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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

                     PRESIDENT BUSH'S TRADE AGENDA

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 7, 2001

                               __________

                            Serial No. 107-2

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
73-538                      WASHINGTON :  2001
_______________________________________________________________________
 For sale by the Superintendent of Documents, U.S. Government Printing 
                                 Office
 Internet: bookstore.GPO.gov Phone: (202) 512-1800 Fax: (202) 512-2250
               Mail: Stop SSOP, Washington, DC 20402-0001

                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                              ----------                              
                                                                   Page
Advisory of February 28, 2001, announcing the hearing............     2

                                WITNESS

Office of United States Trade Representative, Hon. Robert B. 
  Zoellick.......................................................     9
                               __________

                       SUBMISSIONS FOR THE RECORD

American Forest & Paper Association, statement...................    51
Advanced Medical Technology Association, statement...............    54
American Textile Manufacturers Institute, statement..............    57
Florida Department of Agriculture & Consumer Services, 
  Tallahassee, FL, Terry L. Rhodes, statement....................    64
Matel Inc., El Segundo, CA, and St. Maxens & Company, Thomas F. 
  St. Maxens, statement..........................................    66
National Conference of State Legislatures, and International 
  Trade Committee, Bill Friend, letter and attachments...........    70
National Electrical Manufacturers Association, Rosslyn, VA, 
  statement......................................................    74
Ranchers-Cattleman Action Legal Fund, Billings, MT, statement....    78

 
                     PRESIDENT BUSH'S TRADE AGENDA

                              ----------                              

                        WEDNESDAY, MARCH 7, 2001

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 11:00 a.m., in 
room 1100 Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

February 28, 2001

FC-2

                      Thomas Announces Hearing on

                     President Bush's Trade Agenda

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing on 
President Bush's trade agenda. The hearing will take place on 
Wednesday, March 7, 2001, in the main Committee hearing room, 1100 
Longworth House Office Building, beginning at 11:00 a.m.

    The sole witness at this hearing will be United States Trade 
Representative Robert B. Zoellick. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.

BACKGROUND:

    The U.S. economy is increasingly international in focus with more 
than 25 percent of our $8 trillion economy tied to foreign trade and 15 
million American jobs supported by sales in foreign markets. The 
unprecedented economic growth experienced in recent years is in part a 
direct result of expanded international trade.

    In announcing the hearing, Chairman Thomas stated: ``The Committee 
is committed to moving quickly to consider new Trade Promotion 
Authority so that the United States can reclaim its historic leadership 
role in global and regional trade discussions. Our Committee will 
actively examine the President's agenda. The hearing will offer 
Ambassador Zoellick the opportunity to discuss the early outlines of 
President Bush's strategy on trade.''

FOCUS OF THE HEARING:

    The hearing is expected to examine current trade issues such as: 
(1) extension of trade promotion authority, (2) prospects for an 
agreement to establish a FTAA, (3) progress on the WTO ``built-in 
agenda,'' (4) the status of preparations to launch a new round of 
multilateral trade negotiations in the WTO, (5) implementation of the 
bilateral trade agreement with Jordan, (6) approval of the bilateral 
``Jackson-Vanik'' trade agreement with Vietnam, (7) progress in 
negotiations to establish trade agreements with Singapore, Chile and 
other nations in the Pacific Rim region, (8) the functioning of the WTO 
dispute settlement system, and (9) whether to extend and expand the 
Andean Trade Preference Act.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Wednesday, 
March 21, 2001, to Allison Giles, Chief of Staff, Committee on Ways and 
Means,U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Committee office, room 1102 Longworth House Office 
Building, by close of business the day before the hearing.

FORMATTING REQUIREMENTS:

    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit 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 statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely 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. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.

    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.

    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.

    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.

                                

    Chairman Thomas. This is a hearing of the Ways and Means 
Committee to examine another essential component of the 
President's economic plan, and that is reclaiming United 
States' leadership in world trade. As we know, the United 
States is the world's greatest exporter, but it is falling 
behind, frankly, in negotiating trade agreements and setting 
the agenda for rules for international commerce in the new 
century.
    International competitiveness is not just, however trade 
agreements and rules. The Committee also recognizes that other 
areas of this committee's jurisdiction affect our ability to 
compete. Workers, business and farmers run up against a long 
list of outdated and frankly damaging disincentives that are 
currently in the tax code, that impede our success in foreign 
markets.
    Time is running out here, as well, to make changes. So I 
want to welcome Ambassador Robert Zoellick in his first 
appearance in Congress since his unanimous confirmation last 
month by the United States Senate. Trade promotion authority 
will be crucial for this administration as you prepare to 
negotiate closer trading relationships, Mr. Ambassador, not 
just within this hemisphere, but globally.
    I look forward to hearing your plans for following through 
on the free trade agreement of the Americas, launching a new 
round of negotiations in the World Trade Organization, and 
bilateral trade agreement with Vietnam, among others. Together 
we need to also consider the Andean Trade Preference Act, but I 
look forward also to hearing from my Democratic colleagues as 
to how they want to see trade promotion authority evolve.
    We have gotten to the point now where it is just not 
sufficient to point with pride or view with alarm.
    We have to be specific about our concerns as to how we want 
to make changes, to move ahead on a bipartisan basis. We have 
got a lot of work ahead of us to regain our historic position 
in the international marketplace. This is an area that 
historically this committee has worked very positively and 
successfully in a bipartisan fashion.
    In view of the ambassador's time, in which he has about 2 
hours in front of this committee, I would request that all 
members who wish to make opening statements could submit them 
in writing, save for the chairman, the ranking member, the 
chairman of the Trade Committee, and the ranking member of the 
Trade Committee. So at this time, to conclude the chairman's 
opening statement, I would yield to the chairman of the Trade 
Subcommittee, the gentlemen from Illinois, Mr. Crane.
    [The opening statement of Chairman Thomas follows:]

   Opening Statement of the Hon. Bill Thomas, M.C., California, and 
                 Chairman, Committee on Ways and Means

    This is a hearing of the Ways and Means Committee to examine 
another essential component of the President's economic plan, 
reclaiming United States leadership in world trade.
    The United States, the world's greatest exporter, is falling behind 
in negotiating trade agreements and setting the rules for international 
commerce in the new century.
    As the world's premiere trading nation, America's workers and 
businesses now export over $1.8 million of goods and services per 
minute, fueling unprecedented economic growth, job creation and 
technological innovation. Twelve million Americans owe their jobs to 
foreign exports; more than 25% of our $8 trillion economy is tied to 
foreign trade.
    However, in the past five years, during a time when we failed to 
empower our President with negotiating authority, dangerous cracks in 
our global position have begun to appear. During this period, twenty 
significant trade agreements have been negotiated around the world 
without United States participation. In Latin America, Asia, and 
Europe, markets are being pried open, not for U.S. products but for the 
goods and services of our competitors. Our responsibility is to remedy 
this urgent situation.
    The Committee also recognizes that other areas of its jurisdiction 
affect United States competitiveness. Workers, business and farmers run 
up against a long list of outdated and damaging disincentives in the 
tax code that impede our success in foreign markets. Time is running 
out to make changes here too.
    I want to welcome Ambassador Robert Zoellick for his first 
appearance in Congress since his unanimous confirmation last month by 
the Senate. Trade Promotion Authority will be crucial for the 
Administration as you prepare to negotiate closer trading relationships 
within this hemisphere and globally.
    I look forward to hearing Ambassador Zoellick's plans for following 
through on the Free Trade Agreement of the Americas, launching a new 
round of negotiations in the WTO, approving the bilateral trade 
agreement with Vietnam, implementing the free trade agreement with 
Jordan, and completing already initiated talks with Chile and 
Singapore. Together we will also consider the Andean Trade Preference 
Act.
    But I also look forward to hearing from my Democratic colleagues as 
to how they would want to see trade promotion authority evolve. We've 
gotten to the point now where we have to be specific if we want to move 
ahead on a bipartisan basis.
    We've got a lot of work ahead of us to regain our historic position 
in the international marketplace.

                                

    Mr. Crane. Thank you, Mr. Chairman, and I too want to 
welcome our new and impressive U.S. trade Representative, Bob 
Zoellick, and we look forward to working with you. I would 
rather get to the questions rather than make an extended 
opening remark, except to say that I think we have a unique 
opportunity historically. For the first time in all the years I 
have served in Congress, I think we can advance a free trade 
agenda that is in our national interest and the world's 
interest, too, and that you will play an instrumental role in 
that.
    Let me ask you first, you mentioned in your confirmation--
--
    Chairman Thomas. If I could allow the gentleman from 
Illinois--and then I would turn to you.
    Mr. Crane. I am sorry. Let me yield to Charlie.
    [The opening statement of Mr. Crane follows:]

     Opening Statement of the Hon. Philip M. Crane, M.C., Illinois

    Thank you Mr. Chairman. It is critical that America gets back in 
the driver's seat with respect to trade negotiations. We now have a 
President who wants to do just that. Nothing makes this more evident 
than his pick for United States Trade Representative. Ambassador 
Zoellick is an energetic and committed free trader who has the 
background and experience to hit the ground running. I want to join in 
warmly welcoming Ambassador Zoellick to the Committee.
    First and foremost on the agenda, we must grant Trade Promotion 
Authority to President Bush. I believe it is imperative that Congress 
and the President demonstrate renewed commitment to this pressing goal. 
It would be best if we start the dialogue on Trade Promotion Authority 
before the President travels to Quebec City for the Summit of the 
Americas on April 20th. I applaud Ambassador Zoellick for his focus on 
reinvigorating the Free Trade Agreement of the Americas (FTAA) talks, 
particularly his endorsement of accelerating the conclusion date from 
2005 to 2003 which I have been urging.
    Our trading partners have been very active in opening and expanding 
markets for their exports and, as a result, there has been a 
proliferation of free trade arrangements in recent years. There are now 
an estimated 130 free trade agreements in force. Unfortunately, the 
United States has sat on the sidelines for most of these negotiations. 
We are party to only two of the free trade agreements currently in 
force--one with Israel and the North American Free Trade Agreement 
(NAFTA).
    The impact of this trend on American exporters and workers is 
clear. As U.S. negotiators stay away from the negotiating table, 
American companies face higher disparities in tariffs, discriminatory 
rules governing services, unfamiliar and burdensome product standards 
and regulations, and unnecessary threats to their investments.
    It is fortunate, whether it be in Latin America, Asia, or Australia 
and New Zealand, in every corner of the world, our trading partners 
stand ready to negotiate free trade arrangements with the United 
States. At the same time, we must press ahead with our global agenda 
with the WTO, particularly on agriculture and services.
    The opportunities to spur economic growth, create high-wage jobs, 
lower costs for U.S. manufacturers and consumers, and make the world 
more secure by expanding commercial relations among old enemies are 
enormous. The obstacle-- the lack of a domestic consensus on our 
negotiating priorities--stands as the challenge facing all of us. My 
approach is: let's get in a room and work out the specifics of Trade 
Promotion Authority. The costs to the country for failing to offer 
concrete proposals that we all can live with are simply too high.

                                

    Chairman Thomas. The gentleman from New York, opening 
statement?
    Mr. Rangel. Thank you, Mr. Chairman. Ambassador, let me 
join the chairman and others in welcoming you to the Committee 
and congratulating you for the unanimous support that you 
received in the Senate. You bring many great skills to this 
job, and this is one committee that appreciates the need for 
America to continue to find new markets and expand our trade if 
we are going to continue to enjoy the economic prosperity that 
we have today. While not all Americans are able to enjoy it, we 
do know that we just have to increase the size of the pie in 
order for more people to be able to participate.
    We know that there is no Democratic way and no Republican 
way for us to expand our markets, and so we want you to know 
that this is one committee from which you should be able to 
enjoy bipartisan support. The President has gone out of his way 
to expound how important it is to him that the Congress act in 
a bipartisan way. Clearly the Congress has struck out on the 
question of tax relief, but we do get another chance to come up 
to bat on the question of trade.
    So I look forward to working with you, and I would like to 
yield to my dear friend and the Ranking Member of the Trade 
Subcommittee that you will be working closely with, Sandy 
Levin.
    Mr. Levin. Thank you, Mr. Rangel and Mr. Chairman and Mr. 
Crane and colleagues on the Committee. Let me just say a few 
words of a more general nature so we can focus on your 
testimony and Q and A. So, Mr. Ambassador, welcome. Your 
prepared testimony describes the benefit of trade in clear 
terms, and I agree that trade is an essential agreement in 
American economic expansion.
    That said, said, I do not think the main challenge before 
us is just how to sell the benefits of economic globalization. 
A basic issue is whether we believe that economic 
globalization, which is indeed here to stay, needs to be shaped 
or whether we just embrace it blindly on the presumption that 
it will work out on its own without any problems. Put another 
way, the distinction is between those two view trade 
liberalization as an end in and of itself, and those who, like 
myself, view it is a key tool with the need to shape trade 
policies themselves so that they maximize the benefits and 
minimize the downsides of international trade.
    Over the last 18 months, we took the latter approach, the 
approach of shaping globalization. As a result, we broke the 
deadlock of more than 4 years, and in that way the Nation did 
indeed show leadership on issues of world trade. In CBI, for 
example, we found ways to enhance the competitiveness position 
of industries in the Western Hemisphere through 
complementarities of capital and labor, and enhance the labor 
standards in CBI.
    In China, for example, we were concerned that the nonmarket 
structures in China's economy could well lead to overproduction 
that could cause agricultural and industrial products to surge 
into the U.S. market. So we crafted the toughest safeguard ever 
written into U.S. law. Each of these solutions was a building 
block. Each addressed a specific problem and built some 
confidence that we could solve the next one.
    This morning and in the coming weeks the challenge is 
whether we will continue on the path of innovatively shaping 
globalization and creating new building blocks. I believe there 
are real opportunities to move forward. To pass the Jordan free 
trade agreement in time for the visit of King Abdullah next 
month, to address the labor dimensions of the Vietnam trade 
agreement and pass it this summer, and to come up with a 
meaningful response to the crisis in steel.
    With these building blocks in place, I believe we could 
then get to work on other issues, including how to address 
negotiating objectives, consultative procedures and the 
approval mechanisms of fast track. We will welcome today and in 
the future active discussion with you, and I hope work on 
specific topics. In this regard you refer in your prepared 
statement to the importance of the congressional-executive 
partnership, but as Mr. Rangel mentioned, that welcome result 
will occur only if there is an early and genuine effort not to, 
as you phrase it, and I quote, get mired down in partisan 
division.
    Thank you.
    [The opening statement of Mr. Levin follows:]

     Opening Statement of the Hon. Sander M. Levin, M.C., Michigan

    Thank you Mr. Chairman. It is critical Welcome.
    Your prepared testimony describes the benefits of trade in clear 
terms. And I agree that trade is an essential ingredient in American 
economic expansion.
    That said, I don't think the main challenge is just how to sell the 
benefits of economic globalization. A basic issue is whether we believe 
that economic globalization--which is here to stay--needs to be shaped 
or whether we should just embrace it blindly (on the presumption that 
it will work out on its own without any problems). Put another way, the 
distinction is between those who view trade liberalization as an end in 
itself and those (like myself) who view it as a key tool--with the need 
to shape trade policies themselves so that they maximize the benefits 
and minimize the downsides of international trade.
    Over the last 18 months, we took the latter approach--the approach 
of shaping globalization. As a result, we broke the deadlock of more 
than five years.
    In CBI, for example, we found ways to enhance the competitive 
position of industries in the Western Hemisphere through 
complementarities of capital and labor, and enhance the labor standards 
in CBI. In China, we were concerned that the non-market structures in 
China's economy could well lead to overproduction that could cause 
agricultural and industrial products to surge into the U.S. market, so 
we crafted the toughest safeguard ever written into U.S. law.
    Each of these solutions was a building block. Each addressed a 
specific problem and built some confidence that we could solve the next 
one.
    This morning and in the coming weeks, our challenge is whether to 
continue on the path of innovatively shaping globalization and creating 
new building blocks. I believe there are real opportunities to move 
forward: to pass the Jordan free trade agreement in time for the visit 
of King Abdullah next month; to address the labor dimensions of the 
Vietnam trade agreement and pass it this summer; and to come up with a 
meaningful response to the crisis in steel. With these building blocks 
in place, I believe we could get to work on other issues, including how 
to address negotiating objectives, consultative procedures and the 
approval mechanisms of fast track.
    We will welcome, today and in the future, active discussion and--I 
hope--work on specific topics. In this regard, you refer in your 
prepared testimony to the importance of the Congressional-Executive 
partnership. That welcomed result will occur, I urge, only if there is 
an early and genuine effort not to--as you phrase it--``get mired down 
in partisan division.''

                                

    [The opening statements of Mr. Shaw and Mr. Ramstad 
follow:]

     Opening Statement of the Hon. E. Clay Shaw, Jr., M.C., Florida

    Mr Chairman, within the Ways and Means Committee we often look at 
our actions and our jurisdiction as the areas that most influence the 
economic well-being of our country. Much of the debate about our 
nation's unprecedented economic growth over the past decade--and our 
hopes for the future--have focused on issues like tax rates, the 
national debt and the interest rate. But I would like to point out that 
what has gone under-appreciated is the tremendous growth in 
international trade that has bolstered the American economy, created 
jobs, made consumer products affordable--here at home, and made the 
world a safer place for the United States; because of the relationships 
built with economic ties, not just diplomatic ones.
    But diplomacy is as much an art in trade negotiations as it is in 
other foreign affairs, so I am eager to hear from our chief 
international trade negotiator, Ambassador Robert Zoellick, today for 
his perspective on both the Bush Administration's priorities and 
perspective, as well as his insight into the disposition of our various 
trading partners around the world towards progress in the free trade 
arena.
    This is vital to the area I represent, South Florida, which is 
rapidly becoming the most significant gateway to Latin America, the 
Caribbean, and Europe--both by sea and by air, and now, by electronic 
commerce as well. We must start speaking of portals, not just ports and 
airports. Florida's interests include the whole variety of American 
products, from agriculture to durable goods to services.
    But as someone who has been in the position of negotiating 
agreements throughout my professional life, I recognize that our desire 
to complete agreements swiftly is often a posture that can make it more 
difficult to get the quality and verifiability of agreements that we 
deserve. But that is what our constituents demand, that we bargain in 
order to gain some things at the expense of others. We bargain from a 
position of strength, so we must always make sure that we get a good 
deal, and a solid deal, not just a deal. So we must balance patience 
with urgency, and I would like to hear how Ambassador Zoellick thinks 
we can do that on various fronts.
    With that, I would like to welcome Ambassador Zoellick and follow 
up with questions on some of the points he made in his statement. Thank 
you.

                                

       Opening Statement of the Hon. Jim Ramstad, M.C., Minnesota

    Mr. Chairman, thank you for calling this important hearing on the 
Bush Administration's trade policy.
    Many thanks also to Ambassador Zoellick for appearing before us 
today to lay out the trade priorities of the Administration.
    Last year, I think most of us on the Committee would agree, was a 
great year for trade. A number of important bills passed into law to 
expand international trade and development. This year, we need to 
capitalize on those successes by moving ahead quickly on the important 
trade issues before us.
    How can we not? The U.S. economy is increasingly international in 
focus. Over 25% of our economic growth in the last decade is tied to 
foreign trade and 12 million Americans owe their jobs to exports. The 
unprecedented economic growth this country has experienced in recent 
years is in part a result of expanded trade between the U.S. and our 
trading partners.
    I strongly believe the cornerstone of congressional trade action 
must be approval of Trade Promotion Authority for President Bush. As 
long as we continue to deny this fundamental power to the President, 
our economy and our citizens will fail to capitalize on the trade 
opportunities before us.
    What are these opportunities? The U.S. must push aggressively to 
negotiate and enact the Free Trade Area of the Americas, preferably by 
2003. The NAFTA agreement has been an enormous benefit to our country, 
and we will further benefit from expanding free trade to the rest of 
the hemisphere.
    We should also continue to push for bilateral trade agreements with 
countries like Chile, New Zealand, Australia, Singapore and others. 
Lastly we should continue to work with Europe to amicably settle our 
differences and more forward.
    We have the opportunity to build on last year, Mr. Chairman, and I 
hope that we seize that opportunity.
    Thanks again, Mr. Chairman, for holding this hearing and I look 
forward to hearing from Ambassador Zoellick today.

                                

    Chairman Thomas. I thank the gentleman, and now it is my 
pleasure to ask the ambassador that any written statement that 
he may have will be placed in the record, and you can address 
us in any fashion you see fit.
    Mr. Zoellick, welcome to the Ways and Means Committee.

 STATEMENT OF THE HON. ROBERT B. ZOELLICK, UNITED STATES TRADE 
                         REPRESENTATIVE

    Ambassador Zoellick. Thank you, Mr. Chairman. And, thank 
you, Mr. Rangel and Chairman Crane, and Mr. Levin. I appreciate 
the opportunity to be here. What I would like to do, Mr. 
Chairman, is, as you mentioned, if you put my full statement in 
the record, I will just summarize it.
    Last week, President Bush spoke before a joint session of 
Congress about how trade is part of his larger vision of 
expanding freedom. Trade policy is the bridge between the 
President's international and domestic agendas. As the former 
Governor of a border State, President Bush has seen that the 
free exchange of goods and services sparks economic growth, 
opportunity, dynamism, fresh ideas, and democratic values, both 
at home and abroad.
    In undertaking the President's charge, I know well that the 
Constitution vests the Congress with the authority to regulate 
commerce with foreign nations. Frequent substantive 
consultation with this Committee is enormously important to me, 
and I look forward to working closely with you. The history 
books recount economic, political and indeed national dangers 
of a breakdown in America's trade policy.
    The disastrous experience of setting protectionist tariffs 
for over 20,000 individual items in the Smoot-Hawley bill 1930 
led the Congress 4 years later to try a different approach, a 
bipartisan partnership with the executive to try to negotiate 
lower barriers to trade around the world. This partnership 
between the Congress and the executive became a bipartisan 
cause and eventually produced prosperity and opportunity, and 
even liberty beyond the greatest expectations of its 
supporters.
    Federal Reserve Chairman Alan Greenspan has put this 
success in historical perspective, by pointing out that the 
growth in trade as a share of the world economy over the past 
50 years has finally managed to reverse the losses from the 
calamities of the early 20th-century and now approximates 
globalization around 1900.
    So today, just like Americans at the turn of the last 
century, we face some critical decisions about the future 
course for our country, trade and the world. Just as the World 
War II generation forged a bipartisan consensus that sustained 
successful trade expansion through the Cold war, we must build 
a new consensus, to promote open markets and trade for decades 
to come. I know that new ideas are being advanced from many 
quarters and I want to work with you with an open mind to try 
to mobilize broad support for freer trade.
    I am sure we will have many opportunities, including I 
expect today, to discuss the import particulars of trade, but I 
would like to step back just a moment to touch on the 
importance of global trade for the American people. First, 
expanded trade, imports as well as exports, improves the well-
being of Americans. It leads to better jobs with bigger 
paychecks and more competitive businesses, as well as more 
choices as the goods and imports with lower prices for 
hardworking families and hard-driving entrepreneurs.
    I appreciate that votes for agreements like NAFTA and the 
Uruguay round may not have been easy to cast, yet those 
agreements contributed to the longest period of economic growth 
in U.S. history, with levels of full employment and without 
inflationary pressures, beyond the forecast of any economist. A 
new commitment to trade liberalization can help boost a 
vigorous, long-term economic recovery from the present 
slowdown.
    The expanding global trade and the expanding economic 
growth in the United States are not coincidental. They are 
achieved in concert. One strengthens and reinforces the other. 
Moreover restrictions on trade have victims: farmers; 
schoolteachers; factory and office workers; small business 
people and many others who have to pay more for clothing or 
food or homes or equipment because of visible and invisible 
taxes on trade.
    Second, as President Bush has stated, free trade is about 
freedom. Economic freedom creates habits of liberty and habits 
of liberty create expectations of democracy. President Bush 
recently made a historic visit to Mexico where he met President 
Fox, the first president elected from the opposition since that 
nation's revolution, and it is not an accident in my view that 
after Mexico embraced the opening of its economic system as 
embodied in NAFTA, it was drawn to a democratic opening as 
well. So trade can promote our values as well as our economic 
interest.
    Third, expanded trade affects our Nation's security. The 
crises of the first 45 years of the last century were 
inextricably linked with hostile protectionism and national 
socialism. Take an example from today: Columbia is waging a 
battle to defend the rule of law against murderers who finance 
their terror through complicity in drug trafficking. President 
Prastrana, when he visited Washington recently, has said that 
one way to counter this threat would be for Congress to renew 
the Andean Trade Preferences Act, which expires in December. 
With a renewed and robust Andean Trade Preferences Act, the 
emphasis of U.S.-Colombia relations can gradually shift from 
aid to trade.
    I recognize, however, that the benefits of open trade can 
only be achieved if we achieve public support at home. To do 
so, the administration must enforce vigorously and with 
dispatch our trade laws against unfair practices. In a world of 
global economics, justice delayed can become justice denied. We 
need to do a better job of monitoring compliance with trade 
agreements and insisting on performance by our trading 
partners, and I assure you that I will not hesitate to use the 
full power of U.S. and international law to defend American 
businesses and workers against unfair trading practices.
    Even if we do our jobs well, I appreciate that change, 
particularly rapid adjustments from whatever cause, can be very 
difficult and frightening for hardworking people. So part of 
our larger program will have to be to help people to adapt and 
adjust and benefit from change.
    To strengthen and speed America's trade and economic 
policies, we are going to need to reestablish the bipartisan 
congressional-executive negotiating partnership. Last week, the 
President asked the Congress for quick action to give him, 
quote, ``the strong hand of Presidential trade promotion 
authority.'' This authority, as he pointed out, has been given 
to five previous Presidents. Therefore I will be following up 
with this Committee and with the Senate Finance Committee to 
consider how to establish trade promotion authority for the 
President based on the fast track precedent and the broadest 
possible support.
    In the absence of this authority, other countries have been 
moving forward with trade agreements while America has stalled. 
Indeed, other countries are writing the rules of the 
international trading system as they negotiate without us. The 
European Union has free trade agreements with 27 countries; 20 
of these agreements have been signed since 1990. Japan is 
negotiating a free trade agreement with Singapore. It is also 
exploring agreements with Mexico and Korea and Chile.
    There are approximately 130 free trade agreements in the 
world globally, but the United States is party to only two. Our 
deadlock hurts American businesses, workers and farmers, and 
they are going to find themselves shut out of many preferential 
trade agreements and investment agreements negotiated by 
others. Just to cite one example, while U.S. exports to Chile 
face an 8 percent tariff, the Canada-Chile trade agreement will 
free Canadian imports of this duty, and that is why we are 
going to start our negotiations again with Chile on a free 
trade agreement this month.
    We cannot afford to stand still or be mired in partisan 
division while other nations seize the mantle of leadership 
from the United States. This would be a huge missed 
opportunity; indeed, in my view, a historic mistake. In 
considering the grant of trade promotion authority, I urge you 
to give the Presidentmore leverage by broadening our options.
    I would like to be able to tell my counterparts from around 
the world that we are willing to negotiate if they are serious 
about eliminating barriers, yet also make clear that America 
will look elsewhere if they delay, and that the United States 
will move forward and it is up to them to decide to join us or 
be left behind. The fact that we are moving on multiple fronts 
increases our leverage.
    On April 20th, President Bush will attend the Summit of the 
Americas meetings in Quebec city, where one of the major items 
on the agenda will be the free trade area of the Americas, and 
he has emphasized to set a new course for this hemisphere, he 
needs to hold out the prospect in Quebec city that new trade 
promotion authority is on its way.
    Of course, America's trade and economic interests extend 
far beyond this hemisphere. We want to launch a new round of 
global trade negotiations in the WTO, emphasizing a key role 
for agriculture. We will seek to negotiate regional and 
bilateral agreements to open markets around the world. There 
are opportunities in the Asia-Pacific. We will start with a 
free trade agreement with Singapore, and work with you to pass 
the basic trade agreement with Vietnam, negotiated by the 
Clinton administration.
    We will urge Japan to deregulate, restructure and open its 
economy, which is long, long overdue, and we want to complete 
China's accession to the WTO, once it meets its requirements. 
Further reforms in the Middle East and Africa need our 
encouragement and I compliment this Committee on its important 
work with Africa and the Caribbean last year. We are committed 
to working with Congress to enact legislation for a free trade 
agreement with Jordan, to implement the Africa and Caribbean 
provisions, and to consider other ways we can help both these 
regions.
    As India reforms its economy and taps its great potential, 
we should explore ways to try to achieve mutual benefits, to 
help developing nations appreciate that globalization and open 
markets can assist in their own efforts to reform and grow. We 
will need to extend the legislation authorizing the Generalized 
System of Preferences program. Of vital importance, I will seek 
to work with the European Union and its candidate Members in 
central and eastern Europe, both to fulfill the promise of a 
trans-Atlantic marketplace that is already being created by 
business investment and trade, as well as to reinvigorate, 
improve and strengthen the WTO processes.
    Now that there is a fragile peace in the Balkans, we must 
secure it by pointing people toward economic hope and regional 
integration. Therefore, we would like to work with the Congress 
to follow through on the prior administration's proposal to 
offer trade preferences to countries in southeast Europe.
    The Bush administration has an ambitious trade agenda, 
reflecting the importance that President Bush assigns to trade. 
This is an opportune moment to reassert America's leadership in 
setting trade policy and to build a post-Cold War world on the 
cornerstones of freedom, democratic values, open trade and free 
markets, as well as security.
    I appreciate the executive-congressional partnership on 
trade has a rich tradition which has produced very important 
results, and with your help I look forward to working with you 
to build on that partnership as we move ahead.
    Thank you.
    [The prepared statement of Mr. Zoellick follows:]

     Statement of the Hon. Robert B. Zoellick, United States Trade 
                             Representative

