U.S. GOVERNMENT PUBLISHING OFFICE

33–656 WASHINGTON : 2019

OPPORTUNITIES TO EXPAND U.S. TRADE 

RELATIONSHIPS IN THE ASIA-PACIFIC REGION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON TRADE 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

OCTOBER 11, 2017 

Serial No. 115–TR02 

Printed for the use of the Committee on Ways and Means 

( 

ii 

COMMITTEE ON WAYS AND MEANS 

KEVIN BRADY, Texas, Chairman 

SAM JOHNSON, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

PETER J. ROSKAM, Illinois 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

TOM RICE, South Carolina 

DAVID SCHWEIKERT, Arizona 

JACKIE WALORSKI, Indiana 

CARLOS CURBELO, Florida 

MIKE BISHOP, Michigan 

RICHARD E. NEAL, Massachusetts 

SANDER M. LEVIN, Michigan 

JOHN LEWIS, Georgia 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

TERRI SEWELL, Alabama 

SUZAN DELBENE, Washington 

JUDY CHU, California 

DAVID STEWART, Staff Director 

BRANDON CASEY, Minority Chief Counsel 

SUBCOMMITTEE ON TRADE 

DAVID G. REICHERT, Washington, Chairman 

DEVIN NUNES, California 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

MIKE KELLY, Pennsylvania 

PAT MEEHAN, Pennsylvania 

TOM REED, New York 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

TOM RICE, South Carolina 

BILL PASCRELL, JR., New Jersey 

RON KIND, Wisconsin 

LLOYD DOGGETT, Texas 

SANDER M. LEVIN, Michigan 

DANNY DAVIS, Illinois 

BRIAN HIGGINS, New York 

iii 

C O N T E N T S 

Page 

Advisory of October 4, 2017 announcing the hearing ........................................... 2 

WITNESSES 

Matthew Goodman, William E. Simon Chair in Political Economy & Senior 

Adviser for Asian Economics, Center for Strategic and International Studies .......................................................................................................................... 6

(Truth in Testimony) ........................................................................................ 18 

Kelley Sullivan, Owner/Operator, Santa Rosa Ranch .......................................... 20 

(Truth in Testimony) ........................................................................................ 27 

Demetrios Marantis, Senior Vice President and Head of Global Government 

Relations, Visa Inc. .............................................................................................. 28 

(Truth in Testimony) ........................................................................................ 37 

Stefanie Moreland, Director of Government Relations and Seafood Sustainability, Trident Seafoods Inc. .............................................................................. 38 

(Truth in Testimony) ........................................................................................ 48 

Scott Paul, President, Alliance for American Manufacturing .............................. 49 

(Truth in Testimony) ........................................................................................ 61 

QUESTIONS FOR THE RECORD 

Questions from The Honorable Patrick Meehan, to Matthew P. Goodman ........ 81 

Questions from The Honorable Patrick Meehan, to Ambassador Demetrios 

Marantis ................................................................................................................ 84 

PUBLIC SUBMISSIONS FOR THE RECORD 

BSA | The Software Alliance ................................................................................... 86 

HanesBrand, Inc. ..................................................................................................... 89 

Sahra English, Vice President, Global Public Policy Mastercard, statement ..... 92 

U.S. Chamber of Commerce, statement ................................................................. 100 

(1) 

OPPORTUNITIES TO EXPAND U.S. TRADE RELATIONSHIPS IN THE ASIA–PACIFIC REGION 

WEDNESDAY, OCTOBER 11, 2017 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON TRADE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 2:06 p.m., in Room 

1100, Longworth House Office Building, Hon. Dave Reichert [chairman of the subcommittee] presiding. 

[The advisory announcing the hearing follows:] 

2 


Insert 33656A.001

(@ 

WAYS AND MEANS 

CHAIRMAN KEV I N BRADY 

Chairman Reichert Announces Hearing on Oppo•·tunities to 

Expand U.S. Tr ade Relationships in the Asia-Pacific Region 

House Ways and Means Trade Subcommiuee Chainnan Dave Reichen (R·WA) 

announced today that the Subcommittee will hold a hearing entitled "Opportunities to 

Expand U.S. Trade Relationships in the Asia-Pacific Region:• The hearing will examine 

the significant opponunities for U.S. manufaciUrers., services providers. famte-rs, 

ranchers. fishe-mten, worker$, and consumers in the Asia·Pacitic region and explore how 

to expand and improve our access to t11e markets in the region through existing and new 

trade agreements. The hearing will take place on \Vednesday, October I 1, 2017 in 

room 1100 Longworlh House Office Bui.lding at 10:00 AM. 

In view of the limited time to hear witnesses, 01'31 res'limony at this hearing will be from 

invited witnesses only. However, any individual or organization may submit a written 

state-ment for consideration by the Comminee and for inclusion in the printed record of 

the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMEI'TS: 

Please Note: Any person(s) and/or organization(s) wishing to submil wrinen comments 

for dte he.aring record must follow the appropriate link on the he-aring page of the 

Committee website and complete the informational forms. From the Committee 

homepage, http://waysandmeans.hous-e.gov, select "Hearings." Se.le.ct the hearing for 

which you would like to make a submission. and click on the link entitled. •<Click here to 

provide a submission for the record." Once you have fo11owed the online instnactjons. 

submit a.ll requested information. A 1T ACH your submission as a Word document, in 

compliance with the formaning requirements listed below, by I he close of business on 

Wednesday, October 25, 2017. For questions, or if you encounter technical problems, 

please call (202) 225-3625. 

FORMATTING REQUIREMENTS: 

The Commiuee relies on electronic submissions for printing the official hearing record. 

As always, submissions will be induded in the record according to the discretion of the 

Committee. Tlte Comminee will not aher the content of your submission, but we reserve 

the right to fom1at it according to our guidelines. Any submission provided to the 
3 

f 

Chairman REICHERT. The committee will come to order. 

Welcome to the witnesses. Good afternoon. The subcommittee 

will come to order as I said. 

Welcome to the Ways and Means Trade Subcommittee hearing 

on Opportunities to Expand U.S. Trade Relationships in the AsiaPacific Region. 

Before hearing from our witnesses, I would like to make a few 

points. Many of the largest and fastest growing economies in the 

world are in the Asia-Pacific region. The 21 Asia-Pacific Economic 

Corporations, or APEC, members account for 59 percent of the 

global GDP and 49 percent of world trade. U.S. companies can sell 

only so much to the 4 percent of the world’s population that lives 

in the United States, so we must improve our access to global markets. If we want to remain competitive, then we must focus on 

doing more in the Asia-Pacific region. 

Washington is one of the most trade-dependent States in the 

country, with 40 percent of all jobs tied to trade. Given our location 

on the West Coast, my constituents are very aware of the importance of export markets in the Asia-Pacific region. Far too often, 

U.S. companies are held back in this region by high tariffs, nontariff barriers, and discriminatory policies and regulations. And all 


Insert 33656A.002
4 

too often it is much more difficult to do business in the region than 

it should be. 

Reducing these barriers would increase opportunities for the 

United States companies to compete and win, and would also increase prosperity throughout the Asia-Pacific, enhance security in 

the region, and set high standards for future agreements. 

One important tool that the United States can use to address 

these issues is negotiating trade agreements. But we have trade 

agreements with only three countries in the Asia-Pacific region, 

Korea, Australia, and Singapore. We must expand our presence. I 

am convinced that KORUS, our trade agreement with Korea has 

been a great success for both the United States and Korea. 

KORUS has been in place only 5 years, and some of the tariff 

reductions are still being phased in and evaluated, especially for 

sensitive agricultural products. So we can expect even greater 

gains in the future. Even still, we have seen the benefits of KORUS 

throughout the United States, and particularly in my home State 

of Washington. And I mention this quite frequently, we have nearly 

doubled our cherry exports to Korea since this agreement was put 

into effect, making it our third largest market for cherries in the 

world. 

At the same time, Korea’s implementation of certain portions of 

the agreement have been very disappointing. And I know some 

tough conversations are ongoing to address these problems. The 

best way to resolve these issues and instill confidence in both countries about the future of the agreement is to use the committee 

structure it set up under KORUS. That structure has helped us put 

an end to several disputes already. But Korea needs to do much 

more. 

I am eager today to hear from each of our witnesses about your 

experiences in Korea and throughout the region, both where you 

are having success and where you see some continuing challenges. 

I hope that this hearing will help us policymakers more effectively 

push our trading partners to ensure a level playing field for U.S. 

companies and their employees. 

When we have a trade agreement in place, we can work to enforce that agreement and push our trading partner to live up to its 

side of the bargain. But our limited number of trade agreements 

in the Asia-Pacific region greatly reduces our leverage relative to 

the competitors in other countries that have been more aggressive 

in negotiating trade agreements. Therefore, I firmly believe we 

need to pursue new bilateral agreements in the Asia-Pacific region. 

High standard, ambitious, and enforceable agreements would 

benefit all Americans, including farmers, ranchers, workers, fishermen, fisherwomen, manufacturers, and service providers. The 

longer we wait, the more we will fall behind. We simply cannot afford to delay. 

I am eager to hear from our witnesses again about how such new 

agreements can help us force markets open and make sure we are 

treated fairly. 

I now yield to the ranking member, Mr. Pascrell, for his opening 

statement. 

Mr. PASCRELL. Thank you, Mr. Chairman. 

5 

I want to thank our witnesses. We have a great, great five of 

you, all terrific backgrounds. 

But I wanted to thank the chairman for putting us together 

today. 

With rapidly growing economies, and more than half the world’s 

population, it is critical that we engage with the Asia-Pacific countries in a constructive trade relationship. In addition to considering 

these important issues, as all of you know, this administration is 

in the middle of renegotiating our trade agreement with Canada 

and Mexico, the NAFTA agreement. But we have yet to have one 

administration witness come before this committee to testify on 

these negotiations. 

Considering the President has threatened more than once to 

withdraw the United States from NAFTA, I think it is critical that 

we have a public hearing on the trade agreement, the renegotiation 

process, and what the threat of withdrawal means to our economy, 

our workers and our communities. And I look forward to a response 

from the chairman on this matter soon. 

President Trump has had an incoherent and unpredictable trade 

policy. And nowhere is this more clearly on display than with 

China. In April, the President initiated a 232 investigation on steel 

and aluminum to try to address the crisis facing our producers and 

our workers because of the well-documented market distortions created by China’s steel and aluminum overcapacity. 

But since initiating the investigation, the administration has 

pushed off making a decision or releasing its findings. This is what 

you are getting into now. So be aware in context what is going on 

around you not only in terms of what we are here to talk about 

today. 

The result of this uncertainty has been an increase to steel imports because of consumers’ fear of pending trade restrictions. According to the Commerce Department’s most recent steel import 

monitoring and analysis data, steel imports rose 21.4 percent 

through the first 8 months of 2017 compared to the same time last 

year. Think about that and think of all the rhetoric that you and 

I have heard. 

In July, President Trump told the Wall Street Journal that he 

was not going to act on the 232 investigation at that time. It is unclear when, if ever, the President intends to take action. Right now 

it seems that paradoxically, the President has exacerbated the 

problem of increasing steel imports that has been devastating the 

U.S. steel industry. Boy, we have a knack of making things worse. 

The President has also threatened to withdraw from the Korean 

free trade agreement, or KORUS. I believe KORUS has flaws. We 

all have flaws. It could be improved. It could work better for American companies seeking market access, particularly American auto 

companies. And it still contains some troublesome dispute settlement mechanisms that favor powerful corporations in the form of 

investor-state dispute settlements. However, our relationship with 

South Korea is critical and is a valuable trade partner, and some 

elements of the KORUS agreement set very high standards. 

So let’s not do something drastic by blowing up the agreement 

and creating chaos. That serves no one. So we have threats to blow 

that up. We have threats to blow up NAFTA. And I am reading 

6 

newspapers lately, like all of you, I don’t know what the heck he 

is planning to blow up next. That is the context in which you are 

here. Our relationship with South Korea is critical. It is a valuable 

trade partner. And some elements of the KORUS agreement set 

very high standards. I said this, but I want to repeat it because 

this is important and critical before we go onto the discussion. 

I look forward to discussing how we can improve our trade relationship with the Asia-Pacific countries. This region represents 

nearly half of the global trade, 60 percent of global gross domestic 

product, and nearly $20 trillion worth of goods and services flowing 

through the region. This rapidly growing economic zone is critical 

to our continued success as an economy as we look to the future. 

This is not going to be answered by bumper stickers. And thank 

you for coming today. 

Mr. Chairman. 

Chairman REICHERT. Thank you, Mr. Pascrell. Today we are 

joined by five witnesses. 

Mr. Matthew Goodman, the William E. Simon chair in political 

economy and senior adviser for Asian economics at the Center for 

Strategic and International Studies. 

Ms. Kelley Sullivan, owner-operator of Santa Rosa Ranch in 

Crockett, Texas. 

Our third witness is Ambassador Demetrios Marantis, senior vice 

president and head of global government relations for Visa, Incorporated. He served as deputy U.S. Trade Representative in the 

prior administration, covering Asia-Pacific. 

And though seafood from the Pacific northwest needs no introduction, our fourth witness is Ms. Stefanie Moreland, director of 

government relations and seafood sustainability for Trident Seafoods in Seattle in my home State of Washington. A special welcome to you, Ms. Moreland. 

Finally, our fifth witness is Mr. Scott Paul, president of the Alliance for American Manufacturing. 

Before recognizing our first witness, let me note that our time is 

limited, so you should please limit your testimony to 5 minutes. 

And your statements will all be entered into the record. 

Mr. Goodman, you are recognized for 5 minutes. 

STATEMENT OF MATTHEW GOODMAN, WILLIAM E. SIMON 

CHAIR IN POLITICAL ECONOMY & SENIOR ADVISOR FOR 

ASIAN ECONOMICS, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES 

Mr. GOODMAN. Thank you, Mr. Chairman. I have submitted 

more complete written testimony, but I would just like to make 

three points here. 

First, the United States is a Pacific power, and we have compelling national interests in this vital Asia-Pacific region. Those include, as the chairman and ranking member said, a critical economic stake in a region that accounts for nearly 60 percent of global GDP, and has more than tripled in economic size since the end 

of the Cold War. U.S. exports of agricultural goods, manufactured 

products, and services to the Asia-Pacific region totaled nearly half 

a trillion dollars last year, about half our total exports. 

7 

According to the Commerce Department, about 3.4 million American jobs were supported by exports to the region in 2015. Asian 

companies with direct investments in the United States employ 

over one million Americans, with many more jobs supported indirectly by those operations and supply chains across North America. 

And the region holds even more potential in the future. By 2030, 

Asia will be home to more than three billion middle class consumers. This means more export opportunities for U.S. companies 

and more growth in jobs at home. 

My second point is the landscape in the Asia-Pacific region is 

changing, and not necessarily in ways favorable to our interests. 

American companies have long faced an array of barriers in AsiaPacific markets, both at the border, tariffs and conditions on market entry, for example, and behind the border, intellectual property 

theft, regulatory discrimination, and so on. But mercantilist trade 

policies persist, and more assertive industrial policies in the region 

have grown in recent years. 

China in particular has stepped up policies that deny market opportunities to American companies, support its own national champions, and distort global markets. Beijing’s so-called Made in China 

2025 policy or plan shows that it is targeting the industries of tomorrow, artificial intelligence, robotics, aviation, and is prepared to 

use subsidies, forced technology transfers, and abusive competition 

policy to get there. 

Other countries have adopted policies harmful to U.S. interests, 

such as data localization requirements in Indonesia and Vietnam. 

While all of this argues for stepped up U.S. engagement, particularly with our allies in the region, the administration’s statements 

and actions on trade risk isolating the United States. At the same 

time, countries in Asia have moved ahead without the United 

States to shape the region’s trade architecture and the rules of the 

road for trade and investment. President Trump’s early, and in my 

view mistaken, decision to withdraw from the Trans-Pacific Partnership gave a boost to Asia’s other large trade agreement, the Regional Comprehensive Economic Partnership, or RCEP, which 

brings China together with 15 other Asia-Pacific countries, but not 

the United States. 

TPP itself has continued without our involvement, as Japan, 

Australia, and 11 other signatories try to salvage a deal. On the 

plus side, this would preserve some of the high standards in TPP, 

but it would also have negative diversionary trade effects for the 

United States. Countries have also moved ahead with bilateral 

trade deals. The largest of these is between the European Union 

and Japan, initialed this past summer. This agreement is likely to 

contain European-style rules on data privacy and special protections for so-called geographic indications for food and beverage 

products like parmesan and champagne. 

Together, these other deals have the potential to significantly 

erode the competitiveness of U.S. exporters and to lock in rules 

that hurt our interests. Beyond trade agreements, Asian countries 

are pushing competing visions for infrastructure investment across 

the Eurasian supercontinent that could reorder the region’s trade 

linkages and affect our commercial and geopolitical interests. Most 

prominent among these is China’s so-called belt and road initiative, 

8 

which is literally making all roads—or intended to make all roads 

lead to Beijing. 

My third point is that despite this changing and increasingly 

challenging environment, the United States can still recapture economic leadership in the Asia-Pacific region and take advantage of 

the huge opportunities there. We are still a uniquely attractive 

trading partner for the region with our huge market, abundant 

human and financial capital, innovative capacity, and rule of law. 

But we have to have a strategy and policies to back it up. 

The President’s upcoming trip to Asia provides an opportunity to 

reaffirm our interests and commitment to the region, and to articulate for the American public and for our Asian trading partners a 

comprehensive, consistent, and long term economic strategy for the 

region. CSIS will be issuing a short report tomorrow outlining such 

a strategy, and I am happy to share it with the committee. We recommend the President give a speech before or during the trip outlining U.S. interests in the region and the broad pillars of engagement, including an economic strategy. We have other recommendations, but in the interests of time I will skip through those. 

I just want to say one final thing, which is that there is something we should not do, which is to withdraw from NAFTA, the 

North American Free Trade Agreement, or KORUS, the Korea bilateral deal, as the administration has signaled it may intend to do. 

It would be extremely harmful to our economic and political interests in the Asia-Pacific region. This would take away hard-won 

market opening gains for our ranchers, manufacturers, and service 

providers, and undercut the rules that will give our companies and 

workers the long term basis to compete. 

Moreover, withdrawing from these agreements would be a serious blow to our credibility in the region and the world, and make 

it harder for us to persuade others to follow us, not just on trade, 

but in addressing other serious political and security challenges. 

Again, I have made a number of recommendations in my written 

testimony and in this CSIS report, and I am happy to discuss those 

in the question period. Thank you very much. 

[The prepared statement of Mr. Goodman follows:] 

9 


Insert 33656A.003

CSIS I CENTER FOR STRATEGIC & 

INl(RNAf iONAL STUDIES 

Statement Before the 

House Ways & Means Committee 

Subcommittee on Trade 

"Opportunities to Expand U.S. Trade 

Relationships in the Asia-Pacific Region" 

A Testimony by: 

Matthew P. Goodman 

William E. Simon Chair in Political Economy 

Center for Strategic and International Studies (CSIS) 

October II, 2017 

1100 Longworth House Oflice Building 

WWW,C$1$,01\G 1616 RHOO£ ISl.A.ND AVENUE HW TEt.. (lOl) 837.0100 

WA.$HINGTOH. 0( :1001.6 rAX (20.!) '7'7,.)199 
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Insert 33656A.004

GoodiUan: Wriuen Teslimony. House Ways & Means Subcommiucc on Trade 10111/2017 

Introduction 

Mr. Chairman, Mr. Ranking Member, Members of the Subconuniuee. thank you for 1his chance 

to offer my thoughts on U.S. trade opportunities in the Asia· Pacific region. 

The United States is a Pacific power with compel1ing national interescs in the vital Asia·Pacific 

region. Over the past 75 years, we have fought three wars and established robust alliances and a 

forward military preseuc.e in the region, all widt the goal of maintaining peace and stability. We 

have lOllS been champion of a democratic, rules-based order that has underpinned both our 

security and prosperity in che region. And, of greatest interest to this committee, we have 

developed deep econornic ties in the Asia Pac.ific> including trillions of dollars of cwo-way trade 

and invesnne nt~ which have brought unprecedented prosperity to the region and ourselves. 

However, the landscape in the Asia Pacific is changing. and the risks to our interests are 

growing. From the North Korean nuclear threat to an array of territorial disputes, the security 

environment in the region is darkening. Mercantilist trade and industrial policies are on the rise. 

And U.S. leadership is being tested both by new challengers and by uncertainty about our own 

policies and commitment ro the region. 

Against this backdrop, the United States urgemly needs a comprehensive strategy to pron1ote our 

interests in the Asia.Pacific region. Core 10 chis strategy must be s1nan economic statecraft that 

creates a more level playing field for our exporters and investors and recapnLres U.S. leadership 

in market opening and high·standard rulemaking in the Asia Pacific. Work on aniculating this 

new strategy should begin now, in the nm·up to President Trump's first trip to the region next 

month. 

U.S. Economic Interests in the Asia Pacific 

U.S. trade and investment in the Asia Pacific is driven by the region's enormous and growing 

economic size. The region has more than tripled in economic size since the end of the Cold War, 

and the 2 1 member economies of the Asia-Pacific Economic Cooperation group (APEC) now 

account for nearly 60 percent of global gross domestic product (GOP).' The broader Asia-Pacific 

region hosts more than half the world's trillion-dollar economies, and half of the top 20 

economies. 11te APEC region also accounts for around 48 percent of global trade, with nearly 

S20 trillion wonh of goods and services flowing around the Pacific last year. 

2 

This massive and growing economic activity has corresponded with a signific-ant and sustained 

rise in U.S. exports to the region. U.S. exports to Asia-Pacific e<:onomies- including agricultural 

1 Asia-Pacific Economic Cooperation, ''Achievements and Benefits," 

https:flwMv.apec.org/About-Us/About-Af'EC/Achievements-and-Benefits. 1 Asia-Pacific Economic Cooperation ~ ''Key Indicators Database,'' 2016. 

http:f/statistics.apec.org/index.php/key_indicator/kid_result/66. 
11 


Insert 33656A.005

Goodman: Wriucn Te:s1imony. Hoose Ways & Means Suboomminee on Trade 1011112017 

products, manufactured goods, and services-totaled $452 billion in2016·

1

, accouming for over 

half of total U.S. ex pons. The region now boasts five of our 1op 10 rrading partners.' 

Trade and investment with the Asia Pacific has helped drive job growth for Americ-an workers. 

Roughly 3.4 million American jobs were estimated to be supported by exports to the region in 

2015. s Asian companies with direct investments in the United States employed over one million 

Americans in 2015, with many more jobs supported indirectly by those operations and supply 

chains across Nonh America. 6 

Despite 1hese already subslazuial gains, 1he region holds even greater p01emial for increased U.S. 

ex pons in 1be years ahead. 8y 2030, Asia is expected 10 boast 3.2 billion middle-class 

constJmers, more than eight times the projected U.S. population.

7 As the middle class in Asia 

grows and its appetite for U.S. goods and service.s expands, this means more U.S. export~ in tum 

spurring income growth and job creation at home. 

Let me underscore tl1e opportunily in services. The United Slates is a global leader in services 

and already accouniS for over 15 percenl of global services exports, more !han any Other country 

by a substantial margin.8 However, services trade restrictions worldwide remain high. These may 

be particularly hannful given the size of the sector in the Uni1ed Stales and its potential to drive 

productivity growth, as goods ex pons have done in the past. Several coumries in Asia have 

among 1he highest barriers for services ex pons of anywhere in the world, including much of 

Southeast Asia and lndia.9 Bringing these down could create significantly more opportunities for 

U.S. businesses. 

'Uni1ed Stales Census Bureau, "Trade in Goods wi1h Asia," 2016, 

lmps:l/www.census.gov/foreign-tradelbalance/cOO I 6.h1ml. 

'

1 Bureau of Economic Analysis, U.S. Depanment of Commerce, .. International Accounts 

Products for Detailed Goods Trade Data," 

hups://www.bea.gov/inlemationalldetai led _trade_ data.htm. 

>International Trade Administralion, U.S. Department of Commerce, "Employmcn1 and Trade," 

Augus1 2, 2017, bups://www.trade.gov/maslianlentploymem/index.asp. 6 Organization for lmerna1ional lnvestment, "lnsourcing Facts."' August 2016, 

hnp:J/www.ofti.org/resources/insourcing -facts. 1 Homi Kharas, The Unprecetle/1/ed Expansion of 1he Global Mit/tile ('lass: An Uptime, Working 

Paper I 00, (Washington, DC: Brookings, Febnzary 20 J 7), https:l/www.brookings.edu/wpcontenlluploads/20 17/02/global_ 20 I 70228 _global-middle-class.pdf. 

• United Na1ions Conference on Trade and Development, "Exports and imporlS of goods and 

services, annual, 2005-20 16," Oc1ober 6, 20 I 7, 

lutp:// nctadstat unc~ad.orglwdsrrab eViewer tableView.aspx. 

9 International Monetary Fund, World Bank, and World Trade Organiza1ion, "Making Trade an 

Engine of Growth for All: The Case for Trade and for Policies 10 Facili1a1e Adjus1mem," April 

10, 20 I 7, bups://www.imf.org/en/Publicatioos!Policy-Papersllssues/20 J 7/04/08/making-tradean-e-ngine-of-growth-for-all. 
12 


Insert 33656A.006

Goodman: Written Tcslimony. House Ways & Means Subcommittee on Trade 1011112017 

A Changing Landscape in the Asia Pacific 

While the opportunities for trade. and investmem in the Asia-Pacific region are enormous, the 

United States faces an increasingly challenging environment there. Economic and political trends 

in the region have not been moving in a direction favorable to U.S. interests in recent years. and 

have deteriorated further in recent months. 

While the United States remains among the most open economies in the world, with an average 

trade-weighted, applied tariff rate of 1.7 percent, 

10 American companies have long faced a wide 

array of barriers in Asia-Pacific markets. 11oese impediments are both at the border (e.g., high 

tariffs and conditions imposed on market entry), as well as behind the border (e.g., intellecwal 

propeny theft and regulatory discrimination). 

Mercantilist trade and industrial policies have proliferated and hardened across the region in 

recent years. China, in particular. has stepped up policies that deny market opportunities to U.S. 

companies, suppon its own national champions, and diston global markets. Beijing has 

increasingly sho""' that it is prepared to target the industries of tomorrow and compete directly 

with the United States for global technological leadership. Beijing's "Made i11 China 2025" plan, 

adopted in 2013, revealed its ambition to drive China higher up the global value chain by any 

means necessary, inc.luding subsidies, forced technology transfers. aod abuse of competition 

policy. 11 h was complemented on July 20 of this year with publication of the .. New Generation 

Anificial lntelligence Plan;• which set ambitious targets for Chinese AI development through 

2030.

12 

Other countries have followed China's lead in pursuit ofhannful new mles and industrial 

policies. For example, Indonesia, South Korea, and Vietnam have all drafted laws in recent 

momhs that set new requirements on data localization within their borders. 13 South Korea, 

Taiwan, and Thailand have continued to intervene in foreign exchange markets to keep their 

currencies undervalued relative to the dollar, often skirting just around the criteria for 

designation as a currency manipulator by the U.S. Treasury Department. 14 These activities not 

only hann the health of established U.S. industries but also represent a threat to future export 

opportunities. 

10 Wol'ld Trade Orgaotization, "United States of America: Tariff Profiles," 2017, 

http://stat wto.orgfl' arim>rofiles!US _ e.htm. 11 Scott Kennedy, "Made in China 2025," CSIS Critical Questions, June I, 2015, 

https://www.csis.orglanalysislmade-china-2025. 12 Graham Webster. Rogier Creemers, Paul Triolo. and Elsa Kania, "China's Plan to 'Lead ~ in 

AJ : Purpose, Prospects, and Problems," New America, August I, 2017, 

https:l/wwv.•.newamerica.org/cybersecurity·initiativelblog/chinas-plan-lead-ai-purposeprospccts-and-problems. 13 Information Technology Industry Council (!TI), "Data Localization Snapshot," July 29, 2016, 

hups://www. itic.orglpublic-policy/SnapshotoiDataLocalizationMeasures7 -29-20 16.pdf. 14 Brad W. Sester, "Thailand: Currency Manipulator? .. Council 011 Foreign Relations, September 

2 1. 2017, lmps://www.cfr.org/bloglthailand-c.urrency-manipulator. 
13 


Insert 33656A.007

Goodrnan: Written Testimony. House Ways & Means Subcommince on Trade 10/1 1/2017 

Meanwhile, countries in Asia have moved ahead to shape the region's trade architecture without 

the United States. President Tmmp's early decision to withdraw from the Trans-Pacific 

Pannership (TPP) gave a boost to the other large regional trade arrangement, the Regional 

Comprehensive Economic Pannership (RCEP), which brings together China, Japan, South 

Korea~ India, Australia~ and New Zealand with the 10 member countries of the Assoc.iation of 

Southeast Asian Nations (ASEAN). If that agreement were concluded, it would likely generate 

diversionary trade effects that would cost jobs and growth for the United States. More 

damagingly, it could also entrench low-standard economic rules that would tilt the competitive 

playing field against U.S. finns across the region for years to come. 

Despite U.S. withdrawal from the ag.reernem, TPP. too. has continued without our involvement. 

Led by Japan and Australia. the remaining II signatories have 1net severaltin'les this year. Even 

with some resistance from countries such as Vietnam and Malaysia that had expec-ted significant 

gains in access to the U.S. market as the price for deep reforms. the TPP-11 countries aim to 

finish negotiations over modifications to the agreement by the time of the APEC Leaders' 

Meeting in November. Such an agreement without U.S. involvement is projected to have 

negative diversionary trade effects for the United States: about $2 billion in lost real income in 

2030. according to a new study from the Peterson lnstitute for lmemational Economics. IS 

ln addition, many countries in 1he region have renewed their effons to forge bilateral trade deals. 

The most conseq·uential of1hese is an economic partnership agreemem between the European 

Union and Japan> initialed by the two sides in July of this year. Among other things. 1he 

agreement is likely to contain Europe.an rules on data privacy, as well as spec.ial protections for 

so-called "geographic indications" for certain food and alcoholic-beverage products (e.g., 

pam1esan and champagne), to the detrimem of U.S. companies. ranchers. and fanners. 16 

All told, the remaining I I TPP signatories are engaged in 27 separate trade negotiations, 

including wilh China and the EU. and the pace of negotiations has noticeably accelerated since 

the United States withdrew from TPP. 17 Taken together. these agreements have the potential to 

dramatically erode the competitiveness of U.S. exponers and to lock in rules that hann our 

interests. 

