugar issue and the Central America and Dominican Republic

Free Trade Agreement. It is a very sensitive product. As I look at

the agreement, and I have looked at it much more closely in the

last few weeks, I believe that the issue was handled with care.

I believe that it will not negatively impact the sugar program,

and certainly not open up the agriculture bill, which is what some

people have said. It is relatively small, about 1.5 percent, a little

less, in the first year of our total production, which, incidentally,

is less than the fluctuation year-to-year, typically, in our sugar program.

As you and I have discussed, it also includes an interesting provision which is not there for any other product, and that is really

an insurance policy, which is this compensation program where we

would be able to compensate those countries in Central America,

in the Dominican Republic, should there be—should there be—an

effect on the sugar program, which I do not believe would happen,

given the numbers that I have seen.

One thing we have, as you know, Mr. Chairman, is the opportunity to work on that compensation program, because it is not

fleshed out in the agreement. I have looked at it. It is very general.

One thing I would love to do is sit down with you and other representatives of sugar beet growers and sugarcane growers and figure out what makes sense for this compensation program, to be

sure that it is a real insurance policy that works for our farmers.

27

Senator THOMAS. Good.

Some have felt as if the USTR resources have been oriented towards bilateral negotiations rather than the Doha Round, and that

we have missed some opportunities there, particularly in agriculture. What is your view of where we are with Doha?

Congressman PORTMAN. Well, you raise an important concern. I

think that the free trade agreements, when added up, are very important to our economy, including for agriculture.

As you know, we enjoy increased agricultural exports to most of

those countries as a result of the FTAs. Together, they comprise

our third-biggest trading partner when you add up the ones that

you all have approved and the ones that are currently in the pipeline.

But, as I said in my opening statement, Doha is the big agreement. That is the one we need to build toward. These free trade

agreements have helped us in that regard. They provide momentum. They establish higher standards, which then help us in the

multilateral or global round in the Doha Round.

But I think the Doha Round offers great promise for us, for our

agricultural interests, and in particular, as I said earlier, with regard to the export subsidy issue, with regard to export issues in

general.

The United States will benefit if we can knock down barriers to

trade, which will be part of that Doha Round if it is successfully

completed. We will have to work closely with you and others to

make sure that we realize those benefits. But I think it offers great

promise. I also think it needs a jump start.

One reason I am eager to get started is that, if confirmed, I will

be able to go right into that process. There is a meeting, as the

Chairman outlined, the first week of May, which is an important

ministerial meeting, to then build to what I hope will be a very

successful meeting at year-end in December to move the Doha

Round forward.

Senator THOMAS. Good. Thank you. We look forward to working

with you.

Congressman PORTMAN. Thank you, Mr. Chairman.

The CHAIRMAN. Now, Senator Lincoln?

Senator LINCOLN. Thank you, Mr. Chairman.

Good morning, Congressman.

Congressman PORTMAN. Good morning.

Senator LINCOLN. We are delighted you are here. Good to see you

again. I, like others, appreciate and enjoyed our visit last week. As

the Chairman stated, we look forward to working with you, but

look forward to having a continued conversation, as you have with

all of the members here, whether it be in person or by correspondence.

Today I would like to reemphasize just a few of the issues that

we talked about during that meeting, and a new one that has come

up since our discussion. As you know, I represent a State that relies on agriculture as its largest industry.

I am pleased to see that there are a lot of folks at USTR already

that know and understand agriculture well, and I am looking forward and hoping to see that you will be taking some with you as

28

well that know and understand agriculture. So, we hope that we

can continue that open dialogue.

Specifically, the EU Trade Minister Peter Mendelson’s unrealistic

call for an early harvest agreement related to cotton within the

WTO Doha Round. His statement really was a change in position

for the EU as a single undertaking in agriculture in what I see as

a significant shift for the EU in the middle of this negotiating

round.

So, I guess I am interested in your thoughts about the single undertaking approach to agriculture negotiations and what your position would be with respect to the new EU decision to break out

commodities one by one and try to negotiate them separately.

Congressman PORTMAN. Well, Senator Lincoln, I appreciate your

raising that issue. I share your concern. One of the benefits, I

think, of working on these issues on a multilateral or global basis,

and looking at all these agricultural products together, is we have

found that is the best way to move forward and to achieve real results.

So, quite frankly, I was surprised to learn about this change in

approach, and I think we need to stick with the single undertaking

approach. I think it is the only way to move forward, because it is

balanced and it provides for broad-based reform. So, I look forward

to working with you to ensure that we do not have an early harvest, and in fact we harvest these products together.

Senator LINCOLN. Well, it is important. There is safety in numbers, and I think we have discovered that in agriculture, and it is

important to stick together. So, I hope we can look forward to

working with you on those as those things develop.

I also mentioned in our meeting that steel is also a big business

in my home State of Arkansas. My former Congressional district is

probably the largest, if not the second largest, steel-producing district in the Nation. I think the steel industry has been a great example of how our trade laws can be effective when they are enforced aggressively.

As a member of this committee and one who has supported free

trade, I would also say that I have spent the majority of my time,

however, or certainly a lot more of my time, working to ensure that

fair trade exists and that we do use the trade laws that are on the

books, and that we do act aggressively on that.

You are certainly aware, I think, of a bipartisan group of Senators that have introduced legislation to ensure that all countries

are covered by the anti-subsidy law. The countervailing duty law

is an important tool for us to combat prohibited subsidies by foreign governments.

Unfortunately, our U.S. subsidy law is oftentimes not being applied, or certainly not being applied to non-market economy countries like China. We have talked about that, I guess, at great

length, and protecting those countries that subsidize the most

heavily and which cause the greatest injury to our U.S. manufacturers and agricultural producers.

The countries are exporting unfairly subsidized products to our

country without any fear of action by our trade authorities. I heard

from everybody else, and from you, how important that is. We hope

that we will see more.

29

But I guess at the heart of that question is my understanding

that the limitation by the U.S. is based on a 1980s agency interpretation, but not required by law or international agreement.

In your judgment, is there any impediment in the GATT or other

international trade agreements that would prevent us as a Nation,

or any WTO member, from applying countervailing duty laws

against non-market, as well as market, economy countries? Is that

an interpretation?

Congressman PORTMAN. First of all, I think you have raised a

very serious concern, and I share it, which is, how do you get at

these subsidies in non-market economies, China being the best example? You are right. Based on a 1986 court case, the Department

of Commerce, through administrations, Republican and Democrat

alike, have chosen not to apply our countervailing duty laws to

non-market economies.

The reason is, it is tough to do it when you have an economy that

is so subsidized that the market signals are not clearly identified.

So instead, we have relied heavily, as you know, on our antidumping laws, where some would argue in the trade community

that we are able to get relatively high tariffs on antidumping, because there we would use a proxy, another country, as a comparison, and the inputs, and come up with a tariff. We have been successful with that, as you know. There have been a lot of antidumping cases against China, in particular.

So the question is, how do we proceed? How do we deal with this

issue on the subsidy side? I am not sure I know the answer to your

question as to whether there are any reasons we cannot do it from

a WTO perspective. My understanding is, we probably could.

The question is whether the subsidy that we would identify

would hold up because we would be able to justify it, given, again,

that it is just impossible to determine what these market signals

are in a subsidized, non-market economy.