    Chairman Thomas, Representative Rangel, and Members of the 
Committee:
    Last week, President Bush spoke to the joint session of Congress 
about how trade is part of his larger vision of expanding freedom. 
``The cause of freedom rests on more than our ability to defend 
ourselves and our allies. Freedom is exported every day as we ship 
goods and products that improve the lives of millions of people. Free 
trade brings greater political and personal freedom.''
    Trade policy is the bridge between the President's international 
and domestic agendas. As the former governor of a major border state, 
President Bush has seen that the free exchange of goods and services 
sparks economic growth, opportunity, dynamism, fresh ideas, and 
democratic values, both at home and abroad.
    In undertaking the President's charge, I know well that the 
Constitution vests the Congress with the authority ``To regulate 
Commerce with foreign Nations.'' Frequent, substantive consultation 
with this Committee is enormously important to me. I look forward to 
working closely with you.
    The history books recount the economic, political, and indeed 
national dangers of a breakdown in America's trade policy. For the 
first 150 years of the United States, there were contentious 
Congressional debates over tariff bills, some even leading to movements 
for Nullification and Secession. Then the disastrous experience of 
setting protectionist tariffs for over 20,000 individual items in the 
Smoot-Hawley bill of 1930 led the Congress four years later to try a 
different approach: a partnership with the Executive to negotiate lower 
barriers to trade around the world.
    Launched by strong and innovative leaders, Franklin D. Roosevelt 
and Cordell Hull, this partnership between the Congress and the 
Executive became a bipartisan cause, and eventually produced prosperity 
and opportunity and even liberty beyond the greatest expectations of 
its supporters. Federal Reserve Chairman Alan Greenspan has put this 
success in historical perspective by pointing out that the growth in 
trade as a share of the world economy over the past 50 years has 
finally managed to reverse the losses from the calamities of the early 
20th century, and now approximates the degree of globalization around 
1900. So today, just like Americans at the turn of the last century, we 
face critical decisions about the future course for our country, trade, 
and the world.
    Just as the World War II generation forged a bipartisan consensus 
that sustained successful trade expansion throughout the Cold War, we 
must build a new consensus to promote open markets and trade in the 
decades to come. I know that new ideas are being advanced from many 
quarters, and I want to work with you with an open mind to try to 
mobilize broad support for freer trade.
    I am sure we will have many opportunities--including, I suspect, 
today--to discuss the important particulars of trade. These specifics 
are vital to our trade policy. But I would like to step back just a 
moment to touch on the importance of global trade to the American 
people.
    First, expanded trade--imports as well as exports--improves the 
well being of Americans. It leads to better jobs, with bigger 
paychecks, in more competitive businesses--as well as to more choices 
of goods and inputs, with lower prices, for hard-working families and 
hard-driving entrepreneurs. Exports accounted for over one-quarter of 
U.S. economic growth over the last decade and support an estimated 12 
million jobs. In the American agricultural sector, one in three acres 
are planted for export purposes, and last year American farmers sold 
morethan $50 billion worth of agricultural products in foreign markets. 
Imports helped keep prices down as jobs, compensation, and productivity 
increased.
    I appreciate that votes for agreements like NAFTA and the Uruguay 
Round may not have been easy to cast. Yet those agreements contributed 
to the longest period of economic growth in U.S. history, with levels 
of full employment, and without inflationary pressures, beyond the 
forecasts of any economist. A new commitment to trade liberalization 
can help boost a vigorous, long-term economic recovery from the present 
slowdown.
    The expanding global trade and the expanding economic growth in the 
United States are not coincidental; they are achieved in concert. One 
strengthens and reinforces the other. Moreover, restrictions on trade 
have victims: farmers, school teachers, factory and office workers, 
small business people, and many others who have to pay more for 
clothing or food or homes or equipment because of visible and invisible 
taxes on trade.
    Second, as President Bush has stated, free trade is about freedom: 
``Economic freedom creates habits of liberty. And habits of liberty 
create expectations of democracy.''
    President Bush recently made an historic visit to Mexico, where he 
met with President Fox, the first president elected from the opposition 
since that nation's revolution. It is not an accident that after Mexico 
embraced the opening of its economic system, as embodied in NAFTA, it 
was drawn to a democratic opening as well.
    Third, expanded trade affects our nation's security. The crises of 
the first 45 years of the last century--the economic retrogression 
referred to by Chairman Greenspan--were inextricably linked with 
hostile protectionism and national socialism. Communism could not 
compete with democratic capitalism, because economic and political 
freedom creates energy, competition, opportunity, and independent 
thinking.
    Take an example from today. Colombia is waging a battle to defend 
the rule of law against murderers who finance their terror through 
complicity in drug trafficking. President Pastrana has said that one 
way to counter this threat would be for Congress to renew the Andean 
Trade Preference Act, which expires in December. Renewal, he says, 
would stimulate job creation and diminish the appeal of the drug trade. 
With a renewed and robust ATPA, the emphasis of U.S.-Colombia relations 
can gradually shift from aid--Colombia is the third largest recipient 
of U.S. military assistance--to trade.
    I recognize, however, that these benefits of open trade can only be 
achieved if we build public support for trade at home. To do so, the 
Administration must enforce, vigorously and with dispatch, our trade 
laws against unfair practices. In the world of global economics, 
justice delayed can become justice lost. We also need to do a better 
job of monitoring compliance with trade agreements and insisting on 
performance by our trading partners. I will not hesitate to use the 
full power of U.S. law to defend American businesses and workers 
against unfair trading practices.
    Even if we do our jobs well, I appreciate that change, particularly 
rapid adjustments, can be very difficult--even frightening--for many 
hard-working people. We need to help people adapt and benefit from 
change--whether prompted by trade, technology, e-commerce, new business 
models, or other causes. Therefore, a successful trade policy over the 
long term should be accompanied by better schools, worker adjustment 
assistance, tax policies that enable people to keep and save more of 
their paychecks, and reforms of Social Security and Medicare so older 
Americans have a safer retirement.
    From our conversations, I have learned that the economies in your 
districts are transforming, too. Many of your new businesses and 
employers are linked to the global economy, so Secretary of Commerce 
Don Evans, Secretary of State Colin Powell, and I want to work with you 
to tap their support for open trade. In turn, we will try our best to 
deliver for America's farmers, other workers, service providers, high 
tech community and intellectual property providers, small businesses, 
and highly productive manufacturing industries.
    To strengthen and speed America's trade and economic policy, we 
will need to reestablish the bipartisan Congressional-Executive 
negotiating partnership that has delivered so much. Last week, the 
President asked the Congress for quick action to give him ``the strong 
hand of presidential trade promotion authority.'' This authority, as he 
pointed out, has been granted to each of the previous five presidents. 
Therefore, I will be following up with this Committee and the Senate 
Finance Committee to consider how to reestablish trade promotion 
authority for the President, based on the fast-track precedent and the 
broadest possible support.
    In the absence of this authority other countries have been moving 
forward with trade agreements while America has stalled. We are in 
danger of being left behind. There was a time when U.S. involvement in 
international trade negotiations was a prerequisite for them to 
succeed. That is no longer true. Indeed, other countries are writing 
the rules of the international trading system as they negotiate without 
us.
    The European Union has free trade agreements with 27 countries, and 
20 of these agreements have been signed since 1990. Just last year, the 
European Union and Mexico--the second-largest market for American 
exports--entered into a free trade agreement. The European Union is 
also negotiating free-trade agreements with the Mercosur nations and 
the countries of the Gulf Cooperation Council. Japan is negotiating a 
free trade agreement with Singapore, and is exploring free trade 
agreements with Mexico, Korea, and Chile. There are approximately 130 
free trade agreements in force globally, but the United States has only 
two agreements in force: one is with Canada and Mexico (NAFTA), and the 
other with Israel.
    In the long run, our deadlock hurts American businesses, workers, 
and farmers, as they will find themselves shut out of the many 
preferential trade and investment agreements negotiated by our trading 
partners. To cite just one example, while U.S. exports to Chile face an 
eight percent tariff, the Canada-Chile trade agreement will free 
Canadian imports of this duty. That is why we will resume negotiations 
with Chile on a free trade agreement this month.
    We cannot afford to stand still--or be mired in partisan division--
while other nations seize the mantle of leadership on trade from the 
United States. This would be a huge missed opportunity, indeed an 
historic mistake.
    In considering the grant of trade promotion authority, I also urge 
you to give the President more leverage by broadening our options: I 
want to be able to tell my counterparts that we are willing to 
negotiate if they are serious about eliminating barriers, yet also make 
clear that America will look elsewhere if they delay--that the United 
States will move forward, and it is up to them to decide to join us or 
be left behind.
    On April 20, President Bush will attend the Summit of the Americas 
meeting in Quebec City, where one of the major items on the agenda will 
be the Free Trade Area of the Americas. He has emphasized that to set a 
new course in the hemisphere--to overcome the North-South divide, just 
as the United States ended the great divide between East and West--he 
needs to hold out the prospect in Quebec City that new trade promotion 
authority is on its way.
    Of course, America's trade and economic interests extend far beyond 
this hemisphere. We want to launch a new round of global trade 
negotiations in the WTO, emphasizing a key role for agriculture. We 
will also seek to negotiate regional and bilateral agreements to open 
markets around the world. There are opportunities in the Asia Pacific 
and, I hope, with APEC. We will start with a free trade agreement with 
Singapore and will work with you to pass the basic trade agreement with 
Vietnam negotiated by the Clinton administration. We will urge Japan to 
deregulate, restructure and open its economy, which is long overdue.
    Further reforms in the Middle East and Africa need our 
encouragement, and I compliment the Committee for its important work 
with Africa and the Caribbean last year. We are committed to working 
with the Congress to enact legislation for a free trade agreement with 
Jordan, implementation of the African and Caribbean provisions, and 
consideration of other ways we can help those regions.
    As India reforms its economy and taps its great potential, we 
should explore ways to achieve mutual benefits. To help developing 
nations appreciate that globalization and open markets can assist their 
own efforts to reform and grow, we will need to extend the legislation 
authorizing the Generalized System of Preferences program.
    Of vital importance, I will seek to work closely with the European 
Union and its candidate members in Central and Eastern Europe, both to 
fulfill the promise of a trans-Atlantic marketplace already being 
created by business investment and trade, as well as to reinvigorate, 
improve, and strengthen the WTO processes. The total amount of two-way 
investment in the EU and the United States amounts to over $1.1 
trillion, with each partner employing about 3 million people in the 
other. Trade in goods and services between the United States and 
western Europe was $557 billion in 1999, double the level of a decade 
earlier. Similarly, in 1999 European companies acquired and established 
businesses in the United States valued at $205 billion, up from $31.9 
billion five years earlier. We would be remiss to neglect our common 
interests while working to resolve more immediate disputes.
    Now that there is a fragile peace in the Balkans, we must secure it 
by pointing people toward economic hope and regional integration. 
Therefore, we would like to work with the Congress to follow through on 
the prior administration's proposal to offer trade preferences to 
countries in Southeast Europe. Such trade preferences would be 
considered within the parameters of the President's budget request.
    The United States has an unparalleled opportunity to shape the 
international trading order. But we have to get back into this game and 
take the lead. We are certainly in a position to do so. The United 
States is prepared to pursue a number of bilateral and regional free 
trade agreements in the years ahead, as well as the global trade 
negotiations in the WTO. The fact that the United States can move on 
multiple fronts increases our leverage.
    The message I want to send to other countries is that the United 
States is willing to negotiate. We are willing to open if they open. 
But if others are too slow, we will move without them. Our economy is 
so attractive, and the model of our private sector is so appealing, 
that people will come to us if we are accessible and resolute.
    The Bush administration has an ambitious trade agenda, reflecting 
the importance President Bush assigns to trade. This is an opportune 
moment to reassert America's leadership in setting trade policy and to 
build a post-Cold War world on the cornerstones of freedom, democratic 
values, open trade, and free markets--as well as security. I appreciate 
that the Executive-Congressional partnership on trade has a rich 
tradition, which has produced important results. With your help, I look 
forward to building on that partnership as we move ahead.

                                

