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CREATING JOBS: ECONOMIC OPPORTUNITIES IN

EUROPE AND EURASIA

HEARING

BEFORE THE

SUBCOMMITTEE ON EUROPE AND EURASIA

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

MARCH 27, 2012

Serial No. 112–143

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

ILEANA ROS-LEHTINEN, Florida, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

RON PAUL, Texas 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

GUS M. BILIRAKIS, Florida 

JEAN SCHMIDT, Ohio 

BILL JOHNSON, Ohio 

DAVID RIVERA, Florida 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

ANN MARIE BUERKLE, New York 

RENEE ELLMERS, North Carolina 

ROBERT TURNER, New York 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

BRAD SHERMAN, California 

ELIOT L. ENGEL, New York 

GREGORY W. MEEKS, New York 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

DENNIS CARDOZA, California 

BEN CHANDLER, Kentucky 

BRIAN HIGGINS, New York 

ALLYSON SCHWARTZ, Pennsylvania 

CHRISTOPHER S. MURPHY, Connecticut 

FREDERICA WILSON, Florida 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

YLEEM D.S. POBLETE, Staff Director 

RICHARD J. KESSLER, Democratic Staff Director 

SUBCOMMITTEE ON EUROPE AND EURASIA

DAN BURTON, Indiana, Chairman 

ELTON GALLEGLY, California 

GUS M. BILIRAKIS, Florida 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

JEAN SCHMIDT, Ohio 

TED POE, Texas 

GREGORY W. MEEKS, New York 

ELIOT L. ENGEL, New York 

ALBIO SIRES, New Jersey 

THEODORE E. DEUTCH, Florida 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Robert D. Hormats, Under Secretary, Economic Growth, Energy, and the Environment, U.S. Department of State .................................... 8

Mr. Peter Rashish, Vice President for Europe and Eurasia, U.S. Chamber 

of Commerce ......................................................................................................... 35

Dan Hamilton, Ph.D., director, Center for Transatlantic Relations, The Paul 

H. Nitze School of Advanced International Studies, The John Hopkins 

University ............................................................................................................. 48

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Dan Burton, a Representative in Congress from the State 

of Indiana, and chairman, Subcommittee on Europe and Eurasia: Prepared 

statement .............................................................................................................. 3

The Honorable Robert D. Hormats: Prepared statement ..................................... 12

Mr. Peter Rashish: Prepared statement ................................................................ 38

Dan Hamilton, Ph.D.: Prepared statement ........................................................... 50

APPENDIX 

Hearing notice .......................................................................................................... 74

Hearing minutes ...................................................................................................... 75

Question submitted for the record by the Honorable Gregory W. Meeks, 

a Representative in Congress from the State of New York, and response 

from the Honorable Robert D. Hormats ............................................................. 76

Question submitted for the record by the Honorable Gus Bilirakis, a Representative in Congress from the State of Florida, and response from the 

Honorable Robert D. Hormats ............................................................................ 77

The Honorable Ted Poe, a Representative in Congress from the State of 

Texas: Prepared statement .................................................................................. 79

The Honorable Dan Burton: Material submitted for the record .......................... 80

(1)

CREATING JOBS: ECONOMIC OPPORTUNITIES 

IN EUROPE AND EURASIA 

TUESDAY, MARCH 27, 2012

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON EUROPE AND EURASIA, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. 

The subcommittee met, pursuant to notice, at 2 o’clock p.m., in 

room 2172 Rayburn House Office Building, Hon. Dan Burton 

(chairman of the subcommittee) presiding. 

Mr. BURTON. The subcommittee will come to order. The title of 

today’s hearing is Creating Jobs: Economic Opportunities in Europe and Eurasia. As I have made clear in the past hearings and 

statements, I am concerned about the state of Europe’s economy 

and their financial markets. Giving this concern, you may be surprised that I think there is a lot of opportunity in Europe. 

Despite the current financial crisis, the combined nations of the 

European Union remain the United States’ largest trading partner. 

In addition, Turkey, Russia, Central Asia and emerging eastern 

European markets each present additional opportunities for American exporters. 

The national tendency during tough economic and financial times 

is to insulate one’s self from the fluctuating global markets. To 

some extent this makes sense. Some European countries remain 

volatile, and I just talked to you about that. And thus U.S. investors and exporters should remain cautious. However, there are European nations who are weathering the crisis and present opportunities for U.S. exporters and investors to capitalize upon. My colleague just got here. 

We must not forget that growth is an important component of 

the solution to any economic crisis. The United States Government 

can help its citizens create growth by making it easier to do business at home and abroad. For example, a zero tariff agreement 

with the European Union would substantially increase the total 

trade and an enormous jump in our exports to Europe. 

It is true that tariffs between the U.S. and our European partners are low. However, transatlantic trade is so important to economies on both sides of the Atlantic that dropping tariffs by just a 

few percentage points would allow U.S. exports to increase by tens 

of billions of dollars. Accordingly, some estimate that we could see 

upwards of 300,000 jobs created through just the goods portion of 

such an agreement. 

