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U.S. TRADE AGENDA 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

FEBRUARY 14, 2007

Serial No. 110–8 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 


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C O N T E N T S 

Page 

Advisory of February 7, announcing the hearing ................................................. 2 

WITNESS 

The Honorable Susan C. Schwab, U.S. Trade Representative, Office of the 

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

SUBMISSIONS FOR THE RECORD 

Advanced Medical Technology Association, statement ......................................... 94 

Baughman, Laura M., Coalition for GSP, letter ................................................... 99 

Center for Policy Analysis, statement .................................................................... 102 

Coats, Stephen, U.S./Labor Education in the Americas Project, statement ....... 103 

EXPORAMERICA, statement ................................................................................. 106 

Haiti Democracy Project and Manchester Trade, joint statement ...................... 113 

Lake, Charles D., American Chamber of Commerce in Japan, statement ......... 117 

Lawson, Eugene K., U.S.-Russia Business Council, letter ................................... 124 

Offenheiser, Raymond C., Oxfam America, statement ......................................... 126 

Peruvian Asparagus Importers Association, Philadelphia, PA, statement ......... 132 

Retail Industry Leaders Association, statement ................................................... 138 

Spieldoch, Alexandra, Institute for Agriculture and Trade Policy, statement ... 140 

The Honorable Marcy Kaptur, a Representative in Congress from the State 

of Ohio, statement ................................................................................................ 146 

QUESTIONS FOR THE RECORD 

Joseph Crowley ........................................................................................................ 58 

Chris Van Hollen ..................................................................................................... 67 

Ron Kind ................................................................................................................... 69 

Devin Nunes ............................................................................................................. 71 

Earl Blumenauer ..................................................................................................... 74 

Sam Johnson ............................................................................................................ 79 

Kendrick Meek ......................................................................................................... 81 

Kevin Brady ............................................................................................................. 83 

Lloyd Doggett ........................................................................................................... 85 

John Lewis ............................................................................................................... 90 


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(1) 

U.S. TRADE AGENDA 

WEDNESDAY, FEBRUARY 14, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:00 a.m., in room 

1100, Longworth House Office Building, Hon. Chairman Rangel 

(Chairman of the Committee) presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721 

February 07, 2007 

FC–9 

Rangel Announces Hearing on the U.S. Trade 

Agenda 

House Ways and Means Committee Chairman Charles B. Rangel (D–NY) today 

announced that the Committee will hold a hearing on the direction and content of 

U.S. trade policy. The hearing will take place on Wednesday, February 14, 

2007, in the main Committee hearing room, 1100 Longworth Building, beginning at 10:00 a.m. 

In light of the limited time, the sole witness at this hearing will be the United 

States Trade Representative, Ambassador Susan C. Schwab. However, any individual or organization not scheduled for an oral appearance may submit a written 

statement for inclusion in the printed record of the hearing. 

BACKGROUND: 

Congress and President Bush face a number of significant challenges in formulating a trade policy that maximizes the opportunities and manages the downsides 

of globalization. Specific challenges include: addressing the persistent failure of a 

number of major U.S. trading partners, including Japan and China, to live up to 

their international trade obligations, in order to ensure that U.S. workers, farmers 

and businesses are competing on a level playing field; finding ways to conclude successfully the long-stalled multilateral trade negotiations at the World Trade Organization (WTO), known as the Doha Round; completing pending U.S. free trade agreements (FTAs), including with South Korea and other agreements, in ways that create meaningful market access opportunities for U.S. workers, businesses, and farmers; addressing remaining issues in completed and pending FTAs in ways that will 

ensure the benefits of the agreements are broadly shared in the United States and 

abroad, including addressing labor standards in the FTAs; better integrating the 

poorest countries into the global economy; addressing trade relations with Cuba; 

and developing a bipartisan framework to extend presidential trade negotiating authority. 

In announcing the hearing, Chairman Rangel stated that: Congress must be an 

active partner with the Administration in setting a new course for U.S. trade 

policy. We must ensure that U.S. policies and agreements promote the interests of 

the American people, and reflect our shared values. We need a pro-active trade policy that shapes the rules of competition to create new economic opportunities for all 

Americans, maximizes the benefits of globalization and minimizes the downside, 

and spreads the benefits broadly in the U.S. and around the world. 

FOCUS OF THE HEARING: 

The hearing will examine the direction and content of U.S. trade policy, including: 

(1) the status of the WTO Doha Round negotiations and the role U.S. positions 

on agriculture, services, and industrial market access (including non-tariff 

barriers) have played in the talks; (2) the status of signed and yet-to-becompleted U.S. FTAs, including a review of open issues; (3) the U.S. policy 

responses to the U.S. trade deficit and debt, including efforts to combat unfair trading practices such as violations of intellectual property rights, currency manipulation, and subsidization; (4) the operation of the WTO Dispute Settlement Body, including a review of recent Appellate Body decisions 

against the United States; (5) the status of Russia’s, and other countries’ accession to the WTO; (6) whether U.S. preference programs are effective in 

promoting growth and economic development, particularly in low-income 


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and least developed countries, including Haiti; (7) issues related to extension of presidential trade negotiating authority; and (7) other issues. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

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

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

http://waysandmeans.house.gov, select 110th Congress from the menu entitled, Committee Hearings (http://waysandmeans.house.gov/Hearings.asp?congress=18). Select 

the hearing for which you would like to submit, and click on the link entitled, Click 

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

an email will be sent to the address which you supply confirming your interest in 

providing a submission for the record. You MUST REPLY to the email and ATTACH your submission as a Word or WordPerfect document, in compliance with the 

formatting requirements listed below, by close of business Wednesday, February 

28, 2007. Finally, please note that due to the change in House mail policy, the U.S. 

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

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

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

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

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

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

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

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

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

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

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

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

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

the Committee files for review and use by the Committee. 

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

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

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

witness. 

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

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

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

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

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

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

f 

Chairman RANGEL. Good morning, Ambassador Schwab. We 

are very pleased that you’ve been able to overcome the storm and 

to share your views with us about tax policy. 

Mr. McCrery sends his deepest regrets, but the snow prevented 

him from attending this hearing, but as you know, we’ve been 

working very closely with you on a variety of issues, and Mr. Herger will be opening on behalf of the minority this morning. 


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I have a prepared statement, but as you might suspect, I will be 

deviating from it because it is my desire to be your new best friend 

in terms of trying to share with the American people and especially 

the Congress how important trade is to the United States of America and most recently the impact that it has on democracy throughout the world. 

Unfortunately, the thinking about trade has been polarized. It 

has been my limited experience that the Chamber of Commerce 

has never seen a trade agreement that they didn’t like and Labor 

has never seen one that they did, but a lot of the reasons why 

trade gets such a negative feeling is because it’s perceived that the 

negotiations only concern the multinationals—but those who are 

the victims of globalization don’t get the attention that they should 

get, one, to avoid the loss of jobs and industry, but two, they think 

that their Government, maybe not your Department, but their Government will be there to be of some assistance to them. 

So, it seems to me that when this Committee takes a bill out on 

the floor, we don’t have people saying, ‘‘I got my job through the 

North American Free Trade Agreement (NAFTA), please support 

the Central American Free Trade Agreement (CAFTA).’’ We hear 

the people who say, ‘‘I lost my job as a result of the trade agreement.’’ 

So, I am very pleased how the Administration and especially you 

have provided leadership in how we can prove to the American people that yes, there is pain with progress, but our country is not just 

concerned with agreements for business. We’re concerned for businesses that are already in the United States, and we want to help 

them. 

Of course, we’re working on language that would not do damage 

to American trade agreements, but would show that this great 

country is concerned about at least minimum standards that protect minors and women in having some type of labor laws which, 

of course, most of the country is agreed to but we have a problem 

with. 

I’d just like to say that while we’re not there yet, Mr. Levin and 

I are very pleased with the willingness of your office and others in 

the White House to work with Mr. McCrery and me so that we’ll 

be able not to bring problems to the full Committee but to indicate 

that we’ve moved as many impediments as we can in order to make 

certain that agreements that befall us will be considered in a very 

bipartisan way. 

So, I thank you for that, and I would want, before I go to Mr. 

Herger to yield to the Subcommittee Chair, Mr. Levin, who has devoted so much of his time in trying to get these agreements acceptable to both parties. 

Mr. Levin. 

Mr. LEVIN. Thank you, Mr. Chairman and Mr. Herger and Ambassador. Let me, if I might, read a statement that I wrote. It’s direct. I hope it will be felt constructive, as is intended. 

Trade policy is at a new crossroads in our Nation. Ambassador, 

we appreciate that since November you have increased dialogue 

with the Democratic majority in the House and with the Republican minority. What is needed now is a clear agreement on 

changes of approach to vital trade issues. 


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As you know, Democrats in the House have long held a deep concern about the direction of U.S. trade policy. The Administration’s 

approach has been far too passive in shaping trade agreements and 

establishing rules in ways that raise standards of living in the U.S. 

and around the globe, in enforcing trade agreements and in breaking down unfair barriers to U.S. products. 

You said on Monday, and I quote, ‘‘The equation is quite simple. 

Trade agreements mean more exports and more exports mean better jobs.’’ We believe the equation is not nearly that simple. Imports matter as well as exports. More is not automatically better. 

We strongly favor expanded trade, and I think votes have shown 

that, not as an end in and of itself but as a tool shaping the rules 

of competition to maximize the benefits and minimize the down 

sides of globalization. 

It is time to craft a new trade policy for this new era of 

globalization, an activist international trade policy that expands 

and shapes trade. To do so requires real collaboration, moving beyond too often perfunctory consultation. We believe the pending 

FTAs represent an excellent opportunity if the Administration is 

truly willing to change its approach. 

As to the Latin American FTAs, our position has been clear and 

consistent. The text of the agreement must include the five, core 

International Labor Organization (ILO) standards with a reasonable transition period enforceable like other provisions in the 

agreement. 

As to the pending Korea FTA, our position is firmly held. Among 

other key outstanding issues, the agreement must knock down the 

economic iron curtain to American industrial goods including automotive in a measurable way. 

As we have discussed, Ambassador, time is of the essence on 

these and several other issues in the FTAs. The deadline for submitting or resubmitting revised agreements under the current 

Trade Promotion Authority (TPA) is March 31. Democrats being 

ready to work to meet this deadline we need to receive concrete 

proposals on these issues from the Administration, setting standards for international competition and knocking down rigid barriers like those in Korea are the oppositive of ‘‘perfectionism’’ or 

‘‘isolationism,’’ misguided terms sometimes used to avoid real 

issues. 

A real partnership, and I emphasize this as I close, between this 

Administration and the new majority and the minority to rebuild 

the bipartisan foundation for trade is also necessary to address key 

issues in the World Trade Organization (WTO) round that has faltered. Whether agriculture, industrial policies and non-tariff barriers, services or rules, we Democrats stand ready to proceed with 

that kind of true partnership, changing policies where necessary 

for the benefit of U.S. businesses, workers and farmers in the global marketplace. 

Mr. Herger, if you would, now present your opening statement. 

Mr. HERGER. I thank the gentleman from Michigan, Mr. Levin, 

and I welcome the Ambassador with us today. Ambassador 

Schwab, I do want to thank you for joining us today. I think it’s 

crucially important that the Administration continues to discuss 

the benefits of trade to the American people and our economy and 


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the important progress you are making to bring down barriers to 

trade for our many U.S. products. 

I’d like to focus on the DOHA Round negotiations at the WTO. 

We have ambitious expectations for how the United States will 

benefit from these multilateral negotiations not only in agriculture 

but also for goods and services liberalization. We should move in 

a direction that will eventually bring the DOHA Round to a successful conclusion with an agreement that is good for all Americans. 

Many are pegging the future of the President’s trade promotion 

authority on the level of success we see over the next few months. 

I believe we should extend trade promotion authority, and beyond 

a mere extension only for DOHA. Exports to our FTA partners— 

our 13 FTA partners, account for an amazing 42 percent of our 

total annual exports even though these countries only make up 7.3 

percent of world Gross Domestic Product (GDP). 

TPA is important for future bilateral trade agreements, but also 

because we know that other countries are aggressively pursuing expanded trade, such as the European Union (EU) and China. If we 

allow TPA to expire, we would be foregoing a competitive edge as 

these countries expand their trade relationships and leave U.S. 

producers and consumers behind. 

As we continue to discuss the WTO with respect to agriculture, 

I think the central issue will continue to be market access. We 

have to insure that the concessions we made to reduce our tradedistorting domestic subsidies are reciprocated through meaningful 

new market access in places like Europe, Japan and Brazil by 

eliminating tariff and non-tariff barriers. 

Beef and rice offer a good example. The EU market has been 

closed to U.S. beef because of a non-science-based ban which the 

WTO has deemed illegal. We also have a push for renewed beef exports to countries like Japan, China and Korea, which restrict our 

access in violation of international standards. 

The EU also restricts our rice exports, blocking shipments 

through import restrictions and other non-tariff measures due to 

unfounded fears. 

In other countries like Japan our access is severely restricted. 

The U.S. product that makes it into the country sits unused in 

warehouses, never present in the consumer market or people’s dinner tables. These are just a few concerns that I think must be addressed through our continued negotiations at the multilateral and 

bilateral trade level. 

Overall, I’ve been extremely pleased with the bilateral trade opportunities we’ve created since TPA was granted in 2002. I think 

we need to continue our aggressive stance to conclude successful 

agreements with South Korea and Malaysia and see that American 

producers and consumers alike would benefit. 

I believe this is a mission that we can accomplish on the very 

tight time frame we have, and I assure you, you have my full support as you continue to promote U.S. interests in these negotiations. 

I would like to conclude with a couple of thoughts. First, we must 

make sure that our trading partners live up to their already negotiated obligations. Accordingly, I applaud the Administration’s reVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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cent announcement that it is bringing a case against China on export subsidies. 

Second, as Congress looks for a way forward on TPA, an application of our trade remedy laws, we need to keep in mind a balance 

that recognizes the interest of all elements of our diverse economy. 

Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you. Madam Ambassador, welcome 

to the Committee, and we really look forward to working with you 

in a bipartisan way, and we’re anxious to hear your testimony. 

STATEMENT OF THE HONORABLE SUSAN C. SCHWAB, U.S. 

TRADE REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE 

Ambassador SCHWAB. Thank you, Mr. Chairman. I’m delighted 

to be here today. In keeping with the spirit of the day, I will say 

I will be your new best friend if you’ll be my valentine. 

I’m going to move through my written testimony fairly quickly, 

efficiently, and make sure that we have plenty of time for questions 

and answers. The first two slides that I’m going to go through really lay out the context for President Bush’s trade agenda for 2007. 

The economy is very strong. The economy grew last year at 3.4 

percent. We’ve averaged over 3 percent for the last several years. 

Two million jobs were created in the last 12 months, 7.4 million 

since August of 2003. Real compensation is up. Real manufacturing 

output is up. 

That said, we recognize that there are real concerns about trade 

and those concerns are in spite of the very compelling evidence, 

statistics and data to the contrary. That has to do with the changing nature of the workforce and adjustment, structural adjustment 

that takes place in the economy. 

Now we all recognize that productivity increases, technological 

change, and global competition have an impact on this. We must 

be understanding, and we must seek solutions to address and help 

the narrow but very real group of individuals, of companies, of communities that have been negatively impacted by trade. We need to 

do so in a way that does not jeopardize the benefits of trade that 

accrue to the vast majority of Americans, American workers, American producers, ranchers, service providers and so on. 

Yesterday the 2006 trade statistics came out, and they offer a 

very interesting and in many ways upbeat insight into the trade 

picture. Export driven growth last year was tremendous, nominal 

U.S. goods and services exports grew by double digits, nearly 13 

percent. Imports also grew 10.5 percent, but if you look at the composition of the increase in our trade deficit last year, it turns out 

90 percent of that was from increased oil prices. 

On an inflation adjusted basis, you see different statistics, but 

what is compelling when you look behind the statistics, exports accounted for over a quarter of real GDP growth in the United States 

last year. In the fourth quarter, U.S. trade accounted for almost 

half of our GDP growth. 

Actually, if you look on a trade-adjusted basis, the U.S. trade imbalance was largely unchanged last year. In fact, it was down 

slightly, one-and-a-half billion dollars, and that is mainly because 

of strong export growth. 


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We note here the impact that exports had, trade had, in helping 

to offset the impact on the economy of the housing downturn. I 

would note, again, that export pay—export-related jobs pay an estimated 13 to 18 percent more than jobs nationwide. As we know, 

the vast majority of Americans benefit from trade, recognizing that 

not all Americans benefit from trade. 

So, it’s in this context that I want to talk about our trade agenda 

today and to talk about the DOHA Round of multilateral trade negotiations, trade promotion authority, trade agreements, including 

our FTAs and enforcement, compliance and dispute resolution. 

First, the benefits of the DOHA Round deal, a potential DOHA 

Round deal: This is an opportunity for the United States to improve our access to exports to the 95 percent of consumers in this 

world who do not live within our borders. The DOHA Round also 

has incredible potential, very important development potential in 

terms of alleviating poverty in the poorest countries of the world. 

By one estimate by the World Bank, elimination of global trade 

barriers could lift 66 million of the world’s poor out of poverty. 

If Africa, for example, Africa’s share of world trade could increase 

from two percent to three percent, that would be the equivalent of 

over $70 billion a year in income for Africa, well in excess of foreign aid that goes to Africa, but ultimately, we will need trade promotion authority to implement any DOHA Round agreement. 

On page 6, I have a quick summary of where we are in the 

DOHA Round negotiations. We have talked about, and I suspect 

we’ll talk about more the element of trust in trade promotion authority, the nature of the contract between the executive and legislative branches that is represented by trade promotion authority. 

A reflection of that trust included our ability, my ability, to walk 

away last July from a bad deal, knowing that that would mean 

that the current allocation of trade promotion authority would expire before we had a DOHA Round agreement. 

What we’re doing to try to save the DOHA Round is to drill down 

below the headline numbers, the finger pointing, and look really 

specifically at our priority exports, our redline sensitivities, those 

priorities and sensitivities of our trading partners, and then to 

backward integrate, reverse engineer, into top-line numbers. 

The key, at the end of the day, is going to be market access, 

whether it’s in agriculture, whether it is in manufacturing or 

whether it is in services. 

On page 7, we’ve got information about why the DOHA Round 

is important. I’m not going to dwell on this. I’ll be happy to answer 

any questions about it, but again, the key, market access. If you 

want a single solitary contribution that the DOHA Round can 

make to U.S. economic growth and to global economic growth, development and the alleviation of policy, it is the elimination or the 

reduction of trade barriers, tariff and non-tariff barriers that generate meaningful new trade flows, particularly in agriculture. 

There, the real problem has to do with the exceptions or sensitivities or loopholes that countries are looking to shield their barriers. Export subsidies here is one very bright picture to date in 

terms of the DOHA Round negotiations. There is already a commitment if the DOHA Round is ultimately implemented for the elimination of export subsidies in agriculture. 


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Then of course there is the issue of U.S. trade distorting agricultural domestic support where we are obviously under significant 

pressure to reduce and discipline that. 

When it comes to manufacturing, again tariff and non-tariff barriers are critical, and we’re also looking to have enhanced access 

in certain key sectors, chemicals, electronics, electrical products, 

healthcare products, environmental products and forest products. 

In the case of services that account for eight in ten U.S. jobs 

where we have a trade surplus, again, we are focusing on critical 

sectors, financial services, telecommunications, computers, express 

delivery, energy distribution and environmental services. Then 

there are other important issues under negotiation, including rules, 

environmental related issues having to do with fishing, trade facilitation and development. 

Trade promotion authority, as I said, is going to be a prerequisite 

to getting a DOHA Round agreement enacted into law. All presidents since 1974 have used trade promotion authority to open markets and create opportunities for American workers, farmers, 

ranchers, service providers. 

Very few countries are willing to negotiate seriously with the 

United States without knowing that trade promotion authority will 

enable the United States to deliver on a trade agreement without 

it being picked apart during the implementing process. The Administration has used trade promotion authority to increase our exports, and if we do not have trade promotion authority, whether it 

is for the DOHA Round or regional agreements or bilateral agreements or plurilateral agreements, that is the equivalent of walking 

off the field. If you’re not moving forward in this business, you’re 

probably moving backwards. 

If you look at recent free trade agreements that we’ve negotiated 

in the 10 agreements that have been negotiated in the last several 

years, I would note that U.S. exports to those countries have grown 

twice as fast as U.S. exports to the world. Countries with which the 

Administration has concluded or is negotiating free trade agreements account for $157 billion in U.S. export markets, the equivalent of the second largest market in the world for U.S. exports. 

Even though the 13 FTA countries with which we currently have 

agreements in force account for only 7.2 percent of global GDP, excluding the United States, they account for 42 percent of U.S. exports to the world. Those numbers are broken down in the subsequent slide. 

As you mentioned, Mr. Chairman, we are negotiating free trade 

agreements, currently under active negotiation with Korea. That 

negotiation is going on this week with Malaysia. We recognize that 

under the current allocation of trade promotion authority, any 

agreements must be signed by June 30th and we need to notify 

Congress of our intent to sign before the first of April. 

Again, content over calendar. Content will take precedence over 

calendar, the substance of the negotiations, but ultimately access 

to trade promotion authority is critical. 

We have in front of the Congress two free trade agreements, 

Peru and Colombia. Those are extremely good examples of how we 

use trade promotion authority to level the playing field. 


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One of my predecessors, Carla Hills, was quoted in the last two 

weeks about the Colombia and Peru FTAs as saying, ‘‘Well, they 

get unilateral, one-way, free market access to the United States 

through a preference program. Under the FTAs, they have agreed 

to open their markets entirely to U.S. exports. If that isn’t leveling 

the playing field, nothing is.’’ She called it a no-brainer to see Peru 

and Colombia enacted into law. 

We have a free trade agreement that we are very close to closing 

with Panama, as you know. 

Enforcement, last but certainly not least. The last two slides— 

I’m going to talk very briefly about the record of success that we 

have had in enforcement. This is a very results oriented approach 

that we take with results to show for it. The Administration has 

been willing, has shown it is capable of using all the tools in our 

arsenal from jawboning at one end to retaliation at the other to get 

results when there are cases of countries that are not living up to 

their commitments in terms of our bilateral or global agreements. 

Litigation is, in some ways, almost a last resort because if you 

want to settle a deal, if you want to work out a deal and get results, you’d just assume do it now if you can than go to litigation. 

That said, we have gone into litigation, for example, with the EU 

over the Airbus case, the largest case ever filed, and more recently 

with China over auto parts, and just last week with China over 

prohibited subsidies. 

We have won, I’m happy to say, 88 percent of the WTO cases 

that had been brought since 1995 when the WTO was created, and 

we’ve won over half, 55 percent of all cases, offensive and defensive. 

My last slide, Mr. Chairman, just offers some illustrative examples of where we have accomplished compliance enforcement objectives using bilateral consultations, using negotiations, market liberalizing negotiations through free trade area agreements, the WTO, 

by threatening or actually bringing WTO cases, and by reaching 

conclusion in WTO cases that have been successfully prosecuted. 

Let me stop there and let me invite you to ask questions. I can 

go into detail on any of these and other details that you care to discuss. 

[The prepared statement of Ambassador Schwab follows:] 


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Chairman RANGEL. Thank you, Madam Ambassador. 

If Ambassador Carla Hills believes that Peru is a no-brainer, 

why doesn’t she come down and share with us why we haven’t got 

it on the floor and voting on it? 

Ambassador SCHWAB. Mr. Chairman, I can’t speak for Ambassador Hills, but I suspect—— 

Chairman RANGEL, but you already have. 

Ambassador SCHWAB. Well, I was quoting her. I suspect she’d 

be very happy to come down here and work with this Committee. 

Chairman RANGEL. Well, please tell her we welcome her input. 

Having said that, as you know, Mr. McCrery and I are working 

very hard to remove any partisan impediments to any agreement, 

and you do a heck of a job for negotiating what is best for the 

United States. 

Do you believe since the Congress created your office, that there’s 

any room for the executive and legislative branch to agree on basic 

standards how we treat—how countries that we work with treat 

child labor and discrimination issues? 

Ambassador SCHWAB. Mr. Chairman, I believe that the 

record—the United States’ record both in this Administration and 

the previous Administrations on free trade agreements, as affects 

child labor, worst forms of child labor, forced labor and so on, I 

think that record is very good. I think it’s very clear that in every 

case in every one of these free trade agreements, after the free 

trade agreement has gone into effect, the situation on the ground 

for workers in those countries is vastly improved over what it 

would have been if we hadn’t had the FTA. So, these are obviously 

important standards—— 

Chairman RANGEL. But as relates to getting votes for these 

bills and approval from the Congress, can you share with us what 

you think has been the biggest impediment to getting bipartisan 

support on these agreements based on your experience? 

Ambassador SCHWAB. Mr. Chairman, you are asking the 

$64,000 question. These agreements, by almost any measure, are 

of dramatic net benefit to the United States economy, to workers, 

to ranchers, to small business, medium businesses, large businesses. 

Chairman RANGEL. I agree with you, but I’m asking what 

would you think based on your experience in bringing these agreements to the Congress has been the one greatest impediment to bipartisanship. We all know you’re doing a great job. I said that. You 

all know that most everyone in the House and this Committee believes that it’s necessary for us to participate because globalization 

is a state of fact. 

Now we want this. All I’m asking, since we’re working on it, and 

I’m only trying to get it on the record, what do you think has been 

the greatest impediment so that Republicans and Democrats can 

hold hands and support these things? 

Ambassador SCHWAB. I will answer your question. I think there 

are two significant impediments. One has been an increasing 

misperception within the United States among the electorate, your 

constituents, as to the real benefits of trade to the U.S. economy. 


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That has, in turn, telescoped into a dialogue in the Congress 

about worker rights and how the protection of worker rights should 

not fit into these trade agreements. 

Chairman RANGEL. Do you believe that the executive branch 

and more specifically your office can make suggestions that can remove these impediments? 

Ambassador SCHWAB. You have my commitment to make that 

effort. 

Chairman RANGEL. Do you believe that the Congress should 

have any input as to what the President’s authority should be as 

relates to trade promotion authority? 

Ambassador SCHWAB. I believe very strongly that trade promotion authority, whether you look at the original allocation of 

trade negotiating authority in 1934 or trade promotion authority 

starting in 1974, that is ultimately a contract between the Congress and the President, the legislative and executive branches of 

Government, some of which is written down, some of which has to 

be based on trust and a mutual understanding about how the authority can and should be used. 

Chairman RANGEL. Well, I asked those things because, again, 

I want to thank you for you willingness to negotiate these things. 

Jim McCrery is here, and I don’t think I’m talking out of school 

in sharing with the audience that he has been working with me 

and you and Secretary Paulson and the Secretary of Commerce. So, 

I’d just like to see how long we can have this atmosphere of cooperation working and to indicate publicly that you have done more 

than your share to get this started and on the right track. 

While we have not reached any conclusions yet, I want to thank 

you for your efforts. Soon I hope to be able to bring your recommendations to the full Committee so that we can let the House 

know that we’re anxious to move forward and give it present authority and get these agreements agreed to. 

I’d like to once again publicly thank Mr. McCrery for the cooperation that he’s given, not for Democrats and Republicans but 

for this Committee, the Congress and the country. I yield to Mr. 

McCrery. 

Ambassador SCHWAB. Thank you, Mr. Chairman. 

Mr. MCCRERY. Thank you, Mr. Chairman. I apologize for being 

late. For the first time in years, my four-wheel drive vehicle 

couldn’t get up my driveway this morning, so I had to make other 

arrangements to get here. 

I want to add to what Chairman Rangel said in terms of our willingness to work together to find a way to move the trade agenda 

forward for the United States and for the world. Certainly Ambassador Schwab has been more than willing to meet with us and 

work with us, and her staff as well in searching for a way to create 

a robust trade coalition here in the Congress that would enable us 

to move forward with the trade agenda. 

I don’t think there’s much question anymore as to the value of 

opening markets around the world. The value of breaking down 

barriers to American goods and services having access to the 95 

percent of the world’s consumers who live outside of the United 

States. So, given that, I’m confident that we will find a way to 


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forge ahead with opening markets and tearing down barriers to 

trade around the world. 

Obviously, the best way to do that is with the leadership of the 

biggest market in the world, the United States. Obviously the 

United States cannot lead that effort if the executive branch of our 

Government is shackled with not being able to negotiate freely as 

every other country in the world is. 

Given our unique form of government, it is necessary for the legislative branch to not delegate but make sure that the executive 

branch has the—in perimeter of the Government of the United 

States, and the authority of the Government of the United States 

not just the executive branch but the entire Government of the 

United States to negotiate, to knock down these barriers, to open 

markets, and to bring the value free or trade to people all over the 

world, not the least of whom would be our consumers here in this 

country. 

So, I’m glad that we’re talking. I’m glad that we are seeking solutions and not just trying to obfuscate differences and block the 

progress of trade in the world. So, I commend the Chairman, Mr. 

Levin, Ambassador Schwab, and frankly my colleagues on the Republican side for working so hard to find a way to advance our 

trade agenda. 

Mr. Chairman, I have a more complete statement that I would 

submit for the record with your permission. 

Chairman RANGEL. Without objection. What we will do, fellow 

Members, is have the first round at three minutes and then we will 

go back around for those people who want a second round. Do you 

have questions, Mr. Levin, at this time? 

Mr. LEVIN. Thank you, Mr. Chairman. Let me just—let’s talk 

about your presentation. Trade issues are so polarized, and Mr. 

Rangel mentioned that. 

Mr. Rangel, you mentioned how polarized trade issues are. That 

makes it all the more important that we have balance in our presentations. I said the same thing to Mr. Portman. 

Your presentation kind of shows half of the picture. It talks 

about exports, and they are vital. They don’t talk about imports 

and the impact of imports, and I guess I don’t have time. Chart 

one, if it’s quick, shows what our trade deficit is. 

Okay. It’s not ready. It went up to $763 billion. Our deficit with 

China, $232 billion. 

Imports matter. They have an impact, and that was—your pages 

aren’t numbered—trade spurring economic growth. There’s no references here except percentages as to imports; the base is so much 

larger. 

Then skipping to the pages where you talk U.S. FTA’s expanded 

exports, I guess that’s page 10; they are numbered. So, much of 

that is with Mexico and Canada. You need to bring imports in 

there. We have huge deficits with Mexico and Canada. There’s also 

no reference to Japan. 

We’ve had a discussion here about currency. We talked to the 

Secretary of the Treasury about not siding with the Japanese when 

he went over to the G7 meeting when Europe raised issues about 

the weak yen. 


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Again, it’s so imbalanced to not talk about imports and how they 

impact jobs in this country. You talk about the level of manufacturing. There’s no reference to the three million manufacturing jobs 

that have been lost in the United States. The import of cars in one 

year—from ’05 to ’06—these are the imports, went up by 30 percent. 

So, again, I just urge, if we’re going to have a constructive discussion, and we must, and I want to be very much a part of it, we 

need to look at all sides of this. I want to pick up what Carla Hills 

said about no-brainer. 

Look, when we debated issues in the Clinton Administration and 

they said that an issue, a trade agreement was a no-brainer, I said, 

‘‘Never use that.’’ There are differences of opinion, so when you 

quote Carla Hills when we have some basic issues regarding the 

Peru and Colombia Agreement and say it’s a no-brainer, what are 

you transmitting, Ambassador? 

Look, we want to work out these agreements. The record on this 

side is clear in the past and is clear about the future. We’ve got 

some serious issues. They aren’t no-brainer issues. I just urge, the 

next time you come and join our discussions, let’s talk about the 

imports. Let’s talk about the impact of the imports on places in the 

United States. Let’s talk about manufacturing. Let’s talk about currency issues that aren’t really in your domain. Let’s talk about 

breaking down barriers like Korea that don’t let any of our cars except a few hundred, a few thousand, come in when they ship 

500,000 to 600,000 and we’ve said to you, ‘‘Let’s sit down seriously 

and talk about how we tear down the Korean economic walls.’’ 

That’s the kind of balanced presentation that will be the predicate for the kind of full length, bipartisan and executive Congressional discussions about where we go here. I close—we’ve got only 

six weeks on Colombia, Peru and Panama, six weeks on Korea if 

you want the FTA under this present fast track. 

We’ve got DOHA. My view is let’s get the policies straight and 

then talk seriously about the extension of fast track or its renewal. 

We’ve got some very different views on policies. Let’s work to 

straighten them out as well as our language. 

Mr. Rangel is no isolationist; he’s no protectionist. I hope this 

Administration will stop using those terms about this Democratic 

congress. It’s not true. 

Chairman RANGEL. The Chair accepts the Ambassador’s agreement to meet with the Committee in a less formal setting so that 

we can share with you some of the biased feelings that are created 

as relates to free trade, which we all agree with. 

As soon as possible, since the clock is running out, we will be 

meeting in an informal way with you and the staffs and clear up 

some of the things that can be cleared up. 

Recognize Mr. Herger. 

Mr. HERGER. I thank the Chairman, and I think it’s a point 

well taken by the gentleman from Michigan. Somehow no-brainer 

doesn’t have a good sound to it, but the fact that we’re looking at 

in our country today a 4.6 unemployment rate, the greatest prosperity that we’ve ever had, we see exports that are up. We see with 

just the 13 countries that we do have trade agreements with, that 

some 43 percent of our total trade is going to those countries we 


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can see. The fact that we’re living in a dynamic economy, worldwide economy, whether we like it or not, is very important. 

So, no-brainer perhaps isn’t the right term, but the fact that how 

dynamic it is, how positive it is for Americans, also the fact that 

we can import and import goods that our consumers, the America 

can buy at a lower rate to be able to keep our inflation rate down. 

The fact that so many of our industries are dependent on these 

good quality, low rate products they import that they use themselves to put into their goods the export, I think, is incredibly positive. 

Again, I agree. No-brainer isn’t the right term, but some positive 

term that describes what I’ve just said perhaps is. 

Madame Ambassador, I am very concerned about the renewal of 

TPA and consider it to be vital to our economic policy. I’m pleased 

that we have an open dialogue on renewal of this important piece 

of legislation. Perhaps you can help us by describing the future use 

of trade promotion authority and its benefits from your advantage, 

and if TPA is renewed, how would you use it; which negotiations 

besides the DOHA Round and our already ongoing negotiation do 

you envision? 

Ambassador SCHWAB. Thank you, Congressman. If I may respond to your question and also to Congressman Levin’s comments. 

We can set aside—let us coin our own phrase, which is, a ’brainer’ 

as distinct from a no-brainer, and let’s proceed and talk about substance here. 

The TPA renewal, is critical as I mentioned for a DOHA Round 

agreement. It is critical for any free trade agreements, regional, bilateral, that we care to negotiate. It is critical if we choose to negotiate plurilateral agreements, for example, sectoral agreements related to environmental goods and services if, for example, the 

DOHA Round does not succeed. 

There are opportunities to negotiate on intellectual property 

rights and so on. While the United States—if we have a gap in 

trade promotion authority, don’t think that during that period of 

time, the world is going to stand still in terms of trade agreements 

and trade negotiations. There are hundreds of trade agreements, 

bilateral free trade agreements, regional trade agreements being 

negotiated by our trading partners with each other. 

You can bet that if we have walked off the field those negotiations will continue, and they will continue and those agreements 

will be to the detriment of U.S. exporters and U.S. producers and 

U.S. farmers, and ranchers and workers. So, that is the kind of 

thing that we could use the next allocation of trade promotion authority to do. 

I would look forward to working with this Committee, Mr. Chairman, with Members on both sides of the aisle, both sides of the 

Capitol, in identifying the negotiating objectives and the approach 

that we would take and the priorities that we would be looking at. 

If I may, Mr. Chairman, respond briefly to some of the points 

that Congressman Levin made, he is absolutely right. You’re absolutely right, Congressman. Trade issues are much too polarized in 

the United States, and I’m happy to talk about imports. 

Imports do matter. They matter significantly to consumers. They 

matter to people who went out and bought roses today for their 


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sweethearts for Valentine’s Day where they were able to buy inexpensive flowers at Safeway or at Costco, where maybe a few years 

ago it would have been much more expensive to buy long stem 

roses. 

That’s trade. That is comparative advantage. That is trade. That 

is open market. 

Mr. PASCRELL. Chairman, a point of order. 

Chairman RANGEL. For what purpose does the gentleman from 

New Jersey raise the point of order? 

Mr. PASCRELL. Well, I would like to respond to what was just 

said on Valentine’s Day. Those very flowers come from countries 

that have child labor and forced labor, and that’s why the prices 

are cheaper. If we don’t concern ourselves about that, then we are 

not the Nation we pretend to be. 

Ambassador SCHWAB. The principal sources of U.S. imports of 

such flowers include Colombia, include Ecuador, include Israel and 

a variety of other countries. I would say whether we’re talking 

about the ultimate consumer or when we’re talking about imports, 

intermediate users, manufacturers who are more globally competitive because the import parts, imports do matter. 

