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39–378 PDF 2007

FULL COMMITTEE HEARING ON EVALUATING

THE IMPACT OF PENDING FREE TRADE

AGREEMENTS UPON U.S. SMALL BUSINESSES

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

NOVEMBER 1, 2007

Serial Number 110-57

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 


Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 


C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I 

Veroneau, Hon. John, Deputy United States Trade Representative ................... 4

PANEL II 

Ubl, Stephen J., The Advanced Medical Technology Association (AdvaMed) .... 23

Wolf, Doug, National Pork Producers Council ...................................................... 25

Johnson, Cass, National Council of Textile Organizations .................................. 27

Ling, June, Codes & Standards, American Society of Mechanical Engineers .... 29

Ellerhorst, Gary, Crown Plastics ............................................................................ 31

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 44

Chabot, Hon. Steve .................................................................................................. 46

Veroneau, Hon. John, Deputy United States Trade Representative ................... 48

Ubl, Stephen J., The Advanced Medical Technology Association (AdvaMed) .... 59

Wolf, Doug, National Pork Producers Council ...................................................... 66

Johnson, Cass, National Council of Textile Organizations .................................. 78

Ling, June, Codes & Standards, American Society of Mechanical Engineers .... 92

Ellerhorst, Gary, Crown Plastics ............................................................................ 97

Letter to Chairwoman from Ambassador Veroneau dated November 14, 2007 . 97

Statements for the Record: 

Letter to Chairwoman from Ambassador Veroneau dated November 14, 2007 . 100

Attachments to USTR Testimony ........................................................................... 101

U.S. Hispanic Chamber of Commerce .................................................................... 137

National Electrical Manufacturers Association ..................................................... 139

EXPORAMERICA .................................................................................................... 141

Peruvian Asparagus Importers Association .......................................................... 151

(V) 

(1)

FULL COMMITTEE HEARING ON EVALUATING 

THE IMPACT OF PENDING FREE TRADE 

AGREEMENTS UPON U.S. SMALL BUSINESSES 

Thursday, November 1, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:05 a.m., in Room 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[Chairwoman of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Cuellar, Altmire, 

Clarke, Ellsworth, Johnson, Sestak, Chabot, and Akin. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ. I am very pleased to call to order this 

morning’s hearing on pending trade agreements. 

This hearing will provide an opportunity to evaluate the impact 

of the Peru, Colombia, Panama and South Korea trade commitments on the small business sector. It is a critical time to engage 

in this discussion, as Congress is currently considering the ratification of these four treaties. 

Given the resources expended to promote cross border commerce, 

it is important to determine whether these agreements should 

serve as models for future international commitments. 

Today, we will focus on three issues affecting small firms and 

their contribution to the U.S. Economy in an integrated world. The 

role these firms play in the development of trade agreements, 

international regulations impacting entrepreneurs and Federal infrastructure supporting small businesses, American U.S. Businesses in a global economy. 

The beneficiaries of trade agreements are largely determined 

during the negotiation process. Unfortunately, small business involvement in the development has been limited. As I have voiced 

concerns before, the USTR continues to lack a formal delegate as 

well as staff representing the small business sector at the negotiation table. This may explain why the pending agreements lack a 

small business focus. 

Given the opposition in some of the entrepreneurial community, 

particularly to provisions in the Korean agreement, their needs 

should have been more fully incorporated at the initial stage of the 

process. If small businesses had a seat at the table, I believe the 

current agreements would have been stronger. 

2

The agreements also impact smaller firms through their modifications to non tariff barriers. I wholly support inclusion of trade 

facilitation, particularly their harmonization of Customs requirements. This allows small businesses to more affordably access the 

newly opened markets. 

The elimination of technical barriers, particularly those impacting the livestock industry, is critical for U.S. Producers to expand 

their customer base. However, other regulatory barriers continue to 

hinder growth, including the maintenance of physical presence requirements, which benefit only those firms able to relocate abroad. 

Further, the procurement process lacks protection for small 

firms. For the agreements to help small businesses, regulations 

must not unfairly benefit the corporate competitors. 

While reducing regulation is critical for small businesses, they 

must also have access to expert financing alternatives, technical assistance and intellectual property protections. Lending programs 

are crucial for firms exporting to Latin America due to transactions 

fluctuations. Similarly, since the Korean government significantly 

supports its businesses, we must take steps to ensure our firms remain competitive in domestic and global markets. 

Overall, these agreements can significantly enhance small business global market share by decreasing barriers to cross-border 

commerce. With increased small business involvement in the negotiation process, I believe many of the lingering concerns will have 

been addressed. 

We can have trade agreements that open new markets and also 

benefit our Nation’s small businesses. It is my hope that future 

agreements will accomplish this and incorporate the interest of the 

smaller firms more broadly. 

I look forward to today’s hearing and would like to thank all of 

the witnesses for their testimony. 

I now recognize the ranking member, Mr. Chabot, for his opening 

statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr.CHABOT. Thank you, Madam Chairwoman, for holding this 

vital and timely hearing on the proposed free trade agreements and 

their impact on small businesses. I want to welcome our distinguished panels of witness, including Ambassador Veroneau and 

Gary Ellerhorst, who is on the next panel, who is a constituent of 

mine from Harrison, Ohio. 

This Committee’s oversight jurisdiction encompasses problems of 

all types of small businesses. This includes firms wanting to export, 

as well as those competing with imports. Today we will examine 

the proposed free trade agreements and hear the testimony of the 

Deputy U.S. Trade Representative and a panel of distinguished 

witnesses from various sectors of the economy. I want to thank 

them for being with us and sharing their perspectives. 

Free trade boosts our economy, eliminates worldwide barriers, 

and strengthens our global and regional ties with other nations. 

Trade also creates new opportunities for American workers and 

farmers and ranchers and businesses, including small businesses, 

which obviously is the focus of our hearing this morning. SepVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
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tember was America’s forty-ninth consecutive month of jobs creation, the longest uninterrupted period of job growth on record. 

Yesterday, the Department of Commerce reported that the economy grew faster than expected in the third quarter, lead in part 

by a surge in exports. Greater exports translate into more and 

higher paying jobs. In the United States, approximately 95 percent 

of all direct exporters are small businesses and small firms account 

for roughly 29 percent of the exports, totaling $614 billion. 

Trade benefits can be seen in every State, according to the Department of Commerce, over 10,000 companies exported from my 

home State of Ohio in 2005. Of those, 89 percent were small and 

medium-sized firms with less than 500 employees. Since the U.S.-

Chile and U.S.-Singapore free trade agreements were implemented 

in 2004, Ohio’s exports to Chile have grown by 55 percent, and exports to Singapore have risen by 99 percent. But challenging barriers such as Customs issues and high tariffs still exist. We in Congress must do all that we can to make it easier for small businesses to compete and to prosper in the global marketplace. 

Free trade agreements provide important protections such as 

transparency in a stable, legal trade framework for all businesses 

large and small. The stability and transparency lead to exports 

growing at twice the rate to FTA partners than to countries where 

the U.S. Has no agreement. The jobs supported by exports pay 13 

to 18 percent more than those not supported by exports. 

Today Peru, Colombia and Panama enjoy duty free access to U.S. 

Markets. Yet when U.S. Goods are shipped to those markets, our 

products are tagged with significant tariffs. Free trade agreements 

with those countries will knock down many of these barriers and 

offer U.S. Exporters, many of whom are small businesses, the 

chance to compete fairly. Peru’s economy is among the fastest 

growing in South America so there are significant mutual benefits 

from the free trade agreement. 

The Free Trade Agreements are not sole magical exert to increase exports by small businesses. Technical assistance from Federal programs can help if it reaches small business. However, in 

our very tight environment, I am skeptical about funding increases 

for Federal programs. So I look forward to hearing from our distinguished panel about innovative ways we can expand trading relationships and keep our small businesses competitive. 

Again, I want to thank the chairwoman for holding this timely 

hearing. And I thank the Ambassador and other witnesses for 

being with us today, and I think we all look forward to the testimony. I yield back. 

ChairwomanVELA ́ ZQUEZ. Thank you. Now I welcome Ambassador 

John Veroneau. Is that how you pronounce your name? 

AmbassadorVERONEAU. Madam Chairman, Veroneau, John 

Veroneau. 

ChairwomanVELA ́ ZQUEZ. Veroneau. Ambassador Veroneau serves 

as Deputy U.S. Trade Representative. His portfolio at the Office of 

the U.S. Trade Representatives includes trade relations with Europe and Eurasia, the Middle East and America as well as matters 

involving the World Trade Organization. He also oversees USTR’s 

functional offices handling intellectual property, telecommunications, pharmaceuticals, services and market access. Welcome, sir. 

4

STATEMENT OF AMBASSADOR JOHN K. VERONEAU, DEPUTY 

TRADE REPRESENTATIVE, OFFICE OF THE UNITED STATES 

TRADE REPRESENTATIVE 

AmbassadorVERONEAU. Great, thank you very much. Thank you, 

Madam Chairwoman. Thank you for holding this hearing and 

thank you, and Mr. Chabot and others on the Committee, for your 

leadership in assuring that small business is taken care of and 

their interest don’t fall through the cracks. So thank you, it is good 

to be here to talk about the four FTAs. 

We have negotiated agreements with Peru, Colombia, Panama 

and Korea. Peru will soon be considered by you on the House floor, 

we expect next week, so this hearing is very timely and we appreciate it. 

The USTR’s mission is quite simple, we are in the business of reducing tariffs and non tariff barriers. In that sense, I think what 

we do benefits small businesses more than large corporations. 

Frankly, large corporations have the resources to find their way 

around and manage complex trade barriers and high tariffs. Small 

businesses have a much harder time. So in that sense, I would like 

to think that the band of negotiators, which are the heart and soul 

of USTR, their job every day is to do what is in the best interest 

of small businesses. I think that in that sense, USTR is different 

than other government agencies. 

We are not a regulatory agency where as we regulate, we need 

to make sure that we are doing so in a way that doesn’t hurt small 

businesses. Similarly, we are not a procuring agency such as the 

Department of Defense where we need to make sure that our procurement strategy doesn’t leave out small businesses. Our mission 

is quite simply to eliminate these barriers and the benefits, as I 

said, believe accrue mostly and most importantly to small businesses. 

We are benefited from having a small business advisory Committee, which I am pleased to report has endorsed each of the Free 

Trade Agreements. [Ambassador Veroneau was permitted to modify 

this statement in a letter to the Committee dated November 

14,2007, which is included in the Appendix.] 

Exports equal jobs. Is this microphone on by the way? Exports 

accounted for over 40 percent of the economic growth in the past 

year. Exports are growing at twice the rate of imports and 95 percent of the world’s consumers live outside of United States. One in 

six manufacturing jobs relies on exports, one in three acres of farmland is planted for export. Export-related jobs pay 13 to 18 percent 

higher than non export-related jobs. Our Free Trade Agreements 

accelerate exports and create jobs even faster. In fact, our exports 

to FTA countries, free trade partners have increased at a rate of 

60 percent or faster than the rate of exports to other countries. 

The pending FTAs, the Peru, Colombia, Panama and South 

Korea agreements each provide an opportunity to level the playing 

field for U.S. Exporters, small businesses and others. There is currently a significant gap between the tariff that U.S. Companies 

face in those markets and the tariff that those exporters from those 

countries enjoy in the United States. Each of these agreements 

serves U.S. Interest, and respectfully suggests they deserve the 

support of each and every one in this Committee. 

5

I would like to now briefly discuss each of them in the order in 

which they were negotiated. The Peru Free Trade Agreement, I am 

pleased to say, passed the Ways and Means Committee yesterday 

by a vote of 39:0, which is a tremendous credit to Chairman Rangel, and Chairman Levin and Mr. McCrery, so we are grateful for 

that and look forward to floor action next week. 

Our bilateral trade with Peru has doubled in the past 3 years. 

Ninety-eight percent of the goods from Peru come to the United 

States duty free. The average tariff that U.S. Exporters face in 

Peru is 10.2 percent. The average tariff that Peruvian exporters 

face in the U.S. Is 2.2 percent. So this free trade agreement provides an opportunity to level that playing field at zero tariffs. 

I would finally note that small business, small- and medium-size 

enterprises account for 81 percent of our exporters to Peru, accounting for 35 percent of our goods going to Peru. 

I now return to the Colombia Free Trade Agreement. Colombia 

is the largest export market in Latin America for U.S. Agricultural 

products. Ninety-two percent of the Colombian goods coming to the 

United States enter duty free. The average tariff on U.S. Goods 

going to Colombia is 12.5 percent. The average tariff on Colombian 

goods coming here is 2.2 percent. 

Last June this Congress, by an overwhelming majority, voted to 

renew the Andean trade preferences program, which is a terrific 

program that has helped to solidify economic growth in that part 

of the world. It is time that these countries, Peru and Colombia, 

have stepped up to say we appreciate the unilateral trade benefits, 

but what we really want is a partnership, we want a free trade 

agreement that helps lock in duty-free access for both sides and 

provide other benefits such as assuring better protection of intellectual property rights and other benefits. But again, the Colombian 

Free Trade Agreement provides the opportunity to level that playing field at zero tariffs. 

Small- and medium-size enterprises account for 85 percent of the 

exporters to Colombia accounting for 35 percent of the goods. From 

an economic and regional stability perspective the Colombia Free 

Trade Agreement is the most important of the three Latin FTAs. 

Colombia, as many of you may know, has suffered in recent decades through effectively a civil war. It has been a country that has 

had more than its share of turmoil and violence. And to President 

Clinton’s credit in the late 90s, he proposed Plant Colombia, which 

this Congress has supported initially when President Clinton proposed it and during President Bush’s term here to advance and 

promote Plant Colombia. 

Plant Colombia in a nutshell has been a success in helping that 

country move back from a brink of chaos and implosion to a point 

now where speaking of business, Colombia was on the front cover 

of Business Week this summer as one of the critical emerging markets in the world. And that is a remarkable testament to the 

changes that have taken place in that country. And it is a far, far 

better place today than it was 5 or 10 years ago. 