Opportunities exist outside the European Union as well. Russia, 

my colleague and I are working on that. Russia might present one 

2

such opportunity. From 2005 to 2010, my fellow Hoosiers increased 

our exports of Russian goods by more than two and a half times. 

Russia is going to join the WTO this summer, and the increased 

trade that Russia’s WTO membership will allow could support here 

in the United States, 50,000 new jobs within 5 years. 

In the current economic climate we can’t ignore such an opportunity to create jobs. Boy, that is an understatement. At the same 

time, we must preserve U.S. support for democracy and human 

rights. As I am sure everyone in this room knows, it is Congress’ 

decision to graduate Russia from the Jackson-Vanik amendment 

and grant Russia permanent normal trade relations. Such action is 

required in order for U.S. companies to reap the benefits of Russia’s WTO membership. There is a great deal of debate as to what 

action Congress should take. I am concerned about the timing of 

a repeal and what an alternative to Jackson-Vanik would involve. 

However, we must also recognize that Jackson-Vanik is now 

largely symbolic. For almost two decades, the President has waived 

Jackson-Vanik anyhow, and granted Russia normal trade relations 

under the full compliance provision of the amendment. Regardless, 

if Congress decides to graduate Russia from Jackson-Vanik, we 

must maintain our support for democracy and human rights 

through a modern, functional replacement that recognizes the current situation in Russia. 

Turkey presents another opportunity for greater economic cooperation. Between 2005 and 2010, Turkey’s GDP grew an average 

of 4 percent as the country’s economy diversified. This progress 

continues. In just a few weeks, Turkey will receive final bids for 

a third bridge connecting Europe and Asia across the Bosporus. 

This project is emblematic of the tens of billions of dollars that 

Turkey is going to invest into highways and other infrastructure in 

the coming years as its economy continues to grow and diversify. 

In addition to supporting further economic growth with Turkey, 

such developments will leave Turkey better prepared to serve as a 

gateway for Western companies who wish to do business in the 

Middle East and Central Asia. Unfortunately, we are often our own 

worst enemy when it comes to international trade. 

The U.S. must be able to move swiftly and decisively in a fastmoving global market. We failed to do so recently. Trade deals with 

Colombia, South Korea and Panama lingered for several years. As 

Congress proved by changing the rules when President Bush sent 

to Congress the Colombia agreement, fast track authority is no 

longer viable. Currently the U.S. is only participating in one ongoing negotiation, the Trans-Pacific Partnership. The United States 

is not involved in any of the 26 regional trade agreements listed 

by the WTO as being under negotiation, and we hope that will 

change. The people of the United States deserve better. 

This government, both the administration and Congress must get 

serious. We must improve this government’s capability to help 

business and increase exports. If we can’t outpace our competitors 

we cede to them the enormous advantage that comes with being 

the world’s largest economic power, and this is just not acceptable. 

And now I yield to Mr. Meeks, my ranking Democrat. 

[The prepared statement of Mr. Burton follows:]

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Mr. MEEKS. Thank you, Chairman Burton. And I think, and I am 

going to do this, I am sure again, but I think that since the last 

hearing that we have had, this is the first time we have been here 

after your announcement that you were not seeking reelection. And 

I just wanted to say for the record that I believe your district is 

going to miss you being here. They may see you more because you 

are there, but they are going to miss your representation here. 

I want to go on record to say that you have been a very good 

friend. And it may be a little quieter around here without you here, 

but I am sure that you’ve contemplated and thought about it and 

you will have time to spend more time with your beautiful wife and 

family and maybe play a little golf or something of that nature. But 

you will be missed around here, that is for sure. 

Mr. BURTON. Well, I am glad you said that last sentence, because 

you started off saying my constituents would miss me but you 

didn’t say you would miss me. 

Mr. MEEKS. Yes, I would miss you. But we have still got some 

work to do and some time to spend together, and I look forward 

to doing that. 

And I should also say, Under Secretary, it is always good to see 

you. Always good to see you and I look forward to hearing your testimony. 

The central question before us today is, how can we leverage our 

commercial relationship with Europe to create jobs in America? 

Trade and investments plays an important role in the U.S. job creation efforts, and our biggest and most successful commercial relationship is indeed with Europe. In fact, this is the largest and most 

integrated economic relationship between two areas in the world. 

President Obama has committed his administration to doubling 

U.S. exports during his first term, and according to recent numbers 

we are within striking distance of that goal. Exports are currently 

growing at an annual pace of about 16 percent, and this increase 

has been one of the central drivers of the economic recovery, accounting for about half the nation’s economic growth since the recession ended. The administration has bolstered both domestic and 

global demand and pushed through three long-stalled free trade 

agreements with Panama, Colombia and South Korea last year. 