Imports also matter in some cases to individuals, to firms and to 

communities when they are trade distorting and when they are 

trade damaging. I think that’s the point that you were making. I 

would note though that the way you address these issues has to 

be where the cure isn’t worse than the disease. 

The last time we had a trade surplus was 1975. We were in a 

recession. There are ways of addressing trade imbalances. Increasing exports and tearing down foreign barriers to trade really is the 

way to go, and that is the way to go in terms of our workers, in 

terms of our constituencies. 

Where individuals are hurt I would note that the President has 

specifically asked for the extension of trade adjustment assistance, 

and I would be happy in conjunction with the Department of Labor 

and others to work with you in terms of renewal of trade adjustment assistance. 

Let me stop there, Mr. Chairman, for other questions. 

Chairman RANGEL. All now to recognize Mr. McDermott for 

three minutes. 

Mr. MCDERMOTT. Mr. Chairman, I’d like to focus on the DOHA 

Round. There is an assumption that because countries are poor 

that they are dumb or that they can’t count. There are more LessDeveloped Countries (LDCs) in the world than there are developed 

countries, and you are not going to get a change in that round until 

you change some of the policies. 

Now, in the 1970s, they accounted for 1.5 percent of the trade in 

the world. Today they are at .8 percent. That’s why we said this 

is going to be a development round. 

When we sit down with them, we say things like, we’re going to 

stick with our agriculture. Agriculture is two percent of the employment in this country. Eighty percent is in manufacturing and 

services. 

Now when you focus on opening up and forcing these countries 

to give up their agricultural exports by opening the markets, you 

are simply saying to them, we don’t care about you. They can 


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count, and they say, we’re not going along. Then we have a Chairman in the last session who beat up on them by denying benefits 

to them under GSP and saying that India—and we’ve somehow, 

we’ve got to break them. 

Now when you—let me just give you one specific question. When 

you talk at the DOHA Round about a duty free, quota free initiative, you say we’re going to open up our markets, duty free, quota 

free, to poor countries, except for three percent that we figure we 

have to hold on for flexibility. 

The least developed countries immediately said, that’s the part 

that will kill us the most. Now I’d like to hear your answer to them 

about why you want to say to them, we’re going to give with one 

hand but take back with the other, to think that they can’t see 

through that, because cotton, for instance, is made—some of the 

best cotton in the world comes from Africa, and there should be 

duty free, quota free, right? 

Your moment. 

Ambassador SCHWAB. Congressman, thank you. You are absolutely right that the focus of the DOHA Round, which is formally 

named the DOHA development round agenda, as you know, is 

international economic development and the alleviation of poverty 

in developing countries. If you look at any study that is out there, 

World Bank study, Organisation for Economic Co-operation and 

Development study, International Monetary Fund (IMF) study, the 

single most important thing that we can do to enhance development in developing countries is barrier elimination, not just in developed countries, but also in developing countries. 

It turns out, for example, that 70 percent of tariffs paid by developing countries are paid to other developing countries, not to the 

developed world. So, the DOHA Round, to be successful, needs to 

enhance North-South trade. It also needs to enhance South-South 

trade. 

The Round framework is designed so the developing countries do 

less than developed countries in terms of opening their markets. 

The least developed countries, which are the ones you’re talking 

about, need to do nothing at all. Although I would argue in areas 

such as services, they would—one of the best development plans 

that developing countries could undertake is opening their markets 

to services, transportation, communications, computers services, express package delivery, build their own infrastructure for their own 

entrepreneurs to export and to gain access to the markets. 

The United States, as you know, has been very generous in 

terms of preference programs that we offer to the developing countries through GSP, through African Growth and Opportunity Act 

(AGOA) (P.L. 106–200), through Andean preferences to the new 

Haitian preference program. When it comes to duty free, quota 

free, in the DOHA Round negotiation, the agreement—and by the 

way, this was an agreement among multiple countries not just the 

United States to have duty free, quota free applied at 97 percent 

of trade is significant because it turns out that there are some 

countries among the ‘‘least developed’’ that in certain sectors, such 

as textiles and apparel, are powerhouse exporters that really don’t 

need duty free, quota free. If they have duty free, quota free, they 


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will knock out the exports of all the other least developing countries and some other lesser developing countries. 

So, there’s a balance to be struck. We have a Federal Register 

notice that we just issued recently asking for comments on how we 

should allocate that three percent and if there are specifics that 

you or anyone else here on the Committee would like to offer and 

comment, we would welcome them. 

Chairman RANGEL. Chair recognizes Mr. Camp for three minutes. 

Mr. CAMP. Well, thank you, Mr. Chairman. Thank you, Ambassador. 

There are clear benefits to trade as you outlined in your testimony. Our exports have increased and they’re growing faster than 

imports, and they’re growing faster with countries we have trade 

agreements with. Jobs related to export pay more than jobs that 

aren’t. 

I’m also concerned about some of the adverse consequences as 

well. Our trading partners in some cases fail to stop counterfeiters. 

They impose non-tariff barriers. 

I applaud your filing of the trade cases against China on auto 

parts. Korea, as has been pointed out, largely remains a closed 

market. We don’t have any agreement with Korea, but we’re working on that. It’s largely closed to our auto market. Do you think 

greater enforcement of our existing trade laws is as important as 

negotiating new trade agreements? Can you outline some of your 

enforcement efforts in this regard? 

Ambassador SCHWAB. Congressman Camp, thank you very 

much. I think it’s a both-and answer, which is, in some cases active 

enforcement of existing agreements, whether they’re bilateral 

agreements, WTO accession agreements, WTO multilateral agreements on the one hand—in some cases enforcement—ensuring compliance is the best way to go. In other cases, the only way you’re 

going to get the trade barriers down is through new negotiations, 

whether it’s through a free trade agreement or whether it’s through 

a multilateral trade agreement like the DOHA Round. 

It depends on the barrier. In some cases, there are barriers that 

are out there that are fully legit, legal under international trading 

rules, and the only way you get those down is to negotiate them. 

In the case of—let me talk briefly about Korea and then about 

China. You mentioned Korean autos. In the case of Korean autos, 

Korea has, for example, an eight percent tariff on its automobiles. 

That is perfectly legal under the WTO. They only way we will ever 

level the playing field with Korea on autos is to get Korea to eliminate that eight percent tariff in contrast to a tariff we had that’s 

less than three percent and to get Korea to eliminate the non-tariff 

barriers that are very serious, a very, very serious market access 

problem having to do with regulatory standards, having to do with 

tax provisions, and so on. 

That has to be done through a bilateral negotiation. That’s what 

we’re trying to do in the context of the FTA negotiations with 

Korea. You won’t be surprised to learn it’s hard slogging, but we 

haven’t given up yet. 

In terms of China, there are a variety of tools and issues. Last 

year the U.S. trade representative’s office issued a top to bottom 


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review on what our policy vis-a`-vis China should be, and that was 

a comprehensive blueprint that we have been following, and it includes discussion, negotiations through the Joint Committee on 

Commerce and Trade, for example, where we’ve addressed intellectual property rights issues. 

It includes activities now through the strategic economic dialogue, Secretary Paulson’s initiative to address longer term strategic underlying issues, including macro-economic issues. As I note, 

in cases where we believe China is not in compliance with its WTO 

obligations, such as in auto parts, such as in Kraft Linerboard, 

where we almost filed a case last year and didn’t need to because 

when they heard we were filing a case they fixed the problem. 

Most recently, these prohibited subsidies. Where we cannot get 

a resolution, cannot get the problem solved and trade moving on 

a fair basis through negotiation, we will opt for litigation through 

the WTO. 

Mr. CAMP. All right. Thank you. Thank you, Mr. Chairman. 

Chairman RANGEL. Chair recognizes Mr. Neal for three minutes. 

Mr. NEAL. Thank you very much, Mr. Chairman. Madame Ambassador, this is a line of questioning that I’ve raised with the 

trade representative’s office in the past. 

I’m aware of the postal privatization going on in Japan, and I’m 

hearing that there is a growing concern that the Japanese government will permit financial giants of Japan Post to begin selling insurance products of the private sector before the new entities have 

demonstrated they fully comply with all the rules and come under 

the same supervision that applies to private companies. 

Wouldn’t that situation amount to a violation of Japan’s General 

Agreement on Trade in Services (GATS) commitment to provide national treatment? If the answer is yes, what is the United States 

doing to enforce GATS in this situation, and do we have a commitment from Japan that this concern is unfounded? 

Ambassador SCHWAB. Thank you for that question, Congressman Neal. This is an issue that we are tracking very closely. It’s 

an issue we have a great deal of concern about. Privatization of 

their postal program is fine in theory unless it turns out that they 

are creating an unfair advantage, an un-level playing field when it 

comes to package delivery and some of the other issues that—some 

of the other commercial matters that the Japanese Postal Service 

has responsibility for. 

We are monitoring it very closely as we are going through these 

changes. I have personally raised it with the last two trade ministers, Japanese trade ministers. We will continue to raise it and 

we will make sure that either they are ideally going to do it in such 

a way that they’re not creating new barriers to trade that would 

be in violation in contravention of their WTO commitments, their 

GATS commitments. Or we will, if necessary, seek litigation. 

Mr. NEAL. Thank you. It’s very important to me, because I have 

been consistent in terms of raising this question with you in the 

past. 

Lastly, DOHA. For somebody like me who follows the trade 

issues every day in daily publications, one of the things I’m struck 

by with DOHA is it’s almost like trying to determine what the 


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score of a baseball game is. One day the game has been rain delayed. The next day the game has been canceled. The third day, 

there’s a double header. It’s really tough to follow. 

I know some of you are counterparts from other positions they 

have held in governance during the past, but some clarification 

would be very helpful, not only to Members of this Committee but 

to the American people as well. 

Ambassador SCHWAB. Oh my, the nine lives of the DOHA 

Round. The DOHA Round, as you know, was launched in 2001 in 

the wake of September 11, 2001, in an effort primarily to focus on 

global economic growth, particularly in developing countries. 

It has sputtered and started and sputtered and started ever since 

then. There was a framework agreement. There was a declaration. 

Then last July we got down to the wire, and a group known as the 

G6—and that’s the United States, the EU, Brazil, Japan and Australia sat down in a room to see if we could come up with a proxy 

for what an outcome, what a breakthrough would look like. 

Those talks failed. They failed largely over market access issues 

and market access issues in agriculture and manufacturing versus 

how much discipline should be put on trade distorting agricultural 

subsidies. We then walked away from what would have been a bad 

deal that we could not—that I could not in good conscience recommend to the President of the United States and that we could 

not in good conscience as an Administration have recommended to 

you even knowing that Fast Track was going to expire, the nature 

of trade promotion authority and the trust inherent in that. 

Since then we have had to step back from the name calling, the 

finger pointing, all the numbers that you read about in the paper 

that you alluded to in your comments, and said, ‘‘Let’s look at real 

trade flows. Let’s look at real trade flows and the potential for real 

trade flows rather than these sort of macroeconomic numbers’’ because it turned out where we broke down the framework has this 

really interesting, progressive, tariff-cutting formula both for agriculture and industry, meaning the highest tariffs that are out there 

get cut the most, which is really a benefit to the United States because we have much lower tariffs in agriculture and industry than 

anybody else in the world or virtually anyone else in the world, excepting a country like Singapore or a few others. 

So, for us that tariff-cutting progressivity is very useful because 

other countries have shielded their most sensitive products using 

high tariffs. Well, it turned out that there were flexibilities built 

into this framework, loopholes that countries could use to avoid 

taking these dramatic tariff cuts. Not surprisingly, everybody assumed that they would have to cut their most sensitive tariffs a 

great deal and that the other country would be shielding your priority exports, our priority exports, using these flexibilities, using 

these loopholes. 

So, what we’ve done since last July is sit down very quietly in 

terms of serial bilaterals, bilaterals going on with a number of 

countries, not just between the U.S. and other countries but between other countries and each other, saying, ‘‘What are your real 

sensitivities, your real red lines and what are your real priorities, 

and are there ways that we can ensure new trade flows in the priorities in spite of the sensitivities without throwing these top line 


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numbers at each other that really didn’t make a whole lot of 

sense?’’ 

That’s the approach we’re on now. I am cautiously optimistic that 

that ultimately will generate a breakthrough that is ambitious, 

that is robust, and that is a balanced outcome for the United 

States. 

Chairman RANGEL. Chair recognizes Mr. English for three minutes. 

Mr. ENGLISH. Thank you, Madame, Mr. Chairman. Ambassador 

Schwab, in my view, the United States Trade Representative 

(USTR) is very much to be applauded for finally bringing a WTO 

complaint against China, for providing what are clearly WTO, illegal, export and import substitution subsidies. 

We recognize of course that these subsidies only account for a 

small fraction of the support that the Chinese government provides 

Chinese exporters. If you could, speak briefly to the prospects of 

this case. Could you also comment on whether USTR intends to 

further pursue China’s other massive domestic subsidies such as 

loans at preferential rates from state-owned banks and the conversion of debt to equity by state-owned asset management companies. 

Ambassador SCHWAB. Thank you, Congressman English, and 

thank you for your remarks about the subsidy case. We have, as 

you know, in the last week, requested formal consultations through 

the WTO with China. 

We have identified nine subsidies. Six, we believe, are prohibited 

illegal export subsidies. Three of them are, we believe, prohibited 

import substitution subsidies. We know that these subsidies go to 

foreign invested enterprises, Chinese firms. The key there is that 

those subsidies can impact U.S. workers, manufacturers, particularly small and medium sized firms that haven’t invested in China 

and can affect U.S. economic interests that try to compete in the 

Chinese market, that compete with Chinese products here in the 

U.S. market and that try to compete with Chinese products in 

third country markets whether in Europe or Japan or developing 

countries. 

So, that is the fundamental. We know that foreign invested enterprises account for 58 percent of China’s exports, so this could be 

a fairly significant case as it moves forward. 

Our ideal in terms of this case is to resolve it, is to get the subsidies eliminated. If we need to litigate, we will litigate. That decision will be made within the next 60 days, and then we will work— 

the process would work its way through the WTO process. 

In terms of other subsidies, we are always on the lookout for 

other subsidies and other potential cases. We work very closely 

with American companies that have an interest or that can identify 

such subsidies. 

In some areas, such as intellectual property rights, we’re now 

going to the provincial level to look at IP issues. Some subsidies 

are at the provincial level. They’re hard to identify in many cases, 

but if there are specific subsidies that are identified, we’d be happy 

to hear about them. 

Mr. ENGLISH. Thank you, Ambassador. In my view, the whole 

question of fair trade with China is what is going to dominate the 

public perception of the trade agenda for the next couple of years 


ralbany on LAP520R082 with HEARINGS
31 

and is central to any efforts we may make to lower our trade deficit. 

So, I ask you to focus on it, focus on it like a laser beam, and 

certainly work with your counterparts in Treasury on the overarching concerns that we have about China currency. I thank you, 

Mr. Chairman. 

Chairman RANGEL. The Chair recognizes Mr. Tanner for three 

minutes. 

Mr. TANNER. Mr. Chairman, thank you. Welcome, Ambassador. 

I have always thought there are two Committees in the house 

that should be nonpartisan. One is Armed Services; we have only 

one defense. Ways and Means; we have only one economy. 

We’ve had some rough times around here. We’ve had a take it 

or leave it attitude, and because I believe so strongly that engagement is better than nonengagement, a lot of times I was on the receiving end of a take it or leave it attitude. 

I think this Congress has a unique opportunity, the 110th, to rediscover a true bipartisan consensus on trade. I think it’s going to 

be absolutely critical that we do so, because otherwise we’re going 

to have a very, very hard time explaining to the American people 

the non-harmful aspects of trade deficit that is reaching historic 

levels. 

The perception is a lot of trade is going overseas, that trade is 

responsible for a lot of our jobs going overseas. True or false, it’s 

a perception. So, it’s my view that we’ve got to develop a new 

framework here in the 110th Congress, in this Committee, in order 

for us to move ahead in a manner that I think our country needs 

to. 

I think this new framework ought to continue to try to remove 

barriers from foreign markets to the extent we can. It should also— 

we should also have a very aggressive enforcement of the agreements that we already have. Third, and perhaps this is where we 

can work together sooner rather than later, a sensitivity of addressing the perception of the negative consequences of trade. 

We have not done a very good job—nobody, but you have, and 

the Administration has, I think, a better microphone than perhaps 

we do. 

This new framework, and I look forward to what the Chairman 

said earlier about us meeting again informally to talk about this, 

but I want to commend the Chairman and Mr. McCrery for—I 

think—I hope I put into words what they feel about it in terms of 

moving ahead on trade. 

Could you just respond generally to that? I know I only have 

three minutes, but I really feel strongly about this. 

Ambassador SCHWAB. Congressman Tanner, I feel equally 

strongly about the importance of bringing bipartisanship back to 

U.S. trade policy. I commend your leadership in this. 

The Chairman has said that we should be looking for not a Republican trade policy or a Democratic trade policy; we should be 

looking for an American trade policy. I think that is absolutely 

right. 

The President believes that as well. In my confirmation hearing 

last year, it was the top priority that I articulated in terms of why 

I was so grateful to have been asked to take on this task. I spent 


ralbany on LAP520R082 with HEARINGS
32 

some time as a Senate staffer in the 1980s when trade was much 

more bipartisan and there was much less rancor. 

It is—you have my commitment, and I have given my commitment to the Chairman, to Congressman McCrery to work with this 

Committee to see that trade does, in fact, return to more of a bipartisan basis. 

Thank you. 

Mr. TANNER. All right. I’m instructed to recognize Mr. Doggett 

next. Thank you. 

Mr. DOGGETT. Let’s get this all in order. 

Ambassador, I really believe that more than a few Americans 

will be surprised to hear that your reaction to the headlines in this 

morning’s paper, that the United States has a record trade deficit 

in 2006 for the fifth consecutive year, that your reaction to that is 

‘‘upbeat’’ and that as with so many other policies that I view as 

misguided of this Administration, that you believe we just need to 

stay the course. 

Yesterday’s ‘‘Financial Times’’ reported that you now agree that 

‘‘international labor standards should be added to the pending 

trade deals.’’ Was that accurate? 

Ambassador SCHWAB. Congressman, to respond to both of your 

points, one, in terms of the trade deficit, I think it is important to 

look behind the number, but—— 

Mr. DOGGETT. You had said that, and given my three minutes, 

let me just ask you if you agree that the Financial Times article 

was accurate or it’s inaccurate. I just want to know one way or the 

other. 

Ambassador SCHWAB. Congressman, I have made a commitment to Chairman Rangel, to Congressman McCrery, to work with 

this Committee on a bipartisan basis to try to bridge the differences on labor rights in trade agreements, yes. 

Mr. DOGGETT. Does that mean the story was accurate? 

Ambassador SCHWAB. I’m afraid I didn’t read the story, so I 

think I—— 

Mr. DOGGETT. The story said that international labor standards should be added to the pending trade deals. 

Ambassador SCHWAB. Congressman, the approach that I would 

take is let’s see if we can get a substantive agreement between the 

Administration and the Congress on what the nature of those labor 

rights commitments should be in trade agreements, and then let’s 

have a conversation subsequent to that about the form that it 

should take. 

We don’t believe that it should be necessary to reopen existing 

trade agreements, but the first thing to do is see if we can bridge 

the substantive gap, and then we can talk about how it’s—— 

Mr. DOGGETT. So, you don’t favor reopening any of the pending 

trade agreements? 

Ambassador SCHWAB. We don’t believe that that is necessary, 

but I think that before we have that conversation, I think it’s important to keep the conversation—— 

Mr. DOGGETT. One other area of concern. As you know, sometime after 9 o’clock last night some of the 11 Members of this Committee who wrote you a month ago about our desire for a biparVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00036 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\89560\89560.XXX 89560

ralbany on LAP520R082 with HEARINGS
33 

tisan policy that addressed our concerns about the environment, received a fax response from your office. 

I don’t believe it addressed any of our specifics. In the seconds 

that remain, let me just ask you if you agree or disagree with our 

observation in that letter that it is vital that our trade agreements 

require countries to fully implement and enforce obligations made 

through multilateral environmental agreements. 

Ambassador SCHWAB. Congressman, I would be happy to visit 

with you separately when we have more time to talk specifically 

about the issue of multilateral environmental agreements. The key 

I think that we all agree upon is the importance. 

Mr. DOGGETT. I appreciate that, and I’d be delighted to visit 

with you. I just want to know if you agree or disagree with the 

question that we raised to you a month ago that I don’t believe 

your letter last night responded to. 

Ambassador SCHWAB. I believe our letter responded to the letter that we received. 

Mr. DOGGETT. Do you agree or disagree that in our trade agreements we should require enforcement of multilateral environmental agreements to which the partners have agreed? 

Ambassador SCHWAB. Congressman, I think the issue is, as 

with many trade issues, much more complicated than a yes or no 

answer. If the Chairman would allow me the time, I’m happy to answer in some detail. Otherwise, as I said, I’d be happy to visit with 

you separately and go through the issues. 

There are some multilateral environmental agreements 

(MEAs)—there are many MEAs out there as you know. The U.S. 

is a signatory to some. Other companies are signatory to others. I 

think there is clearly a consensus that we need to use our free 

trade agreements to further environmental objectives. Sometimes 

we do that within FTAs, sometimes we do that separately. 

For example, I just recently signed an MOU with Indonesia on 

illegal logging. 

Chairman RANGEL. Maybe we can make arrangements for you 

to send your response in writing or you can get in touch with that 

office. I’m very anxious that everyone has an opportunity to inquire. 

Mr. Weller, for three minutes. 

Mr. WELLER. Thank you, Mr. Chairman, First let me commend 

you and Mr. McCrery for the commitment you have made to advance our trade agenda and to work in a bipartisan way. I consider 

that real progress and I want to support you in your leadership in 

this effort to move forward on our trade agenda. 

Ambassador, it’s good to see you. Welcome. Time is limited so I’ll 

get right to the point. 

My colleague from Texas raised an issue that I want to raise. 

First I want to congratulate you on the progress you’ve made on 

Peru and Colombia and soon to complete on Panama. Latin America is suffering from the unfortunate march of populist 

authoritarianism in different parts of Latin America and strengthening our relationship with our friends and allies, the democracies, 

particularly of Colombia, Peru and Panama, I believe is extremely 

important on all fronts. 


ralbany on LAP520R082 with HEARINGS
34 

The issue of labor of course is coming up. Since these agreements 

have been reached, I have friends that want to do more on labor. 

Looking back on the Dominican Republic Central American Free 

Trade Agreement (DR–CAFTA), I’m interested in knowing from 

you, as based on the DR–CAFTA model and the commitments that 

were made, have there been significant accomplishments from the 

standpoint of enforcing greater protections for workers, greater enforcement of existing laws and expanding opportunities for workers 

in the DR–CAFTA countries as a result of the DR–CAFTA agreement, the ratification by this Congress? 

Ambassador SCHWAB. Thank you, Congressman Weller. Yes, as 

you know, we have DR–CAFTA entry into force with four of the six 

DR–CAFTA agreement signatories. Those have been during the 

last year—entry into force took place. In each one of those cases, 

we can articulate commitments and improvements that each of 

those countries made. 

Mr. WELLER. Now the leadership of each of these countries 

issued the white paper, which is part of that commitment. Can you 

give some specific examples of what, from a bipartisan viewpoint, 

would be considered progress on enforcement as well as giving new 

rights to workers in these countries? 

Ambassador SCHWAB. No, the white paper was very, very significant. In particular it set in motion a process involving the international labor organization and capacity building that we were able 

to provide so that on an individual basis, whether it is the right 

to organize, whether it is addressing child labor, whether it is addressing others of the internationally recognized standards, there 

have been tangible improvements in those countries. 

I would be happy, if you would like a more specific assessment, 

happy to bring that back to you, but in each of the countries involved, each of the four countries where we’ve had entry into force, 

the white paper has been taken very, very seriously. Simply to engage on these issues in a way that they would not have engaged 

absent a free trade agreement, absent CAFTA DR I think is significant. 

Mr. WELLER. Madame Ambassador, three minutes goes by very 

quickly, but if you could provide for the Committee a list of examples of what all of us would consider to be progress both in enforcement and in expanded rights for workers based on this white paper 

and other agreements as part of the DR–CAFTA process, I know 

I would appreciate it and I believe my colleagues would. 

Ambassador SCHWAB. I would be happy to do that. 

Mr. WELLER. Thank you, Mr. Chairman. 

Chairman RANGEL. The Chair is pleased to recognize Ms. 

Tubbs Jones for three minutes. 

Ms. TUBBS JONES. Thank you very much. Madame Ambassador, nice to see you again. How are you? 

I’m particularly concerned when we have this whole discussion 

about unemployment rate of 4.6 percent and how great it is. In 

Ohio, the unemployment rate isn’t 4.6. In fact, in the city, my congressional district is 13.7 percent. We’ve lost a significant number 

of jobs in Ohio, and I keep repeating those numbers over and over 

again at these hearings. 


ralbany on LAP520R082 with HEARINGS
35 

I want to focus on trade adjustment assistance, which you talked 

about momentarily. What—even though it’s administered by the 

Department of Labor, it is through your work and your effort that 

we are able to bring workers—because in Ohio workers, fact or fiction, believe that their jobs are gone because of the trade policies 

of our Government and the failure of our Government to use all of 

the tools that they have to enforce trade relations. 

Tell me what I can tell my people in Ohio that the Ambassador 

is going to do to ease the unemployment rate and their worry. 

Ambassador SCHWAB. Congresswoman, thank you very much 

for that question. You’re absolutely right. There is a serious perception problem that trade somehow is the cause of significant unemployment in the United States, when in fact unemployment is at 

4.6 percent, when we’re creating more than 2 million jobs a year 

more than we’re losing. 

You mentioned trade adjustment assistance. Trade adjustment 

assistance is available for workers who have lost their jobs because 

of trade. I think a better answer to your question—and as I noted 

earlier, the President is fully committed to extending trade adjustment assistance to working with this Committee and with the Congress to do so, but I think the real answer to your question is opening more barriers, removing barriers abroad so that we can enhance our exports. 

We know that U.S. jobs that are related to exports pay 13 to 18 

percent more than average jobs in the United States. 

Ms. TUBBS JONES. The dilemma I have with your response, 

and I’m almost out of time, is the fact is that the workers who are 

unemployed as a result of loss of manufacturing jobs are not getting jobs that they are capable of taking care of their families at 

a level. So, my position is that we collectively, in a bipartisan fashion have to fix it, and it’s not solely perception that trade has lost 

us jobs. It’s a reality that they’ve lost us jobs. It may not be as 

many as people believe, but there is a reality to the fact that people 

are not doing work in the United States as a result of work being 

done all over the country [sic.] 

I guess my time is about up, so I’m just looking forward to the 

opportunity to fight for the workers of Ohio and not fight with you 

but fight for them to have jobs. Mr. Chairman, I thank you for the 

time. 

Chairman RANGEL. Well, let me share with the gentlelady from 

Ohio that the trade representative—fully appreciate, as does the 

ranking Member that there are many people that are looking for 

jobs that are not included in the number of unemployed. We can’t 

give them numbers and say how good the economy is. We can’t talk 

about the historic 4.5. 

Once we realize, statistics notwithstanding that we have to do 

something, it makes our job selling free trade a lot easier. I tell the 

gentlelady that we are working in a bipartisan way to make certain 

that we avoid the pain when we can, and if we cannot, we’ll make 

adjustments to help the people who unfortunately went away of 

progress. 

Ms. TUBBS JONES. Thank you, Mr. Chairman. 

Ambassador SCHWAB. Congresswoman, I look forward to working with you to see that that happens. Thank you. 


ralbany on LAP520R082 with HEARINGS
36 

Chairman RANGEL. The Chair recognizes Mr. Brady. 

Mr. BRADY. Thank you, Chairman. I want to add my voice to 

those. Encouraged by the discussions, Ambassador, you’re having 

with our Ways and Means leadership, Chairman Rangel and others, to try to find some common ground. We really do need to speak 

with one voice around this world when we’re talking about a level 

playing field for our companies and our workers. 

I’m convinced, after working on DR–CAFTA that the goal on improving workers rights and improving the environment are much 

more the same than people imagine. It’s how we get there that’s 

the debate. I think the discussions you’re having are very healthy. 

I also think in this debate on trade we ought to be a little more 

intellectually honest about this trade deficit. It is not caused by our 

trade agreements, just the opposite. Eighty percent of our trade 

deficit comes from countries we don’t have trade agreements with. 

The trade agreements we do have are producing real sales and real 

jobs for American companies and the truth is America is a great 

country to invest in, which drives up our trade deficit. 

We spend so much and save so little. We’re such a huge consuming country. The fact of the matter is we need to spend a little 

less, save a lot more, and we need, through your negotiations, to 

open up new markets and produce—turn countries into spending 

more themselves for our products. 

Here is the question I have for you. Last week, in a very good 

hearing, Gene Spurling recommended to the Committee that we 

pursue a limited extension of trade promotion authority focused on 

the DOHA Round. My concern is that with our bilateral agreements producing so many more sales for American companies and 

the DOHA Round being very important, but as we all know—Uruguay Round took eight years, far less complex. 

Today the issues are far more complex. We have more countries 

in WTO, making that much more difficult to reach a consensus. 

Yet, I’m convinced we stay at DOHA and use the rain dance approach, which is—the key to a successful rain dance is you keep 

dancing until it rains. The key to a successful DOHA Round is we 

stay engaged until it’s the right agreement for America in the global system. 

What are your thoughts on a balanced TPA that gives us the bilateral negotiations and also keeps us at the table with DOHA? 

Ambassador SCHWAB. Thank you very much.—You will notice 

that when the President of the United States called for a renewal 

of trade promotion authority, there were no specifics in terms of 

how broad and how long. That was not an accident, and it is not 

an accident the Administration has not submitted a specific proposal. The nature of trade promotion authority is one that is going 

to ultimately be worked out between the executive and legislative 

branches. Trade promotion authority is a contract between the two 

branches of Government. 

I would say this. Every president needs and should want trade 

promotion authority, and not just for a Doha round. Not just for 

a multilateral trade round. For multilateral trade agreements, for 

the bilateral free trade agreements, for regional agreements, 

whether it is Western Hemisphere or Middle East, for pluralateral 

agreements, for agreements that are sectoral in nature that cut 


ralbany on LAP520R082 with HEARINGS
37 

across regions, for example, in intellectual property rights in areas 

where we have interest. 

So, I would say the broader, the better, the longer term, the better. I look forward to working with you, with this Committee, Mr. 

Chairman, with Mr. McCrery and all Members of this Committee 

to try to forge that contract, forge that consensus. 

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

Chairman RANGEL. The Chair recognizes Mr. Thompson for 

three minutes. 

Mr. THOMPSON. Thank you, Mr. Chairman. Ma’am, every time 

that we’ve had an opportunity to meet with someone from your 

shop, I have asked this or a similar question regarding what you 

are doing to deal with—it’s kind of an intellectual property issue, 

but in China, they make bad wine in China and they label it with 

the Napa Valley. It seems to me that that’s something that you 

guys ought to be able to have some leverage on. They call it Na 

Pa He Gu, which means Napa Valley. It’s clearly an infringement 

in regards to geographical designation, and it’s something that’s 

hurting a business in my district that’s important not only to California but to the country. 

Could I get an answer as to what you guys are doing? It’s been 

three years I’ve been asking the question, and everybody’s, yes, 

we’ll look at it. What are you doing? 

Ambassador SCHWAB. Congressman, thank you. This is an 

issue that we have raised with the Chinese. This is an issue that 

fits in with a broader set of intellectual property rights concerns 

and geographic indications concerns that we have. 

In particular, when it comes to China, as you know, we’ve got a 

variety of intellectual property rights issues that we’re trying to address, whether it has to do with falsified labeling, whether it has 

to do with copyright protection, whether it has to do with—— 

Mr. THOMPSON. Could you—because my time is limited, could 

you send me a letter explaining what it is you’re doing and when 

we can expect some resolve on this? 

Ambassador SCHWAB. Congressman, I’d be happy to do that. 

Mr. THOMPSON. Can I expect a letter sometime soon? The 

three-year window is I think a little long. 

Ambassador SCHWAB. Yes, sir. 

Mr. THOMPSON. Thank you. The other issue—— 

Chairman RANGEL. We don’t have time. No, no. Go ahead. 

Mr. THOMPSON. The other issue I want to talk to you about, 

and Mr. Doggett brought it up, and that’s the international labor 

standards. There are lot of us on this Committee who really wanted to vote for some of the past trade bills, but because of the environmental neglect and the labor neglect, we just—we couldn’t do it. 

Is it my understanding from your answer to Mr. Doggett that we 

can expect—and these are countries that said, yes, put the ILO 

standards in. We’re fine with that. Then I don’t know if it was the 

Committee or the majority on the Committee or the Administration 

that stopped that from happening. 

Is there any harm that can come to anybody if we have strict 

labor standards and strict environmental standards? 


ralbany on LAP520R082 with HEARINGS
38 

Ambassador SCHWAB. Congressman, you have my commitment 

to work with this Committee, with the Chairman, with Congressman McCrery, with other Members of the Committee to bridge the 

gap if at all possible on the labor standards issue and on the environment issues. 

Mr. THOMPSON. Do you see any harm that can come to anyone 

if we have strict labor and strict environmental standards in these 

trade bills? 

Ambassador SCHWAB. I am committed to seeing that we bridge 

the gap that existed last year, and to see if we can do so in a way 

that contributes to rather than detracts from U.S. economic interests. 

Mr. THOMPSON. Thank you. 

Chairman RANGEL. The Chair would like to recognize Mr. Porter for three minutes. 

Mr. PORTER. Thank you, Mr. Chairman, appreciate you being 

here today. I guess a global question, and it may have happened 

before I was here, because of a prior appointment, I couldn’t be 

here. As we look at Europe and kind of the trading roles between 

Europe and the U.S. and then compare that to the emerging markets in South America, it seems to me that that’s the next frontier 

as far as trade, economic development, and with this globalization. 

China seems to have also the focus on South America and the expanding markets. Just kind of give me an overview on your perspective of where we need to be short term, long term in our trade 

South America, as it’s now the next frontier for economic development. 

Ambassador SCHWAB. Congressman Porter, thank you. One of 

the advantages of a multilateral trade round is that you are able 

to negotiate with a wide swath of countries and regions, whether 

it is Europe, Japan, Asia. Bilateral trade agreements, regional 

trade agreements, such as the ones with the Western Hemisphere, 

though, enable us to be much more targeted in our approach, and 

this Administration has been utterly committed to enhancing economic growth through trade, democratization, through trade 

through greater commercial interaction in this hemisphere. 

If we, whether you’re looking at the Peru Free Trade Agreement 

(FTA), which we hope will come before this Committee shortly, the 

Colombia FTA, which we hope will come before this Committee 

shortly, the Panama FTA that we’re just closing out, these are of 

fundamental importance. If you look at a map of the hemisphere, 

with enactment of those three free trade agreements into law, you 

will see a line of trade agreements going from the tippy top of Canada right down through the Horn. 

Chile was one of our first FTA partners after Mexico, Canada, 

obviously, and that has been tremendously successful. We believe 

that these kinds of trade agreements are fundamental not just for 

commercial regions but also for geopolitical reasons. In the Andean 

region, also in terms of our anti-narcotics objectives. 

Mr. PORTER. With the Central America piece, I think that from 

a—Homeland Security may have looked the other way for a few 

years, and now is that a major corridor? I appreciate your perspective. 


ralbany on LAP520R082 with HEARINGS
39 

Ambassador SCHWAB. The Central America piece, DR–CAFTA, 

is a fundamental part of that equation, yes, absolutely. 

Mr. PORTER. Thank you. 

Ambassador SCHWAB. Thank you. 

Chairman RANGEL. Mr. Larson is recognized for three minutes. 

Mr. LARSON. Thank you, Mr. Chairman. Thank you, Madam, 

for your testimony and service to the country. There was a story 

printed earlier today in the Post, I believe. At the end of the story, 

there was a quote from a Peter Schiff, who is the president of EuroPacific Capital, a brokerage firm in Darien, Connecticut. His comment was that instead of producing products, we are just printing 

money. How do you respond—and that we are—the country is in 

serious trouble. How do you respond to that? 

The corollary question to that is one that you touched on in your 

remarks about the benefits of globalization, and that certainly 

Americans have benefitted. It’s been my experience in my district 

that while some Americans may be benefitting, not all Americans 

are benefitting from quote/unquote ‘‘globalization.’’ 

With respect to the comment that was made by Mr. Schiff with 

respect to that, do you think the United States takes full advantage of the global transactions that happen all over the world? Is 

our current Tax Code, the way we look at trade, antiquated in response of need for us to provide for those who may be left out of 

this economy the opportunity to be retrained, to be reeducated and 

foster other future economic development? 

Ambassador SCHWAB. Congressman, I will not pretend to be a 

tax expert. I think the fundamental questions you are raising, 

though, are absolutely the right questions to be asking. 