I had an opportunity to meet recently with General Barry McCaffrey, who many of you may know, he was President Clinton’s drug 

czar. And he was recently in Colombia and he summarized his assessment of it as being night and day from what he saw in the late 

6

1990s. There has been a remarkable turnaround in that country, 

and to reject their offer, their entreaty to have a bilateral trade 

agreement, would be a very serious debacle in U.S. Foreign policy, 

and it is my hope and my belief at the end of the day, this Congress will give its support to that important agreement. 

The Panama agreement, equally important to the United States 

in terms of leveling the playing field, 90 percent of the goods from 

Panama come to the U.S. Duty free. There is a tariff differential 

of 7.3 of U.S. goods to Panamanian goods coming to the U.S. Only 

a 2 percent tariff, again, this is an opportunity to level the playing 

field. 

Lastly, let me mention the Korea Free Trade Agreement. Economically this is the most important agreement in 15 years, it is 

our seventh largest trading partner. The International Trade Commission, which is obliged by statute to do a study of each of these 

free trade agreements, produced its report in September, and it 

concluded that in goods alone, not counting services, in goods alone, 

it will increase exports to Korea from the United States of $10 billion a year, $10 billion a year, which is a tremendous amount of 

job growth and good job growth in the United States. 

Again, the Korean tariffs, U.S. goods going to Korea, average tariff 12.1 percent. Average tariff on Korean goods to the U.S. 3.5 percent. Again, this free trade agreement provides an opportunity to 

level the playing fields in a way that I think small businesses and 

large businesses will benefit. 

Lastly, if we do not move with dispatch to approve these agreements, we will not only miss an opportunity to level the playing 

field as quickly as possible, but we need to be mindful that the 

playing field will get more unlevel. The world will not wait while 

we contemplate whether to have these bilateral trade agreements. 

Europe, Canada, other trading partners of ours and competitors in 

these markets are moving forward with trade agreements. And it 

is important that we not find ourselves in a situation where we are 

facing tariffs, our small businesses are facing tariffs in these markets and our competitors are not facing tariffs. Thank you very 

much. 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Ambassador. 

[The prepared statement of Ambassador Veroneau may be found 

in the Appendix on page 48.]

ChairwomanVELA ́ ZQUEZ. Mr. Ambassador, it is really fascinating 

to hear you representing the administration and the previous administration under President Bill Clinton, and to come here before 

this committee and talk about the important role and the benefits 

for small businesses on any of these trade agreements. 

My question to you is, if this is so important for small businesses 

where they can benefit, American small businesses, why is it that 

throughout the negotiation process on any of these trade agreements, we don’t have a formal delegate representing small businesses? 

AmbassadorVERONEAU. Well, I think, Madam Chairwoman, I 

would say we have a small business advisory committee, so we routinely consult with them, they have the same access to everybody 

that we do. And I would say that it would be artificial, honestly, 

7

to have a negotiate—USTR is the heart and soul of negotiators, so 

you have a negotiator at the table. The interest that negotiator is 

pursuing is unavoidably and necessarily the interest of small businesses. 

It is not as though we would be sitting there saying, well, this 

is a good proposal and a good outcome for large businesses, but not 

good for small business. What we do is eliminate tariffs, that will 

be good for everybody. What we do is eliminate non tariff barriers, 

that will be good for everybody. So it would be artificial, honestly, 

to disaggregate from the negotiators perspective small business interest from other interests. 

ChairwomanVELA ́ ZQUEZ. Can you explain to me why the Small 

Business Trade Advisory Committee to the USTR does not support 

the career FTA in its totality? I have the report right here. 

AmbassadorVERONEAU. There have been concerns about some of 

the non tariff barriers in Korea, they have been significant. And we 

have a major focus of that agreement, it was not simply eliminating the tariffs, but focusing on the non tariff barriers and having mechanism to address that. I think some of the members of the 

Small Business Advisory Committee were concerned that notwithstanding the provisions in the agreement, that they were still not 

confident that all those non tariff barriers would be eliminated. 

And my response to that would be, I believe, that they will be, 

and that the administration, and I am sure any future administration enforcing this agreement will put an extremely high priority 

on assuring that those non tariff barriers come down. 

ChairwomanVELA ́ ZQUEZ. What is really disappointing is the fact 

that the Small Business Trade Advisory Committee to the USTRs 

is not allowed to raise formally their concerns only after the agreements are finalized; isn’t that true? 

Mr.VERONEAU. Actually, it is not, Madam Chairwoman, because 

they have the same access and input in the process as we go 

through these negotiations. Before we have a negotiating round, we 

reach out to our advisory committees, share text with them.So 

there is access to our negotiating process and throughout our negotiating process of the same level that all other advisory groups 

have. 

ChairwomanVELA ́ ZQUEZ. If they were included in the process, 

then why is it that they are opposed? 

AmbassadorVERONEAU. Well, much to my chagrin, there are 

some times where other groups, other advisory committees are not 

pleased with the outcome and don’t support it. So I would not 

equate tepid support or opposition as synonymous with being shut 

out of the process. They just wanted a better outcome and I respect 

that, but I believe that over time we will demonstrate that these 

non tariff barriers will come down in a way that will provide opportunities for U.S. Companies. 

ChairwomanVELA ́ ZQUEZ. So you are correcting your statement 

that you gave when you were reading or giving us your testimony 

saying that the Small Business Trade Advisory Committee was 

supported for all the agreements, and that is not correct? 

AmbassadorVERONEAU. That is not correct, I overstated it. 

ChairwomanVELA ́ ZQUEZ. Mr. Ambassador, with fewer resources 

to protect their enterprises from unfair trade practices, small busiVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
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nesses require effective enforcement of regulations and agreements. 

Currently, many small firms are being harmed by inadequate enforcement. For example, small U.S. Mills are increasingly reporting 

losing orders to companies that claim inaccurately to be based in 

the U.S. What is the USTR doing to help small businesses from 

falling prey to unfair trade practices as new trade legalization efforts are introduced? 

AmbassadorVERONEAU. One of the recent actions that we have 

taken to address that is we took a WTO case against China for export subsidies that it provides. We have taken other WTO cases 

that helped small businesses, ranchers, farmers and businesses. So 

I think the USTR, the primary tool that we have, is bringing WTO 

cases as formal enforcement actions. 

Obviously, the Department of Commerce has authority to take 

countervailing and antidumping actions against companies that are 

subsidized. 

ChairwomanVELA ́ ZQUEZ. How many complaints have been filed 

with WTO regarding practices, unfair practices? 

AmbassadorVERONEAU. Well, every case that we filed obviously 

is based upon a country in our belief not living up to its obligations. We have taken, I think, 23 WTO cases in recent years, which 

puts us at the top of the list. The United States has taken more 

WTO cases than any other country, Europe is a close second. But 

we took the first WTO cases against China, we have taken the 

largest case ever in the WTO in dollar terms in our case against 

Airbus, frankly, which helps a lot of small businesses who support 

Boeing. 

ChairwomanVELA ́ ZQUEZ. Given all of these trade agreements and 

the fact that unfair practices, trade practices can happen, and we 

might foresee that it will happen, how does USTR work with U.S. 

Customs? In terms of personnel, are you going to hire more personnel? What is your interaction with U.S. Customs to make sure 

that you have the personnel necessary to make in terms of enforcement? 

AmbassadorVERONEAU. Well, we work closely with Customs in a 

number of ways. They are the primary enforcers obviously. We are 

not a direct enforcement agency. 

ChairwomanVELA ́ ZQUEZ. I understand that. My question is, do 

you have any interaction with U.S. Customs, any discussion in 

terms of the implementation of trade agreements and what it will 

require? 

AmbassadorVERONEAU. We have constant dialogue with them. 

Our agreements don’t go into effect without Customs understanding what the new terms are. In fact, that is why there is usually a 6-month lag between the ratification of an agreement and its 

entry into force. We need all that time to work with Customs to 

make sure they understand what the new obligations are of these 

agreements. 

ChairwomanVELA ́ ZQUEZ. Mr. Chabot. Thank you. 

Mr.CHABOT. Thank you very much, Madam Chair. 

Mr. Ambassador, relative to your goals and these free trade 

agreements, correct me if I am wrong, my understanding is essentially what you are trying to do is lower the tariffs on our goods 

going over to other countries so we can export more, and our tariffs 

9

have been traditionally lower, and therefore, our interests are adversely affected by that lack of parity, so to speak. 

So the idea with the trade agreements is to lower both, which 

should benefit both large businesses, medium businesses, small 

businesses. Everybody should benefit from that is my understanding. 

Are there any natural adverse interests that small businesses 

and big businesses would have in this whole process or historically 

have they both benefited? 

AmbassadorVERONEAU. Well, I would say, virtually all the time 

their interests are synonymous and our goals would equally serve 

both small and large businesses to the extent that we are eliminating tariffs. Different companies will, depending upon their capabilities, will take advantage of that new market access, but I would 

submit that to the extent a tariff is eliminated, or more importantly, a non tariff barrier is eliminated or a sector telecommunications, or insurance is opened up, I would submit that it is the 

small and medium-size enterprises that stand the most to gain because they are less likely to have an Army of lawyers and trade 

experts who can to find their way around otherwise complex trade 

barriers. 

Mr.CHABOT. Relative to free trade agreements, I think, historically, the goal was to do it on a broader basis, if you look at 

NAFTA, if you look at the African free trade, the Caribbean Basin, 

Doha, that whole idea was to lower. And we have run into difficulties in that area, so it seems like more and more we are having 

a country to country, U.S. With Panama, U.S. With Peru, South 

Korea, Colombia, et cetera, Singapore. 

Does that seem to be the trend that is politically the most realistic to anticipate in the future? 

AmbassadorVERONEAU. Well, we certainly would like to see trade 

liberalization occur on a global basis as well. The Doha negotiations have been going on for a while now. We are still hoping we 

can achieve success, and there happens to be a lot of activity right 

now on that front. But I would envision that there would continue 

to be, in addition to global efforts, more bilateral efforts, and I 

think Europe is clearly on this track, Canada is and others. 

And in Asia there has been a proliferation of these bilateral 

trade agreements. I would envision you will see a continuation of 

not only WTO global trade liberalization efforts, but also these bilateral agreements for a number of reasons, including you can do 

more a lot more in a bilateral agreement. 

You can eliminate tariffs completely and open up sectors completely, you can assure higher protections of intellectual property 

in a bilateral agreement far more than you can in a global agreement where you have to get the consent of 150 WTO members. 

Mr.CHABOT. It seems to me this is one member of Congress that 

has been following this for the last 13 years since I have been here, 

it seems, unfortunately, the political realities of Congress are it will 

be more and more challenging to get one that deals with the whole 

region in the United States as opposed to individual countries, it 

is just tougher and tougher, unfortunately. 

I think we benefit from trade agreements and I would like to see 

them broader, but that just doesn’t seem politically to be double in 

10

Congress any time in the near future, so it looks like you would 

see more of country to country. 

Could you comment on Fast Track, which was the old name and 

now trade promotion authority and how important that is in actually accomplishing these trade agreements in a way that is favorable to the U.S.? 

AmbassadorVERONEAU. The Fast Track, or as we call it now, 

trade promotional authority, I think the best way to think of it is 

from the perspective of the negotiator. You are at the negotiating 

table and you are negotiating with your counterpart, and ultimately, they will want to know are you the ultimate authority? Is 

this the end of the negotiations? Can you deliver, or are we going 

to get a deal here and then it will come back to Congress to change 

the agreement and modify a series of provisions as opposed to saying, all right, in its totality, we think this is a good agreement, or 

we think it is a bad agreement. 

I think there is a tremendous amount of power that you give a 

negotiator, and a negotiator has to have in order to drive the best 

deal for U.S. Interest. And without Fast Track, or TPA, it is much 

more difficult to get that best value, best deal for the United 

States. 

Our view has been and continues to be that every President of 

whatever party has fast track trade promotion authority. It is just 

so essential to driving the best bargain for U.S. Companies, I think 

they should always have it, it is unfortunate that it has lapsed. It 

is our hope that we can reclaim and renew this authority so that 

for the balance of this administration and for the next President. 

The next President should have this authority, regardless of what 

party that President is from. 

Mr.CHABOT. Thank you. Before I yield back, I just want to make 

one point and emphasize something you said in your testimony. 

And that is, relative to the Free Trade Agreement with Colombia. 

This was essentially begun under the previous administration 

under President Clinton, and it has been carried on through the 

Bush administration, and I think it is very important to recognize 

that this country is critical to the interest of the United States and 

South America when one considers Chavez in Venezuela and others 

in that region who certainly don’t have the interest of the United 

States in mind. I think we ought to be very careful to harm the 

relationship that we have with the government in Colombia right 

now, because they are really critical to U.S. Interest. 

And I would yield back my time, thank you. 

ChairwomanVELA ́ ZQUEZ. Ms. Clarke. 

Ms.CLARKE. Thank you very much, Madam Chair, to Ranking 

Member Chabot. This is certainly a very timely issue for a new 

member here. Just sort of wrapping my brain around what is in 

the best interest of our trade, which is a necessity, it is something 

we have been doing since the establishment of this Nation. It is 

really about how we can do that and not adversely impact on the 

reputation we have as a Nation, 1. And 2, what happens to communities around this Nation as we pursue globalization in a very 

proactive way. 

Chairwoman Vela ́zquez asked a question that I want to revisit 

with you, and what she was essentially asking was what is the 

11

level of collaboration that the USTR have with the Customs and 

border protection to produce a seamless process for enforcement 

against trade breaches? Could you clarify USTR’s efforts to establish such protocols, whether they have been established or not. 

AmbassadorVERONEAU. Certainly. We collaborate regularly. We 

need the Customs in so many ways, technical ways. Let me give 

you one example where let’s take section 337 is legal authority to 

block imports that infringe upon U.S. Patents, that is USTR has 

a role in that, the ITC has a role in that, but at the end of the day, 

it is the Customs Enforcement Authority that give effect to give an 

order to block an import. So that is one example of many where 

we obviously rely upon the Customs authorities to enforce these 

agreements, we are not an enforcement agency in that sense. 