Commerce is a major instrument of foreign policy, and I applaud 

Secretary Clinton for laying out a bold vision for Economic 

Statecraft in her speech on that topic in October last year. Free 

trade and international investment are cornerstones of our nation’s 

prosperity, significant generators of jobs in America and a great 

asset for both U.S. workers and companies. But trade also stimulates openness, transparency, efficiency and accountability. Trade 

strengthens innovation and drives reform on a global scale, and 

binds us together with other nations to ultimately reduce the potential for conflict. 

However, according to a recent report on U.S. trade and investment policy by the Council on Foreign Relations, in recent years 

public opinion toward the benefits of international trade has declined significantly in the United States. And I hope that our panel 

and the Secretary might address ways for us to change this perception. Congress, of course, must do its part to address the low-hangVerDate 0ct 09 2002 15:02 Jun 28, 2012 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\WORK\EE\032712\73533 HFA PsN: SHIRL
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ing fruit that can facilitate trade, exports and investments, and 

create jobs and growth in the transatlantic space. 

This agenda includes granting permanent normal trade relations 

to Russia and Moldova. As Chairman Burton here said, Russia will 

accede to the WTO this summer, while Moldova has been a member since 2001. Congress has simply been asleep at the switch 

when it comes to giving U.S. companies the same benefits available 

to other WTO members. 

For more than a decade the United States has been non-compliant with WTO rules because we have failed to repeal the JackonVanik amendment from Moldova, and I fear that we are about to 

commit the same mistake for Russia. If Congress is truly serious 

about creating jobs, growth and export opportunities, this is the obvious place to start. 

Bringing Poland and other European countries into the Visa 

Waiver Program. Poland is one of our strongest allies, and has 

emerged as one of the most dynamic economies in Europe. We 

should take advantage of this dynamism by expanding the opportunities for U.S.-Polish business relations and tourism. U.S. citizens 

can easily travel to Poland for up to 90 days without obtaining a 

visa, but we have not extended the same privilege to Polish citizens. Bringing Poland into the Visa Waiver Program will strengthen both our economy and our national security, and Congress 

should act without delay to pass the necessary legislation. 

We should update export control legislation. Congress must pass 

and update legislation in order to stay in our cutting edge 

techonology sectors and create new, high quality jobs. The current 

export control statute is anachronistic, a relic that fails to recognize 

the reality of high tech products and components that are freely 

traded on global markets. U.S. developers and manufacturers are 

being excluded from these markets for no apparent reason. 

Congress should also fulfill its advisory role to the Transatlantic 

Economic Council. When the Transatlantic Economic Council, the 

TEC for short, was created in 2007, Congress was given an advisory role in the TEC’s work. This role was assigned to the Transatlantic Legislators Dialogue, which brings Members of Congress 

and the European Parliament together to resolve regulatory issues 

at the legislative level. I think the TLD’s work could provide valuable input to the High Level Working Group on jobs and growth, 

and I suggest we find a way to integrate Congress and the EU Parliament input into this process. 

And let me just end on this because I think the executive branch 

also has the responsibility to facilitate the jobs and agenda growth. 

One, eliminate or reduce remaining tariffs on both sides of the Atlantic. Two, work together with our European partners to establish 

international regulatory rules and standards. 

And I know that Chairman Burton would agree on the importance of expanding U.S. trade with Russia, and I want to conclude 

on that. On December 16th of last year, Russia received an invitation to join the WTO which would significantly enhance our opportunities to export goods and services to a booming Russian market. 

However, if U.S. businesses are to have the same benefits of Russia’s WTO membership as all other WTO member countries, Congress must extend permanent normal trade relations to Russia and 

7

repeal the Cold War era legislation that has become redundant. 

Doing so will empower the reformers and innovators that represent 

the future of Russian society, and in fact the leading Russion opposition figures have recently called on Congress to do just that. Repeal the Jackson-Vanik amendment for precisely that reason. 

So I will love and wait to hear the testimony of the Under Secretary and our other panelists, and again I thank my friend, the 

chairman of this subcommittee, Dan Burton, for this timely, timely 

hearing. 

Mr. BURTON. Very good. Jean, I think you were here next. I will 

get to our vice chairman here in just a minute. But before we do, 

I want to say since they mentioned that I am going to be retiring, 

we are going to miss you too. 

Ms. SCHMIDT. Well, thank you. And basically I am here to just 

listen and learn. It is very apparent that Eurasia is becoming an 

emerging market that the United States must pay attention to. 

Most importantly, the region of Turkey, because it truly is the 

place where East meets West. And really continue to look at Russia 

as a trading partner. I think that in the next 50 years, the ability 

for Russia to continue to try to be a player of both economically 

and militarily will continue to decrease, but the emerging area will 

be Eurasia, most importantly Turkey. So looking forward to your 

views on that. Thank you. 

Mr. BURTON. Our vice chairman from the great State of Arkansas, Mr. Griffin. 

