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26–369 2006

THE FUTURE OF THE WORLD TRADE 

ORGANIZATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TRADE 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

MAY 17, 2005 

Serial No. 109–33 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

BILL THOMAS, California, Chairman 

E. CLAY SHAW, JR., Florida 

NANCY L. JOHNSON, Connecticut 

WALLY HERGER, California 

JIM MCCRERY, Louisiana 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

JIM NUSSLE, Iowa 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

J.D. HAYWORTH, Arizona 

JERRY WELLER., Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

BOB BEAUPREZ, Colorado 

MELISSA A. HART, Pennsylvania 

CHRIS CHOCOLA, Indiana 

DEVIN NUNES, California 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

BENJAMIN L. CARDIN, Maryland 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

ALLISON H. GILES, Chief of Staff 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON TRADE 

E. CLAY SHAW, JR., Florida, Chairman 

WALLY HERGER, California 

PHIL ENGLISH, Pennsylvania 

JIM NUSSLE, Iowa 

JERRY WELLER, Illinois 

RON LEWIS, Kentucky 

MARK FOLEY, Florida 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

BENJAMIN L. CARDIN, Maryland 

SANDER M. LEVIN, Michigan 

WILLIAM J. JEFFERSON, Louisiana 

JOHN S. TANNER, Tennessee 

JOHN B. LARSON, Connecticut 

JIM MCDERMOTT, Washington 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of May 5, 2005 announcing the hearing ................................................ 2 

WITNESSES 

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

Trade Representative ........................................................................................... 8 

American Farm Bureau Federation, and Minnesota Farm Bureau Federation, 

Al Christopherson ................................................................................................ 39 

Coalition of Service Industries, and Principal International, Norman 

Sorensen ................................................................................................................ 29 

National Association of Manufacturers, and Power Curbers, Inc., Dyke 

Messinger .............................................................................................................. 34 

United Steelworkers, William J. Klinefelter ......................................................... 42 

SUBMISSIONS FOR THE RECORD 

Aaronson, Susan and Jamie Zimmerman, Kenan Institute of Private Enterprise, joint statement ........................................................................................... 50 

Alliance of American Consumers for Affordable Homes, Alexandria, VA, statement ...................................................................................................................... 52 

Cold Finished Steel Bar Institute, joint statement ............................................... 53 

Gold, Jonathan, Retail Industry Leaders Association, Arlington, VA, statement ...................................................................................................................... 57 

Howard, John, U.S. Chamber of Commerce, statement ....................................... 58 

Irace, Mary, National Foreign Trade Council, statement .................................... 59 

Klein, Harlan and Neal Fisher, North Dakota Wheat Commission, Bismarck, 

ND, letter .............................................................................................................. 61 

Male, Elizabeth, Export, PA, statement ................................................................ 63 

Nelsen, Peter and Jennifer Lambert-O’Keefe, International Trade Council, 

Alexandria, VA, joint statement ......................................................................... 66 

Sheldon, Joe, Huntington Beach, CA, statement .................................................. 67 

Solarz, Barry, American Iron and Steel Institute, statement .............................. 68 

Stewart, Terence, Stewart and Stewart, statement .............................................. 75 

Wallach, Lori, Public Citizen’s Global Trade Watch, statement .......................... 82 


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THE FUTURE OF THE WORLD TRADE 

ORGANIZATION 

TUESDAY, MAY 17, 2005 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON TRADE, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:07 a.m., in 

room 1100, Longworth House Office Building, Hon. E. Clay Shaw, 

Jr. (Chairman of the Subcommittee) presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON TRADE 

FOR IMMEDIATE RELEASE CONTACT: 202–225–1721 

May 05, 2005 

No. TR–2 

Shaw Announces Hearing on the Future of the 

World Trade Organization 

Congressman E. Clay Shaw, Jr. (R–FL), Chairman, Subcommittee on Trade of the 

Committee on Ways and Means, today announced that the Subcommittee will hold 

a hearing to review future prospects for U.S. participation in the World Trade Organization (WTO). The hearing will take place on Tuesday, May 17, 2005, in the 

main Committee hearing room, 1100 Longworth House Office Building, beginning at 10:00 a.m. 

Oral testimony at this hearing will be from both invited and public witnesses. Invited witnesses will include the Honorable Peter F. Allgeier, Deputy U.S. Trade 

Representative. Also, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee or 

for inclusion in the printed record of the hearing. 

BACKGROUND: 

The WTO was established in the Uruguay Round, which was the eighth round 

or series of multilateral trade negotiations under the General Agreement on Tariffs 

and Trade (GATT). These negotiations to expand trade, which date back to the establishment of the GATT in 1948, were a response to the Great Depression and the 

political upheaval and conflicts of the 1930s, which deepened as a result of protectionist policies such as the Smoot-Hawley Tariff. Work under the GATT system 

aimed at raising living standards and promoting international economic growth 

through the opening of world markets has spanned six decades. 

The trade agreements reached at the end of 1994 during the Uruguay Round were 

noteworthy in that they greatly expanded coverage of GATT rules beyond manufactured goods trade to include agricultural trade, services trade, trade-related investment measures, intellectual property rights, and textiles. The most visible accomplishment of this multilateral trade round was to establish the WTO to administer 

the GATT agreements and to settle disputes among WTO members. 

World Trade Organization countries are currently participating in the ninth round 

of negotiations, called the Doha Development Round, which was launched in Doha, 

Qatar, in November 2001. The Doha agenda provides a mandate for negotiations on 

a range of subjects and work in on-going WTO committees. According to the U.S. 

Trade Representative, the main focus of the negotiations is in the following areas: 

agriculture, industrial market access, services, trade facilitation, WTO rules (i.e., 

trade remedies, regional agreements, and fish subsidies), and development. The goal 

of the Doha agenda is to reduce trade barriers so as to expand global economic 

growth, development, and opportunity. 

Sections 124–125 of the Uruguay Round Agreements Act (URAA) (P.L. 103–465) 

require the President to submit a special report on U.S. participation in the WTO 

every 5 years from the date the United States first joined the WTO. Congress received the first of these 5-year reports in 2000. Congress received the second report 

on March 1, 2005. Included in the ‘‘2005 Trade Policy Agenda and 2004 Annual Report of the President’s Trade Agreements Program’’ is the President’s review of the 


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WTO, including highlights, recent accomplishments, as well as cumulative assessments of major trade topics since the WTO was established such as: (1) expanded 

market access in goods and services, (2) economic benefits of trade, (3) trade related 

aspects of intellectual property rights and investment protection, (4) customs related 

matters, (5) continued operation of a sound and effective system to settle disputes, 

and (6) launch of the Doha Development Round in 2001. 

H.J. Res. 27, a joint resolution which would withdraw approval of the United 

States from the Agreement establishing the WTO, was introduced on March 2, 2005, 

by Rep. Bernard Sanders (I–VT) and Rep. Ron Paul (R–TX). Pursuant to the requirements of sections 124–125, this resolution is privileged, and the Committee on 

Ways and Means must consider it within 45 days or face discharge. 

In announcing the hearing, Chairman Shaw stated: ‘‘The WTO has proven to be 

a useful forum for building trade relationships and working out disputes. I cannot 

imagine anyone seriously thinking that we are better off without the WTO, but it 

is important that Congress continually review and oversee how the system works. 

I look forward to hearing from government and private sector panels on their views 

of how the system has succeeded and what challenges remain.’’ 

FOCUS OF THE HEARING: 

The focus of the hearing will be to examine: (1) overall results of U.S. membership 

in the WTO and the GATT, (2) whether future participation of the United States 

in the WTO and the multilateral trading system can be expected to benefit Americans, and (3) prospects for increased economic opportunities for U.S. farmers, workers, and consumers in the Doha Round. 

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD AT THE WTO 

HEARING: 

Requests to be heard at the hearing must be made by telephone to Michael Morrow or Kevin Herms at (202) 225–1721 no later than the close of business Tuesday, 

May 10, 2005. The telephone request should be followed by a formal written request 

faxed to Allison Giles, Chief of Staff, the Committee on Ways and Means, U.S. 

House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 

20515, at (202) 225–2610. The staff of the Committee will notify by telephone those 

scheduled to appear as soon as possible after the filing deadline. Any questions concerning a scheduled appearance should be directed to the Committee staff at (202) 

225–1721. 

In view of the limited time available to hear witnesses, the Committee 

may not be able to accommodate all requests to be heard. Those persons and 

organizations not scheduled for an oral appearance are encouraged to submit written statements for the record of the hearing in lieu of a personal appearance. All 

persons requesting to be heard, whether they are scheduled for oral testimony or 

not, will be notified as soon as possible after the filing deadline. 

Witnesses scheduled to present oral testimony are required to summarize briefly 

their written statements in no more than five minutes. THE FIVE-MINUTE 

RULE WILL BE STRICTLY ENFORCED. The full written statement of each 

witness will be included in the printed record, in accordance with House 

Rules. 

In order to assure the most productive use of the limited amount of time available 

to question witnesses, all witnesses scheduled to appear before the Committee are 

required to submit 300 copies, along with an IBM compatible 3.5-inch diskette in 

WordPerfect or MS Word format, of their prepared statement for review by Members 

prior to the hearing. Testimony should arrive at the full Committee office, 

1102 Longworth House Office Building, no later than close of business on 

Friday, May 13, 2005. The 300 copies can be delivered to the Committee staff in 

one of two ways: (1) Government agency employees can deliver their copies to 1102 

Longworth House Office Building in an open and searchable box, but must carry 

with them their respective government issued identification to show the U.S. Capitol 

Police, or (2) for non-government officials, the copies must be sent to the new Congressional Courier Acceptance Site at the location of 2nd and D Streets, N.E., at 


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least 48 hours prior to the hearing date. Please ensure that you have the 

address of the Committee, 1102 Longworth House Office Building, on your 

package, and contact the staff of the Committee at (202) 225–1721 of its impending arrival. Due to new House mailing procedures, please avoid using mail 

couriers such as the U.S. Postal Service, UPS, and FedEx. When a couriered item 

arrives at this facility, it will be opened, screened, and then delivered to the Committee office, within one of the following two time frames: (1) expected or confirmed 

deliveries will be delivered in approximately 2 to 3 hours, and (2) unexpected items, 

or items not approved by the Committee office, will be delivered the morning of the 

next business day. The U.S. Capitol Police will refuse all non-governmental courier 

deliveries to all House Office Buildings. 

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE AT THE 

WTO HEARING: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘109th Congress’’ from the menu entitled, 

‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Monday, May 

23, 2005. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

Those filing written statements who wish to have their statements distributed to 

the press and interested public at the hearing can follow the same procedure listed 

above for those who are testifying and making an oral presentation. For questions, 

or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS FOR WTO HEARING: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or 

WordPerfect format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted 

for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in 

the Committee files for review and use by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations 

on whose behalf the witness appears. A supplemental sheet must accompany each 

submission listing the name, company, address, telephone and fax numbers of each 

witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 


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The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman SHAW. Good morning. Thank you. In today’s hearing 

the Subcommittee will examine the overall U.S. membership in the 

World Trade Organization (WTO), spending, I hope, a few moments 

on the past and then turning toward the current negotiation and 

what is at stake for American firms, workers, farmers, and consumers. I expect the discussion today will include a wide array of 

issues, ranging from agriculture to intellectual property, and from 

textiles to banking. All too often we focus our attention on aspects 

of trade we disagree with. For example, it is inevitable that when 

we meet with foreign representatives we spend much of our time 

discussing very specific trade barriers and little time phrasing the 

broad range of cooperation and success we may have. 

This hearing may be no different, but Members should not go 

away thinking that judging the WTO comes down to simply counting how many disputes were won or lost. We should examine the 

overall structure of the WTO as an institution, and the various 

trade agreements under it. How has it met our expectations in 

bringing a rules-based trading environment? How has real market 

access developed? In some cases, how have unexpected barriers developed? I would like our private sector witnesses to describe for 

U.S. whether the WTO has brought them benefits and discuss challenges that remain. 

Regarding the current negotiations, Congress has been deeply involved with the Administration every step of the way, through the 

consultations and even by meeting with foreign officials ourselves. 

For example, the U.S. trade proposals are extensively reviewed by 

the Committee on Ways and Means before being tabled. Many 

Members of Congress routinely attend WTO ministerial meetings 

with foreign officials and make the case for an ambitious trade liberalizing agenda in tandem with our U.S. Trade Representative 

(USTR) negotiators. 

I personally very much appreciated the fact that in the Cancun 

USTR negotiations, negotiators would pause between negotiating 

sessions to sit down in front of a dozen Members of Congress and 

explain how the negotiations were developing and answer questions. 

Many of U.S. look forward to joining the U.S. delegation in Hong 

Kong this December. Member interest is always high because there 

is a great deal at stake in the Doha round, such that even very 

technical issues, like the various tariff cutting formulas and the 

method of converting specific tariffs into ad valorem tariffs capture 

headlines because the result could mean more market access for 

the United States’ goods. 

As we discuss these critical areas, I would like a moment to congratulate Mr. Pascal Lamy of France on his selection as the new 

WTO Director-General. Mr. Lamy is a skilled trade negotiator. I 

am hopeful his abilities will ensure the WTO balance and concerns 


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for its members. I look forward to working with him in the coming 

months. 

Finally, I would—I must mention one of the reasons for the timing of this hearing. As you know, when we voted to join the WTO, 

we included a provision to formally review U.S. participation in the 

WTO and a mechanism to withdraw the congressional approval for 

the WTO. This year, under the mechanism, there is a resolution, 

H.J. Res. 27, which was introduced on March 2nd, that calls for the 

withdrawal of the United States from the WTO, and that resolution 

has been referred to the Committee on Ways and Means for consideration. According to the law, which requires expedited consideration of this resolution, the Committee must act within 45 days, 

and that deadline is fast approaching. I expect our witnesses will 

give their views of whether Congress and this Committee in particular should favorably or unfavorably act on this resolution. It is 

my strong view that the United States greatly benefits from our 

continued participation in the WTO. Mr. Cardin? 

Mr. CARDIN. Thank you, Mr. Chairman, and thank you for holding this hearing. Mr. Ambassador, it is a pleasure to have you back 

before our Committee. 

Mr. Chairman, as you pointed out, there are really two reasons 

for today’s hearing. The immediate purpose is for this Committee 

to be able to act on H.J. Res. 27, which is the disapproval resolution for the WTO. The second purpose for today’s hearing is for 

U.S. to assess where we are on the WTO, particularly as it relates 

to the Doha round, which was launched almost 4 years ago, which 

is already more than 2 years behind schedule. 

First, Mr. Chairman, in regards to the disapproval resolution. It 

is interesting to point out that this disapproval resolution was introduced earlier in this 5-year cycle than it was 5 years ago. Five 

years ago we acted on it by June 21st. I hope that we can act on 

this disapproval resolution next week in Committee and we can 

dispose of it as promptly as possible, certainly before the end of 

June. 

I stand ready to work with you to make sure that it is unfavorably reported and disposed of, and we continue in the WTO. I agree 

with you. It is extremely important that we continue working within the WTO. We had wide margins of both the Democrats and Republicans for rejecting the disapproval resolution, and I expect that 

will be the case again this go round. 

With regard to the broader purpose for today’s hearing, which is 

the status of the WTO, it is an important time for U.S. to take 

stock of the WTO and our participation in it. First, the Doha Development Agenda (DDA) negotiations has reached a critical phase. It 

is generally agreed that in order to have a successful meeting of 

the ministers this December in Hong Kong, the members of the 

WTO will have to come to significant levels of agreement by July 

in each of the three key areas. 

First, in agriculture. I am concerned that the steps announced by 

the European Union (EU) on both domestic supports and market 

access are insufficient. I note that the announcement last week 

that the next Director-General of the WTO, as you pointed out, will 

be Pascal Lamy, the former Trade Commissioner of the EU, who 

comes from France. Obviously, Mr. Lamy will have a special burVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\26369.XXX 26369

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den to demonstrate that he can oversee an agricultural agreement 

that includes substantial reductions in the EU’s support and that 

significantly narrows the gap between the EU’s spending on farm 

supports and our own, all while bringing the EU tariff levels down. 

Second, in the area of manufactured goods, there are two key 

challenges: tariff reductions, particularly by the advanced developing countries, and the elimination or the reduction on non-tariff 

barriers (NTB). In both of these areas, much work remains to be 

done to accomplish these goals. I am particularly concerned about 

the negotiations of the NTB, which lag far behind at this time. The 

area is increasingly critical for U.S. manufacturers, particularly 

small manufacturers and particularly in large markets such as 

Japan, China, and Korea. 

Mr. Chairman, finally, in the area of services, there is now widespread agreement that the negotiations are far behind in the area 

that remains critical to the United States. I hope that our negotiators will be able to make up for lost time in the next couple of 

months so that the ambitious service package can be approved in 

Hong Kong. 

Last, but far from least, I would like to comment on one critical 

aspect of the WTO, and that deals with the dispute settlement system. No one doubts that the dispute settlement system of the WTO 

has many strong points. However, unless we address its weaknesses, we are going to be in serious trouble in support for the 

WTO. 

In my view, none is more glaring than the overreaching that has 

been manifested in a large number of WTO decisions. Under the 

old General Agreement on Tariffs and Trade (GATT) system, silence in agreement meant that the country could do what it 

deemed appropriate. Under decisions of the appellate body and the 

panels of the WTO, silence has been altered to mean that the appellate body and panels do what they think is appropriate. The 

WTO agreements did not give panels this authority. The Congress 

in ratifying the WTO did not intend that the WTO appellate bodies 

and panels to have such authority. 

In short, these overreaching decisions must be corrected, fully 

and quickly. If it is not, the risk of eroding support for the WTO 

will be real. In fact, we have already seen erosion in this Congress. 

The numbers are clear and disturbing. In 33 cases brought against 

the United States since 1995, panels where the appellate body have 

overreached in 22 of them or fully two-thirds. Even more disturbing is the 23 cases involving trade remedies brought against 

the United States since 1995. There has been overreaching in 20 

of these cases. The consequences of these overreaching are clear. In 

10 years, the WTO, without authority, has denied every single safeguard measure as applied by the United States or any other country. In trade remedy cases involving the United States, anti-dumping duties, countervailing duty measures and safeguard cases, the 

WTO has upheld the United States’ decisions in only 2 of 17 cases. 

A growing number of observers is coming to recognize that this 

extraordinary loss rate is because the WTO panels and appellate 

bodies do not respect the letter of the WTO Agreements and are 

filling the gaps beyond what the U.S. negotiators agreed to in the 

Uruguay rounds. The USTR has recognized this problem with proVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 E:\HR\OC\26369.XXX 26369

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posals it has made to the dispute settlement negotiations in the 

Doha round. However, these negotiations regarding dispute settlement mechanisms have now dragged on for more than 7 years past 

their scheduled completion date in 1998, with little sign of immediate end. 

As a consequence, I intend to introduce an omnibus bill shortly 

that addresses these growing problems and other problems with 

U.S. trade laws that substantially disadvantage American manufacturers and global competition. This legislation will include a 

number of elements including first border adjustability. Today, the 

WTO allows the European countries and many others to rebate 

companies’ value-added taxes at the border while not allowing the 

United States to do the same with corporate income taxes. This 

provides a major disadvantage to U.S. manufacturers in global 

competition. 

Second, the creation of a special prosecutor for U.S. trade cases. 

I will propose the creation of a Senate confirmed position in the Office of the USTR to handle litigation in the WTO and our other 

trade agreements. Whatever the fault of the WTO panels in gap 

filling, a 15-to-17 loss record is simply unacceptable. There needs 

to be a higher level of accountability to Congress in this critical 

area. 

Third, the WTO Review Commission. I will revive a proposal first 

made by Senator Dole in which I have introduced on a bipartisan 

basis for the last several Congresses for the creation of a panel of 

retired judges to review the decisions of the WTO and advise Congress on their review. The passage of time has only made more 

clear the need for an impartial review of the WTO decisions. 

Fourth, I will propose various updates in the U.S. trade remedy 

laws, including the anti-dumping, countervailing duty of section 

421 China safeguard laws. 

Some of these ideas have already been introduced by our colleagues on both sides of the aisle. However, I think it is time for 

U.S. to consider an omnibus bill on an urgent basis. 

Mr. Chairman, I hope that we can make it a top priority of the 

Subcommittee and Committee to mark up this critical legislation 

this summer, report it to the full House before we adjourn for the 

August recess, and enact the needed reforms prior to the Hong 

Kong ministerial meetings. Too many manufacturers have suffered 

too long for U.S. to delay any further. Mr. Chairman, I look forward to hearing from our panel of witnesses, and I look forward to 

working with you to strengthen our position as we look toward a 

successful completion of the Doha round. 

Chairman SHAW. Thank you, Mr. Cardin. Now, I welcome Peter 

Allgeier back to this Committee. He is the Deputy of the USTR, of 

the Office of the USTR. Sir, we have your full testimony. As you 

know, it will become a part of the record, and you may proceed any 

way in which you see fit. 

STATEMENT OF THE HONORABLE AMBASSADOR PETER F. 

ALLGEIER, DEPUTY U.S. TRADE REPRESENTATIVE, OFFICE 

OF THE U.S. TRADE REPRESENTATIVE 

Mr. ALLGEIER. Thank you very much, Mr. Chairman, for convening this Subcommittee today. I am very pleased to be here to 


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discuss with you participation in the WTO-U.S. participation in the 

WTO and the overwhelming value of continued U.S. participation 

for our economic and our strategic interests. 

First, I wish to recognize the leadership of Congress, and particularly, this Subcommittee and its leadership. You, Chairman Shaw, 

and Ranking Member Cardin, and the other Members in the establishment and operation of the global trading system and its contribution to the interests of the United States. 

The creation of the WTO, of course, represented the culmination 

of decades-long bipartisan U.S. commitment to lead the world away 

from economic isolationism and toward an open rules-based global 

trading system. Today, the United States continues to exercise our 

leadership in a world that faces new challenges to promoting global 

security, economic growth, and the alleviation of poverty. The 

United States is fully engaged in the WTO’s work under the DDA, 

and we are aggressively using the existing WTO machinery to effectively enforce our rights. 

Simply put, the WTO exists as the most important vehicle to advance U.S. trade interests and is critical to promoting the prosperity of America’s workers, businesses, farmers, ranchers, and 

families. The United States, of course, remains the world’s largest 

exporter. During the first 10 years of the WTO, from 1994 to 2004, 

U.S. exports of goods and services have risen 63 percent, from $703 

billion to $1.1 trillion. World trade during that same period has 

more than doubled, increasing from $5.5 trillion to $11.5 trillion in 

2004. This would not have happened without the WTO. During this 

10-year period, the market openings and the trading rules of the 

WTO have contributed significantly to the strong economic performance of the United States, as evidenced by real gross domestic 

product (GDP) growth during this period of 38 percent; growth in 

per capita income—real per capita income—of 25 percent; growth 

in manufacturing production of 43 percent, and that compares with 

27 percent for the previous 10 years; and growth in manufacturing 

exports from the United States of 65 percent. Agricultural exports 

have grown 38 percent during this period; services exports have 

grown by 69 percent. We have experienced an average unemployment rate of 5.1 percent. There has been a net job expansion of 

17.2 million workers in the United States. 

This impressive economic record and the competitiveness that 

underlies it could not have occurred without our active participation in the WTO. By playing a strong leadership role in the WTO, 

the United States has been able to shape the world’s trading system in ways that promote a trade environment that is most advantageous to our producers and service providers, because it rests on 

the same commercial principles that we have at home—non-discrimination, open markets, transparency, the rule of law, and due 

process. In a world where over 95 percent of the consumers live beyond our borders, the WTO is an essential tool for U.S. interests. 

Falling trade barriers have helped rapidly increase the value of 

trade relative to the U.S. economy. United States goods and services trade, exports and imports, reached levels of 18 percent of the 

value of our GDP in 1984. When we started the WTO in 1994, it 

was 21.7 percent; now this trade represents more than 25 percent 

of our GDP or it is equivalent to more than 25 percent of our GDP. 


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Now, to ensure equal opportunities for U.S. businesses, farmers, 

ranchers, and other exporters, the United States has aggressively 

used the dispute settlement mechanisms of the WTO. In fact, the 

United States has brought more WTO dispute settlement cases 

than any other country. Since the establishment of the WTO, the 

United States has initiated 74 cases. Examples of these cases include dairy, apples, biotechnology, telecommunications, automobiles, apparel, customs procedures, and intellectual property 

rights. Of these 74 cases, we have won 23 on the core issues in the 

case. We have settled prior to the end of litigation another 23, and 

we have lost 4. Those are the cases that we have initiated. 

Now, the WTO, of course, contributes more generally to development, and study after study shows that the rules-based system promotes openness and predictability, leading to increased trade and 

improved prospects for economic growth in all member countries. 

Economic research by the World Bank confirms that countries that 

have more open economies have higher growth rates than those 

with more closed economies. A number of World Bank studies in 

2004 found that trade and integration into the world economy lead 

to faster growth and poverty reduction in poor countries. 

I would like to spend just a minute or two looking ahead at the 

advancing the DDA. Two months after the events of September 

11th, 2001, U.S. leadership played a critical role in the launch of 

a new round of multilateral trade negotiations, the DDA. The 

WTO’s DDA is part of President Bush’s strategy to open markets, 

reduce poverty, and expand freedom through increased trade 

among all countries in the global trading system, both developed 

and developing. 

The U.S. role in the WTO obviously is at the core of this strategy. The main focus of U.S. participation in the Doha negotiations 

is in the following areas: agriculture, industrial market access, 

services, trade facilitation, and development. The goal of the DDA 

is to reduce trade barriers so as to expand economic growth, development, and opportunity. Dismantling these trade barriers multilaterally holds immense potential. From 1994 to 2003, the world 

economy expanded at an average rate of approximately 2.5 percent, 

but exports expanded at more than twice that rate, at 5.5 percent. 

This could not have occurred without the liberalization of trade resulting from the Uruguay round and the subsequent establishment 

of the WTO. 

Our new USTR, Ambassador Rob Portman, an alumnus of the 

Committee on Ways and Means, already is doing his part to provide a new spark to these negotiations. Literally, within 24 hours 

of the time that he was sworn in, on April 30th, he was on an airplane to Europe to hold meetings with his ministerial colleagues to 

promote the DDA. His message was one of continued U.S. commitment and determination to be a driver in those negotiations and to 

be a problem solver in the negotiations. 

Doha provides U.S. an opportunity we cannot afford to waste. By 

bringing the negotiations to a successful, ambitious conclusion, we 

can set the course for the global economy for the next decades and 

make a major contribution to development and to our own country’s prosperity. We look forward to working with Members of this 

Committee and other Members of Congress to secure significant reVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\26369.XXX 26369

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sults and new opportunities for America’s workers, farmers, ranchers, service providers, and consumers. 

In conclusion, the first 10 years of the WTO have demonstrated 

why the United States must continue its active participation and 

leadership role. A turn away from the work of the past six decades, 

to bring about a rules-based, liberalized global trading system, 

would bring certain closure of markets to those American workers 

and farmers dependent on continued trade liberalization and would 

ignite persistent trade conflicts that would distort the global economy. A world where the United States steps away from rulesbased, global trading system would be a world where international 

trade would be an additional source of strategic conflict rather than 

serving as a force for cooperation and strengthened ties among 

countries. 

We know that the global trading system is not perfect and remains a work in progress. But through American leadership in the 

WTO and the support of Congress, the core U.S. trade agenda of 

promoting open markets and the rule of law has become the core 

agenda of the global trading system. The work toward these objectives is complex and often difficult, but this work is even more vital 

today than it was in those first decades after the catastrophic 

world war. 

The participation and the leadership of the United States in the 

global trading system remains a critical element for ensuring 

America’s continued prosperity and for meeting the challenges in 

seeking a more stable, secure, and prosperous world. Thank you 

very much, Mr. Chairman. I would be happy to respond to Members’ questions or comments. 

[The prepared statement of Mr. Allgeier follows:] 

Statement of The Honorable Peter F. Allgeier, Deputy U.S. Trade 

Representative, Office of the U.S. Trade Representative 

Introduction 

Thank you for the opportunity to testify today. I am pleased to be here to discuss 

the World Trade Organization (WTO) and the WTO Agreements, the relationship 

to the strategic and economic interests of the United States, and the overwhelming 

value of continued U.S. participation in the WTO. 

First, I must recognize the historic and continuing bipartisan leadership of Congress, particularly this Committee and its leadership by Chairman Thomas and 

Ranking Member Rangel, in the establishment and operation of the global trading 

system, and its function in advancing the interests of the United States. We are 

grateful for the longstanding close working relationship with the Committee regarding WTO matters, and we recognize the value of the five year review of U.S. participation in the WTO undertaken in accordance with Section 125 of the Uruguay 

Round Agreements Act. 

My testimony today provides an opportunity to look back at the creation of the 

WTO and our participation over the last 10 years and, equally important, to focus 

on our agenda for the next several months leading up to the Sixth WTO Ministerial 

in Hong Kong this December and head toward a successful conclusion of the Doha 

Development Agenda negotiations in 2006. 

Historical Context for the WTO 

The creation of the WTO represented the culmination of a decades-long bipartisan 

U.S. commitment to lead the world away from economic isolationism and toward the 

imperative of an open, rules-based global trading system. The GATT had been created in 1947—drawn up in an unsteady post-war world that collectively was determined to strengthen global security and peace through economic opportunity and 

growth in living standards. 

Today, we continue to exercise our leadership in a world that faces new challenges 

to maintaining global security and stability, underscoring the continuing important 


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strategic interest of the United States in an open global trading system governed 

by the rule of law. The United States is fully engaged in the WTO work under the 

Doha Development Agenda, and the United States aggressively uses the existing 

WTO machinery to effectively enforce our rights. 

WTO membership now stands at 148. Accession to the WTO carries more stringent requirements than what was used in the GATT. Key entries during the past 

decades include not only China, but also a wide array of other countries that each 

carry their own strategic and economic importance, such as Jordan, Cambodia, and 

several former Soviet Republics. Negotiations toward entry into the WTO are ongoing at various stages for more than 25 countries, ranging from Russia and Vietnam, 

to Iraq, Ukraine, Saudi Arabia, and Afghanistan. Each effort underscores the importance attached to membership in the WTO, and the importance of moving forward 

with a member-driven, rules-based approach to the global trading system. 

Commercial Significance for the United States of Uruguay Round and the 

WTO 

During the five years since the last review under the Uruguay Round Agreements 

Act, unprecedented growth in trade and global economic integration has continued— 

led by continuing advances in technology, communications, manufacturing, and logistics. Five years ago we did not have ubiquitous cell phones that captured and 

transmitted photos miles away, nor was it yet routine to use the Internet to order 

overnight delivery of a product from thousands of miles away. Advances such as 

these demonstrate that the trade environment is always changing, the citizens of 

the United States—like the rest of the world—are being presented with new products, new services and, most important, new economic opportunities that did not 

exist in 1995, or 2000. At the same time, globalization also undoubtedly presents 

new issues, new competitive challenges and new economic pressures. 

Simply put, the WTO exists as the most important vehicle to advance U.S. trade 

interests, and is critical to America’s workers, businesses, farmers, and ranchers. 

Many are dependent and all are affected by a global trading system that must operate with predictability and transparency, without discrimination against American 

products, and providing for actions to address unfair trade practices. The United 

States remains the world’s largest exporter. During the first 10 years of the WTO— 

from 1994 to 2004—U.S. exports of goods and services have risen 63 percent, from 

$703 billion to over $1.1 trillion. 

To ensure equal opportunities for U.S. businesses, farmers, ranchers, and other 

exporters, the United States has brought more WTO dispute settlement cases than 

any other member. Since establishment of the WTO, the United States has initiated 

74 cases. Examples of cases include those focusing on: dairy, apples, biotechnology; 

telecommunications, automobiles, apparel, unfair customs procedures, and protecting intellectual property rights. Of those, we have won 23 on core issues, lost 

four, and settled 23 before decision. The remaining 24 are ‘‘in process’’ (in panel, 

in consultations, or monitored for progress or otherwise inactive). In the last five 

years, our record to-date in cases—both offensive and defensive—is 16 wins and 14 

losses. From 1995 to 2000, the U.S. record was 18 wins and 15 losses. The United 

States represents roughly 17 percent of world trade, yet has brought nearly 22 percent of the WTO disputes between January 1, 1995 and December 31, 2004. 

This year marks the full implementation of many key Uruguay Round agreements, such as completion of the 10 year phased implementation of global tariff cuts 

on industrial and agricultural goods and reductions in trade-distorting agricultural 

domestic support and export subsidies; elimination of quotas and full integration of 

textile trade into the multilateral trading system; and improvements in patent protection in key markets such as India. The Uruguay Round was highlighted by the 

negotiating results being adopted in a ‘‘single undertaking’’ by all Members, who together rejected any notion of a two or three-tier global trading system. 

The WTO also provides opportunities on a day-to-day basis for advancing U.S. interests through the more than 20 standing WTO Committees—not including numerous additional Working Groups, Working Parties, and Negotiating Bodies—which 

meet regularly to administer agreements, for Members to exchange views, work to 

resolve questions of Members’ compliance with commitments, and develop initiatives 

aimed to improve the agreements and their operation. 

The United States has advocated greater transparency and openness in WTO proceedings. The WTO has taken important steps to increase the transparency of its 

operation across the board, from document availability to public outreach. WTO 

Members continue to set the course for the organization, and the Members themselves remain responsible for compliance with rules. 

Responding to U.S. leadership, during the past 10 years the WTO has shown itself 

to be a dynamic organization, one where our interests are advanced toward achieveVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00016 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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1See: World Bank, 2001, Trade, Growth and Poverty; Jeffrey Frankel and David Romer, 1999, 

‘‘Does Trade Cause Growth?’’; and Francisco Alcala and Antonio Ciccone, 2001, Trade and Productivity. 2See: William R. Cline, 2004, Trade Policy and Global Poverty; and World Bank, 2004 Global 

Economic Prospects 2004. 

ments with concrete positive effect. We have seen to it that the substantive agenda 

has provided the path for significant market-opening results over the past decade, 

such as concluding the Information Technology Agreement (ITA) to eliminate tariffs 

worldwide on IT products, and bringing the Basic Telecommunications Agreement 

into effect, which opened up 95 percent of the world’s telecommunications markets. 

Both are achievements that continue to contribute to the ability of citizens around 

the globe to take advantage of the Information Age. 

The 1997 Agreement on Trade in Financial Services has achieved fair, open and 

transparent practices across the global financial services industry, fostering a climate of greater global economic security. The agreement helps ensure that U.S. 

banking, securities insurance, and other financial services firms can compete and 

invest in overseas markets on clear and fair terms. 

In a world where over 95 percent of consumers live beyond our borders, the WTO 

is an essential tool for U.S. interests. Increasingly, small businesses are important 

players in the global economy and an important stake holder in advancing U.S. interests in the WTO agenda. Between 1992 and 2002, U.S. exports from small and 

medium-sized enterprises rose 54 percent, from $102.8 billion to $158.5 billion—a 

faster pace than the rate of growth for total U.S. exports during the same time. 

Falling trade barriers—many of which reflect the 10 year implementation of the 

results of the Uruguay Round—have helped rapidly increase the value of trade relative to the U.S. economy. U.S. goods and service trade (exports plus imports) 

reached the levels of 18 percent of the value of U.S. GDP in 1984, 21.7 percent in 

1994 and 25.2 percent in 2004. Both U.S. manufacturing exports and U.S. agricultural exports have grown strongly during our 10 years in the WTO. Between 1994 

and 2004, they were up 65 percent and 38 percent, respectively. U.S. exports of high 

technology products grew by 67 percent during the past 10 years and accounted for 

one-quarter of total goods exports. 

During this time period, U.S. exports to Mexico more than doubled, while exports 

to Canada and the EU grew by 66 percent and 56 percent, respectively. Among 

major countries and regions, exports to China exhibited the fastest growth, nearly 

quadrupling over the past 10 years. China’s entry into the WTO in December 2001 

locked in improved market access opportunities, committing to reduce its tariffs on 

industrial products, which averaged 24.6 percent, to a level that averages 9.4 percent. The growth in services exports between 1994 and 2004 (69 percent) slightly 

exceeded that of goods (61 percent). Nearly all of the major services export categories have grown between 1994 and 2004. 

Development 

The United States has been the engine of economic growth for much of the world 

economy. Strong growth of the U.S. economy and openness to trade assisted the recovering countries involved in the Asian financial crisis of the late 1990s and further helped pull the global economy back from the brink of severe recession in the 

early part of the current decade. The completion of the Uruguay Round and creation 

of the WTO have figured prominently in helping our nation to sustain not only our 

own domestic economic strength but also our leadership role within the global economy. 

The United States continues to be second to none in actively working with developing countries to encourage trade liberalization that will boost economic growth 

and development. Trading partners with strong economies make good allies and provide important consumers for U.S. goods and services. Study after study shows that 

the WTO’s rules-based system promotes openness and predictability leading to increased trade and improved prospects for economic growth in member countries. By 

promoting the rule of law, the WTO fosters a better business climate in developing 

country members, which helps them attract more foreign direct investment and 

helps to increase economic growth around the globe, while also helping to lift the 

least developed countries out of poverty. Economic literature confirms that countries 

that have more open economies engage in increased international trade and have 

higher growth rates than more closed economies.1 Several World Bank studies in 

2004 2 found that trade and integration into the world economy lead to faster growth 


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3World Bank, World Development Report, 1995, p. 55. 

and poverty-reduction in poor countries. The developing countries that were most 

open to trade over the past two decades also had the fastest growing wages.3

Looking Ahead: Advancing the Doha Development Agenda 

Two months after the events of September 11th, 2001, U.S. leadership played a 

critical role in the launch of a new round of multilateral trade negotiations, the first 

to be conducted under the WTO. The negotiations under the Doha Development 

Agenda reflect the dynamic complexities of today’s economic world, and present new 

opportunities to make historic advancements on the idea of open markets and a respect for the rule of law. 

The main focus of the negotiations is in the following areas: agriculture; industrial 

market access; services; trade facilitation; WTO rules (i.e., trade remedies, regional 

agreements and fish subsidies); and development. In addition, the mandate gives 

further direction on the WTO’s existing work program and implementation of the 

Agreement. The goal of the DDA is to reduce trade barriers so as to expand global 

economic growth, development and opportunity. 

The market access related negotiations of the DDA offer the greatest potential to 

create high-quality jobs, advance economic reform and development, and reduce poverty worldwide. We recognize that the national economic strategies of our developing country partners include many important issues, but at the same time we believe that the focus of the WTO should be concentrated on reducing trade barriers 

and providing a stable, predictable, rules-based environment for world trade. 

The DDA provides U.S. with historic opportunities to achieve agriculture reform 

and greatly diminish current market distortions that present barriers to American 

farmers and ranchers. We are also aiming to achieve significant new market access 

for our manufactured goods through broad tariff cuts while working to reduce nontariff barriers. We are also pressing for ambitious global market opening for our 

services industries. The WTO negotiations on trade facilitation will result in less red 

tape and more efficiency and predictability for moving goods across borders. And 

less corruption in customs activities. 