Ms.CLARKE. Right. 

AmbassadorVERONEAU. I mean, we enforce WTO laws, we are 

the litigators and we are the ones who bring those cases, but at the 

ports, USTR has no presence. 

Ms.CLARKE. I recognize that, but when you are looking for basically the green light from representatives of people of this Nation, 

and you know how critical it is to present a very strong and focused, I guess, front, for lack of a better term, it would seem to me 

that there would be a much more proactive role that the USTR 

would play and would demonstrate so that even dealing with section 337 and the breach of patent of imports. 

I come from New York, it is very evident there that there have 

been breaches. And at some point, we are going to have to account 

for that. And I think we have reached that point in this Nation 

where folks really want to know do we have strong protocols in 

place that make it possible for U.S. Businesses to benefit as much 

as those who are importing to our nation through trade agreements 

are benefiting. 

China we know is the ultimate example right now. So I just want 

to leave that with you, because I think that is really important. It 

may take moving out of the realm in which we currently operate 

in order to achieve that goal. 

I also just learned that the Peruvian President, Alan Garcia, is 

planning and broadening the number of businesses that would 

qualify as small business enterprises which many say can offer 

workers in that country less pay, fewer vacation days than workers 

in larger firms. 

How does the USTR plan to address this labor rights dilemma? 

AmbassadorVERONEAU. I am not familiar Congresswoman with 

the example you just gave, but I would say that the trade agreement that you will soon have an opportunity to consider has the 

strongest labor provisions of any trade agreement ever considered. 

And the United States is clearly in the forefront of having trade 

agreements with strong labor provisions, we are the only ones 

frankly, that have provisions of this nature. 

So I would say that your colleague Chairman Levin, as you 

know, feels very strongly about the intersection of labor and trade, 

and he has been satisfied through his direct discussions with President Garcia and his administration about the status of Peruvian 

labor law and their plans for enforcement. I am pleased to follow 

up on the specific concern that you raised, but there has been a treVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
12

mendous amount of dialogue between Chairman Levin and Peruvian officials, and I think to Chairman Levin’s satisfaction, he is 

quite happy with the status of the Peruvian labor law and its enforcement plan. 

Ms.CLARKE. Thank you Mr. Ambassador. Thank you, Madam 

Chair. 

ChairwomanVELA ́ ZQUEZ. Mr. Akin. 

Mr.AKIN. Thank you, Madam Chair. From just looking the example of Colombia here and many of us are concerned about Chavez 

and his destabilizing influence in various nations and certainly it 

seems to be in our overall interest to have good relations with some 

of these countries and good relations through trade and all. 

I guess my question is, if Colombia is putting a 12 percent tariff 

on the majority of our goods that are going down there and we are 

putting 2 percent tariff on their goods coming up here. I guess my 

question is, and it seems to me it is a good deal for America if we 

drop the tariffs down so we get closer to a free trade kind of situation. 

Is that going to destabilize Colombia not to have the tariffs on 

the goods that we are sending down there, will it, all of a sudden, 

create a situation where their businesses can compete with the better quality and lower cost products we are sending down there? Are 

we, in a sense, doing them a disservice by doing this? And do we 

inadvertently destabilize Colombia rather than helping them? 

AmbassadorVERONEAU. That is an excellent question. I think the 

short answer is no. Obviously we have to defer to President Uribe 

and his administration, they are the elected representatives, they 

belive this is in their best interest. And I think, frankly, they are 

right on that. And I think they look to their neighbor of Chile. And 

Chile is a great example of a country that had high protective tariffs and decided a decade or so ago to open itself up and the results 

have been quite impressive. 

Our free trade agreement with Chile has been a tremendous success for them and for us. Our agreement is one of 57 trade agreements that Chile has. So I think countries like Peru and others 

look to Chile and say, that is the model they want for themselves. 

And yes, whenever you open yourself, your economy up more, there 

are some transitional adjustments, there is no question about that. 

Some sectors will flourish and others will have a harder time in 

that competitive environment. But overall, the World Bank studies 

and every other study has demonstrated pretty compellingly that 

countries that are more open grow faster. If you look around the 

world at those countries that are doing the worst, it is no coincidence that they are also the ones that are the most closed. 

Mr.AKIN. So Colombia could look at Chile and say, it worked over 

there and so they can have that sense of confidence in trying to 

just drop the tariff barriers. 

AmbassadorVERONEAU. Yes, sir. 

Mr.AKIN. From America’s point of view, Colombia is not a major 

sector of our economy. Politically, we can make a big deal about it, 

but practically speaking, we are talking fractions of a penny or 

something. 

AmbassadorVERONEAU. Yes. I would certainly not want to suggest that I think this trade agreement with Colombia is going to 

13

drive the U.S. Economy, but you are advocates of small businesses 

and I think they would be the first to say every sale counts. And 

I think opening up this market, 44 million consumers is not insignificant. It may not drive the U.S. Economy, but it is not insignificant. 

Mr.AKIN. I thank you for your testimony. Thank you Madam 

Chair. 

ChairwomanVELA ́ ZQUEZ. Mr. Sestak. 

Mr.SESTAK. Thank you, Madam Chair. 

I thought about what you said about President Clinton was true, 

and I worked in the White House during that period of time on the 

NSC, but I worked closely with NEC. I thought his principals approach to free trade were spot on. But it always came down to the 

enforceability had kind of been raised a bit here. I always thought 

the Jordanian FTA was quite a model in ’99, except for the enforceability of it. 

The reason I bring that up is I do think this bodes something for 

small businesses, but ultimately businesses about jobs and wages 

while we may have lost 3.2 million jobs, manufacturing jobs the 

first 3 years of the Bush administration, he regained those back recently. But the real wages median level of income came down about 

18 percent. While the guy might have gotten his job back, it wasn’t 

in the same amount of real income as he had before. 

Three quick questions for me on the enforceability is we are supposed to have this enforceable, reciprocal obligation on both Peru’s 

side and our side to have within law the ILO standards. 

My second question is we are all supposed to enforce not just domestic law, but also have to have and maintain within the law 

WTO environmental standards. 

My third question which I will hold off for a moment will have 

to do with more on the cooperation of the regulatory issues, but can 

you talk a bit about is it in law in Peru and if it is in law how 

are we to enforce it in this case? What is different about this than 

the Jordanian one? Because of the WTO cases you brought 23, how 

many have been successful, not that just that you brought them, 

but they have been successful? And so those are my two over arching questions of the enforceability even if it is in law. 

AmbassadorVERONEAU. Thank you. The number of manufacturing jobs has clearly declined over the past 20 years. 

Mr.SESTAK. It is due to different reasons, if we can get to the 

question because I only have 5 minutes. 

AmbassadorVERONEAU. The enforceability, the key difference is 

in the Jordan agreement, the essence, the labor and environment 

commitment was that each country agreed to enforce its own laws. 

So regardless as to what those laws were as long as you were enforcing your own laws, you were fine. 

What is historic about these agreements and that were reflected 

in the May 10 bipartisan agreement that we reached was that for 

the first time we established an objective standard, not a subjective 

standard, but an objective standard on labor revolving around the 

international labor organization core principals. So that is really 

what is new, it is not enough to enforce your own, you have to meet 

this objective standard. 

14

On the environment similarly there is no global standard on environment in a way that there is for ILO for labor, the agreement 

does require you to enforce your own labor laws and follow through 

and abide by the multi lateral environmental agreements that you 

do have. 

Mr.SESTAK. Of the WTO? 

AmbassadorVERONEAU. It is not of the WTO. 

Mr.SESTAK. I thought it was. 

AmbassadorVERONEAU. No. 

Mr.SESTAK. Are you sure? 

AmbassadorVERONEAU. Yes. 

Mr.SESTAK. All right. So how do you enforce them? That is good, 

it is a nice mechanism, how do you enforce them? You set an objective, now the enforcement. 

AmbassadorVERONEAU. On the enforcement you bring a dispute. 

Mr.SESTAK. So it is back to bringing it up. 

AmbassadorVERONEAU. It is back to bringing a dispute. 

Mr.SESTAK. So really we have set a nice objective, now what we 

have to is if they don’t bring it up to an international body. 

AmbassadorVERONEAU. We bring it up to a bilateral body. 

Mr.SESTAK. And if they disagree. 

AmbassadorVERONEAU. Well, a panel adjudicates it. We appoint 

the panel and they adjudicate it. But I would say that—

Mr.SESTAK. That is enforceable then, the agreement says the adjudication is what will be followed? 

AmbassadorVERONEAU. Yes. There are remedies, there is a 

panel, there is a finding, the finding, let’s say, the country is not 

living up to its obligations, then we have rights to withdraw some 

of the benefits that we have extended. 

Mr.SESTAK. I understand. But if the arbitration panel says U.S. 

Was right, does Peru have to follow that, or if it doesn’t, we then 

have the right to withdraw benefits and all? 

AmbassadorVERONEAU. Right, if it doesn’t, we have the right to 

withdraw benefits. 

Mr.SESTAK. My last question is on regulatory issues. My understanding is ours and Peru’s is supposed to converge, but there is 

no adherence to any international standards. Have we left that all 

by itself out there sanitary and all that? In other words, it is kind 

of their domestic interpretation of what sanitary or health is. That 

is my understanding in perusing this agreement. There is no objective standard, there is no international standard set for this area. 

AmbassadorVERONEAU. I would say the core commitment is that 

these regulations have to be science based. In the food safety area, 

as you can imagine, every country, including ours obviously, we 

have a strong right that we want to say, look, we want to be able 

to decide when is safe, safe? But we have to balance that with the 

reality that a lot of countries use these safety regulations as protectionist measures. 

So the core, the essence of what we achieve in these agreements 

is a requirement that if you want to have a food safety regulation, 

it has to be science-based. We have the right to challenge whether 

that is science-based. That is a critical benefit of these agreements 

that commitment exists in principle in the WTO agreements, but 

it is very difficult to—

15

Mr.SESTAK. If we do disagree on this area, we can bring it up to 

this arbitration panel? 

AmbassadorVERONEAU. Yes. 

ChairwomanVELA ́ ZQUEZ. Your time has expired. 

Mr. Gonza ́lez. 

Mr.GONZA ́LEZ. Thank you very much, Madam Chair. I always 

think if I am a small businessman or woman in the audience who 

are listening, they must wonder why we ask questions about the 

environment or labor. I want to make it perfectly clear that it impacts their ability to compete. I think you may have pointed that 

out. 

It is an unfair advantage to those in another country if they have 

a regulatory scheme that does not add cost to operating their businesses as we have in the United States; which is admirable. We 

have many conditions regarding the rights and benefits to an employee, as well as to the obligations of a business when it comes 

to an array of regulatory scheme relating to the environment, for 

instance. 

So I am hoping everybody understands the relevancy of these 

questions. I know they want us to get to more nuts and bolts, meat 

and potatoes. How do these agreements benefit a small businessman or woman? 

I think Mr. Chabot brought up a very important point, and that 

is in today’s environment and Congress, I think it will be more difficult to get free trade agreements out, on both sides of the aisle, 

actually, for many, many reasons. 

Now the encouraging news is the Peru Free Trade Agreement, 

and we put a lot of effort in this was reported out of committee, 

I think, 39-0. Yesterday the trade adjustment assistance legislation 

passed by 264-157. I would like to think we are laying the groundwork not just for Peru, but everything that will follow thereafter. 

How important is legislation, such as Mr. Rangel’s TAA legislation is to this whole process, in your opinion? 

AmbassadorVERONEAU. Well, I think the maintaining political 

support for trade, I am certainly aware of the difficult environment 

that we all preach about the benefits of trade, but I am certainly 

mindful of the political environment in which we try to do that and 

it is difficult at times. 

I think having TAA and other safety nets for those that are temporarily and adversely affected by trade is critically important. 

President Bush supports reauthorization of TAA. We obviously 

have some differences about how it should be reauthorized, but I 

think having a strong program to help individuals adjust is critical 

to maintaining political support for open trade. 

Mr.GONZA ́LEZ. And TAA, would you agree, also addresses small 

business concerns, expanding that safety net, making sure we take 

care of those individuals and assist them to make those adjustments when they may be displaced or adversely affected by free 

trade agreements, that is incredibly important, wouldn’t you agree? 

AmbassadorVERONEAU. Yes. There is currently as you know, 

Congressman, a program for firms, an adjustment for firms. In its 

broadest sense, I think the most important thing we can do to help 

individuals and firms adjust to competitive pressures from imports 

is by having a pro-business, pro-job creation environment, because 

16

as we found over the past 50 years, especially one of the great 

strengths of the U.S. Economy is its dynamism. Some of the biggest 

companies in the world and the United States today didn’t exist 20 

years ago. It is having an environment that while jobs may be 

shrinking in some sectors, there is an environment of entrepreneurship to create jobs in other areas, and that is to me the most 

important that we can do to help firms adjust, but in addition to 

that we clearly need specific programs to help individuals and 

firms make adjustments. 

Mr.GONZA ́LEZ. Well, in some of the handouts as we considered 

TAA, the bill includes a package of tax incentives designed to encourage the redevelopment of areas that suffered substantial reductions in manufacturing employment. The proposal authorizes Secretary of Treasury to designate a group of manufacturing redevelopment zones. Under the bill, the areas designated its manufacturing redevelopment zones would be eligible for the special work 

opportunity tax credit classification and now applies to empowerment zones. 

I think we are trying to set the stage, I just hope that we will 

be receiving the support and assistance of the administration that 

it is going to be required in order to not just pass Peru, but those 

free trade agreements that will follow in due course. 

Thank you for your testimony, and I yield back. 

ChairwomanVELA ́ ZQUEZ. Mr. Cuellar. 

Mr.CUELLAR. Thank you, Madam Chair, and thank you ambassador for being here with us. 