Mr. GRIFFIN. Thank you, Mr. Chairman. Just quickly I would 

like to point out that I was a staffer for Chairman Burton on the 

Government Reform Committee in 1997, 1998 and 1999, and appreciate his service and appreciate your service as well. 

I have a particular interest in our trading with Europe. In the 

2nd congressional district of Arkansas, which is my district, Little 

Rock is the biggest population center, but it is broader than that. 

It is about eight counties. We have a number of European companies that do business and employ hundreds of Arkansans, and so 

I will be real interested to hear how we can do more business with 

Europe. 

Some of the ones that spring to mind are Unilever, which is a 

British/Dutch company. We have, what I understand to be, the only 

Skippy peanut butter producer in the United States. Also, L’Oreal 

makeup, Maybelline, a French company. They have a plant east of 

Little Rock. Dassault Falcon Jets from France. They bring jets over 

from, I think, their headquarters in Bordeaux. They don’t bring 

any Bordeaux wine with them as far as I know, but they do bring 

their jets from Bordeaux and they are fitted with the interior in 

Little Rock. And then we have LM Wind Power, which is a leader 

in alternative energy that make the big blades for windmills. I 

have toured that plant. 

And so the European businesses have a large footprint in my district. And so when we talk about increased trade and we talk about 

getting more businesses to have a direct investment in the United 

States, for me it is not some academic exercise. I mean, we are 

talking about people who get up in the morning and drive to work 

or they don’t. And when we can have more of these companies investing directly in the United States either because they find a 

8

skilled workforce, or the infrastructure or they believe in the stability of the United States, whatever the reason, we need to be pursuing policies that encourage that further. 

And I look forward to hearing your testimony and anything that 

you can advise us on what we can do to increase that. The chairman already mentioned that it took us as a country a long time to 

get the three trade agreements that we recently passed. They had 

been languishing for a long time. We need to do better. And so I 

am here to hear your opinions on how we can do better. Thank you 

very much. 

Mr. BURTON. Thank you, Mr. Griffin. Mr. Sires? 

Mr. SIRES. Thank you. I apologize for being late. Typical Hispanic, I am always late. But thank you for being here, and I just 

want to hear what you have to say. I am very interested in this 

part of the law. 

Mr. MEEKS. Mr. Chairman, before we go to questions, I just want 

to join you in saying that we are going to miss Jean Schmidt. I 

have had the opportunity to travel with her and she is very enlightened on world issues. And I have just got to tell you, in getting 

to know her is getting to like her and love her and her whole passion for the world and opening up to the world. And so I just wanted to join you. Jean, you will be missed here also. 

Mr. BURTON. I would just like to say before I introduce our first 

guest that you should get out there and run a marathon with her. 

Mr. MEEKS. Oh no, I can’t compete. 

Mr. BURTON. What do you run, about five miles every morning? 

Ms. SCHMIDT. Yes. 

Mr. BURTON. Yes, my goodness. 

Mr. MEEKS. Even when we are abroad, every morning she still 

gets up, whatever country that we are in, and she will run in the 

morning. I mean it is a routine that she will follow even in the 

highest altitudes. I couldn’t believe it. 

Ms. SCHMIDT. We really need to listen to this testimony, but I 

have just got to say if you want to learn what the world is like, 

get up when the world gets up and see how they operate. You really get the best footprint of how a world operates. 

Mr. BURTON. Mr. Meeks will never get up that early. 

Testifying on the first panel is the Department of State’s Under 

Secretary for Economic Growth, Energy and Environment, Robert 

Hormats. Secretary Hormats served in his current position since 

September 2009. Prior to that position at the State Department, 

the Under Secretary was vice chairman of Goldman Sachs. Earlier 

in his career, the Under Secretary served as the Assistant Secretary of State for the Economic and Business Affairs, as Deputy 

U.S. Trade Representative, and as a senior staff member for the 

National Security Council. Pretty impressive credentialing. And 

with that we will listen to what you have to say. 

STATEMENT OF THE HONORABLE ROBERT D. HORMATS, 

UNDER SECRETARY, ECONOMIC GROWTH, ENERGY, AND 

THE ENVIRONMENT, U.S. DEPARTMENT OF STATE 

Mr. HORMATS. Well, thank you very much, Mr. Chairman and 

Ranking Member Meeks and members of the committee. It is a 

great pleasure to be here today, and I just wanted to before I start, 

9

just identify a couple of issues that you have mentioned in your 

opening statements. 

One, I totally agree that there is opportunity in Europe and in 

Russia, Turkey and Eurasia. I think that you, Mr. Chairman, 

pointed out that the worst thing we can do in the current environment is turn inward. The best thing we can do as all of you have 

indicated is turn outward and look for new opportunities all around 

the world. 