Beyond new trade agreements, Asian countries are pushing competing visions for infrastructure 

investment across the E-urasian supercontinent that could potentially re-order the region•s uade 

linkages. with serious consequences for U.S. interests. The most prominent is China's Belt and 

Road Initiative (BRI), under which the country has promised to devote hundreds of billions of 

IS Peter A. Petri, Michael G. Plummer. Shujiro Urata, and Fan Zhai, Going h Alone in the Asia· 

Pacific: Regional Trade Agreements Wid1out d1e United States, Working Paper No. 17-10 

(Washington, DC: Peterson Institute for International Economics, October2017), 

https://piie.com/systemffiles/documents/wp 17 · I O.pdf. 

'

6 European Commission, "EU·Japan Economic Partnership Agreement," July I, 2017, 

hup://trade.oc.europa.eufdoclibldocs/20 17/july/tradoc 155684 .pdf. 11 Adam 8ehsudi. "Trun)p's Trade Pullout R.oils Rural America/' Poli1ico. August 7. 2017, 

http://www.politico.com/magazinefstOry/20 17/08/07/tn,mp-tpp-deal-withdrawal-trade-eiTects· 

215459. 
14 


Insert 33656A.008

Goodman: \Vriuen Testimony. House Ways & Means Subcommittee on Trade 10/1 1/2017 

dollars ofinvesunent in building roads, railways, and pons in neighboring countries and 

beyond.

13 In May, Beijing hosted the Sell and Road Forum, a high-level fonun with senior 

officials from over 130 coumries, to showcase Beijing's continemal ambitions and attrac.t 

support for the initiative. 19 

SRI and similar initiatives by Japan. lndia. and other regional players have the potential to 

dramatically change the composition and direction of the region's trade flows. BRI could 

entrench China at the center of the region's e<:onomy, while saddling other countries with 

onerous debt burdens and low-quality infrastructure, with all the negative social spillovers that 

emails. Conspicuously absem from this nasb to define a new vision for Asia's hard and soft 

infrastructure con.nections is the United States. 

Assessing Trump Administration Policy To Date 

These changes in the economic and political landscape in the Asia Pacific have been met with 

mixed signals from Washington about the direction of American engagement in the region. The 

first. and to date most damaging. was the docision by President Trump to withdraw from TPP in 

January. This ill-considered move not only denied \ IS hard-won economic gains in tenns of 

enhanced market access and stronger rules; it also undermined our credibility in the eyes of our 

allies and panners in 1he region and gave comfort w our adversaries. 

After repeatedly threatening to withdraw from tlte Nonh American Free Trade Agreement 

(NAFT A) with Canada and Mexico. President Trump eventually authorized a renegotiation of 

the 23-year-old deal, but the outcome is highly uncertain, and the specter of U.S. withdmwal 

hovers over the talks. ln late August it was widely reported that the Administration had decided 

tO withdraw from the bilateral free trade agreement with Korea, popularly known as KORUS, 

despite an escalating nuclear crisis with North Korea. 

Meanwhile, though senior administration officials have indicated their interest in pursuing new 

bilateral free-trade agreements in the Asia Pacific, none has yet been announced. All of this has 

created tremendous uncertainty in the region as to t1te prospective U.S. role in building the 

reg.ion 's trade architecture. a traditional pillar of our strategy there.

10 

The Administration has made clear chat it will define its trade objectives by targeting countries 

with which the. United States has persistent bilateral trade deficits. 11tis is a misguided approach, 

not only because the reality of global supply chains has made measuring bilateral balances nearly 

18 Christopher K. Johnson, Pres idem Xi .liupiug 's "Belt and Road" luiliati••e (Washington, DC: 

CSIS, March 20 16), https:J/csis·prnd.s3.amazonaws.com/s3fspublic/publicationl160328 _Johnson_ PresidentXiJ inping_ Web. pdf. 

•• Shannon Tiezzi, "What Did China Accomplish at the Sell and Road Forum," l11e Diplomat, 

May 16, 20 17, https:l/thediplomat.com/20 17/05/wbat-did-china-accompl ish-at-the-belt-androad-forum/. 

"' William Reinsch, "A Series of Unfol'tlmate Events (lemony Snicket strikes again)," 1'l1e 

Stimsou Center, September 27, 2017. https://www.stimson.org/co,lteot/series-unfonunate-evemslemony-snicket-strikes-again. 
15 


Insert 33656A.009

Goodman: Wriuen Tes.imony. House Ways & Means Subeommince on Trnde 10/1112017 

irrelevant, but also because crade barriers are no1 a significant driver ohrade dcficits.21 Rather. 

these are driven by persistent macroeconomic imbalances in many Asia-Pacific economies, 

exacerbated by foreign currency imervention in some cases .. 

22 

The Administration has also raised the prospect of unilateral trade action against Asian countries 

under U.S. trade laws. It has launched investigations under Section 232 of the Trade Expansion 

Acl of 1962 and Section 30 I of lhe Trade Act of 1974 10 examine lhe national securily 

implica1ions ofs1ccl and aluminum impor1s and China's forced technology transfer policies, 

respec1ively. Here the administralion is responding to legj1ima1e grievances from 1he U.S. 

business community, given the increasingly problen.latic market acc-ess issues in China described 

above. These deserve a forceful response. But some of 1he prospec1ive unila1eral aclions under 

these self-initiated trade cases have the-potential for significant collateral damage-for the 

imemational mles-based trading system, for our allies and panners in the region, and for the U.S. 

economy. 

Finally, the United States continues to suffer from a Jack of personnel in key policy positions 

across the executive branch. Nominations have been slow to emerge from the White House. and 

1he pace ofSena1e conflrntaliotts has also been slow.

23 Par1icularly troubling in the context of 

1his hearing arc 1he delays in appointing key officials such as 1he assistam secre1ary of Stale for 

Eas1 Asian and Pacific Affairs and ambassadors to Sotnh Korea and India. 

A WAy ForwArd 

Despite the increasingly challenging environment in the Asia Pacific. as well as our own 

missteps and false starts. there is still an opportunity for the United States to recapture regional 

economic leadership. Our vast consumer market, abundant capital, innova~ive capacity, and rule 

of law make-us an attractive partner for every country in Asia. Our long-held commitment t'O our 

alliance partners and to upholding the current Asia·Pacific security order has been the lynch.pin 

of regional peace and stability. And. as the world•s oldest democracy and an experienced global 

leader, 1he Uni1ed States possesses an unmatched ability to mobilize other na1ions in support of 

common objectives. 

The President's upcoming uip to Asia provides an opponunity to reamnn our interests and 

commitmenr to 1he region, and to aniculate for the American public and for our Asian pan-ners 

and challengers - a clear regional economic strategy. Any successful strategy in the Asia Pacific 

will share cenain characteristics: it must be comprehensive, have a long~ term focus. and be 

delivered consistently. 

" Mattltew P. Goodman, "Good Policy Starts wilh Good Analysis," The Ceurer for Srrategic and 

lutematioual Studies, July 27, 2017, https:l/www.csis.org/analysis!good-policy-starts·good· 

analysis. 

"C. Fred Bergsten and Joseph E. Gagnon, Currency Conflicr and 1i·ade Policy: A New Sll·(l(egy 

for rhe Uniled Stores, (New York: Columbia University Press, June 20 17). 23 The Washington Pos1, 'Tracking how many key positions Trump has filled so far," <Xtober 6. 

2017, https://www. washiogtonpost.com/graphicslpoliticsltnunp-administration-appoimeelrackerldatabasel. 
16 


Insert 33656A.010

Goodman: Wrincn Tcslimooy. House Ways & Mcaos Sul.xxlmmiuee on Trade 10111/2017 

Articulating suc.h a strategy begins wirh a presidemial speech before or during the trip outlining 

broad U.S. interests in the region and the pillars of our engagement. including leadership on 

regional economic integration. The President should foHow through by directing his staff to 

prepare a presidential policy directive laying out U.S. strategy toward the region, with economics 

at its core. This will align agency activities across the administration. including on trade. To 

execute on such a strategy, the White House should work with Congress to ensure the 

expeditious confinnation of political appointees to key posts relating to Asia and eco•.tOmic 

policy. 

Tlte Administration must also recapture reg.ional leadership on market opening and high-standard 

rule-making. Without U.S. participation in TPP or a credible altemative policy. the United States 

risks ceding leadership on market opening and rulemaking to China and othe-rs. We can begin to 

reassen that leade,;hip by signaling to TPP allies and panne,; that we suppon the swift 

conclusion of a TPP-1 1 deal, while leaving the door open to future U.S. participation in a 

regional agreement that addresses our priori lies. 

Meanwhile, ra1her than fueling uncerrainty by threatening to withdraw from NAFT A and 

KORUS, we should be working 10 update and improve those agreemems 10 e~<end the 

rulemakinggains in TPP. High·standard agreements like the.se not only advance U.S. economic 

interests--creating larger. more contestable markets for U.S. businesses large and small and 

benefitting American consumers-but also bolster our security position in the region by 

enmeshing the United States more deeply in regional affairs. We should also work to advance 

U.S.-prcferred norms-on trade. invesunent. infrastructure. erc.-in regional bodies such as 

APEC and the Asian Development Bank. 

The Administration must also work forcefully to combat unfair trade and investment practices 

that hann U.S. businesses and workers. This includes robust use of existing trade remedies. 

provided this does not cause undue harm to our own economic interests. violate our international 

commitments, or undermine the global !fading order. Congress can help by creating new tools to 

comba1 hannful foreign prac1ices. This could include strengthening Section 337 of the Tariff Act 

of 193010 pro<ect U.S. intellec-tual property, as recommended by the 2013 Huntsman-Blair IP 

Co_mmissior'l,

24 h could also include sen.sible reform of the law governing the Comminee on 

Foreign lnvesnnent in 1he Uni1ed S1a1es (CFIUS) to deal more efl'e<:tively with Chinese 

investments in strategic technologies that may pose a national sec.urity threat. 

finally. we should put greater priority on making needed investments at home. Our economic 

engagement in the region will only support SlfO•Igand inclusive grow1h in <he United States if 

par<nered with appropriate infras<rucltlre, tax, regula~ory, education, and other domestic policies. 

Recognizing the linkages ber,veen international and domestic policies can stan to address ll131lY 

Americans' concerns about the role of the United S1a1es in the global economy and ambivalence 

toward our engagement in rhe world. 

l ;t IP Cvnunh;~ivn (lPC). Tlu: R~VQit vftht: Cvnuu i~~ vn vn the: h~:fi vflht: Amt:l it:au 

llllellectual Propen)• (SeaNie, WA: National Bureau of Asian Research, May 20 13), 

hnp://www.ipeommission.org/reportlip _commission _repon _ 052213 .pdf. 
17 


Insert 33656A.011

Goodm3n; Written Testimony. House W3ys. & Mcaos Subcommittee on Tntdc 10111/2017 

The Asia Pacific is 1noving on1 witl1 or wid1om che United States. We need co get staned now on 

crafting a smart economic stnuegy toward this vital region. 

Thank you. 
18 


Insert 33656A.012

Comnllnce on Ways tnd i\1taas 

Witness Disclosure Requirement-'"Truth in Tescimony'' 

Requ;rcd by HOU$< Rule XI, Clause 2(1) 

VourN'ame; 

I. Are you ttstitying on bthllf o( t F'edtra.l, State. or Local (io,-emmcnt m11~ 

.. Name of mt1ry(1cs) . 

b. Briefly deKribe the. capac~l)' in whkh you reptesentthis entity. 

2 Are you tettifying on ~hal(o( any non-&Ovtmmental entity(tc:s)? 

L Name of entity(ic:s). 

c.n. ... for s.,_;c ..., lniO-iooal ~ .. 

b. Briefly descnOe the cap~t•ty in "hich you represem this tntity 

Senior advi.sct for Asiu econom•cs and William E Simon Chair 1n 

Political Economy at CSIS. 

v .. 

0 

yg 

3 Please list ~ny Federal grants or contr~e s (includil'l& subgrants Or subeontl'aett) which you have 

r.r 

No 

0 

rcceivt<l during the cun-ent fiscal year or 01ttler of the two previous fisc.al ~art lhat arc, related to the 

subject m.attcr of the hearing: 

N/A 

4, Ptcuc. hst any gru'll$., OOMriCtJ, or pe)1Mftl$ ori&:iMlnt,; fro!11 fc:nip COWfniMRU whieh you ba:\-e 

rut.ved durint the c.unmt catm4ar )'tal or e:.rher of me two preo.·JOUS c.aknd.w )UI'S d\ac ..-e rdaled to 

the subJ«l matter of the heari"'· 

N/A 

S. Please list tny offices or elected positions you hold. 

N/A 

6. Does the cntity(ies) you ~~nt. other than yoorklf, have: parent orpniutiom1 

"'bsidiar~. or partnerships )·ou are not ~ring? Yes f2j 0 

7. PI<-lost any Federal gtants « -uacu (""'lud;n& subgJ>ntS or subeontrtctS) wlucl• ,..,. -n-..1 

by &he en tit)( its) you represent dunn& the: Wtftnl ft:ttal year or either o( the two prevtous rtSCal )'Cat$. 

which tXcecd 10 perc:eot or et~tit)'(M::s) revenues in the year rec~tivtd Include the source and amount or etch arant or eontn~cl Attach a second p-a.e 1fnecessary. 

FY2018 

oepnnntcnt ot Stare· szso.ooo 
19 

f 


Insert 33656A.013

FY2017 

Depanment of State- $500,000 

8. Please list MY grants, contracts, or payments originating from foreign govem1nenrs which wete 

reorived by the entjty(ies) you rtpresl!nt during the current fiscal year Ot either of tbe cwo previous 

fiscal 

ytarS related to the $ubject matter ofthe heating. lnc:lude the-source and amount of each grant or 

contract. Attach a second page if neces5ar')'. 

FY2017 

Government of Japan · $270,000 

Government of Taiwan - $170,000 

FY2016 Government of Japan· $310,334 

Government of Taiwan · $170,000 
20 

Chairman REICHERT. Thank you Mr. Goodman. Ms. Sullivan, 

you are recognized. 

STATEMENT OF KELLEY SULLIVAN, OWNER/OPERATOR, 

SANTA ROSA RANCH 

Ms. SULLIVAN. Good afternoon. Mr. Chairman, distinguished 

members of the committee. My name is Kelley Sullivan, and I am 

a beef cattle producer. I own and operate Santa Rosa Ranch in 

Crockett, Texas, and I am here today on behalf of the National 

Cattlemen’s Beef Association, and I am honored to provide you 

with our perspective on the importance of trade with our customers 

in the Asia-Pacific region. 

As someone who personally visited our customers in July in both 

Korea and Japan, I have firsthand observations of the strong demand for U.S. beef. Over the years, exports have become critical to 

the success of the U.S. beef industry and rural economies. In 2016, 

we sold over $6.3 billion worth of beef products to other countries, 

with exports alone accounting for over $290 of value per head. We 

expect these values to increase in response to growth in foreign demand. 

Our perspective on international trade stems from a basic 

premise. If we are going to raise the cattle and produce beef, we 

need competitive access to consumers who are willing to pay for 

our products. For many years, Americans have been our primary 

focus because Americans prefer ribeyes, tenderloins, and hamburger, and are willing to pay a higher price. But other beef cuts, 

such as short ribs, tongues, and livers fetch a lower price on the 

domestic market, but actually yield great premiums in foreign markets. For this reason, we are increasingly looking beyond our borders for opportunities to maximize sales, and Asia is a prime target. 

As more Asian consumers join the middle class, they are adding 

proteins like beef to their diets. Simply put, trade allows us to capitalize on the differences in consumer preferences and capture 

value that would not exist if we sold to the domestic market alone. 

Today, the success or failure of the U.S. beef industry depends 

on our level of access to global consumers. Our top export markets 

include Japan, Korea, Mexico, Canada, Hong Kong, and Taiwan. In 

2016, 84 percent of our export sales came from these six markets. 

So you can see why we get nervous about market access being 

threatened. 

We have consistently encouraged the U.S. Government to aggressively pursue opportunities to remove tariff and nontariff barriers 

around the world. As a result, the U.S. beef industry has reaped 

the benefits of trade policies such as implementation of NAFTA 

and KORUS. Our future success hinges on our ability to avoid the 

mistakes of the past and take an aggressive nature in support of 

trade liberalization. 

We are very excited that after 14 years in exile, U.S. beef access 

has been restored to China. While previous administrations worked 

diligently to address China’s concerns and negotiate terms, it was 

the Trump administration that closed the deal and restored U.S. 

beef access to China this summer. Our negotiators worked hard to 

secure market access terms that are superior to terms of our comVerDate Sep 11 2014 08:40 Mar 07, 2019 Jkt 033656 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33656.XXX 33656
21 

petitors, and we view China as an important investment for the future of our industry. While we are excited about the opportunities 

that China holds, we are very concerned with statements from our 

government that may jeopardize our success under KORUS. Let me 

be clear, we have absolutely nothing to gain by walking away from 

KORUS. 

Despite criticism of KORUS from anti-trade groups and even 

some leaders within our government, the U.S. beef industry has 

thrived under KORUS. Korea is now our second largest export 

market, accounting for over a billion dollars in annual sales. In 

fact, annual U.S. beef sales have increased 82 percent during 

KORUS. If we dissolve KORUS, Korea will undoubtedly reinstate 

a 40 percent tariff on U.S. beef, and we will lose our competitive 

advantage over Australia and other countries. 

While Korea is our second greatest export market, Japan is the 

top export market for U.S. beef. In 2016, Japanese consumers purchased $1.5 billion worth of U.S. beef, even with a 38.5 percent tariff in place. 2017 has been a record year for U.S. beef in Japan, 

reaching nearly $1.1 billion in sales just through July. Due to that 

success, however, Japan triggered a snapback tariff of 50 percent 

on frozen beef. It went from 38.5 percent to 50 percent overnight. 

Without a free trade agreement in place, U.S. frozen beef will continue facing a 50 percent tariff until April 2018, and we could face 

this higher tariff again in future years without a trade agreement. 

In contrast, Australian beef imports are not subject to the 50 percent snapback tariff because they have a trade agreement in place 

with Japan. Instead, Australia enjoys a stable 27 percent tariff 

rate. Many U.S. beef producers are eagerly looking for a solution, 

and NCBA strongly supported the TPP because it would have lowered the tariff on U.S. beef from 38.5 percent to 9 percent in 16 

years. Remember, we are currently sitting at 50 percent because 

TPP is not in place, or some sort of bilateral agreement. 

Unfortunately, the decision to remove the United States from 

TPP puts us at a significant disadvantage. We would ask U.S. negotiators to focus on securing new market access for U.S. beef exports, starting with making up the ground we lost walking away. 

It is time for the U.S. Government to make it right and expend all 

necessary resources to secure strong market access for future generations of U.S. beef producers. Thank you. 

Chairman REICHERT. Good job on getting that all out right at 

the end. 

Ms. SULLIVAN. That was not easy for a talkative person, I will 

promise you. Thank you. 

[The prepared statement of Ms. Sullivan follows:] 

22 


Insert 33656A.014

~ '~ ""'""" "'"moo'• Beef Assoe1atlon 

Statement of Ms. Kelley Sullivan, Santa Rosa Ranch 

On behalf of the National Cattlemen's Beef Association 

Submission for the record to the 

Un~ed States House Committee on Ways and Means 

"Opportunities to Expand U.S. Trade Relationships in the Asia-Pacific Region" 

October 11, 2017 

The National Ca111emen's Beef Association (NCBA) submits the following comments regarding 

Opportu~ties to Expand U.S. Trade Relationships in the Asia-Pacific Region". Ms. Kelley Sullivan of Santa 

Rosa Ranch in Crockett. Texas, is a member of the National Cattlemen's Beef Association and will 

represent the views of the National Cattlemen's Beef Association pertaining to the economic impact of 

international trade to the U.S. beef industry. The Santa Rosa Ranch, located in southeastern Texas, is a family-owned and operated seed-stock and cow-calf operation. The Sullivan Family is from Galveston, 

Texas and has been in the beef cattle industry for over tOO years. Trade has been a fundamental part of 

the ranch since its beginning when cattle were grazed in salt grass pastures along the Coastal Bend of 

Texas and then loaded onto cattle boats at the Port of Galveston, bound for Caribbean nations such as 

a~i and Cuba. Today the cattle of the Santa Rosa Ranch produce beef that is consumed in markets 

around the wortd. 

Comments of the National Cattlemen's Beef Association Regarding the Significance of International 

Trade to the U.S. Beef IndustrY 

The National Cat11emen's Beef Association (NCBA) has represented America's cattlemen and women since 

1898, preserving the heritage and strength of the industry through education and public policy. As the 

largest and oldest national association of cattle producers, NCBA represents a diverse group of producers 

wllo deliver tOIHluality beef products to consumers in foreign marl<ets and work tirelessly to increase global 

demand for beef. NCBA appreciates the opportunity to participate in this hearing and provide testimony to 

educate members of this committee on the importance of international trade to the U.S. beef industry. 

Our perspective on international trade stems from a basic premise: If we are going to grow, raise, and 

produce beef, we need consumers wllo will eat and pay for it. U.S. consumers traditionally fill this role. and 

for many years Americans have been the primary focus for U.S. beef producers. Beef sold in the U.S. 

commands a strong rnarl<et price and serves as a staple of the American diet. From Fourth of July burgers 

to the New Y<lfk Strip, beef is synonymous with America. 

Most of our annual beef production continues to be consumed here at home, but the U.S. beef industry is 

ineteasingly looking beyond our borders fO! opportunities to grow. As consumers throughout the Asia· 

Pacific region join the middle Class, they are more willing to pay for high-quality beef. International trade allows our industry to increase our export sales and meet consumer dema_nd in fa.st-grO'Ning markets. 

Exports are critical to U.S. beef producers - and the IUral economies that depend on them - because they 

allow us to maximize the value of each carcass. 
23 


Insert 33656A.015

Americans prefer ribeyes, tenderloins, and hamburgers and are willing to pay a higher price for these cuts. 

Other beef cuts, such as short ribs, skirt steak, tongues, and liVi!rs, are viewed as less desirable and fetch 

a lower price in the domestic matl<et. However, many of the lower -priced cuts in America are preferred by 

foreign oorrsumers. Who are willing to pay much higher prices for the same cuts of beef that Americans find 

less desirable. Trade allows U.S. ptoducers to capitalize on tile differences in consumer pretereoces. 

Through exports, we capture additional value on each head of cattle - vatue that would oct exist if we sold 

to the domestic market alone. 

Today, the success or fa ure of the U.S. beef induslfY depends on our level of access to global oorrsumers. 

Our top export markets include Japan, Korea, Mexico, Canada, Hong Kong, and Taiwan. In 2016. we sold 

S6.3 billion of U.S. beef oVi!rseas, with 84 percent of our sales coming from those six markets. According to 

the U.S. Meat Export Federation, export value per head of fed slaughter averaged $290.05 in August 2017, 

up 13 percent from 2016. For U.S. beef ptoducers, we have seen a correlation between increased cattle 

ptices and increased export value. Exports are becoming more essential to our profit margin as foreign 

demand increases. 

GiVi!n the importance of trade to our industf)', we have consistently encouraged the U.S. goVi!rnment to 

aggressively pursue opportunities to remoVi! tariff and non-tariff barriers to u.s. beef exports around tile 

world. While the United States has some of the lowest import tariffs in the world, our beef exports face high 

tariffs and other ptotectionist trade barriers that hinder our aooess to oorrsumers in some matl<ets. As we 

have teamed from the North American Free Trade Agreement (NAFTA), the Korea-U.S. Free Trade 

Agreement (KORUS), and other similar pacts, trade agreements help to level the playing field lor U.S. beef 

by tearing down tariff barriers and establishing science-based standards that replace politically-motivated 

restrictions on U.S. beef exports. 

inally,~ is critical to accurately understand the role of beef imports to the U.S. industfY. Even though the 

United States is one of the top beef exponers in the WOtld, we are also one of the largest beef importers in 

the world. U.S. beef is ptimarily from cattle finished on grain in feedlots, giving our beef a marbled finish 

that consumers enjoy. Beef imported to the United Stales is primarily !rom Australia, New Zealand, and 

other countries who finish their cows on grass instead of grain. These lean beef trimmings are imported 

ptimarily lor use in tile production of commercial ground beef. ContrafY to the claims of protectionist 

groups, beef imports do not displace U.S. beef sales and are not dangerous for oorrsumption. EvefY 

country that is approved to export beef to the United States must have standardS equivalent to the rigorous 

American safety standards. 

The u.s. beef industry has reaped the benefits of effective trade policies, such as the implementation of 

NAFTAand KORUS. At the same time, we have been the victim of misguided trade policies, such as nonscience based trade restrictions and mandatO'Y counlfY·ol-origin labeling. Our future success hinges on our 

ability to avoid the mistakes of the past and take an aggressive nature in support of trade liberalization. 

Restoring U.S. Beef Access to China 

In December 2003, the U.S. beef industry suffered a massive eoorromic blow from an eVi!nt commonly 

referred to as "The Cow that Stole Chrislrnas". That was the Unfted States first and only classical case of 

Bovine spongiform encephalopathy (BSE), known as mad cow disease. that was discoVi!red in a Canadianborn dailY cow in Washington state. OVi!rnight the Unfted States lost access to our international matl<ets 

induding Japan, Korea, and China. The U.S. beef indust'Y has wotl<ed closely w~ tile U.S. goVi!mment to 

take the neoessaf)' steps to ensure this event never happens again, and as a result the United States has 

soone of the safest BSE safety standar<Js in the world. Over time, many of the oounYies who closed their 

borders to U.S. beef reopened their matl<ets albeit with arbitrafY, non-science based age restrictions on the 

cattle. EVi!n with those restrictions in place, U.S. beef exports have soared in Japan and Korea. MOle 

recently, after 13 years, China lifted its ban on U.S. beef and restored market access for U.S. producers. 
24 


Insert 33656A.016

RestOfing access to China nas been a priority lor lhe U.S. beef industry(()( over a decade. While previous 

administrations worked diligently to address China's concerns and negotiate terms of aooess, it was the 

Trump Administration that dosed the deal and restored U.S. beef aco:ess to China this summer. 

U.S. negotiators worked hard to secure market aooess terms tllat are superior to tenms of our competitors 

in China. For example, China has agreed not to close its market to U.S. beef if we nave another BSE case, 

unless lhe Wortd Organization lor Animal Health changes our safety designation status-<lnd that is not 

something the industry will allow. China also recognizes the equivalence of our food safety systems, so lhat 

it will be United States Oepa~ment or Agriculture (USDA) that determines which packing plants are er~g ble 

to export to China instead of China approving individual plants. Chinese approval of packing plants is 

required of our competitors like Canada, Brazil, and Australia. China also agreed to allow a broad range of 

U.S. beef cuts (both kesh and frozen, bone-in and boneless) along with numerous offal cuts (liver, hearts, 

tongue. etc.). 

Unfortunately, China does place some significant restrictions on U.S. beef that will make it difficult lor us to 

capitalize on this market fOf a few years. Specifically, China has two laws tllat ban the use of certain 

technologies that are deemed safe in the Unijed States (and most of the wortd) and are commonly used in 

beef production. The first banned technology is ractopamine, a beta agonist used to promote leanness in 

meat. Ractopamine is fed to cattle (steers and market heifers) in feedlots during the last 28 to 42 days of 

the finishing period to safely increase carcass gain. feed efficiency and carcass leanness while maintaining 

beefs natural taste, tenderness and juiciness. The Codex Commission, the international food safety 

standards-setting body as recognized in the WT0-5PS Agreement, nas established a set of Maximum 

Residue Levels (MRLs) for veterinary drugs widely aco;epted in international trade. In 2012 Codex adopted 

standards lor maximum residue levels fOf ractopamine- standards tllat have been recognized in many 

countries. Regardless, China has a law that bans the use of this technology lor both domestic production 

and for impo~ed products. If any U.S. beef shipments to China test positive for ractopamine the shipment 

will be returned. 

China also bans the use of hormones in domestically-produced beef and in beef imports. While beta 

agonists are used at the feedlot level, honmones are more commonly used at the cow-calf and stod<er 

levels to help add weight The U.S. industry has used this safe technology lor decades, and non-science 

based resltictions on the use of honmones have been ruled illegal by the Wortd Trade Organization (WTO) 

(see WTO Case DS26 · European COfnmunities - Measures Concerning Meat and Meat Products 

(Honmones). Nonetheless, as part of the pcotoco:l with China, any shipments that test posmve lor synthetic 

hormones and naturally-based honmones will be returned. 

These COfnbined restrictions mean that only a small number of cattle in the U.S. beef herd will be eligible 

lor the Chinese market in the first lew years. In fact, ft may ta.ke roughly two to three years to convert a 

cattle operation to comply with these restrictions. But we anticipate tllat more producers will start to 

produce lor lhe Chinese market once demand for U.S. beef is firmly established. 

China represents a population of nearty 1.4 billion people and is quickly becoming the largest beef importer 

in the world. For example, in 2011 China imported 27,000 metric tons of beef, and that volume increased to 

600,000 metric tons in 2016. Today, most of the beef imported to China is kOfn grass-finished cattle kom 

Australia, New Zealand, Braz~ . and Uruguay, ,vfth only 5 percent of beef importS from grain-finished beef 

kom Australia and Canada. The U.S. Meat Export Federation estimates that our sales will reach $300 

million annually in the first five years. We look loiWard to growing this market and becoming a leading 

souroe of beef for China. 

KORUS: The Success Sto for U.S. Beef 

The relationship between Korean consumers and U.S. beef has not always been positive. In June 2008, 

hundreds of thousands of protestors took to the streets of downtown Seo!A to hold a candle ight protest 
25 


Insert 33656A.017

against the Korean government's decision to restore U.S. beef access. Korean consumers did not trust the 

safety of U.S. beef and harbored coocems about SSE. The U.S. beef industry invested heavily in restoring 

consumer trust in Korea, and in less than ten years Korea has become a $1 billion market for U.S. beef. 

Accolding to the U.S. Meat Export Federation, in 2016 we sotd neatly $1.1 billion of U.S. beef to Korean 

consumers and in the first six months of 2017 our sales totaled $528 million, an increase of 21 percent. 

