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30–435 2006

PRESIDENT BUSH’S TRADE AGENDA 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

FEBRUARY 15, 2006 

Serial No. 109–57 

Printed for the use of the Committee on Ways and Means 

( 

ii 

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 

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. 

iii 

C O N T E N T S 

Page 

Advisory announcing the hearing ........................................................................... 2 

WITNESS 

The Honorable Rob Portman, U.S. Trade Representative ................................... 8 

SUBMISSIONS FOR THE RECORD 

Center for Policy Analysis on Trade and Health, San Francisco, CA, statement ...................................................................................................................... 81 

Coalition for GSP, statement .................................................................................. 89 

Doctors Without Borders/Me ́decins Sans Frontiere`s, New York, NY, statement ...................................................................................................................... 92 

Jackson-Vanik Graduation Coalition, statement .................................................. 95 

Jaeger, Kathleen, Generic Pharmaceutical Association, Arlington, VA, statement ...................................................................................................................... 99 

Lanier, Robin, Consumers for World Trade, letter ............................................... 103 

Retail Industry Leaders Association, Arlington, VA, letter ................................. 106 

U.S. Chamber of Commerce, statement ................................................................. 107 

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PRESIDENT BUSH’S TRADE AGENDA 

WEDNESDAY, FEBRUARY 15, 2006 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to notice, at 1:41 p.m., in room 

1100, Longworth House Office Building, Hon. Bill Thomas (Chairman of the Committee) presiding. 

[The advisory announcing the hearing follows:] 

2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 07, 2006 

No. FC–19 

Thomas Announces Hearing on 

President Bush’s Trade Agenda 

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and 

Means, today announced that the Committee will hold a hearing on President 

Bush’s trade agenda. The hearing will take place on February 15, 2006, in the 

main Committee hearing room, 1100 Longworth House Office Building, beginning at 1:30 p.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. The sole witness will be United States 

Trade Representative (USTR) Rob Portman. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

BACKGROUND: 

Since enactment of the Trade Promotion Authority Act (TPA) of 2002 (P.L. 107– 

210), the President has used his authority to greatly expand trade opportunities for 

the benefit of American workers and businesses. The United States has concluded 

free trade agreements (FTAs) with important trading partners and regions such as 

Chile, Singapore, Australia, Morocco, Central America-Dominican Republic, Bahrain, Oman, and Peru. The Administration is continuing negotiations with Panama, 

Colombia, Ecuador, Thailand, and the Southern African Customs Union, and President Bush has recently notified Congress of his intent to negotiate an FTA with the 

Republic of Korea. Additionally, the President is continuing multilateral negotiations in the World Trade Organization (WTO) to expand U.S. opportunities in trade 

in agriculture, industrial goods, and services, despite strong efforts to diminish the 

ambitions of such an agreement by trading partners seeking to protect various sectors. 

At the same time, USTR is managing a host of serious bilateral trade disputes 

and concerns that require a combination of diplomacy and litigation. In the past several years, USTR has managed and won several formal WTO-based disputes, while 

at the same time defending U.S. interests and demanding compliance with commitments by our trading partners in all parts of the world through negotiations and 

consultations. 

In announcing the hearing, Chairman Thomas stated, ‘‘TPA has allowed us to regain our leadership role in trade negotiations and to eliminate foreign trade barriers 

to U.S. goods and services. The Administration has moved an impressive and ambitious agenda in the past few years and clearly intends to maintain that momentum. 

Expanded trade means more business for American farmers, manufacturers, and 

service providers, better value for American consumers, higher living standards for 

American families, and good jobs for American workers. I am committed to ensuring 

the Administration’s adherence to the rigorous consultation process and the detailed 

negotiating objectives established in TPA. This hearing will give Ambassador 

Portman the opportunity to lay out the President’s trade priorities and is an important component of our bipartisan oversight responsibilities.’’ 

3 

FOCUS OF THE HEARING: 

The hearing is expected to examine current trade issues such as: (1) the prospect 

for trade expansion in agriculture, industrial goods, and services through multilateral negotiations in the WTO; (2) the recently concluded FTAs with Oman and Peru; 

(3) other FTAs that are currently being negotiated or have been notified by the 

President; (4) management of bilateral trade disputes and concerns; (5) ongoing negotiations with several countries seeking to accede to the WTO; (6) compliance with 

WTO dispute settlement decisions; and (7) other trade issues. 

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March 1, 2006. 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 

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FORMATTING REQUIREMENTS: 

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 

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f 

4 

Chairman THOMAS. If I could ask our guests to find seats, 

please. Today the Committee considers the President’s trade agenda. We are pleased to have our former colleague, Ambassador Rob 

Portman, testifying before us for the first time in his new capacity 

to discuss efforts to expand international trade, which will create 

jobs and opportunities for American workers, farmers, and firms. 

Since the President signed the Trade Promotion Authority into law 

in 2002, Congress has approved agreements negotiated by the administration with Chile, Singapore, Morocco, Australia, Central 

America, and Bahrain. We have teed up agreements that we will 

soon look at with Oman and Peru, and it is in the process of negotiating several others. Many in Congress are concerned, frankly, 

about the larger non-bilateral regional world of the WTO and the 

current status of the Doha Round. It seemed to some of us, and the 

Chairman in particular, that several of our trading partners spent 

more energy in Hong Kong in trying to avoid free trade rather than 

liberalizing it, and not to mention any names, the European Union, 

Japan, Brazil, and India seemed to be the frontrunners. If countries were unwilling to move by December on key modalities, as 

they say in the business, Mr. Ambassador, I want you to give me 

some understanding as to why they will move by some new deadline of April or finish by the end of 2006, for that matter, because 

Trade Promotion Authority expires in 2007. I am concerned about 

how we deal with these dynamics or whether we do not think about 

creating a new dynamic. 

In the meantime, I think we should continue to aggressive pursue our bilateral efforts as we have in liberalizing trade. While 

clearly the WTO negotiation is our best opportunity to liberalize 

trade, our bilateral agreements, I think, have spurred growth for 

U.S. exports at twice the rate of our exports to the rest of the 

world. To the degree we continue the success and we move more 

to industrialized nations, as evidenced by the potential for a U.S.– 

Korea Free Trade Agreement, I believe some of our more recalcitrant friends will begin to take notice of the impact our bilateral 

agreements are going to have. Last year, this Committee held hearings on our economic relations with Japan and China—probably 

one of the more unifying hearings we have had in some time in this 

Committee—because of our deep concerns about these countries’ 

apparent lack of commitment to free trade. I would underscore that 

for Japan far more than China. For example, the Chair believes 

Japan has a long history of blocking U.S. goods, devising nontariff 

barriers that allow their farmers and firms to operate while keeping out imports. U.S. beef is only the tip of the iceberg. At the 

Japan hearing, I pointed out that we are not looking for any more 

apologists for Japan’s behavior. There seemed to be a sufficient 

number of those. We are looking for results. 

As we begin to focus on China, I think we have a newer partner, 

one who has shown the ability to move and, frankly, one that was 

fairly impressive by, in baseball terms, doing the Babe Ruth of 

pointing where they were going to go and when they were going to 

get there. Part of the Chair’s interest is in whether or not, based 

upon what our friends the Chinese have agreed to in terms of a 

host of improvements on intellectual property and other areas, how 

successful are they? What kind of a report card can we give in their 

5 

ability to move? We outlined those factors in a bill, frankly, introduced by the gentleman from Pennsylvania, Mr. English, H.R. 

3283. The House moved on this bill. The Senate has not. We would 

appreciate some comment during your testimony, Mr. Ambassador, 

in that regard. Then, finally, let me make sure that I do not forget 

our friends, the Europeans, who recently lost the biotech case in 

the WTO but are publicly stating there is no need for them to 

change their system. They are currently honing their last desperate 

opportunity to deal with issues that we have put behind us in both 

the FSC and in the Byrd cases. Ambassador Portman, welcome 

back. We look forward to your testimony, but first let me call on 

the gentleman from New York, Mr. Rangel, for any opening statement he may wish to make. 

Mr. RANGEL. Thank you, Mr. Chairman. Ambassador, let me 

thank you for the attempts that you have made to bring Republicans and Democrats closer together as it relates to trade policy. 

I think everyone on both sides of the aisle agree that that is the 

way we would like our Nation to be perceived with foreigners, and 

that is that, at least on the issue of trade, we have put our party 

labels behind us. Now, it has been difficult, but you have to agree 

that we have had some success, and the President has called for 

us to attempt at least to try to work more closely together. Each 

time we have a major problem where it looks like there is a partisan approach, more often than not it deals with some form of 

international labor standards. 

Now, we all agree that globalization presents different problems 

to different countries depending on the state of their laws and their 

economic development. You do have, in the communications we 

have, problems with the ILO standards, either in the declarations 

or the conventions and the inability that you have to negotiate 

standards and other people that we have not agreed to ourselves. 

But I hope publicly as well as privately that you understand that 

the only reason we use the international labor standards is because 

they appear to be so minimum. But if what they are saying is that 

we do not want forced labor, child labor, and the right of collective 

bargaining, then it would seem to me that we look forward to your 

good offices to see whether you can build a bridge between those 

that would not want any standard and those that some might 

think that the standards are too high. But based on your ability 

and your skills to have been successful with so many FTAs that 

have come before us and can seriously have been considered as bipartisan, I ask for you to continue to work on that, and if it reaches 

the point that the other party feels that it does not want to work 

in this area or if the administration believes that it cannot be flexible in this area, not to worry. It just saves us a lot of time. But 

I think we are proving our willingness to, whenever possible, especially with trade agreements to try to have it come out as a bipartisan agreement. I just congratulate you and hope we can continue 

to work together. 

Chairman THOMAS. I thank the gentleman. With the Ambassador’s indulgence, given this special occasion, the Chair would be 

a bit more flexible than our usual procedure with other members, 

and without objection, the Chair plans on recognizing the Chairman of the Subcommittee on Trade, the gentleman from Florida; 

6 

and then recognizing the ranking member on the Subcommittee on 

Trade, the gentleman from Maryland. Without objection, the Chair 

recognizes the gentleman from Florida. 

Mr. SHAW. Thank you, Mr. Chairman. I would like to add my 

welcome to Ambassador Portman, and welcome you home. I hope 

you feel that this is always a home. It is wonderful to have somebody in your position that recognizes all the good we can do when 

we act in a bipartisan manner with regard to matters of trade, understanding that there will be some areas that there will be partisan differences. But it is for the best of this country that I think 

every Democrat and Republican really is pushing forward with 

their trade agenda. I want to thank you for your leadership on behalf of the United States during recent World Trade Organization 

meetings in Hong Kong. Thank you for your efforts and work of 

your staff. We remain hopeful for a successful conclusion of the 

Doha Round, but in the next few weeks and months, it is critical. 

The United States must continue to push for the elimination of 

trade barriers across the globe. I look forward to hearing your impressions on where we are in the current negotiations. 

I want to focus my comments for just a few moments on Russia. 

Russia is moving toward joining the World Trade Organization and 

is hoping to reach this goal by the year’s end. Chairman Thomas 

and I met with your Russian counterparts last fall, considering the 

Russians’ lack of enforcement of intellectual property rights. Congress passed a resolution in the fall calling on the Russian government to crack down on piracy and continues to urge Russia to take 

the necessary steps to ensure market access without counterfeiting. 

In my view, the Putin administration has not used the necessary 

political capital to acknowledge the problem and take the proper 

steps to shut down pirates. The United States copyright industry 

estimates losses of $1.7 billion in 2004 alone as a result of this failure by the Russian Government. In fact, there is evidence that the 

Russian government is harboring pirates on government property. 

I recognize the friendly relationship between Moscow and Washington, which is very important; yet as Mr. Putin pushes for World 

Trade Organization membership on the eve of the G-8 Summit, I 

hope that you and President Bush will remain tough with the Russians in ending the piracy and counterfeit practices that have 

plagued Russia. Unless Russia adopts domestic enforcement laws, 

dismantles organized crime, and commits itself to the rule of law, 

I think consideration of permanent normal trade relationships in 

Congress will be highly controversial. American sectors are getting 

a raw deal with Russia. I applaud you on your recent announcements launching the U.S.–Korea Free Trade Agreement. Free trade 

access to Korea, our Nation’s seventh trading partner, in goods 

would be a tremendous opportunity for many United States industries. I look forward to working with you in moving a comprehensive Korea Free Trade Agreement in the coming months. 

Finally, Mr. Chairman, I want to touch on our role within the 

World Trade Organization. The United States is a leader within 

the organization. A successful Doha Round is in our National interest. At the same time, our free trade agreement negotiations provide the quickest route to ending barriers to trade, and I applaud 

you for the negotiations underway. In addition, I believe we need 

7 

to be aggressive in seeking enforcement of the WTO obligations 

among our trading partners. I look forward to your annual report 

to Congress relating to barriers to trade, and I urge you to provide 

us with specifics on the barriers to trade in each country and what 

steps are available to the United States. Working with your team, 

this Committee will get a clearer understanding of what our industries face and what we may be able to do in striking down unfair 

barriers. I look forward to your testimony, and I look forward to 

members’ questions. I yield back, Mr. Chairman. 

Chairman THOMAS. I thank the gentleman. The ranking member of the Subcommittee on Trade, the gentleman from Maryland, 

Mr. Cardin. 

Mr. CARDIN. Thank you very much, Mr. Chairman. Ambassador 

Portman, it is a pleasure to have you before the Committee. We 

ended 2005 on, I think a very positive note, with the Bahrain 

agreement being approved and the method in which we used to 

work out potential differences so that we could have a very strong 

vote without much controversy. I want to applaud your leadership 

in bringing us back together. However, we start this year with 

some rather chilling news on our trade deficits: a record $726 billion trade deficit in 2005, representing nearly 6 percent of the U.S. 

economy. Our deficit with China continues to skyrocket. It hit $202 

billion in 2005, 25 percent higher than in 2004. Let me quote from 

a person who I have the greatest respect for and agree with his 

opinion when he said, ‘‘Our bilateral trade relationship with China 

today lacks equity, durability, and balance.’’ Quoting from your 

statement of yesterday, and I agree with you, Mr. Ambassador. We 

cannot sustain this current bilateral relationship with China. Action must be taken. 

To pay these deficits, President Bush has accumulated more debt to foreigners, $1.2 trillion, than all other Presidents before him 

combined. In fact, foreigners have finance 90 percent of the Bush 

administration’s increase in Federal debt. I mention that because 

I talked to a trade attorney this morning who told me that he was 

in Beijing on a private trade issue talking to a senior Chinese official, who basically said: We don’t have to respond to your concerns 

about market access. Your country can’t do anything about it. They 

need us to continue to buy your dollars. So, I worry about whether 

we really do have the freedom to respond the way we need to 

against our trading partners because we are so dependent upon 

their need to buy our bonds so that we can pay our bills. Earlier 

today, Secretary Snow was here, and I posed the question to Secretary Snow on the Chinese currency manipulation. I understand 

that is under the portfolio of the Secretary of the Treasury. But I 

do believe we all have to be concerned about the currency issue 

with China, the impact it is having on U.S. competitiveness, and 

I was pleased to see that in your review, that is acknowledged as 

an issue that needs to be dealt with. 

On the WTO negotiations, I want to compliment you for your 

leadership. I think you have provided the opportunity for us to 

have a successful Doha Round. You have shown courage and leadership of the United States. I am extremely disappointed by the 

lack of leadership of our traditional trading partners. They don’t 

seem to want to take advantage of an opportunity to expand trade 

8 

through the WTO. I look at the lack of progress in agriculture and 

see Europe and see how disappointed we are that they have not responded to the offer that you put on the table. We look at what is 

happening in the tariff issues, and there is no agreement to a progressive way to reduce tariffs. We look at the service industry and 

we see some progress being made, but certainly not a lot of 

progress, and certain areas of concern. You and I have talked about 

an area that gives me great heartburn in the WTO Doha Rounds, 

and that is, if the rules issues come up and weakening our antidumping and countervailing duty laws, that is going to be something that is totally unacceptable, I think, to the majority of Members of Congress. 

So, I want to thank you for your leadership and just express disappointment that that has not been matched by our traditional 

trading partners. I agree with Mr. Rangel’s point on the free trade 

agreements. I understand that we may have Oman or Peru coming 

in shortly. I would urge you to continue to use the model we did 

in Bahrain in working out issues that are very important, I think, 

to the Members of Congress to deal with worker rights and protection. I look forward to your testimony, and I look forward to a successful year in 2006 on the trade agenda. Thank you, Mr. Chairman. 

Chairman THOMAS. I thank the gentleman. Any other member 

may have a written statement. It will be placed in the record, without objection. Mr. Ambassador, your written statement will be 

made a part of the record, and the Chair fully understands that the 

5-minute rule is but a fond memory. So, you will have the amount 

that your conscience will allow you to have to address us, and we 

are going to extend you a degree of House courtesy. But it is nice 

to have you with us, Mr. Ambassador, and the floor is yours. 

STATEMENT OF THE HONORABLE ROB PORTMAN, U.S. TRADE 

REPRESENTATIVE 

Ambassador PORTMAN. Thank you, Mr. Chairman. I never noticed that kind of generosity on the 5-minute rule when I was on 

the other side of the microphone, so this will be a new experience. 

It is great to be here, and to be here in this newly refurbished room 

but with old friends, and I thank you very much for your statements, Mr. Rangel, for yours. Mr. Rangel talked about the fact that 

we should try to work as Americans, not as Democrats or Republicans on trade. He has made that point to me many times. That 

is what we will try to do because it is so much in our National interest going forward. To Mr. Shaw and Mr. Cardin, I appreciate 

working with you on the Subcommittee, and with your staffs, and 

I think we do have an exciting agenda ahead. I will get into that 

in a second. What I thought I would do, instead of making a statement or even putting a statement in the record, is go through a 

PowerPoint presentation. You have this in front of you, and it is 

the 2006 trade agenda. We talked in the library a moment ago 

about some specific issues, and I told you I am happy to address 

other issues that are not addressed here, and I look forward to 

your questions and to your input. 

I want to start, if I could, by just reviewing why what we are 

doing is so important, just quickly recap where we have been for 

9 

the past year working together. We have actually had a number of 

accomplishments. Mr. Cardin talked about the Doha Round, as did 

Mr. Shaw and Mr. Thomas. The first two points are we have made 

some bold proposals there. We have reinvigorated those talks, I believe. We have still got a lot of work to do. The second major category there would be our FTAs, the free trade agreements. We 

have closed two. We have passed two with your help with seven 

different countries. We have also engaged India in a new trade policy forum, deepening our relationship there, which will be very 

much front and center when the President visits India in early 

March. With China, we were able to work out a comprehensive textile deal after a lot of negotiation. We are working with many of 

you. It is an agreement that I am happy to talk about if you have 

further questions, but it has been very well received, I believe, for 

the most part on our side, and it gives predictability and certainty 

to our importers as well as our manufacturing industry. 

Saudi Arabia is now part of the WTO. We held their feet to the 

fire on some issues, and we were able to get that accomplished this 

last year. The Morocco Free Trade Agreement was implemented. 

We do have a number of agreements going from the EU enlargement agreement to the Russia meat agreement that we were able 

to close this year, some of which had been outstanding for several 

years. That is one of our objectives, to try to complete these agreements that have been on the table for a while and move forward; 

or if they can’t be completed, frankly, to move forward on other 

higher-priority items. In the beef market, we have had some success. I am disappointed, of course, in the recent news from Japan, 

but if you look at what has happened with Korea, Hong Kong, 

Thailand, Taiwan, and the Philippines recently, we are working 

through this BSE issue successfully in those markets. We have got 

more to do. China top-to bottom review we talked about a little in 

our pre-meeting, and then, of course, working with you, we actually 

extended Trade Promotion Authority, kind of a quiet vote but an 

important one to give us the time until July of 2007 particularly 

to work through the Doha agreement. 

We have also had a number, on page 3, the next page, of successes on the enforcement side, and I have listed some highlights 

here. I have organized them along the lines of China, ag, and then 

other, which kind of indicates our focus on China. We have had 

some successes with China, persuading them to remove some semiconductor taxes which were discriminatory. As you know, we have 

filed the only WTO case against China, and it was successful in the 

sense we were able to work out that issue. We were prepared to 

file a second WTO case against China a few weeks ago, and I 

talked to Mr. McCrery about this beforehand. Some of you are very 

familiar with this, who come from one of the 14 States that export 

a very important paper product to China called Kraft linerboard. 

But we told China we were going to file the case, and after months 

of fruitless negotiations, overnight China rescinded an antidumping 

order which was unfair, in our view, and we were able to get the 

result we wanted without going through the protracted litigation. 

It was a good result for U.S. industry, and this is a model I think 

that works. I think we need to use the WTO as leverage to get real 

results for our U.S. commercial interests. 

10 

We are still working with China on a couple other issues. One 

is an auto parts issue we have raised with them over the last several months. We continue to work with them on that as well as the 

various intellectual property rights challenges in China that were 

discussed a moment ago. On the ag side, we did win a biotech case, 

which the Chairman mentioned, against the EU at the interim 

stage. Very successful for us because it relates to a huge issue for 

the United States, which is sanitary and phytosanitary issues. Regardless of how low tariffs get, if we cannot get our product in because bad science is used in a protectionist way, it does not help 

much. So, this is a case that goes well beyond the EU and is an 

important accomplishment for us. We filed a WTO case on Turkey 

just last week with regard to rice, something we have worked 

through with them. We were not able to resolve the issue short of 

a WTO case. We feel that is the best route to take there. We also 

won a number of WTO cases including one against Mexico, Japan, 

Canada, and another one in Mexico on high fructose corn syrup. 

Other cases, as you know, we have what is considered to be the 

largest WTO case ever, which is the Airbus-Boeing case before the 

WTO right now. We brought that when I came to the conclusion 

that the EU was not able to negotiate in good faith on the issue 

of direct launch aid, and to the extent that was not—it would be 

taken off the table, we had no choice but to proceed to the WTO. 

We do hope we can negotiate that case. We think it would be a case 

that could be settled. But it would require the EU to make the necessary decisions with regard to direct launch aid, which we strongly believe is an illegal subsidy under the WTO. We also won a case 

on geographical indications with regard to our products. We also 

were able to win on several counts on a customs regime in the EU, 

a case with regard to Egypt, and a case with regard to telecommunications with Mexico. So, those are just some of the enforcement highlights of this last year. Enforcement will continue to 

be a top priority. Underlying all this work, on the next page just 

a chart that I do not have to go into with this group because you 

all follow trade closely, just why we are doing all this. A proactive 

trade agenda is in our interest, strongly in our interest. We are already the most open large economy in the world. It is going to be 

in our interest to knock down barriers to our goods and services. 

It is critical to our economy. Trade liberalization raises productivity, raises wages, expands consumer choice and our purchasing 

power. 

When you go sector by sector with regard to manufacturing, we 

are the largest exporter of manufactured products in the world. We 

can’t forget that. Our exports actually have increased 82 percent 

since the end of the Uruguay round. One in every five jobs in manufacturing is supported by exports. With regard to the kinds of jobs 

they support, they pay an average of 13 to 18 percent more. So, reducing trade barriers helps spur the creation of higher-paying jobs 

in this country. Agriculture, one in three acres are planted for export, 27 percent of income. Absolutely critical to our ag economy 

Services, of course, we had another great year, record surpluses in 

services. Here we have a comparative advantage. Our surplus this 

year went from $48 to $56 billion, very important for us to have 

access through our services. The trade agenda for 2006, we have 

11 

an ambitious agenda, a proactive one. I divided it into three categories: one is the global trade talks that were talked about; second 

is bilateral and regional agreements; and third would be enforcing 

our trade laws and strengthening our agreements. 

With regard to the global trade talks, there has already been 

some discussion about this. Progress in Hong Kong may be a misnomer, as the Chairman says. We did not make all the progress 

that we had hoped for. On the other hand, the round continued and 

we did make incremental progress in a number of key areas, as I 

talked about a moment ago. The timing, just to remind us, the plan 

is to finish by the end of this year. That is the stated goal, not just 

for the United States but the WTO membership, in part because 

our Trade Promotion Authority, its expiration date is in July and 

the agreement would have to come to you in the spring of 2007. 

There are three negotiating areas, as you know, under the Doha 

Round: one is manufacturing; another is services; and third is agriculture. On manufacturing, we just talked a moment ago about 

how important it is for us. We are seeking—the U.S. proposal is 

real cuts. That means applied cuts, not in just what the bound or 

allowed rate is, but what the real rate is, the applied rate. We are 

also focused on key sectors. We think we can make more progress 

with a sectoral approach. We have some history to support that. 

Also nontariff barriers, extremely important to us, including the 

auto industry. 

The next chart just shows you in a visual form why it is so important for us to reduce these barriers overseas. Our average manufacturing tariff in this country is 3 percent, and you can see on 

that chart the average among all WTO members is closer to 30 percent with regard to manufactured goods, 40 percent for all goods. 

So, we are, again, a relatively open, low-tariff country. Exports are 

key to us, and reducing those barriers is critical through the Doha 

multilateral process. Second is services. Here again we have had a 

nice surplus in 2004 and 2005. Our exports have increased dramatically, nearly doubled over the past 11 years. In Hong Kong, we 

were able to come up with a framework for services. One of the 

frustrations had been we had a framework for agriculture, a framework for manufactured products. But for services, because it 

doesn’t relate to tariffs but, rather, to regulations and other nontariff barriers, it was harder to come up with that formula. We 

think we have one that can work now. It is not just a bilateral 

process but what is called a plurilateral process, meaning working 

with those countries that have a common interest and working on 

particular sectors of services, say financial services or express delivery or telecommunications. 

So, we think we have a model that can work to open up some 

markets for us. We are pushing very hard on that. By the end of 

this month we are looking for revised offers from our trading partners on services. The next chart talks about why this is beneficial 

to us. Again, we have one of the most open service regimes in the 

world. We do have some challenges here. One is so-called Mode 4 

or temporary visits, temporary business entry, and we are getting 

some pressure on that. But the bottom line is services is incredibly 

important to our economy. There is an estimate out there that the 

median U.S. family of four annual income could increase by as 

12 

much as $6,800 per year—$6,800 per year—if we had full liberalization of services because it is so key to our economy, and we have 

such a comparative advantage there. The third pillar is agriculture, 

and within agriculture there are three pillars. One is market access, lowering tariffs. The framework that we have agreed to calls 

for substantial improvement in market access. That is what we are 

looking for, as the Chairman said. We have not received offers that 

are commensurate with our offer on trade-distorting subsidies. We 

need to see that to move this round forward. Importantly, so do a 

lot of other members of the WTO, including many in the developing 

world. 

Second is eliminating export subsidies. There we did make some 

progress in Hong Kong. We came up with a date for the total elimination of export subsidies. You will see in a minute why that is so 

important to our farmers. Third is reducing trade-distorting agriculture support. There we made a commitment in 2004 that we 

would, as WTO members, reduce trade-distorting support. The 

United States has stepped up to the plate and put on the table the 

most ambitious proposal out there on all three of these pillars, but 

significantly being willing to put our trade-distorting support on 

the table in exchange for getting the market access commitments 

that we need and also moving ahead on manufacturing tariffs and 

on services. We would not have a chance to improve this multilateral approach on agriculture had Hong Kong not moved forward. 

Now we have a chance to do it, as tough as it will be. The next 

page is some interesting charts on all three pillars, just to show 

you again why it is so key to us. Market access, average tariff in 

the U.S. is the red bar on the left, 12 percent. If you look at the 

global average on the far right, 62 percent. The highest tariffs in 

the world are on agricultural products, as are most of the tradedistorting subsidies. So, it is an area where there is significant 

room for improvement, and it will help with regard to our farmers 

who have the ability to export our product when they have a level 

playingfield. 

The second pillar is down at the bottom left, direct export subsidies. Again, you see there we have made a commitment now not 

just to eliminate them but come up with a date certain, 2013, with 

significant progress by the midterm there; 89 percent of those subsidies are used now by the European Union. Therefore, our farmers 

are unfairly competing with the European Union with regard to 

our exports currently. The third area is domestic support. Here you 

see two bars. One is the gold bar, which is what is permitted or 

allowed under the WTO. That would be the bound rate. The yellow 

is what is actually used, which is the current so-called AMS or 

amber box levels. If you look at that chart, you will see that the 

Europeans have the ability to use, as an example, four and a half 

times more than we do. They actually use about three times more 

than we do in terms of domestic support. The same with Japan, by 

the way, as a percentage of their agricultural production. It is 

about three times what the U.S. is. So, this is an issue where we 

need to see two things: one, yes, a reduction of our trade-distorting 

support, but also harmonization, where others come down more 

than we come down, to equalize this to a certain extent to four and 

a half to one. It needs to be more equalized. 

13 

The next chart shows you why we are under pressure at the 

WTO on trade-distorting subsidies. You know, frankly what has 

happened since the end of the Uruguay round, as we have seen, reductions in trade-distorting support among our other developed 

country partners. The black line is the EU limit. The black bars is 

where the EU is. The red line is the Japanese limit. The red bars 

is where they are. Likewise, the yellow line is where we are allowed to be, and the yellow is where we are. You will see that the 

Europeans and the Japanese have actually reduced their trade-distorting support significantly—not below our level yet, but significantly; whereas, we have gone up a little and now have sort of leveled off. So, this is why the U.S. has been under particular pressure with regard to this issue of trade-distorting support. Just so 

you understand the context within which we are negotiating in the 

WTO. Another big WTO issue is accessions. Chairman Shaw talked 

a little about Russia, some concerns he has on IPR. We have got 

four major accessions coming up that will go before you, because 

they all involved Jackson-Vanik and, therefore, a vote on PNTR, 

permanent normal trade relations. 

If you recall the PNTR vote on China, these can be tough votes. 

We have Vietnam coming up, Ukraine, Russia, and Kazakhstan. 

We are close with regard to the Ukraine. I hope we are close with 

regard to Russia, taking into account what Mr. Shaw said. With 

Vietnam and Kazakhstan, we are also making progress. I would 

love to have all four of these come before the Congress to move 

them forward even this year. That may be ambitious, but I think 

it is in our interest to get these countries into the rules-based WTO 

system. There are also another 26 applicants looking for membership in the WTO. We have worked with a number of them—I mentioned Saudi Arabia earlier—and we will continue to do so. GSP— 

I wanted to throw in General System of Preferences as part of our 

global discussion because it expires at the end of this year. The 

President has put a 5-year reauthorization in his budget. This is 

a program that does expand choices, as I say, of American industry 

and consumers. It was $26.7 billion last year in imports. Our total 

exports, as an example, would be about $1.2 trillion. So, it is not 

a large percentage as compared to our imports or exports. But it 

is a very significant program for the developing world, and it is one 

I am really looking forward to working with members of this Committee on. I think we will have some opportunities with GSP reform to look at some new ways of doing business. 

With regard to our free trade agreements, I wanted to show you 

all, you know, the obvious benefits we get from our free trade partners in a chart form. I came up with this chart today. I hope it is 

helpful to you. It talks about the fact that our free trade agreement 

partners now account for 15 percent of the GDP of the world. That 

is because we don’t include the EU or China or Japan or India in 

our FTAs, which are the big economies, but 54 percent now of our 

exports. It is an interesting chart. It just goes to show, as many 

of you have said at the outset here, this is definitely in our interest 

to develop not just a multilateral approach, which is ultimately, 

you know, the best way to get a universal reduction of tariffs and 

reducing other trade barriers, but our FTAs are very effective on 

a bilateral and regional basis to get these barriers down and inVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
14 

crease our exports which is great for our economy. Once CAFTADR, Bahrain, Oman, and Peru are implemented, we would have 

ten free trade agreements, seven of which were completed in the 

last 5 years. The next chart talks more specifically about our exports. A simple point here, our exports are rising twice as fast 

among our FTA partners as they are among the world in general. 

Where are we on our negotiations? Oman is up on the Hill. I believe the Committee on Ways and Means will be moving forward 

with some sort of a hearing soon. Mr. Chairman, I know you are 

working on that. Peru, we have notified you of our intent to sign, 

meaning it is up here for the 90-day period. We are more than halfway through that now, I believe. I think you have the opportunity 

late spring to take up the Peru agreement. We are working for 

completion of a few more in 2006. Panama—some of you expressed 

some concern to me before this meeting about Panama, why we 

have not moved more quickly. I would be happy to talk about that 

in questions, but the bottom line is we are very close. We still have 

some concerns from early in the agriculture area. Thailand, Colombia, and the United Arab Emirates. Colombia, of course, we would 

hope to partner with Peru and, for that matter, Ecuador for an Andean trade pact, but in any case, we are moving forward with those 

countries that are prepared to move, and Peru we have already 

closed on. 

New agreements. As you may know, because some of you were 

involved in it, we did launch free trade discussions with Korea. We 

are very interested in continuing to launch free trade agreements 

with countries like Korea, where we have a strong commercial interest and where we see the ability of that country to make some 

important reforms so that you can see a successful conclusion of 

the round. We believe that was true with Korea. We spent several 

months working with Korea even before we launched. We also 

launched up here on the Hill, incidentally, the first we have ever 

launched a trade agreement on the Hill, I am told, and did it in 

a bipartisan way with a lot of support from members of this Committee on both sides of the aisle and Senator Baucus and others 

present. I appreciate that very much. We will work closely with you 

as we negotiate this agreement so we can end up with a great 

agreement. 

We are continuing to work on the Southern African Customs 

Union, SACU. I am happy to talk more about that, if you would 

like. The AGOA benefits are very helpful to all these countries. On 

the other hand, they may make it less advantageous to move to a 

free trade agreement, but we are working on that and continue to. 

The same with FTAA and Ecuador I talked about earlier. On 

Korea, I will not get into a lot of detail here with this chart so we 

can keep moving, except to say Korea is now the tenth largest 

economy in the world and growing and our seventh largest trading 

partner. There is a huge commercial interest here on behalf of our 

services industry, agriculture and industrial goods. They are excited about this. I know many of you are. Again, we look forward 

to working very closely with you to be sure this is an agreement 

that you can support when it comes before you. There are other potential agreements we would like to complete. Even this year, we 

would like to be able to launch with Malaysia. We are not quite 

15 

there yet because, again, we are working through some issues with 

Malaysia to be able to launch an agreement. But again, our tenth 

largest trading partner, a big economy in a strategic part of the 

world—Asia. So, I am hopeful we can make progress on Malaysia. 

I know many of you have been involved in encouraging me to move 

on Malaysia, and I agree with you there is a great potential there. 

Egypt is another possibility. We have some challenges right now 

with Egypt we are working through, but, again, we think it is in 

our long-term interest to have deepening trade relationships with 

the largest Arab country. A third area I want to touch on in enforcing trade laws and strengthening trade agreements. We talked 

about this a little at the outset in terms of last year, what we were 

able to accomplish. Let me just go through, if I could quickly, what 

some of our approaches are on the enforcement side. First is bilateral consultations. We tried to solve problems bilaterally. Often 

that achieves the best outcome. I will give you a couple of examples 

on that. We reached an agreement with the EU recently on compensation for tariffs that were raised when the new members came 

in, when the ten new members came in, the enlargement agreement. We were able to work that out bilaterally to our satisfaction 

and to the interests of our commercial interests among our exporters to Europe. We also were able to recover a lot of the beef markets, as I said, through bilateral and technical conversations and 

negotiations with a number of countries I mentioned earlier. 

The WTO round also gives us some opportunity. Again, it covers 

all sectors, all areas. It is universal, so it has certain advantages. 

It enables us also to negotiate new disciplines. We are doing that 

in the context of the Doha Round. Accessions. As we are doing now 

with all the accessions I talked about earlier, we are able to get 

commitments and concessions from these countries and gain additional tools. One example there could be the China safeguards. We 

would not have had the ability to reach the agreement with China 

or to have had the safeguard imposed had we not worked that out 

as a part of their WTO accession. Enforcing existing agreements, 

of course, is another area for us under the WTO where we are actively involved. I will give you three examples: the TRIPS agreement handled intellectual property; GPA, which is Government 

Procurement Agreement; and also SPS, sanitary and phytosanitary 

agreements under the WTO. We use that as leverage to get movement from our trading partners. The FTA negotiations. We have 

talked about the FTAs. It is a great place to get commitments and 

put new rules in place, and we did that aggressively with the FTAs 

last year. 

Antidumping and CVDs. Since President Bush has taken office, 

the United States has imposed $104 new antidumping orders, 28 

of them against China, by the way, which is by far the most 

against any country. Also 20 new final countervailing duty orders. 

So, we continue—that is the Commerce Department, not USTR. 

Commerce administers antidumping and countervailing duties, but 

that is another place where we enforce our domestic trade laws and 

do so in a way that ensures that we have fair imports coming in. 

WTO dispute cases. Let me go over a few of those, if I could. We 

talked about Airbus earlier. We talked about EC biotech. The initial assessment there is very positive, as I said. Other recent sucVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00019 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
16 

cesses, I mentioned Kraft linerboard. We were prepared to file a 

WTO case a few weeks ago. Literally overnight China changed its 

opinion with regard to an antidumping order they had put on our 

product unfairly, rescinded the order. We were able to get a great 

result for the U.S. industry. Mexico telecommunications, another 

great success for us. Japan apples. High fructose corn syrup, we 

are still working through that one in terms of the compliance part 

of it, but we have won at the panel stage in August of last year. 

It is now under appeal by Mexico, and we expect Mexico to eliminate its beverage tax. 

I talked about EU geographical indications earlier and Korea 

semiconductors. There the appellate body reversed a panel finding 

that the U.S. subsidy did not follow WTO rules, so that was a victory for us in a couple of ways, including upholding a core element 

of our trade remedy laws. Yesterday, as I said, in our pre-meeting, 

we announced the results of the top to bottom review, recognizing 

that our trading relationship has moved into a new phase with 

China, and we laid out plans for moving ahead. The China textile 

safeguards we worked with a number of you on, we signed this 

agreement last fall. It establishes quotas on imports of 34 textile 

and apparel categories through 2008. That is about 46 percent of 

the trade that was previously subject to a quota before the end of 

last year. The broad product coverage and three-year term of this 

agreement will permit our producers, importers, and exporters 

from China to operate in a more stable and predictable environment. The China Transparency Initiative, some of you have been 

involved with. This is under the WTO TRIPS agreement. It is a 

way for us to get more information regarding IP rights. This is the 

so-called Article 63.3 invocation. I appreciate many of you working 

with us on this. What I am particularly pleased about is the fact 

that we got Japan and Switzerland to work with us in this case. 