One thing we are missing here is that all we are trying do with 

the free trade agreement is to allow our exports to go out to those 

countries, because Peru, Colombia, Panama, 90 percent of their 

goods are coming into our country duty free. So all we are doing, 

Members, is allowing our exports to go to those countries. It is not 

a regular trade agreement where we are opening up our country 

to those imports because we have been doing that for years and 

years. 

For example, the CBI, Caribbean Initiative in the 1980s, because 

what was happening in Central America we decided to help those 

countries by opening up our country to those imports. So the TAA 

and those other bills that we have been working on, they are more 

aimed for imports coming into the United States, and I supported 

that yesterday. 

But again, we have to keep in mind, Members, that this trade 

agreement simply deals with our exports going into those countries. 

In fact, when you look at it, and I know you went over this already, 

under CAFTA, Bahrain, Chile, Singapore, Australia, Morocco, all of 

those trade agreements have shown that the exports from the 

United States have increased. As you know, for every dollar we create or have for exports, it means we will have jobs created here in 

the United States. 

If you look at example for, and I have—I don’t have copies for 

the members, but if you look at the exports or you look at the trade 

between Colombia and the United States, 90 percent of the Colombian industrial products are coming into the United States duty 

free. When you look at the duty free ag products coming from Colombia, they are coming in duty free to the United States. When 

17

you talk about our industrial products going into Colombia, there 

are literally zero. 

I don’t have enough copies, but you can see all we are talking 

about, Members, is to allow our exports to go. We are not talking 

about imports coming in, because we have been doing that for 

years and year and years. I would ask you, Members, to look at 

this, and I can understand the arguments that Charlie made and 

the regulations and assistance. And I can understand this, but bottom line, Members, what we are talking about here, it is not a regular free trade agreement where you are allowed imports to come 

in and you negotiate what imports come in like NAFTA. NAFTA 

was different because we negotiated with Canada and Mexico. This 

is a very, very different topic. All we are talking about is talking 

about exports going into those countries. 

Let me say one more thing on—I don’t know how much time I 

have. 

ChairwomanVELA ́ ZQUEZ. You have time. 

Mr.CUELLAR. Let me say this, on CAFTA, the pre CAFTA trade we were in the deficit with those countries, $1.9 billion. The year 

that we go into CAFTA, those 2 years, 2006 and 2007 our trade 

balance went up, it went into a surplus. Immediately we went into 

a surplus with those countries. 

So, Members, again, CAFTA and the Free Trade Agreement are 

just simply to look at the bottom line it is simply allowing our exports to go into those countries, and that is basically what we are 

talking about, especially when you talk about it, most people think 

it is big companies are talking about going to those countries, but 

it is really, what was it, 89 percent in CAFTA when we talk about 

CAFTA as an example, 89 percent or so are small, medium-size 

businesses, which what we are talking about here. It is not the big 

multi corporations like most people make it sound. It is 89 percent 

small and medium-size businesses. 

Members, we can go into different type of discussions, but I ask 

you to look at the bottom line, all we are talking about is sending 

our exports to those countries.

Mr.CUELLAR. That was not a question. That was a statement. 

AmbassadorVERONEAU. Well-put, Congressman, well-put. 

ChairwomanVELA ́ ZQUEZ. Mr. Ellsworth? 

Mr.ELLSWORTH. Thank you, Madam Chairwoman. 

Thank you, Mr. Ambassador, for being here. Sorry I was late. 

I really only have one question. People are very leery, after 

CAFTA and NAFTA, about trade agreements, back in Indiana. 

They realize it is a global economy, they know we want to trade 

with others, but they are nervous about that. And I have to go back 

and reassure them, when I vote for these agreements, that they are 

a good deal. 

I noticed that, when I was reading your testimony, you said on 

page 11 that these countries will have to take any steps necessary 

to bring them into compliance with the FTA obligations as of day 

one. And can you expound on that a little bit, what you mean by 

that? 

Because I guess what I see, as a new Member, is, so many times, 

Federal Government goes into things with really good intentions, 

18

and then we can’t quite get a ride out on the other end, like the 

enforcement that Charlie was talking about. 

So how far along in the process toward labor, environment protections—are they going to be 100 percent? 

And then reassure me and my folks back home that, if we find 

these violations, that we are going to enforce them with some 

teeth, something that really means something. Don’t drag it out for 

years. You know, it is the old hot stove theory. A kid only touches 

a stove one time when it is hot. You hit them fast, you hit them 

every time, and you hit it—that is what I think people want to see. 

And if you can help me with that, I am willing to look at these. 

AmbassadorVERONEAU. Certainly, Congressman. What I was referring to in that part of the testimony is that, under the statute, 

under Trade Promotion Authority, the President must certify, before he signs the essential paper that enters these agreements into 

force, that the other country has met the obligations that it agreed 

to; it has changed its laws in various ways to meet this obligation. 

So we take that process very seriously. A majority of people at 

USTR are lawyers. The legal staff spends an enormous amount of 

time poring over the legislative changes that our trading partners 

have presented to say, ′′Here is how by complied with this obligation.′′ And it is a very long process. In fact, our process with Oman, 

Congress approved that agreement 2 years ago, and we are still 

going through that process. So we do not gloss over or whitewash 

that process. We take it very seriously, and as we should, to make 

sure that the countries on day one have met those agreements. 

Now, after that, there is still, obviously, vigilance required to 

make sure that they continue to live up to those agreements, and 

that we do. And there will inevitably be disputes. We have had 

them in the WTO; we have had them in NAFTA. We have been 

sued under NAFTA for not abiding by some commitments. We have 

sued others for not abiding by commitments. 

So invariably these things will happen, but I would not want to 

give the impression that these are scofflaws. I mean, compliance is 

extremely high in these agreements. It is the rare case where there 

is not compliance. And in those cases, we don’t hesitate to bring actions. I mean, from our perspective, there is every incentive to 

bring an action substantively, and politically frankly, to show that 

we are serious about upholding these agreements. 

Because we know that if we are seen as not serious about upholding these agreement, then we lose political support for them. 

If we are seen as just an agency that negotiates deals and then 

puts them in the safe and moves on to the next deal, we are not 

helping ourselves. And I assure you that is not the posture in 

which we operate. 

Mr.ELLSWORTH. Thank you very much. I appreciate that. 

Then, my only caution is, again, that the public sees us, this 

Government, as not moving very fast, and when we get these countries that find loopholes—for instance, changing the placement of 

a license plate on the bumper so it doesn’t comply with American 

standards—whatever that might be, that they find a loophole to get 

around our agreements, that we then go after that. And I will refer 

back to the hot stove theory: Do it fast, do it fierce and make it 

count. 

19

Thank you. I yield back. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Johnson? 

Mr.JOHNSON. Thank you, Madam Chair. I wish to commend you 

for holding this hearing, and I apologize for being late. 

Ambassador, your testimony makes a convincing case for supporting these agreements. But, as you know, trade remains a controversial issue simply because there are winners and losers. Both 

sides make a compelling case either for or against trade agreements. 

In the case of NAFTA, for example, I know that there were 

24,500 manufacturing jobs lost in the Atlanta area from 1995 

through 2006, or nearly one out of six manufacturing jobs. Those 

were clearly losers. Others might cite the ballooning trade deficit 

and say all Americans are losers because of that. 

What is your response to these critiques of past free trade agreements? And how have these critiques been addressed in the four 

pending agreements before us? 

AmbassadorVERONEAU. Thank you, Congressman. 

I mentioned in my testimony earlier, 40 percent of the economic 

growth of the past year has been as a result of exports. So exports 

are a key part of our economy. I mean, we import, we export, but 

unfortunately, a lot of time, the attention is on imports, that imports cost jobs. The reality is imports are good for consumers, including small businesses, who have seen a lot of their costs moderated because of global competition. But exports are a tremendous 

source of job growth, as I said, 40 percent. 

As far as manufacturing, there is a myth out there that the U.S. 

has lost its manufacturing prowess, and it is simply not true. We 

produce 50 percent more today in manufactured goods than we did 

10 years ago. We produce 30 percent more cars today in the United 

States than we did in 1980—30 percent more. There are fewer people making them, and that is a function not of trade policy but a 

function of technology. 

Mr.JOHNSON. So you are disagreeing with the job-loss statistics 

that I cited? 

AmbassadorVERONEAU. I would. I am not knowledgeable enough, 

Congressman, to know if that number is wrong. But what my 

point, I think, goes more to is, if there has been loss of manufacturing jobs in Atlanta or elsewhere, it is probably unfair to attribute them to trade policy. 

I would say the vast majority of job losses in manufacturing in 

the United States and globally—I mean, even China—most people 

don’t realize this—China has lost millions of manufacturing jobs, 

millions, because of improvements in technology. And I hate to say 

it, but that is a good thing. The same reason that, you know, a 

third of us used to farm, a third of us used to farm. In this country 

today, only 2 or 3 percent of us farm. 

Mr.JOHNSON. Point well-taken. Point well-taken. 

AmbassadorVERONEAU. That is progress. 

Mr.JOHNSON. Let me ask you this question. Have there been any 

lessons that we have learned from the NAFTA and CAFTA agreements? 

AmbassadorVERONEAU. Well—

20

Mr.JOHNSON. Or have they just been roaring successes and we 

just want to build on them? Have there been any negative consequences, in your eyesight? 

AmbassadorVERONEAU. Honestly, I think the lessons that I 

would say are: We need to liberalize and open up these markets 

more, not less. And, in that sense, I think there is—I have learned 

no lesson that suggests, gee, maybe we should not have pursued 

these agreements or opened up the markets. If anything, I would 

say we need to do a better job, those of us in Government, those 

of us in the business community who support trade, frankly, need 

to do a better job to explain to people why open trade is a good 

thing. 

And I think, in that sense, we are not helping ourselves because 

the political environment, as you know better than I, for trade is 

getting more complicated, not less. And in that sense, I would say 

a lesson learned for me has been not so much with the agreements, 

but with our advocacy for them, and stepping up to explain to people why these are good for America. 

Mr.JOHNSON. Let me ask you this question. In your testimony, 

you mentioned that trade agreements give American small businesses access to foreign-government procurement contracts. 

Isn’t it true that foreign companies in Peru, Colombia, Panama, 

et cetera, will be afforded that same opportunity for U.S. Government contracts? And that being the case, what would stop a Chinese company, for instance, from incorporating in Peru and then 

competing with our small businesses for U.S. Government contracts. 

AmbassadorVERONEAU. Well, to take advantage of those procurement opportunities, the goods have to be made in the country. So 

it wouldn’t be enough that a foreign company, Chinese or otherwise, simply purchased the Peruvian company. The goods have to 

be made there. There is no opportunity to simply transship goods 

through a Peruvian company. 

But I would say that, you know, we already have a very open 

system, frankly. Our procurement system is quite open. So, again, 

I see these agreements as a way to level the playing field. It is 

other countries around the world that have much more closed systems on their procurement. 

So, to me, we are not to giving up anything. We are gaining access that we don’t currently have. In the same way that, on the terror side, our markets are already open, and this is an opportunity 

to get equal access to their market. 

ChairwomanVELA ́ ZQUEZ. Time has expired. 

Ms. Hirono? 

Ms.HIRONO. Thank you very much, Madam Chair. 

Mr. Ambassador, did you say that 40 percent of economic growth 

in the United States has been due to exports? 

AmbassadorVERONEAU. Yes, ma’am. 

Ms.HIRONO. How much of that was due to exports based on 

FTAs? 

AmbassadorVERONEAU. I don’t have that figure. 

What I do know is that our exports to FTA countries over the 

past year have been growing 60 percent faster than exports to nonFTA countries. And couple that with the fact that our FTAs acVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
21

count for almost 50 percent—or our FTAs, including the ones I am 

testifying today, account for almost 50 percent of our exports, I 

would say that, of that 40 percent, a not-insignificant amount of 

that is attributable to our free-trading partners. 

Ms.HIRONO. That is really—

AmbassadorVERONEAU. Sorry for those—I think I did four extrapolations. I apologize. I can—

Ms.HIRONO. Thank you for the clarification, because I didn’t realize that our FTAs accounted for almost 50 percent of our exports. 

That is an astoundingly high number. My understanding was that 

most of our trade with other countries are done pretty much outside of FTAs. 

AmbassadorVERONEAU. My staff is double-checking. My recollection is, including these four FTAs—Korea, et cetera—the figure will 

be—that, obviously, Canada, a major trading partner of ours, and 

Mexico. So our exports to our FTA partners, including these pending FTAs, is, I believe, almost 50 percent. I will confirm that number for you. 

Ms.HIRONO. And the reason I ask these questions is that I would 

like to get an understanding of really how much of our trade is 

really done through FTAs, as opposed to just the fact that we are 

trading with all of these countries and have been for decades. 

I have a question about—perhaps you have already gone through 

this, and I apologize for being late. For a lot of us, the environmental and the labor standards that are relatively new to the new 

round of trade agreements is really an important part of us moving 

forward in the kind of trade agreements that we would want to see. 

Now, that is great, but my question really is around enforcement. 

Because if you have all these requirements and standards but we 

are not enforcing them, what good are they? That is my view. 

So what kind of enforcement is our country doing to make sure 

that the countries with whom we have these trade agreements are 

living up to their part of the bargain, particularly in reference to 

labor and environmental requirements? 

AmbassadorVERONEAU. Well, I would say that enforcement is 

very high. I mean, compliance with these trade agreements is extremely high. I mean, as one would expect, attention is paid to 

those instances where there is noncompliance. But compliance is 

very high. So I wouldn’t want to leave here with the impression 

that enforcement is a systemic problem, because that has not been 

my experience in my current capacity or my prior capacity as a 

general counsel. 

The agreements provide for dispute-settlement mechanisms, basically panels to be established to adjudicate cases. We have had 

a number of NAFTA panels, some that we have been the plaintiff, 

so to speak, and others we have been the defendant. But these are 

panels that I think do a very good job of sorting out disputes. 

So I would expect that certainly this administration and any future administration would take seriously any charges that a country is not living up to its commitments. And if you can’t find your 

way to resolve those short of bringing a formal action, then you 

bring the formal action. I have detected no resistance to bringing 

formal actions in the face of noncompliance. 