Korea has been an excellent expolt market for U.S. beef short ribs, tongues, and other cuts that Americans 

find less desirable but Koreans are willing to purchase at a premium. 

Despite criticism of KORUS from anti-trade groups and even some leaders within our govemmen~ the U.S. 

beef industry has thrived under the terms of the agreement Korea is now our second largest export market 

and annual u.s. beef sales have increased 82 percent. This increase -representing nea~y $500 million in 

add~ional sales - is a direcl result of our tariff rate decteases. Starting from 40 percent the year the 

agreement was signed, the tariff rate deaeases about2.7% each year, event\lally reaching zero in 2027. 

The Un~ed States' aggressive pursuit of KORUS secured preferential access for U.S. beef nearly two years 

before our leading competitor in the Korean market, Australia, signed their own free trade agreement As a 

result, U.S. beef enjoys an eight percent tariff rate advantage over the Australians. This adVantage, 

combined with market demand for U.S. beef, resulted in the United States becoming the leading import 

source for beef in Korea in 2016. We expecl the trend to grow as Korean demand for U.S. beef increases. 

For example, earlier this year Costco announced that ~ is replacing all Australian-sourced fresh beef with 

freSh U.S. beef in its Korea-based stores. This is very exciting news because it will add upwards of 15,000 

metric tons of fresh U.S. beef sales. 

The rumors of possible withdrawal from KORUS over the Labor Day weekend stirred an immediate and 

negative reaction from U.S. beef producers across the country. We have absolutely nothing to gain by 

walking away from KORUS. U.S. beef has a competitive advantage in Korea, a market that now represents 

over $1 billion in annual sales. If we dissolve KORU$, Korea will undoubtedly reinstate a 40 percent tariff 

oo U.S. beef. 

Japan: Top Export Market for U.S. Beef...for Now 

Japan is the top export market for U.S. beef exports. In 2016, Japanese consumers purchased $1.5 billion 

of U.S. beef products, even with a 38.5 percent tariff in place. Due to the prolonged drought and herd 

shortage in Australia, U.S. beef sales have skyrocketed in 2017, reaching nearly$1.1 billion in sales just 

through July. Unfort\lnately, our resounding success in Japan triggered a •snapback• tariff of 50 percent on 

frozen beef. Without a free trade agreement in place, U.S. frozen beef will face the 50 percent tariff through 

March 31 ,2018, and we could face this higher tariff again in futtMe years if the s~alion is repeated. 

Uke in Korea, Australia is our leading competitor in Japan. Together our two countries aoooont for 90 

percent of all imports ol frozen beef. which is mostly used by beef bowl. hamburger and other last food 

outlets. However, in Japan, our relative market access positions are reversed. Since Australia already has 

a trade agreement in place with Japan, Australian beef imports are not subjeclto the 50 percent snapback 

tariff. Instead, Australia enjoys a stable 27 percent tariff rate. Some analysts predict that the continued high 

price of Australian beef will help U.S. beef remain competitive in the short term, but we are concerned 

about the long-term implications once our luck runs out and the Australian herd recovers. 

Many U.S. beef producers are eagerly looking for a solution. NCBA strongly supported the Trans-Pacific 

Partnership (TPP) because it would have lowered our $landard Ia riff from 38.5 peroent to 9 peroent in t 6 

years. Analysis by the United States International Trade Commission coocluded that beef exports to TFP 

countries would grow by $876 million per year by the end of the transition period, and that most of that 

growih would be in trade to Japan. TPP would have also lowered the snapback tariff and increased the 

volume amount necessary to trigger the safeguard. 
26 


Insert 33656A.018

Unfortunately, President Trump made the decision to remove the United States from the TPP and pursue 

bilateral agreements instead. Aooording to Reuters, on August 2, Japan's Finance Minister Taro Aso was 

asked about the safeguard frozen beef tariff and said: "This measure would be abolished if the TPP were 

implemented, but it remains because the U.S. withdrew from TPP." We hope that Vioe President Penoe 

may be able to help us find a short·term solution at the upcoming roond of the Japan- U.S. Economic 

Dialogue. Either way, we need a tong·term solution in the fonm of a bilateral trade agreement that meets or 

exceeds the terms of TPP. 

Japan is moving forward with negotiations with our competitors. Recently, Japan and the European Union 

announced they are close to finalizing terms of a trade agreement. The Japanese have stated they are 

willing to give the European Union beef producers similar terms to those negotiated in TPP. Canada and 

New Zealand are also pursuing trade agreements with Japan. How will U.S. beef remain competitiVe in the 

long run il our competitors have preferential tariff treatment? 

45% 

40% 

35% 

?:30% 

.5 25% 1: 

&. 20% E 

- 15% 

10% 

5% 

0% 

Conclusion 

Japan Beef Import Duties 

-u.s. and all other suppliers 

-Aussie frozen beef 

-Aussie chilled beef 

- TPP- chilled & frozen beef 

While we are extremely grateful to the Trump Administration and oor supporters on Capitol Hill who worked 

hard to restore U.S. beef aocess to China, we are extremely conoemed that prolonged NAFTA negotiations 

and withdrawal/modifications to KORUS will pose unnecessary setbacks for the U.S. beef industry. tn these 

cases. we stand to lose more than we stand to gain. Our ardent desire is for U.S. negotiators to focus on 

securing new market acoess for U.S. beef exports, starting with making up the ground we lost by walking 

away from TPP. We need President Trump to deliver on the promise of a better deal with Japan, V~etnam, 

Malaysia, and the other TPP countries thclt are vital to the long-term success of the U.S. beef industry. 

There is no question that the political rhetoric of the previous election poisoned the well for TPP, with 

negative consequences for U.S. beef producers and rural economies. It is time for the U.S. government to 

make it right and expend all necessary resources to secure Asia· Pacific markets for future generations of 

U.S. beef producers. 
27 

f 


Insert 33656A.019

Your Name: 

Committee on Ways and Mc~ .s 

Wi1ness Disclosure Require.nem- "Truth in Testimony" 

cquin.-d b)' I louse Rule XI, Clause 2(g) 

1. Art )'OU 1C$tifying on behalf of a Federal. State. or Local Go,emment e1Uit)? 

a. Name of emit)'(ies). 

b. BrieOy describe the capacity in whic-h you repl'tsent this entity. 

2. Are )'OU testifying on bchalrofan) non·govert~me-ntal cntity(ies)? 

a. N:uuc of cntity(k"$). 

National Cmdemen's Beef Associa1ioo ~CBA) 

b. Urict1y deS(ribe the capacity in which )'OU represent this entity. 

I nm a NCBA member and volunteer. 

Yes No 

0 X 

Yes No 

X 0 

3. Pleast list any Federal grants or eont.Nlcts (including subg.rants Or subcont1"3Cts) whtch )'OU have 

rcceiv(-d during the cumm fiscal year or either ar the two pn:,•ious fiscal ycal'$ that are related to the 

subjtct maner of the hearing: 

N'one 

4. Please list an) grants. contracts.. or p.'\)'nlCnts orig.•nating from foreign go,c.mme.ns '~hich you have 

received d\lring the current calendar year or either of the two Prt'' ious calendar ye3tS duu are related to 

th~ subject matter oft~ he::.ring: 

None 

.S. Please list a11y oOiees or elected positions you hold. 

Bo3td of Directors. Te-xas Beef Council~ Ro.'l.rd of Oirecton.. Texas and Southwestern Canl<:raisers 

Association. Uo\\cvcr.lam not rcpresC".nting these organizations. 

6. Does lhe e:oti1)'{ics) )'01.1 represent. other than )Ou.rstlf. have parent orgnni}!ations. 

subsidiaries. or pannmhips you are not re-prese-nting? Yes No 

0 X 

7. Please list any Federal grants or contracts (including s"bgrants or subcontracts) which "ere rt<:eived 

by the entity(ies) )'OU represent during the current fiscal )-c.'"Ar or either of the two previous. r.scal years. 

which e.xceed I 0 percem of entit)'(ics) rc,•cnucs in the >ear r«"ei,ed. Include the source and amount of 

e.ach grant or contract. Attach., second page ifntcc:~sar) . 

None 

S. Please list an) grants, <:on tracts. or pa)ments origi1,atin.g from fOfcign govc:mmcnl.!t '~hich were 

received by the entiry(ies) )OU represc.m durina the current fiscal )Car or dthe.r of the two previous fiscal 

years related lo the su~t mattcrofthehearinv.. Include the source and runoum oft:ach t:mnt or 

contmct. Anach a second page if neeess.'lry, None 
28 

Chairman REICHERT. Ambassador Marantis, you are recognized. 

STATEMENT OF DEMETRIOS MARANTIS, SENIOR VICE PRESIDENT AND HEAD OF GLOBAL GOVERNMENT RELATIONS, 

VISA INC. 

Mr. MARANTIS. Thank you. Chairman Reichert, Ranking Member Pascrell, distinguished members of this committee, it is really 

nice to be here. And thank you very much for inviting me to testify 

on behalf of Visa about the importance of Asia-Pacific trade to U.S. 

jobs and exports. 

I spent a career working on these issues as a congressional staffer, at USTR, and now in the private sector. And it is always an 

honor to testify before this committee. 

For almost 60 years, Visa has facilitated the growth of commerce 

through electronic payment services technology. Today, we connect 

more than 3 billion Visa cards and millions of merchants globally. 

We are a major U.S. exporter, operate in more than 200 countries 

and territories around the world, and employ thousands of high 

skilled workers across the United States. To grow our business and 

extend the benefits of digital commerce globally, we need open markets and the ability to compete on a level playing field internationally. 

The global leadership role of the U.S. payments industry and the 

well-being of our workers and their families and our customers depends on it. Worldwide, there are tremendous opportunities to 

strengthen economies through increased use of electronic payments. A Visa-commissioned report released this morning projects 

that increasing digital payments in 100 international cities could 

produce annual net benefits of $470 billion through greater efficiencies, cost savings, and expanded commerce. 

Visa also estimates that Asia-Pacific economies stand to gain more than $6 trillion by shifting from cash and checks towards 

credit, debit, or prepaid forms of digital payments. Exciting things 

are happening throughout the Asia-Pacific region. Australia has 

one of the world’s highest rates of contactless transactions. China 

has become a world leader in mobile payments. And in India, the 

volume of digital payments increased dramatically since Prime 

Minister Modi removed 86 percent of bank notes from circulation 

last November. 

In the months that followed, Visa, together with the Indian Government, and other key stakeholders, introduced an interoperable 

low cost acceptance solution to accelerate the transition to electronic payments. However, there are still significant challenges in 

the region. In many countries, trade barriers and regulatory discrimination distort the market. My written testimony describes 

challenges facing U.S. payment companies in China, where Visa recently submitted an application for a license to begin operating in 

the domestic market, and Korea, where strong regulatory preference for local brands tilts the playing field. 

But the most urgent challenge we now face is in Vietnam, where 

U.S. electronic payment suppliers are on the brink of being forced 

out of the domestic market. We are grateful for the strong bipartisan leadership from this committee, including Chairman Reichert 

29 

and Ranking Member Pascrell in highlighting concerns with Circular 19, a regulation issued by the State Bank of Vietnam, that 

grants a de facto monopoly on domestic payment processing to the 

state-owned National Payments Corporation, known as NAPAS. 

Despite grave concern raised by the current and former administration, as well as dialogue between governments and industry, 

NAPAS is charging ahead and pressuring banks to prepare to process all transactions, including those of Visa and Mastercard, over 

its network. This fundamentally threatens the ability of U.S. payment companies to continue operating in Vietnam. To ensure a 

level playing field for U.S. electronic payment suppliers, such blatant discriminatory treatment should not be allowed to occur in 

Vietnam or elsewhere in the region. As APEC chair this year, Vietnam should instead be a champion of fair and open trade. Given 

the consistent message from Congress and the administration on 

this issue, we remain hopeful that the Vietnamese Government will 

suspend and revise Circular 19 before President Trump’s visit to 

Vietnam for the APEC leaders meeting next month. 

Achieving a positive outcome in Vietnam will send an important 

signal about the beneficial effects of sustaining open and fair trade 

across the region. 

In that spirit, we look forward to working with the committee to 

strengthen trade relationships throughout the Asia-Pacific, and to 

help further expand U.S. exports in support of Visa’s workers and 

their families in communities across the country. Thank you. 

[The prepared statement of Mr. Marantis follows:] 

30 


Insert 33656A.020

Statement of 

Ambassador Oemetrios Marantis 

Senior Vice President and Head of Global Government Relations 

Visa Inc. 

House Ways and Means 

Subcommittee on Trade 

Hearing on 

Opportunities to Expand U.S. Trade 

Relationships in the Asia-Pacific Region 

October 11, 2017 
31 


Insert 33656A.021

Chairman Reichert, Ranking Member Pascrell, distinguished members of the 

Subcommittee, my name is Oemetrios Marantis, Senior Vice President and Head of 

Global Government Relations for Visa Inc. Thank you for inviting me to speak about the 

importance of Asia-Pacific trade to U.S. jobs and exports. 1 have spent most of my 

career on this topic- as a congressional staffer, then a USTR official, and now in the 

private sector. It is always an honor to testify before this Subcommittee, which has 

demonstrated tremendous leadership on many issues important to those whose 

livelihoods are impacted by international trade. 

For almost 60 years, Visa has facilitated the growth of global commerce through 

electronic payment services (EPS) technology. Visa is not a bank, and does not issue 

cards, extend credit or set rates and fees for account holders on Visa-branded cards 

and payment products. Rather, we connect more than 3 billion Visa cards and millions 

of merchant locations worldwide through a global network of approximately 16,300 

financial institution partners and Visa Net, one of the world's most secure, reliable and 

interoperable global payment networks. Today, VisaNet processes more than 160 

billion transactions a year, and we are continually developing advanced analytics and 

fraud detection technology to ensure consumers and businesses can transact 

seamlessly and securely, with trust and confidence. 

Visa is a major U.S. exporter, operates in more than 200 countries and territories, 

and employs thousands of talented people -primarily in high-skill positions -across the 

United States. To grow our business, and extend digital commerce to parts of the world 

previously excluded from its many benefits - we need free trade, open markets, and the 

ability to compete on a level playing field internationally just as we do in the United 

States. The world-leading role of the U.S. payments industry- and the well-being of 

our workers, their families, and our customers - depends on it. 

Worldwide, there are tremendous opportunities to help economies thrive through 

the inc.-eased use of electronic payments. A Visa-commissioned report released today 

projects that increasing digital payments adoption in 100 cities around the world could 

result in net benefits of $470 billion, which takes into account time-savings for 

consumers, inc.-eased sales revenues, and more efficient revenue collection. Visa also 
32 


Insert 33656A.022

estimates that Asia-Pacific economies stand to gain more than $6 trillion by shifting from 

cash and checks toward credit, debit, or prepaid forms of digital payment'. For 

example, in India, the volume of digital payments increased dramatically when Prime 

Minister Modi removed 86 percent of bank notes from circulation2_ In the months that 

followed, Visa was proud to work with the Indian Government and other domestic and 

international payment networks to introduce Bharat-QR3 or, as translated "India QR"-

an interoperable and low-cost acceptance solution to help accelerate India's transition 

to electronic payments. 

Visa is working across the Asia-Pacific region to help bring state-of-the-art 

payment security and innovation to as many people as possible. In emerging markets 

such as Myanmar, Visa partners with governments, financial institutions, and merchants 

to enable electronic payments and bring unbanked populations into the formal financial 

system. In maturing markets such as Thailand, Visa has facilitated the adoption of QR 

code (Quick Response barcode) payment standards that will allow more small- and 

medium-sized enterprises - engines of economic growth - to accept electronic 

payments. 

Several Asia-Pacific markets are highly advanced in certain key payment 

categories. For example. Australia has one of the highest rates of contacttess 

transactions in the wor1d4; China has pioneered popular new forms of mobile paymentS; 

and South Korea has the highest overall rate of payment card usage gtobally6. Visa's 

new Innovation Center in Singapore is a key hub for our collaborative work with 

governments, clients, and partners in all of these areas, as we seek to leverage Visa's 

1 Vis. analysis of data from Oxford EconomiC$, The Nilson Report, Euromonitor, Haver Analytics, The Sank of 

Thailand, Reserve Sank of Australia, federal Reserve, and Statistics New Zealand. Available at 

htto•!Jst g4cdn comiQS()6Q§§Sl{files/doc prtsentationsnopnnyestot/291? Investor Pay CLARK web edt 

) Martin Wolf. "'lndJa's Bold El(J)triment with tash.• The Flnandal Times. febru.ary 21, 2017. 

httos://www.ftcom/content/e3f2aaas.fnd-lle6-bd4e-.QdS3499ed71 1 Visa website. *About Bharat QR·mVfsa:" https://www.visa.eo.in/pay·with·visa/featured· 

technolosies/m'lisa/about·mvisa.html 

" Vis.a analysis of Visa Net data for Australia:. 

~ "Th• Rise of Chi ~ S:lnT~t\." GoldM•n S.a<:hs GtouJ), II\C., 2017. 

' A.ocording to the Korea Crtdit Finance Association {CAEFIA)'s data, payment card penetration Is approximatety 88 

percent. CREFIA's figure is based on private sector card spend and prWate consumption expenditure. 
33 


Insert 33656A.023

open Application Program Interfaces (APis) and develop scalable solutions for the AsiaPacific region. 

Despite the tremendous capacity for growth and change across the Asia-Pacific, 

in many of these markets, there are still steep challenges to fulfilling the potential of 

electronic payments to drive economic growth and financial inclusion. Foremost among 

the obstacles is the lack of a level playing field for payment providers, which is often due 

to trade barriers and other forms of regulatory discrimination. In several cases, U.S. 

trade policy tools have played a critical role in helping to address market access and 

other discriminatory trade barriers facing U.S. EPS suppliers. For illustrative purposes, I 

will highlight three examples from Vietnam, China, and South Korea. 

Vietnam is the most urgent. A rapidly deteriorating situation now threatens to 

shut U.S. companies out of the domestic electronic payments processing market. We 

are grateful for the strong bipartisan support from members of the Ways & Means 

Committee, including efforts from Chairman Reichert and Ranking Member Pascrell, for 

their leadership in highlighting concerns with Circular 19. For those unfamiliar with 

Circular 19, it is a regulation written by the State Bank of Vietnam (SBV) that grants a 

de facto monopoly on domestic payment processing to the state-owned National 

Payments Corporation of Vietnam (known as NAP AS). The Office of the U.S. Trade 

Representative and both the current and previous Administrations have raised this issue 

repeatedly with the Vietnamese government. Despite substantial dialogue between 

both governments and industry, state-owned NAP AS is now pressuring Vietnamese 

banks and sending them written instructions to prepare for processing all domestic 

transactions, including Visa and Mastercard-branded payment cards, over the NAP AS 

network. If implemented, this regulation will fundamentally threaten the ability of U.S. 

payments companies to operate in Vietnam. 

Establishing NAP AS as the sole connection point between all banks and any 

other payment network would skew the playing field. It would reduoe the speed, 

security, and reliability of services that U.S. EPS suppliers can currently provide to their 

customers in Vietnam. It would disrupt longstanding eAisting commercial relationships. 
34 


Insert 33656A.024

And, it would create a single point of failure that would dramatically increase 

cybersecurily risk. 

More broadly, giving NAP AS an advantage over U.S. companies that have done 

business in Vietnam for many years sends a negative signal about Vietnam's 

commitment to open and fair trade with the United States. These actions would also 

appear to run contrary to Vietnam's vision to privatize state-owned enterprises, 

introduce more competition in the market, and further integrate Vietnam with the global 

economy. 

To ensure a level playing field for U.S. EPS suppliers, such blatant discriminatory 

treatment should not be allowed to occur in Vietnam or elsewhere in the region. As 

APEC Chair this year, Vietnam should be a champion for fair and open trade, not 

shutting established suppliers out of ils market. Given the consistent message from 

both Congress and the Administration, we remain hopeful that the SBV will act to 

suspend and revise Circular 19 before President Trump's upcoming visit to Vietnam for 

the APEC Leaders Meeting in early November. 

In China, Visa has been operating since 1979 but is limited to processing cross 

border transactions. In other words, unlike its Chinese competitor, China UnionPay, 

U.S. EPS suppliers cannot process domestic transactions. The United States 

government challenged China's restrictions on foreign suppliers processing domestic 

payments and won a World Trade Organization (WTO) case in 2012. After the WTO 

decision, both Congress and the Administration maintained a focus on China fulfilling its 

WTO obligations, and in 2015, China created a licensing process to open up the 

domestic market. 

This year, the Administration placed EPS domestic market opening at the top of 

the U.S.·China bilateral trade agenda. As part of the 100-Day Action Plan following 

President Trump and President X.i's first meeting in April, China affirmed its 

commitment: "By July 16, 2017, to issue any further necessary guidelines and allow 

wholly U.S. -owned suppliers of EPS to begin the licensing process. This should lead to 

full and prompt market access.• 
35 


Insert 33656A.025

With appreciation for the joint efforts of both governments to open China's 

domestic EPS marilet, Visa was pleased to submit a bank card clearing institution 

(BCCI) license application to the People's Bank of China (PBOC) in July 2017. Our 

application is currently with the PBOC. We look forward to consideration of our 

application in line with the Chinese Government's public commitments to market 

opening and the guidelines for BCCI applicants. Looking ahead, we would also 

appreciate more transparency and a time-bound process for any National Security 

Review of our application, if one is required. 

South Korea is an important marilet for U.S. EPS suppliers as it has the world's 

highest rate of payment card usage. For many years, Visa has worked with our local 

Korean clients and partners to offer the latest in payment technology and value-added 

services. However, since 2008, Korean financial authorities have required Korean 

financial institutions issuing payment cards to offer and operate a local brand card 

product (for use only in Korea) with identical benefits/services for each U.S. brand card 

product (such as Visa or Mastercard) introduced in Korea. For example, if a U.S. e<edit 

card brand partners with a hotel chain or airline company to offer a reward card, a 

comparable local card must also be offered. In addition, regulators have mandated that 

the annual fee for domestic cards for cardholders must be less than that for foreign 

brand cards. Following introduction of these provisions, the market position of U.S. card 

brands in Korea dropped sharply and has kept falling as local brand cards are being 

issued increasingly more than foreign brand cards. 

The U.S.-Korea Free Trade Agreement (KORUS) has been a useful tool to 

address level playing field concerns related to regulatory discrimination against U.S. 

EPS suppliers in South Korea. In 2014, South Korean financial regulators suspended a 

policy that would have dramatically reduced the ability of U.S. EPS suppliers to compete 

after the U.S. government brought concerns to the attention of the Korean government 

through the KORUS Financial Services Committee. Unfortunately, despite this 

constructive dialogue, the government preference for domestic over U.S. payment card 

network$ put3 companie3 like Visa at a competitive di3edvantage. 
36 


Insert 33656A.026

Concerns about regulatory discrimination against U.S. EPS suppliers have been 

raised in the Office of U.S. Trade Representative's National Trade Estimate (NTE) 

report for the past several years and it remains a top priority on the bilateral trade 

agenda. Restoring the ability for U.S. EPS suppliers to offer creative card products on 

market-based terms would help level the playing field and enhance the potential for 

increasing U.S. exports of EPS to South Korea. 

Beyond Vietnam, China, and South Korea, the U.S. EPS industry faces level playing 

field challenges in other large and growing markets such as Indonesia, Thailand, and 

Bangladesh that are similar in nature to those mentioned above. 

1 hope this testimony helps to illustrate the tremendous opportunities in the AsiaPacific region, and the need to overcome challenges with the partnership of Congress 

and the Administration. Similarly, I hope that achieving a positive outcome for U.S. 

electronic payment service suppliers in Vietnam will send an important signal about the 

beneficial effects of sustaining free and fair trade across the region. We look forward to 

working with the Committee to strengthen trade relationships throughout Asia-Pacific, 

and to help further expand U.S. exports of electronic payment services in support of 

Visa workers and their families in communities across the country. Thank you. 
37 

f 


Insert 33656A.027

Committee on \Vays and Means 

Witness Disclosure Rcquircmcm- "Truth in Testimony,. 

Rcquirod by House Rule XI, Clause: 2(g) 

Your Name: Ocmctrios Jnmcs Marantis 

I. Arc you testifying on behalf of a Federal. State. or l..ocal Government entity? 

a. N3me of cntity(ies). 

b. Bri~fly describe the capacity in which you represent this entity. 

2. Are you testifying on behalf of any non-&oovcmmcnt.al cntity(ies)? 

a. Name of cntily(ics). 

Visa Inc. 

b. Briefly dcS<:ribc the c;-cpatity in which you represent this entity. 

Senior Vice President, Head of Global Govcnunent Rclatjons 

Yes 0No 

. 

Yes No 

• 0 

3. Please list ::my Fcdcr:tl grams or contracts (including subgrants or subcontracts) which you have 

r«:civcd during the current fis.eal year or cithe,r of the C\llO previous fisc-al yc.\1'$ that are rel;ucd to the 

subject matter of the hearing: 

NIA 

4. Please list any grants, comracts. or payments originating f'rom foreign go\'enuncms which you have 

tC<:cived duting the cun-cnt C3lend3r ye3r or either ofdle rwo previous calendat years that arc related to 

the subject maner of the hearing: 

Vis:s has not been the reC-ipiem of any signifieam grants: or other payme1lts rel:ued to regulatory issues 

and trade from Governments in Asia Pacific. 

5. Ple-ase lis:t any oflkes or elec-ted pOSitions you hold. 

None 

6. Docs the ent'ity(ics) you represent. other than yoursclf, have parent organi;utions. 

subsidiaries, or pa.nncrships you are not representing? 0Yes No 

. 7. Please list any federal grants or contrncts (including subgr:mts or subeoncracts) which were received 

by 1he entity(ics) you represent during a he current fiscal year or e-ither of1he two previous fiscal yenrs, 

which exceed 10 percent of c.Juity(ies) fC\'C-nues in the year received. h~clude the source and amount of 

c.ach &r.'nt orcontrae.t. Attach:.. SCQOnd page ifncecssary. 

NIA 
38 

Chairman REICHERT. Thank you. Ms. Moreland, welcome. 

STATEMENT OF STEFANIE MORELAND, DIRECTOR OF GOVERNMENT RELATIONS AND SEAFOOD SUSTAINABILITY, TRIDENT SEAFOODS INC. 

Ms. MORELAND. Thank you. Chairman Reichert and Ranking 

Member Pascrell, on behalf of Trident Seafoods, I thank you for 

convening today’s hearing. Trident is one of the largest vertically 

integrated seafood companies in North America, headquartered in 

Washington. We own and operate a dozen facilities in coastal Alaska, and a fleet of modern harvesting and at-sea processing vessels 

that fish and process within U.S. waters of the Bering Sea and off 

the coast of the Pacific Northwest. 

These platforms, in combination with an independent fisherman 

fleet that we partner with, harvest and process hundreds of millions of pounds of U.S. seafood. Trident has value-added reprocessing facilities in the State of Washington, Minnesota, and Georgia, 

as well as overseas in Japan, China, and Germany. 

We employ approximately 8,000 men and women in the U.S. during peak production. We sell finished seafood products directly to 

restaurants, distributors, and retail, primarily throughout North 

America, Asia, and Europe. It is often reported that as much as 85 

percent of seafood that is consumed in the U.S. is imported, and 

that the United States runs a significant seafood trade deficit. 

What is less reported is U.S. seafood producers export over $5 billion worth of seafood products annually, or approximately twothirds of the U.S. seafood production by volume. Our industry can 

only thrive with strong export markets, particularly in the Pacific 

and northwest, where 80 percent of all seafood exports originate. 

Asia-Pacific markets, specifically China, Japan, and Korea, are 

critically important. In 2015, U.S. seafood exports to those nations 

accounted for about half of all U.S. seafood exports. As with other 

export-dependent sectors, years of a strong U.S. dollar negatively 

impacted our ability to sell products abroad in countries with relatively weaker currencies. At home, low cost imports undercut U.S. 

seafood products. Both resulted in the global seafood market depressing prices. 

In addition, we increasingly compete in a global market against 

foreign producers that have very low labor costs and much less rigorous fisheries management, air and water quality, and food safety 

standards. That said, Trident supports a free market approach to 

trade over a protectionist approach. We cannot afford retaliatory 

market restrictions that could result in reaction to protectionist 

U.S. trade policy. However, more needs to be done to create a level 

playing field to ensure U.S. seafood producers remain competitive 

in the U.S. and in important export markets. 

My testimony covers the promising market growth in China and 

Korea, remaining competitive in the Japanese market, and challenges we face from Russia far east seafood producers. Regarding 

U.S.-China trade policy, China produces most of the seafood in the 

world, and is the largest seafood exporting Nation globally. However, China is also one of the largest seafood importing nations. 

China’s seafood imports are projected to rise to 10 million tons 

by 2020. Rapid expansion of the Chinese domestic market makes 

39 

it the largest growth opportunity for U.S. seafood products. We 

could substantially increase U.S. seafood exports to China if U.S. 

trade negotiators could reduce or eliminate stiff tariffs and valueadded tax rates on U.S. seafood exports for consumption in China, 

currently at 23 percent for many of our products. 

Regarding U.S.-Japan trade policy, the Trans-Pacific Partnership 

contained favorable terms for U.S. seafood exports to Japan. We 

urge U.S. trade officials to continue to negotiate the favorable TPP 

provisions. 

Trident, along with other U.S. seafood producers, were looking 

forward to significant benefits from TPP, including elimination of 

Japanese tariffs on some of the most abundant U.S. resource and 

product forms. TPP tariff reductions would have improved the U.S. 

industry’s position in relation to non-TPP-covered Russian products, and could have created important new market opportunities. 

U.S. and South Korea trade policy. U.S. seafood exports to South 

Korea markets have increased by 20 percent since implementation 

of the U.S.-Korea Free Trade Agreement. Withdrawing from that 

agreement would erase positive gains already achieved and prevent 

future negotiated gains from coming into effect. 

Before the free trade agreement, Alaska pollock was subject to a 

30 percent import tariff in South Korea. And this was a critical 

barrier to entry, particularly with Russian pollock imported into 

South Korea at virtually duty free level. Since implementation of 

a tariff-reduced quota under the free trade agreement, awareness 

and availability of Alaska pollock quickly spread. The quota is now 

insufficient. We urge U.S. trade negotiators to pursue a substantial 

increase in the quota for Alaska pollock under the free trade agreement. 