So, I really look forward to working with you on this. I think it

is a real issue. I have talked to Senator Collins about it, and also

Senator Bayh, who, as you know, has such a strong interest in it

that he would like to see the Collins-Bayh bill come to the floor.

I have also talked to Representative English about this, who is the

leader of this issue on the House side.

I have had an opportunity to speak to a number of lawyers in

the Commerce Department. This is not a USTR issue, it is a Commerce Department issue, you should know. But I have also talked

to lawyers at USTR and in the private sector about it in the last

few weeks, trying to figure out what would be the best approach.

I think it is a real concern. I think it is one that we ought to take

up. I think if there is a way to identify those subsidies, we ought

to do it, but we ought not to disadvantage American workers in the

process. Some would say—and I am not saying I identify with these

concerns—that this could lead us to a situation where China could

assert that it is now a market economy because we are not using

the non-market economy analysis on the CVD side.

That, I do not think, is in our interests. I do not think China deserves market economy status right now because they have not met

the benchmarks, including their currency revaluation.

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So, I think we need to be careful as we proceed, but I think it

is a very real issue that I really look forward to working with you,

Senator Collins, Senator Bayh, and others on going forward.

Senator LINCOLN. Well, there is no doubt it is a sensitive issue,

but we are looking forward to working with you on it.

Congressman PORTMAN. Thank you, Senator.

Senator LINCOLN. I think you will do an excellent job. Thank

you.

The CHAIRMAN. Senator Snowe?

Senator SNOWE. Yes. Thank you, Mr. Chairman.

Welcome, Congressman Portman. I am pleased that we had an

opportunity to meet the other day to discuss the economy and a variety of issues that are so important to States like mine, that have

been the victim over the years of unfair trade policies, and a lack

of enforcement. In 4 years alone, Maine lost almost 20,000 manufacturing jobs, something that I am sure that you can relate to.

But, first, let me say, I welcome your appointment. With the

breadth of experience and knowledge you bring to this position, I

believe you are well-poised to be able to understand the grave concerns that we have with the overall environment with respect to

trade and the application of the existing agreements and laws.

Hopefully, we can strenuously enforce our agreements through

the laws available to us and within the WTO to enforce these

agreements, because I believe that there certainly is a lack of confidence in our ability to aggressively enforce these agreements.

This brings me to the point of China. You have heard it endlessly, for good reason. My State has been hit hard by the loss of

jobs, and certainly China has contributed to those losses.

We see a plundering of our creativity by China through the violations and rampant piracy of our intellectual property rights, and it

continues unabated, for all practical purposes, even by China’s own

admission. It counterfeits more than $19 billion in counterfeit

goods, and over 90 percent, when you talk about DVDs and everything else.

We have a company in Maine that employs 880 workers in the

rubber footwear business. We appreciate the fact that many of our

agreements have protected them, because it is really basically the

only company of its kind in America that manufactures rubber footwear. It is one sector of the industry that remains in America.

But they had to spend $1 million over the last 5 years to protect

their own rights with respect to the production of their footwear.

One million dollars! So, we have endless reports. I know you are

probably familiar with the U.S.-China Economic and Security Review Commission report that was issued last June. It goes on at

great lengths to talk about the continued failures of China, including the wrongful manipulation of its currency.

We are hesitant and, in fact, have resisted the idea of calling

China a currency manipulator. We refuse to initiate a 301 or a case

before the WTO. All of this while China has deliberately frustrated

the effectiveness and debased the value of the WTO’s transitional

review mechanism.

I believe the point of all this is, at what point do we satisfy ourselves with the breadth of violations perpetrated by China and deVerDate 11-MAY-2000 14:59 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 24928.000 SFINANC2 PsN: SFINANC2
31

cide that we have to establish certain benchmarks for progress, or

lack of progress, and take action?

I know that there is a review that has been undertaken by USTR

regarding compliance and non-compliance issues, but at what point

do we establish specific benchmarks of progress by China?

Congressman PORTMAN. That is a very fair question. My understanding is, there is an out-of-cycle review right now of intellectual

property right violations in China. In a sense, those benchmarks

are established through that review.

But it sounds to me, from what I know about the situation from

talking to members of this committee, as well as my experience on

the Ways and Means Committee, that we not only need more

benchmarks, we need to figure out a way to bring attention among

Chinese officials to those benchmarks.

I think the approach we have taken with regard to intellectual

property rights has been very strong in the sense of identifying the

problem. The STOP! program was talked about earlier, for instance, and now this out-of-cycle review. What we have not seen,

are the results that we need to see.

What I would tell you is what I told you in our meeting, which

is, I think taking a fresh look at all of these issues, including the

IPR issue, as I said earlier. I think we ought to do a top-to-bottom

review of where we are on all of these issues. IPR would be at the

top of that list with regard to China.

Ultimately, although preferring negotiation, having recourse to

litigation through WTO and the rights that we have now that

China is a member ought to be considered. So, I think it is time

to see progress.

Senator SNOWE. When do you expect this report to be included

in this review?

Congressman PORTMAN. I think it is within a month, but let me

check with someone who knows. It should be done, actually, within

a couple of weeks, I am told by USTR, Senator Snowe.

Senator SNOWE. Well, I hope that we can get to a point of concrete action, because there is a lot of frustration with hollow gestures in the final analysis. At some point we have to take a concerted approach to China. Establishing benchmarks and measuring

progress or lack of progress is going to be absolutely essential to

hold them accountable.

Congressman PORTMAN. I think that is a sensible approach.

Senator SNOWE. Because it is devastating our economies and

jobs, as you well know.

Thank you.

Congressman PORTMAN. Thank you, Senator.

The CHAIRMAN. Senator Kerry is next, but he has deferred to

Senator Hatch for a very short statement of support.

Senator HATCH. I want to thank my colleague, Senator Kerry, for

his graciousness here. But I just wanted to say to you that I support you fully. I am very grateful for your willingness to serve in

this position. It is a tough position. It is a demanding position. I

have every confidence in the world you will do it very, very well,

and I intend to help you every step of the way.

Congressman PORTMAN. Thank you, Senator.

Senator HATCH. So, I just wanted to say that.

32

Again, I thank my colleague from Massachusetts.

The CHAIRMAN. Now, Senator Kerry.

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

I do have a number of questions. But before I get into questions,

I would like to make a few comments, if I could.

Number one, first of all, welcome.

Congressman PORTMAN. Thank you.

Senator KERRY. Congratulations to you, Congressman.

Congressman PORTMAN. Thank you, sir.

Senator KERRY. It is obviously an enormously important job. You

have heard it from all of my colleagues and you know the stakes

well. It is a huge job, and a particularly challenging one right now.

So, I wish you well in it, and I look forward to supporting you. I

think you are well-qualified for this, and we all want you to succeed.

Let me give a little bit of background to the comments I am

going to make, because I want to put them in a context. I was not

able to be here for the hearing previously on CAFTA itself.

I have been here 22 years now, and I have always pushed hard

for trade agreements, and I have supported every one of them that

came through here and have been part of those fights.

Beginning with NAFTA, I supported the Uruguay Round, supported China PNTR, supported fast track, supported the Trade Act

of 2002, and bilateral free trade agreements, including, most recently, Australia, Singapore, and Chile.