22

Ms.HIRONO. Madam Chair, if I could just request that you provide to the Committee the list of actions that have been taken by 

our country to enforce trade agreements, the provisions of trade 

agreements. Because I don’t have that kind of information. And 

you indicate that the enforcement part has been a very active part 

of what—

ChairwomanVELA ́ ZQUEZ. Ms. Hirono, will you yield? 

Ms.HIRONO. Yes. 

ChairwomanVELA ́ ZQUEZ. And I would like for the Ambassador to 

also—you say compliance is high. What about the area of intellectual property and textile? 

AmbassadorVERONEAU. I think on intellectual property, again, if 

you look around the world, some of our biggest problems have been 

with partners that we don’t have bilateral trade agreements with. 

China and Russia are the two countries that we are having the 

major problems with on intellectual property. And in that sense, 

frankly these FTAs that are the subject of this hearing today provide mechanisms to address intellectual property that we don’t 

have with those other countries to the same fullness. 

But I would be pleased to provide information about enforcement 

actions, but I think it is important to be clear that enforcement actions encompass much more than bringing formal disputes. I mean, 

every day, I or someone at USTR is on the phone with a foreign 

government to say, ′′Hey, you have to live up to this obligation.′′ So 

the vast majority of enforcement is not through a formal dispute 

mechanism, but through pressuring and jaw-boning and putting 

pressure on countries to meet their obligations. 

ChairwomanVELA ́ ZQUEZ. Time has expired. 

Mr. Buchanan? 

Mr.BUCHANAN. Thank you, Madam Chair. 

I know we have votes, but, Ambassador, real quick, my interest 

is in, as all of this Committee, is small business. How do you define 

small business as it relates to these relationships and various trade 

agreements? Do you have a definition for small business? 

AmbassadorVERONEAU. Well, I think we have used the SME, 

small and medium-size enterprise’s definition of 500 companies or 

less. But—

Mr.BUCHANAN. You mean 500 employees? 

AmbassadorVERONEAU. Yes, 500 employees. But, as I was saying 

earlier, what we do, to oversimplify, is we are in the business of 

eliminating tariffs and nontariff barriers. And I think that mission 

benefits small companies, frankly, more than big companies, because big companies have the resources to find their way around 

and navigate these barriers, where small companies don’t. 

Mr.BUCHANAN. Let me mention, just in terms of that, there is a 

lot of—I mean, that is one way to define small companies. But I 

know in the State of Florida and all throughout the United States, 

a lot of small companies, we—I was chairman of the State chamber. In those businesses, we defined a lot of our companies as small 

companies that were 20, 50 or 40 employees or less. 

What are you doing, and how does it affect those groups? 

AmbassadorVERONEAU. Well, again, I would say whether I am a 

company with 10 employees or 10,000, my interest is seeing a tariff 

eliminated or a nontariff barrier eliminated. So, from our perspecVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
23

tive, from the mission of USTR, my goal and interest in eliminating 

this barrier is the same for you as a small company as it is for a 

large company. And in that sense, our mission does not split, I 

think, in the following way of small-business interests versus bigbusiness interests. We are interested in eliminating these barriers, 

and small and large can take advantage of that. 

Mr.BUCHANAN. Well, on the record, I would just like to say I 

would just love to see us do more in any of these trade representative meetings to help companies 50 employees or less. Because that 

is a lot of what we represent here. 

Thank you. And we have—I know we have to leave. 

ChairwomanVELA ́ ZQUEZ. Mr. Ambassador, thank you for your 

participation this morning. 

We still have some more questions. We will be submitting them 

in writing. 

You are excused. But before you leave, I would like for the record 

to reflect who will be the person or persons from your staff that 

will stay here to listen to the next panel. 

AmbassadorVERONEAU. Our Congressional Affairs Office will 

stay here and enjoy the rest of the hearing. 

ChairwomanVELA ́ ZQUEZ. Thank you very much. 

AmbassadorVERONEAU. Thank you very much. 

ChairwomanVELA ́ ZQUEZ. The Committee stands in recess, and we 

will resume right after this vote. 

[Recess.] 

ChairwomanVELA ́ ZQUEZ. The Committee is called to order. And 

we are going to start with our second panel. 

I want to thank you all for being here this morning. 

Our first witness is Mr. Stephen Ubl. He is the president and 

CEO of AdvaMed. He oversees all internal and external operations 

for the organization, which is the world’s largest association representing manufacturers of medical devices, diagnostic products 

and medical information systems. 

Mr. Ubl, you have 5 minutes to either talk to us or summarize 

your testimony. 

And every statement will be submitted to the record, without objection. So ordered. 

And you have 5 minutes. 

STATEMENT OF MR. STEPHEN J. UBL, PRESIDENT AND CEO, 

ADVANCED MEDICAL TECHNOLOGY ASSOCIATION (ADVAMED) 

Mr.UBL. Thank you, Madam Chairwoman and Ranking Member 

Chabot, for inviting me to testify this morning. I am Steve Ubl, 

president and CEO of AdvaMed. And we thank the Committee for 

holding this important hearing today on pending free trade agreements between the United States and some of our trading partners. 

As you mentioned, AdvaMed represents over 1,600 of the world’s 

leading medical technology innovators and manufacturers of medical devices, diagnostic products and health information systems. 

Importantly, over 70 percent of our members are small companies 

with sales under $30 million in revenue. 

AdvaMed members are devoted to the development of new technologies that allow patients to lead longer, healthier and more productive lives. Our members manufacture 90 percent of the $94-bilVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
24

lion U.S. Health-care technology market and nearly half the $220-

billion market globally. In 2006, U.S. exports in medical devices 

and diagnostics totaled over $29.4 billion. 

The medical technology industry is fueled by intensive competition within the innovative energy of our small companies, firms 

that drive very rapid innovation cycles amongst our products, in 

many cases leading to new product iterations every 18 months. Our 

industry succeeds most in a fair, transparent global market where 

products can be adopted on their merits without excessive regulatory hurdles or inappropriate reimbursement policies. 

We strongly support the efforts to expand market access for U.S. 

products abroad through FTAs, the World Trade Organization, as 

well as oversight of market access barriers in countries with which 

we have strong trading relationships. We believe U.S. leadership in 

international trade is crucial to the health of our industry and the 

future success of the U.S. economy. There is really no credible alternative to engaging fully in the global marketplace. Congressional approval of solid FTAs is an important cornerstone in advancing a strong U.S. Trade agenda. 

The Korea-U.S. FTA is an excellent example of such an agreement. In 2006, U.S. medical technology exports to Korea exceeded 

$673 million, an increase of 8 percent over 2005. Korea currently 

imposes tariffs in the range of 6.5 percent to 13 percent on U.S. 

medical technology compared to almost no tariffs on U.S. imports 

from Korea. The elimination of tariffs on all medical technology 

under the FTA will save the U.S. industry about $25 million per 

year. 

The FTA also offers important benefits specifically addressed to 

medical technology. In fact, it is the first FTA to have a specific 

medical technology chapter, including recognition of innovation; 

commitments to fair, transparent and nondiscriminatory rules on 

reimbursement and regulatory decisions. We urge Congress to pass 

the legislation to implement this FTA. 

The Latin American FTAs would also provide benefits to 

AdvaMed members, including tariff elimination, thereby leveling 

the playing field with countries that enjoy duty-free access to our 

market and provisions addressing a range of nontariff barriers. 

We also hope that the administration and Congress will work together on a bipartisan approach to U.S. trade policy. Many other 

countries are concluding FTAs with our trading partners. As an 

American and as a representative of the medical technology industry, I do not want to see us left behind. 

Thank you, again, for holding this hearing and for seeking our 

input on the pending FTAs. We look forward to working with you 

and the rest of the Committee on these important issues. Thank 

you very much. 

[The prepared statement of Mr. Ubl may be found in the Appendix on page 59.]

ChairwomanVELA ́ ZQUEZ. Thank you very much, Mr. Ubl. 

Our next witness is Mr. Doug Wolf. Mr. Wolf is a board member 

of the National Pork Producers Council and a pork producer from 

Lancaster, Wisconsin. He owns and operates Wolf L&G Farms, a 

farrow-to-finish operation marketing 20,000 hogs per year. 

25

Welcome, sir. 

STATEMENT OF MR. DOUG WOLF, OWNER, WOLF L&G FARMS 

LLC, LANCASTER, WISCONSIN, ON BEHALF OF THE NATIONAL PORK PRODUCERS COUNCIL 

Mr.WOLF. Thank you very much, Madam Chairman, members of 

the Committee. I am Doug Wolf, a board member of the National 

Pork Producers Council and a pork producer from Lancaster, Wisconsin. I do own and operate Wolf L&G Farms, a farrow-to-finish 

operation marketing 20,000 hogs a year. 

The National Pork Producers Council is a national association 

representing 44 affiliated State organizations and the Nation’s 

67,000 pork producers. We annually generate approximately $15 

billion in farm gate sales, support an estimated 550,000 domestic 

jobs, generate more than $97.4 billion in total U.S. economic activity and contribute $34.5 billion to the U.S. gross national product. 

Madam Chairwoman, I strongly believe that the future of the 

U.S. pork industry and the future of livelihood of my family operation depends in large part on further trade agreements, including 

the pending agreements with Peru, Colombia, Panama and South 

Korea. 

Past trade agreements have fueled export growth in the U.S. 

pork industry. Total U.S. exports of pork and pork products have 

increased by more than 433 percent in volume terms, 401 percent 

in value terms, since the implementation of NAFTA in 1994 and 

the Uruguay Round agreement in 1995. Without the NAFTA, there 

is no way that U.S. exports of pork products to Mexico could have 

reached such heights. In 2006, Mexico was the number-one volume 

market and the number-two value market of U.S. pork exports. 

Thanks to a bilateral agreement with Japan on pork that became 

part of the Uruguay Round, U.S. exports to Japan have soared. In 

2006, U.S. Pork exports to Japan reached over $1 billion. Japan remains the top-value foreign market for U.S. pork. 

U.S. pork exports to Korea have increased over 2,000 percent, as 

a result of concessions made by Korea in the WTO Uruguay Round 

in 1995. More recently, U.S. exports of pork have expanded because 

of bilateral deals with Russia, Taiwan, China and the U.S.-Australia Free Trade Agreement. 

As U.S. pork experts grow, so do U.S. jobs. In 2006, the United 

States exported 15 percent of its domestic pork production. International trade contributed approximately 82,500 U.S. jobs to the 

pork industry alone. The majority of these jobs are located in rural 

America. In my home State of Wisconsin, about 14,200 jobs are involved in various aspects of the pork industry. Using 15 percent 

share, Wisconsin receives 2,130 jobs and $90 million in personal income from exporting pork products to foreign markets. 

Wolf L&G Farms is a small, family owned, independent hog operation in southwest Wisconsin. I run the business with my 30-yearold son, Shannon. Between 1998 and 2002, we faced tough financial times. It wasn’t until 2002 that we started to recover and became financially stable and actually expanded our production. 

In September of 2007, we replaced an old sow facility and increased our capacity from 800 to 1,400. Due to this expansion, we 

will be able to increase the number of hogs marketed significantly, 

26

from 20,000 to 30,000 annually. We have also erected new feed 

processing, increased competitiveness with new modern technology, 

and purchased more energy-efficient equipment. 

Increased pork exports over the last 5 years have contributed significantly to the profitability of our operation. Wolf L&G Farms 

markets hogs to the Waterloo and Columbus Junction, Iowa, Tyson 

pork-processing plants. These plants export pork all over the world, 

including loins and tenderloins to Japan, bellies and butts to South 

Korea, hams to Mexico, picnic and trimmings to Russia, and a variety of meats indirectly to China. Wolf L&G Farms is very proud 

to supply the world with our homegrown Wisconsin pork and pork 

products. 

It is absolutely critical that U.S. pork exports continue to grow. 

Right now, though high tariffs, the average global tariff on pork is 

a staggering 77 percent. The technical barriers to trade are stifling 

that growth and affecting the industry. 

The four free trade agreements currently pending in Congress 

can help change that. I am very excited about that. Each agreement aggressively cuts tariffs, and all tariffs are eventually phased 

out completely. 

Additionally, the Governments of Peru, Colombia, Panama and 

South Korea have agreed to accept pork from all USDA-approved 

facilities. This ensures my product will not be stopped from entering these markets because of non-science-based restrictions. 

The potential impact of the pending free trade agreement on 

Wolf L&G Farms is very substantial. According to an Iowa State 

University economist, once fully implemented, the Peru agreement 

will add 83 cents per head to each hog. The Colombia trade agreement will add $1.63. Panama will add 20 cents. And Korea will add 

a phenomenal $10 per animal. Assuming our current level of production, these agreements, respectively, would mean an additional 

$16,600; $32,600; $4,000; and $200,000 in additional income than 

otherwise would have been the case without these deals. That is 

more than $250,000 that will add to our farm receipts. Remarkably, these estimates are based on current levels of production, and 

we are expanding our production. 

The added income from the pending FTAs will allow our small 

operation to grow, develop and ensure a future in hog production 

for my son and his family. We eventually would like to invest resources in the methane digestive technology, which helps supplement profits and generate electricity. It also helps us support the 

environmental concerns. Given the proper resources, this could be 

a reality. 

Free trade agreements spur exports, which, in turn, drive our 

profits upward. I would strongly urge you to support the pending 

free trade agreements with Peru, Colombia, Panama and South 

Korea. 

Thank you very much. 

[The prepared statement of Mr. Wolf may be found in the Appendix on page 66.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Wolf. 

Our next witness is Mr. Cass Johnson. Mr. Johnson is the president of the National Council of Textile Organizations. The National 

27

Council of Textile Organizations represents the entire domestic textile industry, including producers, manufacturers and suppliers of 

these products. 

Welcome, sir. 

STATEMENT OF MR. CASS JOHNSON, PRESIDENT, NATIONAL 

COUNCIL OF TEXTILE ORGANIZATIONS, WASHINGTON, D.C. 