    Chairman Thomas. Thank you very much, Mr. Ambassador, and I 
know you have limited time and I hope Members will appreciate 
that this will not be the only visit that we will have with the 
Ambassador, but it is the first. Let me begin the questioning 
by telling you that a number of prominent people involved in 
trade, even someone as prominent as the former U.S. Trade 
Representative, have indicated that given the fact we have been 
able to negotiate something like the China agreement, that 
perhaps what we used to call fast track, now we call trade 
promotion authority, may not be only as important as we 
thought, but not necessary to place in the hands of the 
President.
    I will do my best as we have these discussions to not drift 
off into jargon, and that those who are watching us can follow 
us, because we used to have something called most favored 
nation, which made no sense, because in fact what it was, was 
normal permanent trade relations, and we have been able to 
conquer that terminology problem. I do support the idea that 
instead of calling it fast-track, we call it trade promotion 
authority; but frankly, rather than worry about what it is 
called, what do you think about whether we need it or not, Mr. 
Ambassador?
    Ambassador Zoellick. Well, thank you, Mr. Chairman. I have 
great respect for Ambassador Barshefsky and I know she worked 
very closely and effectively with this committee.
    Chairman Thomas. As do we all.
    Ambassador Zoellick. I think, at the forum that she spoke, 
she was the only one of about five or six former U.S. Trade 
Representatives that had that view; and I personally feel that 
what it might have overlooked is that the work that this 
committee and the Congress very effectively did were agreements 
that tended to be one-sided. Bringing China into the PNTR 
involved a series of concessions by China. We did not make any 
trade adjustments.
    The Caribbean and Africa bills involved preferential 
arrangements which I compliment the liberalization, but we did 
not make any adjustments. I suspect that as we face the larger 
agreements on our agenda, particularly the Free Trade Area of 
the Americas or the WTO process, that this is going to involve 
some give, as well as some take. I think for a larger 
agreement, it will be very important to be able to have this 
authority for those processes.
    Chairman Thomas. I thank the gentlemen. I also happen to 
believe that if we are going to try to re-establish trade 
promotion authority, that there has to be a way in which we can 
deal with the 21st century questions of trade, along with labor 
and the environment, but frankly it is going to require us to 
be a bit more creative than we have been in the past; and my 
question to you would be do you feel comfortable with the 
suggestions that have been offered already in terms of trade 
and the environment? Is there sufficient specificity or, rather 
than simply pointing with pride or viewing with alarm, do we 
need to get much more serious with those of us who are focusing 
on trade in trying to create an agreement with those who are 
also focusing on labor and the environment? How specific have 
the proposals been that you have seen in terms of trying to 
advance all of our interests with the new trade promotion 
authority?
    Ambassador Zoellick. Well, first, Mr. Chairman, obviously 
both for you and many members of this committee, the trade and 
environment and labor issue is going to be a critical one going 
forward. So let me start with the guidance of President Bush on 
this. He has said of course we want to try to improve 
environment and labor conditions, we just do not want to do so 
in any way that is protectionist.
    As I said in my statement, I want to try to broaden the 
base of support for trade in a bipartisan fashion and that will 
clearly include this issue. Now, there have been a host of 
ideas out there. This committeeand the Congress as a whole took 
one approach with the Africa-CBI bills, which involved at least the 
labor issue.
    I have been trying to consult with people in both the 
Senate and the House. Some are interested in the increased role 
that the ILO can play, the International Labor Organization. 
Some have talked about financial arrangements, including with 
the multi-development banks.
    I know that another issue would be the interconnection of 
environment agreements, for example, the SITIES agreement, with 
endangered species, with the WTO system, and I think that is a 
reasonable question to ask. I have talked with Mr. Levin about 
the Cambodia provisions, which are ones that are designed to be 
incentives as opposed to disincentives, and obviously other 
countries have explored other methods, like the monetary 
penalties that are in the Chilean and Canadian agreement.
    At this point I think there are a number of ideas on the 
table, but I certainly welcome more. Mr. Levin gave a speech 
yesterday where he put out some specific ideas on that. As I 
mentioned to him that while I did not agree with all of the 
speech, I thought it was a very thoughtful presentation on an 
important set of issues. So I believe that, in terms of 
specificity, that from this committee, but also frankly from 
others--I have talked with environmental groups; I have met 
with John Sweeney--that I would like to try to see a variety of 
ideas because I do not believe the one-size-fits-all. I think 
we are going to have to approach this differently in different 
circumstances, and what I would particularly appreciate is that 
as we try to figure out how to build a base of support in this 
country, we also look at how we do it abroad, because part of 
the challenge here is going to be bringing other countries to 
accept these ideas, and frankly there is a lot of fear and 
anxiety out there.
    So I think as long as we approach this in a spirit where 
our purpose is open markets, economic growth, helping countries 
to move to a win-win situation, whether with side agreements or 
other dimensions, we will be more successful in going where we 
all want to go, which is to try to increase economic growth, 
but also do so in a way that improves labor and environmental 
conditions.
    Chairman Thomas. Thank you very much, Mr. Ambassador.
    Does my friend, the ranking member from New York, wish to 
inquire?
    Mr. Rangel. Thank you, Mr. Chairman. Once again, I really 
look forward to working with you. For so much of my life, trade 
has just meant Europe, and I feel so excited that I am living 
in a time when America's concern goes beyond that. It goes to 
Mexico, Central and South America, the Caribbean and Africa. To 
African-Americans and to other people, this is such a healthy 
feeling because it means that we are the only country on the 
face of the earth that has color and cultural attachments to 
all countries; and so I hope the State Department and your 
office will make certain that we have the talent there to 
provide the best support and the best ambassadors, if you will, 
that we can get, to take into consideration all that we have to 
offer.
    I do hope, as it relates to the Caribbean and to Africa, 
that we not just rely on formal treaty agreements, but you are 
able to put together a task force to see what some of us in 
Congress that sit on different committees can do with the Ex-Im 
Bank, that can do with inviting capital to these countries, 
that can do in providing assistance as it relates to quality 
health care, because no one has done more than former Secretary 
of Commerce Ron Brown to make it clear that if you want good 
training friends, you have to be a friend, to assist people and 
get in the economy and having disposable income.
    So you have made one great first impression with colleagues 
on both sides of the aisle, and I look forward to working with 
you and your task force to see what support we can give you to 
make this a greater and more prosperous country.
    Thank you.
    Chairman Thomas. Thank the gentlemen. Does the chairman of 
the Trade Subcommittee, the gentlemen from Illinois, wish to 
inquire?
    Mr. Crane. Yes. Thank you, Mr. Chairman.
    Mr. Ambassador, you mentioned in your confirmation 
testimony that you would consider negotiating bilateral trade 
agreements as a means of advancing the WTO discussions, and I 
have supported for some time negotiations with Chile and with 
Singapore, Australia and New Zealand. I am wondering if you had 
any discussions, or this administration, with Australia and New 
Zealand to lay the groundwork for free trade negotiations with 
those two close allies.
    Ambassador Zoellick. Mr. Chairman, I have had some informal 
discussions with various Australians who I have had the 
pleasure of knowing over the course of the past 15 years. I 
think there is a growing interest in a trade agreement with 
Australia. I will tell you one point that I am trying to be 
careful about with this. In 1992, I wrote a document for 
President Bush, Number 41, about an economic plan that included 
a free trade agreement with Australia, and it got caught up in 
Australian politics at the time.
    So I have said to my friends in both the Labor party and 
the national coalition, since they are facing election, that if 
we approach this, I want to make sure it is done in a fashion 
that has bipartisan support in Australia. I will be meeting the 
Australian trade minister in the coming weeks. I hope that will 
be the case, because I certainly do not want to get caught up 
in the midst of their election campaign; but it is a subject I 
would like to discuss further, also with this committee, 
because we will have some sensitive issues if we are going to 
go down that route.
    As for the New Zealanders, I have not yet had a 
conversation with them. Based on this exchange, I expect I 
will.
    Mr. Crane. The upcoming April summit among 34 leaders of 
the western hemisphere marks an important opportunity to 
advance free trade in the region, and given the sizable amount 
of work that remains to be done to conclude an FTAA and seeming 
reluctance by some key partners, what will the United States do 
at the summit to rejuvenate FTAA negotiations?
    Ambassador Zoellick. Well, first, Mr. Chairman, I would 
like to put this in a context that I think is important. I 
really do see this as a historic opportunity. Some of you that 
have a strong sense of the history of this institution probably 
know that Henry Clay and others had been promoting this notion 
of free trade throughout the Americas for well over 150 years, 
and we have not been able to get it done.
    Senator Blaine, I think, also was an early proponent of 
this. So this really is something that could be an incredible 
success story for the Congress and the executive going forward. 
It is, in my view, as I said, not only about economics, but it 
is about securing democracy. These countries have come a 
tremendous way since the time I dealt with them at the Treasury 
Department in the 1980s, but frankly they are at a little point 
of reform fatigue now, and they need this incentive to try to 
keep moving.
    As you probably know, we have completed nine bracketed 
texts to move the negotiation forward, and these deal with 
topics like market access and agricultural and services, and 
now we have got to begin thehard work of setting the timetable, 
and that is, I think, one of the purposes of the ministerial and the 
summit, to try to march forward with this.
    The early statements by the countries of the Americas were 
to try to complete this by January 1, 2005. I would be 
delighted if it could enter into force before that. We will 
have to see how that works in terms of negotiating with our 
fellow countries. There is one other point on this I think is 
important, given this committee's broader range of interest.
    We know that there are some economic difficulties in the 
world at present, and these always reflect themselves in 
financial markets. What I have said to my Latin American 
colleagues is what greater signal of confidence in the future 
of Latin America, which will be important for investors, than 
moving this agreement forward. So I hope that is one of the 
effects we can have come out of the Summit of the Americas.
    Mr. Crane. Finally, the 5-year U.S.-Canada softwood lumber 
agreement imposes a tariff rate quota on all softwood lumber 
imported from Canada. It is scheduled to expire on March 31 of 
this year--March 31, this month. Proponents of trade barriers 
have made allegations of Canadian softwood subsidies, but this 
has been disputed. Do you agree that the quotas penalize 
consumers and, in this instance, potential home buyers in the 
United States by increasing the price of lumber?
    Ambassador Zoellick. Well, Mr. Chairman, as someone who 
actually spent a fair amount of his professional life in the 
affordable housing industry, I have a pretty good sense of that 
field. I have to honestly tell you I think with lumber prices 
right now, that is not their problem. I think that this is a 
field where I have certainly heard loud and clear from many 
members of the Congress about their larger concerns.
    I think there has been a past practice of subsidies in 
Canada, and it is one of the issues we will need to deal with. 
Since the red light is on, I suspect I will get this question 
to follow-up on.
    Mr. Crane. Thank you, Mr. Ambassador.
    Chairman Thomas. Thank both of you for your cooperation.
    Does the ranking member of the Trade Subcommittee, the 
gentlemen from Michigan, wish to inquire?
    Mr. Levin. Thank you. I will not talk to you about 
softwood. I think your answer to Mr. Crane was interesting and 
revealing, because I think there is a real problem there. Let 
me just say a word. In your testimony, you talk about 
reasserting America's leadership in trade, and I know every new 
administration has a tendency to kind of upgrade its devotion 
and somewhat diminish that of its predecessor.
    I just want to say I do think under the previous 
administration, surely in the last 18 months, there was very 
substantial progress, and I think in part because it was 
willing to tackle some of the tough issues that have been often 
intractable. You say in here, referring to what other countries 
are doing, that we may be losing ground. I just would urge that 
we not overstate that; but in that regard, you talk about the 
small number of FTAs that the U.S. has entered into. So let me, 
if I might, be a bit specific.
    We negotiate an agreement with Jordan. We completed it. 
Will it be submitted here before King Abdullah arrives, so we 
can act on it?
    Ambassador Zoellick. Well, let me answer your first point. 
I certainly think the Clinton administration had a number of 
significant accomplishments, and I have supported them, 
frankly, in terms of the NAFTA and the Uruguay Round effort. I 
do think there was a problem after that and I think it is 
important we face up to the fact that after 1994, the agenda 
slowed considerably, and I do not dismiss any of the work by 
the people in the offices, but I think that relied heavily on 
the fact that the President no longer had the negotiating 
authority that I think we need.
    I certainly take your point that the work over the last 18 
months was important work, and, as I mentioned, that work was 
of a special type in terms of preferential legislation and 
legislation to bring China to WTO, that is different than some 
of the traditional trade negotiations. So I do continue to 
believe that if we are going to move forward and not fall 
behind, and I just have to say respectfully Mr. Levin when I 
talk to people in the business community and what I have seen 
economically, we do run that risk, that we are going to have to 
address that issue.
    Now, to Jordan. I obviously believe that this is a very 
important agreement and I think it has a number of creative 
dimensions. Obviously, when the King comes, he is going to be 
pressing it forward. Just so you know, I have had communication 
just through one other person to Prime Minister Sharon to 
ensure he would support an agreement, and I have been told that 
he supports the agreement; and I think its significance is in 
part not only due to the volatility in the Middle East, but the 
fact that you have a King who is trying to bring his country in 
the right economic direction, and we need to try to encourage 
that as a signal to others in terms of the reform process.
    In terms of the timing, when I have spoken with you, I 
obviously know the priority you place on this one. When I have 
spoken to others, including, frankly, on the Democratic side, I 
hear a priority of Vietnam. I have mentioned in my statement 
the importance of some of the other issues; for example, the 
Andean Trade Preferences with President Pastrana coming and the 
fact that that expires. There are others related to the 
Balkans, given the sense, as I understand it, the prior 
administration proposed that legislation in 1999, and it was 
unable to move.
    So one of the issues that I frankly am going to want to 
consult with this committee and others on is how we do all of 
these agreements, recognizing, and you would know this better 
than I do, that trade agreements are not so easy for the 
Congress to take up one by one by one. So one issue is, 
frankly, how do we handle the agenda that I have tried to lay 
out in my testimony here? Clearly, Jordan needs to be an 
important part of that.
    Mr. Levin. Let me just quickly say I think the only 
controversy about Jordan is among a few--I think a few--who 
have objected to the labor provisions and the environmental 
provisions that Jordan voluntarily entered into. I would hope 
it would be sent up and it would not be used as vote bait for 
other issues. I do not think that will work. It is a sound 
agreement in and of itself.
    Secondly, quickly on steel, a number of us have been doing 
some work on it, and I am going to be sending a letter to the 
administration with a lot of the details about the surges, the 
imports, product by product, and urging a 201 action. Can you 
quickly tell us where you are on this?
    Ambassador Zoellick. Yes. Just on your first point, with 
respect to saying that it only has a labor and an environment 
issue that some people disagree with, that is a big issue up 
here, and I have certainly got that sense from talking to 
people on both sides of the aisle, the recognition. So, as you 
know, I would like to work with you on that issue and we can 
talk more about the specifics of the agreement. I think that it 
is a very creatively drafted agreement. I have some concerns 
about the sanction provisions, but I do not think I can just 
say--well, to be honest with you, we can just sort of move that 
one past. I thinkwe are going to have to discuss this in the 
context of others. But I assure you, Mr. Levin, I would like to move 
all of these as quickly as we can. We just have to try to see how we 
can resolve those.
    Mr. Levin. If we try to package everything, we will do 
nothing. Quickly about steel then.
    Ambassador Zoellick. Yes, on steel, as you and I have 
discussed, I and my colleagues in the administration are 
looking very seriously at the 201 option, because frankly there 
is a clear recognition about the problems that the industry 
faces, how it has never really fully recovered from the 1998-
1997 period, and an important part of that, as you know, is a 
commitment by the industry and the unions to a restructuring, 
so that at the end of that period, we have not just had 
protection, but we have had a more competitive industry.
    Secretary Evans, Secretary O'Neill and I have been in 
discussions with the industry and the labor unions about that. 
I have certainly asked both to give us their suggestions on how 
that might work. We also, I think, need to look at this in the 
larger international context, because clearly the industry is 
dealing with capacity issues, dealing globally. But we are 
seized and focused on the issue, and as we have discussed, I 
frankly think the 201 approach, if we can work out these 
pieces, could be more productive than others.
    Mr. Levin. Thank you.
    Chairman Thomas. Thank the gentlemen.
    Does the gentleman from Michigan wish to inquire?
    Mr. Camp. Yes. Thank you, Mr. Chairman.
    Mr. Ambassador, my question goes to agriculture, 
particularly the area of dried beans. The Mexican government 
for a number of years has been putting requirements into the 
permitting process for us to export our dried beans to Mexico, 
which our producers would like to do. Recently, as late as 
February 27th, the Mexican government published details of 
their auction to be held in March, and in that said that only a 
quarter of the permits would be made available, and this is yet 
another effort where they have made these requirements.
    Auctioning only a quarter of the permits would put our 
growers at a distinct disadvantage. Is there any comment you 
can make on that particular problem?
    Ambassador Zoellick. Yes, Mr. Camp. I was aware of the 
issue and raised it with my Mexican counterpart, Secretary 
Gavez, in one of our first phone conversations. I then met him, 
either this week or last--time is passing quickly--and raised 
the fact that the regulations you referred to are a 
disappointment, not only for that reason, but some of the 
timing requirements--I think they only allow 35 days to be able 
to load this on railroad to Michigan and other places would be 
unduly prohibitive, and the only access to the licenses are for 
people who have had licenses before.
    So I told him how important I thought it was that we move 
on this. He needs to work with his agricultural ministry. He 
pledged to do so, and we have some other issues that are 
related to this that I hope will allow us to get a rapid 
resolution.
    Mr. Camp. Thank you. Also, with the impending expiration of 
the U.S.-Canada softwood lumber agreement, are you working with 
the Secretary of Commerce to come up with a plan to prevent any 
injury to the industry between the end of the agreement and the 
possible imposition of preliminary countervailing duties and 
antidumping duties?
    Ambassador Zoellick. Well, I am glad you raised this 
because it is particularly important in an open forum that we 
all have a sense of how we are trying to approach this issue. I 
tried to speak with a wide range of people in the industry 
about how they thought it was best to approach this, and at 
first there was some thought about a continuation of the 
agreement, but I got a strong message from the industry that 
that was not their preference, that they prefer to have us 
basically get out of the way so they could file the antidumping 
and countervailing duty suits, and I told them I would be 
supportive of that process.
    As I mentioned or alluded to in my conversation with 
Chairman Crane, I also pointed out that when I last dealt with 
this issue at the Treasury Department, we actually were able to 
get an export tax in Canada because there were findings of 
subsidies. If the subsidies are found and the dumping duties 
are found, I still believe that may be a productive solution, 
but one has to reach that step. The last point, Mr. Camp, on 
this is that I made clear to Minister Pettigrew who is 
certainly aware of this issue, that the concerns here are 
volatile to explosive, and I urged him to consider any other 
steps that they might take as the agreement ended so that we do 
not make the problem worse.
    So I know the importance of the issue and it is my 
understanding that this is the preferred approach of the 
softwood lumber industry.
    Mr. Camp. Lastly, I have one other topic, being from 
Michigan, obviously U.S. automotive exports face considerable 
obstacles in other markets, in contrast to our fairly open U.S. 
market. Obviously our access to these markets is just a simple 
matter of fairness, as well as jobs here. Do you have any 
comment on that particular area, as well?
    Ambassador Zoellick. Well, let me start with this. I think 
the U.S. auto industry, under competition, made tremendous 
advances in the 1980s, and I think that, along with those 
advances, the fact that the U.S. auto industry now is a 
competitive force around the world, which frankly, at an 
earlier point, I am not sure that they were focusing on those 
markets.
    So I think it is particularly important that we try to 
follow through with them, to try to help them open those 
markets. The whole industry is changing globally, as you know. 
A large number of the Japanese auto companies are now either 
owned by or have significant investment portions of other 
countries, and that actually creates some possibilities, 
because the key in a lot of these markets is to try to 
deregulate and add some transparency. This is true in Korea as 
much or more as it is in Japan, to try to open opportunities 
for our auto industry, as well as the auto parts industry.
    So I think those are important issues on the agenda. I am 
meeting the Korean president this week and it is one of the 
ones that I plan to mention.
    Chairman Thomas. Thank you very much.
    Thank the gentleman. Does the gentleman from Oklahoma wish 
to inquire?
    Mr. Watkins. Thank you, Mr. Chairman, members of the 
Committee.
    Mr. Ambassador, it is good seeing you. I want to say thanks 
for returning my call, even if it was on a Saturday. I 
appreciate you getting back to me on that.
    Ambassador Zoellick. Pleased to do so.
    Mr. Watkins. I would just like to say, on the last 
statement of your statement there, it is very important and I 
want to talk about it--agriculture, my friend from Missouri, 
Kenny Hulshof and I, worked and pushed the last several years 
on trying to get an agricultural ambassador status, to try to 
give us hopefully more prestige at the table for agriculture, 
because I am a alarmed, very alarmed, when I see what is 
eroding in our trade overall, and I want to bring that up a 
little bit.
    But your last comment is we would be appealing and people 
would come to us if we are accessible and resolute. Well, I 
want to be resolute for the United States of America. I want to 
point this out. I think literately, and my colleagues, I do not 
think we have had the right shake in agriculture because a lot 
of people in agriculture do not have an emotional commitment 
about agriculture.
    I think our USTR, back in 1993 at the GATT talks, Uruguay 
rounds, sold us down the drain, to be very truly. I want to 
point this out because our trade decisions affect this--even 
our budget process right here. Our trade decisions affect some 
markets around the world and our supply and demand factor 
depends on those markets. You made a statement earlier where 
the EU has signed 27 bilateral trade agreements when we have 
only signed two. Many of the bilateral trade agreements give 
them a better positioning in agriculture.
    Now, why they are able to do that is because of that 1993 
Uruguay GATT talks, where basically all the other things were 
agreed to by the USTR, by the United States, all of them except 
agriculture. When we got down to agriculture they finally said, 
after negotiating and discussing, they finally said, well, 
let's have a peace clause. Here is what happened, fellow 
committee members, with that peace clause; it grandfathered in 
over $7 billion worth of agriculture subsidies for the European 
Union, Earl, and only grandfathered in about $200 million for 
the United States, which we basically have not used.
    What has happened has caused us to lose a lot of markets. 
We cannot sell. Because of supply and demand, we find that it 
drives the U.S. agriculture products down, and then we end up 
having to pay more in our loan programs out of our agriculture 
budgets here, and we get criticized a great deal here in the 
United States.
    I know my colleague from Maryland said something about the 
steel industry earlier today, but less than four decades ago, 
we had 16 percent of our population in the production of 
agriculture. Today we only have 1.5 percent of our population 
in the production of agriculture. We have to go back and say we 
can produce--we can produce, but we are not willing to sell. 
The European Union says we will pay whatever the price, and I 
would like to know your plan. I am concerned about the fact, 
Mr. Ambassador, we have not had people sitting at the table in 
your position that had a genuine concern about agriculture.
    I know some people say, well, the FSC and other things are 
going to be affected if we push this or that, but what that 
tells me is we are willing to sell our agriculture people down 
the drain. I would like to get your comment and I have got one 
follow-up I want to ask you.
    Ambassador Zoellick. I will try to be brief, Mr. Watkins. 
This one starts with the President. The President, whenever he 
talks about trade, talks about agriculture. When he interviewed 
me for the job, it was the first topic he raised. So the 
commitment of the President on agriculture and trade is the 
start of the pyramid. I agree with you about the importance of 
the agricultural ambassador. I think it is a very important 
appointment. I am in the process of looking at a number of 
people. I think it is important that person have excellent ties 
with the agriculture community in the United States, but also 
be able to negotiate firmly abroad.
    I may give you partial satisfaction on this. I am from 
Illinois, and I have family who still farm in Minnesota, so I 
have some sense of the farming business a little bit, and I 
also early, in my tenure, met with a large number of farm 
groups because of the importance I place on this issue, and I 
think that Secretary Veneman and I, who I have the greatest 
respect for in this, will be able to work altogether.
    As you know, even with the present limitations, these 
markets abroad are critical to U.S. farmers, because about one 
out of three acres that the farmer plants in America is 
exported, and about 20 to 30 percent of farm incomes deal with 
exports. So even with the limitations, it is critical to their 
role. A lot of this comes down to the EU, as you have 
mentioned, and we know this is not going to be easy given the 
subsidies that they have built into the system. What is 
happening in the EU right now, however, is interesting and 
gives us some prospects----
    Mr. Watkins. Would you yield just a second?
    Ambassador Zoellick. You bet, sir.
    Mr. Watkins. I would like my colleagues to know that out of 
EU's budget, they spend over 50 percent, nearly 60 percent of 
their budget, to subsidize agriculture.
    Ambassador Zoellick. That is exactly the point I was going 
to come to, is that given the problems they are now having, 
with mad cow disease and the foot-mouth and other issues, plus 
the fact of European Union enlargement, they are going to even 
get more pressure on this issue. There will certainly be many 
in the European Union who will resist change, but there is 
supposed to be review in the year 2002 of the EU's policies, 
and frankly one of the reasons I would like to get trade 
promotion authority is I would like to go to the EU and say we 
are now backed by our Congress to go ahead and negotiate; where 
is your reform in the CAP program in 2002 so we can move ahead 
to global round, because I think the stars may be aligned to 
move this further in the EU.
    Chairman Thomas. The gentleman's time has expired.
    Mr. Watkins. Could I refer also to page five----
    Chairman Thomas. The gentleman's time has expired. We have 
very limited time, and other members wish to ask questions as 
well. I apologize to the gentleman. Any Member wishing to 
submit a written question to the ambassador will get a very 
full answer.
    Mr. Watkins. Thank you, Mr. Chairman.
    Chairman Thomas. Does the gentleman from Texas wish to 
inquire?
    Mr. Doggett. Thank you, Mr. Chairman.
    Ambassador, is it your personal opinion that prompt 
congressional approval of the Jordan agreement as written would 
be in the national interest?
    Ambassador Zoellick. As written, I am not sure, Mr. 
Doggett. I believe that there are some serious issues related 
to the final use of trade sanctions. I believe that, in the 
Jordan agreement as a whole, there are some important 
principles there that we need to try to work on, and I have 
talked about these with Mr. Levin. I think the idea of having 
countries enforce their own laws is an important step. I think 
the step that is related to the fact that when we consider 
enforcement, we do not just look at one incident, but we look 
at the question of whether there is a pattern, is another 
important issue. I think therelationship to trade is an 
important issue.
    So there are a number of elements of that agreement that I 
think are very interesting for us to work on. I think, when it 
comes to the level of sanctions, this is something that could 
still be very difficult for us. So, in terms of the larger 
context, I would like to move forward that agreement. I would 
like to have further discussions about enforcement.
    Just one other word on this, if I could. Having talked with 
both labor and environmentalists about this general topic, the 
sense that I have gotten is they are most interested in some 
sense of equal treatment of trade and labor and the 
environment, and maybe that is something we can work on, even 
within this framework. But I would like us to try to resolve 
those issues expeditiously so we can get this agreement done.
    Mr. Doggett. I know you are familiar with the executive 
order that President Clinton signed in 1999 requiring 
environmental reviews of trade agreements and of the guidelines 
to implement those environmental reviews that your predecessor, 
Ambassador Barshefsky, approved last fall. How do you plan to 
implement environmental reviews of our trade agreements so that 
we can have objective information about the consequences, not 
only within this country, but around the world? Perhaps the 
softwood lumber agreement that has already been mentioned would 
be a good example of your explaining to us your level of 
commitment to see that those environmental reviews are complete 
and meaningful.
    Ambassador Zoellick. Let me just take the last one first. 
Since I do not think we are on track to have an agreement, I do 
not think we are likely to have an environmental review. I know 
that a number of the environmental NGOs actually share some of 
our same concerns about timber practices in Canada. So it is a 
good example of how we can work together, even if not formally. 
On your larger question, I believe these environmental reviews 
can play a very important role, and one of the things I frankly 
want to try to get a better sense of is how we do them formally 
and informally, and timing.
    Let me give you an example. In talking with some 
environmental groups over the past couple of weeks, some have 
suggested to me that as we start to frame our negotiating 
objectives, there may be things that we can do in the market 
access area; for example, export subsidies in the European 
Union certainly raise questions among environmentalists. There 
are some in the marine fisheries area where we can have a win-
win solution as we go forward. Then there is a question about 
how the trade and economic flows need to be complemented by 
other environmental issues or protections or other aspects; and 
so I frankly am very open about how we try to approach this, 
and I know that back in the NAFTA and other processes, that 
this was an important precedent that was set, but also builds 
broader support; and that, to me, is part of the name of the 
game here.
    Mr. Doggett. Thank you. Another environmental concern has 
been the use of investment agreements that are certainly 
important to protect our investment abroad and the investment 
of others to challenge, particularly under NAFTA, existing 
environmental provisions. I know you are familiar with the suit 
of a Canadian company claiming over $1 billion in damages 
because California expressed concern about MTBEs and the threat 
that they posed to the drinking water supply. How, given the 
likelihood that investment provisions would be part of a 
Singapore or Chile agreement, how can we ensure that we protect 
the rights of investors without seeing these agreements misused 
to undermine our environmental laws?
    Ambassador Zoellick. Mr. Doggett, I am looking at that 
question right now. I am trying to get more detail about these 
cases to get a sense of whether they are real or whether they 
are cases that are just trying to use a process. As you 
mentioned, we obviously do not want to make changes on our side 
that end up hurting our American investors abroad, but there 
may be some aspects that, to ensure that our regulatory and 
safety and environmental provisions do not become a basis of 
trade action, that we have to consider some adjustments.
    All I can tell you beyond that is that I have had this 
discussion with both my Canadian and Mexican counterparts, 
related to Chapter 11, which is the NAFTA one, and the prior 
Mexican administration was unwilling to consider any adjustment 
in this one. This one is willing to look at the issue to try to 
deal with it. So I would be pleased to work with you as we 
develop our thinking about how to get this fine balance.
    Mr. Doggett. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Thomas. Thank the gentleman. Does the gentleman 
from Ohio wish to inquire?
    Mr. Portman. Thank you, Mr. Chairman.
    First, welcome, Mr. Ambassador. We appreciate your hands-on 
approach, your keen recognition of the needed partnership 
between the legislative and the executive branch, and from what 
I have heard this morning, your contacts around the world. I 
think they are very helpful. I also appreciate your taking a 
fresh look at the steel issue through the 201 lens. I know the 
administration is committed to doing that. I think that is more 
productive than where we have been on that issue.
    With regard to trade promotion authority, it expired in 
1994, as you well know, and during those seven years I believe 
there has been a lot of pent-up interest in free trade 
agreements and expanding markets for American products. I am 
going to be very interested in providing trade promotion 
authority for all the reasons you have talked about this 
morning. I do think that, as you said earlier, we need to 
broaden the support for trade, and I do not think we can do 
that unless the WTO, the World Trade Organization, works. The 
heart of the WTO, of course, is the dispute settlement 
procedure.
    As I look at the cases that have come up, where the United 
States wins, we do not always get compliance. Where we lose, we 
always comply. I would bring to your attention one that you 
have noted in some other hearings and is in some of your 
testimony, which is the beef and banana case. There, we win 
constantly. Time and time again, the Europeans simply snub 
their noses at the United States, and therefore the WTO. I 
would just say that if we are going to have this broadening 
consensus and support for trade here on the Hill, we have got 
to have a system that works.
    When those of us who promoted the WTO did so, we did so 
because we were convinced that we could have some resolution to 
our cases. Frankly, the ag community was very critical to 
getting WTO approved and moving it forward. These two cases are 
about a lot more than those two products. They are about the 
credibility of the WTO. In your testimony, you said that you 
were interested in working with the EU, and I think I am 
quoting you here accurately, ``to improve and strengthen the 
WTO process.'' I wonder what you mean specifically by that and 
what actions you plan to take to ensure that we have a WTO that 
we can rely on and therefore promote more free trade up here on 
the Hill.
    Ambassador Zoellick. Well, Mr. Portman, I am in full 
agreement with you, as you know, on this. I have always tried 
to emphasize to Europeans, even before I was in this job, the 
key point that you made, that these are more than these 
individual issues. They are a sense of confidence in the WTO 
system. Thiswas best made at a meeting I was at in London by 
your colleague, Cal Dooley, from California, who said he did not have a 
particular interest in the products at issue, but for him to stand up 
in the well of the House and say he supported a dispute resolution 
system where we win and we win and we win on the appeal and there is 
not an effective resolution undermines support.
    So I agree with that, four square. On the particulars of 
the ban at issue, since that one is front and center at 
present, I have had a chance to talk with the two primary 
companies involved. As you know, they have a slightly different 
approach to this issue. I have also tried to ensure that the 
approach the United States is taking has basic support 
throughout the Caribbean. I know that Mr. Rangel is very 
interested in that, as well as Latin American countries, and I 
think all but one basically support the approach we are taking.
    We have a near-term issue here that I will be discussing 
with my European colleague, which is that I would like to at 
least have some time to be able to try to negotiate with him to 
see whether we can resolve that issue, working closely with the 
companies involved. The European Union is about ready in March 
to take a position in a lower-level committee, that would 
preclude the followthrough of negotiations that occurred in the 
past because it would be creating a new system. I said quite 
clearly that if they do that, I see no recourse other than to 
start to use the carousel provisions.
    If we do that, the European position is that they will 
follow up with the foreign sales corporations. So it is again 
important that everybody be aware of what we are heading off 
into here. But I feel as strongly about this as you do, and I 
think that, at a minimum, we need some time to try and see if 
we can close gap, and so I have urged our European colleagues 
to give us that time period to try to do that.
    Mr. Portman. Thank you, Mr. Ambassador.
    Thank you, Chairman.
    Chairman Thomas. Thank the gentleman.
    Does the gentleman from Wisconsin wish to inquire?
    Mr. Ryan. Thank you for being here today, Ambassador 
Zoellick, and I am excited about your testimony, especially 
with regard to agriculture. I represent southern Wisconsin, and 
we like to call ourselves America's dairyland. I know some 
Californians may disagree with that, but in our part of 
Wisconsin, we produce basically class three and class four 
milk, which is butter, cheese and dry, powdered milk. I wanted 
to bring an issue to your attention, the milk protein 
concentrate issue. It is something that has come about since 
the Uruguay round. It is becoming a growing problem in the 
dairy industry with respect to its content in cheeses.
    A lot of folks in the dairy industry are encouraging you to 
exercise section 201, 301. There is a lot of angst out in dairy 
land. Just to kind of give it to you in a paraphrasing way, 
when you bring more milk protein concentrates abroad into the 
content of cheeses, you are displacing the dairy products we 
produce right here in America. So there is a lot of concern out 
there. I wanted to bring it to your attention, but more 
importantly, have you looked at this? What is your take on 
this? What do you think would be reasonable solution to this?
    Ambassador Zoellick. Unfortunately, Mr. Ryan, I have not 
had a chance to look at this, but I would be pleased to do so 
and get back to you on it.
    Mr. Ryan. I would appreciate that. Thank you.
    Chairman Thomas. Does the gentleman from Massachusetts wish 
to inquire?
    Mr. Neal. Mr. Ambassador, there is a quote that you used in 
your written testimony which I thought was not only timely, but 
catchy. You stated that, as President Bush has stated, free 
trade is about freedom; quote, ``Economic freedom creates 
habits of liberty, and habits of liberty create expectations of 
democracy.'' What is wrong with Cuba?
    Ambassador Zoellick. Well, Cuba is not a democracy. That is 
for certain, as a starting point. Are you talking about in 
terms of trading relations?
    Mr. Neal. Yes; China, Vietnam.
    Ambassador Zoellick. Well, I think that Cuba--I know people 
often try to compare Cuba to China, and I honestly see them as 
quite different for the following reasons. We have seen no 
evidence of Castro being willing to implement any change, and 
hope always springs eternal, but instead what we see is him 
shooting down unarmed planes. We see him getting defectors and 
trying to rope them back into his country. So, just again to be 
slightly more factual about this, I first visited China in 
1980, and I last visited China a year or two ago. There have 
been enormous changes in China. Depending on how you count, 
about 30 to 50 percent of the economy is in the private sector 
in China.
    Right now, the problem in Cuba is that any economic opening 
just ends up supporting his dictatorship. If one can try to 
figure out a way to change that, as it has been changed in 
others, well, then it could provide the basis of opening. But 
right now, that is not the Castro we have seen; and I have to 
say, based on a 31-year record, I do not see him changing his 
spots.
    Mr. Neal. There are many of us who believe that Castro's 
demise would be hastened by opening up trade between the two 
countries and ending many of the problems that have existed 
over the past four decades. But my sense is that this is an 
example where we sometimes miss the point. I mean, we are 
really talking about Florida and the electoral count, and we 
have to get past that in this debate as it relates to Castro.
    My sense is that Mr. Crane has been more than fair here as 
chairman of the Subcommittee on Trade, and there are many 
Republican members here, incidentally, who have been very open-
minded about this. They have been terrific. I sense that in the 
House--that we could come very close to passing a resolution 
reversing this policy. There is growing support here for 
opening up trade with Cuba, and we cannot continue to say that 
the world's largest nation, which has taken this great leap of 
faith that we did by ending annual MFN votes and proceeding 
with a permanent trade agreement with China, and then in the 
next breath say we cannot trade with this small nation, 90 
miles off the American shore which is not terribly important to 
America's daily interest any longer. There is a real chance, I 
think for you folks at the White House in this instance, to 
reverse this policy toward Cuba.
    As for our side, let me tell you, Mr. Ambassador, that we 
were as guilty of many of these things as I suspect you are, 
even in the argument that you gave me. There is room here for 
honest disagreement. But at the same time, I hope that you will 
use the private moments with the President to urge him to take 
a new look at this. There are Republican members here, as I 
said earlier, who are willing to take a new look at it. On the 
Democratic side, I think we are willing to take a good look at 
it. And I hope that you might offer a new perspective when you 
are back to see us in the near future.
    Ambassador Zoellick. Well, I take your point. I understand 
what you are saying.
    Mr. Neal. Thank you, Mr. Ambassador.
    Mrs. Johnson OF CONNECTICUT. [Presiding.] Welcome, Mr. 
Ambassador, and since the next person to question is Mr. Shaw, 
and after him was myself, I am going to just go ahead with my 
question while he returns from voting. First of all, let me say 
how very important it is that I think you deal directly with 
the issue of trade promotion authority.
    There is no question but that we were compromised in the 
last few years in the international arena by not having proper 
negotiating authority resting solidly in our U.S. Trade 
Representative, and I look forward to working with you on that. 
But also want to mention that Egypt is one of America's most 
important allies in the Middle East, and a U.S.-Egyptian free 
trade agreement, when combined with free trade agreements with 
Israel and Jordan and the Palestinians, would form the basis of 
a Middle East free trade region with our essential peace 
partners.
    I would like to work with you as my colleague, Howard 
Berman, and I worked with the preceding USTR on promoting this 
kind of agreement, because I think it not only would be 
important to ensuring the integration, the economic integration 
of our friends in the region, but also our competitiveness in 
the face of an increasing number of association agreements 
between the EU and, not only countries in that region, but also 
in North Africa.
    I think those association agreements are very compromising 
of the competitiveness of American businessman and American 
products in those countries, and bode ill for the future. Any 
comment on that proposition?
    Ambassador Zoellick. Well, I certainly share your objective 
and I certainly share the importance that you place on Egypt, 
which I think is about 90 percent of the population of the Arab 
world. I believe President Mubarak may be coming to visit 
before long, so it is a subject I suspect that he will also 
raise. I have discussed with my staff what are the practical 
steps we could start to take on this.
    As you may know, we have a trade and investment 
facilitation agreement, and I think we have to build in an 
important discipline in this process. I know you would agree. 
People sometimes like the idea of free trade until they 
actually have to do the work to make it happen. Right now, the 
Egyptians have not been as cooperative as I wish they would be 
in the WTO negotiations. So maybe there is one way that we can 
have some common ground there, as well.
    In terms of their intellectual property and their tariff 
issues, we have got a ways to go there. But my on view on this 
would be to try to set a path and some building blocks to see 
whether we can make some progress and work toward the long-
range goal, because we do not do either them or ourselves any 
good by just saying, ``Oh, well, we are going to have this 
agreement,'' but without recognizing that there has to be some 
serious, serious reforms in Egypt to accomplish this.
    As you know, our aid program is about $2 billion a year to 
Egypt, so it certainly makes sense that we try to facilitate 
trade. But, unfortunately, I have sometimes seen in the past 
that that aid has precluded the reforms that they need to make.
    Mrs. Johnson OF CONNECTICUT. I certainly appreciate the 
importance of the comments you just made. It is also true that 
it is very difficult for countries to make some of the progress 
they need to make in some of these areas, both reforming their 
own laws, intellectual property issues and so on and so forth, 
without, in a sense, some clear opportunity for the country at 
the end of that road. So I think that is the tension that we 
are confronted with in Egypt. We have used American aid dollars 
exceptionally well to promote some analysis of Egyptian law and 
American law and so on and so forth, and make progress in the 
discussions in these areas; but I think it is important to 
begin looking at what is the broader goal, and how do we enable 
other countries, as well as ourselves sometimes, to make the 
tough steps that are necessary.
    Now I would like to both yield the chair and the right to 
question to my colleague, Mr. Shaw, from Florida.
    Mr. Shaw. [Presiding.] Thank you and I join my colleagues 
and welcome you before the hearing. My district is in South 
Florida. I have been told that much of the questioning has 
become somewhat parochial, but that is the way we do business 
around here on many things. But I wanted to ask you about two 
issues that I think are important to the entire country.
    One is, as you probably are aware, there probably will be a 
permanent home for the Secretariat of Americas, and South 
Florida is in there as a strong contender. I think that from a 
language standpoint and an ethnic standpoint, as well as 
certainly an economic standpoint, that we should prevail in 
that. I would hope that we would have your support in making 
Miami Dade County the permanent seat of the secretariat.
    But I also want to talk to you just a moment about Haiti 
and what is going on there. We have, I think, probably a 
tremendously failed policy in Haiti. The country is suffering 
terribly because of the failed policy that we have had, partly 
because of it and partly because it has not gone in the right 
direction. I think one thing that we have learned in Haiti is 
that you cannot have a democracy without an economy. People 
have to have something to hold onto, and it is hard to tell 
somebody how important democracy is when the children are 
suffering and going to bed hungry. People are living in 
cardboard shacks down there with open ditches for sanitation 
waste. It is just a nightmare.
    I do not know whether the administration has had time to 
really try to formulate some type of a Marshall plan or some 
way to return an economy to that island nation, but I think it 
really speaks very poorly of our country, that we have one of 
the poorest countries in the world right there at our doorstep. 
What do you see as what you might be able to do as the trade 
representative of the United States in order to bring that 
economy up to something that would certainly be much better 
than what it is today?
    Ambassador Zoellick. If I could, Mr. Shaw, let me just 
address your first point for a moment, and that is I think it 
would be an excellent idea to have Miami be the location of 
that for the Free Trade Area of the Americas. I have to say I 
think the commitment by people in Florida, in general, and 
Miami to try to support the overall concept is a testament to 
why it would be a good location. Just as a small area of trying 
to both support that, it also demonstrated, we agreed to have 
the next round of our talks with Chile later this month in 
Miami.
    In the process, I must say that one of the reasons that 
helped us do it is that some of the civic institutions in Miami 
were particularly cooperative in helping us be able to put that 
forward. So they have a record of demonstrating some support 
for the trade issue in a practical sense, as well as in a sense 
of a policy commitment. So I think that would be a wonderful 
result.
    On Haiti, like you--it is a tragic and sad story in that we 
occupied this country for about 17, 18 years earlier in the 
century. We occupied it again. We put billions of dollars, as I 
understand, into it, and yet it is sinking back. I think, as 
Mr. Rangel had probably pointed out more generally in the 
Caribbean, thebest way that we can help in the trade area is to 
try to provide the openings so that if some businesses start to develop 
and small businesses develop, they are going to do so in sectors that 
are sometimes somewhat sensitive here.
    One of the things that this Committee managed to reach some 
agreement, and in doing so talked to some of the industries 
that were most concerned about that, as to how we could create 
special trade preferences. I think that is the best way we can 
approach--as you know, you cannot do this for another country. 
They have to be willing to build the small-business sector, the 
rule of law, deal with the violence issues. But if they do, 
then we really do have to be ready to buy their goods so that 
those people have jobs and so they have some sense of improving 
their livelihood.
    Mr. Shaw. Also, of course, following on to what you are 
saying, is it will also promote a great deal of investment, 
which is tremendously important.
    Mr. Hulshof.
    Mr. Hulshof. I appreciate that, Mr. Chairman.
    Welcome, Mr. Ambassador.
    Mr. Chairman, mindful to your suggestion to us that we may 
be speaking to a broader audience, I want to seize on something 
that you said in your written testimony, and that is helping 
make the case to the American people. I appreciate that fact 
that you have acknowledged that, in addition to your primary 
role of sitting at the table and negotiating with other 
nations, that the case has to continue to be made to our own 
domestic citizens.
    Out on the hustings, Mr. Ambassador, NAFTA, to some, is a 
four letter word. The battle in Seattle was a cause celebre for 
those opponents of globalization. Even now, protectionists look 
at this unprecedented trade deficit and they say there is a 
disaster waiting to happen. To the displaced worker, for 
instance, whose sees simply the disparity in labor cost in this 
country than, say, with other nations, and they see a plant 
closing in our country, relocating to that other nation, often 
to that displaced worker it is simply a matter of cheaper labor 
when, in fact, as we know from this Committee, it could be the 
international tax laws that we have that put our businesses at 
a competitive disadvantage.
    It could be, for instance, as we have been interrupted by 
these votes, with these upcoming rule on ergonomics that is 
going to impose an additional cost of American business, that 
Congress, I think, bears some responsibility that we often 
create an unfriendly business climate, and that is part of the 
discussion, although that is probably a little bit more than 
you wish to take on as far as helping make the case. But I do 
want to talk about a specific, and Mr. Watkins very 
passionately talked about agriculture, as Mr. Ryan did.
    I want to focus just a little bit on biotechnology. The 
European reluctance to accept the importation of GMOs, and 
again, that is the terminology, genetically modified organisms, 
although I prefer to call it genetically enhanced foodstuffs. 
GMOs have been a source of tension, as you know, in United 
States-European Union relations. It has been our position that 
GMOs are safe for human consumption; that we are in compliance 
with not only sanitary, but phytosanitary measures. The EU 
contends that GMOs have not been proven safe for human 
consumption. What I would say to them anecdotally is that after 
visiting my parents this past summer on our Missouri family 
farm, that part of our fare was BT corn on the cob, and I am 
none the worse for wear, but I know that is probably not 
something we can go to the European Union with.
    I do want to seriously get to this point. The University of 
Missouri, which is in my hometown of Columbia, is becoming 
really a national leader in biotech research, and whether you 
are talking with those who make their living in agriculture--
you mentioned your own experience of having family connections 
to agriculture--or whether you are talking to the dedicated 
researchers like the University of Missouri, I think the 
sentiment is shared that biotech does offer some really 
innovative ways for farmers to be more productive and to 
continue to meet the world's ever-expanding need for food.
    So my concern is with the EU's hostility to biotech. They 
are our third-largest export market for agriculture goods, but 
the restrictions on GMOs are really hurting our ability to sell 
commodities abroad. My question generally to you then is, if 
you want to comment on anything that I have mentioned to date, 
but what assurances can you give to those researchers, to those 
producers in our own country, that this administration will 
continue to pursue this issue to ensure that our farmers and 
ranchers are not put at a competitive disadvantage? Let me just 
say I do recognize the political sensitivity of this issue in 
the European Union. How are you planning to work with the EU 
Member Statess on this issue?
    Ambassador Zoellick. Let me just answer your first comment 
briefly and then go to the core of it, because I think your 
first comment does bear a moment, and that is it is going to be 
vital that all of this, and this is going to be something I am 
going to try to do with the limited resources of USTR, try to 
communicate more broadly. As you can tell even today, I am 
trying to say this is not simply a matter of economics and 
business, as important as that is. It also relates to freedom 
and security. I think, in the whole globalization debate, we 
are going to have to be sensitive to the values and anxieties 
that are developed. There are different ways we can do that.
    One that I have mentioned in some contest is, given the 
high sensitivity to HIV-AIDS, I was trying to be very quick in 
making sure people recognize we are not changing the policy and 
wanted to work with people to try to address that problem, 
because it is going to be core to building support. But on your 
core issue here, I am in 100 percent agreement with you. This 
gives me extraordinary frustration, and like you, I call them 
GEMs as opposed to GMOs, because this is, to me, a classic 
situation of where science is developing something with 
enormous potential and people are acting as if they are in the 
dark ages or the Luddite era in terms of refusing to understand 
the safety that is associated with science and bioengineering.
    They are willing to consider how a map of DNA can help 
their health, but they are unwilling to use the same processes 
in what they eat. It is even, in my view, to try to address it, 
we need to try to draw the support of others, the developing 
countries, for example. Many of the developing countries, 
including China, are much more supportive of this because they 
see the importance of how this might help with vitamin A and 
rice and deal with blindness and disease, might help with 
health, might help with dealing with hunger in parts of the 
world. So in part, as in many areas, we are going to have to 
build a coalition to get better support.
    Second, we are going to have to deal with the fears, in 
terms of food safety. In the case of Europe, much of this is 
not based on us. It is based on the fact they do not trust 
their own health systems because of the problems of blood and 
the various meat issues and others. If you are going to deal 
with the real problem, you have to deal with that real issue. 
This, in part, I think will require the Europeans to clean up 
their own act in terms of safety.
    I think it is vital that in our work on this, that we keep 
emphasizing the importance of having decisions based on sound 
science. When I talked with some agricultural groups, they 
emphasized to me the importance of the Codex process and how we 
needed to work with the agricultural department, and Ann 
Veneman and I are already doing that. I have tried to emphasize 
that process. We are also going to have to do a better job of 
educating people to understand this.
    The last point I would mention is that the fight is often 
in the trenches. Tolerances. At the end of the day, the way 
this is going, it might end up being that there will be 
different lines drawn, and then it will be a critical question 
of what degree of tolerance do you allow? When I was actually 
in Kansas, in the course of the last year, people were pointing 
out to me the danger of pollen that might spread from one crop 
to another, or the trucks that these products are hauled in.
    So I am in 100 percent agreement with you on the issue. The 
last point I will say is, as my overall theme, this is going to 
be one of the key issues we are going to have to try to get 
done in another WTO round. I cannot do that unless you give me 
trade promotion authority.
    Chairman Thomas. [Presiding.] Thank the gentleman. It is an 
important area and it clearly needs additional discussion and 
approaches, but the gentleman's time has expired.
    The gentleman from North Dakota?
    Mr. Pomeroy. I thank the chairman.
    Mr. Ambassador, I congratulate you to your new position and 
I think your background is really exciting in terms of the 
broad experience you bring to bear on our collective behalf. As 
the administration looks for fast track authority, I think it 
will be very important for us, particularly those in the other 
party, to have a sense of how this administration views trade 
deals. I tend to be, representing an agricultural production 
area, strongly in favor of market expansion.
    On the other hand, we have seen good trade deals and we 
have seen bad trade deals, trade deals that have insufficiently 
protected our interest. That is why there is a bipartisan group 
of us in the House and Senate that have formed a Farmers and 
Ranchers for Trade Caucus, to make certain that even while we 
promote trade deals, we do not end up with the kind of 
differential that works to our disadvantage, as was pointed out 
so well by my colleague from Oklahoma.
    I think in terms of getting initial credibility, entree, 
Mr. Ambassador, the Jordan deal is very, very important. Some 
describe the turmoil in the Middle East now as really more 
about forces of modernization versus antimodernization. I think 
the Jordanian leadership, in advancing this trade deal, clearly 
comes down on behalf of the forces of modernization. Prompt 
recognition of that through prompt action on this trade deal, I 
think, gives us a wonderful foreign policy opportunity and 
trade opportunity at the same time. It is also an excellent 
opportunity for the administration to, I think, gain some 
credibility from those of us that will be watching carefully.
    That was my observation. Now, to my question. Durham wheat, 
and specifically the conduct of the Canadian Wheat Board. State 
trading enterprises is one of those areas where I do not think 
we have sufficiently protected our interest versus the 
operation of a monopoly marketing system that controls 
completely through the vertical flow of product in other areas, 
and we have certainly seen that, grain farmers trying to 
compete against the Canadian Wheat Board have absolutely seen 
that.
    We are convinced that there has been inappropriate, trade-
violative activity of the Canadian Wheat Board, and that was 
why we supported strongly the petition advanced by growers in 
our region for a section 301 investigation. Your predecessor 
approved the petition, and I understand now that your office 
has embarked upon the requisite investigation of whether or not 
there have been illegal or inappropriate activities of the 
Canadian Wheat Board. Can you advise us of the status of the 
investigation?
    Ambassador Zoellick. Certainly. Let me just comment briefly 
on your first point. I definitely agree with you, and just to 
give you an example that probably hits home, I have pointed out 
to the Chinese that the bilateral agreement they made with us 
on agriculture, I believe in 1999, has been blocked in the area 
of wheat because of them stopping things at the border related 
to alleged phytosanitary standards, and that I noticed they 
just did an agreement with Canada at the same time.
    So when we talk about WTO accession, I have said if you are 
going to be able to be in a position to say you are going to 
keep one agreement, you have got to keep all your agreements, 
and I think this phytosanitary issue is going to be one that we 
are going to have to fight a lot harder on. Secretary Veneman 
and I just, I think, made some headway with Brazil on what, on 
this issue, as well. So I am full score with you on that.
    On Jordan, I would be pleased to work with you. I would 
like to get this done. I have some issues we are going to need 
to discuss, I think, and I hope to do that as quickly as 
possible. On the 301, as a mentioned in the Senate, I support 
this investigation. I have had enough sense about how the 
Canadian Wheat Board works that I can see the problems that it 
causes for our people in terms of their ability to price 
accordingly. Obviously this is not going to be an easy issue 
related to changing Canadian practices, but I very sympathetic 
to what you are saying and that is why I want to try to use the 
301 in part to get additional information, and to be able to 
develop a stronger overall case.
    This is another one of the issues that is on our list of 
four or five that we are emphasizing in the global round, which 
is dealing with these State trading enterprises, and this is 
the one that frankly hits us the most. So I share your interest 
in it and am trying to use that process to learn more about 
what we can do with it.
    Mr. Pomeroy. That is excellent. I am very pleased to hear 
that response. I would just finally note that even while we 
feel like we are at the receiving end of a deluge of subsidized 
or dumped Canadian grain, they have brought an antidumping 
action against our corn basically under the guise that it is 
sold below the cost of production. Well, that is just the sad 
reality of commodity pricing right now. We are not recouping 
the cost of production in market prices, but that does not mean 
it is dumping. They may be taking steps to make their initial 
action permanent. Are you addressing that with the Canadians, 
and that is my final question?
    Ambassador Zoellick. I would just mention briefly I raised 
the issue with my Canadian counterpart, and as you know, it 
goes through their process, like we have our process in terms 
of the International Trade Commission. I pointed out the same 
points that you did. It will run through their process.
    Chairman Thomas. Does the gentleman from Georgia wish to 
inquire?
    Mr. Collins. Mr. Chairman, only to say welcome, Mr. 
Ambassador. I appreciate the earlier comments you made. I was 
not here to hear them, but I heard about them, particular in 
the area of the Canadian softwood lumber. We have had several 
discussions as to that subject. Hope you are able to work 
something out with that. I understand time is drawing down on 
us, but we look forward to working with you over the next few 
years.
    Ambassador Zoellick. Thank you, Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    Chairman Thomas. Does the gentleman from Pennsylvania wish 
to inquire?
    Mr. English. Yes, Mr. Chairman.
    Welcome, Mr. Ambassador. I want to start by saluting you 
for your commitment to pursuing a new round of negotiations 
within the WTO. I think this is of paramount importance, but as 
someone who attended Seattle and was aware of some of the 
issues that led to a breakdown of the process in Seattle, one 
of the most troubling for me was the insistence by the Japanese 
and some of our other trading partners that our antidumping 
laws be reopened.
    I am concerned about that because I feel that our 
antidumping laws play a critical role in allowing us to police 
our own markets against unfair trading practices. I think they 
are helpful to a wide range of domestic producers and are 
intended, perhaps not always in practice, but certainly in 
intent, they are to provide a level playing field and some 
fairness. My question is does the administration continue to 
support the position that our antidumping laws should not be on 
the chopping block in a new round of negotiations with the WTO; 
and second, is the administration open to the possibility of 
trade law reform consistent with the WTO guidelines, both in 
the areas of Section 201 and 301, to strengthen those laws and 
make them more accessible to American companies?
    Ambassador Zoellick. Well, first, on the general principle, 
I agree with you that the antidumping laws play an important 
role in dealing with unfair practices. As you know, there is 
always a debate about how they are applied and the 
methodologies. This gets very complicated, but I think they are 
vital to the overall trading system and they are certainly 
vital to maintaining public support for open and free trade.
    One of the issues we are going to have to look at here is 
that other countries are now starting to develop their legal 
regimes, and for all the criticism of ours, theirs are nowhere 
near as transparent or based on a set of rules and a regime 
that exporters can get some appreciation that they are going to 
get fair treatment. This is true in Brazil and South Africa, 
and these are going to be growing and important markets for the 
United States. So frankly, Congressman, as we look at the 
issues going into any round of negotiation, that is another 
feature that we have to examine.
    In terms of your question about whether I would be willing 
to discuss or consider changes in our laws, as long as they 
conform with the WTO, certainly. I do not know the specifics, 
but as I mentioned in my answer to Congressman Levin on steel, 
I believe, I think 201 plays a vital role in the process. In 
fact, I think 201 could be much more useful than some of the 
other unfair trading practices if we put it in place quickly 
and we get serious restructuring, similarly the 301 process. So 
I am certainly willing to consider any set of ideas. I do 
believe we need to try to do them in a way that fits within the 
WTO system, because fundamentally we are the most competitive 
major country in the world. We want to make sure the system is 
a set of rules that works for us in a way that is fair, but 
also allows us to export abroad.
    Mr. English. Thank you, Mr. Ambassador. Let me urge you in 
addition, in thinking about conventional trade promotion 
authority, which I understand the administration is committed 
to seeking, as someone who was skeptical of several of the 
fast-track proposals that came before this committee in the 
past, I hope that the administration will keep an open mind 
when it comes to how to deal with issues like labor and the 
environment. It seems to me there may be a middle ground 
available here that would address the scruples of a wide 
variety of people concerned with this issue. I hope the 
administration will keep an open mind about the possibility in 
structuring this authority to provide for preauthorization of 
specific negotiations, as one feature of that authority.
    That would give Congress greater control over the process, 
but also give you the authority that you need if we can work it 
out procedurally. Your are welcome to comment on that if you 
like.
    Ambassador Zoellick. Well, on the first one, I definitely 
agree with you. As my statement said, I have an open mind about 
this both because I think it is the right thing to do and I 
think it is the thing to try to build a basis of support. It 
goes to my larger point about trying to have a sense of how 
trade relates to our values and what we are trying to 
accomplish more broadly in the world. On the second one, I am 
afraid I am not familiar with the details of the 
preauthorization, but I would be pleased, if you give me more 
information, to give you a fuller response.
    Mr. English. I will follow up. Thank you, Mr. Ambassador.
    Thank you, Mr. Chairman.
    Chairman Thomas. Thank the gentlemen.
    Does the gentlewoman from Washington wish to inquire?
    Ms. Dunn. Thank you very much, Mr. Chairman.
    Welcome to our committee, Ambassador. It is good to see you 
and I want to particularly thank you for making yourself 
available to sectors of our economy that are very interested in 
presenting our views to you, particularly the high-tech sector, 
very, very helpful to them and we appreciate that. I have three 
probably brief questions to ask you, and I apologize if these 
questions have been asked while I was over taking the vote. We 
have concluded an agreement with Vietnam, the first free trade 
agreement since the war in Vietnam, and I would like to have 
some sense of update on when this treaty will be delivered to 
the Congress.
    Ambassador Zoellick. Do you want me to do each one or do 
you want to do all three?
    Ms. Dunn. I can do all three if you like.
    Ambassador Zoellick. Whichever.
    Ms. Dunn. The second question I have has to do with the 
TRIPS agreement. At the world economic summit, I heard more 
talk than before about how developing nations are very 
concerned about meeting the TRIPS agreement, and yet the lack 
of compliance with this agreement is costing us billions of 
dollars every single year in the loss and the piracy of 
software. I would like you to comment on that and let us know 
where that stands and how you believe that is affecting 
industry in the United States.
    Last, I am interested in knowing about the FISK situation. 
We have had a lot of discussion about that in the last year, 
rewrote the FISK provision, and the EU has indicated thumbs 
down on this. What happens next on FISK? I know that Pascolomi 
is going to be in town shortly and you two will be getting 
together. What is our position on FISK and what do you see 
ahead on that issue?
    Ambassador Zoellick. Well, first, Congresswoman, I would 
like to thank you with your help with the high-tech community. 
I know that this is a particular interest of yours and you 
obviously have an extraordinary set of ties, and you brought 
these people into the public policy process. So the thanks 
really goes to you and I would be delighted to work with you in 
the future on these issues, because I think it is important 
economically and it certainly is important, as many people have 
mentioned, in terms of broadening base of support on trade.
    On the Vietnam issue, as a mentioned to Mr. Levin, this is 
another issue that I have gotten a strong sensethat there is an 
eagerness to try to move forward promptly. As you probably know, it is 
actually an agreement that just brings Vietnam to a normal trade 
relationship, like China was, but it does in the course of it have some 
very important market access and other arrangements. There is an issue 
that has been brought to my attention related to textiles, and that the 
possibility of the textile imports that would come in and whether there 
is a need for a separate agreement, and if so, whether it would follow 
some of the provisions that Mr. Levin was interested in related to the 
Cambodia context; and so that is an issue that I think we are going to 
have to deal with here.
    I understand that regardless the administration has the 
authority, if need be, to set quotas for textiles; and so it is 
my understanding that the Vietnamese desire is to get the 
agreement going forward and deal with that later, but that is a 
topic I need to get more wisdom from you and others on. In 
terms of the TRIPS provisions, I share your view that this is a 
critical area, not only because of the competitive advantage of 
the United States, but actually it is in the long-term interest 
of other countries, because if they are going to draw the 
investment that they are going to need to grow, often it is 
related to the intellectual property that is often associated 
with that investment.
    So I believe that--I know there is a concern about the 
implementation of those provisions. My first preference, 
Congresswoman, would be to try to add their capacity, to be 
able to implement them, than to adjust them. But I am willing 
to listen to others as they try to figure out how we achieve 
this, because the goal is to make sure we get that protection. 
On the Foreign Sales Corporation, this committee and your 
counterparts on the Senate side, I think, did an extraordinary 
job in trying to make a fix of what the WTO found to be a 
violation.
    As you probably know, the WTO will issue another ruling on 
that. The EU continues to challenge that. We will certainly do 
all that we can to defend that provision, and I have had some 
conversations with Stu Eizenstat, who I know is very involved 
with that. Under the WTO procedures, the EU is a position to be 
able to retaliate if they so choose, and they have picked a 
number related to the revenue estimate of about, I think, $4 
billion, which is a rather large sum. That does not mean that 
is the number that would be accepted by the WTO, but that is 
what they are using.
    Up to now, they have taken a position that they will not 
retaliate until the WTO makes a ruling. This brings us back to 
the carousel issue and bananas and beef. I have met with a 
coalition of the companies involved with the foreign sales 
corporation, just so I could get a better understanding of 
their interest and where they would like to go on this. I have 
also alerted them to the reality that if we follow through on 
the points, as Mr. Portman was raising in bananas, we have to 
be prepared for the counteraction. We cannot have it both ways. 
I am certainly willing to do that, because I think it is 
important that we defend our rights, but people all need to be 
on notice that that is the path that we are on.
    I hasten to emphasize, my prepared path is to try to get 
some time to negotiate with Commissioner Lamy, for whom I have 
the greatest respect, to see whether we can at least give 
ourselves a few months to try to see whether we can resolve 
this issue. It has been kicking around for nine years. I do not 
see why the Europeans cannot give me a few months to give it a 
try.
    Chairman Thomas. Thank the gentlewoman. It is pretty 
obvious that every sword in trade is a double-edged one, and 
what is useful for us can be useful for others, and we have to 
be very careful about how we not only empower you, but how it 
is exercised, and I appreciate the ambassador's comments.
    Does the gentleman from Colorado wish to inquire?
    Mr. McInnis. Thank you, Mr. Chairman.
    Mr. Ambassador, thank you for coming today. Before I begin 
my comments, I did hear your response in regard to Mr. Neal's 
inquiry on Cuba and China. I want to caution or at least add to 
those comments that I am not sure China is the one to compare 
in talking about the good guy and the bad guy. I certainly 
agree that Cuba is a bad guy, but I would want to just note 
that China has a number--while you mentioned that Cuba shoots 
down airplanes--China has extensive, extensive human rights 
violations. China has made its intentions toward the United 
States very clear. I think China is very clear on where its 
missiles will be aimed, and furthermore, yesterday China just 
announced they are going to increase their military budget 17 
percent. So I would approach China with great caution, as what 
they show on the face is not necessarily what they have in the 
mind. They are kind of like a gigantic iceberg, in my opinion.
    That said, I am concerned really primarily about two 
things, one on the WTO, that as you began your tenure here, 
that we be very careful in these trade agreements that we 
preserve our voice or our vote to be somewhat in proportion to 
our budget. In WTO, for example, WTO and our budget 
obligations, I think it is about 40 percent. You could correct 
me, but it is a significant amount of the total budget as 
compared to the one vote out of the total number of votes--and 
I think that we have to have some tough negotiations in regards 
to our budget contributions so that they are relative or 
somewhat relative, and we are not taken advantage of, which I 
think, frankly, under the previous administration, that we were 
taken advantage of on the budget issues, because that was not 
their focus, and our focus here sometimes is so intent on the 
trade agreement and on the future of the trade agreement, we 
ignore the budget obligations that we sign onto.
    As the Ambassador knows, it took a great deal of 
negotiations and certainly a withholding of our dues to the 
United Nations to get our budgetary obligations dropped, I 
think, 1.5 percent; I think from 26 percent to 24.5 percent. I 
am not sure, but it is in that ballpark, right in there, those 
numbers. So I would ask that you watch those budgetary 
obligations with some care.
    Finally and I would like your concern about this, of 
course, coming from Colorado, we have a lot of ranch country 
and so on. I am deeply concerned about the hoof-and-mouth 
disease that has broken out. In the United Kingdom, as you 
know, it has created a collapse, and as I understand it, once 
they determine that this disease is in existence on a farm, not 
only do they take out the animals--and understand that in the 
European Union countries, they are paying for those animals--
but in order to cleanse of the disease, the farm then has to 
sit idle for 6 months thereafter.
    I am wondering what your thoughts are and what kind of 
provisions we have in these kind of trade agreements to, for 
example, immediately stop importation of a product that may 
threaten the well-being of our products or health over here. 
Could you comment? I just do not know about that and I was 
curious about that, if you could help me?
    Ambassador Zoellick. It is an excellent question. First, on 
China, I take your point. I used to deal with China in a 
different context and I know what they can be like. I do 
believe that, and obviously this Committee believes, that there 
is an openness in China that we need to work with, in terms of 
developing the rule of law, and I do believe there are 
opportunities there, but it does not take anything away from 
any of the security points that you mentioned, including 
espionage. On the WTO budget I will look into the percentage. I 
do not know for sure. It is a good point. I would just like to 
put it in a little context.
    I do recall seeing the size of the WTO budget not long ago, 
and it is minuscule. I do not remember the exact size. It is 
like $25 million or $35 million, and remember, the dues that we 
were paying for all of the U.N.--it was like a $900 million 
appropriation. So while we look at the percentage, we also have 
to look at the amount, given what we get from it, but it is a 
fair point about the U.S. share. On the hoof-and-mouth 
question, this goes to the issue of SPS, the sanitary and 
phytosanitary standards. It is notdirectly, at least to my 
understanding, within the USTR area, because the monitoring of this 
would be done by agriculture and other services.
    I believe, but I will check for you, that there are a 
series of provisions that would allow us to take emergency 
action. For example, even recently under the NAFTA accord, when 
the Canadians were concerned about lack of data from Brazil 
dealing with mad cow--there was not even any evidence of the 
BSEs. It was just data--that they stopped Brazilian beef, as 
you may know, and under our NAFTA accord, we went along with 
that. Fortunately we worked that out and no one had any sense 
of a problem with that, but clearly there is an ability to 
respond in emergency fashion.
    The tricky thing about the SPS standards is how others can 
use them against us. So it needs to be based on a reasonable 
scientific basis. We have a problem with Australia right now--
Chairman Crane was asking about it--related to grapes. So I 
think again what I answered, I think to--maybe it was Mr. 
Hulshof's question--about the key role--that we need to rely on 
the Codex and others to be able to act immediately, if 
necessary, but make sure this is done on a sound scientific 
basis. Otherwise, our agriculture is going to be the big loser.
    Chairman Thomas. Thank the gentleman.
    Does the gentleman from New York, Mr. Houghton, wish to 
inquire?
    Mr. Houghton. Yes. Thank you, Mr. Chairman.
    Ambassador, great to have you here. Thanks so much for 
taking your time. I have not been here recently, and therefore 
I may be redundant. If so, just skip over some of these 
questions. One statement and really one question; the 
Washington Post this morning had an article called Sabotage in 
the Senate. I do not know whether you read this thing, and it 
talks really about the steel industry. It said: ``Mr. Zoellick 
is due to appear before the House Ways and Means Committee 
today. It will be interesting to see whether there are 
saboteurs in that chamber, also.''
    Classify me as a saboteur, because I really think that the 
golden rule should apply; that if people are going to sabotage 
our markets, which is the most precious thing we have, we have 
got to somehow have some sort of a mechanism to protect 
ourselves, whether it is 301 or 201 or whatever it is. It is 
very easy to create a statement like this, but when your job is 
on the line, whether you are in Pittsburgh or wherever it is, 
it is a very, very serious issue. I, as a Republican, as a free 
trader, really strongly believe in this.
    Let me just ask you a question. When a businesses is in 
trouble and it is going through economic difficulties, it tries 
to increase its sales, because you cannot shrink yourself rich. 
You have got to be able to increase your volume. What are those 
things, those mechanisms under your control or under our 
control, we can try to go out and sell the other 95 percent of 
the world and some of our products to be able to keep our 
employment up?
    Ambassador Zoellick. Well, first, I can once again thank 
the Washington Post for helping me with an issue at a sensitive 
point in time. But I want to say a word on steel, because if 
you were not here, I wanted to emphasize that the way that 
Secretary O'Neill and Secretary Evans and I are all trying to 
look at this is in the context of a possible 201 investigation. 
The op-ed actually referred, or the opinion piece referred, to 
antidumping and countervailing duty. Those have been used with 
varying degrees of success, and what we honestly believe might 
be the best course here is if we can get some significant 
restructuring of the industry, as you know from your own 
experience.
    Mr. Cardin. Could I ask my colleague to yield on that 
point?
    Mr. Houghton. Yes. Absolutely. If it is all right. Do you 
mind, Mr. Ambassador? All right. Go ahead.
    Mr. Cardin. I appreciate that. We have had a chance to talk 
and I very much support your position on trying to look at the 
201s and enforcing our laws. You have mentioned over and over 
again the restructuring of the industry, and I just at least 
want to put on the record that the industry has gone through a 
significant restructuring already today. They have invested an 
awful lot of money. There has been a lot of downsizing as far 
as the number of steelworkers. There has been a lot of 
consolidation and a lot of reduced capacity in this country 
already.
    I just really want to put on the record that there has 
already been a significant restructuring within the steel 
industry, and they are finding that as a result of what 
happened in 1998, we have not recovered from the low prices of 
steel. That is having a major impact. I know that you are aware 
of this, and I just really want to put that on the record, and 
I thank my colleague for yielding.
    Ambassador Zoellick. I appreciate it. It is a good point. I 
am sorry I did not include it myself. So what we are actually 
trying to do is to work with the industry and the unions and 
see whether we might be able to follow that course, and we have 
got a group together that is trying to gather some of the data 
and some of the industry analysis to do that, and as I also 
mentioned, it occurs in global context. So that is how we are 
trying to deal with that one.
    On your larger point about increased volumes, the first 
thought that comes to my mind, Mr. Houghton, but I will be 
pleased to give it additional thought, is that this goes to the 
basic issue about trying to reduce barriers around the world 
for our products. I believe, in many industries around the 
globe, the United States can certainly at least hold its own, 
but whether we deal with traditional barriers like tariffs, 
barriers related to investment so you can have some of your 
operations there with the trade flowing with investment, 
whether it is related to various standards and regulations, 
this is what interrupts the trade flows.
    As my prepared testimony stated, it has been quite 
extraordinary what has happened with additional trade flows in 
terms of growth and income. That same op-ed, to give the 
Washington Post its due, noted that the increase in terms of 
income in the United States due to the increase of these two or 
three or four percent trade flows, is quite enormous. So I 
think that is, to me, the best way to try to approach the 
question of helping companies work through difficult times.
    Mr. Houghton. Just one other thought. There are long-term 
important measures to be taken, and you have just cited one, 
reducing the tariff barriers and making it easier for our 
products and services to go elsewhere; but there are also 
short-term emergency measures. Maybe you could think through 
that a little bit, and I would be willing to talk to you, 
because there are a variety of different examples here that 
could be used, because in surges or in pullbacks, certain 
things are necessary in the short-term period that are not in 
the long.
    Thank you.
    Chairman Thomas. Thank the gentleman.
    Mr. Ambassador, we promised we would get you out by one 
o'clock, and obviously our goal was to try to keep on a general 
focus in terms of the broad-based tools that we might need, but 
in any discussion oftrade it gets down to specific interests 
fairly quickly. But I do want to conclude on a specific point, and that 
is this. The chairman and the ranking member, the chairman of the Trade 
Subcommittee and the ranking member of the subcommittee, and especially 
those who worked hard in addition to those individuals, Mr. McDermott, 
Mr. Jefferson, and others, are somewhat concerned about the way in 
which the African CBI agreement has been interpreted by our own 
government, and we would very much like to engage very quickly the 
rationale that has led to what we believe to be a failure to properly 
follow the intent of the law in particular areas.
    So moving from a general to a specific, we might as well 
roll up our sleeves and get to work. I want to thank you on 
behalf of the Committee, especially in terms of your 
knowledgeable and frank answers to a number of very specific 
questions without knowing what was going to be thrown at you. 
It clearly shows that the President has made an excellent 
choice. It will be our pleasure to work with you to make sure 
that the international competitiveness of the United States is 
enhanced. Thank you very much.
    The hearing is adjourned.
    [Whereupon, at 1:00 p.m., the hearing was adjourned.]
    [Questions submitted by Messrs. Thomas, Crane, Jefferson, 
and Doggett, and Mr. Zoellick's response are as follows:]