And Turkey is certainly a growing market. It has certainly come 

on to its own from having a major crisis 10 years ago. It is now 

one of the preemiment emerging economies of the world. Russia is 

a country that now as a member of the WTO, affords us, if we take 

advantage of them, opportunities to sell in a growing market that 

is going to be diversifying. It is a big energy market, but it is going 

to be diversifying into other things. So there are really great opportunities here, and the question is, how do we take advantage of 

them? So I really appreciate the opportunity. It is very timely in 

this environment to discuss these kinds of issues. 

Let me just discuss for a moment the importance of the U.S.-European economic relationship. U.S.-EU bilateral economic relations 

are really one of the central drivers of the global economy. Roughly 

50 percent of global GDP is accounted for by the U.S. and Europe 

combined. Europe itself is about 18 percent of global GDP. Europe 

is also vital to American exporters. The value of American goods 

and services exports to the European Union is actually several 

times that of our exports to China. While China gets a lot of publicity and is a growing market, Europe is still a much bigger market for American exports. 

The same is true with foreign investment. Foreign direct investment has created millions of jobs on both sides of the Atlantic. At 

last measure in 2010, U.S. foreign direct investment in the EU had 

reached nearly $2 trillion. EU investment in the United States is 

also enormous, $1.5 trillion in 2011, creating a lot of jobs in virtually every district, every state in this country. We look to Europe 

to attract more foreign investment in the United States over a period of time. And we are going to be energizing our Embassies and 

our ambassadors as part of Secretary Clinton’s Economic Statecraft 

to be more proactive, working with governors and mayors who are 

already very proactive in attracting foreign investment. 

We look to Europe also for new opportunities for exporters, for 

industrial products, for consumer goods, for agricultural goods as 

well. I mean the area around Little Rock is a big exporter of agricultural products, poultry and such things, and virtually every 

state exports agricultural goods, and saying it is also a place where 

a large number of American companies have been operating successfully for many decades and seek more opportunities there. 

We are also working with Europe to improve the climate for 

trade and investment in third country markets. This is very important because there are a number of countries who don’t share the 

same notion of rules and obligations under the WTO and elsewhere, so we are working with Europe on intellectual property and 

in other areas as well. And of course, Europe has been a strong ally 

as we see in Afghanistan and elsewhere. 

10

Let me discuss the eurozone crisis briefly. We have continued to 

collaborate closely through the global financial crisis, and more recently the current eurozone crisis. We have seen a commitment by 

the EU to address current economic challenges not only through 

fiscal consolidation, which is a major priority for some countries to 

improve their debt sustainability, but also by facilitating job creation and structural improvements and putting in place measures 

to assist member states in finding a path back to economic growth. 

We know from our own expertise that moving from crisis to recovery depends on swift, aggressive action to restore market confidence. 

I would also like to outline some of the things that we are actually doing in the State Department to promote the Secretary’s 

Statecraft agenda. In the written testimony, I won’t go through this 

now, I highlight ways in which our Embassies and our missions are 

very actively involved in promoting American exports, supporting 

American companies, and attracting investment. 

One example is Boeing’s sale of 50 aircraft to Russia’s Aeroflot. 

We also worked in Germany with Volkswagen to encourage them 

to build a $1 billion manufacturing plant in Chattanooga. This 

helps U.S. exports, but as Mr. Griffin pointed out, there are a lot 

of opportunities for investment all over. And in Indiana, as you 

have said, Mr. Chairman, there is a lot of foreign investment and 

we are aiming to get a lot more. And yes, I think it is a big job 

creator and I think it is underestimated. But Indiana is so so central that, you know, it is a great place to invest. You can go anywhere from Indianapolis, and it is a relatively short distance. And 

of course Kennedy Airport is a big hub, and your district is really 

very important. It is really the air gateway to Europe, so it is an 

opportunity. 

The volume of U.S. agricultural exports, let me just talk about 

that briefly. In our 2011 statistics, agricultural exports to the EU 

were valued at $9.5 billion, up 8.2 percent from the prior year. 

USDA estimates that for every billion in U.S. ag exports there are 

about 7,800 jobs supported in the United States. 

We also have been very active, we have got for the first time, 

Secretary Clinton invited representatives from 200 institutions, 

like Chambers of Commerce, from around the world to our global 

business conference to find out how we could do a better job. So we 

are constantly learning and trying to be more proactive. 

We also have the Transatlantic Economic Council, which was established in 2007, led by the White House and the European Commission. We are trying to use that to reduce regulations and improve cooperation in a variety of areas. One of the highlights of the 

TEC is the new work program that has been announced, which is 

designed to see if we can find ways of strengthening jobs and 

growth through a working group that has been created between the 

U.S. and the EU. Ron Kirk is our representative and Karel De 

Gucht, the European Commissioner for trade, is theirs. 