Regarding U.S.-Russia policy, American seafood producers compete directly in Chinese, Japanese, and South Korean markets, as 

well as the U.S. As stated in my written testimony, we really urge 

equity access to that market. In closing, I am grateful for the opportunity to share Trident’s input, and applaud you for your efforts 

to examine opportunities and challenges related to Asia-Pacific 

trade policy. 

[The prepared statement of Ms. Moreland follows:] 

40 


Insert 33656A.028

U.S. House Ways and Means Committee 

Trade Subcommittee 

Hearing on 

Opportunities co Expand U.S. Trade Relationships in the Asia-Pacific Region 

Wednesday, October I I, 2017 

Testimony of 

Stefanie Moreland, Director ofGovemment Relations and Seafood Sustainability 

Trident Seafoods Corporation 

Chainnan Reichert and Ranking Member Pascrell, on behalf of Trident Seafoods, lchattk 

you for convening Coday's hearing on oppornonities and challenges for U.S. trade relationships in 

the Asia·Pacific Region. My name is Stefanie Moreland, and 1 serve as the Director of 

Government Relations and Seafood Sustainability for Trident Trident is the largest vertically 

integrated, privately held seafood company in North America, headquartered in Seattle, 

Washington. Trident owns and operates more than a dozen shore-based seafood processing 

facilities in remote fishing communities across coastal Alaska, as well as, a fleet of modern 

harvesting and ac-sea processing vessels thac fish and process within the U.S. 200·mile zone in 

the Bering Sea and off the coast of the Pacific Northwest. These platforms harvest and process 

hundreds of millions of pounds of U.S. seafood that ship directly to, or are reprocessed for 

distribution to markets in more than 50 countries. 

Tridem bas value·added reprooessing facilities and research and produce development 

i_rulovation centers in Washington State, Mioneso1a, and Georgia, as well as overseas in Japan, 

China, and Gennany. Trident employees nearly I 0,000 people globally during peak production, 

approximately 8,000 me-n and women in the U.S. 
41 


Insert 33656A.029

Trident purchases and takes delivery of fish from hundreds of independent fishennen, 

mostly small businesses, and sells finished seafood products directly to restaurants. distributors. 

club stores, retail, and food service throughout North America, Asia, and Europe. 

Two important new market opponunities for Trident are China and South Korea. ln my 

testimony, I will address challenges and opporn.nities related to trade policy for each of these 

two markets, and touch on overall prioriry trade issues in the Asia·Pacific Region. 

It i.s often reponed that as much as 85% of seafood consumed in the U.S. is imponed and 

that the U.S. nms a e~food trade deficit of nearly Sl4 billion. To oversimplify, Americans like 

to eat shrimp, and we don't produce nearly enough domestically to meet consumer demand. 

Fanned salmon, tilapia. and pangasius also contribute to the U.S. seafood deficit. What is less 

often reported is that U.S. seafood producers export over $5 billion worth of seafood products 

annually, representing approximately two-thirds of U.S. seafood production, by volume. The 

U.S. seafood industry can only thrive with strong export markets. particularly in the Pacific 

Northwest and Alaska where 70"/o of all U.S. seafood landings occur, by volume, aod where 80% 

of all U.S. seafood exports originate. 

Asia-Pacific markets, specifically China, Japan and Korea, are critically important to U.S. 

seafood exporters. In 2015, according to U.S. Commerce Department figures. U.S. seafood 

exports to China totaled S 1. 12 billion, exports to Japan totaled S847 million, and exports to 

Korea totaled S513 million. U.S. seafood exports to those nations accounted for about half of all 

U.S. seafood exports. 

As with other U.S. eXJ>OT1ing sectors, several years of a strong U.S. dollar negmively 

impacted our ability to sell seafood producrs abroad in countries with relatively weaker 

currencies. At home, low cost imports undercut U.S. seafood products. Both circumstances 
42 


Insert 33656A.030

resulted in the global seafood market depressing prices for our products. In addition. we 

increasingly compete in a global market against foreign producers that have very low labor costs 

and much less rigorous fishery management, air and water quality, and food safety standards. 

Notwithstanding the low production costs available to most of our foreign competitors. 

Trident supports a free market approach to trade over a protectio•tist approach. We cannot afford 

to risk becoming subject co reraliatory market restrictions that could result in reaction to 

protectionist U.S. trade policy. That said. more needs to be done to create a level playing field to 

ensure U.S. seafood producers remain competitive in the U.S. and in important export markets. 

My testimony focuses primarily on four seafood sectors-Alaska pollock, Alaska 

salmon, Alaska groundfish and Pacific Northwest/Alaska crab fisheries. These four sectors alone 

account for 60% of all U.S. se.afood exports, and, as I mentioned previously, Asia~ Pacific 

markets are critically important. 

The Alaska pollock fishery is the largest U.S. foshery. That fishery alone accounts for 

nearly one-third of all U.S. seafood landings annually. Co•lsumers know Alaska pollock as the 

fillet in McDonald's Filet-0-Fish sandwich or as the imitation crab in a California roll. It is a 

SI.O billion dollar fishery at first processing. While it is one of the five most collsmned fish 

species in the U.S., we export three-quarters of the Alaska pollock products produced. 

Salmon is second in volume and founh in value among U.S. se-afood landings, and U.S. 

producers earn nearly $1.0 billion annually in export revenues. Non~pol ock groundfish, 

including Pacific cod and Alaska flatfish, are individually top ten in volume and value for U.S. 

seafood landings am1ually. And Pacific Northwest aud Alaska crab fisheries are also 1op ren i.n 

value. 
43 


Insert 33656A.031

Sustaining the S\ac-e-ess of U.S. seafood exporters and creating new market opportunicies 

requires a focus on the critical Asia-Pacific region. My testimony covers the promising market 

growth in China and Korea. remaining competitive in the Japanese market, and the challenges 

we face from Russian Far East seafood producers. 

U.S.-China Trade Policy. China produces the most seafood in the world and is the largest 

seafood exporting nation globally. However, China is also one of the three largest seafood 

imponing nations. China's seafood impons are projected to rise from 7.6 million tons. currently, 

to I 0 million tons by 2020, as global seafood suppliers inc.reasingly partner with domestic C· 

commerce platfonns. 

In 2015, U.S. seafood exports to China from the Seanle and Anchorage Customs Districts 

alone totaled more than $900 million. The vast majority of the U.S. exports of frozen seafood to 

China. however. are reprocessed in China and then re...exponed to other nations because U.S. 

exportS to China at are re-exported are not subject to Chinese duties or the Value Added Tax 

(VAT). U.S. seafood exports that are imported for consumption in China face stiff tariff rates. 

For example, frozen Alaska pollock, Alaska flatfish species, and other Alaska seafood exports to 

China that are consumed in China currently face a duty of I 0% and a.re also subject to a 13% 

VAT. 

T1te rapid expansion of the Chinese domes1ic market makes it the largest growth 

opportunity for U.S. seafood products. We could substantially increase U.S. seafood exports to 

China if U.S. trade negotiators can reduce, or eliminate tariff and VAT rates on U.S. seafood 

ex pons for consuntption in China. 
44 


Insert 33656A.032

U.S.-Japan Trade Policy. The Trans-Pacific Pannership (TPP) comained favorable tenus 

for U.S. seafood exports to Japan, and we urge U.S. trade officials to pursue the 1erms of the TPP 

accord either through a bilateral agreement with Japan or through a renegotiated TPP agreement. 

Tridem, along wid1 other U.S. seafood producers, were looking forward to the following benefits 

fromTPP: 

I. The TPP, as negotiated, would have eliminated Japanese tariffs of 3.5% for Alaska 

salmon products in all product fonus (i.e., surimi, roe, fillet, etc.). The TPP deal promised 

to improve the U.S. industry's position in relation to non-TPP covered Russian salmon 

product expons to Japan. U.S. exponers of Atka mackerel and Pacific Ocean perch also 

face a 3.5% tariff on products into the Japanese market. 

2. The TPP agreement also eliminated tariffs of 4.2% on U.S. Alaska pollock and Pacific 

whiting surimi products and pollock roe. Japan is the principal market for Alaska pollock 

roe and surimi products. If adopted as drafied, the TPP agreement would have markedly 

improved the position of U.S. pollock roe exporters to Japan in relation to Russian 

pollock roe producers. This is significant since the Russian pollock fishery is that nation's 

largest fishery. A TPP trade agreement that includes the U.S. would rtot only have 

improved O\lf competitive position for pollock roe, but it would have also improved the 

competitive position of Ame-rican surimi exporters to Japan where low cost, lowe-r·quality 

Thai surimi ex pons already enjoy a zero to 2.0% tariff on sales into Japan (depending 

upon the fish species) under Japan's bilateral trade agreen1em with the Association of 

Southeast Asian Nations (ASEAN). 

3. The TPP agreement eliminated a 10% Japanese tariff on Alaska pollock fillet products, as 

well. If this tariff elimination had gone through. it could have created an important new 

5 
45 


Insert 33656A.033

market for U.S. fille1-1ype products, reducing rhe U.S. industry's reliance on rhe EU and 

U.S. filler markers. 

In addition, U.S. expc>rters of Alaska pollock, Pacific cod, and herring, among others, are 

subject to Japan's anachronistic hnpon Quota (IQ) system. Over time, Japan's marl<ets have 

opened up, making quota accessible, but rbe process for obtaining such quota is needlessly time 

consuming and expensive. TPP did not address streamlining expon processes by exen1pting U.S. 

expons from JQ requirements. U.S. trade negotiators are encouraged to explore such an option in 

future negotiations. 

In any trade agreement-bilateral or otherwise-with Japan, the U.S. should push to end 

the applic~tion ofrhe antiquated IQ system to U.S. seafood expons and ro match the zero tariff 

rates negotiared under rhe TPP. 

U,S,:cSoutb_KQrc;.a_:t'rade tol~. U.S. s~food expons ro South Kor~n markets have 

increased by 20% since implementation oftl1e U.S.-Korea Free Trade Agreement (FTA). 

Wirhdrawing from rhar agreement would erase positive gains already achieved under the FTA, 

and prevent future negotiated gains from coming into effect. 

We do see porential benefits, however, fro1n U.S. trade negotiators approaching their 

South Korean CO\Interpans about accelerating tariff and quota reductions .. For example, the 

current FTA provides duty-free oppommities for the export of Alaska pollock in a "whole 

round" and "headed and gutted" fonn, though the allotment of product subject to duty-free 

treatment is severely restricted. This is an issue for some Alaska pollock producers and other 

U.S. groundfish producers who incidentally catch Alaska pollock and expon ir mi•1imally 

processed. Sourh Korea's 1ariff-reduced quota (TRQ) for such producrs is only abour 6,000 

rnelric tons in 2017. which is insufficient \Vhen the TRQ is reached, tariffs of22o/o are applied. 

6 
46 


Insert 33656A.034

While the FT A provides for a 9% annual increase in TRQ through 2025 when the TRQ expires 

(and slightly declining tariff rates over tllattime period), it will be a decade until U.S. producers 

can be competitive in the South Korean markets with these product fom1s. Before the 

implementation of US-Korea FTA in 2012. Alaska pollock was subject to 30% import tariff in 

South Korea, and this was a critical entry-barrier for Alaska pollock in the first place. yielding to 

Russian pollock that is imported into South Korea virtually duty-free through various bilateral 

joint-venture companies and Russian government-i,ssued catching quota. Since the 

in1plememation ofTRQ, however, awareness and availability of Alaska pollock quickly spread, 

and curre-nt TRQ was subsequently deemed roo insufficient to meet the increasing demand. This 

is evidenced by how early TRQ is reached; by early May in 2016, and by early March in 2017. 

We urge U.S. trade negotiators to pursue an increase in the TRQ for Alaska pollock to at least 

40,000 metric tons under the existing FT A. 

U.S.-Russia Trade Policy. American and Russian seafood producers compete directly in 

the Chinese, Japanese, and South KQrean markets. The U.S. and Russian Federation are 1he third 

and fi fth largest seafood producers globally. Russian Far East fisheries landings are substantial 

and are comprised of mosr of t11e same species landed by American fishennen and processors 

operating within the U.S. 200·mile zone off Alaska, which as I've noted is the region which 

accounts for most seafood expons to the Asia-Pacific region. ve suggested trade priorities that 

can boost U.S. competitiveness in each of those key markets. 

There remains an inequity in U.S.-Russia bilateral seafood trade policy that needs to be 

addressed. In 20J4.the U.S. imposed cenain trade sanctions on Russia in response to that 

nation's Ukraine aggression. None ofthe U.S. sanctions related to seafood products. However, 

Russia retaliated with sanctions against the U.S., and a host of nations, that included banning 
47 


Insert 33656A.035

se~food expons to Russia. Russia's import ban has been particularly ham>ful to U.S. exporters of 

Pacific whiting and Alaska salmon roe produces. We ask our trade and diplomatic corps to 

prioritize regaining access to the Russian market. 

The Russia sanctions also created a perverse situation domestically where a loophole in 

the National School Lunch Act's (NSLA) Buy American requirement has allowed tbe use of 

federal dollars to buy lower-cost, lower .quality Russian pollock for sc-hool lunches. The U.S. 

Alaska pollock sector cannot sell its products in Russia. but Russian pollock is being purchased 

with U.S. tax dollars for school lunches. Congress should tighten the NSLA's Buy American 

requirement. H.R. 1241, the Ame.rican Foods for American Schools Act. introduced by 

Congressmen LaMalfa and Garamendi strengt.hens 1he Buy Amedcan requirement. and we urge 

Congress to pass this legislation. 

In closing, I'm grateful for d1e opportunity to share Trident's input with you, and I 

applaud your efforts to examine opportunities and challenges related to Asia-Pacific trade policy 

thai in'lpact U.S. businesses, fishing co1rununities, and the ll'ICll and women dependem on access 

to global seafood markets. I look forward to your questions. 

8 
48 

f 


Insert 33656A.036

Committee on Ways and MHDS 

Witness Disclosure Requirement-.. Truth in Testimony"' 

Required by House Rule XI, Clause 2(g) 

Yout Namo: 

I. Are )''OU testifying on behalf of a Federal, State~ or Local Go\'emment entity? 

.. Name of entil)'{ics) . 

b. Briefly deso.ribe the capacity in whieh you represent this e1ltity. 

2. Arc you testifying on behalf of any non-govtnunental entity(ics)? 

.. Name of etuity(ies) . 

'f~"> ..... - f<;:•f.<><.:> (!•l P. 

b. BrieOy describe the capaci[)' in which you represent this entity. 

Q,.<~C.~(._ ~~ Co ... Cl..J rt:..J":" J,(;..,.IJ-r-•·..J .S 

Yes 

0 

Yes 

~ 

3. Please list any federal grants or «mtracu (including sub,grants or subcontracts) which you have 

received during d,e current fiscal year or either of the two previous fiscal years that are related to the 

subjc:ct matter oftJ1e hearing: 

fJ -:::. 

No 

~ 

No 

0 

4. Please list any gmnts. contracts, or payments originating from foreign governments which you ha\'e 

received during the currenr calendar year or eithet of the two previous cale1~dar years that are related to 

the s'1bjcet matter of the hearing: 

~.~-~~ 

.S. Please list any offices or elected positions you hold. 

,.,,.J~ 

6. Does the cntity(ies) you represent. other chan yourself. have parent organizations. 

subsidiaries. or pattnershipS you arc not representing? Yes No 

0 [g! 

7. Please list any Federal grants or coruraet.s (including subgrencs or subcontracts) which were received 

by the entity(ies) you represent during the cum:nt fiscal yea.r or either of the l\\'0 previous fiscal years. 

which exceed 10 petCCt~t of entity(ies) revenues in the year received. [ncludc the sourw and amount of 

each grant or contract Auach a second page if ne<:C$SSJ)'. 

,J'*tl::. 

8. Please lis1 any grants, contracts, or payments originating from foreign governmentS which were 

received by the cntity(ies) you represent during the current fiscaJ year or either of the two ptevi()us fiScal 

years related to the subject maner of the hearing, Include the source and amount of eacll Afi.RI or oontncl. Anach a second page if necessary. 
49 

Chairman REICHERT. Thank you. Mr. Paul. 

STATEMENT OF SCOTT PAUL, PRESIDENT, ALLIANCE FOR 

AMERICAN MANUFACTURING 

Mr. PAUL. Thank you, Chairman Reichert, Ranking Member 

Pascrell, and members of the subcommittee for the opportunity to 

testify on behalf of the Alliance for American Manufacturing. 

It is an honor to appear before you as we look to expand trade 

relationships in the Asia-Pacific region. I believe it is vital to the 

success of U.S. companies and American workers that we concurrently seek to adopt policies that strengthen U.S. competitiveness, 

open foreign markets, and counteract massively lopsided trade deficits with China and other nations. 

You have copies of my written testimony with detailed data and 

recommendations. I will briefly summarize a few of the key points 

here. 

It is impossible to talk about trade in the Asia-Pacific region 

without coming to terms with massive trade imbalances. Since Beijing’s 2001 entry into the WTO, the U.S. bilateral trade deficit with 

China has more than quadrupled. Our global market share in manufactured exports over that same period have shrunk from 14 percent in 2000 down to 9 percent in 2013. Authoritative research performed by MIT economist David Autor and other colleagues estimates net losses of up to 2.4 million jobs from rising Chinese imports into the United States from 1999 to 2011. 

The challenges are not limited to China. The U.S.-Korea Free 

Trade Agreement was predicted to increase exports of American 

goods by up to $11 billion, yet the U.S. trade deficit with South 

Korea actually has more than doubled between 2011 and 2015, displacing up to 95,000 jobs. The agreement hasn’t opened new markets for U.S. automobiles and for some other products. And it 

should stand for some reconsideration or renegotiation. 

When President Trump gave perhaps the most detailed speech 

on trade policy, which was last year on the campaign trail in Monessen, Pennsylvania, he endorsed a philosophy of reciprocity and 

rebalancing and promised to pursue many trade policy reforms that 

some members of this subcommittee have been steadfastly calling 

for. 

In May, we applauded the Trump administration for prioritizing 

the elimination of significant trade deficits through an executive 

order. Yet after nearly 10 months in office, the administration’s 

words have resulted in either inaction or confusion as to the path 

forward. We believe it is time for clarity as well as for action. Here 

are a few of our recommendations. 

First, we have urged the administration to accelerate the work 

of the G–20 Global Forum on Steel Excess Capacity and to press 

for verifiable and enforceable net reductions in global overcapacity, 

including that of China and other Asian nations. 

Second, China is and should continue to be treated as a nonmarket economy, as it fails to meet any of the six criteria laid out 

in our trade laws for market economy status. 

Third, it is critical that the government provide support when 

foreign interests steal trade secrets to manufacture products 

abroad and send them to the United States. We are deeply conVerDate Sep 11 2014 08:40 Mar 07, 2019 Jkt 033656 PO 00000 Frm 00053 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33656.XXX 33656
50 

cerned that section 337 has proven to be an ineffective remedy for 

U.S. manufacturing companies injured by cyber theft, transshipments, and duty evasion. If the statute does not work as it was 

intended, Congress needs to modernize it. 

Fourth, we urge passage of legislation to treat foreign currency 

manipulation as a subsidy under trade remedy laws, and we support the inclusion of strong enforceable rules in all trade agreements to deter and penalize currency manipulation. We will also be 

closely watching as the administration prepares to release yet another semiannual report on international economic and exchange 

rate policies due in 4 days. 

Finally, I want to focus your attention, as Mr. Pascrell has, on 

the pending section 232 steel investigation, on the impact of imports on U.S. national security. In April, President Trump directed 

the Department of Commerce to complete the self-initiated investigation under an expedited timeline by July 1st. That date has 

come and gone. More recently, the President and the Secretary of 

Commerce said they intend to complete tax reform before focusing 

on the section 232 investigation. It is difficult to understand how 

one issue has anything to do with the other, and America’s workers 

deserve a better explanation. 

Steel workers are suffering. Since the investigations were announced, as Mr. Pascrell noted, steel imports have soared 21 percent as foreign countries have rushed product into the U.S. market 

in anticipation of promised action. And we recently received news 

that several steel mills in Pennsylvania are reducing operations, 

including one that produces armor plate for the U.S. military, and 

played an active and important role in supporting the production 

of armored vehicles to protect our servicemen and women from IED 

attacks in Iraq and Afghanistan. 

Domestic production of steel and aluminum are vital in the manufacture of America’s military and critical infrastructure. If domestic manufacturing capabilities deteriorate further, we may be 

forced to rely on countries like China and Russia to supply steel 

for our military and critical infrastructure needs. We cannot let 

that happen, and it is time to complete the section 232 investigation and take decisive action to safeguard America’s economic welfare and national security. 

Thanks for the opportunity to testify today. I look forward to 

your questions. 

[The prepared statement of Mr. Paul follows:] 

51 


Insert 33656A.037

TESTIMONY OF SCOTT N. PAUL 

PRESIDENT, ALLIANCE FOR AMERICAN MANUFACTURING 

BEFORE THE COMMITTEE ON WAYS AND MEANS TRADE SUBCOMMITTEE 

UNITED STATES HOUSE OF REPRESENTATIVES 

HEARING ON OPPORTUNITIES TO EXPAND U.S. TRADE RELATIONSHIPS 

IN THE ASIA-PACIFIC REGION 

OCTOBER 11, 2017 

Chairman Reichert, Ranking Member Pascrell, and members of the committee, thank you for the 

opportunity to testify on behalf of the Alliance for American Manufacturing (AAM) attoday's hearing on 

opportunities to expand U.S. trade relationships in the Asia-PacifiC region. 

The Alliance for American Manufacturing is a non·profit, non·partisan partnership formed in 2007 by 

some of America's leading manufacturers and the United Steelworkers. Our mission is to strengthen 

American manufacturing and create new private·sector jobs through smart public policies. We believe 

thai an innovative and growing manufacturing base is vital to America's economic and national security, 

as well as to providing good jobs for future generations. AAM achieves its mission through research, 

public education, advocacy. strategic communications, and coalition building around the issues that 

matter most to America's manufacturers and workers. 

As AAM approaches its 10·year anniversary, we are proud to have helped call attention to some of the 

mosl pressing trade issues impacting American manufacturing-including global industrial 

overcapac~y. dumping and subsidies. state-owned enterprises, currency manipulation. theft of lrade 

secrets. and the need to better negotiate trade agreements. As we look to determine ways to expand 

trade relationships in the Asia-Pacific region. it is vital to the success of U.S. companies and American 

wotkers that we concurrently seek to adOpt policies that strengthen U.S. competitiveness and 

counteract the massively lopsided and growing trade deficit with China. as well as the significant and 

incteasing defic~s with South Korea, Japan, and other nations. 

U.S-China Trade Deficit is Unparalleled in its Magnitude and Adverse Impact 

Since Beijing's 2001 entry into the Wood Trade Organization (WTO), the U.S. bilateral trade deficit with 

China has more than quadrupled. from S83 billion in 2001 to $347 billion in 2016. The U.S.-China trade 

deficit in 2017 in on pace logo even higher. In just15 years, the impact of the surging U.S-China trade 

deficit on U.S. companies and American workers has been severe and too often ove~ooked. Our 

communities have shed more than 54,000 manufacturing facilities and we've seen our global market 

share in manufactured exports shrink lrom 14 percent in 2000 to 9 percent in 2013. Altogether. a 
52 


Insert 33656A.038

staggering 3.4 million jobs, largely in manufacturing, have been lost because of this massive trade 

imbalance. Each state and every congressional district in the United States has experienced lost jobs. 

And the losses extend into nearly every sector of the economy. ranging from computer and electronic 

parts to textiles and apparel, furniture, steel, aluminum, and other capital-intensive secte<s1 

While the United States maintains significant and growing llade deficits with other Asia-Pacific region 

countries, none come close to the unparalleled magnitude and adverse impact of the China trade deficit 

on our economy. Still, they are significant and merit the consideration of this commUtee as it looks at 

ways to expand trade. 

• South Korea. It was promised that the U.S.-Korea Free Trade Agreement (KORUS) would 

support 70,000 U.S. jobs and increase exports of American goods by S10 to $11 billion. Yet, the 

U.S. trade defic~ with South Korea jumped $15.1 billion between 2011 and 2015 (from $13.2 

billion to S28.3 billion), resuUing in the estimated elimination of more than 95,000 jobs' And, in 

2016, it remained at a stubborn $27.6 billion - a clear sign that the trade agreement hailed as a 

job create< has not opened new mart<ets for U.S. automobiles and other products. as was 

pre<nised. 

• Japan. Meanwhile, it has been estimated that the trade deli~ with Japan- fueled by currency 

practices- is estimated to have eliminated nea~y 900,000 U.S. jobs as the goods defocit 

reached $78.3 billion in 2013.1i It has remained at unacceptable levels ever since. 

Reducing Trade Deficits Should be a Measure of Success 

In May, we applauded the Trump administration for priO<itizing the elimination of signmcant trade 

deficits and for issuing Executive Order 13876 to examine the causes of our bilateralllade deficits wUh 

China and other major trade partners. The United States has been running persistent trade defocits 

since the 1980s, turbocharged by the entrance of China into the wO<Id trading system. A wide range of 

respected economists point to trade deficits and increased imports as a drag on the U.S. economy, 

leading to job loss and harm to our innovation base. 

David Autor, Daron Acemoglu, and Brendan Price of MIT, joined by other respected econe<nists, argue 

thal "the increase in U.S. imports from China, which aocelerated after 2000, was a major force behind 

recent reductions in U.S . manufacturing employment and that ... it appears to have significantly 
53 


Insert 33656A.039

suppressed overall U.S. job growth." Their research shows "net job losses of 2.0 to 2.4 mimon 

stemming from the rise in import competition from China over the period 1999 to 2011 ." iv 

Meanwhile, we have become all too familiar with stories of U.S. tectmology moving to China; or, of U.S. 

technology being manufactured offshore. In 2016, the U.S. amassed an S83 billion advance technology 

products trade deficit with the rest or the world! China alone enjoyed a $120.7 billion bilateral surplus in 

advanced technology products with the United States in 2015.'" 

Trade defiCits matter and there is compelling research showing that reducing trade deficits would yield 

positive outcomes for our economy. For instance, a reduction of the U.S. global trade deficit by 

between S200 billion and $500 billion each year "could increase overall U.S. GOP by between $288 

billion and $720 billion and aeate between 2.3 million and 5.8 million U.S. jobs."" 

To those who have made unfounded claims that the loss or f111e million U.S. manufacturing jobs, or 

roughly a third or the total amount, since 2000 was the result or increased productivity. and not trade 

deficits. the data does not support your claim."' According to the Economic Policy Institute (EPI), 

between 2000 and 2007. 3.6 million manufacturing jobs were lost. Yet, productivity growth declined, 

falling from 4.1 percent per year in the 1990s to 3.7 percent per year. The drop in the rate or growth or 

manufacturing output to 0.5 percent per year is largely the result or the rapid growth of the 

manufacturing trade deficit. Meanwhile, the Great Recession and financial crisis was largely 

responsible for the decline in manufacturing output and job loss from 2007 to 2014. Manufacturing 

trade deficits continued to surge over this period following the Great Recession• 

The lnfonnation Technology & Innovation Foundation (IT IF) attributes a "significant share of the 

(manufacturing job) losses to increased trade pressure and dwindling U.S. competitiveness. which 

suggest that the nation could reclaim manufacturing jobs with the right policies." ITJF adds that "the 

precipitous loss of U.S. manufacturing jobs in the last 17 years was not natural nor inevitable, nor was it 

primarily caused by automation." Countering critics' arguments, ITIF suggests that "If the United States 

is to reduce the trade deficit in goods, it will need to find a way to produce more here, in part by 

significantly increasing manufacturing productiv~y growth rates. If it can do thai and eliminate the 

manufactured trade deficit, JTIF estimates the nation would gain an additional 1.3 million manufacturing 

jobs."" 
54 


Insert 33656A.040

Proactive Approach is Necessary to Expand Trade and Eliminate Trade Deficits 

For too kmg, our trade policies haven't been focused on supporting our manufacturing sector but, in 

many ways, have undermined il The United States is long overdue for a new approach to trade, 

especially with China. It is both possible and desirable to create a trade policy framewor1< to support a 

resurgent, made in America manufacturing base. 

The United States has considerable economic leverage to shrink our $347 billion 2016 trade deficit with 

China. U.S. exports to China account for less than a percent of our GOP, our banks hold less than a 

percent of their assets in China, and multinational companies derive less than two percent of their 

revenue from there. 

Taking action to sttengthen key U.S. sectors is hardly a radical proposition and there is clear precedent 

in our not too distant past of bold leadership and outside the box thinking. President Ronald Reagan 

adopted a flurry of measures to address an uneven playing field with European nations and Japan. His 

administration's aggressive actions helped revitalize our semiconductor industry and the iconic Hartey 

Davidson. The Plaza Accords, which raised the value of currencies in Japan and Europe relative to the 

dollar, had a positive effect in lowering our trade deficits. 

It's Time for the White House to Complete Key Trade Actions 

After nearly 10 months in office, President Trump and his administration have promised to crack down 

on unfair trade and negotiate better trade agreements. Yet, on many key issues, the administration's 

words have resulted in either inaction or confusion as to the path forward. We remain encouraged that 

the President shares the goal of changing the status quo of persistent trade deficns, lost jobs, theft of 

our innovation base, and the steady erosion of our manufacturing capaclly and wor1<force. But, Ws time 

to act. 

For example, the President repeatedly promised to label China a currency manipulator. However, 

China was not listed as a currency manipulator on the Treasury Department's Semiannual Report on 

International Economic and Exchange Rate Policies. 

Also, the President initiated Section 232 investigations on steel and aluminum imports' impact on U.S. 

national security. However, we are now well beyond the administration's own self-imposed deadlines 
55 


Insert 33656A.041

and American workers have been left without a clear timeline as imports continue to surge. I will 

discuss this issue later in my testimony. 

Again, ~ is our ho~ that the administration, working with Congress, will follow-through on its tough 

trade rhetoric and begin to take proactive steps to maigate the continued damage being done to our 

manufacturing base. For many communities across America, this can't come soon enough. 