They have filed it with us and they are sticking with us and I applaud them for that. It would have been nice to have had additional trading partners, too, but the China IP challenge is not one 

exclusively faced by the United States. It is faced by all of us who 

do trade and business in China and faced by Chinese entrepreneurs, innovators, and businesses, as well. 

China JCCT, this is our annual meeting with the Chinese where 

we have made progress in the past. We have another one coming 

up in April. We did make some progress last year. Through the 

JCCTR, customs officials and Chinese customs officials have 

worked together to crack down on some of the piracy, particularly 

with regard to the customs side, the exports of pirated items. China 

also did agree to delay its procurement regulations, but they do 

maintain problematic auto parts and direct sales rules that I mentioned earlier and we still believe that it would be very much in 

our interest and China’s interest to have them accede to the government procurement agreement. We are pushing hard on that. We 

will continue to push hard in our April meeting with JCCT on a 

whole range of issues with China, many of which are mentioned in 

the top to bottom review. The next page, intellectual property, we 

have got a number of initiatives here, some of which have been 

worked out over the years with Congress. The STOP! Initiative is 

a couple of years old now. It coordinates our international outreach 

17 

effort with key trading partners. It has now been extended to other 

international fora, including the E.U.-U.S. summit and the APEC 

summit in Asia. 

Special 301, we use aggressively, as you know, with regard to 

putting countries on an either Priority Foreign Country List, which 

would be the countries that have the worst results, and these can 

result in sanctions; the Priority Watch List, also very serious; and 

the Watch List. Example, when we put Ukraine on the Priority 

Watch List, we were able, having actually designated them as a 

Priority Foreign Country, to get a change in their laws regarding 

intellectual property. They enacted a law to curb illegal CD production in August of last year. We were able then to terminate sanctions we had imposed against Ukraine. So, we used this as leverage. We used it in Pakistan to shut down illegal CD plants after 

designating them as a Priority Watch List country. Finally, FTA 

implementation. Once an agreement is signed, USTR monitors and 

ensures that our trade partners rewrite legislation that they have 

committed to do, including on SPS, intellectual property, and so on, 

make sure it is done in the right way, and we follow through on 

agreements. For example, we have done this in Singapore, Morocco, 

Australia. The reason our CAFTA partners have not implemented 

the agreement is that we are following through on the commitments they made to you and I made to you and we will continue 

to do that. 

To summarize, again in 2006, we have got a lot on our plate, a 

lot of opportunities, a lot of challenges. We look forward to working 

closely with you on that. We hope to conclude these global trade 

talks this year, a once in a generation opportunity to reduce barriers to trade. We hope to continue to pursue these high-standard 

bilateral and regional agreements to provide new market access for 

our workers and our farmers, our businesses, and we will vigorously enforce trade laws and agreements to ensure a more level 

playingfield. Again, thank you, Mr. Chairman, for allowing me to 

go over my allotted time a little bit, but I thought it was important 

to walk through the various items on what is a very ambitious and 

proactive agenda and I look forward to questions. 

[The prepared statement of Ambassador Portman follows:] 

18 

Statement of The Honorable Rob Portman, U.S. Trade Representative 

Testimony Before the House Committee on Ways and Means 

February 15, 2006 


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f 

Chairman THOMAS. I thank the gentleman. The Chairman is 

tempted to ask for written testimony at the next hearing. 

[Laughter.] 

Chairman THOMAS. Rob, back in the old days, some of us remember that USTR simply wasn’t adequately staffed. I am pleased 


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32 

to say that I see you have brought something close to 10 percent 

of your resources—— 

[Laughter.] 

Chairman THOMAS. —which is stressing more of the still relatively small size of the USTR and I think that approach best 

serves our purposes. We want to make sure that you have sufficient resources, and you have outlined some changes that I think 

we agree on, especially focusing on the activity of, or what is growing into a significant and hopefully mutually prosperous relationship with China, but that is going to require additional resources. 

One of the concerns that I have is that in moving initiatives more 

than once in this direction will put you into what I consider to be 

a bureaucracy class that I am hoping you don’t want to be in. 

Therefore, in looking over the list of opportunities you outlined in 

2006, I see some old and familiar friends on the list. One of the 

things I think I am going to ask you to do, and as other members 

ask specific questions, they obviously will go in the directions they 

want to go, but we seem to have some difficulty in getting our 

friends to understand that we really are concerned about some absolutely critical fundamentals, the scientific base, sanitaryphytosanitary system, intellectual property rights in terms of a 

uniform and objective structure, and frankly, some of our friends 

in negotiating are more interested in the phase-out of years or the 

elaborate and cumbersome intertwined relationship that they are 

interested in and that at some point, I am very mindful of the fact 

that there are some ambassadors from some countries that survive 

in Geneva for decades. Over my career, I have seen, and I don’t 

mean this as any personal statement, USTR Ambassadors come 

and go, a number of them, unfortunately. 

I am thinking along the lines of indicating that if you have a decent run, you know, four to 6 years, we need to assess the progress 

that we are making on particular efforts and that if we don’t have 

clear-cut effort, it seems to me that we simply have to come to the 

conclusion that it is probably not a productive use of USTR’s time 

and resources and that we don’t want to expand the resources to 

have that many more balls in the as you move forward, but that 

we prioritize, and that message delivered to some of those folks 

who seem to enjoy the leisurely pace, I think might actually move 

us toward the conclusion on some of these. Perhaps, and I hate to 

say this, the threat of being dropped or we quit wooing some of 

them might put some underscoring along the lines that there are 

certain key things we need agreement on, and if we don’t get those, 

it doesn’t make a whole lot of sense to continue to fool each other 

that we aren’t moving in terms of a Free Trade Agreement. The recent example of Peru and Oman and some others, Bahrain, although it was through no fault of their own that they weren’t 

moved a year earlier, indicate that if two willing partners sit down 

and really understand what needs to be done, it doesn’t take all 

that long. So, I am going to be asking you to take a look at some 

of these folks that we have been wooing for some time without material progress and maybe suggest that at what point do you continue to fool each other that we are on the road to somewhere 

when, in fact, we are not. What is your reaction to that? 

33 

Ambassador PORTMAN. Well, first, we are a lean and mean organization, about 212 people and about a $42 million budget, which 

is tiny by government standards. 

Chairman THOMAS. So, my 10 percent was more accurate than 

I thought. 

Ambassador PORTMAN. Yes, and maybe closer to 20 percent. 

[Laughter.] 

Ambassador PORTMAN. It is a great group of people, high quality and highly-motivated career people for the most part, but it, for 

the most part, was the career side of it. They are all highly motivated and highly skilled. But you are right. We probably have 

sometimes fallen into this trap of continuing to try to work through 

some of our negotiations when our time might be more productively 

spent prioritizing agreements where we can make more progress, 

so I will take that under advisement. I would appreciate it if you 

would give me some more specifics, because you have followed this 

over the years, and that goes to other Members of the Committee, 

as well. 

Chairman THOMAS. Well, I can give you some examples. For example, bills introduced in the Congress are good only for as long 

as the Congress meets, which is no more than 2 years and then 

they are all dropped and you have to start over. At some point, we 

have to create a sense of timing, if not urgency, among some of our 

friends, and, of course, that goes to ongoing and existing relationships, as well. I just think we need to assess where we are and 

what is helping us get to where we say we want to go and I am 

very anxious to get that prioritization by the United States Trade 

Representative, not necessarily by other agencies of the U.S. government who may have reasons other than the very narrow and 

important trade aspect that you folks are focused on, and I am 

going to have continuing discussions with you over this and I appreciate it. 

Ambassador PORTMAN. Thank you. I can provide you something that is a draft that we work from in this regard, but perhaps 

we could even refine it further. 

Chairman THOMAS. I think we will shorten it significantly. The 

gentleman from New York. 

Mr. RANGEL. Thanks again, Mr. Ambassador. You indicated the 

President was going to recommend a five-year extension of the 

General System of Preferences. Would that include the textiles and 

apparel? 

Ambassador PORTMAN. Mr. Rangel, I honestly don’t know if the 

budget got into that level of detail. I don’t think it did. It did not. 

Mr. RANGEL. Would that include the Andean Trade Program? 

Ambassador PORTMAN. No, it does not include ATPA. It is just 

with regard to GSP. But you are very appropriately mentioning another expiration that I probably should have mentioned, which is 

the Andean Trade Promotion Act. 

Mr. RANGEL. Well, I am concerned about how developing countries are going to be impacted by this globalization. At one point, 

we were talking about having one of your representatives work 

with the CARICOM organization. Are there any special considerations given to that group? 

34 

Ambassador PORTMAN. Well, under CBI, there are, and under, 

of course, CAFTA, they sent their members, which I think they all 

are. 

Mr. RANGEL. I think only one is. 

Ambassador PORTMAN. On CARICOM? 

Mr. RANGEL. No, CAFTA, only one, D.R. 

Ambassador PORTMAN. Only D.R.? 

Mr. RANGEL. Having said that, you are having some problems, 

you point out, with CAFTA. Any of those ‘‘I told you so’’ type of 

issues? 

[Laughter.] 

Ambassador PORTMAN. I am sure if you told me, it was something very profound and I should have listened. No, what the issue 

is is just making good on the commitments that I made to you, and 

a big part of it, frankly, right now is SPS. Sanitary and 

phytosanitary issues have become very difficult to work through. It 

is a controversial area, what we asked for. 

Mr. RANGEL. Could you send me—I am looking at the time, but 

he is leaving so I get as much time as I want now. 

Ambassador PORTMAN. He is very generous today. 

Mr. RANGEL. Could you tell me, in the Korean agreement, how 

you take care of those restrictions they have on American motor vehicles? 

Ambassador PORTMAN. Well, it is a big concern of mine because 

so few cars get in, fewer than 5,000 a year now, I believe, and we 

have worked through one issue with them even before launching 

that I think you and I have talked about, which is the auto emissions issue, which is an indirect import barrier for our automobiles, 

we believe, and they tend to be more indirect, not direct. But we 

are going to work through the auto issues as part of the negotiation 

with Korea this year and to me, this is one of the critical issues. 

We need to be able to see more access for our automobiles in Korea 

and our auto parts. 

Mr. RANGEL. Is there anything that the Congress can do to help 

you with the CAFTA–DR agreement? 

Ambassador PORTMAN. Yes. I think the Chairman just did, perhaps inadvertently, talking about the importance of SPS. You 

know, our farmers and ranchers look at the reduction of tariffs and 

are very pleased, but they also look around the world and see 

where their products are blocked because international standards 

are not used, science-based standards, and that is all we are asking 

for. I know this is a tough issue politically back home in many of 

these countries, but we need to bring more focus to that. I do think, 

Mr. Rangel, that by the end of this month, by the end of February, 

we should have two of the six countries fully implemented and I 

am hopeful that another two could come on in the next month or 

two. The only country that right now is not ratified, as you know, 

is Costa Rica. They have just gone through a Presidential election 

and are in a recount. I believe that we will be able to make 

progress there, as well, once that recount is over. We are making 

progress, but I have taken the position, and not all have agreed 

with this, but I have taken the position that to the extent we have 

got a commitment, even if it was oral, an oral commitment, not in 

writing, we need to be darn sure that that commitment is kept. 

35 

One of the concerns I heard raised as I talked to you and others 

about CAFTA was sometimes in our Free Trade Agreements, we 

finish the vote here in the House and the Senate and then commitments are not maintained. I want to be sure that with regard to 

the CAFTA countries that we start off on the right foot. 

Mr. RANGEL. As violently as we oppose CAFTA, we are still 

here ready to make it work as best that it can, so you can depend 

on our support in that process. 

Ambassador PORTMAN. Thank you, Mr. Rangel. 

Mr. RANGEL. Thank you. 

Mr. SHAW. [Presiding.] Thank you, Mr. Rangel. Mr. Portman, 

for some time, Mr. Rangel and I have expressed great concern 

about Haiti and its economy and the direction it has been going. 

They just got through with an exercise in democracy, and I will 

quote Secretary Rice when she said, ‘‘We will continue to support 

the people of Haiti as they progress toward a transparent and stable democracy.’’ I am concerned about the recent rioting in wake 

of the election and urge that the international community certify 

the election as quickly as possible. One thing I think that perhaps 

we can all agree on, that a democracy has a very difficult time, if 

not an impossible time, in surviving where there is no economy. 

Basically, there is very little economy in Haiti. What do you see on 

the horizon as to what preferences we may be able to give Haiti 

in order to stimulate some additional capital flowing into that 

country? 

Ambassador PORTMAN. I appreciate your question, Mr. Shaw, 

and your advocacy of this over the years. As you know, you and I 

worked with this when I was on the other side of this dais and I 

share your concerns. Mr. Rangel and I have talked a lot about it 

also in my new position. It is a desperate situation, not just the political situation today on the streets of Haiti, but the economic situation. There is an interest on my part in working with you and others to try to come up with some way to help Haiti. Once this election is resolved, it might be a good time to do that. The textile 

issue is a political concern here in the U.S. Congress. We want to 

be sure we come up with something that is balanced that we can 

get through the political process that we are not putting together 

legislation which doesn’t meet the concerns of other members of 

this Committee and the Congress who are concerned about additional textiles coming in, perhaps from third countries, even. 

I will say one thing that I like about what we did in CAFTA is 

we have a special arrangement we agreed to within a side letter 

from August 2004—I think Mr. Rangel was involved with this—between the U.S. and the D.R. that regards the preservation of the 

preferential treatment for the Haitian-Dominican Republic co-production of textiles and apparel, which should bring Haiti some relief. I think that’s one thing we need to follow as we get D.R. on 

board, is to be sure that that 2004 letter is one that is followed 

with regard to Haiti. 

Second, again, we would like to work with you in a number of 

ways, but specifically in the area of legislation, similar legislation 

that you have already introduced, Mr. Shaw and Mr. Rangel and 

others, to try to see what we can do to move forward with some 

kind of a preference program. I do think that what we are talking 

36 

about in the WTO will directly affect Haiti. There is this duty-free, 

quota-free commitment we have made under the WTO Doha 

Round. The U.S. commitment is to provide up to 97 percent dutyfree, quota-free by tariff line for least-developed countries. Haiti 

qualifies for that. 

Mr. SHAW. Let me switch your attention to Saudi Arabia. Back 

in September, we announced our favorable impression of bringing 

Saudi Arabia into the World Trade Organization. Part of that commitment is to abide by the provisions of the World Trade Organization. One is to provide Most Favored Nation status to other members of the World Trade Organization. In December, Saudi Arabia 

made the announcement that they would continue their boycott of 

Israel. This seems to be very inconsistent with membership in the 

World Trade Organization. Where do you see this thing going? 

Ambassador PORTMAN. Well, it is a big concern of the United 

States, of course, because we worked with Saudi Arabia on the 

issue of their WTO accession and part of coming into the WTO is 

MFN treatment, in other words, nondiscriminatory treatment for 

all members. Saudi Arabia did not, when they joined the WTO, invoke non-application with regard to Israel or anybody else. So, as 

far as we are concerned, Saudi Arabia is required under the WTO 

to provide that kind of treatment to all the members of the WTO 

that they have agreed to. 

We have been monitoring this situation on the boycott. We have 

raised this with officials there in Saudi Arabia. We have received 

assurances from Saudi Arabia that they will abide by their WTO 

commitments. In addition, Mr. Shaw, I am able to tell you today 

we are sending a team of experts from the Departments of Commerce and State to work with the Saudi government on boycott 

issues as they affect U.S. companies. In terms of who might have 

a legal right, Israel is a member of the WTO, rather than the 

United States would have that legal right, but again, we have 

raised it with the Saudis and they tell us they will follow through 

on their WTO obligations. 

Mr. SHAW. My time has expired. Mr. Levin? 

Mr. LEVIN. Thank you, Mr. Shaw, and welcome, Mr. Ambassador. Just two quick comments so that we don’t lose the forest for 

the trees, which I think sometimes happens in trade issues. There 

are so many very specific issues. I hope as we talk about this, we 

don’t lose sight of the impact of the trade deficit. It is not sustainable, and your work only relates to part of it. I was looking over 

a chart recently. There really are no magic bullets in trade. Some 

of the FTA partners of recent times have seen their surplus with 

us increase. In other words, our deficit has increased, not gone 

down. 

Secondly, Mr. Rangel raised the issue of international worker 

standards, core labor standards, and I simply want to say that it 

is really part of a larger issue of the impact of globalization. Trade 

isn’t simply a commercial issue, the flow of goods no matter how 

they go, but it is part of a much larger issue and trade is so much 

a part of the impact of globalization. So, when we talk about workers, we are talking about one component of larger issues of the impact of globalization, and that is so compelling, for example, in 

Latin America, where I was recently, where there is a turn against 

37 

globalization because people feel they haven’t benefited from it. So, 

when we talk about trade issues, I hope we keep in mind it is part 

of a larger context of globalization, and that is true of worker 

rights. It is not a narrow focus. 

Let me ask you three quickies together so you can answer. On 

China, you issued your report yesterday. You mentioned how hardfought the PNTR was. There were two aspects I want to refer to. 

One was the transitional review mechanism. We provide for an annual mechanism. Mr. Ambassador, we haven’t done well with it. It 

hasn’t worked, and the GAO said that. I would welcome your comment. Secondly, we put in there a general safeguard, the 421 safeguard. Four times out of four, the administration has, even though 

the ITC said there was a reason to use it, this administration has 

said no. Secondly, on Korea, I am glad you talked about the nontariff barriers. You sent us a letter just a few days ago saying, ‘‘I 

agree with you. It is critical that we include NTBs as an integral 

and equally important component of the Doha Round.’’ In the opening remarks with Korea, there wasn’t a single reference, as I read 

it, to the automotive sector. It is two-thirds of our trade imbalance. 

Last, on dumping, it was not so long ago, I guess six months ago, 

you said, at the Doha Ministerial Conference, U.S. negotiators insisted upon and obtained a mandate under which the effectiveness 

of our trade laws will be preserved. Now, at Geneva, and before 

that at Hong Kong, there was agreement for a very general negotiation of the anti-dumping rules and it is hard to reconcile that 

when we were assured way back at Doha that what we agreed to 

was not a broad negotiation. So, if you could touch those three 

things, China, our failure to use the annual review and the safeguard, Korea and the anti-dumping. Thank you. 

Ambassador PORTMAN. Thanks, Sandy. Let us start with 

China. You are right. Under the PNTR, we did set up this mechanism. Perhaps we could use it more effectively, and I just asked 

Tim to look into that, Tim Stratford, who you know is a new Assistant U.S. Trade Representative for China who has got a lot of good 

experience he brings to bear on this. In terms of the safeguards 

cases, we talked about the textiles safeguards, which is separate 

from the 421, but we did get that as part of the accession. We have 

been pretty aggressive there, both in invoking the safeguards and 

in using that as leverage to come up with what I think has been 

a good agreement and widely applauded by our industry on both 

sides, which is unusual. In terms of 421 cases, you are right, we 

have not taken a 421 case forward yet. We have had, I think, four 

and the most recent one was steel tubes. That is the one I got involved with more and worked with Phil English and you and others 

on that. At the end of the day, the analysis from the ITC was so 

clear that there were third countries that would be providing the 

same product at low cost that it would not have the benefit for the 

domestic industry that would have made the safeguard invocation 

appropriate. That is basically how the analysis came out. 

It does not mean we are not going to use 421. When the facts 

indicate that it is the appropriate channel to take because there is 

a determination of a need based on a surge for a safeguard, we will 

use 421, and I in particular will take a very careful look at it. On 

that one, we did spend a lot of time looking at it. With regard to 

38 

Korea, you are right about the automotive sector, and you and I 

have talked about NTBs in relations to Doha. We are the ones who 

keep putting that on the table, by the way, and insist on it. I don’t 

think anybody else among the membership has a particular interest right now, and so we are trying to generate more interest in 

that. But we are holding firm that it has to be part of the overall 

reduction of barriers, not just the tariffs which we talked about 

earlier, but also, as I mentioned in my remarks, the non-tariff barriers, particularly in the automotive sector. With Korea, it is one 

of the major items on our list to be negotiated. I don’t know if I 

neglected to mention it at the launch. That is what you are indicating. I shouldn’t have if I did, but it is very much on my mind 

and on the minds of the Korean negotiators, more importantly. 

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

Ambassador PORTMAN. Let me just, if I could, just quickly on 

dumping, because this is an issue I know a lot of members have 

a concern about. The effectiveness of our trade laws be preserved 

is the general issue that we have fought hard for, and for a while, 

we were kind of in this defensive posture. You were there in Doha. 

You saw it. It was sort of the United States against the other WTO 

members. That has changed, and all I can tell you is you didn’t see 

anti-dumping raised as a big issue in Hong Kong and there was a 

reason for that and that is the U.S. has engaged and engaged aggressively on this. We have put a number of proposals on the table, 

in fact, which we had not done initially. We were more in a 

hunkered down defensive posture and now we are more on the offense and we are talking about due process, we are talking about 

transparency, we are defending the system that we have in place. 

Frankly, other countries are beginning to look at our program more 

objectively rather than to just say, gee, the U.S. must be abusing 

this process. We are not. We have a very transparent, open process. 

We have one that follows due process. Not all countries do that, including some that have complained about our system. So, that is 

going to be the approach we will continue to take to end up with 

something that may change the way we must implement some of 

our laws, but will not change the effectiveness of our laws, and I 

would even argue could improve the effectiveness of our laws. That 

is our objective. 

I would be happy to give you or any other members who want 

a more detailed briefing on this. We do have someone on our team 

here that follows this very closely and also, of course, in Geneva, 

we have someone who is exclusively focused on the rules issues, 

and then the Department of Commerce, led by Frank Lavin, who 

is the new Under Secretary, have taken on this issue. In fact, I 

asked Frank to take the lead in Hong Kong, meeting with countries 

all throughout the membership, and I think that is one reason, 

again, by our focusing on it and pushing it and being proactive 

rather than sitting back, we were able to see that not be raised as 

an issue against the United States. 

Mr. SHAW. Mrs. Johnson? 

Mrs. JOHNSON. Thank you, Mr. Chairman, and welcome, Ambassador Portman. It is very good to hear these last remarks of 

yours that we are taking a far more aggressive and proactive 

stance. As the most open market in the global trading system, it 

39 

is very important that we preserve our defensive laws against unfair trading practices by others. I also want to thank you for the 

very close working relationship you are developing with the Foreign Commercial Service and embassies, particularly in China. You 

haven’t had a chance to touch on that, but that is extremely important. It is very important to me because our embassy and our Foreign Commercial Service officers have been extremely helpful to 

small manufacturers in my district that don’t have the resources 

of some of the global manufacturers at their own personal disposal, 

and so they have had a lot of help in dealing with finding partners, 

trustworthy partners, and finding both a market for their goods 

and a way to reduce their own costs in America. 

But I do want to ask you to talk a little bit more about this problem we have with Airbus. I was absolutely astounded in 2004 when 

some of the E.U. member states put on the table new subsidies for 

new Airbus products and they covered the waterfront. They were 

launch aid subsidies. They were grants and government-provided 

goods and services to develop, expand, and upgrade Airbus manufacturing sites. They were loans on preferential terms, forgiveness 

of debt from past launch aid, development financing, equity infusions, grants. It is sort of appalling when at the same time they 

were frustrated with our failure to change our law in a way that 

is very costly to some of our biggest global competitors, which we 

did do and which they now have just yesterday ruled is non-compliant. But I see sort of a foot-dragging here, and the idea that the 

interim report due in November may slip is very concerning to me 

because if you look at the whole history of subsidies in this area, 

it is quite astounding, the degree to which governments outright 

and publicly announce subsidies to Airbus. So, where is this? Is 

this as slowed down as it appears to be from the rough summary 

in your notes? 

Ambassador PORTMAN. Well, two things. One, I hate to tell 

you, but the Welsh government has now announced its intention to 

provide direct trade-distorting launch aid, which is one of the reasons that we went forward with the new filing that you followed, 

I am sure, a couple weeks ago in Geneva in the WTO. We also believed it was necessary to make the new filing to be sure that we 

were including all of the various claims that we would have on a 

process basis. There were some procedural deficiencies that we 

thought we needed to address. So, we have refiled and some have 

said, well, that might delay the decision. I hope not. I share your 

concern. I think we need to move forward and move forward aggressively. 

At the same time, Mrs. Johnson, we are always open to discussions and to a negotiated solution. That, to me, would actually be 

the preferred option, but it is only possible if the E.U. is prepared 

to eliminate all forms of market-distorting launch aid that E.U. 

member states have given Airbus to help it develop and to produce 

new aircraft models, and that is not something they are willing to 

do at this point. So, in the meantime, we must move, and I think 

move aggressively on the litigation front to protect our rights. We 

have told the European Union that we are willing to put on the 

table the subsidy issue on both sides of the Atlantic. We believe 

40 

strongly that we have a strong case and we will continue to pursue 

that case. 

Mrs. JOHNSON. Thank you. 

Mr. SHAW. Mr. Cardin? 

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

Portman. Let me go back, if I might, first to the Doha Round. As 

I said in my opening statement, I applaud your leadership and am 

disappointed in the leadership among our trading partners. I want 

to underscore the point that Mr. Levin made on our anti-dumping 

and countervailing duty laws, and I appreciate your statements. I 

think that we have got to be extremely careful that we don’t get 

ourselves in a position where we have no friends and find that we 

are compromised on our laws where we should be strengthening 

them and not weakening them. I want to also talk a little bit about 

services, because I am concerned that with the new approach that 

was taken in Hong Kong, which is using this collective approach 

where countries of like minds are trying to come together with 

some proposal on services, could be a race to the bottom rather 

than to the top. I just wanted to get your observations as to where 

our expectations are on the services and to allow you a little bit 

more time if you would like to comment on the anti-dumping and 

countervailing duty laws and the rules agenda within Doha. 

Ambassador PORTMAN. Thank you, Mr. Cardin, and I share 

your concerns with regard to services. As I said at the outset, or 

in my prepared remarks that you have before you, services is extremely important to the United States. This is something where 

we have a comparative advantage. It is also very important to Europe and it is a place where the E.U. and the U.S. should be able 

to work together, even as we have not been able to work together 

on the agriculture areas. We also have a very strong working relationship with India. In fact, India and the United States co-chaired 

a services working group in Geneva and services is extremely important to the development aspects of the round because it helps 

modernize economies through things like telecommunications, financial services, express delivery, and so on. So, it is a very important part of the round. It is more difficult to get at because it 

doesn’t relate to this quantitative measure of tariffs. It is more like 

the non-tariff barriers that Mr. Levin and I were talking about. So, 

it is caps, it is cross-border restrictions, it is regulations. What I 

think we achieved, I hope we achieved in Hong Kong—it certainly 

was our intent—was a more effective way to get at it through this 

what I call plurilateral, where you have these members, WTO 

members that have like interests, similar interests coming together—— 

Mr. CARDIN. As long as those interests are to open markets and 

not restrict markets. 

Ambassador PORTMAN. I see what you are saying, but it has 

worked in the past and, you know, I would refer you to the telecommunications successes we have had on sectors where you get 

countries working together, importers, exporters, where you have 

an interest, and you are able to make more progress and almost 

leapfrog the overall general formula that you might come up with. 

That is the idea here. We will know at the end of this month because we will have the results in from the revised offers. The initial 

41 

offers, which were bilateral, were not satisfactory from our point of 

view, nor were they from a number—from the E.U. or the Indian 

point of view. So, I am hopeful that this process will work better, 

but we are going to really push on that. I also think we ought to 

have a mini-ministerial meeting just on services. 

Mr. CARDIN. I appreciate that. 

Ambassador PORTMAN. That is something that Peter 

Mandelson offered and I think it is a good idea. 

Mr. CARDIN. I think that would be helpful. Let me just move 

on quickly to the FTAs because I think we have a model with Bahrain that worked and I just really want to underscore the point 

that you and I have gone over on international labor standards. 

Our concern is when we are dealing with countries that we have 

trade preference laws currently, where we allow certain preferential treatment of their imports and a commitment to meet 

international labor standards, that we move to an FTA and we 

don’t have in the FTA laws that are adequate to ILO standards, 

that we are actually moving backward. You and I have talked 

about what we can do and what we can’t do and I personally believe we can adopt international labor standards and core agreements. 

But I would urge you on the labor front that the trading partners 

who want FTAs with us need to comply with international labor 

standards, not their definition of it, but objective, independent definitions, and, of course, we are willing to work with our staffs to 

make sure that there are no misunderstandings in that regard. The 

last point, I want to compliment you in one aspect on Peru, and 

that is it does not contain sugar. I know a lot of people are going 

to talk about sugar and I know that is an issue that comes up frequently, but I do believe that in the agriculture areas, we are better off dealing with these on our policies either on the agriculture 

bill or in the WTO. I just wanted to point that out and was pleased 

to see that that was not included in the Peruvian agreement. 

Thank you, Mr. Chairman. 

Ambassador PORTMAN. A couple of things. One, with regard to 

sugar, I don’t think it is going to be an issue because there is so 

little sugar, but there is a little bit of sugar, roughly 10,000 

tons—— 

Mr. CARDIN. But there are other Andean countries where that 

could become more of an issue. 

Ambassador PORTMAN. Exactly. Exactly. I happen to have miraculously before me here a letter from the American Sugar Alliance talking about the FTA with Peru consistent with what you are 

saying. It says, ‘‘In consequence of the care shown by the administration in fashioning these provisions, we are pleased to support 

this agreement,’’ which has not been the case, as you know, in 

other agreements, including CAFTA, where we have had some 

sugar imports that were increased. So, I do appreciate your comment on that, but I just wanted to make clear there is some increased sugar, but it is minimal. 

Just quickly on anti-dumping, let me just, in response to your 

and Mr. Levin’s, if I could just for a second, Mr. Chairman, here 

are some of the proposals that we have made. I mentioned transparency and due process. We have also made proposals on 

42 

strengthening subsidies disciplines, which is in our interest; stronger rules against circumvention, which is something we think we do 

better than a lot of other countries on trade remedies; and abusive 

new shipper reviews. So, again, instead of being in a defensive posture, I think we have got some good proposals on the table that actually make sense to help strengthen other disciplines around the 

world that affect our exporters. I feel better about the dynamic of 

that negotiation in Doha as a result. 

Finally, on labor, I do appreciate your comments here and look 

forward to working on that. I have got more comments that we 

talked earlier in the library about, about why we are where we are 

with TPA, but I will just say that I appreciate working closely with 

you and Mr. Rangel and others on Bahrain. I do think we can 

make progress and not move backward on each of these agreements. I think we have. 

Mr. SHAW. I would like to voice agreement with the gentleman 

from Maryland, the ranking member on the Subcommittee on 

Trade, that the new Commerce report that came out just yesterday 

is showing that our sugar program is actually costing us jobs as 

companies are moving out of this country into other areas because 

of the high price of sugar in this country and it is something that 

we need to come forward and take a close look at. Mr. Herger? 

Mr. HERGER. Thank you, Mr. Chairman. Mr. Ambassador, it is 

great to have you with us. Thank you for the outstanding job that 

you are doing in an area that is so crucially important to not only 

the economy, the entire United States, but particularly of importance to our agricultural communities that I represent. With over 

$27 billion in farm value and 250 commodities, California leads the 

nation in agricultural production. According to a November 2005 

report by the University of California Agriculture Issues Center at 

U.C.-Davis, in 2004, for the first time, California had agricultural 

exports totaling over $8 billion, much of which originated in my 

home district, including almonds, dairy, rice, beef, dried plums, 

peaches, just to name a few. 

Understandably, of primary importance to our region is the improvement of global market access for California agriculture, 

whether through bilateral trade agreements or the continuing 

Doha Round negotiations. For example, through the recently announced U.S. CREA–FTA, we have a real opportunity to expand 

market access for California agriculture, 4 percent of the State’s 

total in 2004, through reduced tariffs and liberalized import policies. Of course, there are still obstacles to overcome, such as the 

reluctance of the Koreans to discuss rice market access. Mr. Ambassador, could you maybe discuss this problem we are having with 

Korea concerning the rice and some of the other crops that face 

higher applied tariffs, such as our tree nuts? 

Ambassador PORTMAN. Thank you, Mr. Herger, and let me 

thank you for your strong support of our agriculture export interests. You have been a leader on that in the FTAs but also in Doha. 

I think with regard to almonds, you are looking at about 70 percent 

of the product now being exported, if I am not mistaken, so it is 

a huge interest among so many of the growers. Most of those products you named in your district, by the way, received little or no 

subsidy, so for them, what they are looking for is a level 

43 

playingfield out there where they can compete fairly, and it is not 

fair now. The average tariff is 62 percent globally in agriculture. 

Our tariffs in this country, on average, are 12 percent. I don’t think 

that is unfair for us to ask for that and I think we can do it 

through bilateral, regional, and multilateral efforts and I look forward to working with you continually on that. 

With regard to Korea, you are right, it is a huge opportunity for 

us. It is our seventh-biggest trading partner, but I believe it is now 

our fifth-biggest agriculture market and the potential is enormous 

because they have significant barriers in place. Even though it is 

a big market already, significant barriers are in place, so there is 

a lot of potential for California agriculture and agriculture around 

this country. We, as you know, in our FTAs require a comprehensive agreement. We have the gold standard in Free Trade Agreements. I know sometimes they get controversial here in the halls 

of Congress, but I will tell you, around the world, people look at 

our FTAs as being the most comprehensive, the most difficult, 

frankly, because they require the most market access, and with regard to Korea, we didn’t launch this FTA without Korea acknowledging that and understanding that and that means it covers agriculture. We haven’t gotten to the point of negotiating yet because 

we have the agreement up here on the Hill and we have to wait 

a certain number of days, 90 days, before we can start the intense 

negotiations, but we are poised to do that, including with our agriculture negotiator. 

I want to take this opportunity, if I could, Mr. Herger, to introduce Dick Crowder, who you already know, but Mr. Crowder is our 

new agriculture negotiator as of a couple of months ago. Through 

the Senate process, he is confirmed. He is an ambassador. He negotiates for us. He got back from Europe just yesterday. He was the 

chief negotiator for the United States back during the Uruguay 

round when this function was actually at the Department of Agriculture. He has got a lot of experience in the private sector and we 

are delighted to have him on board. He is tough and he focuses on 

exactly what you are talking about and he will be very involved in 

this Korean FTA. In fact, he has made some comments about the 

Korean FTA which have been picked up by the media in Korea and 

here and the comments he has made have been basically the obvious one, which is we have comprehensive agreements that include 

agriculture and it is going to have to be dealt with, including rice. 

Mr. HERGER. Thank you. Would you mind commenting on beef 

and restoring access to beef to Korea? 

Ambassador PORTMAN. Well, as I said earlier, we have made 

some great progress just in the last couple of months on beef. We 

hope to make some more progress in the next couple of months 

with regard to a number of different countries. Japan was a step 

forward, then a step back. We are hoping to be able to restore that 

market soon after what I am sure will be a very comprehensive 

and objective report by the Department of Agriculture. With regard 

to Korea, and before we launched the FTA, there was a decision 

made on the basis of science in Korea to expand the U.S. beef market there for the boneless product. Boneless beef is our largest export and it is an important accomplishment for our cattlemen. It 

44 

was for cattle 30 months and younger, which is the international 

standard, the OAE standard. We were very pleased with that. 

What we are still seeking, though, after commending our Korean 

trade partners for this opening is that the bone-in product, including short ribs, also be included. We believe that the science supports our position strongly. We believe that even the more recent 

decisions that have been made here in the United States with regard to certifying the bone-in product support our decision, and we 

believe that the international standards support the position that 

we have taken. So, we are hopeful that through the process of additional discussions and focus on science and focus on the international standards, we will be able to open the market even further 

in Korea. But we are very pleased that prior to the launch of the 

FTA, we were able to get a significant opening with regard to the 

boneless product. 

Mr. HERGER. Thank you very much. 

Mr. SHAW. The time has expired. Mr. McDermott? 

Mr. MCDERMOTT. Thank you, Mr. Chairman. Welcome, Mr. 

Portman. It is good to have you back. We hope we can work together on some bipartisan issues around Africa and other things, 

but I want to ask you a kind of a philosophical question. Recently, 

our trade policy with Cuba came into focus when the Treasury 

called down to some hotel in Mexico City and said, you can’t have 

American businessmen meet with Cubans in your hotel. Was that 

kind of thing cleared through you or do they just operate like that, 

sort of independent of you? 

Ambassador PORTMAN. Dr. McDermott, I am not aware of the 

meeting or the U.S. government action there, but I will say that, 

as you know, this is not something that is handled within USTR. 

It is handled within Treasury in terms of the specific issue that you 

are talking about with regard to the sanctions, or the State Department with regard to our policy. So, they didn’t nor should they 

have cleared anything with me. 

Mr. MCDERMOTT. Did they, when they made the State of the 

Union speech, ask you anything about the oil business at all? I notice that the president or the vice Chairman of Chevron just went 

out to Jeddah in Saudi Arabia and said, ‘‘I don’t think anyone actually believes the United States can end its dependence on oil in the 

Middle East at all. Frankly, I think these comments reflect some 

misunderstanding of global energy supply.’’ Was that cleared with 

you? 

Ambassador PORTMAN. That comment? 

Mr. MCDERMOTT. Well, no, not the comment—— 

[Laughter.] 

Mr. MCDERMOTT. —the President’s speech about we are going 

to reduce by 75 percent our dependence on Arab oil, Saudi Arabian 

oil. 