The WTO’s Doha Development Agenda is part of President Bush’s strategy to 

open markets, reduce poverty, and expand freedom through increased trade among 

all countries in the global trading system, developed and developing. The U.S. role 

in the WTO is at the core of this strategy. 

Dismantling trade barriers multilaterally holds immense potential. From 1994 to 

2003, the world economy expanded at an average rate of about 2.5 percent, but exports have grown at more than double that pace—about 5.5 percent, a harbinger 

of accelerating globalization. 

Obstacles to the free flow of commerce undermine our ability to maximize this potential and its benefits. We need to move toward a system that provides incentives 

for innovation and growth in the most competitive aspects of our productive sectors. 

The best way to do this is successfully to complete the WTO Doha Development 

Agenda negotiations. 

Last August, we made a crucial step forward by adopting negotiating frameworks. 

Much of our work this year has been on fleshing out the technical details to set the 

negotiating table. Looking ahead, the next major challenge for the WTO will be 

preparations for the 6th Ministerial Conference in Hong Kong, China, December 13– 

18, 2006, where Ministers will be providing direction and guidance as to how to 

bring the Doha negotiations to a successful conclusion. Final negotiations need to 

be underway, with offers on the table in the first quarter of 2006. Once we agree 

on modalities, we have tough bargaining ahead. 

One important lesson we drew from the meetings in Seattle and Cancun is that 

such meetings only succeed if they are well prepared. Simply put, most of the work 

needs to be done before arriving at the Ministerial meeting. This gives all of U.S. 

the necessary time at home, and with our partners to build the needed consensus 

among the wider WTO Membership on any given issue. 

For Hong Kong, we clearly need to have an agreement on the modalities for negotiation in agriculture and non-agricultural market access, prospects in hand for a 

significant result in services, directions for how to ensure that WTO rules remain 

effective and in some cases are strengthened (e.g., by adding new disciplines to subsidies to deal with over fishing) and the outlines of an agreement on Trade Facilitation. 

If we are to secure such results in Hong Kong, we will need to be very far along 

in the process before the August recess in Geneva, and have an outline of the agreements to be affirmed at Hong Kong. To meet this timetable, we believe that there 

is an urgent need to reinvigorate the negotiations. 


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Ambassador Portman already is doing his part to provide a new spark to the negotiations. Appointed on Friday, April 30, he departed for Ministerial meetings focused on Doha the following day. His message was one of continued U.S. commitment and determination to be a driver and problem solver in the negotiations. Doha 

provides U.S. an opportunity we cannot afford to waste. We can set a vision for the 

global economy for the next decades and make a major contribution to development. 

We will conclude in 2006 only if we achieve a balanced outcome with results that 

will benefit all members. That’s why agriculture, non-agricultural market access 

(NAMA), services, rules and development are the major issues for the negotiations. 

We have learned that while agriculture may be the engine for negotiations, success 

requires U.S. to secure strong results across the broad range of issues in the Round. 

Working with Members of this Committee we believe we can secure results that provide new opportunities for America’s workers, farmers, ranchers, service providers, 

and consumers. And, at the same time secure a result that strengthens the rules 

of the global trading system to meet America’s trade interests. 

On agriculture, we have work to do in all three pillars of agriculture: market access, export competition and domestic support. The 2004 Geneva framework envisions reforms in global agricultural trade: the complete elimination of export subsidies by a date to be negotiated; a framework for negotiating substantial reductions 

in domestic agricultural supports, including a significant down payment up front in 

the form of a 20 percent cut in the allowable level of domestic supports; and a commitment to making substantial improvements in agricultural market access. 

Until last week, the negotiations were blocked on a technical issue. It is clear that 

how deeply and broadly tariffs are cut will determine the level of ambition for the 

agriculture negotiations overall. The World Bank recently reported that the 92% of 

the welfare gains from liberalization in agriculture will come from improvements in 

market access, compared to 6% from reduction of domestic subsidies and 2% from 

the elimination of export subsidies. So, the stakes are high, and highest for our 

partners in the developing world. 

On non-agricultural market access, the key standard of success will be increased 

market access in manufactured goods, which account for nearly 60 percent of all 

global trade. The mandate from Doha lays the groundwork for broad cuts in tariffs 

through a formula that would make deeper cuts in higher tariffs, and it provides 

the possibility of complete tariff elimination in key sectors. 

Negotiations now are focused on the technical details of how we get a big result. 

We need to find common ground on the centerpiece of the proposal—the Swiss formula—combined with appropriate forms of flexibility for developing countries in 

order to proceed. Other issues—work on sectoral initiatives and non-tariff barriers— 

must also be addressed. There are concerns and sensitivities—we all have them— 

and we need to understand one another. We have a big opportunity to open markets 

for the future—particularly for developing countries—but we need to find a way to 

ensure that all contribute fairly to the outcome. 

We cannot afford to be anything but ambitious and ensure that we are looking 

to markets of the future. We did so in the Uruguay Round with great success—we 

accomplished a number of sectoral initiatives where growth has been substantial 

(e.g., chemicals, medical equipment, pharmaceuticals). We want to look at the most 

aggressive ways to create market opportunities. As a result of the market openings 

in the Uruguay Round on the sectoral initiative on medical equipment, that sector 

grew nearly 165% in global exports (U.S. exports grew 89.2%). 

On services, in July 2004 WTO Members agreed to intensify the negotiations on 

opening markets and made clear that services are definitely on par with agriculture 

and manufacturing as a ‘‘core’’ market access area. Services are playing an increasing role in both developed and developing economies. Indeed, the World Bank recently reported on the force multiplier effect of open services markets: developing 

countries with open telecommunication and financial services markets grew 1.5 percent faster than countries where those two markets remained closed. Services, investment and trade go hand-in-hand, and liberalization in services will be a powerful engine for growth and job creation—especially in higher value added and therefore higher paying jobs. 

This month, Members are expected to table revised market access offers, according to the timetable established for negotiations. The process is slower than we 

would like, but we are encouraged that governments are beginning to see the important role that services plays in development. For developing countries, for example, 

over 55% of GDP comes from services trade—and much of this trade is done with 

other developing countries. Working with industry, we want to build out the negotiations and supplement the current process to ensure that the degree of openness 

and liberalization now provided by the United States is matched by others. 


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On rules, negotiations are underway on subsidies and antidumping. We have 

found convergence with our trading partners on a number of issues, notably the importance of creating greater transparency, certainty and predictability in the ways 

in which the rules are administered—and we have vigorously questioned any proposal that would undermine the effectiveness of our trade laws. We have also seen 

that there is enormous interest in building out the subsidy disciplines further to address new and emerging issues, including those that challenge the environment. The 

Chairman of the negotiating group, Ambassador Valles of Uruguay has an intensive 

consultative process underway. I recognize that this is an area of great interest to 

Members and we appreciate the continued close cooperation we have with you and 

your staff as we develop proposals and respond to issues raised by others. 

WTO Members are currently negotiating clarifications and improvements to the 

WTO Dispute Settlement Understanding. The United States recognizes that an effective dispute settlement system advantages the United States not only through 

the ability to secure the benefits negotiated under the agreements, but also by encouraging the rule of law among nations. The DSU negotiations offer Members the 

opportunity to assess the strengths and weaknesses of the WTO dispute settlement 

system and to work together to improve the system. 

In those negotiations, the United States has taken an active role. The United 

States has tabled proposals that would provide greater flexibility and Member control in the dispute settlement process, including the ability to more effectively address errant or unhelpful panel reasoning. Moreover, the United States has tabled 

proposals to open up the dispute settlement process to the public—there is no reason the public should not be able to see the briefs filed or the panel and Appellate 

Body hearings. 

After substantial delay, in July last year we managed to have an agreement to 

launch negotiations on trade facilitation. These negotiations are aimed at updating 

and improving border procedures to be more transparent and fair, and to expedite 

the rapid release of goods. The goal will be to overhaul 50-year-old customs rules 

that no longer match the needs of today’s economy, much less tomorrow’s. This work 

on trade facilitation will round out the market access elements of the overall Doha 

negotiating agenda and present the opportunity for true win-win results for every 

WTO member—developed and developing country alike. 

This leads me to the question of development. It is clear that the biggest gains 

to development will be in the core areas of goods, services and agriculture. I am 

pleased to report to the Committee that many of our trading partners see the issue 

in the same way. Liberalizing trade among developing countries is an essential part 

of this effort. Some 70 percent of the duties collected on developing country trade 

are due to tariffs imposed by developing countries. This is significant. 

In addition to the negotiations, the United States will continue to contribute in 

various ways to development. On the technical assistance and capacity building 

side, I am pleased to announce that the United States will contribute an additional 

$1 million this year to the WTO’s DDA Trust Fund. The appropriation by Congress 

for this purpose is something that we appreciate, as yet another example of our 

working together to support our overall strategic efforts. In this regard, I would also 

note that our total trade capacity building activities last year were close to $1billion 

($903 million). 

In sum, the Doha negotiations hold the potential to made an important contribution to global growth and development. The Uruguay Round was launched in 1986, 

finalized in 1994, and we are just now seeing the final implementation of results. 

With care and attention, we can use the WTO to make a further substantial contribution to global growth and development. The United States is prepared to lead 

by example, but we need to ensure that we secure real gains and market opportunities in the decades ahead. 

Conclusion 

The first 10 years of the WTO have demonstrated why the United States must 

continue its active participation and leadership role. A turn away from the work of 

the past six decades to bring about a rules-based liberalized global trading system 

would bring certain closure of markets to those American workers and farmers dependent on continued trade liberalization and would ignite persistent trade conflicts 

that would distort the global economy beyond anything imaginable today. A world 

where the United States steps away from a rules-based global trading system would 

be a world where trade no longer would be a positive contribution toward solving 

broader international tensions; instead, trade issues would simply act as an additional dimension exacerbating larger strategic conflicts. 

We know that the global trading system is not perfect, and remains—and perhaps 

always will remain—a work in progress. But through American leadership within 


ccoleman on PROD1PC71 with HEARING
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the WTO, the core U.S. trade agenda of promoting open markets and the rule of 

law remains the core agenda of the global trading system. The work toward these 

objective is complex and often difficult, especially in a dynamic global economy unfolding as never before. But this work is no less vital today than it was in those 

first decades after a catastrophic world war. The participation and leadership of the 

United States in the global trading system remains a critical element for ensuring 

America’s continued prosperity, and for meeting the new challenges in seeking a 

more stable and secure world. 

f 

Chairman SHAW. Thank you for your testimony. How long has 

the WTO been in existence? How long has the United States been 

part of it? 

Mr. ALLGEIER. Well, the WTO has been in existence for 10 

years, since the end of the Uruguay round. Of course, we were a 

founding member of its predecessor institution, the GATT, which 

was established in 1947. 

Chairman SHAW. The GATT is gone now; right? 

Mr. ALLGEIER. Yes. It was replaced by the WTO. 

Chairman SHAW. All right. How many countries of the world or 

what percentage of the countries in the world belong to the WTO? 

Mr. ALLGEIER. One hundred forty eight countries belong to the 

WTO. 

Chairman SHAW. Yes, and so—— 

Mr. ALLGEIER. With a number of other important countries negotiating their accession to the WTO. 

Chairman SHAW. That means about 40 or 50 don’t—— 

Mr. ALLGEIER. Pardon me? 

Chairman SHAW. That means about 40 or 50 do not I guess— 

somewhere right? 

Mr. ALLGEIER. I think it is probably a little bit lower than that. 

Chairman SHAW. What would govern trade if we didn’t—if the 

United States were not a part of the WTO? 

Mr. ALLGEIER. Well, some would say the rule of the jungle 

would govern trade. There would be no governing body, and it 

would be each country out there for itself. Pursuing its interests in 

whatever way that it felt. 

Chairman SHAW. Trade would still exist, but without the United 

States being part of it, and as a larger exporter in the world—over 

$1 trillion exports out of the United States. This would be almost 

chaotic, wouldn’t it? 

Mr. ALLGEIER. Yes. It is really inconceivable to imagine how it 

could continue effectively without the United States. 

Chairman SHAW. Thank you. Mr. Cardin? 

Mr. CARDIN. Thank you, Mr. Chairman. Mr. Ambassador, I 

once again want to thank you not only for being here, but for your 

service to our country. You have been one of our true leaders on 

trade issues and we very much appreciate that. 

Mr. ALLGEIER. Thank you very much. 

Mr. CARDIN. I want to concentrate on one area in regards to the 

Doha round and that is the service area. I am very concerned that 

the process that was used to try to make advancements in service 

basically depended on the goodwill of an individual country’s submitting their proposals, and we found that many countries did not 

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posals. I know there has been some recent meetings in which we 

are trying to establish some parameters of what should be included 

as far as progress in the service areas are concerned. 

I am also concerned by what I have heard that particularly the 

developing countries are demanding that we change our immigration laws as a tradeoff to making progress in service. Now, I don’t 

normally agree with Chairman Sensenbrenner on many of his proposals, but I do believe that immigration laws should be controlled 

by Congress, and that that would not be the right area to include 

in trade negotiations. 

Then lastly, if we continue the current trend, we are going to become a net negative on service by the year 2010 if the current 

trends continue. So, I think this should be one of the highest priorities and yet it seems to me that we are not very far advanced in 

making progress on this round. So, I am hoping that your answer 

will reassure me that this is under close attention and we are 

doing better than what at least I have been led to believe. 

Mr. ALLGEIER. Thank you. First of all, there should be no 

doubt in anyone’s mind that services is one of our highest priorities 

in these trade negotiations. When the WTO was established that 

was really the first time that there were international rules governing the trade in services. That was in there because the United 

States pushed so hard from the early eighties up until 1994, and 

we continue to be a leader in advocating very ambitious market access for services and fair rules. So, that is a top priority for U.S. 

in these negotiations. 

We share with you the concern that countries have not been as 

ambitious as we think they should be in the negotiations. We have 

pushed very hard to get a critical mass of services offers from 

major economies and then from those who already provided offers 

in an earlier phase to greatly improve those offers. We will be submitting our revised by the next deadline which is the end of this 

month, and we are pushing very hard for countries to do the same. 

Mr. CARDIN. Well, there were some meetings that took place in 

Europe that suggested that we were going to change the format for 

service negotiation. At least that is what I was under the impression. Can you just update U.S. on that? Are we still dependent 

upon the offers that are being made? 

Mr. ALLGEIER. Well, we are looking really to supplement the 

request offer approach, and we are working with a number of our 

colleagues, for example, the other countries in what is known as 

the Quad—the United States, EU, Canada, and Japan—to see if 

the request offer approach can be supplemented by others, for example, identifying kind of a core of critical services that everybody, 

both developed and developing countries should include in their offers looking to see if we can assess whether we are raising the entire level of services openness in the world economy instead of just 

looking at it bilaterally to say can everybody kind of level up toward where the United States is frankly in terms of the openness 

of our services market. 

Mr. CARDIN. Well, I think we need to supplement the request 

offer approach. I just—looking at the type of response we received 

to date, if we are going to be able to make progress and have a successful Doha round, it won’t happen unless we are more aggressive 


ccoleman on PROD1PC71 with HEARING
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than just using the current approach and I would urge you to do 

that. 

Let me just make one other observation now that Mr. Lamy is 

the head of the WTO. I must tell you he was not my first choice. 

Now, I hope that I am going to be proven wrong and that he will 

be fair and objective, but in the discussions that we have had with 

him in the past on agriculture I found to be very unacceptable, and 

I hope that we can hold him accountable to an approach that will 

narrow the disparities on subsidies on agricultural products and 

not look for equal amount of relief. 

Mr. ALLGEIER. I don’t think that he is under any illusions as 

to what will be required for a satisfactory package to the United 

States on agriculture or on the other market access issues, such as 

services and the non-agricultural market access. 

Mr. CARDIN. Good luck. 

Mr. ALLGEIER. Thank you. 

Chairman SHAW. Mr. Lewis? 

Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman. Mr. 

Ambassador, welcome. 

Mr. MARTIN: Thank you. 

Mr. LEWIS OF KENTUCKY. How have free trade negotiations 

helped U.S. in the WTO process and can you give examples in 

which our free trade area trading partners have become more allied to the U.S. trade liberalization positions as a result of opening 

their markets through the free trade agreement (FTA)? 

Mr. ALLGEIER. Yes. First of all, let me say that one of the criteria that we have used in determining with whom to negotiate 

free trade areas is the behavior of that country or countries in 

other negotiations, and particularly in the multilateral negotiations 

of the WTO. So, that is a starting point. 

Let me just mention three areas of the negotiations. First of all, 

in the non-agricultural market access (NAMA) negotiations, we 

work very closely with a group which we call the Friends of Ambition. These are the countries that look for very ambitious outcomes 

on NAMA. That group includes such free trade area partners of 

ours as Canada, Australia, Chile, Singapore, and Costa Rica. 

Similarly, in services, we found that several that our FTA partners are strong, strong advocates for ambition. It is understandable, because when they have opened their markets for services 

through our FTAs, generally speaking they are opening their market broadly, not just to us. So, they have an interest in having 

other countries who are not part of an FTA open their services to 

them. So, therefore, in services, for example, we work very closely 

with Canada, Mexico, Chile, Singapore, and others who are our 

FTA partners. 

The third example is what is known as trade facilitation, basically getting open and fair customs procedures. There is a group 

there that has worked for several years on that, the so-called Colorado Group and that includes Canada, Australia, Morocco, Chile, 

Colombia, Singapore, Costa Rica—all countries that either we have 

FTAs with or we are negotiating them with. So, we feel that there 

has been a very good synergy between our FTAs and the WTO negotiations. 

Mr. LEWIS OF KENTUCKY. Thank you. 


ccoleman on PROD1PC71 with HEARING
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Chairman SHAW. Mr. Levin? 

Mr. LEVIN. Thank you, Mr. Shaw. Welcome. 

Mr. ALLGEIER. Thank you. 

Mr. LEVIN. You have surely worked hard. You mention in your 

opening statement about the historic and continuing bipartisan 

leadership of Congress. There will be a bipartisan effort on WTO, 

because the alternative, withdrawal, is not wise and is not feasible. 

It is neither. However, I don’t think anybody should mistake that 

vote and think that there is the strong bipartisan foundation that 

has existed in previous decades in this Congress on key trade 

issues, because it has broken down in recent years and it needs to 

be rebuilt, and it can’t be rebuilt on a narrow basis, trying to find 

a few people on one side to go with a majority on another. That 

isn’t a bipartisan foundation. In fact, it is the opposite. It is shifting 

sands. We aren’t going to be able to tackle the tough issues in the 

Doha round with the present shifting sands instead of a strong 

foundation. 

I also want to say that the Congressional Oversight Group (COG) 

in my experience—and I was on it for a good number of years— 

has not been an effective instrumentality. The meetings have been 

sporadic and attendance has been minimal. The meetings have 

usually been interrupted. That isn’t anybody’s fault. So, if there is 

going to be a meaningful effort to tackle these tough issues, there 

is going to have to be much more back and forth. But, if there a 

strong foundation, bipartisan foundation, whether it is agriculture 

or services or tariffs. These are tough issues. Presently, it would be 

very difficult, I think, to put together a strong coalition that could 

tackle these tough issues from the point of view of the United 

States. 

Let me just ask you about NTB. There has been little progress 

in so many areas these years since the Doha round was kicked off, 

and NTB were brought up. I forget if you were there at Doha? I 

forget. 

Mr. ALLGEIER. Yes. 

Mr. LEVIN. I thought you were. You know we pushed that NTB 

not receive second place when it came to industrial tariffs. You 

know the evidence is that that is kind of what is going on; that the 

focus in the industrial area is on tariff reduction and NTB lag behind. There isn’t even a clear negotiating mechanism set up for the 

NTB within the regular negotiating process; right? 

Mr. ALLGEIER. Well, there is within the NAMA, there is the 

NTB component. 

Mr. LEVIN. Well, it is kind of—there is some kind of a separate 

mechanism that has been set up; right? 

Mr. ALLGEIER. Well, the nature of NTB obviously is different 

than tariffs. So, whereas in the tariff approach, we are looking at 

a formula to cut the tariffs, in the NTB the approach we are taking 

is first of all to identify what are the problematic NTB. For example, the United States has put forward a proposal with respect to 

automobile NTB, working closely with our industry. Then, the 

question is what will be the discipline that should be applied to 

those NTB, and that is what our team is working on there. 

Mr. LEVIN. Well, for example, I read from a report of just a few 

months ago, the U.S. Government did not include a link between 


ccoleman on PROD1PC71 with HEARING
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its willingness to tackle tariffs in the automotive sector and to 

eliminating NTB during the February 2nd meeting. The discussion 

of NTB is being done very separately with some kind of an informal group as I understand it rather than through the single mechanism of the group linking NTB with tariff reductions. My time is 

up. Well, but look for many sectors, the NTB are as important as 

if not more important than the tariff reductions, and there has to 

be—we fought this out, we talked about this at Doha, and we 

pushed and finally it was agreed to put them on the same plane, 

but there is no clear evidence that is what happening in these discussions. 

All right. So, why don’t you send U.S. all an update on that. Also, 

if I might ask, Mr. Chairman, then I will finish. If you could send 

U.S. the Administration’s description of its approach on the Geneva 

discussions on China, the review mechanism, because the general 

feeling is and it is mine that it has failed. We put it into China 

permanent normal trade relations (PNTR), and I think there has 

been a lackadaisical approach. So, I would appreciate, especially 

with a new USTR, if you could give U.S. a detailed description of 

what you have done to carry out that provision of PNTR. Will you 

do that? 

Mr. ALLGEIER. Yes, I will. I will be happy to do that. 

Mr. LEVIN. Thank you. 

Chairman SHAW. The time of the gentleman has expired. Mr. 

Brady? 

Mr. BRADY. Thank you, Mr. Chairman. At the heart of free 

trade lies I think a fairly simple principle, which is if America 

builds a better mousetrap, we should have the freedom to sell it 

without discrimination throughout the world. If someone else 

builds a better mousetrap, we should have the freedom to buy it. 

The WTO plays a critical role, not in rubber stamping American 

trade policies, but in breaking down barriers around the world for 

U.S. to sell our products and a dispute resolution system for resolving the many disputes that invariably occur, just as they do in our 

own business climate, in the world business climate. 

I want to ask you two questions. One, in your view, is the dispute resolution system used by the WTO, is it open? Is it fair? Is 

it enforceable? The second question has to deal with in our efforts 

to break down those barriers, to advance U.S. interests, how damaging would the rejection of the Dominican Republic-Central America-United States Free Trade Agreement (DR–CAFTA) be to our efforts? So, first, dispute resolution process—fair, open, and enforceable; second, effects of DR–CAFTA. 

Mr. ALLGEIER. Thank you, Mr. Brady. First of all, let me say 

that whether in the WTO or anywhere else, for U.S. it is extremely 

important that any agreement we have be one that is enforceable. 

There are a number of keys to that, one of which is clarity in the 

agreement itself, but the other is an effective and accessible dispute settlement process. So, that is why during the Uruguay round, 

we spent so much U.S. effort in trying to shape this dispute settlement process. We feel that overall the process has proven to be an 

effective process. It is also a work in progress. It is not perfect, and 

we have identified areas where we feel there needs to be improvement, and one part of it is transparency. We think that it needs 


ccoleman on PROD1PC71 with HEARING
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to be more open so that the public generally can understand what 

is going on there and how cases are treated. 

There are also are instances in which we believe that members 

of appellate bodies or panels overreached their authority in determining the outcome of those disputes, and that is why we have put 

forward proposals in the Doha negotiations to try to improve that 

so that they stick to the standard of review, for example, in antidumping; that they don’t go off and start—pardon the expression 

and this is the House—legislating. That isn’t the role of the panels. 

So, we do think that it is generally effective, but it needs improvement, and we are working to do that. 

With respect to DR–CAFTA, the rejection of DR–CAFTA would 

send a terrible signal worldwide about U.S. leadership in opening 

markets and using trade as a mechanism for lifting people out of 

poverty. It would be even more disastrous with respect to this 

hemisphere. If we were to reject DR–CAFTA, Hugo Chavez would 

declare a holiday in Venezuela and he would use the holiday to 

give a 24-hour speech on feckless Americans. So, that is something 

that I don’t think any of U.S. want to see happen, and I appreciate 

very much, Mr. Brady, your strong, strong support from the very 

beginning of DR–CAFTA. 

Mr. BRADY. I thank you, Mr. Ambassador. Thank you, Chairman. 

Chairman SHAW. Mr. Jefferson. 

Mr. JEFFERSON. Thank you, Mr. Chairman. Mr. Levin has 

talked about the desire for bipartisanship in the trade arena, and 

I think he is dead right about that. And for many of U.S. who voted 

for the Trade Promotion Authority (TPA) (P.L. 107–210) legislation 

a few years ago, our hope was that there would be broad multilateral agreements at the conclusion of Doha, Free Trade Area of the 

Americas (FTAA) with Brazil, and all the rest of the South American and Latin American countries—and progress on the big 

issues—big trade issues of the world. 

Unfortunately, we have seen a lot of small agreements here and 

there that have been useful but that have not been nearly as comprehensive, which I think feeds into the whole lack of an opportunity here in the Congress to have a bipartisan approach to all of 

these issues. 

For instance, if in Doha, we had worked out the issues on sugar 

worldwide, we would not now be talking about sugar in a DR– 

CAFTA agreement or any other one coming up subsequently. I 

think all of U.S. agree that there is no—the subsidies aren’t good 

for our country; aren’t good for the world. They cost U.S. money 

needlessly. The prop up inefficiencies—all the reason that we can 

find to argue for them. 

But we have got to have success there. We had a deadline for 

January 5th. I would like you to tell me if you could, since we all 

know that this legislation is perforce has got to pass—this is our 

opportunity to ask you a question about something else. We missed 

the January 5th, 2005 deadline. I would like to know what you 

think the major reasons for that were and one of the major obstacles in the Hong Kong ministerial of getting an agreement on text 

in four key areas: agriculture, NAMA, services, and trade facilitation. 


ccoleman on PROD1PC71 with HEARING
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Mr. ALLGEIER. Thank you, Mr. Jefferson. Collectively, negotiations have missed the initial target date of January of 2005 for 

completing the DDA. At this point, the consensus is that we should 

aim at completing this by the end of 2006, and that is why this 

Hong Kong ministerial is important because we need to be at a 

point at the time of the Hong Kong ministerial that we are confident that we can complete the negotiations, the very detailed negotiations in these various areas that you are talking about, of agriculture, non-agricultural market access, services, trade facilitation and so forth. 

Why did we miss the deadline? First of all, it was an extremely 

ambitious deadline and particularly when one is dealing with 148 

countries, and there has been a large expansion of the membership 

of the WTO over its 10 years. As you know, decisions are made by 

consensus. The good thing about that is once you have a consensus, 

everybody is on board and you have a result that is accepted and 

it is strong. The disadvantage is getting to consensus among 148 

countries that are so diverse in economics, in political orientation, 

and so forth. 

There are a number of issues in the negotiations. We are trying 

to focus as much as possible on the real market access dimensions, 

which we think are important to the United States, but also important to other countries. In that regard, I want to be really clear 

that we certainly understand that market access in manufactured 

goods requires not just reduction, elimination of tariffs, but the 

NTB. As the tariffs have come down, then the NTB loom even larger. So, that is an integral part of our approach to those negotiations. 

Mr. JEFFERSON. I have a little more time. Let me ask you a 

follow up in that same area. What do you see the Congress as a— 

because there is a lot of complaint here that the Congress isn’t involved enough and isn’t consulted enough. What do you see the role 

of the Congress in this next year to help conclude this round in 

Doha? What can Congress do to help move this along? 

Mr. ALLGEIER. Well, first of all, we are extremely cognizant of 

the fact that whatever we have to—whatever we negotiate we have 

to bring back to the Congress for your scrutiny, and the only way 

to be confident of what the outcome of that will be is if we are in 

close consultation with you and the other interests within Congress 

on the negotiations as they proceed. 

I think that certainly the fact that our new USTR spent more 

than a dozen years in Congress will be very, very helpful in terms 

of the communication that we have back and forth. I can just tell 

you from his first few weeks in office, he has been very clear with 

U.S. about the importance of communication with Congress, twoway communication. 

Chairman SHAW. Mr. Foley? 

Mr. FOLEY. Thank you very much, Mr. Chairman. Following 

along with the inquiry of Mr. Jefferson. Many of my sugar growers 

do ask why can’t we move it to a WTO level. What is your thought 

on that? 

Mr. ALLGEIER. Sugar, of course, will be part of the picture of 

the overall agricultural negotiations in Doha. It is a part of that, 

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gotiations because all of the participants in the sugar market are 

present in those negotiations. So, certainly we will continue to 

work very closely with the industry as we go forward in the three 

areas of the agricultural negotiations, including market access, the 

domestic supports, and export subsidies. However, let me just say 

that we are doing this with a great deal of care, and we work extremely closely with the U.S. Department of Agriculture (USDA), 

which understands the U.S. sugar program intimately. 

Mr. FOLEY. The Administration’s decision to stop imports from 

China—cotton-type materials—it sounds like a response to dumping. We are concerned obviously with sugar dumping into the country. So, in one case, they take a proactive approach to limit the influx of goods in order to stabilize the market. On the other side, 

it is kind of the concern our grower groups have of flooding. Can 

you give me the rationale for the recent decision on China? 

Mr. ALLGEIER. Yes. First of all, the decision that was made on 

China the other day—we announced that we would be imposing 

quantity restrictions or limitation on the growth of certain textile 

products coming into the United States from China. When one 

looks at the first quarter statistics this year, compared to the first 

quarter last year, it is stunning the increase. Just to give you the 

order of magnitude, it is something on the order of a 1,500-percent 

increase; something under if I recall correctly a million square 

meter equivalent or whatever the denomination is to seven times 

that. So, that’s in just a matter of these first 3 months. So, the— 

we have used the provisions of China’s own accession to the WTO 

to limit the growth of these products into the United States that 

it will be limited to another 7-percent growth over last year, so we 

are not closing down the market. 

Now, in the case of sugar, the amount of sugar that is permitted 

potentially under the Central American agreement is even smaller 

than that growth rate in the China textile quotas and there are 

other features, of course, that we have to protect the sugar. So, we 

have I think in both cases, we have acted very responsibly to balance the interests of the United States as an exporter and as an 

importer and as a producer in products that are getting a lot of 

competition from outside the United States. 

Mr. FOLEY. Can you tell me the thought behind taking sugar 

out of Australia? 

Mr. ALLGEIER. Well, that was a very difficult negotiation, as 

you know, and in that case, we had to balance the interests, our— 

shall I say—offensive interests in what we were seeking from Australia with the potential harm that Australia might do, and we decided that this balance was best served in that instance by excluding sugar from the agreement. So, it is a case by case situation, 

and we try to judge the balance as best we can. 

Mr. FOLEY. But in order to achieve victory, you have been able 

to remove that in the past? 

Mr. ALLGEIER. We were able to do it in the case of Australia. 

That doesn’t mean, of course, that we can do it identically in every 

trade negotiation. 

Mr. FOLEY. Was it because it was done pre-negotiation? Like 

DR–CAFTA right now is approved I guess by one side awaiting our 

approval. 


ccoleman on PROD1PC71 with HEARING
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Mr. ALLGEIER. Several of the Central American countries have 

already ratified that agreement. The others are in their legislative 

process. 

Mr. FOLEY. Thank you, Mr. Chairman. 

Chairman SHAW. Mr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. I recognize your 

expertise in economics and if I understand correctly, the primary 

way in which the Chinese or any other country—they peg their currency to our money; is that correct? 

Mr. ALLGEIER. My understanding is that their currency is 

pegged to the U.S. dollar. 

Mr. MCDERMOTT. Since we have the biggest deficit in the 

world—and our history, actually—and the primary way that we are 

financing that is selling bonds to the Chinese, at what point are 

the Chinese—I mean, how does the USTR think this is going to 

work when you have ultimately the Chinese beginning to say 

maybe we are not going to buy any more Federal securities. We 

will just move to the Euro—Euro denominated things, because the 

dollar is dropping. That will cause the dollar to drop more and our 

own interest rates will go up, and the domestic economy gets better. Yet today’s newspaper has this story again—this one from the 

New York Times. Who’s in charge of determining U.S. interest 

rates? It may be Beijing. 

I have the feeling that this Administration doesn’t have the domestic economy people talking to the trade people, but somehow 

they think they operate independently and that when the interest 

rates go up in this country and all those young people who have 

bought houses with adjustable-rate mortage interest rates are 

going to get clobbered and lose their houses that the exporters will 

have gained something because we will have forced the yuan to 

sort of float a little bit. There will be a short-term gain there, but 

a big term loss in the domestic economy. How do you explain all 

that to us? What is going on with China and are we doing the right 

thing by telling them the answer is let the yuan float? 

Mr. ALLGEIER. Okay. First of all—and I don’t mean to be dodging the question—the USTR concentrates on the trade aspect of our 

relationship. But to get to your point about coordination, we are 

part of an interagency process that is coordinated in the White 

House that brings together all the economic agencies, both those 

with respect to—who have responsibility on the domestic side, including the U.S. Department of the Treasury, for example, the 

President’s advisors—the Council of Economic Advisors—and then 

our organization, the U.S. Department of Commerce, and so forth. 

With respect to China in particular, of course, the U.S. Department of the Treasury has the responsibility for the dialog with 

them and other countries with respect to exchange rates and the 

foreign exchange regime that they have. Certainly, I think everybody is aware that the Treasury has been working with the Chinese to help them move from the rather rigid system they have 

now with the peg to something that would be more responsive to 

market forces. That would, of course, be helpful in terms of establishing a better equilibrium there. 

Mr. MCDERMOTT. But has that organization—and I would love 

to know who it is that coordinates it or who is the central person 


ccoleman on PROD1PC71 with HEARING
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in that—but have they decided they are willing to sacrifice interest 

rates in the United States for the trade problems with China? 

Mr. ALLGEIER. I have not—— 

Mr. MCDERMOTT. The deficit? 

Mr. ALLGEIER. I am certainly not aware that that is way that 

anybody is approaching it. Obviously—— 

Mr. MCDERMOTT. Do they think they can have—have you sat 

in on those meetings? I don’t know if you are at the proper grade 

level to sit in on those combined meetings of domestic and foreign? 

Mr. ALLGEIER. Well, the meetings occur at various levels, and 

so some of them, yes, I have sat in. 

Mr. MCDERMOTT. Who is making the decision that we should 

keep pushing the Chinese when everybody is predicting if we do 

our interest rates are going to go up? Who is doing that? 

Mr. ALLGEIER. Well, there is a collective determination of recommendations to be made as to what fiscal policies are followed, 

what monetary policies are followed, what trade policies are followed, and so it is a network of policies and responsibilities. 

Mr. MCDERMOTT. Is that the Council of Economic Advisors’ 

Chairman or is it the Secretary of the Treasury or the Secretary 

of Commerce? Who’s the center person here? Who says to the President: this is what we are doing, Mr. President? 

Mr. ALLGEIER. It is coordinated by the National Economic 

Council, but then that council is comprised of these different agencies and so as in any recommendation to the President, the President gets the advice from all of the departments and if the advice 

is different, he is informed of which agencies feel one way, which 

agencies feel another, and then he ultimately makes the decisions 

based upon the advice that he gets from his entire cabinet and the 

agencies. 

Mr. MCDERMOTT. The reason I raised it is because in this 

same pile of clips for today is a story in Seattle about people losing 

their houses, because of the interest rates, and the adjustable rate 

mortgages, and what is happening with all that. It seems to me 

that you have two forces going on that somebody has got to start 

thinking about what are willing to do to the American people as 

a part of this trade relationship with China. Thank you, Mr. Chairman. 

Chairman SHAW. Mr. Weller. 

Mr. WELLER. Thank you, Mr. Chairman. Mr. Ambassador, it is 

good to see you, good to have you with us. Again, I want to commend you for your effective efforts and your effective ability to 

speak in behalf of the President’s trade agenda. 

Mr. ALLGEIER. Thank you. 

Mr. WELLER. As we open new markets. I also want to congratulate you on your good work. 

Mr. ALLGEIER. Thank you. 

Mr. WELLER. As a strong supporter of DR–CAFTA, I want to 

thank you for your efforts, along with Ambassador Zoellick and 

others, to make trade with Central America and the Dominican Republic a two-way street and right now, for Illinois manufacturers, 

Illinois farmers, and Illinois workers. Our products enter those 

markets in Central America and the Dominican Republic and facing tariffs. 


ccoleman on PROD1PC71 with HEARING
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Mr. ALLGEIER. Right. 

Mr. WELLER. However, our policy over the last 20 years has 

been to allow their products to come in essentially duty free, and 

your efforts have produced a two-way street, and I look forward to 

working with you through the ratification process. 

The one issue that raised its head during the DR–CAFTA process—and it appears to be a trend as we look at international 

trade—is the issue of intellectual rights, intellectual property 

rights, which are important to manufacturers and workers in my 

home state of Illinois, and in particular the pharmaceutical sector, 

which is a major employer in Illinois. It appears that there is real 

effort to move forward on an assault on the intellectual property 

rights, particularly of pharmaceutical products. 

Brazil, for example—it has been brought to my attention—that 

they are attempting to break patents on medicines for use not only 

in Brazil, but to have the ability to produce for export, essentially 

stealing someone else’s idea and then making money off it. They 

have been attempting to justify this by invoking the trade-related 

aspects of international property rights (TRIPS) agreement compulsory licensing provisions. 

First I would like to hear your comment, Mr. Ambassador, on 

Brazil’s attempt to break U.S. patents through TRIPS, even though 

Brazil is not a developing country, but also how widespread is this 

challenge as you work on trade agreements? 

Mr. ALLGEIER. Thank you. Well, the area of intellectual property, as you pointed out, is extremely important to the United 

States. It is not just on patents, but also on copyrights and trademarks and trade secrets. This whole—the innovation that we have 

in our economy is one of the strongest elements in our competitiveness. So, it is a very important priority for U.S. in our trade negotiations. 

That said, we also are very sensitive to the fact that all countries, and particularly developing countries, many developing countries, have enormous challenges in meeting the public health needs 

of their population, and with limited resources. So, that is why the 

United States played such an important role both at Doha and 

then subsequently to refine the WTO procedures and understandings on how a country can balance the protection of intellectual property with meeting its public health needs for its public. 

We have taken that through and incorporated in our FTAs including the DR–CAFTA 

Now, with respect to the specific problem that you identified with 

Brazil. Brazil, of course, has a very significant acquired immune 

deficiency syndrome (AIDS) problem, which they have dealt with 

and they have had some very innovative policies for doing it. Our 

belief, based upon experience to date in Brazil and elsewhere, is 

that that is best done in a cooperative mode with the pharmaceutical companies, and not doing it a way that is very 

confrontational and that is threatening to break patents in order 

as a negotiating ploy to reduce prices. 