Let me just mention a few things about trade with Turkey and 

Russia. I know I am out of time. I will just go very quickly. First 

with Russia, I think eliminating the Jackson-Vanik restrictions as 

they apply to Russia is critically important and providing them 

with PNTR is very, very important. Russia only takes about 1⁄2 of 

11

1 percent of American exports today. It has the potential to enable 

American exports to grow, if we have the same opportunities as 

other countries in the WTO will have, once Russia accedes to membership in the WTO. If PNTR is not provided, if Jackson-Vanik is 

not lifted with respect to Russia, we will be at a disadvantage visa`-vis our trading partners, and we will also not be able to enjoy the 

full benefits of the commitments that Russia has made when it 

joins the WTO. So it is a double negative for us. 

It is also worth pointing out that in the WTO negotiations, the 

United States gave up nothing. All the concessions, all the commitments were made by Russia. We have made no concessions to them 

or to any other country. They made concessions in order to join the 

WTO. So this is an enormous opportunity for American exporters 

and American business to take advantage of one of the big markets 

of the world with energy and a lot of other things that can enable 

companies in the United States to do better. 

The other point is Turkey. I totally agree that Turkey is a growing market, and a country that has undertaken a lot of very important reforms. And lastly, Eurasia, Central Asia, very important 

countries like Kazakhstan, Azerbaijan—we are working with these 

countries. They have a lot of raw materials and a lot of growth potential so we should be developing our relations with them, and we 

will be doing that. I have met with the President of Azerbaijan, 

which as you know has a lot of energy, and we are going to have 

a bilateral commission with them to try to reduce barriers and increase opportunities. 

So there is a wonderful menu of opportunities here. It is up to 

us to work together, the executive branch, the Members of Congress together to find ways of taking advantage of these opportunities for American workers and the American people and American 

business. 

So thank you very much, Mr. Chairman. Sorry I went over. 

[The prepared statement of Mr. Hormats follows:]

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Mr. BURTON. No, that is okay. Thank you very much. You mentioned a couple of things that concern me. This Trans-Pacific Partnership that is already in force has been, I think, pretty beneficial. 

But we haven’t had any trade deals with many nations over there 

in recent times. Why is that? 

Mr. HORMATS. In the Pacific, you mean in the——

Mr. BURTON. No, I am talking about that we are not seeking any 

trade deals with any other nation right now that I know of. You 

mentioned Colombia. 

Mr. HORMATS. Yes. 

Mr. BURTON. You mentioned Panama. You mentioned Korea, 

North Korea or South Korea? 

Mr. HORMATS. South Korea. 

Mr. BURTON. But there is 25 or 30 other opportunities out there 

and we are not taking advantage of them, and I just was wondering why. 

Mr. HORMATS. Well, the current objective now and where we are 

really devoting most of our attention, Mr. Chairman, is on the 

Trans-Pacific Partnership. Actually I just got back a couple of days 

ago and I have got the voice to attest to this from a long trip to 

Vietnam and to Thailand. Vietnam is a partner in these TPP, 

Trans-Pacific Partnership negotiations. So our goal is to really 

move those along. 

That is the fastest growing area of the world, so what we are trying to do is focus our negotiating energies on this as a top priority. 

But we also see the lifting of Jackson-Vanik restrictions to Russia 

as expanding trade opportunities as well. So if you combine what 

we hope will be a success in expanding trade opportunities in East 

Asia and the Pacific through TPP and then moving along on Russia 

as we have both, I think all of us have agreed this would be a good 

idea, that can actually boost trade quite substantially. 

Mr. BURTON. During your comments, you mentioned the European Union and the fiscal problems that they are having. One of 

the concerns that I have had for a long time, and that is one of the 

reasons we were in Brussels and a number of those countries over 

there, is that we don’t know exactly how involved the United States 

is financially. I know in the International Monetary Fund we have 

put up about 18 percent. 

But I have been told by some people that the Fed has been printing money and they have been investing in bonds over there with 

the European Central Bank, and I don’t think anybody really 

knows how deeply we are involved and what kind of risk there is 

in the event that a number of countries go belly up. 

I think Greece is in real, real trouble. I don’t see how they are 

going to survive. I know everybody is trying to keep them afloat, 

but it is going to be tough. And then you have got Italy, and you 

have got Spain and Portugal. And if we are deeply involved and 

some of those countries start going belly up, they can’t make good 

on their bond payments or the interest even, how is that going to 

affect the United States and our investments over there? 

Mr. HORMATS. Okay. Well, first the IMF, the first point you 

made. We are a major supporter of the IMF as you correctly point 

out, and the IMF has actually provided a substantial amount of 

money to Europe. But our obligations are really to the IMF, and 

27

the IMF balance sheet is still very strong. Whenever there is a repayment of a loan, the IMF gets first preference from whoever the 

borrower is. So the IMF has really never run into, or even come 

close to, running into any financial difficulties. So the contributions 

we have made or what we provide to the IMF——

Mr. BURTON. Let me interrupt because I am running out of time. 