Mr.JOHNSON. Thank you. 

Chairwoman Vela ́zquez and Congressman Chabot and distinguished members of the Committee, thank you for the opportunity 

to appear today and outline the textile industry’s perspective on 

the pending free trade agreements. 

My name is Cass Johnson. I am the president of the National 

Council of Textile Organizations. First of all, I would like to thank 

you for holding this hearing on trade. It is very important, as you 

have noted, to small- and medium-sized business. I believe this is 

the second hearing the Committee has held this year, and I urge 

you to continue to hold these hearings. It is very important. 

I would like to state at the outset that our companies, almost all 

of which are small- and medium-sized businesses, need a trade policy that concentrates on retaining jobs in this country and that 

exacts penalties for those countries that break the rules. 

The U.S.-China Economic and Security Review Commission estimates that Chinese bad-playing has cost the United States over 1.5 

million manufacturing jobs during the last 10 years. Many of these 

were good-paying textile jobs. And yet our members are very concerned that China continues to get virtually a free pass by the Congress and by the Government. While our industry is supportive of 

free trade agreements, if we were to ask you today to do one thing 

for the U.S. manufacturing sector, it would be to pass a bill that 

holds China accountable for its currency manipulation and subsidy 

schemes. We hear that such bills are being prepared, and we look 

forward to those moving through Congress quickly. 

Regarding the Peru and Colombia and Panama FTAs, NCTO 

members have examined these agreements carefully and have been 

strongly supportive. In terms of textiles, these agreements contain 

the gold standard for textile agreements, a pure-yarn foreign rule 

of origin, with none of the free-riders that have been in past agreements. This means that only textile apparel companies in the free 

trade areas get the benefits and that nonparticipants, particularly 

China, are technically shut out. 

You may have noticed I said the word ′′technically.′′ I use the 

word, because, while Customs regulations in these agreements are 

very strong, Customs itself has been back-pedaling furiously on 

commitments made to the textile industry when the CAFTA agreement was being debated. These commitments are one of the primary reasons that our members voted to support the CAFTA 

agreement. 

But today, instead of a reinvigorated customs effort that we were 

promised, textile customs enforcement is now at a crisis point. The 

Government has stopped sharing data on seizures and detentions 

with both the industry and the Congress. Special operations regarding textiles enforcement have been virtually halted, and textile 

enforcement staff has been leaving in droves. 

28

The result is that the cheaters are now winning. U.S. textile 

mills are reporting a sharp upswing in shipments lost to illegal 

trade. This is because the rules in CAFTA are being broken by unscrupulous importers who know there is virtually no chance, in this 

current customs environment, that they are going to get caught. 

The industry has done its homework on this issue. We have 

traced the roots that illegal shipments take from China and elsewhere. We know which ports the boats dock at. We know which 

companies are falsely claiming U.S.-origin goods, and yet we watch 

as U.S. mills close, as a spinning mill closed 2 weeks ago down in 

North Carolina. And their workers become unemployed, because 

Customs is no longer keeping its word and making textile enforcement a priority in free trade agreements. 

This turnaround by U.S. Customs is all the more infuriating because Customs’ own records show that fraud and cheating occurs 

more in textile trade than in any other manufactured good. In fact, 

nearly 50 percent of all customs fraud involves textile products. 

Our industry’s patience is nearing an end. We have made many 

appeals to Customs to restore the program, but we have yet to see 

Customs respond in a meaningful way. 

So while we support the Peru and Colombia and Panama agreements, there is no reason for the industry to continue to support 

these or future agreements if Customs has decided it will not bother to enforce them. Rules are great, but they have to been enforced. 

If they are not being enforced, then we are in more danger having 

an agreement than in not having an agreement. 

Finally, regarding the Korea FTA, we believe the textile portions 

need to be renegotiated. In the agreement, USTR reversed a decades-old policy when it agreed to give Korea duty-free treatment 

immediately on the vast majority of its textile products. In addition, Korea continues to manipulate its currency, and the chaebol 

system continues to give its manufacturers additional unfair advantages. Finally, Korea has been a major transit point for textile 

fraud with China for over 30 years and has shown no willingness, 

to date, to enforce its borders. 

This concludes my verbal remarks. I would like to thank the 

Committee once again for holding this hearing and for turning its 

attention to the issue of trade and its impact on small- and medium-sized businesses. 

[The prepared statement of Mr. Johnson may be found in the Appendix on page 78.]

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Johnson. 

Our next witness is Ms. June Ling. Ms. Ling is the associate executive director of Codes & Standards for the American Society of 

Mechanical Engineers. Founded in 1880, the organization promotes 

the arts, science and practice of mechanical and multidisciplinary 

engineering and allied sciences. 

Welcome. 

29

STATEMENT OF MS. JUNE LING, ASSOCIATE EXECUTIVE DIRECTOR, CODES & STANDARDS, AMERICAN SOCIETY OF MECHANICAL ENGINEERS, NEW YORK, NEW YORK 

Ms.LING. Thank you, Madam Chairman, and thank you, Ranking 

Member. 

This morning I would like to cover standards, their impact on 

trade and small- and medium-sized enterprises, and I would also 

like to highlight the importance of language within trade agreements when addressing international standards and their implementation through regulatory adoption. 

So what is a standard? What is a technical consensus standard? 

Basically, it is a set of rules or guidelines developed under a disciplined process of well-defined characteristics. And when applied, 

standards achieve a common objective. That objective may be a 

baseline for public safety, from toys to home heating boilers to safe 

operation of nuclear power plants. It can achieve better utilization 

of new technological advances, and it can also cover interchangeability and interconnectivity of products and services. So standards 

are basically a set of rules or guidelines. 

Standards have two significant results: One is they enable a 

transfer of technology to a broad base of users, and, two, they create a level playing field for competition and, thus, enter into new 

markets. Both technology transfer and market access are especially 

important benefits to small businesses, as most would not have the 

means of achieving these results independently. 

Today the United States enjoys a well-established and vigorous 

process for development of technical consensus standards by the 

private sector in partnership with Government. This partnership 

has become ever more important in ensuring U.S. competitiveness 

in the global market. The USTR and Department of Commerce 

have actively worked in concert with the private sector, including 

the standards-developing community, to safeguard U.S. interests 

through ensuring international standards used by U.S. companies 

are not unfairly blocked. 

Free trade agreements and texts regarding standards in free 

trade agreements are essential to ensuring businesses are able to 

export goods. So why is text in trade agreements important? 

Well, under the WTO Technical Barriers to Trade Agreement, 

signatory nations are obligated to provide, quote, ′′preferential 

treatment′′ to, quote, ′′relevant international standards.′′ As such, 

how international standards are defined within the context of the 

TBT Agreement became a major item of debate. 

A significant milestone occurred during the second tri-annual review of the TBT Agreement. At that time, there was an effort by 

other nations to define international standards as limited to standards developed by organizations whose membership structures consisted only of national bodies. Under this interpretation, the open 

membership of U.S.-domiciled international standards-developing 

organizations, such as ASME, would not qualify, and the products 

made in the United States that were engineered to these international standards would effectively be restrained from trade. 

But through the strong and able efforts of USTR, support by 

Commerce and the private sector, the U.S. prevented this threat 

through sustained efforts, and it led to the decision of the TBT 

30

committee not to specify or name organizations developing international standards but, rather, to define the principles for international standards development that any standards developer 

could follow. The principles of transparency, openness, impartiality 

and consensus, effectiveness and relevance, coherence and development are met by ASME and other U.S.-domiciled standards organizations. 

It is important that the U.S. remain vigilant, however. We need 

to ensure that any text within trade agreements which address 

international standards is inclusive of those standards utilized by 

U.S. Businesses and Government. In addition, treatment of conformity assessment in the WTO TBT Agreement and implementing 

text in free trade agreements can add to the complexity of fair and 

open access to the market. Here, too, vigilance is needed. 

A few years ago, ASME and three other organizations formed a 

consortium, and we opened an office in Beijing using a manufacturing development cooperative program grant provided by the Department of Commerce International Trade Administration. With 

Commerce ITA support and their engagement on a Government-toGovernment basis, this consortium of four organizations successfully gained greater understanding on use of our standards in 

China, which, in turn, facilitated greater acceptance of products 

and technology produced to those standards. 

So, in conclusion, standards and related conformity assessment 

are an underpinning of U.S. competitiveness and trade promotion. 

It can carry a greater impact for small businesses, as small businesses do not have the resources for independent research nor participation in the international standards activity. Effective export 

trade promotion would not be achievable without continued acceptance and use of international standards, many of which are developed and maintained by ASME. 

Thank you. 

[The prepared statement of Ms. Ling may be found in the Appendix on page 92.]

ChairwomanVELA ́ ZQUEZ. Thank you, Ms. Ling. 

And the Chair recognizes the ranking member for the purpose of 

introducing our next witness. 

Mr.CHABOT. Thank you, Madam Chairwoman. 

I am pleased to welcome a constituent of mine, Gary Ellerhorst, 

who is president and CEO of Crown Plastics Company, Inc., which 

is located in Harrison, Ohio, which is in my congressional district. 

He happens, also, to be a graduate of one of the more distinguished 

high schools in our district, Elder High School, who happens to be 

playing my son’s high school in the State playoffs this week and 

one of the rivals of my high school as well. So football in Cincinnati 

is a big deal, and we always talk about that back home. 

But Crown was cofounded in 1973 by Gary’s father, Bob 

Ellerhorst. Gary began as a second-shift machine operator, worked 

his way up to sales manager, and today he and three of his brothers manage the company, which now employs 52 people. 

Crown manufacturers plastics material and resin and is the 

world leader in the manufacture of ultra high molecular weight 

polyethylene, which is used in the manufacture of high-quality 

31

snowboards and which lined the bottom of four American gold and 

silver medal-winning snowboarders in the 2006 Winter Olympics. 

Gary is a two-term past president of the Main Street Harrison 

Downtown Revitalization Program. 

And I want to thank him for adding his perspective to the hearing, and I think we all look forward to his testimony. 

Mr. Ellerhorst? 

STATEMENT OF MR. GARY ELLERHORST, PRESIDENT AND 

CEO, CROWN PLASTICS, HARRISON, OHIO 

Mr.ELLERHORST. Madam Chairwoman, Congressman Chabot and 

esteemed Committee members, I would like to thank you for the 

honor of speaking before you today on the subject of small business 

and free trade agreements. 

Unlike many who come before you, I have no charts or graphs, 

no reams of data, no results of exhaustive research. I am here with 

nothing but 30 years of experience of working in, growing with and 

managing a small manufacturing business in the Midwestern region of the United States. 

Like every other company in America, we are challenged by the 

ever-changing landscape of the global market we find ourselves in. 

The acceleration of market changes for our company over the past 

5 years, and the necessary adaptation that goes along with it, has 

exceeded that of our first 30 years in business. 

Explosions in technological advancement and the massive shift in 

manufacturing throughout the world has created the scenario 

where over 50 percent of what Crown Plastics now produces either 

involves the use of materials from outside the U.S. or is exported 

in the form of finished products or components. We currently export product to approximately 15 countries throughout North and 

Central America, Asia, Europe, the Middle East, as well as Australia and New Zealand. 

Much of our growth in exports are in areas of the world that 

have developed through trade with the United States, such as Mexico, Canada and China. We have found that open trade policies 

have not only encouraged economic cooperation to reduce costs and 

red tape, but that economic growth experienced by our international trade partners has also led to increased demand for additional U.S. products. In other words, investment in trade is an investment in the American economy. 

Crown Plastics’ future strategy has part of its focus in Central, 

Latin and South Americas, several of these countries, again, being 

currently considered for additional free trade agreements. Again, I 

am sure you have received data from both sides of the issue, but 

my experience tells me that enacting these proposed agreements 

will, in the long term, prove to be economically, politically and socially beneficial. 

As a parent and a CEO of a small business, I completely understand the natural tendency to want to help when we see an issue 

with things or people we care about. But I also see that, in some 

cases, we have tried so hard to protect our children from everything that they are now susceptible to anything. If we raised an 

animal in the protected environment of our homes and then later 

released it into the wild without the necessary developed skills and 

32

instincts needed to survive, our actions would rightly be admonished as cruelty. Why, then, do we insist on doing the same to our 

own businesses? 

While artificial supports and protections are usually well-intentioned, in the short-term reality they only benefit the small portion 

of the economic population they are designed to help, while actually 

creating additional difficulties for the rest. More importantly, in 

the long run, they only serve to artificially prop up outdated, antiquated and inefficient policies and practices and provide a false 

sense of security and success to those they are intended to help. 

Meanwhile, the global marketplace continues to shift and grow 

around us. The end result, as we see with so many of these programs, is a lifetime of continued addiction to such support, as we 

are no longer able to fend for ourselves in the wilds of the marketplace, or, if finally forced to deal with the realities of an open market, a massive investment of time and money to impose a greatly 

accelerated process of adjustment which may or may not succeed. 

In either case, we are the weaker for it. 

Businesses, like everything else, need to constantly be able to adjust to the changing environment or risk extinction. Besides our 

competitors, we are in a constant battle with economic forces such 

as interest rates, energy cost, currency fluctuations, technological 

advances, health-care costs and so on. On top of that, we have national and international political issues, environmental issues and 

people issues. And when we finally think we have it all figured out, 

along comes 9/11 or Katrina or wildfires. 

And we continue to survive and to succeed. Is it difficult? Absolutely. Is it painful sometimes? You bet. But what in life is not? 

And we in America have got to quit looking for the painless fix 

that does not exist. When faced with a problem, we demand that 

somebody fix it, but just don’t let the solution affect me. Or we 

waste our efforts putting Band-Aids on symptoms and ignoring the 

disease, the category in which artificial supports and trade restrictions fall. 

We have economic cancers that require chemo-therapeutic treatment. During the process, we will feel sick and our hair will fall 

out. But when we are past it, we will be stronger, and the alternative is far less desirable. The longer we waste time trying to 

avoid discomfort, the more intrusive and painful the cure becomes. 