        Implementation of the Trade and Development Act of 2000

Question 1: Last year, Congress passed provisions to expand trade with 
the Caribbean Basin and sub-Saharan Africa. Although scheduled to take 
effect on October 1, various elements of the program have been delayed 
and, in fact, some have still not been fully implemented. Can you give 
your assessment of the success of the program thus far (particularly in 
terms of increasing trade) and an outline of what you expect to do to 
ensure that the program becomes fully operational in a manner 
consistent with Congressional intent? Also, what are your plans to 
convene and promote the various trade meetings that Congress directed 
in the legislation?

Answer 1: I have been generally pleased with implementation of the 
Trade and Development Act since its enactment on May 18, 2000. Through 
an interagency process, chaired by the Office of the U.S. Trade 
Representative, 35 sub-Saharan African countries and 24 Caribbean Basin 
countries have been designated as beneficiary countries. In December 
2000, over 1,800 products were designated as eligible for duty-free 
treatment under the enhanced Generalized System of Preferences (GSP) 
Program when produced in, and exported from, beneficiary sub-Saharan 
African countries. The GSP product review process normally takes one 
year, but was accelerated and completed in half that time in the case 
of AGOA.
    We have determined that four of the designated beneficiary 
countries have satisfied the additional statutory criteria for 
eligibility for the AGOA's textile and apparel benefits. We are working 
closely with nine other countries that are seeking these benefits and 
expect that several of these countries will satisfy the criteria soon. 
These additional criteria-- the adoption of an effective visa system 
and related customs laws or regulatory procedures-- are important 
statutory safeguards against unlawful transshipment of textile apparel 
products. Implementation of these safeguards is a time-consuming 
process that has required a substantial amount of coordination between 
beneficiary countries and the U.S. Government. This effort has been 
complicated by the fact that as of May 2000 when the AGOA was enacted, 
none of the sub-Saharan African countries had an effective visa system 
to prevent unlawful transshipment.
    I am meeting this month (April) with the diverse group of AGOA 
supporters to reaffirm the Administration's commitment to a strong 
Africa trade policy and to hear and exchange views on AGOA 
implementation and elements of U.S. trade policy. I am also meeting 
with the African Ambassadors Corps to exchange views on AGOA 
implementation and ways in which we can work cooperatively to 
strengthen our trading relationship with Africa.
    With respect to CBI, twelve of the 24 designated beneficiary 
countries have met the customs-related requirements established in the 
legislation, and these countries are receiving benefits. While it is 
too soon to track statistical trends, we have anecdotal evidence that 
the new preferences in AGOA and CBI are being applied and that trade 
and investment in the relevant products are increasing.
    Consistent with the AGOA, we are planning to hold the inaugural 
U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum this year. 
I look forward to joining the Secretaries of State, Treasury, and 
Commerce in hosting the Forum. I also look forward to convening a 
meeting with the CBI trade ministers, as provided for in the CBTPA, and 
hope to have such a meeting later this year.

Question 2: What are your thoughts on how the United States, and your 
agency in particular, can facilitate greater participation by 
beneficiary countries in the African Growth and Opportunity (AGOA) 
program?

Answer 2: The U.S. government is working cooperatively with the 
eligible AGOA beneficiary countries to ensure they receive maximum 
benefits from the Act. We have a four-pronged approach. First, we have 
worked to ensure that information about the AGOA's benefits and 
requirements is readily available through extensive outreach to the 
African and U.S. private and public sectors. These efforts have 
included more than 10 regional workshops, a comprehensive AGOA 
implementation guide, an AGOA website, a customs workshop attended by 
over 90 African Customs officials, and U.S. Customs missions to five 
African countries. In addition, we work extensively on a daily basis 
with the countries seeking apparel benefits by providing guidance on 
the requirements that must be met to obtain these benefits. Second, we 
are encouraging sub-Saharan African governments to strengthen enabling 
economic and political reforms to complement the trade preferences 
accorded in AGOA. Third, we are helping to facilitate business-to-
business linkages between U.S. and African companies including through 
assistance to trade missions. Lastly, we are working to provide 
additional trade capacity-building and related technical assistance 
through USAID.
    I look forward to my meetings this month (April) with the African 
Ambassadors Corps and with a diverse group of AGOA supporters, in order 
to exchange views on AGOA implementation and explore ways that we may 
work cooperatively to strengthen our trade relationship.

Question 3: Currently, there are a number of outstanding implementation 
issues which are impeding use of some of the apparel benefits under the 
AGOA as Congress had intended. For example, I was greatly disturbed to 
hear Customs deny preference for shipments from Mauritius because of an 
overly restrictive definition of what constitutes knit-to-shape 
apparel. This is significant because knit-to-shape sweaters have been 
seen as a product that Africa could produce competitively. Has USTR 
taken a position on this issue? How can you ensure Congress that this 
program will be implemented as Congress had intended?

Answer 3: U.S. Customs Service and other Treasury Department officials 
are reviewing comments they have received regarding U.S. Customs' 
interim rules. USTR's position is that the benefits of the AGOA should 
be made available to the full extent possible under the law and in a 
way that reflects the trade-liberalizing spirit of the Act. USTR has 
conveyed these views to appropriate U.S. Customs and other Treasury 
officials.

Question 4: With respect to the CBI provisions, I have heard some 
disturbing reports that some eligible goods will be excluded from the 
program. These include goods knit-to-shape in the U.S. from U.S. yarn 
and finished in the CBI region or goods assembled in the CBI region 
from fabric that was cut in both the United States and the CBI. Can you 
tell me your plans to ensure that, as this program is implemented, 
these kinds of goods are not excluded?