The European Central Bank is doing the same thing that we did 

with QE1 and QE2. They are printing money. And that money is 

going into these countries to help bail them out at a very low interest rate, and then a lot of the financial institutions are trying to 

loan it out at a much higher rate so they can try to get well of 

those governments. My main concern is what impact, and if you 

can be concise about this, what impact is it going to be if these 

countries do start going south? 

Mr. HORMATS. Well, it is hard to speculate on that because I 

think there is a very good chance that things will get better. But 

there are always risks in any financial environment as we have 

seen. But I think that from an American point of view, our money 

in the IMF is safe. The money that the Fed has provided is through 

swap agreements with central banks, which I think are very safe 

as well. 

I think the big problem that we face for the moment is that a 

weaker Europe, economically, can have very negative implications 

for our trade, and that I think is what you are getting at, and I 

do think that is a concern. And one of the reasons we are trying 

to support Europe is to avoid a deterioration financially and from 

a trade perspective. 

Mr. BURTON. No, I understand that and that is one of the reasons, I think, that Germany and Merkel over there is trying to 

keep some of these countries afloat, because they are such a big 

trading partner. But I understand the Gordian knot that we are in, 

but I wish somebody could tell me what our exposure really is. 

And with that I will yield to Mr. Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. Mr. Secretary, I was glad 

to hear you say, and I was going to include that even in my opening remarks, about the other opportunities that lie before us as far 

as the trade with Turkey and the Caucasus in Central Asia, because these are also emerging markets representing great opportunities for expanded U.S. exports and investments. 

Now I also sit as the co-chair of the Services Committee and a 

co-founder of the Services Caucus, I should say, and I believe that 

there are immense possibilities for increased trade in the service 

sectors such as the airline industry and telecom and health care 

and capital markets that will provide a significant economic boost 

to the transatlantic economy. 

And with the failure of Doha, et cetera, what do you think about 

a plurilateral agreement with a number of the participants on services where maybe we can agree on the services because where we 

can expand? Because as you know, Dr. Hamilton, for example, calls 

services the sleeping giant of the transatlantic economy in some of 

his previous publications. 

So my first question is, what do you think about the services in 

that regard? I would like to hear your opinion in that regard. 

28

Mr. HORMATS. Well, first of all, I agree with Dr. Hamilton that 

services represent an enormous opportunity. A large portion of our 

economy is services. I think manufacturing is very important, but 

services represent a potential opportunity that we ought to be developing. 

The second point I would make is, one of the things we are doing 

under this working group on jobs and growth with Europe that has 

been set up with Ambassador Kirk being the American co-chair, is 

to try to find ways of expanding opportunities with Europe. And 

while they are looking at all options, one option that lends itself 

to real progress would be the services sector. 

And the other thing is that we are looking, and as you pointed 

out, the WTO is sort of at the moment in a quiescent state, but 

there may be opportunties for groups of countries to move ahead 

on certain aspects of trade liberalization even without a complete 

new success of the Doha Round. So identifying opportunities for expanding trade and services either with the Europeans through this 

working group or through a group of countries within the WTO 

who see this as being in their common interest would be a very 

positive thing. And I think we ought to look for opportunities to do 

that because he is absolutely right. This is a sector where growth 

is possible and where job creation would be quite substantial of 

both. 

Mr. MEEKS. I would love to continue to talk and work on that 

with the Caucus. I couldn’t agree more with you in talking about, 

and what Jean has indicated also with Turkey, in opening up that 

market. I have been talking a lot about Russia and Turkey which 

are tremendously important, huge markets. 

And as a result I have had though, a number of our U.S. pharmaceutical companies come to me asking about their access to the 

Turkish market and that issue. So I was wondering, do you know 

what the Government of Turkey is going to do or can do to ensure 

full market access for innovative U.S. medicines, because that is 

also important to get our products out like services and medicines. 

Mr. HORMATS. Yes. Well, this is an issue with Turkey, there is 

no question about it. We have made a little bit of progress, but 

there are still major problems that need to be resolved with respect 

to Turkey’s policies as they relate to the pharmaceutical industry 

that impede access of products into Turkey and the ability of some 

American companies that may want to invest in Turkey as well. 

We have had conversations with the Turkish Government at very 

high levels. I, myself, have had several conversations with Turkish 

officials on this. This is something that we work with PhRMA on 

a very regular basis to look for opportunities. This is a very high 

priority for us, I think, and actually over a period of time will be 

for the Turks as well, because they need the very best, and they 

want the very best medicines for their people. American companies 

have, I think, the best medicines in the world, the best pharmaceuticals in the world, so there should be a match. We just have 

to keep working at it and we still have a way to go. 

Mr. MEEKS. One more question, but I agree with you. And I 

should hope that Turkey does want the best, because part of our 

idea is to make sure that we get the products that we export, and 

the U.S. pharmaceutical companies are very important to helping 

29

with that export initiative and we want to make sure we can move 

it forward. 

Mr. HORMATS. Absolutely. 