Ambassador PORTMAN. No, but I wouldn’t expect it to be. I will 

say, I mean—— 

Mr. MCDERMOTT. Well, how does—— 

Ambassador PORTMAN. You raise an important issue because 

oil is a big part of trade, in fact. If you look at our deficit numbers 

this year, which are unacceptably high, and we can talk about the 

relationship to trade policy, which as Mr. Levin said, it is more 

45 

complicated than that, it has to do with a lot of factors, but oil represents, I think, 60 percent. Sixty percent of the increase in our 

trade deficit from last year to this year was oil. 

Mr. MCDERMOTT. That is why I am raising this question—— 

Ambassador PORTMAN. I mean, that is a significant amount of 

trade. 

Mr. MCDERMOTT. —because it seems to me that we sit here 

talking. I have been on this Committee as long as you were and 

before that, actually. I have been here 16 years and I have listened 

to guys come in from this office over and over again and tell us, 

next year, it is going to be better in the trade field, and every year, 

it is worse. We are up to $700 billion and who knows where it will 

be when you are all done. Then I read a little something in today’s 

newspaper which I sort of wonder what this mean when it says, 

‘‘Syria Switches to the Euro Amid Confrontation with the United 

States.’’ Now, if they switch to the Euro and then maybe the Iranians switch to the Euro, tell me what that means in trade terms 

if people that are trading with us start switching from the dollar 

to the Euro. How does that affect us? I mean, is it meaningless? 

Ambassador PORTMAN. Probably not. Let me just say, I will not 

be one of those people who comes before you and promises the 

trade deficit will be less next year. I won’t do it. 

Mr. MCDERMOTT. You will not? 

Ambassador PORTMAN. I will not, and I will also not tell you 

that it will be more. I think there are lots of factors that affect it. 

Every economist I talk to tells me the same thing, which is, in 

varying degrees, there are factors like the one you just mentioned, 

which is currency or monetary policy or other macroeconomic policies. We mentioned in the pre-meeting the savings issue and the 

consumption issue and the gap between savings and investment. In 

this country, we have low savings. In China, very high savings, up 

to 50 percent. Those are very important factors in terms of how the 

trade balance ends up. So, as I said to you previously, it could be 

we do all the right things in trade policy and actually increase exports as a result, which is a more important barometer, and still 

the trade deficit might go up, or it might go down next year, which 

a lot of economists are predicting. 

Mr. MCDERMOTT. Well, then explain to me what I say to my 

constituents, because this is the dilemma many of us have. I go 

home and they say, we have got two huge deficits in this country. 

The Treasury is in the tank, borrowing money all over the world, 

and our trade deficit is out of sight. Some people think this is 

unsustainable. Actually, some people with economics degrees are 

saying things like that. How do I explain the fact that the Trade 

Office comes before us and says, there isn’t really much I can do 

about the trade deficit. I am just here negotiating with folks back 

and forth about cotton or, you know, whatever. What do I say to 

my constituents to make them not worry about that $700 billion 

trade deficit? 

Ambassador PORTMAN. Well, Jim, I would tell them a few 

things, and you may not want to hear this, but this is what—you 

know, only several months ago, I was in your position, and one is 

that I think it is a concern, more mid- and long-term, and it is a 

question of sustainability or durability of a large imbalance in the 

46 

current account deficit. But I would also tell them two other things. 

One is the trade deficit is not an indication of our economic 

strength. Look what has happened in the last year. We have added 

two million jobs to this economy. We have grown at 3.5 percent, the 

envy of the developed world. We have gone from 5.2 to 4.7 percent 

unemployment. The strength of the U.S. economy, in fact, is a factor that is pulling imports here. In other words, as our economy 

grows in strength—— 

Mr. MCDERMOTT. Can I just add one fact? 

Ambassador PORTMAN. —the trade deficit goes up. 

Mr. MCDERMOTT. Could I just add one fact for you? 

Ambassador PORTMAN. Yes. 

Mr. MCDERMOTT. That is that wages in this country actually 

dropped last year. 

Ambassador PORTMAN. Well, it depends on what analysis you 

look at. I—— 

Mr. MCDERMOTT. So, the people that are living in my district 

are really excited about these graphs that go up—— 

Ambassador PORTMAN. Yes. 

Mr. MCDERMOTT. —but when their paycheck doesn’t go up, 

they think there is something wrong. 

Ambassador PORTMAN. I would just tell you, if we didn’t have, 

and we talked about this at the outset, the more open trade philosophy that we have relative to the rest of the world, those wages 

would go down even further because wages have improved as a result of trade. You have been an advocate of trade. You understand 

this. But I think it is something you need to explain. It is not the 

best barometer. During the depression, we had a nice surplus. You 

know, during recessions, we have had nice surpluses in terms of 

trade. So, it is not a direct indicator of the economy. 

A final point is, in terms of what this guy Portman can do or not 

do per your comment, I am not telling you that it doesn’t have an 

impact. It does, and it is definitely in our economic interest for us 

to encourage exports and be sure imports are fairly traded here. It 

is the right thing to do and it does have an impact on the deficit, 

but I don’t want to mislead you or mislead your constituents by 

saying it is the silver bullet, because the macroeconomic factors, 

the currency issue you talked about—switching to the Euro might, 

incidentally—I am not an economist, so I should be careful here, 

but it might actually have a positive impact on the trade deficit. 

But would that be positive for our economy? I don’t think so. The 

strength of our economy is, in part, reflected in the fact that people 

want to invest here and invest in dollars. But I have gone beyond 

time, so that is my advice to your constituents. Thank you. 

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

McCrery? 

Mr. MCCRERY. Thank you, Mr. Chairman. Ambassador 

Portman, welcome, and I know this is not your bailiwick, but my 

information is that, in fact, after-tax real wages have gone up in 

this country, not down, and that is to me the best measure of what 

gets in the pockets of American workers. But now getting to your 

bailiwick, I want to compliment you for the work that you did to 

get China to revoke its anti-dumping duties on kraft liner board 

from this country. It is a very, very important decision for our doVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
47 

mestic industry and you were very critical to that decision being 

made by China. I was wondering, in light of the controversy when 

we were trying to decide whether we should support China’s accession to the WTO, if you might want to use this as an example, 

along with some others, maybe, to point out the value of having 

China as part of the WTO and perhaps use this as a lesson for future considerations of countries entering the WTO. 

Ambassador PORTMAN. Mr. McCrery, that is a great point and 

I appreciate it. I did raise it earlier and mentioned you and I 

talked about it, but this is an opportunity for us to use the leverage 

that we have obtained by China’s accession to the WTO. I mean, 

it is a great example. Without having the WTO case as a threat, 

we would never have gotten this resolved, and you are right, it was 

the best result for the U.S. industry because they actually rescinded their order rather than a year and a half of litigation, probably another 6 months for appeal, and then the remedy being we 

could retaliate by increasing tariffs on Chinese products, which, depending on what products we chose, could also raise concerns and 

hurt our consumers and prices and choices. 

So, I think we need to use these international mechanisms we 

now have with China more effectively and it is our intent to do 

that, but this is a great example. If we had brought the WTO case, 

I would probably be getting more plaudits from this Committee and 

particularly from some members who have been critical of USTR 

for not being tough enough on filing WTO cases. I am telling you, 

I am so glad we didn’t have to file the case because we got a better 

result for U.S. commercial interests and we opened up a market, 

a product that comes from 14 of your States that is very important 

right now in our trade with China. By the way, our exports increased in China over 20 percent again last year, the third year in 

a row, making it our largest big market, export market for the 

United States, the highest growth. So, I think it is a good example 

and I think it is one that shows that we do have some leverage 

that comes from that accession. 

Mr. MCCRERY. Just explain a little bit more as to why China’s 

being a member of the WTO gave us leverage. 

Ambassador PORTMAN. Well, specifically in this case, we would 

not have had the ability to take them to the WTO, so they would 

have been in a situation, as other countries are now, Russia is an 

example, where we don’t have the ability to go to the WTO and to 

file, in this case, an action against something which we believe was 

WTO illegal, which was an anti-dumping order against our products, which we believe was a protectionist move that was not consistent with their WTO commitments. 

But even more generally, Jim, as you know, there are a number 

of disciplines within the WTO that relate more generally to trade 

that are very helpful to us and these have to do with things like 

procurement. That is why we want China to get in the government 

procurement agreement in the WTO. TRIPS, we talked about, intellectual property. That is why we were able to do this Article 63.3 

invocation with China on intellectual property and why we are able 

to, with regard to intellectual property, talk about the WTO possibilities. So, there are a number of different areas where we benefit, 

and I see it now more clearly than ever, being in this position, 

48 

where it is in our interest to have them in the WTO in a rulesbased system. 

Mr. MCCRERY. Do we win most cases we bring to the WTO? 

Ambassador PORTMAN. Our actual averages, in terms of offensive cases, we win most of them. In terms of defensive cases, I don’t 

know if it is 50 percent. Jim, what is the number? Our track record 

in the WTO has been pretty good, in part because when we take 

a case to the WTO, we feel we have a pretty good shot at winning 

it, and that is one of the criteria that I would use going forward, 

as I talked about earlier. We have a 56 percent win-loss record 

when you combine offensive and defensive cases. On offensive 

cases, we have won eight and lost one. On defensive cases, we have 

won 12 and lost 15, for an overall 20 to 16 record, 56 percent. In 

the Clinton administration, it was similar, 54 percent. 

Mr. MCCRERY. So, bottom line, our experience in the WTO has 

been that our participating in the WTO has helped us with enforcing trade laws around the globe. It helps our ability to trade and 

open markets. 

Ambassador PORTMAN. Yes, it does. One thing, we can talk 

about figures, which are important and I am happy to go through 

that, but there is also a qualitative measurement here. On antidumping, for instance, some have said they are concerned because 

we have lost some WTO cases related to our trade remedy laws, 

countervailing duties or anti-dumping. When I look at these cases, 

on the core issues, we have actually won most of them. So, it is not 

just the win-loss record. I think you need to look behind that and 

see, what is the real meat of the matter? 

For instance, in the Canadian lumber dispute, which has been a 

very tough one and it has been litigated to death, as I have said 

on occasion, with regard to the fundamental issue of whether the 

Canadian practice with regard to stumpage, which Wally Herger 

and others have been very involved in, and you have been involved 

with, the WTO upheld the fact that it was a subsidy. That was a 

core issue. 

So, we may have lost on some extraneous issues—one example 

is we lost on one issue—I don’t have the numbers here in front of 

me—and we had to reduce our tariff by something like in the range 

of 27 percent down to 24 percent. Well, that is important, but what 

was more important is in that same matter, we actually won on the 

core issue. So, you can both look at the win-loss record and the underlying issues, and there, I think an objective analysis would demonstrate that it has been to our benefit to have this rules-based 

system. 

Mr. MCCRERY. Thank you. 

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

of Georgia? 

Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman. Thank you, Mr. Ambassador, for being here. It is good to see 

you back in the Committee. We miss your wonderful presence in 

the Committee, but we greatly appreciate your service as our Trade 

Representative. I think Mr. Levin raised a point a moment or so 

ago and I am not sure you responded. With the growing 

globalization of the economy and trade of the community of nations 

and this growing sense of discontent and unrest when there is a 

49 

world-wide needing. What can you do to eradicate that or to diffuse 

it? 

Ambassador PORTMAN. That is a good question. I think Mr. 

Levin was talking about Latin America, as I recall, and being down 

there and sensing some concern. 

Mr. LEWIS OF GEORGIA. There is a feeling on the part of a 

large segment of the world population that they are being left out 

and left behind. 

Ambassador PORTMAN. I guess what I would say is two things. 

One, I know that we have not done an adequate job in communicating the benefits of opening markets and in giving people opportunity. If you look at the data on Africa, for instance, and you 

look at those countries that have been relatively open—I talked 

about the services market earlier, or on agriculture products, which 

is very sensitive, but the countries that have been more open are 

the countries that have grown much more rapidly, and I can get 

you some World Bank data on this, but it is very compelling. 

You look at countries that have been relatively open. They are 

the ones that have been able to raise the standard of living in their 

country, not just for the wealthy, and that is an issue is distribution of that gain, but to provide water and health care and just the 

basics. We need to hold that up more and hold up the countries 

that have made tough decisions to do that, particularly when they 

are democratic countries. That is what this MCC is about, John, is 

in part, this Millennium Challenge Corporation, the way you all 

now give money through foreign aid. Trade is one of the considerations and openness and, obviously, lack of corruption and democracy and so on and human rights. But we need to hold that up 

more in the countries that have done a good job, and in Africa, 

there are a number of examples. I think we need to do a better job 

of communicating what the benefits are of trade. 

Second is with regard to something like the Doha Round, where 

I get involved with this issue a lot because I work a lot with the 

nongovernmental organizations, I will tell you, I think there is a 

little different attitude that I am perceiving, and maybe I am not 

picking up enough on the ground, but a number of the so-called 

NGOs, nongovernmental organizations, that used to be very antitrade are now looking at trade differently. Obviously, they are very 

supportive of our cutting our domestic support in agriculture because they think that is a big negative to the developing country’s 

ability to export their agricultural products, so they are pleased 

with that part of our proposal right now, so maybe they are feeling 

the United States has shifted its position somewhat. 

But I find a number of these organizations now are not reflexively anti-trade. They are concerned about some of the distributions 

of the benefits of trade. They are concerned about some of the transition periods and so on. But they believe that trade is a big part 

of the answer. I will give you one example. I gave a speech recently 

on Africa and talked about the fact that Africa used to be about 

6 percent of global trade. Now, it is about 2 percent. It has gone 

down. If we could increase that by just 1 percent, which I believe 

would happen under Doha even under a relatively unambitious 

Doha result, that would result in $70 billion of additional income 

to Africa per annum, per year. That is three times all of the donaVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
50 

tions to Africa from all of our aid money, assistance money, from 

the E.U., the U.S., Japan, and so on. It has a tremendous potential, 

and as a result, I see a little bit of a shift in terms of the attitude 

of some of the nongovernmental groups that have traditionally 

been anti-trade of saying trade is part of the answer. 

Mr. LEWIS OF GEORGIA. Thank you, Mr. Ambassador. Mr. 

Ambassador, last week, the trade deficit figures for 2005 came out 

showing that the United States has a $726 billion trade deficit last 

year. This is almost double what it was at the end of the year 2000. 

Does this concern you? 

Ambassador PORTMAN. It does concern me. I just talked for a 

moment with Dr. McDermott about it. I also made the point 

which—— 

Mr. LEWIS OF GEORGIA. Are you over-concerned about it? 

Ambassador PORTMAN. Well, I don’t think I am over-concerned. 

I think I am concerned more in terms of the mid- and long-term 

build-up, really, in the surplus dollars coming back here. I think 

our economy is very strong. I think, in a sense, a trade deficit—— 

Mr. LEWIS OF GEORGIA. Since my time is running out, do you 

have any plans, immediate plans, to do something about it? 

Ambassador PORTMAN. Yes. I mean, our plan is—it will sound 

pretty simplistic, but it is to expand exports and to make sure imports are fairly traded and we are aggressive on it. I laid out a 

2006 agenda for you a moment ago that is very sharply focused on 

opening up markets to our products because that will affect the 

balance of trade. But as I also said to Dr. McDermott, I don’t want 

to mislead you to think that that is going to be the biggest factor 

in determining what our trade deficit is next year. There will be 

other macroeconomic factors, including currency, and the China 

currency issue is not within my bailiwick. I appreciate you are not 

pushing me on that, but that is a factor in trade, and these macroeconomic factors like how much we consume versus how much 

other countries like China save. We need to see some changes in 

policy, in terms of China of consuming more, more of a consumption economy. We need to see our economy save more, and we need 

to see a transition so there is less of a global imbalance. But no, 

I am concerned about it, John, and I think our plan in terms of 

trade policy is the right plan to try to get at it. I did mention that 

60 percent of that increase this year was due to energy imports, oil 

in particular, and that is something that I hope we also will be able 

to get a handle on over time. 

Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Ambassador. Thank you, Mr. Chairman. 

Mr. SHAW. The time of the gentleman has expired. Mr. Camp? 

Mr. CAMP. Thank you, Mr. Chairman, and Ambassador 

Portman, good to see you again. I certainly appreciate your eloquent testimony today. I really appreciate your attempts in recent 

announcements to really promote a rules-based international trading system. I think that is what we all would like to see. I certainly 

applaud your recent announcement of a new Chief Counsel for 

China Trade Enforcement. I think that is the exact right direction 

to go. As you may know, I have introduced legislation, along with 

Representative Levin, to create a Chief Trade Prosecutor that 

would seek to enforce all trade agreements, not just those with 

51 

China, because we have problems, as you mentioned, with CAFTA 

and other countries that we need to continue to pursue, and I think 

we are not afraid of trade in this country as long as people play 

by the rules. What the problem is, we enter into agreements with 

countries and then they don’t play by the rules and we have no 

way of leveraging that despite the successes you mentioned of the 

few cases that have been brought before the WTO, if someone was 

dedicated to that mission within your office, not just with China 

but with all countries. So, could you just tell the Committee why 

that logic that you are using with China should not extend to all 

countries and all trade agreements? 

Ambassador PORTMAN. Well, with regard to China, as you and 

I talked about before, it is unprecedented. We have never had a 

country-specific enforcement focus like that. I think it is necessary, 

given the challenge we have as China enters this new phase now 

that it is fully a member of the WTO, and it is both with regard 

to its WTO obligations and its more general obligations that come 

with being a mature global trading partner. With regard to your 

legislation, I think it is consistent with what we are doing generally at USTR. I mean, I would hope my General Counsel, who is 

behind me here somewhere, feels that he already has that accountability and responsibility because I believe he does. There is also 

as an Assistant U.S. Trade Representative, as you know, who has 

the sole functioning of monitoring and enforcement. But I will look 

at that legislation. You and I have talked about it before. Now that 

I have been at USTR going on nine or nine-and-a-half months, I 

have a better sense of how it operates. We have, I think, roughly 

22 lawyers in the monitoring area, is that right?—22, and they 

work their hearts out. They do a very good job and I hope that each 

of them feels that accountability that you are trying to be sure is 

at USTR through your legislation. So, I will take a look at the legislation, but I would hope that we already have that at USTR 

through the General Counsel’s Office and through this Monitoring 

Enforcement Office. 

Mr. CAMP. Do you think there is room for improvement in 

USTR’s enforcement of WTO commitments and trade agreements? 

Ambassador PORTMAN. Yes. There is always room for improvement. However, I do think, as I said earlier, that we have been 

very targeted and focused on results, appropriately. Sometimes we 

use WTO, sometimes we can settle something without going 

through the litigation process. As I said in response to Mr. 

McCrery’s question, the notion of going through a costly and 

lengthy litigation process with an end result being retaliation or a 

similar remedy is not always as satisfactory to the U.S. commercial 

interests as getting a more expedited response, as we did with 

kraft liner board. So, to the extent we have gone to WTO, and it 

is always an option and it is always something that the USTR 

needs to keep on the table as an option, in a sense, we have failed 

to deliver something more tangible and immediate to the business 

interests. 

Mr. CAMP. On another subject, I wonder if you could just give 

a brief update on how the Thailand talks are progressing, particularly with regard to the truck tariff issue and, obviously, the concern that an FTA would remove the tariff without reciprocal access 

52 

to the Thai marketplace for U.S.-produced vehicles, and I would 

just appreciate your comments on that subject. 

Ambassador PORTMAN. I appreciate that, and I appreciate your 

correspondence with me on that. It is a huge issue, I know, in your 

State as well as in my State of Ohio. Two things. One, we have not 

gotten to that point in the negotiations yet. We still have issues 

with intellectual property rights, with agriculture. We are still 

working through some of the financial services issues. We have 

made progress on all those issues. In fact, we had a good negotiation about 2 weeks ago, two and 3 weeks ago in Thailand, and the 

Assistant U.S. Trade Representative who is conducting these negotiations for our office has made good progress, but we have not gotten to that point yet of negotiating on the access on automobiles 

or light trucks. 

Second, with regard to Thailand, a concern that you have raised 

with me before is trans-shipment, in other words, other countries 

using that as a market and a platform to come to the United 

States. I think that is a very legitimate concern and one I am very 

focused on. Then finally, of course, was, you said, the reciprocal 

benefits. We have got to be sure that with regard to all these markets, and Korea was mentioned earlier, that we have access for our 

exports, auto parts and automobiles and, for that matter, to the extent we are competitive, light trucks. So, that will also be very 

much a part of our thinking. 

Mr. CAMP. All right. Thank you. Thank you for your testimony. 

Thank you, Mr. Chairman. 

Mr. SHAW. Mr. Becerra? 

Mr. BECERRA. Thank you, Mr. Chairman. Mr. Ambassador, 

good to see you. Always good to see you, and thank you for the 

work that you do. I want to hit on this whole issue, talk more 

about this issue of our deficits because I don’t think we are doing 

enough. I think the bottom line is, when you hit three-quarters of 

a trillion dollars in deficits when it comes to trade, where we are 

selling a lot less than we are buying, you can only pull out the government credit card so much before you finally go down the tubes. 

So, I do want to hit on that. 

But first, I am intrigued. Give me a sense of something here. We 

are facing this $726 billion deficit, trade deficit. Our companies and 

our farmers are being shut out of key markets around the world. 

We are engaged, as you have mentioned in some cases, in at least 

seven bilateral trade negotiations in addition to the Doha Round. 

Yet, if I am correct, the President’s budget cuts your office funding. 

So, my question, I guess, is, is this a case where the administration 

expects you to do better with less? 

Ambassador PORTMAN. You know, I sort of—— 

Mr. BECERRA. Don’t smile. Don’t smile. 

[Laughter.] 

Ambassador PORTMAN. That would be like me asking my teenage son, do you think you are getting adequate allowance? I think 

I know what his answer would be, but that can’t be my answer. 

[Laughter.] 

Ambassador PORTMAN. Let me say two things. One is, if you 

look at the budget over the last couple of years, Congress has, I 

think, wisely seen fit to increase funding at USTR and sometimes 

53 

for more specific targeted areas, like enforcement, and we are using 

that funding and using it well. I will tell you, I truly believe that 

we have got our budget in good shape. I think we are lean and 

mean. I think we are spending the taxpayers’ money well. 

Mr. BECERRA. So—— 

Ambassador PORTMAN. If you look at the budget from 2005 and 

2006 and 2007, you actually will see an increase. The administration request for this year is more than last year. Mr. BECERRA. Let me tell you, Mr. Ambassador, from $44 mil- lion to $42 million, $2 million won’t probably have you lose those 

22 attorneys you just identified, but it probably makes it more difficult for you. I have got to tell you, you see a $726 billion—billion 

dollar—trade deficit, I would rather give you a couple million more 

to hire the folks it takes to go out there and capture the $2.4 billion 

we know in copyright piracy we lost just in China alone back in 

2004. Whatever it takes, we should do, because I know you want 

to do some good work, and I know that the folks that are with you 

are trying very hard. But the last thing we should do is strap you 

with insufficient resources to go out there and do the work to represent America’s workers and companies well. So, I just hope that 

by the time that we have a budget in place, that you won’t have 

to say what your son says with regard to an allowance. 

Now, returning to the whole issue of deficits, all-time high, 

fourth year in a row that we are saying we hit an all-time high 

trade deficit. We have hit all-time high trade deficits with China, 

Japan, Europe, the OPEC nations, Canada, Mexico, South America, 

Central America. Some folks—let me read from an article in the 

Associated Press that says, ‘‘Trade deficits is a major factor in the 

loss of nearly three million manufacturing jobs since mid-2000, as 

U.S. companies move production overseas to lower-waged nations. 

Many economists believe those manufacturing jobs will never come 

back.’’ 

As I look at our trade agreements, Free Trade Agreements that 

we have entered into over the last, say, 20 years—and by the way, 

my 13-and-a-half years now in Congress, I have voted against only 

one trade agreement—in every case but, let me see, I am looking 

at about eight or nine trade agreements, in every case but two, we 

have seen our trade balance grow in deficit rather than surplus 

after we have struck these trade deals, whether it is Israel, Canada, Mexico, Jordan, Chile. The only exceptions there are Singapore and, in a very modest way, Australia, which we reached in 

2005. But all but Singapore and Australia, we have ended up seeing our trade deficit grow with these countries. 

So, I guess my point, and perhaps there is a little time for you 

to comment on this, my point is that it doesn’t seem that this regime of striking these bilateral Free Trade Agreements with these 

countries is going to help us with these trade deficits, and so I hope 

we figure out—we declare victory real quickly and move on to a different way of doing things. Thank you. 

Ambassador PORTMAN. Just quickly, if I might, Mr. Chairman, 

and I talked about this earlier, our exports have grown dramatically to our FTA partners, double what they have for the rest 

of—— 

Mr. BECERRA. But so have our imports. 

54 

Ambassador PORTMAN. Yes, you are right. In some cases, they 

have. Jordan would be an example of that, as you mentioned. Mexico would be an example of that. But I wouldn’t—— 

Mr. BECERRA. Mexico, we have a 3,150 percent imbalance of 

what has happened since 1993. So, by over 3,000 percent, we are 

now buying more from Mexico than we are selling them as compared to 1993. 

Ambassador PORTMAN. We have about, I think, a 120 percent 

increase in our exports to Mexico, too, which created a lot of jobs. 

All I would say is, in terms of—and I don’t know where you got 

the figure on the manufacturing jobs—the Council of Economic Advisors did a study recently on this and analyzed our job market. 

We lose and gain a lot of jobs every year in this country. We had 

about a two million job gain in the last year, but we lost about 15 

million jobs, we gained about 17 million jobs, and about two or 3 

percent of those jobs are related to trade. 

Mr. BECERRA. A very important area of manufacturing, we continue to lose, and as you saw from the recent news from Ford and 

General Motors, we will continue to lose it. That is where I think 

we want to work with you to see if we can turn that around, because those are pretty decent-paying jobs that Middle America has. 

Ambassador PORTMAN. Well, again, the jobs related to trade 

are better jobs, though, and remember, if my figures are right, two 

or three percent of those jobs are related to trade, the jobs that we 

lost. Of the 17 million new jobs, 15 million jobs lost, those two million jobs gained in the last year—— 

Mr. BECERRA. Ambassador, I see a lot of ‘‘Made in China’’ labels on products that I am buying and everyone is buying. I know 

those used to be made by Americans. 

Ambassador PORTMAN. Well, they may be made in China, but 

I will tell you that we are creating a lot of jobs through our exports, 

again, an over 20-percent increase in exports to China again this 

year, a huge market for us, and we need to be very careful to focus 

on the fact that trade is not something, again, that is a barometer 

of our economic health. We have gone from 5.2 to 4.7 percent unemployment in the last year. We have added two million new jobs. 

Now, you could do a lot of—— 

Mr. BECERRA. You can get a lot of things when you use a credit 

card—— 

Ambassador PORTMAN. —during our times of recession and certainly during the depression, we had huge trade surpluses. That is 

not an indication of our economic health, and that is my only concern here is we confuse the two, I think, which is why I am not 

promising, as Dr. McDermott said, I am going to promise to come 

back next year and this will make a difference. There are bigger 

factors here that relate to our deficit. In terms of our economic 

health right now, we are in great shape. One reason we have a relatively high deficit is we are in great shape compared to Japan and 

the E.U. We are growing twice as fast as they are, on average, and 

that results in more consumption here. 

Mr. BECERRA. Thank you, Mr. Chairman, although I would 

have to challenge the great shape of the economy, in great shape 

when we have the largest deficits we have ever seen in this country’s history. 

55 

Mr. RAMSTAD. [Presiding.] The Chairman thanks the gentleman from California, although I am sure I will be deposed soon 

in that I let you go 3 minutes extra. Mr. Ambassador, thank you. 

I just want to say you are doing a heck of a job, and as one who 

knows you well, I know I will never have to take back those words 

As you know, Congress recently passed and the President signed 

the repeal of the Byrd amendment, principally for two reasons. 

One, it was declared an illegal trade subsidy, and two, it threatened our position in international trade talks. Nobody in this room 

knows that better than you, Mr. Ambassador. Could you explain to 

the Committee exactly how the Byrd amendment affected your negotiating position, and could you also explain the reaction of the 

international community, the trade ambassadors you deal with 

from other nations, how did they react to the Byrd repeal and how 

did that repeal change the dynamic, change your posture in negotiations? 

Ambassador PORTMAN. I appreciate your strong interest in the 

trade issue. I hear from you a lot—and I appreciate it—and I expect to hear more in the future on these multilateral issues as well 

as the regional and bilateral ones. On Byrd—as well as step 2, by 

the way, which was the agriculture program that relates to export 

subsidies for cotton. It was a very positive development for the 

United States in terms of the international trade talks. Significantly though, also recall that with regard to Byrd it was a matter 

of stopping the retaliation. One of my concerns is that not all of our 

trading partners have agreed to stop the retaliation because we 

phase out the Byrd amendment over time. So, I am disappointed 

that we didn’t get more plaudits from them immediately, but they 

are not going to be able to retaliate once we phase it out. 

That was significant for a lot of U.S. companies that are involved 

in exporting. So, it was the right thing to do in terms of our economy, it was the right thing to do in terms of our trade posture, and 

I know it was a tough decision for some members of this Committee. I appreciate the work you did on it, and initiating it, and 

I have specifically identified Chairman Thomas in this regard because it took courage to move it when he did and how he did, and 

I think it was the right thing to do for our economy and the right 

thing to do for trade policy. My answer would be that it was beneficial to our trade negotiating position. 

Mr. RAMSTAD. Thank you, Mr. Ambassador. I was pleased to 

lead the charge, and you are right, without the Chairman of the 

full Committee, we couldn’t have made it happen, and we got good 

bipartisan support certainly. Implicit in my question was the fact 

that, as you pointed out, it is not actually repealed until October 

1 of 2007. I want to switch gears now, Mr. Ambassador. You described in your testimony—and those of us who work closely with 

you know that you are very much interested in seeking additional 

bilateral and multilateral agreements. As you also know, I believe, 

Mr. Jefferson, on the other side of the aisle, and I have sponsored 

a resolution calling on the United States to enter FTA negotiations 

with Taiwan. In fact, in the last Congress we gained 69 cosponsors 

to our resolution, which I think demonstrates significant congressional support for such an FTA. Today, in fact, we are going to reintroduce that very same resolution. 

56 

It seems, Mr. Ambassador, that Taiwan serves as an ideal candidate because it benefits the United States both economically and 

politically. It is the United States’ eighth largest trading partner, 

and it has always been a stalwart supporter of United States foreign policy. I realize there are some problems that relate to intellectual property right protection. I know there are some improvements that need to be forthcoming on the part of the Taiwanese before an agreement is finalized, especially in the area of optical medical piracy. I would expect nothing less than a hard stance on the 

part of the United States in protecting American intellectual property. We all know how important that is. But it seems to me that 

those improvements could be discussed in the context of negotiations. My question is this, Mr. Ambassador, would you be willing 

to consider Taiwan as a potential FTA candidate? 

Ambassador PORTMAN. First of all, Mr. Ramstad, I appreciate 

your leadership on that as well as other issues like the Byrd 

amendment. You talk about the importance of the Taiwan economy 

to the U.S. economy. We have a very strong and growing relationship. We also have some trade issues, as you mentioned. I do believe that we have seen some progress recently. Taiwan made improvements to its copyright laws, as you know, and we believe that 

they are doing a better job enforcing their laws. But we have a 

need, I think, to move forward with our trade discussion at a different level than the FTA at this point. 

Typically, as many of you know, we work with these trade investment framework agreements first, TIFAs, and with regard to Taiwan, we had a TIFA discussion with them, which was productive, 

in 2004. It was the first one we had had since 1998, and I am 

pleased to announce today to you, Mr. Chairman, that we are planning another TIFA meeting in the first half of 2006. This is where 

we have this very serious and sometimes intense dialog on the 

trade issues and our concerns, and that will include the IPR issues 

I discussed as well as other issues. That will be the next step. We, 

again, have a very strong economic relationship. We will look at 

the same criteria we look with regard to other potential FTA partners, and we look forward to having a successful TIFA meeting the 

first half of this year. 

Mr. RAMSTAD. Mr. Ambassador, let me thank you and your 

hard-working staff for your activist agenda, for your activist approach to knocking down trade barriers, to liberalizing our trade 

policy, finding those markets, and we need to continue that, and 

I applaud the good work you are doing. Thank you for your testimony here today. I ask unanimous consent to submit additional 

questions that I would like answers to, to the record. Without objection, so ordered. The Chair now recognizes the gentleman from 

Texas, Mr. Doggett. 

Mr. DOGGETT. Thank you, Mr. Chairman. Thank you for your 

service, Ambassador, and let me touch just on three topics that 

were not covered by your expansive testimony and your PowerPoint 

presentation. The first one is the environment. We could increase 

trade by millions of dollars if we permitted the import of certain 

endangered species, but we have, through many administrations, 

recognized that it wasn’t worth the damage that was caused to add 

a few million dollars to our trade balance. This is just one example 

57 

of many of where our trade policy needs to be broad enough to consider more than just how many widgets flow back and forth across 

international borders. I am concerned particularly with the Andean 

agreements, with Peru and the other countries, that we have fully 

25 percent of the biological diversity of entire Earth in the Andean 

region’s tropical areas. There was, for example, a recent New York 

Times story about the immense danger to that region from expanding gold mining and other types of resource extraction that damaged the rain forest. We know that damage to the rain forest not 

only will damage a great source of potential future pharmaceuticals, but also can contribute to the near runaway crisis we already have with global climate change. In the FTA agreement to 

this point with Peru, am I correct in understanding that there is 

no enforceable provision to discourage the obliteration of the Andean rain forest? 

Ambassador PORTMAN. Thank you for your question, and it is 

a concern. As you may remember, the Tropical Forest Conservation 

Act is something I offered here, and something Peru has taken advantage of, so I am somewhat familiar with that particular issue. 

The agreement we sent to you for your review did not include the 

environment provision. Since that time we have had a number of 

discussions, including with Senator Baucus, as you know has had 

a strong interest in this, and working with the interagency process 

we believe we have come up with something that would create a 

public submissions process, and independent secretariat to allow 

the nongovernmental organizations who are in Peru and other 

countries, some of the groups that are most knowledgeable about 

the issue of tropical forests and biodiversity to have access that 

they do not have now. So, that you would have, through the Free 

Trade Agreement, an improvement in the environmental situation 

there. I can get that to you. It, frankly, took us a little while to 

work through this in our process, and I am happy to sit with you 

and go through it with you, but in the meantime we will get you 

the documentation. 

Mr. DOGGETT. I appreciate that. 

Ambassador PORTMAN. Essentially what you will see now in 

the agreement is a place mark for it, but this would be something 

that we would like to pursue. 

Mr. DOGGETT. I think the real question will be what kind of enforcement mechanism there is, a concern you have heard me voice 

before in this Committee. A second topic that I am concerned about 

is tobacco. Is USTR seeking to promote the sale or export of tobacco 

or tobacco products by reducing either tariff or nontariff barriers in 

Korea? 

Ambassador PORTMAN. Mr. Doggett, I think we are treating tobacco just as we would other products. I will check on that. With 

Korea we have not, of course, come to that point yet because we 

are not beginning the negotiation yet. But on these other agreements, including some of our accession agreements, I know tobacco 

has been an issue. My understanding is that, again, we treat tobacco as we would other products, but I will get back to you on 

that. With Korean, we have not entered that phase of the discussion yet. 

58 

Mr. DOGGETT. Specifically because of the unique agreements 

that we have going back to the Reagan administration when they 

were promoting tobacco overseas in 1998, I would also appreciate 

your responding concerning whether we will continue to require 

Korea to consult with us in advance before it changes tobacco taxes 

or its restrictions on advertising and promotion of tobacco products. 

A third area, another one you have heard me raise here in the 

Committee before, is the investor state mechanism. As you know, 

there was no investor state mechanism included in the Australian 

trade agreement. Is it your plan to seek an investor state dispute 

provision that would perhaps accord foreigners more rights than 

Americans in your negotiations with Korea? 

Ambassador PORTMAN. Again, we are not at that stage yet, but 

I think if you look at what we have done in other FTAs, including 

in the Central American-Dominican Republic Free Trade Agreement, I think we ended up with an investor state approach, which 

was consistent with our own due process, but did not give advantages to those, in that case, Central American entities that you 

would be concerned about. So, I guess I would look more at the 

model of CAFTA, which you may or may not be satisfied with. 

Mr. DOGGETT. As you know, I am not, but you envision following the CAFTA model rather than the Australian model? 

Ambassador PORTMAN. Well, again, we haven’t gotten to that 

point yet. With regard to Australia, we were dealing with a developed country which had also a very developed judiciary and a system to resolve disputes. We are still in the process with Korea of 

analyzing that. 

Mr. DOGGETT. In your comments on Korean on your Web page 

and the like, you present Korea as a very advanced democratic 

country—— 

Ambassador PORTMAN. It is. 

Mr. DOGGETT. Is there less confidence in the Korean courts 

than in the Australian courts? 

Ambassador PORTMAN. Not necessarily, not necessarily. We 

just are not at that point yet. Honestly, with Korea we have a 90- 

day requirement to give you the ability to consult with us, and this 

is what is going on today, and you and I will have this discussion 

on these two issues that relate to Korea going forward. Then I believe it is in May we are permitted to begin the intensive negotiations, and we want to be prepared to do that, so I want to have 

this discussion with you during this period of congressional consultation. 

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

Mr. RAMSTAD. Thank you. The Chair would just remind the 

members that the Ambassador now has testified for 2 hours and 

30 minutes, and would appreciate if members would stay within 

the 5-minute rule. The gentleman from Texas, Mr. Johnson. 