Answer 4: I understand that the U.S. Customs Service is considering 
revisions to the interim rules for the new CBI benefits, based on 
public comments. Issuance of final rules falls within the authority of 
the Treasury Department and the Customs Service. We support 
implementation of the Caribbean Basin Trade Partnership Act in a way 
which achieves the trade-expanding spirit of the legislation, and will 
continue to work with our counterparts at Treasury and Customs toward 
that end.

Question 5: The Committee for the Implementation of Textile Agreements 
(CITA) recently issued its procedures for making yarn and fabric short 
supply determinations under the apparel provisions of the Africa and 
Caribbean trade initiatives. As drafted, these procedures appear to 
have ignored Congressional intent that the short supply process be fair 
and transparent. For example, under the procedures, CITA could deny a 
short supply petition based on business confidential information 
supplied by domestic producers, to which the petition would have no 
access or ability to comment. There is also nothing in the procedures 
as announced that ensures that a domestic producer that claims it can 
make a product in commercial quantities in a timely manner actually 
delivers on its assurances. What does the administration plan to do to 
correct these deficiencies?

Answer 5: On March 6, 2001, the Committee for the Implementation of 
Textile Agreements (CITA) published procedures for considering 
petitions under the short supply provisions of the Trade and 
Development Act of 2000. To date, no short supply decisions have been 
made under these procedures. Consistent with Executive Order 13191, the 
procedures are intended to ensure appropriate public participation in 
these decisions. CITA will announce the receipt of short supply 
petitions in the Federal Register and all interested parties are 
provided an opportunity to comment and provide relevant information. At 
the same time, however, the procedures protect sensitive business 
information. I understand that CITA will monitor and, if necessary, 
revise its procedures in light of its experience. As a CITA member, 
USTR office will seek to ensure maximum transparency in CITA 
decisionmaking.

Questions from Hon. Philip Crane:

              Renewal of the Andean Trade Preferences Act

As you know, authorization for the Andean Trade Preference program 
expires on December 4, 2001. This program has proven to be a valuable 
weapon in the war against drugs, but more needs to be done. What can 
Congress do to enhance the ATPA so that the program will truly be 
effective in increasing trade and investment with these countries and 
better address the unique challenges that they face?

Answer: The Administration shares your view that the ATPA program has 
helped strengthen the legitimate economies in the Andean countries and 
create viable alternatives to the drug trade, and we agree that more 
can be done. The Administration is conducting a review of the products 
previously excluded from eligibility for ATPA preferences in order to 
form a position on product coverage under a renewed ATPA. Congress can 
and should do the same. I look forward to working with you and other 
Members of Congress on this important legislation.

Sanctions Reform

I am preparing to reintroduce legislation that would establish a 
procedural framework for the consideration of future unilateral trade 
sanctions, including cost-benefit analysis and an opportunity for 
public comment. As you know, unilateral trade sanctions are rarely, if 
ever successful, but can have significant consequences for U.S. firms 
and workers in terms of lost trade opportunities. What are your views 
on this subject?

Answer: In general, I am skeptical about the use of unilateral 
sanctions. Sanctions can be a significant foreign policy tool, but they 
must be used judiciously. If they are not used effectively, sanctions 
will hurt U.S. business, farmers, and workers. President Bush has also 
called for the exemption of food and medicine exports from new 
unilateral trade sanctions.

Question from Hon. William Jefferson:
The last USTR to visit sub-Saharan Africa was Mickey Kantor. I would 
like to challenge you to commit to a mission to Africa that will focus 
on the implementation of AGOA and on increasing U.S. capital flows to 
Africa. Would you consider such a trip in the near future?

Answer: Early in my tenure, I contacted several African Trade Ministers 
by phone to initiate cooperative working relationships with them, and 
will be making more of such calls. This month, I am meeting with a 
group of AGOA supporters and with the sub-Saharan African Ambassadors 
of the African Diplomatic Corps to reaffirm the administration's 
commitment to a strong Africa trade policy and to exchange views on 
ways to strengthen our trade and investment relationship.
    Expanding our trade and economic relations with the countries of 
sub-Saharan Africa is an important part of this Administration's trade 
agenda. I will seriously consider opportunities to visit the region. I 
visited Africa when I was with the State Department. If a trip to 
Africa would help us with the reform and trade opening process, I would 
be pleased to go.

Questions from Hon. Lloyd Doggett:

Question 1: Please provide the Committee with a firm date by which you 
expect to re-issue the formal notice of an environmental review of 
trade negotiations for Agriculture and Services agreements within the 
World Trade Organization?

Answer 1: On April 19, 2001 I sent to the Federal Register a notice 
initiating the environmental review of the WTO built-in agenda 
negotiations on agriculture and services.

Question 2: Now that the quantitative analysis part of an environmental 
review of the Free Trade Area of the Americas (FTAA) appears to be 
underway, please provide the Committee with a firm time line of the 
implementation regarding legal and regulatory impacts on the 
environment.

Answer 2:We have published a Federal Register Notice (FRN) initiating 
an environmental review of the FTAA. The FRN provided an outline for 
the scope of the review, and introduced a proposed quantitative 
methodology, which would, as a first step, identify some of the 
anticipated environmental effects associated with changes in the terms 
of trade in the hemisphere. We received numerous public responses to 
the FRN, some of them quite significant, and are currently assessing 
those responses as well as the scope of the review and the proposed 
methodology. The quantitative part, however, as your question points 
out, is only part of the process. The regulatory review is an important 
component of an analysis, and we anticipate that as the quantitative 
portion of the review proceeds, and the texts of the FTAA are further 
developed, the regulatory portion would be performed along a time line 
that would allow for the review to inform the negotiating process in a 
meaningful way. The recent decision in Buenos Aires at the FTAA 
Ministerial to release the consolidated negotiating text after the 
Quebec Summit only enhances the ability of the public to participate 
effectively in the environmental review.

Question 3: Please provide the Committee with a copy of the U.S. 
negotiating proposals and the consolidated draft text of the FTAA, 
which has already been provided to hundreds of US advisors and to the 
other 33 countries involved.

Answer 3: USTR has already provided both sets of texts to the 
Committee.

Question 4: Do you agree that greater openness and opportunity for 
public participation in the operation of the World Trade Organization 
will assist in broadening public support for reducing trade barriers? 
What specific steps will you be taking to open panel dispute 
deliberations and meetings to the public, including observation, 
participation, and amicus curiae designation? What are the appropriate 
mechanisms to ensure citizen groups are represented at the same level 
as commercial interests?

Answer 4: I share your view of the importance of greater openness at 
the WTO, and I agree that the benefits of open trade can only be 
achieved if we build public support for trade at home. This is a 
priority for the Bush Administration. With respect to dispute 
settlement proceedings, we continue to press our trading partners to 
agree to more openness in the proceedings, and at the same time we take 
steps on our own to make the process more transparent. For example, 
USTR seeks public comment, through a Federal Register notice, on every 
dispute settlement proceeding to which the United States is a party. We 
make our own written submissions to panels and the Appellate Body 
available to the public as soon as they are submitted, and we routinely 
request parties to all WTO cases to provide us with a copy of their 
submissions or non-confidential summaries for release to the public. We 
also release panel reports to the public on receipt; and as we pursue 
broader reforms, we have made a standing offer to all countries with 
which we have disputes (either as plaintiff or defendant) to open the 
panel meetings to the public.
    To ensure that all interests are represented, we are committed to 
frequent consultation with all stakeholders and the sharing of 
information, where appropriate and consistent with our ability to 
advocate effectively the interests of the United States.
    I would note that in the case of trade initiatives in the WTO, such 
as preparation for the upcoming ministerial meeting in Doha, Qatar, 
USTR has published, on behalf of the Trade Policy Staff Committee, a 
solicitation for public comment on our priorities for the meeting. This 
is one in a series of solicitations we have made with respect to the 
built-in agenda negotiations, and more recently on the question of WTO 
transparency and institutional reform. We routinely ask for comments in 
other WTO negotiations. For example, in the accession negotiations, we 
always seek public comment and publish notices in addition to meeting 
our other consultative requirements.

Question 5: Do you believe that the environmental representatives on 
Industry Sector Advisory Committees (ISAC) 10 (Lumber and Wood 
Products) and ISAC 12 (Paper and Paper Products) have made a positive 
contribution to the US trade policy review and the advisory process?

Answer 5: I am committed to ensuring that diverse stakeholders are 
represented in the formulation of trade policy. It is somewhat early to 
ascertain the impact of the environmental representatives on these two 
Committees. ISAC-10 has only met twice and ISAC-12 has met three times 
since the environmental members were appointed in May 2000. ISAC-12 did 
recently issue a resolution recommending the elimination of paper 
tariffs in upcoming trade negotiations, with a business member 
consensus and a minority view from the environmental representative. I 
believe that it is useful for the government to receive broad-based 
advice from various stakeholders, even if this advice is sometimes 
conflicting.
    As you may be aware, USTR and the Department of Commerce also 
recently announced that the two agencies will seek to appoint an 
environmental representative to another committee, ISAC-3 (Chemicals & 
Allied Products). This was in response to requests by environmental and 
other non-governmental groups for greater participation in the 
development of U.S. trade policy, and specifically for participation on 
ISAC-3. Currently, an environmental representative from the Trade and 
Environment Policy Advisory Committee (TEPAC) is serving in an interim 
capacity on ISAC-3, until a permanent environmental member can be 
appointed.
    I believe it is necessary for the Administration and Congress to 
work together to explore broader reforms to the existing trade advisory 
committee system, established by Congress under the Trade Act 1974. I 
look forward to close consultations with Congress on this matter.

Question 6: Since the Trade and Environment Policy Advisory Committee 
(TEPAC) has not met since November, how do you plan to make more 
effective use of this important advisory group? Do you plan to provide 
a more defined role, including regularly scheduled meetings, and a 
higher profile for the TEPAC?

Answer 6: The TEPAC has played a very active role in advising USTR on a 
number of key policy issues related to trade and the environment. In 
2000, the TEPAC met three times at the Member level and five times at 
the staff liaison level, and was also consulted several times by 
conference call. Last year, the TEPAC provided advice on environmental 
issues related to the Jordan FTA, the Singapore FTA, guidelines for the 
Executive Order on Environmental Reviews of Trade Agreements, the 
advisory committee review process, and other matters. In 2001, TEPAC 
has provided comments to USTR on the proposed methodology for 
quantitative analysis of the Free Trade Area of the Americas, and has 
also been included in discussions with cleared advisors on the Chile 
FTA. Over the past year, TEPAC members have also sponsored a number of 
open public workshops on trade topics, attended by USTR and EPA staff, 
and we look forward to additional workshops in the future.
    I intend to continue this important relationship with the TEPAC and 
look forward to regular meetings. Recently, Administrator Whitman and I 
met informally with a number of TEPAC members at their invitation, to 
hear their individual views and the trade and environment priorities of 
the organizations they represent.

Question 7: How can monetary fines alone be sufficient sanctions to 
discourage labor and environment trade violations when you find such 
fines insufficient to sanction commercial violations?

Answer 7: Given the increasing diversity of our trading relationships, 
and the scope and variety of our trade agreements, we need to think 
creatively about how we can shape dispute resolution procedures to 
adapt them to the particular countries and commitments our agreements 
cover. Among other things, that means exploring the full range of 
methods available to secure compliance with dispute settlement panel 
decisions. One idea is to consider using monetary assessments instead 
of trade sanctions to enforce certain agreements.
    In principle, there is no reason why monetary assessments could not 
be used to help secure compliance both with trade obligations and with 
labor, environmental, and other types of commitments that foreign 
governments may make to the United States. Like trade sanctions, the 
ability of monetary assessments to exert useful leverage will vary 
according to their size, the likelihood they actually will be applied, 
and the circumstances of a specific dispute. The key would be to set 
the assessment in a specific case at a level that would create the 
necessary incentive for the government concerned to bring its measures 
back into line with its obligations.
    Monetary assessments have one clear advantage in the case of 
disputes over trade-related environmental or labor issues. The revenue 
generated from monetary assessments can be used for environment--and 
labor-related purposes.
    The NAFTA supplemental agreements on labor and environmental 
cooperation, for example, provide for monetary assessments in case of 
non-compliance and call for the funds generated from those assessments 
to be used for environmental and labor purposes. The Canada--Chile 
agreements on labor and environment use a similar approach. By 
contrast, trade sanctions create additional trade barriers without 
necessarily advancing environmental protection or worker rights.

Question 8: Now that you have had a chance to study investment issues, 
how can you ensure that investment protections in our trade agreements 
are not misused to undermine legitimate U.S. environmental and health 
laws and regulations?

Answer 8: An important U.S. objective for international investment 
policy is to seek to ensure that investment provisions are not misused 
to undermine legitimate environmental and health laws. The investor 
protections that exist in U.S. investment agreements have continuously 
received bi-partisan support, but we recognize that concerns have been 
raised which threaten to weaken this support. For this reason, the 
administration has a process to examine some of the controversial 
issues to see if changes should be made. In general, the protections in 
our investment agreements for U.S. investors abroad are intended to 
match the protections that are already provided to both domestic and 
foreign investors under U.S. law and therefore we are hopeful that we 
will not need to make substantial changes in investment provisions. 
While investors cannot be prevented from bringing unjustified claims, 
we are confident that such claims will not prevail and that our 
regulatory objectives will not be undermined.

Question 9: How do you plan to implement environmental reviews of our 
trade agreements so that we can have objective information about the 
consequences not only within this country, but around the world?

Answer 9: Executive Order 13141 provides that, as a general matter, 
environmental reviews will focus on impacts in the United States, but 
that, as appropriate and prudent, reviews may also examine global and 
transboundary impacts. We will seek to strike the proper balance in 
implementing the Executive Order for individual reviews, and we will 
consult with interested stakeholders to help us determine where the 
balance lies in a particular case. In implementing the reviews policy, 
I hope we can tap into a broad range of expertise, both inside and 
outside the government. In addition, we have been encouraging our 
trading partners to conduct their own environmental reviews, as Jordan 
did (with USAID support) and as Singapore has announced it will do.

Question 10: Are you committed to ensuring that any future trade 
agreements revise existing dispute resolution processes which do not 
allow for public participation and observation? In the interim, are you 
committed to ending secret panel deliberations and instead implementing 
transparency in the dispute process where the other party is agreeable?

Answer 10: I believe we should take every opportunity to encourage more 
openness and transparency, both when negotiating new dispute settlement 
provisions and in the context of individual disputes in which we are 
involved. Every time we are a party to a new WTO dispute, we urge the 
other parties to open the proceedings to public observation.
    In dispute settlement proceedings arising under the U.S.-Jordan 
Free Trade Agreement, the two governments have agreed our briefs will 
be made available to the public; panel hearings generally shall be open 
to members of the public; panels shall accept and consider amicus 
curiae submissions by entities with an interest in the outcome of the 
dispute; and panels shall release their reports to the public at the 
earliest possible time.
    In addition, Jordan has agreed that if a dispute between the United 
States and Jordan arises over our respective WTO obligations, in any 
WTO panel proceedings we will make our briefs public and will seek the 
appointment of panelists who will agree to open hearings. We hope we 
can reach similar bilateral agreements with other WTO Members.

Question 11: Are you willing to consult with Congress, cleared 
advisors, and interested parties before the U.S. makes any decisions to 
challenge foreign environmental, health, or safety regulations? If so, 
how will you accomplish this?

Answer 11: USTR is committed to consulting with Congress, cleared 
advisors, and other interested parties in the development and 
implementation of U.S. trade policy, including with respect to dispute 
settlement proceedings regarding foreign environmental, health, or 
safety regulations.
    USTR seeks public comment, through a Federal Register notice, on 
every matter involving the United States where a party has requested 
consultations, both where the United States is requesting consultations 
and where a U.S. measure is the subject of a request for consultations. 
We consider the comments that we receive prior to initiating dispute 
settlement proceedings and consult regularly with congressional staff 
and interested advisors at all stages of a dispute, and that will 
continue to be our practice.

                                

    [Questions submitted by Mr. Matsui, and Mr. Zoellick's 
response follows:]

    1. During the enactment of the implementing legislation of the 
Uruguay Round, one of the issues that this Committee debated was 
sovereignty. We included section 129 to address this issue. Has section 
129 ever been used? Is there a current situation in which use of 
section 129 would be appropriate? If you choose not to use section 129 
wouldn't an unfavorable trade precedent be set?

Answer:

    Section 129 has been used by the Commerce Department to bring an 
antidumping determination into conformity with a WTO ruling, and on 
March 13, 2001, I requested the International Trade Commission to 
commence an inquiry under section 129 with regard to the WTO Appellate 
Body ruling that our Section 201 relief on wheat gluten is inconsistent 
with the WTO Agreement on Safeguards.
    2. Specifically in terms of the wheat gluten case, if section 129 
is not invoked are we sending a signal to the EU and other trading 
partners that we are not going to actively enforce our safeguard 
measures and that we are going to accept automatically WTO Appellate 
Body decisions? Shouldn't the ITC have a chance to cure the safeguard 
measure on wheat gluten?

Answer:

    I have asked the ITC to issue an advisory report on whether Title 
II of the Trade Act permits the ITC to take steps in connection with 
the wheat gluten case that would render its action in that proceeding 
not inconsistent with the Appellate Body findings. It is required to 
issue such a report within 21 days, but I have asked that it be done as 
quickly as possible. If a majority of the ITC issues an affirmative 
report, we will consult with the Ways and Means Committee and the 
Finance Committee on the appropriate next step.
    3. I am concerned that March 31, 2001, is fast approaching and 
there will be no final resolution with Canada concerning softwood 
lumber. President Bush is preparing to go to Quebec to discuss the Free 
Trade Area of the Americas with leaders from all over the hemisphere--
asking our neighbors in the Western Hemisphere to adopt free trade 
policies. Before President Bush arrives in Quebec, shouldn't we 
consider free trade for softwood lumber and not merely repeat old 
claims that have been adjudicated in the past?

Answer:

    The United States' basic policy is to support open markets for 
fairly traded goods, unencumbered and undistorted by government 
intervention. That is the principle upon which the NAFTA is founded, 
and what we aim to accomplish in the Free Trade Area of the Americas.
    Since the 1980s, the United States has sought to persuade the 
Canadian provinces to reform their timber harvesting and forestry 
management practices. Unfortunately, the Canadian provinces have 
refused to move to more market-oriented practices, which has 
exacerbated cross-border tensions over trade in softwood lumber 
products.
    Finally, U.S. trade remedy laws are expressly intended to permit 
U.S. industry to seek relief from injurious, unfairly traded imports. 
The U.S. industry claims that Canadian lumber is now sold in the United 
States at dumped prices, a claim they have not raised before. With 
regard to the claims of subsidization, our statute gives the U.S. 
industry the right to request another investigation regardless of 
whether certain issues may have been adjudicated in the past. Both 
factual circumstances and the legal framework for addressing them have 
changed since the previous lumber investigation, which preceded the 
completion of the Uruguay Round and the many changes that were 
implemented in U.S. countervailing duty law.

                                

    [Submissions for the record follow:]

          Statement of the American Forest & Paper Association

    This statement is submitted by the American Forest & Paper 
Association (AF&PA) for inclusion in the record of the Committee's 
March 7 hearing on the Bush Administration's trade agenda.
    AF&PA is the national trade association of the forest, pulp, paper, 
paperboard and wood products industry. The vital national industry 
which we represent accounts for 7% of total U.S. manufacturing output. 
The industry employs approximately 1.7 million people, with an annual 
estimated payroll of $51 billion. Sales of the paper and forest 
products industry top $250 billion annually in the U.S. and export 
markets.
U.S. TRADE NEGOTIATING OBJECTIVES
    AF&PA strongly supports the Administration's multi-front approach 
to opening world markets. In pursuit of that goal, we believe that the 
global elimination of tariffs on wood and paper products merits 
continuing designation as a priority U.S. negotiating objective.
    Tariff elimination in our sector was a priority U.S. negotiating 
objective in the Uruguay Round, but was not achieved. As part of a zero 
for zero package, eight economies (the U.S., the EU, Canada, Japan, 
South Korea, New Zealand, Singapore and Hong Kong) agreed to eliminate 
their paper tariffs by 2004 (five years beyond the Uruguay Round 
formula for tariff cuts at this level--on the insistence of the EU) and 
to reduce their wood tariffs by approximately one-third. The U.S. was 
not able to get agreement from the major producing countries in Asia or 
Latin America to make any tariff cuts on either wood or paper products.
    The Uruguay Round Agreements Act (URAA) specifically identified the 
elimination of tariffs in forest products and other zero for zero 
sectors as a U.S. negotiating objective to be pursued as a priority 
matter by the Administration--independent of any subsequent round of 
negotiations--and provided the Administration with the requisite 
authority to conclude agreements in this area. This provision of law 
reflects Congressional intent that elimination of tariffs on forest 
product should be a priority U.S. trade negotiating objective, and the 
expectation that it would be achieved as part of a repair to the 
deficiencies in the Uruguay Round agreement.
IMPACT OF TARIFFS ON U.S. INDUSTRY'S COMPETITIVENESS
    Global elimination of tariffs on wood and paper products is the top 
international trade objective of the U.S. forest products industry. In 
the period since conclusion of the Uruguay Round, the persistence of 
tariff inequities in wood and paper between the U.S. and its major 
trading partners--especially vis a vis emerging producers in Asia--has 
caused substantial economic damage to the U.S. industry. The majority 
of U.S. tariffs on wood and paper products were already at or near 
zero, making the U.S. market a prime target of opportunity for foreign 
suppliers. As a result, the U.S. trade balance in forest products 
significantly deteriorated--from a deficit of $3 billion in 1995 to 
12.5 billion in 2000.
    Rising imports and declining exports have contributed significantly 
to an erosion of prices and profitability for U.S. producers and, 
consequently, a reduction in U.S. production. In the 1998-2000 period, 
industry records show that 39 paper and paperboard mills closed their 
doors, contributing to an overall loss of 28,000 jobs, or 13% of the 
workforce at pulp and paper mills.
    A 1999 investigation by the U.S. International Trade Commission on 
behalf of the Senate Finance Committee (Conditions of Competition in 
U.S. Forest Products Trade--October 1999), which identified the 
persistence of market access barriers in the wood and paper sector, 
reinforced the fact that tariffs are a principal factor impairing the 
competitiveness of the U.S. forest products industry.
INDUSTRIAL TARIFF NEGOTIATIONS
    Global elimination of wood and paper tariffs remains the number 1 
trade priority of the U.S. forest products industry. If there is a new 
WTO Round, we will enthusiastically support it. However, we urge the 
Administration to move on multiple fronts--bilateral, regional and 
multilateral--to pursue all potential trade agreements that offer 
substantive benefits for American interests and increase our leverage 
in WTO. It must be made clear to trading partners that the U.S. will 
not let trade liberalization stall at this critical juncture.
WTO Round
    Elimination of wood and paper tariffs--as part of the Accelerated 
Tariff Liberalization (ATL) package of sectoral initiatives that grew 
out of Early Voluntary Sectoral Liberalization (EVSL) in APEC--was 
identified as a priority U.S. deliverable for the WTO Ministerial in 
Seattle. While the Seattle meetings did not result in the launch of a 
new Round, it is critical that the U.S. make ATL an early deliverable 
when industrial tariff negotiations are launched in the WTO.
    It should also be noted that in advance of Seattle, the 
environmental impacts from elimination of wood and paper products were 
examined (Accelerated Tariff Liberalization in the Forest Products 
Sector: A Study of the Economic and Environmental Effects USTR/CEQ--
November 1999) and found to be negligible. We believe the positive 
results of that environmental review is one more reason why initiatives 
to further liberalize forest products trade should go to the head of 
the queue.
U.S.-Chile Free Trade Agreement (FTA)
    The U.S. forest products industry's objective for FTA negotiations 
with Chile is zero tariffs on wood and paper products, immediately upon 
implementation. These are the terms accorded our Canadian competitors 
in the 1997 Canada-Chile FTA. As a result, U.S. forest products 
suppliers have lost substantial market share in Chile:
    In 1997, U.S. paper and paperboard exports to Chile amounted to 
156,000 metric tons, with a value of $99 million; this represented 30% 
of Chilean imports. In 2000, U.S. exports were only 38,000 metric tons, 
with a value of $44 million, which represented just 13% of Chile s 
paper and paperboard imports.
    Had the U.S. market share held constant, we estimate that our paper 
and paperboard sales in 2000 would have been $143 million--$l00 million 
more than they actually were. If this unequal treatment continues much 
longer, it will be difficult for these supplier relationships to be re-
established and our market share loss could become permanent.
    While U.S. exports of wood products to Chile have declined, the 
Chilean wood products industry is aggressively exporting to third 
country markets and has dramatically increased its presence in the U.S. 
Imports of Chilean wood products, which enter the U.S. duty free, have 
grown from $16 million in 1988 to over $420 million in 1999.
    A U.S. proposal built on the zero for zero and ATL concepts would 
send a clear signal that the Bush Administration will pursue early 
sectoral tariff liberalization, and will also have a salutary effect on 
parallel industrial tariff negotiations in the FTAA and in the WTO--
hastening the day when we achieve global tariff elimination in our 
sector. Indeed, since Chile has up to now declined to participate in 
any sectoral liberalization because of its adherence to a uniform 
tariff structure, agreement to a sectoral approach in the FTA could 
serve as a strong impetus for a change in their position in the WTO and 
APEC contexts.
Free Trade Area of the Americas (FTAA)
    Early sectoral tariff elimination in the FTAA--including forest 
products--would be an important building block for action on a ATL in 
the WTO. Key markets in the Western Hemisphere (outside of NAFTA) are 
Mercosur, Chile, Colombia, Venezuela, Ecuador and the Dominican 
Republic.
    To help advance FTAA, AF&PA has established a working group with 
counterpart Latin American associations to promote common positions on 
industry issues, including tariffs.
Asia Pacific Economic Cooperation Forum (APEC)
    As part of its WTO accession-related bilateral market access 
agreement with the U.S., China committed to participate in any ATL 
agreement that is undertaken in the WTO. In addition, China's 
priorities during its 2001 chairmanship of APEC include leveraging APEC 
deliverables at the WTO and making progress in the EVSL sectors, which 
include forest products.
    The U.S. should capitalize on the possibility of new APEC energy on 
tariffs during the China year by renewing its efforts in APEC to 
promote early tariff liberalization in the EVSL/ATL sectors.
JAPAN
    In the Uruguay Round, Japan was a party to the zero for zero 
agreement to eliminate tariffs on paper products by 2004. On wood, they 
succeeded in getting credit for tariff cuts agreed to in settlement of 
a pre-existing 301 settlement while opposing the inclusion of wood 
products in the zero for zero package. The wood products industry 
believes a major outstanding issue between the U.S. and Japan is their 
tariffs on value-added wood products. The Japanese practice of 
maintaining low or zero tariffs for raw materials, but high tariffs on 
processed wood products (e.g., lumber, molding, panel products, 
plywood, veneer, engineered and laminated products, doors, windows, 
flooring, siding, etc.) denies equitable market opportunities for U.S. 
producers by undermining our comparative manufacturing advantage while 
providing maximum benefit to Japanese domestic producers of value-added 
products. Tariff escalation distorts access to the Japanese market, and 
the U.S. industry therefore remains adamant that the U.S. government 
cannot judge the Japanese market for wood products to be fully open 
until all wood product tariffs are eliminated.
    The Japanese government continues to provide direct aid through 
both high subsidies and a tariff wall to ensure the survival of the 
non-competitive domestic wood processing industry. In fact, on November 
30, 2000 MAFF requested trade and customs officials to assess the 
impact on domestic lumber prices of a surge in lumber imports with a 
view to invoking emergency protection measures under the WTO. MAFF 
officials have publicly stated that they will take any and all measures 
to maintain the 20% market share of the domestic wood industry. Recent 
increases in imports and the domestic demand for kiln-dried product has 
obviously put the 20% figure in jeopardy. A safeguard action against 
U.S. wood exporters would have a dramatic impact on a more than 
billion-dollar market and would turn back the clock on efforts to 
liberalize the Japanese forest products market.
    While tariffs are the most visible hurdle to entering export 
markets, the U.S. paper industry learned that in Japan tariffs are by 
no means the most significant barrier. Even with low paper tariffs, 
over the past decade, Japan--which is one of the world's highest cost 
producers of paper--has successfully excluded certain grades of U.S. 
paper, and foreign paper products in general, from its market. USTR 
negotiated a market access agreement with Japan in 1992 aimed at 
substantially increasing access to Japan's market for paper products. 
However, the Japanese government and industry did not comply with the 
agreements and, instead, used the time to restructure their industry 
and add new capacity. As a result, today Japan imports just 4.2% of its 
paper consumption, practically the lowest level of any country in the 
world.
SUBSIDIES
    The elimination of foreign subsidies in natural resource based 
industries represents a trade and environment win/win and should be 
pursued as a priority part of the U.S. trade policy agenda. Subsides 
not only give foreigncompetitors price advantages, they have 
contributed to building uneconomic/unsustainable capacity which has 
further distorted markets for forest products and increased pressure on 
forest resource. The U.S. government should identify subsides as a 
priority Non-Tariff Measure (NTM) to be addressed on a sectoral basis 
in a New Round of multilateral trade negotiations.
FORESTRY CERTIFICATION
    Certification and other programs designed to ensure sustainable 
forest practices have emerged as a major new factor in global fiber 
supply since the June, 1992 Earth Summit. As these schemes have 
proliferated in recent years, the U.S. industry urges governments to 
refrain from sanctioning certain certification schemes without the 
opportunity for mutual recognition of comparable schemes. Some 
certification schemes give competitive advantages to products based on 
production methods regardless of similar characteristics and the end-
use. Only open and transparent mutual recognition of comparable 
certification schemes will ensure that certification does not become a 
market access barrier and continues to achieve the objectives of 
enhancing forest stewardship and sustainability.
CODES AND STANDARDS
    Foreign product standards and building codes often act as technical 
barriers to trade, curtailing U.S. wood product exports. International 
standards affect U.S. wood product exports in several important ways; 
in addition to requiring that U.S. products comply with these standards 
when used overseas, efforts are underway to bring some international 
standards to the U.S. domestic market. As wood competitors seek to 
expand their exports, and also preserve market share at home, more 
frequent cases of standards being used as trade and market access 
barriers to U.S. wood products have developed. The U.S. government 
should continue to support the international harmonization and mutual 
recognition of product standards and accreditation procedures.
CONCLUSION
    More than a decade has passed since the elimination of wood and 
paper tariffs was designated a priority goal of U.S. trade policy--and 
this passage of time has been attended by serious, negative economic 
consequences for the U.S. forest products industry and its workers. We 
therefore urge the Bush Administration to treat the achievement of 
global tariff elimination in our sector as unfinished business that 
deserves to be a priority objective in every forum where the U.S. is 
negotiating trade liberalization, including the U.S.-Chile FTA, the 
FTAA, APEC and the WTO. In addition, the U.S. needs to be vigilant in 
preventing the proliferation of non-tariff barriers, including 
subsidies, standards and certification schemes, that might be used by 
trading partners to offset the benefit of tariff reductions.