Recommended Actions for the Administration and Congress 

Outlined below are some of the issues AAM believes need to be addressed for the unaed States both 

to expand trade relationships in the Asia-Pacific region in a manner that increases domestic production 

and to ensure that our markets do not become flooded with unfairly traded products. 

Global Industrial Overcapacity. Many U.S. industrial sectors are suffering from unprecedented 

challenges due to global overcapacity -largely fueled by China - which dampens prices and 

has forced plant closures and massive layoffs. Despite slowing demand in the Chinese market, 

Beijing continues to maintain high levels of production with subsidies and other state support, 

undermining U.S. companies that compete based on market considerations. In tact, a recent 

report shows that, despite China's daims of capacity closures in 2016, its net steelmaking 

capacity actually increased!; The G20 established the Global Forum on Steel Excess Capacity 

as a venue to directly engage China on this issue. For it to yield meaningful results, it will be 

necessary to establish verifiable and enforceable craena for the elimination of industrial capacity 

in key sectors like steel and aluminum. 

China will only respond, and America will only benefit, if there are enforceable mechanisms to 

ensure that Beijing is living up to its commitments. For the past ten years, China has delayed 

concrete action with lofty promises to cut capacity that never materialize. Despite repeated 

public pronouncements dating back to 2009 of plans to aggressively cut capacity, China's 

steelmaking capacity has increased over 400 million metric tons, roughly equivalent to five times 

the total production of the U.S. steel industry in 2016. The G20 Global Forum on Steel Excess 

Capacity cannot be another tool to be used by the Chinese government to delay meaningful 

change. We have urged the administration to accelerate the work of the Global Forum and 

press for verifiSble and enforceable net reductions in global overcapacity. 
56 


Insert 33656A.042

• Trade Enforcement. America's trade enforcement laws are the bad<bone of U.S. trade law and 

represent that last line of defense for W'Orkers facing unfair trade. Strict enforcement is vital to 

the preservation of a rules-based trading system-one in which American worl<ers are not 

forced to compete against the endless resources of a foreign government that props up its 

state-run companies. nmely enforcement of U.S. trade remedy laws is vital to leveling the 

playing field for U.S. companies and American workers impacted by unfair trade practices -like 

dumping and subsidies. While our trade remedy laws help mitigate the damage, rarely do they 

restot'e all the k>st jobs or ma.ke an impacted community whole again. Significant time and cost 

-and injury- is required to proceed with a trade enforcement case. In some cases, entire 

plants must be shut down before rel~f can be delivered. This makes no sense. We must ensure 

that timely and effective relief from such market distortions is available before plants are forced 

to close and worl<ers lose their jobs. 

We appreciate the work of this committee in the passage of the Trade Faci!itation and Trade 

Enforcement Act of 2015, which provided new tools to speed trade enforcement and to crack 

down on evasion of existing trade orders. It is simply unfair to U.S. companies and their workers 

for trade remedies to be circumvented-resulting in further harm and larger trade deficits. 

• Maintain China's Non-Market Economy Status. No one can seriously claim that Beijing runs 

a market economy, but the Chinese government desperately wants to be treated that way. 

Under U.S. law, China is and should continue to be treated as a non-marl<et economy (NME). 

Any change to this status would severely undermine America's trade remedy laws and expose 

U.S. companies and American workers to more dumped imports. Such changes can only be 

made if China meets six specific cr~e ria demonstrating that marl<et forces, and not the 

government's party leadership, are directing the economy. China fails to meet any of the six 

criteria and should focus on reforms rather than its attempts to shortcut this issue by way of the 

WTO. 

Cyber Theft. It is critical that the government provide support when foreign interests steal trade 

secrets to manufacture products abroad and send them to the United States. Theft of 

intellectual property and trade seccets has been a serious problem with China. U.S. oompanies 

report that Chinese interests have not only stolen sensitive trade secrets, but that Chinese firms 

are now commerdallzlng that valuable Intellectual property Into Chinese products. It Is 
57 


Insert 33656A.043

outrageous that U.S. companies are being forced to compete against the very products that 

they spent years and significant financial resources to develop. 

We are deeply concerned that Section 337 of the Tariff Act or 1930 has proven to be an 

ineffective remedy for U.S. manufacturing companies injured by cyber theft, trans-shipments 

and duty evasion, and other predat()(y trade practices. II the statute does not work as it was 

intended, Congress needs to change it so that our companies are not subjected to dishonest 

and criminal activity without the opportunity to seek effective and timely relief. 

• State-Owned Companies. China has many state-owned and state-directed enterprises (SOEs) 

that send dumped and subsidized goods into the U.S. market. In a disturbing trend, China's 

SOEs are also now aggressively seeking to invest here in America, putting further strain on U.S. 

firms that make decisions based on market forces. It is vital that we strengthen our system or 

review;ng foreign acquisitions of strategic U.S. companies and operations so that they do not fall 

under the control or the Chinese government. 

• Currency Manipulation. A strong dollar remains a heavy burden on the U.S. economy. Cheap 

imports. combined with weak demand from overseas. hinders growth in America's 

manufacturing sector. This trend has played out from 1987 to 2009 and 2011 to present as 

periods of sustained manufacturing trade deficits in the Unrted States coincide with strong dottar 

policies. Making matters worse, China, Japan. South Korea, and other major trading partners 

have a long history of currency manipulation, which contributed to the loss of five million U.S. 

jobs.'" Despite claims that the yuan is no longer undervalued, there is ample evidence that 

Beijing continues to play an active. daily role in setting exchange rates. 

We urge the passage of legislation to treat foreign currency manipulation as a subsidy under 

trade remedy laws. And, we support the inclusion or strong, enforceable rules in trade 

agreements to deter and penalize currency manipulation. We will also be closely watching as 

the administration prepares to release yet another Semiannual Report on International 

Economic and Exchange Rate Policies, due by October 15". 

Automobiles and Rules of Origin In Trade Agreements. A trade agreement's rules of origin 

determine the national source of a prOduct. Tnls ts Important because onty tnose countr1es 
58 


Insert 33656A.044

bearing the risks and responsibilities of signing an agreement should obtain its benefits. We 

believe the rule of origin on automobiles in NAFTA and other trade agreements should be 

strengthened, so that workers in signatory countries can enjoy more of the benefits, while 

minimizing the advantages of non-participating countries. In the context of the NAFTA 

negotiations, automobiles and auto parts from countries such as Japan, South Korea, and 

China, all of which heavily protect their own industries. should not be permitted to displace North 

American production through rules of origin that are set too low. 

As it relates to KORUS. more work must be done to open the Korean market - one of the most 

dilft<:<JU lor our automakers to export into despite the signing of a trade agreement intended to 

open the market. Our companies and workers face countless non·tariff barriers that continue to 

protect the Korean marl<el Aceo<ding to Secretary Ross, "Only 25,000 cars per Big Three 

manufacturer are allowed in based on U.S. standards. Anything above that needs to be on 

Korean standards ... So that kind of rule-making affects quite a lew industries and really restricts 

the access that U.S. companies have to the Korean mad<et-..61 

It's Time to Act on the Section 232 Investigation 

Last, but certainly not least, I want to locus your attention to the pending Section 232 investigations on 

the impact of steel and aluminum imports on U.S. national security. In April President Trump directed 

the Department of Commerce to complete these sell-initiated investigations under an expedited 

timeline. Here's what he said in an Oval Office ceremony: 

MFor decades, America has lost our jobs and our factories to unfair foreign trade. And one steel 

mill afler another has been shut down, abandoned ana closed ana we're going to reverse 

that .. .As I traveled the country. I saw the shuttered factories and the shuttered dreams and I 

pledged that I would take action. And I think it's probably one of the primary reasons I'm sitting 

here today as president... Today, I'm ciirec~ng the Department of Commerce to immediately 

prioritize the investigation ... into foreign steel arriving into our markets ana to submit a report on 

the effects of these foreign steel products on the national security of the United 

States ... Maintaining the production of American steel is extremely important to our national 

security ana our defense industrial base. Steel is critical to both our economy ana our military. 

This is not an area where we can afford to become dependent on foreign countn·es ... Based on 

lhe: fiadiogs of IJ)is te:pot·t, Se:c,.e:taty Wt1bu,. Ross will malte: fonnal recomtnt:mdalioos to me 
59 


Insert 33656A.045

Whfte House in [the] very, very near future. He'll be back very soon with those 

recommendations that we will implement." - President Trump, April 20. 2017- The Oval Office 

In late-May, the administration said the reports would be released in June and, just days later, the 

President himself publicly said the 232 reports would be coming "very soon• and that "we're going to 

stop the dumping." 

• ... we have no intention of taking 270 days. Our hope would be to complete the report by the 

end of June. • - Commerce Secretary Wilbur Ross, May 24, 2017 -Section 232 Public Hearing 

"/look forward to reading the @CommerceGov 232 analysis of steel and aluminum- to be 

released in June. Will take major action if necessary.·-President Trump, May 27, 2017-

Twi«er 

Wait until you see what I'm going to do for steel and for your steel companies ... We're going to 

stop the dumping, and stop all of these wonderful other countries from coming in and killing our 

companies and our workers. You'll be seeing that very soon. The steel folks are going to be 

very happy.·- President Trump, June 7, 2015- Cincinnati, OH 

Months have now passed and we do not have a clear understanding of when they will be completed. 

Just recently, American WOtkers were told that the administration intends to complete tax reform and 

other legislative priorities before it can again focus on the Section 232 investigation. It is difficult to 

understand how one issue has anything to do with the other. and America's worKers deserve a better 

explanation. 

All the while. the import problem is worsening for American JNOrkers and U.S. companies. Since the 

investigations were announced, steel imports have soared 21 percent as foreign countries have rushed 

product into the U.S. market in anticipation of promised action to adjust imports. And, we recently 

received news that several steel mills in Pennsylvania would be reducing operations, including one that 

produces anmor plate for the U.S. military and played an important role in supporting the production of 

armored vehicles to protect our service men and women from lEO attacks in Iraq and Afghanistan.• 
60 


Insert 33656A.046

Further delay results in a greater threat to America's economic welfare and national security. Our 

national security rests on a healthy industrial base. Domestic production of steel and aluminum are vital 

in the manufaelure of America's military and critical infrastructure, inCluding everything from ships and 

tanks to bridges and energy infrastructure. If domestic manufacturing capabi ~ies deteriorate further, we 

may be forced to rely on countries like China and Russia to supply steel for our military and critical 

infrastructure needs. We cannot let that happen. It is time to complete the Seelion 232 investigations 

and take decisive action to safeguard America's ecooomic welfare and national security. 

Conclusion 

Thank you for the opportunity to testify today. We look forward to working with each of you to advance 

policies that will benefit American manufacturing and revitalize America·s manufacturing sector- a 

majO( economic driver, foundation of U.S. national security, and source for millions of family-sustaining 

jobs. Together, we can Keep It Made in America. 

1 Sooll, Robert E. "GfOW!h i'l U.S . ..china trade d6flcll between 2001 and 2015 cost3.4 million jobs: E~e Pdicyln$tfltAe, 31 Jarwary 

2017. Wf0. 9May20t7. • Sooct. RobM E. "U.S.-Kocu ltade deal r~ 1n groy.1ng trade de6cits and mote than 95,000 lost U.S. jobs ... Eoonotrk Poley Institute, 5 

May2016. Web. 9May2017. 

li Scott, Robert E. ·currencyManipM;tionMdtht 896,600U.S. Jobs lO&t Oue kt 1t1e U.S . .Japen Trade Oefieil: &onomic Policy lnsfilvte, 4 Fetwuary2015. Web. 9 May2017, 

"' Autor, David et al '""Port Compe6tionand the Gfut U.S. EmpkJ)mtont Sag olthe 2000s." Augus;t 2014. ""Trade i'IGoodswilh ~Technology Prodvct:t.• \h'Wted State& Censu$. Wflb. 9 May2017. 

"'$Q::IQ, Robert E. "Tnlimonybetoq; thct ~itt!N on Atio" th• Pllltik of tlw House Sulxx:mrnmo. on FOtei!11 Nh!irs. • E~ 

Pdicylns.lirute, 26April2017, Web. 9M~2017, 

.. Sc:ocl. Robef1 E. -c~MTtncy M<~nipJI&\iQn tlnd lht 896.600 U.S. Jot.lmt Out: to I~ U.S • .JJP.-n Tr- Def~: E~ PIQNcy lnJtifut•. 4 

Febt\Jary201S, Web. 9May2017, .. Gors'Selln_ Peter and Oorl"'lnQ. Mike-. 'Aftef Ood:lts, Economists Find Chi!\& lOb U.S. Fadory Jobs." 8Joomt>etg Pditics. 18 .AJne 2015. Web. 

9May, 2017. "Scoa, Rebert E. 'Manuf~g Job los~: Trade. Not Producdvily, b tM Culprit. • Economic Poficy lnstllute, 11 August 2015. Web. 9 May 

2015. • Nager, Adams. 'Trade vs. Productivity. What Caused U.S. Manufaccuring's Dtoeline and How to ReM lt." mF, February 2017. Web. 9 May 

2017. "Wong, Edward. 'Greenpe.aoe llnk& Seijing'sAirPollutionSwge10Stee1Fac(orift." !WwYorlc T.vn.s, 16Fel:xuary2017. Web. 10May2017. "' Petersonln$1it\lte for International ECOfiOITiic;$ 

tt.tp: ~.cletroitnew&.~~Mit~uto612017~~~~rrieri10032459C)' 

.,. ttp'/ld'IM~trtontribunt wn'II'Bulinenl~al_®f~r~_of_,. l.m 
61 

f 


Insert 33656A.047

Committee on \Vays and Means 

Witness Disclosutc Requirement •'Truth in Testimony" 

Required by House Rule XI, ClauS<: 2(g) 

Your Name: St.oi( N f>Avt._ 

I. Are you testifying on behalf of a Federal, State. or Local Government entity? 

a. Name of entity(ies). 

b. Briefly describe the capacity in which you represent this entity. 

2. Are you testifying on behalf of any non-governmcntalentity(ies)? 

.. Name of entity(ies) . ~ .... ..,..;Pi'\-~IU~ A~..<.-IY'I--tF P<>n.- """"~c.A,._) 

b. Briefly describe the capacity in which you represent this entity. 