Mr. JOHNSON OF TEXAS. Thank you, Mr. Chairman. Good 

morning, Rob. You know, in 1991, I understand that under the Andean Trade Preference Act, unilateral trade benefits were granted 

to Peru under conditional circumstances, and according to the law, 

I understand it makes clear that a benefiting country must not 

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59 

less the country provides prompt and adequate compensation. We 

have a company, Laterno, in Texas, from our district in Rowlett, 

that has been battling in and out of court with the government of 

Peru for about 30 years. Laterno built a 40-mile highway in the Peruvian jungle, and was supposed to be compensated roughly one 

million acres for the work. In 1970 Peru expropriated the property, 

and to this day refuses to pay the company. Peru committed to 

President Bush back in 2002 that this issue would be cleared up 

by February of 2003. Nothing has happened, and the Congress, you 

are about to ask the Congress to act on a free trade agreement 

with this country. I am sending you a letter on it, so I won’t go into 

any more specifics. My concerns is simply this: by law, countries 

given unilateral trade benefits like Peru must not have expropriated property, and what amount of importance, if any, are you 

placing on cases like this before you enter into trade negotiations 

with offending countries? 

Ambassador PORTMAN. Mr. Johnson, I am glad you raised the 

issue because we do have some investment disputes still with Peru. 

We have had some concerns about Peru. As you know, thanks to 

you encouraging me to do so, I met with Mr. Laterno personally, 

and your colleague, Ralph Hall, has also been corresponding with 

me on this and encouraged me to meet with him. What I am hearing is that the Peruvian government has now made a settlement 

offer. It may be less than Mr. Laterno and his company believes 

is appropriate, but at least they are talking and we have some offers on the table. I have been pushing this case, just as you would 

imagine that I would, because I want to get it off the table. I want 

to resolve it to the satisfaction of the U.S. interests here. So, we 

will continue to push it. We have a couple of other issues too with 

Peru that we are working on, but this would be—in my view, the 

FTA is an opportunity for us to get more focus and attention on 

that issue, and you will certainly have that in my office. 

Mr. JOHNSON OF TEXAS. Do you intend to clear this up before 

you offer them free trade? 

Ambassador PORTMAN. I would certainly hope so. I mean it 

takes the two parties being able to agree. 

Mr. JOHNSON OF TEXAS. I am aware that Peru made that 

proposal, and it wasn’t the result of a fair and impartial process 

I don’t think, and I don’t believe American companies ought to be 

pressured into accepting a deal that no other company would be expected to accept. I would just like to work with you on a reasonable 

outcome, and I know you will. Changing the subject, I was in Thailand just 3 weeks ago now, I guess. We discussed free trade with 

them. That was high on their list, and I want you to know that we 

told them that they needed to do some stuff too to make it happen. 

They thought—and we cleared it up—that the U.S. Congress could 

snap their fingers and it would happen, and, obviously, they wanted it tomorrow. But you know and I know that it is a long drawn 

out process, but I hope we helped you a little by telling them to 

get off the stick and do their end of the bargain as well. So, keep 

up the good work over there, and I thank you for being here today. 

Ambassador PORTMAN. Thank you, Sam. Let me just say briefly—and you have heard me say this before—but I really appreciate 

that. I think members of Congress are under utilized in our trade 

60 

policy initiatives, including these FTAs. So, I encourage you to 

travel and I encourage you to check in with us. We try to keep 

track of where you are going and provide you the talking points, 

as I think we did in your meetings, but just to give you our point 

of view at least, and I hope that it will be your point of view in 

most cases. That is very helpful. You are right, most of these countries do not recognize the significant role that our legislative 

branch plays over here. I run into this all the time, and I believe 

it can be very, very helpful, so thank you for doing that. 

Mr. JOHNSON OF TEXAS. Well, you helped us out. Thank you. 

Thank you, Mr. Chairman. Yield back. 

Mr. RAMSTAD. The gentleman from North Dakota, Mr. Pomeroy. 

Mr. POMEROY. Mr. Ambassador, it is great to see you again. 

When your predecessor would testify, I would be absolutely amazed 

at the grasp of what seemed like infinite detail that he held in his 

head, and I must say that you have been studying. You have demonstrated a very impressive mastery, you and the rest of your Department here this afternoon. Anyway, it is good to see you again, 

and congratulations on what a quick study you have been. I want 

to quote to you from today’s CQ Today. This is an article, according 

to Saxby Chambliss, Senate Ag. Committee Chairman, ‘‘Chambliss 

noted he has been critical of Bush administration’s trade policies 

in the past because he felt as though agriculture had been the sacrificial lamb in trade agreements such as NAFTA and CAFTA. 

However, he said, this has changed because we now have a U.S. 

Trade Representative, Rob Portman, who understands agriculture. 

Now we have got folks who are negotiating bilateral trade agreements who actually care about agriculture.’’ 

I ascribe to the remarks of my former colleague and the Senate 

Ag. Committee Chairman Chambliss. So, the expectations are high 

on your shoulders as you now seek to level the playingfield that 

U.S. agriculture finds itself in, as well demonstrated on these 

handouts. First I want to ask you about farm bill strategy. We 

have to build a farm bill in the next year. The WTO Round will 

not be over yet. It seems to me that if we are not very careful, we 

could be in a situation. We already stand at a disadvantageous position relative to Europe, and we structure our farm program shy 

of an agreement that actually amounts to unilateral disarmament 

before we sit down to the table. We are taking away ammunition 

that you might have relative to trying to negotiate some more level 

treatment in support of agriculture across the globe. Do you have 

counsel for us relative to the farm bill? 

Ambassador PORTMAN. Thank you, Mr. Pomeroy. There could 

be another scenario, which is Congress could move ahead, which 

may in a sense be more likely in this environment, and not make 

the changes in the so-called amber box, the trade distorting subsidies, which might put us in an even more difficult position trade 

wise for whatever number of years that farm bill were in place. 

Mr. POMEROY. Some of us think, Mr. Ambassador, we would be 

well served continuing our present structure until the round is concluded, and then we would know what target we have to shoot for. 

Ambassador PORTMAN. I guess it is not in my interest necessarily to have raised that issue, but my conclusion would be the 

61 

same on both scenarios, which is, we need to work extremely closely together, and as you know, from our testimony and discussions 

in the Ag. Committee, where you said something which really impressed me, by the way, about the fact that you need to be in a 

position to walk away from these agreements, which we are, and 

we must be, and you are right. When we put our best offer on the 

table on not just agriculture, but on services, and we are the most 

ambitious and open trading player among the major players, and 

others do not come up with commensurate offers, at some point you 

have to be able to say, ‘‘Maybe this process is not one that is conducive to a good result.’’ We will always keep that as an option. In 

the meantime, we are going to push really hard to get this resolved 

this year, so that you, when you are writing the farm bill, have in 

mind not a micro management of the legislative process but the parameters within which you can operate, not just to deal with the 

Doha Round, but also the potential litigation as we have seen with 

the cotton case. 

Mr. POMEROY. My time is expiring here. 

Ambassador PORTMAN. That would be the goal. 

Mr. POMEROY. Thank you. Let me just—I was a little alarmed 

to see that the White House released a report from the Commerce 

Department saying that domestic sugar prices are costing the 

United States jobs, and they talk about the demise of the candy 

manufacturing industry, which has got really a whole range of reasons. The report also doesn’t talk about the jobs created in the 

sugar sector, our agriculture and processing sector. So, we don’t 

think it is a fair report. Now, up to this point you have indicated, 

and Secretary Johanns has indicated, that sugar would be deemed 

to be a sensitive product excluded from tariff elimination in the 

even this whole concept of tariff elimination for the least developed 

countries would proceed. Is that still the position of the administration? Is there something about this commerce, what we think of as 

an unfair Commerce Committee report that indicates some administrative shifting on treatment of the U.S. sugar policy? 

Ambassador PORTMAN. No, I don’t believe so. When you weren’t 

here I talked about the American Sugar Alliance letter on Peru, by 

the way, and I appreciate the fact that they are working with us 

on these trade agreements, and I this case they have said that because we have shown some sensitivity they support the agreement, 

despite the fact there are some sugar imports as you know. With 

regard to the duty free/quota free issue, we worked closely with 

some of the same people who are involved in this letter and in 

other efforts, to be sure that they understood what we were doing. 

We didn’t make any commitments, but we did leave enough flexibility there to cover some of the concerns that they had, and the 

letter doesn’t reflect a change in our communication that we had 

with them with regard to that issue. 

Mr. JOHNSON OF TEXAS. [Presiding.] The gentleman’s time 

has expired. 

Mr. POMEROY. Thank you. Mr. English. 

Mr. ENGLISH. Mr. Ambassador, I would like to congratulate you 

on what I think has been a virtuoso performance today. I think one 

of the most detailed and impressive presentations of American 

trade policy that I have ever heard, and I found it to be most inVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00065 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
62 

formative. I will also offer you at least one insight from going back 

to the statement of the last questioner. I would like to congratulate 

the administration for being willing to take a nuanced approach to 

sugar issues, since I represent a State which is a State that uses 

sugar as part of the manufacturing process in a whole range of food 

products. I bring that out because I thought you would find it refreshing that I could find at least one issue where Pennsylvania 

doesn’t bounce protectionist. Mr. Ambassador, reviewing your top 

to bottom review—and we are still in the process of doing it—I am 

disappointed in a small way that it doesn’t point to the opportunity 

to strengthen the available trade remedy laws to the extent allowable under international rules, which I think is an obvious conclusion of the bulk of the report. There are opportunities to do that, 

I think, including adding applying countervailing duties to nonmarket economies, which as the Chairman noted at the beginning 

of the hearing, we have passed China-specific legislation out of this 

Committee, H.R. 3283, which would apply countervailing duties to 

non-market economies. May I ask what is the administration’s position on this bill? 

Ambassador PORTMAN. Mr. English, I appreciate the fact that 

you have read the report, and I know you have, and you will have 

a very thorough analysis of it. You are right, we did not get into 

a specific recommendation on really any legislative issue. I did say 

in the report and in the cover letter to Mr. Thomas and Mr. Rangel 

that I welcomed that, and I thought that this information we provided, which was a review, a top to bottom review of where we 

have been, where we are and where we are going on China trade 

policy would be helpful to inform policymaking, including the way 

in which the English bill is ultimately handled in the U.S. Senate, 

because I think that legislation is currently under consideration in 

that body. I hope it is a helpful addition to the information you already have about China, and where we are going and where we 

have been—— 

Mr. ENGLISH. Yes. I am grateful for it, and given the limitation 

of my time, let me simply press the question. Has the administration taken a position on this bill? 

Ambassador PORTMAN. No. To my knowledge, the administration has not taken a position. 

Mr. ENGLISH. Thank you. Another approach mentioned in the 

top to bottom review, in fact, first revealed when the President declined to implement relief under section 421 for the pipe and tube 

industry, as per our recent discussion, is the establishment of a bilateral high-level dialog on steel in the JCTT. First, can you please 

elaborate on what the scope, goals and timeframe for these discussions would be? Second, could you please give us your thoughts on 

why in your opinion China would be more receptive to participating 

in bilateral steel talks than it was to participate in the multilateral 

OECD Round to eliminate steel subsidies in all countries? 

Ambassador PORTMAN. That is a very good question. My view 

is that it is time to have a more serious dialog on the whole issue 

of steel, not just the tube issue, as important as it is to you, Mr. 

English, and I appreciate your meeting on that and your advocacy 

on their behalf. But as you know, there is a much bigger issue even 

than these specific imports which is what is the China industrial 

63 

policy here? Why are they so dramatically expanding their steel 

production? What is their intent and how are we going to deal with 

it? So, I am very concerned about it, and that is why we identified 

that in the top to bottom review as a specific area, not telling you 

how to legislate, but telling you that we believe it is appropriate 

to have that high-level dialog. We have talked to the Chinese about 

this. They have agreed to engage in this dialog, as compared to the 

OECD dialog, so, so far, so good. 

Mr. ENGLISH. Very good. 

Ambassador PORTMAN. In terms of timeframes, we are beginning the process in April. We are looking, again, at the broad 

range, and once we have that initial discussion, I think we will 

have a better sense of where it is going and what the timeframe 

ought to be. We will get back to you on that. 

Mr. ENGLISH. My time is expired. 

Mr. JOHNSON OF TEXAS. The gentleman’s time has expired. 

Mr. ENGLISH. I thank you for your time, and I will submit. 

Mr. JOHNSON OF TEXAS. I am going to ask everyone to use 

the 5 minutes judiciously because the Ambassador has a meeting 

that he needs to make, and I recognize Ms. Tubbs Jones. 

Mrs. TUBBS JONES. I don’t know why that prohibition always 

comes when it is my turn to ask questions. 

[Laughter.] 

Mr. JOHNSON OF TEXAS. You got 5 minutes. 

Mrs. TUBBS JONES. Everybody else goes over time, but anyway, Ambassador Portman, it is nice to see you. Always good to see 

a Buckeye doing well. I want to focus my questions around trade 

adjustment assistance. Coming from Ohio, you know how terrible 

the job situation is in the State of Ohio. We lost more than 200,000 

of manufacturing jobs, and the jobs that they are being replaced 

with are not the same kind of jobs that people had. The money is 

not the same. They are often service jobs without any health care, 

without any real benefits. What I am concerned about is that in the 

budget in 2005, the amount for trade adjustment assistance was 

$1,057,300,000. In 2006 it was $966,400,000, and in this proposed 

budget it is $938,600,000. At a time when you are entering into 

more agreements and we are losing more jobs—I am going to make 

my statement, then give you the rest of the time to answer the 

question—at a time when there is this whole discussion about 2 

million new jobs, I don’t know what those 2 million new jobs are 

paying. 

I don’t believe the number about it being only a 4.7 percent unemployment rate. There are areas in my congressional district 

where the unemployment rate is 12 percent. So, I don’t know what 

these numbers are, but in Ohio, we are suffering. I would like to 

know how it is that you can afford to operate—and don’t give me 

that answer about having a little bit of, what was that, allowance 

or something like that? I don’t quite remember what you said. The 

reality is we need to be planning for trade adjustment assistance 

and retraining and opportunities for people in Ohio and across the 

country to have jobs. Tell me what you are going to do. 

Ambassador PORTMAN. First of all, I am out of my lane here, 

as they say, because trade adjustment assistance doesn’t come 

under me, as you know. It is Department of Labor. But let me 

64 

make a couple comments quickly. I don’t think the system works 

very well because—— 

Mrs. TUBBS JONES. The note the guy sent you was at—you all 

know you work together on these issues. Give that note back there. 

[Laughter.] 

Ambassador PORTMAN. That is why I am going ahead and answering your question even though I shouldn’t. You know, one of 

the reasons the funding is going down, I think—and I have some 

data here; I don’t know if it is accurate, so I am going to doublecheck it—is that we haven’t seen the uptake that we expected. In 

other words, people are not applying for it because they do not believe they are eligible. Maybe they are, maybe they aren’t, because 

it is restricted to that causal connection to trade which is tough to 

make. I mean, my own view is, from a trade perspective—I need 

to be careful here, it is not an administration view, giving my personal view here—that the system needs to be reformed so that it 

works better for trade because I think if you look at these number, 

I think what you will find is that it is not that we are reducing 

funding when there is a demand. It is that the demand is not there 

because perhaps that link to trade is too restrictive. That is my 

view. 

Mrs. TUBBS JONES. I do have a little time left. Without doing 

it one plus one equals two, you recognize that the manufacturing 

belt across this country, the loss of those jobs comes as a result of 

trade and doing business with other countries. It doesn’t take a 

rocket scientist to come to that conclusion. When you were—and I 

am not saying you are in a new role—but when you were sitting 

in that other chair up there and we both, as Republicans and 

Democrats, were complaining about the loss of jobs in Ohio and the 

impact that trade has on it. All I am saying to you is, Ambassador 

Portman, my old friend, Rob, from Ohio, work on it. The people in 

Ohio need your help in that role that if we are going to open up 

the trade doors, then we have to help and figure out how we keep 

the people in Ohio employed. Simple. 

Ambassador PORTMAN. I appreciate that comment. 

Mrs. TUBBS JONES. Mr. Chairman, I yield back the balance of 

my time. It is nice to see you. 

Ambassador PORTMAN. Thank you, I appreciate it. 

Mr. JOHNSON OF TEXAS. Bless your heart. Thank you. You 

know, we need those jobs in Texas too. We probably took them all 

from Ohio to Texas and Missouri. The gentleman from Missouri is 

recognized. 

Mr. HULSHOF. Thank you, Mr. Chairman. Mr. Ambassador. 

Ambassador PORTMAN. How did you get up in the top tier? 

Mr. HULSHOF. Well, I want to touch on that. First of all, very 

few are probably aware that you and I were next door neighbors 

in a nearby apartment building, and I promise not to talk about 

how loud your television set was. 

Mrs. TUBBS JONES. Mr. Chairman, can I get in on that one? 

No, I am kidding. 

[Laughter.] 

Mr. HULSHOF. If you promise not to talk about how frequently 

my kids would wake you up in the middle of the night. I am one 

of your biggest fans, Rob, and when your name was in considerVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
65 

ation I know it was a tough decision for you and Jane. You are providing an essential service to our country, and the fact that I am 

a huge cheerleader has nothing to do with the fact that your vacancy allowed me to go from the bottom tier to the top tier. In Article I, section 8, obviously enumerates to this body, this legislative 

body, the power to regulate commerce among the nations, and yet 

we have to have a partner, and you are doing a great job. I have 

just met recently, stepped out, in fact, during your testimony, to 

meet with some rice growers from Missouri. They applaud the fact 

that we have been very aggressive in going after the anti-dumping 

case with Mexico. They hope that that will actually bear fruit. I am 

mixing crops here, rice and fruit, but hopefully we will actually see 

some benefit from that. 

I have to go on a bit of a rant, and if you want to comment, you 

can do that, and as I have shared with you publicly, last week the 

WTO panel found the European Union has illegally banned our genetically enhanced crops. This is something I have personally 

shared with EU Ag. Ambassador Mariann Fischer Boel last year 

when she was here in a very aggressive way. To me, this replicates 

the history of the European Union, where it goes through beef hormones, when it goes through the bananas case that you worked on 

personally when you were sitting here. Yet now, then, we have got, 

at least to all indications, the European Union thumbing its nose 

again at the United States, at the WTO, and in the same breath 

it seems, after this legislative body has worked its will in a very 

tough way on foreign sales corporation and legislatively fixing the 

extraterritorial income issue, the European Union is quick to say 

that they are going to retaliate with sanctions, possible sanctions. 

To me it is unconscionable to be considered a trading partner of 

these United States, to say, well, we are going to quickly retaliate, 

but we aren’t willing to change our regime. I recognize I am on a 

bit of a personal rant here, but thank you for your aggressive 

stance. I look forward to working with new Ambassador Dick 

Crowder on agriculture issues. I know he stepped out. I don’t have 

enough time. I have been on the record as far as Japan. You covered that as far as the ban on U.S. beef, but any comments, I will 

just yield to you the remainder of my time, specifically regarding 

the European Union. Again, thanks for what you are doing for our 

country. 

Ambassador PORTMAN. Thank you, Mr. Hulshof. You have 

touched on a huge issue, not just with regard to the European 

Union, by the way, but with regard to a science-based system for 

food safety. What this WTO decision allows us to do now is globally 

to help ensure that other countries don’t follow along the path of 

certain EU member states, and unfairly block the exports of U.S. 

products which are safe, and which can add to the prosperity particularly of the developing world because of some of the disease and 

drought resistant qualities. So, it is a very big decision that has big 

implications, and we need to be sure that it is properly implemented. We will be on top of that. 

I also share, as you know, your concern on FSC-ETI, because this 

is a piece of legislation that not only went through a very tough 

process—and they don’t have to be sympathetic to our tough political process here—but they do have to be sympathetic to the fact 

66 

that the transition is this year, and then the grandfathered amount 

is relatively minor. The Joint Tax Committee has said it is $75 million, and yet they are talking about retaliating it to the tune of billions of dollars. So, it just doesn’t make any sense, and I am not 

sure that I fully appreciate what the intention is here. We will follow up on that as well, and if necessary, we will take action to ensure that there is not unfair retaliation. 

Mr. JOHNSON OF TEXAS. Mr. Foley, you are recognized. 

Mr. FOLEY. Thank you very much, Mr. Ambassador, and I want 

to commend you on the report that you provided today, because one 

of the concerns I have had—we have never had a scoring mechanism to determine victories. We always hear the losses we have in 

tribunals. We never hear the victories. We are finally starting to 

see us claw our way into equality in trade disputes. Let me ask you 

the question: do you believe in your heart that American candy 

manufacturers have left this country solely because of the price of 

sugar? 

Ambassador PORTMAN. I don’t know. Mark, I have been told by 

members of Congress who represent some of the sugar users, which 

includes candy, chewing gum and other processors, that it is a factor, and it is a factor because it is a cost of production. I have not 

had a chance to review this report yet that was discussed by Mr. 

Pomeroy. I will do that now. But I think it is a factor. 

Mr. FOLEY. But I think it singles out one area of the equation 

unfairly, in my view. I just want to express my view here, because 

otherwise, why is Motorola building in China? Why is everyone else 

going to Mexico to construct cars? It seems like there are a lot of 

people leaving to build, based on salaries, liability considerations 

and a number of factors. It grieves me as a member representing 

the sugar communities, that it always seems to be deduced to one 

little level, because right now the sugar price is at 19 cents, an alltime high in the world market, so maybe because it will be cheaper 

to produce here we will start getting the jobs back. 

A specific question I do have for you. You sit on the Committee 

on Foreign Investments. This Committee recently has allowed for 

the purchase of United States ports, six specific strategic ports, to 

be assumed by the United Arab Emirates. Today the United Arab 

Emirates, in a conversation with Iran on increasing—it just crossed 

the wires—increasing their bilateral trade, at a time when we are 

trying to put pressure, along with international partners, on getting Iran to back down on their nuclear proliferation. Today in the 

Washington Times they said: ‘‘We should be improving port security in an age of terrorism, not outsourcing decisions to the highest 

bidder. The ports are thought to be country’s weakest homeland security link with good reason. Only a fraction of the Nation’s maritime cargoes are inspected. The root question is this: why should 

the United States have to gamble its port security on whether a 

subsidiary of the government of the United Arab Emirates happens 

to remain an antiterrorism ally?’’ 

In all of my conversations with our trading partners, NAFTA, 

CAFTA, I have been down, and I have asked spy what they are 

doing to inspect cargo. Now my fear comes home to roost that New 

York and Miami and New Orleans and Philadelphia and Newark, 

we have turned over the ports to a foreign entity, a government, 

67 

foreign government. Can you provide some illumination on why 

that is a good process, a good procedure, or are you assured, at 

least from your deliberations, that we are going to be able to maintain the integrity of these facilities based on a foreign nation’s ownership? 

Ambassador PORTMAN. Mr. Foley, you raise an important issue 

I am not prepared today to be able to give you that answer, because I just don’t know enough about it. I have taken some notes 

here, and if you could follow up with me with some more specific 

information, it would be helpful, and I will get back to you on it. 

Mr. FOLEY. Thank you. The other issue is, obviously, and I 

think you have illuminated it, and I understand particularly your 

sensitivity to the agricultural products which, like Florida, like 

sugar, are almost exclusively domestic, and I appreciate your acknowledgement of the Sugar Alliance’s letter. I know, as you recall, 

I played what I hope was a constructive role in CAFTA. Then I get 

reports from Commerce about singling ut sugar, I get a little nervous was that effort in vain? Not to suggest that they are supposed 

to create and fabricate reports for one member, but I hope you will 

continue to display the sensitivity. 

I would also like to suggest that, at the behest of Ms. Tubbs 

Jones, who was mentioning about domestic loss of manufacturing, 

I think here State—and you did acknowledge—thanks to the trade 

policies, we have grown exponentially in new starts in employment 

and manufacturing. Honda Motor Cars, Toyota, BMW, a lot of 

international, multinational corporations have in fact come domestically and created jobs. I hear one side of the equation we have 

lost jobs, and that is a concern to everyone, but I don’t hear any 

amplifications. Today we crossed 11,000 on the Dow. We have an 

all-time low unemployment. In Florida it is below 4 percent. Nationally it is below 5. We have a greater capacity for homeownership than ever, and I think that largely goes on trade policy and 

tax policy by this administration. I commend you. 

Ambassador PORTMAN. Thank you. I appreciate those comments. 

Mr. SHAW. [Presiding.] Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. Rob, in addition to the 

other compliments you heard today, I really appreciate the effort 

you make in trying to find bipartisan consensus on trade issues. 

We ought to speak as one voice. America should, in our trade initiatives—and while Republicans and Democrats may differ, I know 

that we agree you are always sincerely trying to find a common 

ground we can base from, and I encourage you to continue those 

efforts, that they will do us all well. I also appreciate your honesty 

on the trade deficit. The fact is, you can’t control the savings rate 

in America would drives so much of our consumption including foreign products. You can’t control the economy of America, which 

thankfully is strong, which always mirrors trade surpluses and 

deficits as well. What you have said is what you can continue to 

do is recognize that 80 percent of our trade deficit comes with countries we don’t have pretrade agreements with. As we open these 

markets to American products and services, we have an impact of 

some measure on that trade deficit. The question I have for you, 

two issues. What progress do you see, if any, in the coming 2 years 

68 

on the dispute with Canada on softwood lumber, and on the Free 

Trade Agreement of the Americas, recognizing the second one gets 

more difficult as decisions are made in that hemisphere, but knowing that you have been laying and our administration has been laying some careful stepping stones toward the FTAA in our hemisphere? 

Ambassador PORTMAN. Thank you, Mr. Brady. I appreciate 

that comment you made about the fact that 80 percent of our trade 

deficit comes from countries we don’t have a free trade agreement 

with. That chart that I had during the presentation indicates the 

degree to which exports are increased to our free trade partners, 

but then it also lists where the largest economies are, and you are 

right, it is an interesting point. What I tried to say earlier was we 

need to look at the trade deficit. It is important, but the goal of this 

Committee and I think of USTR in terms of trade, ought to be 

maximizing our exports, and we have done that with these free 

trade agreements, and I think it has been in the interest of not just 

the U.S. economy, but specifically workers who are making better 

salaries and having better jobs as a result of it. 

With regard to Canada and the softwood lumber discussions, I 

said earlier that I think the litigation has been excessive in the 

sense that it hasn’t resulted in the kind of—as I view it—positive 

results for our industry, and acknowledgement of the subsidy and 

dealing with it in a straightforward way. So, that has been our goal 

since I took this job, was to try to get beyond the back and forth 

of the filings. I think there are 24 different ongoing litigation matters right now in this case. It has been going on, some would argue, 

since the mid 1800s, but it has certainly been going on, this latest 

round, for several years with a lot of legal fees, and frankly, very 

little progress. 

So, I am hopeful that with the new administration, we will be 

able to make more progress. The Harper government has indicated 

that they would like to improve relations with the United States. 

We welcome that. I have also had good discussions with my new 

colleague, David Emerson, who is the new Trade Minister for Canada, had a very good discussion with him on trade in general, and 

specifically on our mutual interest to try to resolve this issue. I believe the Ambassador, Frank McKenna, from Canada, who has 

been here under the previous government, has been a constructive 

force in trying to come up with a solution that makes sense for 

both sides. So, I am more hopeful than I have been that we can 

resolve this issue with Canada. 

By the way, Canada is our biggest trading partner. We have almost a dispute-free trade relationship with the biggest trading 

partner of the United States. We are their biggest trading partner. 

They now enjoy a considerable surplus with us. It has been a very 

positive trade relationship for Canada and for jobs in Canada. So, 

sometimes this one issue gets a little blown out of perspective. It 

is an important issue. It is one that we spent a lot of time on, I 

will focus on in trying to resolve, but we ought not to ignore the 

fact that we have in general a very healthy trade relationship with 

Canada. 

That goes to your second question, FTAA, going from Canada 

down to Tiera del Fuego. One would hope we could have a Western 

69 

Hemisphere Compact that would result in economic prosperity, increase prosperity for all of us. That is not something that is going 

to happen in the short term, but I think it needs to continue to be 

our goal, and in the meantime we need to continue to work on a 

bilateral and regional basis as we did with Central America to 

achieve that goal, country or region by region, and that is what we 

are doing. If you look at our recent announcement of completion of 

our talks with Peru, and we have discussions with Colombia this 

week. President Uribe is here. I will be meeting with him. We are 

trying to, as you know, make further progress with Panama. We 

are very close to a final agreement there that we will be bringing 

to you for your input. So, we are making progress in the Western 

Hemisphere, but all the while understanding that ultimately it 

would be beneficial for our hemisphere to achieve this goal of a free 

trade area of the Americas. 

Mr. BRADY. Thank you, sir. Thank you, Mr. Chairman. 

Mr. SHAW. Mr. Portman, how much more time do you have? I 

understand you have some time restraints right now. 

Ambassador PORTMAN. I do, but I think it is more important 

that I answer the questions that any of the remaining members 

have. 

Mr. SHAW. Okay. I would ask the members to be as short as 

they can, and perhaps you want to shorten your answers a little 

bit just so you can get back on schedule. 

Ambassador PORTMAN. I will. 

Mr. SHAW. Thank you. Mr. Thompson? 

Mr. THOMPSON. Thank you, Mr. Chairman. Mr. Ambassador, 

thanks very much for being here. I want to make one comment, 

and then I will ask you a couple of questions, and I will just let 

you respond in a short answer so other folks can go. I am one of 

those who believe or I am concerned about our trade policy driving 

our farm policy, and I too highlighted the Saxby Chambliss concerns about agriculture being a sacrificial lamb. We have other examples, and you are very familiar with the concern that some of 

us from the northwestern part of the United States have in concern 

to trade agreements that have really adversely impacted the pear 

industry in the three northwest States. I really think we need to— 

it is probably a hearing of its own just to deal with those two issues 

and how they will affect both the trade policy as well as the ag. 

policy. 

I have a couple of very specific regional issues that I want to 

present to you and ask you just to respond to those. One is the 

WTO’s TRIP agreement that was designed to protect geographical 

designations such as in my home, the Napa Valley. So, I am interested in knowing what you are doing to provide that protection and 

protect against the misuse of geographical indicators. Also in regard to wine, the U.S.–EU wine agreement sparked some concern 

by some of our friends in Germany who made some pretty nasty 

remarks about our wine industry and our product, which hasn’t 

done a lot to help. That is a big issue not only for my district but 

for the State of California and for the country. That is a major industry. So, I would be interested to know what you are able to do 

to try and help protect our reputation and the sales viability of our 

wine from this country. 

70 

Then to follow up on Mr. Brady’s comment about the soft lumber 

issue, I guess what I would like to get some direction from you as 

to how we can help in that regard. I don’t know if we are precluded 

because of the lawsuit from doing it. Does that have to play out or 

can we get involved now? From someone who represents a timber 

area, it may be a little issue in the big picture, but for those of us 

from timber areas, this is a giant issue for us. So, I would like to 

be able to get some direction how we can help or some idea from 

you specifically what you are able to do to move this issue along. 

Ambassador PORTMAN. Thank you. If I can quickly tick down 

some of your questions, and then we can have a further discussion 

perhaps after this hearing, we can correspond. One. On ag., generally front and center on all the FTAs and in the Doha Round, 

and it will continue to be, as long as I am in this job. Softwood. 

No reason we can’t have a negotiation even while the litigation is 

ongoing. Litigation will come and go. We are going to win some, we 

are going to lose some, but in the meantime we need to be sure 

that we have focused on the issue, which is the subsidy in Canada, 

and come up with a fair result. 

Mr. THOMPSON. What is the status of the lawsuit? 

Ambassador PORTMAN. Well, there are, as I said, I think 24 different legal actions out there right now including—— 

Mr. THOMPSON. The subsidy issue. 

Ambassador PORTMAN. The subsidy issue is still in litigation. 

It has been determined that there is a subsidy question as to how 

much and what the countervailing duty should be, and as you 

know, we have reduced our countervailing duties here recently 

based on a decision by the NAFTA appellate panel, essentially, 

which is the ECC. But it doesn’t mean that we can’t have a negotiation, and we should. With regard to the wine agreement, we 

have not singed that agreement yet, as you know. Hoping to sign 

it perhaps when I am in Europe in the next month or so. Ambassador Crowder was just over in Europe talking about the specific 

issue of Germany. I met with the Wine Institute, as you know, a 

couple weeks ago, actually had an opportunity to review some of 

the footage of some of the German television analysis of our wine 

product, which was quite disturbing, and this is something that we 

are very focused on, and we have raised deep concerns with the 

German government over. He indicated to me, when he returned 

this morning, that he thought he had been able to have a good dialog on that with the German government. We can follow up with 

you on that. 

With regard to Napa Valley, the European Commission actions 

there are troubling to us. They appear to directly contradict statements they made during the course of the WTO case, which we 

won, by the way, that I mentioned earlier. We have already talked 

to your constituents and others in the Napa Valley about the problem, and we will continue to raise it with the EC. If it is not corrected, we will consider appropriate legal action. Finally, on the 

northwest generally, you are right, we have some challenges. We 

also have some great opportunities for agriculture from the northwest in terms of new export markets. 

Mr. THOMPSON. Well, the pear issue has really hurt the whole 

region, so look forward to working with you on those. 

71 

Ambassador PORTMAN. Thanks, Mike. 

Mr. SHAW. Mr. Beauprez? 

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

marveled at your opening statement. I don’t know that in my limited time in Congress I have ever heard one as thorough or as substantive, so I was impressed by that, but I am even more impressed by your persistence, the breadth of knowledge that you obviously have, the dedication to the job, so I commend you for that. 

To your personal attention, you and I have already had a visit 

about a very personal issue for me, business back in my district 

named Goldbug, and I think they are an example of what I would 

determine or would characterize as the unintended consequences of 

the U.S.–China textile agreement. 

I completely agree with your statement about wanting to provide 

predictability and stability for our American businesses, but with 

all due respect—and this is not your problem you created, far from 

it—it is one that you kind of got dumped in your lap I know when 

you took over, but I will commend you again for trying to get a resolution to it. With Goldbug—and the issue is baby socks, and who 

would have thought? But they survive on marketing baby socks, 

ones that they have imported from China for a long, long while, 

and thought with, I think full expectation, that they were not going 

to be impacted. They found out that they were in kind of a last 

minute of revision to the agreement impacted. One could say that 

they have found a solution, that they got quota from the Chinese 

Government. They got a solution, but at the cost of $3 million out 

of their pocket from their bottom line. It is very difficult for a business, a small business such as this, to take a great degree of comfort in that kind of a solution. Now, I find most recently that confusion in the agreement has also raised the specter with regard to 

outdoor apparel, and so some additional consternation on behalf of 

people in my district. Do you care to respond to that and how we 

might really provide that predictability and stability that you have 

identified, and I know you are personally very pledged to? 

Ambassador PORTMAN. Thanks, Bob. I appreciate the fact that 

you raised this with me shortly after the agreement. As you know, 

there was some issue as to the proper classification which made 

this more complicated than it otherwise would have been, and 

these were honest mistakes that were made, and that has created 

more of a problem. But you have been a great advocate for 

Goldbug, and as a result of that, as you know, I have talked to 

them directly, worked with them. We have worked with the Chinese government directly. We have a situation now where they 

were able to get the adequate quota allocated for 2006. As you say, 

there is an issue of price. We also now are working with Customs, 

and with the Commerce Department to develop a definition of this 

issue of babies’ booties so that those goods can be exempted from 

this quota. That is, I think, the most pressing issue right now, is 

to be sure that that definition doesn’t create additional problems 

for them. So, we will keep working with them. We have also 

worked with them, as you know, on some other sourcing opportunities. 

Mr. BEAUPREZ. Right. 

72 

Ambassador PORTMAN. We will be very willing to be facilitators 

and to help in ways that maybe go beyond our immediate mission 

here, because we want to be sure that this agreement does work, 

not just for the U.S. manufacturers, but also those who import 

products. This is one where we will continue to focus on the definition and on the sourcing for them so they can work through it. 

Mr. BEAUPREZ. I applaud you for that, and I think it is important. At the moment it looks like the main beneficiary in this 

agreement, at least in this very narrow portion, has been the Chinese government, and I hope we can find a long-term solution. 

Last, I will just make a comment. I very much applaud and appreciate, look forward to your efforts relative to the benefit of American agriculture. I have long through that the American farmer 

would feed the world if given a free and fair change to do that. 

From materials you have provided today, it is clear that there is 

a lot of opportunity. 

Ambassador PORTMAN. A lot of opportunity. 

Mr. BEAUPREZ. I very much applaud you for that. Agriculture 

is still a huge piece of who Colorado is. We are the No. 4 producer 

of beef in the entire Nation of the 50 States, and pretty proud of 

that, as well as other commodities, and look forward to exporting 

those and sharing that quality product with much of the world. 

Thank you very much, again, for your service, and I yield back. 

Ambassador PORTMAN. Appreciate it, thank you. 

Mr. SHAW. Mr. Emanuel? 

Mr. EMANUEL. Mr. Chairman, the Congresswoman was here 

longer, and I have no problem with her going first, and then I will 

go. 

Mr. SHAW. Okay. Ms. Hart. 

Ms. HART. Thank you. It is great to see you here, Rob, Mr. Ambassador, and I am going to follow along the same lines of Mr. 

English, and I believe Mr. Levin. I am very interested in the 421 

process. I want to do as your interagency goals suggests, to ensure 

full and transparent enforcement of U.S. trade remedy laws and 

agreements, and I expect that includes section 421. I am still mystified about the application of 421s. I have testified in front of the 

ITC several times. We have had some relief. We have had some relief suggested by the ITC or encouraged by the ITC, and then denied by the president. In my opinion, it is actually one of the least 

transparent of the trade remedies that are available, and I am hoping that you will use this opportunity, the interagency process, to 

do a couple of things. One, help make it useful for us. If you think 

it is useful now, then I would beg to differ simply because of the 

facts that are presented at those hearings, and then the results 

that certainly are not I agreement with what the actual commission suggests. I guess my question for you is, is there a specific 

goal provided within your interagency process to make the 421 

more transparent, change it in some way, provide a little more opportunity to use it to, obviously, the assistance of some of our 

American companies? 