                                

          Statement of Advanced Medical Technology Association

    AdvaMed represents over 800 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 $71 billion in life-enhancing health care 
technology products purchased annually in the United States, as well as 
50 percent of the $165 billion in medical technology products purchased 
globally. Our industry currently enjoys a trade surplus of $7.1 billion 
vis-a-vis our trading partners.
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. Advanced medical technology can not only save and improve 
patients' lives, but also lower health care costs, improve the 
efficiency of the health care delivery system, and improve productivity 
by allowing people to return to work sooner.
    However, when regulatory policies and payment systems for medical 
technology are complex, non-transparent, or overly burdensome, they can 
significantly delay or deny patient access to the latest, state-of-the-
art innovations. They can also serve as non-tariff barriers, preventing 
U.S. products from reaching patients in need of innovative health care 
treatments.
    AdvaMed applauds President Bush's support of international trade 
initiatives. To allow the President, and U.S. Trade Representative 
(USTR) Robert B. Zoellick to reduce tariffs and non-tariff barriers 
throughout the globe, we would like to echo the comments made by the 
President in his recent address to the joint session of Congress in 
calling for Congress to give him presidential trade promotion 
authority. It should be extended to ensure further work on regional and 
global trade negotiations, including the Free Trade Area of the 
Americas (FTAA), the Asia-Pacific Economic Cooperation (APEC) forum, 
the World Trade Organization (WTO) and the Transatlantic Business 
Dialogue (TABD) with Europe. In addition, the President and USTR should 
use this authority to continue to pursue bilateral trade agreements 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 and arbitrary, across-the-board 
reimbursement cuts imposed on foreign medical devices and diagnostics.
Key Markets: Japan and Europe
    Efforts to oversee foreign policies impacting the export and sale 
of US medical devices abroad should primarily focus on our two largest 
foreign markets, Japan and the European Union (EU). After the U.S., 
Japan is by far the largest global market for medical technologies ($24 
billion) followed by Germany ($16 billion) and France ($7 billion.) US 
manufacturers annually export over $2 billion to Japan and manufacture 
another $6.5 billion in the region for the Japanese market. Our trade 
surplus with Japan is an impressive $1.3 billion. We believe that this 
statistic is a good indicator our industry's global competitiveness in 
the field of medical technology and it strongly underscores the 
importance of critical ongoing efforts with the U.S. government to open 
the Japanese market further to cost-saving and life-enhancing medical 
technologies. U.S. manufacturers also export nearly $8 billion annually 
to the EU and maintain a $3.6 billion trade surplus with the EU.
Japan's Soaring Healthcare Expenditures and the Need for Deregulation
    Japan's health care system is facing a grave funding crisis--with 
estimates of a nearly $40 billion shortfall and several major insurance 
associations facing potential bankruptcy within the next 2-3 years. To 
date, however, Japan has resisted making much-needed structural 
changes, such as reducing the extraordinarily long average hospital 
stays (over 30 days) with the help of technological advances, and has 
instead sought reductions in expenditures by cutting reimbursements for 
medical technologies and pharmaceuticals, and by shifting some costs to 
patients. Persistent price-cutting, coupled with slowing safety 
approval and reimbursement processes for new technologies, has made it 
difficult to introduce state-of-the-art health care that would increase 
the productivity of the Japanese health care system.
    USTR must exert leadership in promoting market-opening measures in 
Japan's healthcare market, including reforms that will allow Japan to 
reap the life enhancing and cost-saving benefits offered by medical 
technologies, including:
     Reimbursement policies that are more responsive to the 
innovation process, such as:
           Measures to expedite the coverage, payment and 
        access to brand-new-to-Japan medical technologies (category 
        C2), as per earlier trade agreement commitments;
           Avoidance of excessive price control measures as a 
        policy means to control overall healthcare spending, focusing 
        instead on the creation of payment categories that are more 
        reflective of the differences in technologies; and
           Japan should encourage more reimbursement decisions 
        based on foreign clinical data, as well as create a cost-
        sharing system for any clinical trials required in Japan.
     Streamlined and transparent safety approval procedures, 
including (but not limited to):
           Better definitions and criteria within the product 
        classification system;
           Improved ``pre-consultations'' process and use of a 
        standardized ``checklist'' of submission contents to clearly 
        identify requirements prior to application submission; Also, 
        better documentation practices within MHLW on discussions with 
        industry (to avoid misunderstandings and to create binding 
        decisions);
           Resolution over the longstanding issue over 
        materials characterization and acceptance of biocompatibility 
        tests of materials conducted according to international 
        standards.
           Better harmonization with Global Harmonization Task 
        Force recommendations in areas such as ``adverse event 
        reporting'' where Japan is implementing unique and burdensome 
        requirements on manufacturers.
Europe: Seek Appropriate Policies That Improve Patient Access to 
        Innovative Medical Technologies
    In the EU, enforcement of current trade agreements is key. The US-
EU Mutual Recognition Agreement (MRA) must be fully implemented. 
Bringing healthcare products to the market faster is an important 
priority consistent with the protection of public health and the 
reduction of regulatory costs and redundancy. The European Commission 
(CEC) should be encouraged to take all proper measures to ensure that 
the MRA is operational by January 2002, when the current three-year 
transitional period is scheduled to end.
    In addition, European Member States should be encouraged to adopt 
policies for their health technology assessment (HTA) decisions 
affecting medical technologies that are transparent and timely, and 
industry participation should be allowed. US firms, as the leaders in 
innovative medical technologies, stand to suffer disproportionately 
from unnecessarily long delays in HTA decisions in Europe. The CEC 
should ensure that the EU Medical Devices Directives are implemented 
uniformly by the Member States. Uniform implementation of the Devices 
Directives is essential to the furtherance of the European Single 
Market B a concept strongly advocated by the Transatlantic Business 
Dialogue (TABD). To the extent that additional regulatory requirements 
are deemed necessary in Europe, Member State must be advised to consult 
with industry in advance and to ensure that such requirements are 
consistent with the objectives of global harmonization.
    AdvaMed supports the Safe Harbor agreement struck between the EU 
and US B an agreement that promises the uninterrupted data flow from 
the EU to the US. The agreement, reached in response to the 1995 EU 
Data Privacy Directive, provides additional flexibility (along with 
specific data privacy contracts or compliance with the actual directive 
itself) for US firms to continue to receive data from EU-based 
companies. AdvaMed and its member companies look forward to working 
with both sides on implementing the agreement in such a way that 
supports transatlantic business and economic activities and, in 
particular, supports industry's efforts to research, develop, and bring 
to market medical technologies that offer great promise for patients on 
both sides of the Atlantic.
Utilize Multilateral Opportunities to Establish Basic Principles to 
        Expand Global Trade and Patient Access to New Technologies
    A primary goal of all economies is to provide high quality, cost 
effective healthcare products and services to all citizens. The 
mission, and sovereign right, of a government's regulatory agency is to 
oversee the efforts of medical technology manufacturers to ensure that 
their products are safe and effective. Another mission is to ensure 
their citizens have timely access to state-of-the-art, life-saving 
equipment and that compliance procedures 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 regulatory agencies around the world make their policies 
and practices conform to the relevant and appropriate international 
trading rules established by the World Trade Organization (WTO).
    Toward that end, member economies should agree to make their 
medical device regulatory regimes conform to these guiding principles:
     Acceptance of International Standards; Conformity/
Provision of 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;
     Ensure balanced opportunity for the primary suppliers and 
developers of technology to participate in decision-making, e.g., 
national treatment.
     Establish meaningful appeals processes.
Utilize Multilateral and Regional Forums to Eliminate Tariff and 
        NonTariff Barriers to Trade That Unnecessarily Increase the 
        Cost of Health Care
    Many countries maintain significant tariff and nontariff barriers 
to trade for medical technology. Such barriers represent a self-imposed 
and unnecessary tax that substantially increases both the cost of 
health care to their own citizens. Such barriers also delay the 
introduction of new cost-effective, medically beneficial treatments. As 
a result, regional forums are striving to enhance market access for a 
number of important sectors. The Asia-Pacific Economic Cooperation 
(APEC) forum has made significant strides in developing a tariff 
reduction schedule that will facilitate trade and access in key 
developed and emerging markets, though implementation of the 
Accelerated Tariff Liberalization (ATL) package stalled due to the 
inability to launch another WTO round. USTR should take strides to 
ensure ATL and non-tariff barrier reduction initiatives developed under 
APEC reach fruition via the appropriate trade forum. Moreover, a new 
WTO round should be seen as an opportunity to improve access to new 
medical technology on a global basis.
    With regard to Europe in particular, the U.S. medical technology 
industry supports the activities of the Transatlantic Business Dialogue 
(TABD). TABD provides industry leaders an opportunity to engage in 
dialogue with high-level U.S. and EU government leaders on important 
trade and policy issues related to medical technologies. TABD has 
become an important vehicle for ensuring that the EU and US markets 
remain open to innovative medical technologies. The success of the 
medical technology MRA can be attributed in large part to TABD. It is 
through the TABD that industry expects to make progress on important 
issues, including technology assessment, reimbursement practices, and 
appropriate regulations for innovative medical technologies. The 
medical technology industry looks forward to the new Administration's 
support for TABD.
Conclusion
    AdvaMed appreciates the President's commitment to expanding 
international trade opportunities and is fully prepared to work with 
the President, USTR Ambassador Zoellick and other interested government 
agencies, such as the Commerce department, to encourage positive action 
and help secure presidential trade authority to monitor, enforce and 
advance multilateral, regional and bilateral trade agreements 
particularly with our key trading partners.

                                

         Statement of American Textile Manufacturers Institute

    This statement is submitted on behalf of the American Textile 
Manufacturers Institute (ATMI), which is the national trade association 
for the U.S. textile industry. Our member companies operate in more 
than 30 states and process approximately two thirds of all textile 
fibers consumed by plants in the United States.
    As an industry that is both a major exporter and deeply impacted by 
foreign imports, the domestic textile industry believes that United 
States trade policy should be motivated by principles of fairness and 
equity. The United States, with its history of transparent, open and 
accessible markets,1 must likewise insist that its own 
exporters have access to transparent, open and accessible markets.
---------------------------------------------------------------------------
    \1\ While there are those who continue to decry the US textile and 
apparel quota phase-out schedule as ``protectionist,'' they fail to 
note that textile and apparel imports have increased every year under 
the program, that 73 countries are now listed in the Commerce 
Department's ``major shippers'' textile and apparel report published by 
the Commerce Department and that since the quota program was instituted 
in 1972, imports of textile and apparel products to the United States 
have increased by 3,600 percent, rising from $3 billion to a record 
high $72 billion in 2000.
---------------------------------------------------------------------------
    The United States government must also recognize the dynamic forces 
that impact world trade and the domestic industry. In 1997, Asian 
currencies dropped precipitously and have never recovered. This has 
resulted in a flood of artificially low-priced Asian imports into the 
U.S. market. The strong dollar policy on the part of the US government 
has helped to keep these currencies at record lows and contributed to a 
wave of plant closings, bankruptcies and layoffs in the U.S. textile 
industry.
    The Asian currency crisis and a strong dollar policy have altered 
the competitive landscape in textiles and their impact needs to be 
recognized. The major Asian exporters that today are arguing for new 
cuts in U.S. textile tariffs must be rebuffed B indeed, the currency 
declines and strong dollar policy have already given them de facto 
tariff cuts of 35% or more. Demands for accelerated quota phase-out 
schedules should likewise be rebuffed in light of the enormous 
increases in exports from Asia.
Regarding Textiles, Basic Rules For Trade Agreements
    Regarding trade agreements with other nations, from the perspective 
of the American Textile Manufacturers Institute, three basic principles 
prevail.2 (1) trade agreements must be fair and equitable to 
the domestic industry; (2) trade agreements must be enforceable and (3) 
the U.S. government must exhibit the will to enforce trade agreements.
---------------------------------------------------------------------------
    \2\ In 1993, the American Textile Manufacturers Institute, along 
with fiber, textile and apparel trade and labor associations from 
throughout Europe, Japan and North America, was a signatory to a 
``Charter of Fundamental Principles of Global Trade for Textile and 
Apparel.'' This document, which has been termed a ``textile and apparel 
Magna Carta'' established ``fair conditions of trade'' in textiles. The 
basic principles which this document drew were ``equity,'' 
``reciprocity'' and ``enforceability''.
---------------------------------------------------------------------------
1. Trade Agreements Must Be Both Fair and Equitable
    Trade agreements must provide a balanced and equitable set of 
outcomes. The element of fairness should be the basis for judgement. 
From ATMI's perspective, we must ask, does the agreement provide for 
real, effective access to foreign markets, are rules and disciplines 
applied equitably, and are effective safeguards available if agreements 
fail to keep their commitments?
2. Trade Agreements Must Be Specific and Enforceable
    The second test regarding trade agreements is their enforceability. 
Agreements which cannot be enforced will be violated. The Uruguay Round 
agreements are a prime example. In the Uruguay Round's Agreement on 
Textiles and Clothing (ATC), developing countries are directed to 
Apromote improved access@--but the agreement spells out no specific 
benchmarks for what would constitute improved market access. As such, 
many governments have elected to make superficial changes--such as 
dropping tariff rates from 70 percent to 50 percent--but have de facto 
kept their markets tightly closed.
    In contrast, the United States and other developed countries are 
directed by the ATC to reduce their tariffs by specific amounts and to 
increase or entirely remove their remaining quotas by certain dates. 
This has led to dramatically increased access to the U.S. market--in 
the last six years, textile and apparel imports into this country have 
nearly doubled and now total more than $70 billion.
3. Governments Must Be Willing to Enforce the Agreements They Sign
    Ultimately, the final test of a successful trade agreement is the 
willpower of the government to enforce the trading regime that it has 
put in place.
    As we have seen, the language in the ATC gave U.S. textile mills 
little to hope that closed markets around the world would open. 
However, as part of the Uruguay Round legislation, the U.S. Government 
developed specific criteria for what it considered effective market 
access for textile products. These criteria specified maximum tariff 
levels for different textile products as well as the removal of non-
tariff barriers. If these criteria were not met, then the United States 
pledged to take action against those countries that were keeping their 
markets closed.
    Unfortunately, the U.S. government has thus far taken little or no 
action against these closed markets. While there are instances where 
the government has acted--the government successfully used the WTO 
dispute settlement process to force India to phase out its outright 
bans on textile product imports is one instance--the government has not 
acted against other barriers that have kept the Indian market, as well 
as many others, closed to U.S. textile exports.
The State of Textile Trade
The Asian Currency Collapse Has Caused Asian Imports to Soar
    The collapse of Asian currencies in 1997-98 and the resulting 
collapse of demand in Asia have combined to drive prices for Asian 
textile and apparel products to artificially low levels. This has 
caused a flood of low-priced Asian imports into the U.S. market--a 
market that had seen relatively little growth of imports from the Far 
East for a decade. A strong U.S. dollar policy has contributed to an 
unprecedented three-year long period of deflationary price cuts for 
U.S. textile products. Heretofore successful efforts by the U.S. 
textile industry to increase productivity, drive costs lower and expand 
export sales to Mexico and the CBI, have been overwhelmed by devalued 
Asian imports. The continued viability of major sectors of the U.S. 
textile industry is now threatened.3
---------------------------------------------------------------------------
    \3\ See Attachment I for information on industry successes during 
the quota phase-out period and prior to the Asian currency collapse.
---------------------------------------------------------------------------
      
    [GRAPHIC] [TIFF OMITTED] T3538A.001
    
Combined with a U.S. Strong Dollar Policy, Major Asian Exporting 
        Countries Now Receive a De Facto ``Tariff Cut'' of 35% or More
    As noted in the accompanying chart, the East Asian currencies that 
precipitated the financial crisis have never recovered and, in fact, 
have dragged down the currencies of other major exporters such as 
India, Pakistan, and Bangladesh to record (since 1997) lows. As a 
result, China has increased its use of export tax rebates, which has 
further depressed prices. At the same time, the U.S. instituted a 
strong dollar policy in order to boost Asian economic recovery by way 
of increasing exports to the United States. This has resulted in a de 
facto tariff break for Asian exporters of 35 percent or more. 
[GRAPHIC] [TIFF OMITTED] T3538A.002

The Flood of Artificially Low Priced Asian Imports Now Threatens Major 
        Sectors of the U.S. Textile Industry
    Faced with severely depressed 4 Asian currencies that 
resulted in low priced competition from Far East imports, prices for 
U.S. textile products have been falling for several years. The Producer 
Price Index for processed yarns has declined for four consecutive years 
and, in 2000, stood nearly seven percent below its 1996 level. The 
Index for broadwoven greige fabrics fell during each of the past three 
years and now stands more than eight percent below its 1997 level. The 
Index for finished knit fabrics has also dropped for three straight 
years and stands nine percent below its 1997 level.
---------------------------------------------------------------------------
    \4\ Currencies of major Asian textile and apparel exporters have 
never recovered from their 1997-1998 declines. Indonesia is still down 
87 percent, Thailand down 52 percent, South Korea down 36 percent, and 
the Philippines down 35 percent. Other Asian exporting nations have 
seen their currencies drop as well: Pakistan is down 41 percent (a 
record low since 1997), India is down 23 percent (a record low), and 
Bangladesh is down 24 percent (a record low). 
[GRAPHIC] [TIFF OMITTED] T3538A.003

    Most of the cotton and man-made fiber yarns used in apparel and 
home furnishings fabrics are spun from staple fiber, and consumption of 
the fiber used in spinning these yarns dropped more than four percent 
in both 1998 and 1999. During 2000, fiber consumption for spinning yarn 
for apparel and home textiles products fell almost five percent and was 
nearly 13 percent below the pre-downturn level in 1997.
    As imports increased market share and pushed prices of domestic 
textiles down, U.S. textile mill shipments fell. Down nearly two 
percent in 2000, industry shipments have declined for three consecutive 
years so far. Not since the 1950s have industry shipments fallen for 
three years in a row. 
[GRAPHIC] [TIFF OMITTED] T3538A.004

    Meanwhile, employment in the textile industry has fallen for six 
consecutive years, reaching 525,000 workers inDecember 2000. At the end 
of last year, industry employment was nearly 150,000 workers, or more 
than 22 percent, lower than it was a decade earlier. While a small 
portion of this employment decline can be attributed to productivity 
gains, the rest has clearly been caused by imports.
Textile Mill Closings Are Accelerating
    As textile companies' market share was lost to imports, there were 
at least twenty textile plant closings in 2000 and almost 20 more 
already announced in the first few months of 2001. Among many others, 
these plant closings and employment cuts have occurred at Mayfair 
Mills, Swift Spinning, Armtex, Inc., CMI Industries, Guilford Mills, 
Inman Mills, Galey & Lord, Burlington Industries, Spray Cotton Mills, 
Culp, Inc., WestPoint Stevens, Inc., Crown Crafts, Inc., and JPS 
Textile Group, Inc. 
[GRAPHIC] [TIFF OMITTED] T3538A.005

After Three Years of Cutting Prices, in 2000 U.S. Textile Industry 
        Reports First Annual Loss
    As margins were squeezed by falling prices, the textile industry 
registered its largest quarterly loss in at least twenty years during 
the third quarter of 2000. The loss in the third quarter was the first 
quarterly loss in almost five years and will in all likelihood result 
in an overall industry loss for full-year 2000. If that occurs, it will 
be the first annual loss for the textile industry in the more than 50 
years that these data have been collected.
    The poor financial performance of U.S. textile mills has had a 
significant impact on the stock prices of publicly owned textile 
companies. The Wachovia Securities Textile Index, which includes the 
stocks of 10 textile companies, dropped 65 percent between the end of 
1998 and December 29, 2000. The index fell nearly 47 percent last year 
alone. In comparison, the Russell 2000 Index was down only four percent 
in 2000. Thus, the current crisis adversely affects not only textile 
mills and their employees, but every individual, institution, pension 
fund, etc. owning textile stocks.
Upcoming Negotiations, Trade Agreements and Trade Issues
1. WTO Negotiations Regarding a New Round
    Many major exporting countries B including India, Pakistan and 
Thailand B have called for an ``up front payment'' for a new round by 
means of an increase in the textile quota phase-out schedules to which 
they agreed in 1993. These same countries have kept their markets 
tightly closed to U.S. exports and have benefited enormously from quota 
increases over the last six years. In addition, almost all of these 
countries have rapidly expanded their exports as their currencies have 
declined.
    In contrast, the U.S. textile industry has gotten little or no 
access to these same countries' markets. The U.S. trade policy 
regarding a new round should acknowledge that substantial work 
regarding access to foreign markets for U.S. textile manufacturers has 
yet to be done. This should be the government's priority regarding 
textile and apparel trade in any future global talks. In addition, the 
major exporting countries have already received a large de facto tariff 
rate cut in the form of devalued currencies (as shown in a previous 
chart) and are not entitled, nor should they receive, any new grants of 
access.
    Regarding tariffs, the United States should also take into account 
the impact that reduced tariffs would have on preferential trade areas 
already in existence. Over $25 billion in two-way textile trade has 
developed between the U.S. and Mexico, and the U.S. and the Caribbean 
Basin Trade Partnership Act countries, because of the zero duty status 
that they enjoy. Reduction of textile tariffs worldwide would erode the 
competitiveness of the Mexican and Caribbean apparel sectors that today 
employ hundreds of thousands of workers. Economic stability in the 
areas south of the U.S. border is an important foreign policy goal of 
the United States--reduction of textile tariffs would threaten that 
goal.
2. Free Trade Agreement with Singapore
    The proposed free trade agreement with Singapore fails all three of 
the tests used by ATMI to evaluate trade agreements. The agreement is 
not equitable or fair because it proposes to give Singapore duty-free 
access for textiles and apparel goods, which would threaten U.S. 
textile producers, including those who ship large amounts of fabric to 
Mexico and the CBI. Because the market for U.S. textile and apparel 
products in Singapore is tiny, there is no prospect for substantially 
increased U.S. textile exports to Singapore. In addition, the agreement 
is not enforceable. $200 billion worth of trade passes through 
Singapore each year, including a substantial amount of transshipped 
merchandise.
    The U.S. Customs Service's own reports show that Singapore cannot 
produce the goods it currently exports, yet Singapore officials have 
refused to cooperate in anti-transshipment efforts.
3. Free Trade Agreement of the Americas (FTAA)
    In regard to an FTAA, it is important that the government create a 
subgroup within the market access negotiating team dedicated to textile 
and apparel issues. This would mirror the process that has been used in 
every major multilateral negotiation B including the Uruguay Round, 
NAFTA and the U.S.-Canada FTA--that has involved textiles and apparel 
to date. The issues involved in textile and apparel market access, 
which include quotas, possible transshipments, Customs verification 
teams and the negotiation of over 1,500 tariff lines, are so technical 
and detailed that a dedicated sub-group on textile market access is 
absolutely necessary for a successful outcome.
    While ATMI has not yet taken a formal position on an FTAA, in 
general terms we believe the agreement must be fair and beneficial to 
U.S. textiles, it must have enforceable rules and the government must 
be willing to enforce those rules. To use NAFTA as a point of 
reference, the textile and apparel rules must exclude free-riders, have 
strict origin requirements, allow for cross-country Customs 
verification and have reciprocal tariff phase-outs. Enforcement is key; 
each time that free trade is expanded, the opportunity for goods from 
outside the free trade region to enter illegally is expanded as well.
    Again, to draw upon NAFTA, seven years into that agreement, it has 
recently become clear that large scale smuggling of textile and apparel 
goods into Mexico and the United States is now a problem of the 
firstmagnitude. These goods, which falsely declare NAFTA origin and 
which deprive the U.S. Treasury of many millions of dollars in duties, 
cause great harm to U.S. and Mexican producers of textiles and apparel. 
Despite the authorization of funds and of dedicated agency personnel to 
NAFTA textile enforcement in the NAFTA legislation, U.S. Customs has 
yet to make a concerted effort to crack down on this illegal trade.
4. The CBI/AGOA Bill and Possible Extension of CBI Trade Benefits to 
        Colombia and the Other Andean Pact Nations
    Regarding an extension of CBI/AGOA trade benefits to Colombia and 
the Andean Pact, ATMI will evaluate proposals on their merits, 
including Senator Bob Graham's newly introduced legislation, S. 525. 
While ATMI supported the CBI portion of the Trade and Development Act 
of 2000, ATMI is still concerned about U.S. Customs' interpretation of 
key provisions of the Act, especially with respect to texturing of U.S. 
yarn and dyeing and finishing of U.S. fabrics. Moreover, the Sub-
Saharan Africa portion of the Act contained sections that were very 
troubling to the industry. These included the lack of a workable surge 
mechanism, the size and growth rate of the quota for garments made of 
non-U.S. components and generally weak anti-transshipment measures. 
These concerns will be taken into account in our evaluation of S. 525 
or any subsequent proposal.
5. China WTO Accession Negotiations
    The China Working Group negotiations have been extended because 
China has tried to backtrack on a number of important issues, including 
several that are textile-related. In addition, China appears to be 
backtracking on bilateral agreements involving agriculture that it 
signed with the U.S. in order to show its goodwill during the WTO 
negotiations.
    It is of the utmost importance that China be held to the letter and 
intent of the U.S.-China WTO agreement. In particular, the textile 
safeguard and the general product safeguard must remain available for 
use by the domestic industry. China must not be able to claim 
developing nation status regarding subsidies and safeguards, in 
particular regarding the use of export subsidies (including export tax 
rebates), the serious prejudice clause, privatization programs, de 
minimis levels and the finding of injury for actionable subsidies. 
China must also be required to undergo a regular two-year review of its 
progress in integrating into the WTO.
6. Normal Trading Relations (NTR) with Vietnam and a Bilateral Textile 
        Agreement
    Vietnam's already impressive textile and apparel capabilities, 
combined with some of the lowest wages in the world, make it imperative 
that a bilateral textile agreement be completed before NTR tariffs go 
into effect, or at minimum at the same time (but certainly not after 
the NTR tariffs become effective). As evidence of Vietnams potential, 
within five years of achieving MFN tariff status with the European 
Union, Vietnam had become one of the EU's biggest suppliers. Also of 
note, even without getting NTR tariff rates, Vietnam has become a major 
supplier of cotton gloves, cotton woven shirts and cotton woven 
trousers to the United States.
    A bilateral textile agreement with Vietnam must also contain 
stringent anti-transhipment measures.
7. Countervailing Duty Laws for Non-Market Economies
    ATMI strongly urges the U.S. government to apply its countervailing 
duty laws to non-market economies. Countries with such economies, which 
include China and Vietnam, are able to subsidize their industries 
without fear of penalty. It is foolish for the U.S. government to treat 
those countries more favorably than it does market economies and, in 
effect, to provide support to a type of economic system that is in 
direct conflict with its own free market system. Accordingly, we 
support Rep. Phil English's proposed legislation along these lines.
Conclusion:
    ATMI believes the U.S. textile industry can and will be able to 
compete in the global textile and apparel trade environment provided 
certain basic rules are followed. The U.S. textile industry is going 
through some very difficult times, caused predominantly by continued 
under valuation of Asian currencies. Our government must pursue 
policies and trade agreements which are specific and enforceable, and 
which incorporate the principles of fairness and equity. And our 
government must adequately enforce such trade agreements, particularly 
with respect to ensuring market access for U.S. textile exports. Our 
government must also consider the impact of future trade agreements on 
the viability of existing agreements, particularly NAFTA and the CBI.
    Under these circumstances, our industry can remain competitive and 
again thrive in the global marketplace.