I think that our companies have shown a sensitivity to those 

issues and so we have been working in this latest instance with the 

Brazilian authorities and with the companies urging them, the two, 

to get together to find out what is going to be in the best long-term 


ccoleman on PROD1PC71 with HEARING
28 

interest of Brazil in meeting its public health needs. It should be 

based upon that, not upon some other kind of longer-term commercial calculation on the part of industrial authorities in Brazil as to 

where they would like to be 10 years from now in terms of production. They will be in the best position if they work to create an environment in which our companies work together with Brazilian 

companies to develop the industry in Brazil. 

Mr. WELLER. Is that the strategy the Administration—— 

Mr. ALLGEIER. Yes. 

Mr. WELLER. When it comes in and selects a product; to encourage industry and the particular government of that particular 

country to work it out or do we have a strategy overall on protection of intellectual property rights? 

Mr. ALLGEIER. Well, we certainly have a strong objective of 

protecting intellectual property rights within the boundaries that 

have been established within the WTO, which we think has struck 

the right balance between respect for intellectual property rights 

and then also ways in which companies can work with countries 

that have severe public health needs. 

Mr. WELLER. Thank you, Mr. Chairman. I see my time has expired. 

Chairman SHAW. Mr. Herger? 

Mr. WELLER. Thank you, Mr. Ambassador. 

Mr. ALLGEIER. Thank you. 

Mr. HERGER. Thank you, Mr. Chairman. Mr. Ambassador, it is 

great to have you with us. I represent one of the richest agricultural producing areas in our nation, the northern Sacramento Valley of California. More than 60 percent of our California almonds 

are exported, about half of our dried plums, about half of our rice. 

For this reason, I am very interested in the ongoing WTO negotiation to bring down the worldwide agricultural tariffs and other barriers that restrict our northern California exports. 

My question is this—and I know you have addressed it somewhat—but still, as we look at forward to the sixth WTO Ministerial 

Conference this coming December, how do you now view our U.S. 

negotiating position as it relates to improving market access for agricultural products among other WTO member nations? 

Mr. ALLGEIER. First of all, I think that it is absolutely clear to 

our negotiating partners that a very strong, ambitious result in 

market access in agriculture is absolutely essential to a package. 

We have been clear. All these countries that come to U.S. and say 

well, we want to see reform in domestic supports or we want to see 

some other development aspects. We say a key element is strong 

market access in agriculture, so there is complete clarity in the 

minds of our trading partners, and obviously complete clarity in 

our minds, and we work very closely, as you know, with the various 

farm groups to make sure we understand the conditions that they 

need to compete in key markets overseas. 

Mr. HERGER. Well, I want to thank you for that, and just reemphasize how important it is that we continue in this vein. Obviously agriculture is one of our major exports and it’s key to our 

economy and key to helping to bring in the closer line or imbalance 

of trade. So, thank you very much. 

Mr. ALLGEIER. Thank you. 


ccoleman on PROD1PC71 with HEARING
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Chairman SHAW. Thank you, Mr. Allgeier. We have now a vote, 

possibly two votes, on the floor. I want to thank you for your insightful testimony. It is always a great privilege to have you before 

the Committee. We will now stand in recess, and we will reconvene 

in approximately 20 minutes with the panel of four witnesses that 

remain as part of our hearing today. 

Mr. ALLGEIER. Thank you, Mr. Chairman. 

[Recess.] 

Chairman SHAW. Thank you. That vote took a little longer than 

we expected. Thank you for your patience. The second panel is Norman Sorensen, President and Chief Executive Officer (CEO) of 

Principal International, Des Moines, Iowa, and Chairman, Coalition of Services Industries; Dyke Messinger, President and CEO, 

Power Curbers, Incorporated, Salisbury, North Carolina, on behalf 

of the National Association of Manufacturers (NAM); Al 

Christopherson, President of the Minnesota Farm Bureau Federation, Pennock, Minnesota, on behalf of the American Farm Bureau 

Federation; and William Klinefelter, Legislative and Political Director of the United States Steelworkers. 

We have each one of you—you can start out by correcting my 

pronunciation if I have mispronounced your names. We have your 

full testimony. We ask that you try to limit your testimony to 5 

minutes and your full testimony I can assure you will be part of 

the permanent record. Mr. Sorensen. 

STATEMENT OF NORMAN R. SORENSEN, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, PRINCIPAL INTERNATIONAL, 

DES MOINES, IOWA, AND CHAIRMAN, COALITION OF SERVICES INDUSTRIES 

Mr. SORENSEN. Well, thank you, Mr. Chairman, Ranking Member, Mr. Cardin. Thank you for the opportunity to testify today. My 

name is Norman Sorensen. I am the Chairman of the U.S. Coalition of Service Industries. I am also the President of Principal 

International, an international arm of Principal Financial Group, a 

large pension and asset management company based in Des 

Moines, Iowa, and a member of the Fortune 500. 

Mr. Chairman, the message is very basic. We believe the WTO 

is the foundation of the world trading system and that continued 

active U.S. engagement in it is essential. The WTO has been effective in removing trade barriers that had long restricted international trade. United States companies, workers, consumers, and 

families have benefited, in our opinion, tremendously as a result. 

It is the broadest form within which liberalization is negotiated, 

rules are set, and disputes are adjudicated. 

Without the WTO, there would be no vehicle for global trade liberalization. We support efforts to liberalize bilaterally and in that 

regard strongly support ratification of DR–CAFTA. But we believe 

that the WTO must now take center stage, both because it is the 

only means of achieving liberalization globally, and because the 

Doha round has reached a critical stage. We, therefore, hope that 

Congress will ensure that the United States remains committed to 

involvement and engagement in the WTO. 

The issue at hand today—and some of these argument have been 

expressed throughout the hearings earlier—is not whether to mainVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 E:\HR\OC\26369.XXX 26369

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tain a membership in the WTO, but that should be a given. Rather, 

we ask that policy makers now focus hard on ensuring that the 

Doha round concludes successfully. 

Since the adoption of the agreement establishing the WTO in 1994, U.S. cross-border services exports have grown from $186 billion in 1994 to $338 billion in last year. The United States is, by 

far, as has been said, the largest services exporter and enjoys about 

a $50 billion surplus in services trade. 

Potential benefits to the United States from a successful Doha 

round are tremendous, especially for services. According to one 

University of Michigan study, if all barriers to worldwide trade in 

goods, agricultural products, and services were dismounted and dismantled, the United States would enjoy a welfare benefit of an astonishing $542 billion, and the bulk of this, $466 billion would result from the elimination of services barriers. We must, therefore, 

in the Doha round move to the next phase, in which we negotiate 

deeper, more liberalizing commitments. 

However, Mr. Chairman, we are of the opinion that the services 

negotiations are at a point of crisis. They are at a crisis because 

many countries have not tabled offers, and those offers that have 

been tabled provide for little new liberalization. Not only are offers 

weak, the hard work of country by country, sector by sector bargaining is also not taking place. 

In our discussions with U.S. trade officials, WTO officials, and 

our trading partners, we have explored ways to get the services 

talks back on track. In my visits last month to four major capitals—New Delhi, Beijing, Brasilia, and Kuala Lumpur—I met with 

trade officials to stress these very arguments and encouraged them 

to submit revised officers to WTO this month, which is, as you 

know the first deadline on May 31st. 

The Coalition of Service Industries proposes that all WTO members undertake to make commitments in all services sectors in the 

GATT. If WTO members can accept that as a starting point, it will 

improve the negotiating environment significantly, allowing negotiators to focus on the depth, scope, and quality of commitments. 

Those commitments should at least capture their current levels of 

liberalization. 

In further negotiations, the United States could then request 

that our trading partners bring their schedules of services commitments at least up to the quality of liberalization reflected in the 

schedules of countries that have done the most to liberalize their 

services sectors, like the United States and some of our trading 

partners in the industrialized countries. 

The importance of the Doha round services talks demand that 

the United States dedicate the resources and focused energy, as 

has been said before, to succeed in the services negotiations. All 

members of the global trading system have a stake in the future 

of the WTO and the Doha round, but it is the United States that 

stands to gain the most. We must, therefore, continue to participate actively and vigorously in the WTO. 

In conclusion, services are central to our economic interest. 

Worldwide liberalization of services means more American jobs, expanded U.S. trade, and a stronger American economy. Thank you, 

Mr. Chairman. 


ccoleman on PROD1PC71 with HEARING
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[The prepared statement of Mr. Sorensen follows:] Chairman 

SHAW. Thank you, sir. Mr. Messinger, please. 

Statement of Norman Sorensen, President and Chief Executive Officer, 

Principal International, Des Moines, Iowa, and Chairman, Coalition of 

Services Industries 

INTRODUCTION 

Thank you, Mr. Chairman, for the opportunity to testify today on the future of 

U.S. participation in the World Trade Organization. The Coalition of Service Industries (CSI) is the leading business organization dedicated to the reduction of barriers 

to U.S. services exports. CSI was formed in 1982 to ensure that U.S. trade in services, once considered outside the scope of U.S. trade negotiations, would become a 

central goal of future trade liberalization initiatives. 

Today’s hearing is timely, as we are entering a crucial phase in the Doha Round, 

which is the 9th Round of multilateral trade negotiations since the formation of the 

GATT, the predecessor to the WTO, in 1948. 

The WTO is the foundation of the world trading system. The WTO has been effective in removing trade barriers that had long restricted international trade, and 

U.S. companies, workers, consumers, and families have benefited tremendously as 

a result. With a membership that includes 148 nations and nearly all the world’s 

significant economies, it is the broadest forum within which liberalization is negotiated, rules are set, and disputes are adjudicated. Without the WTO, there would 

be no vehicle for global services liberalization, and until its establishment ten years 

ago, there wasn’t. The institution is crucial for maximizing the advantages from, 

and managing our interests in, the global economy. The continued focused and determined engagement of the United States in the WTO is critical to the interests 

of the U.S. service industry. 

We support efforts to liberalize bilaterally and in that regard strongly support 

ratification of CAFTA. But we believe the WTO must now take center stage, both 

because it is a means of achieving liberalization globally, and because the Doha 

Round has reached a critical stage. Unlike FTAs, which are negotiated bilaterally 

or with a small number of trading partners, WTO negotiations lead to liberalization 

by all WTO members. 

We therefore hope that Congress will ensure that the United States remains committed to the WTO, especially at such an important juncture in the Doha Round. 

Many challenges stand in the way of a successful completion of the Round, not 

least in the service sector. In our view, the issue at hand today is not whether to 

maintain our membership in the WTO. That, we believe, should be a given. Rather, 

we hope that policymakers will focus on ensuring that the Doha Round concludes 

successfully, which means comprehensive new liberalization across the range of 

service sectors, as well as in other areas under negotiation. 

BENEFITS: HOW HAVE WE GAINED FROM PARTICIPATION IN THE 

WTO? 

Services are still a relatively new item on the multilateral trade agenda. Only 

during the 1980s did serious work begin to define and quantify services trade, and 

only during the Uruguay Round did services negotiations commence. The end of the 

Uruguay Round resulted in the adoption, by all GATT/WTO members, of the General Agreement on Trade in Services or GATS, which spelled out the terms under 

which liberalization of trade and investment in services would be pursued. 

Accompanying the GATS were schedules of commitments that identified the service sectors in which members were willing to offer market access and national treatment. Those schedules of commitments, combined with separate agreements on financial services and basic telecommunications, concluded in 1997, formed the basis 

for further negotiation when broad-based services negotiations were launched in 

2000 as required by the agenda built into the Uruguay Round. That negotiation was 

subsequently subsumed into the Doha Round. 

The inclusion of services in the Uruguay Round was a groundbreaking achievement. It opened up services markets and for the first time provided a means by 

which WTO members could make commitments to liberalize international trade and 

investment in a wide array of service sectors. 

The WTO has produced successes for services. The 1997 Financial Services Agreement and the Agreement on Basic Telecommunications are examples of WTO agreements which provided market access and national treatment, and established important disciplines in two vital service sectors. 

The numbers illustrate the benefits even more vividly. Since the adoption of the 

agreement establishing the World Trade Organization, U.S. crossborder services exVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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1 ‘‘The Importance of Services to the U.S. Economy.’’ Dear Colleague letter, signed by Congressmen Ben Cardin and Jim Kolbe, March 18, 2005. 2 University of Adelaide, Institute for International Business, Economics & Law (IIBE&L), 

Global Trade Opinion Poll Survey No. 10, April-May 2005. 

ports have grown steadily, from $186 billion in 1994 to $338 billion last year. The 

U.S. is by far the world’s largest service exporter, and enjoys about a $50 billion 

surplus in services trade. 

Sales of services by U.S. affiliates in foreign markets is even larger, rising from 

$190 billion in 1995 to over $400 billion in 2002. The operations of these affiliates 

are vital to U.S. companies’ global competitiveness, and thus to American jobs. 

By establishing a framework for services liberalization, the WTO has significantly 

advanced U.S. economic interests. Now is the time to build on that work. 

While the U.S., Europe, and a handful of other countries made good services commitments coming out of the Uruguay Round, most countries’ commitments were limited, both in scope and depth. Many schedules did not even reflect existing levels 

of openness, and many excluded coverage of key service sectors. 

We must therefore move to the next phase, in which we negotiate deeper, more 

liberalizing commitments that provide new commercial opportunities across the 

breadth of the service sector. 

THE IMPORTANCE OF SERVICES TO THE U.S. ECONOMY 

Mr. Chairman, as you and your fellow Congressmen well know, the service sector 

is vital to U.S. economic growth and vitality. To quote directly from a bipartisan 

Dear Colleague letter circulated in the House of Representatives a few weeks ago, 

‘‘Many of U.S. may not fully appreciate that services represent the overwhelming 

share of our country’s employment, economic output, a large and growing share of 

our foreign trade, and are key to the future growth of the American economy.’’ 1

We could not agree more. Services account for nearly four-fifths of U.S. economic 

output, and 87 million Americans are employed in the service sector—80% of the 

private sector workforce. By Labor Department reckoning, 90% of all the new jobs 

created in the U.S. between now and 2012 will be in the service sector. 

Viewed against that backdrop, the importance of securing meaningful services liberalization in the Doha Round is self-evident. 

However, developing countries too have a big stake in services liberalization. Even 

in lower income developing countries, services account for an average of nearly 50% 

of GDP. This was a point that my CSI colleagues and I made during a series of business missions I led last month to Beijing, Brasilia, Kuala Lumpur, and New Delhi, 

specifically for the purpose of advocating greater progress in the services component 

of the Round. 

In our conversations with trade and finance ministers, central bank, foreign ministry, and other senior officials, as well as private sector leaders in all four countries, the level of interest in and understanding of services varied markedly. I was 

encouraged that all four countries are committed to tabling revised services offers. 

Some countries see services as an important future growth sector and are developing their negotiating positions accordingly. However, too many other countries are 

not. 

SERVICES NEGOTIATIONS ARE AT A CRISIS POINT 

Mr. Chairman, we are of the opinion that the services negotiations are in crisis. 

This view is widely shared among trade officials and observers in Washington, in 

Geneva, and in many capitals, and was echoed during a series of meetings that CSI 

organized with WTO officials and Ambassadors in Geneva earlier this year. 

Services negotiations are complex and time-consuming. They are based on a request-offer process, requiring multiple intensive negotiating sessions in which initial 

offers are followed by further negotiations and improved offers. Effective services negotiations take, at a minimum, many months. They are at a crisis because too few 

services offers have been tabled, and those offers that have been tabled provide for 

little new liberalization. The real work has yet to begin. 

Without a decisive push by the U.S. and other key WTO members, the Doha 

Round will reach a point where, having finally achieved agreement on agricultural 

liberalization, for example, there simply will not be sufficient time left to adequately 

address services before the Round’s conclusion. 

The sense of pessimism was underscored last week in a poll of trade policy officials and specialists in Geneva and in key capitals.2 The poll, conducted by former 

WTO Deputy Director General Andrew Stoler, revealed that 77% of respondents 

doubt that there will be a critical mass of services offers on the table by the end 


ccoleman on PROD1PC71 with HEARING
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3 International Trade Commission. General Agreement on Trade in Services: Examination of 

South American Trading Partners’ Schedules of Commitments (Investigation 332–367) Publication 3007 Published December 1996. 4 International Trade Commission. General Agreement on Trade in Services: Examination of 

the Schedules of Commitments Submitted by Asia/Pacific Trading Partners Investigation No. 

332–374 Publication 3053 August 1997. 5World Trade Organization: ‘‘World Trade 2004, Prospects for 2005,’’ April 14, 2005. 

6 Brown, Drusilla K., Kozo Kiyota, and Robert M. Stern, ‘‘Computational Analysis of the U.S 

FTA with the Southern African Customs Union (SACU),’’ University of Michigan, July 6, 2004. 

of this month, which is the deadline by which WTO members are to submit revised 

services offers. 

A POSSIBLE WAY FORWARD 

In our discussions with U.S. trade officials, WTO officials, and our trading partners, we have explored several options for getting the services talks back on track. 

We propose that WTO Members make commitments in all services sectors in the 

GATS. If WTO members can accept that as a starting point, it will improve the negotiating environment significantly, allowing negotiators to focus on the depth, 

scope, and quality of commitments. Those commitments should at least capture current levels of liberalization. 

In further negotiations, the U.S. could then request that our trading partners 

bring their schedules of services commitments at least up to the quality of liberalization reflected in the schedules of countries that have done the most to liberalize 

their services sectors, like the United States. 

This approach would be helpful because the U.S. (and a handful of industrialized 

countries) has already taken on the most commitments, while many other countries 

have made relatively few commitments. Analyses of existing services schedules 

show, for example, that most Latin American countries, with the exceptions of Argentina and Mexico, have made full or partial commitments in only 20% of the possible service sectors.3 Asian countries such as Thailand and Malaysia have made 

commitments in less than 40% of the possible sectors, while the figure is under 30% 

for the Philippines and under 20% for Indonesia.4 The U.S., Canada, and others, 

by contrast, have made full and partial commitments in a significantly higher number of the possible sectors. 

THE POTENTIAL GAINS FROM A SUCCESSFUL DOHA ROUND 

In 2004, global services trade was only about 24% of the value of global goods 

trade.5 The figure is low in part because of the prevalence of barriers to services 

trade. While tariff and non-tariff barriers to goods and agricultural products have 

been reduced significantly over the course of successive multilateral trade Rounds, 

this process is only beginning in services. Thus, the marginal gains to be had from 

further services liberalization are much greater than in other sectors. 

The potential benefits to the United States (and to all our trading partners) from 

a successful Doha Round are tremendous. Moreover, a variety of studies have demonstrated that the greatest gains for the U.S. are to be had in the services sector, 

which is not surprising in light of its prominent role in our economy. According to 

one University of Michigan study, if all barriers to worldwide trade in goods, agricultural products, and services were dismantled, the U.S. would enjoy a welfare benefit of an astonishing $542 billion, and the bulk of this—$466 billion—would result 

from the elimination of services barriers.6

CONCLUSION 

Services are a frontier area of WTO negotiations, and it is here that the WTO’s 

work overlaps most directly with American economic interests. Commensurate with 

its importance, resources and energy must be directed toward a successful conclusion to the services negotiations. All members of the global trading system have a 

stake in the future of the WTO and the Doha Round, but it is the U.S. that stands 

to gain the most, and we must therefore continue to participate actively and vigorously in the WTO. In this regard, it is especially important to help our trade negotiators bring other key countries to the negotiating table by engaging senior officials 

at the Treasury and State Departments in this effort. 

In conclusion, I refer again to the recent Dear Colleague letter, which aptly summarizes my message today: ‘‘Services are central to our economic interests. Worldwide liberalization of services, as is being pursued in the Doha Round, means more 

American jobs, expanded U.S. trade, and stronger growth for the American economy.’’ 

I thank you for your time, and would be glad to answer any questions you might 

have. 

f 


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STATEMENT OF DYKE MESSINGER, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, POWER CURBERS, INC., SALISBURY, 

NORTH CAROLINA, ON BEHALF OF THE NATIONAL ASSOCIATION OF MANUFACTURERS 

Mr. MESSINGER. Mr. Chairman, Members of the Subcommittee, 

my name is Dyke Messinger. I am President and CEO of Power 

Curbers, Incorporated, of Salisbury, North Carolina, and I am 

pleased today to testify on behalf of the (NAM). 

Power Curbers sells globally. We export to over 70 countries 

around the world, including places as far away as Australia, China, 

Japan, Malaysia and places as close to home as Canada, Mexico, 

and other countries in Central America. More than one-fifth of our 

production was exported in 2004, and our exports have doubled in 

the last 3 years. 

Trade is very important to manufacturers like me. One out of 

every five manufacturing jobs in the United States is directly related to exports, and manufactured goods account for fully 87 percent of total U.S. exports of goods. Small and medium sized firms 

comprise 97 percent of all exporters. Only 3 percent of exporters 

are large firms, and small and medium sized firms account for 30 

percent of U.S. exports. That is a considerable amount. In many 

ways, smaller firms probably need the WTO system more than 

larger ones. The cost of compliance with discriminatory foreign 

standards, the difficulties of dealing with counterfeiting and intellectual property, the cost of customs clearance and delays—all 

these are proportionately larger for smaller firms. 

Mr. Chairman, I am not a trade lawyer. I am a businessman. 

However, I can tell that because of the rules-based trading system, 

barriers have been coming down over the years, and firms like 

Power Curbers have benefited, as well as my competitors. However, 

my company faces still trade barriers that are much too high. We 

could sell more to our existing customers if the costs of trade were 

cheaper, and if other countries did not throw up one barrier after 

another. We could find new customers and markets if those barriers came down. The Doha round of the WTO negotiations offers 

the next opportunity to bring these barriers down. 

Trade liberalization over the years has been a boon to the U.S. 

manufacturing base as more markets are open to U.S. than ever 

before. The global trading system has also brought about improving 

the protection of intellectual property and transparency in government procurement. The more the U.S. Government can open up 

foreign markets and assure that trade is fair, the more we are 

going to sell and the more people we will have on our payroll. 

The NAM believes strongly that the successful completion of the 

Doha round of the WTO negotiations is of critical importance to the 

U.S. and world economies. A deal that cuts deeply into agricultural 

barriers and distortions is of critical importance to the success of 

the round, but so are deep cuts in industrial trade barriers. 

Last month, the NAM led a global manufacturers’ fly in to the 

WTO in Geneva to stress manufacturing priorities in the Doha 

round of trade negotiations. More than 30 individuals from manufacturing organizations around the world participated, including 


ccoleman on PROD1PC71 with HEARING
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Australia, Brazil, Canada, Europe, Japan, and Korea. After decades of multilateral negotiating rounds, industrial nation tariffs 

have fallen to very low levels for the most part, but developing nation tariffs have not. For example, my equipment faces duties of 14 

percent in Brazil, 15 percent in India, and 8 percent in China. We 

could sell a lot more if we could see these barriers eliminated or 

substantially reduced. 

The NAM also believes that negotiation on NTB must continue 

to be addressed in the negotiations. The NTB are a concern because they can become just as great an impediment to trade as tariffs. The NTB are a particular disadvantage for small companies 

like mine. Trade facilitation improves basically improvements in 

custom procedures are another way in which the Doha round can 

benefit U.S. companies. A number of companies have speculated 

that these costs may add as much as 5 to 8 percent to the cost of 

importing into many developing countries. 

The WTO’s procedure for resolving trade issues under the dispute settlement understanding is another important aspect. It is 

vital for enforcing the rules. Before the WTO, dispute settlement 

had no teeth, and cases could go on for years because the process 

was totally voluntary. Having a rules-based system that is enforceable is critical. The system is certainly not perfect, and NAM endorses efforts to make WTO dispute settlement process more open 

and transparent. 

Power Curbers has benefited directly from recent FTAs. Previously, we faced duties of 6 percent in Chile and 5 percent in Australia. As a result of our FTAs with those countries, we can now 

export to both countries duty free, while our competitors still have 

to pay these duties. 

Mr. Chairman, let me conclude by saying that the United States 

must continue to lead the WTO and that the resolution to withdraw from the WTO must be vigorously opposed by the Administration and Congress. Thank you so much. 

[The prepared statement of Mr. Messinger follows:] 

Statement of Dyke Messinger, President and Chief Executive Officer, 

Power Curbers, Inc., Salisbury, North Carolina, on behalf of the National 

Association of Manufacturers 

Good morning Chairman Shaw, Ranking Member Cardin, and members of the 

Subcommittee. Thank you for giving me the opportunity to participate in this panel. 

My name is Dyke Messinger and I am President and CEO of PowerCurbers, Inc. 

a small manufacturer located Salisbury, North Carolina. We manufacture machinery for slipforming concrete curb-and-gutter, highway safety barrier, bridge parapet, 

monolithic curb, gutter and sidewalk, irrigation ditches and roller compacted concrete dams. I am pleased to testify today on behalf of the National Association of 

Manufacturers (NAM) at this hearing to review future prospects for U.S. participation in the World Trade Organization (WTO). 

The National Association of Manufacturers is the nation’s largest industry trade 

association, representing small and large manufacturers in every industrial sector 

and in all 50 states. The large majority of NAM members are SMMs like my company who are affected directly or indirectly by trade and have a keen interest in 

the factors affecting our trade and international economic relations. 

PowerCurbers, Inc. sells globally. We export to over 70 countries around the world 

including places as far away as Australia, China, Japan and Malaysia and places 

as close to home as Canada, Mexico and the countries in Central America. More 

than one-fifth of our production was exported in 2004 and our exports have doubled 

in the last three years. We have hired more employees over the years to keep up 

with the increased exports. 


ccoleman on PROD1PC71 with HEARING
36 

Trade is very important to manufacturers like me. In fact, Commerce Department 

data show that one out of every five manufacturing jobs in the United States is directly related to exports. And manufactured goods are also the most important part 

of our overall trade, accounting for fully 87 percent of total U.S. exports of goods. 

Even when services are included, manufactured goods exports comprise two-thirds 

of total U.S. exports of goods and services. 

It is frequently assumed that world trade is a big company game, and that exporting is too difficult and costly for smaller firms. That is just not so. It certainly is 

not true for my firm; but it isn’t true for others either. 

I think the Subcommittee will be very interested to learn that in fact small and 

medium-sized firms comprise 97 percent of all U.S. exporters. Only 3 percent of exporters are large firms. It is true that large firms account for the lion’s share of exports, but small and medium-sized firms typically account for about 30 percent of 

U.S. exports. That is a considerable amount. 

Smaller firms benefit from the WTO rules-based trading system just like larger 

firms. In fact, in many ways smaller firms probably need the WTO system even 

more than large firms. The cost of compliance with discriminatory foreign standards, the difficulties of dealing with counterfeiting and intellectual property piracy, 

the cost of customs clearance and delays—all these are proportionately larger costs 

for smaller firms, because we have to spread these costs across fewer units of exports than larger firms. 

Mr. Chairman, I am not a trade lawyer. I am a businessman. I can tell you that 

because of the rules-based trading system, barriers have been coming down over the 

years and firms like PowerCurbers, Inc. have benefited. However, my company still 

faces tariffs and trade barriers that are much too high in too many countries. We 

could sell more to our existing customers if the costs of trade were cheaper, and if 

other countries did not throw up one barrier after another. And we could find new 

customers in more markets if barriers came down. The Doha Round of World Trade 

Organization (WTO) negotiations offers the next opportunity bring those barriers 

down. 

Since its original founding in 1948 as the General Agreement of Tariffs and 

Trade, the GATT/WTO system has seen global tariffs on manufactured goods fall 

dramatically and global trade volumes grow exponentially, resulting in more freedom and prosperity for hundreds of millions of people. Trade liberalization over the 

years has been a boon to the U.S. manufacturing base as more markets are open 

to U.S. than ever before. Access to a greater supply of raw materials at lower prices 

enables U.S. manufacturers to reduce costs and become competitive in markets 

around the world. The global trading system has also brought about improving the 

protection of intellectual property (IP) and transparency in government procurement. 

Ten years have elapsed since the last multilateral Round was completed. The 

more the U.S. Government can open up foreign markets and assure that trade is 

fair, the more we are going to sell—and the more people we will have on our payroll. 

The United States is the world’s leader for trade expansion and must continue its 

determined, aggressive leadership to complete the Doha Round. 

Doha Round Negotiations 

The NAM believes strongly that the successful completion of the Doha Round of 

World Trade Organization (WTO) negotiations is of critical importance to the U.S. 

and world economies. The framework agreement reached last summer in Geneva 

shows that a successful Doha Round is now a real possibility. 

The negotiations are called the ‘‘Doha Development Agenda’’ (DDA) for good reason—it is time that the developing countries, particularly the least developed, become more integrated into the global trading system and obtain more of the gains 

from trade. 

The NAM fully endorses this, but we want to stress that many of the gains to 

developing countries will come from reducing their trade barriers and opening their 

own markets—just as we have gained from our own market openness. We agree 

that special consideration must be made for the least developed nations. However, 

we also believe that no country should be a ‘‘free rider’’ in the Round. 

A deal that cuts deeply into agricultural barriers and distortions is of critical importance to the success of the round, but so are deep cuts in industrial trade barriers. American manufacturers need to see substantial cuts to industrial trade barriers, including substantial reductions in the actual tariff rates developing countries 

apply to imports. 

The NAM created a special WTO Action Group to promote, advocate and achieve 

manufacturers’ ambitious trade liberalization goals as the Doha Round of trade negotiations continues. The NAM’s Action Group is being chaired by Steve Biegun, 


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Ford Motor Company’s Vice President of International Governmental Affairs. The 

principal aim of this Group is to elevate the importance of industrial trade in the 

Doha Round. 

Last month, the NAM led an unprecedented Global Manufacturers Fly-In to the 

WTO in Geneva, Switzerland, to make certain manufacturing priorities are addressed in the Doha Round of trade negotiations. More than 30 individuals from 

manufacturing organizations around the world participated, including Australia, 

Brazil, Canada, Europe, Japan and Korea. The principal objective of the fly-in was 

to demonstrate that manufacturing organizations from around the world are determined that the Doha Round should result in truly ambitious cuts in industrial tariff 

barriers. After all, manufactured goods account for over 75% of world merchandise 

trade! 

Non-Agricultural Market Access (NAMA) Negotiations 

After decades of multilateral negotiating rounds, industrial nation tariffs have 

fallen to very low levels for the most part, but developing nation tariffs have not. 

Developing nations were not expected to make proportional cuts in their tariffs, and 

in many cases were not asked to make reductions at all. 

The resulting imbalance in tariff rates is huge: U.S. and other industrial country 

bound tariff rates on imports of manufactured goods now are down to an average 

of about 3 percent, but the average bound industrial duties in the developing countries is over 17 percent—nearly six times as high. For example, my equipment faces 

duties of 14 percent in Brazil, 15 percent in India and 8 percent in China. We could 

sell a lot more if we could see these barriers eliminated or reduced substantially. 

The NAM believes the task of obtaining substantial cuts in foreign tariffs on U.S. 

manufactured goods, while difficult, is achievable by focusing on 23 trading partners—three industrial partners and 20 developing partners. Together, these 23 account for 96 percent of the global duties assessed on U.S. exports of manufactured 

goods. 

We recommend selecting the EU, Japan, andNew Zealand as top industrial country priorities. Together they account for 99 percent of industrial nation duties 

charged on U.S. manufactured goods exports. 

Twenty developing countries account for a startling 95 percent of all duties assessed by developing countries on our exports. The twenty developing countries, in 

order of the estimated amount of duties U.S. manufacturers now pay are: China, 

Brazil, Korea, India, Thailand, Taiwan, Malaysia, Colombia, Egypt, Argentina, Venezuela, the Philippines, Peru, the United Arab Emirates, Pakistan, Nigeria, South 

Africa, Indonesia, Ecuador, and Panama. 

Non-Tariff Barriers 

While much of my focus thus far has been on tariffs, the NAM also believes that 

negotiations on non-tariff barriers (NTBs) should continue to be addressed as an important feature of the non-agricultural market access negotiations. Non-tariff barriers are a concern because they can become just as great an impediment to trade 

as tariffs. Moreover, non-tariff barriers tend to raise the fixed costs of trading. This 

is a particular disadvantage for small and medium-size enterprises (SMEs), like 

mine, which have to spread those fixed costs over fewer dollars of sales. 

NTBs have been rising in importance as trade-distorting factors, including such 

measures as discriminatory standards, conformity assessment requirements, preshipment inspections, custom valuation practices, regulatory requirements, port procedures, and security procedures. Product requirements, including environmental 

and other regulations, should be nondiscriminatory and based on sound and widely 

accepted scientific principles and available technical information. For example, my 

products face very rigorous NTBs in the European Union to meet safety and health 

requirements. 

Trade Facilitation 

Trade facilitation improvements, basically in customs procedures, are another way 

in which the Doha Round can benefit U.S. companies. While we have seen no specific estimates of the overall costs of these trade complications, a number of companies have speculated that they may add as much as 5–8 percent to the cost of importing into many developing countries. 

SME’s can be particularly hard-hit by border barriers, since both buyers and sellers in international SME transactions often operate on thin margins. Strong disciplines on trade facilitation offer certainty to businesses and investors. That certainty benefits all countries, as business and new ideas and technology move into 

the market. It benefits American companies, as they are more certain of international sales. 


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Customs delays are one of the major trade facilitation issues experienced by industry. The causes of delays are many. In general, however, the absence of clear 

global guidelines on how to deal with new products, a lack of resources at the border, corruption, absence of computerization, and lack of a clear mechanism for preclearance or streamlined procedures for entry, among other issues, contribute to 

delays. A good example is the case of India. The typical ship waiting time across 

the globe is less than 6 hours. In India, the average ship waiting time is 3–5 days. 

For air freight imports, the average dwell time is less than 12 hours. In India, the 

average dwell time is 8 days. 

Dispute Settlement Understanding 

The WTO’s procedure for resolving trade issues under the Dispute Settlement Understanding (DSU) is another important aspect. It is vital for enforcing the rules 

and therefore for ensuring that trade flows smoothly. Before the WTO, dispute settlement had no teeth and cases could go on for years because the process was voluntary. It is good to know that we can go to a fair and impartial dispute settlement 

body to have these cases settled. Having a rules-based system that is enforceable 

is critical. However, the system is certainly not perfect and the NAM endorses efforts to make the WTO dispute settlement process more open and transparent. 

We urge that safeguards be discussed that would discourage or prevent WTO dispute settlement bodies from creating obligations that were not agreed to in negotiating the text of the various documents comprising countries’ obligations under the 

WTO. 

Bilateral Agreements 

The NAM strongly supports the on-going negotiations at the World Trade Organization, but also believes that the U.S. Government should continue to negotiate new 

bi-lateral and regional free trade agreements (FTAs) that would level the playing 

field for U.S. manufacturers.The expansion of comprehensive U.S. free trade agreements (FTAs) among countries and regions contributes substantially to the overall 

goal of opening world markets to U.S. manufactured goods. The NAM supports 

FTAs because U.S. manufacturers face much higher barriers in foreign markets 

than foreign producers face here. 

I think the Subcommittee should focus on the fact that our bi-lateral FTAs account for 40 percent of U.S. manufactured goods exports, but only 10 percent of the 

manufactured goods trade deficit. Fully 90% of the U.S. trade deficit in manufactured goods is with countries with which the U.S. does not have FTAs. 

For example, PowerCurbers, Inc. has benefited directly from recent FTAs negotiated and signed by the United States. Previously, we faced duties of 6 percent in 

Chile and 5 percent in Australia. As a result of our FTAs with those countries, we 

can now export to both countries duty free-while our competitors still have to pay 

these duties. 

Mr. Chairman, I know that this hearing is about the WTO, but as someone who 

does business in Central America and the Dominican Republic, I would like to say 

something about the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA–DR), which is pending before Congress. American manufacturing 

strongly believes that passage of this agreement is in the best interest of the United 

States. The agreement will benefit a lot of companies and it will be good for the 

region. Their economies will be better off so we can sell them more of our products. 

The agreement also offers customs facilitation and state of the art intellectual property protection for American manufacturers. 

Conclusion 

Finally, it is self-evident that the Doha Round of WTO negotiations cannot proceed without Trade Promotion Authority (TPA) or without U.S. membership in the 

WTO. Therefore, the NAM strongly recommends that TPA be continued, as provided 

for in law; and the resolution to withdraw from the WTO be opposed vigorously by 

the Administration and Congress. The United States is the world’s leader for trade 

expansion and must continue its determined, aggressive leadership to complete the 

Doha Round. 

Thank you, Mr. Chairman. 

f 

Chairman SHAW. Thank you, sir. Mr. Christopherson. I bet you 

were the last one in your first grade class that learned to write 

your name? 


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Mr. CHRISTOPHERSON. Certainly. About eighth grade I mastered it. 

STATEMENT OF AL CHRISTOPHERSON, PRESIDENT, MINNESOTA FARM BUREAU FEDERATION, PENNOCK, MINNESOTA, ON BEHALF OF THE AMERICAN FARM BUREAU 

FEDERATION 

Mr. CHRISTOPHERSON. Thank you. Good afternoon, Mr. 

Chairman and Members of the Subcommittee on Trade. My name 

is Al Christopherson, and I am a corn and soybean and hog producer in Minnesota. I also serve as President of the Minnesota 

Farm Bureau. I am on the Board of Directors and the Executive 

Committee of the American Farm Bureau, and I am here representing the views of the American Farm Bureau Federation here 

today. I certainly appreciate the opportunity to share those 

thoughts on the future of the WTO and the importance of the Doha 

round of the multilateral trade and negotiations. 

Our organization strongly supports the membership of the 

United States in the WTO. The trade negotiation standard setting 

and dispute settlement functions of the WTO operate to provide a 

stable and predictable world trading environment for U.S. agriculture. With the production of one-third of our acres destined for 

foreign markets, U.S. agriculture is strongly export dependent. The 

148-member WTO operates to provide a stable environment for 

continued growth in markets for America’s farmers and ranchers. 

A review of the issues involved in the current round of agricultural trade talks highlights the vital role that the WTO plays in 

the economic development of agriculture. The framework agreement of July 2004 set the guidelines for future negotiation in the 

areas of market access, domestic support, and export competition. 

In market access, the world average tariff on agricultural products is 62 percent, while the U.S. average agricultural tariff is only 

12 percent. The framework agreement supports the use of a formula for reducing all agricultural tariffs so that high tariffs would 

be reduced more than low tariffs. A final agreement on tariffs must 

result in significant percentage reductions that result in commercially meaningful access. 

Domestic support. United States agriculture is prepared to negotiate reductions in trade distorting domestic supports as part of an 

overall agreement that increases market access—and that is the 

key—in both developed and developing countries. Under the 

Framework Agreement, countries must commit to substantive reductions in domestic support levels. Countries support their agriculture in different ways. The United States, the EU, and Japan 

use domestic support programs. Most other nations use tariffs only 

to control or stop imports from competing with their own farmers. 

There must be improvement in market opportunities for U.S. farmers and ranchers through lowered world agricultural tariffs in 

order for the United States to be able to lower trade distorting domestic support. 