I understand that when it comes to free trade agreements like 

those being considered, many across the political spectrum have legitimate human rights, environmental and economic fair-play concerns. But unlike some issues that require sanctions and trade barriers, most socioeconomic issues are best addressed through economic engagement. Having a vested economic stake is the best way 

to ensure proactive cooperation. And one need only to look at recent changes in China for proof. There are still many, many problems, but a whole host of issues are moving rapidly in the right direction. 

But I suspect the biggest issue with protectionism is fear: fear 

of the future, fear of uncontrollable forces in the marketplace, fear 

of the unknown. Well, I am here to represent all of those who are 

not afraid of the uncertainties of the global marketplace but rather 

revel in their opportunities. Why do we feel this way? Because we 

33

have two huge advantages over many of our foreign competitors. 

The first is us—me, those sitting at this table with me, and millions of men and women like us who have grown up with the American, entrepreneurial, competitive spirit etched into our very being. 

The second is you, all you honorable representatives working in the 

Government based on a Constitution which allows people like us to 

strive to be all we wish to be. Working together, there is not a 

country on earth that can compete with us. 

Circling the wagons may at times seem like a good idea, as it 

might help you to defend yourself. But the only thing it actually 

guarantees is that you either move in a circle or stop moving all 

together. But all this requires a third factor, and that is trust: a 

trust and faith and confidence in and between the people and the 

Government, as well as in the global free-market economy; a trust 

and understanding that, as with nature and the U.S. Constitution, 

the free-market system always works best when not tampered 

with, despite our best intentions. And with that trust and understanding, I guarantee you that we will not fail. 

Again, as a mere small-business man with no Ph.D. In economics, no studies or data or anything else to back me up, except the 

nonpolitical common-sense opinion, how can I be so sure? Simple: 

Because I am an entrepreneur in the greatest country this world 

has ever known. And we, the American business men and women, 

will simply not allow ourselves to fail. 

I will grow Crown Plastics. I will be successful. And I will make 

bigger profits for myself and my family in the near future. And at 

that time, I will be thrilled to come back to Washington to meet 

with you nice people once again and discuss the issue of how much 

of it you will allow me to keep. 

Thank you, again, for allowing me the honor of addressing you 

here today. 

[The prepared statement of Mr. Ellerhorst may be found in the 

Appendix on page 97.]

ChairwomanVELA ́ ZQUEZ. Thank you. Thank you very much, Mr. 

Ellerhorst. 

Let me just say that I love real people, and it is really refreshing 

when we are able to bring people from our own districts to come 

here and talk to us about your own stories. Definitely. 

Something that really got my attention is the statement that you 

made about the best tool that we have to deal with human rights 

and environmental violations is through economic engagement. So 

that is why I support for this Government to do commercial trade 

with Cuba. 

Will you support that? 

Mr.ELLERHORST. I believe that there are, outside of the free 

trade, there are political and governmental decisions that are made 

by our Government for what it deems to be in the best interest of 

our national security. At that point, I feel we need to defer to our 

representatives to make those decisions. I would like to see free 

trade opened with Cuba, but under the proper circumstances. 

ChairwomanVELA ́ ZQUEZ. Sure. Well, we did it with Vietnam. 

Mr.CHABOT. Will the gentlelady yield? 

ChairwomanVELA ́ ZQUEZ. Sure. 

34

Mr.CHABOT. I would just like to comment, that was a pretty impressive answer, I think, Mr. Ellerhorst. 

ChairwomanVELA ́ ZQUEZ. Definitely. He dodged that one, huh? 

Mr.ELLERHORST. I want to grow up to be just like you, Mr. 

Chabot. 

ChairwomanVELA ́ ZQUEZ. This question I would like to invite 

every one of the witnesses to answer it. 

Could you tell this Committee what you see as the top provisions 

in the pending FTAs to aid small businesses in your industry access, newly opened markets? 

Mr. Ubl? 

Mr.UBL. Sure. I will—

ChairwomanVELA ́ ZQUEZ. And a second question: What provisions 

would you recommend for inclusion that would further facilitate 

cross-border commerce with consumers in these countries? 

Mr.ELLERHORST. I will focus mostly on Korea, because, again, as 

we look at the pending FTAs as a matter of economic development 

of those partners, our exports to Korea are far more material. They 

are about six times greater than Colombia and about 20 times 

greater than the other two FTAs. 

But the two things that the FTA focuses on, I think, are emblematic of the two barriers that our companies face most frequently 

and should be incorporated in FTAs going forward. And that is 

eliminating high border tariffs and including mechanisms to address nontariff barriers. 

In our industry, nontariff barriers can take many forms. It can 

be slow or corrupt Customs processes. It can be nontransparent 

regulatory processes. The U.S. medical technology industry is the 

leading sector. There is no indigenous market in many of these 

countries that we deal with. So sometimes it is very easy to take 

discriminatory pricing decisions, reimbursement decisions or regulatory decisions that are focused slowly on our industry. 

So, in terms of what we can do to further commerce, I think a 

greater focus, perhaps, on the nontariff barriers, and including 

mechanisms for dispute resolution and committees, for example, 

that allow for a dialogue on nontariff barriers. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Wolf? 

Mr.WOLF. I am not certain I can give you the best answer at all, 

but I can give you the one that comes to mind with us today. 

Number one is reducing our tariffs. It is 77 percent. We definitely need to get that down to be fair. 

And some of the other issues that we could use help with are in 

the phytosanitary concerns, that our products are safe and that we 

do not go beyond scientific means to determine that, that everything that we do today is backed up scientifically and it makes it 

fit across all borders. 

So that would be our health areas. Thank you. 

Mr.JOHNSON. Regarding textiles, I think the certainty that these 

free trade agreements bring that tariff rates will remain at zero 

and that you can build trade is probably the best portion of the 

agreement. 

The areas that the free trade agreements, particularly Korea, do 

not get into—and I think trade policy in the United States needs 

35

to start getting into this—is the fact that governments, through 

nontariff barriers and through subsidies, wipe out the notion of free 

trade. 

Free trade is a great thing, and we can compete and export all 

over the world when it really occurs. But when governments such 

as China target a sector, such as the textile industry—we are now 

being targeted with their 11th 5-year plan; 73 different subsidies 

offered to the Chinese textile industry; we don’t get any of them—

I think the Government needs to go after those. 

It is not appropriate, necessarily, to protect U.S. industry, but it 

is appropriate for the U.S. to go after the bad players who are 

breaking the rules and get them to stop. And that is what we have 

not seen happen enough. 

ChairwomanVELA ́ ZQUEZ. Before I go to the next two witnesses, 

Mr. Johnson, what type of domestic trade assistance programs do 

you think are necessary in order to help the textile industry? 

Mr.JOHNSON. Domestic assistance programs? 

ChairwomanVELA ́ ZQUEZ. Uh-huh. Are there any Federal programs that exist right now that you think it would be—

Mr.JOHNSON. Well, I think our industry is concerned about a 

number of things that many manufacturers are—that is, the cost 

of health care; the fact that we control our environmental output, 

and other countries do not, and they can benefit from that and 

charge lower prices. 

On the export side, I think the Government could do a better job 

in terms of supporting industry and getting out there, small- and 

medium-sized industry in particular, giving them the resources to 

do trade missions around the world. I mean, our members have 

done export missions through the Department of Commerce, but 

they are actually very expensive, very expensive to do. And there 

is only a limited number of people who can do them, only a limited 

number of trips. And they find them helpful, but I think that is another area where small- and medium-sized businesses could get a 

big benefit. 

ChairwomanVELA ́ ZQUEZ. Okay. 

Ms. Ling? 

Ms.LING. I would like to address standards and the need to assure the text of FTAs carefully address international standards and 

the use of international standards. 

Standards are not a sexy topic. They are not overt. They are not 

as overt as tariff or tariff barriers. But the inappropriate restrictions on use of standards can very easily convert into a nontariff 

barrier. 

So within any free trade agreement, the recommendation would 

be that language be open and inclusive of all international standards, not just those that are developed by groups such as ISO or 

IUC or ITU. ASME had a recent example where that did occur. It 

would have affected many small businesses, mom-and-pop welding 

shops, fab shops, manufacturers of compressors and home heating 

appliances and all, in which there was an effort by the Europeans 

to block out ASME and other U.S.-domiciled standards. And it took 

a concerted effort of private sector and Government to defuse that 

threat. 

36

So the treatment of international standards and also conformity 

assessment in trade agreements is key. 

ChairwomanVELA ́ ZQUEZ. Mr. Ellerhorst? 

Mr.ELLERHORST. Yes, with regards to enforcement, I think it is 

critical, whether it is a political negotiation or economic one, they 

work when both parties have a common goal of reaching some sort 

of common ground, not when one is going to use what they negotiated as a weapon because they know you intend to keep their 

word and they don’t intend to keep theirs. So I think enforcement 

becomes critical. 

As far as what the Government can actually continue to do is—

I am in a relatively high technological environment. Some of the 

tax incentives for technological investment have been very, very 

helpful, as far as us. People who copy can do what you do today, 

but they can’t do what you do tomorrow, because they don’t know 

what you did yesterday. And so, investment in what makes us different, which is our technological know-how and advancement, I 

think is where we can stay out in front. If I focus all my time on 

protecting my IP, I am not really focusing on my business. 

So anything that can enhance small businesses, especially their 

creative talents and abilities, to improve the technological advancements is where I think we will stay ahead the curve. And I think 

that would be the safest way for my industry that the Government 

can help. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Ubl, in your statement you mentioned the need to maintain 

oversight of existing trade agreements. And which one or two, in 

particular, are of top concern for your industry? 

Mr.UBL. I would say, right now, we are very much focused on the 

bilateral relationship with Japan, as well as China. 

Japan continues to have probably the most expensive and slow 

regulatory-approval process for new technologies anywhere in the 

world. And that is coupled with, in our view, a discriminatory pricing practice, where they compare our prices in Japan to those 

prices in other markets, which tend to ignore the real differences 

in the marketplace in Japan. 

Similarly, in China, we have a proposed price-control regulation 

that the Chinese Government is contemplating, particularly focused on medical technology. And there are, in some cases, agencies serving the same functions, so we have duplicate inspection regimes that are conducted both by customs and by regulatory agencies. So that redundant regulation is a very high nontariff barrier 

for many of our small companies.

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Chabot? 

Mr.CHABOT. Thank you, Madam Chair. 

Mr. Ellerhorst, I will begin with you, if I can. I think you stated 

that about 40 percent of your business is export-related. How important is trade to the bottom line, and especially with respect to 

the number of employees? I think you have about 52 right now. 

Mr.ELLERHORST. Yes, sir. 

Mr.CHABOT. If you didn’t have the export trade opportunities 

that you have now because we were more protectionist or whatVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
37

ever, how would that impact your ability to hire more people? Is 

that one of the critical aspects of all this? 

Mr.ELLERHORST. Yes. We probably, if we didn’t export, we would 

be maybe half of the people currently that we have at this point. 

It is kind of unique because it didn’t start as export. That is the 

other thing. If we create business here, and then as that shifts 

within the marketplace, things that didn’t used to export, as companies move, then our business has to move with it. So it is critical. 

And the free trade agreements, from the aspect of making things 

less—I am not as intelligent as the people sitting to my right, when 

it comes to all the exportation and the issues involved. So the simpler it is for somebody like me, the more time I can spend on growing my business and less time on dealing with how I am supposed 

to get this material out of the country. 

So exports right now are huge, and I think in the next 5 years 

it will even become more critical for us as a company. 

Mr.CHABOT. I imagine with winning of the gold medals and the 

silver medals in the Olympics, that must have been kind of a—your 

employees must have gotten a pretty big rush out of that, I would 

think. Is that accurate? 

Mr.ELLERHORST. Yeah, there are posters all over the place. When 

they are on the gold medal stand and they turn their board over, 

they like to see what it is they make. And they probably garnish 

53 more people watching every snowboard event in the Olympics. 

Mr.CHABOT. I will bet. Thank you. 

Mr. Ubl, you stated that the medical technology industry jobs 

pay about 30 percent more than the average U.S. Salary. How important is it, opening new markets, to keeping those high-paying 

jobs in this country? 

Mr.UBL. Oh, it is just incredibly important. We are very proud 

in our sector of that statistic. And we actually just had the Lewin 

Group take a look at the economic impact of the medical technology 

sector, both in the direct that you mentioned, but the indirect, in 

terms of other jobs that they stimulate and economic activity. 

I mean, if you consider two States where we have a high concentration of companies you will get a better sense, but in Massachusetts one in five jobs in medical technology is dependent on free 

trade; in California, one in seven jobs are dependent on just trade 

with Asia. 

So trade is an incredibly important aspect, and the typical medical technology company has around 50 percent of their sales outside of the United States. 

Mr.CHABOT. Thank you. 

Mr. Wolf, relative to the pork industry, I understand it is really 

experiencing record growth and that the U.S. Is one of the world’s 

leading pork-producing countries and it is the second-leading pork 

exporter. And the consumer demand is really high worldwide. 

With the current trade environment, did you envision a continued growth for the industry? 

And I don’t know if you happened to see this, but I think it was 

on one of the ′′Good Morning America′′-type shows, they were referring to some new survey out there talking about people living 

longer and getting cancer. And the gist of what I got is you are not 

supposed to eat anything. And as long as you don’t eat anything, 

38

you are probably safe. And they particularly bashed bacon. They 

were commenting about—

ChairwomanVELA ́ ZQUEZ. I saw that, yes. 

Mr.CHABOT. Did you see that, too? 

ChairwomanVELA ́ ZQUEZ. Yes. 

Mr.CHABOT. Now, I happen to consider bacon to be nature’s perfect meat, myself. But they said don’t eat it. And I think you 

should have this forum to defend bacon and other products. So go 

ahead. 

Mr.WOLF. Thank you very much. I appreciate your comments. 

On bacon, I feel the same. 

ChairwomanVELA ́ ZQUEZ. What is this, free advertisement here? 

Mr.CHABOT. Hey. 

Mr.WOLF. The check is in the mail. 