                                

  Statement of Florida Department of Agriculture & Consumer Affairs, 
                          Tallahassee, Florida

    The Florida Department of Agriculture and Consumer Services follows 
with great interest developments involving international trade. Florida 
is a major agricultural state, and approximately 19 percent of its 
agricultural production is exported. Florida recognizes the benefits 
that its farmers and ranchers can obtain from increased liberalization 
of international trade. At the same time, however, Florida is concerned 
that the United States has negotiated away many of the minimal 
protections formerly available to its farmers and ranchers--while 
agricultural producers in other countries remain relatively more 
protected.
    The Florida Department of Agriculture is pleased to submit the 
following suggestions to the Ways and Means Committee regarding 
ongoing, and future, international trade negotiations. While a number 
of trade agreements will likely be debated during the 107th Congress, 
the Florida Department of Agriculture is most concerned with World 
Trade Organization (WTO) and Free Trade Area of the Americas (FTAA) 
negotiations. In addition, these comments will address possible changes 
in U.S. trade laws outside the context of international trade 
negotiations.
Special Rules for Perishable and Seasonal Agricultural Products
    The Florida Department of Agriculture suggests that the United 
States advance in trade negotiations special rules for perishable and 
seasonal agricultural products. Rules should be developed that reflect 
the commercial realities of these products. The Florida Department of 
Agriculture is not the only entity seeking the development of such 
rules. For example, the National Association of State Departments of 
Agriculture (NASDA) and the New Mexico, Florida, Arizona, California, 
and Texas (NFACT) Agricultural Coalition--which is composed of the 
agricultural commissioners of those five states--have over the past 
several years advocated the inclusion of special rules on perishable 
and seasonal agricultural products in trade negotiations. In addition, 
agricultural groups in Mexico and Canada have requested that their 
governments support the development of such rules for future trade 
agreements as well.
Harmonization
    Given the disparate laws of various countries regulating 
agricultural chemicals, such as pesticides, herbicides, and fungicides, 
as well as the differing food safety laws of countries, Florida 
supports efforts to harmonize internationally such laws. Florida 
producers do not advocate the lowering of U.S. environmental and food 
safety standards. Rather, they seek to ensure that farmers and ranchers 
in other countries also adhere to laws that provide adequate 
protections for human health and the environment. At the present time, 
as Florida producers are subject to some of the strictest environmental 
and food safety laws in the world, they are placed at a cost 
disadvantage in relation to their counterparts in other countries. 
Harmonization of food safety and agricultural chemical laws would 
benefit Florida's farmers and ranchers as well as the citizens of other 
countries.
Antidumping and Countervailing Duty Laws
    The Florida Department of Agriculture strongly opposes any efforts 
to weaken the U.S. antidumping and countervailing duty laws, or the 
ability to use such laws. These laws are essential in permitting 
Florida's agricultural producers to counter unfair trade practices.
Sanitary and Phytosanitary Measures
    The Florida Department of Agriculture believes strongly that 
sanitary and phytosanitary (SPS) measures should be transparent and 
based upon science. Any SPS rules of possible future trade agreements, 
such as the FTAA, should follow the general guidelines of the SPS 
Agreement of the WTO.
    Florida has been subjected to numerous pest infestations in recent 
years. Many in the state are concerned that these crises have been 
caused, at least in part, by the fact that the budgets and staffs of 
the border inspection personnel of the Customs Service, the Department 
of Agriculture, and the Food and Drug Administration have not kept pace 
with increased volumes of trade across U.S. borders that have resulted 
from new trade agreements. The Florida Department of Agriculture urges 
that Congress provide sufficient funds to provide for adequate 
inspections of imported products.
Export Subsidies
    The use of export subsidies distorts the international market for 
agricultural products. These subsidies provide some of our competitors 
with an unfair advantage over U.S. agricultural producers. The Florida 
Department of Agriculture favors the global elimination of export 
subsidies.
State Trading Enterprises
    State trading enterprises (STEs), like export subsidies, are trade 
distorting. Their practices harm U.S. farmers and ranchers. The Florida 
Department of Agriculture would support the elimination of STEs through 
international negotiations.
Tariffs
    Florida producers are concerned that past trade agreements have 
reduced or eliminated tariffs on U.S. agricultural products while, at 
the same time, the tariffs of our trading partners have remained higher 
in comparison with U.S. tariffs. The Florida Department of Agriculture 
urges U.S. negotiators to seek tariff parity with our trading partners. 
In any case, further reductions in U.S. duties on orange juice, sugar, 
and fresh winter vegetables beyond the agreements achieved during the 
Uruguay Round are unacceptable.
International Cooperatives and Marketing Orders
    Due to the growing internationalization of the produce industry, as 
well as other sectors of the agricultural economy, cooperation among 
growers in different countries is becoming more essential. Florida 
requests that U.S. trade negotiators discuss with our trading partners 
the possible establishment of rules regarding the use of international 
marketing agreements and international cooperatives. Such mechanisms 
would better enable U.S. farmers and ranchers, and their counterparts 
in other countries, to address the problem of major price fluctuations 
in the international market.
Tariff Rate Quotas
    Tariff rate quotas (TRQs) provide a modicum of protection for 
producers of import-sensitive agricultural products who must compete in 
world markets characterized by price distortions. As such, Florida 
supports the continued ability of the United States to use TRQ 
mechanisms. Namely, Florida would strongly oppose any efforts to 
dismantle, or to widen available quotas of, the U.S. TRQs on sugar and 
beef.
    Florida has significant reservations about the effectiveness of 
TRQs established under NAFTA for fresh market produce. Under NAFTA, 
safeguard seasonal tariff rate quotas were negotiated for several of 
Florida's vegetable products, including tomatoes, onions, and chili 
peppers. For these seasonal and perishable products, the TRQ mechanism 
alone has not provided adequate import protection.
    Moreover, the mechanism used under NAFTA to liberalize TRQs--duty-
free access for an in-quota amount with the over-quota tariffs 
eliminated over a negotiated phase-out period--has not provided 
adequate protection for the most import sensitive products. While the 
Florida Department of Agriculture is strongly supportive of the ability 
of the United States to impose TRQs, the NAFTA TRQs should not serve as 
a model for future negotiations in the FTAA context or other free trade 
agreement negotiations.
Conclusion
    The Florida Department of Agriculture appreciates the opportunity 
to submit comments to the Ways and Means Committee on globalization and 
American trade policy. We would be pleased to provide further 
information on Florida's views on this subject upon request.

                                

 Statement of Thomas F. St. Maxens, St. Maxens & Company, and Mattel, 
                      Inc., El Segundo, California

    This statement is submitted on behalf of Mattel, Inc. in connection 
with the March 7, 2001 hearing conducted by the House Committee on Ways 
& Means regarding the U.S. trade agenda. The Committee's formal 
announcement of this hearing requested public comments in connection 
with this issue by March 21, 2001.
    Mattel strongly supports the continued elimination of trade 
barriers globally, and supports the initiation of a new round of WTO 
negotiations. In these negotiations, Mattel attaches the highest 
priority to the earliest possible conclusion of the Accelerated Tariff 
Liberalization (ATL) initiative currently under negotiation in the WTO. 
In addition, Mattel also supports regional negotiations such as the 
FTAA and free trade area initiatives, particularly if the resulting 
agreements are ``docked'' to the NAFTA.
    Headquartered in El Segundo, California, Mattel is the world's 
largest toy company with 1999 sales of $5.5 billion in over 150 
countries. Mattel has 31,000 employees, of whom 7,700 are in the United 
States.
    Mattel and other U.S. manufacturers of toys are among the most 
competitive in the world, and would stand to reap major benefits from 
the further dismantling of global trade barriers. Also benefiting 
directly from a reduction of trade barriers would be the 33,700 U.S. 
workers employed by the U.S. toy industry.
    The U.S. toy industry achieved its position as the world's leader 
by combining high value-added domestic operations, such as product 
design, engineering and strategic marketing, with substantial 
production overseas as well as in the United States. As a result, a 
large portion of U.S. toy companies' product lines are manufactured 
overseas, but even those toys incorporate important U.S. value. In the 
case of Mattel, that value includes the critical functions of product 
conceptualization and design, design and development engineering, and 
strategic marketing that are performed for the company's worldwide 
operations by the 2,000 workers at its El Segundo headquarters.
    With only 3 percent of the world's children living in the United 
States, U.S. toy companies must turn increasingly to foreign markets 
for industry growth. Although the United States has the largest toy 
market in the world, the growth in domestic sales by U.S. toy companies 
has been modest in recent years, reaching $23 billion in 1999. However, 
sales by U.S. toy companies in foreign markets (including U.S. exports 
and sales by overseas subsidiaries) have expanded at a rapid pace, 
totaling an estimated $5.5 billion in 1999.
    While the toy industry has been successful in penetrating overseas 
markets, that growth frequently has been limited by significant trade 
barriers. For example, most major developing country markets throughout 
the world are protected by tariffs of 20 percent or more on toys. These 
high tariffs will remain in effect even after the full implementation 
of all concessions from the Uruguay Round of multilateral trade 
negotiations concluded in 1994.
    In addition, while the United States, the European Union, Canada, 
Japan and Korea agreed to participate in a zero-for-zero agreement on 
toys under the Uruguay Round, this agreement left much to accomplish. 
While the United States immediately eliminated its tariffs on all toy 
categories, the other four countries participating in the zero-for-zero 
agreement on toys excluded several major toy categories from their 
tariff elimination commitments. For example, after the staged 
implementation of Uruguay Round tariff concessions is complete in 2004, 
both the European Union and Japan will still maintain tariffs on 
categories accounting for over half of their respective total imports 
of toys. Since these economies represent the largest overseas markets 
for most U.S. toy companies, these gaps pose a major continuing 
problem.

                             ATL Initiative

    In an effort to build on the Uruguay Round zero-for-zero agreement 
on toys, Mattel in 1996 enlisted the aid of the U.S. government to 
secure the inclusion of toys in the consultations on early voluntary 
sectoral liberalization (EVSL) conducted under the auspices of the 
Asian-Pacific Economic Cooperation (APEC) forum. APEC leaders in 1998 
then forwarded these EVSL talks, which cover toys and seven other 
sectors, to the WTO for final agreement as the Accelerated Tariff 
Liberalization (ATL) initiative.
    As currently structured, the ATL proposal on toys calls for the 
progressive elimination of tariffs on all toys, games and festive 
articles (HS 9501-9505). Negotiators have pressed hard to ensure that 
participating countries do not exclude selective product categories, 
and instead have sought to address import sensitivity problems through 
the deferred staging of tariff eliminations rather than through product 
exclusions. Under the most recent ``flexibility'' proposal adopted 
during the 1998 APEC negotiations, developed countries would be 
required to eliminate tariffs on most toys no later than 2005 (with 
final elimination of tariffs on remaining products by 2006), while 
developing countries would be required to eliminate tariffs on most toy 
categories by 2006 (with final elimination of tariffs on remaining 
products by 2007). Many countries have tabled offers calling for them 
to eliminate most or all of their tariffs on toys in the year 2000.
    Given the importance of the ATL initiative to Mattel and the rest 
of the U.S. toy industry, it is critical that WTO negotiators reach a 
final ATL agreement as soon as possible. As a result, Mattel urges that 
WTO negotiators agree to initiate formal ATL negotiations during the 
November WTO Ministerial Conference in Qatar, with a goal of completing 
these negotiations and beginning implementation within one year. The 
ATL agreement can serve as an early concrete signal of WTO members' 
commitment to a successful round, with the specific commitments made as 
part of the ATL agreement considered as an integral part of the overall 
commitments in the new round.

                       Other WTO Round Objectives

Tariffs
    In addition to concluding an ATL agreement, Mattel seeks through 
the new round's negotiations on industrial tariffs the deepest possible 
reduction in those foreign tariffs on toys that will remain following 
the completion of the ATL agreement. Assuming the ATL agreement is 
concluded along the lines currently envisaged, the primary focus of 
these follow-on negotiations would be the high tariffs maintained by 
those countries that did not participate in the ATL agreement. These 
are likely to include virtually all of Latin America, including the 
major market countries of Brazil, Argentina and Mexico.
    The industrial tariff component of the new round on negotiations 
must also address any exceptions taken by participants in the ATL 
agreement. These may include the exclusion of certain toy categories 
from some countries' tariff liberalization commitments, a failure to 
reduce tariffs on some toys all the way to Free, and/or overly long 
tariff staging periods.
Electronic commerce
    Mattel urges the Administration to ensure that future market access 
negotiations in the WTO include negotiations on e-commerce that will 
make permanent the standstill agreement on e-commerce tariffs (i.e., 
binding such rates at Free) and that will address key trade-related 
issues associated with e-commerce. Of these, Mattel has a particularly 
strong interest in matters pertaining to the use of privacy standards 
as trade barriers and the intellectual property aspects of domain name 
registration.
    One of the most pressing e-commerce issues to be addressed by the 
WTO is the need to ensure that privacy standards intended to protect 
personal information do not serve as barriers to trade. In order for 
companies to undertake e-commerce initiatives, it is critical that they 
be able to gather personal information voluntarily provided by 
individuals. For a multinational corporation such as Mattel, it is 
critical that this information be freely transmitted across borders for 
use by company subsidiaries in foreign countries.
    In addition to the consideration of privacy standards for general 
personal information, the WTO should also consider the growing 
implementation of separate privacy standards for the protection of 
children's privacy on the Internet. While the need to protect the 
privacy of children's information on the Internet is without question a 
top priority, it should not be used as an excuse to allow the creation 
of trade barriers.
    Meanwhile, the issue of domain name registration, and related 
intellectual property considerations, should also be addressed during 
future market access negotiations in the WTO. There currently exists no 
internationally-accepted system for the registration of domain names in 
individual countries, and this has prevented Mattel and other U.S. 
companies from effectively protecting their trademarks in many 
countries.
    Given the trademark protection aspects of domain name registration, 
this issue, as well as other intellectual property aspects of e-
commerce, should be addressed during future market access negotiations 
in the WTO. Furthermore, for these reasons, it is appropriate for the 
WTO to address this topic as part of the WTO's current review of the 
Agreement on Trade-Related Intellectual Property Rights (TRIPs).
Customs modernization, harmonization and simplification
    Mattel urges the WTO to establish WTO disciplines that will 
strengthen ongoing work in the areas of customs modernization, 
harmonization and simplification. To ensure that the gains from trade 
liberalization efforts are achieved, the global trading system must be 
supported by modern, transparent and harmonized customs procedures in 
line with international business requirements. Many of the potential 
benefits from the Uruguay Round and other regional agreements remain 
elusive in the face of existing customs-related barriers. In virtually 
every market in the world, significant customs-related barriers 
continue to restrict, distort and raise the cost of cross-border trade. 
Meanwhile, world trade has grown exponentially and global sourcing and 
demand have challenged business to produce and deliver goods and 
services more efficiently and at the lowest possible cost to consumers. 
This has not been matched by commensurate reform and modernization at 
the governmental level, leaving customs authorities struggling to keep 
up with the velocity and volume of world trade.
    The new WTO round must focus on the customs function because 
customs is fundamental to the transactions that make up global trade. 
Although the WTO imposes some limited disciplines on import and export 
requirements and procedures (e.g. GATT Article VIII: I(c), and the 
Agreements on Import Licensing and Customs Valuation), none adequately 
address the burdensome customs and data requirements placed on traders.
    In particular, the WTO should support the conclusion and full 
implementation of the ongoing work at the WCO to revise and strengthen 
the 1973 International Convention on the Simplification and 
Harmonization of Customs Procedures (Kyoto Convention). This 
comprehensive set of rules for ensuring high standards for customs 
procedures and practices should be adopted by WTO member governments 
and should take the form of a binding, enforceable and truly 
multilateral agreement.
    In addition, the WTO should focus on its mandate to simplify trade 
procedures by concentrating on customs procedures. A WTO working group 
on the harmonization and simplification of customs procedures should be 
established to: (a) analyze the impact of customs-related barriers to 
trade on WTO commitments; (b) assess the possibility for enforcing a 
revised Kyoto Convention through the WTO; (c) promote and coordinate 
the development and implementation of initiatives to modernize and 
simplify trade procedures; and (d) examine the steps that can be taken 
under current WTO rules to improve customs transparency as outlined in 
GATT Article X. These measures will serve as a complement to the WTO's 
ongoing efforts with regard to customs valuation, non-preferential 
rules of origin and pre-shipment inspection.
    The WTO also should step up its ongoing work to ensure that non-
preferential rules of origin are simplified and harmonized so as to 
prevent them from creating unnecessary obstacles to trade. These rules 
should be clear and predictable; they should be applied in an 
impartial, transparent, predictable and consistent manner; and they 
must not create additional documentation or data retention requirements 
(i.e., any new rules should be based on existing commercial data/
documents kept in the ``normal'' course of business).

                                  FTAA

    In addition to these WTO negotiations, Mattel also supports the 
negotiation of the FTAA. In particular, Mattel feels that the FTAA will 
serve as another important mechanism for securing the elimination of 
Latin American countries' tariffs on toys. As noted above, no Latin 
American countries participated in the Uruguay Round zero-for-zero, and 
few are expected to participate in the ATL agreement on toys. As a 
result, most major developing country markets throughout the Western 
Hemisphere are protected by tariffs of 20 percent or more on toys. 
Furthermore, the two largest developing country markets in Latin 
America, Brazil and Argentina, have undertaken protectionist actions 
against toy imports in recent years to further insulate their domestic 
industries from import competition. Given this situation, it is 
important that FTAA negotiators seek the earliest possible elimination 
of hemispheric tariffs on toys.
    Mattel urges the United States to seek the earliest possible 
conclusion of this FTAA agreement, and specifically supports the 
proposal by Chile and Canada to accelerate the timetable for conclusion 
of the FTAA negotiations by 2003. Of perhaps greater importance, it is 
critical for the United States to seek the quickest possible phase-out 
schedule for the elimination of toy tariffs in these FTAA negotiations.
    In addition to the elimination of tariffs on toys, Mattel also 
supports the inclusion in the FTAA of provisions on electronic 
commerce, customs harmonization and rules of origin analogous to those 
sought by Mattel in the new WTO round. Of particular importance in the 
FTAA talks, Mattel urges that the current de minimis allowance for non-
originating materials be increased significantly from the 7 percent 
level provided for in the NAFTA rules of origin (ideally to 25 
percent).
    Mattel also urges that the FTAA negotiations address standards 
harmonization. In particular, Mattel supports the adoption of ISO 8124 
as the toy safety standard in all FTAA countries, as well as the 
adoption of self-certification testing programs throughout FTAA 
countries. In addition, Mattel strongly supports efforts to address 
intellectual property protection in the FTAA negotiations.

                    Bilateral Free Trade Agreements

    In addition to these longer-term multilateral and regional trade 
negotiations, Mattel also supports the Administration's efforts to 
conclude bilateral free trade agreements with certain countries, 
including the pending negotiations with Chile and Singapore. As part of 
these negotiations, Mattel urges that the United States seek the 
immediate elimination of these countries' tariffs on toys given the 
lack of any U.S. tariffs in this sector. A commitment by these 
countries to eliminate their tariffs on toys immediately also would set 
an important precedent for the negotiation of future free trade 
agreements, including the new WTO round and the FTAA.
    In addition to the ongoing bilateral negotiations with Chile and 
Singapore, the United States should also explore bilateral agreements 
with additional countries, including Australia, New Zealand, and others 
now mentioned as candidates for future bilateral free trade talks. 
Mattel would strongly support these additional free trade agreements, 
particularly if they are eventually ``docked'' to the NAFTA in order to 
magnify their commercial impact.

                               Conclusion

    In conclusion, Mattel strongly supports the ongoing efforts of the 
United States to reduce global trade barriers. In particular, Mattel 
urges the U.S. government to secure an ATL agreement on toys as quickly 
as possible as part of a new round of WTO multilateral negotiations.
    We appreciate this opportunity to share Mattel's views with the 
Committee on Ways & Means.

                                

          National Conference of State Legislatures
                                       Washington, DC 20001
                                                   (March 19, 2001)
The Honorable Bill Thomas,
Chairman,
Committee on Ways and Means,
U.S. House of Representatives,
1102 Longworth House Office Building,
Washington, D.C. 20515.

Re: Written Submission to March 7, 2001, Hearing on President Bush's 
        Trade Agenda.

    Dear Representative Thomas: The National Conference of State 
Legislatures (NCSL) has consistently supported recent international 
trade agreements, provided that they include adequate federalism 
protections. NCSL is eager to build on the intergovernmental 
partnership reflected in recent agreements, including the implementing 
legislation for the Uruguay Round of the General Agreement on Tariffs 
and Trade, to ensure that concerns of state legislators are preserved 
and protected. In this connection, we appreciate the opportunity to 
comment regarding extension of trade promotion authority, prospects for 
an agreement to establish a Free Trade Area of the Americas (FTAA) and 
ongoing and prospective negotiations through the World Trade 
Organization.
General Principles
    The National Conference of State Legislatures believes that 
international agreements that liberalize the world trading and 
investment system can and must be harmonized with traditional American 
values of constitutional federalism. In particular, NCSL recognizes 
that reservations can be made to trade and investment agreements that 
limit the unnecessary preemption of state law and that preserve the 
authority of state legislatures. Implementing legislation for trade and 
investment agreements also can be crafted that includes protections for 
our constitutional system of federalism, in particular by insuring that 
no private right of action is allowed to enforce international trade 
law in U.S. courts.
    The states are committed to nondiscriminatory treatment of foreign 
firms that do business within their borders, based on the broad 
standard of protection afforded by the Commerce Clause and the Foreign 
Commerce Clause of the U.S. Constitution. What the states are not 
prepared to accept, however, is a challenge to their sovereignty and to 
state authority based on an arbitrary and unreasonable standard of 
discrimination against foreign commerce, similar to that employed by 
the GATT panel in the so-called Beer II decision.
    Great care must be exercised in crafting dispute resolution 
provisions in international trade and investment agreements to protect 
states from challenges to their laws or policies that are not 
consistent with institutional principles. Only the United States should 
be allowed to sue a state to enforce an international dispute 
resolution panel ruling. Similarly, states should not be subject to 
money damages or similar liability. Particular care also must be 
exercised to ensure that state tax laws and revenue systems are not 
subject to unjustified challenge under international agreements, and 
they generally should be ``carved out'' of such agreements. In general, 
federalism protections must be consistent with NCSL's policy on Free 
Trade and Federalism (see attached).
WTO Dispute Settlement Understanding
    The National Conference of State Legislatures supports efforts to 
increase the transparency and effectiveness of the World Trade 
Organization dispute settlement procedures as part of the review of the 
Uruguay Round Dispute Settlement Understanding (DSU). In particular, 
NCSL strongly supports an opportunity in each dispute for submission of 
amicus curiae briefs to the panel and the Appellate Body.
    Amicus curiae briefs offer stakeholders a valuable opportunity to 
enhance panels' information and aid them in drafting reports that will 
help resolution of the dispute. NCSL has been among the most active 
amicus participants before the U.S. Supreme Court and would be very 
eager to play a similar role in states rights cases before WTO dispute 
settlement panels.
Government Procurement
    The National Conference of State Legislatures is eager to work with 
Congress and the Office of the U.S. Trade Representative (USTR) on 
government procurement issues to identify ways of reducing trade 
barriers in ways that respect the constitutional role of the states and 
state legislatures.
    State legislators are very interested in the ongoing Government 
Procurement Agreement (GPA) negotiations regarding expanded market 
access commitments for additional subnational government entities 
taking place through the World Trade Organization. In negotiating trade 
agreements, it is critical that decisions made about state procurement 
practices be made in consultation with state legislators. While the 
executive branch is an important partner in state procurement 
decisions, state legislators are equally vital. Any change in state 
law, of course, requires legislative action. Dialogue between the 
federal government and state executive branch officials related to the 
GPA negotiations therefore should involve state legislative 
organizations, including NCSL.
    NCSL appreciates efforts to reduce non-tariff barriers to 
international trade, including those barriers found in foreign and 
domestic government procurement policies. If the constitutional role of 
state legislatures in this process is respected, rapid progress is 
possible.
Electronic Commerce
    State legislators are well aware of the impacts that the Internet 
and electronic commerce will have on the economic vitality of the 
states. The marketplace for electronic commerce is not just Main Street 
USA, but the vast global market.
    State legislators share the concern of many members of Congress and 
the Administration that ill-conceived or over-regulation of the 
evolving Internet and electronic commerce services could harm our 
global competitiveness. However, state legislators also recognize that 
there is an obligation to act, when and if necessary, to protect the 
general welfare of our constituents.
    In the absence of federal law or regulations, state legislators are 
providing the parameters for conducting business and other transactions 
over the Internet. In the true sense of the phrase, ``states are 
laboratories of democracy,'' state legislators are writing the laws on 
electronic notarization, the legality of electronic documents, 
financial authentication and what constitutes criminal activity. As 
with previous technologies, states are setting standards to protect 
transactions and secure financial resources. The ability of states to 
protect constituent rights, even in a borderless medium like the 
Internet, must be preserved in future trade and investment agreements 
in a manner consistent with NCSL's policy on the Internet and 
Electronic Commerce (see attached).
Trade Promotion Authority
    NCSL supports efforts to negotiate trade agreements that secure 
free and open access to overseas markets for American products. In 
negotiating new agreements, adequate federalism protections must be 
included. NCSL has worked closely with the United States Trade 
Representative (USTR) and Congress to ensure that these concerns are 
taken into account in recent trade and investment agreements and their 
implementing legislation.
    Implementing legislation for the Uruguay Round of the General 
Agreement on Tariffs and Trade reflects a partnership between USTR, 
Congress and NCSL in providing federalism protections while at the same 
time opening overseas markets to American products. NCSL supports 
continued cooperation and opportunities to build on this relationship. 
In this connection, NCSL supports proposals to renew the President's 
bid for ``fast-track'' negotiating authority. However, states must 
receive assurances that federalism protections similar to those 
provided in implementing legislation for the GATT are incorporated into 
any new trade or investment agreement and its implementing legislation. 
And NCSL believes that any fast track legislation should require that 
enforceable labor and environmental standards be included in the core 
of any new trade agreements.
    Federalism protections must be consistent with NCSL's policy on 
Free Trade and Federalism. These provisions include, but are not 
limited to: reservations to trade and investment agreements to 
``grandfather'' existing state laws that might otherwise be subject to 
challenge, and provisions that promote effective and meaningful 
consultation between the states and the federal government related to 
any dispute involving state law or any dispute that could prompt 
retaliation against states. Provisions must also be made in federal 
implementing legislation that so far as possible commit the federal 
government to protecting state authority when it is exercised in 
conformity with accepted U.S. constitutional principles of 
nondiscrimination against foreign commerce.
    On behalf of the National Conference of State Legislatures, I 
appreciate your continued communication and look forward to working 
with you.
            Sincerely,
                                       Bill Friend,
                           Indiana House of Representatives
          Chair, NCSL Agriculture and International Trade Committee
CC: Christina Sevilla, Office of the U.S. Trade Representative.
Free Trade and Federalism
    The National Conference of State Legislatures (NCSL) believes that 
principles of free trade and efforts to expand U.S. exports through 
international agreements that liberalize the world trading and 
investment system can and must be harmonized with traditional American 
values of constitutional federalism. In particular, NCSL recognizes 
that reservations can be made to trade and investment agreements that 
limit the unnecessary preemption of state law and that preserve the 
authority of state legislatures. Implementing legislation for trade and 
investment agreements also can be crafted that includes protections for 
our constitutional system of federalism.
    The states are committed and prepared to treat foreign firms that 
do business within their borders in a nondiscriminatory fashion, under 
a standard based on the broad protection afforded by the Commerce 
Clause and the Foreign Commerce Clause of the U.S. Constitution. What 
the states are not prepared to accept, however, is a challenge to their 
sovereignty and to state authority based on an arbitrary and 
unreasonable standard of discrimination against foreign commerce, 
similar to that employed by the GATT panel in the so-called Beer II 
decision.
    Therefore, reservations must be made to trade and investment 
agreements to ``grandfather'' existing state laws that might otherwise 
be subject to challenge. Particular care must be exercised to ensure 
that state tax laws and revenue systems are not subject to unjustified 
challenge under international agreements, and they generally should be 
``carved out'' of such agreements.
    Provisions also made in federal implementing legislation that so 
far as possible commit the federal government to protecting state 
authority when it is exercised in conformity with accepted U.S. 
constitutional principles of nondiscrimination against foreign 
commerce. In addition, provisions must be made to deny any private 
right of action in U.S. courts based international trade or investment 
agreements, especially if it could result in foreign firms gaining an 
advantage in terms of their tax and regulatory treatment over U.S. 
firms. Neither the decisions of international dispute resolution panels 
nor international trade and investment agreements themselves must be 
binding on the states as a matter of the U.S. law. Implementing 
legislation for any agreement must include provisions that promote 
effective and meaningful consultation between the states and the 
federal government related to any dispute involving state law or any 
dispute that could prompt retaliation against states. These provisions 
should include a timetable for prompt notice to states of a potential 
state issues, as well as the right of attorneys for the state to 
participate as part of the ``team'' defending a state law before 
international tribunals. It is imperative that when state laws are 
under challenge in World Trade Organization proceedings that the 
federal government defend state laws as vigorously as it defends 
federal law.
    Because the federal government retains the power to sue a state to 
enforce international agreements, federal legislation implementing any 
new trade or investment accord must include appropriate protections for 
the states related to rules of procedure, evidence and remedies in such 
litigation. The federal government must bear the burden of proof in 
court showing that state law is inconsistent with an international 
agreement, regardless of the finding of an international dispute 
resolution panel. The President must be required, at least 30 days 
before the Justice Department files suit against a state, to file a 
report with Congress justifying its proposed action. In the event of an 
unfavorable judgment, states must be protected from financial 
liability. If the federal government agrees, in an international trade 
or investment agreement, to allow foreign firms to collect money 
damages for ``harm'' caused by a state law, then the federal government 
must fulfill its promise to pay those damages itself, rather than shift 
the cost to states.
The Internet and Electronic Commerce
    The Internet is fundamentally changing the way we communicate, 
learn, conduct business, transact financial services and are 
entertained. Every day the nature of the Internet changes, as people 
add more material, build faster computers, devise cheaper means of 
electronic storage, create improved software, and develop more capable 
communications. Such explosive growth is projecting our nation, indeed 
our world, into a new, almost borderless frontier.
    As the Internet empowers citizens and democratizes societies, it 
also is changing traditional business and economic rules. The Internet 
provides consumers with access to products and services never before 
possible. It is estimated that by the dawn of the new millennium 
commerce on the Internet, electronic commerce, could total tens of 
billions of dollars.
    Geographic borders cannot contain the Internet. Its ability to 
transcend state and national borders makes some existing laws and 
regulations of states and nations obsolete. At the same time, the 
Internet defies detailed one-size-fits-all approach to public policy 
and regulation. America's federal and state lawmakers, as well as 
policy makers from other countries should be guided by principles that 
foster the Internet's progress and ensure the realization of its 
potential.
    The National Conference of State Legislatures supports the 
following principles in formulating laws and regulations that impact 
the Internet and electronic commerce:
    Privacy and Security--Every American should be empowered to 
protect, assure and secure their privacy and digital property from 
intrusion or piracy. Advanced technologies, including encryption, that 
empower people to protect themselves, should be available in the 
marketplace without onerous government controls, restrictions, 
technical mandates or threats.
    Free Speech--The Internet allows persons to communicate and share 
ideas with others with an ease never before possible. Federal 
government policy should rigorously protect freedom of speech and 
expression on the Internet, but not restrict states or local 
governments from such oversight. New electronic and/or digital 
technologies adequately enable individuals, families and schools to 
protect themselves and students from communications and materials they 
deem offensive or inappropriate.
    Self-governance--The Internet has flourished in large part due to 
the unregulated environment in which it has thus far developed. 
Voluntary codes of conduct, industry-driven standards and individual 
empowerment, together with a market environment, generally hold greater 
future promise than does intrusive governmental regulation.
    Dynamic Competition--New electronic and/or digital technologies are 
converting industries once characterized by economies of scale and 
natural monopolies into prototypical competitive markets. Federal 
government policies, laws and regulations should support the Internet 
and Internet access by aggressively promoting free entry into markets 
and replacing government mandates with market competition.
    Growth--The Internet's continued expansion depends on continuing 
growth in its capacity. Public policies must be designed to foster 
ongoing expansion of useful and affordable bandwidth, encourage 
development of innovative technologies and promote broad universal 
access.
    Electronic Commerce and Taxation--Electronic commerce promises to 
become an increasingly vital component of our states' and national 
economies. Government policies should create a workable infrastructure 
in which electronic commerce can flourish. Policy makers must resist 
any temptation to apply tax policy to the Internet in a discriminatory 
manner that hinders growth. The federal government should work with 
state legislatures in ensuring equal tax treatment of all forms of 
commerce and should encourage and not impede state efforts to achieve 
simplification and uniformity of state and local sales tax systems.
    Our nation's state legislatures are well aware of the impact that 
access to the Internet and electronic commerce will have on the 
economic vitality of our states and communities. State legislatures 
also recognize that the marketplace for electronic commerce is not just 
Main Street USA, but the vast global market. State legislatures share 
the concern of many of our colleagues in Congress that ill-conceived or 
over regulation of the evolving Internet and electronic commerce 
services could cause much harm to our nation's own ability to compete 
globally. However, state legislatures also recognize that they have an 
obligation to act, when and if necessary, to protect the general 
welfare of their constituents.
    The National Conference of State Legislatures will oppose 
unnecessary or unwarranted federal legislation or regulation that would 
impede efforts by states to promote access to the Internet, limit 
competition or increased consumer choice or ensure the security of 
personal information of consumers conducting electronic commerce 
transactions.