Export competition. We support the complete elimination of export subsidies as contained in the framework agreement. Export 

subsidies are recognized as the most trade distorting measures. 


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We talked about dispute settlement. One of the major accomplishments of the Uruguay round was a strengthening of the dispute settlement system. A rules-base trading regime requires an 

enforcement mechanism so that nations can be assured that following the rules will not place them at a competitive disadvantage. 

With the reduction of trade barriers and the increase in trade and 

agricultural products, the opportunity for disputes are ever increasing. What farmers get out of U.S. membership in the WTO is a 

trade system based on rules that helps maintain stable markets for 

one-third of the U.S. farm production that is needed to be exported. 

The Farm Bureau believes that the WTO agricultural negotiation 

is the best forum in which to achieve progress on a wide variety 

of international agricultural trade concerns, and we believe agriculture’s future continues to lie in expanding foreign markets and 

eliminating barriers to our exports. Continued U.S. membership 

will help assure that the WTO has an important and effective future for the United States and the other member nations. As long 

as exports are important to U.S. agriculture, WTO membership will 

be important as well. Thank you for the opportunity to share our 

views and look forward to continuing to work with the Ways and 

Means Committee on these and other trade issues. 

[The prepared statement of Mr. Christopherson follows:] 

Statement of Al Christopherson, President, Minnesota Farm Bureau Federation, Pennock, Minnesota, on behalf of the American Farm Bureau 

Federation 

Good morning, Mr. Chairman and members of the subcommittee. I am Al 

Christopherson, President of the Minnesota Farm Bureau Federation. I am here 

today on behalf of the American Farm Bureau Federation. 

I appreciate the opportunity to testify on the future of the World Trade Organization and the Doha Round of multilateral trade negotiations. 

The American Farm Bureau Federation strongly supports the membership of the 

U.S. in the WTO. The trade negotiation, standard setting and dispute settlement 

functions of the WTO operate to provide a stable and predictable world trading environment for U.S. agriculture. With the production of one-third of U.S. cropland destined for foreign markets, U.S. agriculture is strongly export-dependent. The 148 

member World Trade Organization operates to provide a stable environment for continued growth in markets for America’s farmers and ranchers. 

DOHA ROUND OF THE WORLD TRADE ORGANIZATION NEGOTIATIONS 

Farm Bureau policy, as adopted by the delegate body at our 86th annual convention, makes clear that our highest trade priority remains a successful conclusion to 

the multilateral Doha Round of the WTO trade negotiations. 

Our delegates approved a thorough and well-thought-out position to guide AFBF 

in the trade arena. Farm Bureau policy affirms that all commodity sectors should 

be on the table during trade negotiations. Our delegates believe U.S. agriculture’s 

best opportunity to address critical trade issues, such as market access and domestic 

subsidies, is through the multilateral process. 

A review of the issues involved in the current round of agricultural trade talks 

highlights the vital role that the WTO plays in the economic development of agriculture. The Framework Agreement of July 2004 set the guidelines for further negotiations in the areas of market access, domestic support and export competition. 

The future of the WTO depends upon the success of the current negotiations as 

a vehicle to advance trade liberalization. 

Market Access 

The world average tariff on agricultural imports is 62 percent, while the U.S. average agricultural tariff is 12 percent. The Framework Agreement supports the use 

of a formula for reducing all agricultural tariffs so that high tariffs would be reduced more than low tariffs, thus reducing the gap between high-tariff and low-tarVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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iff products. A final agreement on tariffs must result in significant percentage reductions that result in commercially meaningful access. 

Sensitive Products—The Framework Agreement allows all countries, developed 

and developing, to negotiate some number of ‘‘sensitive’’ products that will be subject to smaller tariff cuts. Our goal is to make sure that this number is limited so 

that meaningful market access is achievable as a result of these negotiations. 

Tariff-Rate Quotas—A method to expand market access is to have a nation agree 

to a tariff-rate quota (TRQ) for a specific product. A TRQ is a reduced tariff on a 

specified amount of imported product. The U.S. would gain increased exports if 

countries actually ‘‘filled’’ their TRQ’s. Farm Bureau wants the negotiations to result 

in higher TRQs and improved fill rates. 

Special and Differential (S&D) Treatment—Developing countries, and in particular least developed countries (LDCs), have received S&D treatment to give them 

more time to adjust to competition. While the LDCs clearly require greater protection, some ‘‘developing’’ countries are actually highly developed and competitive in 

certain sectors. It is unreasonable to provide those countries special treatment for 

those commodities. Those countries must assume greater obligations. 

Domestic Support 

U.S. agriculture has clearly indicated its willingness to negotiate reductions in 

trade-distorting domestic supports as part of an overall agreement that increases 

market access in both developed and developing countries. Under the Framework 

Agreement countries must commit to ‘‘substantive reduction’’ in domestic support 

levels. The WTO categorizes domestic support into the amber, blue and green boxes. 

Amber Box—The amber box is composed of domestic support programs that are 

used to support prices or are directly related to production and are viewed as ‘‘tradedistorting.’’ An example is the U.S. marketing loan program. The Framework Agreement calls for ‘‘substantive reduction’’ in trade-distorting domestic support. Any reductions must be balanced against improvements in the area of market access in 

order to advance export prospects for our farmers and ranchers. 

Blue Box—The blue box includes agricultural support programs that are not related to production and are considered less trade-distorting. 

Green Box—No caps should be placed on non-trade-distorting support. U.S. green 

box programs include research, extension, conservation and part of the crop insurance programs. 

The negotiations over market access and domestic support must be directly linked 

for any substantive agricultural trade liberalization. While the U.S. is able to use 

domestic programs to assist producers and keep import tariffs at a low level (average 12 percent) most nations use high tariffs (average 62 percent, with many tariff 

lines over 100 percent) to provide complete import protection in order to assist their 

agricultural producers. Both mechanisms of support—tariffs and domestic programs—need to be addressed together to achieve a successful negotiation. 

Export Competition 

We support the complete elimination of export subsidies as contained in the 

Framework Agreement. Export subsidies are recognized as the most trade-distorting 

measure in trade. The European Union (EU) spends from $3 billion to $5 billion a 

year on export subsidies and is allowed to spend as much as $8 billion under the 

current WTO agreement. The EU accounts for about 88 percent of the world’s export 

subsidies and uses them to market products of export interest to the United States. 

Farm Bureau also supports the phase-out and elimination of the trade-distorting 

practices of State Trading Enterprises, which is also included in the Framework. 

Sanitary and Phytosanitary (SPS) Agreement—We adamantly oppose any changes 

to the SPS agreement. We urge strong resistance to any attempts by the EU or others to allow social or economic considerations to form any basis for applying SPS 

measures in exchange for reduction in subsidies, tariffs or any other negotiating 

issue. 

DISPUTE SETTLEMENT IN THE WTO 

One of the major accomplishments of the Uruguay Round was the strengthening 

of the dispute settlement system. A rules-based trading regime requires a mechanism for holding nations to their commitments so that following the rules will not 

be seen as a competitive disadvantage. With the reduction of trade barriers and the 

increase in trade in agricultural products, the opportunities for disputes are ever increasing. 

The U.S. has both won and lost WTO trade cases. The U.S. has prevailed in cases 

against Japan on apple exports, Canada on grains and the EU on hormones in beef. 


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The U.S. lost the case brought by Brazil on cotton. Current disputes involving agriculture include softwood lumber with Canada and rice with Mexico. 

While we disagree with the Appellate Body’s ruling in the ‘‘cotton case,’’ we have 

urged the administration to comply with the ruling. U.S. membership in the WTO 

provides a trading system based on rules that helps maintain stable markets for our 

exports. A fair and effective dispute settlement system is an important component 

of the WTO’s future leadership role in world trade. 

In conclusion, Farm Bureau believes that the completion of a successful WTO 

Doha agriculture negotiation is the best way to achieve progress in a wide variety 

of international agricultural trade concerns. We believe agriculture’s future continues to lie in expanding foreign markets and eliminating barriers to our exports. 

Continued U.S. membership will help ensure that the WTO has an important and 

effective future for the United States and the other member nations. As long as exports are important to U.S. agriculture, WTO membership will be important as well. 

We look forward to continuing to work with the Ways and Means Committee on 

these and other important trade issues. 

f 

Chairman SHAW. Thank you, sir, for your testimony. Mr. 

Klinefelter? 

STATEMENT OF WILLIAM J. KLINEFELTER, LEGISLATIVE AND 

POLITICAL DIRECTOR, UNITED STEELWORKERS 

Mr. KLINEFELTER. Mr. Chairman, Ranking Member, Members 

of the Committee, my name is—— 

Chairman SHAW. I do not believe your microphone is on. 

Mr. KLINEFELTER. Mr. Chairman, Mr. Ranking Member, 

Members of the Committee, my name is William Klinefelter. I am 

the Legislative and Political Director of the United Steelworkers 

Union. As you may know, we just merged with the Paper, AlliedIndustrial, Chemical & Energy Workers International Union 

(PACE), which now makes U.S. the largest industrial union in 

North America, with 850,000 members. We now cover almost every 

single jurisdiction you can imagine, from pulp and paper to chemical to pharmaceuticals to steel to copper. You name it, the United 

Steelworkers Union has it. 

We welcome this opportunity to come today and talk about the 

future of the WTO. We believe that this operates on two different 

levels. We believe it operates on a macro level, what the future will 

be, and it also operates on a level of what we are doing in terms 

of the current negotiations that need to be done to reform the 

WTO, because the WTO is in serious need of reform. We have 

looked at what the WTO has done since its foundation in terms of 

well how it deals with American trade laws, and we are saying to 

the Committee that we must put real pressure on our trade negotiators as they go forward this year in the Doha round to make certain that our trade laws are not weakened in this round. They 

must also concentrate on going back and talking to our trading 

partners about what WTO panels have done when they have rendered decisions, because it is our belief that when they have been 

rendering these decisions, they have been changing our trade laws 

without negotiating about them. That is not, I don’t believe, what 

the Congress of the United States believes the WTO should be 

doing. So, we ask you to focus on that with our negotiators at the 

WTO. 

A second thing that needs to be focused on is what are we going 

to do about China in this round of the WTO. Is China going to be 


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allowed to sit on the sidelines and gain the benefits of WTO membership without adhering to what they’ve already agreed to adhere 

to when they got into the WTO? There is a process, a consultation 

process, which we set up when they got into the WTO to advise 

China without taking them all the way on what they were doing 

wrong and what they weren’t living up to. Unfortunately, they 

have not been living up to that. They have been walking away from 

that. They say it doesn’t apply to them. So, what we are saying is 

look what we should do in this round of the WTO: negotiate. Negotiate all the things that need to be negotiated in this round of the 

WTO. 

But for those countries who don’t comply with what they have already agreed to comply to put any benefits that would be gained 

by this new round of the WTO to one side until those nations actually do comply. So, those are two major things that the union 

would like to talk about today. The other is a more macro setting. 

I think that we believe that there are a couple of things that the 

WTO future depends on. 

Number one is a consensus in the U.S. Congress over American 

trade policy. As you know, right now, there is no consensus in this 

Congress. If there had been a consensus, DR–CAFTA would have 

gone through here very, very quickly and with no debate. There is 

no consensus on DR–CAFTA. There is no consensus on trade policy. There will not be until we deal with labor rights and trade 

agreements and until we deal with environmental rights and trade 

agreements. So, the future of the WTO is really dependent upon 

American consensus on American trade policy which can only be 

done here in the Congress. 

Number two, the WTO is dependent upon those developing countries in the world having the faith in what the WTO does. Right 

now, that faith has been shaken in this round of the negotiations, 

and it does continue to erode. You know it is all well and good to 

say, come up here and say that 95 percent of the people of the 

world are—95 percent of the people outside the world are America’s 

customers. Well, there are 6 billion in the world, about a billionand-a-half of those people make less than one dollar a day. Those 

are not very good customers. So, what the developing world is looking at are tremendous pressures in their internal workings. Right 

now, in Bolivia they are pressuring the government to nationalize 

the gas industry as a source of revenue for that country. In Brazil, 

there is a march on the capitol in Brazil because the current government, although he is a good steelworker, has not been able to 

make good on the promise of giving land to the peasants. What we 

are saying there are other pressures on trade that need to be dealt 

with and there are other pressures in the world that need to be 

dealt with that are outside of trade. Thank you very much. 

[The prepared statement of Mr. Klinefelter follows:] 

Statement of William J. Klinefelter, Legislative and Political Director, 

United Steelworkers 

Mr. Chairman. Members of the Committee. It is a pleasure to appear before you 

today on the question of the role of the World Trade Organization and the United 

States’ participation in that body. 

My name is William J. Klinefelter and I am the Legislative and Political Director 

for the United Steelworkers Union. Today, as a result of the merger last month of 


ccoleman on PROD1PC71 with HEARING
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the United Steelworkers of America and the Paper, Allied-Industrial, Chemical and 

Energy International Union, the Steelworkers are now the largest industrial union 

in North America. We are the most diverse union in the country, representing workers in manufacturing sectors ranging from steel to rubber to glass—to lumber and 

paper—to chemicals and energy; and also non-manufacturing sectors such as health 

care, services and education. 

In short, we represent a substantial cross section of this country and the diverse 

interests of our nation. 

Mr. Chairman, I will outline the broad concerns of my union and which I believe 

are shared by organized labor and working people all across the country. 

The World Trade Organization is in serious need of reform. A broad and comprehensive reform agenda must be immediately implemented. Without this reform, 

the U.S. should terminate its membership in the WTO. 

The union urges the Committee to continue a broad oversight of the WTO and 

to hold more hearings in the near future. 

It has always been the view of the Steelworkers—and I think it’s simple common 

sense—that the success of a nation’s trade policy should be judged not by the number of trade agreements that are negotiated, but by the results they achieve. Our 

nation’s trade deficit is skyrocketing. Wages are basically stagnant. The gap between the haves and the have-nots continues to plague the U.S., and far too many 

nations. This, in our opinion, is not a sign of success. 

The WTO is supposed to oversee the system and ensure that rules are fairly negotiated and fairly applied. The Steelworkers have always believed that international 

trade must be governed by a strong rules-based system. Yet, to the Steelworkers 

and most Americans, the WTO appears to be asleep at the switch when it comes 

to supporting our interests. In fact, they seem to constantly rule against our laws 

and skew the negotiating agenda against our interests. 

Let’s be clear: the U.S. has the most open market in the world. Our tariffs, on 

a trade-weighted basis, are among the lowest of any nation. We simply don’t have 

much more to give. 

But, that’s exactly what other nations want U.S. to do. They attack our trade laws 

which are designed to simply ensure fair play. They constantly seek to impose new 

obligations on the U.S. which were never negotiated. They often block our efforts 

when we strive to ensure that the rights of working people around the world are 

given a higher priority. 

And it’s especially troubling that the record on reviewing our unfair trade laws 

clearly indicates that the WTO has an agenda—and that is to attack and dismantle 

the basic framework of laws we have on our books that are designed to ensure that 

predatory trade practices can be confronted. 

This is a recurring problem—yet hard to understand. Injurious dumping, for example, is the only activity that is ‘‘condemned’’ in the original GATT drafted in 

1947. The WTO, the successor organization to the GATT, seems to have turned this 

legal text on its head to the extent that measures to combat injurious dumping are 

continually being ‘‘condemned.’’ 

And, the Bush Administration is not standing up for these laws: we have a win/ 

loss record of 2 out of 17 cases brought against the U.S. Day-by-day the Administration allows our laws and our regulatory framework to be whittled away in a process 

known as ‘‘gap filling.’’ 

This is a very esoteric area of law—but one that has real repercussions to our 

jobs and standard of living. 

And, all too often, the WTO stands idly by when other nations refuse to live up 

to the commitments they have made. 

China became a member of the WTO four years ago. Their record of compliance 

with their WTO commitments is seriously deficient. Time and time again, they have 

failed to fully implement the promises they made and, in fact, have erected new barriers to our exports. 

They’ve done everything they can to throw sand in the wheels of the Transitional 

Review Mechanism that they agreed to which was designed to foster a forum at the 

WTO for review and implementation of their commitments. 

And, our Administration has failed to use the system effectively. It’s become virtually useless. 

China deserves to be criticized. But, let’s recognize an important fact: More than 

one-third of China’s exports come to the U.S. while only about four percent of our 

exports go there. Wal-Mart welcomed roughly $18 billion of China’s exports We have 

leverage to force their compliance. Yet, we refuse to use it. 

How does this Administration expect to get public support to continue our participation in the WTO, much less deepen it through the Doha Round, if it allows for 

our laws to be attacked without providing an effective and aggressive defense? 


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How does it expect to gain public support when it allows China and other nations 

to welch on their promises, while we provide an open door? 

How does the Administration expect to increase support for trade liberalization 

when it turns its back on efforts by the private sector to use the trade laws that 

exist—such as Section 421? 

How does the Administration expect people to believe that they are negotiating 

in America’s interests when they allow China to manipulate its currency but the 

President’s Secretary of the Treasury refuses to say they are manipulating the value 

of the yuan? 

How does the Administration expect U.S. to gain from trade when our intellectual 

property is being pirated and counterfeited to a point in excess of 90% in China, 

yet our former U.S. Trade Representative, Bob Zoellick, says we don’t have enough 

information to bring a case? 

Mr. Chairman, a broad reform agenda must be developed and quickly adopted by 

the WTO if it is to survive, and if the U.S. is going to benefit from continued participation. I’ve outlined just some of the areas for reform. There are many, many more. 

One important area needs to be discussed as part of this agenda: the need to ensure that benefits that are negotiated are actually received. China has failed to implement the commitments they’ve made. Yet, they are sitting on the sidelines at the 

Doha Round waiting to reap its benefits. Apart from the other questions I have 

raised, we should recognize that an effective negotiating approach would be to have 

our negotiators do their work, but put the benefits on the shelf and not provide 

them to the Chinese unless and until they live up to the promises they have already 

made. We should be using a carrot and a stick with China. 

Mr. Chairman. Clearly, you hear our frustration. But, the questions I’ve asked, 

and the concerns I’ve outlined, are not just those of the Steelworkers. They are the 

concerns of a broad cross section of America’s farmers, workers and businesses. 

I thank you for the opportunity to testify and welcome the opportunity to answer 

questions. 

f 

Chairman SHAW. Thank you, and I thank all the witnesses for 

preserving our 5-minute rule. As I read the panel, even though, 

Mr. Klinefelter, I think you have been somewhat critical of the enforcement, I assume from your testimony that you want to continue 

with WTO, but you wanted stricter compliance requirements and 

you want our negotiators to work for that. Am I correct? 

Mr. KLINEFELTER. Mr. Chairman, the Union’s position has always been that the WTO needs to be reformed. At some point in 

time, if those reforms are not forthcoming—and we cannot make 

the WTO reform in terms of our trade laws and reform in terms 

of transparency—then I believe that the Steelworkers Union would 

say that it is time for U.S. to get out of the WTO. 

Chairman SHAW. But you are not there yet? 

Mr. KLINEFELTER. We are not there yet. 

Chairman SHAW. Fine. Mr. Cardin? 

Mr. CARDIN. Thank you, Mr. Chairman. I am pleased that we 

had H.J. Res. 27 introduced so we could have this panel before us. 

This has been I think a very helpful panel on—and I agree with 

Mr. Klinefelter that it is time to reform the WTO. Mr. Sorensen, 

I also agree with your point that the focus needs to be on the WTO. 

We can all argue what happened with DR–CAFTA, but we got to 

keep our eye on the ball. This Doha round is just so important to 

the future of trade that that needs to be our priority, and I also 

agree with you, as you know, the request offer approach on services 

is not giving the type of results and I like the way that you used 

the current liberalization to be a standard to be met on the service 

industry, and I want to congratulate you on your testimony. 


ccoleman on PROD1PC71 with HEARING
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Mr. Klinefelter, I want to ask you a question, though. I agree 

with your statement. When we went into the Doha round, many of 

U.S. were concerned with the inclusion of our anti-dumping provisions on the table. We thought it shouldn’t be on the table. Now 

I am thinking that maybe it is a good idea because we have seen 

such an erosion, let U.S. take the affirmative. I agree with you that 

there has been this use of the dispute settlement process within 

the WTO to erode our laws that we legitimately have a right to enforce. So, it seems to me the Doha round might give U.S. an opportunity to aggressively advance the rightful rights that we have in 

regards to dumping. My question to you is that we have a situation. In your statement, you say the Bush Administration is not 

standing up for these laws. We have a win-loss record of 2-out-of17 cases brought against the United States. Day-by-day the Administration allows laws in our regulatory framework to be whittled 

away in a process known as gap filling. 

I agree with that statement. I guess my question to you: what 

should we be trying to do in this round in regards to dispute settlement resolution process and the effectiveness of our anti-dumping 

laws? Is it more aggressiveness in enforcing our laws or is it fundamental changes we need in the dispute settlement process within 

the WTO? 

Mr. KLINEFELTER. Mr. Cardin, I would answer that in this 

way. First of all, we fought very hard not to get our trade laws on 

the table for these negotiations. The former president of the Union 

and myself were in Qatar at those negotiations when they kicked 

off this round. 

We fought very hard for Mr. Zoellick not to put them on the table 

because we believed then as we do now that once something is on 

the table for negotiation that there is no place else for U.S. to go 

but downhill; that a weakening will take place as the trade laws 

become part of the mix of a drive to get a complete agreement on 

other areas. As labor people we are very used to negotiations and 

we know how negotiations operate and how people trade one thing 

for another as they go down the road. 

We believe that we actually need to strengthen these laws from 

what we’ve seen since 1998. As you know, being a member who has 

been involved with steel that without the trade laws of this country, the basic steel industry would not exist in the United States 

today. It would have been divided up piecemeal and it would have 

been devastating to these communities. Because we had trade 

laws—first the dumping laws, which gave U.S. a brief respite in 

the 1998 to 2000 period and then because this Administration implemented the 201 on the recommendation of the International 

Trade Commission and the support of this body, we were able to 

have a consolidation in basic steel. 

If anything, if we are going to support American industry, if we 

are going to support their modernization, if we are going to support 

the transition of those employees in those jobs that we need to do, 

we have to strengthen the trade laws in these negotiations, not 

weaken them. 

Mr. CARDIN. Well, I agree with you. It is—you are absolutely 

correct in your observations. Without the trade laws and the enforcement of the trade laws, we wouldn’t have a basic steel indusVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 E:\HR\OC\26369.XXX 26369

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try in this country today, not because we can’t be competitive, but 

because of the subsidized dump steel into the U.S. market, which 

really raises the issue of where do we go from where. I sent a letter 

also urging this not be on the agenda, because I am worried that 

it becomes an issue that gets tied into other matters where we are 

trying to make advancement. I would just urge U.S. all to put a 

spotlight on how important our trade laws have been and that we 

need to make progress in more effectively having a dispute settlement resolution that respects what we have previously negotiated 

and stop these appellate panels from legislating and weakening our 

laws. Thank you, Mr. Chairman. 

Chairman SHAW. Thank you, Mr. Cardin. Mr. Lewis. 

Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman. Mr. 

Messinger, I am interested in your product and how you manage 

to export to so many countries. I am a former equipment salesman 

so that certainly interested me. Can you describe your experiences 

and what advice can you give to other U.S. small-medium firms 

that consider exporting to be too complicated or something that 

only big firms can manage? Also, do you trade now in Central 

America and how important is the DR–CAFTA agreement to your 

particular concerns? 

Mr. MESSINGER. Well, it is always good to see a fellow salesman. Mr. Lewis, we have been in the international market for 40 

years, yet we’re only a small manufacturer. I think we got into it 

because we needed to grow our product base. The United States, 

while it is the largest market in the world today, is not a place that 

we can grow forever. There is a limited amount of equipment that 

we can sell. We manufacture road construction equipment, concrete 

paving equipment that makes roads, curb and gutter, sidewalk— 

that sort of thing. My advice to smaller companies is be creative. 

It is not nearly as difficult to open those doors as some might 

think. For example, we are going to use this summer an intern, a 

college student, who happens to be fairly fluent in Spanish to go 

to Central America to look for distributors and talk to road building contractors. 

Mr. LEWIS OF KENTUCKY. Great. 

Mr. MESSINGER. It doesn’t take—it is not going to cost U.S. 

very much. He doesn’t need to be paid that much. He is going to 

get the experience of a lifetime. His Spanish will be improved and 

our market knowledge will be improved. So, we, our company, and 

the NAM support DR–CAFTA tremendously because this is going 

to do things for our business and all members that manufacture. 

Mr. LEWIS OF KENTUCKY. Yes. Thank you. 

Chairman SHAW. Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. First, I want to congratulate you on a great panel. This has been very interesting and 

it spawns about a thousand questions, and even with Mr. 

Klinefelter, while I disagree with some conclusions, makes a key 

point about aggressively pursuing enforcement of trade laws. It 

cuts across parties and areas in a big way. 

It is the message I heard you say, each of you say, is that the 

world is changing; that it is not enough to buy American anymore. 

We have to sell American. We have to sell our products and services around the world without discrimination and that to do that, 


ccoleman on PROD1PC71 with HEARING
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like any successful business, you can’t put all your eggs in one basket. Our trade policy has to negotiate nation-to-nation agreements 

that lower those barriers. We have to pursue regional agreements 

that lower those barriers, allow U.S. new customers, and through 

the WTO, through these rounds, we have to find a worldwide 

agreement and progress in a number of different areas. 

I talk about that diversification because Central America and the 

Dominican Republic is admittedly not a large market. But tell that 

to the Farm Bureau who will sell a billion-and-a-half dollars more 

agricultural product each year to Central America at a time when 

more and more countries are closing off that market. Tell it to our 

manufacturers who will sell an estimated $1 billion of widgets to 

Central America and should we reject it, which we won’t, but what 

we have at risk $4 billion of widgets we would lose selling, which 

supports a lot of workers. You look at the services area, where 

through this agreement, we have opened up some areas in financial 

and insurance and telecom services that support a whole lot of 

American workers. We know, given a fair shot, that we are going 

to sell those products and services. Central America, as we all 

know, already sells almost all their products into America. Almost 

all their agricultural products, certainly. Our opportunity here is to 

create two-way trade so we get a shot at opening into that market. 

A critical part of why we have to have a diversified trade policy, 

which brings me to the question. Each of you raised it in one way 

or the other. People don’t pay as much attention to it as they 

should. What are examples of NTB that our services companies, 

our manufacturing companies, and our farm producers are experiencing when we try to sell our markets overseas, and maybe, Mr. 

Christopherson, we could start with you and work our way down? 

Mr. CHRISTOPHERSON. Well, perhaps the issue that comes to 

mind right up front is those issues—we call them phytosanitary— 

those issues that somebody has decided that for perhaps political 

reasons and for trade reasons they do not meet the expectations of 

what they want. So, that has been probably our biggest frustration 

is those issues that deal with where we can’t agree on quality and 

that type of thing. 

Mr. BRADY. You see any progress in that area? 

Mr. CHRISTOPHERSON. I guess it all depends on how you 

measure progress. It is very slow. As you are well aware, the beef 

issue with the Europeans kind of came to a resolution here I don’t 

know how many years ago now, and we still haven’t really resumed 

that level of activity. 

Mr. BRADY. In the absence of a world agreement, I think these 

bilateral agreements where we reach I think more saner, logical 

processes for this I think have been helpful. But you are right. We 

got a lot of progress to go. Mr. Messinger? 

Mr. MESSINGER. You know I think Europe is the biggest challenge for us. They have some NTB in the form of the CE Mark and 

things associated with that that make it very difficult for small 

manufacturers to comply with the boatload of regulations that they 

put out front. While I am sure some would say that the regulations 

are intended for the benefit of the citizens of Europe, which I don’t 

doubt, and I think it has a secondary effect of limiting imports of 

products from other countries, particularly the United States. 


ccoleman on PROD1PC71 with HEARING
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Mr. BRADY. Yes, I think that you share that with the agricultural community in Europe, where under the guise of an informed 

consumer what you are really doing is keeping products out of the 

marketplace so they can’t consume them at all. Mr. Sorensen? 

Mr. SORENSEN. I would say in the area of services, the most 

important ones are in Asia and Latin America—limitations on ownership. In India, for example, an asset management company cannot own more than 49 percent. It must have a partner. China, 26 

percent. In Brazil, there is a monopoly on reinsurance. The government is working on that within the scope of the WTO because reinsurance is a global market. In the area of express services, for example, I know for some of our members, Federal Express and 

United Parcel Service are having issues with setting up airport and 

land facilities in China as freely as domestic companies can. So, 

these are, although not necessarily in the framework of the WTO, 

they can enter and should enter, for example, the scope of the 

WTO. 

The DR–CAFTA did away or will do away, once the agreement 

is put forth and ratified by Congress, that the Costa Rican insurance monopoly will be dismantled, and that is a major entry for a 

market that is not large, but it is meaningful for American insurance companies. So, ownership restrictions I think are one area 

that needs to be worked on, both bilaterally and in the WTO area, 

as well as the monopolies that some of these countries have in 

their nationalized systems. 

Mr. BRADY. Great. Mr. Chairman, thank you. This is a great 

panel. 

Chairman SHAW. Thank you. Mr. Herger? 

Mr. HERGER. Thank you, Mr. Chairman, and this is a great 

panel, and I appreciate, Mr. Brady, your comments and your line 

of questioning. For our—we have our Farm Bureau, Mr. 

Christopherson, what new markets accessed do you expect to receive out of the Doha round and do you have a dollar estimate of 

the value associated with what we can gain from an ambitious agricultural deal? 

Mr. CHRISTOPHERSON. I don’t know that we have ever assigned any dollar value to it, but if you look at the level of tariffs 

now with regard to on an average 62 percent as opposed to our 12, 

even a slight reduction is certainly an improvement, and we recognize that this is a work in progress, and it is going to take a while. 

We have to understand that. But at the same time, we need to 

start. We need to get at it, and we need to recognize that if others 

are going to have access to our markets, we need to have access 

to their markets and for U.S. to become protectionist in this whole 

process that will be, indeed, a folly from the standpoint that the 

consuming public is not going to stand for that; much less, we are 

producers. We want to have access to all of the goods of other countries as well as our own. 

So, that is part of what trade is all about, and that is going to 

be the ultimate goal that we do have. We are not—as U.S. farmers, 

we are not afraid of competing with other countries as long as the 

playingfield is level, and as long as we deal with the same regulatory structure as they do and those types of things, and all of 


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those we recognize. They are not going to happen overnight. Yet, 

that is our goal. 

Mr. HERGER. Just the fact, as you have mentioned, our average 

tariff on agricultural goods is only 12 percent. Yet trying to get into 

these other markets are 62 percent. It shows what we are up 

against as far as leveling the playingfield just in that area. Do you 

have any complaints regarding the manner that USTR has conducted consultations with you and the negotiations of the Doha Agricultural talks and are there any improvements you can suggest? 

Mr. CHRISTOPHERSON. I guess it is easy to reflect on past negotiations and we should have been more firm. We should have 

done this. We should have done that, and unless you are sitting at 

that table, I guess it is very difficult. I am not so sure that we have 

any great advice that hasn’t already been given, but obviously, we 

would hope that our negotiators would first of all recognize that 

this is important to agriculture and that we need to recognize that 

for the health of our industry, of agriculture, as well as for our 

share of that portion of the economy which accrues to agriculture 

that is, indeed, in our best interest to continue this process of increasing the market access to allow further trade exports. 

Mr. HERGER. Certainly the fact that where agriculture is keeping the spotlight on this, keeping the pressure up, if you will, certainly helps our cause very much. How has the Sanitary and 

Phytosanitary Measures Agreement worked in your view? We have 

been successful in pushing countries toward eliminating unreasonable barriers, and we have won a few WTO cases: Japan, apples; 

and EU, beef hormones. Yet there are still many instances in 

which U.S. exporters cannot bring their agricultural goods to foreign markets, particularly in the horticulture area. What can be 

done to improve our market access and what does the Farm Bureau do to cooperate with the USDA and USTR in such matters? 

Mr. CHRISTOPHERSON. I guess quite simply it is the continuation and the further strengthening of the WTO process. That is, 

in our estimation at least—and I thought it was said very well this 

morning by the deputy who spoke here saying that without it, it 

would be the rule of the jungle. This process is not perfect, but it 

is at least, as I have got it figured out right now, it is the only one 

we have. So, we need to strengthen that and to continue to give 

it the respect that it needs and the try to assess the respect from 

the other countries also in this whole process, because it is that 

that is going to make this whole thing work. 

Mr. HERGER. Thank you very much, Mr. Christopherson, and 

each of our panelists, and, Mr. Chairman, thank you for this very 

important hearing. 

Chairman SHAW. Thank you very much, and I want to add my 

appreciation, along with Mr. Cardin to this panel. It has been very 

insightful. We very much appreciate your staying with U.S. this 

morning, and with that the hearing is adjourned. 

[Whereupon, at 12:35 p.m., the hearing was adjourned.] 

[Submissions for the record follow:] 

Joint Statement of Susan Ariel Aaronson and Jamie Zimmerman, Kenan 

Institute of Private Enterprise 

As the World Trade Organization (WTO) prepares to mark its 10th anniversary 

this year, few citizens or policymakers are breaking out the champagne to celebrate. 


ccoleman on PROD1PC71 with HEARING
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The global governance institution has much responsibility, little authority, and few 

admirers. Moreover, its performance over the ten year period is mixed. The WTO 

has made great progress as a global governance institution, but as a vehicle for 

trade negotiations, it has been stuck in idle. WTO members have struggled since 

November 2001 to focus these talks on the needs of developing countries. Their failure to narrow their negotiations to development issues is hurting the world’s poor 

and undermining the WTO’s legitimacy. The Ways and Means Committee should 

pay close attention to this as it weighs the WTO’s record. 

As a global governance institution, the WTO provides a venue for nations to handle trade disputes, monitors national trade policies and provides technical assistance to developing country policymakers. When the WTO replaced the GATT on 

January 1, 1995, it had 132 members, a staff of some 500, and a budget of approximately 100 million Swiss Francs. Today it has 149 members, including China, a 

staff of 630, and a budget of 169 million Swiss Francs. Its dispute settlement body 

has resolved over 300 trade disputes. Clearly, the WTO does a lot, cheaply. 

WTO decisions are made by members for members. Because it moves by consensus, decision making is slow and deliberate. Yet its members have successfully 

accommodated the addition of new countries with divergent economic, social and political cultures. Moreover, the WTO has learned from critics who don’t want trade 

objectives to undermine the achievement of other important policy goals. Increasingly, dispute settlement panelists are illuminating ways that member states can 

protect the environment without distorting trade. The appellate body of the WTO 

is beginning to understand and illuminate ways that nations can achieve other policy objectives (such as maintaining cultural norms) without distorting trade. Moreover, the WTO is beginning to find ways to ensure that trade does not undermine 

human rights. For example, some 47 nations currently ban trade in diamonds that 

are not certified under the Kimberley Process (a certification that the diamonds 

were not produced in situations where human rights were abused.) This is the first 

time the WTO (or the GATT) has allowed a trade waiver based on a human rights 

rationale. 

But the WTO staff and leadership can only lead by exhortation. Members hold 

the cards and develop the rules, and these same members seem unable to narrow 

their negotiations to complete a new round. But in November 2001, when members 

agreed to launch a new round they promised to focus on development. The bulk of 

the WTO’s membership are developing countries. Many such countries felt their 

needs had been ignored or undermined in the previous rounds. Thus, in 2001 members agreed to ‘‘commit ourselves to the objective of duty-free, quota—free market 

access for products originating from LDC’s.’’ Yet in the three and a half years since 

the Round was launched, these commitments have not been met. To get the negotiations back on track, in July 2004, WTO members agreed to limit the purview of the 

negotiations to five key areas—agriculture, industrial tariffs, trade facilitation, development issues and services. But as of today, these are talks about talks, and not 

commitments. 

Why have WTO members been unable to move beyond pretty words to complete 

the round? There is an inherent contradiction between the overarching objective expressed at Doha and the objectives and strategies of industrialized country WTO 

members as they negotiate. In general, industrialized country governments determine their negotiating positions at the national level through a broad debate influenced by parliamentarians, business, labor, and civil society interests. (The EU has 

a more indirect route. Trade policy is directed by a committee composed of representatives from the 25 Member States and the European Commission. The EU 

Parliament is only indirectly involved.) When policymakers determine negotiating 

priorities, they focus first on expanding markets for key export sectors, rather than 

on meeting the market access needs of their developing country trade partners. This 

is not to say these needs are ignored, but they are further down on the list of negotiating priorities. 

But the conflict between the overarching objectives of the Round and national negotiating objectives could be met by further limiting the parameters of the new 

round to true development concerns. WTO members should reduce the purview of 

the negotiations to two topics: agriculture and market access. This will not be easy 

to do. After all the key advocates of trade liberalization tend to be multinational corporations and many really want new negotiations on services and industrial tariffs. 

Policymakers might find it difficult to ‘‘sell’’ the results of such a round to national 

legislatures, who generally must pit the economic benefits of greater exports against 

the costs of greater imports. But policymakers from many WTO members recognize 

their economies will prosper only if they can tap new growing markets in the developing world. They understand that poverty can breed conditions where terrorism 

can grow. Thus, they should make every effort to reduce poverty. And as UN memVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00055 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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bers, they have already made a commitment to halve poverty under the Millennium 

Development Goals. 

A key beneficiary of a successful development round would be the WTO. If the 

WTO fails at meeting the needs of developing countries to trade, it will also lose 

much of its legitimacy as a global governance institution. The U.S. would of course 

gain too. 

The American people have benefited significantly from the WTO warts and all. 

Yet the U.S. has not always been supportive of its work. The U.S. has not implemented many of the decisions of the WTO’s dispute settlement body. Moreover, the 

U.S. has focused more of its negotiators efforts on bilateral and regional agreements. 

At a time when the U.S. commitment to internationalism is already suspect, this 

strategy tells our trade partners that the U.S. is more interested in cutting bilateral 

or regional deals that it can dominate than committing to the more difficult multilateral negotiations. 

Leadership entails making hard choices, helping and inspiring other countries to 

make hard choices, and taking risks in the broader interest of global stability. As 

the world’s largest trading nation, and the world’s biggest debtor, the U.S. must be 

actively involved and supportive of this multilateral institution. While far from perfect, the WTO deserves greater American support to make this institution successful 

as a venue for negotiations. 

Susan Ariel Aaronson is the Director and Jamie Zimmerman the Associate Director of globalization studies at the Kenan Institute, Washington, part of the University 

of North Carolina’s Kenan Flagler Business School. This written testimony reflects 

their views and not that of the University. 

f 

Statement of Alliance of American Consumers for Affordable Homes, 

Alexandria, Virginia 

On behalf of the Alliance of American Consumers for Affordable Homes (ACAH), 

we wish to thank Chairman Shaw for allowing U.S. to make a written submission 

to the May l7 hearing record on issues related to the World Trade Organization 

(WTO). 