In the case of manufacturing, U.S. manufacturing output has 

gone up dramatically, has gone up in the last ten years over 38 

percent. This is our manufacturing. Capacity utilization in manufacturing—— 

Mr. LARSON. I don’t mean to interrupt you, but I’m from a 

State where we’re losing over 40,000 manufacturing jobs on a regular basis, and we’re a high tech, aerospace, defense-oriented, pharmaceutical State, and yet we still continue to shed manufacturing 

jobs. 

Ambassador SCHWAB. There, Congressman, you are talking 

about questions of causality. If in fact, as is the case, manufacturing output in the United States is up, and capacity utilization, 

is at a 33-year high, then the question is, where we are shedding 

manufacturing jobs to what we can—what can we attribute that to. 

Labor productivity is part of that issue. Part of it has to do with 

when you look imbalance in our import/export composition, part of 

it has to do with different rates of economic growth, the fact that 

we save less than a lot of other countries. Other countries, developed countries are growing less fast than we are. 

You alluded to questions about education. We’ve talked about 

trade adjustment assistance. Enabling individuals to be able to 

tackle today’s economy, the global economy. If look at the difference 

in earning power of someone with a college degree as opposed to 

someone without a college degree, that is a huge gap, and it has 

gone up dramatically. That gap has grown dramatically in the last 

several decades. 


ralbany on LAP520R082 with HEARINGS
40 

So, I think there are multiple causes here. We need to look for 

solutions that don’t jeopardize the successes that we do have in 

terms of manufacturing and exports. 

Mr. LARSON. I’ll get back to you in writing on the printing of 

money as opposed to productivity, because it’s—— 

Chairman RANGEL. I’d like to share with the gentleman of Connecticut that the U.S. Trade Representative fully realizes that people who are working think better about trade whether they’re involved or not. Even though it’s not in her direct portfolio, she 

shares with me and the Ranking Member that her title is the U.S. 

Trade Representative. 

So, therefore, the Administration has agreed to have other people 

perhaps sitting at the table to deal with the negative impact sometimes that progressive trade policy brings about. So, we are working very hard to find the language to make trade a popular thing. 

The Chair recognizes the gentleman, Mr. Ryan, from Wisconsin. 

Mr. RYAN. I thank the Chair for yielding. I’ve been enjoying this 

conversation, and I’ll just try and add my little contribution to it, 

and then just quickly follow up with a request more than a question. 

It seems to me we have pretty good road map on how we can accomplish TPA moving forward by looking at some of the recent successes we had. Two agreements that I was very involved in, Bahrain and Oman, involved side agreements with respect to labor and 

core ILO standards. It was—it took a lot of time and effort and 

work to get these side agreements, probably more than was necessary, but nevertheless, they occurred. 

We just got this letter from the finance minister dated 6 February, from the finance minister of Oman, stipulating that they basically implemented all those labor laws we asked them to implement. If I recall here, they implemented not only the core ILO 

labor standards, but also the United Nations (UN) protocols and 

some additional agreements. 

So, in Oman we basically achieved what we all want to achieve, 

what we’re hearing here, we did it outside of it. So, now how do 

we come up with a model that put this within TPA so that we sort 

of standardize this process so it works a lot more efficiently and so 

that we can address these key critical issues? 

That’s what we need to work together on. At the same time I 

want to put out just one little word of caution. As I understand it, 

there’s a possibility that a new labor regime, if not properly crafted, may possibly leave us subject to dispute settlement and possible 

trade sanctions because our superior labor laws are questioned. So, 

the devil’s in the details. That would be a bad situation that would 

undermine the reason we enter into these trade agreements in the 

first place, to help American workers and businesses. 

In addition, I simply think we need to be mindful that we don’t 

want to adopt a model that would dissuade potential trade partners from negotiating with us in the first place. If we demand too 

much, we end up with nothing, not even the improvements in labor 

like we have been using with the current standards, like we got 

with Oman and Bahrain. All these new labor laws in those countries would never had occurred if it were not for our trade negotiations. 


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So, I also worry that if we make it too difficult for partners to 

partner with us and get these agreements, then these other wouldbe trading partners will simply go to the EU, they’ll go to China, 

and they’ll cut easier, better deals with them and freeze us out. 

So, we are in a competitive atmosphere here. So, we have to find 

that sweet spot. We have to find that right area where countries 

want trade agreements with us, where we do advance these very 

common sense labor causes. In my opinion these are common sense 

things. We’ve got to do it in such a way that we don’t set up our 

own laws for more litigation, for sanctions and dispute settlement. 

So, that’s where the devil in the details exists. If you could just 

kind of elaborate for me how to get that done. I know—I guess 

we’re on three minutes and my time’s kind of out—perhaps in writing. That would be very helpful. 

I think we can do this. I think we should do this. If we don’t do 

this, all these other countries are going to trade and get better 

deals with our competitors, and we will lose because of that, and 

we will not advance this labor cause. 

So, we’ve got to get this done. Thank you. 

Chairman RANGEL. Mr. Ryan, no one understands that better 

than our trade representative, and we if she didn’t find it—if it 

wasn’t difficult, we would have done it a long time ago. So, I look 

forward for your input in helping us to reach that point where it’s 

in the best interests of the United States and we get broad-based 

support for the trade agreements. I thank you for the cooperation 

that you—and the input that you’ve had in the past, and hope that 

you continue to work with us. Thank you. 

Mr. Blumenauer is recognized for three minutes. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I would state 

from the outset that I am one Member who is very interested in 

watching the development of the Administration’s agricultural policies and perhaps giving you greater latitude for the United States 

to be more forthcoming in the agriculture arena, particularly for 

poor and developing countries. 

I would hope that maybe some of that same spirit about the special and differential treatment that we’re talking about maybe in 

Doha also finds its way into some of the FTAs with some of these 

countries themselves that are developing. I must say that I find a 

little of that wanting when we’re looking at the agreements with 

Peru and Colombia. 

I am gratified by the leadership that is being exhibited by our 

Committee, by Chairman Rangel and Ranking Member McCrery. 

It was in that sort of spirit of trying to move and reestablish the 

bipartisan trade consensus that we’re going to need that you did 

receive the letter from us dated January 17th. Some of us got faxed 

late last night a response. I want to add my voice as saying, with 

all due respect, that response I hope was just dashed off by some 

staff member who wanted to have something in our hands before 

this hearing, because it doesn’t go very far towards developing a 

sense of momentum dealing with these environmental issues as far 

as I’m concerned. In talking to my fellow signatories, they feel the 

same. 

May I ask respectfully for maybe another shot at it? Let me offer 

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ing to see if there’s somewhere in USTR we can do a better job. 

Has the United States ever brought a complaint pursuant to the 

provision of our trade agreements requiring domestic environmental laws be effectively enforced? Under what conditions would 

USTR consider bringing such a complaint? 

An example. Where it’s document that there are illegal logging 

in the Rio Planto Bioreserve in Honduras, which is on the list of 

endangered world heritage sites, would that be an appropriate case 

to bring under the environmental chapter of DR–CAFTA? We’ve 

got the Singapore FTA where we’ve got massive transshipments of 

illegal log timber through the ports of Singapore. 

I sat on the plane coming out from the Northwest this last week 

with a lumber executive that I’ve been having embarrassing comments with in the past. We’ve got a trade in illegally harvested 

timber that is posing a threat to his companies and others around 

the country, losses I’ve heard of a billion dollars a year in revenue 

because of these imports. 

Now since it’s clearly, it would seem, a trade issue which impacts 

both conditions abroad and in the United States, could we have addressed this issue of illegal harvested timber in a more forthright 

fashion, negotiating the trade agreement with Peru? 

I’d like—I don’t want to trap you, but I would like maybe a more 

detailed response in writing that speaks to what we’ve done, can 

we do it in the case of these illegal logging, the illegal transshipment, and putting teeth into these agreements that we have 

coming before us now that give some of us pause? 

Chairman RANGEL. The Chair would like to recognize Mr. 

Nunes for three minutes. 

Mr. NUNES. Thank you, Mr. Chairman. Ambassador, I want to 

be very quick with this. On the Korean FTA, it’s come to my attention that some of the agricultural products are not being zeroed out 

in terms of zero duty. Specifically, this troubles me for crops that 

are not even grown in Korea. 

So, I hope we will send a very clear message to the Koreans that 

they won’t have my support if they’re going to try to put duties on 

products that they don’t even grow in their own country. So, that’s, 

of course, parochial to me, but of concern. 

I want to get to a question in regards to perishable agricultural 

products. Given the short timeframe here, I will be very brief, but 

you know of the seriousness that we have with trying to get agricultural products into foreign markets, specifically dealing with the 

FIDO sanitary barriers to trade that they put up. 

What I’d like to get from you is what do you think of an establishment of a perishable commodity export indemnification program perhaps operated by the USTR? Are there any indemnification programs for any U.S. exports today? In other words, getting 

more people on the ground to try to get this handled more quickly 

than it happens now. 

Ambassador SCHWAB. Congressman, in terms of Korea, I think 

you just sent a very effective message. I would say—I would note 

that we have this round of the Korea-U.S. Trade Agreement negotiations going on this week here in Washington. 

As far as the United States’ position, the United States’ position 

is very, very clear that these have to be comprehensive agreements 


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that nothing is off the table, regardless. Nothing is off the table. 

That’s the position we take. That is the set of commitments that 

we’ve made in terms of market access, even though sometimes 

that’s difficult for us. 

In terms of Sanitary and Phytosanitary Standards (SPS) issues, 

sanitary, FIDO sanitary issues, they are a constant source of problems in trade that we have, particularly in terms of our exports, 

but also other countries would argue that we have a system that 

is less efficient than it should be. Other countries would argue 

that. 

I have worked with Secretary Johanns, and will continue to work 

with Secretary Johanns to see what kind of facilitative measures 

we can take. In terms of SPS barriers being used against U.S. exports, we are very active in terms of getting those eliminated, making sure that other countries also adhere to globally recognized 

standards. 

Mr. NUNES. I think we have an opportunity with this farm bill 

coming up to try to help with some of these long outstanding 

issues. It seems like these never go away. I don’t know if it’s that 

the USTR is understaffed or if the staffing levels aren’t appropriate 

at the foreign level in the other countries, but anyway, we’re optimistic that we can try to get something done this year with this 

farm bill that would be beneficial for market access. 

Ambassador SCHWAB. I will look forward to working with Secretary Johanns and with the agriculture Committees on this. 

Mr. NUNES. Thank you, Ambassador. Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you. The Chair will now go back to 

those Members that were here when the gavel fell, which is Mr. 

Becerra, Mr. Kind, Mr. Pascrell, Ms. Berkley, Mr. Crowley, Mr. 

Meek, Ms. Schwartz, and then we’ll go to Mr. Pomeroy and Mr. 

Van Hollen. 

The Chair recognizes Mr. Becerra for three minutes. 

Mr. BECERRA. Thank you, Mr. Chairman. Ambassador, again, 

thank you very much for being here. I’m actually very delighted at 

some of the questions and conversation that’s taken place, because 

it seems like this year we’re seeing conversation about worker 

rights, worker protections occurring on both sides of the aisle in 

this discussion, and I think that’s great. 

However difficult we have found it to promote our protections 

and our interests in things like our commodities, beef, crops, or our 

goods, heavy equipment, or even things you can’t touch like intellectual property, we’ve always done the best job we can to protect 

our interests, to promote them as well abroad. 

So, when we have provisions in our trade agreements which say 

that if we find a country is violating our intellectual property 

rights on movies or CDs, not only can we enforce actions against 

that country’s crops or other products unrelated to CDs or movies, 

but we can actually require them to change their domestic laws to 

make sure that they are criminally sanctioning people who pirate 

our intellectual property. I think that is absolutely essential for us 

to be able to promote our interests abroad. 

I’m wondering if you could tell me if you think it’s difficult for 

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ers in America and workers, of course, in those countries, trading 

partner countries as well, as we go about fashioning a trade agreement that not only talks about worker protections but also includes 

it within the body of the agreement to be able to enforce protections and interests of American workers and interests of those—the 

worker interests in those trading partners as well. 

Ambassador SCHWAB. Congressman, thank you for raising the 

question. As I have indicated and will reiterate, the Administration 

and I am fully committed to working with this Committee to see 

if it is possible to bridge the gap in terms of how we address worker rights. Congressman Blumenauer was talking about environment issues. We have—— 

Mr. BECERRA. My question was more focused on whether or not 

you as our ambassador believe that—I think it was Mr. Ryan who 

said it’s difficult—it can be difficult to get these trade agreements 

signed if we go too far on some of these rights for workers. I don’t 

think we spared any negotiating tool when it came to protecting 

our rights to our intellectual property, our rights to make sure our 

farmers can sell their crops for a decent price abroad, our rights 

to make sure that our heavy equipment that we send to other countries gets a fair price. 

I’m just wondering if you could tell me if you believe that it’s too 

difficult to negotiate an agreement that includes protections that 

will make sure that, for example, in China where in their industrial heartland, that industrial worker will make about 64 cents an 

hour compared to in America where an industrial worker probably 

will on average make about $22 an hour, or in Mexico where the 

minimum wage is less than $5 in a day compared to our deplorable 

$5.15 an hour minimum wage. 

How do we make sure that as we go about making these agreements that we’re protecting the interests of workers not just in our 

country but in those trading partner countries as well to make sure 

that, just as we protect product, intellectual property, commodities, 

we’ll protect workers as well? 

Chairman RANGEL. You may respond. 

Ambassador SCHWAB. Thank you. Let me echo Congressman 

Ryan’s comment that if this were easy, we would have done it a 

long time ago. We spend an inordinate amount of time and energy 

trying to make sure that we have solid and productive components, 

labor rights components, and environmental components, I might 

add, in our free trade agreements. 

I believe that our free trade agreements are the single best vehicle that we have to improve the situation in terms of labor rights 

in other countries, and we have pursued that as actively and as 

avidly as we have pursued intellectual property rights and other 

services investment and so on. 

We do need to—if it were easy, we would have done it some time 

ago. Let us recall that when we put together these free trade agreements, they’re very complicated. They have to be comprehensive, 

and there are tradeoffs for everything. I have made the commitment to work with this Committee to see if we can bridge the gap 

on the labor rights issues. 

Mr. BECERRA. Thank you. Thank you, Mr. Chairman. 


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Chairman RANGEL. I want to be as positive as I can about what 

the gentleman referred to. It means that we would like to see that 

with the same enforcement as the other areas, as difficult as it may 

be, because we know it’s a question of trade policy, and we know 

that what you come up with is going to be in your opinion in the 

best interests of the United States of America. That doesn’t mean 

that the legislative branch may differ with the executive branch as 

to what’s in the best interest of the United States, especially when 

we’re giving that authority to the President of the United States. 

So, to some extent—and we’ll have to have experts to support 

it—we may have a different opinion as to what’s in the best interests of the people of the United States of America. So, I know you 

say that you’ve tried hard, but I’m more confident that we’ll be trying harder to work together, because it makes the difference as to 

whether or not we’re going to have a bipartisan trade policy. 

I know you believe that, but the gentleman from California was 

not privy to the many, many meetings we have had, and we hope 

to please you as well as the majority Members of this Committee. 

Let’s see now. 

Mr. BECERRA. Mr. Chairman, I’m hoping to be pleased as well. 

Chairman RANGEL. Okay. Mr. Kind will be recognized for three 

minutes. 

Mr. KIND. Thank you, Mr. Chairman. Thank you, Ambassador 

Schwab. This actually has been a very helpful discussion that we’ve 

been having throughout the morning. You’ve been very patient, and 

we appreciate it. 

I’m going to eventually ask you about the Doha round, our ag bill 

coming up, but also the Canadian WTO challenge, ag challenge 

that’s recently been filed against us, but before I do, this is tough 

stuff. I think the comments you’ve heard her reinforces that. You’ve 

got one of the toughest jobs in Washington today in helping us try 

to form a new bipartisan consensus and how we can move forward 

on a trade policy that makes sense for our country. I think it’s 

worthwhile in doing, because I think trade is incredibly important 

for our country, for future growth prospects for our constituents. I 

believe it’s important to our national security, because I believe 

when goods and products cross borders, armies don’t. I believe it’s 

an important tool in our diplomatic arsenal and in how we engage 

the rest of the world, but especially the developing world at this 

crucial time. 

I also believe it’s an opportunity of trying to elevate standards 

globally, both at home and abroad. To me, trade is all about the 

harmonization of rules and how we’re going to engage one another 

on an economic basis. The real question is, and what’s in the minds 

of our constituents back home, are we going to work hard to try 

to harmonize upwards, or are we going to encourage a race to the 

bottom, where we have no worker rights, no labor enforceable 

standards, no environmental protections, no level playing field for 

our constituents in which to compete, too? That’s really the great 

challenge that we’re trying to get at. 

I, along with a few of my colleagues, spent a week in Geneva 

after Thanksgiving to get more insight on the Doha round, and 

there’s nothing more dangerous than Members of Congress going 

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perts, but it’s clear that all eyes are on us in regards to what we 

do with TPA, and especially on what we do with our egg bill coming up this year, but somehow we’ve managed to position ourselves 

as being the scapegoat or the bad actor in all this in Geneva right 

now. So, there’s a lot riding on this. 

I was hoping to be more encouraged with the Administration’s 

farm bill that was sent up recently, especially with the Title I commodity program, so-called ‘‘Amber Box’’ payments. I think we need 

to go further, and I know it’s just a starting point for negotiations 

with the egg bill, but obviously there was a round of criticism of 

both Europe and in the developing world on what the Administration was proposing under Title I. That’s a concern. 

Now I hope you might have an egg expert on staff that can come 

up and brief me on where things like in Doha and what we need 

to accomplish with the egg bill. I would hope maybe it’s the same 

person that can give me an update on the Canadian challenge. We 

already had our hands handed to us with the cotton challenge, and 

we face a very serious challenge now with what the Canadians are 

arguing. Maybe if we can get something written from your office 

as well, that would be much appreciated. 

If you could just comment on the importance of making sure we 

produce the right agriculture bill and what that means in the multilateral round. 

Ambassador SCHWAB. Thank you, Congressman. We welcome 

Members of Congress going to Geneva, talking to WTO members 

and getting up to speed on a lot of these issues, because some of 

them are very arcane, they’re very complicated, and we very much 

appreciate it when you take the time to do that. 

Just a couple of very quick observations. One, obviously, I would 

be happy to come up and see you, or our chief agricultural negotiator or a team to come up and talk about the relationship between the farm bill and what’s going on in Doha in agriculture. 

Let me make one very emphatic comment, though, which is the 

farm bill, the Administration’s farm bill, is not our Doha round agriculture offer. 

Mr. KIND. Right. 

Ambassador SCHWAB. What the United States is prepared to do 

in terms of cutting our trade distorting domestic support, whether 

it’s Amber Box or Blue Box or other, or aggregate, has everything 

to do with how much agricultural market access, how much market 

access there is in this agreement. Those were—it was that tension 

that brought the talks down last July. So, we are pushing very 

hard to have a more ambitious market access outcome so that we 

can have a more ambitious conversation about trade distorting domestic support. 

You mentioned the corn case. Mr. Chairman, this really bears 

some thought. In the absence of a successful Doha round negotiation, I think it’s very clear we’re going to see more litigation, and 

that includes more litigation like the corn case. We believe our programs are consistent with the WTO. We believe the new farm bill 

would be consistent with the WTO. Other countries don’t necessarily feel that way, and litigation is what happens when you 

aren’t able to resolve things through negotiation. 

Mr. KIND. Thank you. 


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Chairman RANGEL. The gentleman from New Jersey, Mr. Pascrell, is recognized for three minutes. 

Mr. PASCRELL. Thank you, Mr. Chairman. Thank you, Madam 

Ambassador. Madam Ambassador, I hope someday that trade will 

someday be a tool for economic security within our country and 

other countries as well, as well as national security, which I think 

it can serve a vital, vital part of that. There’s not enough time to 

get into that today. I want to take some exceptions to what you’ve 

said, if you’ll permit me to do that. 

Your answer to the Chairman on his question about why do so 

many people believe that trade is really the bottom line, it’s not 

good for the rest of the—many workers in this country, and you 

said, you responded to him because of misconceptions. 

That is why I—I hope I was not out of order, but that is why 

I responded to you before when you brought up the subject of Valentine’s Day for flowers. I know where those flowers come from. 

You know where those flowers come from. Cocoa, which goes into 

chocolate, a lot of chocolate going out today to bevel off the edges 

with many relationships, chocolate does it, but many times that 

cocoa comes from places where you can’t organize, and they use 

child labor. 

So, I want to ask you a question, if I may, about a subject that 

I didn’t bring it up, the gentleman from Wisconsin brought up, on 

Oman and Bahrain. I proudly voted against both of those trade 

agreements. In those agreements, it was promised—they promised, 

both of those countries, to strengthen their laws in order to secure 

passage of their respective FTAs. 

Bahrain recently issued a decree banning strikes in numerous 

public and private sectors, and Oman has not adopted laws necessary to implement what they promised. It appears that it is 

enough for the USTR to obtain promises regardless of whether the 

promises are kept. I’d like to know in 15 or 30 seconds, what are 

you going to do that the promises are being kept? We can’t accept 

promises that are not being kept by most of the countries that we 

trade with. What are you going to do about it? 

Ambassador SCHWAB. Let me begin by respectfully disagreeing 

with your underlying premise. 

Mr. PASCRELL. Which is? 

Ambassador SCHWAB. First that the agreements are not being 

kept. In the case of Oman, Oman has fully complied with the commitments that it made in terms of changing its trade laws, royal 

decrees, in terms of regulations. They are now in place. The trade 

agreement has not yet even entered into force, so. 

Mr. PASCRELL [continuing]. Know that. 

Ambassador SCHWAB. Those are in place. In the case of Bahrain, Bahrain made significant commitments. Bahrain is, to my understanding, acting in a manner consistent with those commitments. I just heard of the claim that you described, and our office 

is looking into that to make sure that they are addressed. 

Let me note the obvious, though, which is absent free trade 

agreements with Oman and Bahrain, there would be nothing whatsoever that the United States could have done to improve labor 

rights in either of those countries. None of those laws, none of 


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those regulations would have gone through, and we would have no 

mechanism to enforce them. 

So, I’m happy to say that we have those agreements in place and 

we have the dispute resolution mechanisms available to us. 

One last point, Congressman. That is, in my written presentation, I specifically noted that of the long-term unemployed, there 

are approximately 3 percent of those whose jobs have been lost directly attributable to trade. We understand there is a problem. It 

is not—it is not a huge problem statistically. It’s a huge problem 

for those individuals in those communities. 

Mr. PASCRELL. Yes. We’re talking about human beings. We’re 

not talking about—— 

Ambassador SCHWAB. That’s exactly right, and we’re committed 

to helping them. 

Mr. PASCRELL. We’re not talking about widgets. The previous 

President did not have fast track, and yet he had very specific 

trade deals with the WTO, with the Permanent Normal Trade Relations (PNTR) in China. Why do we need to have fast track? Why 

do we need to be kept out of things in order to come to these agreements? 

Chairman RANGEL. The Chair would like to recognize—— 

Mr. PASCRELL. Thank you, Mr. Chairman. 

Chairman RANGEL [continuing]. Ms. Berkley for three minutes. 

Ms. BERKLEY. Thank you, Mr. Chairman, and a belated welcome, Ambassador. I’m going to change topics a bit. I think we can 

agree that our participation in international trade through the 

framework of the WTO is advantageous for a number of reasons. 

So, I’m wondering if you can help me. What happens when the 

United States finds itself in a situation where we’re judged by the 

international community to be in violation of WTO principles which 

we have agreed to follow? I’m specifically referring to the case that 

Antigua and Barbuda have brought before the WTO alleging that 

the United States is in violation due to our confusing and may I 

say hypocritical stance on Internet gaming. According to the Justice Department, any gaming conducted over the Internet is illegal. 

This Congress in its infinite wisdom included a ban on Internet 

gaming in the port security bill that was passed right before we adjourned for the election. I have never been able to figure out how 

banning Internet gaming had any connection whatsoever with this 

Nation’s port security, but included in that ban was an exception 

for horse racing. So, I have to think poker bad, horse racing good. 

As a result, our Government has prevented operators based in 

Antigua and elsewhere from offering online gaming within our Nation’s boundaries, citing our Nation’s moral objection to Internet 

gaming at the same time we are allowing online betting for horse 

racing. 

The WTO of course has disagreed with our Justice Department’s 

position and will shortly issue a ruling that confirms we are in violation and that Antigua may and can retaliate. What are we going 

to do about this contradictory policy? What do you recommend that 

Congress does? Ought we not study the problem or the issue of 

Internet gaming before we ban it, in violation of WTO? 

Ambassador SCHWAB. Congresswoman, you have been very patient waiting to ask this question. 


ralbany on LAP520R082 with HEARINGS
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Ms. BERKLEY. You have no idea. 

Ambassador SCHWAB. This is quite a question. Let me offer the 

following. One, because this is a matter still under litigation in the 

WTO, I would just as soon not get into any specifics. What I would 

appreciate is if you have the time, if I can come in with some of 

our compliance attorneys who are working on this case. The United 

States takes the position we believe that our laws are consistent 

with our WTO obligations, but if you would permit, I’d like to be 

able to come in with some of our attorneys to get into more details 

and respond more fully to your question. 

Ms. BERKLEY. I would appreciate that, but the idea that we’re 

going to spend a fortune litigating an issue that I think could be 

easily taken care of in Congress with a simple vote seems a waste 

of taxpayers’ money, but I would welcome sitting down with your 

attorneys and talking to them about this issue. 

Ambassador SCHWAB. Thank you, Congresswoman. 

Chairman RANGEL. The Chair will now recognize my colleague 

from New York, Chairman of the Queens County Democratic Organization for what international input he would like to place in this 

issue before us. Mr. Crowley. 

Mr. CROWLEY. I need a moment, Mr. Chairman. 

[Laughter.] 

Mr. CROWLEY. Let me just—get back to where I’m at. Thank 

you, Mr. Chairman, as always. Ambassador, thank you for being 

here. It’s great to see you again. 

I just want to follow up very quickly on the question Mr. 

McDermott asked earlier, and that is pertaining to the LDCs, Least 

Developed Countries. As you know, I have an interest in—primarily, in a number of those countries, in particular, Bangladesh, 

Sri Lanka, just to name a few of them, and an interest to see them 

advance in terms of their society and the need to have more free 

access to our markets. 

During the Doha development agenda, WTO members would 

move to adopt the initiative which promotes duty free, quota free 

market access for the LDCs. By 2008, this initiative would be applicable to all products originating from LDCs, with the aim to 

move towards greater equity in international trading opportunities 

for those countries. 

When Mr. McDermott asked you the question in regard to 100 

percent duty free and quota free access, you raised the issue of the 

African nations’ objection to that. Recent economic studies, including the International Food Policy Institute, which is a conservative 

institute, show that 100 percent duty free, quota free access would 

not adversely affect apparel exports from Africa, and in fact—and 

moreover, the Africa countries have expressed support for 100 percent duty free, quota free access for all LDCs. 

One, I’m going to ask you to respond to that. Before I ask you 

to respond to that, if you could, just another note, because time is 

of the essence here, I mentioned to you briefly in private the issue 

of Oracle and their difficulties in India, specifically, they face difficulty working through the Indian bureaucracy. India’s Securities 

and Exchange Commission and Fed leaked the sale within India 

that increased the stock price there. They changed the filing fee 


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during the process from $1,058 to $6.6 million. It’s a software company dealing with banking software. 

Oracle is in the process again of purchasing that within India. 

It would be the largest forward directed investment in the history 

of India, over $2 billion. They were told that they could have 100 

percent ownership within India. They’ve only been able to secure 

84 percent ownership. So, a lot of double dealing is the sense that 

Oracle has gotten in their dealings with India. 

Can you comment on that and tell me what it is you are doing 

as Trade Representative and what our ambassador, Mulford, has 

been doing or saying to the Indians in India? Thank you. 

Ambassador SCHWAB. On your second question, the issue of 

Oracle’s acquisition in India, this is one that we are following, very 

familiar with, and between Ambassador Mulford and our office, has 

been raised with Indian authorities. I will continue to raise that in 

context of the India-U.S. Trade Policy Forum, which was created 

last year, and that will be meeting again in the next several 

months. 

In terms of duty free, quota free, the duty free, quota free decision—and this was an agreement reached in December—of the 

Doha—in the Doha agreement of the WTO members, was for 97 

percent of products to be duty free, quota free. Countries that want 

to do more can do more. 

Ninety-seven percent was a position that a lot of countries 

agreed on. We have currently a Federal Register notice out asking 

for input, asking for comments on what should or should not be included, because we do—we are fully committed to making the duty 

free, quota free provisions as useful to the least developed countries 

as possible. 

There are preference erosion issues that need to be considered 

not just in terms of African countries, although I hear a lot of concerns from African countries, AGOA members in particular, but 

also other preference holders, other countries that already have extensive preferences in our market. 

We will be using this request for information, request for input 

process, public input, to get a sense of where this would fall out. 

It is our expectation and our desire to make sure that the maximum possible benefits to developing countries are derived from 

this 97 percent. 

Mr. CROWLEY. Well, I look forward to working with you on this 

in the future, Ambassador. Thank you very much. 

Ambassador SCHWAB. Thank you, Congressman. 

Mr. CROWLEY. Thank you, Mr. Chairman. 

Chairman RANGEL. The Chair would like to recognize Mr. Meek 

of Florida for three minutes. 

Mr. MEEK. Thank you, Mr. Chairman, Madam Secretary, thank 

you for coming before us. I know that many of the questions that 

many of us on the bottom row had for you have already been answered, but as you know, I’m from Miami, Florida, and I’m the only 

Member on this Committee that represents Florida, and trade is 

something that, like the pork industry says, we’re the new white 

meat as it relates to trade, because some of the issues or some of 

the issues that are facing Americans, loss of jobs, what have you, 


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that’s being blamed on trade, did not affect Florida like it affected 

Ohio and some of the other States and South Carolina. 

As you know, we had the Free Trade of Americas that we attempted to try to promote, and we know the status of that now. 

Also, CAFTA, DR–CAFTA, which I understand there’s still some 

discussions that still need to take place for that to be in full effect. 

Now we have the Hope legislation that was passed in the closing 

of the last Congress. I represent more Haitian Americans than any 

other Member of Congress, and we know the situation in Haiti, the 

poorest country in the Western Hemisphere. I know that the Administration has really been looking to do a lot, not only in South 

America, but in our own hemisphere to promote trade. 

I also would like to hopefully give some questions to your staff 

for the record so that you can give me some feeling of where we’re 

headed as it relates to Haiti. A very difficult, very technical international community is there trying to do the best they can. I just 

want to make sure that we’re putting our best foot forward. I voted 

against DR–CAFTA for the main reason that we had the Hope legislation or Hero or what have you before us, and it wasn’t getting 

the attention that it deserved from the Administration. It did not 

come up for a vote, and when it was coming up for a vote, thanks 

to the Chairman, it was so watered down under the previous 

Chairman, it wasn’t even worth bringing it up, but I’m glad that 

our present Chairman and the previous Chairman worked to get 

the Hope legislation up. 

I want to just ask you very quickly as it relates to Haiti, what 

kind of forward lean does your office have as it relates to getting 

the implementation of the Hope legislation moving fast? Faster 

than it’s doing now. I understand that we may be in a DR–CAFTA 

experience, and it’s just one country. 

Ambassador SCHWAB. Congressman Meek, thank you for asking 

the question. We have committed our office, and we’re working 

with the Customs and Border Patrol for their side of it. We have 

committed to have expeditious implementation of the Hope legislation. That is within a timeframe ideally within 90 days of enactment. That takes us into March. We’re moving very quickly, and 

I am optimistic that we will be able to meet that timeline. 

You are absolutely correct that Florida is an incredible beneficiary of an open trading system, particular Western Hemisphere 

trade, and the Hope preference program I hope will be of significant benefit. We believe very strongly that DR–CAFTA, when it’s 

fully implemented, again, has fundamentally important implications for Florida and the Peru and Colombia and Panama free 

trade agreements when those come before this Committee, when 

they are enacted will also be very, very significant in terms of Florida and other countries in the region, including Haiti, gaining the 

benefits that are possible from international trade. 

Mr. MEEK. Thank you very much, and I look forward to following up with you and your staff on the issue. Thank you. 

Ambassador SCHWAB. Yes. I forgot to mention, if you’ve got specific questions, we will be very happy to receive them and respond 

to them promptly. Thank you. 

Chairman RANGEL. I’d like to make your job easier, because 

when we have these—the Ranking Member and I agree that when 


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we have these informal meetings, some of the questions that people 

have of their own district other Members would be interested in 

getting these answers so that you’ll have a Committee that’s more 

in line with our full trade policy rather than just what hits our district. 

We would be better informed, and I want to thank you again for 

your willingness to have these informal meetings. 

Ms. Schwartz is recognized for three minutes. 

Ms. SCHWARTZ. Thank you, Mr. Chairman, and thank you for 

your patience, too, in hearing all of our questions. I wanted to really ask about—more about the issue of enforcement. I mentioned it 

to you before the hearing, but one of the concerns, and the Chairman expressed it in the beginning, that there is skepticism about 

these trade agreements really being helpful to either American 

businesses or to the workers of course they employ. So, what that 

means is that we work hard to get language in legislation in these 

trade agreements, but then the issue of enforcement is clearly a 

major one. 

So, specifically, Congress did insist in the China WTO accession 

agreement and the China PNTR that the legislation include the 

special anti-surge agreement that would allow the United States to 

act against unfairly traded Chinese imports. The anti-surge mechanism known as—you referred to it as the 421 provision—is a major 

reason that the China PNTR was passed. 

Since the law went into effect, a number of U.S. industries have 

sought to use the anti-surge mechanism and to seek relief under 

this law. In four out of six of the cases, the independent U.S. International Trade Commission found that the U.S. firms did in fact 

need relief, but in every one of those cases, this Administration rejected those petitions, often reaching beyond the parameters of the 

Congress’s intention, and looked for justifications for the rejection. 

I have a business in my district. I wrote to you about this. I’ll 

represent it’s a standard pipe manufacturer located in the city of 

Philadelphia, in the northeast section. I can tell you just—this is 

an example. The standard pipe imports from China increased from 

10,000 tons in 2002 to 663,000 tons in 2006. That’s not a small increase. It’s a staggering figure. As a result, this particular company 

has had to cut back and has laid off workers’ hours. 

This is true for standard pipe companies across the Nation. 

While you might say, and I hope you do, that you would speak to 

the specific concerns I have about this company, I am really asking 

more as we go forward, I’m asking more the question as we go forward, as we seek to build in language that will in fact offer this 

kind of potential relief as we go through—sometimes it’s a transition, sometimes it’s actually really sort of an anti-dumping provisions as well—can we count on the Administration to find only reasons to reject the opportunity for relief for American industry and 

companies? 

Or in fact will we see some enforcement from the Administration, 

from you and from the President? It’s an assurance I think that we 

need going forward to make sure that as we want to promote trade 

policies in this country that work for American business and American workers, we need to have that assurance going forward. 


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I would like to have you speak again to the specific or to the general notion of enforcement. Thank you. 

Ambassador SCHWAB. Congresswoman, thank you. Let me 

speak both to the specific and to the general. General first. We are 

absolutely committed as an Administration, as the U.S. Trade Representative’s Office where we have jurisdiction, and the Commerce 

Department in anti-dumping countervailing duty areas where they 

have jurisdiction, we are absolutely committed to effective enforcement of trade agreements. 

It is not a good use of anyone’s time for us to go out and negotiate trade agreements and discuss them here and debate them and 

enact them into law and put them into effect if we are not actively 

enforcing those agreements. If, for example, you look at the—you 

mentioned the case of China. 

If you look at cases that we have brought related to auto parts, 

the most recent subsidies case, prohibited subsidies case, involving 

export subsidies, involving import substitution subsidies, some of 

the issues that we’re debating over intellectual property rights and 

so on, we are showing that we will be rigorous in our enforcement 

of trade agreements. 

Ms. SCHWARTZ, but not in the anti-surge. 

Ambassador SCHWAB. In terms of anti-dumping and countervailing duty, the anti-surge mechanism 421 that you reference, 

that is a provision of law that we respect, that we implement in 

good faith. 

In the case of the Standard Pipe decision, that decision and the 

previous decisions, the President needs to make a determination, 

we make a determination as to whether it is in the national interest to impose these special safeguards. 

In that particular case, we found that there were more than 40 

other producers of this product, countries exporting that product to 

the United States, and that a safeguard put on one imports from 

China, would not have done any—provided any real benefit to U.S. 

producers. In fact, it would have harmed U.S. users. 

You have our commitment, and Carlos Gutierrez, Secretary 

Gutierrez, I’m sure would say the same thing if he were here, that 

this is a provision of law that we will faithfully implement. 

Chairman RANGEL. The Chair would like to recognize Mr. Pomeroy for three minutes. 