I supported those, even in the course of the presidential race

when a lot of people were pushing in another direction, because

those countries, particularly, had strong regimens of enforcement,

strong laws and standards with respect to their workers.

During that same time, even as I supported those over the last

5 or 6 years as a member of this committee since I came on the

committee, I have also consistently been warning the administration, at the end of the Clinton administration and now this administration, about the changing dynamic in the world with respect to

trade and our economies.

Trade cannot be looked at, sort of, just as trade. It is not just

trade. It is investment policies. It is fiscal policies. It is technology,

research and development, and a host of other things. It is enforcement and standards. If those do not keep up, if you are not vigilant

about them, you lose the consensus, the global consensus on which

trade regimens have been built.

For 5 years or more, I have been warning about the fraying of

the edges of that consensus. I think, not that it was particularly

remarkable or anything, but just that it was a demarcation point

in my own thinking.

I remember speaking at the World Economic Forum in Davalos

about 4 or 5 years ago about backlash, and the threat of backlash,

and the warning that if you do not maintain consensus, the backlash will grow.

Well, it has grown. We are inheriting now the harvest of not having done the work that many people, Democrat and Republican

alike, laid out that needed to be done to maintain that consensus,

and even to look dispassionately at some of the differences between

countries and standards and how we approach this.

33

Last year during the campaign, I said I thought we needed to put

together a commission to look at all our trade agreements and

make a nonpartisan analytical judgment: what is working for us,

what is not working for us, and go out and try to cure some of

those things that are not working for us.

Now, I also said that unless things change with respect to

CAFTA, I would not be able to support it. Now, that was reflecting

the view back in June of 2003 of our own USTR, who said that

there were serious problems with the Central American labor laws,

pledged to take action to address those problems before duplicating

the labor rules of Chile and Singapore.

Peter Allgeier testified before us as to whether the labor provisions of the Chile and Singapore agreements would be sufficient for

Central America, and he said, ‘‘It depends in part on what changes

in their laws they make during the negotiating process.’’

He stated that, frankly, the different circumstances that exist in

those countries and among those countries compared to, for example, Chile and Singapore, may require a different approach.

He pledged that USTR would ‘‘need to get those,’’ the labor

standards and the enforcement of labor rights, ‘‘up to a certain

level before we would find acceptable a commitment to enforce

those laws.’’ A year and a half later, most of those countries have

done nothing to bring their labor laws closer to the international

standards.

So my first question to you is going to be—but I want to say a

few more words before that—if the model was not acceptable to

USTR for Central America in 2003 and they have not changed it,

why should it be acceptable to the Congress now? I think that is

a very legitimate question.

But what is important is to understand that the current trade regime is not working as effectively as we want it to be. American

manufacturing has suffered 42 consecutive months of job losses, 2.7

million jobs. You have lost a lot of them in your own State. We continue to face record trade deficits with no sign that that is going

to change.

When we were debating fast track authority in 2001, I remember

issuing a warning, both to the President and to the Trade Representative, to use that authority carefully.

Many of us asked the Representative and the administration

then to pay close attention to labor laws and environment standards, and indeed to improve those standards.

President Clinton and the prior administration came to that conclusion, which is why the Jordan trade agreement embraced those

standards for the first time in the four corners of the agreement.

We had a big debate.

I remember Phil Gramm, I, and others. There was always that

ideological tension here of purity, but it tended to have blinders on

with respect to real consequences, real people, real jobs, and the

real economy. That has not been addressed. Frankly, those appeals

were just ignored. Now we are presented with CAFTA, which is our

largest trade challenge in a decade.

Frankly, it is deeply flawed. The labor and environment standards contained in CAFTA are inadequate to deal with serious

issues in the region, including pay and working conditions, violence

34

against trade unionists, and inadequate enforcement of existing

laws.

CAFTA leaves our States and municipalities vulnerable to costly

investor rights litigation if they act to protect the public health or

the environment. A large part of the problem is that, in my judgment, CAFTA was not reached through this kind of consensus that

we have talked about, and cooperation.

Democrats and Republicans have expressed concerns, and I think

all have been sort of left out, those considerations have been left

out, in the reaching of the final agreement.

So, obviously, your first job is going to be to try to address these,

but I think it is beyond CAFTA, frankly. You have heard some people mention that here. The China situation is simply unacceptable.

The administration has dragged its feet on the trade deficit with

China. It is causing enormous economic dislocation. I think all of

us understand that good trade policy requires consensus. I do not

think your predecessor upheld the spirit or letter of the trade promotion authority as I have understood it over the 22 years I have

been here.

I voted for fast track, but it was with the expectation and the

promise that the administration was going to work closely with us

to address these kinds of concerns.

Frankly, it has been lip service through the years. No fault of

yours, but it has been a kind of lip service and almost sort of a

blinder to just, there are benefits to trade and they are automatic,

so we flow ahead.

There is a big distinction between the economy we have today in

America and the economy we had in the 1990s, also, the fiscal policies of those periods of time. We were investing in R&D, investing

in education, investing in infrastructure, pushing the curve with

respect to new technologies and high value-added jobs. It is not

happening today.

So I knew that my time would probably be used up largely with

this, and I expected that. I will wait until the next round and then

go through the questions that I have.

The CHAIRMAN. Senator Schumer.

Senator SCHUMER. I apologize to the witness. We had Judiciary

hearings on two issues that are even more controversial than trade

with China. But I would like to talk about trade with China here.

I believe that we are one world, that you cannot build walls, and

that a lot of the blame for our big trade deficit is here at home.

We do not have a good enough education system. We do not save

enough.

But there are some countries you do not see much hue and cry

against, say, India, and there are some you see a whole lot, namely

China. The more we look at it, the more it seems that China is not

playing by the rules of free trade. They want the advantages, but

when it comes to the responsibilities, they do not step up to the

plate.

What they do with intellectual property is well-known. When you

visited my office, I told you about big companies like GE and little

companies like Marietta who are simply told—Marietta—it is all

they’ve got in Cortland, NY—makes soaps and shampoos. They

were just told by the Chinese, you cannot import them, for no reaVerDate 11-MAY-2000 14:59 Feb 10, 2006 Jkt 095484 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 24928.000 SFINANC2 PsN: SFINANC2
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son. I asked the head of Marietta. It is the only job producer in

Cortland, NY after they lost Smith-Corona and Buck-Bee Meers.

I asked the head of the company, why do you not go to the WTO?

He said, I will be gone by then, because China, with its walled-off

market, is using their manufacturer to compete with them overseas, even though they make record profits.

But to me, the worst of these examples is pegging the currency

artificially low. It violates every precept of free trade. If you are a

little, tiny country we have always looked the other way, but China

is not a little, tiny country any more.

The excuse that some make is that their financial system is not

up to it, they have not tried to make their financial system up to

it. No one says they have to do 27.5 percent in a day, but they are

not even trying. They just talk.

Many of us are dissatisfied with how the administration has handled this on both sides of the aisle. I do not want to make this a

partisan issue.

So what I would like to ask you is, first, are you satisfied with

the administration’s policy on trying to get China to revalue its

currency this far? Second, specifically, what would you do differently? Third, do you believe that China should allow its currency

to float and go to whatever level possible rather than peg it?