Ambassador PORTMAN. That is a very fair question, and this is 

one of the tools that we would like to use where the facts justify 

it. We have not been shy about using it. For instance, I talked 

about the fact that China is the number one country now where we 

73 

have anti-dumping orders, and we were not shy with regard to the 

textile safeguards. With 421, I will do some additional thinking on 

this and get back to you with, I hope, a more helpful and thoughtful response as to how perhaps the legislation could be changed. I 

will tell you, under the authority the President has, when the ITC 

tells him that there has been material injury, he has accepted that, 

and in four cases that happened. In two cases it didn’t happen. One 

of the four, of course, was the most recent pipe case, the standard 

pipe case. But he also then is required to consider how the import 

restrictions would affect the economy, and a broader set of U.S. interests. 

In each case, the remedies were not deemed to be effective in 

helping the domestic industry. One of the reasons, as I said, and 

under the pipe case, I said earlier there were—I don’t know how 

many countries I indicated, but a number of countries. In the steel 

pipe case, the ITC documented more than 50 other countries supplying the U.S. market, ready to step in and replace the curtailed 

Chinese imports. That is the data that he relied on I part to make 

his decision. So, just so you know how it operates. There may not 

be adequate transparency, and I am happy to talk to you about 

that, but my understanding is, is that in that case, the ITC material injury issue was not the question. The question was whether 

in the end the remedy would be effective in helping the industry 

in Pennsylvania and elsewhere. The market disruption issue was 

not the issue. The market disruption issue was accepted. I am 

happy to work with you more on this, and talk about maybe how 

to use the existing authority more effectively, or whether this authority is adequate to meet the concern we have with products coming in from China. 

Ms. HART. I am not sure what a yellow light means, but I think 

it means I am getting close to the end. I appreciate that, and we 

will follow up with you on that. Significant progress has been 

made—and I think you are aware of this—in many of these industries as far as their technology and their process, and they are now 

state of the art, and they are still in this situation where they are 

unable to compete. There comes a point where I think we really do 

have to re-examine what we are doing to determine whether we do 

want every particular of our, for example, heavy manufacturing, 

steel manufacturing, to be offshore. I just—now the red light—I 

just would suggest that the entire issue be examined on sort of a 

larger, with a larger world view, and a view about the United 

States and our security as well. Thank you. I yield back. 

Mr. SHAW. Time of the gentlelady has expired. Now the gracious 

Mr. Emanuel. 

Mr. EMANUEL. Let the record show. 

Mr. SHAW. The record is showing that. 

Mr. EMANUEL. Thank you, Mr. Chair. Mr. Ambassador, I have 

a couple of questions, mainly dealing with the issue of public 

health and health care. When we were dealing with CAFTA, I had 

offered an amendment. Obviously, it was ruled not germane, but 

nonetheless, actually, the now-Chairman said it was an important 

issue. He and I have communicated about creating an Office of 

Public Health over at USTR. As you know, part of the issues that 

dealt with CAFTA, specifically Honduras, dealt with their own pubVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00077 Fmt 6633 Sfmt 6602 E:\HR\OC\30435.XXX 30435
74 

lic health needs, and so forth. You have advisory boards, Eli Lilly 

represented on it, Pharma’s represented on it, Schering Plough is 

represented on it, but you don’t have a person specifically for public 

health, and a lot of the issues, whether you are dealing with South 

Africa now, whether you are dealing with Colombia, the issue of 

Thailand, all deal with their public health concerns and our pharmaceutical companies’ interest. 

I would hope that at some point you would take a serious look. 

I got a letter actually from your office today on this, and quote, unquote, it talks a fairly balanced—anyway, it was a very good letter, 

but, Rob, I would hope that you would really take the potential of 

creating an office, an ombudsman for public health to be on the advisory panels. They have an equal voice. I am not saying not Schering Plough, Eli Lilly or Pharma off, but they get heard. There is 

no doubt about it, they get heard. Some of us think some of these 

trade deals unfairly benefit them, and damage public health both 

here and abroad. But I encourage you to really create either an office for it, a person for it, or give the public health officials, one or 

two people on these advisory panels, because right now it impugns 

the character of what we actually negotiate, and you know this 

issue is coming up in all these one-on-one deals that we are working on, bilateral agreements. 

Ambassador PORTMAN. Rahm, two things. One, I agree with 

you, and I think when I first came in the concern was expressed 

during my confirmation process about the generic representation, 

and I agreed that we had to broaden the representation there. On 

public health, my understanding is—and I will check on this—that 

we have not issued a Federal Register notice asking for public 

health nominees for the advisory board. I think it makes sense. So, 

I will follow up on that. I will let you know more specifically where 

we are in terms of that advertising process we have to go through. 

But I think you are right. 

I do think we have not done a very good job of explaining what 

the TRIPs agreement provides for in terms of public health, and 

specifically what TPA provided for, and I don’t think it is inconsistent to say we ought to be helping with regard to where we have 

a comparative advantage in pharmaceuticals and being sure that 

these countries—you mentioned Honduras I think—but Guatemala 

or other counties we might do an agreement with in Latin America, 

Africa or Asia, that they have the ability, when they have a public 

health crisis, to access a medicine they need. I think we have 

worked that out now with this latest Doha TRIPS agreement. It 

would be consistent with the approach that we would take. 

Mr. EMANUEL. You will know more about this, but from my understanding, part of the implementation problems on CAFTA now 

relate to health care. Australia pushed back on us when we tried 

to get certain changes to their market as related to pharmaceuticals. All I am recommending—and if you need names, I encourage you to do this, hope you do it. The second thing on the 

issue of pharmaceutical products, you know when we passed the 

appropriations for Commerce, State and Justice, we talked about 

no-trade deals would impact the ability for re-importation. The executive branch’s view was we will take it under advisement. That 

was not the intent when Congress passed that. It was not to be 

75 

taken under advisement. It was to be actually executed, implemented accordingly. I would hope that you wouldn’t ignore 

Congress’s intent when we passed that legislation. You know this 

is an issue I care deeply about, as it relates to re-importation, and 

hope that it would not be—it was not intended to pass for advisory. 

We intended it specifically to be implemented. As I understand the 

Constitution—this is just one man’s reading—we have an impact 

on trade as it is related to that, Congress, and international trade. 

Last, I have a specific issue about a company in my district. I 

mean we always talk about China as it relates to intellectual property. It is the largest ladder manufacturer in the country, and 

about a knock-off that China is making. I would like to talk to you 

about that individually. We don’t have to take everybody’s time 

here, your time here. I will work with your staff accordingly, but 

to help them as it relates to their competition, and especially with 

retail operations here in this country, and they get really treated 

unfairly. 

Ambassador PORTMAN. I would love to talk about that. Is it a 

patent issue among others? 

Mr. EMANUEL. Yes, it is a patent issue. 

Ambassador PORTMAN. A trademark issue? 

Mr. EMANUEL. Exactly. We talk about it from intellectual property, but here is a manufacturer, about 400 some odd jobs. They 

have a facility here and one in Alabama, and they are competing 

against a Chinese operation that does a total knock-off. 

Ambassador PORTMAN. We would love to work with you on 

that. I should have said earlier in my testimony when more members are here, we are very interested in pursuing those individual 

cases, and we will do aggressively. One reason I want somebody in 

Beijing is to be able to do it even more directly with our embassy 

in Beijing. 

Mr. EMANUEL. Thank you also for taking the time to stay behind. 

Ambassador PORTMAN. Thank you, Rahm. 

Mr. SHAW. Well, we thank you very much. It is wonderful to 

have you back here, and it is all too rare in this political climate 

to see the mutual respect between the members of this Committee 

and you as a member of the administration, which we greatly appreciate. Thank you very much. We are adjourned. 

[Whereupon, at 4:58 p.m., the hearing was adjourned.] 

[Questions submitted from Chairman Thomas, Mr. Herger, Mr. 

Ramstad, Mr. Weller, Mr. Hulshof, Mr. Brady, and Mr. Nunes to 

the Honorable Rob Portman, and his responses follow.] 

Question from Chairman Thomas to the Honorable Rob Portman 

Question: The House passed H.R. 3283 last year, and sec. 5 contained a 

long list of commitments voluntarily taken on by the Chinese in the U.S.– 

China Joint Commission for Commerce and Trade process. For example, 

the Chinese committed to increase civil and criminal prosecutions of intellectual property violators and to ensure all government agencies are using 

legal software by the end of 2005. Did China meet these commitments? If 

not, how will the Administration react? 

Answer: With regard to IPR prosecutions, some U.S. companies report that Chinese authorities have been working harder to penalize violators, as China committed to do. Our law enforcement agencies have seen a degree of increased cooperation from China’s public security ministry on trans-border cases, which we and 

76 

China are seeking to expand. In general, however, copyright owners report that they 

have not seen significant numbers of prosecutions, and trademark owners report 

that their ability to bring criminal cases has only marginally increased. U.S. companies continue to report that Chinese authorities rarely take effective action, violators pay token fines, infringing goods end up back on the street, and almost no one 

is prosecuted criminally. This is in part because China still maintains volume and 

value thresholds that allow commercial scale violations to escape criminal procedures and penalties. Much more is needed, and the solutions need to be top-down, 

politically driven and consistent. 

China agreed at the U.S.–China Joint Commission on Commerce and Trade meetings in 2004 and 2005 to ban government use of unlicensed software by the central, 

provincial and local governments, and to extend this ban to large enterprises, including state-owned enterprises, this year. China tells us that its central government program has been completed. However, they have not provided us with specific 

information to confirm this and we are concerned that they do not have an effective 

audit process in place. We also have not seen effective steps taken to reduce use 

by large enterprises of unlicensed software. I have made it clear to my counterparts 

that the Chinese government needs to allocate the budget needed to ensure that 

governments at all levels use only licensed software, and to take verifiable steps to 

make sure this is happening. 

Questions from Representative Herger to the Honorable Rob Portman 

Question: Since U.S. fruit and vegetables do not receive amber box subsidies, what trade negotiation procedure can we use to assure the U.S. fruit 

and vegetable growers they will see European fruit and vegetable subsidies 

be reduced? 

Answer: In addition to the United States proposing the EU cut its allowed overall 

trade distorting domestic support by 75%, it has also suggested the EU cut its allowed aggregate measure of support (AMS) by 83% and product-specific caps be set 

at a 1999–2001 base period. The EU has offered to cut its allowed AMS by 70%. 

Since EU fruit and vegetable subsidies have historically totaled roughly $10 billion 

and account for just under one-fourth of all EU AMS, we can expect these products 

to be among the first to make significant contributions in cuts to EU domestic support. In addition, a modest level of export subsidy support for EU fruits and vegetables will be fully eliminated by 2013. The elimination of export subsidies, along with 

an aggressive U.S. market access proposal will mean that trade for U.S. fruits and 

vegetables in all foreign markets will face fewer barriers and trade distortions. 

Question: Regarding Ecuador, I am concerned about U.S. businesses that 

have been subjected to unfair practices and corruption in the Ecuadorian 

judicial system. It appears that the system encourages Ecuadorian interests to exploit and blackmail U.S. companies by bringing unfounded actions against them in Ecuador. I would like to know how your office is pursuing this matter, and further, whether you believe it will be possible to 

resolve such difficulties prior to moving ahead with a free trade agreement? 

Answer: We share your concern about the outstanding investment disputes and 

have repeatedly reminded the government of Ecuador that resolving these disputes 

is important both for Ecuador’s investment climate and for Congressional passage 

of the free trade agreement we are negotiating. We view our role as encouraging 

foreign governments to promote the fair and prompt resolution of disputes involving 

U.S. investors, consistent with the rule of law. Further, it is in Ecuador’s interest 

to demonstrate that investors receive fair and expeditious treatment under its judicial and administrative systems. As we continue our negotiations with Ecuador, we 

will continue to work hard to get these disputes resolved as soon as possible. 

Questions from Representative Ramstad to the Honorable Rob Portman 

Question: The medical technologies healthcare sectoral initiative in the 

Doha Development Agenda (DDA) would eliminate tariffs on a range of 

healthcare related products in WTO members. The remaining tariffs—usually in the 10–20 percent range—are almost entirely in developing countries, so this initiative is helpful in reducing healthcare costs in these countries. How do you see these ‘‘zero-for-zero’’ initiatives proceeding in the 

DDA, and the healthcare sectoral in particular? 

Answer: We were pleased to achieve a specific mention of sectoral initiatives as 

a key part of the NAMA modality in the Hong Kong Ministerial text. We see negotiations on sectoral initiatives that eliminate or harmonize tariffs as an essential 

77 

1 ‘Still Taxed to Death’ by Roger Bate, Richard Tren and Jasson Urbach, available at 

http://www.aei-brookings.org/publications/abstract.php?pid=930. 

element of the ongoing DDA negotiations on non-agricultural market access 

(NAMA). While we believe that a Swiss tariff-cutting formula will deliver increased 

overall market access, sectoral initiatives offer an avenue to go further than the formula and create new opportunities for U.S. exporters. 

On February 27, Singapore and Switzerland joined the United States in formally 

tabling at the WTO a proposal to eliminate tariffs on medicines and medical devices. 

We have worked closely with health-focused NGO groups in creating this proposal. 

A recent research paper published by the AEI–Brookings Joint Centre finds that 

several countries’ taxes and tariffs inflate the price of medicines to patients by 

around 10% and often higher.1 Last year a report by the World Health Organization 

confirmed that many countries, several of which are grappling with severe public 

health problems such as HIV/AIDS, TB and malaria, continue to impose import tariffs on medicines and medical devices. The WHO urged countries to remove these 

tariffs and argued that the loss of government revenue from their removal will be 

insignificant. 

The Hong Kong Ministerial text directs Members to determine which sectors are 

viable for inclusion in the overall tariff cutting package by April 30, 2006. In order 

to advance sectoral proposals in the WTO, we must increase participation, especially 

by developing countries. We are working both in Geneva and on a bilateral basis 

to encourage key countries to participate in sectors of interest. Industry groups are 

coordinating with their counterparts overseas and in the medical technologies sectoral, NGO groups are assisting with outreach. Yet more work remains. We need 

to see visible support from Europe, African countries such as Kenya, U.S. FTA partners such as Morocco, Mexico, Chile and Thailand, as well as other ASEAN countries. Important issues such as the precise products to be covered by the sectoral 

initiative, options for addressing sensitive products, and flexibility for developing 

countries, will be negotiated in each sector group. 

Question: It appears the United States is well on the way to completing 

its talks with Vietnam as part of the process for Vietnam joining the World 

Trade Organization. I have heard conflicting reports about these negotiations on whether the U.S. wants to include a special textile safeguard 

mechanism in an agreement with Vietnam—an action I would strongly advise against. With most of the world no longer subject to textile and apparel quotas, I fail to see an economic argument in favor of a mechanism 

that would continue to impose quotas on Vietnam, which accounts for only 

2 to 3 percent of all imports of textiles and apparel into the U.S. Given the 

confusion on this issue, I would like to understand better the potential 

costs and benefits of tabling a proposal for a special textile safeguard in 

the negotiations with Vietnam. Therefore, I would appreciate hearing your 

position on this issue, and your views on the following points: 

a. Since Vietnam considers quota free treatment for their textile and apparel products to be a major benefit of WTO membership, it is clear 

that getting good commitments from the Vietnamese on things like 

market access, services and intellectual property would be jeopardized 

if the U.S. were to press for inclusion of a textile safeguard in the 

agreement. Therefore, what would the U.S. gain from having a textile 

safeguard in this agreement that would be worth putting at risk substantial benefits to U.S. exporters? 

b. Notwithstanding pressure from its own domestic textile industry, the 

European Union did not negotiate a textile safeguard with Vietnam. If 

the U.S. bows to similar pressure and pushes for Vietnam to accept a 

textile safeguard, why would we want to provide a benefit to the Europeans from a concession that we alone would have to pay? 

c. Given that all previous legislation to continue the normalization of political and economic relations with Vietnam has passed Congress with 

strong bipartisan majorities, do you think that having a textile safeguard is necessary for Congress’ approval of legislation to give Vietnam permanent normal trade relations status, and if so, why? 

Answer: The United States is continuing to negotiate a bilateral market access 

agreement with Vietnam as part of its WTO accession. The negotiations are conducted on two tracks: (1) bilateral negotiations to open Vietnam’s markets to WTO 

Member exports, and (2) multilateral negotiations in the Working Party to bring 

Vietnam’s trade regime into conformity with WTO rules and obligations. We have 

78 

made substantial progress, including in the most recent visit of our negotiating 

team to Hanoi in January of this year. We will continue our discussions in Geneva 

soon. With respect to textiles, the Administration has not proposed a special safeguard. 

However, we have made clear to Vietnam that we will be looking closely at its trading regime, including areas such as industrial subsidies, an issue that the U.S. textile industry has flagged as a potential concern in the negotiations. We have made 

similar comments to U.S. stakeholders who have, as you indicate, a range of views 

on this issue. 

We want to work with the Congress and industry on a strong commercial agreement that helps to strengthen our bilateral trading relationship with Vietnam. 

Question from Representative Weller to the Honorable Rob Portman 

Question: I recently introduced a bill that would force transparency on 

the traditionally opaque decisionmaking in the Committee to Implement 

Textile Agreements, or CITA. I know it is a U.S. priority to encourage our 

trading partners to adopt transparent decisionmaking processes as they relate to trade policy, and page 22 of your power point presentation says that 

promoting transparency is a priority with China (ironically, right after the 

priority of China textile safeguards). Doesn’t it hurt U.S. credibility on 

transparency to allow CITA to operate in a black box, and as USTR is a 

member agency of CITA, what is your view on introducing to CITA notice 

and comment procedures that are consistent with the Administrative Procedures Act? 

Answer: The Committee for the Implementation of Textile Agreements (CITA) is 

the interagency group vested with making sure that the textile provisions of our 

trade deals work. For instance, they administer the ‘‘short supply’’ processes and 

other aspects of our free trade agreements. We are aware of the concerns that you 

raised about the transparency of CITA’s operations and are working to improve it, 

where appropriate. 

For example, the new short supply process for the United States-Dominican Republic, Central American Free Trade Agreement (CAFTA–DR) is anticipated to involve significant public notice as well as an open registration for email alerts. The 

statutory requirement is that these decisions be made in 30 business days. Interim 

regulations were published in the Federal Register on February 24. 

Despite our efforts to enhance the transparency of CITA’s work, we feel it would 

be inappropriate to subject all of CITA’s actions to prior notice and comment procedures. For example, in many cases, giving a foreign government prior notice of 

CITA’s intentions could harm U.S. interests and interfere with our conduct of foreign policy. U.S. Commerce Secretary Gutierrez, on behalf of CITA, has conveyed 

the Administration’s position on Congressman Weller’s legislative proposal on this 

matter. 

Questions from Representative Hulshof to the Honorable Rob Portman 

Question: An interim WTO panel recently ruled against the European 

Union’s de facto moratorium on certain genetically modified crops. The 

EU’s inertia on this issue results in the loss of up to $300 million in agricultural export sales annually. I am confident that you know how important 

these foreign agricultural markets are for American farmers. For instance, 

Missouri exports about 1 out of every 5 rows of corn and half of our soybean crop, and as more of these crops are farmed using biotech products, 

it is imperative that we continue to push the EU to end the ban on our Nation’s biotech farm products. While the WTO’s ruling is a strong step in the 

right direction, I fear the EU will ignore this ruling and continue their 

standing precedent on food safety policy and close their borders to our 

farm goods. In your opinion, what recourse does the U.S. have, and would 

you contemplate the filing of a WTO challenge against the EU’s protectionist regulations? 

Answer: We of course share your views on the importance of foreign agricultural 

markets for American farmers, and we welcomed the results of the interim report 

of the panel in the EC–Biotech dispute. As you know, in the dispute the United 

States has argued that the EC’s administration of its biotech approval procedures 

are inconsistent with the EC’s WTO obligations. The interim report is an important 

step, but the Panel must still issue a final report, and then there will be the possibility for an appeal. In the event that the dispute results in a final finding that the 

EC is out of compliance with its WTO obligations, we would certainly hope and expect that the EC will proceed to comply with its WTO obligations. Although it would 

79 

be premature at this point to speculate on what specific steps the United States 

might take should the EC fail to come into compliance with its WTO obligations, 

we can confirm that the United States would consider all the tools available to encourage the EC to comply. 

Question: European Trade Commissioner Peter Mandelson made a statement prior to the Hong Kong Ministerial that the EU is willing to consider 

a proposal by certain developing countries to amend TRIPS to include new 

mandatory patent disclosure requirements for genetic resources used in 

pharmaceutical or biotechnology products. The U.S. biotech industry maintains that such changes to U.S. patent laws would significantly frustrate 

the industry’s research and development of new products for the public 

good. USTR has taken a position against these additional patent disclosure 

requirements. How do you plan to respond to the EU? 

Answer: This issue has been under discussion at the WTO over the past few 

years. USTR has submitted several position papers to the WTO TRIPS Council arguing against new disclosure requirements in the TRIPS Agreement, on the grounds 

that such requirements would not achieve the purported goals of ensuring prior informed consent upon access to genetic resources and equitable sharing of benefits 

arising from the use of genetic resources. Further, we are concerned that such requirements would undermine the innovation incentives built into the patent system 

by creating uncertainty in patent rights. We will continue to work in the WTO 

against the introduction of new disclosure requirements by encouraging countries to 

implement national contract-based access and benefit sharing systems that promote 

the goals of prior informed consent and equitable sharing of benefits for use of genetic resources. 

Questions from Representative Brady to the Honorable Rob Portman 

Question: With respect to the DR–CAFTA implementation, which I understand will now proceed on a rolling basis, can you tell us how you will preserve the access that the trade is entitled to under the agreement for goods 

from the first country or countries on board? Specifically, how those countries, and more importantly U.S. importers, will have duty-free treatment 

upon importation when goods contain the inputs from another country for 

which the agreement is not yet in effect? I applaud the Administration for 

taking the responsible approach of delaying implementation with those 

countries not ready to implement their commitments, and proceeding with 

those that are ready. Nonetheless, it appears that USTR has sufficient proclamation authority as given by Congress in the implementing legislation to 

ensure there is a seamless transition for all parties from the CBTPA to the 

CAFTA and we encourage you to affirm that this is your intention. The Administration must ensure that the trade is not harmed by the rolling implementation. 

Answer: The rolling admission approach enables us to bring the CAFTA–DR into 

force for each country as it becomes ready to carry out its obligations under the 

agreement. This procedure, which our CAFTA–DR partners have encouraged, has 

enabled us to get the agreement underway in the shortest possible time. We recognize, however, that there are concerns that textile and apparel goods produced in 

a CAFTA–DR ‘‘party’’ from materials made in a country that remains just a ‘‘signatory’’ may become ineligible for preferential duty treatment. 

The most effective and practical way to ensure that our CAFTA–DR partners will 

be able fully to cumulate their production and receive tariff preferences is to bring 

each signatory into the agreement as soon as possible. We are working hard with 

our CAFTA–DR partners to accomplish that. 

The CAFTA–DR is now in force between the United States and El Salvador. We 

are making every effort to bring additional CAFTA–DR partners on board as soon 

as possible. As that occurs, it will help to reduce cumulation concerns. 

We have been consulting closely with representatives of our domestic textile and 

apparel industry to solicit their views on ways to address concerns on this subject. 

We are examining all avenues—including existing Presidential authority and possible legislative action—that may be available to resolve these concerns. I look forward to working with you and your colleagues on the Ways and Means Committee 

as we seek an appropriate and timely resolution to this issue. 

Question: Continuing on this line of questioning, what happens for short 

supply designation requests if, for example, a short supply request is still 

pending when the FTA is in effect for the first country, which is subsequently approved? If another country then implements the FTA, would 

80 

only the second country get to use the short supply designation and not the 

first country? We should not put the trade and such petitions in ‘‘never 

land’’ as we transition from CBTPA to DR–CAFTA. 

Answer: All items on the approved CBTPA short supply list as of March 1, 2006 

were incorporated into CAFTA–DR. Going forward, CAFTA–DR provides a new, 

streamlined procedure for considering new short supply requests. Any potential producer or supplier, even if located in a country that has not yet completed CAFTA– 

DR implementation, may submit a petition under the new procedure. Once a product has been designated as not commercially available in the CAFTA–DR region, the 

benefit of that designation extends to all CAFTA–DR parties. 

Under this new procedure, within 30, or at most 45, business days from the receipt of a petition, CITA will either match the petitioner with a regional supplier 

of that input or designate the input as not commercially available, allowing manufacturers to obtain the input from any source and maintain duty-free treatment for 

the finished product. We believe that the new CAFTA–DR process will provide better and faster results for both producers and suppliers. 

Question: We support the long term objective of establishing a free trade 

area linking the countries of the Western Hemisphere. It now seems to be 

increasingly clear that some countries in the Hemisphere will continue to 

be holdouts. In the Committee’s report on CAFTA, we expressed our interested in seeing broader cumulation provisions in future agreements. What 

steps is USTR taking to ensure that opportunities for cumulation are fully 

developed in our trade agreements and specifically, in the current Andean 

negotiations? Cumulation among our FTA partners offers an important 

strategic opportunity to put some real muscle into a free-trade oriented 

hemispheric system. 

Answer: Cumulation is an important component in promoting hemispheric integration. In the Andean FTA negotiations, we worked closely with our Andean partners to ensure that the proposed agreement will allow cumulation for all products 

and between all participating countries. We expect that the cumulation provisions 

in the FTA will generate new commercial opportunities that will encourage Andean 

economies to integrate with each other as well as with the United States. 

Questions from Representative Nunes to the Honorable Rob Portman 

Question: We are on the road to completing free trade agreements (FTAs) 

with South Korea and Thailand—both important markets for fruits and 

vegetables. As of today, we have completed about 10 FTAs, and the fruit 

and vegetable industry has supported each one in an attempt to gain market access. However, after agreements are signed, they find market access 

unrealized because of sanitary and phytosanitary (SPS) restrictions imposed by those countries. How can we learn about the SPS restrictions during the negotiations so that we can elect not to complete the South Korea 

FTA until all SPS barriers are disclosed? 

Answer: The fruit and vegetable industry can assist us in this effort prior to the 

negotiations by identifying market access priorities in the Republic of Korea. With 

the access priorities clear, USTR will be better equipped to solicit information related to Korea’s current and anticipated sanitary and phytosanitary regulatory requirements for the entry of specific fruit and vegetable products into Korea. We 

therefore encourage U.S. fruit and vegetable industry interests to testify during the 

interagency Trade Policy Staff Committee (TPSC) public hearing concerning the proposed U.S.–Korea FTA, scheduled for March 14, 2006(as notified in the Federal Register on February 9, 2006). This hearing will assist USTR in clarifying the negotiating objectives for the proposed FTA before negotiations get underway, based on 

advice on as to how specific goods should be treated under the proposed agreement. 

Question: I believe that our Nation can compete against any other in 

terms of efficiency and quality, including in the production of agriculture 

commodities. My district is the largest agriculture district in the United 

States, with the most diverse crop base in the nation. Many of the crops 

in my district are not traditional Farm Bill crops and are not offered domestic support of any kind. These farmers are particularly susceptible to 

trade policy. I believe it is essential that meaningful and measurable market access be part of any trade pact Congress is asked to support. However, 

even when we are assured this market access we have found that trading 

partners have put up roadblocks. Recently, a farmer in my district has 

tried to access the Moroccan market under the new FTA and failed. This 

was the first effort my district has made in shipping to Morocco under the 

81 

FTA. The message that has been sent back to us is not a good one. I would 

like to know what USTR is doing to make certain not only that agreements 

in the pipeline are good ones, with meaningful liberalization of trade in 

theory, but also what USTR is doing to make certain that once these agreements are reached we get the access we were promised? The time it is taking to resolve these barriers hurts my farmers and it hurts my ability to 

effectively represent the importance of FTAs in the future. 

Answer: USTR and other U.S. agencies work in a number ways to assure that 

U.S. exporters receive the market access to which they are entitled, including under 

our FTAs and other international agreements. We cooperate daily with other agencies in responding directly to complaints such as this one brought to our attention 

by U.S. exporters and companies. We hear from companies directly through numerous channels, including industry advisory groups and industry associations. 

A case in point is our effort to assist your constituent who has had a problem exporting almonds to Morocco. Working with the U.S. Embassy in Rabat, USDA, and 

U.S. Customs and Border Protection, USTR carefully reviewed Morocco’s decision 

that the almonds failed to meet rule of origin requirements. We wrote to the Moroccan government to express our view that the Moroccan customs service erred in its 

decision. We requested that the almonds be given FTA treatment and that the Moroccan government change its policy regarding this type of case. We will be following 

up to ensure that Morocco responds to this request and to assure that this problem 

does not arise for other U.S. exporters. 

In addition, as with our other FTAs, the agreement with Morocco has provisions 

to allow our countries to work together to assure full implementation and avoid 

similar complaints in the future: The Customs Administration chapter, for example, 

spells out how the two sides will cooperate to help assure efficient customs processing. The agreement obligates our two countries to identify contact points to address any matter pertaining to the agreement. The FTA also creates a Joint Committee that meets annually to review the working of the agreement and to identify 

steps that might be needed to make sure that the FTA is fully meeting its objectives. 

[Submissions for the record follow:] 

Statement of Center for Policy Analysis on Trade and Health, 

San Francisco, California 

EXECUTIVE SUMMARY 

I. PUBLIC HEALTH ISSUES ARE CRITICAL TO TRADE POLICY 

The United States has signed and is currently negotiating multilateral and bilateral trade agreements with significant implications for public health and health 

care. These agreements can provide a basis for altering domestic U.S. laws and policies, as well as those of our trading partners. Vital issues in current international 

trade negotiations which are directly related to health include: Intellectual property, 

affecting access to affordable prescription drugs; Trade in essential human services 

such as health care and water; Standards for health professional licensing; Regulation of alcohol and tobacco distribution; Standards for the safety of plants and food; 

and Rules on how state and federal government entities procure goods and services, 

such as affordable medicines for veterans and seniors. 

II. INTELLECTUAL PROPERTY PROVISIONS REDUCE ACCESS TO MEDICINES; DMINISTRATION INTENDS TO DISREGRD CONGRESS ON 

REIMPORTATION 

Controversies regarding intellectual property (IP) provisions are delaying conclusion of agreements with Central America, Thailand, and South Africa. Public health 

officials, clinicians, and patients are concerned that trade policies designed to extend 

pharmaceuticals’ monopoly rights will delay competition from generic medicines, 

propping up high prices for brand name drugs in the U.S., and effectively denying 

access to life-saving medicines in developing nations. These provisions include extended terms for patents and for data exclusivity. They present barriers to compulsory licensing, thus further undermining the ability of governments to protect public 

health. 

In 2005, Congress passed H.R. 2862, the ‘‘Science, State, Justice, Commerce, and 

Related Agencies Appropriations Act, 2006,’’that calls for the USTR to refrain from 

negotiating trade provisions that would bar the reimportation of prescription drugs 

into the U.S. Unfortunately, President Bush’s signing statement asserts his intent 

to treat Congress’ legislation on reimportation as ‘‘advisory.’’ Disregarding this imVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00085 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
82 

portant legislation would both flout the will of the people’s representatives in Congress, and continue an unfortunate and unpopular policy. 

III. PUBLIC HEALTH MUST BE REPRESENTED IN TRADE NEGOTIATIONS 

Following months of discussions, CPATH and a coalition of public health groups 

filed a suit to demand that corporate interests be balanced with public interest representation on six influential U.S. Industry Trade Advisory Committees (ITACs). 

Partners include the California Public Health Association-North, the Chinese Progressive Association, Physicians for Social Responsibility, and the American Nurses 

Association, represented by the legal firm Earthjustice. In response, USTR and the 

Department of Commerce published a request for nominations to two ITACs not 

named in our suit, which are heavily dominated by the pharmaceutical industry. 

While a positive step forward, USTR has given no deadline for selecting appointees 

even to these two committees, and has delayed finalizing the appointment of a representative from the Generics Pharmaceutical Association to ITAC 3. USTR must 

take positive and immediate steps to include public health in determining critical 

trade policies. 

IV. CPATH RECOMMENDATIONS 

CPATH urges Congress to pass legislation that promotes transparency and democratic accountability at all levels of the trade negotiation process, including enabling 

public access to all trade advisory committee meetings, proceedings and submissions 

related to multilateral and bilateral trade negotiations. We recommend an assessment of the impact of the trade agreements on population health, and follow-up 

measures to assure, based on such assessment, that these agreements do not have 

an adverse impact on health. 

I. PUBLIC HEALTH ISSUES ARE CRITICAL TO TRADE POLICY: 

The United States has signed and is currently negotiating multilateral and bilateral trade agreements with significant implications for public health and health 

care. These agreements can provide a basis for altering domestic U.S. laws and policies, as well as those of our trading partners. Vital issues in current international 

trade negotiations which are directly related to health include: 

• Intellectual property, affecting access to affordable prescription drugs; 

• Trade in essential human services such as health care and water, 

• Standards for health professional licensing, 

• Regulation of alcohol and tobacco distribution; 

• Standards for the safety of plants and food; and 

• Rules on how state and federal government entities procure goods and services, 

such as affordable medicines for veterans and seniors. 

Trade policies can undermine efforts of national, state, and local municipalities 

to enact a diverse array of public health regulations: they could prohibit public 

school systems from requiring limits on school soda machines, and they could even 

remove privacy protections from medical records. Trade policies could also promote 

privatization of public water supplies and other vital services. 

II. INTELLECTUAL PROPERTY PROVISIONS REDUCE ACCESS TO MEDICINES; ADMINISTRATION INTENDS TO DISREGARD THE WILL OF 

CONGRESS: 

Controversies regarding intellectual property (IP) provisions are delaying conclusion of agreements with Central America, Thailand, and South Africa. Public health 

officials, clinicians, and patients are concerned that new policies designed to extend 

pharmaceuticals’ monopoly rights will hinder access to life-saving medicines. The IP 

provisions in these bilateral and regional agreements would delay competition from 

generic medicines, helping to prop up high prices for brand name pharmaceuticals 

in the U.S., and effectively deny access to life-saving drugs in developing nations. 

IP provisions that would discourage generic competition include extended terms for 

patents and for data exclusivity. Also, new provisions present barriers to compulsory 

licensing, thus further undermining the ability of governments to protect public 

health. 

The pharmaceutical industry argues that high prices allow them to recoup expenses from costly research and development, and that since other (developed and 

developing) countries charge less for medications, they are essentially getting a ‘‘free 

ride’’ from the U.S. However, this approach is misguided and based on inaccurate 

assumptions. In actuality, European pharmaceutical companies do invent new drugs 

83 

at proportionately the same level as U.S. companies and they do recoup their research and development dollars, while charging substantially less for their products 

(see Light and Lexchin article, attached). In addition U.S. taxpayers pay for much 

of the basic research that is conducted in this country. The current patents system 

maintains high prices, and has resulted in producing hundreds of ‘‘me too’’ products, 

(e.g., slight variations on allergy medications,) while there are not enough innovative products for life-threatening, highly prevalent diseases such as tuberculosis, 

and HIV–AIDS. 

The ‘‘free rider’’ argument was used to justify the U.S. position on medicines in 

the U.S.–Australia FTA. CPATH found that the U.S.–Australia FTA contained provisions prohibiting reimportation of drugs from Australia to the U.S., and that the 

agreement would directly conflict with pending Congressional legislation to authorize reimportation of less expensive medications. CPATH found that the agreement 

would also give drug companies the right to challenge drug listing, purchasing and 

reimbursement decisions by the U.S. Department of Veterans Affairs, Medicare, 

Medicaid and other government authorities, which could lead to higher drug prices 

for the vulnerable populations affected. 

CPATH submitted public testimony to the Ways and Means Committee of the 

U.S. House of Representatives, and worked closely with Congressional Representatives and Senators concerned with public health. Many drew a line in the sand, calling for an end to trade rules in the future that may limit access to medicines. 

In 2005, Congress passed H.R. 2862, the ‘‘Science, State, Justice, Commerce, and 

Related Agencies Appropriations Act, 2006,that calls for the USTR to refrain from 

negotiating trade provisions that would hinder Congress’ ability to pass legislation 

for reimportation of prescription drugs. 

Unfortunately, President Bush’s signing statement asserts his intent to treat Congress’ legislation on reimportation as ‘‘advisory’’ only. Disregarding this important 

legislation would both flout the will of the people’s representatives in Congress, and 

continue an unfortunate and unpopular policy. 

III. PUBLIC HEALTH REPRESENTATION IN TRADE NEGOTIATIONS: 

It is important for Congress, the U.S. Trade Representative (USTR) and the Department of Commerce to receive information and guidance from the public health 

and health care community on trade negotiations which affect the public’s health, 

and to benefit from a transparent public debate. 

Public health vastly outnumbered: 

While there is no representation on the trade advisory committees for public 

health regarding the impacts of international trade on public health and health care 

(other than a representative from nursing on the Tier 2 labor advisory committee), 

there is substantial representation from the pharmaceutical, tobacco, alcohol, food 

processing and health insurance industries. In fact, on six relevant committees 

(dealing with issues ranging from distribution of tobacco and alcohol to regulation 

of hospital services, to intellectual property), there are a total of 42 representatives 

from these industries, and absolutely zero public health representatives. 

Public health request: 

The public health community has called for representation on the trade advisory 

committees, which is both legally required and a sound policy step. In May 2005, 

several organizations, including the American Public Health Association, American 

College of Preventive Medicine, American Nurses Association, Doctors for Global 

Health, National Association of Community Health Centers, California Conference 

of Local Health Officers, Physicians for Social Responsibility (PSR), Physicians for 

Human Rights, and CPATH formally requested representation for public health on 

84 

6 advisory committees affecting public health. These committees and the issues they 

address are described below: 

Committee Issues Relevant to Public Health 

Consumer Goods (ITAC 4) Trade in tobacco, alcohol, processed foods and 

other consumer goods 

Distribution Services (ITAC 5) Distribution of food, alcohol, tobacco, pharmaceuticals, hazardous products 

Information and Communications Technologies, Services, and Electronic Commerce (ITAC 8) 

Information technologies and services including those used to store and transmit medical 

information, and to conduct telemedicine and 

research 

Services and Finance Industries (ITAC 10) Health-related services including health care, 

water supply, sanitation, research, health 

professional education and other education 

Customs Matters and Trade Facilitation 

(ITAC 14) 

Movement of goods which affect injury control (tobacco, alcohol, and firearms) and government ability to safeguard public health 

Intellectual Property Rights (ITAC 15) Terms of access and pricing for pharmaceuticals, and copyrighted materials for research 

Standards and Technical Trade Barriers 

(ITAC 16) 

Standards and measures affecting environmental health and safety, agricultural and 

processed food safety, and alcohol products. 