Mr. POMEROY. Thank you, Mr. Chairman. Madam Ambassador, 

is sugar secure as a sensitive product in your negotiations with, 

among others, least developed countries? 

Ambassador SCHWAB. Congressman, it would have been lovely 

if you had been able to ask that question about the same time that 

the two congressmen were here asking me why duty free, quota 

free—— 

Mr. POMEROY. You’re on my time. Question, please. 

Ambassador SCHWAB. The answer is, we have committed that 

97 percent of imports would come in duty free, quota free from the 

least developing countries in the world if there is a Doha round 

agreement. We have not made any commitments as to what would 

be contained in that 3 percent. We have a Federal Register notice 

that we have recently issued to get comments on that very subject. 

I am assuming that any—— 


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Mr. POMEROY. Sugar is insecure relative to be in sensitive 

product exclusion at the present time. Is that right? 

Ambassador SCHWAB. We have not made any determination as 

to what will be—— 

Mr. POMEROY. All right. 

Ambassador SCHWAB.—within that allocation. 

Mr. POMEROY. Watching the Doha round, it reminds me of a 

one-bidder auction with recalcitrance, intransigence by our trading 

partners, the United States just tossing more and more on the 

table. I believe that in light of restricted market access that is very 

different from the open market we allow, the extraordinary European subsidies, which are very different than what we have in our 

own farm programs, this approach is ill advised. 

Not only have we been wimpy in negotiating, we are wimpy in 

trade enforcement, and this is where I would direct the rest of my 

time. Two issues. Transshipment of sugar through Canada under 

NAFTA—I’m sorry, through Mexico under NAFTA, as we have the 

NAFTA 2008 date arriving with unlimited amounts of sugar allowed in from Mexico, what resources are allowed—are you allocating to make sure there’s no transshipment, which is clearly prohibited under the terms of the signed agreement? 

Second and very different issue, but I think it reflects upon the 

array of areas where trade enforcement has been lacking, is the 

privatization of Japan post exposing a $50 billion a year life insurance presence in Japan, what resources do you have dedicated to 

the privatization of Japan post? Have you had discussions with 

Japan relative to national treatment of Japan post as they’re in 

this transition toward privatization? 

I thank you and yield—and look forward to your answer. 

Ambassador SCHWAB. Congressman, you raised two questions 

and accused us—accused me of being a wimpy negotiator, and I 

must—— 

Mr. POMEROY. Our trade policy generally, Madam Ambassador. 

Ambassador SCHWAB. Well, let me suggest, Congressman, that 

Exhibit One for our determination to make sure that any Doha 

round outcome is clearly in the national interest of the United 

States was walking away from the table in July. There was a bad 

deal on the table. It had insufficient market access in agriculture, 

in manufacturing, and in services. We walked away from the table 

even knowing that that was our last chance to use trade promotion 

authority. That is because we are determined when we negotiate 

free trade agreements, when we negotiate multilateral trade agreements like the Doha round, that there has to be market access. In 

terms of what we are or are not prepared to do, in terms of our 

trade distorting domestic support in agriculture, that has everything to do with how much market access is on the table. 

So, first, foremost, most important. In terms of sugar, in terms 

of sugar and NAFTA, as you know, and as you implied in your answer, the market ultimately becomes fully open between the 

United States and Mexico next year in terms of sugar and a number of other products that are very sensitive to, for example, the 

Mexican government and sensitive to Mexico, sensitive to the 

United States. We will need to make sure that transshipments do 

not occur, because it is important that if there is going to be trade 


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within this NAFTA agreement it is fair trade and it is trade that 

was anticipated by the agreement, not trade with third countries. 

Finally, on Japan post, it is an issue that we are concerned 

about. We need to make sure that with this transition in Japan 

there is a level playing field at the end of the day and that U.S. 

rights under the WTO that Japan has allocated are not eroded by 

this change, we will continue to work with the Japanese to make 

sure that happens. 

Mr. POMEROY. Thank you. 

Chairman RANGEL. The Chair recognizes Mr. Davis for three 

minutes. 

Mr. DAVIS. Thank you, Mr. Chairman, Ambassador Schwab. I 

apologize for getting here and delaying your departure. I had some 

weather issues today. 

Let me go back to Ms. Schwartz’s questions about countervailing 

duties. As you’re probably aware, Mr. English and I have had a bill 

in the last Congress that we’ll be introducing soon, which unambiguously—which gives unambiguous authority to U.S. Commerce Department to apply countervailing duties in the event of subsidies 

by the Chinese. The reason it’s difficult to do that now, as I understand it, is because of the determination of the term ‘‘nonmarket 

economy.’’ 

Two questions. Is there any good economic reason or any good 

substantive reason why the United States should be reluctant to 

treat China as a country for whom these provisions are applicable? 

Is there a reason that the Administration has been resistant to interpreting the current law in such a way that allows countervailing 

duties to be applied? Is there a good reason why this legislation 

shouldn’t be implemented by the Congress? Give me a brief answer 

to that. 

Ambassador SCHWAB. Congressman, thank you. On the issue of 

Chinese subsidies and countervailing duties, as you know, there is 

currently under review, under consideration, a specific case before 

the Commerce Department related to coated paper that I can’t 

comment on where the Commerce Department has decided to review whether or not and how applicable countervailing duty laws 

are and whether they should be applied in this case. That is obviously at a sensitive stage, and I won’t comment on that specific 

case. 

In terms of addressing Chinese subsidies, this is an area where 

we have a great deal of concern, and where it is very clear that 

China has subsidies that are illegal or clearly inconsistent with 

their WTO obligations, we are acting. Most recently, we announced 

that we are seeking formal consultations under the WTO—— 

Mr. DAVIS. Let me stop you simply because my time is about to 

run out. The concern that some of us have, Ambassador, is I understand there’s a current case in controversy that you don’t want to 

wade into. It’s not your job to wade into that here today, but the 

concern that some of us have is this. There is a lingering concern 

in the American economy, on both the employer level and the labor 

side, that we have not been zealous in enforcing the trade provisions that currently exist with respect to China. 

If we were to provide unambiguous authority to the Commerce 

Department to make this determination, some of us think that that 


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would strengthen our hand with the Chinese. I hear the argument 

that’s advanced that, well, we don’t want to needlessly upset the 

apple cart with China. I certainly understand the arguments about 

the need for constructive engagement. 

I would just end with this point. China has as much incentive 

as we do to constructively engage if we’re willing to show some 

sticks as well as carrots. I don’t think that we’re somehow going 

to push the Chinese off the international market if we get more aggressive with enforcement actions. Certainly if we add this tool 

that’s available for all kinds of economies around the world, if we 

add that to our arsenal of sticks, I don’t think it’s going to push 

the Chinese away. I think it will be a demonstration of seriousness 

on our part. 

Finally, this has to go both ways if we’re looking to build the 

kind of political support that we need. As the Chairman has made 

clear to you, as other Members have made clear to you, we have 

to serve constituents who empower us every two years to come 

back, and they have to hear something from us more than the longterm benefits of trade or the 15-year benefits of trade. They have 

to hear some sense of current reciprocity, and they have to hear 

that we take seriously the laws we have in place. I’ll end on that 

observation. 

Ambassador SCHWAB. Thank you, Congressman. 

Chairman RANGEL. The Chair would like to recognize Mr. 

Ramstad for three minutes. 

Mr. RAMSTAD. Thank you, Mr. Chairman. Ambassador Schwab, 

nice to see you again. I’ll be brief. I just want to commend you for 

the progress you’ve made with respect to the Doha round negotiations. I realize much work is left to achieve a breakthrough, but 

you have done a yeoperson’s job in leadership in terms of progress 

with respect to Doha. 

I also want to commend you for your leadership on trade promotion authority, and I certainly hope that a majority of Congress 

understands how absolutely critical it is. We need trade promotion 

authority obviously to implement Doha, and to negotiate regional 

and bilateral agreements to open those new markets which are 

critical certainly to my State of Minnesota, a State that has a great 

high tech industry, a lot of agriculture as well as financial services 

and others. So, thank you for your work there as well. 

Also I commend you for the progress that’s been made on the 

various trade agreements. I think you probably have the second or 

third toughest job in this town, but I appreciate the work that 

you’ve done, and there has been real progress on those pending enactment as well as ongoing negotiations. 

Finally, I want to commend you for your impressive record of 

success with respect to enforcement and dispute resolution. So, I 

just wanted to say thank you and keep up the good work, Madam 

Ambassador. 

Ambassador SCHWAB. Congressman Ramstad, thank you very 

much. 

Chairman RANGEL. The Chair recognizes Mr. Herger. 

Mr. HERGER. Thank you. Ambassador Schwab, I’m eager to see 

the U.S.-Korea free trade agreement because I believe that Korea 

would be an immense market for our goods and services. 


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I also want to make sure that any agreement meets our usual 

high standards by being comprehensive and aggressive. In addition, I believe the agreement should include a robust investor state 

dispute settlement mechanism, and I’m alarmed by reports that 

Korea wants to limit this mechanism severely. This mechanism is 

essential to preserving the rights of U.S. investors abroad. 

Do I have your commitment to principles on investor state issues 

that we’ve used in our prior agreements? 

Ambassador SCHWAB. Congressman, as you know, the eighth 

round of the Korea-U.S. free trade negotiations are going on this 

week. It is a tough negotiation. This is our seventh largest trading 

partner. We are trying to move this agreement in as fast a manner 

as we can in the hopes that if we can get a mutually acceptable 

deal, we can do it before this allocation of trade promotion authority runs out. 

You do have my commitment that when it comes to investment 

issues, investor state issues, we will be as tough and seek the same 

degree of comprehensive inclusion when it comes to investment 

issues with Korea as we have in other FTAs, yes. Thank you. 

Mr. HERGER. Thank you. 

Chairman RANGEL. Thank you again, Madam Ambassador, and 

as much as I appreciate your willingness to meet with individual 

Members that need some answers, because of your generosity with 

your time, the Ranking Member and I are prepared to call the full 

Committee, at least those who want to participate, in the library 

or some other place so that it will save you time and we could be 

better informed. Is there anything that you could suggest that I 

and the Ranking Member do to improve our ability to support the 

trade policies of our country? 

Ambassador SCHWAB. Mr. Chairman, thank you. Thank you for 

your offer to hold executive sessions where we can get into more 

specifics, and in some cases, I can be more candid than I can be 

in an open session. I think the most important thing you can do, 

you’re doing right now, which is to make sure that there is an active and bipartisan dialogue about U.S. trade policy, whether it is 

trade negotiations, whether it is enforcement and compliance, 

whether it is trade agreements. You have my commitment, this Administration’s commitment to work with you, to work with Congressman McCrery, Congressman Herger and whatever we need to 

do to be part of that partnership. 

U.S. trade policymaking is a difficult and complicated exercise for 

governance, in governance in the United States, and anything that 

we can do to work with you, we’re prepared to do. 

Thank you. 

Chairman RANGEL. Thank you for your time. You can see that 

the participation of the full Committee shows the interest that this 

Committee has. 

Thank you so much for your time. 

Ambassador SCHWAB. Indeed, thank you. 

[Whereupon, at 12:53 p.m., the hearing was adjourned.] 

[Questions submitted by the Members to the witness follow:] 


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[Submissions for the record follow:] 

Statement of Advanced Medical Technology Association 

We thank the Committee for holding this important Hearing today on the U.S. 

Trade Agenda. As you may know, AdvaMed represents over 1,300 of the world’s 

leading medical technology innovators and manufacturers of medical devices, diagnostic products and medical information systems. Our members are devoted to the 

development of new technologies that allow patients to lead longer, healthier, and 

more productive lives. Together, our members manufacture nearly 90 percent of the 

$86 billion in life-enhancing health care technology products purchased annually in 

the United States, and nearly 50 percent of the $220 billion in medical technology 

products purchased globally. Exports in medical devices and diagnostics totaled 

$25.5 billion in 2005, and imports were $23.7 billion. The medical technology industry directly employs about 350,000 workers in the U.S. 

The medical technology industry is fueled by intensive competition and the innovative energy of small companies—firms that drive very rapid innovation cycles 

among products, in many cases leading new product iterations every 18 months. Accordingly, our U.S. industry succeeds most in fair, transparent global markets where 

products can be adopted on their merits. We strongly support the Administration’s 

effort to expand market access for U.S. products abroad through the World Trade 

Organization (WTO negotiations and new free trade agreements (FTAs), as well as 

oversight of market access barriers in countries with which we have strong trade 

relationships. 

Global Challenges 

Innovative medical technologies offer an important solution for industrialized nations, including Japan and European Union members that face serious health care 

budget constraints and the demands of aging populations. Medical technologies also 

provide a way for emerging market countries, like China, India, and Korea, to improve healthcare to their people, who are increasingly expecting substantially better 

healthcare to accompany rapid economic development. Advanced medical technology 

can not only save and enhance patients’ lives, but also lower health care costs, improve the efficiency of the health care delivery system, and increase productivity by 

allowing people to return to work sooner. 

To deliver this value to patients, our industry invests heavily in research and development (R&D). Today, our industry leads global medical technology R&D, both 

in terms of innovation as well as investment. The level of R&D spending in the 

medical devices and diagnostic industry, as a percent of sales, more than doubled 

during the 1990s—increasing from 5.4% in 1990 to 8.4% in 1995 and over 11% last 

year. In absolute terms, R&D spending has increased 20% on a cumulative annual 

basis since 1990. Our industry’s level of spending on R&D is more than three times 

the overall U.S. average. 

Despite the great advances the medical technology industry has made in improving patient quality of life and delivering considerable value for its innovations, patient access to critical medical technology advances can be hindered by onerous government policies. Patients and health care systems experience much less benefit 

from our industry’s R&D investment when regulatory procedures are complex, nontransparent, or overly burdensome—all of which can significantly delay patient access and drive up costs. In the future, patients will be further disadvantaged if reimbursement systems fail to provide appropriate payments for innovative products—which will subsequently affect the availability of R&D funds and the stream 

of new technologies. 

The medical technology industry is facing these challenges around the world as 

governments enact more regulations. While we support those regulations that ensure product safety and efficacy, many others are being imposed without scientific 

justification, and in non-transparent processes, which only adds to costs and delays 

without improving patient outcomes. 

As governments prioritize difficult budget decisions, they sometimes look to shortterm decreases in health care expenditures without accurately assessing the longterm implications. In most cases, governments do not effectively measure the contributions medical technology makes in enhancing patient outcomes and productivity as well as expanding economic growth, which would more than offset the costs 

of providing these products. Instead, governments often inappropriately include reduced reimbursement rates as part of overall budget cuts. 

In some cases, governments seek to reduce prices of medical technologies in their 

country by comparing and referencing prices in other countries. By fixing ceiling 


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prices based on the prices found in other countries, governments are imposing price 

controls on medical technologies that do not appropriately account for different market conditions and contract terms. Our industry is witnessing a spread of these reference pricing schemes. In the longer-term, patients in these countries and around 

the world will experience less access to innovative medical technologies, as research 

and development funds decrease. 

AdvaMed applauds continued progress on international trade initiatives, including 

bilateral, regional and global trade negotiations, such as newly concluded free trade 

agreements (FTAs) in Latin America, and the Doha Development Agenda in the 

World Trade Organization (WTO). We support new efforts with our other trading 

partners to provide U.S. exports of medical devices duty-free treatment. We are 

hopeful that future bilateral agreements, including the U.S.-Korea FTA and the 

U.S.-Malaysia FTA, can also include directives to knock down tariff and non-tariff 

barriers for medical technologies. In addition, the President and U.S. Trade Representative (USTR) should continue to pursue trade liberalization in the medical 

technology sector with our major trading partners. 

AdvaMed believes the USTR, Department of Commerce (DOC) and Congress 

should monitor regulatory, technology assessment and reimbursement policies in 

foreign health care systems and push for the creation or maintenance of transparent 

assessment processes and the opportunity for industry participation in decision 

making. We look to the Administration and Congress to actively oppose excessive 

regulation, government price controls, foreign reference pricing schemes, and arbitrary, across-the-board reimbursement cuts imposed on foreign medical devices and 

diagnostics. 

Continued U.S. Leadership Needed to Fight Trade Barriers in Japan 

The Administration’s efforts with Japan under the U.S.-Japan Partnership for 

Economic Growth are critical for the medical technology industry to maintain access 

to the Japanese health market. 

After the U.S., Japan is the largest global market for medical technologies at $25 

billion. Yet the situation facing the medical technology industry in Japan is getting 

more difficult every year. Japan’s system for approving use of new medical technologies is the slowest and most costly in the developed world. Although Japan is 

one of the wealthiest countries in the world—the second largest economy in the 

world—its spending on health care is among the lowest of major developed countries. On a per capita basis, Japan’s spending of about 8.0% of GDP is lower than 

18 other Organization of Economic Cooperation and Development (OECD) member 

countries. 

In April 2005, Japan compounded the problem by imposing even more burdensome and costlier regulations, thereby penalizing the U.S. medical technology industry. Japan’s latest regulations are expected to cost our industry over $1.5 billion just 

to achieve compliance to 2010. 

Even after creating a new agency in 2004 to process applications for medical technology products, Japan has a huge backlog of unprocessed applications. A problem 

for this new agency is the number of staff reviewing applications for approval of 

medical technology products—about 40 officials, compared to over 700 in the U.S. 

Due to the long approval process, the medical technologies patients receive in Japan 

are often several generations behind the products in the U.S., Europe, and even developing countries like China, India and Thailand. Lengthy approvals also translate 

to higher costs for the U.S. medical technology industry, which must maintain outof-date product lines just for Japan. 

At the same time, Japan has made significant reimbursement reductions for medical technologies that impact the medical device industry in many ways, including 

limiting the availability of funds that could be devoted to R&D of new and innovative products. Inventing products that save and enhance lives requires large investments. Deep cuts for medical technologies in Japan have put downward pressure on 

companies’ ability to invest in R&D. 

The Japanese government sets the maximum reimbursement rates, which usually 

act as ceiling prices for all medical technology products. These prices are reviewed 

and usually reduced every two years. For the period April 2002 to March 2006, the 

total revenue loss from these reimbursement reductions was about $3 billion—a significant share of which would have gone toward R&D. On top of this, Japan imposed 

additional cuts of several hundred million dollars in April 2006. 

Before 2002, Japan adjusted prices according to a process it called ‘‘reasonablezone’’ or ‘‘R-zone.’’ In brief, MHLW surveys its hospitals for prices paid to distributors, and allows for a reasonable margin (or ‘‘zone’’) for discounts off of the government’s reimbursement rate. While there are some difficulties with this system—as 

identified in bilateral Market-Oriented, Sector Specific (MOSS) negotiations between 


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the U.S. and Japanese governments—our industry recognizes that it is at least 

based on factors in the Japanese market. 

In 2002, however, Japan also adopted a system called Foreign Average Pricing 

(FAP). This system calls for the establishment and revision of reimbursement rates 

on the basis of prices paid for medical technology products in the U.S., France, Germany, and the United Kingdom (U.K). The prices of medical technology products in 

Japan are designed to be based not on that market’s requirements, but on completely unrelated conditions in foreign markets. 

The U.S. medical technology industry has strong objections to this system for calculating reimbursement rates. As a methodology for setting reimbursement rates, 

it is not economically sound to compare prices in foreign markets that operate under 

vastly different conditions. Japan is a far costlier market for our industry to operate 

in compared to other countries. Additionally, Japan’s FAP system is an attempt to 

compare prices for products that are not the same in Japan as they are in other 

countries. Due to Japan’s regulatory delays, U.S. manufacturers must incur the cost 

of maintaining older or outmoded production lines for sale in Japan. 

Going forward, industry seeks U.S. Government and Congressional support to 

help ensure an open dialogue with Japan that would seek to identify alternatives 

to the current reimbursement system and improvements in Japan’s regulatory practices. The goal would be to ensure that Japan’s regulatory and reimbursement policies promote the timely introduction of innovative medical technologies and do not 

negatively and unfairly impact U.S. medical technology manufacturers. 

Regulatory and Reimbursement Obstacles Impede Market Access in AsiaPacific 

AdvaMed looks to the U.S. government to pursue trade liberalization throughout 

the Asia-Pacific region, including in China, India, Taiwan and Korea. AdvaMed and 

its member companies have identified a number of real and potential barriers to 

doing business in these countries. While most of the barriers pertain to unnecessary 

or redundant regulatory requirements, there are increasing concerns in the areas 

of reimbursement and intellectual property. 

China has quickly become an important market for the U.S. medical technology 

sector. The American Chamber of Commerce in China estimates that the Chinese 

market for medical technology exceeds $8 billion and is growing rapidly. It is on 

pace to surpass some of the key European markets for medical technology in a few 

years. As global leaders, U.S. medical technology firms already account for a significant portion of sales in China and the position of these firms underscores the importance of ongoing efforts with the U.S. government to open the Chinese market further. 

AdvaMed looks forward to working with Congress and the Administration to address the following barriers: 

A Lengthy and Costly Product Registration Process 

Redundancy in the Registration Process 

Lack of Transparency in Decision-Making 

Inappropriate Price Controls 

Counterfeiting and piracy of Medical Technology 

For the medical technology industry, the Bush Administration’s efforts with China 

under the U.S.-China Joint Commission on Commerce and Trade, as well as in less 

formal meetings, are critical for allowing U.S. medical technology firms broader access to the burgeoning Chinese health care market. The recently-launched U.S.- 

China Health Care Forum initiative, led by the U.S. Department of Commerce and 

supported by AdvaMed and other health care partners, holds great promise as another vehicle for addressing many of the trade-related and health policy-related barriers confronting U.S. medical technology firms in China. We also endorse including 

healthcare under the Strategic Economic Dialogue. 

Korea is another important market for U.S. medical technology exporters. Last 

year, U.S. manufacturers exported more than $500 million worth of medical technology products to Korea, an increase of 24 percent over the previous year. However, 

access to this market remains marred by antiquated product-testing requirements; 

inappropriate requirements to re-register products following a change in manufacturing location; and pricing and reimbursement policies that discriminate against 

foreign manufacturers. Korea was not a party to the Uruguay Round zero-for-zero 

tariff agreement on medical technology, and maintains import tariffs on a range of 

medical technology products. AdvaMed recommends the fastest possible elimination 

of tariffs and non-tariff measures applied to medical technology products by Korea. 

AdvaMed is also concerned that Korea’s current reimbursement policies create incentives to re-use medical devices designated for a single-use in multiple procedures 


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within several different patients, with the attendant risks of cross contamination 

and degradation of product quality. AdvaMed looks forward to working with Congress and the Administration through the U.S.-Korea Free Trade Agreement negotiations to address these issues. 

India, with its rapid economic growth and large population, will be an important 

market in the future. India is in the process of developing its regulatory system for 

medical technologies. The Department of Commerce has provided AdvaMed invaluable assistance in working with the Government of India on its approach to regulations. 

Europe: Seek Appropriate Policies That Improve Patient Access to Innovative Medical Technologies 

Efforts to oversee foreign policies impacting the export and sale of U.S. medical 

technologies abroad should also focus on the European Union (EU). U.S. manufacturers of medical devices export nearly $8.8 billion annually to the EU. Within the 

EU, Germany ($20 billion) and France ($8 billion) are the largest markets for medical devices. 

Despite opposition from Congress and the Administration, in 2005, the European 

Commission approved a directive to up-classify all shoulder, hip and knee joint implants from Class IIB to Class III. Industry now is focused on fair and transparent 

implementation of the directive, so as to minimize disruption of this important market. 

In addition, the EU continues efforts towards over-regulation of industry through 

the implementation of burdensome regulatory measures such as the Medical Device 

Directive revision, the REACH chemicals initiative, the WEEE/ROHS, and a possible ban on the use of DEHP in medical devices. Industry also remains concerned 

about the potential termination of an EU exception that allows U.S. exporters to include both metric and non-metric labeling on their products. Elimination of the exception would require U.S. manufacturers exporting to the EU to develop metriconly labeling for the EU. 

Finally, as new methods of reimbursement and health technology assessment 

(HTA) spread throughout Europe, EU Member States should be encouraged to adopt 

policies for product reimbursement and health technology assessment systems that 

are transparent, timely, and adequately account for the benefits of innovative technology. Breakthrough products available in the United States to a majority of patients are still available to only a small fraction of eligible patients in the major European markets. Industry should be allowed to participate in the HTA process. 

Specific recent issues of concern include onerous new national tendering policies 

in the United Kingdom and Italy, where product prices will be unilaterally reduced 

without sufficient regard to quality or innovation. Because U.S. manufacturers are 

benchmark leaders in the most innovative, high technology products, these policies 

have a disproportionate impact on our U.S. companies and threaten to drive innovation out of the marketplace. Because it further becomes less attractive to invest in 

these markets and conduct research, it increasingly means that the burden for R 

&D is shifted more to American markets. 

Product Reimbursement in Brazil 

In December 2006, the Brazilian product registration authority, ANVISA, issued 

Technical Regulations that require the most sweeping and complex submissions of 

foreign reference pricing data of any market in the world. Consistent with U.S. policy for other foreign markets, we encourage Congress and the Administration to oppose this policy, as it will seek to artificially fix prices in the Brazilian market, stifle 

innovation and deny Brazilian patients the benefits of U.S. medical technologies. 

Utilize Multilateral, Regional, and Bilateral Forums to Eliminate Tariff 

and Nontariff Barriers to Trade that Unnecessarily Increase the Cost of 

Health Care 

We encourage Congressional and Administration efforts to eliminate significant 

tariff and nontariff barriers to trade for medical technology maintained by many 

countries, particularly developing countries. Such barriers represent a self-imposed 

and unnecessary tax that substantially increases the cost of health care to their own 

citizens and delays the introduction of new, cost-effective, medically beneficial treatments. For example, the medical technology sector continues to face tariffs of 15– 

20% in Mercosur countries, 9–12% in Chile, Peru, and Colombia, and 6–15% in 

China. 

The Doha Development Agenda offers an important opportunity for the United 

States to ensure global access to medical technology by securing global commitments 

on lowering tariff and nontariff barriers for the medical technology sector while expanding upon the access to medicines goal at the heart of the Doha declaration. We 


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support resumption of negotiations on this important multilateral trade round. We 

encourage the U.S. government to build upon the zero-for-zero tariff agreement on 

medical technology achieved in the Uruguay round by expanding the product coverage and adding countries throughout Latin America and Asia as well. AdvaMed 

has proposed a sectoral initiative that would achieve this objective to the Administration. Moreover, elimination of nontariff barriers such as burdensome import licensing regulations and non-transparent government procurement policies will help 

developing countries ensure patient access to lifesaving medical technologies. 

Utilize Multilateral Opportunities to Establish Basic Regulatory and Reimbursement Principles to Expand Global Trade and Patient Access to New 

Technologies 

We commend the WTO’s recent efforts to ensure global access to medicines and 

medical products. While all economies seek to provide high quality, cost effective 

healthcare products and services to their citizens, they should also ensure timely access to state-of-the-art, life-saving equipment and implement compliance procedures 

that are efficient and effective. To further expand patient access to safe and effective 

medical devices and ensure cost effective regulatory compliance, USTR should seek 

to ensure that economies around the world make their policies and practices conform to the relevant and appropriate international trading rules established by the 

WTO. 

Member economies should agree to make their medical device regulatory regimes 

conform to these guiding principles: 

Acceptance of International Standards; 

Transparency and National Treatment; 

Use of Harmonized Quality or Good Manufacturing Practice Inspections; 

Recognition of Others Product Approvals (or the Data Used for Those Approvals); 

Development of Harmonized Auditing and Vigilance Reporting Rules; 

Use of Non-Governmental Accredited Expert Third Parties Bodies for Inspections 

and Approvals, where possible. 

Similarly, many economies require purchases of medical technologies to take place 

through centralized and/or government-administered insurance reimbursement systems. To ensure timely patient access to advanced medical technologies supplied by 

foreign as well as domestic sources, member economies should agree to adopt these 

guiding principles regarding the reimbursement of medical technologies. 

• Establish clear and transparent rules for decision-making. • Develop reasonable time frames for decision-making. • Data requirements should be sensitive to the medical innovation process. • Reimbursement rates should be based on conditions in each country. • Ensure balanced opportunity for the primary suppliers and developers of 

technology to participate in decision-making, e.g., national treatment. • Establish meaningful appeals processes. 

The medical technology industry is committed to working with Congress and the 

Administration on upcoming trade policies and agreements to ensure patients 

throughout the world have access to medical products. 

Conclusion 

AdvaMed appreciates the shared commitment by Congress and the President to 

expand international trade opportunities and encourage global trade liberalization. 

We look to the U.S. Government to aggressively combat barriers to trade throughout 

the globe, especially in Japan. AdvaMed is fully prepared to work with Congress to 

monitor, enforce and advance multilateral, regional and bilateral trade agreements, 

particularly with our key trading partners. 

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Baughman, Laura M., Coalition for GSP, letter 

Coalition for GSP 

February 28, 2007 

The Honorable Charles Rangel 

Chairman 

Committee on Ways and Means 

U.S. House of Representatives 

1102 Longworth HOB 

Washington, DC 20515 

Dear Chairman Rangel: 

The Coalition for GSP is pleased to have the opportunity to provide the following 

views in response to the request by the Ways and Means Committee on the direction and content of U.S. trade policy. In particular, we intend to focus our comments 

on whether U.S. preference programs are effective in promoting growth and economic development, particularly in low-income and least developed countries. The 

Coalition for GSP is an ad hoc group of U.S. companies and trade associations that 

use the Generalized System of Preferences (GSP) program to improve their competitiveness, both as farmers and manufacturers, and as suppliers of consumer goods 

to American families. Over the years, GSP has become an integral part of our businesses. Our members import a wide range of goods under GSP, from jewelry to plywood to batteries to spices. 

The Coalition appreciates the Committee’s particular interest in ensuring that the 

benefits of GSP effectively promote economic development, particularly in least-developed countries (LDCs). Over our many years of using the program, which has 

been in effect since 1974, we believe we can explain some of the dynamics of international sourcing that influence the extent to which we purchase goods under GSP 

from LDCs or from other GSP beneficiaries. We offer three key factors that are critical in the sourcing decision: 

Local trade capacity; 

The length of GSP renewal; and 

China. 

Local Trade Capacity 

Committee members are well aware of the abysmal infrastructure that pervades 

so many LDCs: poor or even non-existent roads, unpredictable power supply, inadequate communications, untrained manpower (including an understanding of what 

it takes to meet preference program rules of origin), even corruption at ports and 

in the customs departments. Trade capacity must be improved before trade can flow. 

The World Trade Organization, the World Bank and other international organizations have embraced these projects, and even the Doha Development Agenda talks 

recognizes the need for the developed countries to assist the LDCs with trade capacity improvements if they are to reap the benefits of trade liberalization. 

Until these significant hurdles are addressed, it matters little if the United States 

extends a trade preference program only to LDCs. U.S. duty savings under GSP 

generally do not offset the costs associated with importing from them under these 

infrastructure conditions. If the Committee wishes to encourage increased sourcing 

under GSP from LDCs, it should focus its attention on targeting U.S. foreign assistance to infrastructure projects. In addition, the Committee should ensure that the 

rules of origin and other requirements for taking advantage of preference programs 

are as simple and straightforward as possible. Complicated rules drive up compliance costs, which can also negate the benefits of the duty savings under GSP. 

Length of GSP Renewal 

Our ability to use the duty-free benefits available under the program is most effective when we know those benefits will be available by the time we need to import 

the product or products of interest to us. While the time from design to order to 

importation varies for each of us, for some companies it can be quite long. For example, some products take as long as one year from design to importation. For others, 

the products are advertised in catalogues with a shelf life of at least six months. 

In all cases, we need to know what the duty-status will be for the imported product 

at the very beginning of that process. If we can count on receiving duty savings 

under GSP, we can incorporate those important cost savings into our pricing. But 

if the program expires mid-stream in the order-to-delivery process, we can be caught 

with a serious financial burden. We cannot always adjust our prices to our customers to pass on the unexpected duties, especially if those prices are advertised 

in catalogues. So we have to evaluate the risk of losing GSP mid-stream against the 


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benefits of the duty savings. If the program is likely to expire, we often cannot incorporate the duty savings into our sourcing plans, and our prices to our customers 

will need to be higher to offset the risk. 

With those planning constraints in mind, you can see how short-term renewals 

of GSP in the 1990s, compared to the long-term period from 2001–2006, have affected our use of the program. From July 1993 through September 2001, Congress 

renewed GSP in fits and starts (largely due to the need to meet ‘‘pay-go’’ constraints). Planning our sourcing using GSP was difficult if not impossible. Over this 

period, from 1994 to 2001, U.S. imports under GSP actually declined an average 2.2 

percent annually. But in 2001 Congress renewed GSP for six years, and as a result, 

imports from GSP beneficiary countries to the United States have increased an average 13.2 percent annually. 

A long-term renewal of the program is important in encouraging sourcing from 

countries that do not yet have the infrastructure or production capability to be competitive suppliers of GSP-eligible products. You can see from the Chart below how 

the long-term renewal of GSP has increased interest in sourcing from poorer beneficiary countries. To the extent that some of our members are interested in investing 

in new overseas production relationships, we need time to grow these suppliers. 

Short-term renewals of the program do not encourage this, and keep us focused on 

more traditional GSP-eligible countries. 

Thus, the Committee can increase interest in sourcing from LDCs under GSP by 

ensuring that the program is renewed for at least five years, preferably longer. The 

current renewal term expires December 31, 2008, just two years after the last expiration. 

China 

The Coalition urges the Committee to proceed with caution when it examines 

whether certain beneficiary countries like India or Brazil are competitive and no 

longer need GSP benefits. Those who promote a ‘‘Robin Hood’’ approach of removing 

benefits from ‘‘rich’’ GSP countries in order to divert them to ‘‘truly poor’’ beneficiaries wrongly assume that if GSP products could not be imported from, say, 

Brazil or India, U.S. companies would shift sourcing to Lesotho or Nepal, instead. 

The choice for U.S. importers is not India vs. Nepal, or Brazil vs. Lesotho, it is India 

vs. China, and Brazil vs. China. If a country were to lose GSP benefits, U.S. companies and importers will look globally for the best supplier at the lowest cost—suppliers that may not necessarily be other GSP beneficiaries. Indeed, in today’s highly 

competitive markets, China is likely to be the chief winner from such graduations. 

Least developed GSP countries need to have not only the capability to produce 

the products no longer available under GSP from Brazil or India, for example, but 

as noted above the infrastructure and manpower as well. In most cases, they do not 

(and China does), and most U.S. importers do not have the time or resources to 


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bring producers in other GSP beneficiary countries up to speed. Not when China 

looms as a much easier low cost alternative, and GSP tends to expire frequently. 

Finally, it is wrong to assume that because a country is competitive in a few sectors that it no longer needs the benefits provided by GSP. As the table shows, supposedly ‘‘well off’’ GSP beneficiaries are still quite poor, by any standard. The Administration should instead use current GSP ‘‘rules’’ that already include a way to 

deal with the situation of a GSP beneficiary that is a major supplier of a specific 

product and is competitive in the U.S. market. The competitive needs limitation 

component of the program can ‘‘graduate’’ certain products from an LDC that is a 

competitive producer of those products. At the same time the GSP program continues to encourage development in that country by allowing it to continue to receive duty-free benefits on other products where it is not a competitive producer. 

Per-Capita Income Levels of Top Ten GSP Beneficiaries, 2005 

Country Gross National 

Income Per Capita 

Angola 1,350 

India 720 

Thailand 2,750 

Brazil 3,460 

Indonesia 1,280 

Equatorial Guinea 710* 

Philippines 1,300 

Turkey4,710 

South Africa 4,960 

Venezuela 4,810 

‘‘High Income’’ (GSP Graduation Threshold) $10,726 

United States GDP/Capita 43,740 

*Most recent data available (2001) 

Countries ranked by total exports to the United States under GSP in 2006. 

Source: World Bank, World Development Report 2007 and U.S. Bureau of the Census. 

The Committee will not force more sourcing into LDCs by removing the leading 

users of the GSP program from eligibility. Such removal will merely shift most of 

the trade with those very poor countries to China. 

Conclusion 

GSP is a preference program that works. It works for very poor countries and it 

works for American farmers, manufacturers and consumers. There are changes the 

Committee could enact to make it work better for LDCs, like simplifying the rules 

and renewing the program for an extended period. There are other changes the 

Committee should refrain from making such as ending the eligibility of those developing countries that tend to use the program the most because such a change would 

not have a positive impact on LDCs. 

Sincerely, 

Laura M. Baughman 

Executive Director 

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Statement of Center for Policy Analysis 

Public Health and Global Trade: Findings 

Global and bilateral trade negotiations present important opportunities to promote a healthy, safe and just global community. However, current U.S. trade policies have contributed to social and economic inequality, both within the U.S. and 

among our trading partners, factors strongly associated with poor health outcomes. 

Trade agreements provide a basis for altering domestic U.S. laws and policies that 

protect the public’s health and access to health care and medicines. 