                                

 Statement of National Electrical Manufacturers Association, Rosslyn, 
                                Virginia

General and Multilateral Issues
     Trade Negotiating Authority: NEMA favors quick approval 
during the 107th Congress of trade agreement negotiating authority. 
Over the past three years, the President's lack of such authority has 
not only impeded the Administration's ability to negotiate agreements, 
but has been invoked by many of our trading partners as an excuse to 
delay real negotiations on opening their markets. We must remove this 
barrier to trade liberalization and leadership by giving President Bush 
broad ``fast-track'' authority as soon as possible in the 107th 
Congress. NEMA favors keeping labor and environmental issues outside of 
trade agreements. NEMA supports the market opening measures contained 
in the recently concluded U.S.-Jordan Free Trade Agreement (FTA) but 
opposes the inclusion of labor and environmental provisions that hold 
the possibility of trade sanctions. For this reason, the FTA with 
Jordan as currently negotiated sets a poor precedent for future and 
more ambitious trade agreements, including a Free Trade Area of the 
Americas (FTAA).
     Tariff Elimination: The world-wide elimination of tariffs 
on electrical products is a basic NEMA goal. We therefore urge the U.S. 
to pursue tariff elimination for electrical products in all fora, 
including via the energy sector of the WTO Accelerated Tariff 
Liberalization (ATL) initiative or via regional groups and/or other 
opportunities as they arise. NEMA also urges the U.S. to push for 
completion of the second phase of the International Technology 
Agreement (ITA-2), which would eliminate tariffs on a wide range of IT 
items, including some NEMA products. NEMA also supports continued 
efforts by U.S. officials to expand the membership of the existing ITA 
and to negotiate accelerated tariff elimination for electrical products 
under the North American Free Trade Agreement (NAFTA).
     Energy Services Liberalization: NEMA supports 
liberalization of trade in energy services, in order to allow more 
people worldwide to enjoy high quality, affordable energy, and also to 
provide new opportunities to those energy service and electricity 
providers who use the equipment made and services provided by NEMA's 
members. Thus, NEMA is an active member of the industry coalition 
campaigning for the inclusion of commitments on energy services in the 
WTO's ``built-in agenda'' negotiations on services. NEMA's primary 
perspective is that of the industry that provides the equipment and 
products used to build and maintain electrical energy systems, but many 
NEMA members are active providers of energy services as well. The 
liberalization that is good for utilities is also good for our 
manufacturers, service suppliers, and for the users of electricity. 
USTR has included energy services in its proposals for the WTO services 
negotiations and we look forward to continued efforts from the Bush 
Administration and support from Congress to secure commitments from our 
trading partners in this crucial area.
     Transparency in Government Procurement: The U.S. has been 
a leader of efforts to achieve a WTO agreement to make government 
procurement more open and transparent. Preferences for local companies 
on the part of host governments, as well as a lack of transparency in 
awarding contracts, have served to unfairly exclude U.S. companies on 
countless occasions. It is time for U.S. entities to be able to compete 
on equal footing with domestic suppliers. We look forward to continued 
leadership from USTR and Congress in pursuing a WTO agreement on 
transparency in government procurement.
    NEMA also urges the Bush Administration to increase efforts to 
obtain full implementation and enforcement of all signatories to the 
1999 OECD Anti-Bribery Convention and the 1997 OAS Convention on 
Corruption.
     WTO Technical Barriers to Trade (TBT) Agreement: NEMA 
supports the concepts outlined in the WTO TBT Agreement and believes 
that all countries should implement, to the fullest extent, the 
obligations outlined there. These obligations include: standards 
development processes that are transparent and include participants 
from all interested parties; a conformity assessment system thatupholds 
the principles of most-favored nation treatment (meaning equal 
treatment in all countries); and national treatment (meaning equal 
treatment of domestic and foreign products, as well as test 
laboratories conducting conformity assessment services) in the 
application of testing and certification procedures.
    In addition, the U.S. government must continue working to dispel 
the misinterpretation that the use of the term ``international 
standards'' in the WTO TBT agreement applies only to International 
Electrotechnical Commission (IEC), International Standards Organization 
(ISO) and International Telecommunications Union (ITU) standards. An 
interpretation should also include widely-used norms such as some North 
American standards and safety installation practices. This 
misinterpretation can be disadvantageous to U.S. businesses' efforts to 
sell in global markets. Moreover, the importance of openness and 
transparency are lost when focus is only on those three standards 
bodies. The Bush Administration must continue vigilant monitoring of 
our WTO partners to ensure their adherence to their TBT commitments.
     Opposition to Mutual Recognition Agreements (MRAs): In 
NEMA's view, the use of MRAs should be limited and considered only as 
an alternative for conformity assessment needs when applicable to 
federally regulated products such as medical devices. MRAs are not the 
answer to conformity assessment needs in non-regulated areas; if 
anything, they serve to encourage the creation of unnecessary product-
related regulation. In this regard, while we strongly objected to the 
inclusion of an electrical safety annex in the U.S. MRA with the 
European Union a few years ago, we are pleased that the Clinton 
Administration has either excluded electrical products from 
subsequently negotiated MRAs or refused to sign on to any such accords 
that include them. We look forward to a continuation of that stance.
     WTO Accessions: NEMA looks forward to China's accession to 
the WTO in the near future, but supports U.S. and EU efforts to ensure 
that China is fully committed to fulfill all of its pledges and 
obligations. NEMA welcomes the opportunity to help our member companies 
take advantage of China's formal market-opening entry into the rules-
based international trading system and will work with the National 
Association of Manufacturers to assist USTR, the Commerce Department, 
and Congress to monitor and ensure China's compliance with those rules. 
If multilateral negotiations on China's accession are prolonged into 
the summer of 2001, NEMA calls on President Bush and Congress to grant 
a one-year renewal of China's MFN status. NEMA also looks forward to 
Taiwan's WTO accession, which should quickly follow China's.
    NEMA also hopes for a greater progress in bilateral negotiations 
with other WTO accession candidates. NEMA appreciates the ongoing 
negotiations with Saudi Arabia and urges continued emphasis on 
standards and TBT issues. NEMA representatives traveled to Saudi Arabia 
in May 2000 to strengthen dialogue with Saudi Arabian Standards 
Organization (SASO) officials and will continue to develop a 
cooperative relationship to ensure market access for products made to 
NEMA standards. USTR should also seize the opportunity for renewed 
emphasis on negotiations to bring Russia and Ukraine into the WTO. 
Although membership is years away for both countries, U.S. leadership 
is needed to ensure that progress toward that end continues at a 
reasonable pace and both countries reinvigorate their long processes of 
legal and economic reform and institution-building.

         European Union Regulatory Initiatives and WTO Disputes

     Regulatory Cooperation: NEMA supports continued work 
toward a U.S.-EU agreement on Principles for Regulatory Cooperation. 
This agreement could not be worked out in time for the Dec. 2000 U.S.-
EU summit in Washington, but both sides should strive to complete an 
agreement in early 2001.
     Proposed EU Substance Bans and ``Take Back'' Legislation 
(WEEE, EEE): The EU has proposed two new directives as part of its 
broader environmental agenda that could form market access barriers for 
U.S. electrical and electronics products. Approved by the EU Commission 
in June 2000, the first directive addresses take-back and recycling of 
Waste Electrical and Electronic Equipment (WEEE) while the second, 
known as the ROHS (Restriction on the Use of Hazardous Substances) 
directive, would impose bans on the use of certain substances currently 
used in manufacturing without providing sufficient basis for processes 
to identify any needed substitutes. Since the directives' approval by 
the Commission, industry concerns have been effectively ignored. The 
two directives could come into force in 2001, allowing differing 
standards and procedures among the 15 member states.
    In addition, the Commission's Enterprise Directorate is developing 
its own Electrical and Electronic Equipment (EEE) directive, which 
would require manufacturers to comply with a series of requirements 
throughout the life-cycle of a product. The need for such a directive 
is questionable and the views of the U.S. government and U.S. industry 
should be taken into account by DG Enterprise, especially during this 
development stage.
    NEMA urges the Bush Administration and Congress to clearly identify 
these measures as serious potential trade barriers and to seek an 
accommodation that would emphasize rational, cooperative and science-
based measures as alternatives to broad-brush regulatory mandates.
     EU Council Recommendations on Electro-Magnetic Fields 
(EMF): In 1999, the European Union issued recommendations that set EMF 
exposure limits for the general public over a range of frequencies. 
Member states may provide for a ``higher level of protection'' than in 
the recommendations, and thus can adopt more strict exposure limits. 
Extensive U.S. Government research on low frequencies recently 
concluded that ``the scientific evidence suggesting that ELF/EMF 
exposures poses any health risk is weak.'' Similar conclusions have 
been made from health risk studies in other countries.
    Manufacturers on both sides of the Atlantic have warned their 
authorities through the TABD process that EMF could potentially become 
a major point of contention between the U.S. and Europe. NEMA has 
notified the Commerce Dept. that EU implementation of its EMF 
recommendations would create a substantial barrier to trade, severely 
affecting U.S. electrical manufacturing interests. NEMA supports the 
TABD position that EMF exposure standards must be harmonized 
internationally. The U.S. government must continue its efforts to work 
with the leaders in the EU Commission and in the member states to avoid 
another trans-Atlantic trade dispute.
     EU Low Frequency Emissions (LFE) Requirements: On January 
1, 2000 the EU implemented unnecessary guidelines on low frequency 
harmonics emissions. Although many of the products impacted have been 
exempted by the EU standards body CENELEC, a U.S. industry coalition 
including NEMA will be seeking to play a more active, effective role at 
both a technical standards level and trade policy level in anticipation 
of other LFE-related measures as well as broader trade-barrier issues 
raised by the guidelines. Commerce Secretary Norman Mineta raised the 
LFE issue in a recent meeting with the EU Enterprise Directorate's 
leadership. Continued attention from the Bush Administration is 
warranted.
     Implementation of the Electrical Safety Annex of the U.S.-
EU MRA: As noted above, NEMA opposed negotiation of the Electrical 
Safety Annex to the U.S.-EU MRA because it adds no value to the 
existing electrical safety systems in the U.S. and EU. The historical 
record of electrical safety based on a private-sector-based standards 
and conformity assessment system is a good indicator that private-
sector approaches are successful. The U.S. Occupational Safety and 
Health Administration (OSHA) has implemented the ESA with the 
applicable NRTL (Nationally Recognized Testing Lab) Regulations which 
call for OSHA accreditation of conformity assessment bodies (CABs). EU 
CABs can be accredited by OSHA (as was agreed under the MRA and 
available under the NRTL program before the MRA) for testing and 
certifying EU products to US voluntary standards and for labeling for 
OSHA recognition in the workplace. The Bush Administration should 
continue implementation of the ESA in this manner.
     ``Carousel'' Retaliation Lists: NEMA does not consider it 
appropriate for electrical products to be included among those EU 
exports assessed 100% retaliatory tariffs as a result of the banana and 
beef hormone disputes in the WTO. Our view is that our industry's 
products should not be caught up in another sector's ongoing, 
potentially escalating impasse, and we have made this position clear to 
USTR.
     Foreign Sales Corporations (FSC) Dispute: NEMA supported 
U.S. efforts to resolve this dispute by repealing the old FSC provision 
and installing a new regime while seeking to ensure that U.S. exporters 
suffer no disadvantages. NEMA has urged its EU counterparts to support 
a resolution of the dispute over the FSC-replacement law so that 
products in our industry do not become entangled in a cycle of 
retaliatory tariff hikes on both sides of the Atlantic. NEMA encourages 
both the U.S. and the EU to manage the dispute responsibly and to avoid 
any escalation of tensions.

                     The Americas and Asia-Pacific

     Free Trade Area of the Americas (FTAA) Talks, Particularly 
the Negotiating Group on Market Access (NGMA): Although talks toward 
the 2005 creation of an FTAA have moved along slowly, NEMA looks 
forward to the completion of draft negotiating texts, including a 
chapter on market access, by the Buenos Aires meeting of trade 
ministers in April 2001. With that step completed, we support 
accelerating the timetable for completion of the FTAA. The new deadline 
should be 2003. NEMA also encourages all FTAA countries to implement 
the agreed customs facilitation measures by the time of the 
ministerial, which will precede the Summit of the Americas in Quebec 
City. Moreover, NEMA urges the U.S. to convince the hemisphere's 
countries that any standards provisions included in an FTAA must mirror 
the WTO TBT Agreement. NEMA will continue to be engaged in the process 
and recently coordinated a meeting of hemispheric industry associations 
to exchange views toward potential industry consensus on FTAA agenda 
items.
     NAFTA Implementation and Tariff Issues: The U.S. and 
Mexico recently agreed to a cross-border industry petition to 
accelerate the elimination of tariffs on primary batteries (HTS chapter 
8506) to January 1, 2001. Although Mexican tariffs on U.S. electrical 
products will reach zero in 2003, NEMA is exploring further 
possibilities for industry consensus on early tariff elimination for 
specific product sectors. Also, with a new office in Mexico City NEMA 
is well positioned to work with U.S. authorities to monitor and 
influence the Mexican standards development process for electrical 
products to ensure that Mexican norms do not act as barriers to U.S. 
products.
     Chile-U.S. Free Trade Area: In 2001, the U.S. and Chile 
should take an additional tangible step toward the FTAA by completing 
and enacting a high quality bilateral free trade agreement. Given the 
small size of the Chilean economy and the precedent setting benefits of 
such an agreement, completion of the Chile FTA should be completed 
expeditiously, and need not await passage of trade negotiating 
authority legislation.
     Singapore-U.S. FTA: The U.S. government should complete a 
free trade agreement with Singapore as soon as practical under the Bush 
Administration, taking full account of industry input. This agreement 
should include an investment chapter, cover energy services, and 
provide for complete transparency in government procurement.
     U.S.-Vietnam Basic Trade Agreement: After several years of 
negotiations, the U.S. and Vietnam reached agreement in 2000 to open 
their markets to each other through a basic bilateral trade accord. 
Congress should act early in 2001 to approve this agreement, which is a 
crucial step in the long process of opening Vietnam's markets.
     APEC Standards: NEMA is actively involved in bringing a 
greater understanding of conformity assessment alternative processes to 
the region and looks forward to National Institute of Standards and 
Technology workshops in 2001-2002 for Asia-Pacific Economic Cooperation 
forum member countries.

                       U.S. Government Resources

     Monitoring, Enforcement and Overseas Presence: The U.S. 
Government needs to do more than simply reach favorable trade accords; 
it also needs to be vigilant in making sure that other countries live 
up to their commitments to foster openness, transparency and 
competition. In this regard, our view is that the Commerce Department's 
Standards Attache program should be expanded and fully funded. 
Likewise, we greatly appreciate the assistance provided by Foreign 
Commercial Service (FCS) offices abroad, and hope that FCS activities 
will receive ample support in the years ahead.
    With the support of a Market Development Cooperator Program (MDCP) 
grant from the Commerce Department, NEMA opened offices in Sao Paulo, 
Brazil and Mexico City, Mexico in 2000. The MDCP is an innovative 
public/private partnership whose grant budget should be expanded so 
that more organizations can enjoy its benefits. NEMA looks forward to 
continuing its close cooperation with the Commerce Dept. on this 
project.
    Similarly, the Bush Administration and the 107th Congress should 
continue the trend in recent years of reasonable increases in funding 
and staff of the U.S. Trade Representative's Office to better allow it 
to more effectively negotiate, monitor and enforce trade agreements.
     Export-Import Bank Reauthorization: The charter of the 
U.S. Export-Import Bank (Ex-Im Bank) expires in 2001 and NEMA supports 
legislation to reauthorize and adequately fund the Bank. Failure to 
reauthorize and fund the Ex-Im Bank would leave U.S. companies alone to 
face competitors armed with the aggressive export financing regimes of 
European and Asian governments. Exports assisted by Ex-Im Bank help to 
support hundreds of thousands of U.S. jobs and eighty percent of Bank-
supported transactions assist U.S. small businesses.
     Customs Modernization and Enforcement: Last year, Congress 
made an important first step in appropriating funds for the U.S. 
Customs Service's long-overdue reform of its automated systems. We look 
forward to further congressional support this year for this vital 
initiative. In addition, we urge to continued vigilance from the 
Customs Service in ensuring imported electrical products meet U.S. 
regulatory standards.
     ``Buy America'' Procurement Regulations: Majority U.S.-
content restrictions on non-sensitive electrical products should be re-
evaluated in the context of both the increasingly global economy and 
potential savings. By restricting access to the U.S. market, these 
restrictions also have the reciprocal effect of disadvantaging U.S. 
companies seeking to sell into foreign markets.
     Economic Sanctions Reform: NEMA supports passage of 
legislation that would establish a more deliberative and disciplined 
framework for consideration and imposition of economic sanctions by 
Congress and the Executive branch. In addition, existing economic 
sanctions should be reviewed to determine if their effectiveness 
justifies the costs to U.S. jobs and industries.
     Export Administration Act Reauthorization: NEMA supports 
congressional efforts to enact updated legislation that meets the U.S. 
need for an efficient, transparent and effective export control system.

                                

  Statement of Ranchers-Cattlemen Action Legal Fund, Billings, Montana

    The Ranchers-Cattlemen Action Legal Fund (R-CALF) is a non-profit 
association of U.S. cattle producers with membership in 32 states. R-
CALF has local and state affiliates including Farm Bureaus, Farmers 
Unions, and stockgrower organizations and associate membership from 
many main street businesses. R-CALF monitors international trade issues 
that affect U.S. cattle producers. R-CALF supports efforts to 
liberalize international trade as long as such efforts benefit all 
participating countries and agricultural sectors.
    R-CALF notes that the health of the U.S. cattle industry has a 
substantial effect on the overall rural economy of the United States. 
The cattle industry is the single largest component of U.S. agriculture 
with more than one million cattle operators who generate over $30 
million in agricultural revenues annually. For most of this past 
decade, this vitally important industry has been in a state of 
significant decline.
    The United States has among the most open markets in the world for 
imports of live cattle and beef. Unfortunately, while recent trade 
agreements have opened the United States even further to imports, the 
barriers to entry into the markets of too many of our trading partners 
remain relatively closed, or off limits altogether, to U.S. cattle and 
beef. In upcoming trade negotiations, R-CALF suggests that the United 
States advance policies that will maintain and strengthen fair trading 
rules, eliminate distortions in the marketplace, and maintain market 
stability. Also, given recent cattle disease outbreaks around the 
world, R-CALF strongly urges that the United States not act too hastily 
in permitting imports of cattle and beef from areas in which 
debilitating cattle diseases may be present.
Tariffs
    Tariff negotiations must distinguish between tariffs on cattle and 
on beef and beef products. U.S. tariffs on imports are either ``free,'' 
e.g., for purebred breeding cattle and cows imported for dairy 
purposes, or 1.4 cents per kilogram, e.g., for live cattle for 
slaughter.1 R-CALF endorses expedited duty reductions to 
zero for imports of live cattle as long as such duty reductions are 
simultaneous with those of our trading partners, so, consequently, 
already low U.S. tariffs will not be reduced to zero before those of 
other countries.
---------------------------------------------------------------------------
    \1\ See HTS 0102.10.00.10-0102.90.40.84.
---------------------------------------------------------------------------
    With respect to beef, both in-quota and out-quota U.S. tariffs are 
low, especially when compared to tariffs of some of our major trading 
partners. For example, Brazil, which like the United States is both a 
major producer and consumer of beef, has a bound rate for fresh and 
frozen beef of 55 percent.2 In contrast, the U.S. in-quota 
rates are 4.4 cents/kg., or 4 to 10 percent ad valorem, depending upon 
the specific item, and 27.2 percent for out-quota product.3
---------------------------------------------------------------------------
    \2\ Based on information provided by the Foreign Agricultural 
Service of the U.S. Department of Agriculture.
    \3\ See HTS 0201-0202.
---------------------------------------------------------------------------
    R-CALF requests that the United States not agree to lower U.S. 
tariffs on either cattle or beef unless our trading partners also lower 
their tariffs to the same levels simultaneously.
State Trading Enterprises
    The impact of state trading enterprises (STEs) such as the Canadian 
Wheat Board (CWB) is not limited to the commodity markets in which they 
specifically operate, but also other markets for which these 
commodities are an input. For example, the CWB's export restrictions on 
feed barley distort conditions of trade in cattle; Canadian ranchers 
and feedlots effectively receive a subsidy for feeding their cattle. 
Ideally, R-CALF would like to see STEs eliminated. If this is not 
possible, R-CALF would like, at a minimum, for international trade 
negotiations to develop disciplines for the operation of STEs.
Subsidies
    R-CALF is concerned about subsidies provided to cattle and beef 
producers by foreign governments. R-CALF asks that trade distorting 
subsidies that harm the cattle industry be eliminated, including 
subsidies currently permitted under the World Trade Organization (WTO). 
R-CALF suggests that U.S. negotiators refer to the Subsidies 
Enforcement Annual Report to the Congress, which was last issued by the 
Office of the U.S. Trade Representative and the Department of Commerce 
in February 2001, for guidance when preparing for negotiations. This 
report discusses subsidies for cattle and beef producers provided by 
some of our major trading partners and competitors.
Rules of Origin
    R-CALF requests that the United States advocate in trade 
negotiations that the country of origin of cattle be the country in 
which the cattle were born. Likewise, the country of origin of beef 
should be the country of birth of the cattle from which the beef was 
derived.
U.S. Tariff Rate Quota
    The U.S. cattle industry has relatively few mechanisms in place to 
help it weather periods of economic difficulty. One such mechanism is a 
system of tariff rate quotas (TRQs) which became operative upon the 
implementation of the Uruguay Round Agreements Act of 1995.
    As imports from other countries might grow as a result of trade 
negotiations, the importance of TRQs in promoting stability in the 
price sensitive beef sector will be heightened. Thus, a major goal of 
the United States in trade negotiations should be to maintain the right 
of the United States to impose TRQs. Given the supply-price sensitivity 
of the cattle industry, the November 1999 report by then Chairman of 
the International Trade Commission Lynn Bragg that packers can and do 
use imports to suppress domestic cattle prices, and the length of the 
expansion phase of the recent cattle cycle which in part has been due 
to increasing imports, R-CALF finds it imperative that TRQs be 
maintained.
U.S. Special Safeguard
    A second mechanism of the United States to address periods of 
difficulty in the cattle sector is a special safeguard provision for 
imports of certain beef products, which went into effect in 1995 and 
operates in accord with Article 5 of the WTO Agreement on Agriculture. 
Namely, Article 5 of the WTO Agreement on Agriculture includes a 
special safeguard provision that permits countries to resort to 
additional duties in the event that the volume of imports of a 
particular product exceeds a threshold or ``trigger'' level, or if the 
price of those imports falls below a trigger price level. The special 
safeguard provision provides an important remedy in the event of a 
sudden surge in imports of beef. The United States should ensure that 
the special safeguard mechanism for beef remains intact.
Antidumping and Countervailing Duty Laws
    R-CALF strongly supports the continued availability of antidumping 
and countervailing duty laws as internationally recognized trade 
remedies to economic harm caused by unfairly priced or subsidized 
imports. It is important to recognize that new trade agreements will 
not necessarily eliminate opportunities and incentives for producers in 
certain countries to dump their products or to obtain unfair subsidies. 
Therefore, antidumping and countervailing laws must be maintained and 
strengthened.
    Also, antidumping and countervailing duty investigations are 
historically too often conducted ``after the fact,'' and in many cases 
irreparable damage has already been done. A more accelerated process is 
needed.
Sanitary Measures
    R-CALF believes that the sanitary standards of countries must be 
based upon science. Accordingly, R-CALF supports the intent of the 
Sanitary and Phytosanitary Agreement of the WTO, to require that 
sanitary and phytosanitary measures have a scientific basis.
    R-CALF is concerned, however, that the U.S. Department of 
Agriculture (USDA) may be too willing to open the U.S. market to 
imported cattle and beef in instances in which evidence of the lack of 
threat of imported products is far from clear. As demonstrated by 
recent outbreaks of foot and mouth disease (FMD) in the United Kingdom, 
Argentina, and other countries, as well as the continuing bovine 
spongiform encephalopathy (BSE) crisis in Europe, diseased imported 
cattle can pose a very real threat to the United States.
    R-CALF believes that the United States acted imprudently in 
delaying the implementation of a policy to ban, temporarily, the 
importation of beef from Argentina due to the presence of FMD in that 
country. The U.S. Department of Agriculture has announced that it will 
prohibit the importation of Argentinean beef products processed on or 
after February 19, 2001. However, reports of the presence of FMD in 
Argentina surfaced during the summer of 2000. The U.S. Department of 
Agriculture acted too late in addressing this very real threat to U.S. 
agriculture. In addition, given the presence of FMD in Argentina well 
before February 19, R-CALF questions whether this policy might still 
threaten health of U.S. cattle herds. Given the grave threat that FMD 
poses to the U.S. cattle industry, as well as to other livestock 
producers, R-CALF would like to emphasize strongly to Ways and Means 
Committee members its concerns with the U.S. Department of 
Agriculture's policy.
    Also, with the accelerated expansion of FMD, and based on the 
recurrence of FMD in countries or regions in the process of being 
certified as ``FMD-free'' or already certified, R-CALF requests that 
following certification countries maintain a ``disease-free'' status 
for a minimum of three to five years before imports are accepted into 
the United States.
    As a general matter, R-CALF would like to see strong rules 
implemented by the United States that would ensure the continued FMD-
free status of the United States.
Country of Origin Labeling
    In an issue related to rules of origin, R-CALF strongly supports 
country of origin labeling of meat. Consumers have the right to know 
from where the beef they consume was derived. R-CALF believes that beef 
labeled as a product of the United States should be beef from cattle 
born, raised, and slaughtered in the United States.
    Again, the current international spread of cattle diseases has only 
heightened the need for country of origin labeling and tracking.
    Also, it is important to note that U.S. cattle producers since 1987 
have been mandated by the federal government to contribute nearly $1 
billion for research and promotion. Yet they have been unable as an 
industry to differentiate their product from imported product for the 
U.S. consumer.
The EU and Beef Hormones
    R-CALF remains concerned about the refusal of the European Union to 
open its market to beef derived from cattle treated with growth 
promoting hormones. The outcome of the beef hormone dispute at the WTO 
has resulted in U.S. cattle producers having limited faith in the 
ability of the WTO dispute settlement process to open foreign markets 
to U.S. products. R-CALF encourages the United States to continue to 
attempt to open the European market to American beef.
Instruments to Promote Stability in International Markets
    Due to the peculiar nature of the agricultural industry and the 
small amount of revenue that is returned to producers, it is critical 
that ranchers have some ability to maintain minimum prices and be able 
to control the quality and quantity of their products in the market. 
For most of this century, the U.S. government has provided such 
mechanisms to U.S. farmers. These mechanisms have lessened the impact 
of adverse temporary market conditions that would otherwise have driven 
producers out of business.
    Recognizing the special circumstances faced by the agricultural 
sector, the United States provides a limited antitrust exemption for 
agricultural cooperatives, including cooperatives composed of ranchers, 
from antitrust laws. Courts have held that cooperatives may set minimum 
floor prices for agricultural products under this law.4 The 
United States should work in international trade negotiations to extend 
the coverage of Capper-Volstead to include international cooperatives 
composed of agricultural producers.
---------------------------------------------------------------------------
    \4\ See Northern California Supermarkets, Inc. v. Central 
California Lettuce Producers Cooperative, 413 F.Supp. 984 (N.D. Cal. 
1976), aff'd 580 F.2d 369 (9th Cir. 1978), cert. denied, 439 U.S. 1090 
(1979).
---------------------------------------------------------------------------
    Likewise, U.S. laws permit certain groups of agricultural producers 
to set quality and grade standards through marketing orders. These 
measures can be used to promote stability in the marketplace. R-CALF 
suggests that the United States advocate in international trade 
negotiations the development of international instruments that will 
function in the same manner as marketing orders.
Mandatory Price Reporting
    R-CALF's members and other primary agricultural producers in the 
United States are consistently at a distinct disadvantage in 
negotiations with buyers. In the livestock sector, a limited number of 
meat packers very often control prices for regions and indeed the 
entire country. Rather than buy in open cash markets, packers can feed 
their own animals or use private marketing arrangements--such as 
forward contracts, formula pricing, and exclusive purchase agreements--
for which prices and terms of sale are not publicly disclosed. This 
makes it difficult for producers, particularly smaller ones and those 
that would like to utilize open cash markets, to determine a ``fair'' 
market price.
    In 1999, the United States passed legislation providing for the 
mandatory reporting of prices paid by packers for cattle. Such 
legislation allows producers access to the data needed to compare 
quickly and easily bids from different packers and to negotiate the 
best possible price for their livestock. R-CALF encourages the United 
States to encourage our trading partners to enact or strengthen laws on 
mandatory price reporting. Such laws would benefit U.S. producers when 
selling in foreign markets.
Exchange Rate Manipulations
    Currency exchange rates can have major impacts on trade flows, 
including the trade flows of agricultural products. Indeed, some 
countries have used exchange rate controls as a method of altering 
trade flows in agricultural products. Such manipulations can create 
serious harm in the international marketplace. R-CALF urges the United 
States to consider this problem and to attempt to craft a proposal to 
address it through international negotiations. Indeed, R-CALF proposes 
that international trade rules prohibit such manipulations.
Price Collapses
    Various commodities, including cattle, have experienced major 
international price collapses during the past decade. These price 
collapses have adversely impacted not only individual producers, but 
also rural economies throughout the world. R-CALF requests that the 
United States work with our trading partners to develop a mechanism to 
remedy the devastating effects of collapses in commodity prices.
    Further, on a subject not directly linked to the activities of the 
Ways and Means Committee, R-CALF is concerned that recent price 
collapses for cattle have been caused in large part by concentration in 
the U.S. meatpacking industry. R-CALF supports legislation that would 
advocate more effective enforcement of U.S. laws addressing 
concentration in agriculture. R-CALF also supports legislation that 
would prohibit packer ownership of cattle.
Conclusion
    R-CALF appreciates the opportunity to provide comments for the Ways 
and Means Committee's hearing on President George W. Bush's trade 
agenda.
    R-CALF will continue to monitor trade negotiations closely. R-CALF 
would be pleased to provide further information to Ways and Means 
Committee members upon request concerning R-CALF's views on trade 
negotiations.
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