CPATH’s May 2005 letter also requested that the USTR create a new Tier 2 committee to address public health implications of trade, and that the USTR promote 

transparency and democratic accountability at all levels of the trade negotiation 

process, including enabling public access to all trade advisory committee meetings, 

proceedings and submissions related to multilateral and bilateral trade negotiations. 

Members of the tobacco control community responded to a published requested for 

nominees to the advisory committee on Agriculture Committee on Cotton, Peanuts 

& Tobacco in March, 2005. The USTR appointed Judy Wilkinfeld of the Campaign 

for Tobacco Free Kids to this ATAC. However, Ms. Wilkenfeld was unable to serve 

due to illness. Although the USTR stated in October, 2005 that they would appoint 

her colleague, Eric Lindblom, as a replacement, they have delayed actually doing 

so. The tobacco control groups also sent a companion letter in May, 2005, supporting 

the requests of CPATH and colleagues. 

The USTR still has not implemented the appointment announced months ago of 

Shawn Brown from the Generic Pharmaceuticals Association to ITAC 3, which also 

includes significant representation by brand name pharmaceutical companies. We 

applaud this appointment and urge that Mr. Brown be seated immediately. 

The USTR moves at snail’s pace to appoint public health representatives, while 

feverishly negotiating binding agreements without benefit of public health expertise: 

On December 16, 2005, in response to our imminent lawsuit, the USTR published 

a Federal Register notice calling for public health representatives to apply to two 

advisory committees: ITACs 3 (Chemicals) and 15 (IP). 

The good news is that these are important committees for pharmaceutical issues. 

The announcement calls for representatives from public health organizations who do 

not work for industries that are already represented. 

The bad news, however, is that the announcement gave no timeline for making 

appointments. CPATH sent a letter to the USTR and Department of Commerce in 

December asking for the deadline for applications and appointments. We have received no response from either office. 

In response, CPATH and our colleagues solicited applications from several wellqualified applicants: 

William Von Oehsen, General Counsel to the Public Hospital Pharmacy Coalition 

(PHPC), which is a coalition of the National Association of Public Hospitals and 

Health Systems (NAPH); 

Professor Kevin Outterson of the West Virginia University School of Law; 

85 

Sharon Treat, Executive Director of the National Legislative Association on Prescription Drug Prices (NLARx); 

Hongmai Pham, MD, Johns Hopkins University; and 

Kyle Kinner, JD, MPA, Director, Policy and Programs, Environment and 

Health,Physicians for Social Responsibility. 

CPATH has sent letters of support for these individuals and we may nominate 

others. So far USTR has acknowledged to these individuals that they’ve received 

their applications; but there has been no other progress, and no response to CPATH. 

As of this date, there are still no public health representatives on the USTR advisory committees. The public health community and policy-makers are disheartened 

that since we first approached the USTR, numerous trade agreements have been negotiated and are currently in process: CAFTA has been approved, the Hong Kong 

WTO ministerial occurred in December, negotiations are in process with Thailand, 

Southern Africa, and the Andean nations (and completed with Peru), all without our 

participation. 

Public health sues USTR 

On December 15, 2005, CPATH and a coalition of public health groups including 

California Public Health Association-North, the Chinese Progressive Association and 

Physicians for Social Responsibility, filed suit against the USTR, to demand that 

corporate interests be balanced with public interest representation on the U.S. Industry Trade Advisory committees. We called for representation on six relevant committees, per our May 2 letter (ITACS 4, 5, 8, 10, 14, and 16). The USTR has 90 

days to respond, or until March 15. A magistrate has been appointed but there has 

been no response from the USTR. 

The Federal Advisory Committees Act (FACA) requires that advisory committees 

be ‘‘fairly balanced in terms of the points of view represented.’’ Though the U.S. 

General Accounting Office recently issued a report criticizing the USTR for not 

opening most of its committees to public interest representatives, the USTR has 

failed, despite repeated requests from CPATH and others, to appoint representatives 

of public and environmental health organizations to several ITACs. Thus, we have 

been forced to go to court, seeking to ensure balance on these federal advisory panels. Several plaintiffs in the lawsuit voiced their frustration: 

‘‘Currently the health advisory committees are made up exclusively of industry representatives,’’ said Peter Abbott,MD MPH, President of California Public Health Association-North. ‘‘The foxes are not just guarding the hen house, but they are selling 

the eggs in a private market. That’s no way for international trade policy to be 

made.’’ 

‘‘You would think that a trade panel empowered to make public health decisions 

that will impact millions of people would seek out a few doctors and medical experts 

with no ties to industry,’’ said Kyle Kinner, JD MPA, of Physicians for Social Responsibility. ‘‘But unfortunately, that is not happening. Hopefully this legal action 

will bring some balance to the process.’’ 

IV. CPATH’S RECOMMENDATIONS: 

We urge Congress to pass legislation that promotes transparency and democratic 

accountability at all levels of the trade negotiation process, including enabling public access to all trade advisory committee meetings, proceedings and submissions related to multilateral and bilateral trade negotiations. The public interest, including 

public health, must be represented on the Tier 3 Industry Trade Advisory Committees. In addition, we recommend that a new tier-2 public health advisory committee 

be created to provide information, reports, and advice to and consult with the President, to Congress, and to the U.S. Trade Representative (USTR), in accordance with 

the Trade Act of 1974, as amended. In addition to these changes to the negotiation 

process, we recommend: 

• Congress should not extend ‘‘Fast Track.’’ 

• An assessment of the impact of the trade agreements on population health, and 

assure based on such assessment that these agreements do not have an adverse 

impact on health. 

• Exclude vital human services such as health care and water, and intellectual 

property rules that affect affordable medications, from trade negotiations and 

challenge under free trade agreements. 

• Support enforceable commitments to advancing population health, and to 

achieving universal access to health care, affordable medications, and safe, affordable water in the U.S. and internationally. 

86 

1McClellan MB. Speech before first international colloquium on generic medicine. Washington, 

DC: U.S. Food and Drug Administration, 2003. www.fda.gov/oc/speeches/2003/ 

genericdrug0925.html (accessed 15 Aug 2005). 2 Aldonas G. International trade and pharmaceuticals. Washington, DC: U.S. Senate Finance 

Committee, Subcommittees on Health and Trade, 2004:1–17. 3Safire W. The donut’s hole. New York Times 2003 Oct 27:A21. 4Light D, Castellblanch R, Arrendondo P, Socolar D. No exit and the organization of voice 

in biotechnology and pharmaceuticals. J Health Polit Policy Law 2003;28:473–507. 5 National Institute for Health Care Management Research and Education Foundation. Prescription drug expenditures in 2001: another year of escalating costs. Washington, DC: NIHCM, 

2002. 6Gross D, Schondelmeyer S, Raetzman S. Trends in manufacturer prices of brand name prescription drugs used by older Americans, 2000 through 2003. Washington, DC: AARP Public Policy Institute, 2004. 7Families USA. Sticker shock: rising prescription drug prices for seniors. Washington, DC: 

Families USA, 2004. 8 United States Department of Commerce. Pharmaceutical price controls in OECD countries: 

implications for U.S. consumers, pricing, research and development and innovation. Washington, 

DC: USDC, 2004. 9Pharmaceutical Research and Manufacturers of America. Pharmaceutical industry profile 

2004. Washington, DC: PhRMA, 2004. 10Department of Health. Pharmaceutical price regulation scheme:seventh report to parliament. London, DoH, 2003. 

Foreign free riders and the high price of U.S. medicines 

Donald W Light, Joel Lexchin 

The U.S. government, backed by the pharmaceutical industry, wants to convince 

Americans that they’re paying more for drugs because they’re contributing more 

than their fair share of the costs of research and development. Not so, argue two 

researchers who have looked at the evidence. 

Department of Psychiatry, University of Medicine and Dentistry of New Jersey 

Donald W Light, professor 

School of Health Policy and Management, York University, Toronto ON, Canada 

Joel Lexchin, associate professor 

Correspondence to: DWLight, dlight@princeton.edu 

BMJ 2005;331:958—60 

The United States government is engaged in a campaign to characterise other 

industrialised countries as free riding on high U.S. pharmaceutical prices and innovation in new drugs.1 This campaign is based on the argument that lower prices 

imposed by price controls in other affluent countries do not pay for research and 

development costs, so that Americans have to pay the research costs through higher 

prices in order to keep supplying the world with new drugs.2 Supporters of the campaign have characterised the situation as a foreign rip-off.3 We can find no evidence 

to support these and related claims, and we present evidence to the contrary. Furthermore, we explain why the claims themselves contradict the economic nature of 

the pharmaceutical industry. 

Origins of the campaign 

The campaign, strongly backed by the pharmaceutical industry, seems to have 

started in the late 1990s as a response to a grass roots movement started by senior 

citizens against the high prices of essential prescription drugs.4 This issue was the 

most prominent one for both parties in the 2000 elections and has since been fuelled 

by a series of independent reports documenting that U.S. drug prices are much 

higher than those in other affluent countries.5,6,7 The idea that other countries are 

exploiting the U.S. has led to a hearing of the U.S. Senate Committee on Health, 

Education, Labor and Pensions and was behind a Department of Commerce report 

that strongly advocated that other developed countries raise prices on patented 

medicines.8 But are higher prices really necessary? 

The free rider myth 

We can find no convincing evidence to support the view that the lower prices in 

affluent countries outside the United States do not pay for research and development costs. The latest report from the UK Pharmaceutical Price Regulation Scheme 

documents that drug companies in the United Kingdom invest proportionately more 

of their revenues from domestic sales in research and development than do companies in the U.S. Prices in the UK are much lower than those in the U.S. yet profits 

remain robust.9,10

Companies in other countries also fully recover their research and development 

costs, maintain high profits, and sell drugs at substantially lower prices than in the 

U.S. For example, in Canada the 35 companies that are members of the brand name 

industry association report that income from domestic sales is, on average, about 

87 

11Patented Medicine Prices Review Board. Annual report 03. Ottawa: PMPRB, 2004. 12Statistics Canada. Financial performance indicators for Canadian business. Ottawa: Statistics Canada, 1996. 1McClellan MB. Speech before first international colloquium on generic medicine. Washington, 

DC: U.S. Food and Drug Administration, 2003. www.fda.gov/oc/speeches/2003/ 

genericdrug0925.html (accessed 15 Aug 2005). 9Pharmaceutical Research and Manufacturers of America. Pharmaceutical industry profile 

2004. Washington, DC: PhRMA, 2004. 13 European Federation of Pharmaceutical Industries and Associations. The pharmaceutical 

industry in figures. Brussels: EFPIA, 2004. 14Patented Medicine Prices Review Board. A comparison of pharmaceutical research and development spending in Canada and selected countries (2002). Ottawa: PMPRB, 2002. 15Patented Medicine Prices Review Board. Annua l repor t 00. Ottawa: PMPRB, 2001. 16 National Science Federation. Research and development in industry: 1999. Arlington: NSF, 

2002. 

10 times greater than research and development costs.11 They have profits higher 

than makers of computer equipment and telecommunications carriers 12 despite 

prices being about 40% lower than in the U.S.11

Lower prices do not lead to less research 

Mark McClellan, the former commissioner of the Food and Drug Administration, 

maintained that low prices are ‘‘slowing the process of drug development worldwide.’’ 1 A corollary to this claim is that drug companies are shutting down their European operations because prices are too low and moving to the U.S. This assertion 

is contradicted by the industry’s data. The European Federation of Pharmaceutical 

Industries and Associations reported that, between 1990 and 2003, its members increased their research and development investments in Europe by 2.6-fold and in 

the U.S. by fourfold.13 The federation concluded that this differential was due to 

multiple factors, such as the economic and regulatory framework, the science base, 

the investment conditions, and societal attitudes towards new technologies. 

On several measures, other developed countries spend proportionately as much as 

the U.S. on research and development. The table presents the spending on research 

and development as a percentage of gross domestic product for eight developed 

countries.14 The U.S. is about at the median. Prices in the countries with better ratios than the U.S. were 31–36% less than those in the U.S.15 Pharmaceutical companies commit as large a percentage of sales to research and development in Europe 

as in the U.S., about 19% on average over the past seven years.9,13 This little reported fact contradicts the widely circulated claims that European countries deliberately ignore research and development costs in calculating prices.1

Europee no less innovative than the U.S. 

Contrary to claims of American dominance, pharmaceutical research and development in the U.S. has not produced more than its proportionate share of new molecular entities. The U.S. accounts for just under 48% of world sales and spent 49% 

of the global total on research and development to discover 45% of the new molecular entities that were launched on the world market in 2003, less than its proportionate share. European countries account for 28% of world sales, 36% of total research and development spending, and 32% of new molecular entities, more than 

its proportionate share.13

Limited investment in breakthrough research 

Pharmaceutical research and development is traditionally divided into three categories: x Basic—work to discover new mechanisms and molecules for treating a disorder x Applied—work that develops a discovery into a specific practical application, 

including research on manufacturing processes and preclinical or clinical studies x 

Other—work that includes drug regulation submissions, bioavailability studies, and 

post-marketing trials. 

Although all types of research are valuable, it is basic research that leads to important therapeutic breakthroughs. Only a fraction of overall industry expenditure 

is on basic research, and it does not require the high prices currently seen in the 

U.S. to support it. 

The Pharmaceutical Research and Manufacturers of America reports that companies invest on average about 18–19% of domestic sales into research.9 This figure 

is considerably higher than that produced by the U.S. National Science Foundation.16 Its 1999 data show that drug companies invest 12.4% of gross domestic sales 

on research and development (10.5% in-house and 1.9% contracted out), but only 

18% of the amount spent in-house went on basic research. Assuming that 18% of 

contracted out research is also spent on basic research (the actual figure is not reported) then only 2.2% (18%¥.4%) of revenue goes to basic research. The after tax 

88 

17 Bindra G, Sturgess J. Assessment of current competitiveness of Canadian R&D in the pharmaceutical industry. Ottawa: Industry Canada, 1996. 18 Industrial interests versus public health: the gap is growing. Prescribe Int 2004;13:71–6. 19 National Institute for Health Care Management Research and Education Foundation. 

Changing patterns of pharmaceutical innovation. Washington, DC: NIHCM, 2002. 20Families USA. Off the charts: pay, profits and spending by drug companies. Washington, 

DC: Families USA, 2001. 21Gregson N, Sparrowhawk K, Mauskopf J, Paul J. Pricing medicines: theory and practice, 

challenges and opportunities. Nat Rev Drug Discov 2005;4:121–30. 

cost of $1 of research and development expenditures in the U.S. seems to be $0.53 

to $0.61, owing to tax incentives to do research.17 Thus U.S. pharmaceutical companies devote a net of only about 1.3 cents (2.4%x(0.53+0.61)/2) of every dollar from 

sales to innovation. 

Only 10–15% of newly approved drugs provide important benefits over existing 

drugs.18,19 From a drug company’s point of view, investing principally in research 

to produce new variations of existing drugs makes sense. Government protections 

from normal price competition do not distinguish between the lower risk, less costly 

derivative kind of research and high risk basic research needed to discover new molecules. 

Ratio of pharmaceutical spending on research and development to 

gross domestic product and ratio of drug prices to U.S. prices, 

2000 12,15

Country 

Canada France Germany Italy Sweden Switzerland 

United 

Kingdom 

United 

States 

Percent of GDP 0.08 0.14 0.11 0.06 0.35 0.55 0.32 0.24 

Price as a percent 

of U.S. price 63.6 55.2 65.3 52.9 63.6 69.2 68.6 — 

12Statistics Canada. Financial performance indicators for Canadian business. Ottawa: Statistics Canada, 1996. 15Patented Medicine Prices Review Board. Annual report 00. Ottawa: PMPRB, 2001. 

Misusing economic theory 

The industry’s principal claims, as well as being contradicted, are based on false 

premises. First, counting which country discovers the most new molecular entities 

is irrelevant in a global market. Companies know that where a good drug is discovered does not matter, and often a discovery comes from research in several countries. Whether domestic revenues recover a given country’s research and development costs is also irrelevant. If this were not the case the industry would have shut 

down operations in Switzerland long ago because of its small market size. 

If revenues are inadequate, it would make more sense to conclude they do not 

cover all marketing costs rather than research costs. Research is central to the industry, and costs associated with it should be deducted first. Pharmaceutical companies report that they invest around three times more in the combination of marketing, advertising, and administration than in research, leaving ample room to cut 

costs.20

Secondly, every student in introductory economics learns that fixed costs like research do not determine prices.21 The market sets prices, implying they are open 

to free trading like stock prices. Patents, and especially patent clusters, turn the 

market into a monopoly, and only a monopoly can claim that fixed costs determine 

prices because it can make that a self fulfilling prophecy. The claim by companies 

that they have to set prices at 50–100 times production costs to recover research 

and development costs has never been substantiated, because they have never 

opened their books to independent public inspection to prove it. What we do know 

is that all research and development costs are fully recovered each year from domestic sales in the UK and Canada at prices that are far lower than those in the U.S. 

Thirdly, free rider is both a vivid public image of someone jumping on for a free 

ride and a highly misleading economic term. Technically it refers to a method for 

allocating fixed costs in proportion to the prices that different groups pay. For example, if Group A (call it Europe) pays $1 per pill and Group B (call it the U.S.) pays 

$2 a pill and each buys a million pills, then this accounting method would assign 

half as much of the fixed cost to Group A as to Group B. If, however, the fixed costs 

are only $300 000 (a tenth of the total revenue) for the two million pills, the fixed 

89 

costs could be allocated by volume rather than by price ($150 000 for each group) 

and conclude that Group A more than pays the fixed costs and Group B pays much 

more than it has to. In short, the free riding argument economically is the artefact 

of an accounting convention and can be eliminated by Group B cutting its prices 

in half, rather than forcing Group A to double its prices. 

Conclusions 

The pharmaceutical industry has provided invaluable medicines to cure and relieve millions of patients throughout the world. As an industry, it drives economic 

growth and employs thousands of skilled people. But it also uses false economics 

and makes up stories to justify higher prices. Higher prices strain budgets, causing 

millions of U.S. patients not to take the drugs their doctors think necessary. The 

pharmaceutical industry and the U.S. government want to blame other developed 

countries for these higher prices rather than make drugs more affordable. 

f 

Statement of the Coalition for GSP 

I. Introduction 

This written statement is submitted by the Coalition for GSP (the Coalition) in 

response to the request of the Committee on Ways and Means (the Committee) for 

comments from the public regarding President Bush’s trade agenda in 2006. The Coalition is a diverse group of U.S. companies and trade associations that use the GSP 

program. A list of our members, as of today, is attached. We care so much about 

GSP renewal because, over the years, the program has become an integral part of 

our businesses. Coalition members import a wide range of goods under GSP, from 

jewelry to plywood to batteries to spices. 

The Coalition was formed in 1992 to work with Congress on a renewal of the program, which was then set to expire on July 3, 1993. We have worked for repeated 

Congressional renewals of the program ever since. Over the years, we have learned 

much about how important this program is to American consumers, be they families 

or manufacturers or farmers. We have also learned much about how the renewal 

process has affected U.S. companies and consumers. We are pleased to have the opportunity to share with you some of those lessons learned, and hope they are helpful 

in guiding your consideration of how Congress can best support this important program. 

II. Long-term Renewals Are Crucial to American Users of the Program 

We urge Congress and the Administration to work together towards the longest 

period of seamless reauthorization possible. Our ability to use the duty-free benefits 

available under the program is most effective when we know those benefits will be 

available by the time we need to import the product or products of interest to us. 

While the time from design to order to importation varies for each of us, for some 

companies it can be quite long. For example, some products take as long as one year 

from design to importation. For others, the products are advertised in catalogues 

with a shelf life of at least six months. In all cases, we need to know what we will 

be paying for the imported product at the very beginning of that process. If we can 

count on receiving duty savings under GSP, we can incorporate those important cost 

savings into our pricing. But if the program expires mid-stream in the order-to-delivery process, we can be caught with a serious financial load. We cannot always 

adjust our prices to our customers to pass on the unexpected duties, especially if 

those prices are advertised in catalogues. So we have to evaluate the risk of losing 

GSP mid-stream against the benefits of the duty savings. If the program is likely 

to expire, we often cannot incorporate it into our sourcing plans, and our prices to 

our customers need to be higher. 

With those planning constraints in mind, you can see how short-term renewals 

of GSP in the 1990s, compared to the long-term period of the past five years, have 

affected our use of the program. From July 1993 through September 2001, Congress 

renewed GSP in fits and starts (largely due to the need to meet ‘‘pay-go’’ constraints). Planning our sourcing using GSP was difficult if not impossible. Over this 

period, from 1994 to 2001, U.S. imports under GSP actually declined an average 2.2 

percent annually. But in 2001 Congress renewed GSP for five years, and as a result, 

imports from GSP beneficiary countries to the United States have increased an average 11 percent annually. 

A long-term renewal of the program is also important in encouraging sourcing 

from countries that do not yet have the infrastructure or production capability to 

90 

be competitive suppliers of GSP-eligible products. You can see from the table below 

how the long-term renewal of GSP has increased interest in sourcing from poorer 

beneficiary countries. To the extent that some of our members are interested in investing in new overseas production relationships, we need time to grow these suppliers. Short-term renewals of the program do not encourage this, and keep us focused on more traditional GSP-eligible countries. Taking GSP away from some of 

the larger users of the program, like India or Brazil, will not increase interest in 

sourcing from least developed countries (sourcing would shift from India and Brazil 

to China instead), but a long-term renewal of GSP will. 

Average Annual Increases in U.S. Imports under GSP from 

Selected Beneficiary Countries 

1994–2001 Stop-and-Start 

Renewal Period 

2001–2005 Stable Renewal 

Period 

Guyana ¥ 0.6% +85.1% 

Lesotho ¥73.2% +63.7% 

Croatia ¥10.8% +47.0% 

Kenya ¥ 5.5% +14.3% 

Source: U.S. Census Bureau 

A long-term renewal of GSP is so important to American companies—again, many 

of them small businesses and manufacturers—that we recommend Congress extend 

GSP indefinitely, with a requirement that the Office of the U.S. Trade Representative (which administers the program) submit a report to Congress every three years 

on the operation and effect of the program over the previous three years. Upon receipt of the report, Congress would have a specific opportunity to modify, if necessary, the program—or terminate it altogether. But if termination is not approved, 

importers could count on the program’s continued operation (albeit, perhaps, with 

some modifications). 

III. GSP Matters to American Companies and Workers 

While it is traditional to view GSP as a program designed to benefit primarily 

least-developed countries, over the years it has become just as important to U.S. 

farmers, manufacturers and consumers. Today, consumer goods account for 30.0 

percent of GSP imports; raw materials and components further processed in the 

United States account for another more than two thirds of GSP imports. For example, U.S. manufacturers incorporate raw materials like ferroalloys used in steel production, imported under GSP, or aluminum ingots imported under GSP for the aluminum they produce in the United States. Leather from Argentina is incorporated 

into furniture in North Carolina. The U.S. automotive industry incorporates nearly 

$2.5 billion worth of duty-free auto parts and components, imported under GSP, in 

into motor vehicles manufactured in the United States. American farmers benefit 

from the duty-free savings afforded by the program to agricultural chemicals used 

to make fertilizers in the United States. 

The duty savings afforded by GSP are significant. For example, GSP saves consumers from paying a 12.5 percent duty on flashlights and duties of up to 13.5 percent on jewelry. By importing auto parts and components under GSP, the U.S. auto 

industry saves millions of dollars on tariffs that range up to 25 percent. 

Numerous small businesses owe their continued competitiveness to the GSP program, and indeed small businesses are some of the most enthusiastic Coalition 

members. The duty savings afforded by GSP for many products used by these companies may appear modest, but in the savings can make the difference between 

profitability and survival in tough markets. 

Lapses of the GSP program place a large financial burden on U.S. companies who 

must pay thousands of dollars in duties to the Bureau of Customs and Border Protection for an unknown period of time. After Congress approves reauthorization, 

typically retroactively to the expiration date, those companies must file requests 

with Customs to have their money refunded. If we were to return to a period such 

as that, it is very likely U.S. companies would simply chose to source their products 

from other countries where the tariff situation is stable and predictable. 

Therefore, we strongly urge the Committee to consider heavily the positive impact 

of GSP on American companies, workers and consumers. Failure to renew GSP beVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00094 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
91 

fore it expires December 31, 2006 would have a serious adverse impact on American 

companies, workers and consumers. 

IV. GSP Helps Achieve U.S. Trade Objectives 

For nearly 30 years, the GSP program has been an important tool of U.S. trade 

policy. The United States has used GSP to encourage developing countries to improve their worker rights and intellectual property rights protections. Within the 

past month, USTR reinstated GSP benefits for the Ukraine because that country 

has taken drastic steps to combat piracy of DVDs, CDs and other optical media. 

USTR also recently terminated investigations of Pakistan’s and Brazil’s intellectual 

property rights practices because both countries have made substantial progress in 

combating piracy and enforcing copyrights. In addition, the United States restored 

certain GSP benefits for Pakistan in 2005 because that country has made substantial progress in granting internationally recognized worker rights. (The United 

States had suspended those benefits in 1996.) 

Some Members of Congress have suggested that it may be best to allow GSP to 

expire so that the program does not distract beneficiary developing countries from 

participating in meaningful negotiations in the Doha Round. If the object of such 

a strategy is a GSP beneficiary such as Brazil, Members should remember that 

Brazil has been especially supportive of U.S. goals for agricultural trade liberalization in the Doha round. If the objects of such a strategy are countries in Sub-Saharan Africa (and South Africa in particular), which have been most vocal about their 

fears of ‘‘preference erosion’’ they believe would result from tariff reductions through 

the Doha round, Members should note that SSA countries will be unaffected by an 

expiration of GSP because their GSP benefits (expanded with textile and apparel 

benefits) will continue through 2015 on a separate track thanks to the African 

Growth and Opportunity Act (AGOA). 

V. Conclusion 

While it is certainly true that GSP was born of a desire to provide a temporary 

way to assist developing countries to become competitive producers and exporters, 

over time the program has evolved into an important contributor to American competitiveness. Duty-free benefits on a wide variety of products enable American retailers to supply their customers with lower-cost goods, and American companies, 

many of them small businesses, to purchase raw materials for their U.S. manufacturing and farming operations. Today, Americans need this program. We urge the 

Administration to support a long-term rollover of the existing program, and for us 

to pursue, together, that rollover before the end of the next Congressional session. 

COALITION FOR GSP 

Members 

Companies 

*Albaugh, Inc. (Ankeny, IA) 

Binney & Smith (Easton, PA) 

Cost Plus/World Markets (Oakland, CA) 

*Friitala of America (Connelly Springs, 

NC) 

The Home Depot (Atlanta, GA) 

J. C. Penney Company (Plano, TX) 

JVC Americas Corp. (Wayne, NJ) 

Leo Schachter Diamonds (New York, 

NY) 

*Liberty Woods (Carlsbad, CA) 

McCormick and Company, Inc. (Sparks, 

MD) 

Panasonic Corporation of North America 

(Secaucus, NJ) 

PBI Gordon Corporation (Kansas City, 

MO) 

*S&V Industries, Inc. (Akron, OH) 

Target Corporation (Minneapolis, MN) 

*Ten Strawberry Street (Denver, CO) 

Timex (Middlebury, CT) 

ZF Industries (Vernon Hills, IL) 

Associations 

American Spice Trade Association 

Association of Food Industries 

Consumers for World Trade 

International Wood Products Association 

National Customs Brokers and 

Forwarders Association 

National Retail Federation 

Retail Industry Leaders Association 

U.S. Chamber of Commerce 

* signifies a small business (less than 

100 workers) 

f 

92 

1 It is important to note that USTR issues ‘‘side letters’’ about public health. These are not 

legally enforceable and do not supercede the (contradictory) language in many FTAs and cannot 

be seen as providing any assurance for countries to make use of TRIPS safeguards. 2http://www.unaids.org/epi/2005/doc/EPIupdate2005 _ html _ en/epi05 _ 02 _ en.htm— 

Accessed February 28, 2006 

Statement of Doctors Without Borders, New York, New York 

Introduction 

Doctors Without Borders/Me ́decins Sans Frontiere`s (MSF) is pleased to submit 

these comments to the Committee on Ways and Means of the House of Representatives in response to the Committee’s Hearing regarding President Bush’s Trade 

Agenda held on February 15, 2006. This testimony focuses entirely on the potential 

negative consequences of the Administration’s trade agenda on access to essential 

medicines. MSF is deeply concerned that provisions sought by the Office of the 

United States Trade Representative (USTR) will undermine the historic World 

Trade Organization (WTO) Ministerial Declaration on the Trade Related Aspects of 

Intellectual Property Rights (TRIPS) Agreement and Public Health (‘‘Doha Declaration’’), resulting in devastating consequences in terms of access to medicines for millions of people with HIV/AIDS and other diseases throughout the developing world. 

MSF has called repeatedly on USTR to ensure that the Doha Declaration remains 

a ceiling for trade negotiations on IP as they relate to health technologies. Because 

of the clearly stated negotiating objectives of the U.S., however, we have been forced 

to go one step further in recommending that IP be excluded from bilateral and regional free trade agreements (FTAs) altogether. The standards for IP protection established in the WTO TRIPS Agreement are sufficiently high and do not justify 

seeking additional norms in WTO Members by the USG. 

Specifically, MSF has raised concerns about the following IP provisions in various 

FTAs: 

• Restrict the use of compulsory licenses to overcome barriers to access created 

by patents • New obstacles related to pharmaceutical test data, which will delay the registration of generic medicines (‘‘data exclusivity’’) and render compulsory licensing ineffective; • Rules that will confer abusive powers to regulatory authorities to enforce patents (‘‘linkage’’); and • Extensions of patent terms on pharmaceuticals beyond the 20-years required in 

TRIPS. 

Each of these provisions, which are elaborated upon below, appear in multiple 

FTAs and threaten to hamper generic competition—the only reliable mechanism for 

ensuring significantly lower drug prices—and therefore restrict access to affordable 

medicines.1

We urge members of this Committee in the strongest possible terms to 

take every necessary measure to ensure that the health and lives of millions of people in developing countries are not jeopardized by future U.S. 

FTAs. 

Background: MSF 

MSF is an independent, international medical humanitarian organization that delivers emergency aid to victims of armed conflict, epidemics, natural and man-made 

disasters, and to others who lack health care due to social or geographic 

marginalization. We operate medical relief projects in over 70 countries throughout 

the world. MSF currently has a field presence in numerous countries included in 

regional or bilateral agreements with the U.S., including Bolivia, Brazil, Colombia, 

Ecuador, Guatemala, Haiti, Honduras, Lesotho, Morocco, Nicaragua, Peru, South 

Africa, and Thailand. Teams provide medical care for people with HIV/AIDS, malaria, tuberculosis, Chagas’ disease, leishmaniasis, and other diseases, as well as 

primary care, maternal/child health care, and other services for displaced and homeless populations and for indigenous people. The organization was awarded the 1999 

Nobel Peace Prize. Patents, Prices & Patients: The Example of HIV/AIDS 

Patents, Prices & Patients: The Example of HIV/AIDS 

According to UNAIDS, there are currently over 40 million people living with HIV/ 

AIDS in the world; six million of whom clinically require antiretroviral therapy 

now.2 The AIDS epidemic is having major consequences for infectious diseases in 

the region, such as tuberculosis. It is estimated that 95% of the people who require 

immediate treatment for HIV/AIDS do not have access to antiretroviral therapy— 

which, in wealthy countries such as the U.S., has dramatically extended and imVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00096 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
93 

3 According to the U.S. National Institute of Allergies and Infectious Diseases (at the National 

Institutes of Health) and the Centers for Disease Control and Prevention, the estimated annual 

number of AIDS-related deaths in the United States fell approximately 70 percent from 1995 

to 1999, from 51,117 deaths in 1995 to 15,245 deaths in 2000. This drop is attributed primarily 

to the introduction of highly active antiretroviral therapy (HAART). Centers for Disease Control 

and Prevention (CDC). HIV/AIDS Surveillance Report 2001; 13 (no.1):1–41. 4 Note that least-developed countries (LDCs) do not have to grant or enforce patents on pharmaceutical products before 2016, as per paragraph 7 of the WTO Declaration on the TRIPS 

Agreement and Public Health, available at http://www.wto.org/english/thewto _ e/minist _ e/ 

min01 _ e/mindecl _ trips _ e.htm 5To view the full Declaration, see http://www.wto.org/english/thewto _ e/minist _ e/min01 _ e/ 

mindecl _ trips _ e.htm 

proved the lives of people living with HIV/AIDS, reducing AIDS-related deaths by 

over 70% 3—simply because they, and the health systems that serve them, cannot 

afford it. 

Just five years ago, the average cost of a triple combination of antiretrovirals was between $10,000–$15,000 per patient per year, and today it is available for as little 

as $140 per patient per year under certain circumstances. These price reductions 

were the direct result of international public pressure and generic competition, particularly from Indian and Brazilian manufacturers. Generic competition was possible as a result of the lack of patent protection for pharmaceutical products in those 

countries. With the full implementation of the TRIPS Agreement in all but leastdeveloped countries in January 2005, such competition is likely to disappear, unless 

flexible conditions for granting compulsory licenses are available, as per the Doha 

Declaration. Compulsory licensing of pharmaceuticals will become one of the most 

important policy tools for ensuring generic production and competition. 

The case of AIDS drug prices helps illustrate the need for routine use of compulsory licenses now that all new pharmaceutical products may be patent protected as 

of 2005, when most WTO Members with pharmaceutical capacity implemented the 

TRIPS Agreement.4 As a consequence, prices of new medicines will remain far beyond the means of patients in need in poor countries. The lever that has brought 

the price of AIDS drugs down will be lost. The U.S. regional and bilateral agreements are creating a system that blocks use of equivalent but cheaper drugs, which 

will be a catastrophe for our patients and for all people in the region, because the 

difference in price can be the difference between life and death. 

MSF comments to USTR on TRIPS–Plus Provisions 

On numerous occasions, MSF has raised concerns publicly about the U.S. insistence on including IP provisions that far exceed requirements set forth in the TRIPS 

Agreement, and directly undermine the Doha Declaration, which clearly recognized 

concerns about the effects of patents on prices and stated unambiguously that 

TRIPS should be interpreted and implemented in a manner ‘‘supportive of WTO 

members’ right to protect public health and, in particular, to promote access to 

medicines for all.’’ 5 MSF has called repeatedly on USTR to ensure that the Doha 

Declaration remains a ceiling for trade negotiations on IP as they relate to public 

health technologies, and, as a logical consequence, to exclude IP from bilateral and 

regional trade agreements altogether. 

It is important to point out that the draft text of most regional and bilateral 

agreements pursued by the U.S., including DR–CAFTA, U.S.–Morocco FTA, and 

U.S.–Thailand FTA, are not made available during, and sometimes after, negotiations. We urge USTR to make the text of U.S. regional and bilateral free trade 

agreements available to the public throughout negotiations in order to increase the 

level of transparency and to promote democratic debate and to engage in an informed public debate about crucial issues that directly affect the lives and health 

of people. 

Comments on Common Intellectual Property Provisions Included in U.S. Free Trade 

Agreements 

1. Restrictions on the use of compulsory licenses 

Compulsory licenses for pharmaceuticals are one of the most important tools for 

ensuring generic competition. In other fields of technology they are commonly used 

by industrialized countries such as the U.S. They are especially important now that 

all WTO countries with pharmaceutical manufacturing capacity, except for least developed countries, may provide patents for pharmaceutical products and processes. 

Generic production of new medicines will increasingly become dependant upon compulsory licensing, meaning that flexible conditions for granting compulsory licenses 

must be in place in order to ensure the continued supply of affordable generic medicines. 

94 

6 Article 15.10 CAFTA—Measures Related to Certain Regulated Products, paragraph 3.a; Article 16.8 U.S.–Singapore FTA—Certain Regulated Products, paragraph 4.(a)(b); Article 17.10 of 

U.S.–Chile FTA—Measures Related to Certain Regulated Products, paragraph 2.(b)(c); USTR fact 

sheet on U.S.–Morocco FTA available at www.ustr.gov/new/fta/Morocco/2004–03–02-factsheet.pdf; U.S.–Australia FTA Chapter 17 available at www.ustr.gov/new/fta/Australia/text/ 

text17.pdf. 7 Article 15.10 CAFTA—Measures Related to Certain Regulated Products, paragraph 3.a; Article 16.8 U.S.–Singapore FTA—Certain Regulated Products, paragraph 4.(a)(b); Article 17.10 of 

U.S.–Chile FTA- Measures Related to Certain Regulated Products, paragraph 2.(b)(c). 8See also Essential Action comments in response to USTR request for public comment on 

FTAA draft text, August 22, 2001, Rob Weissman—available at http://lists.essential.org/ 

pipermail/pharm-policy/2001–August/001422.html 9 Article 15.10 CAFTA—Measures Related to Certain Regulated Products, paragraph 1.(a); Article 16.8 U.S.–Singapore FTA—Certain Regulated Products, paragraph 1; Article 17.10 of U.S.– 

Chile FTA— Measures Related to Certain Regulated Products, paragraph 1. 10The original manufacturer is given five years, from the date of approval in the original 

country, to apply for registration in the developing country and get a new five-year period of 

data exclusivity, resulting in a possible total of 10 years of data exclusivity in the developing 

country. See Article 15.10 CAFTA—Measures Related to Certain Regulated Products, paragraph 

1.(b) 

A compulsory license is a public authorization to others than the patent holder 

to produce, sell and export a particular product. However, it is of no use if the drug 

regulatory authority cannot register any generic drug during the life of the patent. 