Federal legislation mandates that the United States Trade Representative receive 

domestic input into trade negotiations from interested parties outside the Federal 

Government. There have been limited opportunities for public health advice in reviewing trade policies, and as a result trade negotiations do not reflect a public 

health perspective. 

Federal law also mandates Congressional oversight of U.S. global trade negotiations. Presidential Trade Promotion Authority undermines Congressional oversight 

and has limited Congress’ ability to ensure that trade agreements promote social 

and economic equity. 

We urge Congress and the U.S. Trade Representative (USTR) to adopt the following enforceable Public Health Objectives, as a basis for amending pending trade 

agreements and to guide any future agreements, and to initiate a review of bilateral, regional and multilateral agreements for their adherence to public health principles. 

Public Health Objectives for Global Trade 

1. To assure democratic participation by public health and transparency in trade policy by: 

a. Appointing to all relevant trade advisory committees representatives of organizations that work to assure equitable access to affordable health-related 

services and products, and promote the health of individuals, communities 

and populations, 

b. Opening all proceedings and documents of trade advisory committees to the 

public, and 

c. Requiring USTR’s consultation with all relevant committees of the House 

and Senate in the development, implementation, and administration of U.S. 

trade policy, without renewing presidential trade promotion authority. 

2. To develop mutually beneficial trade relationships that create sustainable economic development for the U.S. and our trade partners in an 

increasingly interdependent world. 

3. To recognize the legitimate exercise of national, regional and local 

government sovereignty to protect population health, and to ensure 

that countries do not weaken or reduce, as an encouragement for trade, 

sound policies that contribute to health and well being, including laws on 

public health, the environment and labor. 

4. To exclude tariff and nontariff provisions in trade agreements that 

address vital human services such as health care, water supply and sanitation, food safety and supply, and education, including licensing and crossborder movement of personnel in these fields. 

5. To exclude tobacco and tobacco products, which are lethal, and for 

which the public health goal is to reduce consumption, from tariff and nontariff provisions of trade agreements, including advertising, labeling, product 

regulation and distribution. 

6. To exclude alcohol products, which present serious hazards to public 

health. Policies designed to reduce the harm caused by alcohol products 

should not be subject to compromise in exchange for other trade benefits. 

7. To eliminate intellectual property provisions related to pharmaceuticals from bilateral and regional negotiations, as these are more 

appropriately addressed in multilateral fora, and promote trade provisions which enable countries to exercise all flexibilities provided by 

the Doha Declaration on Public Health, including issuing compulsory licenses for patented pharmaceuticals, parallel importation, and other measures that address high prices and promote access to affordable medicines. 

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Statement of Stephen Coats, U.S./Labor Education in the Americas Project 

The U.S./Labor Education in the Americas Project (US/LEAP) is a twenty yearold independent non-profit organization that supports the basic rights of workers in 

Latin America. The greatest source of US/LEAP’s financial support comes from individuals. We also receive support from foundations, unions, and the U.S. religious 

community. 

US/LEAP supports global trade, but believes that without trade rules that protect 

the rights of workers, trade agreements and trade programs will not spread the benefits of trade to workers abroad and will accelerate the race to the bottom for workers in this country. 

US/LEAP Experience on Trade and Worker Rights 

US/LEAP has been actively engaged in linking U.S. policy on trade and worker 

rights since 1992 when it filed a Generalized System of Preferences (GSP) worker 

rights petition on Guatemala with the Office of the U.S. Trade Representative 

(USTR). Since then, US/LEAP has had extensive experience in using the worker 

rights conditions of both the GSP and the Andean Trade Preferences Act (ATPA) 

preferential trade programs. As Members of the Committee know, these and other 

U.S. preferential trade programs condition U.S. trade benefits on the beneficiary 

country taking steps to improve workers’ internationally-recognized worker rights. 

Worker Rights Conditions Can Work. US/LEAP has seen that effective enforcement of worker rights conditions in U.S. trade programs can improve labor rights 

and help level the playing field in global trade. For example, the GSP worker rights 

petition process was used by USTR with Guatemala in the 1990s to secure labor 

law reform, an increase in the minimum wage, new labor courts, improved enforcement mechanisms, and even a break-through in the wall of impunity, resulting in 

the first conviction of criminals for violence against trade unionists in decades. 

But They Need to Be Strengthened. It is also clear that worker rights conditions 

need to be strengthened and much more effectively enforced. They should be, as 

part of a fundamental strengthening of U.S. trade policy on ensuring respect for 

basic worker rights. Global trade must be built on a solid foundation of a level playing field for workers here and abroad. Instead of a strengthening, we have seen the 

reverse approach over the past ten years, a weakening of U.S. commitment to worker rights as part of U.S. trade policy. In Latin America, protections for worker rights 

provided for by the Central America Free Trade Agreement (CAFTA), and pending 

agreements elsewhere, represent a huge step backwards from those contained under 

the GSP and ATPA programs. CAFTA and the pending trade agreements both lower 

standards (to national law rather than international standards) and weaken enforcement mechanisms (replacing trade sanctions with modest fines paid back to the 

offending government). The Bush Administration’s trade-worker rights policy is 

going exactly in the wrong direction, with negative consequences for workers here 

and abroad. 

Upsurge of Violence in Guatemala Since Passage of CAFTA. The level of violence 

against trade unionists in Guatemala has increased since the passage of CAFTA. 

As many trade unionists have been murdered in Guatemala in the past two months 

than in the three years before CAFTA was passed. Those who are opposed to the 

exercise of basic rights in Guatemala know full well that the leverage of the U.S. 

government and of organizations like US/LEAP that seek to apply that leverage has 

been drastically reduced with the passage of CAFTA and the replacement of GSP 

worker rights conditionality with the labor chapter of CAFTA. 

II. COLOMBIA 

This submission pertains primarily to the pending Free Trade Agreement with 

Colombia. 

US/LEAP is a leading U.S. non-governmental organization working on Colombia 

worker rights. In the past year, US/LEAP authored ‘‘Justice for All: The Struggle 

for Worker Rights in Colombia,’’ the most comprehensive study of worker rights in 

Colombia in recent years whose release by the AFL–CIO Solidarity Center generated wide-spread press coverage including by The New York Times, The Washington Post, and Voice of America. US/LEAP also leads delegations to Colombia each 

year while staff travel to Colombia on a regular basis to meet with Colombian and 

U.S. government officials as well as trade unions and NGOs. 

A. Violence 

Colombia is by far the most dangerous country in the world for a trade unionist. 

Not only are more trade unionists murdered each year in Colombia than in any 

other country, more trade unionists are murdered in Colombia than in all 


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other countries combined. This was true last year, the year before, and 

every year since the Uribe Administration has been in power. 

The Uribe Administration is a year into its second term. Since it took office, over 

400 trade unionists have been murdered, raising the total of trade unionists murdered since 1991 to over 2,200. 

Preliminary and unofficial figures show that more trade unionists were killed in 

2006 (75) than in 2005 (70). 

According to the respected Escuela Nacional Sindical (ENS, the National Labor 

College, an independent NGO whose analysis and statistics are cited by the U.S. 

government): 

• Public sector unions, especially teachers, have been particularly hard hit. In 

2005, 44 out of the 70 trade unionists killed were teachers. In addition to teachers, municipal workers, judicial workers, and health workers continue to be the 

principal targets. 

• Most of the violence against trade unionists is a result of engagement in normal union activities. ENS estimates that over 75% of the anti-union violence 

that took place in Colombia in 2005 (including murders, attempted murders, 

kidnaps, threats, etc.) was the result of the victims’ normal union activities. 

• Violence against Colombian women trade unionists has increased dramatically in recent years. Since 2002, human rights violations against women trade 

unionists have increased nearly 500%. Violations against women trade unionists 

accounted for nearly 35% of all violations against trade unionists in 2005. 

B. Impunity Rate of over 99% 

The second and perhaps even more relevant fact for this committee’s consideration of the Colombia FTA is the shocking level of impunity demonstrating the inability or unwillingness of the Colombian government to prosecute those responsible 

for the horrific violence against trade unionists. By the Colombian government’s 

own figures, the rate of impunity with respect to these murders is over 99%. That 

is, less than 1% of murderers of trade unionists have been put behind bars. 

Government can’t even keep track of the few cases prosecuted. The Uribe government has had a difficult time demonstrating any progress on impunity. In an April 

2006 meeting with US/LEAP, Vice President Santos stated that there had been 19 

successful prosecutions since President had taken office, out of a case load of over 

2,200 murdered trade unionists in the past 16 years. While a ridiculously small 

number given the large number of cases from which to choose, the number of successful prosecutions cited by the Vice President in April 2006 was, incomprehensibly, 

no higher than the number cited in documents provided by the Vice President to 

members of Congress in October 2004, a year-and-a-half earlier. (To compound the 

confusion, in May 2006, the Ministry of Social Protection provided US/LEAP with 

a report documenting only 15 successful prosecutions.) 

The inability of the Colombian government to provide internally consistent reports 

on prosecutions of murderers of trade unionists is itself a damning critique of the 

priority to which the government gives this issue. 

ILO Chastises Colombia. An ILO report released in November 2006 takes Colombia to task for failing to address violence and impunity. In its November 2006 report, the ILO’s Committee of Freedom of Association, ‘‘ . . . once again urges the 

Government [of Colombia], in the strongest possible terms, to take the necessary steps 

to pursue the investigations that have been initiated and to put an end to the intolerable impunity that currently exists.’’ 

C. Non-Violent Attacks on Worker Rights 

Workers in Colombia face not only violence but also non-violent attacks on the 

exercise of their basic rights. These include the failure of the government to enforce 

labor law, inordinate delays in the approval of union recognitions, and a weakening 

of labor law protections in the early 1990s that, among other things, permit the extensive use of temporary workers to block the exercise of freedom of association. 

Case study: Worker Rights in the Flower Sector. The denial of worker rights in 

the Colombian flower sector is widespread, as revealed in a recent report cited on 

National Public Radio on Valentine’s Day. Indeed, the most important flower grower 

in the country and the largest exporter of flowers from Latin America (Dole Fresh 

Flowers) is currently in the process of closing its largest flower plantation in the 

face of the most important union-organizing effort in the Colombian flower sector 

in the past five years. The flower sector should be of particular interest to U.S. 

trade policy makers, since nearly every flower from Colombia enters the U.S. dutyfree under the ATPA program and Colombia provides about 60% of all flowers sold 

in the U.S. 


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For an extensive documentation on the attack on worker rights in Colombia, see 

the June 2006 report, Justice for All: The Struggle for Worker Rights in Colombia. 

The combined violent and non-violent assault on worker rights in Colombia has 

been successful, with a sharp reduction in the number of workers covered by collective bargaining agreements. Less than 5% of the Colombian work force is now 

unionized, a third of its previous level. 

Conclusion 

The pending FTA with Colombia should never have been negotiated, given the 

level of violence and impunity with respect to murders of trade unionists. As stated 

in testimony before USTR in March 2004, US/LEAP’s position is that the Bush Administration should have conditioned the initiation of negotiations with Colombia on 

an end to impunity with respect to murderers of Colombian trade unionists and a 

real reduction in the level of murders. 

What has subsequently been negotiated is completely unacceptable, representing 

a huge step back in current U.S. trade policy commitments to worker rights. Any 

FTA, with Colombia or any other country, must include at its core enforceable protections for acceptable conditions of work and for core ILO conventions, accompanied 

by effective measures to ensure full compliance. 

But Colombia is a special case. Even if an FTA is renegotiated to include acceptable provisions on worker rights, no FTA with Colombia should be approved until 

the government demonstrates the political will to end impunity. 

One could list a host of worker rights violations in Colombia as reasons why 

stronger worker rights conditions are needed in a FTA with Colombia and why the 

current FTA should be opposed. 

But there are really only three facts that members of Congress need to know for 

why the current FTA should be rejected: 

1. More trade unionists are killed each year in Colombia than in all other countries combined. 

2. The rate of impunity for murderers of trade unionists in Colombia is over 

99%. 

3. The first two facts have not changed under the government of President 

Alvaro Uribe. 

Rejecting the pending FTA with Colombia provides the clearest opportunity for 

Congress to reverse the destructive free trade policy of the Bush Administration. 

Conversely, approval would make a mockery of any expressed U.S. commitment to 

constructing a global trading system built on a level playing field that ensures respect for worker rights. And approval would give a green light to those who wish 

to deny workers abroad their basic rights and accelerate the race to the bottom for 

workers at home. 

f 


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1

2

3 United States International Trade Commission, ‘‘The Impact of the Andean Trade Preference Act’’—Eleventh Report 2004, USITC Publication 3803, September 2005, p. 2–38. 4

5 Ibid p. 3–22. 

Statement of EXPORAMERICA 

This statement is submitted on behalf or EXPORAMERICA, an association of Peruvian apparel companies whose objective is to promote increased trade between 

Peru and the U.S. Fostering the development of the Peruvian textile and apparel 

industry has been a true success of U.S. trade policy, and one that has maximized 

the benefits of globalization both to Peru and to manufacturers, workers and consumers in the United States, while minimizing its costs. The successes generated 

by this policy to date can be extended through the passage of the Peru Trade Promotion Agreement (PTPA), which has already been ratified by the Peruvian Congress and whose approval by the U.S. Congress is pending. Similarly, if the opportunity to pass the PTPA is lost and existing trade preferences expire, both the U.S. 

and Peruvian economies will suffer significant negative effects. 

I. U.S. ‘‘Peru Trade in Fibers, Yarns, and Apparel’’ A Mutually Beneficial 

Relationship 

Since the implementation of the Andean Trade and Drug Eradication Act 

(ATPDEA) in 2002, trade in textiles and apparel between the U.S. and Peru has 

grown considerably.1 In Peru’s case, apparel exports have nearly doubled since 2001 

and Peru has surpassed Colombia to become the leading Andean exporter of textiles 

and apparel to the U.S. Although Peru supplied only 1% of total U.S. apparel imports in 2005, it was the fifth largest source of knit cotton shirts and blouses, with 

shipments of $644 million (equal to 78% of U.S. textile and apparel imports from 

Peru) and a 5% marketshare.2

Peru’s growth has also led to significant benefits for the U.S. as demand in Peru 

for raw materials has outstripped supplies. As noted by the U.S. International 

Trade Commission (ITC), U.S. cotton for use in the textile and apparel industry is 

a major export product to Peru,3 and the provisions of the PTPA are likely to have 

a significant positive effect on U.S. cotton exports to Peru.4 In addition, according 

to the ITC, tariff liberalization under the PTPA will likely result in a large percentage increase in U.S. exports of textiles and apparel to Peru. These exports consist 

mostly of yarns, fabrics, and garment parts.5

Reflecting the mutually beneficial nature of the U.S. and Peru industries’ relationship, the Peruvian Textile and Apparel Industry Association, the National Council 

of Textile Organizations (NCTO) and the National Cotton Council (NCC) have expressed support for the PTPA, and have urged prompt consideration and approval 

of the PTPA by the U.S. Congress. 

The PTPA builds upon the benefits of the ATPDEA (which, without further extension, will expire in mid-2007), and its predecessor the Andean Trade Preference Act 

(ATPA) of 1991. A direct outgrowth of the ATPDEA is the increasing interconnectedness of the U.S. and Peruvian textile and apparel industries, a mutually beneficial 

trade relationship that will permit industries in both countries to face the stiff competition coming from China and other Asian producers, which largely do not use 

U.S. inputs in their textile and apparel production. Moreover, Chinese and Asian 

producers, in many instances depend on subsidies; artificially low exchange rates to 

promote exports; and labor that in many cases does not conform with minimum, 

internationally-recognized labor standards, none of which occurs in Peru, a country 

that scrupulously observes the 71 International Labor Organization (ILO) agreements to which it has subscribed. The PTPA will permit the already thriving U.S.- 

Peruvian relationship to grow, and thereby help the two industries face new competitive challenges together. 

II. Benefits to the U.S. Economy: 

A. Cotton 

As is shown in the chart below, the U.S. is Peru’s primary trade partner and the 

destination for nearly one third of the country’s exports. As indicated earlier, Peru’s 

growing exports also benefit the U.S. In the case of apparel, 95% of Peru’s exports 

are manufactured from cotton fiber. Given that there is a shortfall of cotton production in Peru for use in export garments, the country must import cotton to meet 

the demand of its textile and apparel sector. According to the ITC, Peru imported 

an average of 39625 MT of cotton annually from 2000–2005, of which 27,155 MT, 


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6 ITC May 2006 report, p. 3–8. 7 ‘‘Cotton’s Week’’ (NCC Newsletter), February 17, 2006, referring to letter from John 

Maguire, NCC senior vice president, Washington Operations to Ambassador Portman. 8 United States International Trade Comission, ‘‘U.S.-Peru Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects’’—USITC Publication 3855, May 2006, p. 3– 

23. 

or more than two-thirds, were imported from the United States.6 This growing consumption of U.S. cotton has been spurred by the ATPDEA and will be further encouraged by approval of the PTPA. 

It should be noted that, at present, U.S. cotton exports to Peru are currently subject to a 12% import duty on the CIF value. Upon implementation of the PTPA, this 

import duty will be eliminated immediately. This will further encourage U.S. cotton 

exports to Peru and in turn make Peruvian apparel more competitive price-wise in 

the U.S. market. Moreover, Peruvian imports of a variety of synthetic fibers, demand for which has grown on a daily basis, are also likely to increase significantly. 

However, allowing the ATPDEA to lapse without the PTPA in place would immediately threaten this thriving relationship and hurt Peruvian apparel producers and 

their U.S. cotton suppliers. 

Source: SUNAT (Peruvian Tax Authority) 

Recognizing the benefits to the U.S. cotton industry of increasing exports of U.S. 

cotton to the ATPDEA countries, as referenced above, the Memphis, TN-based, National Cotton Council (NCC) passed a resolution supporting the adoption of the 

PTPA and its strong rule of origin requirements, and informed the USTR that the 

NCC had determined that the agreement will be beneficial for U.S. cotton producers 

and for U.S. textile and apparel manufacturers.7 The chart below shows the growth 

in U.S. cotton exports to Peru over the last five years. 

U.S. Cotton Exports to Peru (including U.S. Pima and U.S. Upland) 

YEAR VOLUME M.T. 

FIBER CIF VALUE IN U.S. $ TOTAL IMPORTS % 

2001 22,141.82 30,461,312 60.33 

2002 32,910.34 38,909,099 77.00 

2003 34,374.10 50,018,140 86.03 

2004 23,774.70 43,311,251 66.87 

2005 34,672.84 48,484,849 74.57 

B. Yarns and Fabrics 

The rules of origin agreed to under ATPDEA, and the PTPA, are designed to foster the use of inputs produced in member countries (the use of yarn or fabrics from 

third parties) as is the case in some of the countries that participate in the CAFTAis not allowed in PTPA except in specific cases). Once the PTPA is in place Peru 

is expected to increasingly meet its unsatisfied demand for yarn and fabrics with 

products manufactured in the U.S., because this is the only way in which apparel 

will qualify for duty free treatment in the U.S. under the rules of origin. 

As the ITC notes, U.S. textile firms generally support the rules of origin for textiles and apparel under the PTPA because the rules ensure that the agreement benefits both parties and will further regional integration goals.8 Under the agreement, 

yarns and fabrics produced in the U.S. will enter Peru duty free immediately upon 

implementation. This will boost imports from the U.S., which will have an advantage vis-a`-vis yarn and fabric suppliers that pay a 25% customs tariff to enter Peru. 

Again, expiration of the ATPDEA, without the PTPA in place, will interrupt this 


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9 The National Council of Textile Organizations (NCTO), another major U.S. association 

based in Gastonia, NC, which represents numerous yarn and fabric producers throughout the 

U.S., but who are mostly concentrated in North Carolina, South Carolina, and Georgia, is also 

pleased that the PTPA addresses all the major negotiating objectives, which significantly enhances the hemispheric supply chain and makes these improvements permanent. The structure 

and rules of the PTPA will benefit textile and apparel producers in both countries. 10 Once endangered wild vicun ̃a herds, which have some of the finest fibers in the animal 

kingdom, are making a comeback in the impoverished Andean highlands thanks to export markets created in the last 15 years for apparel made with their wool.. 11 4–14 12 UN Office on Drugs and Crime, ‘‘Coca Cultivation in the Andean Region: A Survey of Bolivia, Colombia and Peru,’’ June 2006, Preface. 

flow and will threaten the growth in trade between both countries that would otherwise be expected from a smoother transition from the ATPDEA to the PTPA.9

C. The Apparel Value Chain in the U.S. and Other Considerations 

In addition to the direct benefits to the U.S. cotton and textile industries noted 

above, growing apparel imports from Peru under the ATPDEA have generated benefits to the U.S. economy across the entire transportation, distribution, and retail 

chain. In this regard, if for example a clothing garment has a FOB Callao-Peru 

value of US$6.00, the price at which the same garment is sold in the U.S. generally 

ranges from US$40 to 50. This price differential indicates that a greater portion of 

the value chain involved in Peruvian apparel exports remains in U.S. hands. These 

considerable benefits are distributed among U.S. sea, air, and land transporters; 

couriers; ports; warehouses and distribution facilities; and finally retailers. It is also 

safe to say that the Peruvian apparel industry supports thousands of U.S. jobs along 

the value chain associated with this trade. Finally, the last link of this value chain 

is, of course, the U.S. consumer who as a result of the ATPDEA has had access at 

more competitive prices to high-quality apparel containing in many instances cotton 

and animal fibers unique to Peru. 

In this regard, it is important to mention that Peruvian apparel exports include 

those manufactured with wools from species in the camelid family such as the alpaca, llama, and vicun ̃ a. This uniquely Peruvian production has grown rapidly in 

recent years, does not compete with U.S.-produced apparel, and has resulted in concrete conservation and environmental benefits in Peru.10

Under both the ATPA, and its successor the ATPDEA, Peru’s growing apparel industry, its capacity to generate employment, and its need for imported and domestically grown cotton and other inputs, has also contributed to Peru’s success in reducing illegal coca-leaf cultivation and providing alternative, legal employment for tens 

of thousands of Peruvians. This is an important U.S. strategic objective in the war 

on drugs, the struggle against narcotics trafficking towards the U.S., and keeping 

illegal drugs out of U.S. communities and neighborhoods. This is also a key reason 

for approval of the PTPA. 

Figures from the ITC noted that net coca cultivation decreased dramatically from 

115,300 hectares in 1995 to 27,500 hectares in 2004.11 Although coca cultivation has 

risen slightly in Peru in the last two years, it is important to note that since 2000, 

coca cultivation in the Andean region as a whole has declined by nearly 30% to 

158,000 hectares, according to the United Nations Office on Drugs and Crime 

(UNODC).12 Given that the ATPDEA has been in place since 1991, it is clear that 

this program has been an invaluable tool in reducing coca cultivation by spurring 

the growth of the apparel and other export-driven industries in Peru. 

In observing the overall picture, it is also important to note that Andean apparel 

exports to the U.S. do not even reach 1.1% of total U.S. imports. Therefore, there 

is no risk of displacement or damage to the U.S. from Peruvian apparel imports. 


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13 The ATPDEA beneficiary countries are Bolivia, Colombia, Ecuador and Peru. 

Source: U.S. International Trade Commission (USITC) 

It should be considered that, as shown in the chart below, Peruvian and U.S. 

economies are complementary in many aspects and barely compete against each 

other, and therefore, a bilateral agreement generates a win-win situation for both 

countries. 

In this regard, it is estimated that for every dollar exported by the ATPDEA beneficiary countries to the U.S., 94 cents worth of U.S. goods are in turn imported by 

the ATPDEA countries, whereas by way of comparison the Asian countries only buy 

14 cents out of every dollar exported to the U.S.13


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Peru: U.S. imports for 2004 

Millions of US$CIF 

III. Importance of the Textile and Apparel Industry to Peru’s Economy 

The textile and apparel manufacturing industry represents around 10% of Peru’s 

total exports. It is one of Peru’s leading industries and an estimated source of direct 

and indirect employment for over 500,000 Peruvians. As such, it accounts for nearly 

20% of the country’s manufacturing jobs and almost 10% (considering an average 

family size of 5) of Peru’s population of 28 million depends on this industry for its 

livelihood. 

It is also one of Peru’s fastest growing export industries. In 2006, Peru exported 

approximately US$1.4 billion worth of textiles and apparels, compared to US$664 

million in 2001. These exports increased by nearly 13 percent from 2005 to 2006. 

Approximately 79.2% of Peru’s exports were destined to the U.S. market. This industry has become successful in large part thanks to the ATPDEA. 


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14 Peru Trade Promotion Agreement, Chapter Twenty-One: Dispute Settlement 

The qualitative importance of apparel exports to Peru becomes evident when considering that 70% of Peru’s exports correspond to minerals (gold, copper, lead, silver, 

zinc, etc.) and fish meal, all of which represent commodities and have little or no 

value-added. In this regard, it is estimated that an article of clothing multiplies the 

value of the fiber approximately 12 times. Peru’s apparel industry allows for substantial value added because, unlike neighboring Colombia or the Central American 

nations which are overwhelmingly maquila (cut & sew) oriented, its industry is 

vertically integrated throughout the productive chain and its niche market is the 

‘‘full package’’ product. Approximately 80% of Peru’s textile and apparel exports are 

represented by cotton garments and fabrics. Of this amount, about 80% are knit fabrics. 

IV. Peru TPA and Labor 

The growth of globalized, export-based industries in Peru has been such that in 

parts of the country such as Ica and La Libertad there is full-employment year 

round and extreme poverty has been reduced by an astounding 36% comparable to 

levels experienced nationwide by countries such as Chile. The cotton, textile and apparel industries located in these regions have helped to contribute to these successes. Moreover, workers in these industries earn good wages by Peruvian standards which is helping to reduce Peru’s extreme poverty levels. For example, former 

Peruvian Prime Minister Pedro Pablo Kuczynski annouced that extreme poverty 

dropped from 24% to 18% between 2001 and 2005. 

In terms of its commitment to global labor standards, Peru has ratified 71 ILO 

conventions, including the eight ‘‘core conventions.’’ It has been praised multiple 

times by the ILO for its progress in improving labor laws. In addition to all of the 

ILO’s Core Labor Rights Conventions, the PTPA’s labor standards exceed those of 

five other previously-ratified trade agreements: Jordan, Chile/Singapore, CAFTA, 

Bahrain and even the ATPDEA, which does not make ILO or national standards 

mandatory. 

The PTPA goes beyond many other free trade agreements in the enforcement of 

worker rights and dispute resolution. The PTPA-created Labor Affairs Council develops public participation in reporting and funding to ensure implementation of the 

agreement and improved cooperation and capacity-building mechanisms. Additionally, the PTPA holds member countries accountable to effectively enforce existing 

labor laws, under penalty of fines, which are used by the PTPA commission to fund 

projects improving labor right protections. Noncompliance results in the formation 

of an arbitral panel, which may fine violating parties up to $15 million per year and 

suspend tariff benefits to the party complained against if necessary to cover the assessment.14

V. Investment and Dispute Resolution 

The PTPA’s Investment Chapter will facilitate transactions for U.S. industries 

and banks, as well as commercial and service companies, among others, that have 

investments or are interested in investing in Peru. U.S. investors will be treated 

equally as local institutions. Moreover, they will have full freedom to remit investments and profits. Therefore, it is possible that U.S. textile companies will install 


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industrial plants and trading companies in Peru, which will use supplies produced 

in the United States, such as state-of-the-art fibers, yarns and fabrics. 

It should also be pointed out that the PTPA contemplates a dispute settlement 

mechanism, designed to provide security to U.S. investors in Peru given that any 

controversy will be resolved on a fair and equitable basis, without the intervention 

of political or other considerations in the settlement of disputes. 

VI. Concluding Remarks 

The Peruvian economy, as shown in the chart below, is very small in comparison 

to the U.S. economy. However, as a direct result of the duty-free access afforded to 

Peru in the ATPA and ATPDEA, a strategic alliance has developed between the U.S. 

cotton industry, U.S. yarn and fabrics manufacturers, and participants in the U.S. 

apparel value chain on one hand, and the Peruvian textile and apparel industry on 

the other. As discussed in these comments, this alliance has brought significant and 

widely dispersed benefits to both the U.S. and Peruvian economies, and it will continue to thrive under the PTPA. The PTPA is an excellent opportunity to ensure 

the continued prosperity of these U.S. and Peruvian industries, and by extension 

raise overall living standards in Peru, and ensure the continuation of the benefits 

enjoyed by U.S. industries, workers and consumers. 

Source: Brigham Young U. In terms of GDP 

f 


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Statement of the Haiti Democracy Project and Manchester Trade 

In December 2006, Congress passed an important humanitarian measure in support of the poorest country in the hemisphere. The HOPE act, while limited, has 

the potential to restart the motor of job creation in one of Haiti’s few remaining viable industries. In a country where those few who have work make an average of 

a dollar a day, and where the number of textile manufacturers has dropped from 

ninety in the late 1990s to fifteen today, the HOPE concession is crucial to Haiti’s 

recovery. The HOPE act sets forth eligibility requirements under Section 5002(d). 

Criteria include progress in creating a market-based economy, rule of law, elimination of trade barriers, anti-poverty and -corruption policies, and respect for workers’ rights and for internationally-respected human rights. By mid-March President 

Bush can certify that Haiti has met these requirements and make HOPE operational. 

The Haiti Democracy Project and Manchester Trade believe that Haiti either 

meets these conditions or is making continual progress toward them. ‘‘Haiti’’ in this 

case must be understood not as merely the government of Haiti, for the functioning 

of government in Haiti has been seriously impaired for more than two decades; this 

is indeed the definition of the problem of Haiti. Despite the recent progress evidenced by fair and accepted elections, the resultant government has not yet consolidated and is only beginning to function effectively. 

Rather ‘‘Haiti’’ is here better understood as the complex of government, civil society, private sector, the supportive international community, and the concerned Haitian diaspora that make up what Haiti has in terms of functioning institutions. The 

question is whether these components working together meet Haiti’s eligibility requirements. Let us review the requirements and also some of the serious objections 

that have been raised to Haiti’s eligibility. 

Section 5002(d) 

Haiti shall be eligible for preferential treatment under this section if the 

President determines and certifies to Congress that Haiti 

(A) has established, or is making continual progress toward establishing 

(i) a market-based economy that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as 

price controls, subsidies, and government ownership of economic 

assets. 

Haiti indeed has a market-based economy based on private property and has considerably less government involvement in the economy than most U.S. free-trade 

partners. 

(ii) the rule of law, political pluralism, and the right to due process, a 

fair trial, and equal protection under the law; 

Political pluralism is flourishing in Haiti and legal rights are enshrined in the 

constitution and are actively promoted by civil society and the population. One cannot state that the rule of law exists throughout Haiti. Due to Haiti’s tragic history 

over the past quarter century, 82 percent of Haiti’s trained professionals live 

abroad. There are a great number of poorly educated and poorly paid civil servants 

prone to corruption. 

However, substantial progress is being made to spread the rule of law through 

the island. The government has focused on creating a capable judiciary system a 

crucial component in assuring there is rule of law. We have been very impressed 

with the quality of the new appointments. The Haitian police force supported by the 

U.N. forces on the island has become proactive in pursuit of the kidnapping rings 

that have sown terror in Haiti. The police and U.N. have recently launched an offensive against the gangs’ strongholds in Cite ́ Soleil and other areas, scattering the 

leadership of the gangs and establishing government presence in these areas for the 

first time in years. The international force is assisting in training and establishing 

internationally accepted standards for all elements of law enforcement and the judiciary. 

(iii) the elimination of barriers to United States trade and investment, 

including by C (I) the provision of national treatment and measures to create an environment conducive to domestic and foreign 

investment; (II) the protection of intellectual property; and (III) 

the resolution of bilateral trade and investment disputes; 


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The government and society of Haiti welcome U.S. investment, and the improvement of the investment climate was one reason why Haiti strongly backed the 

HOPE initiative. It is no deliberate policy but sheer lack of infrastructure, security, 

and legal capacity that is the main impediment to investment, both domestic and 

foreign. The HOPE act, by reviving a crucial Haitian industry, begins to address 

this crucial constraint. Unlike other countries including some FTA partners, Haiti 

has always welcomed foreign investment and treated it as favorably as it treated 

local investment. 

(iv) economic policies to reduce poverty, increase the availability of 

health care and educational opportunities, expand physical infrastructure, promote the development of private enterprise, and encourage the formation of capital markets through microcredit or 

other programs; 

The present government launched a ‘‘social-appeasement’’ policy aimed at countering the lure of the gangs, and Haiti’s international partners have pledged, and 

begun to disburse, billions of dollars to address basic human needs. The HaitianAmerican diaspora also pours in more than $1 billion a year in family remittances. 

If security can be reestablished and investment resumed, we believe these policies 

and concrete actions will begin to show success in reducing mass poverty and improving health and education. 

(v) a system to combat corruption and bribery, such as signing and implementing the Convention on Combating Bribery of Foreign Public 

Officials in International Business Transactions 

Corruption and bribery have unfortunately become ingrained in Haiti’s government and folkways, as is the case in many other developing countries, and constitute a fundamental obstacle to progress. However, progress has been made recently. The previous government that of the interim prime minister Gerard Latortue 

did Haiti credit by establishing two investigatory commissions in Haiti that found 

serious embezzlement by the previous president, Jean-Bertrand Aristide. The 

Latortue government also launched a lawsuit in U.S. federal court seeking recovery 

of these stolen assets. The U.S. government is helping by trying and convicting a 

number of highly-placed drug traffickers who had operated with impunity in Haiti 

for many years. Together these investigations and convictions are effectively countering the long tradition of impunity enjoyed by corruptionists in Haiti. 

These efforts are aided by Haitian civil society, the diaspora, and the international presence. Haiti has a chapter of Transparency International. A senatorial 

committee is looking into the corruption among its ranks, and the proceedings are 

followed by the media and civil society. A government-appointed prosecutor has expressed the will to root out all of the major corruption among the ‘‘untouchables’’ 

of Haiti, frequently powerful officials of previous governments. The administrator of 

the electoral commission was able to intercept fraud and hold three fair and accurately-counted elections in 2006. 

A U.S. trade association representing U.S. protectionist textile interests and having no experience in Haiti, in a statement to the U.S. trade representative on February 13, 2007, has cited Haiti’s corruption as the main reason why President Bush 

should delay any decision to find Haiti eligible for the benefits of HOPE. The National Council of Textile Organizations claimed that Haiti would not produce textiles 

at all but would merely smuggle in Chinese finished products using its HOPE quota, 

and that it would be shielded in doing so by its endemic corruption, beyond the effective purview of U.S. customs enforcement. 

This is simply not correct. Haiti is benefiting from special textile provisions under 

the CBI and has never been cited for violations involving transhipments. The fact 

is that the Haitian companies themselves realize the danger of such violations. 

The law requires Haiti to present U.S. customs an acceptable visa system of control. It is at that time that the U.S. government will decide whether Haiti has a 

system capable of preventing transhipment. If it has such a system, it will be certified for HOPE benefits. The U.S. trade association’s arguments are premature and 

prejudge a system that is currently being created and will be judged by U.S. authorities in the future. 

We also note that the trade association has dramatically shifted its argument 

since last September. Then, it claimed that Haiti’s low-cost production would seriously harm U.S. textile manufacturing. Now it is claiming just the opposite: that 

Haiti would not produce at all but would sneak in others’ goods. 

The common point in the organization’s stance has remained opposition to HOPE, 

under which Haiti’s now-minuscule market share could rise to 1 percent of the U.S. 

garment market now and 2 percent in five years. 


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While ceding the point of Haiti’s ingrained corruption, we strongly question the 

claim that Haiti would not produce but merely smuggle. Haiti has the capacity and 

desire to produce. 

In recent years, Haiti’s instability has grown and disrupted Haitian manufacturers’ ability to win and keep overseas customers. Many were forced to close, as noted, 

but many also sought to keep their plants open or intact, pay their workers something even when there were no orders, and keep going somehow. This testifies to 

their desire to produce. This idle capacity and employer-worker bond remains and 

will be quickly reactivated with the economic incentive provided by HOPE. 

During recent decades, Haiti’s workers and employers displayed impressive prowess in low-cost garment production. They do not need to smuggle out Chinese finished goods. They can make much more money by weaving Chinese and other yarn 

and assembling the products in Haiti. They know how to weave and sew. They have 

the experience, the capacity, and the willing and dexterous workers. There is a Haitian manufacturers’ association, there are trade unions, and the self-interest of 

these sectors will insure that no one be allowed to endanger Haiti’s access under 

HOPE by smuggling finished goods. 

(vi) protection of internationally recognized worker rights, including 

the right of association, the right to organize and bargain collectively, a prohibition on the use of any form of forced or compulsory 

labor, a minimum age for the employment of children, and acceptable conditions of work with respect to minimum wages, hours of 

work, and occupational safety and health; (B) does not engage in 

activities that undermine United States national security or foreign policy interests; and (C) does not engage in gross violations of 

internationally recognized human rights or provide support for 

acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorist activities. 