Mr.CHABOT. He is just kidding. Right? 

Mr.WOLF. Yes, of course. I am sorry. I didn’t realize that. 

Mr.CHABOT. That is all right. 

Mr.WOLF. No, we feel that we are in the best place to produce 

pork in the world. We can do it—we have the resources, we have 

the technology, the ability to do it. And we have a very healthy animal, our product that we produce. 

Our biggest thing is competing and getting the tariffs down, of 

course, and, as I said earlier, the nontariff barriers that they put 

up to prevent us, because nobody can compete with us on a costproduction-wise. So that is where we feel that we can continue to 

do it on a long-term basis. 

And I appreciate you bringing up the report, because we discussed that a little bit just a few minutes ago. I think everything 

has to be taken in moderation. If you sit down and eat 10 pounds 

of bacon a day, you will probably get sick, as well as any other food 

out there. 

Mr.CHABOT. Oh, man. 

Mr.WOLF. As well as any other food out there. So I think the report has to be looked at very, very closely before it goes any further. But thank you. 

Mr.CHABOT. Thank you. 

Mr. Johnson, you mentioned particularly, as a problem, China. 

And I know we are all very familiar and we hear a lot about the 

currency-manipulation aspects of what China is doing that is counterproductive. And you mentioned about the textile customs enforcement, how it is really either nonexistent or isn’t where it 

ought to be. 

Other than the currency manipulation, would you tell us, again, 

what is China doing to get around the rules and just creating a 

non-level playing field that we ought to be aware of and that Congress perhaps should act to counterbalance that? 

Mr.JOHNSON. Well, I think enforcement, here, again, is key. We 

did a review of the subsidies that China is giving to its textile industry, 73 subsidies. I think 23 of those were export-related, which 

is a banned, on its face, subsidy by the WTO. And China has been 

doing this since it joined the WTO. And we have forwarded these 

to USTR, to go after them in the WTO. 

But our experience with the current structure of the trade administration in this country is that the resources go too heavily toVerDate 0ct 09 2002 09:46 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\39378.TXT LEANN
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ward negotiation and too little toward enforcement. And that enforcement is not seen as a strong career path, either within Commerce or within USTR. If there is a way to make the enforcement 

of these agreements, the investigatory ability of the Commerce Department and USTR, if there is a way to enhance that and to also 

help small- and medium-sized businesses bring cases when they 

find them to the groups—we had to do a lot of digging and a lot 

of searching. We are an association with a lot of members; we could 

afford to do that. Most small companies can’t. 

I would suggest those three areas. 

Mr.CHABOT. Okay. Thank you. 

And finally, Ms. Ling, you referenced the establishment of market-accepted international standards. Could you describe the efforts 

that are under way to do so currently? 

Ms.LING. Within ASME, we have what we call a Boiler and Pressure Vessel code. It is about 85 years old. It began purely as a U.S. 

Code, accepted by State law and cities. It is now accepted in over 

100 countries around the world. 

The importance of, again, the right language in the text is to ensure that the U.S. Businesses that use the ASME standards can 

get their products accepted in other nations without going through 

the unnecessary hoops and loops based on technical regulations 

and technical requirements. So that is an example of the international standards that organizations such as ASME has developed. 

As far as the U.S. Technical consensus standards, I would estimate there is probably tens upon tens upon tens of thousands of 

standards, impacting every sector represented here today at this 

table and every other sector that is not. Standards, again, are a 

non-sexy product developed by organizations such as ASME, but 

they underpin every product that goes out. 

Mr.CHABOT. Thank you very much, Ms. Ling. 

And I yield back the balance of my time. 

ChairwomanVELA ́ ZQUEZ. Mr. Gonza ́lez? 

Mr.GONZA ́LEZ. Thank you very much, Madam Chair. 

And my apologies to the witness. I missed all of your testimony. 

Of course, the good thing is you have your written states, which 

greatly benefits us as we read through them with staff. 

I want to commend the Chairwoman for what she has been doing 

in this Committee. You probably have picked up that our mission 

and our goal is the interest of the small-business man and woman 

in this country when it comes to governmental policies and such. 

And it has been my experience that we really never dealt to the 

extent that we have in all the different areas. 

But the shocking thing, of course, is that, many times, small 

business is kind of an afterthought as we go through huge policy 

considerations and programs and agendas. And I will give you two 

real quick examples. 

We have actually had hearings with the FCC Chairman, regarding the sale of spectrum and such—no one ever heard of that—but 

in the context of, what does that mean for small business? And I 

think what we learned was small business can’t compete in the 

auction for spectrum. And so it was interesting. So, then we have 

40

to start figuring out, how do we get small-business men and women 

at the table after the fact? 

Then we go in for the Centers for Medicaid and Medicare on competitive bidding. Was that just yesterday? I can’t even remember. 

But we had these hearings. Huge changes, and the whole intent is 

to reduce the number of vendors. Well, you know who is going to 

go first; it is going to be the smaller businesses. So then we have 

to figure out how we are going to address that. 

Now, when it comes to trade, it is really difficult. And I know 

that we hear from our trade representatives that small businesses 

are being looked at and cared for and such. But the truth is that, 

unless we are all really vigilant—and I want to thank you for your 

contribution that you are making—regarding, for instance, enforcement, making sure that the regulatory scheme in another country 

doesn’t really prohibit, now that we have the reduction or elimination of tariffs, from you actually doing business. I mean, that is 

important. We have to start figuring out how to become your advocates. 

The good news is that you have got an incredibly aggressive 

Chairwoman. And I am not trying to just butter her up; she doesn’t 

need it, believe me. 

But that is the interesting thing. And so, I think we need to get 

that message out there. 

And, again, I just apologize, because what I gathered here in 

your testimony is that you will throw things out that are actually 

tangible, that we can promote your interest. 

And so, I guess if there was—again, and you probably went over 

it—but to each of the witnesses, one small, incremental but important thing that we can do for you in the context of free trade agreements, because they are going to be pretty contentious. Now, we 

have labor out there; it is pretty well-represented. We have the environmentalists are pretty well-represented. We have big, big businesses and manufacturers and producers that are represented. 

What is the one thing that you could say, just keep an eye out 

for us and that is truly meaningful? 

Mr.UBL. Well, first, let me applaud you for the hearing yesterday. We had a witness who testified. 

And if I could attempt to try to combine the two, what you are 

doing with this hearing and bringing attention to transparency 

around nontariff barriers—you know, competitive bidding happens 

in all the foreign markets that we operate in, but they do it without proposed rule-making, without transparency, without congressional oversight, in many cases. So, you know, nontariff barriers 

and addressing nontariff barriers in these agreements is just critical for our members. So if you ask me one thing. 

I guess the other one thing, I am tempted to say, is just keep 

them moving. You know, trade agreements work; they work for our 

sector. Work in a bipartisan way to keep them moving, because 

they are working. They are creating jobs in our space. And jobs in 

our space, as we talked about while you were away, pay 30 percent 

more, on average, than the U.S. Jobs. So it is a job creator. And 

just keep them moving. 

Mr.GONZA ́LEZ. Mr. Wolf? 

41

Mr.WOLF. I would probably have to agree with everything Mr. 

Ubl just said. It was very appropriate. Mainly to just keep the 

trade moving, keep increasing, if we can. Thank you. 

Mr.JOHNSON. I would add, make sure they are enforced. Mr. 

Veroneau, a very insightful question, what does USTR do to make 

sure that Customs enforces the agreement? Well, we have gone 

back to USTR and we have said, ′′Customs is not enforcing this 

agreement. What are you going to do?′′ and they say, ′′Well, we will 

pass on your concerns,′′ and we believe they do, but they have no 

control over Customs. And Customs, if it doesn’t want to, it just 

doesn’t. 

And so I don’t know how you go back and you say, ′′Is this agreement being enforced or not, and what is being done about it?′′, but 

there needs to be some kind of a review or an increased emphasis 

in manpower on how are these agreements being implemented and 

enforced. 

Mr.GONZA ́LEZ. Thank you. 

Ms. Ling? 

Ms.LING. Again, text of trade agreements, but in this area, in addition to international standards, it would be conforming assessment, and that includes the testing and inspection that can create 

nontariff barriers to trade. 

It would be important that text agreements currently in the future include language that provide national treatment within the 

TBT Agreement context. And that means that U.S. Manufacturers 

are not treated unfairly within the testing and inspection protocols 

of a nation. 

Thank you. 

Mr.GONZA ́LEZ. Thank you. 

Mr. Ellerhorst? 

Mr.ELLERHORST. We are very a small business. We don’t really 

have a full-time import-export person on our staff. It is very, very 

easy, in running your own business, to get so inwardly focused that 

you really don’t have a good idea of the changes that are happening, other than when you start feeling them in the marketplace. 

I would say an effort to work with the U.S. Trade organizations 

and things, to come up with ways of identifying the opportunities 

and the things that you are offering to small businesses. Because 

a lot of times, I don’t think people, businesses our size, really 

know—we don’t really get the information. We read on the news 

that this happens, but we don’t know how that really impacts us, 

what opportunities it provides. 

Because, in the global marketplace shift, the smaller companies 

are the ones that must reinvent themselves, and do it quickly. 

Sometimes we are so wrapped up in doing that, we really get 

closed off from looking up, coming up for air a little bit and finding 

out, really, what opportunities the Government is providing us. 

There is help out there that we don’t even know exists, a lot of us, 

already. And I think if we could get word to the small, small businesses that, ′′Hey, you can play in the global market; it is not just 

for the big companies anymore,′′ I think that would be helpful. 

Mr.GONZA ́LEZ. And I do believe you need that advocate. You 

know, we work with the Small Business Administration and others 

and maybe small-business development centers. There has to be a 

42

way that they will have that personnel out there that you can’t 

have on staff that puts you on notice regarding certain issues that 

are coming, how they impact you, or if you have a question about 

it. We have to do that. 

And just one last thought, Madam Chair, and that is I think we 

are all, really, for free trade, especially when it is the other country 

that has had tariffs and so on. But I don’t think we can have such 

a simplistic attitude, saying, ′′Look, let’s just go for it because they 

are dropping all their tariffs. This is a great windfall for the United 

States.′′ We have to really look at the potential impact of the competition and who will benefit by it. And, again, where is the small 

business in America going to, in any way, reap any of the benefits 

that should be out there. 

So, again, just, thank you very much. 

And, again, my apologies, Madam Chair. I yield back. 

ChairwomanVELA ́ ZQUEZ. Sure. 

Mr. Gonza ́lez and to the witnesses and Mr. Ellerhorst, there are 

programs under the Department of Commerce. And when people 

come here and say, ′′But we don’t know about it′′—so it seems like 

they have to do a better job at doing the outreach, providing information. 

We have the Agriculture Marketing Service under the Department of Agriculture. There is the Manufacturing Extension Partnership and the Advanced Technology Partnership. But there is a 

role for the Federal Government to play. We are not asking, here, 

for handouts for small businesses, but when they do well, the 

American economy does well too. And then we create the jobs that 

are important and are necessary. 

I would like to follow up on what Mr. Gonza ́lez was talking 

about, to ask each one of you if you—well, during the whole negotiation process of this trade agreement, do you feel that there was 

participation with small businesses? Do you feel that you have 

some input into those trade negotiation processes? 

Mr.UBL. I would say we felt we did, but maybe not for the reason 

you might suspect, in that we felt we had very good collaboration 

with USTR and Commerce as a trade association, as these negotiations proceeded. Inside the trade association, we have a small-business or emerging-growth entity that is comprised of the CEOs of 

our small companies. So we used that as a feedback mechanism as 

we engaged with USTR and Commerce. 

But I must say, with regard to USTR in particular, they spent 

hours with our companies as these negotiations were proceeding. 

And there is a specific chapter on medical technology in the Korea 

FTA dealing, as I mentioned in my testimony, with many of our 

critical concerns. 

Mr.WOLF. Yes, as far as the National Pork Producers Council, we 

did have representation on the trade agreements with Mr. Giordano. 

ChairwomanVELA ́ ZQUEZ. Let me just—yes, Mr. Johnson? 

Mr.JOHNSON. We did, but as part of the Textile Apparel Advisory 

Committee, in good consultation. 

ChairwomanVELA ́ ZQUEZ. Ms. Ling? 

43

Ms.LING. There is also another advisory committee under USTR 

with Commerce, and that is the Advisory Committee on Standards. 

And we had input through that advisory body. 

Mr.ELLERHORST. I am unaware of any direct, but we have international plastics associations and things, and I am sure—

ChairwomanVELA ́ ZQUEZ. Sure. 

All right. I think that basically, if Mr. Gonza ́lez has no further 

questions—

Mr.GONZA ́LEZ. Nothing further. 

ChairwomanVELA ́ ZQUEZ. Look, I think the timing of this hearing 

is very important, since we are going to be dealing with Peru probably next week? 

Mr.GONZA ́LEZ. I think so. 

ChairwomanVELA ́ ZQUEZ. And then Colombia, Panama and Korea. 

And there are some important issues that continue to be out there. 

But let me just say that, in the sense that this Committee—we do 

not have jurisdiction over trade agreements, but we do have influence over the decision-making process, especially since the jurisdiction of this Committee was expanded. And since Democrats, the 

different chairmen, we meet every Tuesday, we discuss and we go 

over legislation. So I share many of the things that we hear in 

these hearings. So it is very important for you to come to us and 

spend some time and discuss the issues that are important to you. 

We hope that, as this legislation moves forward, that we feel 

more comfortable, in the sense that we feel provisions that are 

needed to be included as part of the trade agreements representing 

small businesses, that will be there, that the Department of Commerce, also, and USTR will provide the tools and the resources that 

are needed to make sure that, yes, laws are good, they look good 

on paper, in the books, but it is important—enforcement is important. 

And, Mr. Johnson, I hear you loud and clear. 

So, to all of you, thank you. 

And members have 5 legislative days to submit statements and 

other materials for the hearing record. 

This hearing now is adjourned. Thank you. 

[Whereupon, at 1:03 p.m., the Committee was adjourned.]

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