:r'...,_ ~tLa .... ~ 0 ., AAYIA t b. I~,..,., 

~~~~. 

Yes 

0 

» 

3. Please list any Federa.l grants or contracts (including subgrants or subcontracts) which you have 

received during the current fiscal year or either of the two previous fiscal years that arc related to the 

subject matter of the hearing;: f6 

fo1 

No 

0 

4. Plea.se list any grants, contracts. or payments originating from foreign governments which you have 

receivt:d during lhc current calendar year or either of the two previous c.aleodar years that are related to 

tJ1e subject matter of the hearing: f S. Please list any offices or elected positions you bold. 

\-)l> f',)'lU(.. ()f¥-1&0$. . 

6. Docs the entity(ies) you represent, other ttlan yourself, have parent organizations. 

subsidiaries, or p:umerships you are not representing? Yes No 

0 .KJ 

1. Please list any Federal grants or contra~ts (including subgrants or subcontracts) which were received 

by the entity(ies) you represent during the current iisca.l year or either of the two previous fiscal years., 

which exceed 10 pe~m of entity(ies) revenues in the year received. Include 1he source and amount of 

eoch grant or contract. Attach a second page if necessary. 

~ ' p. 8. Please list any grantS, contracts, or paymerus originating from foreign governmentS which were 

received by the entity(ies) you represent during tJ1e current fiscal year or either of the two previous fisc:al 

years related to the subject matter of the hearing. Include the source ond amou.nt of each grant or 

contract. Anach a second page if r•ecessary. ,.., I p.. 
62 

Chairman REICHERT. Thank you, Mr. Paul. I would like to 

begin the questioning with Ms. Moreland. Naturally, I would be a 

little bit interested in Trident’s success in the Asia-Pacific. You 

mentioned that the U.S.-Korea Free Trade Agreement reduced the 

tariff by 23 percent I think was in your testimony. If you could be 

more explicit on how the Korea Free Trade Agreement has made 

a difference in Trident’s ability to export to Korea. And would Trident’s competitors have an advantage if KORUS wasn’t in place? 

Ms. MORELAND. Mr. Chairman, the free trade agreement created a tariff-reduced quota for some of the most abundant products 

that we have, specifically Alaska pollock. That fishery has been 

able to harvest 1.3 million metric tons annually in recent years. It 

is an abundant resource. 

Russians also harvest an Alaska pollock species, the same species, and have long relationships with Korea. Product harvested on 

the Russian side of the border by Russian companies that work bilaterally with Korean companies are able to bring that fish into the 

market with no tariff. 

Chairman REICHERT. Now when you say work bilaterally, what 

do you mean? What is the advantage that Russia has there? 

Ms. MORELAND. There has been both joint venture as well as 

quota allocations to Korean companies of the Russian resource. 

And that fish brought into the South Korean market is able to 

enter duty free. We have achieved a reduced tariff quota. That 

quota level is quite low. There is interest by many of our customers 

to grow their relationship and dependence on U.S.-produced Alaska 

pollock. We would like an opportunity to do that. 

Chairman REICHERT. Thank you. Ambassador, your testimony 

made clear that Visa and other electronic payment services, EPS 

providers, face unwarranted barriers to prevent you from doing 

business in Vietnam. If the opportunity arose to negotiate a bilateral FTA with Vietnam, do you think we could build on the work 

done with TPP negotiations to open the EPS market? And secondly, 

how can we address that issue in other Asia-Pacific markets? 

Mr. MARANTIS. Thank you, Chairman Reichert. And thank you 

very much for your support and for the letter that you have circulated on the Vietnam issue. It is a real challenge for us. I mean 

on the one hand, there is a huge opportunity in markets like Vietnam. I mentioned in my testimony that there is a $6 trillion opportunity to move from cash and checks to digital form of payments. 

And Vietnam is a huge market. They have embraced a market 

opening philosophy on most everything except on this one particular issue, where we continue to face a severe level playing field 

issue, where the government action is really tilting the playing 

field in favor of a domestic competitor and is driving U.S. payments 

companies essentially out of the market. We have an opportunity 

over the course of the next month, before President Trump travels 

to Vietnam, to resolve that issue. And working together with you 

and the administration, we are hopeful we can get there. 

TPP had a provision on electronic payment services, which was 

a very useful provision, and would have helped us to address this 

issue in Vietnam. We don’t have that now, so we are open to exploring every possible tool we can use to solve this problem. And 

the President’s upcoming trip is one of them. 

63 

You also asked about other challenges we face. Korea is another 

one, where government action is essentially favoring local brands 

over international brands. So what happens in Korea is the government basically says you, bank, if you are going to issue a card, you 

have to make sure that the local brand has the exact same products and services as the international brand. And oh, by the way, 

offer that at lower cost. So as a result of that action, our market 

position in Korea has deteriorated significantly over the course of 

the past 10 years. 

Chairman REICHERT. Great. I appreciate your answers. Thank 

you. Mr. Pascrell. 

Mr. PASCRELL. Thank you very much, Mr. Chairman. Mr. Paul, 

the question of trade deficits is a fascinating subject area I think. 

We seem not to have a handle on it in any of the deals that we 

are talking about. 

The United States has lost five million manufacturing jobs in the 

last 16 years. So there seems to be a strong correlation between 

China entering the WTO in 2001 and establishing permanent, normalized trade relationships in 1998, and the acceleration of lowcost China imports into our market. Look at those three things. 

So I think you mentioned or referred to our largest trading part- ner is China, $578 billion in trade between our countries, and a 

trade deficit of $347 billion. Economist Robert Scott found in 2015 

in the Economic Policy Institute report, growing trade deficits in 

manufacturing goods led to the loss of 3.6 million manufacturing 

jobs from 2000 to 2007, prior to our Great Recession. He found that 

it is not just increasing productivity or automation driving the job 

losses. 

The Information Technology Innovation Foundation similarly attributes significant job losses to trade pressures, and not primarily 

to automation or to immigration. Anyway, so my question is to you, 

Mr. Paul, you mention in your testimony, a couple times, that the 

trade deficit with China since its entry into the WTO has quadrupled, from $83 billion to $347 billion, a number I referred to before. How would you reduce the trade deficit with China? And how 

would it impact U.S. GDP? 

Mr. PAUL. Mr. Pascrell, thank you for the question. It is a question that I think the past couple of administrations have struggled 

with. 

First, I think we have to look at the terms under which China 

entered into the WTO. And by all accounts, they were extraordinarily favorable to China. And the commitments that China 

made to market reform, to adhere to international trade standards, 

have been widely ignored. It has led the current U.S. Trade Ambassador Bob Lighthizer to say that the types of challenges that China 

presents cannot be well addressed through normal WTO mechanisms, they are so broad in scope. We hear the central planning. 

With respect to the steel industry, the largest steel companies in 

China are run by the government. There is systematic violation of 

intellectual property rights. And there is, you know, the annual list 

of trade barriers that the U.S. Trade Representative puts together 

is the stick. Mr. Marantis and the Obama administration, the current USTR, could spend all day filing cases against China. There 

are plenty of them to be filed. 

64 

I think the challenge is that this is going to take greater leadership and is going to take a priority from this administration to seek 

that kind of deficit reduction. You know, we have seen very specific 

commercial deals that have been beneficial or could be beneficial to 

narrow aspects of American industry. But to get an economy-wide 

effect, and one that is going to have a significant impact on reducing the trade deficit, is going to require China to purchase more 

U.S. products and is going to have to reduce China’s industrial 

overcapacity, which is present not only in the steel and aluminum 

industries, but also in semiconductors and other advanced technology products, in clean energy products, and in other types of 

manufactured goods. And it is going to take a serious negotiation, 

one that we haven’t yet seen so far. 

Mr. PASCRELL. Well, we are relying on China to do our bidding, 

help us in our bidding in terms of the North Korean crisis. If you 

remember the commitments that were made about trade with 

China, we forgot them as soon as we asked China to do its job, live 

up to its responsibilities. That has not happened. They may have 

tried, but it hasn’t happened. 

We need to take very careful—I just leave this question in the 

air right now. Should we use trade as a bargaining chip in terms 

of international relations, particularly in times of conflict, as exists 

right now? We will come back to that maybe. Thank you very 

much. 

Chairman REICHERT. Thank you. The gentleman’s time has expired. Ms. Jenkins. 

Ms. JENKINS. Thank you, Mr. Chairman. And I thank the panel 

for joining us today. All across my district there are rural families 

who either own or work in small businesses and ag operations that 

are substantially dependent on exporting their products that they 

produce, raise, or grow. Kansas is called the Wheat State for good 

reason, but we also have much more. 

Soybeans and corn fields also dot our landscape, and our expansive grasslands provides some of the best pastures and ranges in 

the world to produce the highest quality beef. Therefore, successful 

trade agreements to ship out and add value to their products are 

one of the top priorities expressed by my constituents in conversations. 

For Kansas wheat growers, new trade deals in Vietnam, the Philippines, and Indonesia would be ideal. For cattle producers, Ms. 

Sullivan, spoke a moment ago about China and Japan. It is clear 

that the barriers to access these markets have detrimental aspects 

to so many families across Kansas and the Nation. 

So Ms. Sullivan, to you, with regards to the U.S.-Korean trade 

agreement, or KORUS, can you give us a sense of the challenges 

that farmers and ranchers would face today in accessing the South 

Korean market if KORUS and the recent gains made in the region 

were nonexistent? 

Ms. SULLIVAN. Ms. Jenkins, thank you for the question. 

Again, as I mentioned in my testimony, I personally visited 

Korea and Japan, both, in May. And it was really refreshing, as a 

producer, and that is where I derive my entire livelihood, to see the 

demand for the product that I and your constituents produce. So 

65 

what would be troubling to me as a producer is, quite frankly, from 

any of the barriers where a tariff is concerned. 

Right now we enjoy an 8 percent or so tariff within KORUS. And 

what would happen with the elimination, it would jeopardize all of 

that, and in fact increase our tariff to 40 percent. I mentioned earlier that we saw a tariff increase in Japan take place from 38.5 to 

50 percent. If we were to see that, it would significantly—I mean 

just logic tells you what happens if families, Korean families are 

threatened with increased costs, they are going to find alternatives. 

And what we have been able to do as producers is actually build 

such a strong demand for our product just recently. 

I will give you a case in point when I was there. Costco has a 

huge presence in Korea, and have recently converted all of their 

beef from Australian beef to U.S. beef. And I visited a Costco, the 

largest in the country, in one of the suburbs of Seoul, and I 

watched as consumers stood six, seven deep at the meat case, buying up U.S. beef. And they have to refill their meat case six times 

a day. So it is a tremendous market for us. 

And we enjoy that because of KORUS being in place. If KORUS 

were to go away, it really frightens me to think about what could 

happen. And again, these are items that as U.S. citizens we don’t 

consume. They have a demand for items, for cuts that we do not 

utilize in the American diet. And that automatically reduces that 

economic value of those cuts tremendously, and basically brings it 

to nil. 

So that is one of the most frightening parts about those trade 

agreements going away or any adjustment being made, is that actually we will see that market disappear. And it would significantly 

impact all of our American ranchers. 

Ms. JENKINS. Thank you. Helpful information. Mr. Chairman, 

I will yield back. 

Chairman REICHERT. Mr. Kind. 

Mr. KIND. Thank you, Mr. Chairman. I want to thank the witnesses for your testimony today. Mr. Chairman, hopefully we can 

tee up some more hearings like this to explore U.S. trade policy 

and where we go from here. 

Just for the whole panel, out of curiosity, do any of you think 

that now is an appropriate time for us to be withdrawing from the 

South Korea trade agreement? I would like the record to reflect no 

hands are up. What about this being the appropriate time for us 

to be withdrawing from NAFTA trade agreement? Again, no hands 

are raised. 

Does anyone on the panel believe that it was appropriate or wise 

for us to unilaterally withdraw from the Trans-Pacific Partnership 

agreement without further consideration of those terms in the 

agreement? Mr. Paul, you want to be recognized. Yeah, go ahead. 

Mr. PAUL. Yeah. I would just say from a manufacturing perspective, it was lacking. There were no enforceable currency disciplines. 

It was projected to increase the manufactured goods trade deficit. 

That was the Peterson Institute as well as an ITC estimate, and 

to lose manufacturing jobs. As it stood, I didn’t think it was a well 

negotiated agreement. 

Mr. KIND. I appreciate that. With the chairman’s leadership, he 

and I both submitted a bipartisan letter that we worked on that 

66 

we sent to the administration, saying that it would be a terrible 

idea for us to be withdrawing from South Korea, although there 

are certainly areas of improving that agreement. 

And many of us are quite concerned about the loss of market 

down in Mexico in particular if we were to withdraw from NAFTA 

at this time. But what is frustrating is the whole perception of 

trade right now. It is more than just goods and products crossing 

borders. But I believe that when that does happen, armies don’t. 

It is an important tool in our diplomatic and national security arsenal. 

And when we vacate that space, I think bad things happen for 

our country and, quite frankly, for the entire global trading regime. 

I mean since our withdrawal from TPP, for instance, the EU now 

has stepped up their negotiations with Mexico, with Indonesia, 

Japan, has made overtures to Australia and New Zealand. The EU 

has concluded FTAs with Vietnam and Canada. 

They have established geographic indicator standards now, which 

may be tough for us to try to go back and revise, which will be detrimental to our agriculture producers. This is what is happening. 

The rest of the world is moving on without us. And we have created a vacuum. And Mr. Goodman, you have pointed out that 

China is more than happy to step in with the Regional Comprehensive Economic Partnership. 

In fact, during the whole course of TPP negotiations, China negotiators were following on our heels telling these same countries we 

were talking to, don’t listen to those crazy Americans. They are 

asking too much of you. Environmental standards, labor standards, 

human rights standards, they are crazy. Come to us, because we 

don’t care about any of that. 

How withdrawing from that right now puts us in a stronger position, especially in the fastest growing economic region in the world 

today, the Pacific rim area, I fail to comprehend or understand. So 

working with all of you, we have obviously got a stake in the whole 

trade, we are trying to figure out a way how to get back in the 

game again. And it is difficult when you have a current President 

and the administration threatening to withdraw from a lot of crucial trade agreements now, but without any real clear objective or 

end goal with any of this. And it is very, very frustrating, but also 

a very dangerous game that is being played. Because the more that 

we recede and pull back in isolationism, I think the world is in a 

worse place then. And there is more at stake than what we are—— 

Mr. Paul, I appreciate your concerns about manufacturing, the 

impact TPP might have. But right now we only have 20 trade 

agreements with nations around the globe. There are 198 of them. 

And of those 20 countries, we are actually running a trade surplus 

in manufacturing, in agriculture, in services. And I said for some 

time that it is the countries that we don’t have a trade agreement 

with that gets us into trouble. That is a race to the bottom, with 

no standards, no values, no rules to enforce, no disciplines to enforce. It is just a race to the bottom. And no one should be happy 

with that. 

But we live in a very dangerous climate right now. And there is 

economic anxiety at home, because the easiest political card to play 

is blame the foreigners, blame the immigrants, blame trade agreeVerDate Sep 11 2014 08:40 Mar 07, 2019 Jkt 033656 PO 00000 Frm 00070 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33656.XXX 33656
67 

ments, and somehow all of that is going to solve the problems that 

we face. And that is going to be a problem as we move forward too. 

Mr. Marantis, we will continue trying to work and trying to resolve the electronic payment issue. I know the chairman and I have 

teamed up, and others, to try to resolve that with Vietnam. I am 

afraid we have given up tremendous leverage by withdrawing from 

TPP. But as you pointed out, it is not just Vietnam, it is China, 

it is South Korea, it is other nations too now trying to establish 

their de facto monopolies. 

So leading up to the Vietnam meeting, I would be happy to continue to work with you and all of you on the panel as far as what 

more we need to be doing with the administration to make sure we 

are at the table and we are ultimately getting a fair shake on all 

that. 

So I guess that was more of a statement than a question, but I 

appreciate your testimony here today, and look forward to working 

with you in the future. 

Thank you, Mr. Chairman. 

Chairman REICHERT. Thank you, Mr. Kind. 

Mr. Paulsen. 

Mr. PAULSEN. Thank you, Mr. Chairman. Let me also just 

thank all of our witnesses for being here today. 

And it is a given that our trade agreements need to eliminate 

tariffs faced by our exports. Equally important, though, as many of 

you have mentioned, is the need to negotiate the right rules. And 

in the modern economy today it is critical that we address issues 

like restrictions on data flows and data server, localization requirements that so many governments have used to limit the availability of our companies to do business, ability of our companies to 

do business. 

And Ambassador Marantis, just to follow up a little bit, you 

talked about Korea, Vietnam a little bit. Can you elaborate a little 

bit more for Visa or for other electronic payment service providers 

on the importance of limiting those barriers? I mean, just elaborate 

just a little bit more. 

Mr. MARANTIS. Sure. I mean, you point to some very real challenges we are facing in the region, including data onshoring requirements. But I think as the committee thinks about agreements 

and being modernized, for us, from the electronic payment services 

perspective, I think three provisions are key. 

Market access, obviously, is important. Because you can’t have 

anything else without getting into a market. But, second, and 

equally as important, is national treatment. We are facing significant level-playing-field challenges where governments are deciding 

to favor a local competitor over U.S. companies. Vietnam is a great 

example, Indonesia, Korea. So national treatment is very, very important. 

And then, I think the third area, Mr. Paulsen, is what you have 

identified, are some of the provisions that were in the TPP electronic commerce chapter. The digital trade provisions, are enormously relevant for us. Having free flow of data. We can’t offer our 

services without being able to do that. We are seeing increased 

data localization requirements. So addressing that issue will help 

a company like Visa be able to provide their services on a crossVerDate Sep 11 2014 08:40 Mar 07, 2019 Jkt 033656 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33656.XXX 33656
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border basis and be as efficient as possible. So I would point to 

those three as, at least for us, the big three. 

Mr. PAULSEN. And, of course, for those of us that are watching 

the modernization discussions now on NAFTA, digital trade didn’t 

exist decades ago when it was first put together. And so we want 

to make sure that a chapter on digital trade is included that recognizes e-commerce and those challenges that ag producers use, manufacturers use, minors use in today’s world. 

I want to follow up, Mr. Goodman, I will start with you. Yesterday I met with a company in Minnesota, and they are doing a lot 

more exporting. But they identified a challenge they have with regards to streamlining customs clearance. And they just brought up 

an example. They got a product that is registered for the first time 

in another country, and they don’t think it should be necessary to 

file additional product registrations with that regulatory agency 

over and over. 

Can you just talk about how important it is to have a streamlined customs clearance process in place in the context of trade 

agreements? 

Mr. GOODMAN. It is enormously important. I don’t have the 

statistics off the top of my head, but it has a real impact on actual 

trade flows, significant additional cost imposed at the border from 

those procedures. And this is, again, an example of something the 

TPP was trying to take on. There was a good chapter on these procedures that helped to eliminate a lot of those unnecessary regulations and to put disciplines on how you could use custom procedures or not use it as a barrier to trade, de facto to slow trade and 

leads to the bigger point about—and I just want to echo your 

point—about digital and what Demetrios said as well. 

You know, this was something that I would say almost more 

than any other chapter was absolutely critical part of TPP, the digital economy chapter. The Obama administration, at the end of the 

administration, created a list of what they called the digital two 

dozen, of two dozen of the commitments that were made that, you 

know, a person like me who is not an expert in digital, an ordinary 

citizen could look at the list, see no duties on digital trade, free and 

open internet, free data flows, no localization requirements, a simple list which you understand. 

The U.S. has a huge stake in ensuring that these rules are the 

ones that govern international digital commerce. And if we are not 

going to do it in TPP, we need to find a way back to that leadership 

on those issues. And I would say if we can do that in NAFTA, if 

we can put a digital chapter equivalent or similar to the TPP chapter, I think that would be great. 

Same thing on the customs procedures. I think those are the 

kinds of things that there is an opportunity with renegotiating 

NAFTA to try to import—some people call it the organ transplant 

strategy, which is to take the best parts of TPP and transplant 

them into NAFTA. That would be encouraging. Locking away or 

putting on onerous, unrealistic burdens that Canada and Mexico 

are not going to agree to, I think, would be a real mistake. 

Mr. PAULSEN. Thank you, Mr. Chairman. I yield back. 

Chairman REICHERT. Mr. Doggett. 

69 

Mr. DOGGETT. Thank you, very much, Mr. Chairman. I commend you on conducting a hearing. It is something we have not 

had in the tax policy subcommittee or in the full committee concerning the Republican tax bill, which, as Mr. Paul indicated, is apparently going to be coming up here before some trade matters are. 

Indeed, we have been here for the entire month of September. 

We will have soon, with next week’s recess, have gone through half 

of October, and not one expert, not one business with the varying 

impact on business, has appeared before any subcommittee or the 

full committee to talk about taxes or the impact of the Republican 

tax plan on business. 

It would appear that the approach will be the same jack-in-thebox approach that was used in the failed attempt to destroy 

healthcare coverage for millions, and that is to pop out a bill without ever having a thorough public discussion of its impact on the 

American economy and the American taxpayer. 

But, having an appreciation for the fact that we are having a 

hearing today does require some consideration of what the hearing 

is on. And, with all due respect to the chairman and the witnesses, 

this seems to me to be the wrong hearing at the wrong time. Yesterday, President Trump said that NAFTA—and I quote, NAFTA 

will have to be terminated if we are going to make it good. Otherwise, I believe you can’t negotiate a good deal. While our trade relationship with Vietnam, and Korea, and the various countries in 

Asia, is important, we just had the prime minister of Canada, Mr. 

Trudeau, remind us that America sells more goods to Canada than 

it does to China, Japan, and the United Kingdom combined. And 

Morning Trade is quoting one business representative as saying 

this is absolutely headed for a disaster. This is an absolute crisis. 

The New York Times is reporting, while we have been meeting, 

about the far-reaching consequences for the economy for so many 

businesses and the disruption of supply chains if President Trump 

proceeds to terminate NAFTA, which he is empowered to do. 

It is particularly surprising that we would be having this hearing 

about Asia while Mexico and Canada and our trade with them and 

so much is at stake. But whether it is Asia or NAFTA, we have 

no one here from the administration who is been asked to come 

and explain the administration trade policy. That may be because 

the administration can’t seem to agree on its trade policy any more 

than it can agree with fellow Republicans about its foreign policy, 

as Senator Corker has acknowledged. 

It would seem to me that the importance of having the administration come here on NAFTA is emphasized by the fact that when 

NAFTA was first approved, we had 8 days of hearings on it. We 

had 8 appearances by administration officials to explain the administration position. And I think it is very important that the administration be summoned here to explain its trade policy, whether it 

is Asia or perhaps much more important what it is doing with reference to NAFTA and what the consequences of terminating 

NAFTA will be on one sector of our economy after another and how 

many job losses will result from it. 

I very much favor reform of NAFTA. There are many things that 

need to be changed in it after two decades. But the idea of termiVerDate Sep 11 2014 08:40 Mar 07, 2019 Jkt 033656 PO 00000 Frm 00073 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\33656.XXX 33656
70 

nating or repealing it will have far-reaching consequences in Texas, 

and it will have far-reaching consequences across our country. 

I think that for the subcommittee and for our full committee to 

not summon the administration officials here to explain their position on NAFTA and on other aspects of our trade policy really just 

empowers President Trump to make this very significant blow 

against NAFTA. 

Mr. RICE. Would the gentleman yield? 

Mr. DOGGETT. On your time. 

Ms. Moreland, let me ask you. What effect will terminating 

NAFTA have on your business? 

Is it good or bad? 

Ms. MORELAND. Thank you for the question. 

With respect to NAFTA, it is an area—it is an agreement that 

would least impact us depending on the extent of change or reach. 

Mr. DOGGETT. Thank you. 

Ms. Sullivan, how does it affect your business? 

Ms. SULLIVAN. Mr. Doggett, it is deeply concerning for our industry, for the beef industry. It would have a significant impact. I 

believe that—and I am speaking as a producer. 

Mr. DOGGETT. Sure. 

Ms. SULLIVAN. So it is my personal opinion alone. I think that 

there are some items, as you had mentioned, that are worth readdressing. But for the beef industry it would have a significant 

impact. 

Mr. DOGGETT. Thank you. And I will be glad to yield on your 

time. 

Chairman REICHERT. The gentleman’s time has expired. 

Mrs. NOEM. Thank you, Mr. Chairman. 

And I would like to reiterate that all of our recent conversations 

with the administration, with all the members on this committee, 

with the U.S. Trade Representative, indicate that we are modernizing NAFTA, that we are not eliminating NAFTA. Nobody is talking about throwing it out, that the discussions have been on what 

can we improve while we continue to negotiate on other bilateral 

trade agreements. 

And so I want to thank all of ours witnesses for being here today. 

I know it is never easy to take this much time away from your 

businesses and your schedules are tight. And so I do appreciate you 

being willing to come. 

Ms. Sullivan, I related to you because I am from South Dakota, 

and I spent decades raising cattle in a commercial cow/calf operation and then we backgrounded them, as well, for the market. So 

I appreciated your testimony today. And I also recognize the concern that you showed on tariffs, because we also were crop farmers 

as well. And so we were in several different areas of caring about 

making sure that we could export our food and make sure we not 

only take care of this country’s food supply but we feed many, 

many other people as well. So thank you for being here. 

In fact, beef production is so important in our State of South Dakota that there is actually more cattle than there are people. So it 

is incredibly important to our economy and to our State. And so I 

thank you for making those comments. 

71 

I did want to ask you, one of the concerns that I have had, is 

while we revisit current trade agreements such as NAFTA, we are 

going back and looking at South Korea, that we could lose market 

access. We are seeing that now as Australian beef is flowing into 

Japan. And they do have a trade agreement there, and it is sucking 

up more market access. And so we not only have the tariffs that 

impact that, but this lost market share that we are having, as well, 

because we are banned from the country. 

So I was wondering if you had a perspective on that as to impact 

on the industry that you have seen as well on market access and 

the concerns you may have if we don’t aggressively pursue these 

bilateral agreements while we are renegotiating important agreements like NAFTA? 

Ms. SULLIVAN. Ms. Noem, thank you. I appreciate the question. 

You know, from my perspective, it is hard to find more free market 

capitalists than agriculture producers. 

Mrs. NOEM. Yeah. 

Ms. SULLIVAN. And what we do is we produce a product that 

needs to be consumed. I mean, we like to say that agriculture produces the food and fiber that feeds the world. And that is what we 

do. 

We need access to those markets and without barriers. Because, 

without question, we produce the safest, most consistent, nutrientdense form of protein, in our opinion—although I do love seafood. 

I am from the coast, believe it or not. But we do. In the world. 

And all we need is access. And that is what we seek more than 

anything. Because, again, we are family farmers. Everyone likes to 

talk about corporate farms this. Well, that is not the case. Families 

are producing these animals that are feeding everyone. Families 

are producing those crops. 

I am actually originally from Galveston, Texas. And we have the 

Port of Galveston, which is a primarily agriculture export facility 

there along the Gulf Coast of Texas. And so we have a lot of your 

grain from South Dakota that has gone out of the Port of Galveston. Our economies, my local economy in my hometown, exists 

because of exports. 

So the trickle-down effect, if you will, of market access is tremendous where the U.S. economy is concerned. Again, this is my personal opinion. I have a lot of them. So I am willing to share them, 

if only asked. But having access is so critically important because 

we can provide what the world needs to feed and clothe all of our 

neighbors. We just need the ability to get that product there without barriers. 

Mrs. NOEM. That is great. And that is exactly the discussion 

that I had last week with the U.S. Trade Ambassador Lighthizer 

was the fact that we appreciate that you are modernizing these 

agreements. We appreciate that you are fixing different issues that 

have been in there. He indicated that he felt agriculture usually 

comes out pretty well in agreements. And, you know, I said that 

we have at times, but then we face regulatory barriers once our 

grain and beef hits the border of that country as well. And so we 

need to pay attention that we don’t get shut out of those markets 

by regulatory actions that may happen from those foreign governments. 

72 

But he indicated that he understood the value of agriculture. 

But, also, what I drove home to him was the speed that he needs 

to use to negotiate these bilateral agreements. Because every single 

day other countries are looking to fill those markets, and we can 

do it better than anybody else. So thank you for being here today. 

With that, I yield back. 

Chairman REICHERT. Mr. Levin. 

Mr. LEVIN. Thank you, and welcome. I am glad you are here. 

Let me just say a few words if we are talking about Asia and the 

Korean free-trade agreement. 

Mr. Goodman, as I read your testimony, I had these recollections 

and feelings. I was one who helped to negotiate the Korea free 

trade agreement. We attempted to strengthen it, and, at times, the 

administration, we had to renegotiate it or redo it. The Obama administration was willing to settle for something less than some of 

us, both in the labor movement and the auto industry, myself, 

thought essential. So they returned, the Obama negotiators, to try 

to strengthen the agreement. The problem is in some respects it 

was strengthened. It was far from perfect. And I think the rule of 

origin was defective. 

But if you look at what has happened since then in the industrial 

sector, it is woeful. And those of you who support expanded trade 

need to help focus on the problems we have in making agreements 

real. Because otherwise the public, and I think rightfully, thinks 

that we are putting together something that may look okay on 

paper but in terms of their real lives is truly defective. 

And one of the auto companies invested a lot in trying to help 

put together the agreement. And they invested a considerable 

amount in establishing places, auto dealers in Korea, to try to 

break through. It has been frightfully difficult. 

So those of you who are in the agricultural business who want 

to point to where there has been a breakthrough, also, I think, 

need to look at other areas where there has been a stone wall. Because, otherwise, any plea to negotiate further trade agreement 

really hits a wall with good parts of the public. 

The same is true, really, of currency. You know, some of us have 

tried endlessly to get past administrations to step up to the plate 

on currency. They never really have. And so now you have—not 

China. It isn’t manipulating its currency. But it did frightfully. And 

we let it happen, and it lost millions of jobs. 

Korea has been manipulating their currency. And there is no outcry. And I meet with businesspeople in Korea who are part of the 

U.S.-Korea business roundtable or entity, and they just pull back. 

So what was missing, I think, in this testimony, was a sense of urgency. 

And so let me also say something about NAFTA since we are 

talking about Asia. Mexico has this industrial policy, and we have 

had no hearings on it, which essentially attract industry from the 

United States to go to Mexico, keeping wages frightfully low, a dollar, a dollar and a quarter an hour. And it is not only true of automotive where there have been movement of plants to Mexico, but 

I was reading about the washing machine industry. And the two 

large Korean producers have now moved increasingly their production to Mexico. 

73 

And I asked someone in Mexico to check. And they are paying 

a dollar and a quarter an hour to their workers. And the American 

company, Whirlpool, that pays a decent wage, is now in danger of 

losing its production capacity because of a failure to have an honest 

discussion, here and elsewhere, about the key problem with the 

original NAFTA agreement. 

So I just want to finish my 6 seconds to urge that everybody who 

thinks expanded trade can work needs to help out pointing to areas 

where it isn’t working. Otherwise, you won’t have credibility. 

Chairman REICHERT. Thank you. 

Mr. Holding. 

Mr. HOLDING. Thank you, Mr. Chairman. 

The Investor-State dispute system has been in the news lately, 

and we have all seen that. I have always considered ISDS as an 

important part of our trade agreement that helps ensure that U.S. 

companies have a meaningful remedy if they are treated unfairly 

by a foreign government. That is why, during the TPP negotiations, 

I was adamant that no sector or part of the economy should be 

carved out of ISDS. 

So I am going to address this to the panel if any of you-all can 

elaborate the importance of ISDS in your sector or things that you 

have seen with ISDS that are important and relevant that you 

might want to bring forward. 

And, Mr. Goodman, do you want to start? And we will just go 

down the line. 

Mr. GOODMAN. Well, the Investor-Dispute settlement provisions are obviously one of the most controversial in these new 

agreements. And there is—you know, I mean—I think there is a 

legitimate argument about what the best way is to protect investors. But these provisions were set up really with our investors’ 

challenges in challenging markets. Not so much the ones—the advanced markets that we are dealing with in—you know, some of 

the bigger economies in Asia. But for countries where our investors 

are subject to arbitrary and unreasonable treatment of our investors, they are important mechanisms that allow our investors to 

get their rights enforced. And, so far, there have been no cases in 

which the United States has been subject to a finding that was, 

you know, adverse to us. So I think it has been shown to be helpful 

to our interests. 

But it is certainly something that has been a subject of a lot of 

scrutiny. And I think, frankly, as an analyst, I think there is a set 

of discussions that need to be had about the best way to do this 

investor protection and future agreements. 

Mr. HOLDING. Sure. 

Ms. Sullivan, in your sector of the economy have you had any 

dealings with the ISDS? 

Ms. SULLIVAN. It is not really something that we have confronted just on that regard. It was more than anything the tariffs 

in particular. But as far as just the investor protection mechanisms, it wasn’t necessarily a threat that we were really—discussed 

as a real—something that really put us in jeopardy very much. 

Mr. HOLDING. Good. 

Mr. Marantis. 

74 

Mr. MARANTIS. Strong investor protections are extremely helpful. Let me give you a live example. We own our entity in Indonesia. We have been told by the bank of Indonesia that if you want 

to continue to process domestic payments in Indonesia, you will 

have to divest—we will have to divest 80 percent of our ownership 

to a domestic Indonesian entity. So we don’t have an investment 

treaty with Indonesia, but that is an example of a situation where 

strong investment protections could help. 

Mr. HOLDING. So let’s just explore the situation that you are 

facing there a little bit. What recourse do you have without ISDS? 

Where are you turning to, the Indonesian courts? 

Mr. MARANTIS. We have been working very closely with the 

U.S. Embassy in Indonesia which has been enormously helpful. We 

have raised the issue with the foreign business community in Indonesia. We are actually starting to make some headway, but we 

don’t have a specific trade tool to rely on other than the trade and 

investment framework agreement, that we have with Indonesia, 

which provides for bilateral dialogue between the two countries. 

Mr. HOLDING. So if the advocacy section of the embassy isn’t 

able to make any headway on the diplomatic front and you ultimately had to go to Indonesian courts to try to protect your interests there, what are your lawyers telling you, if you would like to 