And one final question. We just heard a news report this morning that Chrysler is going to make small, compact cars in China

and export them to the United States. This would be a huge shift

in manufacturing.

My view is, if they do it on a level playing field, that is one thing.

But what do you say to people here, the manufacturers and workers here, who have to compete with a built-in 27.5 percent, or

whatever the difference is, effective tariff against them?

So, those are my three questions and I will give you some time

to answer them. Well, four, I guess it was, but they are all related.

Congressman PORTMAN. Well, thanks, Senator. First, I did enjoy

our conversation, including the discussion about Marietta in

Cortland, NY. As I mentioned earlier—I think you were here—I

have had some experiences in my own district of companies that

have been unfairly disadvantaged by the Chinese not opening their

markets as they should, and by the currency issue.

I stated very clearly early on in my statement, but also in response to a question, that I do believe that this is an issue that

affects our U.S. manufacturers, our U.S. farmers and agricultural

sector. I believe it is something that does affect trade.

By the same token, as you know, the Treasury Department has

the lead on this, appropriately—it is a currency issue—and not

USTR. I also believe that there has been some progress made recently.

I told you privately, and I will say this publicly, that I think the

vote on your legislation that you and Senator Graham had been

working on is likely to have sent a strong message.

Senator SCHUMER. To whom?

Congressman PORTMAN. I believe it sent a strong message to the

world, Senator.

Senator SCHUMER. Good. Well, that is what we wanted.

Congressman PORTMAN. And not just to me.

36

Senator SCHUMER. Are you happy with the progress that has

been made thus far on the currency issue?

Congressman PORTMAN. Well, I think the very recent progress is

promising because we have finally begun to see some statements

recently by Chinese officials who have authority which indicates

that they would like to see some movement toward liberalizing

their currency regime. The New York Times, as you know, editorialized on this very topic this morning.

Senator SCHUMER. Do you agree with that editorial? They say we

should not be for it, that China, because of its backward economics

and financial system, should not be required to revaluate its currency.

Congressman PORTMAN. What I thought they accurately portrayed, is that this is not a simple issue. You know that as well,

and we talked about that.

Senator SCHUMER. Of course it is not.

Congressman PORTMAN. It has a lot of complexities that have to

do with our international economic situation that go well beyond

the immediate issue of trade.

But having said that, it also does affect trade. Yes, it is in our

interest not to have the Chinese financial system implode. The

Treasury Department has worked closely with them, as you know,

and the Treasury Department believes that it is time for the reevaluation. The President has spoken very recently—I believe it

was last week—in very strong terms in this regard.

Senator SCHUMER. Do you believe they should revalue their currency?

Congressman PORTMAN. I believe they should, yes.

Senator SCHUMER. Let me ask you one other question that can

take a 1-word answer, because I know my time has expired.

Congressman PORTMAN. Yes.

The CHAIRMAN. One more question.

Senator SCHUMER. All right.

One to 100.

Congressman PORTMAN. Yes.

Senator SCHUMER. One hundred is a complete free trading nation, one is a completely protectionist nation. The U.S. is somewhere around 85, I would suppose. Give me a number where you

would put China right now.

Congressman PORTMAN. I cannot come up with a number. Hopefully, I will be able to do that in the job and understand it better.

Senator SCHUMER. Just off the top of your head, from what you

know now.

Congressman PORTMAN. Well, I have a laundry list of concerns

with China, and I listed them in my statement and I talked about

some others in response to a specific question. I think China offers

huge opportunities for our exporters. They are in the process of developing what will be the largest middle class in the world. But

they also offer huge challenges, and we have tremendous problems.

I think, unless we can resolve those problems, per Senator

Kerry’s comments a moment ago and some comments that you and

I had in our private meeting, I think the consensus on trade becomes endangered. Clearly, there are huge benefits to trade, to our

37

economy, to the world economy, and we need to be sure that it is

fair.

Senator SCHUMER. Thank you, Mr. Chairman.

The CHAIRMAN. Now, Senator Conrad. I want you to observe all

the charts he has. You will see them many times as you come before this committee, so you can have an answer ready for him next

time.

Congressman PORTMAN. Very good. [Laughter.]

Senator CONRAD. Thank you, Mr. Chairman.

Congressman, I think you know, I have a high regard for you,

personally and professionally. Colleagues of mine over in the other

body, whom I have very strong ties to, have great respect for you

and your talent. So, I want to state that at the outset.

Let me talk a little about the great concerns I have about the

trade policy of the United States and where we are headed. This

is a chart that shows what has happened to the trade deficit since

1992 after the string of negotiations and trade treaties which members of both parties, administrations of both parties, have described

as ‘‘great successes.’’

We had the Canadian Free Trade Agreement that is before this

chart begins. Then we had NAFTA in 1994. We were told that was

a great success. Then WTO in 1995. We were told that was a great

success. Then China in 2001. We were told that was another great

success. In the meantime, the trade position in the United States

deteriorated in a more dramatic way each and every year.

I have begun to wonder how much more of these successes we

can afford. I remember, very well, what happened with NAFTA.

We had a trade surplus with Mexico of $2 billion before NAFTA.

We passed it. Now we have a trade deficit of $45 billion.

You come before us and you say CAFTA would be another important contribution, that 80 percent of their goods enter our market

duty-free, and that they retain high duties against us. Yet, the

International Trade Commission, our own International Trade

Commission, says if we complete this agreement, our trade deficit

with the region will get worse, not better.

What is the measure of success with these trade agreements? Is

at least part of a measure of success whether or not these massive

growing deficits are reduced? I would ask that question to you.

Congressman PORTMAN. Well, thank you. It is a thoughtful question. You and I talked about some of this in our meeting. Senator

Bunning asked me about the trade deficit and what the factors

were, and I told him that I thought trade played a role.

I also told him that every economist I have talked to says that

it is a relatively small role, that there are bigger macroeconomic

factors that affect those numbers that you see on your chart.

I also made the point that I am concerned about those numbers

and that I think trade can play a role, and the obvious role is to

expand exports and to make sure imports are fair. If they are,

there will be fewer of them and we will begin to see some help on

that chart.

But I cannot tell you, sitting here, that I believe that trade

agreements ought to be judged just on the basis of the deficit because it has to do with so many other factors.

38

Right now, as you know, the big factor is our economy is strong

and growing. We are adding jobs. Our consumer demand is being

fueled by that strong economy, and we are bringing a lot of imports

in.

At the same time, the countries we normally would export to are

not doing as well—Japan and Europe, the huge economies in the

world—and we are not seeing the level of exports that we should

have.

One way you could come up with a way to judge these trade

agreements is just looking at the export side. You could say, are

our exports increasing? We had record exports last year in this

country. We had a trillion dollars worth of exports going out.

As I said, last year alone we had a 22 percent increase in our

exports to China. The question is, what would that chart look like

if we did not have these free trade agreements? Would it be even

worse? Because our exports are increasing.

As you know, and I know you were very concerned about agriculture, rightfully so, but we do have a nice surplus in agriculture.

I think it was about $9 billion last year. That surplus is extremely

important to hold onto and to expand.

So I guess my answer would be, the measure of success is complicated because there are macroeconomic factors, like our economy, like the savings rate, that are so big in determining this. But

trade policy does play a role, and the role ought to be expanding

exports and making sure the imports are fair, and being tougher

on enforcement.