In the 1980s and 1990s, as U.S. activists rightly expressed concerns about overseas ‘‘sweatshops,’’ Haitian manufacturers got the message and took the steps to 

make sure that their market access would not be affected by this issue. It was relatively easy for them to do so because they could easily exceed Haiti’s low minimum 

wage and remain competitive. Also, the cost to them of assuring adequate lighting, 

ventilation, and work hours was low. The Haiti Democracy Project has visited factories in Haiti and found conditions to be decent. 

Haiti has freedom for union-organizing and even militant and largely-political 

unions have appeared in the textile sector. 

Haiti’s government does not engage in human-rights violations. Politically, there 

is a threat to certain individuals’ rights from armed remnants of the Aristide government (two regimes ago), but it is not widespread nor countenanced by the 

present government. 

Altogether, then, the Haiti Democracy Project and Manchester Trade consider 

that Haiti meets the criteria of the HOPE act. The scenario put forward by the U.S. 

textile association, that Haiti would hide behind its corruption to ship finished Chinese products, appears to us to be completely unrealistic in the Haitian scene. 

Knowing many of Haiti’s manufacturers personally, and with abundant experience 

with young, able Haitians who desperately seek remunerative work, we find it inconceivable that they would stand by idly and watch someone deprive them of their 

livelihood in this manner. On the contrary, Haitians can be very assertive in demanding their rights. They most definitely would be so if they saw the opportunity 

afforded by the HOPE act being threatened. 

As progressive organizations the Haiti Democracy Project and Manchester Trade 

are also extremely sensitive to the claim of the American textile interests that workers in the rural South would lose their jobs. We simply find, however, that Haiti’s 

market impact, well below 1 percent now and allowable to a maximum of 2 percent 

in five years, is too minuscule to have the claimed effect. Furthermore, if there is 

competition with anyone, it is with China, not the United States. The textile association itself acknowledged this when it claimed that Haiti would ship finished Chinese goods rather than produce. By producing, Haiti would then displace Chinese 

goods, not American. 

Since the expiry of quotas on January 1, 2005, it is China that has been the ninehundred-pound gorilla in the world textile market with its low-cost labor and strong 

fabric industries. ‘‘Haiti’s production is so small that it’s not going to have any effect 

on the United States,’’ said apparel specialist Don Truluck of High Point, N.C., noting some factories in China produce more than all Haiti combined. 

The jobs in question long ago left America. The United States now exports far 

more to Haiti than it imports. With the United States being the largest exporter 


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to Haiti, the business generated by development in Haiti, as stimulated by the 

HOPE act, will go to U.S. exporters above all. 

The humanitarian and policy reasons for the prompt execution of HOPE are also 

compelling. Even if it came at the expense of U.S. economic interests, which it does 

not, HOPE would be eminently defendable on humanitarian grounds alone simply 

because of Haiti’s intense poverty. From a policy point of view, it makes no sense 

whatever to maintain a U.N. mission in Haiti at the cost of a half billion dollars 

a year, and not to stimulate the Haitian economy so as to hasten the day of the 

mission’s departure. 

Thus the Haiti Democracy Project and Manchester Trade present this testimony 

to the Ways and Means Committee, certainly as a supporter of Haiti and the cause 

of Haiti’s unfairly deprived and desperately poor masses, but not in a blindly partisan sense. We remain highly aware of the ills of Haiti, yet strongly believe that 

the government assisted by the private sector, civil society, the international community, and the Diaspora is making continual progress. Designation under HOPE 

will accelerate this progress and even help Haiti become ready to negotiation an 

FTA with the United States. 

We would point out that in a number of areas Haiti is ahead of U.S. free-trade 

partners. In other areas, it is making continual progress in meeting HOPE criteria. 

It is our expectation that by the time certain HOPE provisions providing special access expire in about three years, Haiti will fully satisfy these conditions and could 

be ready to enter into a free-trade agreement with the United States. The possibility 

of such a step would galvanize the whole island to meet these conditions since 

HOPE only covers garment production and Haiti has the possibility of being competitive in many other sectors. 

Not only would such exports help alleviate poverty and create jobs in Haiti, they 

would remove the discrimination that Haiti is currently experiencing vis-a`-vis its 

neighbors who are members of FTAs. They would also displace imports from the Far 

East. Haitian imports would contain a significant amount of U.S. components, thus 

benefitting U.S. workers. The Asian imports it would replace contain hardly any 

U.S. components. The reciprocal elements of an FTA would also assure more exports 

to Haiti that will create jobs in the United States. 

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1 U.S. Department of Commerce, International Trade Administration, Office of Trade and Industry information (OTII), TradeStats Express 2005. * China, Hong Kong, South Korea, Singapore, Taiwan, Indonesia, Malaysia, the Philippines, 

and Thailand. 2 Japan External Trade Organization (JETRO), from Ministry of Finance data. Figures converted to dollars from yen using U.S. Federal Reserve Board annual exchange rate averages. 3 Ibid. 

** China, India, Hong Kong, South Korea, Singapore, Taiwan, Indonesia, Malaysia, the Philippines, and Thailand. 4 Japan External Trade Organization (JETRO), from Ministry of Finance data. 

Statement of Charles D. Lake II, American Chamber of Commerce in Japan 

I. Introduction 

Given the size of its economy and its close relationship with the United States, 

Japan must be carefully considered when formulating U.S. trade policy. U.S.-Japan 

economic ties are strong, but there remain a number of areas across Japan’s economy where U.S. trade policy can be instrumental in ensuring businesses meaningful 

market access and a level playing field to the benefit of U.S. companies, workers, 

and farmers alike. 

With Japan increasingly shifting its trade, investment, and foreign policy focus toward Asia and away from the United States, the time has come to reexamine the 

effectiveness of the current framework for addressing trade and investment issues 

with Japan and in Asia to ensure that the U.S.-Japan economic relationship remains strong and leveraged strategically by both nations to further contribute to 

prosperity and stability in the region. 

Accordingly, the American Chamber of Commerce in Japan (ACCJ) recommends 

that the United States and Japan articulate a clear vision for the future of this critically important bilateral economic relationship. Both nations should commit to promoting further U.S.-Japan economic integration as the necessary foundation for continued sustainable growth in the Asia-Pacific region and initiate talks on laying the 

groundwork for concluding an Economic Integration Agreement (EIA). 

II. Economic Focus Shifting to Asia 

The U.S.-Japan relationship began over 150 years ago with the arrival in Uraga 

of Commodore Matthew Perry, which led to the signing of the U.S.-Japan Treaty 

of Peace and Amity in 1854, ending more than 200 years of Japanese isolation. Six 

years later, the relationship took off when Japan sent its first official mission to the 

United States. Since then, despite the devastating experience of World War II, the 

two countries have overcome tremendous challenges to forge a strong and wideranging bilateral relationship based on common interests and values. 

Clearly, both the United States and Japan benefit from the close win-win relationship, but over the past five years, bilateral trade has remained relatively flat, as 

both countries have been lured by the attractive opportunities in other parts of East 

Asia. Indeed, trade between the United States and Asia is growing at a rapid pace, 

in 2005 amounting to $817 billion and far outstripping U.S. trade with the European Union, which stood at $492 billion.1 Although Japan accounts for around a 

quarter of the United States’ trade with Asia, the United States has been deepening 

its trade ties with other countries in the region at a faster pace. 

From the Japan side, its international trade and investment, which have traditionally been focused on the United States, are increasing with East Asian countries 

as well, especially China. From 2001–2005, for example, Japan’s total trade with 

Asia* increased from $312 billion to $473 billion, with China’s share of that total 

nearly doubling from $93 billion to $179 billion.2 During the same period, Japan’s 

total trade with the United States declined from $193 billion to $189 billion.3 Japan’s outgoing investment has also taken a similar shift. While Japanese investment into the United States fell from $14.1 billion to $12.1 billion from 2000–2006 

(reaching a low of $7.0 billion in 2001), its investment into Asia** rose sharply from 

$2.1 billion to $16.2 billion, with China’s share of that total increasing from $0.9 

billion to $6.6 billion.4

Indeed, the Government of Japan has made increased integration with Asia one 

of its key economic growth policies, often to the exclusion of the United States. Its 

initiatives in this area include an aggressive program of negotiating bilateral free 

trade agreements with Asian nations, increased joint business/government diplomacy in Asia; and an agreement to negotiate a trilateral investment treaty with 

China and South Korea and conduct joint research on a trilateral FTA. Most notable, however, is Japan’s proposal for an East Asian free trade agreement, to be comVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00121 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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+ ASEAN nations are Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, 

Singapore, Thailand, and Vietnam; ‘‘plus Six’’ nations are Australia, China, India, Japan, New 

Zealand, and South Korea. 

posed exclusively of ASEAN plus Six+ members. The Government of Japan proposed 

this initiative in 2006 and continues to expend considerable effort to push it forward, with some senior government officials favoring this Asia-only approach over 

the United States’ more inclusive Free Trade Area of the Asia-Pacific (FTAAP). 

In sum, despite the widely reported political tensions between Japan and its 

Asian neighbors such as China and South Korea, the macro- and micro-economic 

data as well as substantial progress in government to government initiatives make 

it clear that Japan’s integration into the Asian economy continues rapidly, and that 

this trend will continue. These developments raise serious strategic implications for 

the United States, not only with regard to economic and trade policy, but also in 

terms of our national security interests. 

III. A New Vision Needed for U.S.-Japan Economic Ties 

With this backdrop, the ACCJ urges the United States to redouble its efforts to 

ensure that the U.S.-Japan economic relationship remains strong and continues to 

play a key role in maintaining prosperity and stability in each nation and in the 

Asia-Pacific region. The United States and Japan enjoy common values, including 

a commitment to representative democracy, freedom of speech, and the rule of law. 

Each nation considers the alliance a core aspect of its security and diplomatic relations globally and in Asia. 

Conditions for greater bilateral economic integration between the United States 

and Japan are better than ever. Both the overall health of bilateral relations and 

Japan’s economy are their strongest in decades. For U.S. companies, the Japanese 

market is more open, with more opportunity than ever before, thanks to structural 

reforms. Despite recent slowing trends, Japanese companies continue to invest in 

the United States, with U.S. production for some Japanese companies exceeding 50 

percent of total output. 

The two countries have a demonstrated ability to work together to resolve issues 

in a mutually beneficial manner that extends across many decades. The Economic 

Partnership for Growth, a bilateral mechanism established in 2001, for example, 

provides a government-to-government forum to discuss and work through such economic-related issues as macroeconomic policies, structural and regulatory reform, financial and corporate restructuring, foreign direct investment, and open markets. 

Challenges for further U.S.-Japan economic integration do remain, however. 

IV. Challenges for Further U.S.-Japan Economic Integration 

A. Japan’s Domestic Challenges and Prime Minister Abe’s Vision 

Domestically, Japan faces an array of difficult issues, including a declining population and an aging workforce; an unprecedented level of public debt; difficult monetary and tax policy environments; and low research and development (R&D) productivity. Continued commitment by the Government of Japan to implement marketbased reform will be necessary to overcome these potential impediments to continued growth. The Government of Japan must stay firm in its resolve to further reforming Japan’s economy to make it more efficient and better able to compete in 

increasingly globalizing markets. Dealing with these challenges will be key to 

achieving enhanced economic integration between the two countries. 

Prime Minister Abe has recognized these challenges in policy speeches and has 

laid out a vision for addressing them. The Prime Minister’s vision includes a goal 

of attaining ‘‘sustained and stable economic growth’’ by promoting foreign direct investment (FDI); aggressively pursuing Economic Partnership Agreements in Asia; 

and promoting initiatives such as his ‘‘Asian Gateway Vision,’’ which aims to position Japan as a conduit for the flow of people, goods, money, culture, and information between Asia and the rest of the world and ‘‘Innovation 25,’’ which is designed 

to foster innovation through a range of programs in medicine, engineering, and information technology. 

The Prime Minister has also pledged to continue the structural reforms started 

by his predecessor. These include major efforts to enhance efficiency by continuing 

to devolve authority to local governments and by reducing government involvement 

in the market through the sale of government assets; following through with postal 

privatization; consolidating other public financial institutions; and opening certain 

public services to competition from the private sector. 

Finally, the Government of Japan has set a goal to turn Tokyo into a global financial center on par with New York and London. A 2006 survey by the Corporation 

of London found that Tokyo, while an important regional financial center, does not 


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5 Corporation of London, ‘‘The Competitive Position of London as a Global Financial Centre,’’ 

November 2005. 6 Hong Kong Securities and Futures Commission, ‘‘Hong Kong as a Leading Financial Center 

in Asia,’’ August 2006. 

meet two important standards for global financial centers.5 Tokyo is not yet a city 

where ‘‘business is conducted between organizations from all over the world using 

financial instruments from all over the world’’ nor is it one that has ‘‘an intense concentration of a wide variety of international financial businesses and transactions 

in one location.’’ In fact, according to another 2006 study, Tokyo is not even the 

most competitive financial center in Asia, ranking well behind Hong Kong and 

Singapore in several key categories, including availability of skilled personnel and 

access to suppliers of professional services, regulatory environment and government 

responsiveness, and access to international financial markets.6

The Government of Japan is taking action to achieve further reform in this area. 

Three government-sponsored panels are currently studying ways to reform Japan’s 

financial system to encourage the development of Tokyo into a true global financial 

center, with the government expected to incorporate their findings into a strategy 

by the summer of 2007. 

B. Sector-Specific Challenges and Recommendations 

In its recent Business White Paper: ‘‘Working Together, Winning Together,’’ the 

ACCJ provides a snapshot of the state of the Japanese economy after the implementation of key economic structural reform measures and an assessment of progress 

made in the last five years. The ACCJ Business White Paper also identifies immediate and longer-term measures that the ACCJ believes are key for the United 

States and Japan in partnering for success in a globalizing economy. Respective 

chapters address different areas of Japan’s economy, but they contain common 

themes such as transparency, stakeholder participation in decision-making, like 

rules for like competitors, independent and accountable regulators, global standards, 

innovation and improving efficiency for growth, and sound regulation to promote 

healthy competition. 

As part of its trade policy agenda, the U.S. Government is urged to engage Japan 

on a wide range of outstanding issues, including the following—drawn from the 

ACCJ Business White Paper— which represent challenges for U.S.-Japan economic 

relations. These challenges could be the subject of consultations under existing bilateral mechanisms and, in the medium- to long-term, be included in negotiations ultimately resulting in the successful conclusion of an Economic Integration Agreement. 

For a full discussion of the ACCJ’s vision for increased economic integration between the United States and Japan, please refer to the full ACCJ Business White 

Paper (the ACCJ stands ready to provide additional copies as necessary). 

Financial System 

Tremendous progress has been made in restructuring Japan’s financial system to 

make it more competitive since the government introduced financial reforms in the 

mid-1990s. Two examples are the government’s shift to the Financial Service Agency’s (FSA) more transparent, rules-based regulatory approach and the successful reduction of major banks’ non-performing loans, which has allowed Japan to shift its 

focus from ‘‘financial system stability’’ to ‘‘financial system vitality.’’ Despite this 

progress, however, more is required to achieve the government’s stated goal to 

transform Tokyo into a true global financial center to rival New York and London. 

Recommendations 

Continue improving the transparency of Japan’s financial rulemaking process (including its practice of consulting outside advisory groups) and ensure that it is fair 

for all stakeholders, including foreign companies. 

Ensure that Japan’s regulatory reform process promotes innovation, particularly 

through reform of Japan’s capital markets. 

Ensure that Japan fulfills its international treaty obligations by ensuring like regulation for like service providers. Japan Post’s financial institutions, for example, 

are financial service providers with significant portions of Japan’s banking and insurance markets that enjoy special treatment inconsistent with Japan’s World 

Trade Organization (WTO) obligations under the General Agreement on Trade in 

Services (GATS) and are not subject to full oversight and supervision by the FSA. 

Ensure that Japan Post’s financial institutions are prohibited from expanding 

their businesses until a level regulatory playing field between Japan Post and its 

private sector competitors is established. 


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Healthcare System 

The Government of Japan should focus on reforms that bring about a healthcare 

system that facilitates speedy patient access to the best medical technologies, pharmaceuticals, and services the world has to offer. 

Recommendations 

Ensure that reform of Japan’s healthcare system addresses several fundamental 

issues: inefficiencies in the healthcare system; the slow and cumbersome approval 

process for new medical technology; and the system for establishing reimbursement 

rates. 

In the area of pharmaceuticals in Japan, create an efficient, science-based regulatory approval for new technologies, fundamentally revise the current drug pricing 

rules, recognize and reward innovation in the pharmaceutical industry, fully protect 

intellectual property rights, support R&D and improvements in the reimbursement 

system for medical treatments, increase its commitment of fiscal resources, and improve patient access to information. 

In the area of healthcare services in Japan, permit medical institutions to operate 

as commercial corporations to expand the choices available to healthcare providers 

as well as patients. 

Physical Infrastructure 

Physical infrastructure has taken on heightened importance as globalizing markets have increased demand for the rapid movement of people and goods across borders. Japan’s economic prominence depends on a vast physical infrastructure to support its regional and global commerce. Japan, however, pays an unnecessarily high 

price through over-regulation, high operating costs, and inadequate or redundant infrastructure, in part due to low external competitive pressure. This has hindered Japan’s international competitiveness and threatens to reduce its role as a nexus for 

trade in Asia and globally. 

Recommendations 

• Ensure that the Government of Japan provides all stakeholders with a fair 

process for engaging in dialogue on issues related to airports, aviation, customs, and the privatization of Japan Post. 

• Increase the transparency with which Japan conducts oversight and planning 

of its national air transport system, including commercial, business, and 

cargo aviation. 

• Ensure that Japan Post is subject to identical regulations as its private sector 

competitors, including customs clearance, transportation, and security regulations, with no cross-subsidies among the postal products or operating companies. 

• Information Technology and Communications 

• The Government of Japan’s IT strategy identifies information technology as 

critical to achieving the structural reforms necessary to meet Japan’s needs 

in a broad range of areas, setting as a national goal the creation by 2010 of 

a ‘‘ubiquitous network society.’’ This is an admirable goal, and one that will 

require a sustained and cooperative effort to achieve. 

• Recommendations 

• Refrain from micro-managing the development of IT and applications. 

Governments contribute to innovation by sustaining an environment that allows 

companies and individuals to compete in the marketplace to bring new ideas and 

technologies to the consumer. Attempts by governments to ‘‘pick winners’’ or to favor 

one technology over others, distort the competitive discipline of the market and ultimately slow innovation. The Government of Japan should consider these points as 

it weighs its role in information security and privacy, IT procurement, telecom policy, and the protection of intellectual property rights. 

Consumer Products and Food 

Consumer products and food markets annually generate 35 percent of all retail 

business in Japan, providing a solid base for creating a more balanced economy 

driven by domestic demand. However, although Japanese producers of manufactured goods have often been at the forefront of extending the benefits of consumer 

products to consumers around the world, Japan’s own consumers lack full access to 

the world’s most innovative products in several key areas. 


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Recommendations 

Create simple, fair, and transparent regulations consistent with global best practices. Allowing all stakeholders meaningful opportunities to comment on proposed 

rules would be an important step in the right direction. 

Streamline the approval process for specific additives commonly used in the 

United States and Europe and use a single standard for both imported products and 

those already approved in Japan. 

Legal System 

Although different kinds of legal systems can facilitate the development of large 

market economies, no one doubts the importance of having one that meets the needs 

of the domestic economy and is compatible with global practices. A solid legal infrastructure is conducive to providing efficient international legal services to domestic 

and foreign companies and individuals, which will contribute significantly to the 

health of Japan’s economy. 

Recommendations 

Extend the public comment period to a full 60 days and to include governmentdrafted legislation submitted through the administrative process, implement measures to further strengthen corporate governance in Japan, remove remaining limitations on foreign lawyers and law firms operating in Japan, and develop clearer and 

more consistent privacy rules. 

Communicate to ministries and agencies full support of the No Action Letter system, educate them on how to most effectively implement the system, and have them 

proactively encourage the submission of requests for No Action Letters to those with 

questions regarding regulatory interpretation. 

Human Resources 

In an increasingly integrated global economy, national and corporate competitiveness are closely linked to the availability and flexibility of human resources. Although Japan has been justifiably proud of its economic accomplishments, changing 

economic realities, increased competition for foreign direct investment, and its rapidly aging population are just a few of the forces at work that require it to re-evaluate its post-war approach to human resources. 

Recommendations 

Consider a wide array of reforms, including: improving the teaching of English at 

all levels of the educational system; encouraging more competition and differentiation among Japanese universities; providing recognized Foreign University, Japan 

Campuses with the same tax status as recognized Japanese universities; revising 

the current Labor Standards Law to more clearly define its abusive dismissal doctrine; establishing clear statutory rules concerning changes in working conditions; 

and implementing, in a comprehensive and proactive way, policies and procedures 

that will facilitate the entry and integration of foreigners and their families. 

Government Reform, Procurement, and Privatization 

Efficient, predictable, and transparent government administration is key to 

achieving sustained growth in any economy. The Government of Japan has taken 

a range of measures in recent years designed to streamline and improve its core 

functions, including strengthening competitive bidding procedures and passing legislation to privatize state-owned enterprises (SOE). However, more work must be 

done in government procurement and privatization of SOEs, two areas where actions by the government have tremendous impact on the marketplace. 

Recommendations 

Reform Japan’s IT procurement policies to further promote openness and transparency. The Government of Japan’s policies should also be neutral with respect to 

competing technologies, ensure equal opportunity for all companies, eliminate unnecessary layers, and utilize a ‘‘lifecycle’’ approach to cost assessment. 

Implement changes to increase Japan’s defense procurement efficiency while enhancing defense industry competitiveness and national security. Adoption of multiple-year equipment purchases, more flexible licensed production programs, more 

practical payment schedules, and increased incentives for efficiency are just a few 

of many needed reforms. 

V. Economic Integration Agreement 

The ACCJ believes that it is vitally important that the governments of the United 

States and Japan make every effort to complete the WTO Doha Round negotiations. 

Both Japan and the United States would reap substantial benefits from a successful 


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Doha Round. The Government of Japan estimates an economic impact of approximately $401.8 billion, while the U.S. Government anticipates a boost in U.S. household income by $500 billion, or $4,500 per household. 

If multilateral negotiations are the most effective means to open markets, why is 

the ACCJ now urging the governments of Japan and the United States to start 

work on concluding a bilateral EIA? There are many factors that have led the ACCJ 

to this conclusion. 

First, major economic issues between the United States and Japan are currently 

less about market access and more about the need for improvements in our overall 

respective business environments. Many of the issues that make doing business in 

Japan complicated and expensive would not be addressed at the WTO level, but 

could be addressed in a comprehensive EIA. 

Since most traditional trade barriers, such as tariffs, have largely been reduced, 

an EIA between the United States and Japan would have to embody a broad and 

forward-looking vision, and promote institutional cooperation in areas such as 

standards and certification, IT security, intellectual property rights, as well as security and trade. Such an agreement could serve as a model for agreements with other 

countries, establishing best practices for the next generation of trade agreements. 

Indeed, a comprehensive EIA would have to encompass and build on all aspects of 

bilateral economic activity, while maintaining all the measures contained in existing 

bilateral trade agreements and building upon them. Such a high-level bilateral 

agreement would have to meet WTO standards on Free Trade Agreements (FTA) 

for goods and services coverage, including agriculture, and extend to non-tariff 

measures that inhibit trade and investment. In other words, an EIA would be an 

ambitious ‘‘FTA-Plus’’ agreement. 

In addition, such an agreement would complement and strengthen, not replace, 

multilateral efforts at the WTO. It could even give a strong push to other countries 

to move the Doha Round to a successful conclusion. Given the sheer size of the two 

economies, an EIA between Japan and the United States would create a sense of 

urgency among other major trading nations, spurring progress at the WTO level 

much as the conclusion of the North American Free Trade Agreement did in the 

Uruguay Round of negotiations more than a decade ago. 

VI. New Mechanism for Bilateral Economic Dialogue 

Finally, the ACCJ urges the governments of the United States and Japan to restructure and reinvigorate the Economic Partnership for Growth. 

A. U.S.-Japan Ministerial Economic Forum 

Over the past decades, the United States and Japan have benefited greatly from 

a deep relationship between the two nations built upon shared principles of political 

and economic freedom, democracy, the rule of law, and respect for human rights. 

Leveraging this relationship, the new bilateral economic initiative should include a 

U.S.-Japan Ministerial Economic Forum (Ministerial Forum). Under the Ministerial 

Forum, Cabinet-level leaders could meet to discuss key strategic bilateral, regional, 

and global issues facing the two economies and possible areas for cooperation. The 

Ministerial Forum would be an essential complement to existing Ministerial-level 

mechanisms with other key trading partners in East Asia, including China and 

South Korea. 

The Ministerial Forum would remain informal and flexible, providing the Cabinetlevel leaders a setting to address both immediate as well as long-term strategic matters as appropriate. The Cabinet-level leaders would also report progress to the 

prime minister and president as necessary. Likely themes include building political 

and economic stability in the Asia Pacific Region; assisting the developing world 

achieve economic growth and stability; cooperating in multilateral and regional bodies; and taking common approaches to global regional economic issues. 

B. U.S.-Japan Economic Cooperation Working Groups 

While the Ministerial Forum would provide direction, context, support, and momentum for the overall bilateral economic initiative, the new bilateral economic initiative should also include several working groups, which would be tasked with submitting semi-annual or annual reports to the prime minister and president through 

the Ministerial Forum. These reports would address any immediate issues relating 

to trade and investment and identify areas where material mutual benefit could be 

gained through further bilateral economic cooperation. 

VII. Role of the Private Sector 

The private sector can play a critical role by supporting analytical studies of the 

impact of a U.S.-Japan EIA, identifying specific impediments, and helping build political and public support. Indeed, a comprehensive EIA between the United States 


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and Japan would bring tremendous benefits to U.S. and Japanese companies and 

consumers alike, stimulating economic growth, generating high-productivity employment, and increasing U.S. and Japanese competitiveness in the global economy. 

The United States and Japan share many common values. The two nations also 

face many common challenges—including rapid globalization and aging populations. 

A U.S.-Japan EIA will provide an essential foundation for continued sustainable 

growth in the Asia-Pacific region and can become a key tool enabling both countries 

to work together to become more competitive in the new global environment. 

VIII. Conclusion 

The ACCJ wishes to express its sincere gratitude for the opportunity to submit 

these comments and stands ready to work with the executive branch and our leaders in Congress to promote further U.S.-Japan economic integration, which is the 

necessary foundation for sustainable growth in the Asia-Pacific region. 

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Lawson, Eugene K., U.S.-Russia Business Council, letter 

U.S.-Russia Business Council 

February 26, 2007 

The Honorable Charles Rangel 

Chairman, Committee on Ways & Means 

U.S. House of Representatives 

1102 Longworth House Office Building 

Washington, D.C. 20515 

Dear Chairman Rangel: 

The U.S.-Russia Business Council (USRBC) is pleased to present this statement 

to the Committee on Ways and Means in connection with the hearing on February 

14, 2007, on the direction and content of U.S. trade policy. 

USRBC is a Washington-based trade association that represents the interests of 

approximately 300 member companies operating in the Russian market. The Council’s mission is to expand and enhance the U.S.-Russian commercial relationship 

through advocacy efforts and by promoting dialogue between the private sector and 

U.S. and Russian decision makers. The Council strongly supports Russia’s integration into the global economy and the rules-based system of the World Trade Organization (WTO). 

Securing a Commercially Strong Agreement on Russia’s WTO Accession 

After more than a decade of negotiations on Russia’s WTO accession, the U.S. 

business community applauded the signing of the historic bilateral accession agreement between the U.S. and Russia on November 19, 2006. It is a strong agreement 

and it benefits U.S. interests. In combination with Russia’s side letter commitments, 

it represents an important step forward in solidifying economic opportunities for 

U.S. firms and farmers, which can have a positive effect on jobs here in the United 

States. 

We congratulate the Bush Administration, and the Office of the U.S. Trade Representative in particular, on their stellar work in addressing the concerns of the 

U.S. business community in the bilateral negotiations with Russia to ensure that 

the agreement was commercially meaningful. We appreciated the efforts of the leadership of the Committee and your staff who, in a bipartisan fashion together with 

your colleagues on the Senate Finance Committee, provided helpful input to the Administration to help ensure this effective result. 

The bilateral agreement is not the endgame, however. We look forward to building 

upon the good communication we have established with the Committee to encourage 

the proper implementation of Russia’s side letter commitments and move forward 

the multilateral negotiations. The U.S. business community understands that before 

Congress can move forward with action on Russia’s graduation from Jackson-Vanik 

and the extension of Permanent Normal Trade Relations (PNTR), significant 

progress must be achieved in the multilateral negotiations and in connection with 

bilateral commitments Russia has made to the United States. However, when the 

negotiations near their end point, it is critical for the U.S. business community that 

the Congress be prepared to act promptly on Jackson-Vanik and PNTR. The competitiveness of U.S. companies engaged in trade with Russia is at stake. 

Once negotiations are completed, Russia will be eligible to join WTO, with or 

without PNTR. Because our own WTO commitments require us to provide unconditional most-favored-nation trade status to any WTO member, only when the U.S. 

graduates Russia from Jackson-Vanik and extends Russia PNTR status will U.S. 

firms and farmers be able to share in the tariff reductions and other liberalizations 

that form Russia’s WTO commitments. Passage of PNTR vote therefore will be critical for U.S. companies and farmers to stay competitive with other foreign competitors. 

Additionally, there are benefits of Russia’s accession to the U.S. business community that are difficult to quantify, but, over the longer term, are even more important than tariff concessions to U.S. firms. For example: 

• Russia’s WTO accession will require Russia to comply with transparency and 

notification requirements and provide a stronger basis for U.S. companies to 

assert their commercial rights in the Russian market. 

• As a WTO member, Russia will need to bind its tariff levels, preventing unilateral increases for purely protectionist reasons. For example, WTO rules 

would have prevented Russia from tripling its tariffs on U.S. combine harvesters as it did late in 2005. 


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• Having Russia in the WTO will allow the U.S. to seek redress with Russia 

through the WTO’s dispute settlement procedures if Russia steps outside the 

boundaries of accepted WTO norms. Without PNTR, the U.S. will be ineligible 

to use these mechanisms of the WTO vis-a`-vis Russia. 

• A basic tenet of the WTO is national treatment requiring that foreigners are 

subject to the same rules and enforcement practices as domestic parties (with 

exceptions for national security and balance of payment requirements). As a 

WTO member, Russia will need to honor its commitments placing foreign 

companies on a level playing field with their domestic competitors. 

Requiring U.S. companies to pay higher tariffs than their competitors and denying 

them the other advantages of Russia’s WTO concessions would be tantamount to 

ceding to our competitors one of the world’s fastest growing and attractive markets. 

Russia is a key emerging market for U.S. manufacturers, service providers and 

farmers. It is currently the 10th largest economy in the world, and, with current 

growth trends expected to continue (Russia has had average annual GDP of 7% over 

the last eight years), it may be the 5th largest within another decade. Its highlyeducated population and vibrant consumer sector make it an attractive export market for U.S. value-added goods and services. U.S. exports to Russia grew 20% in 

2006, after growing more than 30% in 2005. And while Russia currently does not 

rank among the top U.S. trade partners, companies from high technology to services 

to natural resources to manufacturing see Russia as an important part of their global competitiveness strategy. 

For more than a decade, the U.S. has found Russia to be in compliance with its 

Jackson-Vanik commitments regarding freedom of emigration. Accordingly, the U.S., 

by an annual Presidential waiver, has extended normal trade relations to Russia on 

an annual basis. As Russia moves closer to full WTO membership, it should be 

clearer than ever that Jackson-Vanik, an outdated measure with no relevance to today’s Russia, does not advance U.S. interests or its agenda with Russia. On the 

other hand, graduating Russia from Jackson-Vanik and granting PNTR to Russia 

will represent a Congressional vote of confidence in U.S. firms, farmers and workers; it will give the U.S. business and agricultural communities the green light to 

compete on an equal footing with their European and Asian counterparts in the 

Russian market. 

Finally, USRBC strongly supports Russia’s accession to WTO not only because of 

the important market liberalizations that offer opportunities to U.S. firms, but also 

because we understand that the U.S. and the global trading system itself can only 

benefit when one of the world’s largest economies abides by the rules of the world 

trading system. Adherence to WTO rules will bring more certainty to an often uncertain environment which will have ramifications well beyond the Russian market. 

Building on the bipartisan spirit you and Ranking Member McCrery have demonstrated as this Congress begins, we look forward to engaging this Committee in 

a bipartisan fashion at the appropriate time to ensure that the U.S. business community is on a level playing field with foreign competitors as Russia accedes to the 

WTO. 

We thank the Committee once again for this opportunity to share our views regarding this important commercial issue, and we look forward to working with you. 

Sincerely, 

Eugene K. Lawson 

President 

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Statement of Raymond C. Offenheiser, Oxfam America 

Oxfam believes that trade can be an important engine for development and poverty reduction. Well-managed trade has the potential to lift millions of people out 

of poverty. We believe it is important that trade agreements, which set the rules 

for ongoing trade relations, work to improve livelihoods and reduce poverty in developing countries. 

1. Introduction 

The U.S. trade agenda shapes the welfare of people in this country as well as 

across the globe. Conditions of poverty, ill health and lack of economic opportunity 

in developing countries are a human tragedy. But they also have implications for 

America’s long-term security and prosperity. While U.S. foreign policy seeks to address such problems, U.S. trade policy often exacerbates them by imposing hardships on developing country farmers, making access to affordable medicines more 

difficult, and constraining the kinds of policies developing country governments 

enact to protect their own citizens. U.S. trade policy can and should do much better. 

Trade rules that serve to strengthen developing country economies ultimately help 

to generate economic growth abroad, which will, in turn, increase demand for U.S.- 

produced goods and services and ease the social and political tensions that result 

from economic exclusion. 

U.S. trade policy should therefore have development as a core objective and 

should seek to ensure that trade rules will help reduce poverty and inequality. U.S. 

trade policy in recent years has failed to do this in practice, and instead has run 

at cross-purposes with U.S. foreign policy on international development and drug 

eradication. Moreover, non-conformity with certain international trade rules generates animosity among our trading partners, as illustrated by the Brazilian WTO 

case that successfully challenged U.S. cotton subsidies, and the more recent Canada 

case challenging U.S. corn subsidies. 

Trade can be an engine for economic growth and poverty reduction, but only if 

the rules actually benefit poor people and developing countries. Despite many scholarly attempts to demonstrate a direct association between trade liberalization and 

economic growth, a growing consensus is emerging that trade liberalization in and 

of itself does not lead to economic growth. Countries that have benefited from trade 

in their process of industrialization did so with unique combinations of policy interventions, macroeconomic stability, investments in human capital, and land reform. 

In most cases, including the United States, countries benefited from the combination 

of selective liberalization along with government support. 

Today, however, international trade rules increasingly limit the kinds of trade 

and industrial policies that developing countries can implement to promote their 

own industrialization, while facing unprecedented pressures from the United States 

and other industrialized countries to liberalize their own markets. In recent years, 

the U.S. trade agenda has contributed to these burdens in at least three ways. 

First, the U.S. has not complied with certain global trade rules while using the 

WTO’s Doha Development Round of negotiations to continue pressuring for additional market access from developing countries. 

Second, U.S. trade policy in recent years has been designed to spur a competition 

for liberalization, predominantly by engaging small developing countries in bilateral 

or regional trade deals that limit their ability to use trade and investment policies 

to promote development. These Free Trade Agreements (FTAs) not only force full 

and radical market openings on developing economies, they also impose far-reaching 

rules in areas such as intellectual property and investment that give corporations 

free reign, while limiting the very policies developing countries need to fight poverty. 

Third, while pressuring developing countries to open their markets to U.S. goods, 

the United States restricts entry for many key products produced by developing 

countries—particularly agricultural products and labor-intensive apparel and textiles. To make matters worse, the U.S. continues subsidizing the production of agricultural commodities for export that compete directly with those produced by developing countries. 

2. World Trade Organization (WTO) and the Doha Development Round 

In 2001, in the wake of September 11th, the countries of the world agreed to 

launch a new round of trade negotiations under the auspices of the World Trade 

Organization. The round was launched in Doha and took the title of the ‘‘Doha Development Agenda’’ in recognition of the importance of focusing the outcome of this 

negotiation on the needs of developing countries, which have been seeking redress 

of problems they face in trade rules. 


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More than five years later, the negotiations are at a standstill or, according to 

latest media reports, possibly reviving, though they clearly have a long way to go 

before conclusion. 

Oxfam’s analysis is that the United States and other developed countries bear 

most of the blame for the failure of the Doha Round to make progress. To date, the 

key elements of importance to developing countries have yet to be resolved. And developing countries have grown understandably skeptical, leading to the emergence 

of several important blocs of countries to promote developing country interests: the 

G–20, the G–33, and the NAMA 11, among others. 