divulge, as to your chances in Indonesian courts? 

Mr. MARANTIS. Sir, I am not sure. I don’t know Indonesian law 

well enough, but I can look into that and get back to you. 

Mr. HOLDING. All right. Ms. Moreland. 

Ms. MORELAND. Of course dispute resolution is something of 

great interest anywhere that we have investments in ensuring that 

there is a structure to be able to support any elevated dispute resolution would be important to us, but it is nothing that is an immediate threat. 

Mr. HOLDING. Thank you. Mr. Chairman, I yield back. 

Chairman REICHERT. Thank you. 

Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. 

We keep hearing that looking at deficits is not necessarily a good 

way to evaluate trade policy. Let me ask each one of you, perhaps 

beginning with Mr. Goodman, what should we be looking for in 

trade policy as benefits to this country, especially job creation and 

income? 

Mr. GOODMAN. I think it is legitimate to look at deficits if we 

are doing that on a global, macro basis. It is the question of whether it makes sense at a bilateral basis with individual countries. Because some of that reflects just patterns of supply chains and the 

way things are produced in various markets, and then the last 

country to ship the product to the U.S. gets credited for the full 

value of the export to the U.S. So that can often look like—that will 

skew the deficit for that country, or surplus for them and deficit 

for us. 

But if you look on a global basis, I think there is a real issue, 

which is that our current account surplus, which is the global position, overall, of our trade, is a—you know, is a result of the way— 

is a combination of our savings and investment, how we save and 

invest in our country. And, frankly, we don’t save enough to cover 

75 

the investment we need. And so that creates a fundamental problem. 

And then there are practices in other countries and some have 

been alluded to, like currency manipulation, which has been a 

problem historically in a lot of other countries that has skewed 

these overall deficits. And I think those are issues that we should 

be legitimately looking at. 

But, you know, the bottom line is that trade is not, you know, 

zero sum. There are benefits that are not just measured by a bilateral trade deficit, and we shouldn’t be too focused on that in my 

opinion. 

Mr. DAVIS. Ms. Sullivan. 

Ms. SULLIVAN. Yes, sir. In our industry, we have really found 

that trade agreements actually have given more predictability, if 

you will. We have been able to secure and protect our market access better and without trade agreements in place, it is not really 

holding our trading partners accountable. It is defining how we actually work with our trading partners. And so by having bilateral 

trade agreements in place, it gives greater predictability, if you 

will, to our industry. And I think that is something that makes it 

more equitable as we move forward in trading, particularly beef, 

but any agriculture products, as far as I am concerned. 

Mr. DAVIS. Thank you. 

Ambassador. 

Mr. MARANTIS. Mr. Davis, that is a great question. I think, 

from Visa’s perspective, a really good proxy to measure the success 

of our trade policy is, do we operate on a level playing field? I think 

whether we are a payments company, whether beef, whether seafood, manufacturing, U.S. companies can compete and win wherever they are, but we need a level playing field in order to be able 

to do that. And if we can use our trade policy to push for a level 

playing field, so much the better for all of us. 

Mr. DAVIS. Ms. Moreland. 

Ms. MORELAND. Thank you for the question. 

We can’t change the fact that U.S. consumers want to eat a lot 

of shrimp. And they are eating shrimp that needs to be imported. 

Similarly, with farmed Atlantic salmon, tilapia, pangasius. So we 

just need market access elsewhere. We are providing it to everybody else here. 

Mr. DAVIS. Mr. Paul. 

Mr. PAUL. I think it is a great question, and I do think trade 

deficits are one important data point in measuring both the competitiveness of an economy and also in identifying some other barriers. 

Exchange rates. I am glad that was mentioned, because I think 

that is important. Also, countries that tend to run higher surpluses 

either have very strong industrial policies or very mercantilist 

practices without much regard for the agreements that they signed. 

And it is helpful in identifying where some of these barriers are. 

And, you know, sometimes trade deficits decline because of really 

bad reasons like recessions. And so you can’t look at it in a vacuum. 

But I am pleased that this administration is trying to take a look 

at trade deficits. I don’t know where they are going to end up on 

76 

this. But the trade deficit we have with China is not a natural occurrence. It is something when you are trying to marry a free-market economy like the United States with a State-run economy like 

China that has an aggressive industrial policy and historical currency manipulation, that is going to be the end result. And it is important to note that that does mean it displaces some production 

in the United States as a result of import competition and impacts 

jobs in the United States and job quality as well. 

Mr. DAVIS. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman REICHERT. Thank you, Mr. Davis. 

Mr. Rice. 

Mr. RICE. Thank you, Mr. Chairman. 

First, I want to respond to what Mr. Doggett said earlier. I am 

sorry he left. But, you know, it is alarming his commentary that 

we haven’t had any hearings on tax reform or on NAFTA. But the 

only problem with that is, it is just not true. We have had at least 

two full committee hearings in the last few months on that. And 

I am not on the tax policy subcommittee, but I am told the tax policy subcommittee has had two hearings on tax reform as well. 

With respect to NAFTA, I know that Secretary Ross has been 

here in closed-door meetings at least twice, I think three times, and 

once in front of the full committee. And the primary topic of discussion was certainly trade policy and NAFTA in particular. 

And I know Mr. Lighthizer, Ambassador Lighthizer, has been 

here at least once and the primary topic of discussion is on 

NAFTA. So the plain fact is we have had hearings. We are having 

hearings, and we will continue to have hearings. 

Now, with respect to the Korean trade agreement and TPP, you 

know, everybody here today has generally been decrying the demise of TPP. But, again, the plain fact of that is that both presidential candidates said it was a bad deal. Whether Donald Trump 

got elected or Hillary Clinton got elected, TPP was going nowhere. 

And the plain fact of it is the majority of the Democratic caucus 

thought TPP was a bad deal. So to sit here and complain about the 

fact it has gone away now is, you know, crying over spilt milk. 

Both presidential candidates felt we could get a better arrangement. 

And so, you know, what I want is everybody on this panel, with 

the exception of maybe one or two, agree that we need trade agreements. And I think we certainly need some form of the Trans-Pacific Partnership, but I also want to make sure that our interests 

are protected. 

With respect to this Korean trade agreement, Ms. Sullivan, you 

were saying that there is a Korean tariff on U.S. beef of 9 percent 

and Japanese of 50 percent, correct? 

And do we get any meat products from Korea? 

Ms. SULLIVAN. Not that I am aware of. 

Mr. RICE. Do we get any seafood from Korea, Ms. Moreland? 

Ms. MORELAND. Not of significance. 

Mr. RICE. I didn’t hear your answer. 

Ms. MORELAND. Not of significance relative to the other— 

Mr. RICE. Is there any tariff on Korean seafood? 

Ms. MORELAND. Coming into the U.S.? 

77 

Mr. RICE. Yes. 

Ms. MORELAND. It would only be subject to up to maybe a half 

of a percent, a set of fees. 

Mr. RICE. Okay. And so you said you have a very small reduced 

tariff quota. Correct? 

Ms. MORELAND. Correct. 

Mr. RICE. And so what is your reduced tariff with Korea. 

Ms. MORELAND. For the product form that I am talking about, 

Alaska pollock, heading got a particular category, 6,000 metric 

tons. 

Mr. RICE. And what is the tariff on that reduced quota. 

Ms. MORELAND. I have to look at my notes. 

Mr. RICE. Okay. And what is the tariff when you get passed the 

reduced quota? 

Ms. MORELAND. Thirty percent is what we—— 

Mr. RICE. Thirty percent. 

And there is maybe a half percent on their seafood coming in 

here, correct? 

Ms. MORELAND. Correct. 

Mr. RICE. And yet we are running a trade deficit, I think, of like $17 billion a year with South Korea. And you are paying a, what 

is it, 9 percent tariff. 

Ms. SULLIVAN. Eight. 

Mr. RICE. And I suspect there are meat products coming from 

South Korea, and I suspect that their tariff, if there is any, is minimal. So, you know, we have a very large market that they want 

access to like you want access to their market. 

And, you know, I don’t want to do anything to unduly disrupt 

this arrangement and these trade agreements, but it is pretty obvious to me that we can do better than this. And I personally am 

glad that the Secretary and Ambassador Lighthizer are going to 

look at this and try to make sure that the American worker gets 

a fair shake here. 

As you, Mr. Paul, pointed out. We have had 2.4 million jobs lost 

in manufacturing. Mr. Pascrell said the number was 5 million jobs. 

I think we can do a little bit better than that. I think we gotta 

make this country competitive. We need to look at tax reform as 

an aspect. Do you agree tax reform can make this country more 

competitive, Mr. Paul? 

Mr. PAUL. If it is done in the right way. 

Mr. RICE. Do you think that it could restore American jobs. 

Mr. PAUL. Again, I think a lot depends on the product which we 

have yet to see. 

Mr. RICE. Do you think lowering the corporate tax rate will help 

make American corporations more competitive worldwide. 

Mr. PAUL. Certainly having a competitive Tax Code that recognizes that we are in a global economy—— 

Mr. RICE. So tax reform, trade reform, we need to look at all 

these things, and we need to give the American worker a fair 

shake. My time is up. I yield. 

Chairman REICHERT. Thank you, Mr. Rice. 

Mr. Smith, follow that. 

Mr. SMITH. I will try. Thank you, Mr. Chairman. Thank you to 

our panel. 

78 

Ms. Noem kind of got to some of the topics that I wanted to. But 

I might ask for you to further elaborate. 

The 50 percent tariff that Japan levees on U.S. beef, ridiculous. 

It was bad even before it reached the 50 percent. And there were 

plenty of reasons to engage in a bilateral trade agreement. That 

would carry out some of what TPP may have accomplished with 

Japan. But a bilateral trade agreement, that I think there could be 

strong support for, would give us the opportunity to achieve so 

many of the same things with a major economy. I don’t have to tell 

you that, obviously, with—and that is just beef. 

And so I am hoping that we can continue to head in that direction. A lot of things happening right now with trade. But we cannot 

be distracted from getting this done. 

Ms. Sullivan, can you speak perhaps more specifically in how 

beef trade could be enhanced through a bilateral trade agreement 

with Japan, more specific? 

Ms. SULLIVAN. Well, I find—I will reflect back on Mr. Rice’s 

statements about TPP. There is no such thing as the perfect trade 

agreement. Again, this is my opinion, Kelly Sullivan. I am speaking for me. There is no such thing as the perfect trade agreement. 

But I will say agriculture would have benefitted greatly had TPP 

been pursued. It is gone. You are right. It is gone. There is no reason to talk about it anymore. 

So let’s go back to the table, and we need to aggressively pursue 

a bilateral trade agreement with our number one trading partner, 

Japan, right now. It is of tremendous urgency for our industry, not 

just for the beef industry, but for agriculture in general. And, 

again, I am just speaking from our point of view. 

You know, we went from—we were seeing a tremendous increase 

in beef imports to Japan up through July, as I mentioned in my 

opening statement. And that was prior to the tariff increase that 

was implemented. It is yet to be seen what impact it is going to 

have. Inventory levels in Japan were built to a point that we are 

still seeing absorption of that in the market. I just kind of follow, 

as a morbid fascination, a lot of these economic indicators that we 

are watching. And so we haven’t seen any adjustment yet. But, 

again, logic will tell you that if something goes from 38 and a half 

to 50 percent, there is going to be a detrimental effect. That is why 

we have to be aggressive to, again, as we said earlier, get on a level 

playing field. 

Our number one competitor is Australia. They pay 27 percent on 

Australian beef. That is—you can’t compete. Now, granted, I will 

say that the beef that we produce in the United States is far superior, as I should, because we do. But—— 

Mr. SMITH. More specifically, Nebraska beef are you saying? 

Ms. SULLIVAN. Oh, no, actually, you know, Texas beef. But, 

hey, we are all beef producers. Right? You know, I have my pin on 

with my stars and stripes. We are all U.S. beef producers. I don’t 

care. We are here to do the same thing. We are all in this together. 

But we have to appreciate the fact that Australia is our greatest 

competitive threat. We are in their sights. They are going to take 

every advantage—all of our competitors are, but I will just use 

Australia as an example—are going to take full advantage of the 

fact that we do not have any trade agreements in place, and they 

79 

are going to try to absorb as much market share as they possibly 

can as quickly as they can. And they are moving very, very quickly. 

They are nimble. 

And so we need to make this a tremendous priority. Because the 

problem is that those agreements are going to get in place, and it 

is going to be very difficult for us to get back in and recapture any 

of that market once it has gone away. 

Mr. SMITH. Well said. Thank you very much. 

I yield back, Mr. Chair. 

Chairman REICHERT. Thank you Mr. Smith. 

I want to thank all the witnesses for your testimony and your 

very clear answers to the questions that were posed to you today. 

Some very good points have been made. 

And I think just to sort of revisit some of the comments and discussion that occurred, just to follow up on some of Mr. Rice’s comments, not only have we had hearings on some of the issues that 

Mr. Doggett referred to, but we have also, all of us on this dais, 

and members of the committee, have opportunities to meet with 

members of legislative branches from all of these countries. They 

are visiting us almost daily. 

The Canadians have been very active in visiting with all of us, 

especially those of us who are on this committee. The prime minister today spent an hour with the full committee in discussing 

some of the issues that we talked about today. And even though 

the title of this hearing has been Asia-Pacific, we have had discussion about NAFTA. This all ties together as it relates to all of you 

and the businesses that you represent, and the thoughts that you 

represent around trade and around the economy that it creates, 

and the jobs that it creates here in the United States. But we also 

know that there are improvements to be made and especially when 

we look at Korea. There are some concerns there with implementation. 

So I think that, you know, in highlighting some of the things 

that haven’t been implemented in agreements that we have made, 

going back and reviewing and taking a new look at NAFTA and 

Korea, I think is a good exercise. But, on the other hand, as youall know, and as some of you have said today, we cannot allow 

much more time to lapse in creating opportunities to have other 

agreements. And especially when you look at Japan, as has been 

mentioned, a great friend and trading partner, it is critical that we 

keep that open market to our products. 

Also, looking at Vietnam, we have got to move forward quickly 

on these bilateral agreements so that our industries, our ag industries, manufacturing, et cetera, services, have the opportunity to 

compete fairly across this world, sell their products, create more 

jobs, and raise wages here in the United States. All those things 

happen if we are able to sell our products. When we sell products, 

we have to make more products. Right? 

So thank you, again, for all of your testimony. Thank the members for their questions. 

And as just a reminder, be advised that members will have 2 

weeks to submit written questions to be answered later in writing. 

Those questions and your answers will be made a part of the formal hearing record. 

80 

Our record will remain open until October 25th, and I urge interested parties to submit statements to inform the committee’s consideration of these issues discussed today. 

Committee is adjourned. 

[Whereupon, at 3:46 p.m., the subcommittee was adjourned.] 

[Member Questions for the Record follows:] 

81 


Insert 33656A.048

Responses to Questions for the Record 

Matthew P. Goodman, 

ReJJresentative Patrick Meehan 

House Ways and Means Committee, Subcommittee on Trade 

November 9, 2017 

J. Chinese Predatory 111\'CSfrnent 

U.S. trade relationships in the Asia .. Pacific region are simJlly dominated by China. China 's 

theft of intellectual property and offensive cyber capabilities ha,•e brought negath'e 

attention and political pressure on Chinese moth•es in investing in the United States. 

Chinese companies-<tften state owned and/or financed- flood the market over long 

periods of time to gain market share, with little concern about earning a profit. They 

undercut existing American producers., gain market share and destroy existing American 

jobs. Can you summarize Chinese .. predatory ilwestment" i11 the United States in critical 

sectors sut h a s energy, chemic.als., defense and tec.hnotogy and how these targeted 

investments fit into a broader ruuionAI stratetp' by China? 

Chinese investment in the United States has risen dramatically in recent years. According to data 

from the Rhodium Group. inflows of foreign direct investment from the People•s Republic of 

China grew over 200 percent in 2016 compared to 2015, reaching a record high of $46.2 billion. 

which was more than the preceding th.ree years combined. to the first three quarters of2017. 

foreign direct investment from China has declined especially in announced new mergers and 

acquisitions, from last year's record level. Chinese investment has historically been largely 

concenrrated in real estate , information and communic-ation technology, energy, and agriculture, 

though investment across a broad range of sectors has expanded in recent years. 

The recent surge in Chinese inbound investment is driven by various considerations. ranging 

from macroeconomic to strategic. First, as economic growth in China has slowed, Chinese 

companies have looked abroad for higher returning investments, inc luding in the United States. 

Other macroeconomic factors a lso motivate Chinese investment, with many Chinese companies 

and wealthy individuals seeking investments abroad, for example, in real estate, to hedge against 

local c urrency risk and/or high local asset valuations. 

Increasingly, the growth o f Chinese investment in the United States also appears to be driven by 

China •s strategic goal o f becoming "the world•s maio.r science and technology oower" a goal 

articulated by Chinese Pre-sident Xi Jinping and enshrined in plans such as Made in China 2025. 

A key element of this strategy is the acquisition of strategic a ssets abroa ~ panicularly in the 

technology sector, backed by the large financ ial resources o f the state. Some oftltese acquisitions 

appear designed to suppon the growth of China's national champions and contribute to dte 

country's military moderni7.ation. Separately, China's acquisitions in the agriculture sector are 

Page I 
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Insert 33656A.049

aimed at helping the country maintain food security for its growing population, as consumption 

per person continues to expand. 

2. Chinese Investment Tactics 

l:low do you believe the Chine~ are adapting to the new political environment when 

im'tSting in the United States? Has this caused China to shirt tactics? 

Growing concems in China about the pace of capital outflows and the underlying healtlt of the 

Chinese economy? combined with a growing; wariness of Chinese investment in the United States 

have contributed to a shift in tactics in China's overseas investment strategy. Beijing announced 

a series of new rules and guidelines last summer to rein in ••irrational" overseas acquisitions in 

sectors ranging from re-al estate to gambling to professional sports teams. These guidelines 

appear to be targeted at curbing capital outflows as well as addressing domestic economic 

concerns in China. Chief among these concerns is financial stability, where mounting debt in the 

non·financial corporate sector has reached 166 percent of GOP. Beijing believes a ponion of this 

debt buildup is related to the foreign acquisition spree. 

As relates to mechanisms for investing in the United States, China has increased its allocations to 

private equity (PE) and venture capital (VC) firms, which in tum, increase its indirect economic 

interests in PE and VC portfolio investments, and exposure to technology sectors in particular. 

China has also used special purpose vehicles (SPV) to channel its investment, and in at least one 

instance, the use of an SPV was allegedly used to hide the source of capital as Chinese for a 

foreign acquisition. 

3. Chinese Greenfield Investments 

Can you summarize the Chinese strategy of pushing state owned and financed domestiC' 

champions to make g:reenfield im•estments in the United States and the potential downside 

impacts it may bring to existing American companies? 

Greenfield investments refer to investments where the enterprise value is developed "from the 

ground up .. - for instance through research and development- rather than acquired by the 

investor. To the extent China uses .. state owned and financed domestic champions" to make such 

investments in the United States, the practice likely lowers the cost of capital for the investor. 

Unlike many .. stan·up .. vennLres, which typically do not have recurrent revenue streams to fi.and 

operations, a greenfield investment supported by a state actor may not face binding financing 

constraints; as a result, such a ve-nture may have greater flexibility in building its operations, 

including greater flexibility to attracc high-cost talent. The-refore, state-financed Chinese 

companies can our bid their compecitors- including U.S. finns- in the-United Stares and 

elsewhere for talent and other inputs such as real estate. That said, greenfield investments, like 

other forms of foreign investmem, c<ut also bring significant benefits to tbe U.S. econo1ny by 

fueling growth, in,tovation, and job creation ht the United States. 

4. CFIUS Authorities 

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83 

f 


Insert 33656A.050

Do you believe the U.S. 1>rocess for ''e«ing sensiti\•e foreigr' acquisitions of U.S. assets 

through CFIUS is adequately addressi ng these concerns? Should CJifUS authority be 

broadened to include greenfield inves-tments in the energy, chemical, defense and 

technology sectors? Is there anything more the U.S. could be doing in the trade space to 

combat China's negati,•e and growing influence? 

Based on information available to me as someone outside the fonnal CFIUS process and 

therefore not privy to classified information, I believe the CFI US process, for tbe most part, 

works well in striking an appropriate balance between maintaining the general openness of the 

U.S. investment climate while protecting U.S. national security against threats from specific 

transactions. The flexibility of the CFIUS process, which gives the Committee's staff and 

member agencies significant discretion. paired with its dedicated focus on national security has 

proven effective. Both characteristics should be preserved in any new legislation. 

That said, it may be appropriate to consider modifications to the CFIUS process that would 

suppoo the Commiuee•s ability w rnollitor irlvestments in stnuegic sec.tors that may be evading 

scrutiny. Given the scale of inbound invesunem to the United States fro Ill China and the opacity 

of some transactio•.ts, panicularly in technology-related areas, it would be reasonable to give 

CFIUS more resources and analytical capacity. This should include the ability to share 

iofonnation with allies and partners where appropriate. 

Beyond inbound investment, the U11ited States should do more to combat China's problematic 

trade practices. These issues should be pursued both within the World Trade Organization 

(WTO) and, where appropriate, through the use of domestic tools that are consistent with U.S. 

commitments to the \VTO. and done in coordination with allies and partners such as Japan and 

the European Union. These actions should be pan of a comprehensive strategy for U.S. 

engagement not only with China, but more broadly in the Asia-Pacific region. For more on what 

such a strategy should look like, please read CSIS's updated recommendations for a U.S. 

economic srrategv in the Asia Pacific. 

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84 

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Insert 33656A.051

House \Vays and Means Committee, Subcommiuee on Trade 

Hearing on the Asia-Pacific (October II, 201 7) 

Questions for tbc Record 

Rep. Meehan to Ambassador Demetrios Marantis, Visa Inc. 

1. Data Localization Requirements 

The TPP missed che mark in ics data localization policy as it relates to financial services. But 

in I his modem economy it is essemial to address prohibitive restrictions on data flows or 

server localization requirements for aU industries. Could you expound upon the importance 

of eliminating such barriers for Visa and other elecrronic payment services providers? 

Visa Inc. Answer 

At Visa. we seek to compete o.n a level playing field everywhere. Unfonuuately, many 

foreign governments continue to take action that restricts U.S. technology and digital exports, 

and disrupts broader trade flows. Strong digital trade principles - including protections for 

cross-border data flows and prohibitions on data localization - arc absolutely fundamental for 

Visa and U.S. services companies at large, and support the competitiveness of the U.S. 

economy as the world's leader in dig.ilaluade. 
85 

[Public Submissions for the Record follows:] 

86 


Insert 33656A.052

St atement of 8SA I The Software Alliance on Expansion of U.S. Trade in the Asia· Pacific Region 

BSA 1 The SOftware. Alliance (8SA). 11 the leading advocate for the global software industl"y, welcomes the 

opportunity to submit this st.a,tement on "'Opportunities to E.xp~nd U.S. Triide Rel.a,tionships in the Asia· 

PaeiHt Region", in connection with the sub·committee's October 11, 2017 hearing. BSA members 

eng~ge in dig t~ I commerce of miiny types, including through the provision of cloud computing services, 

and through data analysis services that utilize the latest tee:hnologlc.allnnovatlons such as artificial 

ntell gen~e. 

git~f trade plays ~n important ~nd expanding role in US tr~de relationships with A$ a·P~c:ific countries. 

It consistently generates trade surpluses for the United States. But digital vade is also susceptible to 

governmental interference with data flows. imposition of datil oc:~l z~t on requirements and te(hnology 

transfer demands, among other challenges. 

BSA recently put forth a modernized digital trade agenda.1 we are pleased that the United States Trade 

Represent~tive (USTR) h.a,s included many of these items in its negotiating objectives for the North 

America Free r rade Agreement (NAFlA). The same pfindples are Important in expanding digital trade In 

the Asia-Pacific: region. 

The United St~tes has additionaJ tools ~tits disposal to ensure that digital tr~de can continue to grow. It 

participates in the Asla·Paclfic Economic Cooperation (APE C) Cross·Sofder Privacy Rules (CBPR) 

program, a mechanism that is designed to allow companies to transfer personal data among the twenty· 

one member economies In the APEC region subject to stringent privacy protections. Congress should 

encourage the Administration to redouble its efforts to expand this valuable system more widely in the 

region. In addition, it should incorporate digital trade chapters in bilateral free trade agreements with 

Asia-Pacific countries. 

Sc-ale of Asia-Pacific Digital Trade 

U.S. trade in digital services is a significant and growing component of overall U.S. services trade, 

according to statistics from the U.S. Bureau of £c.onomic Analysis. In 2015, the United States exported 

$65.4 bimon in digital services and imported $40.8 billion. yielding a trade surplus of $24.6 billion. 

Digitally4 enabled services - a broader measurement that captures potentially ICT·enabled services 

across economic sectors- are even more substantial. Exports of such services totaled $398.7 billion in 

2015, while imports were $237.1 billion, resulting in a surplus of $161.6 billton. Dighally·enabled 

services constituted approximately half of total U.S. seNius trade that year. 

The Asia-Pacific region is the second-largest market for U.S. digital services exports, and the largest 

market for U.S. imports of these services. Between 2006·2014, both U.S. exports and imports of digital 

1 &SA I Th• Softw~r• All~nc.• (www.bu.orl) Is eM lndln.a: ~dvocat~ for th• t1ob~l softw~r•ln.dvstry btfor• covernm•nts ~nd ln 

th• int~rMtionfb markttpl~•.lts meml>t,. r~ amooe th~ world's most innov~tlve wmpanits, cr•~tine softw~r• sohrtlons 

1h~t spiirk th• •(;Oflomy and imprQ'II• mod•rn llf•. 

BSA's mem~rs indude: Ado~. ANSYS, Apple, Autod•sk, BenOey Syitems, CA Tkh..olocies, CNC/Mutercam, Oata.Stax. 

DocustJn, tBM, lntet,lntuit, MiCrosoft, Otacl•. salestoree.com, SA..S lnstitut•, Sitmens PlM SOftwat•, Splunk. syrnantec, Ttl• 

MathWorts, Tr•nd Micro, TriMbl• SOI!Itiotts COrJ)Otatlon, aM Workday. 

1 8$A'$ ei~l t~d• und.Jit •v•lbble •t http:jfwww.bn.oref .. /m.dii! iles/Poky/Tr~•/OS 2220178SANAfTAHandoutPreu .. POF 
87 


Insert 33656A.053

services with this region expanded steadily. Exports have risen from over $12 billion to more than $18 

billion dudng this period, while imports have increased from more than $7 billion to $1S billion. 

N~ed for Digital Trade Legal frameworks 

BSA I The SOftware Alliance strongly supports the development of rule·based legal frameworks to 

enable this growth in digital trade. Such framework;s are essential to ensure the free movement of data 

actoss borders. and to discourage governments from Imposing t equirements that data be locallzed, such 

as by requiring that data centers be built within their territories as a condition for doing business there. 

Similarly, governments should not force companies to transfer their technology, or to disclose tr ade 

secrets, sourc·e code or algorithms in order to secure market access. 

A sizeable number of governments in the Asia· Pacific region have imposed data transfer restrictions. 

Some of these sectoral restrictions bar data transfers entirely, while others allow transfers but only 

subject to onerous conditions. localization requirements also are increasingly being imposed. Nln 

almost aii i APEC) economies, national security interests trump the necessity for cross-border data 

flows,N according to a 2017 study by the APEC Policy Support Unit. The study cites restrictions in 

Australia, Canada, China. Indonesia, Korea, Malaysia, Russia, Chinese Tai~ . and Vietnam, among APEC 

members. 

APEC Cross-Border Privac Rules s tem 

APEC has established an important system to facilitate cross-border data flows and enhance consumer 

privacy and interoperability across the region·- the Cross-Border Privacy Rules (C8PR}. This system 

consists of a set of privacy principles and implementation guidelines. It was developed and is 

Implemented through a process that brings together the governments and privacy enforcement 

authorities of participating economies with a range of other stakeholders, including businesses and civil 

society. 

BSA. has joined other industry assodations across the Asia·Paci fic region to urge member economies to 

join the C8PRs. The United States has been an early participant in the system, alon.g with canada, 

Mexico and, most rec-ently, Japan and Korea. Singapore recently applied to join the program, and a 

number of other APEC economies-Chinese Taipei and the Philippines-have indicated that they are 

taking steps towards participation. Several others, including Hong Kong and Vietnam, are explodng 

joining as well. 

The CBPR system requires participating companies to develop and implement data privacy policies 

consistent with the principles espoused in the APEC Privacy Framework.J An accountability agent 

selected by a participating government in turn assesses whether a company is complying with the CSPR 

requirements. Ally divergence that is found between a company's privacy commitments and its 

compliance with CPBR requirements is enforceable under the domestic privacy laws of participating 

economies. 

) The (:8PR ~pp les to comp~nl s that ~recontrol leN of rson~ I d~t~, i.e. th~t decide how such d•t~ is to be processed. APEC 

o hn d evct1oped ~ p~r~llel ~nd simil.lt reclme tor cbu p rocessors, Priv~cy Recocnltion for Processon (PRPt, desicned to 

Hlsur e tlut comp.1nies wtlkh proc.ss d.1t~ effectively implement contt ollen' prfvxy r equirements. 
88 

f 


Insert 33656A.054

An increasing number of companies participate in the CBPR program and intend to use the framework 

as a legal basis for ttansfer of personal data among partidpating economies. It thus can serve as one of 

the important c.ross·border data transfer mechanisms.• 

Free Trade Agreements 

Free trade agreements (FTAs) between the United States and Asia-Pacific countries also are an 

important tool In assuring that data, the lifeblood of the digital economy. may flow freely In the region. 

FTAs also can be critically important in protetting U.S. digital companies from requirements imposed by 

Asia·Pac.iflc governments to transfer their tec-hnology, or to disdose trade secrets, source code or 

algorithms in order to secure market access. 

The US·Korea FTA {KORUS} took a first step in this direction by calling for the partie·s to "endeavor to 

refrain from imposing or maintaining unnecessary barriers to electron it information flows across 

borders.N The Trans-Pacific Partnership (TPP) went further, imposing binding obligations with respect to 

data flows, localization and compelled source code disclosure, among other disciplines. If the eleven 

governments other than the United States that signed TPP decide to proceed with its application, these 

important protections would protect and promote digital trade in the region. 

The United States has drawn upon precedents including TPP in developing its proposed digital trade 

chaptt•r in a modemized North American ftee Trade Agreement {NAFTA). Agreement on a strong digital 

trade chapter among the United States, canada and Mexico would send a clear me»age to other 

countries In the Asla·Paclfic region of North America's commitment to digital trade. If the United States 

considers possible amendment of KORUS, a state-of4 the·art digital trade chapter should be a priority. 

Similarty, the United States should pursue sueh chapters as It explores bilateral free trade agreements 

with other tountries in the Asia-Pacific region. 

• fn the fvtvre, a-s the AP£C C&PR fra-mewort e.xp•nds&eocra-pllit;ll ylntt\4 rqlon il\d is utililed by addltionat ~mpa-ni s, 11 

hotds promise as a un!Mn.& mechanism a-mont the dispara-te natlot»l and re&ioNI Me<h¥t.lsms for data «a-Mftr. For example, 

the Evropean Commts~. rt59Q1'1Sible f« a-dmlnisttrtl'l.l the EU's (()mptt'hensive General Dna Proteccton Reculatlon, a.rw:f 

APEC have anatyled the siml arltifl a-nd differences b•tween the two reclmes.. They are elCP't'«t'd to btcln fvnhtt discussions 

on the possibility of., formal EU certific-.ation of th4t AP£C CBPR.s. wh ich in turn could be., potentially sianifkant step in h'entu"l 

&lob.al inte.r-oper.ability for dna ttans-(H. 
89 


Insert 33656A.055

Comments to Ways and Means Committee in Respon.se to Hearing on Opportunities to 

Expand u.s. Trade Relationships in the Asia-Pacific Region 

Submitted on behalf of HanesBrands Inc. 

Headquarters located: 

1000 East Hanes Mill Road 

Winston Salem, NC 27105 

October 10, 2017 

Many Asia-Pacific countries have become manufacturers of products that are destined for the 

U.S. market over the past thirty years. Over time, the progress in shipping and transportation 

have drawn the United States doser to the Asia-Pacific countries. As a result, the production 

value chain has matured and in the last decade we have seen Increased opportunity to use U.S. 

origin/formed inputs in this value chain. 

These countries are an opportunity not only for finished U.S. goods, but for U.S. inputs that can 

be used to manufacture other goods. However inherent in our cutrent system Is a bias that 

negates the value of U.S. inputs when they are used to manufacture a good outside the U.S. and 

returned. This imbalance is a disincentive to U.S. manufacturers of inputs, to U.S. exporters and 

to U.S. companies developing a global value chain. Modifications to U.S. law which today 

penalizes a competitive U.S. industry -the textile sector- would spur increased U.S. 

manufacturing, U.S. exports and use of U.S. goods in global supply. 

For example, let's look at an item for which production has migrated offshore: apparel · where 

98% of all apparel sold in the U.S. is manufactured abroad and Imported. Apparel production 

notwithstanding, the U.S. cotton, manmade fiber, yarn and fabric industries remain vibrant and 

globally competitive. Currently, U.S. origin yarns and fabrics that are exported for manufacturing 

into a finished garment and then re-imported into the United States are subjected to a duty on 

the full value of the finished article, at an average duty rate of 12.SS% and up to 32%. 

A significant opportunity exists for U.S. textile manufacturers to expand exports and to encourage 

the use of U.S. yarns and fabrics in apparel made in the Asia-Pacific region for the U.S. market. 

Thi s opportunity is an extension of the current U.S. outward processing program that allows the 

deduction of the value of U.S. origin yarns and fabrics from the total value of the finished artide 

for duty purposes, thereby preventins a tax on U.S. materials and promoting the incorporation 

of U.S. materials into Asia-Pacific manufactured goods. 

For inQuiries on this submission please contact Jerry Cook 1-336-S19-S250 or 

jerrycook@hanes.com 
90 


Insert 33656A.056

The U.S.Iaws that exist today have been In place since the 1960's. Current U.S. law on outward 

processing has not been not updated since then and does not appfy to our example of apparel 

because it only takes into consideration materials that U.S. Customs and Border Protection 

defines as •tabricated components• that are •assembled" abroad. This limited language doesn't 

allow for commodities or materials shipped in forms other than as .. components .. or that are 

lnc:otporated into manufactured articles through means outside of an antiquated concept of 

"assembly" processes. 

U.S. law notwithstanding, global law has been u pdated as recently as 2016 to reflect and 

encourage outward processing of intermediary or inputs globally. In fact, the WTO Trade 

Facilitation Agreement specifically advocates this type of outward processin,g program. Article 

10, Paragraph 9.2 provides: 

9.2/nward and Outward Processing 

(a) Each Member shall allow, as provided for in its laws and regulations, inward and 

outward proces.sing of goods. Goods allowed for outward proces.sing may be re· 

imported with total or partial exemption from import duties and taxes in accordance 

with the Member's lows and rt!gulations. 

(b) For the purposes of this Article, the term "inward processing" means the customs 

procedure under which certain goods con be brought into a Members customs 

territory eonditfonaf/y relieved, totally or partially, from payment of Import duties 

and taxes~ or eligible for duty drawback~ on the basis that such goods are intended 

for manufacturing~ processing, or repair and subseqvent exportaNon. 

(c) For tht! purposes of this Article, the term "outward processing" means the 

customs procedure under which goods which ore in tree circulation in o Member's 

customs territory may be temporarily exported for manufacturing, processing, or 

repair abroad and then re·impcrted. 

Thus, not only would such a program promote the export of U.S. inputs as well as the use and 

incorporation of those inputs into manufactured goods, it would also be a natural and WTO· 

consistent update of U.S.Iaw to facilitate trade in U.S. materials .. 

Further, a modification to U.S. law that would promote U.S. manufacture, U.S. exports and 

benefits to U.S. companies is in alignment with current U.S. trade policy and is long overdue. In 