I look forward to working with you on that, particularly on the

agricultural side, Senator Conrad. You have a lot of good points

that you raised in our meeting about the need to focus on this

Doha Round and be sure that we are leveling that playing field,

particularly with the EU.

Senator CONRAD. Well, I appreciate that.

Let me just say one other thing. I do believe that we now have

to focus very directly on this trade imbalance. Trade is certainly

part of it. I would agree with you, there are other factors, but I

think we are going to have to get very, very serious about what is

happening.

With respect to something that is very important to my State,

sugar, CAFTA would permit almost 100,000 additional tons. That

same precedent applied to the other treaties being negotiated—

South Africa, Thailand, the Andean countries, and include the Dominican—we would have an additional almost 500,000 tons coming

in.

Virtually every economist says if that were to happen, sugar

prices would collapse below the redemption price and the sugar

program would begin to unravel, threatening the jobs of 160,000

people. So, we are deeply concerned about the precedent being set

here in CAFTA.

Can you tell us whether or not you would resist CAFTA serving

as a precedent for other agreements you might negotiate?

Congressman PORTMAN. I will tell you that I do not think

CAFTA should be a precedent, in the sense that every agreement

ought to be handled on a case-by-case basis. Sensitive products—

39

and sugar is one—have traditionally been dealt with in that manner.

Look at Australia. You pointed out to me that the Australian

agreement did not include sugar. So I think you want to have as

broad-based free trade agreements as possible, because that is

where you get the most benefit and that is where you are able to

move both countries, our country and whatever country we are entering into a bilateral agreement with, whether it is Thailand or

South Africa, forward. But we also need to deal with sensitive

products, and so I think it ought to be looked at on a case-by-case

basis.

Senator CONRAD. Let me just conclude by saying, I voted for

some of these trade agreements. I voted for WTO, I voted for

China. I will tell you, I now believe we have a trade policy that is

failing. All of us have a collective obligation to try to find a better

way. The ‘‘same old’’ is not working and it is losing support in a

very dramatic way out across the country. We need a new vision.

Congressman PORTMAN. I appreciate that. Thank you, Senator.

Senator CONRAD. I thank the Chair.

The CHAIRMAN. For our second round, I have a question I want

to ask about softwood lumber. I have been monitoring this dispute

with Canada for a long period of time. Sometimes it seems like we

are no closer to a solution than we were decades ago.

Meanwhile, in my State, homebuilders and lumber dealers tell

me that, as small businesses, they have to pass on lumber price increases to their customers when the government controls the lumber market. So, it is having a real impact.

A price increase of $1,000 on a new house can eliminate as many

as 300,000 American families from the chance to buy a new home.

This typically impacts poorer families.

Could you assure me that you will take a fresh look at this dispute and work to achieve market-oriented results that can ultimately bring us to free trade in softwood lumber?

Congressman PORTMAN. Yes, Mr. Chairman. I appreciate your

question. As I said in response to Senator Wyden’s and Senator

Smith’s questions on this topic, I share your frustration.

I think, as you indicated, all of our constituencies do: the folks

who want to buy a home and have to pay more for that lumber;

the folks in the timber industry; the processing industry, as you

talked about, some of whom have gone out of business.

This is an issue that is ripe for resolution. It would be in the interest, in my view, also in Canada to see some certainty and some

resolution of this issue. So, I look forward to working with my

counterpart, Trade Minister Jim Peterson, on this issue, if confirmed, at the earliest possible point.

The CHAIRMAN. More than 40 WTO members have yet to submit

an initial services offer in the Doha Round, even though the deadline for that initial offer passed 2 years ago.

Moreover, the service offers that have been put forward offer

very little new liberalization from what was committed to during

the Uruguay Round. There seems to be little momentum in services

of the Doha Round, and industry groups and WTO officials alike

have warned that services are heading towards a crisis.

40

If that is a view you share, I would like to know it, and if so,

what you think you can do so that the crisis does not occur.

Congressman PORTMAN. No, Mr. Chairman, I do share that concern. I talked earlier about the fact that I think the Doha Round

can use a jump start. The United States has traditionally taken a

leading role in WTO talks, the Uruguay Round, and now the Doha

Round, working with other countries, including the EU.

I know that the commissioner for the EU, Peter Mendelson,

shares that view. It is time for us to add some new energy, and

perhaps a new perspective will help in that regard.

I am hoping, as you said at the outset, to be able to jump into

this issue right away. If confirmed by May 2, I hope to travel, Mr.

Chairman, to the WTO ministerial meeting in Europe, which is a

very important meeting, which will then establish some of the parameters for a July meeting, leading to what we hope will be a very

successful meeting at year-end in December in Hong Kong.

So, I share your concerns about getting these initial offers. Making sure they agree is extremely important. I look forward to working with you and members of this committee. As I mentioned earlier, Mr. Conrad and others have talked about the agricultural

issues in Doha with me and want to be involved.

I think the active involvement of members of this committee and

members on the House side who are interested, and others who are

interested who might not be on the committees, can be very helpful

in moving us forward.

The CHAIRMAN. Senator Baucus, I am going to step out for just

a minute to make a phone call, so would you take over?

Senator BAUCUS. Thank you, Mr. Chairman.

Congressman, I think it is important that all of us get a handle

on this whole question of trade policy, generally, and China, more

specifically.

I think the undertone of this hearing is a current of great frustration.

We all know the tremendous influence that other departments

have on issues other than trade in affecting American foreign policy, with the State Department, the Defense Department, and who

knows what else? We have to, as a country, get our act together

much more. We have to do a better job.

I think the real message here is not to you, it is to the administration, and to all of us, to work better together to have much more

solid policy.

Intellectual property infringement in China has been going on for

a long time. It is rampant and extreme. I remember when Madame

Wu was here very recently. She is very high in the Chinese government. I raised this with her.

Those of us who sometimes go to Beijing and walk down that

street near the American embassy are accosted by Chinese peddlers of material that is not copyrighted at one-tenth or one-hundredth of what they otherwise would cost, right there next to the

American embassy, and nothing is done.

Now, I just urge you to have kind of an emergency session with

somebody who can get something done. Maybe the President is the

only man who can do this. Karl Rove. This is serious. This is really

serious stuff.

41

I also think we can better project our power in the world the

stronger we are economically, the more we take on these countries

that are violating trade agreements. China is taking advantage of

America’s timid approach to this issue. They are taking advantage

of us. They are taking advantage of us.

You have to have leverage. Talk does not do it. There has to be

actual leverage.

Your problem, frankly, Mr. Portman, is not with the Congress.

Your problem is within the administration, convincing the administration to get tougher and to put trade on a much higher priority

than it has been. That is your problem; it is our problem.

So, all these accolades towards you personally are accurate. You

are a hell of a guy. You are wonderful. But, not to be critical, it

takes more than you. It takes the administration, frankly, to be

more aggressive. So I think Senator Snowe asked a very interesting

question: what are the benchmarks? What are the metrics? I would

just like to ask you, what are they? How are we going to know

whether we are making progress, in your judgment?

Congressman PORTMAN. Well, thank you, Senator. We talked

about some of these issues in our meeting. I hope that, in some

way, I can add two things.