American Consumers for Affordable Homes (‘‘ACAH’’) represents at least 95% of 

soft wood lumber consumption in the United States. About 70% of that consumption 

is for building or remodeling American homes—soft wood lumber is by far the largest physical input in a typical American house. Thus, buyers, home builders, and 

lumber dealers and retailers have been the primary victims of the ongoing trade 

wars involving the import of softwood lumber into the United States. 

In this connection, we wish to call the Committee’s attention to a severe imbalance in WTO and U.S. trade remedy law. 

We as American consumers, are treated considerably worse in trade remedy proceedings in the United States than U.S. producers. It is important to note that the 

housing construction industry employs more than 6.5 million workers, 25 to one 

when compared with those in the U.S. forestry industry. In legal terms, this means 

that we do not have ‘‘standing’’ in the cases, and that we can submit confidential 

information, but never see the replies of the other parties. 

The Congress could remedy this by legislation, but realistically, the U.S. would 

make no changes in its legislation unless other WTO members change theirs. Consequently, we request the Committee to urge USTR to include in the WTO Antidumping Agreement, Agreement on Subsidies and Countervailing Measures, and 

Safeguard Agreement, the following items: 

• Equal standing for consumers (including distributors, retailers and end-users of 

the imported product, and possibly downstream industries as well) with at least 

foreign producers, and logically with U.S. producers. Why should the U.S. Government express a preference for U.S. producers over U.S. consumers, especially 

as ‘‘consumers’’ are frequently themselves U.S. producers? 

• An absolute rule that duties, quotas, or other measures taken under trade remedy laws (including antidumping and countervailing duties, and safeguards) 

never exceed the injury caused by the dumping, subsidies, or increase in imports. Before the imposition of any trade distorting measure, a determination 

be made that the measure, including its amount and duration, be found to be 

in the ‘‘public interest’’, including specifically a determination of the impact on 

consumers, and that the impact is less than the benefit to local producers. 

• A requirement that no duties be charged on imports destined for customers 

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ducers (for example, after the damaging hurricanes in Florida in 2004, rebuilding was severely hindered by shortages of cement and softwood lumber caused 

by existing antidumping and existing trade remedy measures, in circumstances 

where domestic producers could not supply the demand). We note that the European Union has such a provision in its trade remedy laws. 

• In any case which is resolved through negotiation rather than the imposition 

of measures, U.S. consumers be given identical rights of consultation as producers and, that no settlement be made which does not give equal weight to 

the interests of local consumers and producers. 

We urgently request the Committee to instruct the Department of Commerce to 

undertake no settlement of the softwood lumber cases without first preparing and 

making public for public comment a neutral analysis by the General Accounting Office of the costs to U.S. consumers and benefits to U.S. producers of any proposal 

under consideration. 

Finally, we urge the Committee to undertake an in-depth evaluation of the functioning of antidumping laws. We note that the U.S. Department of Commerce in the 

softwood lumber case found an average antidumping margin of 8% for a period of 

investigation during which the average price in Canada of softwood lumber was 18% 

lower than the average price of Canadian softwood lumber sold in the United States. 

The Committee should request Commerce to identify the source of this 26% divergence. 

Please feel free to contact Susan Petniunas with any questions. Thank you for the 

opportunity to comment. 

Participants of Alliance of American Consumers for Affordable Homes: 

American Homeowners Grassroots Alliance 

Catamount Pellet Fuel Corporation 

CHEP 

Consumers for World Trade 

Free Trade Lumber Council 

Furniture Retailers of America 

Home Depot 

International Sleep Products Association 

Manufactured Housing Association for Regulatory Reform 

Manufactured Housing Institute 

National Association of Home Builders 

National Black Chamber of Commerce 

National Lumber and Building Material Dealers Association 

National Retail Federation 

Retail Industry Leaders Association 

United States Hispanic Contractors Association 

f 

Statement Of Cold Finished Steel Bar Institute 

The Cold Finished Steel Bar Institute (CFSBI) appreciates the opportunity to provide this statement for inclusion in the written record and for consideration by the 

Subcommittee on Trade of the Committee on Ways and Means pursuant to the public hearing held May 17, 2005, to review future prospects for U.S. participation in 

the World Trade Organization (WTO). In particular, the CFSBI appreciates Chairman E. Clay Shaw for convening this hearing and permitting the CFSBI and other 

interested parties to present their views on this important and timely topic. 

The CFSBI is a trade association representing approximately 60 percent of the 

North American cold finished steel bar industry. The CFSBI’s overall mission is to 

promote and encourage beneficial and useful growth and development of the cold 

finished steel bar industry and to foster, among the public, the government, and 

major user groups, an awareness and recognition of matters and conditions of importance to or affecting the industry. 

The focus of the Subcommittee’s hearing is to examine: (1) overall results of U.S. 

membership in the WTO and the GATT, (2) whether future participation of the 

United States in the WTO and the multilateral trading system can be expected to 

benefit Americans, and (3) prospects for increased economic opportunities for U.S. 

farmers, workers, and consumers in the Doha Round of multilateral trade negotiations. In announcing the hearing, Chairman Shaw stated, in part: ‘‘The WTO has 

proven to be a useful forum for building trade relationships and working out disputes. I cannot imagine anyone seriously thinking that we are better off without the 


ccoleman on PROD1PC71 with HEARING
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WTO, but it is important that Congress continually review and oversee how the system works.’’ 

The CFSBI does not advocate withdrawal of the United States from the WTO. The 

CFSBI does not dispute that the WTO agreements have been useful for building 

trade relationships and opening up markets to certain U.S. goods and services. The 

WTO has also further strengthened the existing platform for building on positive 

developments in the future. 

However, as the Subcommittee is aware, a primary focus of certain U.S. trading 

partners has long been to undermine U.S. trade remedy laws through whatever 

means possible. Unfortunately, from the CFSBI’s perspective, creation of the WTO 

was itself a movement in that direction. These WTO members are continuing their 

efforts now by seeking ruinous amendments to the trade remedy provisions of the 

WTO agreements in the context of the ongoing Doha Round negotiations. 

The CFSBI urges the Subcommittee to actively monitor these negotiations and resist any attempt by the Administration to consider further weakening U.S. trade 

remedy laws. At the same time, the Subcommittee should press the Administration 

to clarify and improve the current trade remedy provisions in key respects so as to 

effectuate the intent originally underlying the agreements. A particular area of concern is the WTO Dispute Settlement Understanding (DSU). The DSU’s deficiencies 

have become apparent over time. The plain facts demonstrate, and the Administration has confirmed, that WTO panels and the Appellate Body regularly exceed their 

authority and misinterpret the applicable agreements. Therefore, consistent with 

the Administration’s stated objectives, a U.S. negotiating priority should be to 

amend the DSU and ensure that WTO panels and the Appellate Body respect proper limitations on their adjudicative role. 

TOP PRIORITY MUST BE GIVEN TO PRESERVING U.S. TRADE REMEDY 

LAWS 

Preserving U.S. trade remedy laws is the CFSBI’s highest priority. The CFSBI 

urges the Subcommittee and Congress as a whole to adopt a similar view. U.S. support for the WTO, and before that the GATT, has always hinged on the agreements 

condemning unfair trade practices and ensuring the ability of governments to defend against unfair and otherwise injurious trade. This remained a strongly voiced 

U.S. priority at the time the current round of trade negotiations was launched in 

Doha in 2001. 

The Doha Ministerial declaration called for ‘‘clarifying and improving’’ the rules 

under the Antidumping Agreement and Subsidies and Countervailing Measures 

(SCM) Agreement, with the goal of ‘‘preserving the basic concepts, principles and 

effectiveness of these Agreements.’’ This language should not be interpreted now as 

signaling an intention to weaken the agreements or the corresponding provisions of 

the U.S. antidumping (AD) and countervailing duty (CVD) laws. Congress set out 

its view of this mandate and of U.S. negotiating objectives in the Trade Act of 2002: 

to preserve the ability of the United States to enforce rigorously its trade laws, 

including the antidumping, countervailing duty, and safeguard laws, and avoid 

agreements that lessen the effectiveness of domestic and international disciplines on 

unfair trade, especially dumping and subsidies, or that lessen the effectiveness of 

domestic and international safeguard provisions, in order to ensure that United 

States workers, agricultural producers, and firms can compete fully on fair terms 

and enjoy the benefits of reciprocal trade concessions.... 

The need for strong and effective trade remedy laws is at least as strong today 

as it was in 2001. Following the steel crisis in 1997–1998, and the much-deserved 

safeguard assistance provided by the Administration with Congress’ support in 

2002, the surge of low-priced imports temporarily receded. The U.S. steel industry, 

including manufacturers of cold finished steel bar, embarked on a dynamic transformation through modernization, consolidation, and restructuring. According to the 

American Iron and Steel Institute, the industry as a whole has invested $4 billion 

to date in this process, resulting in more consolidation in the past two years than 

in the previous two decades. 

However, imports have again begun increasing. Looking just at cold finished steel 

bar, imports in 2004 increased to 268,897 tons, 25 percent higher than 2003. The 

2004 import level exceeded that of 2001, the year before the Administration imposed 

safeguard tariffs. Imports during January and February 2005 were higher than in 

over a decade for either of these two months. Imports increased their percentage of 

apparent domestic consumption, as well, to 16.5 percent in 2004, from a little less 

than 14 percent in 2003. Moreover, at the current pace, imports in 2005 will exceed 

2004 levels by over 50 percent. 

The WTO members now anticipate concluding the Doha Round negotiations by 

the end of 2006, in time to take advantage of U.S. trade promotion authority (TPA) 


ccoleman on PROD1PC71 with HEARING
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procedures, which likely will expire by mid-2007. Therefore, much of the substance 

of a final negotiated package will presumably have to be in place by the time of the 

Hong Kong ministerial conference in December of this year. 

It is against this backdrop that certain WTO members—all perennial unfair traders—have made numerous negotiating proposals seeking not to clarify or improve 

the agreements, as called for by the Doha Ministerial, but rather to transform their 

substance, making unfair trade relief more difficult to obtain, more limited in scope, 

and shorter in duration. Even more significantly, we sense that the Administration 

may be willing to agree on behalf of the United States to do just that—substantially 

weaken the trade remedy laws in order to advance the negotiating process and obtain concessions in other issues such as agriculture and services. It is essential that 

Congress exercise its oversight authority, consistent with previous pronouncements, 

to resist such efforts and fully preserve the integrity of U.S. trade laws. 

The CFSBI urges Members of the Subcommittee to play an integral role in this 

regard. Please reaffirm that backtracking will not be tolerated on previous U.S. 

pledges to the steel industry and other vital domestic industries to maintain strong 

and effective trade remedy laws. Engage members of the steel and other caucuses 

to organize broader efforts within Congress. Voice a strong, persuasive, and consistent message to the Administration that any weakening of the trade laws is not 

acceptable and will not be approved by Congress. Raise these issues at every opportunity, including through letters to the President and direct representations to key 

Administration officials. 

Active participation by this Subcommittee and Congress in past negotiations has 

been instrumental to obtaining as favorable an outcome as possible. Thus, the Subcommittee should also coordinate the formation of a delegation from Congress to attend key events concerning the Doha negotiations. This should include, in particular, the Hong Kong ministerial in December. Demonstrating that weakening the 

trade laws during the present negotiations will not be approved in Congress is a 

substantial incentive for the Administration and our trading partners to avoid putting such changes into the WTO agreements. 

THE WTO ADJUDICATIVE PROCESS MUST BE REFORMED 

The WTO authorizes binding dispute settlement through the DSU, which the 

United States supported during the Uruguay Round negotiations creating the WTO. 

Since entering into force, however, the flaws in the DSU have become all too apparent. The WTO tribunals have misused their authority and misinterpreted the relevant agreements to rewrite the rules governing trade remedy investigations to a 

significant extent, thus thwarting the intent of the United States and other WTO 

Members in negotiating the relevant WTO agreements. The CFSBI urges the Subcommittee to ensure that the Administration makes this issue another U.S. trade 

negotiating priority. 

Specifically, WTO panels and the Appellate Body regularly (1) disregard specific 

limitations in the DSU on their exercise of discretion, (2) exploit ambiguities wherever possible to the benefit of complainants, and (3) go out of their way to interpret 

‘‘silent’’ provisions or gaps in the relevant agreements as imposing obligations on, 

or limiting the discretion of, national investigating authorities. In Section 2101(b)(3) 

of the Trade Act of 2002, Congress recognized the seriousness of this issue: ‘‘Support 

for continued trade expansion requires that dispute settlement procedures under 

international trade agreements not add to or diminish the rights and obligations 

provided in such agreements.’’ However, Congress found that: 

(A) the recent pattern of decisions by dispute settlement panels of the WTO and 

the Appellate Body to impose obligations and restrictions on the use of antidumping, 

countervailing, and safeguard measures by WTO members under the Antidumping 

Agreement, the Agreement on Subsidies and Countervailing Measures, and the 

Agreement on Safeguards has raised concerns; and 

(B) the Congress is concerned that dispute settlement panels of the WTO and the 

Appellate Body appropriately apply the standard of review contained in Article 17.6 

of the Antidumping Agreement, to provide deference to a permissible interpretation 

by a WTO member of provisions of that Agreement, and to the evaluation by a WTO 

member of the facts where that evaluation is unbiased and objective and the establishment of the facts is proper. 

There are many well-documented examples of this growing problem. Most apparent is a general tendency on the part of panels and the Appellate Body to ignore 

the appropriate standard of review in AD/CVD cases. The tribunals persistently impose obligations and restrictions on the use of trade remedies that are not found 

in the agreements and were never intended or negotiated by the WTO members. 

Likewise, the tribunals substitute their judgment improperly for that of the investigating authorities. In the case of the Antidumping Agreement, in particular, as reVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00059 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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ferred to by Congress in the quote above, the United States demanded inclusion of 

a specific standard of review provision, Article 17.6, to ensure deference by WTO 

panels and the Appellate Body to findings of fact and law by investigating authorities. However, even many opponents of trade remedies agree that such deference is 

often completely lacking. 

The result of panels and the Appellate Body overreaching their authority is, for 

one, to offset the balance of rights and obligations that the United States negotiated 

in the Uruguay Round, which must be restored in the current negotiations. Only 

in this manner can Congress and domestic industries regain faith in the effectiveness and sustainability of the WTO and the U.S. commitment to the international 

trading system as it currently stands. To accomplish these goals, specific revisions 

are required in the text of the DSU. 

To begin, the CFSBI supports the joint Chile-U.S. proposal to the WTO to provide 

‘‘additional guidance to WTO adjudicative bodies’’ regarding (1) the nature and scope 

of the task presented to them (e.g., when the exercise of judicial economy is most 

useful), and (2) rules of interpretation of the WTO agreements. Consistent with this 

proposal, the DSU should emphasize that the role of adjudicative bodies is only to 

clarify the existing provisions of covered agreements, which requires restraint in 

considering issues on which findings are not necessary to resolve the matter. Specifically, DSU Article 11 should be amended to eliminate the ability of panels to 

make ‘‘such other findings as will assist the [WTO Dispute Settlement Body] in 

making recommendations or in giving the rulings provided for in the covered agreements.’’ 

In addition, the rules of interpretation should emphasize that panels and the Appellate Body are to defer to WTO Members’ reasonable interpretations of existing 

agreement provisions and to refrain from filling any apparent gaps in the text of 

agreement provisions. In this regard, DSU Article 3.2 should be amended to clarify 

that (1) Members are presumed to have acted in conformity with their WTO obligations, (2) words or concepts cannot be imputed into agreements, (3) reasonable interpretations of covered agreements by Members should be permitted, and (4) gaps in 

the text of agreements reflect the absence of an agreement and must be respected 

as such. 

Furthermore, Article 17.6 of the AD Agreement (and a corresponding provision of 

the SCM Agreement) should be amended to clarify that the standard of review contained in those agreements supplants any other standard of review. Article 11 of 

the DSU should also be amended to refer to those provisions of the AD and SCM 

Agreements and to the inapplicability of the DSU standard of review to disputes 

under those agreements. 

The CFSBI also supports including a provision in the DSU that adapts Articles 

31 and 32 of the Vienna Convention on the Law of Treaties to accommodate the 

needs of WTO dispute settlement. Such WTO-appropriate rules of interpretation 

could include, among other things, requiring consideration of ‘‘any’’ subsequent practice; permitting reliance on formal proposals and meeting minutes otherwise publicly available and posted on the WTO website in conjunction with the DSU and 

Doha negotiations as a contemporaneous record of the negotiations; and clarifying 

the use of external aids to inform the interpretation of any term with a ‘‘special 

meaning’’ that is otherwise defined by the agreement. 

CONCLUSION 

The CFSBI supports U.S. membership in the WTO. The CFSBI also embraces 

greater trade liberalization and recognizes the need for the WTO to evolve accordingly. However, increasing trade liberalization does not equate to sanctioning unfair 

or otherwise injurious trade; and winning concessions on other issues should not 

come at the expense of essential U.S. manufacturing industries, such as steel. 

The U.S. steel industry has made a dramatic turnaround in recent years—with 

the assistance of the Administration and Congress and the trade remedy laws currently in place. However, imports are already on the rise again, a trend that will 

only continue, in large measure from the very countries that advocate weakening 

the WTO trade remedy provisions. The United States has consistently pressed the 

view that strong and effective trade remedy laws are an essential and positive component of a sound trade policy, both in the short and long term. The CFSBI urges 

that the Subcommittee both demand and help organize a sustained Congressional 

effort to ensure that the United States maintains this position in the current WTO 

negotiations. 


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Again, the CFSBI is grateful for this opportunity to provide its views and can address any questions or provide any additional information that might be considered 

helpful. 

Respectfully submitted, 

Alton Steel, Inc. 

Banner Service Corp 

Charter Steel, A Division of Charter Manufacturing Company 

Charter Wire, A Division of Charter Manufacturing Company 

Corey Steel Company 

Ispat Inland Bar Products 

Kentucky Electric Steel, Inc. 

Krueger and Company, Inc. 

Laurel Steel 

LMP Steel & Wire Company 

Nelson Steel & Wire 

Niagara LaSalle Company 

Sheffield Steel Corporation 

Taubensee Steel Corporation 

Vulcan Threaded Products, Inc. 

f 

Wilton Precision Steel 

Statement of Jonathan Gold, The Retail Industry Leaders Association, 

Arlington, Virginia 

The Retail Industry Leaders Association (RILA) welcomes the opportunity to submit written comments for the record of this hearing on the Future of the World 

trade Organization. RILA strongly supports continued U.S. membership in the WTO 

and participation in WTO-based trade liberalization. 

RILA and the Retail Sector 

The Retail Industry Leaders Association (RILA) is an alliance of the world’s most 

successful and innovative retailer and supplier companies—the leaders of the retail 

industry. RILA members represent almost $1.4 trillion in sales annually and operate more than 100,000 stores, manufacturing facilities and distribution centers nationwide. Its member retailers and suppliers have facilities in all 50 states, as well 

as internationally, and employ millions of workers domestically and worldwide. 

Through RILA, leaders in the critical disciplines of the retail industry work together 

to improve their businesses and the industry as a whole. 

The retail sector, along with the suppliers and customers that it serves, is an essential part of the U.S. economy. Retailers provide good jobs with good benefits, creating opportunities at every level of employment ranging from entry-level employment, part-time work, and jobs for non-skilled workers, to technology professionals, 

logistics experts and market analysts. Retailers serve the consumer goods market, 

an essential driver of the U.S. economy; they also serve the global market for consumer goods and bring U.S. products to the foreign markets where they operate. 

Virtually all of RILA’s members, both retailers and suppliers, rely on international trade to conduct their businesses. Our members depend on imports of both 

finished consumer products and production inputs for merchandise that will eventually be sold at retail. They also seek opportunities to expand retail outlets in countries that are open to U.S. investment and expand market access for American products. 

Importance of Continued Participation in the WTO 

A liberalized, rules-based trading system is essential to U.S. economic success and 

serves other important U.S. foreign policy objectives as well. The WTO agreements 

help sustain an open trading regime for goods and services, and the WTO itself provides an essential institutional forum for further rules-based liberalization of international commerce. The WTO’s rules and institutional arrangements, which reflect 

intensive U.S. negotiating efforts over several decades, help ensure that the United 

States succeeds economically in the many areas where it has a comparative advantage. 

Participation in the WTO (and its predecessor, the General agreement on Tariffs 

and Trade) has enabled U.S. to marry liberalization of the U.S. trade regime—a 

beneficial step in its own right—to increased access around the world for U.S. proVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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ducers, farmers and service suppliers. And there are many more benefits which participation in the WTO can yet deliver—notably including further opening of the retail and distribution sectors in key emerging markets around the world. 

RILA accordingly urges the defeat of H.J. Res. 27, introduced March 2, 2005, 

which would rescind Congressional approval of the WTO agreements. Passage of 

this Resolution would harm the United States economically and undermine hardwon U.S. accomplishments over the last half-century in liberalizing trade and advancing the rule of law. Rather than repudiating the WTO agreements, the United 

States should rededicate itself to the success of the current negotiating round—the 

Doha Development Agenda—as the surest path toward advancing efficient resource 

allocation, consumer welfare, and market access for U.S. products, sustainable development, and general economic prosperity. 

Conclusion 

RILA congratulates the Committee for its attention to and oversight of U.S. participation in the WTO. WTO-based trade liberalization has been, and remains, an 

essential element of America’s economic success story. Passage of H.J. Res. 27 would 

impair our access to the trading system’s benefits at a time when we need those 

benefits more than ever before. If RILA can be of any assistance in ensuring a decisive vote against this damaging resolution, please contact Lori Denham, Senior Vice 

President—Policy and Planning or Jonathan Gold, Vice President—Global Supply 

Chain Policy. 

f 

Statement of John E. Howard, U.S. Chamber of Commerce 

The U.S. Chamber is pleased to comment on the future of the World Trade Organization (WTO). Nearly sixty years ago, after the twin disasters of world depression 

and world war, the United States led the fight for a global rules-based trading system that would create new markets for U.S. businesses and new jobs for U.S. workers. We have also led by example by maintaining low trade and investment restrictions that are often not reciprocated by our trading partners. 

However, notwithstanding the GATT/WTO system’s contributions to economic 

growth worldwide, the uneven distribution of that growth and attendant benefits 

continues to threaten already tenuous public support here and abroad for continued 

trade liberalization. This ambivalence is partly reflected in the scaling back of what 

was a truly ambitious Doha Development Agenda (DDA) work program adopted in 

November 2001. 

Absent a clear and unmistakable demonstration of commitment by the U.S. and 

other leading nations to the viability of the WTO—as an organization, a set of rules 

and a process for achieving more trade and investment liberalization—we are deeply 

concerned at the very real prospect that continued progress in international trade 

and investment liberalization may wither on the vine, to the detriment of U.S. and 

global interests. 

We recognize the benefits that ‘‘competitive liberalization’’ as practiced by this administration has had for U.S. businesses and workers. If one bilateral negotiation 

does not present a viable framework for achieving results, we should find another 

one. The truly impressive list of recently-concluded bilateral free trade agreements 

shows progress can be made. However, U.S. global economic interests require that, 

at some core level, we continue to insist on the application of comprehensive, modern trade rules on a multilateral basis. 

Therefore, the U.S. and other nations must do their best to ensure that the Doha 

Development Round yields additional progress. We envision a continuing core agenda for progress as necessarily including the following: 

• Agriculture. This trilogy of issues—market access restrictions, export subsidies 

and domestic supports—has represented in many ways a ‘‘clash of the Titans’’ 

in that so much of the world trading system’s potential rests on an ability and 

willingness of the world economy’s major players to agree to impose significant 

new discipline on these costly and contentious practices. 

• ‘‘Non-agricultural market access.’’ Tariff and NTB reduction and elimination not 

only means improved access to foreign markets for a wide variety of U.S. exporters. But it has also been estimated that U.S. tariff elimination could save 

American families an estimated $18 billion a year in import taxes collected on 

everyday household items. 


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• Trade in Services. Service industries account for roughly eighty percent of U.S. 

employment. International trade in some services (for example, banking, insurance, the legal profession, accounting, and telecommunications) was first subject 

to multilateral trade negotiations in the 1994 Uruguay Round. However, it soon 

became clear that negotiating a comprehensive approach to trade in services 

would need to be much more ambitious and cover far more ground. 

• In addition, trade facilitation initiatives provide significant opportunities to 

achieve real, nuts-and-bolts improvements for businesses of all sizes. Progress 

in such areas as port efficiency, customs procedures and requirements, the overall regulatory environment, and automation and e-business usage will prove especially valuable to smaller and medium-sized enterprises. 

There are many other issues—notably including the need for improved transparency in dispute settlement as well as resolution of such outstanding issues as 

investment, government procurement, and intellectual property—that must be addressed, whether in a WTO context or otherwise. Additionally, an emerging divergence in regulatory rulemaking poses potentially costly new obstacles to open commerce; future negotiations must strive for regulatory compatibility among the 

world’s key economies. Finally, a negotiated agreement must prove acceptable to the 

U.S. public, and by extension the U.S Congress. This means care must be taken not 

to negotiate premature and unwarranted concessions in U.S. unfair trade laws or 

their enforcement. 

The U.S. Chamber intends to participate very closely in all relevant fora leading 

up to a successful conclusion of the Doha Development Round, and will have more 

to say on all of these issues in the weeks and months ahead. We look forward to 

working with this and other Committees as they continue to conduct their constitutionally-mandated oversight of these and all trade negotiations. 

f 

Statement of Mary Irace, The National Foreign Trade Council, Inc. 

The National Foreign Trade Council (NFTC) appreciates the opportunity to provide its views on the World Trade Organization (WTO) as part of the five-year congressional review of the WTO, as provided under Sections 124–125 of the Uruguay 

Round Agreements Act of 1994. The NFTC is an organization of 300 American companies which supports the advancement of open and rules-based trade. We strongly 

support the WTO for several fundamental reasons and urge Congress to resoundingly defeat H.J. Res. 27 which would withdraw U.S. approval of continued participation in the WTO. 

The WTO/GATT Serve as the Bedrock Foundation of the Global Trading System 

The WTO and its predecessor the General Agreement on Tariffs and Trade 

(GATT) have served as the foundation of an open and rules-based multilateral trading system since the GATT’s founding in 1948. Its original purpose of raising standards of living by eliminating barriers to trade and expanding peaceful trade among 

nations is as important today as it was in 1948. As the largest single trader worldwide, the United States has an enormous stake in ensuring that the WTO remains 

a vital institution in removing barriers to trade and ensuring that trade is based 

on the rule of law rather than the rule of the jungle. 

Since the GATT was first established, the United States has been as a leading 

voice and proponent of eight ‘‘rounds’’ of trade negotiations. Each negotiation has 

aimed to remove a wider range of barriers. Concluded in 1994, the last round of 

multilateral trade liberalization negotiations—the Uruguay Round—expanded market access and trading rules to cover major new areas of critical importance to 

American business, workers and farmers by including for the first time agriculture, 

services and intellectual property rights. It also formally created the WTO as a 

stand alone institution and established effective dispute settlement rules for the 

first time, which was a primary objective of the United States during the Uruguay 

Round. As the recent USTR report highlights, the benefits to the United States from 

its participation in the WTO have been wide-ranging and of enormous impact to the 

average working family, and American exporters, workers and farmers. 

A Successful Doha Development Agenda is of Vital Importance to the United States 

The United States is in the midst of another major new round of trade liberalization negotiations—the Doha Development Agenda (the ‘‘Doha Round’’)—launched in 

November 2001. The Doha Round is perhaps more important than any previous 

round because of the active participation of developing countries and the proliferaVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00063 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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tion of regional trade agreements, many of which exclude the United States. This 

year is critical to the ultimate success of the round with the upcoming Hong Kong 

Ministerial meeting in December and the general consensus that the round must 

conclude in 2006 at the latest. Time is running short. 

In early 2002, the NFTC issued a comprehensive set of bold proposals and recommendations for the Doha Round centered on achieving high levels of market access in industrial goods, services and agriculture, as well as new rules on trade facilitation. The NFTC and its members continue to believe that the only outcome 

worth aiming for in the Doha negotiations is an ambitious one. This means the active participation of all WTO Members, especially middle income developing countries, in addition to the United States, the European Union and other advanced industrialized countries. 

With respect to the spread of bilateral and regional trade agreements, the NFTC 

supports high quality and commercially meaningful Free Trade Agreements between 

the United States and its trading partners. However, an ambitious outcome to the 

Doha Round has the potential to liberalize trade among a much larger number of 

U.S. trading partners—close to 150 nations which belong to the WTO. Importantly, 

new access to major emerging and middle income markets such as Brazil, China, 

India, Malaysia, Turkey and other countries will likely only be achieved in the near 

term through the WTO. Tariff and non-tariff barriers remain high in many of these 

countries and the Doha Round offers a unique opportunity to reduce and eliminate 

them. If there are no substantial market access outcomes in these and other developing countries, it will be difficult to generate enthusiasm in the American business 

community for the final agreement. 

U.S. Leadership Must Focus on Achieving A High Level of Ambition and Win-Win 

Outcomes 

The NFTC has focused on ambitious outcomes across the range of issues in the 

Doha Round for two reasons. First is that the United States has major market access negotiating objectives in all major areas of the negotiation. Second, and just as 

important, is that achieving a high level of ambition across all areas will enable all 

WTO members to secure ‘‘win-win’’ outcomes through major new market access. 

This in turn will create positive momentum for the final agreement and will allow 

every WTO member to make the necessary tradeoffs or overcome politically sensitive issues. Major new multilateral trade liberalization and improved trade rules 

will grow the global economy, strengthen national economies, raise living standards 

and alleviate poverty. 

The recent ‘‘Mini-Ministerial’’ meeting in Paris on May 4 was a positive indication 

that ministers are focusing on getting the job done and leading the negotiations in 

an ambitious direction. We strongly support this outcome, as highlighted in the 

range of positions we have issued. Most recently we issued a position paper on 

GATS Mode 4 addressing the temporary movement of business personnel in the delivery of services. We believe the United States has pro-active and strategic interests on GATS Mode 4, and we also recognize that it is an essential component of 

an overall ambitious agreement on broader services, industrial goods and agriculture. We urge Congress to maintain a commonsense approach on this issue that 

focuses on enhancing U.S. global competitiveness. 

The United States, under the able leadership of former USTR Ambassador 

Zoellick, Ambassadors Deily and Allgeier, and the entire team at the USTR and 

other agencies such as the Commerce Department, have done a remarkable job in 

achieving solid progress in the Doha negotiations and leading the trade talks in a 

direction of ‘‘can do’’ rather than ‘‘won’t do’’. We have full confidence that Ambassador Portman will continue to lead U.S. in the direction of achieving an ambitious 

and meaningful conclusion to the Doha Round. 

The stakes in this ninth round of multilateral trade negotiations are high. The 

outcome will, we believe, determine the future credibility and relevance of the WTO 

to the realities of the global marketplace. If not, then we miss a critical opportunity 

to make major advancements, rather than piecemeal, in the breaking down of trade 

barriers. This round is a test of political leadership and commitment to multilateralism as a main vehicle for stimulating trade and improving trade governance. 

A modest outcome will not in our view be sufficient to ensuring that multilateralism 

keeps pace with growing regionalism, which is counter to the most basic WTO principle of non-discriminatory trade treatment. 

We urge Congress to support an ambitious outcome to the Doha Round and continued U.S. participation in the WTO by voting against H.J. Res. 27. 

The NFTC appreciates the opportunity to submit this statement. 

f 


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North Dakota Wheat Commission 

Bismarck, North Dakota 58503 

May 20, 2005 

The Honorable E. Clay Shaw, Jr. 

Chairman 

Subcommittee on Trade 

House Committee on Ways and Means 

1104 Longworth House Office Building 

Washington, D.C. 20515 

Dear Mr. Chairman: 

We thank you for holding the hearing on May 17, 2005 to review the future prospects for U.S. participation in the World Trade Organization (WTO). We concur with 

your comments supporting U.S. membership in the WTO and that the organization 

is a useful forum for building trade relationships. We also agree that Congress 

should review and oversee how this multilateral trade system works. For, while the 

system has succeeded in many cases, challenges and obstacles do remain. The North 

Dakota Wheat Commission (NDWC) submits this written statement to your Committee and respectfully requests that it be made a part of the hearing record. 

The WTO provides an international means by which its Member countries can address critical issues facing the short and long-term export competitiveness of many 

U.S. agriculture products, including wheat produced in North Dakota. These issues 

range from freer market access in customer countries to disciplines on export subsidies and State Trading Enterprises (STEs) in competitor countries. As world trade 

expands, the NDWC believes that the United States must continue to play an active 

role in establishing the rules for international trade if our wheat producers hope to 

have a profitable and competitive future. 

Addressing the unfair trade practices and subsidies of competing wheat exporters 

can be achieved to a certain degree through U.S. laws and bilateral trade agreements, but it is also clear that an international body like the WTO is needed to complement limitations in those national or bilateral trade regimes. One example of this 

is the ongoing trade distortions caused by the Canadian Wheat Board (CWB), a Government of Canada STE, which engages in unfair wheat pricing and unfairly competes for market share because of its vast array of government protections and subsidies. The CWB has a longstanding history of questionable practices aimed at systematically creating and developing a competitive advantage on a non-commercial 

basis in wheat markets around the world. It is the largest exporter of wheat in the 

world and its protected and subsidized monopoly status (which grants it exclusive 

rights, provides government financial guarantees, and protects its domestic market) 

allows it to distort world wheat trade and critically reduce market share and market 

value for competing wheat exports from the United States. 

Notably, progress and reform of the international wheat market was steady 

throughout the 1990s, with the exception of the CWB. In 1990, 90 percent of all 

international wheat purchases were made by governments. That number is now 

closer to 40 percent and continues to fall. Ironically, China entered into WTO membership having agreed to more disciplines on its STEs, including the introduction 

of private-sector imports, than Canada—the United States major trading partner— 

has ever entertained. Clearly, with regard to the status and functioning of STEs, 

the WTO and its Agreements have failed. 

U.S. trade laws have provided some relief for North Dakota’s wheat producers in 

our own domestic market, but further work is needed in international markets if 

we are to have a viable future in export markets for our wheat. It is critical that 

U.S. wheat producers have access to foreign markets and a fair chance to compete 

for the highest valued sales possible in the world market. Undisciplined, government-subsidized STEs are a real threat to that future. 

The U.S. Trade Representative (USTR) has been a key supporter in our efforts 

to bring a more focused and global attention to the problems that STEs create in 

the international wheat market. At the urging of North Dakota wheat producers, 

and with support from all three national wheat organizations, the USTR launched 

a Section 301 investigation into the wheat trading practices of Canada and the CWB 

in October 2000. As a result, the USTR found that the acts, policies and practices 

of the Government of Canada and the CWB are unreasonable and burden or restrict 

U.S. commerce. It found the CWB to have numerous government protections, privileges and subsidies which enabled it to unfairly erode both market share and market value for U.S. wheat producers and which infringe on and undermine the integrity of a competitive trading system. The investigation also concluded that the CWB 

is in all significant respects an arm of the Government of Canada. See USTR Affirmative Finding in Response to NDWC Section 301 Petition, Investigation No. 


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301–120, February 15, 2002; see also Wheat Trading Practices: Competitive Conditions Between U.S. and Canadian Wheat, U.S. International Trade Commission, Investigation No. 332–429, December 2001. 

The USTR’s investigation led to further action in the form of successful industrybrought countervailing duty and dumping investigations (14.15 percent duties on 

certain Canadian wheat imported into the United States), and USTR-initiated WTO 

Dispute Settlement proceedings. More significant progress needs to be made however, and active participation and involvement of the United States in drafting WTO 

language specific to disciplines on STE’s is needed in the ongoing WTO agriculture 

negotiations. 

With regard to the USTR-initiated WTO Dispute Settlement proceeding, then-Ambassador Zoellick filed a WTO complaint on Canada’s violation of its WTO obligations under Article XVII and Article III of the Agreement. The WTO Dispute Settlement Panel ruled in favor of the United States with regard to Article III, holding 

that Canada discriminates against imported wheat by discriminating against U.S.; 

and, that Canadian rail transportation provides a preference for domestic over U.S. 

wheat. See Final Report of the Panel, Canada—Measures Relating to Exports of 

Wheat and treatment of Imported Grain, WTO, WT/DS276/R (2004). 

Unfortunately, the WTO Dispute Settlement Panel held that Canada was not in 

violation of its Article XVII obligations which requires that STEs make ‘‘purchases 

or sales solely in accordance with commercial considerations.’’ The panel’s simplistic 

view of commercial considerations gives STEs a green light to engage in harmful 

market-distorting behavior. The panel, on one hand, suggested that sales based on 

nationality, government policies, or the ‘‘national (economic or political) interest of 

the STE’’ are not in accordance with commercial considerations, and thus would be 

impermissible. On the other hand, the panel indicated that STEs may be used to 

carry out governmental policies that diverge from profit-maximizing commercial behavior. In a complete affront to the WTO’s goals, the panel’s report stated, ‘‘We note, 

however, that an export STE might, for instance, want to charge a lower price than 

the market would bear in order to deter competitors from entering the market. In 

our view, such sales might be considered to be based on commercial considerations.’’ 

Such inconsistencies in the panel report on Article XVII has robbed this clause 

in the WTO Agreement of any meaning and precludes Member countries from having any viable manner of ensuring that STEs operate in a non-discriminatory manner. As a result of this ruling, then-Ambassador Zoellick said, ‘‘The finding regarding the Canadian Wheat Board demonstrates the need to strengthen rules on state 

trading enterprises in the WTO. The United States will continue through the WTO 

negotiations to aggressively pursue reform of the WTO rules in an effort to create 

an effective regime to address the unfair monopolistic practices of state trading enterprises like the Canadian Wheat Board.’’ 

In July 2004, a significant achievement was reached when WTO negotiations lead 

to a framework agreement for the ongoing agriculture negotiations. The current 

working language adopted by the WTO General Council last July, under Paragraph 

18, specifically lists trade distorting practices of STEs including the elimination of 

export subsidies provided to or by them, government financing and the underwriting 

of losses. This portion of paragraph 18 is key to any effort to meaningfully discipline 

STEs, and it must remain in the text of any final agreement. If this language remains, it will be an important accomplishment for U.S. wheat producers in moving 

the CWB into a more market oriented and commercial disciplined entity. 

The text of Paragraph 18 of the July 2004 WTO framework agreement also indicates that the future use of monopoly powers will be subject to further negotiations. 

With regard to the overall operations of STEs, both monopoly and monopsony powers granted to these entities must be disciplined in order to restrain and check the 

trade distorting practices of STEs. As a monopsonist (single buyer) and monopolist 

(single seller), the CWB is inherently a trade distorting entity. The CWB’s control 

of its domestic wheat supply allows cross-subsidization between domestic and foreign markets or across foreign markets. Thus, it can engage in price discrimination 

across all of its markets, and the subsidies and protection it receives from the Government of Canada enhance its ability to engage in such discriminatory activities 

in a way that no commercial entity could undertake. As a monopsonist buyer, the 

CWB can also force Canadian producers to adopt lower prices than might otherwise 

be acceptable under competitive conditions. The CWB’s activities distort international markets for wheat by reducing the price and increasing the volume of Canadian exports to both U.S. and third-country wheat markets compared to levels 

that would exist in an undistorted market. 