fact, with respect to the example of an apparel item, it has been the practice of the United States, 

when it is negotiating free trade agreements to specifically include the use of U.S. made yarns 

and fabrics when making apparel abr"oad by the fOtm of the rules of origin. This rule system 

ingrains the practi ce of using U.S. origin inputs. However, the conflict Is that outside of the free 

trade agreements, there is no incentive to use U.S. origin inputs in apparel manufacturing. We 

2 

For inquiries on this submission please contact Jerry Cook 1-336--519·5250 or 

jerryc:ook@hanes.com 
91 

f 


Insert 33656A.057

need to modify U.S. laws to incentivize the use of, manufacture of and export of U.S. inputs in 

products such as apparel or other goods that have migrated offshore to build our domestic textile 

industry. Such a policy is consistent wi th the U.S. domestic textile industry which has advocated 

that a yarn forward rule of origin promotes exports of U.S. textiles in U.S. free trade agreements. 

We urge Congress to recognize that such a change in policy would expand our market in t he Asia 

Pacific countries to drive even greater exports U.S. yarns and fabrics. 

For inquiries on this submission please contact Jerry Cook 1-336-519-5250 

jerrycook@hanes.com 
92 


Insert 33656A.058

Written Testimony of 

Sahra English 

Vice President, Global Public Policy 

Mastercard 

House Ways and Means 

Subcommittee on Trade 

Hearing on 

Opportunities to Expand U.S. Trade 

Relationships in the Asia-Pacific Region 

October 25, 2017 
93 


Insert 33656A.059

Mastercard is a technology company in the global electronic payments services 

(''EPS") industry that connects consumers, financial institutions, merchants, 

governments and businesses worldwide, enabling them to use electronic forms of 

payment instead of cash and checks. As the operat()( of what we believe is the world's 

fastest payments network, we facilitate the switching (authorization, clearing, and 

settlement) of payment transactions and deliver related products and services. We also 

provide value-added offerings such as safety and security products, information 

services and consulting, issuer and acquirer processing, and loyalty and reward 

programs. Our network is designed to ensure safety and security for the global 

payments system. Mastercard is headquartered in Purchase, New York. 

Mastercard contributes billions of dollars to the U.S. services trade surplus. 

Roughly half of our revenue is generated by processing payments in countries around 

the world using our centralized global operations center in St. Louis. Whenever 

technically feasible and legally permissible, we provide services from our base in the 

United States. This approach is not only efficient, but it keeps jobs and technology in 

the United States. For example, since 2010, Mastercard global revenues have nearly 

doubled, which has coincided with a growth domestically of U.S. jobs of over 50%. 

Mastercard's centralized business model, however, is coming under threat as 

many countries around the world have tumed to policies that require localization of 

payment infrastructure or data, or that seek to displace U.S. companies like Mastercard 

by establishing government-created, -supported, or -protected domestic competitors. 

We group these policies under the broad rubric of "disintermediation." Disintermediation 

policies make it difficult or impossible for Mastercard to continue exporting services from 
94 


Insert 33656A.060

the United States. 

In many cases, international trade rules provide the sole or main tool to protect 

against disintermediation policies. For this reason, Mastercard strongly supports the 

enforcement of trade agreements and the negotiation of new trade agreements to 

ensure open and level playing fields in foreign markets. 

I highlight below examples illustrating the growing problem of disintermediation 

policies in China, Vietnam, Thailand, and Bangladesh. 

CHINA 

For decades, Mastercard has processed what we call "cross-border" transactions 

in China. Cross-border transactions primarily involve purchases by individuals traveling 

to and from China, and take place in a currency other than renminbi ("RMB"). Until last 

year, there was no legal avenue for non-Chinese companies to obtain a license to 

process RMB-denominated (domestic) transactions that take place in China on cards 

issued in China. As a result, a Chinese company called China Union Pay ("CUP") has 

had a stranglehold on the domestic market in China, and has been able to leverage its 

position to build an acceptance footprint around lhe world and compete directly with 

established U.S. EPS companies. In fact, in just 15 years, CUP has become the largest 

network in the world. 

When China joined the WTO in 2001, it committed to allow non-Chinese EPS 

companies to compete and do business in its domestic market on equal terms with 

Cf1i11t:!~tt curnpcsni~s. iniJuUillij by proc.;t!':s:sirtg RMB-dt!'IIUftlirlcttt!'d horl:sC:tctiuii:S ir1 
95 


Insert 33656A.061

China. Unfortunately, China ignored theirWTO commitments. The United States 

challenged China's EPS regulations in WTO dispute settlement, and prevailed in 2012. 

After several years of consistent, high-level engagement by the U.S. government, 

China adopted new Administrative Measures in 2016 that allow non-Chinese EPS 

companies to obtain licenses to process domestic transactions. However, the 

Administrative Measures impose many regulatory hurdles, and it remains to be seen 

how China will implement certain requirements related to, for example, national security 

reviews and cybersecurity. It also remains uncertain whether China will restrict the 

ability of non-Chinese EPS companies to process cross-border transactions using 

infrastructure located outside China. 

It is critically important to U.S. EPS companies to be able to process both 

domestic and cross-border transactions in China. In July 2017, the U.S. secured 

China's agreement as part of the 100-day plan in the U.S.-China Comprehensive 

Economic Dialogue to allow U.S. EPS companies to begin to apply for licenses, which 

in turn should lead to "full and prompt market access." 

VIETNAM 

U.S. EPS companies have actively participated in Vietnam's payment market for 

more than twenty years. Last year, the State Bank of Vietnam ("SBV") issued Circular 

19/2016/TT-NHNN ("Circular 19' ). Article 24 of Circular 19, if implemented, would 

require all non-Vietnamese (including U.S.) EPS companies to route all their 

transactions throur~h a local "payment r~ateway " It is widely understood that the 
96 


Insert 33656A.062

gateway will be a local Vietnamese company known as the National Payments 

Corporation of Vietnam ("NAPA$"), which is majority owned by SBV. 

NAP AS already directly competes against U.S. EPS companies as it continues to 

build a full-service payments networl<, with its own brand, contractual relationships with 

banks. and the ability to perform transaction processing. If SBV implements Article 24, 

Circular 19 as originally planned, NAPA$ would be given an unfair, and perhaps 

insurmountable, advantage as the sole connection point for all payment transactions in 

Vietnam. 

The U.S. government has raised concerns with Vietnam over the commercial 

impact of Article 24, Circular 19 and pointed out that Vietnam's policies will ultimately 

lead to a less secure. Jess reliable, inefficient, and non-competitive EPS sector. In 

response to these concerns, Vietnam has agreed to suspend implementation of the 

gateway requirements in Circular 19 for one year, to allow time for further study. 1 The 

suspension is a welcome development, but we remain deeply concerned that Vietnam 

might, at the end of the suspension period, move forward with its proposal. 

Artide 24, Circular 19 is an ill-conceived, protectionist measure. If implemented, 

il would be detrimental not only to U.S. companies but to Vietnam itself. The EPS 

' With the exceptiOn of Attide 24. whictt deals with the gateway. CifCulat 19 has been in effect 

since it was issued. Article 24 was Ofiginally intended to enter i.nto force on January 1. 2018. As of the 

Umo or writir~ , the one-year suspension has bee•l oommunk.ated to Mastercard artd Vi$a but has n04 yet 

been offtcially communicated to the wider industry. 
97 


Insert 33656A.063

sector in Vietnam has great commercial potential. Article 24, Circular 19 threatens to 

undermine that potential and unfairly lock U.S. EPS companies out of the market. 

THAILAND 

Since 2013, Thailand has required that all domestic debit transactions on cards 

issued domestically be processed on-soil in Thailand. As a result, suppliers must 

establish a local presence and build on-soil processing facilities to process debit 

transactions. As Mastercard does not have processing facilities deployed on-soil, it 

does not process domestic debit card transactions, even if they are executed on 

Mastercard-branded debit cards. Those transactions are routed to a local entity for 

processing. Recently, Thailand adopted a new Payment System Act. which will 

empower the Bank of Thailand to regulate the payments industry. Mastercard may be 

classified under the new legislation as a ·regulated payment system" (implementation 

regulations are in the process of being drafted). The risks to Mastercard include being 

subject to conditions that could further restrict our ability to provide services from the 

U.S. 

Thailand is also reviving the Credit Card Bill, which had been stalled due to the 

change in government. An initial draft of the law included a requirement to process 

domestic credit card transactions on-soil. That requirement was removed but might be 

re-introduced. As with domestic debit transactions, if there is an on-soil processing 

mandate for domestic credit card transactions, Mastercard will either lose its ability to 

process domestic credit card transactions or be forced to establish processing facilities 

in Thailand. 
98 


Insert 33656A.064

BANGLADESH 

Since 1997, Mastercard has made considerable investments in Bangladesh by 

partnering with 16 domestic banks to help establish a payment system with world class 

security standards and a reliable acceptance network. 

The National Payments Switch of Bangladesh (NPSB) was launched on 

December 27, 2012 with a mandate to route A TM transactions. Officially, on August 24, 

2017, Bangladesh Bank required lhat all domestic point of sale ("POS") transactions 

also be switched through the NPSB. With the introduction of NPSB, lhe Bangladesh 

Bank has become both a regulator and a market player while setting pricing 

(interchange fees), downgrading security standards, and requiring banks to route 

domestic transactions only through lhe NPSB, with a systemic risk of a single point of 

failure. With this mandate implemented, international players are being denied access 

to large sections of the Bangladesh payments market. 

CONCLUSION 

Mastercard welcomes fair competition, but opposes any government policies that 

create an unlevel playing field, particularly those that provide advantages to local 

entities operated or favored by governments. The examples provided above are merely 

illustrative of the types of disintermediation policies U.S. EPS companies face around 

the world. 

International trade rules provide the best protection against the continued spread 

of these protectionist policies and the best tool ror persuading countries to chcmge the 
99 

f 


Insert 33656A.065

policies and positions they have already adopted. Mastercard supports a rigorous trade 

agenda to enforce existing trade agreements and negotiate new, modern agreements to 

open markets around the world. 
100 


Insert 33656A.066

Statement of the U.S. Chamber of Commerce 

ON: Opportunities to Expand U.S. Trade Relations 

in the Asia-Pacific Region 

TO: U.S. House of Representatives 

Committee on Ways & Means 

Subcommittee on Trade 

BY: U.S. Chamber of Commerce 

DATE: October 11, 2017 

1615 H Street NW I Washington, DC 120062 

The Chamber's mission is lo advnna- human protrcss hro h tin economic, 

political a.td social system based on individual freedom. 

inocolivc, initi:uivc. opporhmity and re-sponsibility. 
101 


Insert 33656A.067

The U.S. Chamber of Commerce is the world 's largest business federation represeming 

the interests of more than 3 million businesses of all sizes, sectors, and regio11s, as well as state 

and local chan'lbei'S and industry associations. The Chamber is dedicated w promoting, 

protecting, and defending Americ.a's free emerprise system. 

More than 96% of Chamber member companies have fewer than I 00 employees, and 

many of the nation's largest companies are also active members. We are therefore cognizant not 

only of the challenges facing smaller businesses. but also those facing tlte business community at 

large. 

Besides representing a c-ross-section of the American business commuoity with respect to 

the number of employees, major classifications of AJnerican business-e.g., manufacwring, 

retailing, services. constntction, wholesalers, and finance-are represented. The Chamber has 

membership in all 50 states. 

The Chamber's international reach is substantial as well. In addition to 117 American 

Chambers of Commerce abroad, an increasing number of our members engage in the export and 

impon of both goods and services and have ongoing investment activities. The Chamber favors 

strengthened intemational competitiveness and opposes artificial U.S. and foreign barriers to 

imernaliooal business. 
102 


Insert 33656A.068

The U.S. Chamber of Commerce is pleased to submit this statement for the record to 

address U.S. economic relations with the Asia-Pacific region, which is critical to current and 

future U.S. economic growth, competitiveness and job creation. U.S. exporters-whether large 

or small companies producing goods and services or fanners and ranchers exponing agricultural 

products-need access to these fast growing economies and the rising pool of consumers. 

According to the Organization for &onomic Cooperation and l)evelopment, the global 

middle class will expand to 3.2 billion by 2020 and 4.9 billion by 2030, from 1.8 billion in 2009. 

Most of this growth is in Asia: In fact, Asia's middle-class consumers will represent 66% of the 

global middle-class population and 59% of middle-class consumption by 2030, doubling these 

shares since 2009. 

It is essential, therefore, that U.S. agricuhural, industrial, technology and service 

exporters have access to these dynamic markets. Unfonunately, the United States is falling 

behind. Tbere are four primary reasons or factors at play: 

J) Firsr and foremost is China •s growing ec.onornic dominance ofrhe region through arade, 

investment, infrastructure, and other major initiatives. 

2) Second is the decision by the Trump Administration to withdraw from the Trans-Pacific 

Partner.; hip (TPP), a decision that sent confusing signals about the U.S. commitment to 

the region. This action potentially excludes the United States from the largest regional 

agreement as the so-called "TPP-1 1" countries work to bring the agreement into force 

without the United States in a slightly ahered form. 

3) Third is the proliferation of new trade agreements from within and outside the AsiaPacific region. With ~1e TPP decision, the United States has only three free· trade 

agreements (FT As) in the region. with Australia .• ingapo ~ and South Korea. 

Meanwhile, the European Union. Canada, and others are aggressively seeking to 

negotiate and conclude FTAs with countries ranging from Japan to Vietnam in order to 

gain preferential acc-ess for their expon·ers. 

4) Last but not least is 1he spread of domestic policies. regulations. standards and 

administrative practices in various countries across Asia that both inadequately protect 

intellectual propeny and restrict U.S. companies' ability to compete on a level playing 

field, panicularly in sectors such as the digital economy, heahh care, financial services, 

and advanced manufacnaring in which U.S. companies are among the most competitive. 

Asian coumries wam an active U.S. presence in the region. They want to be robust 

trading partners with the United States. But Asian economies are not standing still as the United 

States seeks a strate-gy for economic engagement with the region. They are moving forward 

a-cross a number of fronts, from trade and aid to investment and infrastructure with all manner of 

partners. 
103 


Insert 33656A.069

Trade between Asian countries is surging, but even as total Asian imports have risen 

more than three-fold, the U.S. share oflhc pic has dropped dramatically in the past IS years. 

Losing Ground: US Market Share 

Shrinks as Asian Trade Soars 

7000 

6000 

12.2% 

sooo 

~ 4000 

~ i 3000 

2000 

1000 

2000 2014 

As1a's Total111'4)0rts • Asia's 111'4)0rts from the US • US Market SN>re 

~ ·~~iri Au.- wt.,~IJ,S U""'IU'\ot~~HM~~ n. Thoftlw., ~,_..,..,~.,_~,~..--..~~ 

~..-..t-01-..c! c:J VENNGAGE 

China's Dramatic Rise: Regional Dominance and Domestic Challenges 

As the charts below indicate, China has become the dominant regional trade power since 

the tum of the century. China is the top trading partner for most Asian economies- from Japan 

and Korea in the nortlteast to lndonesia and Malaysia in the soU1heast 

2 
104 


Insert 33656A.070

Exports to Pacific Coontries in 2000 

PP~ •tf.S .... ow-•~ "'" Sctilt«"1"-Wooidtt.rq.o HT~Sotvc>on WITS)Oo~~obyU..WoAtll<wW 

-.......· . 

o"WO)S.:O" 

o;o.• ..., . ......,. . ........ Wno.cfg" 

......... , ... 

Expotts to AsiawPacifk Countries jn 2015 

•JPPMc-mbHs 

~INff';~WMd',_,~..,«dT«>*~(Wn'$)Dc~Puf:,/M,t.dbyfM Md8ont 

o .. 

In addition to China's growing regional role, the United States and China share a highly 

interdependent yet complex relationship that is critically imp011am to each other and the world. 

U.S. indusrry continues to see significant economic opportunity in the China market, which is 

worth half a trillion dollars annually to U.S. companies- and should be worth considerably 

more. 
105 


Insert 33656A.071

Together, the U.S. and China represent approximately 40%> of dte global economy. China 

is the third largest merchandise export market for the United States. The American Chamber of 

Commerce in China (AmCham China) 2017 China Business Climare Sur.•ey reports that the 

majority of U.S. companies experienced revenue growth in 2016. 

While top-li1le revenue growth for some of our members is encouraging, more farreaching outcomes are urgently needed to address the myriad strucmral impediments that inhibit 

U.S. companies from accessing and competing in the China market. Long·standing concerns are 

intensifying regarding market access restrictions. national securi1y policy. and industrial policy 

support for domestic champions. 

Overall, an increasingly burdensome and restrictive regulatory environment in China is 

undermining optimism as well as the hope for market·based reforms and market opening that 

companies held when the 7itirtl Plenum Deci.siou1 was released in 20 I 3. For example, the 

successive adoption of China's Coumerterrorism, National Security, ami Cybersecurity Laws, 

along with the draft Eucryptiou and Export Control lAws, have created burdensome new marke1 

access, operating, and compliance challenges for our members. According lO the AmCham 

China 2017 Survey, 31% of surveyed businesses reported a dete-riorating investment 

environment (a record amount), and 8 1% of members reponed feeling less welcome now than 

they did in previous years.2 

As a result. China. while remaining a significant market overall for America.n companies, 

is becoming less of an investment priority for some of our members than it once was. According 

to the AmCham China 2017 Survey, China's status as a top-three investment priority has 

declined to a record low of 56% from 78% in 2012. According to China's Ministry ofConunerce 

(MOFCOM), China's total inbound foreign direct investment (FDI) from the world for January 

to July 2017 dropped 6.5% year-over-year.' Investment restrictions in China's market, coupled 

with a restrictive regulatory environment. continue to limit the ability of U.S. companies to 

provide goods and services in China,. Funhermore, these restdctiOilS are a source of increasing 

tension in the relationship. 

A number of policy issues contribute to American company concerns. among them: 

an investment regime that is the second mos-t restrictive among G20 countries. only 

behind Saudi Arabia, and limi1s market access in service sectors such as banking. 

insurance. securities. telecommunications. and cloud computing: 

industrial policies like Made in China 2025 that are usiog state resources to create and 

alter comparative advantage in global arkets~ 

cybersecurlty, information communication technology (JCT). and data policies that pose 

challenges for global connectivity and that use security as a pretext to pursue and disguise 

industrial policies in these areas~ 

an An i~ Monopoly Law that often is enforced in a discriminatory manner and used to 

advance industrial policies ~ and 

1 hup.://c_ec: pca_ple com en/1\12013JIIIS c64094-2~$59163 html 1 201 7 AmCho.m Gllin;s, Whilol! J)ap~r. pg. 10 

'lttt :l/data orrom.g_ov.cn/chn nncl mcludes/Jist sltlml1ehanne ~7'ti&\'JSJI=C 

4 
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Insert 33656A.072

IP enforcement that~ while improved in cenain areas in recent years, is insufficient 10 

protect against high levels of counterfeiting, piracy, and trade secret theft. 

The Chamber has been forthright in expressing our serious concerns regarding a range of 

Chinese government policies and practices that restrict access to its market. condition 

panicipation in the market on technology transfer, and broadly seek to undermine the value of IP 

held by American companies. These are global concerns that have also been voiced by 

stakeholders from around the world over many /ears. We have therefore published a series of 

repons covering indigenous imlovation (2010), investment restrictions (2012),$ stale-owned 

enterprises (2012),' China's antitrust policies (2014),' China's ICT policies (2016),

1 and Made in 

China 2025 (2017),' all of which describe the wide range of ways China uses its regulatory 

regime and localization policies to support domestic champions. disadvantage foreign 

companies, and induce technology transfer. 

China's regulatory regime and its enforcement. including but not limited to IP policies. 

presents a unique and complex set of challenges for U.S. indnstry. Regrenably, the regime and 

its enforcement too often exact a cost to our members- most often in the form of technology and 

IP-to access and compete in the market. As China,s ecoootny takes orl greater significance and 

ilS companies ascend the value chain. policies 1hat force or induce technology uansfer or suppon 

domestic champions by discriminating against U.S. companies risk compromising our nation•s 

overall competitiveness. 

Today, the Chinese economy, the world 's second largest, moves global markets, and its 

companies across many industries are no longer laggards but fierce global competitors. China's 

Railway Rolling Stock Corporation has contracts to build subway cars in Boston, Chicago, and 

Los Angeles,10 and seven oftbe top 10 global handset makers, in tern>s of market share, are 

Chinese. Moreover, Chinese companies, private-and tate-owned~ expect 1he best 1reatme-nt 

available as they enter and compete in markets around the world-even as they enjoy significam 

protection and support at home. 

An uncompetitive China market raises serious concerns not only for its domestic 

economy but i1s economic partners. Chinese industrial policies precipitate 1narket ineffic.iencies 

4 .. Chirw·s Orivc for 'Indigenous Jnnovalion· A Wcboflnduslrial J)olicics.,' ' U.S. Chambcr ofCommcrce(:WJO) 

hUJls·/lwww.usch:unbcr.cotnfsltt:sldcfaultlfilc;r./dl'ICUtncnts/filc!'/100728chma.rcpon_O_O pdf 

J "China·s Approw,l l-...occ5$. for lnbound Foreign Direc:c lovts.I.Jncnt: Impact on Market A<:tcSl!., National Tr\.-atmcnt 

and Transparency;· u.s. Chamber otCoouncrcc (20 12) 

hnps;://www.usth11mbcr comfsiu:Ydtf!luh filt~dotumentslfik.Y020021 Chin.'l lnboundhwe~m~lt Otr,pdf 6 "No Ancient Wisdom, No Followers: The Challenges ofChiocsc Authoritarian Capitalism.'" Jim McGregor (2012) 7

"Cornpe:ling t.:uercsiS in China's Cotnp<:citiol) Uw Eaafon;:cm<:ot: (.llil)a's Atlli·Monopoly U.w Applic:nioo nnd 

Role of lndu~rial Policy." U.S. Chamber of Commerce (2014) 

hups:/lww usch smbcr c()lll':-•tcsldef:mltl filc~am _li nal_090814_fi al_ ock00 fl<lf 

•··Preventing Dcglobali-'JIIion: An EcotMlmic and S('Curity Argmn.."''tt for rce ·rrndc lind lnvtstnu."''tt in leT." U.S. 

Chambi.'f of Commerce (2016) 

hups://'www.uschambcr'.<»tW'sttesldeflluh/files/documanVfik$.1pre-\'Cntint &globallt.lUion l.lli!f 7 "Ma<k in China 201 S: GloOOI Ambitjons Duilt on lot-11! Prou.-ctions.·• U.S. Chamber ofConmu:rct (2017) 

hUJlS://www uschambcr.cmnfsttcYdcfnuh/fik'S/fin31_madc_m_china_2025_report_full pdf 10 .. China·s lli&h·Svccd Rail DiJ,Ic.'ltllaty." Michelle Ket. U.S.·China Ecot.oJili¢ and Security Review C(lrmniss-ion 

(Fcbruary20t7) 

)llllt'C:I/WWW li~¢.,&.;\V/ti :s/def:udtffii~.:J ewMc Chill:)%27s%2011i..&_h%20~!'%20 :t il %20~<>m<l~ 

5 
107 


Insert 33656A.073

and spark overcapacity. resulting in lower prices for global commodities and the potentiaJ for 

predatory pricing--which has forced non~Chinese companies out of business in steel, solar. 

aluminum. and other industries. 

Ha,•ing a competitive market in China is critical to minimizing these market distortions 

globally from China. In addition, American companies need to be able to s11cceed in China to 

ensure sufficient economies of scale to compete in the global ecooomy against Chi.1.1ese and other 

finns. 

/Jilateral Engagemelll 

The range of discriminatory policies and other factors (e.g., inadeq11ate legal protections) 

that affect U.S. industries are signific-ant. They require a long-temt and comprehensive strategy. 

It is imponant that the ongoing Section 301 inve-stigation form pan of this comprehensive 

strategy so that the United States can continue to make progress on the full panoply of issues in 

our bilateral relations over time. While the various dialogues and commissions have proven to be 

less productive and slower·moving than needed, they have provided a mechanism to achieve 

progress on discrete issues. Along witb the Section 301 tool, the U.S. govemment should 

prioritize the development of new, revitalized, and effective outcomes-focused 

dialogues/commissions to ensure continuous improvement of access w China's market, 

including not ooly through the Comprehensive Dialogue but also through Joint Commissioo on 

Commerce and Trade--like mechanisms. 

To achieve success in the future, the Chamber believes the U.S. government should not 

only develop a comprehensive strategy. but also articulate it publicly. A successful strategy 

should empha.size diplomacy and use both bilateral and multilateral policy tools that are 

consistent with U.S. international obligations. with the aim of achieving enduring solutions. It 

must also prioritize dte development of strong coalitions with like-minded countries. The U.S. 

go,rernment has a unique oppornmity to lead allies in a conoened elTon to address technology 

transfer challenges with China. but doing so will require it to increase substantially the priority it 

auaches to working effectively with allies on dte underlying challenges, perhaps at the expen.se 

of other priorities on ~1e trade agenda. 

Despite che immense challenge that China's actions and policie,s present1 the bilateral 

economic relationship continues to proc:t-uc.e significant benefits for U.S. companies) workers, and 

consumers. The Chamber believes the U.S. government should ensure that U.S. businesses and 

workers be-nefit from any actions to address the technology transfer and other challenges with 

China. and make maximum efforts to minimize harm to American companies and workers 

stemming from the nvesti gation~ its findings. and any subsequent actions. 

Developing strategies to counter Chi11a 's unfair policies and practices is imponant. 

Equally, if not more imponam, is taking the steps at ho1ne that c.an rees1ablish 1he U.S. economy 

as the •ttost successful and admired in the world. This includes improving our heahhcare system, 

refonnin._g our 1ax policies. maimaining immigration policies that support growth and innovation, 

and investing heavily in education, R&D, and infrastructure. 

6 
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Insert 33656A.074

The Consequences ofTPP Withdrawal 

To say that U.S. trade panners that had wotked so hard to conclude the TPP agreement 

over seven years of negotiations were disappointed with the Tnamp Administration's decision to 

withdraw is an \lnderstatement. The TPP was by no means a perfec-t agreement, but in many 

imponant respec.ts it is the most advanced trade agreement yet negotiated. In addition to opening 

markets for goods and services. the TPP sets high standards for digital commerce. competition 

with state .. owned e-nterprises, regulatory coherence. and in a number of areas relating to 

intellectual property protection-aU of which matter enormously for U.S. exporters of aH sizes, 

but panicularly small and mid-sized companies. 

In the afiermath of the U.S. decision, Japan a.nd New Zealand, which have ratified the 

TPP, have assumed leadership roles in trying to push forward with a possible "TPP-11" 

arrangement. h is clear their objective is to advance the TPP in some form, so that tlle strong 

rules and high standards contained in TPP survive. 

Other countries in Southeast Asia, notably the Philippines and Thailand, had signaled 

their interest in joining the TPP, and undertook significant analytical work in preparation for 

potentially joining the agreement. They may still ultimately join a TPP-11 should that 

arrangement move forward. as seems likely. 

There are direct economic losses for Americ-an exporters as a resuh of 1he TPP 

withdmwal. For example. Australian beef exporters have a I 0 percentage point advantage over 

American beef exponers in Japan due to the Australia-Japan FTA. The TPP would have 

eliminated the relative disadvantage of U.S. cattlemen. Similar stories are found in other 

agricultural and industrial sectors across the region, where a few percentage points of tariff 

advantage often confer major commercial gains to U.S. competitors. 

A bilateral FT A with Japan could potentially close this gap, but according to Japanese 

oflicials in public comments. the United States should not expect to get more than we would 

have with the TPP. Further. negotiating a bilateral FTA with Japan would still take several years. 

Another cost of the TPP withdrawal is harder to quantify but no less imponant. Some 

TPP counlties have explicitly said they are backtracking 011 commitmentS chey were prepared to 

make under the TPP that would help U.S. companies. l11is problem is especially acute with 

regard to business prioriries that are inaccurately btu commonly viewed as primarily beneficial w 

1he United Sta1es, such as scro11ger intellectual propeny prorections and enforcement. 

Jn sum, the United States has withdrawn from the TPP. but the challenges - and 

opportunities- it was designed to address remain. These include: (I) the Asia-Pacific region is 

growing. and it will soon be home to two·t1lirds of the world•s middle class consumers~ (2) 

made-in-America products are too often shut out of those promising mari<ets by steep tariOs a11d 

other barriers; and (3) U.S. exponers' disadvantages in the region are likely to mount as Asian 

econornies clinch new trade pacts that benefit Asians but shut us out. 
109 


Insert 33656A.075

Should the TPP·ll move forward, the extreme disadvamages that U.S. exporters will 

face , .. ,ill likely incentivize many companies to establish operations in Asia in order to retain t1teir 

access to these valuable markets. 

Regional Trade Agreemenls are Proliferaling 

As indica1ed. 1he U.S. has only 1hree FTAs io 1he region, wilh Australia, Singapore, and 

South Korea. At the same time, according to the Asia Regional Integration Center of the Asian 

Development Bank, Asian countries have signed 140 bilateral or regional trade agreeme-nts. and 

15 more are under negotiation or concluded and awaiting entry into force. 

In addilion 10 the TPP-11 , one notable pact now under negotiation is the Regional 

Comprehensive Economic Partnership (RCEP), iovolving the I 0 A SEAN economies, Japan, 

China, Korea, Australia, New Zealand and India. While RCEP is an ASEAN initiative, China is 

making efforts w drive negotiations to a conclusion this year. R.CE'P is a lower-standard 

agreemelll than 1he TPP, but is one of two pathways toward the APEC goal of an eveorual Free 

Trade Agreemenl of the Asia-Pacific (FT AAP), the TPP being ~1e other. 

Moreover, the lack of U.S. strategic economic engagement in the resion is creating a void 

that will be filled by our competitors. For example, the European Union is currently negotiacing 

trade agreements with Indonesia, Malaysia, the Philippines, and Thailand, and has comple1ed 

(but no1 yet implemented) deals with Japan, Singapore and Vietnam. All of those countries 

individually have FT As with numerous other 1narkets around the world as well, com_pouoding 

the problems for U.S. exponers in1o the region. 

Our regional and global competitors also aggressively support their exporters in Asian 

markets. Leaders of these countries take trade delegations to the most promising markets in 

search of commercial deals. They provide export credits and low interest loans for their 

companies through aggressively funded export credia a_gencies. Fttrthennore. they cie foreign 

assiscance to commercial opportunities. China's suppon via One Belt One Road and 1he Asian 

lnfrastrucnLre Investment Bank (AUB) is accelerating and will take this activity to a new level. 

Meanwhile. we have not yet restored the Ex·lm Bank to full capacity. and are arguing 

over whether we should reduce our foreign assistance budget, which is less than I% of GOP. and 

of which only 2% goes 10 Southeast Asia. 

The Trump Administralion has frequently and clearly stated its preference 10 pursue 

bilateral trade negotiations wirh Asian trading partners. To date, there ate no specific plans 

underway in this regard, so it is difficult for the Chamber to take a view on any prospective 

bilateral FT As. Our posi1ion is 1ha1 for any new bilateral FTA sought by the Uni1ed States, Trade 

Promotion Authority (TPA) sets the right negociating priorities and the proper process, and it 

should be followed scrupulously. 

Whether bilateral FT As can deliver much for American exponers is open to que-stion. In 

an era of global value chains, the TPP had the advan~age of cutting through the "Asian noodle 

bowl" of divergent trade rules under multiple agreements. 
110 


Insert 33656A.076

Further. it is unclear if any other counrries in the region are genuinely interested in 

negotiating bilaterally with the United States. Among other actions, the Administration's 

repeated threats to withdraw from KORUS and NAFT A have not engendered confidence toward 

the United States on the pan of our Asian trading panners. In any event, the United States is 

running out or time. Bilateral IT A$y even with small economies. will take years to negotiate and 

enter into force. Our exporters will continue to be at a compedtive disadvantage. 

The U.S.·Korea FTA (KORUS) 

The U.S.-Korea Free Trade Agreement (KORUS) remains the cornerstone of our bilateral 

trade and investment relationship. and importamly.supports our vital security alliance with the 

Republic of Korea. We cannot overstate how intertwined these relationships are. and we must be 

careful not to disrupt them. 

Since early July, when Korean President Moon Jae-in visited Washington, the Trump 

Administration has placed KORUS under scnuiny. There has been strong criticism of the U.S. 

trade deficit with Kore.a. discussion of renegotiation. and rumore-d threats of withdrawal. All of 

this has occurred against the backdrop of escalating missile launches and a nuclear test by the 

regime of Kim Jon g-Un of the Democratic People's Republic of Korea (DPRK). 

U.S. industry has expressed fn1stration with the unsatisfactory implementation of 

KORUS in a number of areas in the five years since it entered into force. Some areas of concen1 

cited by U.S. companies include customs verification. non·tariffrneasures in the automotjve 

sector, transparency in phannaceuticals and medical devices» financial services. and others. 

While some of issues have been resolved, some issues have lingered. 

KORUS established a comprehensive comminee strucn1re that allows govemments to 

review progress and problems at regular intervals~ and this structure should be employed 

vigorously. Indeed~ given che current effort uoderway between the govenHllents under Anicle 

22.2 ofthe KORUS agreement, this is an opponunity to redouble U.S. effons to press the Korean 

government to fully implement and respect the letter and the spirit of rhe agreement. 

The Chamber believes this approach to ensure full and faithful implementation of 

KORUS and, if necessary, "amend and modify" the agreement in some areas is greatly 

preferable to withdrawal or a renegotiation. The agreement as written sets a high b..·u. and in a 

number of areas includes the strongest rules yet achieved in U.S. trade agreements. 

It is imponam to note that KORUS has led 10 sharp increases in U.S. service expons 

while exports of many U.S. agricultural and industrial goods- namely, those that have benefitted 

from tariff elimination- have increased since KORUS went into effect five ye-ars ago. KORUS 

has helped maintain a steady level of U.S. goods exports at a time when Korea's overall impons 

have dropped dramatically due to domestic economic difficulties. Trade through the first half of 

2017 shows that U.S. expons to Korea have increased by over 20%. 

These imponant gains for U.S. companies should not be overlooked, nor should KORUS 

be al•eroa,ely c-redited or blamed for changes in trade panems in sectors where it had oo impact 

(more tharl half of U.S.-Korc.a soods t-rade was already dury free before KORUS). 'T11;c U.S. 

9 
111 


Insert 33656A.077

bilateral trade deficit in manufactured goods should not be viewed as the proper measure of the 

agreement"s quality. KORUS has increased opportunities for U.S. exporters and will continue to 

do so as tariff cuts take full effect over the next few years. 

At the same time, withdrawal from KORUS would subject U.S. exports to Korea to some 

of the highest tariffs of any developed ~ooomy. Korea's average most-favored nation tariff was 

13.9% in 2016, a level about four times higlter than tbe U.S. equivalent. Leaving KORUS would 

hit U.S. exports hard as these steep levies were reestablished. The gains U.S. exporters have 

achieved under KORUS - U.S. aerospace exports to Korea have doubled to $8 billion. and U.S. 

beef exports have risen 82% to $1 billion, to cite two examples- would be lost 

ln short, there are positive forces at work, and trends in trade are moving in a positive 

direction. Overall implementation of t1te agreement must be improved. That should be our 

coll ~tive focus and goal- to ensure this high-standard agreement is implemented fully and 

faithfully so that it is truly a win-win. The Chamber is confident that if the Korean govcmment 

does this, U.S. exports will continue to expand. 

Conclusion 

The U.S. Chamber of Commerce appreciates that the Ways & Means Committee called 

this hearing to discuss the critical importance of trade in Asia to U.S. exponers. U.S. economic 

engagement with Asia is not a luxul)' but a necessity for any effons to spur economic growth and 

job creation here at home and ensure a secure a.nd prosperous region for posterity. 

Unfonunately, given the TPP decision and threats to withdraw frorn KORUS, U.S. policy 

toward the Asia-Pacific is being perceived in the region as ec.onomic .. disengagement'' more than 

anything else. The U.S. business and agriculture community faces tremendous compe1itive 

pressures and significant market access barriers in Asia. In dte absence of a forward·leaning 

trade policy toward the region, we can expect that we will continue to lose market share and that 

important uading panoers in Asia will continue to forge deals with other countries, to the 

exclusion of the United State.s. 

Tlte bottom line is that dte United States needs to deploy the full array of tools to help 

boost American competitiveness in this dynamic region. This includes ensuring full compliance 

with and enforcement of existing trade agreements; tJ1e conclusion of new TPA-compliant trade 

agreements, bilateral investment treaties, or other fonnal commercial agreements; and full 

support for the Ex-lm Bank, U.S. Commercial Service, and other U.S. government agencies that 

can help address barriers and advise companies- particularly small and medium-sized 

companies-seeking new opportunities in cbese dynamic marke1s~ and full enforcement. 

We appreciate the opponunity to share these comments and look forward to our ongoing 

engagement with you. 

10 
112 

Æ 


Insert 33656A.078