One is to higher prioritize the issue of trade. As I said earlier,

I think, frankly, some of the trade deficit numbers have been helpful in focusing our attention as a country, and therefore as a government, on these issues. But I think prioritizing this is extremely

important because it has such a huge impact on the future of our

children and grandchildren.

Senator BAUCUS. No. But could you give us some metrics, some

numbers, some benchmarks, some dates by which we decide whether we are making any progress, rather than talk? I mean, you are

a smart man. Most executives that run an organization need to

have standards, benchmarks, dates.

Congressman PORTMAN. I think performance measurements are

extremely important. I preach them all the time.

Senator BAUCUS. What are some of yours that you can share

with us?

Congressman PORTMAN. Well, I am probably not in a

position——

Senator BAUCUS. Well, you are going to be confirmed, so you

have thought about this. So what might it be? [Laughter.]

Congressman PORTMAN. I am probably not in a position today to

give you specific benchmarks, but I like that idea, as I said to Senator Snowe. I think we should be judged, not by the number of

cases we bring in the WTO, but by our results.

Senator BAUCUS. And what would some of those results be?

Congressman PORTMAN. Well, the first result, as I said, and the

top priority I think we have on our agenda right now, is China.

Senator BAUCUS. No, no, no. Results, we are talking about. Not

the goals, but results.

Congressman PORTMAN. I think the intellectual property right

issue, as I said, would be at the top of my list. I also had six or

seven others on my laundry list that I think are very important.

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ment of the laws that are in place and of the commitments that

we already have.

Thanks to your work and others’, we have put China into a rulesbased system. I do not know what the precise metrics ought to be,

whether it ought to be a percentage. You mentioned to me in your

meeting, 90 percent piracy. I have heard other numbers.

But we ought to be able to establish through this review that is

being completed, I am told, within a couple of weeks, what that

percentage is now. That ought to be a benchmark. We ought to establish benchmarks from that going down.

Senator BAUCUS. On that point, that is the IPR review, is it not?

Congressman PORTMAN. Yes.

Senator BAUCUS. You know, there are all kinds of IPR infringements. I mean, there is trademark, patent infringements, copyright, and the list goes on.

Congressman PORTMAN. Right.

Senator BAUCUS. My sense is, I hear we have a much stronger

case on copyright than perhaps in some other areas. So, we will all

be looking very closely on May 2 to see what you come up with and

what you are going to do.

It is more than an embarrassment that we have done nothing

about this. It is more than an embarrassment, it is an outrage. I

just cannot believe the United States has not done more with respect to intellectual property infringement with China.

My time has way expired.

Congressman PORTMAN. Thank you, Senator Baucus.

Senator BAUCUS. I think Senator Lincoln is next.

Senator LINCOLN. Senator Kerry is very anxious. Would you like

to go ahead of me?

Senator KERRY. Is it possible?

Senator LINCOLN. Absolutely.

Senator KERRY. Thank you. I appreciate it, because I have a

meeting that is waiting. Thank you very, very much. That is very

generous of you.

Mr. Portman, I think that Senator Baucus has sort of come back

around to where I started. What is frustrating to all of us here is

that we have been talking about this. We have been pleading with

people to listen to us over the course of the last years. There has

just been this deaf ear: we know better, we are on a course. For

5 or 10 years, these things have been compounding, and it is going

to be that much harder now to try to get back.

But let us get to some of the specifics. I asked you specifically

about Mr. Allgeier’s comments to us about the 2003 standard and

it has not changed. Why, now, is it all right?

Congressman PORTMAN. I took some notes from your earlier comments. I will be able, if confirmed, to give you more specifics.

Let me tell you what I know at this point. First of all, when

those comments were made in 2003, those countries had not undergone the process of looking at their own laws and trying to upgrade

them. Some countries have. You indicated some have and some

have not.

My understanding is, during that interim period, the International Labor Organization, the ILO, has actually visited those

43

countries and issued a report, indicating that the basic core standards have now been met.

Now, this is all about enforcement, as you said earlier. You can

have the laws on the books, and they have been improved, but we

need to be sure that those laws are actually enforced. I will be able

to, again, give you more information on this more precisely if I am

confirmed.

But my understanding is we have an opportunity, as we did last year with a $20 million appropriation, to improve capacity-building

in Central America and in the Dominican Republic through the

Central American-Dominican Republic Free Trade Agreement.

I think that would be a positive aspect of what we would do, not

only to see improved laws on the books. And you listed some of the

concerns, some of the labor rights concerns, but actually to have

the United States help to ensure that there are inspectors.

I am told, Senator Kerry, that it is to the point where there are

inspectors in some of these countries, but they literally do not have

transportation to be able to go out to do the inspections to be able

to help them to enforce their laws.

Senator KERRY. But the laws themselves have, in fact, not been

changed in most of those countries. In fact, the USTR has been

touting a number of those laws, the reforms made in the past decade, particularly Costa Rica in 1993, the Dominican Republic in

1992, El Salvador in 1994, Guatemala in 1992, and again in 2001,

and then Nicaragua in 1996.

But each and every one of those major reforms did not come

about because of the political will of the country, they came about

precisely as a direct outcome of the GSP which controlled.

Now, GSP allows for members of the public to file a workers’

rights petition based not just on the failure to enforce the law, but

also the adequacy of the laws. That tool is eliminated if CAFTA

passes.

So in its place we are only going to be able to condition trade

benefits and the enforcement of a country’s labor laws, no matter

how inadequate they are—and they are by everybody’s measurement—and the only recourse we are going to have is non-punitive

fines before the withdrawal of trade benefits can be threatened.

So we are, in effect, going to move to a weaker workers’ rights

enforcement mechanism under CAFTA, and we will lose the GSP

petition process and go backwards. So if our goal is to improve

workers’ rights in the regions, why would we eliminate the one tool

that has been proven effective?

Congressman PORTMAN. Well, I think it is positive that we graduate these countries out of GSP. I think you probably share that.

If we could bring them into a free trade agreement, the GSP would

not——

Senator KERRY. But only if you have a mechanism for enforcement. If you do not, it is not positive.

Congressman PORTMAN. You are right. If they do not continue to

uphold their laws—and there is a maintenance provision, as you

know, in the legislation that would be sent to the Congress—there

are fines.

And again, I will get back to you, Senator Kerry, very specifically

on this. My understanding is that, ultimately after those fines are

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in place and if there still is not the adherence to this maintenance

requirement, then there could be trade sanctions.

Those trade sanctions obviously would be a big stick, because the

whole reason these countries are interested in entering into this

agreement is we do have enhanced trade between our countries. So,

I do think that there is some more enforcement behind that, but

I will certainly look into that.

And with regard to the public comment issue, I do not know the

answer to that at this point, but I will look into it as well.

Senator KERRY. I would appreciate it if we could continue that

dialogue.

Congressman PORTMAN. Yes. I would like to.

Senator KERRY. I am confident we will. I know you will.

Obviously, the opposition to CAFTA in the Central American region is striking, in and of itself. You have small farmers, indigenous groups, environmentalists, bishops, parliamentarians, and

many others who have spoken out against it.

What they do is, they cite the experience of Mexico as one of the

reasons that they are deeply concerned about it. In Mexico, real

wages have fallen, poverty has risen. More than a million small

farmers lost their land.