At the conclusion of the USTR’s Section 301 investigation, the USTR stated that 

it shared the NDWC’s goal to end the CWB’s monopoly status and enhance the 

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1 ‘‘I would like to spend a moment recalling how we got to where we are today. To be perfectly 

blunt, the EU’s challenge to the FSC is a case that never should have been brought. Back in 

1981, we reached an agreement with the European community to resolve challenges to each others’ tax laws. That agreement provided the foundation for adoption of the FSC. Recognizing the 

validity of the FSC, the EU refrained from challenging it for over 15 years. Then, only after 

Continued 

vestigation No. 301–120, February 15, 2002. The United States also agreed that in 

the ongoing Doha Round of negotiations that it would aggressively seek: 

• To end exclusive export rights to ensure private sector competition in markets 

controlled by ‘‘single desk,’’ monopoly exporters; 

• To eliminate the use of government funds or guarantees to support or ensure 

the financial viability of single desk exporters; and, 

• To establish WTO requirements for notifying acquisition costs, export pricing, 

and other sales information for single desk exporters. 

Mr. Chairman, despite the United State’s leadership in the WTO negotiations, not 

all of these STE-related goals have been achieved, and there is always the possibility that Canada could attempt to alter provisions already settled under the July 

2004 WTO framework agreement. The United States must continue to take a leading and active role in the agricultural negotiations in the current Doha Round. The 

challenges to the CWB in recent years have exposed the unfair structure and government-guaranteed powers of STEs, and the negative impact they have on other 

competing export countries. The United States’ resolve in this matter has helped to 

solidify allies in efforts to bring discipline to STEs through the WTO. Canada now 

stands alone as the only WTO-member from a developed country which continues 

to resist changes to the current WTO framework language and disciplines on STEs. 

North Dakota’s wheat producers need continued assistance from all available U.S. 

trade remedies in the interim; however, we most certainly need the United States 

to continue to press forward in this important fora to set the stage for free and fair 

international wheat trade in the future. Success in the WTO negotiations on these 

issues is a critical component in the WTO’s relevance to the future of commercial 

markets for global wheat trade. 

Thank you for your attention to this important matter. 

Sincerely, 

Harlan Klein 

Chairman 

Neal Fisher 

f 

Administrator 

Statement of Elizabeth A. Male, Export, Pennsylvania 

I take extreme exception to the opening statement of U.S. Trade Representative, 

The Honorable Peter F. Allgeier, wherein he said: ‘‘Simply put, the WTO exists as 

the most important vehicle to advance U.S. trade interests, and is critical to America’s workers, businesses, farmers, and ranchers.’’ Nonsense! 

The World Trade Organization has consistently demonstrated a bias AGAINST 

United States interests. One needs look no further than the recent trade dispute involving the Foreign Sales Corporation and the Extraterritorial Income Exclusion for 

an example of egregious meddling and frank bias against U.S. interests. The origins 

of the dispute are more than 30 years old and perhaps a brief history is in order. 

A Brief History: 

In response to a growing international trade imbalance, Congress in 1971 enacted 

legislation to encourage formation and operations of Domestic International Sales 

Corporations (DISCs). Three years later, the European Community challenged the 

DISC regime, alleging that it violated the General Agreement on Trade and Tariffs 

(GATT). A dispute panel subsequently concluded that the DISC regime did indeed 

violate GATT, and in 1981, a mere decade after its enactment, Congress repealed 

the DISC legislation. After reaching a consensus with our GATT trading partners 

in 1984 on international tax issues, the Foreign Sales Corporation (FSC) law was 

enacted to take the place of the repealed DISC regime. 

After a hiatus of nearly 17 years,1 the European Union (EU) challenged the 

validity of the FSC and, in 1999, the World Trade Organization (WTO) found the 


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losing the Beef and the Bananas cases in the WTO, the EU cast aside our 1981 agreement and 

launched the FSC dispute. In short, this was a case brought by bureaucrats eager to even the 

dispute settlement score. The WTO appellate body has made clear that a benefit such as is provided through the ETI provisions that is tied to export activity is not permitted. Therefore, it 

will not be fruitful to pursue another, similar replacement of the ETI provisions. Rather, addressing the WTO decision through our tax law will require real and meaningful changes to our 

current international tax legislation.’’—Senator Max Baucus, Opening Statement of the Senate 

Finance Committee hearing held July 30, 2002. This refreshingly frank declaration makes it 

clear that this dispute is not rationally based and further efforts to duplicate the DISC, FSC 

or ETI regimes will be futile. 2Kenneth Dam, Deputy Treasury Secretary, testimony before the Senate Finance Committee 

July 30, 2002 

FSC regime to be an impermissible export subsidy. In response, we repealed the 

FSC legislation while simultaneously enacting the Extraterritorial Income Exclusion 

Act (ETI). The ETI exclusion provided broadly preferential treatment not only to income earned from exports, but also to foreign source income. It was thought that 

this broadening effort would cure the EU objections, thereby allowing the ETI regime to survive WTO scrutiny. 

However, in 2001 the EU lodged a complaint alleging that the ETI provisions 

amounted to an impermissible export subsidy. The Dispute Settlement Body of the 

WTO reviewed the complaint, held the ETI to be an impermissible export subsidy, 

and authorized the imposition of over $4 Billion annually in retaliatory tariffs. The 

tariffs were directed at a very broad range of products, including agriculture, textiles, metals, jewelry, and many others. 

When Congress failed to act or demonstrate meaningful progress, the tariffs took 

effect at a rate of 5% in March of 2004. They increased at a rate of 1% per month 

and were scheduled to reach a maximum of 17% in March of 2005. By October of 

2004, when the tariffs were at 12%, Congress passed HR 4520, The American Jobs 

Creation Act of 2004, and President Bush signed the legislation into law on October 

22, 2004. 

In fact, ‘‘. . . Few things are as central to a country’s sovereignty as how 

it raises revenue,’’ 2 Yet the majority of Americans appear content to allow the 

WTO to exert significant influence over U.S. tax policy with not so much as a whimper in protest. If the American people understood this dispute, and the effect on 

jobs, there would be rioting in the streets. 

Some Basics: The Arcane Distinction 

The difference between a direct tax and an indirect tax is a legal distinction with little or no economic difference, but this distinction is pivotal to this 

long-running international dispute. Per WTO regulations, an indirect tax such as 

the Value Added Tax (VAT) of Europe is border adjustable without consequence. 

In contrast, a direct tax such as the Corporate Net Income Tax (CNI) is not eligible 

for border adjustment. This disparate treatment of the two taxes which are economically indistinguishable serves to disadvantage U.S. goods in the global marketplace. 

Our corporate income tax and associated compliance costs are reflected in the 

price of goods produced by U.S. companies; raising the relative price of those goods 

in the world market. Because of the global nature of the U.S. CNI, this burden attaches to not only domestically produced goods, but to goods produced offshore as 

well. The DISC, FSC, and ETI regimes each sought to unburden our export products 

without violating the spirit or the letter of existing trade agreements. These legislative ‘‘attempts to level the global playing field,’’ were all seen as attempts to tilt the 

field in favor of the United States. 

Incidence of a Corporate Income Tax vs. Value Added Tax 

Economists have struggled for decades to determine who actually bears the incidence of the corporate-level income tax. In the final analysis it appears that the ultimate incidence is not only impossible to predict or measure, but shifts over time in 

response to infinitely complex changing market conditions. The indeterminate nature of this tax burden supports the WTO prohibition of blanket border adjustment 

of the CNI; blanket border adjustment may result in subsidy rather than mere removal of an embedded tax component. Distasteful as it may be, this argument has 

merit. 

Like the CNI, initial incidence of the VAT is easily determined; it falls on the consumer. Although they are often thought of as powerless, consumers can collectively 

and unconsciously reallocate a VAT burden to the entity’s investors and employees 

by decreasing their consumption of the firm’s products. To the extent that a VAT 

reduces consumption and adversely impacts sales volume and profits, at least a porVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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3 July 30, 2002 

4 At: http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm 5 Id. 

6 At: http://www.wto.org/english/thewto_e/whatis_e/10ben_e/10b08_e.htm 7 Andrew K. Rose, National Bureau of Economic Research, Working Paper Number 9273, Do 

we Really Know That the WTO Increases Trade? (October 2002) Available at: http:// 

www.nber.org/papers/w9273 8 Andrew K. Rose, National Bureau of Economic Research, Working Paper Number 10207, 

Does the WTO Make Trade More Stable? (January 2004) Available at: http://www.nber.org/papers/w10207 9 Andrew K. Rose, National Bureau of Economic Research, Working Paper Number 9347, Do 

WTO Members have More Liberal Trade Policy? (November 2002) Available at: http:// 

www.nber.org/papers/w9347 

tion of the total VAT burden is shifted to the investors and employees of manufacturing companies. 

Because the VAT is imposed at each level of production, similar to the CNI in 

a non-vertically integrated production process, market forces act in the same manner to allocate the burden of the VAT. This fundamental economic truth is often 

overlooked. It renders the legal distinction between the indirect VAT and the direct 

CNI functionally and economically meaningless. As U.S. Trade Representative, Robert Zoellick testified before the Senate Finance Committee: ‘‘—the economic theory— 

says that the distinction between direct and indirect taxes that lead them to use 

a different treatment for the VAT as an indirect tax and allow a rebate versus a 

direct tax, say a corporate income tax suggests that the logic no longer holds, that 

basically over time all those taxes are passed through.’’ 3

As a regrettable result of this oversight or conscious disregard of economic fact, 

the VAT is border adjusted without penalty while the CNI burden is potentially 

fully extant on the consumer. To the extent that European investors and employees 

bear any of the VAT burden, permissive border adjustment rules serve to subsidize 

or artificially reduce the price of European products in the world market. This disadvantages U.S. businesses not only in European markets, but in the global 

marketplace as a whole; including within the borders of the United States. 

Stated Objectives of the WTO: 

According to the WTO website: ‘‘The World Trade Organization is the only international organization dealing with the global rules of trade between nations.’’ Flowery platitudes continue: ‘‘Its main function is to ensure that trade flows as smoothly, 

predictably and freely as possible. The result is assurance.’’ 4 ‘‘The multilateral trading system is an attempt by governments to make the business environment stable 

and predictable.’’ 5 ‘‘Non-discrimination is just one of the key principles of the WTO’s 

trading system. Others include: transparency (clear information about policies, rules 

and regulations); increased certainty about trading conditions (commitments to lower 

trade barriers and to increase other countries’ access to one’s markets are legally 

binding). . . .’’ 6

Those are all lofty goals, but does the WTO really accomplish those goals? The 

irreverent and contrarian Andrew K. Rose, in a series of papers published by the 

National Bureau of Economic research, ‘‘Does the WTO Really Increase Trade?’’, 

‘‘Does the WTO Liberalize Trade?’’, ‘‘Does the WTO Stabilize Trade?’’, suggests that 

the answers to those questions are No, No, and No! 

His empirical strategy involved controlling for as many natural causes of trade 

as possible (multicollinearity), while searching for the effects of multilateral agreements in the residual. Once other factors such as common language or heritage have 

been taken into account, Rose compared trade patterns for countries in the GATT/ 

WTO with those outside of the system. The key result with respect to whether the 

WTO increases trade: ‘‘that membership in the GATT/WTO is associated with an 

economically and statistically insignificant increase in trade—seems robust.’’ 7 With 

respect to whether the WTO stabilizes trade: ‘‘There is little evidence that membership in the GATT/WTO has a significant dampening effect on trade volatility.’’ 8

With respect to trade liberalization: ‘‘Almost no measures of trade policy are significantly correlated with GATT/WTO membership. Trade liberalizations, when they 

occur, usually lag GATT entry by many years, and the GATT/WTO often admits 

countries that are closed and remain closed for years. The exception to the negative 

rule is that WTO members tend to have slightly more freedom as judged by the Heritage Foundation’s index of economic freedom.’’ 9

Not all agree with Rose’s findings. Authors Subraminian and Wei, in a paper written for the National Bureau of Economic Research, ‘‘The WTO Promotes Trade, 

Strongly But Unevenly,’’are somewhat critical of Rose’s work. They argue that after 

refining his econometric methods, correcting for differences between developed and 


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10 Arvind Subramanian and Shang-Jin Wei, National Bureau of Economic Research, Working 

Paper Number 10024, The WTO Promotes Trade, Strongly But Unevenly (October 2003) Available at:http://www.nber.org/papers/w10024 11 Id. At 9 

developing countries, and differences between countries that joined the WTO before 

the Uruguay Round (members of GATT), and those who joined after the Uruguay 

round: They claim to have found robust evidence that the WTO promoted world 

trade.10 However, a closer examination of their work indicates, by their own admission: ‘‘The basic Rose result about the ineffectiveness of the WTO in increasing trade 

is illustrated in column 1. Indeed, if membership in the WTO is undifferentiated, 

with all countries treated alike, our result is a more damning indictment of the 

WTO than even that in Rose (2002a). He found that membership in the WTO had 

no significant effect on trade. We find that membership has a significantly negative effect on trade: the average WTO member trades about 11 percent 

[exp(Ø0.113)Ø1] less than the average in the sample (column 1).’’ 11

Subraminian and Wei continue in their analysis, engaging in nothing more than 

pretzel logic, to conclude that the WTO is an effective promoter of trade. Nonsense! 

Truly free and fair trade proceeds from individual rational self-interest, and there 

is no need for an unelected, international bureaucracy to oversee or promote it. 

Economist Murray Rothbard said it best: ‘‘You don’t need a treaty to have free 

trade. Governments and quasi-government bodies like the WTO can only politicize 

and interfere with the natural flow of goods and services across borders. When we 

cede even a fraction of our sovereignty to an organization like the WTO, we can 

hardly hope to become more prosperous or more free.’’ 

Conclusion 

The United States must extricate itself from the artificially imposed stupidity of 

the corporate net income tax and the ineffective World Trade Organization. Neither 

serves the interests of the United States. Only when we have freed ourselves from 

the self-imposed impediments will trade flow unconstrained by unelected and unresponsive international bureaucrats and only then will the productivity of the American worker shine like a beacon for the rest of the world to emulate. 

Please de-fund the World Trade Organization and remove U.S. from participation therein. 

f 

Joint Statement of Dr. Peter T. Nelson and Jennifer Lambert-O’Keefe, 

International Trade Council, Alexandria, Virginia 

Mr. Chairman and members of the committee, thank you for the opportunity for 

the International Trade Council (ITC), and the International Development Institute 

to present testimony on the ‘‘Future of the World Trade Organization (WTO), as 

well as testimony on the General Agreement of Tariffs and Trade (GATT). 

I am Dr. Peter T. Nelsen, President of the ITC and Chairman of the IDI. We have 

since 1975, for 30 years represented a broad cross section of the U.S. producers of 

commodities, good and services relating to exports and imports. We have conducted 

Trade Development Seminars, Congressional Liaison Sessions and Overseas Trade 

Development Missions. 

The GATT and the WTO are the systems that have developed the ground rules 

and relating laws by which international trade has developed since the dismal failure of the Smoot-Hawley Tariff Act of the early 1930’s. The World living standards 

of the U.S. including health systems, education, communications and most other aspects of civilized life on earth have evolved and improved the quality of life dramatically in each country to the extent that each population has participated. 

The overall results of the U.S. membership on the WTO and the GATT are difficult to ascertain because there is no ‘‘scientific date on a ‘‘controlled population’’ 

with which to compare changes. 

The average U.S. growth of exports and imports during the last five decades is 

7% on a cumulative basis or twice the 3% average U.S. domestic growths, although 

starting at a much lower base. 

The performance of the trading counties have greatly benefited from the trade 

laws and regulations that have been established by the WTO, GATT, The United 

Nations and by the other intergovernmental organizations. 


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The basis question—Do we need the WTO and GATT is as profound a question 

as ‘‘Do we need the United States Constitution?’’ There is no ‘‘substitute,’’ nor alternative. 

The WTO and GATT have substantially expanded the trade categories they now 

include trade in services, i.e. banking, consulting, accounting and information dissemination, as a result of the DOHA Round. 

Further participation in the multinational trading systems is of essential benefit 

to Americans. There are numerous aspects to trade that have not yet been agreed 

upon such as: 

• Intellectual Property Protection 

• Tariffs used as trade Barriers 

• Uniformity Standards on Property Rights 

There are substantial increased opportunities for U.S. farmers, workers and consumers inherent within the DOHA Round of negotiations. 

The U.S. will benefit for the increases in trade. It was 5% of the U.S. Gross Domestic Product in the 1940’s; it was 20% by the end of the 20th Century. The projections of the International Development Institute, (IDI) is that by the year 2010, U.S. 

Gross Domestic Product will be 25%, our projections further indicate that by the 

year 2020 the U.S. GDP will be 31% and by the years 2025, we project the annual 

U.S. Gross Domestic Product to be at 35%, given a 2% margin of error. 

These figures assume that Congress will eventually pass the bilateral and multilateral trade legislation that the previous 4 United States Presidents have proposed, 

including DR–CAFTA Trade Agreement and the ‘‘Trade Agreement of the Americas,’’ which would encompass all the countries from Canada down to Argentina. 

ITC testified in the early 1980’s before both the Senate Finance Committee and 

the House Ways and Means Committee on the subject of negotiations of Free Trade 

Agreements with any country independently. Since it seemed very difficult to get 

98 countries of the WTO, which was the membership number at that time, to agree 

in concert. 

If any country would agree, the other non participating countries would be obliged 

to follow, given that they would see other member counties increase their competitiveness in the world to the benefit of all farmers, manufacturers, service industry 

related workers and consumers from the increase of the ‘‘Economies of Scale,’’ that 

will obviously ensue. 

Market-driven globalization is a ‘‘positive-sum’’ system whereby all participants 

benefit, i.e. all company’s workers and consumers by enlightened self-interest. 

By elimination trade barriers and tariffs, producers can produce products and 

services at a more competitive price. Thus benefiting consumers both hear and overseas with ‘‘Freedom of Choice,’’ in the world market place. 

Mr. Chairman, and Members of the Committee, I thank you for your attention 

to my testimony provided you today. It is my honor that you have the benefits to 

consider its statistical and academic merits to the benefit of all Americans. 

f 

Statement of Joe E. Sheldon, Huntington Beach, California 

For the past several years as a matter of personal interest I have been researching and investigating different types of possible tax systems this country might benefit from. 

In the course of this work I have naturally encountered the Word Trade Organization and other non-U.S. governmental bodies purporting to improve and control 

trade between countries. As a country we seem to blow hot and cold with an onagain off-again love affair with such bodies depending, perhaps, upon the direction 

of the political winds at the particular moment. 

In looking at such involvement over time, it really appears to be almost 

unremittingly a case of shooting ourselves in both feet and putting organizations 

and individuals from our country at a great disadvantage with respect to such trade. 

It is perplexing to me as to why we are in such a quandary as we now exhibit by 

these hearings. 

I have never been able to satisfactorily answer in my own mind why we allow 

ourselves to have our trade so greatly controlled or influenced by these offshore bodies who after all have other interests at heart than our own. There seems to be some 

mis-guided belief that we must be ‘‘Mr. Nice Guy’’ and align our own trade affairs 

with the desires of others so as to not trigger all-out trade wars. 


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Certainly such economic no-win situations as trade wars or trade retaliation are 

laudable goals, but this can surely be accomplished by noting the borderadjustability of the European Value Added Tax or VAT. These VAT countries enjoy 

a great advantage over U.S. since their things sold to others are freely border adjustable under the WTO regulations as I understand them. 

The VAT form of taxation is certainly not a good choice for a people as free we 

are. With all of its attendant problems in logistic and administrative complexity 

(which are extensive) in addition to the cascading of taxes despite extensive artificial attempts to do otherwise, any form of the VAT—simply put—works poorly and 

has the additional downside of actually encouraging truly a blizzard of evasion and 

non-compliance. In short, in the over 100 countries instituting a VAT (with most 

having the mistaken belief that it will eliminate tax cascading and tax consumption), the actual real life experience has been different—quite different. Almost all 

of these countries end up with huge numbers of exemptions and exceptions and 

other types of income taxes (personal and/or corporate) as well truly making taxes 

into a hybrid tax system—a nightmare if ever there was one. 

If one looks at the VAT experience it is not difficult to see swelling compliance 

and seemingly never ending bureaucratic levels of regulation and paperwork with 

a great amount of non-compliance and evasion. That is the tradeoff for the VAT 

countries—compliance with the WTO mandates to free up their foreign trade but 

with a nightmare internally. We do not need to go this route; indeed it would be 

foolish to do so. 

There is a mechanism for this country that offers the border-adjustability of 

taxes—an indirect tax in WTO parlance. This system is presently in the form of bills 

before Congress—HR25/S25 which are originated as non-partisan efforts to solve, 

among other things, the border adjustability of taxation thereby aiding our exporters in other markets and taxing incoming products equally as our own when sold. 

These bills, knows as the FairTax bills, have many economic and internal political 

benefits and—being fairly small—can be easily digested from the Internet. There 

has been more economic research into these bills than any other tax measure in 

American history and they are worthy of serious study by the Subcommittee and 

full Committee especially from the standpoint of easing our trade deficits and deficiencies. 

I shall not repeat the extensive research done on the bills but it is readily available on the Internet also and many private citizens have obviously look into the 

matter as can be seen from the large number of comments from Individuals on the 

2nd Request for Comments by the President’s Tax Reform Panel. It is clear that 

some of these looking at the FairTax recognize its benefits from the standpoint of 

easing the deleterious effects of WTO regulations on our foreign trade. 

I would urge the Subcommittee and, in turn, the full Committee to seriously investigate the FairTax as it relates to the WTO with an eye to becoming as knowledgeable as some of the citizens are becoming. The AFFT (Americans for Fair Taxation) organization, a non-partisan group, already has about 600,000 members and 

is growing. Please consider the highly-researched material offered relating to the 

FairTax. I believe it is a better solution—FAR better—than any tax system such as 

any form of VAT (or flat tax for that matter). It will greatly aid our overseas trade 

situation. 

f 

Statement of Barry Solarz, American Iron and Steel Institute 

I. Introduction 

In response to the request of the Subcommittee on Trade of the U.S. House of 

Representatives Committee on Ways and Means (the ‘‘Subcommittee’’), the American Iron and Steel Institute (‘‘AISI’’), on behalf of its U.S. member companies who 

together account for approximately three-fourths of the raw steel produced annually 

in the United States, is pleased to provide the following submission regarding future 

prospects for U.S. participation in the World Trade Organization (‘‘WTO’’). 

The Subcommittee’s solicitation of submissions relates to its May 17, 2005 hearing 

on the future of the World Trade Organization, focusing on (1) overall results of U.S. 

membership in the WTO and General Agreement on Tariffs and Trade, (2) whether 

future participation of the United States in the WTO and the multilateral trading 

system can be expected to benefit Americans and (3) prospects for increased economic opportunities for U.S. farmers, workers and consumers in the current round 

of WTO negotiations, called the Doha Development Round (‘‘Doha Round’’). The following comments do not attempt to address all of the myriad potential issues preVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00072 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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1 U.S. trade balance data in this submission are taken from the U.S. Census Bureau’s web 

page, available at http://www.census.gov/foreign-trade/balance (last visited May 17, 2005). 2For the first three months of 2005, the United States had a trade deficit of $183.115 billion. 

On an annualized basis, this would be a trade deficit of $732.46 billion. (183.115 x 4 = 732.46). 3 U.S. manufacturing employment fell from 17.325 million jobs in July 2000 to only 14.308 

million jobs in April 2005. U.S. Bureau of Labor Statistics, Series ID CES3000000001 (Manufacturing), available at http://www.bls.gov (last visited May 17, 2005). 4 In the last two years, the number of U.S. manufacturing jobs has actually declined, from 

14.615 million jobs in April 2003 to 14.308 million jobs in April 2005. Id. 5 Eighty-nine disputes have been filed against the United States at the WTO, far more than 

any other member. The European Union is second with 53 disputes, while no other member has 

faced more than 17 disputes. 6Specific examples of such decisions can be found in Section III.A.1 of this submission. 

sented by these topics, but instead focus on areas of core concern in terms of the 

operation of the WTO, as well as prospects for continued U.S. participation. 

In particular, and as discussed in more detail below, a number of very serious 

issues confront the WTO and the United States as it contemplates the future of this 

organization—including the fact that the dispute settlement system is clearly broken (and not acting in the best interests of the United States), critical disciplines 

against dumping, subsidies and other forms of unfair trade are under attack and 

in danger of being made ineffective (both by rogue dispute settlement decisions and 

by Doha Round negotiations) and the WTO system embodies a number of other 

basic inequities that are harming fundamentally American workers and businesses. 

These issues will need to be dealt with and meaningfully addressed if support for 

the WTO system is to be maintained in the United States. 

II. The Manufacturing Crisis and Unsustainable Trade Deficits Demand 

That Problems with the International System Be Rectified 

Despite concerns—particularly with regard to the effect on trade remedy laws and 

the operation of international dispute settlement mechanisms—American steel producers have supported past trade agreements and market-opening initiatives, including the Uruguay Round Agreements creating the WTO. Indeed, domestic steel 

producers have long believed in and promoted a strong and vibrant multilateral 

trading system. AISI believes, as it has for many years, that U.S. workers and businesses can thrive in a global economy that rewards innovation, hard work and market outcomes. Unfortunately, such outcomes are too often defeated by unfair trade 

and market distortions that rob the international system of its promise and deny 

critical benefits to American workers and companies. The fact is that the WTO has 

not been successful in addressing these problems and, in fact, has often exacerbated 

them through indefensible dispute settlement decisions and inequitable global rules. 

In 1994, the last full year before the WTO came into existence, the United States 

had a trade deficit of $150.6 billion.1 At the time, it was widely hoped that the WTO 

would level the playing field for U.S. companies, leading to a reduction in the trade 

deficit. This hope has not been fulfilled. During 2004, the U.S. trade deficit hit an 

all-time high of $650.8 billion. Indeed, the U.S. trade deficit last year with China 

alone was $162.0 billion—a figure greater than our trade deficit with the entire 

world just a decade ago. Furthermore, the data for the first quarter of 2005 indicate 

that the United States is currently on pace for a $730 billion trade deficit.2 These 

astronomical deficits are not due merely to the explosion of imports, but to relatively 

poor export performance. Indeed, U.S. exports have lagged since the creation of the 

WTO, growing only 4.7 percent in the last five years—as compared to a growth rate 

of more then 30 percent in the five years before the WTO was created. These enormous and unprecedented trade deficits represent a severe imbalance in the global 

economy that could ultimately have disastrous consequences—including undermining the position of the dollar, destabilizing world economies, destroying the U.S. 

manufacturing base and damaging the national economic security of the United 

States. 

In fact, exploding trade deficits have coincided with a time of crisis for American 

manufacturing—which has seen devastating losses in employment and entire industries pick up and move overseas. U.S. manufacturing employment today is down almost 3 million jobs since the summer of 2000.3 Even as the U.S. economy has expanded in recent years, these lost jobs have not been replaced.4

Unbelievably, at a time when the United States is running the largest trade deficits in the history of the world, it has also become the top target of litigation at 

the WTO.5 In decision after decision, often based on ridiculous legal reasoning and 

the invention of new requirements out of whole cloth, 6 WTO dispute settlement 

panels have struck down U.S. laws and practices—including in areas relating to taxation, appropriations, agricultural support and, perhaps most important, trade remVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00073 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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edy laws. So as the United States continues to soak up more and more of the world’s 

exports, our trading partners have seen fit to exploit a blatantly unfair and inept 

dispute settlement system to extort even more concessions out of the United 

States—gaining through litigation what they could not secure through negotiation. 

Americans will not long support a system that operates this way. 

There can be no doubt that these developments have already significantly undermined U.S. support for the multilateral trading system. If the fundamental problems facing the system are not rectified, such support will quite possibly disappear 

altogether. 

III. Fundamental Problems With the WTO System 

A. The WTO Dispute Settlement System Is Broken 

Binding dispute settlement was hailed as one of the central accomplishments of 

the negotiations that led to the WTO. U.S. workers and businesses were promised 

that a binding settlement process would force foreign countries to fulfill their commitments to open their markets to U.S. goods—while respecting U.S. laws and practices in critical areas such as the trade remedy statutes. Unfortunately, this system 

is not working as advertised. Both dispute settlement panels and the WTO Appellate Body (‘‘AB’’) have issued numerous rogue decisions that have no basis in the 

WTO agreements. These bodies have also disregarded the proper standard of review 

in disputes involving trade laws. Finally, these problems are exacerbated by the almost complete lack of transparency in the dispute settlement process. Each of these 

problems is discussed in more detail below. 

1. WTO Dispute Settlement Panels and the Appellate Body Have Issued Numerous Rogue Decisions 

Despite having the most open market in the world and running staggering trade 

deficits, the United States has found itself the primary target of challenges in the 

WTO dispute settlement system. Since the beginning of 2001, the United States has 

been the defendant in 19 of the 36 cases decided by the AB—i.e., in more cases than 

the rest of the world combined. 

These challenges relate to U.S. law and practice in a vast array of economic and 

policy areas—including tax rules (as reflected in the Foreign Sales Corporation tax 

case); agriculture (as seen in the cotton decision); appropriations (the so-called ‘‘Byrd 

Amendment’’ case); foreign policy (as shown in the Helms-Burton/Cuba litigation); 

the environment and conservation (shrimp/turtles); and morals/decency (internet 

gambling). In case after case, panels of international bureaucrats have twisted the 

meaning of international rules, and invented new obligations, in the course of striking down U.S. laws and practices. These foreign bureaucrats apparently view it as 

their province to second guess the sovereign decisions of the U.S. Congress and Executive Branch, and are all too willing to go well beyond the text of WTO agreements to, in effect, make policy for the United States. 

In no area have these decisions been more harmful to Americans—and in particular to our manufacturing base—than those relating to trade remedy laws. The 

one common thread in all of these cases is that the United States never agreed to 

the restrictions that have been found on the use of basic fair trade disciplines. Indeed, in many instances, Congress was specifically told (at the time it approved the 

WTO agreements) that U.S. practice was consistent with the relevant international 

agreements. These cases have already significantly impacted the effectiveness of 

U.S. trade remedy laws, and threaten far greater damage if this system is not reformed. Here are a few examples of such decisions: 

• Disbursement of Antidumping(AD) and Countervailing Duties (CVDs). The AB 

found that the Continued Dumping and Subsidy Offset Act of 2000 (i.e., the 

Byrd Amendment) is a ‘‘specific action against dumping and subsidization’’ in 

violation of the Antidumping Agreement and the Agreement on Subsidies and 

Countervailing Measures (‘‘SCM Agreement’’). The AB reached this decision despite the fact that the Byrd Amendment simply governs how the United States 

spends the duties that it lawfully collects and does not provide for any action 

to be taken against dumping or subsidization or against imports that are 

dumped and subsidized. 

• Zeroing. The AB has ruled against the United States use of ‘‘zeroing’’ in a recent AD investigation. The decades-old practice of ‘‘zeroing’’ merely ensures that 

so-called ‘‘negative margins’’ on fairly trade merchandise in the United States 

are not improperly used to offset a foreign producer’s dumping margins on merchandise sold at less than fair value. To the extent fairly-traded sales were allowed to offset the margins on unfairly-traded merchandise, foreign producers 


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7See,e.g., United States—Antidumping and Countervailing Measures on Steel Plate from 

India, WT/DS206/R (June 28, 2002) (finding that the Commerce Department’s rejection of information submitted by the Steel Authority of India Ltd. (‘‘SAIL’’) in an antidumping investigation 

and its reliance on facts available was improper, even though substantially all the information 

needed for the calculation of SAIL’s dumping margin was untimely submitted and was completely unusable.) 

could sell massive quantities of dumped products in the U.S. market to the extreme detriment of U.S. workers and businesses. 

• Standard for Causing Injury. In several cases, WTO panels and the AB have 

created a completely new obligation in AD cases pursuant to which injury determinations must ‘‘separate and distinguish’’ the effect of dumped imports from 

that of every other possible cause of injury. This causation standard—which 

was simply invented by WTO panels and the AB—is unduly burdensome and 

likely unattainable. 

• Facts Available. Several WTO decisions have undermined the ability of investigating authorities to use ‘‘facts available’’ and adverse inferences when foreign 

producers or exporters fail to cooperate in AD and CVD proceedings, including 

the five-year ‘‘sunset’’ reviews.7 These tools are essential to enable such authorities to obtain the information they need to make their determinations. 

• Safeguards. The AB has struck down every safeguard decision that has ever 

come before it, and has created such unworkable requirements in this area as 

to make the Safeguards Agreement essentially a dead letter. The undermining 

of this remedy makes it all the more critical that antidumping and anti-subsidy 

provisions see no more weakening whatsoever. 

These rogue decisions are without basis in the WTO agreements and should be 

overturned. Such aggressive judicial activism is causing untold damage to the reputation of the world body and, if unchecked, could entirely undermine support for 

the WTO in this country. 

2. WTO Dispute Panels and the AB Have Disregarded the Proper Standard 

of Review 

The repeated abuses at the WTO—and the refusal of dispute settlement panels 

and the AB to respect the discretion and authority of the U.S. government—are particularly outrageous given that negotiation of a deferential standard of review in 

trade remedy cases was one of the key U.S. objectives and achievements in the negotiations that created the WTO. 

Indeed, the WTO Antidumping Agreement contains specific language stating that 

when a relevant provision of the Agreement admits to more than one permissible 

interpretation, WTO dispute settlement panels and the AB shall uphold a member’s 

antidumping measure if it rests upon any of those permissible interpretations. This 

common-sense provision was designed to ensure that international bureaucrats 

defer to reasonable agency interpretations and applications of the rules—rather 

than substituting their own judgment and creating new obligations to which the 

United States and other Members never agreed. 

Unfortunately, the dispute settlement panels and the AB have all but ignored this 

standard of review. In case after case, they have concluded that there is only one 

acceptable interpretation of the Antidumping Agreement—that imposed by the AB 

or the panel. This blatant attempt to undermine the ability of U.S. agencies to interpret and apply our laws has further eroded the WTO’s credibility, and significantly 

damaged U.S. interests. 

3. The WTO Dispute Settlement Process Suffers from a Lack of Transparacy 

The defects in the WTO dispute settlement system are only further magnified by 

its remarkably secretive and non-transparent method of resolving disputes. Among 

the obvious shortcomings in this system: 

• Members of WTO dispute settlement panels are often obscure bureaucrats chosen by the WTO Secretariat—with questionable expertise and without sufficient 

guarantees of their objectivity. 

• All hearings conducted by WTO dispute settlement panels and the AB are 

closed to the public, which may not even obtain transcripts of such hearings. 

• The public has no right of access to the briefs and filings submitted by other 

countries in WTO dispute settlement proceedings. 

• Private parties (including those who originally filed and successfully prosecuted 

a particular case at the national level, who intimately know the record, and 

whose interests are directly affected by the outcome of that case) have no right 

to submit briefs, appear at WTO hearings or participate in WTO proceedings. 


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8Press Release from the Department of Treasury Office of Public Affairs, ‘‘Statement of Secretary John W. Snow on the FOREX Report (May 17, 2005). 

No court in America would allow even the most minor legal dispute to be decided 

by such patently flawed procedures. But the WTO uses them to make critical decisions affecting our sovereignty, decisions that can be worth billions of dollars to U.S. 

workers and businesses. It is simply unrealistic to expect that Americans—who have 

long recognized that transparency is absolutely essential to good government—could 

ever respect or support a body that operates in such a manner. 

B. Global Rules and Practices under the WTO System Are Unfairly Harming U.S. Workers and Businesses 

At the same time that Americans are being harmed by a broken WTO dispute settlement system, they are also laboring under international rules that are often inexplicable and patently unfair. Two areas that deserve priority consideration in the 

context of future U.S. participation in the WTO are (1) unfair international tax rules 

and (2) international currency manipulation. 

• Border Adjustability of Taxes. WTO rules allow so-called ‘‘indirect’’ taxes, such 

as the value-added tax (‘‘VAT’’) principally relied upon by many U.S. trading 

partners, to be refunded when a product is exported without being considered 

an illegal subsidy. However, direct taxes, such as the income taxes used in the 

United States, may not be refunded. To make matters worse, U.S. products sold 

in foreign markets are subject to the VAT, whereas foreign companies bear no 

U.S. income tax in selling in the United States. The result is that nations using 

the VAT have received an artificial and unfair advantage in international trade, 

whereas U.S. companies selling abroad are essentially double-taxed. There is no 

legitimate economic justification for the disparity, which serves as an enormous 

competitive handicap to U.S. businesses and manufacturers. Congress has for 

years demanded that this disparity be fixed, and has included it as a principal 

negotiating objective in legislation granting the President trade promotion authority. And yet nothing ever seems to be done about it. 

• Currency Manipulation. Another critical area in terms of global trading rules— 

and the unfairness to U.S. businesses and workers—relates to the blatant currency manipulation engaged in by China and other foreign nations. These efforts to keep the dollar artificially high (while depressing the value of foreign 

currencies) act to encourage imports into the United States and to discourage 

U.S. exports—directly contributing to the trade deficit and serving as a major 

impediment to U.S. manufacturing and other businesses. By playing the currency markets in this manner, such countries effectively subsidize their exports 

to the United States, and place a tariff on U.S. shipments to them. Just last 

week, the Secretary of the Treasury stated with respect to China that ‘‘{t}he 

current system poses a risk to {its} economy, its trading partners, and global 

economic growth.’’ 8

• Export Restrictions on Raw Materials. Foreign government interventions, restrictions and distortions in the coke, iron ore, scrap and other key raw material 

markets are on the rise. It is important not only to eliminate tariff and nontariff barriers (NTBs) to imports, but also to end taxes and restrictions on exports. In the WTO Non-Agricultural Market Access (NAMA) negotiation, AISI 

supports vigorous U.S. government efforts to end foreign government export 

taxes and other export restrictions on raw materials. 

While attempts have been made to challenge these practices under WTO rules, 

thus far there has been no effective resolution. To the extent current global rules 

are not sufficient to discourage and remedy such blatantly market-distorting behavior, changes are clearly needed. 

IV. Needed Reforms and Actions to Address Problems with the WTO 

For all of the reasons given above, U.S. support for the multilateral trading system is at risk. Unless these problems are addressed, the legitimacy of the entire system could be undermined and calls for the United States to withdraw from the body 

will only increase. Efforts to redress the problems that exist should focus initially 

on three vital tasks: (1) preserving and enhancing trade remedy laws in the Doha 

Round, (2) reforming the WTO dispute settlement system and (3) correcting the fundamental disparities in global rules that continue to distort global markets. Each 

of these tasks is discussed in more detail below. 