This is what USTR has managed to negotiate in almost all previously signed FTAs 

(such with Australia, CAFTA, Chile, Morocco and Singapore).6 By barring drug regulatory authorities from registering generic versions of drugs under patent, the U.S. 

is blocking the ability of countries to make use of compulsory licenses to ensure access to medicines for their people. 

We urge USTR to refrain from including provisions that will restrict the use of 

compulsory licenses in future regional and bilateral free trade agreements, in order 

to preserve the full use of this important safeguard for low- and middle-income 

countries. 

2. Abusive powers to drug regulatory authorities (DRAs) to enforce patents 

As explained above, provisions in numerous free trade agreements negotiated by 

the U.S. use drug regulatory authorities to help enforce patents and prevent generic 

competition. This is clearly going beyond the traditional role and functions of drug 

regulatory authorities, which are limited to checking the safety, efficacy and quality 

of medicines authorized for use in human beings. In a number of U.S. FTAs, DRAs 

are requested to refuse the marketing of quality generic medicines if the original 

medicine is patented in a given country.7 This effectively means that drug regulatory authorities will function as patent enforcement agencies and will potentially 

result in the enforcement of ‘‘bad quality’’ patents, which would be revoked if challenged before courts. 

We urge USTR not to include a similar provision in other U.S. FTAs, as it can 

only serve to protect invalid patent claims, since valid claims receive adequate protection through normal judicial processes.8

3. Exclusive rights over pharmaceutical test data 

The TRIPS Agreement only requires WTO Members to protect clinical information 

that is generally required by drug regulatory authorities to approve/register the 

marketing of a new medicine (‘‘undisclosed test or other data’’) against ‘‘unfair commercial use’’ and ‘‘disclosure’’ in the framework of unfair competition law. However, 

many U.S. FTAs 9 clearly go beyond this minimum requirement and confer exclusive 

rights on these pharmaceutical test data for a period of five years, from the date 

of approval of the original medicine in the developing country. Some agreements go 

even further by conferring data exclusivity also in cases where the original medicine 

is not registered in the developing country 10. Under these conditions, market exclusivity could last for up to ten years. 

Such proposals are clearly aimed at preventing generic competition of medicines, 

which are not patented in some countries as a result of pre-TRIPS legislation, and 

result in a de facto market monopoly. In cases where the original medicine is not 

registered in the developing country, which may be the case for countries that do 

not constitute an attractive market for the original manufacturer, the prevention of 

generic competition will lead to a complete lack of access to medicines, at any cost, 

for up to ten years. 

We therefore urge USTR not to pursue these unacceptable provisions that contradict the letter and spirit of the Doha Declaration. 

95 

11MSF and Drugs for Neglected Diseases Working Group (now Neglected Diseases Working 

Group), Fatal Imbalance, September 2001 available at www.accessmed-msf.org/documents/ 

fatal_imbalance_2001.pdf and The Report of Commission on Intellectual Property Rights, September 2002, available at http://www.iprcommission.org/papers/text/final _ report/ 

reportwebfinal.htm 12 Canada—Patent protection of pharmaceutical products—Complaint by the European Communities and their member states (WT/DS114/R). 13 Available at http://www.ustr.gov/releases/2004/02/2004-02-12-letter-thailand-house.pdf 14http://www.ustr.gov/Document _ Library/Letters _ to _ Congress/2002/USTR _ Notifies _ 

Congress _ Administration _ Intends _ to _ Initiate _ Free _ Trade _ Negotiations _ with _ SubSaharan _ Nations _ House _ Letter.html 15To view the full Declaration, see http://www.wto.org/english/thewto _ e/minist _ e/min01 _ 

e/mindecl _ trips _ e.htm 

4. Extensions of patent terms beyond the 20-year minimum in TRIPS 

The TRIPS Agreement obligates WTO Members to provide patent protection on 

medicines for 20 years. However, the U.S. has been pushing for patent extension 

to ‘‘compensate’’ for delays either in drug registration or in patent granting. These 

are unjustifiable extensions of patent terms. Extensive literature 11 has shown that 

twenty-year patents are more than enough—indeed they may be considered excessive—to allow the pharmaceutical industry to recoup investments made in research 

and development. 

Patent extensions are not required by the TRIPS Agreement and a WTO panel 

expressly stated that extensions to compensate for drug registration delays do not 

constitute a ‘‘legitimate interest’’ of patent owners.12 From a public health perspective, it is critically important that the terms of pharmaceutical patents not exceed 

what is required in TRIPS. Extending patent terms on pharmaceuticals beyond the 

20-years required in TRIPS would be detrimental to the health of people in developing countries as it would unnecessarily further delay generic competition. We 

therefore urge USTR to refrain from seeking such measures in upcoming regional 

and bilateral agreements. 

Conclusion 

Recently negotiated trade agreements by the U.S., including DR–CAFTA, U.S.– 

Chile, and U.S.–Singapore, as well as the U.S. negotiating objectives for U.S.–Thailand 13 and U.S.–SACU 14 demonstrate its intent to strengthen intellectual property 

regulations beyond what is required in TRIPS, and reduce the effectiveness of 

TRIPS safeguards to the detriment of public health. If U.S. free trade agreements 

continue to create a system that undermines and contradicts the Doha Declaration, 

blocking use of affordable generic medicines, it will be a catastrophe for our patients 

and millions of others in the developing world with HIV/AIDS and other diseases. 

One hundred and forty two countries, including the U.S., negotiated and adopted 

the Doha Declaration, firmly placing public health needs above commercial interests 

and offering much needed clarifications about key flexibilities in the TRIPS Agreement related to public health. We have repeatedly stated that the Doha Declaration 

must remain a ceiling for international trade negotiations on intellectual property 

as they relate to public health technologies and called upon the U.S. government 

to ensure that regional and bilateral free trade agreements do not renege on the 

historic agreement reached in Doha. 

The TRIPS Agreement already establishes comprehensive standards for IP protection in WTO members, which protect sufficiently the interests of IP holders. The 

promise of Doha is that the TRIPS Agreement can and should be interpreted and 

implemented in a manner ‘‘supportive of WTO members’ right to protect public 

health and, in particular, to promote access to medicines for all.’’ 15 Regional and 

bilateral U.S. free trade agreements threaten to make it impossible for countries to 

exercise the rights re-confirmed in Doha. 

In order to ensure the protection of public health and the promotion of access to 

medicines for all, we therefore strongly recommend that intellectual property provisions be excluded from U.S. regional and bilateral free trade agreements altogether. 

f 

Statement of Jackson-Vanik Graduation Coalition 

The Need for Action Now 

The Jackson-Vanik Graduation Coalition, which currently includes more than 250 

businesses and Ukrainian-American, Jewish-American and non-governmental orgaVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00099 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
96 

nizations, calls on the House of Representatives to pass legislation in February to 

graduate Ukraine from the provisions of the Jackson-Vanik Amendment. 

The Senate passed by unanimous consent in November 2005 legislation to graduate Ukraine from Jackson-Vanik. Failure by the House now to pass similar legislation will be seen in Ukraine as a failure of the government’s foreign policy and an 

indication of Western disinterest, at a time when the country is struggling to realize 

the full promise of the Orange Revolution. Ukraine holds critical Rada (parliament) 

elections on March 26. Congressional inaction in the run-up to those elections will 

be exploited by opponents of the government’s pro-reform, pro-West course; indeed, 

Rada deputies have expressed concern to Coalition leaders about precisely such tactics by the opposition. The Coalition thus seeks House passage of legislation in February to signal support for U.S.–Ukraine relations, and for Ukraine’s efforts to consolidate democratic institutions and build a robust market economy, fully integrated 

into the Euro-Atlantic community. 

Passage of graduation legislation is also necessary to support a key element of 

President Bush’s policy toward Ukraine. In his April 2005 joint statement with 

Ukrainian President Viktor Yushchenko, President Bush called for ‘‘immediately 

ending application of Jackson-Vanik to Ukraine.’’ 

Background 

The Jackson-Vanik Amendment, as contained in Title IV of the 1974 U.S. Trade 

Act, was a response to the discriminatory emigration policies of the former Soviet 

Union. The communist restrictions had the most serious impact on religious minorities, particularly on the ability of Soviet Jews to emigrate. The Jackson-Vanik 

Amendment stated that non-market economies that continued to impose emigration 

restrictions on their citizens would not be granted permanent normal trade relations 

or ‘‘most favored nation’’ status by the United States until they had met the Amendment’s freedom-of emigration requirements. 

Since regaining its independence in 1991, Ukraine has built a strong and impressive record of allowing open emigration. Indeed, a large number of Ukrainian Jews 

have emigrated over the past fourteen years. Ukraine has also created conditions 

for religious minorities to pursue their beliefs freely. Ukraine thus is a success story 

for Jackson-Vanik and now merits graduation from the Amendment’s provisions. 

Ukraine’s excellent emigration record was recognized in 1997, when President 

Clinton found Ukraine to be in full compliance with the Amendment’s freedom-ofemigration requirements. President Bush has regularly endorsed this finding and 

has called on Congress to take the next step: to graduate Ukraine from JacksonVanik. Before the House International Relations Committee in July 2005, Assistant 

Secretary of State for European and Eurasian Affairs Fried said: 

‘‘Ukraine has complied with the provisions of the Jackson-Vanik Amendment to 

the Trade Act of 1974 for over a decade. This Administration strongly supports 

Ukraine’s immediate graduation’ from Jackson-Vanik. As the Ukrainian people look 

for tangible signs of our new relationship, they are perplexed that Ukraine remains 

tainted by the legacy of Jackson-Vanik. We urge Congressional action on this matter.’’ 

In a November 8, 2005 letter to key Congressional leaders, Secretary of State Rice 

wrote: 

‘‘The Administration strongly supports appropriate legislation that would authorize the President to terminate application of Title IV of the Trade Act of 1974 (the 

Jackson-Vanik Amendment), with respect to Ukraine, and to extend permanent normal trade relations treatment to the products of that country.’’ 

‘‘Congressional action to lift Jackson-Vanik and extend permanent normal trade 

relations would sent a strong signal of support to Ukraine at a critical juncture.’’ 

Various non-governmental groups, including the National Conference on Soviet 

Jewry and the Euro-Asian Jewish Conference, agree that Ukraine has demonstrated 

its full compliance with the Amendment’s requirements and therefore should be 

graduated from the restrictions it imposes. 

When President Yushchenko spoke before a joint session of Congress on April 6, 

2005, he focused on the importance to Ukraine of being graduated from JacksonVanik. He received a standing ovation when he declared, ‘‘I’m calling upon you to 

waive the Jackson-Vanik Amendment. Make this step. Please make this step toward 

Ukraine. Please tear down this wall.’’ There is nothing more important that Congress could do now for Ukraine than pass graduation legislation. 

In Sum 

The House must act now to pass legislation to graduate Ukraine from JacksonVanik: 

97 

• It is the right thing to do. Ukraine has long fully met the freedom-of-emigration 

requirements of the Amendment. 

• It is imperative to send Ukraine a positive political signal now, on the eve of 

the March 26 parliamentary elections. Failure to do so will be exploited by political forces in Ukraine that oppose the government’s pro-reform, pro-West 

course. 

• It is essential that Congress help President Bush carry out his April 2005 commitment to President Yushchenko. 

• It is important for the sake of the Jackson-Vanik process that Congress show 

that, when a country meets the freedom-of-emigration requirements, it will be 

graduated. What incentive will countries have to meet such requirements if 

Congress moves the goal posts? 

COALITION MEMBERSHIP LIST 

February 2006 

ABEA Ltd. 

ACDI/VOCA 

Adams and Reese, LLP 

AES Corporation 

Affiliated AppraisersAmerican Chamber 

of Commerce in Ukraine 

American Jewish Committee 

American Jewish Congress 

American International Group (AIG) 

American Ukrainian Medical Foundation 

Americans for Human Rights in Ukraine 

Andrew J. Futey & Associates 

Arbor View Dental Clinic, Mt. Prospect, 

IL 

Aspect Energy, LLC 

Association for the Democratization of 

Ukraine 

Association of American Youth of 

Ukrainian Descent—ODUM 

Atlantic Group, Ltd. 

‘‘Awakening’’ Independent Film Studio 

A W and Sons Inc 

Baker, Donelson, Bearman, Caldwell & 

Berkowitz 

Berdyansk Reapers 

B’nai B’rith International 

Boeing 

Bolshoi Agrotechnica Machina (BAM) 

America 

Borough of Roselle Park, New Jersey 

BRAMA, Inc. 

Breakthrough to People Network, Inc. 

Breeze Ventures Management 

BSI Group 

Buckner Orphan Care International 

Canada-Ukraine Foundation 

Cape Point Capital Inc. 

Case New Holland, Inc. 

Cardinal Resources PLC 

Cargill Inc. 

Center for U.S.–Ukrainian Relations, 

NYC 

Chadbourne & Parke, LLC 

Chicago Kyiv Sister Cities Committee 

Chopivsky Family Foundation 

Coca-Cola Company 

Conlan & Associates 

Council of Ukrainian-American 

Organizations of Greater Hartford 

Crestway Manor Apts. LTD 

Customs, Trade & Risk Management 

Services, Ltd. 

David D. Sweere & Sons International, 

Ltd. 

Democrats Abroad—Ukraine Chapter 

Diaspora Enterprise 

Dr. James Mace, Holodomor-Genocide 

Memorial Fund 

Drake Group Holding Corporation 

Draper Fisher Jurvetson NEXUS 

Dutko Worldwide 

ECdata, Inc. 

Energy Alliance 

Excelsio Communications 

Exquisite Elixirs, Inc 

Eye Center of Delaware 

Floral Designs by Katya, Chicago 

‘‘Freedom’’ Ukrainian-American 

Publishing House 

GN Associates 

Gold Coast Construction 

Gold Coast Properties, Inc. 

Gongadze Foundation 

Gordon C. James Public Relations 

Gnxpert Color Inc. 

Gnxpert Netral Technologies, Inc. 

GnxTach, Inc. 

Hamalia South Travel 

Heller & Rosenblatt Law Firm 

Heritage Foundation of 1st Security 

Federal Savings Bank, Chicago 

Hollywood Trident Foundation 

Holodomor Survivors, Inc. 

Inco Americas 

Independent Voters for Equal Education 

& Opportunity 

International Republican Institute 

International Ukrainian GenocideHolodomor Committee 

Irondequoit-Poltava Sister Cities 

Committee 

ISTIL (Ukraine) 

ISTIL Group Inc. 

Ivan Bahrianyj Foundation, Arlington 

Heights, IL 

Jewish Institute for National Security 

Affairs 

John A. Wood, Associates Inc. 

John Deere 

John Wood Ministries, Inc. 

98 

Kalik Lewin Law Firm 

Kiev-Atlantic Ukraine 

Kobzar Society, Ltd. 

Kraft Foods, Inc. 

Krislaty Realty Investments 

Kvazar-Micro Corp. 

Kyiv Mohyla Foundation of America 

Largo Asset Management, LLC 

Larry M. Walker Ministries, Inc. 

L. B. Lyons & CompanyLemberg 

Unternehmensberatung, GmbH 

Light of Crimea Foundation 

Lithuanian-American Community, Inc. 

LPL Financial Services, Inc. 

MACOIL & Gas International 

Maple Investments 

Media Finance Management, LLC 

Medical Relief Charity Fund 

Melitopol Tractor Hydro Units Plant 

Meta 

Ministering to Ministers Foundation, 

Inc. 

MJA Asset Management, LLC 

Moye Handling Systems, Inc. 

NAS Global Trade Ltd. 

National Conference on Soviet Jewry 

National Tribune 

Nealon and Associates, P.C. 

New Millennium Strategies 

New Roots Restoration 

North Winnipeg Credit Union Limited, 

Winnipeg, MB 

Nuclear Information and Resource 

Service 

Odza, Gindhart, Steckiw & Farion 

Organization for the Defense of Four 

Freedoms for Ukraine, Inc. 

Organization for the Rebirth of Ukraine 

Paco Links International 

Parents Targeting Achievement 

Parents Targeting Opportunity 

Perekhid Media Limited 

Prerkhid Outdoor 

Prerkhid Business Publishing 

Piedmont Trading, Inc. 

Plast Ukrainian Youth Organization 

Poltava Confectionery 

Pro Trade Group 

Pro-W International Corporation 

Raymond Linsenmayer & Associates 

Rescare, Inc. 

Reut Consulting 

Richard W. Murphy Consulting Group 

Ring Publishing 

RUKH—Ukrainian Movement to aid 

Democracy in Ukraine, Chicago 

Russian-Ukrainian Legal Group, P.A. 

Russin & Vecchi LLC, Moscow 

Salans Law Firm 

Sevastopol Shipyard 

Shevchenko Scientific Society 

Sibik and Cataldo 

Sigma Venture, Inc. 

SigmaBleyzer Emerging Markets Private 

Equity Investment Group 

Siguler Guff & Company, LLC 

Skarabey Group LLC 

Society for Fostering Jewish Ukrainian 

Relations 

Softline 

Solid Team, LLC 

Squire, Sanders & Dempsey LLP 

St. Andrew’s Ukrainian Orthodox 

Church, Bloomingdale, IL 

St. Nicholas’ Ukrainian Catholic 

Cathedral—B.M.V. Sodality, Chicago 

‘‘St. Sophia’’ Religious Association of 

Ukrainian Catholics, Inc. USA 

SUM Ukrainian Youth Organization 

Svitanok 

Sweet Analysis Services, Inc. 

Techinvest 

TEREX Corporation 

Town of Irondequoit, New York 

The Action Ukraine Report (AUR) 

The Bleyzer Foundation 

The International Medical Education 

Foundation, Inc. 

The PBN Company 

The School of the Voloshky Ukrainian 

Dance Ensemble 

The Ukrainian Museum 

The Washington Group 

TransNational Resource, LLC 

UBCTV 

UkrAgroAssets, LLC 

UkrAgroSystems, LLC 

Ukraine-United States Business Council 

Ukrainian Academic and Professional 

Association 

Ukrainian Academy of Arts and Sciences 

in the USA 

Ukrainian American Bar Association 

Ukrainian American Chamber of 

Commerce 

Ukrainian American Civil Liberties 

Association 

Ukrainian American Club of Southwest, 

Fl 

Ukrainian American Coordinating 

Council 

Ukrainian-American Environmental 

Association 

Ukrainian-American Freedom 

Foundation 

Ukrainian American Senior Citizens 

Association 

Ukrainian American Soccer Association, 

Inc. 

Ukrainian American Sports Center 

‘‘Tryzub‘‘ 

Ukrainian Association in Austria 

Ukrainian Citizens International 

Association 

Ukrainian Community Action Network, 

Chicago 

Ukrainian Congress Committee of 

America, Illinois Branch 

Ukrainian Cossack Brotherhood, Chicago 

Ukrainian Credit Union Development 

Committee 

Ukrainian Cultural Center, Fairfax, VA 

Ukrainian Cultural & Humanitarian 

Institute 

99 

Ukrainian Development Company, LLC 

Ukrainian Education & Cultural Center 

Ukrainian Engineer’s Society of America, 

Inc. Philadelphia Chapter 

Ukrainian Federal Credit Union 

Ukrainian Federation of America 

Ukrainian Fraternal Organization 

Ukrainian Genocide Famine Foundation, 

Chicago 

Ukrainian Gold Cross, Inc. 

Ukrainian Holodomor Exhibition 

Committee 

Ukrainian Human Rights Committee 

Ukrainian Institute of America 

Ukrainian Museum-Archives, Cleveland, 

Ohio 

Ukrainian National Credit Union 

Association 

Ukrainian National Association 

Ukrainian National Museum of Chicago 

Ukrainian National Women’s League of 

America, Inc. 

Ukrainian National Women’s League of 

America- Regional Councils: 

Detroit, New York, Central New York, 

Northern New York, Ohio, 

New Jersey, Chicago, New England, 

Philadelphia; 

Branches at Large: Phoenix, Atlanta, 

Miami, Pittsburgh, Denver, North 

Port, 

Washington D.C., San Jose, Los Angeles, 

Houston, Tucson, St. Petersburg 

Ukrainian Selfreliance New England 

Federal Credit Union 

Ukrainian Wave Radio Program, Chicago 

UKRUSA International Ltd. 

United Software Corporation 

United Ukrainian American 

Organizations of Greater New York 

United Ukrainian Organizations of 

Greater Cleveland (UZO) 

Usability Matrix Corporation 

U.S. Chamber of Commerce 

U.S. Civilian Research & Development 

Foundation (CRDF) 

U.S.–Ukraine Foundation 

Vantage Enterprises, L.L.C. 

Venable LLP 

VIKO Corporation 

Volia Cable 

Volia Software, Inc. 

Voloshky Ukrainian Dance Ensemble 

Westinghouse 

Wilton S. Tifft Photography 

WJ Group of Agricultural Companies 

WJ Hopper & Co., Limited 

World Federation of Ukrainian Medical 

Associations 

World Federation of Ukrainian Women’s 

Organizations, Financial Committee 

World League of Ukrainian Political 

Prisoners 

www.ArtUkraine.com Information 

Service (ARTUIS) 

Zaporizhya Meat Processing 

f 

Zen Architects 

Statement of Kathleen Jaeger, Generic Pharmaceutical Association, 

Arlington, Virginia 

The pharmaceutical provisions in recent Free Trade Agreements (FTAs) negotiated by the United States Trade Representative (USTR) are contrary to or exceed 

U.S. law. Specifically, recent FTAs allow brand pharmaceutical companies to garner 

greater intellectual property rights than those afforded under U.S. law by removing 

limits on patent extensions and expanding provisions that protect intellectual property beyond the legal parameters of the U.S. patent system. At the same time, FTAs 

lack sufficient generic drug access provisions essential to the vitality of the U.S. generic pharmaceutical industry. 

The Generic Pharmaceutical Association (GPhA) strongly supports a balance between fostering innovation and ensuring access to affordable medicine here at home 

and abroad through our agreements with other nations. The effectiveness and sustainability of the U.S. health care system depend increasingly on such a balance. 

Accordingly, FTAs that fail to promote these interests equitably will result in a less 

productive global pharmaceutical industry, and will damage the U.S. health care 

system in turn. 

One important goal of President Bush’s administration is to increase global sharing of pharmaceutical research and development (R&D) costs through eliminating 

price controls and fostering a robust generic pharmaceutical sector. Thus, GPhA 

strongly supports such initiatives and sufficient protection of intellectual property, 

and views the reduction of price controls and greater sharing of R&D costs as beneficial to the entire pharmaceutical industry—a win-win for all involved. Yet, recent 

FTAs are in direct conflict with this policy, as they neglect to ensure the proper balance between innovation and access. 

Simply put, the FTAs increase protection of innovation, but blatantly exclude provisions to ensure access to affordable medicine. Over 53% of U.S. prescriptions are 

filled with generic medicines, yet they account for only 12% of the total cost of prescriptions in the U.S. Without a robust generic industry to complement the brand 

100 

industry, neither the U.S. health care system, nor that of any foreign nation would 

be sustainable. FTAs should export the U.S. balance of pharmaceutical innovation 

and access to affordable medicine in order to ensure the same prosperity. 

Furthermore, trends among FTAs could begin to establish an international standard for governing pharmaceuticals that clashes with U.S. law. In the near future, 

U.S. law makers may be pressured to conform to such a standard through harmonization efforts. Even now, for instance, the vast majority of the FTAs do not contain 

a ‘‘best mode’’ provision and the recent Patent Reform bill H.R. 2795 proposes to 

eliminate the ‘‘best mode’’ requirement under the premise of international harmonization. The USTR should not be promoting agreements with trading partners that 

will stifle generic competition or make U.S. law anomalous. 

I. Free Trade Agreements Conflict with International and U.S. Law 

Numerous FTA provisions regarding IP and other measures involving pharmaceuticals contradict, both explicitly and in spirit, commitments made by the United 

States in the World Trade Organization in both the November 2001 Declaration on 

the TRIPS Agreement and Public Health (the Doha Declaration) and the September 

2003 Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health (the Paragraph 6 Decision). Moreover, several of these provisions are contrary to or exceed U.S. law. GPhA is concerned that such measures 

will block generic drug exports abroad, substantially delay the timely access to affordable pharmaceuticals in those territories, and create the means to delay generic 

competition here at home, such as through international harmonization measures. 

USTR should make efforts to ensure that any FTA negotiated is fully consistent 

with both the letter and spirit of our country’s WTO commitments and U.S. law. 

II. Patent Extensions For Pharmaceutical Products 

The patent term extensions available in existing FTAs allow extensions beyond 

those permitted under U.S. law (Hatch/Waxman patent extensions, 35 U.S.C. § 156). 

Among other things, the FTAs are not clear that the patent extensions apply only 

to ‘‘new chemical entities.’’ The FTAs also require Parties to adopt an overly vague 

standard for restoring patent terms for pharmaceutical products in instances of ‘‘unreasonable curtailment’’ of the effective patent term resulting from the marketing 

approval process. These provisions thus fail to take into account the limitations on 

extensions contained in current U.S. law, which include the five year cap and the 

fourteen year limit on the total length of the restoration period. 

FTA patent term extensions should be subject to the same limitations found in 

U.S. statutory and corresponding case law. Those limitations are as follows: (1) the 

product must contain a new chemical entity (NCE), i.e., a truly novel medicine; (2) 

the product must be subject to a regulatory review period; (3) the approval for marketing or use of the product upon which the patent extension application is based 

must be the first permitted commercial marketing or use of the product; (4) only 

a single patent can be extended; (5) the applicant must have acted with due diligence; (6) the patent restoration period may not exceed five years; and (7) the restored patent may never exceed 14 years. Without these limitations, patent extensions could be available for almost every pharmaceutical product marketed in the 

territories of the Parties, including the United States, for periods far exceeding what 

our domestic law currently permits. 

III. Market Exclusivity 

The FTAs allow marketing exclusivity for pharmaceutical products in excess of 

five years and do not make clear that the exclusivity is limited to ‘‘new chemical 

entities.’’ The FTAs prohibit marketing approval for third parties relying on data 

submitted by another for at least five years from approval granted to the original 

party in the territory of the Party. Moreover, where approval is based on approval 

in another country, some FTAs (e.g., Singapore, Australia) state that marketing may 

be delayed for at least five years after approval in the Party or approval in the other 

country, whichever is later. There are no requirements in most cases to register a 

product in the Party within a short defined period of time after receiving approvals 

in other countries (except for the FTAs with Chile and CAFTA which provide for 

a protracted 5-year registration period), further enabling delays in marketing approvals for generic products. 

The practical effect of these provisions is that they could permit brand companies, 

without penalty, to deny access to innovative pharmaceuticals for approximately 

seven years and block the marketing of affordable generics in those countries for 

a period of about 12 years. Marketing approval for the brand company would take 

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1 In contrast, NAFTA Art. 1711:7 provides that ‘‘[w]here a Party relies on a marketing approval granted by another Party, the reasonable period of exclusive use of the data submitted 

in connection with obtaining the approval shall begin with the date of the first marketing approval relied on.’’ 2The FTA with Australia also contains similar language ‘‘[Party] will not permit marketing 

of the same or similar product for at least five years from the date of marketing approval by 

the Party.’’ Art.17.10:1(c). Art.17.10:2 also requires at least 3 years of additional exclusivity if 

the Party requires submission of new clinical information (other than information related to bioequivalency) essential to the approval of the product. 3 21 U.S.C. § 355(j)(5)(B)(iii). 4 Id. 

about two years 1 and the company would have marketing exclusivity for another 

five years after that. If a brand company waits until the end of its five-year market 

exclusivity period in one country before filing in another, the introduction of 

generics could take 12 years. 

Permitting brand companies to wait up to five years after receiving approval in 

one country before filing for approval in another country, with no erosion of market 

exclusivity, would limit one of the flexibilities identified in the Doha Declaration for 

increasing access to medicines, and accordingly, it appears to contradict the direction in section 2102(b)(4)(c) of the Trade Act of 2002 (‘‘Trade Promotion Authority’’ 

or ‘‘TPA’’). Specifically, the Doha Declaration reaffirmed that the TRIPS Agreement 

provides flexibility for WTO Members to take measures to protect public health, including ‘‘promot[ing] access to medicines for all.’’ In keeping with the spirit of the 

Doha Declaration and the TPA, the FTAs should encourage signatories to take action to require companies to expeditiously seek approval of life-saving medicines for 

use in their countries. 

U.S. law provides for a total of five years of exclusivity for products containing 

‘‘new chemical entities,’’ and five years appears to be the global standard. Anything 

more than that is injurious to the U.S. economy and will drive up already skyrocketing health care costs here at home and abroad. No FTA should be interpreted 

to suggest that U.S. law can, or should be changed to extend the carefully balanced 

five-year NCE exclusivity period. USTR should modify its negotiations template to 

only proffer a five-year NCE exclusivity period for products containing new chemical 

entities. 

Certain of the FTAs (e.g., Singapore, Bahrain) also prevent marketing of the 

‘‘same or similar product’’ for a period of three years.2 This language appears to permit marketing to be delayed based on information not tied to the product for which 

marketing is sought, and for attributes of the product that have been previously approved. This overly broad protection is contrary to U.S. law in that refers to ‘‘same 

or similar product’’ rather than narrowing the three-year protection to the new ‘‘conditions of use.’’ USTR should remove this expansive language from the text of any 

FTAs. 

IV. Linkage Without Exceptions (Hatch/Waxman) 

The FTAs that the United States has been negotiating require that our trading 

partners establish a generic approval process that ‘‘links’’ generic approvals with the 

expiration of brand patents, an approval process similar to that in the U.S. However, the FTAs incorporate only those provisions that give protection to the patent 

owner while failing to provide for the corresponding provisions that ensure access 

to generic products. With no measures to ensure timely resolution of patent disputes, brand companies will enjoy de facto patent extensions in this country and in 

others. In other words, linkage without generic access provisions, blocks generic 

competition indefinitely. 

The FTAs require signatories to prohibit, without exceptions, the marketing of 

generic pharmaceutical products during the term of the patent by persons other 

than the person who originally submitted safety and efficacy data for approval of 

the product without the consent or acquiescence of the patent owner. In contrast, 

in the United States, where a generic applicant files a Paragraph IV Certification 

challenging a drug patent and is not sued by the patent owner within 45 days of 

its Paragraph IV Notification, FDA approval and marketing may occur immediately 

notwithstanding the existence of an unexpired patent.3 In such cases, the failure of 

the patent owner to file an infringement action could be construed as consent. However, U.S. law also permits FDA approval and marketing at the expiration of the 

30-month stay (30 months after a patent infringement lawsuit is filed) even if the 

lawsuit is still pending and the patent has not expired.4 If the filing and continued 

prosecution of such suit were construed to mean that the patent holder does not consent to third-party marketing, this provision could nullify existing U.S. law by requiring the conversion of the 30-month stay into an indefinite stay of generic apVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00105 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
102 

proval. Ultimately, this would discourage timely resolution of patent disputes and 

result in de factopatent extensions for the brand companies—a result that would 

have substantial financial implications for this nation’s health care system. 

The FTAs consistently fail to require the inclusion of U.S. counterbalancing access 

measures that allow challenges to questionable patents that stand as barriers to 

market entry, patents that are frequently found un-infringed or invalid in the 

United States. Access measures should include provisions that are identical to the 

U.S. system related to: scope of patent listability (to prevent improperly listed patents that block generic product approvals); the mechanism to delist patents that fail 

to meet the eligibility for listing; the 45-day window to facilitate patent dispute resolution and corresponding means to permit FDA approval despite patent litigation, 

such as the 30-month stay period; and measures to ensure that brand companies 

do not receive de facto patent extensions by sitting idly by, such as declaratory judgment actions. If USTR requires our trading partners to duplicate two-thirds of the 

U.S. Hatch/Waxman system to the benefit of brand pharmaceutical industry, USTR 

also must seek to include the generic access provisions. To do otherwise forces FTA 

countries to accept a lopsided system that protects innovation, yet fails to promote 

access. The United States recently passed measures in the Medicare Modernization Act 

of 2003 (MMA) to restore the balance between pharmaceutical innovation and access 

by closing unintended loopholes in the U.S. system that needlessly blocked generic 

competition. In so doing, the United States has set and maintained the gold standard in balancing pharmaceutical innovation and access. We should not reverse this 

accomplishment by being a party to agreements that upset that balance in favor of 

innovation to the detriment of American generic manufacturers and consumers. Accordingly, FTAs that require the implementation of a drug approval system linking 

generic drug approvals to patent protections of brand products must also expressly 

require generic access measures. 

V. Omission or Weakening of Best Mode Provision 

The monopoly afforded by a patent is given in consideration of full disclosure of 

the invention so that the public can enjoy the full use of that invention upon expiration of the term of the patent. In the United States, full disclosure includes (a) disclosure of the invention (the ‘‘written description’’), (b) a clear, concise, and exact 

enabling description of how to practice the invention (‘‘enablement’’), and (c) disclosure of the best mode of practicing the invention known to the inventor (‘‘best 

mode’’). FTAs (e.g., CAFTA, Australia, Bahrain, Morocco, Jordan) do not require disclosure of the best mode, and thus patents under these FTAs can disclose less than 

the minimum required in the United States. The ‘‘best mode’’ requirement is that 

the inventor shall disclose in the patent application the most efficient method 

known to him (or her) to reduce the invention to practice. Failure to disclose the 

‘‘best mode’’ would result, upon patent expiry, in a less than efficient means of producing the invention, potentially giving the patent owner a further monopoly. FTAs 

should require at least the same disclosure standard for each Party as that which 

the U.S. requires in exchange for granting a monopoly. 

VI. Mandatory Access Provisions: ‘‘Bolar’’ 

The United States should support mandatory access provisions in all FTAs so that 

access to affordable medicine cannot be circumvented through implementing legislation. Recently negotiated FTAs do not mandate a ‘‘Bolar’’-type provision, which is 

a critical element in the U.S. generic drug approval process. Such provisions allow 

for the testing, manufacture and use of the subject matter of a patent for purposes 

related to the development and submission of information to support generic drug 

marketing approval. Under U.S. law, actions relating to the development and submission of a generic drug application do not constitute an infringement of patent 

rights. Permissive adoption of this provision in FTAs, however, leaves FTA countries 

open to pressure by special interests not to adopt provisions that are consistent with 

U.S. law. Unfortunately, this situation has already occurred in Guatemala. To prevent special interests from undermining the purposes of the Doha Declaration in the 

future and to facilitate access to affordable medicine, USTR must encourage our 

trading parties to adopt mandatory Bolar and other access provisions. 

VII. Conclusion 

The United States has achieved excellence in health care by properly balancing 

pharmaceutical innovation and access. USTR, therefore, should be holistically promoting both of these features of U.S. law in trade negotiations with other countries. 

To do otherwise is damaging to the U.S. generic pharmaceutical industry, and adversely impacts both the U.S. economy and our overtaxed health care system. Rather than act in a manner detrimental to affordable health care both home and 

103 

abroad, USTR should seek to export the U.S. balance of innovation and access to 

ensure access of affordable medicine around the globe. This is especially critical in 

light of the Administration’s stated objective to secure global research and development support by the elimination of price controls. 

f 

Consumers for World Trade 

February 14, 2006 

The Hon. Bill Thomas 

2208 Rayburn HOB 

Washington, DC 20510 

Dear Chairman Thomas: 

I am writing on behalf of Consumers for World Trade (CWT), to express our views 

concerning the Congressional 2006 trade agenda. By way of background, CWT is a 

national, non-profit, non-partisan organization, established in 1978 to promote the 

consumer interest in international trade and to enhance the public’s awareness of 

the benefits of an open, multilateral trading system. CWT is the only consumer 

group in America whose sole mission is to educate, advocate and mobilize consumers 

to support trade opening legislation. 

In summary CWT urges Congress to pursue two key goals as it moves forward 

with its trade policy in 2006. First, we urge Congress to assist lower-income Americans by removing high tariffs, dumping and countervailing duties, and import 

quotas on the necessities of life such as food, clothing and shelter. Second, we urge 

Congress to take immediate steps to open up the trade policy and trade remedy 

process so that consumers are no longer excluded. The current exclusion of consumers is unfair and should be ended as quickly as possible. 

Our detailed comments on these priorities follows. 

Reduce Tariffs on Clothing, Footwear and Food 

Tariffs are simply taxes that, although technically paid at the customs border by 

importers, are ultimately passed through to consumers in the form of higher prices. 

In this way, tariffs are like the worst kind of sales tax—hidden from view, but definitely felt in the pocketbooks of the nation’s lowest income families. 

Although the overall average tariff on goods entering the U.S. market has been 

reduced through numerous trade rounds to less than 4%, this national average 

masks the high tariff rates on particular goods consumed by the nation’s poorest 

families. Consumers for World Trade recommends that Congress impress upon U.S. 

trade negotiators to give priority consideration in the Doha negotiations of the 

World Trade Organization (WTO) and in bilateral free trade agreement negotiations 

to tariff reductions on goods that have above-average tariffs in the United States. 

In particular, CWT urges the elimination or substantial reductions in tariffs on 

products with above-average tariffs in the food, clothing and footwear sectors. These 

products are all basic commodities that every American consumes or uses in his or 

her daily life. Yet many of these basic staples are subject to high tariff barriers that 

artificially increase their costs to consumers. 

Food Tariffs: The United States is a major world producer of most agricultural 

commodities and processed food products, as well as a major consumer of these 

goods. As a result of the Uruguay Round, import quotas no longer exist on agricultural products. However, tariff-rate quotas now provide substantial border protection for many of these same goods, through restrictive lower-tier quota levels and 

high upper-tier (over-quota) tariff rates. While the average agricultural tariff in the 

United States is about 12%, this average reflects the fact that many agricultural 

products enter the U.S. duty-free, while certain other products have extraordinarily 

high tariffs. 