Currently, developed countries capture about 70% of world trade flows worth 

$20.6 trillion, while poor and developing countries representing 81% of the world’s 

people—many of them living in extreme poverty—get 30%. While the share of developing countries overall has been growing, for many of the poorest countries the 

share of global trade flows has actually been shrinking. Africa, in particular, has 

seen its share of trade fall to just 2.6%, while the share of all LDCs is below one 

percent. 

While there are many factors contributing to the increasing economic 

marginalization of poor countries, unfair trade rules play a significant role. For example, tariff levels on the products that poor countries export—like apparel and agricultural commodities—are higher than tariffs on the products that dominate developed economies’ exports. Trade rules also permit developed countries to use grossly 

unfair agriculture subsidies that distort trade and result in dumping of agricultural 

products on developing countries’ markets. 

The Doha Round offers the opportunity to address these concerns, although it has 

not yet done so sufficiently. The current state-of-play demonstrates: 

• Little to no progress on agricultural dumping, except for the proposed elimination of export subsidies, which are now a marginal part of the total subsidy 

arsenal of developed countries. 

• Bigger demands on developing countries to open up their markets than during the previous round, with strong adverse implications on vulnerable livelihoods in most developing countries in the agricultural and industrial sectors. 

• Little improvement in market access for developing countries in agriculture 

and industry due to proposed exemptions, and little progress on non-tariff 

barriers. 

Oxfam strongly believes that multilateral negotiations are the best forum to address these concerns. Most economic analysis shows that the benefits for all players 

are much higher from producing global agreements than from regional or bilateral 

agreements. 

But the U.S. negotiating posture has been highly mercantilist, failing to recognize 

our longer-term interest in robust economic growth in developing countries. The evidence is strong that U.S. exporters benefit from strong growth in developing countries, which need flexibility to determine for themselves how and when they open 

up their markets. However, U.S. demands for greater market access risk increasing 

poverty and wreaking damage to many developing countries with high levels of poverty and inequality. The U.S. should stop treating development issues as concessions rather than as critical components of a development-friendly agreement. 

3. Free Trade Agreements (FTAs) 

The FTAs negotiated under the current Trade Promotion Authority (TPA) require 

accelerated trade liberalization with little regard to a country’s level of development 

or economic vulnerability. In addition, these FTAs require extensive intellectual 

property and investment protections that limit the policy options developing countries need to effectively govern their economies. In many cases, our trading partners 

have agreed to FTAs because they feared losing access to U.S. markets that had 

been provided as part of long-standing regional trade programs. The negotiating 

pressure of withdrawing market access for Central American and Andean countries 

induced them to agree to measures in the FTAs that are contrary to their interests 

in development and poverty reduction. 

3.1 Agricultural trade 

Under FTA rules on agriculture, developing countries are granted no special treatment to address their development needs. Yet since the founding of the GATT over 

50 years ago, it has been a principle of the multilateral trading system that developing countries need not grant reciprocal commitments to reduce or remove tariffs 

and non-tariff barriers to trade. This basic principle was enshrined in the WTO 

under the rubric of Special and Differential Treatment, which recognizes important 


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existing asymmetries between developed and developing countries and permits the 

latter to forgo making concessions similar to those expected from the former. 

Yet consider the situations that Peru and Colombia will face as a result of their 

FTAs, which allow extensive U.S. domestic agricultural supports and subsidies that 

enable U.S. products to be exported below their cost of production. These countries 

will be forced to eliminate their price-band system, which stabilizes prices of sensitive products and protects them from the trade-distorting effects of U.S. subsidies. 

Furthermore, the agricultural safeguard mechanism included in the FTAs is weak 

and temporary and can only be used for a limited number of goods, rendering it ineffective to protect vulnerable farmers. 

Furthermore, Peru and Colombia were not able to exclude any products from tariff elimination, yet the U.S. excluded 47 tariff lines for sugar, sugar substitutes and 

products with high sugar content. The U.S. was also granted a special mechanism 

for sugar compensation, allowing greater policy flexibility to avoid imports causing 

damage to our domestic producers. Such policy flexibility is not at all available to 

Peru and Colombia. In addition, although longer tariff elimination periods were 

granted for some of their products, duty-free quotas beginning immediately will offset advantages that such delays in tariff reductions might provide to cushion impacts on their farmers. 

Thus, these FTAs dismantle mechanisms for the protection of agricultural products vital for food security and the livelihoods of small farmers who produce for 

their domestic markets, leaving them with few options for preserving their income. 

In Peru and Colombia, where half the population lives in poverty, the majority in 

rural areas, the lack of employment alternatives, limited access to credit, lack of 

basic services, adverse climatic conditions and geographic isolation further compound the problems facing displaced farmers. Farmers in these countries are in a 

vulnerable position and could face pressure to turn to the cultivation of coca in a 

region that provides more than 98 per cent of world supply, thereby undermining 

U.S. drug policy and billions of taxpayer dollars invested to reduce the supply of 

cocaine. 

3.2 Intellectual property rules and access to medicines 

U.S. trade policy also hurts development abroad by raising the cost of essential 

medicines to populations already facing hardships. In TPA § 2102(b)(4)(C), the U.S. 

Congress instructed USTR to ‘‘ensure that future trade agreements respect the Declaration on the TRIPS [Trade Related Aspects on Intellectual Property Rights] 

Agreement and Public Health,’’ adopted by the WTO at its Fourth Ministerial Conference on November 14, 2001. This Declaration affirmed the primacy of public 

health over intellectual property rules and was motivated by profound concerns that 

such rules could limit access to medicines in developing countries. 

Yet new intellectual property rules in FTAs extend the monopoly rights of the 

international pharmaceutical industry, restricting or delaying generic competition 

and reducing access to affordable new medicines in developing countries. In most 

developing countries, national health-care budgets are deficient and the majority of 

people lack insurance and must pay for medicines out-of-pocket. In particular, U.S. 

FTAs include the following rules, which exceed commitments established in the 

TRIPS Agreement and will lead to price increases for newer medicines in developing 

countries: 

Extension of the patent terms: Provisions extend patent protection beyond the 20 

years established in the TRIPS Agreement to compensate for delays in granting the 

patent and in granting marketing approval. These measures exceed even U.S. law, 

which includes limitations to ensure that the product is a truly novel medicine and 

which put a ceiling on the extension period. 

Exclusive use of test data: Provisions create a new system of monopoly power, separate from patents, by blocking the marketing approval of generic medicines for five 

or more years, even when no patent exists. Drug regulatory authorities are prevented from using the clinical trial data of the patented medicine to approve the 

marketing of a generic drug that has already been shown to be equivalent to the 

original one, thereby delaying or preventing generic competition. The TRIPS Agreement protects only ‘‘undisclosed data’’ to prevent ‘‘unfair commercial use’’ it does not 

confer either exclusive rights or a period of marketing monopoly. 

Linkage between marketing approval and patent status: Drug regulatory authorities are prohibited from registering generic versions of medicines until after the patent has expired, with no exceptions. Thus, these public agencies charged with 

verifying a medicine’s safety and efficacy would have to become a sort of ‘‘patent 

police’’ with the burden of enforcing private property rights, instead of leaving the 

patent owner with the responsibility of using the judicial system to that end. Unlike 

U.S. law, the FTAs do not include any measures to ensure timely resolution of patVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00132 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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ent disputes when generics producers challenge such patents, resulting in de facto 

patent extension. 

3.3 Investment rules 

The investment chapters in FTAs prevent developing country governments from 

regulating foreign investment once it enters the country and ban the use of all ‘‘performance requirements.’’ These rules prevent governments from screening foreign 

investment to ensure it contributes to the development needs of their economies. Investment provisions in FTAs also prohibit governments from requiring foreign companies to transfer technology, train local workers, or source inputs locally. Additionally, they restrict the ability of governments to regulate capital flows, thereby exposing fragile developing country economies to undue financial risks. Under such conditions, as seen with NAFTA for example, investment fails to support the domestic 

economy to the fullest extent possible by creating jobs that provide decent employment conditions and wages. These goals are critical to ensuring that the livelihoods 

of the poor are improved in countries that enter into an FTA with the United 

States. 

Investment rules in FTAs also allow foreign investors to sue governments for 

passing laws that investors believe could restrict their ability to profit from their 

investment. This has the potential to restrict governments from upholding their responsibility to enact and enforce regulations that ensure the well-being of their citizens, such as measures to protect health, safety, the environment, and workers’ 

rights. Through the investor-state dispute settlement system, private investors can 

challenge the legality of such laws and, in so doing, undermine the ability of developing countries to balance private interests and public rights. The impact of U.S. 

efforts to foster development is vastly diluted by the enactment of these provisions, 

which are harmful not only to development and poverty-reduction, but also to democracy. 

3.4 Recommendations: Pro-development rules are needed 

U.S. trade agreements with countries that have high levels of poverty must allow 

for special and differential treatment in agricultural market access in order to enable developing country governments to enact policies that ensure food and livelihood security and promote rural development. For example, developing countries 

should be allowed to exclude sensitive products from tariff elimination and establish 

more gradual market openings. Until the U.S. fully eliminates trade-distorting domestic supports and subsidies, trade agreements must allow developing countries to 

use a price-band system or other tariff mechanism that will serve to compensate for 

the effects of these subsidies. Furthermore, there should be an agricultural safeguard mechanism that can be triggered by changes in price, can be applied to all 

sensitive products even after tariffs are fully phased out—as is being negotiated as 

part of the WTO Doha Round, and does not prohibit use of the WTO safeguard 

mechanism. 

Intellectual property rules in trade agreements should eliminate those patent and 

related provisions that restrict or delay generic competition and exceed the rules established in the TRIPS Agreement. Trade agreements must respect the Doha Declaration on the TRIPS Agreement and Public Health and enable developing countries to make full use of safeguards to ensure the primacy of public health over patent rights. Outside of FTAs, the USTR should not exert pressure on developing 

countries that enact and use public health safeguards to reduce the price of medicines, and should stop employing the Special 301 Review Process to force developing 

countries to implement intellectual property standards that exceed their obligations 

under TRIPS. Furthermore, the U.S. should not use other trade negotiation venues, 

including the WTO Accessions Process and the TRIPS Council, to impose stricter 

intellectual property rules on some of the world’s poorest countries. 

Investment rules in trade agreements should not restrict the right of governments 

to impose capital controls on foreign investment and performance requirements that 

encourage joint ventures, technology transfer, and local sourcing. Furthermore, dispute settlement mechanisms should not give greater rights to foreign investors than 

the rights conferred to national investors. International arbitration should only be 

available to foreign investors after exhausting all options for resolution through national judicial systems, and only for compensation for ‘‘direct expropriation’’ by a 

government. 

4. Trade Preference Programs 

U.S. trade preference programs have for decades provided important duty-free 

market access to developing countries, which have used these benefits to build businesses, create jobs, and gain export earnings. Indisputably, these programs have 

contributed to improving the livelihoods of many people through the jobs they have 


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created. At the same time, however, U.S. preference programs could be further improved to have an even greater impact on reducing poverty and improving livelihoods in developing countries. 

First, U.S. preferences should be made permanent. Since U.S. preference programs are temporary in nature, their potential revocation means that investors, 

local businesses, governments, and workers cannot be positive that duty-free benefits will continue into the future. This level of uncertainty can have a chilling effect 

in terms of attracting new investment into developing countries. By making its preference programs permanent, the U.S. would send a strong signal that it is committed to increasing the share of developing countries in world trade. The programs 

should maintain their conditionality requirements, as well as the petition process 

to challenge a country’s eligibility if it fails to comply with these conditions. However, making preference programs permanent would increase their potential to contribute to economic growth and poverty reduction in developing countries. 

Second, the eligibility criteria that countries must meet in order to receive dutyfree benefits should be strengthened, so that these programs contribute more to improving workers’ rights as well as transparency and governance in developing countries. Countries should be required to comply with core International Labor Organization conventions, including employment and occupation discrimination, which is 

presently omitted from current eligibility criteria. Moreover, eligibility criteria pertaining to good governance, anti-corruption efforts and respect for human rights 

need to be strictly and consistently applied. Special attention should be paid to the 

issues of corruption and mismanagement that are all too prevalent in countries rich 

in natural resources (e.g., oil, gold, diamonds, other precious minerals and timber). 

In these cases, eligibility criteria should include the existence of systems designed 

to transparently publish revenues received from these natural resources, as well as 

key terms of contracts between private companies and the state for the development 

of such resources. Such transparency measures, in line with U.S. support for the 

Extractive Industries Transparency Initiative, would increase the ability of citizens 

to monitor the use of government revenues derived from extractive industries. 

Third, the list of products covered by U.S. preferences should be expanded so that 

developing countries can better utilize the programs, particularly in agriculture. Because several important products are excluded from eligibility, countries that 

produce these goods are unable to benefit from U.S. preferences. 

Finally, many poor countries face capacity problems that prevent them from being 

able to benefit from trade. Trade capacity building assistance can help overcome 

these constraints, providing economic aid that enables countries to use trade as an 

engine for growth. Trade capacity building can include enhancing worker skills, 

modernizing customs systems, building roads and ports, improving agricultural productivity and export diversification. However, such assistance should be recipientdriven, additional to existing development aid, free of economic conditions, adequate, predictable, and complementary to—and not a substitute for—better and fairer trade rules. While trade capacity building is important, particularly for the poorest countries, it does not equal development, and it cannot compensate for the adverse effects of bad trade deals on a country’s national development and poverty 

eradication efforts. The U.S. should do a better job of providing trade capacity building in a manner that is transparent, well-coordinated, and consistent with recipient 

countries’ development strategies. 

5. Presidential Trade Negotiating Authority 

Oxfam believes that strengthening multilateralism is central to global governance, 

as international cooperation is necessary to address the challenges of poverty, inequality, unemployment and environmental destruction in an increasingly more 

interdependent world. While the WTO needs reform, multilateral cooperation remains fundamental to ensure that trade can reach its potential as an engine for development and poverty reduction. 

In order to complete the WTO’s Doha Development Round of negotiations, Congress will need to grant new negotiating authority to the President. Yet progress 

on substance must come first. An extension of presidential negotiating authority will 

not lead to conclusion of the Doha Round if there is not the political will to do what 

is necessary to reach agreement. To that end, G7 countries, including the United 

States, must put significant new offers on the table before negotiations can be successfully concluded so that developing countries are able to realize the gains from 

trade they have long been promised in the multilateral trading system. 

In any case, trade negotiating authority should not be extended to continue with 

a policy of ‘‘competition for liberalization’’ as has been done during the last five 

years. For developing countries, particularly the poorest countries, U.S. trade objecVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00134 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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tives should incorporate broad-based economic growth, poverty reduction, and stability, rather than a blind focus on market access and U.S. market share. 

Oxfam believes that a new framework of objectives and priorities is needed for 

Congress to grant presidential trade negotiating authority, ensuring that trade policy is not a tool strictly for advancing U.S. business interests, but for shared prosperity, increased integration, and cooperation. Trade should be a means to further 

broad-based growth, development and poverty reduction, and is not an end in and 

of itself. U.S. trade can and will continue to grow without renewal of presidential 

trade negotiating authority. 

Congress must now ensure that U.S. trade policy is strategically focused on 

spreading the benefits of trade as broadly as possible, in the developing world as 

well as in the United States, instead of simply seeking to expand the volume of U.S. 

trade. In this context, any future presidential trade negotiating authority should: 

• Give priority to the multilateral, rules-based trading system that addresses 

the development needs of poor countries; 

• Make all negotiations transparent and open to the public, ensuring a more 

balanced representation by public interest groups on USTR advisory boards 

as a counterweight to special business interests; 

• Ensure that all trade agreements are accompanied by adequate mechanisms 

and resources to address the problems of those adversely affected by trade, 

both in the U.S. and in our trading partners; 

• Take into account the asymmetric conditions between the U.S. and our developing country trading partners and ensure that any burdens resulting from 

new trade agreements are lighter for countries with higher poverty rates and 

lower levels of development; 

• Ensure that all trading partners recognize and enforce international labor 

and environmental conventions; 

• Retain a role for Congress in decision-making over which trading partners to 

engage and over the parameters of the content of negotiations; 

• Exclude from trade agreements any further expansion of intellectual property 

protections for pharmaceuticals beyond the rules established by TRIPS and 

re-affirmed in the Doha Declaration on the TRIPS Agreement and Public 

Health; 

• Guarantee that investment rules do not grant greater rights to foreign investors than to domestic investors, undermine national judicial systems, or curtail the ability of governments to make effective policy decisions to protect the 

public interest and promote national development. 

U.S. trade policy should promote a new set of rules that recognize that the welfare 

of people in the United States is inextricably linked with the well-being of people 

across the globe. Such rules should seek to ensure that the benefits from trade are 

more broadly shared and to reverse the trend of increasing inequality that has led 

to greater exclusion in the global economy. 

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1The member-companies of PAIA are: Altar Produce Inc.; Alpine Fresh; AYCO Farms Inc.; 

Chestnut Hill Farms; CarbAmericas Inc.; Central American Produce Inc.; Contel Fresh Inc.; 

Crystal Valley Foods; Dole Fresh Vegetables Inc.; Fru-Veg Marketing Inc.; Globalex Inc.; Gourmet Trading Company; Jacobs Malcolm & Burtt; Mission Produce Inc.; North Bay Produce; ProAct LLC; Rosemont Farms Corporation; Southern Specialties; Team Produce International; Triton International; Yes Fresh, LLC; AL-FLEX Exterminators; Customized Brokers; Hellmann 

Perishable Logistics ; and The Perishable Specialist, Inc. 2The ATPDEA was scheduled to expire as of December 31, 2006, but this program has been 

extended for at least another six months. We note that imports of fresh or chilled asparagus 

from Peru are not currently subject to duty-free treatment under the Generalized System of 

Preferences. 

Statement of Peruvian Asparagus Importers Association, Philadelphia, 

Pennsylvania 

This statement is submitted on behalf of the Peruvian Asparagus Importers Association (PAIA). PAIA is a not-for-profit association of 25 U.S. companies that earn 

a living by importing fresh asparagus from Peru.1 Fostering the development of the 

Peruvian asparagus industry has been a true success of U.S. trade policy, and one 

that has maximized the benefits of globalization to both Peru and to workers and 

consumers in the United States, while minimizing—though not eliminating—its 

costs. The successes generated by this policy to date can be extended through the 

passage of the Peru Trade Promotion Agreement (PTPA), which has already been 

ratified by the Peruvian Congress and whose approval by the U.S. Congress is pending. Similarly, if the opportunity to pass the PTPA is lost and existing trade preferences expire, both the U.S. and Peruvian economies will suffer significant negative 

effects. 

The fact that the U.S. market is already largely open to imports from Peru means 

that the PTPA would essentially make permanent the existing Andean trade preferences, an important step for the economies of the United States and Peru, as detailed herein. On the other hand, the most significant change in the current trading 

relationship between the United States and Peru resulting from the PTPA would 

be the opening of the Peruvian market to exports from the United States. This is 

an important factor to consider when evaluating the likely effects of the PTPA on 

the U.S. economy, and argues for the PTPA to be considered on its own merits. A 

range of U.S industries would benefit. For example, according to the USTR, more 

than two-thirds of current U.S. agricultural exports to Peru will immediately become duty free as they enter the Peruvian market. In addition to eliminating often 

significant rates of duty, the PTPA would remedy a range of non-tariff barriers that 

have hindered exports from the United States to date. 

The overall effect on U.S. exports could be similar to that experienced as a result 

of the U.S.-Chile Free Trade Agreement (FTA). According to the USTR, U.S. exports 

to Chile increased by 90 percent due to this agreement, from $2.7 billion in 2003 

to $5.2 billion in 2005. Significant increases in exports were noted in sophisticated 

machinery, vehicles, and parts. We understand that exports to Chile from one U.S. 

firm, Caterpillar, doubled after the implementation of the U.S.-Chile FTA. Anticipating benefits of this nature, many U.S. industry groups have voiced their support 

for the PTPA, including the National Pork Producers Council, the American Electronics Association, the Distilled Spirits Council of the United States, the Grocery 

Manufacturers Association, the National Council of Textile Organizations and the 

National Cotton Council. 

I. U.S. trade policy on imports of asparagus from Peru has benefited both the 

United States and Peru 

PAIA’s particular area of interest in the larger context of U.S. trade policy is the 

trade between the United States and Peru in fresh asparagus. Under the Andean 

Trade Preference Act (ATPA) and its successor, the Andean Trade Promotion and 

Drug Eradication Act (ATPDEA), imports of fresh asparagus from Peru have been 

accorded duty-free treatment since 1992.2 For the future, PAIA strongly supports 

the actions of U.S. and Peruvian negotiators to maintain this duty-free treatment 

for imports of fresh asparagus under the terms of the Peru Trade Promotion Agreement (PTPA), and urges the Congress to implement this agreement as soon as possible. 

The U.S. policy of providing duty-free treatment to imports of fresh asparagus 

from Peru, which has been in effect since 1992, has resulted in pronounced economic 

benefits in the United States as well as Peru. As we discuss further in these comments, U.S. consumers, U.S. importing companies, U.S. distributors, U.S. transportation companies, and the many other companies in the domestic commercial chain 

have benefited as the Peruvian industry has matured and U.S. imports of fresh asVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00136 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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3World Horticultural Trade & U.S. Export Opportunities: World Asparagus Situation & Outlook, Foreign Agricultural Service, U.S. Department of Agriculture (August 2005) at 1 (data provided for 2004). The United States ‘‘is Peru’s top market, accounting for 75 percent of Peru’s 

fresh asparagus exports in 2004.’’ Id. at 3 4 World Horticultural Trade & U.S. Export Opportunities: World Asparagus Situation & Outlook, Foreign Agricultural Service, U.S. Department of Agriculture (July 2004) at 2 (‘‘In 2003, 

asparagus became Peru’s leading agricultural export, valued at a record $206 million, bumping 

coffee to second place.’’). 5 The Impact of the Andean Trade Preference Act: Eleventh Report 2004, Inv. No. 332–352, 

USITC Pub. 3803 (September 2005) at 2–20. 6 Id. at 3–14. 7 See Improving Competitiveness and Market Access for Agricultural Exports Through the Development and Application of Food Safety and Quality Standards: The Example of Peruvian Asparagus, A Report by the Agricultural Health and Food Safety Program of the Inter-American 

Institute for Cooperation on Agriculture (IICA), Tim M. O’Brien and Alejandra Dı ́az Rodrı ́guez 

(July 2004) at 4–5. 

AGAP discussed this finding in a report that it presented earlier this year to the Technical 

orking Group for the PTPA from the Congressional Agricultural Commission in Peru. AGAP’s 

president, Felipe Llona Malaga, explained that the high level of employment generated in the 

agroexport sector is concentrated in crops including asparagus, artichokes, paprika, onions, 

grapes, and garlic, particularly in the provinces of Lima, Ica, Piura, La Libertad, and others. 

paragus have grown. In addition to the growers and exporters in Peru, the Peruvian 

economy and the thousands of people in Peru whose livelihood is dependent on trade 

with the United States receive a benefit from this trade policy. 

Unless this policy is continued by implementing the PTPA, millions of dollars in 

U.S.-Peru trade in asparagus and other crops, as well as thousands of jobs in Peru, 

could be lost. Such losses would be devastating for Peru, a country that has: witnessed remarkable market-led growth in recent years, and has been a strong regional ally of the United States against populist leaders such as Hugo Chavez as 

well as a solid partner of the U.S. in the war on drugs. Reversal of the current trade 

policy with Peru by failure to implement the free trade agreement would put all of 

these gains in jeopardy. 

II. Economic Benefits to U.S. Workers, Businesses, and Communities of the U.S.- 

Peru Trade in Asparagus 

Peru is the world’s largest exporter of asparagus,3 and that crop stands squarely 

at the heart of a dynamic agroexport sector in Peru.4 As the U.S. International 

Trade Commission (ITC) has noted in its reports on the ATPA, asparagus is a perennial crop that requires substantial long-term investment. Peru’s exceptional climate conditions, its favorable geographic location, and the advances made by Peru 

in its management of water supply for irrigation, has enabled the country to achieve 

the highest asparagus crop yields in the world.5 In turn, the asparagus-growing industry in Peru is estimated to employ nearly 60,000 people,6 and has enabled regions of the country—such as Ica and La Libertad—to become models of economic 

development and engines of job creation. Of these sixty thousand jobs, roughly half 

are held by women, the primary breadwinners in many Peruvian households. The 

trickle down effects of this industry on tens of thousands of Peruvians and their 

families are helping to reduce poverty and raise living standards. The Asociacio ́n de 

Gremios Productores y Agroexportadores del Peru ́ (AGAP)—Peruvian Coalition of 

Agro export Associations—estimates that the Peruvian agro export chain as a whole 

has generated 600,000 jobs, three times more than were generated in traditional agriculture sectors.7

While the Peruvian asparagus industry has created tangible economic benefits in 

that country, the U.S. has also derived a significant economic benefit from this 

trade. The vast majority of the value chain generated by sales of Peruvian asparagus in this market remains in this country. For example, PAIA estimates that the 

value chain for fresh Peruvian asparagus imports is worth between $260 million 

and $285 million. Of that total, approximately 70 percent remained in U.S. hands, 

including air, sea and land carriers, importers, ports, storage facilities, distributors, 

wholesalers and retailers. In other words, for every dollar spent by a U.S. consumer 

on fresh asparagus imported from Peru, 70 cents remains in the U.S. In addition, 

imports of fresh asparagus from Peru fuel job creation in the United States. PAIA 

estimates that aside from the several hundred persons employed or indirectly involved in the process of importing fresh asparagus imports from Peru, these imports 

result directly or indirectly in the creation of at least 5,000 U.S. jobs in companies 

throughout the commercial chain. 

Furthermore, of the roughly 30 percent of the value chain in fresh and processed 

asparagus that do remain in Peruvian hands, a large portion is invested in U.S. inputs including: (1) asparagus seeds purchased from U.S. suppliers such as CaliVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00137 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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8 Transcript of hearing before the United States International Trade Commission: In the Matter of: U.S.-Peru Trade Promotion Agreement: Potential Economywide and Selected Sectoral Effects, Investigation No. TA–2104–20 (March 15, 2006) at 33–35. 

For example, in 2003 (the last full year for which the complete set of following data are 

available), the fob value of Peruvian fresh asparagus exports to the U.S. was approximately 

$78.5 million. The comparable cif value was $132.7 million. The value that accrued to importers 

was approximately $20 million, while the value that accrued to wholesalers and retailers was 

approximately $90 million. In addition, other value-added in the U.S. (e.g., for storage, fumigation, etc.) totaled approximately $15 million. These sub-totals sum to $258 million, which represents the approximate retail value of fresh asparagus imports from Peru sold off the U.S. supermarket shelves. In other words, approximately 30 percent of that end-value ($78.5 million 

out of $258 million) remains in Peruvian hands, while the remainder ($179.5 million out of $258 

million) remains here in the United States. 

Sources: Aduanas (National Customs Superintendancy of Peru); U.S. International Trade 

Commission Trade DataWeb; estimates by APOYO Consultorı ́a, and the Instituto Peruano del 

Espa ́ rrago y Hortalizas (IPEH). 9 The Impact of the Andean Trade Preference Act: Eleventh Report 2004, USITC Pub. 3803 

at 3–12. 10 In 2005, 89 percent of imports of fresh asparagus from Peru entered the U.S. through the 

Port of Miami. Source: U.S. International Trade Commission Trade DataWeb (subheadings 

0709.20.1000 and 0709.20.9000, HTSUS), by quantity. 

fornia Asparagus Seeds; Stacy Seeds; and Jacobs Malcolm and Burtt; (2) glass jars 

used in canned asparagus by a local branch of Ohio-based Owens Illinois; (3) and 

fertilizers (Peruvian agriculture used approximately $40 million worth of U.S. fertilizers) and pesticides.8

While labor costs in Peru are lower than in the United States, Peruvian asparagus must contend with high freight costs (ex: the air freight cost for an 11 lb. box 

of fresh asparagus represents between 40 to 45% of the overall cost of production). 

As of 2005, these costs increased from the traditional $0.85 per kilogram to $1.25/ 

kg. Additionally, exporters bear costs associated with U.S. customs brokers ensuring 

compliance with the Bioterrorism Act and pre-notice requirements (about $10 to $15 

per shipment). Conservative calculations of total freight costs paid annually for asparagus exports from Peru to the U.S., using mostly U.S. airlines and shipping companies, were $71 million in 2005. 

Finally, while Peru’s U.S. exports have increased, the availability of asparagus at 

competitive prices in Peru and the development of U.S.-Peruvian joint ventures in 

Peru have also helped U.S. vegetable companies such as General Mills (Green 

Giant) and Del Monte to survive in a competitive global market. 

III. Peruvian Asparagus Imports are Counterseasonal to U.S. Asparagus Production, which Reduces Direct Competition between U.S. Farmers and Peruvian Exporters 

Imports of fresh asparagus from Peru also serve a U.S. market demand that cannot be met by domestic growers alone. The most important factor here is that imports of fresh asparagus from Peru are largely counter-seasonal to the U.S. crop. 

As the ITC has noted, historically, the season for U.S. production has differed somewhat from that of most imports from ATPA countries, with the bulk of fresh asparagus imports from ATPA countries entered during July through the following January when overall U.S. production is low.9

According to official U.S. import statistics for 2005, 85 percent of total fresh asparagus imports from Peru entered the United States during the months of July 

through January; only 15 percent entered during the remainder of the year (February through June). In contrast, the peak production period for U.S.-grown fresh 

asparagus is February through June; therefore, all or nearly all U.S. production occurs during a period when the level of imports from Peru is minimal. 

This is not to say that there are no imports of fresh asparagus from Peru present 

in the U.S. market during the peak production period for the U.S. crop; as referenced above, imports of Peru during the February-June period represent 15 percent of total annual imports from that country, or approximately 9,794 net tons 

(2005 data). However, even in this period, imports from Peru largely complement, 

rather than supplant, the U.S. crop. The vast majority of fresh asparagus imports 

from Peru enter the United States through the Port of Miami,10 and are sold primarily in East Coast markets. Because of the distances involved and the high costs 

for transportation, most of the fresh asparagus produced in California and Washington is sold in West Coast and Southwest markets. 

Therefore, even to the extent that there is some degree of overlap between the 

U.S. production period and imports from Peru, direct competition between these 

sources is reduced. Most of the imports from Peru that enter the United States during the February through June period are marketed in the East Coast and southeast United States regions. Indeed, the advent of year-round availability of fresh asVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00138 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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11 The Impact of the Andean Trade Preference Act: Eleventh Report 2004, USITC Pub. 3803 

at 3–12–14. 12 Total imports accounted for approximately 60 percent of the U.S. market for fresh asparagus in 2004. U.S. imports from Peru accounted for approximately 60 percent of total imports 

in 2004, as well. See also U.S. Department of Agriculture FATUS data (http://www.fas.usda.gov/ 

ustrade/). Consequently, Peru’s share of the U.S. market was about 36 percent (compared to 

about 40 percent accounted for by domestic production). 

Indeed, the quantity of domestic production in 2004 was approximately 87,000 net tons, 

which exceeded the volume of imports from Peru that year (61,123 net tons) by 42 percent. 

About one-fourth of domestic production, or approximately 22,000 net tons, was exported. 13 According to the Commission’s most recent report on the impact of the ATPA, domestic 

production of fresh asparagus declined 4 percent from 2003 to 2004, from 119.4 million pounds 

to 115 million pounds. However, the value of domestic production increased by 10 percent over 

that period, from $136.7 million to 150.4 million. The Impact of the Andean Trade Preference 

Act: Eleventh Report 2004, USITC Pub. 3803 at 3–12. 

paragus thanks to imports from Peru has allowed U.S. consumers in large geographic portions of the country to gain access to this product at times when supply 

would simply not exist from U.S. growers, such as Thanksgiving and the year-end 

holidays. This is one reason why per capita consumption of asparagus in the United 

States has doubled in the last decade alone, exceeding the rate of growth exhibited 

by nearly all other fruits and vegetables. As the ITC recently stated, the impact of 

ATPA on U.S. consumers has been significant in that imports of Peruvian freshmarket asparagus, together with Mexican exports and U.S. production, have resulted in greater availability of fresh asparagus throughout the year. This extended 

availability of fresh-market asparagus, together with the overall consumer awareness of, and preference for, healthy foods, may be partly responsible for higher per 

capita annual consumption of fresh asparagus in recent years.11

Notwithstanding the seasonality and regionality aspects of supply and consumption discussed above, the fundamental fact is that since at least 1998, U.S. consumption of fresh asparagus has outpaced U.S. supply.12 Imports are necessary to meet 

demand in the United States. In the absence of import sources—meaning, specifically, imports from Peru and Mexico—domestic production would be woefully inadequate to meet U.S. consumer demand. This would inevitably lead to a jump in 

prices, to the detriment of U.S. consumers, and eventually a drop in consumption, 

to the detriment of U.S. producers. While domestic production of fresh asparagus 

may have declined in recent years,13 the decline would surely accelerate in coming 

years in the absence of reliable import supply. 

IV. Asparagus and Other Agroexports as a Weapon Against Narcoterrorism 

The intention of the ATPA was to spur the development of alternative industries 

to assist Peru and other Andean countries in the War Against Drugs; and the struggle against guerrillas and terrorist organizations dependent on the illegal coca trade 

for funding. In this regard, U.S. trade policy has succeeded. Thanks to the ATPA 

and the vision of U.S. policymakers, the Peruvian asparagus and a number of other 

industries were able to blossom starting in the early 1990’s. These industries have 

helped Peru to sustain some of the highest growth rates in Latin America, have provided employment for hundreds of thousands of Peruvians, and have helped reduce 

poverty levels. Just recently, for example, the former Peruvian Prime Minister, 

Pedro Pablo Kuczynski announced that extreme poverty has been reduced from 24% 

to 18% between 2001 and 2005. It is estimated that nearly 1 million jobs in Peru 

are dependent on trade with the United States, most of which is covered by the 

ATPA program. 

As stated earlier the Peruvian agro-export chain has generated approximately 

600,000 jobs. 10%, or 60,000 of these jobs are held by workers in Peru’s asparagus 

industry. The Peruvian Asparagus and Vegetables Institute (IPEH) estimates that 

nearly 40% of the workers in the asparagus industry come from areas that formerly 

supplied workers to illegal coca cultivation. Asparagus has been a model for other 

agroexport industries and their growth is having a multiplier effect in terms of their 

impact on trade, job creation in both countries, reduced illegal coca cultivation, and 

reduction of poverty in Peru. Peru’s paprika industry, for example, has enjoyed export growth of 88% from 2004 to 2005, making Peru now the top world exporter of 

paprika, an industry which employs 15,000 Peruvians. Another successful example 

is the Peruvian artichoke industry, which has increased exports by 100% from 2004 

to 2005, and also employs about 15,000 workers. 

It is clear, therefore, that the ATPA-spurred industries such as asparagus have 

had a positive impact in the war against drugs in Peru. Coinciding with the rise 

in asparagus production, from 1995 to 2004, the ITC reported that coca cultivation 

decreased dramatically, from 115,300 hectares to 27,500 hectares in 2004. While 

this figure increased to 38,000 hectares in 2005, the overall decrease remains draVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00139 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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14 Peru Trade Promotion Agreement, Chapter Twenty-One: Dispute Settlement 

matic, and government coca-eradication efforts remain in effect. The decrease in 

coca production in Peru helps to reduce the presence of drugs in U.S. communities. 

These successful eradication efforts have also helped Peru to combat the terrorist 

guerrillas such as Shining Path that are financed by proceeds from drug trafficking. 

The PTPA will help consolidate these gains against the scourge that the illegal drug 

trade has represented for both countries. 

V. Peru TPA and Labor Standards 

In addition to Peru’s compliance with ILO’s core labor standards and the labor 

rights provided by the country’s constitution, the asparagus and vegetables industry 

has implemented best labor practice programs (Buenas Pra ́ cticas Laborales—BPL) 

to ensure that the industry is engaged in the creation of a healthy and safe work 

environment. The Peruvian asparagus and vegetables industry is also committed to 

help build schools and health facilities that will contribute to improved living standards for their workers, their families, and the rural communities where they live. 

The growth of agroexports in Peru has been such that in parts of Peru such as 

Ica and La Libertad there is full employment year round and extreme poverty has 

been reduced by an astounding 36% comparable to levels experienced nationwide by 

countries such as Chile. Workers in these industries make wages of between $5 and 

$7 per day which is considered a good salary by Peruvian standards. 

Peru has ratified 71 ILO conventions, including the eight ‘‘core conventions.’’ It 

has been praised multiple times by the ILO for its progress in improving labor laws. 

In addition to all of the ILO’s Core Labor Rights Conventions, the PTPA’s labor 

standards exceed those of five other previously ratified trade agreements: Jordan, 

Chile/Singapore, CAFTA, Bahrain and even the ATPDEA, which does not make ILO 

or national standards mandatory. 