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9For examples of such decisions, see Section III.A.1 of this submission. 

A. Preserve and Enhance Trade Remedy Laws in the Doha Round 

U.S. trade remedy laws—particularly the AD and CVD laws—play a vital role in 

assuring U.S. workers and businesses that free trade constitutes fair trade. With 

the most open market in the world, American producers and workers expect and deserve that those trading in this market will do so in accordance with decades-old 

rules requiring fair trade. At a time of growing challenges to our manufacturing sector, fair trade disciplines are more important than ever—both to ensure the survival 

of core U.S. industries, and to preserve support in this country for open trade and 

the international system. Accordingly, it is imperative that the United States seek 

to overturn the WTO’s rogue decisions regarding trade remedy laws, resist efforts 

to use the Doha Round to undermine these laws and push for changes to strengthen 

such laws. 

1. Overturn the WTO’s Rogue Decisions on Trade Remedy Laws 

As discussed above, WTO dispute settlement panels and the AB have issued numerous decisions significantly weakening U.S. trade remedy laws—and going well 

beyond the obligations to which the United States agreed in the Uruguay Round.9

The first thing that should be done in the new Round of trade talks is to restore 

the balance of rights and concessions that was agreed to in creating the WTO, and 

that means reversing the flawed decisions undermining fair trade disciplines. 

Among other things, U.S. negotiators must seek explicit recognition of the right to 

distribute unfair trade duties to injured industries, and must reverse the overreaching of WTO panels and the AB with respect to zeroing, the injury causation 

standard, the use of facts available and other key trade remedy provisions. 

2. Resist Any Weakening of Trade Remedy Laws 

A number of U.S. trading partners—including the most consistent and egregious 

offenders of international disciplines against unfair trade (such as Japan, Korea, 

and Brazil)—have made the weakening of U.S. trade laws their top priority for the 

Doha Round. U.S. negotiators must avoid any negotiation or agreement that would 

result in a weakening of U.S. trade laws. A weakening change would include any 

measure that would make relief more difficult or costly to obtain, would delay or 

preclude effective relief or would make relief more difficult to maintain over time. 

The proposals that have already been made in the negotiations by parties such as 

the so-called ‘‘Friends of Antidumping’’ clearly constitute weakening changes. These 

include, for example, proposals for: 

• A so-called ‘‘lesser duty’’ rule (which would require inherently speculative and 

political judgments as to the amount of duty required to remedy any injury 

caused by unfair trade); 

• A requirement that national administrators consider factors in addition to the 

existence of unfair trade (e.g., amorphous concepts of ‘‘public interest’’) in determining whether relief can be imposed; 

• Raising so-called de minimis levels of dumping or subsidization to, in effect, immunize greater amounts of unfair trade; 

• Mandatory revocation of AD and CVD orders after five years. 

There should be one and only one response by U.S. negotiators to these and other 

weakening proposals—each one should be flatly rejected. Congress should make 

clear that it will reject any new trade agreement that contains such provisions, or 

that would weaken U.S. trade remedy laws, either with respect to individual provisions or in their overall effect. 

3. Push for Changes to Strengthen Trade Remedy Laws 

Indeed, U.S. negotiators should look beyond existing disciplines on unfair trade 

to seek ways to strengthen and close any loopholes in those disciplines. For example, the United States should press for changes such as the following: 

• Establish a presumption of injury and causation in cases involving repeat offenders of the laws against unfair trade. (Such provisions would alleviate the 

need for domestic industries already injured by unfairly traded imports to endure successive, and highly costly, investigations against the same companies— 

where those companies simply shift their sources of supply, or the product that 

they ship to the United States, after the entry of an AD or CVD order.); 

• Strengthen provisions to deter circumvention (e.g., through alteration of merchandise subject to order, transshipment through third countries, etc.) of existing AD and CVD orders. 


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10This standard of review was also supposed to be applicable to the WTO Agreement on Subsidies and Countervailing Measures, but has not been used in that context. 

• Lower de minimis thresholds in AD/CVD cases to ensure that such provisions 

do not immunize injurious unfair trade; 

• Include a presumption that injury will recur in five-year reviews, or consider 

eliminating such reviews altogether; 

• Allow parties with access to confidential materials under administrative protective order to attend verification of foreign producer questionnaire information. 

These and similar provisions would make critical improvements to ensure strong 

and effective enforcement of fair trade disciplines, and to deter market-distorting behavior. 

B. Reform the WTO Dispute Settlement System 

As discussed above, the WTO dispute settlement system is broken and must be 

reformed. Several actions are critical. To begin with, Congress should finally act on 

longstanding, bipartisan proposals to establish a WTO Dispute Settlement Review 

Commission. Such a commission would be composed of distinguished U.S. jurists 

(e.g., retired federal judges) and charged with reviewing WTO decisions adverse to 

the United States to determine whether the relevant decision makers failed to follow the applicable standard of review or otherwise abused their mandate. Such a 

system would enhance confidence in the WTO system domestically (by ensuring that 

panel and AB decisions affecting this country were subject to rigorous review) and 

provide a strong incentive for WTO panels to hew closely to their legal mandate. 

Other actions are equally vital. 

• First, the United States must make clear that it will no longer tolerate judicial 

overreaching at the WTO or the creation by judicial fiat of obligations to which 

it never agreed. Activism at the WTO is threatening the credibility of the entire 

system and must be dealt with through a fundamental change in the approach 

and culture of panels and the AB. 

• Second, Congress must refuse to implement WTO decisions that are not solidly 

grounded in the WTO agreements. The time has come for the United States to 

demonstrate once and for all that we will not allow the WTO to rewrite our 

treaty obligations. We should start by refusing to implement decisions—such as 

the AB’s decision on the Byrd Amendment—that clearly rest on an unjustified 

invention of obligations to which Parties never agreed. This would protect legitimate U.S. interests and send a message that we will not tolerate rogue WTO 

decisions. 

• Third, given the enormous problem with decisions in the trade remedy area, the 

United States should seek to eliminate coverage of trade remedy actions from 

the WTO dispute settlement system altogether. At a minimum, the United 

States must insist that the WTO Dispute Settlement Understanding be amended to make clear that the creation of new obligations and the re-weighing of the 

evidence in dispute settlement cases are impermissible. While the standard of 

review contained in the Antidumping Agreement 10 should have been sufficient 

to prevent such ultra vires actions from occurring in trade remedy cases, it is 

apparent that WTO panels and the AB are simply ignoring that standard of review. More stringent and explicit restrictions must be placed on the authority 

of WTO panels and the AB. 

• Fourth, the United States must also seek to open up the WTO dispute settlement process to private parties with a direct and substantial interest in a proceeding. Such parties should be able to participate fully in dispute settlement 

proceedings through the filing of briefs and attending and participating in hearings before WTO panels and the AB. Once again, this step would enhance confidence in and support for the WTO system, while holding WTO panels and the 

AB more accountable. It would also ensure that the expertise and resources of 

the parties most affected by a given dispute could be fully brought to bear in 

the dispute settlement process. There simply is no valid basis for denying such 

parties access to and involvement in the process. 

• Finally, the U.S. government should take the steps that it can under the current system to improve the way it litigates WTO cases. Among the changes that 

should be made are to (1) deputize private parties with a direct and substantial 

interest in a case (and whose interests are aligned with the government) to appear and participate in WTO proceedings; (2) devote greater resources to litigation at key agencies involved in WTO disputes; and (3) create a new Deputy 

at the Office of the U.S. Trade Representative to deal solely with litigation. 


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C. Correct Fundamental Inequities in the Multilateral Trading System 

As described above, there are a number of areas where international rules currently act to disadvantage U.S. businesses and workers, and where changes are 

warranted. For example, there is no legitimate economic justification for the current 

disparity in treatment between countries using VAT systems and those that rely on 

an income tax. Congress has consistently identified the elimination of this disparity 

as a principal U.S. negotiating objective. The United States should demand that this 

inequity be rectified before agreeing to any new multilateral trade agreement. 

Similarly, the United States should act aggressively to prevent countries like 

China from using currency manipulation as a tool for protectionism. The U.S. government must do more than simply ‘‘jawbone’’ about the effects of currency manipulation. It should demand that this practice be stopped, cut off market access for 

those who engage in it and aggressively pursue legal action (such as a Section 301 

case) against market-distorting behavior in this area. To the extent stronger rules 

are needed internationally to address this problem, the United States should demand them in ongoing trade talks. 

In addition, the time has come to do more than just talk and threaten WTO action 

to address foreign government efforts to manipulate raw material markets. We need 

to end export taxes and other export restrictions on raw materials and, if current 

WTO rules are inadequate, they must be strengthened. 

V. Conclusion 

A strong and vibrant international trading regime requires that the governing 

rules be equitable and that they be fairly applied and enforced. The current WTO 

system has major problems, particularly in the manner in which disputes are resolved—a process that has all too often resulted in the creation of new obligations 

that were never agreed by the United States or other WTO Members. This process 

has acted to harm and undermine fundamental U.S. policies in a wide range of 

areas, including the enforcement of our trade remedy laws. At the same time, Americans continue to be disadvantaged by blatantly unfair international rules and practices—such as inequitable tax rules and foreign currency manipulation. 

Resolution of these issues should be a prerequisite for future U.S. participation 

in the WTO. These issues are central to the overall fairness of the system and to 

the assurance that winners and losers will be determined by market outcomes— 

rather than government actions or foreign market-distorting practices. These issues 

are also critical in determining whether Americans will continue to support the 

WTO and the multilateral trading system. 

AISI appreciates the opportunity to comment on this vital topic, and urges the 

Subcommittee to examine vigorously the issues we have raised. 

f 

Statement of Terence P. Stewart, Esq., Stewart and Stewart 

EXECUTIVE SUMMARY 

The United States, a leader in global trade liberalization, has actively promoted 

and supported the World Trade Organization (WTO) throughout the course of its ten 

and a half years of existence. Although the WTO Agreement offers unprecedented 

opportunities for companies in the U.S. to access new markets, in the U.S.’ ten years 

of experience, many of those opportunities have been diminished by various traderelated problems that have gone unresolved since the Uruguay Round of Multilateral Trade Negotiations. Despite overall increases in U.S. trade, four major traderelated problems have caused a significant imbalance in global trade and have effectively reduced the benefits of U.S. participation in the WTO. 

First, on the issue of different treatment of tax systems, the U.S. is seriously disadvantaged by the application of WTO rules on taxes. With 136 countries applying 

a VAT tax and a worldwide VAT tax average of 15%, the U.S. faces up to a $450 

billion total disadvantage to U.S. exports ($180 billion) and export subsidies to import competition ($270 billion). 

Second, innovative U.S. industries are being denied the full value of their products due to the ‘‘global scourge’’ of counterfeiting and piracy. In the absence of full 

implementation of the TRIPs Agreement and adequate border enforcement, U.S industries are being denied an estimated $200 to 250 billion per year from counterfeiting alone. 

Third, currency manipulation or misalignment is causing serious market distortions because it acts as both a de facto export subsidy for the foreign products and 

a hidden import duty. Without action by the international institutions established 


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to govern trade and monetary systems, the U.S. trade deficit is estimated to have 

been worsened by $100 billion annually. 

Finally, the U.S. is also now faced with responding to WTO dispute settlement 

decisions that impose obligations that the U.S. did not agree to and would not have 

agreed to had they been included in the agreements at the end of the Uruguay 

Round. By engaging in ‘‘gap-filling,’’ not adhering to the appropriate standards of 

review, and applying inconsistent interpretive approaches, WTO panels and the Appellate Body have acted inconsistently with prior practice under the GATT and principles of treaty interpretation. Such ‘‘overreaching’’ is a significant detriment to U.S. 

industries. 

For the U.S. to take full advantage of the benefits offered by the WTO membership over the next decade, however, it must urgently address those trade-related 

problems that have effectively reduced the benefits of U.S. participation in the 

WTO. 

I. Focusing on the Future of the WTO 

The World Trade Organization (WTO), created as a result of the Uruguay Round 

of trade negotiations and launched on January 1, 1995, has been in existence for 

roughly ten and a half years. The WTO agreements expanded the coverage of the 

multilateral trading system to include services and trade related intellectual property rights, brought all goods trade under WTO rules and disciplines, established 

agreements in areas dealing with certain non-tariff measures such as technical barriers to trade (TBT) and sanitary and phytosanitary measures, called for expanded 

liberalization in goods and services and created a dispute settlement system that 

results in adopted decisions unless all parties (including the winning party) agree 

otherwise. Interest in the WTO’s predecessor, the GATT, increased during the Uruguay Round, and other nations that were not members at the beginning of the organization have lined up in large number to receive the benefits of membership. At 

the present time, there are 148 members to the WTO, with 20 of these members 

(including China and Taiwan) having joined since the launch of the organization in 

1995. Twenty-seven additional applicants (including the Russian Federation, Saudi 

Arabia, Vietnam and Ukraine) are in the queue awaiting membership. 

The United States has been a champion of a rules-based system for international 

trade and has been, for the past decade and most of the period since the original 

GATT, one of the leading voices for expanded trade. While there have been many 

positive developments from the creation of the WTO, ten years of experience have 

also seen an exploding trade deficit in the United States and developments that are 

not necessarily understandable in light of the openness of the U.S. market and the 

benefits that should flow from expanded liberalization abroad. 

There are a number of problems with the current system that need to be addressed to improve the WTO and to obtain for the United States the benefits that 

should flow from a well-functioning rules based trading system. The issues that urgently need to be addressed range in type and in what type of solution is needed/ 

possible. Some issues have existed for decades and not been addressed. Others may 

be viewed as outside the competence of the WTO. Others may need to be addressed 

in domestic law versus changes to the trading system. All, however, directly affect 

the competitiveness of U.S. agricultural producers, U.S. manufacturers and U.S. 

service providers. 

As the Ways and Means Committee considers progress in the WTO, I urge it to 

work with the Bush Administration to see that the following issues are addressed 

on a timely basis so that the trading system provides the benefits to our companies, 

workers and communities that American entrepreneurship, creativity and hard 

work justify. 

II. The state of the U.S. economy today 

The Uruguay Round created the WTO and introduced predictable, transparent 

and binding rules to the world trading system. In its first ten years of existence, 

the WTO has resulted in an exponential growth in global trade. As former U.S. 

Trade Representative, Mickey Kantor, observed at the conclusion of the Uruguay 

Round, expanded trade opportunities have a profound impact on the domestic economy, which consists not only of consumers, but also of producers, workers, employers, employees and services suppliers: 

The benefits of trade ripple through our economy. Trade benefits not only the 

company that exports, but also the company which produces parts incorporated in 

exported products, the insurance agency which insures exporters, and the grocery 

store near the exporter’s factory. 


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1 Results of the Uruguay Round Trade Negotiations: Hearings Before the Committee on Finance, 103rd Cong. 211 (1994) (prepared statement of Ambassador Michael Kantor). 2Statement of Robert B. Zoellick, U.S. Trade Representative before the Committee on Finance 

of the U.S. Senate (March 9, 2004). 3Statement of Robert J. Portman, U.S. Trade Representative-designate before the Committee 

on Finance of the U.S. Senate (April 21, 2005). 

* * * 

U.S. workers and companies are poised to take advantage of the dynamics of the 

global economy, if they have accesss to foreign markets and can be ensured they 

are competing on fair terms with their foreign counterparts.1

Former U.S. Trade Representative Robert Zoellick likewise emphasized that opening new markets would benefit each segment of the economy: 

When we work with the world effectively, America is economically stronger. Ninety-five percent of the world’s customers live outside our borders, and we need to 

open those markets for our manufacturers, our farmers and ranchers, and our service companies. Americans can compete with anybody—and succeed—when we have 

a fair chance to compete. Our goal is to open new markets and enforce existing 

agreements so that businesses, workers, and farmers can sell their goods and services around the world and consumers have good choices at lower prices.2

Similarly, at his recent confirmation hearing, Ambassador Portman considered the 

most important trade negotiation underway to be the WTO’s Doha Development 

Agenda because it has the ‘‘potential to substantially reduce tariff and non-tariff 

barriers, begin to level the playing field for our agriculture producers, open new 

markets for services, and facilitate the more efficient movement of goods across borders.’’ 3

Since the WTO was created, the U.S. economy has expanded from $7.4 trillion in 

1995 to $11.7 trillion in 2004. U.S. GDP is larger now than at any time in the nation’s history. U.S. exports have also increased significantly, growing from $812.2 

billion to $1.2 trillion. Imports, however, have grown at an even faster pace, rising 

from $904 billion to $1.8 trillion, and the trade deficit has consequently ballooned 

from $91 billion in 1995 to more than $600 billion in 2004: 

The trade deficit as a percentage of GDP also more than quadrupled during the 

period, increasing from 1.2% of GDP to 5.2% of GDP. In agricultural trade, the U.S. 

has seen a trade surplus of $26 billion in 1995 steadily decline to a surplus of just 

over $7 billion in 2004 and only $1 billion for the first quarter of 2005. The manufacturing sector has lost over 3 million jobs since 2000. There is also widespread 

and growing concern, recognized by the Administration and Congress, that U.S. 

companies can no longer afford to support traditional retirement systems, pensions, 

and health care for U.S. workers. Thus, the undeniable import trend over the past 

decade is not only a reflection of voracious American consumerism but an important 

bellwether of our future if the United States does not call for an improved and rebalanced WTO. 

III. A series of Trade-related problems reduce the benefits of U.S. participation 

in the WTO 

The WTO international trading system is an important vehicle for the United 

States and its trading partners to develop rational trade. The opportunities afforded 

by stimulating international trade through increased market access, however, are 

limited by a series of trade-related problems which WTO Members have not addressed within that framework. As explained below, serious discrepancies in the application or coverage of current WTO rules have jeopardized U.S. economic interests. 

The following problems have resulted in an escalating U.S. trade imbalance that requires urgent attention if the trading system is to deliver the benefits promised. 

A. Different Treatment of Tax Systems 

The United States is singularly prejudiced by the application of WTO rules to its 

tax system. As they currently exist, WTO rules discipline direct and indirect taxes 

differently. Under Articles VI and XVI of the GATT 1994, border adjustments are 

permitted for indirect taxes but not for direct taxes. Such border tax adjustments 

may exist in the form of refunds or remissions of internal taxes paid on products 

that are destined for export rather than domestic consumption. Typically, such refunded internal taxes are indirect taxes (e.g., sales taxes and value-added taxes 

(VAT)) and do not include direct taxes (e.g., income taxes paid by a company). At 

present, 136 countries have a VAT tax, and the worldwide VAT tax average is apVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00081 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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4The Value Added Tax—Experiences and Issues, Background Paper prepared for the International Tax Dialogue Conference on the VAT, Rome, March 15–16, 2005, available at 

www.itdweb.org. 5The discrepancies between the direct and indirect tax systems also undermine the benefits 

of tariff concessions granted by Members. 6The Value Added Tax—Experiences and Issues, Background Paper prepared for the International Tax Dialogue Conference on the VAT, Rome, March 15–16, 2005, available at 

www.itdweb.org. 7 19 U.S.C. § 3802(b)(15). A nearly identical principal negotiating objective was also identified 

in the Omnibus Trade and Competitiveness Act of 1988, 19 U.S.C. § 2901(b)(16). 8 Communication from the U.S. of March 19, 2003, TN/RL/W/78, p. 4 (March 19, 2003). 

9 USTR, 2005 Special 301 Report, at 2 (Executive Summary) (April 29, 2005); Adam Pasick, 

Final ‘Star Wars’ film leaked to the Internet, Reuters, May 20, 2005, available at http:// 

today.reuters.co.uk. 10See Fakes!, Business Week, February 7, 2005. 

proximately 15%.4 In the EU countries alone, the VAT tax can range between 15%– 

25%. 

In countries such as the U.S., that rely primarily on direct taxes, the price of the 

product reflects taxes paid to produce it, regardless of whether the product is destined for export or domestic sale. Consequently, U.S. producers and farmers that export do not receive the benefit of border tax adjustments that exporters from other 

countries that use an indirect tax system receive. This detrimentally affects U.S. exporters in two ways: (1) refunds of indirect taxes result in an export subsidy that 

causes unfair competitive advantage; and (2) in addition to paying direct taxes on 

the products in the U.S., if the U.S. producers and farmers export products to a VAT 

tax country, those products are also subject to VAT tax, resulting in double taxation.5 Moreover, these VAT taxes on U.S. exports are essentially a non-negotiable 

duty that is never subject to reduction through rounds of trade negotiations. A 

worldwide VAT tax average of approximately 15% 6 translates to U.S. exports facing 

$180 billion in additional competitive disadvantage on our exports. At the same 

time, the remission of VAT taxes could be a $270 billion export subsidy to our trading partners with VAT tax systems. This results in a $450 billion total disadvantage 

to U.S. exports. While the U.S. permits rebate of sales taxes that have been paid, 

as a general matter, these rebates are much smaller than the VAT taxes imposed 

by our trading partners with VAT tax systems. 

Congress has continuously recognized the prejudicial effect of disparate treatment 

of border taxes and has identified as a principal negotiating objective in the Trade 

Act of 2002 the task of obtaining ‘‘a revision of the WTO rules with respect to the 

treatment of border adjustments for internal taxes to redress the disadvantage to 

countries relying primarily on direct taxes for revenue rather than indirect taxes.’’ 7

In the context of the Doha Rules negotiations, the U.S. has only expressed general 

concerns regarding disparities in the treatment of different taxation systems and 

has suggested that the goal of negotiations ‘‘should be to work toward greater 

equalization in the treatment of various tax systems—’’ thereby addressing the prejudicial effect that current practices have on trade.8 To date, the U.S. has not aggressively pursued this issue by offering specific proposals to satisfy the negotiating 

mandate. 

The problems and disadvantages caused by the differences in treatment of border 

taxes remain one of the primary obstacles to more balanced trade relations between 

the U.S. and its major trading partners. In order to correct these disparities and 

to preserve the nation’s sovereign right of taxation, the U.S. must either submit further proposals in the Rules negotiations and must actively pursue modifications to 

the GATT 1994 and the SCM Agreement so as to equalize the treatment of direct 

and indirect tax systems or it must pursue neutralization of the disadvantage 

through a modification of the existing U.S. tax system. 

B. Inadequate Intellectual Property Enforcement 

As a leading exporter of products protected by copyrights or patents, the United 

States was an advocate of strong intellectual property provisions in the TRIPs 

Agreement. Yet, full implementation of TRIPs obligations, particularly the enforcement provisions, has not yet been achieved in certain countries and has led to ‘‘unacceptably high’’ levels of piracy and counterfeiting of U.S. intellectual property. For 

example, just hours after the first showing of Star Wars: Episode III—Revenge of 

the Sith, a pirated copy was available on the Internet.9 The World Customs Organization has estimated that global counterfeiting amounted to more than $500 billion 

in lost sales last year with the majority of that originating in China.10 Thus, despite 

U.S. innovation and competitiveness, U.S. industries are being denied the full value 

of their products, in both domestic and export markets. As a result, the USTR estiVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00082 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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11 USTR, 2005 Special 301 Report, at 3 (Executive Summary) (April 29, 2005). 12 USTR, 2005 Special 301 Report, at 2–3 (Executive Summary) (April 29, 2005); USTR, 2004 

Special 301 Report, at 2 (Executive Summary) (May 1, 2003). 13See U.S. Dept. of Commerce, Manufacturing in America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturers (January 2004) at 52. 14See ‘‘Monthly Currency Manipulation Monitor,’’ Coalition for a Sound Dollar, 

www.sounddollar.org (accessed May 23, 2005). 15 Compare Report to Congress on International Exchange Rate and Economic Policies (October 2003) with Report to Congress on International Exchange Rate and Economic Policies (May 

2005). 16See Testimony of Franklin J. Vargo, National Association of Manufacturers, before the 

House Committee on International Relations, Hearing on U.S.-China Ties: Reassessing the EcoContinued 

mates that losses to U.S. industries alone from counterfeiting amount to between 

$200 to 250 billion per year.11

The USTR has acknowledged the rapid explosion of counterfeit and pirated goods 

around the world and identified significant concerns with respect to Argentina, 

Brazil, China, Egypt, India, Indonesia, Israel, Kuwait, Lebanon, Pakistan, Paraguay, the Philippines, Russia, Turkey, Ukraine, and Venezuela. Counterfeiting and 

digital piracy have developed into a ‘‘global scourge’’ harming companies, consumers, 

government revenue, and workers. According to USTR, stronger and more effective 

border enforcement is necessary to stop the import, export, and transit of pirated 

and counterfeit goods.12

In granting trade promotion authority in 2002, Congress identified as a principal 

negotiating objective the promotion of adequate and effective protection of intellectual property rights through, inter alia, ensuring the accelerated and full implementation of the TRIPs Agreement particularly with respect to meeting enforcement obligations under that agreement. WTO Members should address this abuse of the 

global trading system in the Doha Round or otherwise adopt additional measures 

to ensure that intellectual property rights remain in the hands of innovators. 

C. Foreign Currency Manipulation or Misalignment 

Currency manipulation or misalignment causes serious market distortions that 

have been identified as a problem by U.S. manufacturers and members of Congress.13 Concern in Congress has led to a number of proposals to address the issue, 

including, for example, a bill introduced by Senators Charles Schumer (D–NY) and 

Lindsey Graham (R–SC) that would impose a 27.5% additional duty on Chinese imports, and a separate bill introduced by Representatives Duncan Hunter (R–CA) and 

Tim Ryan (D–OH) that would treat currency manipulation as a countervailable export subsidy or a market disruption. 

Currency manipulation or misalignment occurs when foreign governments set exchange rates by pegging their currencies to the U.S. dollar and intervening in the 

currency market to maintain their exchange rates at that set level. This acts as a 

de facto export subsidy for the countries manipulating their currencies. It simultaneously acts as a hidden duty on imports, which is not reachable in market access 

negotiations. The result is a serious misallocation of economic resources, which creates trade distortions and undermines stability. Undervalued currencies, in particular, produce false market signals—making it appear that industries in the country with an undervalued currency are more competitive than they actually are, leading to overexpansion of production and export flooding in particular products. For 

instance, since 1994, China has pegged its currency exchange rate at 8.28 yuan to 

the dollar. As has been detailed by various economists and other groups, such as 

the Fair Currency Alliance and the China Currency Coalition, the yuan is currently 

significantly undervalued. As a result, Chinese goods compete domestically and 

internationally at prices that are artificially low hurting U.S. producers in the U.S. 

market, in the Chinese market and in third country markets. 

While, at present, China has been particularly singled out as a country with an 

undervalued currency that has had substantial negative effects on trade, other countries have also engaged in similar unwarranted interference in the value of their 

currencies. For example, Japan, South Korea and Taiwan have made frequent interventions to purchase U.S. dollars to maintain their exchange rates or minimize the 

appreciation of their currencies.14 Together, these three countries plus China hold 

$1.9 trillion of official reserves, which reflects an increase of more than $600 billion 

since 2003.15 They also account for over 40% of the U.S. trade deficit. 

The effects of currency manipulation on the U.S. economy have been staggering. 

Economists have estimated that the Chinese currency is undervalued by as much 

as 40% or more and that the effect of undervaluation by the four countries is that 

the U.S. trade deficit is about $100 billion larger than it would otherwise be.16


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nomic Relationship at 2, 4 (October 21, 2003); Chinese Currency Manipulation and the U.S. 

Trade Deficit, Statement Before the U.S.-China Economic and Security Review Commission by 

Ernest H. Preeg, Senior Fellow in Trade and Productivity, Manufacturers Alliance/MAPI (September 25, 2003). 17 Articles of Agreement of the International Monetary Fund, Article VI, Section 3. 18 ‘‘IMF Concludes 2003 Article IV Consultation with the People’s Republic of China,’’ Public 

Information Notice (PIN) No. 03/136 (November 18, 2003); ‘‘IMF Concludes 2004 Article IV Consultation with the People’s Republic of China,’’ Public Information Notice (PIN) No. 04/99 (August 25, 2004). 19 Understanding on Rules and Procedures Governing the Settlement of Disputes, Apr. 15, 

1994, arts. 3.2 & 19.2, in World Trade Organization, The Results of the Uruguay Round of Multilateral Trade Negotiations 354 (2001). 

The International Monetary Fund (IMF) has responsibility to ‘‘exercise firm surveillance over the exchange rate policies’’ of member countries.17 However, the IMF 

has not acted to curb market distortions caused by currency manipulation or misalignment. Currency manipulation is not defined in the IMF Agreement and, in 

2003, the IMF found ‘‘no clear evidence that [China’s] renminbi is substantially undervalued.’’ In 2004, the IMF noted that ‘‘greater exchange rate flexibility remains 

in China’s best interest,’’ but the Fund took no action to bring about such flexibility.18 The IMF has abandoned its responsibility in this area of international monetary regulation and the U.S. economy has suffered greatly because of this inaction. 

The focus of the WTO is trade liberalization. However, the current rules have 

proven ineffective at reaching the de facto subsidies and hidden import duties that 

result from currency manipulation or misalignment. WTO Members are not supposed to use exchange action to frustrate the intent of the trade agreements and 

are prohibited from providing export subsidies on manufactured goods, but these 

agreed principles have not been enforced to address currency manipulation or misalignment and ensure a level playing field. The U.S. is engaged bilaterally with 

China to obtain a fair exchange rate, but this issue is not a subject of multilateral 

negotiations in the WTO Doha Round, and China has moved very slowly in correcting the bias they have created. The needs of many sectors of the U.S. economy 

for a restoration of economic rationality in the value of the Chinese currency cannot 

await the likely years of internal reforms needed for to achieve a real float. A substantial upward revaluation of the yuan (e.g., by 40%) is needed now and it is also 

important that the U.S. work with other trading partners, including Japan, Korea, 

and Taiwan to ensure a restoration of exchange rate equilibrium for their currencies 

vis-a-vis the U.S. dollar. The concern is that the international institutions established to govern the trade and monetary systems are failing or abdicating their responsibility to address this issue and the result is significant damage to the U.S. 

economy. The international institutions established to govern trade and monetary 

systems must address this issue to avoid significant additional damage to the U.S. 

economy. 

D. WTO Dispute Settlement Decisions That Rewrite Agreements 

The United States is also now faced with responding to WTO dispute settlement 

decisions that impose obligations that the United States did not agree to and would 

not have agreed to had they been included in the agreements at the end of the Uruguay Round. In 1995, the Dispute Settlement Understanding (DSU) put into place 

an experimental dispute settlement system that allowed for automatic adoption of 

decisions in international trade disputes. Moreover, the DSU created a system of accountability for Members’ compliance with the covered agreements. In the DSU, the 

U.S. (and other countries) conditioned its acceptance of binding dispute settlement 

on the basis of its understanding that obligations not otherwise agreed to would not 

be created by the dispute settlement process. Indeed, DSU Articles 3.2 and 19.2 explicitly prohibit panels, the Appellate Body, and the Dispute Settlement Body (DSB) 

from making findings or recommendations that ‘‘add to or diminish the rights and 

obligations provided in the covered agreements.’’ 19 Instead, WTO Members have the 

exclusive authority to amend or adopt interpretations of the WTO Agreement pursuant to Article IX and X of the Marrakesh Agreement Establishing the WTO. 

While most countries are generally pleased with the functioning of the WTO dispute settlement system, some systemic issues have arisen that involve the proper 

functioning of the DSU. Following the Uruguay Round, the U.S. amended its trade 

remedy laws to be fully consistent with WTO obligations. Moreover, the U.S. believed that the Antidumping Agreement’s ‘‘special standard of review to be applied 

by WTO panels in resolving antidumping disputes’’ would ‘‘preclude panels from second-guessing U.S. antidumping determinations and from rewriting the terms of the 


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20Statement of Administrative Action to the Uruguay Round Agreements Act, H. Doc. 103– 

316, Vol. 1, 103d Cong., 2d Sess. 807 (1994). 21 19 U.S.C. § 3801(b)(3)(A) & (B). 22 19 U.S.C. § 3802(a)(3). Congress also identified seven ‘‘principal trade negotiating objectives’’ 

regarding dispute settlement and the enforcement of trade agreements. 19 U.S.C. § 3802(b)(12). 23 Executive Branch Strategy Regarding WTO Dispute Settlement Panels and the Appellate 

Body—Report to the Congress Transmitted by the Secretary of Commerce, 8 (Dec. 30, 2002). 

Antidumping Agreement under the guise of legal interpretation.’’ 20 Despite this understanding, over the last ten years there have been a host of losses in WTO dispute 

settlement cases in which covered agreements have been interpreted in a manner 

that, in the view of many, has created new obligations for the U.S. and other WTO 

Members. 

The conflict regarding the creation of new rights and obligations flows from three 

systemic problems. First, WTO panels and the Appellate Body have adopted the approach of taking unto themselves the right to fill ‘‘gaps’’ or ‘‘silences’’ in agreements 

and to increasingly disregard negotiating history when language in an agreement 

is deemed ambiguous. This approach is inconsistent with practice under the GATT 

and principles of treaty interpretation and effectively encourages Members to seek 

to achieve through dispute settlement what they were unable to achieve in negotiation. Second, in their efforts to clarify covered agreements, panels and the Appellate 

Body, when faced with multiple possible definitions, will not generally approach 

their task asking whether or not the Member’s choice is reasonable, possible, or permissible. In so doing, panels and the Appellate Body have failed to honor the standard of review provisions contained in the covered agreements (DSU Arts. 3.2 and 

19.2; ADA Art. 17.6) by ignoring that Members are presumed to be in conformity 

with their WTO obligations. Finally, the interpretative approaches taken by panels 

and the Appellate Body are inconsistently applied from case to case and agreement 

to agreement. For example, the Appellate Body has read GATT Article XIX and the 

Safeguards Agreement provisions together, but has not generally read GATT Article 

VI and the Antidumping Agreement provisions together. 

As a result of these systemic problems and in conflict with the principles of sovereignty, the WTO Agreements are being modified in ways the U.S. neither accepted, nor would have accepted, during negotiations. It is implausible that a major user 

who actively participated in the negotiations on the Antidumping, SCM, and Safeguards Agreements in the Uruguay Round to ensure general conformity of the 

agreements with its existing practices would be subject to roughly 40% of requests 

for consultations citing violations of those agreements even though accounting for 

only an estimated 15% of the cases initiated. This disparity and the failure of panels 

and the Appellate Body to follow prior rules of construction and the special dispute 

settlement provisions in the Antidumping Agreement have undermined the perception of objectivity and fairness of the WTO dispute settlement process. 

The problem of the creation of rights or obligations, or ‘‘overreaching,’’ by WTO 

dispute settlement panels and the Appellate Body has been recognized and criticized 

by the U.S. Congress and the Administration. In fact, the Trade Act of 2002 reflects 

Congress’ concern with the ‘‘pattern of decisions by dispute settlement panels of the 

WTO and the Appellate Body to impose obligations and restrictions’’ on the use of 

trade remedies and the appropriate application of the standard of review contained 

in the Antidumping Agreement.21 The Trade Act of 2002 includes the ‘‘overall’’ negotiating objective of ‘‘further strengthen[ing] the system of international trading disciplines and procedures, including dispute settlement. . . .’’ 22 The Administration 

has also recognized that ‘‘aspects of several recent reports by WTO panels and the 

Appellate Body have departed from’’ the clear requirements to ‘‘ground their analyses firmly in the agreement text and accept reasonable, permissible interpretations 

of the WTO agreements by the Members.’’ 23 In DSB meetings, the U.S., in addition 

to many other WTO Members, has objected to the problem of ‘‘overreaching’’ by 

WTO dispute settlement bodies with respect to a wide range of WTO agreements. 

Despite these objections by WTO Members, the U.S. Congress and the U.S. Administration, the problem of ‘‘overreaching’’ has continued to date. 

During the course of the Doha negotiations, the U.S. has made proposals aimed 

both at reforming the DSU and modifying specific WTO agreements (e.g., Antidumping Agreement and Agreement on Subsidies and Countervailing Measures) in 

order to address aspects of adverse WTO panel or Appellate Body decisions. While 

the initial U.S. DSU proposals have raised important systemic issues, and the Rules 

proposals have addressed specific problems created by WTO panel or Appellate Body 

decisions, a comprehensive solution to this problem should be formulated. To many 

industries, achievement of the correction of this issue is critical to a successful outcome to the Doha negotiations. 


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24WTO International Trade Statistics 2004, at Table IV.9, available at http://www.wto.org/ 

english/res—e/statis—e/its2004—e/its04—bysector—e.htm. 25 ERS/USDA (updated February 11, 2005). 26 USDA Agricultural Baseline Projections to 2014, February 2005, at 67. 27See, e.g., National Foreign Trade Council, Inc., Looking Behind the Curtain: The Growth of 

Trade Barriers that Ignore Sound Science at 10 (May 2003). 28 USTR, 2005 Trade Policy Agenda and 2004 Annual Report, Section II, at 8 (March 2005). 

E. Loss of U.S. Agricultural Trade Surplus 

The Uruguay Round produced the first multilateral trade agreement covering agriculture which was expected to reduce barriers to export markets and trade-distortive subsidies. As a leading exporter of agricultural products, the United States anticipated that the WTO Agreement on Agriculture would significantly expand markets for U.S. agricultural products. 

According to WTO trade statistics, however, the U.S. share of agricultural exports 

has dropped from over 14% of total world exports, by value, in 1990 to over 11% 

of total world exports, by value, in 2003 while the export shares of other major agricultural exporters, such as Brazil, China, and Thailand, have increased.24 Indeed, 

the U.S. trade balance in agriculture products dwindled from a high of $26.7 billion 

in 1996 to $7.2 billion in 2004: 25

The U.S. Department of Agriculture predicts that the U.S. agricultural trade balance will reach 0 in fiscal year 2005.26

The agricultural trade balance figures are disturbing and reflect a fundamental 

imbalance in global agricultural trade disadvantaging the U.S., as a highly competitive agriculture producer. There may be many potential causes of what appears to 

be an undeniable trend. For example, U.S. agricultural trade has been affected by 

the role of state trading enterprises and agricultural conglomerates and their impact 

on prices and the ability of fragmented producers to cover their costs. A host of restrictive sanitary and phytosanitary measures have also been identified as limiting 

agricultural trade flows.27 Given that U.S. agricultural exports are estimated to provide over 900,000 jobs to U.S. workers, it is critical that the United States identify 

those causes and address them in the short term. Yet, while the Doha Round negotiations on agriculture will address market access and subsidies, it should also 

evaluate whether special rules are needed for all or some parts of agricultural trade 

to account for the special characteristics of such trade (e.g., perishability) and 

should evaluate whether the SPS Agreement is achieving its objective, whether increased harmonization is needed or desirable and what abuses may be occurring.28

IV. U.S. interests call for an improved and rebalanced wto 

Over the last ten years, the WTO has extended trade rules beyond GATT’s coverage of goods to cover sectors such as services and trade related intellectual property rights and has brought certain parts of good trade fully under WTO rules (agriculture and textiles). The WTO has provided a general framework for the application of uniform standards and an important forum for Members to address measures 

that do or can restrict international trade. At the same time, however, there has 

been a serious erosion in the U.S. balance of trade which flows from many factors, 

including gaps in the WTO agreements, an imbalance in rights and obligations of 

the U.S. and other Members in the tax arena, and a systemic failure to adhere to 

restrictions protecting those rights and obligations. While the Doha Round will offer 

another opportunity for Members to improve disciplines on a host of issues ranging 

from agricultural subsidies to regional trade agreements, most of the issues raised 

in this statement are not being pursued in those negotiations. For the U.S. to take 

full advantage of the benefits offered by the WTO membership over the next decade, 

however, they must be addressed on a fairly urgent basis. The U.S. must demand 

more comprehensive agreements, greater institutional accountability in WTO dispute settlement, and a better balance for our national interests. 

f 

Statement of Lori Wallach, Public Citizen’s Global Trade Watch 

On behalf of Public Citizen’s 200,000 members, I thank the Committee for the opportunity to share my organization’s views on the record of the World Trade Organization (WTO). Public Citizen is a nonprofit citizen research, lobbying and litigation 

group based in Washington, D.C. with offices in Austin, TX and Oakland, CA. Public 

Citizen, founded in 1971, accepts neither government nor corporate funds. Global 


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Trade Watch is the division of Public Citizen founded in 1995 that focuses on government and corporate accountability in the globalization and trade arena. 