Many civil society groups and people of conscience believe that

you have an even worse enforcement mechanism and a worse starting point here. Tens of thousands of Central Americans have taken

to the streets to protest this. They are demanding a public referendum on the agreement.

A recent Gallup poll found that 65 percent of Guatemalans think

it is going to harm them, rather than help their country. You have

a number of immigrant groups here in our country, the League of

United Latin American Citizens, the Labor Council for Latin American Advancement, Carasin, Salvadoran-American National Network, and others who have come out against it.

Why do you think such a broad and diverse range of Central

Americans here and there are against it, and what does that say

about this consensus that is so necessary to proceed forward and

make it work?

Congressman PORTMAN. Well, I think it goes back to your earlier

concerns about the fact that we do have a fraying of that consensus, for a lot of reasons. I think part of it, as I said in response

to Senator Wyden, is we have not effectively communicated the

benefits of trade and bringing these countries into a free trade

agreement. I think it would have tremendous economic benefits

over time. It also has great benefits to sustaining democracies.

I have heard some of these comments. I have also, as you know—

I am sure you have as well—met with a lot of the elected representatives from these countries, as well as traveled to those countries, and I recently met with the economic ministers and labor

ministers from those countries. They are democracies, and they

have elected as democracies, albeit in some cases fragile democracies, to move forward with this, sometimes courageously and at

some political risk.

I also know that there are groups that are non-government

groups in those areas that are very supportive, including environmental groups. As you know, some of the environmental groups are

45

strongly supportive of the agreement because it does raise environmental standards.

Does it raise it to the level that all these environmental groups

would like? No. But the question is, do you go from where you are

now to an improvement? I would say the same thing with regard

to the labor standards.

So, these are democracies. They have made, in many respects,

probably a courageous political position to move forward. But they

have done it through the legislative process and through their democracies, and I think we should respect that.

Senator KERRY. Well, my time is up also, again, and I do not

want to infringe. If I could just say two things, quickly. Number

one, I looked at the environmental pieces very carefully, and I was

interested. There are a couple of good changes, and I was struck

by that. I thought they were creative and they were positive steps.

But then there are these other enforcement issues and the overall standards question which sort of drag it down on the back side,

and I think create even a larger problem. I would like to talk to

you about it, and we can do it at another time.

The second thing I want to emphasize also, together with the

Ranking Member, Senator Baucus, on the Foreign Relations Committee, I have served as the Chair and Ranking Member of the

Asia Committee for a long time, and have traveled to China, like

the Senator has.

We have been at this for 15 years with China now. The problem,

despite all the promises and all the entreaties and efforts of the

last several Trade Representatives of both parties, the problem has

gotten worse.

China is now the second largest PC manufacturer in the world,

but it ranks only about twentieth in terms of software. The loss of

billions of dollars—billions of dollars—to our music industry, to our

software industry, to our companies in this country is simply unacceptable. Senator Baucus is absolutely correct.

We are just kind of kidding ourselves and sitting here pretending

this can be a sweetheart relationship for other kinds of reasons, or

whatever reasons, and it is not working for the American people.

It is not adhering to our laws. It is not even adhering to the agreements with respect to the WTO.

Now, either you are going to live up to the law or you are not,

and we are going to have a relationship and be partners or we are

not. This is not directed in any personal way against China. There

is a great partnership that could be built there, and there is great

work to be done together. But, boy, that enforcement has got to

change and the relationship has to change.

Congressman PORTMAN. Well said.

Senator KERRY. Thank you so much.

Senator LINCOLN. You are welcome.

Senator BAUCUS. Thank you, Senator Lincoln.

Senator LINCOLN. I graciously gave him a bye. It is my turn.

The CHAIRMAN. Senator Lincoln, obviously you are entitled to a

second round. The rest of us had it.

Senator LINCOLN. Well, thank you, Mr. Chairman. I want to

thank the Congressman for his patience here today. I have to say

46

that, in all good conscience, there was just no way that I could not

come back and ask this one question that is very important to me.

You know that, as I mentioned in our earlier meeting, there was

a letter from myself and several of my Senate Finance colleagues

that was sent to Ambassador Zoellick that raised concerns about

Saudia Arabia’s records on human rights. I think that is some of

what the Chairman was talking about in terms of getting a response in a timely fashion. We hope we can see that happen in the

future.

But the letter I received this week from Mr. Allgeier did not

make any reference to human rights issues. I would just like to

mention a few specific human rights issues that are related to

Saudi Arabia that I think are so very important.

As you know, in September of 2004, the Secretary of State designated Saudi Arabia as a ‘‘country of particular concern’’ in the

State Department’s Annual International Religious Freedom Report. This status is reserved for just a handful of governments that

have engaged in or tolerated particularly severe violations of religious freedom.

Furthermore, Saudi Arabia has one of the worst records relating

to women’s rights in the entire world. According to the State Department’s Country Reports on Human Rights Practices, the most

recent edition which was released this February, all women in the

country are prohibited from driving and are dependent upon males

for transportation.

Likewise, they must obtain written permission from a male relative or guardian before the government would allow them to travel abroad. The requirement to obtain permission from a male relative or guardian applied also to foreign women married to citizens

of Saudi Arabia, and to minors and single adult daughters of Saudi

fathers.

The report goes on to say that women have few political or social

rights, and are not treated as equal members of society. They are

restricted in their use of public facilities, not always enforced, but

sometimes even to the degree of the use of hospitals for medical

treatment.

Last, but certainly not least, and I think you know, my biggest

concern—and Mr. Chairman, I appreciate you indulging me—I am

so deeply troubled that Saudi Arabia continues to invoke its law in

religion to detain U.S. citizens, in particularly my constituent,

Heidi Alamare, in a blatant violation of U.S. law and a valid court

order.

Heidi was abducted in 1997 as a 5-year-old by her Saudi-born father, and she has been stuck in Saudi Arabia ever since because

the Saudi government does not believe that Heidi’s father, who is

a wanted fugitive in our country, has done anything wrong, even

though he used our court systems to gain access to her, and then

blatantly turned around and then abused our laws in abducting

this child.

I have to say, certainly as a woman, but more importantly as a

mother, I have to look Heidi’s mother in the eye, a constituent of

mine whom I am here to represent. I cannot fathom someone taking one of my children in the dark of the night, and for 6 years not

being able to see or hear my child. I just cannot imagine that.

47

Having to live that circumstance with my constituent, I recognize

there are issues of international child abduction, and it is not limited to Saudi Arabia. However, the status of female abductees in

the Kingdom is certainly unique, Congressman, since under the

Saudi law and custom women have very limited autonomy and

very likely will never have a meaningful opportunity to leave, even

as an adult.

As you can tell, I have enormously strong feelings about this

issue and I really question, especially when combined with the

other concerns that I have raised relating to the boycott and the

questions regarding terrorism financing and other things, my question is why the administration would consider supporting Saudi

Arabia’s admission into the WTO.

I think following this course without demanding meaningful

progress on the issue that I have raised sends the wrong signal

that bad behavior of this kind is not a problem when it comes to

trade.

We have talked and talked and talked today about enforcement.

It is a critical component, but there is no doubt that if we support

people into the process when we know that they are not going to

have the kind of behavior that we ask of other countries, especially

those that we trade with, it is that age-old saying, fool me once,

shame on you, but fool me twice, shame on me, and in this instance, us.