The PTPA goes beyond many other free trade agreements in the enforcement of 

worker rights and dispute resolution. The PTPA-created Labor Affairs Council develops public participation in reporting and funding to ensure implementation of the 

agreement and improved cooperation and capacity-building mechanisms. Additionally, the PTPA holds member countries accountable to effectively enforce existing 

labor laws, under penalty of fines, which are used by the PTPA commission to fund 

projects improving labor right protections. Noncompliance results in the formation 

of an arbitral panel, which may fine violating parties up to $15 million per year, 

and suspend tariff benefits to the party complained against if necessary to cover the 

assessment.14

VI. Peruvian Asparagus and Environmental Concerns 

Since asparagus cultivation is undertaken almost entirely on irrigated desert 

lands along Peru’s coast, the environmental impacts of this industry on existing 

habitats is negligible. In fact, by contributing to the successful reduction of coca leaf 

production in biologically sensitive rain forest habitats, the growth of the asparagus 

industry along Peru’s arid coast has had, in an indirect manner, highly beneficial 

environmental impacts. 

The growth of the asparagus industry has created a business that is a global player and as a result has adopted rigorous international standards on environmental 

management practices and labor standards to comply with import requirements in 

the U.S., the European Union, and elsewhere. The Peruvian asparagus industry 

complies with very exacting practices of EUREPGAP and GAP (Good Agricultural 

Practices) to maintain consumer confidence in the quality and safety of its product. 

VII. Conclusion 

U.S. trade policy beginning in 1992 made imports of fresh asparagus from Peru 

eligible for duty-free treatment. This policy has served a wide range of economic interests both in the United States and in Peru. In the United States, a steady, yearround demand supply of asparagus enters the U.S. and satisfies the increased demand for asparagus in the U.S that domestic production cannot meet. Asparagus 

also accounts for about 5,000 U.S. jobs in transportation and distribution. 

In Peru, the asparagus industry, thanks to the duty-free access to the U.S. market, has been able to fight extreme poverty by employing at higher wages than other 

Peruvian jobs. Asparagus in Peru has also indirectly fought coca production and 

narcoterrorism by providing an alternative source of well-paying employment. 

These great changes could not have been possible without the duty-free access afforded to Peru in the ATPA and ATPDEA. The PTPA is now an excellent opportunity to ensure the continued prosperity of these industries, and by extension raise 


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living standards in Peru, and ensure the continuation of the benefits enjoyed by 

U.S. consumers and workers employed in the asparagus supply chain. 

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Statement of Retail Industry Leaders Association 

The Retail Industry Leaders Association (RILA) appreciates the opportunity to 

submit written comments for today’s hearing with United States Trade Representative (USTR) Susan Schwab on the direction and content of U.S. trade policy. RILA 

promotes consumer choice and economic freedom through public policy and industry 

operational excellence. Our members include the largest and fastest growing companies in the retail industry—retailers, product manufacturers, and service suppliers—which together account for more than $1.5 trillion in annual sales. RILA 

members provide millions of jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad. 

The Successful Completion of the WTO Doha Round Is Essential to American Consumers and Businesses 

Continued growth and expansion into new markets is key to America’s success in 

the global economy. First and foremost, RILA believes the United States should continue to place a priority on the successful conclusion of the Doha Round of WTO 

negotiations, with a particular focus on the dual goals of eliminating or reducing 

tariffs and non-tariff barriers. As the Committee knows, high tariffs and non-tariff 

barriers prevent U.S. manufacturing, retail, service, and financial sectors from expanding into other markets. In addition, these barriers place burdens on the U.S. 

import community which translates into added costs for consumers. 

Trade can be a powerful economic force to help people improve their standard of 

living. Trade liberalization raises productivity and real wages while expanding consumer choice and purchasing power. The Doha Round provides a tremendous opportunity to reduce global tariffs. As the Committee seeks to find ways to spread the 

benefits of trade to all segments of society, RILA suggests the elimination of disproportionately high tariffs on low-cost items such as footwear and clothing. 

Today, U.S. tariffs on consumer goods are regressive; the lowest earners pay the 

highest rates, in percentage terms. Tariffs on some products are in the double digits, 

such as on certain clothing, footwear, luggage, dinnerware, and food such as butter 

and cheese. Some of the highest tariffs apply to the types of goods that people of 

modest means tend to buy, and lower duties are imposed on similar products that 

are more often purchased by upper-income individuals. For example, tariffs on lowend sneakers range between 48 and 67 percent, but tariffs on higher-end sneakers 

are only 20 percent, and for leather dress shoes, the tariff is 8.5 percent. This trade 

policy forces consumers with limited means to pay a greater percentage of their disposable income on life’s necessities. RILA recommends reducing the disproportionately high tariffs on everyday consumer products, and recognizes that the Doha 

Round represents the best opportunity to achieve those reductions around the globe, 

and particularly in key markets. 

In addition to reducing tariffs, RILA believes it is equally important to also eliminate or reduce non-tariff barriers. As the Doha negotiations continue, RILA urges 

negotiators to (1) protect retail brand names by making it easier for retailers to 

safeguard their brand names in other countries; (2) establish transparent customs 

administrations that facilitate rather than hinder the movement of goods and services across national boundaries, which are essential to a modern distribution economy; and (3) prioritize market access improvements in distribution services (broadly 

defined as retailing and wholesaling as well as ancillary services such as express 

delivery, telecommunications and financial services). More specifically, RILA supports the elimination of local equity requirements that cap foreign retail investment 

at 49 percent, the elimination of competitive need limits or investment screening 

tests, the easing of restrictions on the repatriation of profits, liberalization of telecommunications and transportation sectors, and the removal of unwarranted restrictions on store size and operating hours. 

Congress Should Renew Trade Promotion Authority (TPA) 

RILA and its members recognize that Trade Promotion Authority (TPA) provides 

a practical and positive mechanism to facilitate trade, an area in which Congress 

and the President have shared responsibility. By establishing parameters for consideration of trade agreement implementing legislation by Congress on trade negotiations, requiring continuous consultations and exchanges between the Administration 

and the Congress, and providing congressional guidance on the contents of U.S. 

trade agreements, TPA allows the United States to negotiate and conclude economically meaningful, comprehensive trade agreements that benefit the U.S. economy. 

Since the enactment of TPA in 2002, the United States has negotiated a number 

of new free trade agreements (FTAs) and is pursuing negotiations with countries 

that hold significant new market opportunities such as South Korea and Malaysia. 


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Global integration is a reality, and the question for U.S. lawmakers is not whether to participate in the global economy, but how to create the best opportunities for 

U.S. businesses to compete and win. TPA provides the necessary tools to promote 

and shape trade policy in a way that can benefit all Americans. 

RILA and its members are champions for trade expansion and recognize that 

trade is essential to providing U.S. consumers with the quality and variety of products they expect at prices they can afford, and to creating opportunities for U.S. retailers to offer goods and services to customers around the world. New trade agreements simply will not be possible without TPA, and the United States cannot afford 

to let that happen. 

Countries around the globe increasingly recognize the benefits of open trade. Regional FTAs are proliferating between countries in Asia, Europe and South America. 

The rise of such agreements highlights the competition for global market share that 

is key to growth and prosperity in the 21st century. Some have proposed a ‘‘strategic 

pause’’ or moratorium on trade negotiations. While on its face this might seem like 

a legitimate proposal, doing so would only come at the peril of U.S. businesses, consumers and employees. The United States can ill-afford to halt the expansion of U.S. 

FTAs when doing so means other countries continue to expand services and operations globally without America. 

Congress Should Pass All Currently Negotiated FTAs While Aggressively 

Pursuing New Opportunities 

U.S. trade with Columbia, Panama and Peru has nearly doubled over the past 

seven years, and the United States has an opportunity to expand our trading relationships as well as strengthen diplomatic ties by approving the FTAs that have 

been negotiated with those countries. These agreements provide meaningful opportunities for U.S. businesses to export and import products. For example, under these 

agreements, eighty percent of U.S. consumer and industrial products, and a majority of the most competitive U.S. farm exports, will enter these Latin American markets duty-free immediately upon enactment. 

Negotiations with South Korea and Malaysia have the potential to be the largest 

and most economically meaningful FTAs since the enactment of the North American 

Free Trade Agreement (NAFTA). With a population approaching 50 million people, 

U.S. businesses are eager to gain a foothold in South Korea’s market. Meanwhile, 

Malaysia is the United States’ tenth largest trading partner, with $44 billion in twoway trade in 2005, and an FTA would significantly increase opportunities for more 

bilateral trade and investment. Beyond the economic benefits, FTAs with South 

Korea and Malaysia provide opportunities for enhanced diplomatic relationships 

with strategic allies in a volatile region. The Committee should encourage USTR to 

continue to aggressively pursue the successful conclusion of those agreements. 

Conclusion 

RILA and its member companies are grateful for the opportunity to provide comments to the Committee on the U.S. trade agenda. RILA believes it is critical that 

the United States continue to pursue an aggressive trade agenda. Expanding export 

and investment opportunities overseas increases the purchasing power of American 

consumers while providing important jobs domestically. In today’s economy, global 

integration is both a challenge and an opportunity for U.S. policy makers. The key 

to America’s continued prosperity is to seize the opportunities and mitigate the challenges. RILA respectfully urges the Committee to consider these comments, and we 

stand prepared to work lock-step with you to help all Americans feel the benefits 

of open trade. If you have any questions on this statement or require any assistance, 

please contact Lori Denham, Executive Vice President, Public Affairs, or Andrew 

Szente, Director, Government Affairs. 

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1Quaid, Libby. ‘‘Lawmakers, White House Set to Battle on Farm Bill.’’ Associated Press. January 16, 2007. <http://www.yorkdispatch.com/business/ci_5023411> 2Morrison, Nneka. Strengthening Compliance at the WTO. Institute for Agriculture and 

Trade Policy. September 2006. <http://www.iatp.org/iatp/publications.cfm?accountID=451&refID 

=89107> 3 Inside U.S. Trade. ‘‘U.S. Blocks Brazilian Request for Cotton Compliance Panel.’’ September 

8, 2006. 

Statement of Alexandra Spieldoch, Institute for Agriculture and Trade 

Policy 

On behalf of the Institute for Agriculture and Trade Policy, I would like to thank 

the Ways and Means Committee for the opportunity to provide written testimony 

on the Hearing on the U.S. Trade Agenda. The Institute is based in Minneapolis, 

MN, and also has offices in Geneva and Vienna. Our mission is to promote resilient 

family farms, rural communities and ecosystems around the world through research 

and education, science and technology. 

U.S. AGRICULTURE & TRADE POLICY AT A CROSSROAD 

U.S. farm policy has come under extensive scrutiny from both at home and abroad 

in recent years. Trade negotiators point to distortions in world markets created by 

the Farm Bill. They identify billions of dollars in farm subsidies, along with the U.S. 

policy of pressuring other countries to lower their tariffs, as the primary cause of 

export dumping. Weak enforcement of U.S. antitrust law against oligopolistic multinational agribusinesses headquartered in the U.S. has accelerated concentration in 

global agriculture markets, often to the detriment of farmers. Health experts and 

environmentalists criticize the export of U.S. food habits and the food system those 

habits depend on. 

In 2007, the World Trade Organization is scheduled to complete the Doha Round 

of negotiations while the U.S. will write a new Farm Bill. These two events were 

supposed to converge and complement each other. But with the collapse of the Doha 

talks and an electoral party change in Congress, the Farm Bill will likely be written 

more to reflect budget constraints and a domestic political calculus. Congressional 

leaders have said they will not try to ‘‘anticipate’’ the results of a Doha deal on agriculture. House Agriculture Chair Colin Peterson, D–Minn., has gone so far as to 

say, ‘‘I want to write a Farm Bill that’s good for agriculture. If somebody wants to 

sue us [at the WTO], we’ve got a lot of lawyers in Washington.’’ 1

As the Farm Bill debate begins in earnest, we have an opportunity to reflect on 

ways to improve U.S. farm policy in support of small farmers, rural development 

and livelihoods around the world. Specifically, we will look at how the Farm Bill 

directly affects trade, subsidies, dumping, food aid, market concentration and public 

health. 

Dancing with the WTO 

Criticism of U.S. farm policy at the WTO has been substantial. Among WTO 

members, the U.S. government is perhaps the loudest advocate of market liberalization alongside Australia and New Zealand. Repeatedly, the Bush administration has 

denied poor countries the flexibility to protect certain crops critical to their food security and rural development by insisting that development depends on open markets. Yet the billions of dollars the U.S. government spends on agricultural programs contradicts the ‘‘free market’’ rhetoric and makes trading partners both skeptical and cynical about U.S. intentions. 

The U.S. has also taken steps to undermine the WTO’s ability to implement rules 

for domestic subsidies. For example, the U.S. has not reported and categorized its 

domestic support payments to the WTO since 2001—the year before the last Farm 

Bill was passed. By not reporting how the payments fit within WTO rules, the U.S. 

makes it difficult to know whether the Farm Bill is complying with WTO rules. 

In addition, the U.S. has been slow to comply with WTO dispute panel rulings.2

In 2004, the dispute panel ruled that U.S. cotton subsidies were causing harm to 

Brazil’s industry by suppressing prices in the world market. The U.S. had until July 

1, 2005 to comply with the ruling, but has yet to fully comply. Brazil has now formally requested a new WTO dispute panel to force the U.S. into full compliance.3

Empty Proposals 

The Bush administration’s October 2005 proposal on agriculture has also hurt its 

credibility at the WTO. When announcing the proposal, the U.S. trade representaVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00144 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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4 U.S. Trade Representative. ‘‘U.S. Offers Bold Plan on Agriculture to Jumpstart Doha Round.’’ 

October 10, 2005. 5Murphy, Sophia. The U.S. WTO Agriculture Proposal of October 10, 2005. Institute for Agriculture and Trade Policy. October 25, 2005. <http://www.iatp.org/iatp/publications.cfm?account 

ID=451&refID=77195> 6WTO Committee on Agriculture. ‘‘Agriculture Domestic Support Simulations.’’ May 22, 2006. 

<http://www.tradeobservatory.org/library.cfm?refid=87952> 7Muller, Mark. Where are Future Markets for Midwest Agriculture? Institute for Agriculture 

and Trade Policy. March 2006. <http://www.iatp.org/iatp/factsheets.cfm?accountID=421&refID= 

80441> 8Schoonover, Heather and Mark Muller. Staying Home: How Ethanol Will Change U.S. 

Corn Exports. Institute for Agriculture and Trade Policy. December 2006. <http://www. 

agobservatory.org/ library.cfm?refid=96658> 9 Brownfield Ag News. ‘‘U.S. Senator Harkin Picks Renewable Fuels for First

Hearing.’’ January 11, 2007 http://www.thepoultrysite.com/poultrynews/10740/

us-senator-harkin-picks-renewable-fuels-for-first-hearing> 10 Environmental Working Group. Farm Subsidy Database. <http://www.ewg.org:16080/farm/ 

regionsummary.php?fips=00000> 

tive (USTR) characterized it as ‘‘bold,’’ ‘‘ambitious’’ and ‘‘substantial.’’ 4 But the proposal largely involved the re-categorizing of subsidy payments from the restricted 

Amber Box to the less restricted Blue Box, and would leave actual spending virtually unchanged.5 In addition, the proposal required other WTO members to drastically cut their tariffs in agriculture and requested an extension of the Peace 

Clause, which would exempt Farm Bill subsidy programs from legal challenge at the 

WTO. In 2006, the European Union and nine other WTO members asked for an economic simulation of the various agriculture proposals at the WTO. The simulation 

found that under the U.S. proposal, U.S. agriculture spending could legally increase.6

Domestic Markets Favored 

U.S. farmers have less and less interest in exports, especially after two decades 

of promised prosperity through exports have not materialized. In fact, U.S. farm exports have remained relatively flat over the past few decades.7

Instead, the dramatic growth in demand for most U.S. commodities over the past 

year has come from the emerging biofuels market. For example, if only a quarter 

of the ethanol plants currently proposed in the Midwest do come on-line and if the 

corn needed to supply these plants and the plants currently under construction were 

to be diverted from exports, Midwest corn exports could be cut in half by 2008.8

‘‘Meeting the domestic demand for biofuel and animal-feed markets is the primary 

concern of U.S. producers. And it’s also a primary concern of Congress in the next 

Farm Bill. ‘‘We can and I believe we must, formulate and pass a Farm Bill that accelerates the rural production of energy for the whole nation,’’ Senate Agriculture 

Chair Tom Harkin, D–Iowa, said as he opened Farm Bill hearings in January.9 The 

growing importance of biofuels in the U.S. has changed the context of the Farm Bill 

debate and may ultimately affect the agriculture negotiations at the WTO. It is unclear what impact demand for biofuels in the U.S. will have on other countries, but 

there are already concerns that developed countries will ‘‘dump their energy demand’’ on the South with potential disastrous consequences—for example, expansion 

of palm oil plantations into the rain forests of Indonesia. 

Setting Subsidies, Not Prices 

Through a variety of programs, the Farm Bill sets the various types of subsidy 

programs, how much money will be spent and which crops will be supported. U.S. 

commodity programs written in the Farm Bill cover 20 different crops but the vast 

majority of money and resources go to corn, soybean, wheat, cotton and rice. Fruits 

and vegetables are not part of the commodity programs because when the programs 

were first established in the 1930s they were only for crops that could be stored for 

long periods of time. 

The U.S. is heavily criticized for its subsidy programs, which have been associated 

with commodity dumping that depresses world prices. But the focus on U.S. subsidies often misses its mark. U.S. farm subsidies, as categorized by the WTO, have 

risen over the past 10 years from just over $7 billion in 1995 to a high of $23 billion 

in 2000.10 The wild fluctuations in subsidies each year occur because several forms 

of subsidies depend on the market price. If the market price for corn is higher, subsidy levels drop. If the price is lower, subsidies increase. This explains why U.S. 

farm subsidies ultimately do not dictate price fluctuations; rather, the market price 

dictates overall subsidy levels. And subsidies play only a marginal role in the cropping decisions of U.S. farmers. Instead, the significant increase in U.S. subsidies 

over the past ten years is tied almost directly to the removal of supply management 


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11 Ray, Daryll, Daniel De La Torre Ugarte and Kelly Tiller. Rethinking U.S. Agricultural Policy. Agricultural Policy Analysis Center, University of Tennessee. September 3, 2003. <http:// 

www. agpolicy.org/blueprint.html> 12 U.S. Department of Agriculture Economic Research Service. Briefing Room for Farm Income 

and Costs. <http://www.ers.usda.gov/Briefing/FarmIncome/nationalestimates.htm> 13 Houck, James P. Elements of Agricultural Trade Policies. Prospect Heights, Ill.: Waveland 

Press, Inc. 1996. 14 E.g.: Peters, G.H. and Joachim Von Braun, editors. 1999. Food Security Diversification and 

Resource Management: Refocusing the Role of Agriculture? Proceedings of the Twenty-third 

International Conference of Agricultural Economics held at Sacramento, California, August 

1997. The International Association of Agricultural Economists. 15 Barrett, Christopher B. ‘‘Does Food Aid Stabilize Food Availability?’’ Staff paper, Department of Agriculture, Resource and Managerial Economics, Cornell University. January 1999. 16Timmer, C. Peter. Getting Prices Right: The Scope and Limits of Agricultural Price Policy. 

Cornell University Press: Ithaca, N.Y. 1986. 

tools in the 1996 Farm Bill, i.e., agricultural market ‘‘deregulation,’’ which had required farmers to set aside a percentage of their acreage to qualify for government 

payments. Without those tools, U.S. farmers overproduced at such levels that the 

market price for most major crops dipped well below the cost of production. According to the Agriculture Policy Analysis Center at the University of Tennessee, simply 

eliminating U.S. farm subsidies would do little to slow U.S. crop production. Rather, 

it would likely shift production to different commodity crops’’but the fundamental 

problems of oversupply and low prices would persist.11

Ironically, the 1996 Farm Bill, written to comply with WTO rules, required most 

farm subsidies to be phased out by 2001 through a mechanism called ‘‘decoupling,’’ 

which removed the historical tie between farm payments and the crops produced. 

But when farmers were allowed to produce as much as they could, prices collapsed 

and the subsidies were restored in the form of ‘‘emergency payments.’’ In 2002, Congress transformed those ‘‘emergency’’ payments into a permanent part of the Farm 

Bill, calling them different names: ‘‘countercyclical’’, ‘‘decoupled’’ and ‘‘marketing 

loan’’ payments. 

In 2006, the growth of the ethanol market sent corn prices higher than they had 

been in a decade and has had a ripple effect on other crops, particularly other animal-feed crops like wheat and soybeans. Ethanol’s growth and rising prices had an 

immediate impact on farm subsidies, which went down from $24.3 billion in 2005 

to an estimated $16.5 billion in 2006.12 The U.S. Department of Agriculture projects 

prices to continue to rise in 2007 and subsidies to again decline. It is unclear whether the price increases due to ethanol are a brief bump, as the U.S. experienced in 

1995 prior to the writing of the 1996 Farm Bill, or part of a longer-term systemic 

shift in U.S. agriculture prices. However, if efforts by the Bush Administration succeed in removing the existing 54-cent per gallon tariff on imported ethanol, corn 

prices could collapse along with ethanol prices, dragging down prices of other crops 

as well. 

The Devastation of Dumping 

Over the past decade, the Farm Bill has intentionally driven prices down with a 

focus on expanding export markets. In many cases, crops from the U.S. were actually exported at prices below the cost of production (known as dumping). Agricultural dumping creates an unfair trading advantage for U.S. agribusiness firms because they depress international prices and narrow or even eliminate market opportunities for producers in other countries.13 This structural price depression can have 

two major effects on developing countries whose farmers produce competing products. First, without substantial governmental support, developing-country farmers 

are driven out of their local markets by the below-cost imports. Second, farmers who 

sell their products to exporters find their market share undermined by the lowercost competition. 

The full effects of dumped exports have to be considered in light of the push over 

the past 20 years at the World Bank and International Monetary Fund to reduce 

tariffs in developing countries as a condition for access to international financing. 

Agricultural development in less-developed countries is a catalyst for broad-based 

economic growth and development.14 Research shows that domestic food productivity is more effective in stabilizing developing-country food security than the reliance on inexpensive (i.e., dumped) food imports.15 A fair price for the farmer’s production will also help stabilize demand for wage labor in the local economy.16

Multinational agribusiness firms based in the U.S. and European Union have 

been the most involved in agricultural dumping. The Institute for Agriculture and 


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17Murphy, Sophia, Ben Lilliston and Mary Beth Lake. WTO Agreement on Agriculture: A Decade of Dumping. Institute for Agriculture and Trade Policy. February 2005. <http://www.iatp. 

org/iatp/publications.cfm?accountID=451&refID=48532> 18 Ibid. 19Murphy, Sophia and Kathleen McAfee. U.S. Food Aid: Time to Get It Right. Institute for 

Agriculture and Trade Policy. July 2005. <http://www.iatp.org/iatp/publications.cfm?accountID= 

451&refID=73512> 20Murphy, Sophia. Food Aid: What Role for the WTO? Institute for Agriculture and Trade Policy. November 17, 2005. <http://www.iatp.org/iatp/publications.cfm?accountID=451&refID=77567> 

Trade Policy has documented the high dumping levels of U.S.-based firms since 

1990.17

Farm Bills Driving Dumping 

The last two U.S. Farm Bills, which encouraged over-production and low priced 

commodity crops, have played a major role in agricultural dumping by U.S.-based 

multinational firms. Each of the five major export commodities saw a significant 

jump in export dumping when comparing the seven years prior to the 1996 Farm 

Bill (1990–1996) to the subsequent seven years (1997–2003): 18

• Wheat dumping levels increased from an average of 27 percent per year pre1996 Farm Bill to 37 percent per year post-1996 Farm Bill. 

• Soybean dumping levels increased from an average of 2 percent per year pre1996 Farm Bill to 11.8 percent post-1996 Farm Bill. 

• Maize dumping levels increased from an average of 6.8 percent per year pre1996 Farm Bill to 19.2 percent post-1996 Farm Bill. 

• Cotton dumping levels increased from an average of 29.4 percent pre-1996 

Farm Bill to an average of 48.4 percent post-1996 Farm Bill. • Rice dumping levels increased from an average of 13.5 percent pre-1996 Farm 

Bill to an average of 19.2 percent post-1996 Farm Bill. 

Food Aid: Time to Get It Right 

The U.S. Food Aid program is included in Title III of the Farm Bill. The Farm 

Bill decides how much and what type of food aid will be allocated. Food aid is often 

held up as an example of the good that the U.S. agricultural bounty affords. Yet 

U.S. programs are the most controversial of all bilateral food aid programs, attracting criticism from international trade and aid officials alike. One criticism is that 

almost all the aid is in the form of food produced, bagged, fortified and shipped in 

the U.S. by U.S.-based firms, rather than as cash to buy food wherever it can be 

sourced most effectively—at a good price, as close to the final destination as practical and with a view to supporting long-term agricultural capacity in the area suffering food shortages. This makes U.S. food aid both slower and more expensive 

than it should be—up to twice as expensive as prevailing commercial prices.19 Local 

purchases ought to be the first recourse for food aid to minimize the risk for future 

dependency and to provide an injection of cash into the local economy. 

Most food aid donors have shifted their policy to give money instead of food. Canada and the U.S. are the only significant food aid donors that do not use a cashbased system to give food aid. 

In 2005, the Bush administration proposed designating an additional $300 million 

for food aid purchased from local or regional sources, but Congress rejected the proposal. An unlikely alliance of interests persuaded Congress to maintain the status 

quo. The alliance is composed of U.S. shipping firms guaranteed all food aid business; U.S. agribusinesses that provide the food; and U.S. nongovernmental organizations (NGOs) that often deliver food aid, particularly project aid for development 

purposes and humanitarian aid in emergencies. The NGOs sell a portion of their 

food aid in recipient countries to generate funds for their development work, a process known as monetization. The costs of monetization are considerable, but it represents resources that the U.S. government would be unlikely to replace with cash 

for development. 

Food Aid and the WTO 

U.S. food aid has been the subject of negotiation at the WTO, particularly during 

the recent Doha negotiations, under the heading of export competition. U.S. food aid 

poses two main problems for rival exporters. First, the government’s use of export 

credits to sell program food aid effectively prices commercial exporters out of the 

market. Second, increasing monetization of food aid. The U.S. has resisted any 

meaningful new discussions on food aid, particularly on monetization.20 Rather than 

risk new trade rules that could reduce total food aid by reforming delivery, recipient 

governments have been inclined to support the U.S. 


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21 Hendrickson, Mary and William Heffernan. Concentration of Agricultural Markets. Department of Rural Sociology, University of Missouri. February 2005. <http://www.nfu.org/wp-content/ 

uploads/2006/05/Concentration%20Tables%202005.pdf> 22 Cargill Web site. <http://www.cargill.com/about/index.htm> 23 Archer Daniels Midland Web site. <http://www.admworld.com/naen/about/locations.asp> 24Monsant Web site. <http://www.monsanto.com/monsanto/layout/about_us/locations/default. 

asp> 25Tyson Foods Web site. <http://www.tyson.com/Corporate/AboutTyson/CompanyInformation/> 26Smithfield Foods Web site. <http://www.smithfieldfoods.com/upload/sfd_ar06.pdf> 27Wal-Mart Web site. <http://www.walmartstores.com/GlobalWMStoresWeb/navigate.do?catg= 

14> 28Murphy, Sophia. Concentrated Market Power and Agricultural Trade. Ecofair Dialoge. August 2006. <http://www.iatp.org/iatp/publications.cfm?accountID=451&refID=89014> 29 U.S. Department of Agriculture Office of the Inspector General. Audit Report: ‘‘Grain Inspection, Packer and Stockyard Administration’s Management and Oversight of the Packers and 

Stockyards Programs,’’ Report No. 30601–01-Hy (January 2006). <http://www.usda.gov/oig> 

With the Doha talks now suspended, it is not clear whether U.S. food aid will 

change in the new Farm Bill. President Bush’s Farm Bill proposal including more 

money for the purchase of food aid by recipient countries. And a number of the largest U.S. NGOs involved in providing food aid are moving away from their support 

for monetization. However, a few vocal NGOs still remain committed to the existing 

system. 

Market concentration hurting competition 

There is pressure from farm groups and some members of Congress to include a 

Farm Bill title that addresses market concentration in agriculture. Market concentration describes how many different companies control a specific market. Increased market concentration and market power of agricultural input, production 

and processing companies has dramatically affected the agricultural market in the 

U.S. Market power is defined as the ability to affect price (setting buyer prices 

above and/or supplier prices below open market levels) and to reduce competition. 

U.S. farmers have fewer companies from whom to purchase inputs and fewer companies to which they can sell. The result has been a squeeze from both sides of the 

supply chain resulting in a steady decline in farm income. 

Currently, only four beef packers control 83 percent of the U.S. market, four pork 

packers control 64 percent of the market, four flour milling companies control 63 

percent of the market, and three soybean-crushing companies control 71 percent of 

the market. Many of these sectors are not only horizontally integrated, where a few 

companies dominate a given sector, but also vertically integrated, where companies 

are dominant across several sectors in the supply chain. For example, Cargill is one 

of the top beef packers, turkey producers, animal-feed suppliers, flour millers and 

soybean crushers.21 Vertical integration allows companies such as Cargill to internalize a number of costs and realize significant competitive advantages over their 

competition. 

Technological innovations in the areas of transport and communications have revolutionized food production, processing and distribution. We now live in a truly 

globalized food economy, and many U.S.-based agribusinesses including Cargill, Archer Daniels Midland, Monsanto, Tyson Foods, Smithfield Foods and ConAgra have 

operations in multiple countries around the world. 

U.S. Based Agribusiness’ Global Reach 

Cargill—63 countries 22

Archer Daniels Midland—U.S., Canada, Latin America, Europe, Asia and Pacific 

Rim and Africa 23

Monsanto—61 countries 24

Tyson Foods—80 countries 25

Smithfield Foods—8 countries 26

Wal-Mart—15 countries 27

The steady downward pressure on tariffs advocated by the U.S. at the WTO and 

World Bank has opened up markets and aided U.S.-based food companies doing 

business on a global scale.28

Challenging market power 

Inside the U.S., weak antitrust enforcement by the Federal Government has increased the market power of U.S.-based food companies.29 ‘‘As Congress heads toward a new Farm Bill in 2007, there is a growing recognition inside and outside 

Congress that reform is needed. Vertical integration leaves the independent producer with even fewer choices of who to buy from and sell to. And, it hurts the abilVerDate Sep 11 2014 06:40 Jun 28, 2016 Jkt 089560 PO 00000 Frm 00148 Fmt 6621 Sfmt 6621 I:\WAYS\WAYSPS\89560\89560.XXX 89560

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30Grassley, Charles . ‘‘Grassle y Works to Ban Packer Ownership of Livestock.’’ January 16, 2007. <http://grassley.senate.gov/index.cfm?FuseAction=PressReleasesView&Press 

Release_id=5246> 31 National Farmers Union Competition and Concentration. <http://www.nfu.org/issues/ 

economic-policy/competition-concentration> 

ity of farmers to get a fair price for their products,’’ said Senator Charles Grassley, 

R–Iowa.30

In January, more than 200 U.S. organizations sent a letter to Congress calling 

for a competition title to be included in the Farm Bill. Such a title aims to restore 

fair markets, including an expansion in U.S. Department of Agriculture’s role in the 

pre-merger review process and the establishment of an Office of Special Counsel on 

Competition within the USDA; 31 fairness and transparency in agricultural contracts 

between companies and farmers; improved enforcement of the Packers and Stockyard Act, the main legislation for antitrust enforcement in agriculture; and mandatory price reporting. 

The 2007 Farm Bill stands a better chance of passing competition-related provisions than in the past, and if successful these efforts would likely impact the operations of many U.S.-based companies around the world. 

Opportunities for a Fair Agriculture & Trade Policy 

The U.S. Farm Bill has had a dramatic impact on agricultural economies across 

the globe. U.S. farm programs are targeted at the WTO for violating trade rules. 

Agricultural dumping from U.S.-based agribusiness firms undercut farmers in poor 

countries. Food aid is criticized for hindering farming economies of countries facing 

hunger. A few U.S.-based agribusiness companies are part of a global market that 

is becoming more concentrated, squeezing farmers in the U.S. and around the world. 

And the Farm Bill’s promotion of artificially cheap raw commodities is adversely affecting health in the U.S. and abroad. 

Farm Bill programs that have been so harmful to many in the international community have been extremely beneficial to U.S.-based food companies. These companies are some of the most powerful in Washington. The following recommendations 

would help move the United States to a more balanced food, agriculture and trade 

policy for farmers, consumers and rural communities both in the United States and 

around the world. 

Recommendations 

A fair agriculture and trade policy would include the following: 

• Acknowledgement of the right of all countries to formulate their own food and 

farm policies to secure a safe and health food system for their own people, 

as long as those policies do not result in the dumping of commodities onto 

world markets at below the cost of production. 

• Commodity programs that ensure a fair market price for farmers and eliminate export dumping. 

• Placing a high priority on negotiating a viable worldwide formula for fairly 

calculating the cost of production for agricultural crops in a manner that 

takes into consideration relevant economic differences among countries. Such 

an international agreement on a cost of production calculation would represent an important first and necessary step towards ending dumping worldwide. 

• Support for policies that encourage farmers to shift existing crop acreage devoted to industrial monoculture exports into native perennial plants grown in 

compliance with sustainability standards to provide feedstocks for bioenergy 

production facilities that are locally owned and tailored to meet local energy 

demand first. Such a shift of crop acreage to locally oriented sustainable biomass—Kespecially among major exporting countries—could help curtail 

unsustainable overproduction and dumping. 

• Stronger antitrust enforcement and improved price transparency in the food 

and agriculture industry could help competition in the global market. 

• Support for local food economies, smaller farmers and greater food security 

would help diversify cropping systems and reduce agriculture exports. 

• A transition to untied, cash-based food aid and a phase out of sales of food 

aid (monetization). 

Thank you again for this opportunity to testify. 

f 


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Statement of the Honorable Marcy Kaptur, a Representative in Congress 

from the State of Ohio 

Mr. Chairman, I would like to thank you for this opportunity to share my 

thoughts on the U.S. trade agenda before the House Committee on Ways and 

Means. Under your skillful leadership, this committee is faced with the challenge 

and this chance to reform American trade policy and better the lives of millions 

worldwide. 

Even though Article I, Section 8 of the Constitution guarantees the legislative 

branch ‘‘the power to regulate commerce with foreign nations,’’ members of this body 

will soon consider giving up their own rights to allow President Bush to have almost 

exclusive privileges to sell to the highest bidder the future of America’s trade, our 

jobs, and our economy. 

Even with our 2006 deficit reaching $763.6 billion, the Bush Administration still 

feels that Trade Promotion Authority, euphemistically referred to as ‘‘Fast Track,’’ 

is in the best interest for our country. 

I have never understood why we in the Congress do this to ourselves or to the 

people who elect us to represent them, much less do such a disservice to the wisdom 

and vision of the founders. 

Let us never forget that ‘‘fast track’’ was the legerdemain by which the Administration rammed the Central American Free Trade Agreement (CAFTA) through the 

House. President Bush expected to bring this agreement to the floor for a simple 

up or down vote under fast track. Is that really the way to develop international 

trade policy? Without discussion, negotiation, or input from those affected? 

Free trade ought to occur among free people, and America ought to stand for 

internationally recognized labor rights, the right to own and farm your land, the 

right to a clean environment and the right to economic security. We need integration on democratic terms through transparent, democratic processes. 

Instead, these free trade agreements passed under fast track represent American 

as a country that stands for declining real wages, displaced farmers and rural dwellers, environmental travesties, and all the other devastative effects of the ‘‘race to 

the bottom.’’ And they are passed through opaque, secretive negotiations by our executive branch, without even the counsel of Congress. 

Even with all its faults, NAFTA was the result of seven years of negotiation. 

When Congress gives up its rights to participate in negotiations and to amend trade 

agreements, we turn a blind eye to our constituents and the millions of people world 

wide affected by our trade policy. 

Moreover, Congress has learned the hard way how this President handles extraordinary grants of authority. For evidence, we obviously need to look no farther than 

the debacle in Iraq. President Bush takes extraordinary grants of authority and 

then cavalierly transforms them into abuses of power. It would be nothing less than 

irresponsible for this Congress, knowing what it knows now about how President 

Bush views the separation of powers, to grant him fast track authority. In short, 

President Bush has proven that he cannot be trusted with such extraordinary 

power. 

What will be left of our democracy here at home after more trade agreements like 

CAFTA? What kind of model are we exporting, where freedom is shortchanged, 

where profits are given the green light? We should only have free trade among free 

people. We should use trade as a lever to raise living standards, and we should 

place freedom first. It is truly a joy to be with my colleagues here this evening and 

to try to fight in freedom’s cause. 

Æ 


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