On the basis of the ten-year record of the WTO in operation, Public Citizen urges 

Congress to demand a transformation of the current global ‘trade’ rules which have 

not only failed to achieved the economic gains we were promised when Congress debated the establishment of the WTO in 1994, but have resulted in unacceptable reversals in an array of non-trade, non-economic policies and goals which promote the 

public interest in the United States and abroad. While this hearing is focused on 

the WTO’s record, I urge the committee to hold a future hearing about ideas for 

transforming the current system to one that is more economically and environmentally sustainable and democratically accountable. Unfortunately the Bush Administration’s March annual trade report to Congress, which was also to be understood as fulfilling its statutorily required five-year report on the WTO, did not satisfy the statutory language by answering the specific questions set forth there which 

were designed to measure both the positive and negative results of the WTO on the 

United States. Rather, the March 1 report only touted the Administration’s view of 

the WTO’s benefits for the United States. 

We have spent the last ten years closely monitoring and documenting the outcomes of numerous trade agreements. Beginning in 2001, we compiled these findings for a book released in 2003, entitled Whose Trade Organization? A Comprehensive Guide to the WTO. This book is unique in its examination of the effect of WTO 

rules on economic well-being and development, agriculture and food safety, the environment, public health, and democratic policy-making. This testimony summarizes 

and updates the major findings of the book, but I encourage any interested member 

of this committee to read the entire book, and we will gladly furnish a complementary copy to your office 

During the Uruguay Round negotiations of the General Agreement on Tariffs and 

Trade (GATT) which established the WTO and over a dozen new substantive agreements it would enforce, Public Citizen raised concerns about the implications of establishing such broad global rules on non-trade matters in the context of an international regime whose goal was expanding trade. While expanded trade has the 

ability to bring benefits to consumers, workers, and farmers, setting broad non-trade 

rules in a body whose aim was trade expansion, threatened to undermine an array 

of consumer, environmental and human rights goals, the implementation of which, 

sometimes limits trade, such as in food containing banned pesticides. Effectively our 

concern was that the WTO did not mainly cover ‘trade,’ but rather served to implement a much more expansive corporate globalization agenda that required countries 

to change their domestic policies worldwide to meet the needs and goals of the 

world’s largest multinational business interests. 

We also raised deep concerns about the WTO’s threat to citizen-accountable, 

democratic policy-making processes—in which the people who would live with the 

results participate in making decisions and are able to alter policies that do not 

meet their needs. While some problems require a global approach—such as 

transboundary environmental problems or weapons proliferation—others, such as 

setting domestic food or product safety standards or developing policies to ensure 

a countries’ inhabitants have access to affordable medicine or basic services such as 

healthcare, education, transportation, water or other utilities do not require global 

redress and moreover, setting global rules on these matters can undermine democratic policy making that reflects the needs and desires of different countries’ inhabitants at different times. 

We sought to alert Congress as to what a dramatic shift WTO would affect in how 

and where non-trade policy would be set. Yet even in this hearing, much of the focus 

remains on the important, but not singular implications of the WTO on trade flows. 

While the GATT covered only traditional trade matters, such as tariffs and quotas, 

with respect only to trade in goods, the WTO included agreements setting terms on 

the service sector; food, environmental and product safety standards; patents and 

copyrights; investment policy; and even the terms by which countries could make 

procurement decisions regarding their domestic tax dollars. The operative term of 

the WTO requires that ‘‘all countries shall ensure conformity of their domestic laws, 

regulations and administrative procedures’’ to all of these broad WTO requirements. 

As well, the WTO’s Dispute Settlement Understanding (DSU) provided for a stringent enforcement mechanism, subjecting countries who fail to conform their domestic policies to the WTO dictates to trade sanctions after a tribunal process that does 

not guarantee the basic due process protections afforded by U.S. law, such as open 

hearings, access to documents, conflict of interest rules for tribunalists, or outside 

appeals. 

In 1990 when Public Citizen began working on the Uruguay Round, we were not 

particularly focused on the potential implications for poor country development or 


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on U.S. wages, income inequality or jobs. However, over 15 years of working on the 

GATT and then WTO, our relationships with developing country economists and policy experts, as well as our tracking of economic trends, has expanded the scope of 

our focus. 

Now, after a decade of tracking the WTO’s actual outcomes, Public Citizen’s concerns about the WTO have grown dramatically. We have worked internationally 

with civil society and governments to promote a transformation of the existing global ‘‘trade’’ rules contained in the WTO and oppose the expansion of the scope of the 

WTO. Yet, even as the negative consequences of the current rules and the model 

they represent increase, the current Doha Round WTO negotiations fail to address 

he existing problems and instead are designed to expand the WTO’s jurisdiction into 

yet greater non-trade matters. 

The WTO’s Controversial Dispute Settlement Procedure 

Unlike the GATT, which required consensus to bind any country to an obligation, 

the WTO is unique among international agreements in that its panel rulings are 

automatically binding and only the unanimous consent of all WTO nations can halt 

their implementation. These rulings are backed up by trade sanctions which remain 

in place until a WTO-illegal domestic policy is changed. Among our analysis of WTO 

decisions between 1995 and 2003 are the following findings: 

• U.S. Domestic policies from gambling regulations to tax policies have 

been repeatedly ruled against by run-away WTO panels. The recent WTO 

gambling case is the most recent demonstration that when expansive ‘trade’ 

rules come up against public interest laws before WTO tribunals, nondiscriminatory, democratically-created domestic policies can be undercut. Among the 

WTO panel’s outlandish decisions in that case, where the Caribbean nation of 

Antigua challenged various U.S. state and federal anti-gambling laws, were the 

following: The entire U.S. gambling sector is covered by provisions within the 

WTO’s General Agreement on Trade in Services (GATS) irrespective of the intention of U.S. trade negotiators. As such, the ability of the U.S. government 

to regulate not only Internet but ALL forms of gambling at the federal, state 

and local level is limited by the rules of GATS. The panel also announced that 

GATS rules forbidding numerical restrictions on covered services means that a 

ban on an activity in a GATS-covered sector, even if applied to domestic and 

foreign service providers alike, is a ‘‘zero quota’’ and thus a violation of GATS 

rules—with broad implications for bans on an expansive range of pernicious activity. These two elements of the ruling mean that the U.S. is exposed to future 

WTO challenges in light of limits on gambling common in many states, as well 

as assorted exclusive supplier arrangements, such as with Indian tribes, and 

state monopoly gaming, such as the 43 U.S. states and territories which use lotteries to raise revenues. Thus, the WTO panel, in this case, interpreted that a 

GATS exception for ‘‘laws necessary to protect public morals,’’ could be applied 

if the U.S. eliminates discrepancies between the way in which it regulates domestic and foreign providers, including through the U.S. Interstate Horseracing 

Act, which waives the three laws challenged by Antigua for certain domestic 

firms. A week later, a WTO tribunal issued a ruling on the same necessity text 

within the GATS exceptions clause in a case having to do with the Dominican 

Republic’s alcohol distribution system which explicitly contradicted the inclusive 

reading in the gambling case. At a minimum this conflict in rulings shows that 

the lenient decision in the gambling case with regards to the necessity test is 

not a settled WTO standard. Some WTO observers wonder if the sudden switch 

back to the past, narrow ruling on the necessary test points to the political nature of the WTO dispute process and an attempt to avoid an explosive WTO 

ruling just before the U.S. Congress takes up the WTO ten year review. 

• With only two exceptions, every health, food safety or environmental 

law challenged at the WTO has been declared a barrier to trade. The 

exceptions have been the highly-politicized challenge to France’s ban on asbestos and a WTO compliance panel’s determination that after losing a WTO case 

on the Endangered Species Act turtle protection regulations, the U.S. had weakened the law to sufficiently comply with the WTO’s orders. 

• In most WTO cases, the country that launches the challenge wins. As 

a result, mere threats of WTO action now cause many nations to change their 

policies. The challenging country at least partially prevailed in an astonishing 

102 out of 118 completed WTO cases—a success rate of 86.4 percent. 

• Important U.S laws ruled illegal at the WTO. In 42 out of 48 cases brought 

against the United States in which a WTO panel has made a ruling, or 85.7 

percent of the time, the WTO has labeled as illegal policies ranging from sea 


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turtle protections and clean air regulations to tax and antidumping policies. The 

United States also lost two high-profile cases that it brought against EU computer tariff classifications and Japan’s film policies. • U.S. trade safeguard laws have been successfully challenged numerous 

times in the WTO. One of the most politically sensitive aspects of Congress’ 

1994 consideration of the WTO was the degree to which U.S. trade safeguard 

law would have to be changed to conform to the related WTO agreements. Congress was promised that our laws would remain effective, yet, a decade later, 

the United States has not been able to successfully defend any of our safeguard 

laws in 14 out of 14 completed cases brought by other countries against our 

safeguards on products ranging from steel to lamb to wool shirts. Furthermore, 

the United States has lost 11 out of 15 anti-dumping or countervailing duties 

cases. Additionally, Doha Round ‘‘Rules’’ negotiations are poised to translate 

these WTO cases against the U.S. into new, more expansive limits on U.S. domestic trade safeguard laws. Meanwhile despite promises that other U.S. trade 

laws, such as Section 301, would remain operational under a WTO regime, the 

U.S. withdrew a case against Japan regarding anticompetitive practices in film 

trade after it became clear that use of Section 301 sanctions would be prohibited under WTO rules. • The process is closed, narrow and unbalanced. Our concerns about the 

WTO dispute resolution process have born out. Complaints are typically filed 

at the request of business interests with no opportunity for input from other 

interested parties.The WTO Secretariat selects panel members from a roster 

formed using qualifications that ensure a bias towards the WTO’s primacy. Panelists’ identities are not disclosed and there is no requirement that they disclose 

conflicts of interest they might have in deciding cases. Tribunals meet in closed 

sessions and proceedings are confidential unless a government voluntarily 

makes its submissions public.Far from being a neutral arbiter, the singular and 

explicit goal of the dispute settlement process is to expand trade in goods and 

services. Increasingly, WTO panels have rewritten WTO provisions with their 

broad interpretations, a situation that can find no remedy as there is no outside 

appeal. 

The WTO Decade and the U.S. Economy: Exploding U.S. Trade Deficits, Increased Income Inequality, Stagnant Real Wages, and the Loss of 1 in 

6 U.S. Manufacturing Jobs 

In the early 1990s, many economists argued that the opening of foreign markets 

for U.S. exports under WTO (and NAFTA) would create U.S. jobs and increase income for U.S. workers and farmers. When Congress was preparing to vote on WTO 

in 1994, the President’s Council of Economic Advisers informed Congress that approval of the package would increase annual U.S. GDP by $100–200 billion over the 

next decade. Others claimed that the WTO’s adoption would lead to a decline in the 

U.S. trade deficit. President Clinton even went so far as to promise that that the 

average American family would gain $1,700 in income annually from the WTO’s 

adoption, which would have meant that the U.S. real median family income would 

have been upwards of $65,000 in 2005, or a nearly 35 percent increase since 1995. 

These growth projections have been shown to be wildly off the mark. 

• U.S. Median Income Growth Meager: U.S. median income grew only 8 per- cent to $52,680 in 2003—the latest numbers available. There is little reason to 

think that this has improved in 2004–05, since median real wages have not 

grown since that time. In fact, the U.S. real median wage has scarcely risen 

above its 1970 level (only 9 percent), while productivity has soared 82 percent 

over the same period, resulting in declining or stagnant standards of living for 

the nearly 70 percent of the U.S. population that does not have a college degree. • Trade Deficit Soars as Imports Boom: During the WTO era, the U.S. trade 

deficit has risen to historic levels, and approaches six percent of national income—a figure widely agreed to be unsustainable, putting the U.S. economy at 

risk of lowered income growth in the future. Soaring imports during the WTO 

decade have contributed to the loss of nearly one in six U.S. manufacturing 

jobs. • U.S. Has Suffered a Good—Job Export Crisis: Another factor contributing 

to this job loss is the shift in investment trends, with China overtaking the 

United States in 2003 as the leading target for FDI. WTO Trade Related Investment Rules, (TRIMs), limit the ability of countries to set conditions on how foreign investors operate in other countries, making it more appealing for manufacturers to seek lower wages by relocating. Meanwhile, WTO terms guaranteed 

low tariff access for products made in low wage countries back into wealthy 

markets while forbidding rich countries from setting labor or other standards 


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such products must meet. The type and quality of jobs available for workers in 

the U.S. economy has dramatically shifted during the WTO decade, with workers losing to imports or offshoring their higher wage manufacturing jobs (which 

often also provided health care and other benefits) and finding reemployment 

in lower wage jobs. Labor Department data shows that such workers lose up 

to 27 percent of their earnings in such shifts. 

• U.S. Income and Wage Inequality Have Jumped: During the WTO decade 

these trends have resulted in U.S. income and wage inequality increasing markedly. In 1995, the top five percent of U.S. households by income made 6.5 times 

what the poorest 20 percent of households made, while this gap grew by nearly 

10 percent by 2003. In wages, the situation was comparable. In 1995, a male 

worker that ranked at the 95th percentile in wages earned 2.68 times what a 

worker at the 20th percentile earned. By 2003, that gap had widened nearly 8 

percent. Nearly all economists agree that increased trade has partially driven 

this widening inequality. One study by the non-partisan Center for Economic 

and Policy Research found that trade liberalization has cost U.S. workers without college degrees an amount equal to 12.2% of their current wages. For a 

worker earning $25,000 a year, this loss would be slightly more than $3,000 per 

year. William Cline, at the pro-WTO Institute for International Economics, estimates that about 39 percent of the actually observed increase in wage inequality is attributable to trade trends. 

• Job Export Crisis Is Expanding from Manufacturing to High Tech and 

Services: While some commentators, such as Nike CEO Phil Knight, have famously argued that this decline in assembly-line U.S. manufacturing is a result 

of ‘‘Americans simply not wanting to make shoes for a living,’’ job loss and wage 

stagnation is increasingly affecting workers in those sectors where the United 

States is understood to have a comparative advantage, such as professional 

services and high technology. Studies commissioned by the U.S. government 

have shown that as many as 48,417 U.S. jobs—including many in high-tech sectors—were offshored to other countries in the first three months of 2004 alone. 

This trend does not appear to be slowing down, as 3.3 million high-end service 

sector jobs—including physicians, computer programmers, engineers, accountants and architects—are all forecast to be outsourced overseas in the next decade. Another study by the Progressive Policy Institute, a think-tank associated 

with the pro-WTO faction of the Democratic Party, found that 12 million information-based U.S. jobs—54 percent paying better than the median wage—are 

highly susceptible to such offshoring. 

This manufacturing and high-tech job loss has had direct impact on workers’ ability to bargain for higher real wages. Studies commissioned by the U.S. government 

show that as many as 62 percent of U.S. union drives face employer threats to relocate abroad, with the factory shut-down rate following successful union certifications 

tripling in the years after WTO relative to the years before. 

In short, few of the claims made about the U.S. economic benefits that would flow 

from greater trade liberalization can be shown to have been close to accurate. This, 

however, has not stopped another round of WTO expansion from being launched, 

accompanied by a new set of promises. 

The WTO and the Developing World: Do As We Say, Not As We Did 

The WTO’s failure to deliver the promised economic gains in the United States 

has also been mirrored abroad. Despite a paucity of evidence, think tanks, public 

opinion-makers and newspapers editorials have continued to relentlessly promote 

the notion that developing countries are the primary beneficiaries of WTO 

globalization. After a decade of the WTO, few if any of the promised economic benefits have materialized for developing countries. For many, poverty and inequality 

have worsened, while nearly all countries have experienced a sharp slowdown in 

their rates of economic growth. 

• Poverty on the Rise. The number and percentage of people living on less than 

$1 a day (the World Bank’s definition of extreme poverty) in the regions with 

some of the worst forms of poverty—Sub-Saharan Africa and the Middle East— 

have increased since the WTO went into effect, while the number and percentage of people living on less than $2 a day has gone up in the same time for 

these regions, as well as for Latin America and the Caribbean. The number of 

people living in poverty has gone up for South Asia, while the rate of reduction 

in poverty has slowed nearly worldwide—especially when one excludes China, 

where huge reductions in poverty have been accomplished, but not by following 

WTO-approved policies given China only became a WTO member in 2001. 


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• Slowdown in global growth rates under WTO model. The per-capita income growth rates of developing regions before the period of structural adjustment and WTO liberalization are higher than the growth rates after the countries implemented the WTO—International Monetary Fund (IMF) model, many 

aspects of which are locked in through the WTO’s services, investment, intellectual property and other agreements. For low and middle-income countries, per 

capita growth between 1980 and 2000 fell to half of that experienced between 

1960 and 1980. Latin America’s per-capita GDP grew by 75% between 1960– 

1980; however, between 1980–2000—the period during which these countries 

adopted the package of economic policies required by the WTO and IMF—it 

grew by only six percent. Even when one takes into account the longer 1980– 

2005 period, there is no single 25-year window in the history of the continent 

that was worse in terms of rate of income gains. Sub-Saharan Africa’s per-capita GDP grew by 36% between 1960–1980 but declined by 15% between 1980— 

2000. Arab states’ per-capita GDP declined between 1980–2000, after it grew 

175% between 1960–1980. South Asia, South East Asia and the Pacific all had 

lower per-capita GDP growth, subsequent to 1980 than in the previous 20 years. 

(Only in East Asia was this trend not sustained, but only because China’s percapita GDP quadrupled during this period prior to China joining the WTO). 

• Developing countries that did not adopt the package fared better: In 

sharp contrast, nations like China, India, Malaysia and Vietnam, that chose 

their own economic mechanisms and policies through which to integrate into 

the world economy had more economic success. These countries had among the 

highest growth rates in the developing world over the past two decades—despite 

ignoring the directives of the WTO, IMF or World Bank. 

• Gap between rich and poor widens. Instead of generating income convergence between rich and poor countries, as WTO proponents predicted, the corporate globalization era of the 1990s exacerbated the income inequality between 

industrial and developing countries, as well as between rich and poor within 

many countries. According to one United Nations study, ‘‘in almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining industrial employment 

of unskilled workers and large absolute falls in their real wages, on the order 

of 20–30% in Latin American countries.’’ According to another, the richest 5 

percent of the world’s people receive 114 times the income of the poorest 5 percent, and the richest one percent receives as much as the poorest 57 percent. 

This trend is widening over time, not closing, with the 20 richest countries 

earning per-capita incomes 16 times greater than non-oil producing, less developed countries in 1960, and by 1999 the richest countries earning incomes 35 

times higher, signifying a doubling of the income inequality. 

The track record of the IMF and WTO—condoned policies—which have failed to 

reduce poverty and inequality or increase growth—are falling into greater ignominy. 

A recent study by the Inter-American Development Bank found that, of a total of 

66 presidential and 81 legislative elections in 17 Latin American countries during 

the 1985–2002 period, incumbent parties that pursued trade liberalization and 

privatizations while in office lost between 25 to 50 percent of their previous votes 

when pursuing reelection. If anything, voter discontent in Latin America, a region 

widely seen as having most fully implemented the standard ‘‘neo-liberal’’ policies, 

has increased since 2002. 

Even policy-makers who once pursued such liberalization policies, such as former 

Venezuelan economic minister Ricardo Hausmann and SAIS economist Riordan 

Roett, have now advocated a move away from the Washington Consensus policies, 

due to their utter failure to generate growth and rising living standards. Such a reversal is not surprising, given that no developed country, including the United 

States, England, or even Korea developed on the basis of ‘‘free trade,’’ without managing foreign investment or without government intervention in providing basic 

services and infrastructure Indeed, many commentators have observed that developed country’s advocacy of WTO liberalization policies is akin to ‘‘kicking away the 

ladder’’ to development for the poor countries, once the rich countries have already 

climbed up. 

U.S. Becomes Net Food Importer Under WTO, While Poor Countries Face Increased 

Food Insecurity 

The WTO’s approach to agriculture is to treat food as if it were any other commodity, like steel or rubber, not something on which every person’s life depends. 

WTO rules on agriculture, both under the Agreement on Agriculture (AoA) and the 

Trade Related Aspects of Intellectual Property (TRIPS), have led to devastating outVerDate Aug 31 2005 04:49 Mar 29, 2006 Jkt 026369 PO 00000 Frm 00091 Fmt 6633 Sfmt 6621 E:\HR\OC\26369.XXX 26369

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comes for developing countries, while farm income in the wealthy countries has declined as food trade volumes have risen. These WTO rules have forced the elimination of domestic policies aimed at ensuring food sovereignty and security in developing countries, and of policies aimed at balancing power between producers and 

grain traders and food processors in rich countries. These changes have greatly benefited multinational commodity trading and food processing companies who, in the 

absence of government price and supply management programs, have been able to 

manipulate the markets to keep prices paid to farmers low, while at the same time 

keeping the prices paid by consumers steady or rising. Farmers in rich and poor 

countries have only seen their incomes decline, with many losing farms and livelihoods under the decade of the WTO regime. In the developing world, the combination of sharply lower prices and the effects of WTO rules regarding the patenting 

of seeds and plants under TRIPS have led to increased hunger. 

• United States to become net food importer. According to a U.S. Department of Agriculture (USDA) write-up of the topic, 2005 may be the first time 

since 1959 that the United States will be a net food importer, thanks to a flood 

of imports and declining export growth. That the report blames the increased 

appetite of U.S. consumers for foreign products for this projected deficit is nonsensical given that much of the flood of imports is in the products in which the 

United States was once considered the leading exporter, such as beef and poultry, while U.S. exports of cotton, soy, red meat have declined dramatically in 

recent years. • Under the AoA, export prices for key U.S. crops have fallen to levels 

substantially below the cost of production, while consumer prices increased. Since 1996, U.S. crop prices have generally declined about 40 percent, 

while the cost of running a farm has risen by as much. The overall tilt of U.S. 

government farm policy, in line with the WTO’s AoA, has been to remove the 

last vestiges of production management and price support, while topping off the 

dips in gross farm income through government payments. According to government data, however, real prices for food eaten at home in the U.S. rose by 30% 

during the WTO era (1994 and 2004), even as prices paid to farmers plummeted. • A similar long-term trend holds in the developing world, where falling 

real prices for the agricultural commodity exports on which poor countries depend have fallen 50 percent relative to the 1960s, while wild price swings of 

up to 25 percent off of price trends make planning and subsistence difficult. At 

the same time, many of the very poorest countries are increasingly reliant on 

grain imports to meet their food needs, with the share of food imports in national income tripling since the 1960s. This trend has been particularly felt in 

Mexico, where the consumer price of the staple food corn tortillas has only risen 

since NAFTA, despite a flood of cheap corn imports into Mexico that have collapsed much of Mexico’s domestic small-scale corn production. 

• A dramatic loss of U.S. family farms accompanies sharp falls in income 

for the poorest farmers under the WTO. The United States lost 226,695 

small and family farms between 1994 and 2003, while average net cash farm 

income for the very poorest farmers dropped to an astounding-$5,228.90 in 

2003—a colossal 200 percent drop since the WTO went into effect. 

• Displacement and hunger the norm in developing countries. Following 

the decade of the WTO and NAFTA, over 1.5 million Mexican campesino farmers were thrown from their land. The agricultural sector, traditionally a major 

source of employment in Mexico, was devastated by the dumping of U.S. and 

foreign agricultural products into their markets. Likewise, the Chinese government projects that as many as 500 million of China’s peasants will be made surplus, as the country continues the rapid acceleration of industrial development 

of its agriculture sector under WTO rules. In country after country, displaced 

farmers have had little choice but to join swelling urban workforces where the 

oversupply of labor suppresses wages and exacerbates the politically and socially destabilizing crisis of chronic under—and unemployment in the cities of 

the developing world. 

• By dramatically expanding legal definitions of what can be patented 

under the TRIPS Agreement, the WTO has endangered food sovereignty 

and security in poor countries. In most developing countries, the majority 

of the population lives on the land and feeds itself by replanting saved seeds. 

Yet over 150 cases have already been documented of research institutions or 

businesses applying for patents on naturally-occurring plants, some of which 

have been farmed for generations. After the WTO TRIPS Agreement becomes 

fully binding for developing countries in 2006, governments that fail to enforce 


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patents on seeds—by pulling up crops or by forcing subsistence farmers who can 

not afford to do so to pay royalties—will face trade sanctions. 

These trends and the policies underpinning them are not expected to be improved 

upon in the current WTO Doha Round negotiations. Increasingly, even pro-trade 

academics such as Jagdish Bhagwati are arguing that the proposed agricultural reforms will not benefit most poor countries, characterizing claims to the contrary as 

‘‘dangerous nonsense’’ and a ‘‘pernicious fallacy.’’ The liberalization-led fall in prices 

has had a negative effect on producers in rich and poor countries alike, as a recent 

National Bureau of Economic Research study concluded when it found that middle 

income corn farmers in Mexico saw their incomes fall by more than 50 percent after 

NAFTA/WTO implementation. After a decade of failed policies, it is clear that the 

WTO’s ‘‘one size fits all’’ approach to agriculture and food security issues has failed 

at delivering its promised results. 

The WTO’s Coming to Dinner and Food Safety is Not on the Menu 

The WTO’s relentless drive toward the ‘‘harmonization’’ of food, animal and plant 

regulations based on low, industry-preferred international standards, endangers 

human health and sharply curtails the ability of elected governments to protect the 

health of their citizens in this critically important area. WTO-approved standards 

are generally set in private-sector bodies which do not permit consumer or health 

interests to participate and which make decisions without complying with domestic 

regulatory procedures for openness, participation or balance. Even if a country’s domestic food safety laws treat domestic and foreign products identically, if the policy 

provides greater consumer protection than the WTO-named international standard, 

it is presumed to be a WTO violation and must pass a series of WTO test established din the Sanitary and Phytosanitary Agreement that have proved impossible 

to meet. Some of our key findings include: 

• As required under WTO ‘‘equivalency determination’’ rules, the U.S. declared that dozens of countries ensure their meat inspection systems 

are ‘‘equivalent’’ to that of the U.S. even though the countries’ standards and performance violated U.S. law and regulation. Many nations 

maintain their equivalency status and this right to ship meat to the U.S. despite documented violations of U.S. policy. For instance, Argentina’s meat inspection system maintains its U.S. equivalency status despite well-documented 

problems that include contamination of meat with oil, hair and feces. Similarly, 

the Brazilian system, which allowed companies to pay meat inspectors in violation of U.S. law requiring independent government inspection, was declared 

‘‘equivalent.’’ USDA labeling of imported products makes them indistinguishable 

to the consumer. 

• Time and time again, WTO tribunals have refused to permit any regulatory action based on the ‘‘Precautionary Principle.’’ Governments have 

long relied on this principle to shield their populations from uncertain risks 

from new or emerging products. Previous ‘‘precautionary’’ actions by the U.S. 

government to ban the morning sickness drug Thalidomide in the 1960s and to 

prevent the outbreak of Mad Cow disease in the 1980s and 90s helped avert 

the substantial human and agricultural devastation that occurred in other countries due to these and other policies. Yet the U.S. has used the WTO to systematically attack other countries’ precautionary regulations such as those dealing 

with beef hormones, genetically modified organisms (GMOs), invasive species 

and agricultural pests. 

• Any domestic standard that provides more health protection than a 

WTO-approved standard, is presumed to be a trade barrier, unless the 

higher standard is supported by extensive scientific data and analysis that 

clearly shows a specific and significant risk associated with the lower standard. 

No nation has yet been able to demonstrate the need for higher standards, 

much to the WTO’s satisfaction, despite several lengthy and costly attempts by 

developed countries to perform WTO-required risk assessments on the dangers 

posed by artificial hormones in beef, invasive species, pest contamination of native salmon populations, and more. 

The WTO’s Environmental Impact: First, Gattzilla Ate Flipper 

Public Citizen has documented a systematic pattern of WTO attacks on member 

nations’ vital environmental concerns and policy priorities, as well as a series of biases built into WTO rules that promote unsustainable uses of natural resources. 

Over its over ten years of operation, the WTO’s anti-environmental rhetoric has 

been replaced by more political pronouncements, even as WTO tribunals have systematically ruled against every domestic environmental policy challenge that has 


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come before it, and eviscerated whatever GATT Article XX exceptions that might 

have been used to safeguard such laws. Instead of seeking to resolve conflicts between commercial and environmental goals, the WTO’s largely ineffectual Committee on Trade and the Environment has become a venue mainly for identifying 

green policies that violate WTO rules. Key findings include: 

• To date, all GATT/WTO dispute panel decisions on environmental laws 

have required that the challenged domestic laws and measures be 

weakened—even when the challenged policy treats domestic and foreign goods 

the same, or when it implements a country’s obligations under a Multilateral 

Environmental Agreement (e.g. the U.S. Endangered Species Act regulations 

implementing the Convention on International Trade in Endangered Species 

(CITES)). When the WTO ruled against U.S. Endangered Species Act rules protecting CITES-listed sea turtles from shrimpers’ nets, the U.S. complied with 

the WTO order by replacing the requirement that all countries seeking to sell 

shrimp in the United States had to ensure that their shrimpers used turtle exclusion devices. The new U.S. regulations were approved several years later, but 

Thailand and other shrimp exporting countries continue to put pressure on the 

United States to weaken the rule’s enforceability. • WTO rules have consistently been interpreted to mean that products 

cannot be treated differently according to how they were produced or 

harvested. This interpretation, for which there is no legal basis in the actual 

rules, requires, for example, that clear-cut tropical timber cannot be treated differently from sustainably-harvested timber, that fish caught with damaging 

drift nets cannot be distinguished from sustainably-caught fish, and that products made using child labor or extreme cruelty toward animals must be given 

the same trade treatment as products made under more humane and ethical 

conditions. 

• Because WTO panels have systematically ruled against challenged environmental policies, now mere threats of challenges often suffice. For example, after years of sustained trade law challenges, the Bush administration 

decided to quietly implement a change to a ‘‘dolphin safe’’ labeling policy which 

Mexico had demanded as necessary for implementation of a GATT ruling. (Mexico had threatened a new WTO case if their demands were not met). On New 

Years Eve 2002, when few U.S. citizens were focused on policy matters, the 

Bush administration announced that it would change the ‘‘Flipper-friendly’’ 

tuna policy and allow the ‘‘dolphin-safe’’ label to be used on tuna caught using 

deadly purse seine nets and dolphin encirclement. While this policy was eventually overturned in a challenge brought by environmentalists to federal court, 

Mexico and other countries continue to make noises about a possible WTO challenge. Another case involved Hong Kong’s WTO complaint about U.S. antiinvasive species laws. In this case, U.S. regulatory efforts to fight the costly infestation of the Asian Longhorned Beetle (which is devastating maple and other 

trees throughout the United States) are being classified as violating WTO rules. 

The mere threat of a challenge in this regard has provoked the USDA to considering watering down regulations requiring treatment of raw wood packing material to comply with a weaker, WTO-sanctioned ‘‘international’’ standard. 

Warning: The WTO Can be Hazardous to Public Health 

The WTO’s wide-ranging rules have consistently troubled public health advocates, 

who have found that many policies which have little to do with trade, are being 

threatened by WTO mandates. The following are some examples: 

• Access to and safety of medicines. The creation of a worldwide pharmaceutical patenting system under the WTO’s TRIPS agreement has raised pharmaceutical costs in the U.S. and further restricted the availability of lifesaving 

drugs in developing countries.A 1995 study on the overall impact of the TRIPS 

agreement on U.S. consumers ‘‘conservatively estimated’’ $6 billion in higher 

U.S. drug prices due to windfall patent extensions under the WTO. Why a business protection scheme guaranteeing monopoly markets would be inserted into 

a trade ‘liberalization’ agreement has outraged consumer groups worldwide. 

Poor country governments and health officials note with fury that even though 

the current patent and licensing regime has only recently been accepted in developed countries (Switzerland for example, did not recognize drug patents until 

the 1960s), under WTO rules developing nations around the world are required 

to adopt monopoly patents on medicines. Concern about public health has 

grown around the world, with many Members of Congress taking a lead in opposing trade agreements that restrict access to essential medicines. Unfortunately, the U.S. government has often been on the wrong side of this issue, 


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WTO—challenging Brazilian and threatening Thai and South African laws on 

compulsory licensing of pharmaceutical products and pushing to undermine in 

its new Free Trade Agreements a 2001 WTO Declaration reiterating countries’ 

ability to issue compulsory licenses for medicines. Yet the U.S. itself used the 

power it seeks to deny other nations in WTO when it threatened a compulsory 

license after the 2001 anthrax scare. • Downward harmonization for drug testing. In order to fulfill its harmonization obligations under the WTO, the Food and Drug Administration (FDA) in 

1996 proposed changes to its guidelines for testing the potential carcinogenicity 

of medicines being approved for U.S. use. The FDA had previously required 

companies to test drugs on two species (typically mice and rats) because tests 

on rats alone often failed to produce evidence of carcinogenicity where it was 

subsequently found in mice. The new WTO—‘‘harmonized’’ testing standard approved by the FDA, however, allows drug companies to drop long-term mice 

tests and substitute them with less reliable short-term second species tests. • Threatening developing countries with WTO challenges to pressure 

them into reducing public health protections. American Gerber Products 

Company refused to comply with Guatemalan infant formula labeling laws that 

implemented the WHO/UNICEF ‘‘Nestle’s Code’’ on the grounds that the laws 

violated trademark protections provided in the WTO’s TRIPS agreement. The 

Guatemalan law forbid pictorial depictions of healthy babies aimed at inducing 

illiterate people to replace breast feeding with formula which, when mixed with 

unsanitary water, was causing an epidemic of avoidable infant deaths. Gerber 

refused to remove its trademark ‘‘Gerber Baby’’ from its labels. The law might 

have withstood the threatened WTO challenge. However, to avoid the prohibitive cost of mounting an uncertain defense, Guatemalan authorities instead exempted imported formula from this important public health law,whose success 

in saving babies’ lives had led to Guatemala previously being held up as an example by UNICEF. 

Conclusion: The WTO Must Shrink or Sink in Order for the Public Interest 

to be Served 

The WTO, far from being a win-win proposition, has been a lose-lose affair for 

most people in the United States and abroad, threatening people’s livelihoods, the 

environment, public health, and the right of people around the world to enjoy democratic policy-making processes that allow them to decide what is best for themselves. 

The recent WTO gambling ruling and other controversial rulings are widening the 

coalition of groups questioning U.S. trade policy. Groups such as the Association of 

State Supreme Court Justices, U.S. League of Cities, National Conference of State 

Legislatures, National Association of Counties, and National Association of Towns 

and Townships all have expressed concerns that current and proposed trade rules 

may undermine our nation’s system of federalism and the integrity of our domestic 

courts. Groups typically considered bedrocks of the ‘‘pro-trade’’ alliance, such as the 

National Association of State Departments of Agriculture and other agricultural 

groups, are expressing concerns about depressed commodity prices, lowered farm income, and the United States’ ‘‘net food importer’’ status. Associations of immigrantdescended groups such as the League of United Latin American Citizens are expressing concerns that Hispanics and people of color are not sharing in the gains 

from trade. And high-tech workers and inventors are arguing that the drive to make 

ever-more protectionist trade law favoring the largest high-tech corporations like 

Pfizer and Microsoft is cheating workers whose jobs are being offshored, inventors 

who are seeing few gains for their innovations, and consumers in rich and poor 

countries alike, who face lessened access to essential medicine and restrictions on 

legitimate uses of copyrighted items. 

Opposition to the WTO’s rules is increasingly coming from governments themselves, as the organization’s ever-growing crisis of legitimacy bursts into public view 

again with the collapse of the WTO’s Cancun Ministerial. In particular, these countries—led by Brazil, India, South Africa and other nations—demanded that the 

WTO should not establish one-size-fits all, anti-democratic rules over investment, 

government procurement, and competition policy, proposed rules that were subsequently dropped from WTO discussion. It is extremely ironic that while the Bush 

Administration argues that one of its top priorities is promoting democracy worldwide, the status quo WTO and U.S. positions regarding the WTO’s future course 

push in the opposite direction. 

We no longer have to guess what might happen under the WTO: we now know. 

A decade of WTO policy has led to stagnant real national and family incomes 

around the world, increased poverty in the poorest regions, and undemocratic WTO 

attacks on national sovereignty and public policy. Based on this evidence, Public 


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Citizen finds it highly unlikely that continuation or expansion of this model will reverse these failures. 

Thus, Public Citizen works with a global movement calling for transformation of 

the current WTO system. While we believe that a system of global trade rules is 

vital, the current rules are not serving U.S. well. We propose that certain non-trade 

aspects be eliminated from the WTO. We also propose that the trade rules that 

would remain be altered so as to better meet the goals of providing sustainable livelihoods to people in rich and poor countries alike, fighting for the elimination of poverty, ensuring sustainable use of natural resources and providing food sovereignty, 

the essential tool in fighting hunger. For details on these proposals, we you to review their summary at ‘‘WTO—Shrink or Sink! The Turnaround Agenda International Civil Society Sign-On Letter,’’ or for a more through review, please allow 

U.S. to provide you with a complimentary copy of Alternatives to Economic 

Globalization: A Better World is Possible, an edited anthology with contributions 

from Public Citizen. 

To maintain, much less expand, a global ‘trade’ regime that to date has worsened 

the economic situation in rich and poor countries alike, threatened food sovereignty 

and access to essential medicines, and that undermined democratic governance is 

a recipe for growing economic, social and political instability. At a minimum, the 

real life outcomes of a continuation of the expansive status quo corporate 

globalization agenda as implemented by the WTO poses an enormous risk to the legitimacy of trade itself. 

NOTE: Sources and further information are available upon request by contacting 

Public Citizen’s Global Trade Watch at 202–454–5105 and www.tradewatch.org. 

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