I feel such passion about this issue because, as I said, looking at

that mother in the eyes and thinking myself of what it would be

like to lose a child, to not see them again for 6 years, and then to

meet with that child in a circumstance so restricted, so overseen,

and to find my child in fear of every ounce of surroundings, it is

just hard to believe.

So I just plead with you, Congressman, that I hope you will take

this issue seriously and that you will encourage President Bush in

upcoming meetings and other opportunities to reemphasize, these

are important issues to us as Americans, particularly when they affect U.S.-born U.S. citizens in this regard.

So, I hope that we can count on you. I hope that you will take

into consideration the human rights and the respect for our laws

and its citizens in looking at when we do grant favored trading status to countries like Saudi Arabia.

Congressman PORTMAN. Thank you, Senator Lincoln. I found

your description today as heart-wrenching as I did when we met

in private. It is a very powerful statement about child abduction,

generally.

As I told you, I have had some unfortunate experiences with

some constituents in this regard, not with regard to Saudi Arabia,

but with another country. This is certainly an issue where the

United States has traditionally played a leadership role, and we

must continue to.

The Saudi accession talks are ongoing, I understand. I do not

know the details of it. I hope to soon, if I am confirmed. I look forward to getting back to you on the human rights element of that.

One of the issues, obviously, is going to be whether accession is

in our interests or not. One of our interests ought to be human

48

rights. The question is, would cases like this one be benefitted or

harmed by moving forward?

But at a minimum, as you know, as I said privately to you, I am

happy to make a commitment to look into this specific issue. It is

a State Department issue. As Senator Baucus has reminded me,

there is an interagency process in all this, primarily, but it is one

that I certainly would be happy to get back to you on.

Senator LINCOLN. Thank you.

Congressman PORTMAN. Thank you, Senator.

Senator LINCOLN. And just, I do know it is a State Department

issue, but I do appreciate your support, and I do appreciate you

recognizing, and I hope that you will continue to bring it up as we

talk about the admission of Saudi Arabia into the WTO, as a critical issue, and something that we do have a great concern on in

this country on behalf of our American families.

Thank you.

Congressman PORTMAN. Thank you, Senator.

Senator BAUCUS. Thank you, Senator.

Just a few quick questions here, Mr. Portman.

The CHAIRMAN. Go ahead.

Senator BAUCUS. One, on timber and softwood lumber, this has

been going on for so long now, we all know it has got to be resolved.

My feeling is, because the subsidies are so great, it hurts the

U.S. timber industry to such a great degree, but because the Canadians have been winning some of these cases, for, I think, technical

and incorrect reasons—nevertheless, that is the result—and because the U.S. timber industry, the softwood lumber industry, is

going to continue to file all these suits and it is going to stay on

forever, that the only resolution is a settlement.

On the one hand, the American industry is going to keep filing.

On the other hand, some of these suits have not been going well,

but the industry will still keep filing. To get this behind us, I believe we should just say to both sides of the table, hey, we need

to get agreement here. Let us settle this thing and move on. Otherwise, we are in the same fix for another 3, 4, 5, 6, 8, 10 years.

On sugar, it is concerning. It is very concerning with respect to

CAFTA. The chart that Senator Conrad put up showed one big portion was Thailand. As you well know, so far sugar is being negotiated in the U.S.-Thailand Free Trade Agreement, so the precedential effect of sugar in CAFTA is a concern.

As you know, the sugar industry would prefer to deal with sugar

not in the context of free trade agreements, but rather in WTO. It

was off the table in Australia. It is on the table in Thailand. It is

part of CAFTA. It is kind of inconsistent all the way around here,

but it is a major, major concern.

Frankly, in my judgment, CAFTA faces such a steep climb here

that, unless the administration finds a way to deal with sugar, I

am not betting very solidly on the passage of CAFTA.

As far as I am concerned, the administration has gone nowhere

as far as it has to go to deal with sugar. It has to go a long, long

way, and it has not even begun yet.

We talked about benchmarks and metrics. I would appreciate it

if, when you do your top-to-bottom review, that you inform the

49

Chairman and myself of the results of that review. We want to

work with you. It is teamwork here. We are all part of the same

process. We just want to help get more jobs in America and

strengthen the American economy. It would be very helpful to us

if you could share that with us.

Beyond that, I do suggest that you send a letter to the committee

indicating the degree to which China has met its WTO commitments. As you know, there are a series of dates by which China

has to accomplish certain results. One, is distribution services. It

is extremely important for our retailers. That is due this year,

2005.

Telecommunications services. That is to be phased in sometime

this year. Banking and financial. Some are already phased in, some

not. I would like to know the dates. If you could give us kind of

a——

Congressman PORTMAN. Status report.

Senator BAUCUS [continuing]. Status report of all of those commitments that China has made under WTO, when they are supposed to make those commitments, and in your judgment, the degree to which they have done so thus far. There is a long list, and

I am not going to go through the whole list now, but I think that

would be one way for us to get at this problem.

Congressman PORTMAN. Thank you, Senator. I look forward to

that, and I would be happy to do that, if confirmed. If I am not confirmed, I am sure USTR would be happy to do that.

Could I just say one thing about CAFTA? I appreciate your comment on sugar, and I know it is a sensitive topic and will be a sensitive product going forward. I hope I have made that very clear

in my earlier comments.

I do think the benefits of this particular agreement, as I looked

into them more deeply over the past few weeks—and you and I

have had this discussion about the other agricultural benefits

which are tremendous, including many products in your State and

Senator Grassley’s State—but there are also great advantages here

in terms of manufactured products and services. The bottom line

is, because of GSP and because of other preference programs, they

have access to our market now.

So I think if we can get those facts out, I think there is overwhelming evidence that this is beneficial to our country, and we

will expand our exports, as we talked about earlier, and that will

have a positive impact on jobs in this country.

With regard to sugar, I really want to sit down with you, if confirmed, and work through—in fact, whether I am in the Ways and

Means Committee or confirmed, I want to sit down with you on

that—this issue to get the facts out there, but also, because this

compensation program is not fleshed out, it gives you and other

members of this committee an opportunity to work on something

that you think is appropriate to meet the concerns of your sugar

beet growers.

Senator BAUCUS. I appreciate that. But again, the administration

has a long way to go on sugar. A long way to go.

Congressman PORTMAN. Well, I think we can make some

progress together.

Senator BAUCUS. They are not near there yet. Thank you.

50

Congressman PORTMAN. Thank you.

The CHAIRMAN. We will adjourn in 30 seconds. I just want to

make one last point, and that is in regard to American agriculture

and the WTO Doha Round.

For this to succeed and for American agriculture to get what we

have to get out of Doha—and it is making sure that some countries

do not get special treatment—it seems to me that Brazil and other

major agricultural exporting economies must make very comprehensive and meaningful market access commitments.

The bottom line is, these countries cannot get the same exceptions as other poor, developing nations might legitimately request

and legitimately get based upon past experience. There is quite a

bit of difference between really poor countries of Africa and their

agriculture, and Brazil and Brazil’s agriculture.

The hearing is adjourned.

Congressman PORTMAN. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

[Whereupon, at 12:44 p.m., the hearing was concluded.]

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