For example, according to USDA’s Economic Research Service, the following six 

groupings of food commodities have U.S. tariffs at or above the U.S. average: fresh 

meat (12%), oilseeds (17%), nuts (17%), cocoa beans and products (18%), dairy products (43%), and sweeteners (46%). Even these figures, however, are averages and 

therefore somewhat misleading, as an examination of the individual tariff lines reveals much higher tariff rates, often exceeding 100% (called megatariffs). 

Megatariffs are most prominent in the U.S. tariff schedules for dairy, sweeteners, 

and nuts—all food commodities subject to tariff-rate quotas. About 24 tariff lines in 

the agricultural chapters of the U.S. tariff schedules identify over-quota tariff rates 

in excess of 100%. The U.S. over-quota tariff rate on sweeteners exceeds 200%, and 

on peanut butter is 132%. Seven different dairy products have over-quota tariffs exVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00107 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
104 

ceeding 100%. Some of these food products are direct consumer goods and some are 

ingredients used to make other food products. Either way, such extraordinary tariff 

rates impose substantial costs on American consumers. These megatariffs and other 

above-average tariff rates must be a high priority for immediate, substantial reduction both in multilateral and bilateral negotiations. 

CWT notes that many of these agricultural and food products with high tariff 

rates in the U.S. are similarly protected in other major agricultural producing nations. The Doha negotiations therefore provide an ideal opportunity to dismantle 

these tariff walls on a global basis, benefiting consumers everywhere. 

Clothing and footwear: There is also a significant opportunity for meaningful tariff relief to be achieved in the clothing and footwear sectors. While the United States 

has removed quotas from wearing apparel under the terms of the terms of the 

Agreement on Clothing and Textiles, more needs to be done. The effective tariff rate 

for wearing apparel now stands at 11%, taking into account recent U.S. trade preference programs. The average tariff for clothing excluding preferences is still quite 

high at 15% and at 40% for footwear products. 

Because the United States has significantly liberalized trade in virtually every 

other industrial sector, much of the United States’ tariff protection is now concentrated in these two industries. Fully half of all duties collected by the U.S. Government are collected in these products (Chapters 50 to 65), even though the products represent only about 8 percent of total U.S. imports. 

Reducing duties on these consumer products would have a significant impact on 

the prices consumers pay at retail since these markets are highly price sensitive. 

Over the past decade, while overall U.S. retail prices have slowly increased, U.S. 

apparel and footwear prices have actually declined. As apparel and footwear companies and retailers strive to take additional costs out of the supply chain in order 

to allow further price reductions for consumers, the importance of reducing these 

high tariffs cannot be overstated. Through simple market pressure, consumers will 

demand that these savings be passed on, and thereby would clearly benefit from a 

removal of these duties 

Ironically, it is unclear whether these high tariff rates have been effective in protecting the domestic industry. Import penetration in apparel and footwear—where 

most of these duties are assessed—now stands at 90 and 98 percent, respectively, 

begging the question just who in America benefits from these high tariffs. 

We hope that Congress urges the administration to aggressively pursue reductions in wearing apparel and footwear tariffs, not only in the Doha round of trade 

negotiations but in bilateral free trade agreements, as well. Efforts to limit tariff 

reductions in these sectors through complex rules of origin do not protect apparel 

and footwear jobs—they simply make these necessities of life more expensive than 

they ought to be. 

High tariffs on footwear, clothing and food hits certain Americans harder than 

others. Minority households and single parent households spend a greater proportion of their income on the necessities of life. As a consequence, these families pay 

a higher percentage of the hidden price tag for the U.S. high tariff policy. It is time 

to recognize that there is little domestic industry to protect, and to eliminate tariffs 

in this sector, thereby helping hard working American families. 

The U.S. should eliminate tariffs on softwood lumber imports from Canada 

CWT urges you to recommend that the Administration eliminate the dumping and 

countervailing duties imposed on imports of Canadian softwood lumber products. 

Today, the 27% duties imposed on these building products have inflated the price 

of new homes by roughly $1,000. In the era of high home prices, this price increase 

adversely impacts the poorest Americans struggling to make a down payment on a 

new home. Furthermore, duties imposed on Canadian building products disadvantage those Americans rebuilding their homes devastated by last summer’s hurricanes. For those impacted Americans along the Gulf Coast, every penny counts towards their recovery efforts. The United States could help many Americans by reducing the cost of lumber in the United States. 

This is especially true, given the fact that a recent NAFTA Extraordinary Challenge Committee (ECC) ruled against the U.S. with respect to these duties on Canadian softwood lumber products. We believe it is improper and unwise for the United 

States to ignore this international commitment by leaving in place the antidumping 

and countervailing duties on Canadian softwood lumber ultimately paid by consumers. 

We also strongly urge Congress to impress upon USTR to cease its efforts to negotiate a Canadian-imposed export tariff on these products. Such a tariff would still 

increase the price of lumber in the United States, but it would also transfer U.S. 

Consumer dollars directly to provincial governments in Canada. Consumers for 

105 

World Trade vehemently opposes such a scheme to make U.S. consumers ‘‘pay off’’ 

Canadian producers. 

Renew the Generalized System of Preferences 

CWT urges Congress to quickly pass a long-term renewal of the Generalized System of Preferences (GSP) that is set to expire by the end of 2006. This program offers tariff-free entry on certain products from a host of least developed economies 

and it benefits consumers in the form of lower prices. 

Trade Remedies Injure and Exclude Consumers 

U.S. trade remedy law, and the underlying provisions of the General Agreement 

on Tariffs and Trade, significantly impact American consumers. And yet consumers—both retail and industrial consumers—have no standing in these cases and 

are often unable to defend themselves when trade cases are brought. This is 

quintessentially unfair when one considers that an increasing number of trade cases 

are being brought against consumer products, such as shrimp, furniture, and lumber. 

Indeed, U.S. dumping law provides more standing for foreigners than for American consumers. This lack of official standing means that consumers cannot effectively defend themselves against the imposition of taxes, and that is inherently unfair. The lack of standing means that consumers are not guaranteed time at hearings, are excluded from seeing the trade data upon which the cases are brought, and 

therefore cannot mount anything like an effective rebuttal to the claims of domestic 

producers. It is important to understand that retail and industrial consumers are 

also Americans, and their views should be balanced against those of domestic producers. Indeed some industrial consumers are also domestic producers so the national interest ought to include the consideration of their views. Nevertheless, the 

International Trade Commission and the U.S. Department of Commerce, under existing trade law, have no obligation to even consider the impact of a trade remedy 

on competing U.S. interests such as retail and wholesale consumers. In this way, 

the United States has made a decision that the interests of retail and wholesale consumers is not important. And that’s not only wrong, it is often unwise. 

U.S. consumers matter to the economy. They vote and they have views on trade 

cases. U.S. industrial and wholesale consumers are often badly hurt by trade remedy cases that drive up the costs of their inputs. As such, trade cases often reduce 

jobs in one sector in the name of saving jobs in another. Maybe that is wise policy 

in some cases, but without a requirement to hear the views of consumers, neither 

the Commerce Department or the U.S. International Trade Commission really 

knows. 

For this reason, we urge Congress to pass legislation that would allow consumers—both end users and consuming industries—to have standing in trade remedy cases. In addition, we hope that Congress will urge USTR to pursue this change 

as part of Doha round of trade negotiations. 

The U.S. Trade Policy Making and Advisory Process Excludes Consumers 

At present, the United States has no consumer representatives on any of its trade 

advisory committees. This is not for want of consumer groups appealing for a seat 

at the trade policy table. Indeed, within the last year, Consumers for World trade 

was denied advisor status as part of the Industry Trade Advisory Committee on 

Consumer Goods (ITAC 4) because the organization was not deemed to be ‘‘a U.S. 

entity that trades internationally and is engaged in the manufacture of a product 

or the provision of a service.’’ 

It is disturbing that the interests and concerns of 296 million American consumers should be dismissed so cavalierly. For this reason, we urge Congress to support making seats available to consumer groups on the Consumer Goods ITAC. If, 

in the judgment of the Administration that only an act of Congress would allow 

such participation, then we urge Congress to pass such legislation. It makes sense 

for the Congress and the Administration to have the broadest possible participation 

in the trade policy advisory process. There is no good reason to exclude American 

consumers from that process. 

On behalf of CWT, I thank you once again for the privilege of providing you written comments regarding our priorities for the Congressional 2006 trade agenda. If 

you have any questions about CWT or its views, please feel free to contact me at 

(202) 293–2944 ext. 201. 

Sincerely, Robin Lanier 

f 

Executive Director 

106 

Statement of 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 President Bush’s Trade 

Agenda. RILA strongly supports that agenda and appreciates the Committee’s efforts to help move it forward. 

RILA and the Retail Sector 

Retail is the second largest sector in the U.S. economy, employing 12 percent of 

the nation’s workforce with $3.8 trillion in annual sales. RILA is a trade association 

of the largest and fastest growing companies in the retail industry. Its member companies include more than 400 retailers, product manufacturers, and service suppliers, which together account for more than $1.4 trillion in annual sales. RILA 

members operate more than 100,000 stores, manufacturing facilities and distribution centers, have facilities in all 50 states, and provide millions of jobs domestically 

and worldwide. Our members pay billions of dollars in federal, state and local taxes 

and collect and remit billions more in sales taxes. They are also leading corporate 

citizens with some of the nation’s most far-reaching community outreach and corporate social responsibility initiatives. 

The retail sector, along with the suppliers and customers that it serves, is an essential part of the U.S. economy. Retailers meet the needs of U.S. consumers, and 

in doing so are essential drivers 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. Retailers provide quality jobs at all employment levels with good benefits. The industry also creates opportunities for entry-level employment, part-time 

work, jobs for non-skilled workers, and management training for front-line workers. 

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 stores. Many RILA members are also working to expand retail 

outlets and operations in countries that are open to U.S. investment and expand 

market access for American products. 

WTO Negotiations 

A liberalized, rules-based trading system is essential to U.S. economic success and 

serves other important U.S. policy objectives as well. Multilateral trade agreements 

help sustain an open trading regime for goods and services, ensuring that the 

United States succeeds in the many areas where it has a comparative advantage. 

Participating in the WTO enables us to marry liberalization of the U.S. trade regime—beneficial in its own right—to increased access around the world for U.S. producers, 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 strongly supports the Committee’s and the Administration’s commitment to 

ambitious results from the current WTO negotiating round to advance the Doha Development Agenda. RILA’s specific market access objectives for the round include: 

(1) significant reduction, on a worldwide basis, of tariffs, quotas, other border measures, and non-tariff barriers to trade in agricultural and non-agricultural products 

(particularly footwear, clothing, and food products); and (2) broad and deep further 

liberalization of services trade, with a particular focus on distribution/transportation/delivery services and retail direct investment. Specifically, we want to see a 

further reduction in barriers to owning and operating retail establishments in WTO 

Member countries. 

In the trade rules area, RILA priorities include (1) conclusion of an ambitious 

trade facilitation agreement, to update the various existing WTO disciplines in this 

critical area; (2) improvement of WTO disciplines on the use of trade defense instruments, and (3) expansion of intellectual property disciplines to promote better protection of retail brand names in the markets of all WTO Members. 

The United States should do its utmost to achieve an ambitious Doha Round outcome, this year, as the surest path toward advancing efficient resource allocation, 

consumer welfare, market access for U.S. products, sustainable development, and 

general economic prosperity. 

RILA also supports rapid conclusion of accession agreements with major economies presently outside the WTO system, particularly Vietnam and Russia, and 

prompt enactment of U.S. legislation extending ‘‘Normal Trade Relations’’ status to 

products of these countries on a permanent basis. RILA strongly opposes the inclusion of safeguard provisions in these accession agreements, such as a textile safeguard comparable to what was included in China’s accession agreement. 

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Free Trade Agreements 

RILA’s members benefit from, and energetically support, the bilateral and regional elements of the U.S. trade negotiating agenda as well. We welcome the conclusion of FTA negotiations with Oman and Peru, and urge the most rapid possible 

submission and passage of implementing legislation. We would also like to see FTAs 

in the pipeline, particularly with larger trading partners like Korea and Thailand, 

concluded and implemented during the effective period of the current Trade Promotion Authority procedures. Finally, we believe the existing FTA template could 

be improved by providing greater U.S. market access, through less-restrictive origin 

rules and other techniques, in the textile and apparel sector. 

Preference Programs—GSP 

RILA supports a timely, long-term renewal of the Generalized System of Preferences (GSP) program which is presently due to expire at the end of 2006. The GSP 

program promotes economic development by boosting the export trade of developing 

countries, contributing to political stability and thereby furthering U.S. foreign policy goals. The GSP program also advances sound economic policies in areas such as 

intellectual property protection and worker rights; boosts the competitiveness of 

American industries that use the program to import raw materials and production 

inputs, and benefits consumers who see reduced prices on imported consumer goods 

and on products made in the United States using GSP-eligible inputs. This important program should be renewed prior to its expiration at the end of this year. All 

too often in the past the program was allowed to lapse which led to increased costs 

and price instability. This had a significant negative impact on small and medium 

sized U.S. businesses that rely on the GSP program. We also urge the longest possible period of reauthorization; the program is most effective when importers and 

retailers know its duty-free benefits will be available when the need to import 

arises. Finally, larger beneficiaries should remain eligible to participate subject to 

the existing mechanism for graduation on a product-specific basis. 

Compliance With WTO Dispute Settlement Decisions 

RILA congratulates the Committee for the leadership it has shown in revising 

U.S. measures that have been found, in dispute settlement cases, to violate WTO 

obligations. We were particularly pleased by the recent passage of legislation repealing the WTO-inconsistent Continued Dumping and Subsidy Offset Act. The United 

States benefits from being, and being seen as, a rule-abiding WTO Member. 

Conclusion 

RILA congratulates the Committee for its attention to and oversight of the U.S. 

trade agenda. Negotiated trade liberalization and ongoing autonomous reform of our 

own trade regime are essential elements of America’s economic success story. RILA 

stands ready to work with the Committee in pressing forward an ambitious protrade agenda. If you have any questions on this statement or require any assistance, 

please contact Lori Denham, Senior Vice President—Policy and Planning or Jonathan Gold, Vice President—Global Supply Chain Policy. 

f 

Statement of the Chamber of Commerce of the United States of America 

On behalf of the Chamber of Commerce of the United States of America (U.S. 

Chamber), we are pleased to present the House Committee on Ways and Means 

with this testimony regarding President George W. Bush’s international trade agenda for 2006. International trade plays a vital part in the expansion of economic opportunities for American workers, farmers, and businesses. As the world’s largest 

business federation—representing more than three million businesses and organizations of every size, sector, and region—the U.S. Chamber views efforts to expand 

trade opportunities as a national priority. 

As such, the U.S. Chamber has helped lead the business community’s effort to 

make the case for initiatives to expand trade, including global trade negotiating 

rounds under the purview of the World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade, as well as bilateral and regional free trade agreements. We do so because U.S. businesses have the expertise 

and resources to compete globally—if they are allowed to do so on equal terms with 

our competitors. 

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Trade, Growth, and Prosperity 

America’s international trade in goods and services accounts for nearly a fifth of 

our country’s GDP. As such, it is difficult to exaggerate the importance of the Congressional vote in 2002 to renew Presidential Trade Promotion Authority (TPA). As 

we predicted, this action by Congress helped reinvigorate the international trade 

agenda and has given a much-needed shot in the arm to American businesses, workers, and consumers. The leadership demonstrated by the many members of the 

House Committee on Ways and Means was critical to this progress. 

The evidence is overwhelming that trade is a powerful tool to strengthen the U.S. 

economy. As the Office of the U.S. Trade Representative has pointed out, the combined effects of the North American Free Trade Agreement (NAFTA) and the Uruguay Round trade agreement that created the WTO have increased U.S. national 

income by $40 billion to $60 billion a year. In addition, the lower prices for imported 

goods generated by these two agreements mean that the average American family 

of four has gained between $1,000 and $1,300 in spending power—an impressive tax 

cut, indeed. It is also widely recognized that jobs in the export sector pay a premium 

of approximately 15% on average. 

When TPA lapsed in 1994, the international trade agenda lost momentum. The 

Uruguay Round was implemented, but no new round of global trade negotiations 

was launched as the 1990s wore on. Moreover, the United States was compelled to 

sit on the sidelines while other countries and trade blocs negotiated numerous preferential trade agreements that put American companies at a competitive disadvantage. As we pointed out during our 2001–2002 advocacy campaign for approval of 

TPA, the United States was party to just three of the roughly 150 free trade agreements in force between nations at that time. 

The passage of TPA allowed the United States to demonstrate once again the 

leadership in the international arena that has seen trade emerge as a primary engine of growth and development since 1945. Four years ago, the promise of TPA renewal fueled the launch of the Doha Development Agenda—the global trade negotiations currently being conducted under the aegis of the World Trade Organization. 

The Doha Development Agenda 

The Doha Development Agenda (DDA) represents a unique opportunity to unlock 

the world’s economic potential and inject new vibrancy in the global trading system 

by reducing barriers to trade and investment throughout the world. The round was 

launched on the premise that both developed and developing nations alike share in 

the economic gains resulting from global trade liberalization, particularly by addressing unfinished business in the agricultural sector. 

With TPA due to expire on June 30, 2007, time is short for the WTO’s 149 member countries to secure an agreement. It is clear that the United States must lead— 

and the United States is prepared to do so. In this vein, the U.S. Chamber applauded the Bush Administration’s October 2005 announcement that it is willing to 

make a 70% cut in the level of ‘‘domestic support’’ to farmers allowed by the WTO 

in return for commensurate gains in market access overseas. 

Ambition is the key to the DDA’s success. As one of the most open economies in 

the world, the United States must be ambitious in its approach to liberalization of 

trade in manufactured goods, services, and agricultural products if we are to convince our more reluctant trading partners to share our goals. Of course, we cannot 

lead alone. The European Union and the G20, in particular, need to demonstrate 

that they, too, are committed to the success of the DDA and willing to make the 

concessions necessary for a balanced result that can win the support of all WTO 

member countries. 

The U.S. Chamber and its member companies are working with the Administration, Congress, and their counterparts around the world to ensure that the negotiations advance. On October 25, 2005, the U.S. Chamber, in partnership with other 

leading U.S. business organizations and a broad range of companies and agricultural groups, launched the American Business Coalition for Doha (ABC Doha) to ensure that the U.S. private sector is coordinated, mobilized, and focused on achieving 

success in the DDA. The recommendations that follow represent our priorities for 

the DDA, and we will be working actively with our trading partners around the 

world in the weeks and months ahead to build support for the objectives set out 

below. 

Trade in Agricultural Products: In 2001, the WTO member countries committed to making ‘‘substantial improvements in market access; reductions of, with 

a view to phasing out, all forms of export subsidies; and substantial reductions in 

trade-distorting domestic support.’’ We are encouraged that last fall’s proposals set 

forth by the United States and the G20 seem to have re-energized negotiations with 

respect to agricultural reforms. We hope these advances will stem what we had perVerDate Aug 31 2005 05:48 Dec 23, 2006 Jkt 030435 PO 00000 Frm 00112 Fmt 6633 Sfmt 6621 E:\HR\OC\30435.XXX 30435
109 

ceived before the 6th WTO ministerial conference in Hong Kong last December to 

be an emerging lack of ambition on the part of some key parties to the negotiations. 

In a World Bank paper, Kym Anderson concludes that 92% of developing countries’ gains in agricultural trade will come from reductions in market access barriers. The paper finds that such tariff reductions will not only improve the trade 

climate between developed and developing nations, but more importantly will yield 

significant gains in trade among and between developing countries. This outcome 

mirrors what we have witnessed in improved market access provisions in the areas 

of manufactured goods and services—the most robust gains are seen in trade among 

and between developing nations. 

In this vein, the EU agricultural market access offer issued a month before the 

Hong Kong ministerial was disappointing. As an example, the EU is basically offering U.S. poultry producers the opportunity to sell every EU citizen one additional 

chicken nugget a year. The EU is the largest trading power in the world, but European leaders need to recognize that with great power comes great responsibility. 

The United States is uniquely positioned to press for success based on the highest 

levels of ambition. Bold positions can help break what appears to be a stalemate 

between developed and developing countries over who should make the first move. 

We cannot fail to deliver steep reductions in both trade-distorting domestic supports 

and tariff rates. In the end, success will only be achieved through mutual recognition that comprehensive trade liberalization is an opportunity that will yield enormous benefits to farmers and consumers worldwide. 

Trade in Manufactured Goods: Manufactured goods represent 75% of global 

merchandise trade, and the manufacturing sector is a strong driver of U.S. economic 

growth and employment. In 2001, the WTO member countries made a commitment 

‘‘to reduce or as appropriate eliminate tariffs, including the reduction or elimination 

of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in 

particular on products of export interest to developing countries.’’ While some 

progress has been made toward this goal, much work remains to be done in the nonagricultural market access (NAMA) negotiations. 

In order to deliver on its development promises, the DDA must provide genuine 

new market access by substantially reducing or eliminating tariffs among, at minimum, the developed and developing countries through a formula that focuses on 

making meaningful reductions in tariffs across all product segments, particularly 

peak and high tariffs. A final agreement must also allow for a voluntary sectoral 

approach to tariff elimination. Above all, achieving a ‘‘level playing field’’ requires 

an approach that recognizes the current differences among countries’ tariffs, and 

mandates reductions in tariffs that will reduce and eliminate those differences, so 

as to avoid an outcome where countries with high average tariffs are only required 

to make relatively small reductions. 

While tariff elimination is a critical component of the round, non-tariff barriers 

are increasingly becoming as important, if not more important, as tariffs in constraining global trade. The DDA should focus on removing these hindrances to international trade, using both horizontal and sectoral approaches. In addition, the WTO 

should strengthen, or create where necessary, problem-solving mechanisms specifically focused on addressing and removing non-tariff barriers. 

In order to ensure that the NAMA negotiations lead to substantially increased opportunities for trade, growth, and development for all countries, flexibilities should 

be built into the process that can provide some room for less developed and small 

economies to take part without shouldering the same burden as their more developed counterparts. 

Finally, we recognize that the NAMA negotiations are impacted by progress in the 

broader negotiating environment. It is important that negotiations on agriculture, 

services, and NAMA move forward on parallel tracks to ensure that success in the 

broader round is achieved. 

Trade in Services: The services sector is the backbone of the economy in developed and developing countries alike. In total, it represents about two-thirds of world 

GDP, or $35 trillion in 2004. Further liberalization of this critical sector will allow 

WTO member countries to attract greater foreign direct investment and take full 

advantage of the growth and employment that this vital sector provides. 

In 2001, the services liberalization work that had been conducted under the GATS 

(General Agreement on Trade in Services) was incorporated into the DDA mandate. 

WTO members endorsed the existing negotiating modalities and set a schedule for 

successive market access requests and offers. Progress has been unsatisfactory to 

date: few offers and even fewer revised offers have been tabled, despite the fact that 

the May 2005 deadline is long passed. The request/offer process is clearly not delivering sufficient progress, and there is an urgent need to realign priorities and to 

raise the profile of the services negotiations among trade ministers. While new 

110 

methods that hold promise are being explored to revitalize the process, the objective 

of achieving substantial new liberalization commitments by the spring of 2006 

should guide U.S. efforts. 

In mode one (cross border supply of services), the U.S. should seek full market 

access and most-favored nation (MFN) treatment for all cross border services trade. 

This level of ambition should apply for mode two (consumption of services abroad) 

as well. In mode three (commercial presence), the U.S. should seek the abolition or, 

at the very least, substantial easing in equity limits for services investments and 

allow for the incorporation of services businesses in whatever legal form makes the 

most business sense. In mode four (temporary movement of professionals), countries 

should commit to screen temporary workers, ensure they will leave when their visas 

expire, and generally commit to containing illegal migration in return for their professionals’ access to host countries. 

Trade Facilitation: The Doha Declaration recognizes the case for ‘‘further expediting the movement, release and clearance of goods, including goods in transit, and 

the need for enhanced technical assistance and capacity building in this area.’’ 

Trade facilitation initiatives provide significant opportunities to achieve real, nutsand-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 are important for all companies but are 

especially valuable to smaller and medium-sized enterprises. 

Major world regions are already embracing trade facilitation. In 2002, the 21 

member economies of the Asia-Pacific Economic Cooperation (APEC) forum 

launched a Trade Facilitation Action Plan that included a commitment to reduce 

trade-related transaction costs by five percent within six years. In November 2004, 

the APEC leaders were proud to announce that they had reached their goal three 

years ahead of schedule. And in the Western Hemisphere, the countries negotiating 

the Free Trade Area of the Americas committed in 1999 to implement a package 

of nine customs-related ‘‘business facilitation’’ measures that covered much of the 

same ground as the APEC action plan. In November 2005, a group of over 100 of 

the Western Hemisphere’s leading business organizations released a declaration favoring an ambitious stance in the trade facilitation negotiating group of the DDA. 

These efforts have served to raise the profile of trade facilitation as an opportunity for the DDA, but much more can be done. Trade facilitation can bring great 

benefits if adopted unilaterally, but a global rules-based approach also offers the advantages of certainty, stability, and enhanced commonality to customs measures 

and port administration. This is the promise of the DDA’s trade facilitation negotiations. 

Free Trade Agreements 

While the DDA offers the remarkably broad opportunity to lower barriers to trade 

globally, the free trade agreements the United States has negotiated represent a 

more ambitious and comprehensive way to open markets one country or region at 

a time. By leveraging both the breadth of the DDA and the depth of FTAs, U.S. 

business can attain important new market opportunities in the years ahead. 

As noted above, the United States is an extraordinarily open economy. Consider 

how U.S. tariffs compare with those of countries where FTA negotiations have recently been concluded, are underway, or were recently proposed. According to the 

World Bank, the United States has a weighted average tariff rate of less than 2%. 

By contrast, the weighted average tariff of Panama is 7%, Thailand 8%, Peru 9%, 

Colombia and Korea 10%, and Oman 14%. 

We made this point repeatedly in 2004–2005 during our advocacy campaign for 

Congressional approval of the U.S.–Dominican Republic–Central America Free 

Trade Agreement (DR–CAFTA). The United States eliminated tariffs on nearly all 

imports from Central America and the Caribbean in 1983 through the Caribbean 

Basin Initiative. In 2003, 77% of Central American and Dominican industrial products (including 99% of non-apparel industrial products) and 99.5% of agricultural 

products entered the United States duty-free. On the other hand, U.S. consumer, 

industrial, and agricultural exports to these countries faced average tariffs in the 

7–11% range. As we often pointed out during the DR–CAFTA campaign, this was 

like going into a basketball game 11 points down from the tip off. 

An academic observer may regard the resulting 5–12% price disadvantage that 

follows from these lopsided tariffs as insignificant. However, business men and 

women face narrower margins than these every day, very often with the success or 

failure of their firm on the line. Best of all, a free trade agreement can fix this imbalance once and for all. 

The way free trade agreements level the playing field for U.S. workers, farmers, 

and business is borne out in the results attained by America’s FTAs. For example, 

111 

the U.S.–Chile Free Trade Agreement was implemented on January 1, 2004, and 

immediately began to pay dividends for American businesses and farmers. U.S. exports to Chile surged by 33% in 2004, and by a blistering 85% in 2005. In fact, U.S. 

exports to Chile have risen nearly two-and-a-half fold in the agreement’s first two 

years of implementation, reaching $6.7 billion in 2005. 

Other recent FTAs have borne similar fruits. Trade with Jordan has risen fourfold since the U.S.–Jordan Free Trade Agreement was signed in 2000, fostering the 

creation of tens of thousands of jobs in a country that is a close ally of the United 

States. The U.S. trade surplus with Singapore nearly quadrupled over the first two 

years of implementation of the U.S.–Singapore Free Trade Agreement (2004–2005), 

reaching $5.5 billion last year. And over the 12 years since implementation of the 

North American Free Trade Agreement (NAFTA), by far the largest and most important of these agreements, U.S. exports to Canada and Mexico have surged by 

$189 billion (to a total of $331 billion in 2005), sustaining literally millions of new 

jobs and businesses. 

One of the most compelling rationales for these FTAs is the benefit they afford 

America’s smaller companies. The following table reveals how America’s small and 

medium-sized companies are leading the charge into foreign markets, accounting for 

more than three-quarters of exporting firms to these three selected markets (one a 

market where an FTA was recently approved, the second where FTA negotiations 

were recently concluded, and the third where an FTA has just been proposed). As 

a corollary, it suggests how smaller businesses stand to gain disproportionately from 

the market-opening measures of a free trade agreement: 

Market 

No. of U.S. companies exporting to the 

market 

No. of U.S. SMEs 

exporting to the 

market 

No. of U.S. SMEs as 

a percentage of exporters 

DR–CAFTA countries 15,625 13,557 87% 

Peru 5,080 4,010 79% 

Korea 17,330 15,233 88% 

Source: U.S. Department of Commerce, 2003 data (latest available). 

Beyond the highly successful track record of America’s FTAs as measured in 

terms of new commerce, the U.S. Chamber and its members also support free trade 

agreements because they promote the rule of law in emerging markets around the 

globe. This is accomplished through the creation of a more transparent rules-based 

business environment. For example, FTAs include provisions to guarantee transparency in government procurement, with competitive bidding for contracts and extensive information made available on the Internet—not just to well-connected insiders. 

FTAs also create a level playing field in the regulatory environment for services, 

including telecoms, insurance, and express shipments. In addition, recent FTAs 

have strengthened legal protections for intellectual property rights in the region, as 

well as the actual enforcement of these rights. 

Following are observations on three of the FTAs that have been in the headlines 

lately: 

Peru: Negotiations for the Peru Trade Promotion Agreement (PTPA) were concluded in December 2005. U.S. trade with Peru has doubled over the past three 

years, reaching $7.4 billion in 2005. The text of the PTPA reveals an agreement that 

is both ambitious and comprehensive. Eighty percent of U.S. consumer and industrial products and more than two-thirds of current U.S. farm exports will enter Peru 

duty-free immediately upon implementation of the agreement. 

U.S. investors in Peru also regard PTPA as a helping hand for a close ally in the 

Andes. As described above, PTPA will lend support for the rule of law, investor protections, internationally recognized workers’ rights, and transparency and accountability in business and government. The agreement’s strong intellectual property 

and related enforcement provisions against trafficking in counterfeit or pirated products will help combat organized crime. PTPA will clearly promote economic growth 

in Peru, lending strength to its economy and providing its citizens with long-term 

alternatives to narcotics trafficking or illegal migration. 

The U.S. Chamber is serving as Secretariat of the U.S.–Peru Trade Coalition, a 

broad-based group of U.S. companies, farmers, and business organizations advocating for PTPA’s approval. Negotiations for a similar agreement with Colombia are 

being held this very week, and both the coalition and the Chamber are hopeful these 

talks will produce a trade agreement of similar quality. 

112 

Korea: The U.S. Chamber also strongly supports the announcement earlier this 

month by the U.S. and Korean governments of their intent to launch negotiations 

for a U.S.–Korea FTA. Such an agreement would be the most commercially significant FTA the United States has entered into with a single country. In 2005, Korea 

was the seventh-largest U.S. trading partner, its seventh-largest export market, and 

its sixth-largest agricultural market overseas. Moreover, a U.S.–Korea FTA will 

strengthen the important political relationship and alliance between the United 

States and Korea, further contributing to security and stability in the Asia-Pacific 

region. 

The Chamber-administered U.S.–Korea Business Council is serving as Secretariat 

of the U.S.–Korea FTA Business Coalition. This coalition already embraces over 100 

leading U.S. companies and business associations that strongly support the conclusion and passage of a U.S.–Korea FTA to advance the interests of the U.S. business 

community and promote further bilateral trade and investment. 

Oman: On January 19, 2006, the United States and Oman signed a free trade agreement. With bilateral trade surpassing $1.1 billion in 2005, the FTA is of particular interest to U.S. exporters of telecommunications equipment, oil and gas 

equipment, medical equipment, and electrical and manufacturing equipment. As 

noted above, Oman has a weighted average tariff of 14%, presenting U.S. exporters 

with relatively high barriers to market access; the FTA will eliminate all tariffs on 

industrial and consumer products immediately upon entry into force. 

From a regional standpoint, the U.S.–Oman FTA is an important strategic step 

in the overall U.S. foreign policy in the Middle East. The Bush Administration has 

announced its intention to create a Middle East Free Trade Area by 2013. The 

United States already has FTAs with Bahrain, Israel, Jordan, and Morocco and is 

in negotiations with the United Arab Emirates. Congressional approval of this FTA 

is a crucial step in attaining the MEFTA goal. Passage of this comprehensive agreement will set a high standard for future FTAs with Gulf Cooperation Council member countries and other countries in the region. 

China: Challenge and Opportunity 

Beyond the Doha Development Agenda and the various free trade agreements 

coming up for Congressional consideration or under negotiation, we would like to 

comment on U.S.–China trade. The Sino-American commercial relationship is the 

subject of a number of recent legislative proposals in Congress. 

The U.S. Chamber and our members applaud the many recent cases in which Chinese authorities have worked closely with the U.S. business community to implement the commitments China made upon accession to the WTO, as well as to resolve disputes that have arisen during the implementation process. Partly for these 

reasons, China is now the fastest-growing trading partner of the United States. 

Rapidly expanding bilateral economic and commercial ties underscore the market 

opportunities that China offers to U.S. exporters and investors, which support the 

creation of high value-added jobs at home. 

However, as underscored by last week’s trade deficit figures, China can and must 

do more to open its market and instill the rule of law. The U.S. business community 

and others that vigorously advocated China’s WTO membership premised their support on expectations that China is evolving into a more open and transparent market based on the rule of law. China’s unsuccessful efforts to consistently enforce its 

laws protecting intellectual property (IP) and to combat IP theft represent the most 

visible examples of these expectations remaining unfulfilled. 

Similarly, China has continued its reliance on state guidance and industrial policies—capitalization requirements, mandated national technology standards, procurement preferences and subsidies—in key sectors. Not only is this a breach of China’s 

market access commitments and the spirit of openness China embraced when joining the WTO, but it also gives credibility to China’s critics who doubt China’s commitment to create a business environment that values equally the economic contributions of domestic and foreign companies. 

China needs to implement its WTO obligations fully and consistently in order to 

advance on the path toward a clear and transparent rule-based regulatory environment that values equally the contributions of U.S. as well as Chinese businesses. 

Some key policy issues in the area of IP, industrial policy, transparency, and currency are outlined below: 

Intellectual Property: China needs to reduce the depth and breadth of IP infringement and realize a marked reduction in the export of pirated and counterfeit 

products. This can be accomplished through such efforts as the routine implementation of effective civil, administrative, and criminal penalties and increased market 

access for the purchase of foreign IP-based products to facilitate the sale of legitimate products. 

113 

Industrial Policy: China must refrain from using discriminatory government 

procurement policies, national standards, competition law, and IP regulations to 

erect barriers to fair competition and unfairly reduce the value of foreign-held IP. 

China should reaffirm its commitment to non-discriminatory, merit-based, and technology neutral government procurement. China should also accelerate its efforts to 

join the Government Procurement Agreement (GPA) and, prior to accession to the 

agreement, adhere to the principle of national treatment in government procurement. It is also essential that China respect the rights of patent holders, including 

the right to derive reasonable compensation (e.g., royalties or one-time payments) 

from IP and refrain from utilizing compulsory patent licensing to resolve patent-infringement issues, even for mandatory national standards. 

Transparency: China must do much more to ensure that it develops and implements laws and regulations in a manner consistent with international practices and 

WTO commitments. China has made important progress in improving the transparency of its rulemaking and other regulatory activities since its WTO accession 

in 2001, but transparency remains a key concern of U.S. Chamber member companies. 

Currency: China should move as quickly as possible to a fully convertible exchange rate. China’s status as a large, developing economy that is not yet fully market-based poses special challenges to world trade and financial systems. The U.S. 

Chamber supports the Administration’s engagement of the Chinese government in 

discussions on such matters as currency levels, trade flows, investment regimes, and 

compliance with international agreements. 

The U.S. Chamber would like to underscore that for all the examples of China’s 

challenges in realizing full WTO compliance, none of these trumps the value of engaging the world’s most populous nation in the rules-based trading system. While 

we share the concerns of many members of Congress over the U.S.–China trade deficit, rising competition from Chinese imports, and China’s currency regime, it is important that we do all we can to resist protectionist sentiments to address trade 

challenges. We understand the motivation behind legislative proposals to repeal 

China’s ‘‘permanent normal trade relations’’ status or add significant tariffs to Chinese imports, but such actions would retard, not advance, U.S. interests. 

For all those who care about the future of our economy, jobs for Americans, stability and peace in the world, the protection of global health, and the advancement 

of environmental quality and human rights, we must continue to encourage China 

to become an active and committed member of the world trading system. We are 

pleased with the Administration’s efforts to take a broad-based review of the U.S.– 

China commercial relationship through the top-to-bottom review. The U.S. Chamber 

encourages efforts to hold China accountable through appropriate means such as the 

U.S.–China Joint Commission on Commerce and Trade and other bilateral forums. 

When dialogue is ineffective, the Chamber supports the use of U.S. trade laws and 

the dispute settlement process within the WTO. Constructive engagement with 

China remains the most promising path to progress and is vastly superior to approaches that seek to punish and isolate this emerging global power. 

Conclusion 

Trade expansion is an essential ingredient in any recipe for economic success in 

the 21st century. If U.S. companies, workers, and consumers are to thrive amidst 

rising competition, new trade agreements such as the DDA and the various free 

trade agreements cited above will be critical. In the end, U.S. business is quite capable of competing and winning against anyone in the world when markets are open 

and the playing field is level. 

The U.S. Chamber appreciates the leadership of the House Committee on Ways 

and Means in advancing the U.S. international trade agenda. We stand ready to 

work with you on these and other challenges in the year ahead. Thank you. 

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