Mr. MEEKS. But let me ask you, what is your position on bringing Poland, for example, into the Visa Waiver Program? And what 

explains, if you could, Poland’s consistently high visa refusal rate 

despite the fact that it has this booming economy? 

Mr. HORMATS. Well, I will have to check with the consular affairs 

people in the State Department on that. But in general, if countries 

meet our criteria for Visa Waiver, we are happy to do it. I will certainly check out Poland and get back to you on that. But in general, where we can do it and where the criteria are met we are 

happy to do it. We have a number of countries as you know that 

do have it. There are only four, I think, in Europe that don’t, if I 

am not mistaken, but relatively few anyway. So I will check Poland 

out. And there are a couple of other countries that are in that category that I know you are also focused on. So we will get back to 

you on that right away. 

Mr. MEEKS. Thank you. 

Mr. HORMATS. Thank you. 

Mr. BURTON. Ms. Schmidt? 

Ms. SCHMIDT. Thank you. I have several questions. The first, 

Congress’ role with the Transatlantic Economic Council. As you 

know it was created in 2007, and Congress was given an advisory 

role. That role is specifically assigned to the Transatlantic Legislators Dialogue. 

Apart from granting fast track authority, in your opinion what 

role should Congress be playing, and is there legislation that we 

should consider to benefit trade especially in Europe and Eurasia? 

Mr. HORMATS. Yes, thank you. I have been very actively involved 

in the TEC, and I regard it very important for a number of reasons. 

One of which is that it is focused, as you correctly pointed out, on 

creating new opportunities. A lot of those opportunities for the moment are focused on differences in regulations and standards, and 

it has mostly been in the realm of the standard setting bodies on 

both sides. And some of them have traditional ways of looking at 

these things, and the flexibility in some cases has not been as great 

as I personally would like it to be. 

On the other hand, they are working at it and we have been taking a fresh look at various regulations and standards to see where 

there is an opportunity for some sort of commonality or mutual recognition or actually an agreement in terms of standards between 

the U.S. and Europe. 

We have found a few areas where we think we can make real 

progress that probably won’t require legislation, at least not at the 

moment. One is on electronic vehicles, e-cars, e-mobility. And that 

is, if we can get interoperability and interconnections and standards agreed to between the United States and Europe, and also 

standards for smart grids which are needed for these cars, then 

first of all, we can reduce barriers between the U.S. and Europe. 

And second, very important, that we can set standards that we and 

Europe agree to and then encourage other countries to apply those 

standards. 

30

The role both the U.S. and Europe have now is that we will develop high standards, but then other countries like China will have 

more nationalistic or restrictive standards that keep American and 

European cars out of the market. Not just China, other countries 

as well. So these probably won’t require legislation at the moment, 

but they will require a lot of work. And we have actually made 

some progress on electric cars. We are thinking of moving, do the 

same thing on electronic health records which as you know American doctors and hospitals are going to have to comply with. 

Nanotechnology, a number of things where we can actually develop 

some harmony among our regulatory proceedings and have as a result reduced barriers to trade across the Atlantic in these areas. 

Ms. SCHMIDT. Thank you. Speaking of trade barriers, some have 

expressed the fact that our current tax structure can be a hindrance to companies trading on an equal and fair level with other 

countries. Regarding the EU and Eurasia and Russia, do you see 

that as part of a trade barrier problem? 

Mr. HORMATS. Our companies do express exactly the sentiments 

that you have mentioned. I don’t think they are a big part of the 

trade problem with those countries. I think the bigger part of the 

trade problem with Europe, the EU, is differences in regulations 

and standard setting procedures, and then differences in things 

like——

Ms. SCHMIDT. Let us go back with that, with standards and regulations, et cetera. Europe in some cases is more restrictive than the 

United States, and then there is the general fear in the United 

States that if we apply those standards in the United States it will 

impede our growth as well. How do we get around that? 

Mr. HORMATS. That is a very good question. We each, in Europe 

and the U.S., want to have standards that are protecting the 

health and safety and well being of our people, but not standards 

that are restrictive and restrict opportunity and commerce. One 

area that I think is very useful to focus on and we are seeing it 

as a high priority is in the area of biotech as it relates to agricultural products. Europe has a very, I would say restrictive——

Ms. SCHMIDT. Restrictive, backward thinking. 

Mr. HORMATS. Yes, restricted standards that are not based on, 

in our judgment, good science. And what we are trying to do is 

when there are regulations needed they should be based on scientific evidence of their necessity as opposed to political pressures. 

Ms. SCHMIDT. Before I run out of time, do you see Eurasia as a 

little more lenient, the Eurasian countries than the European countries or is it a wash? 

Mr. HORMATS. Well, Turkey has a number of provisions that, 

when we were talking a little on pharmaceuticals, that are again 

procedures or standards that we think impede, for instance, the 

pharmaceutical goods that we would like to sell, medicines that we 

would like to sell. So our goal again is to encourage them when 

they set standards or when they set procedures to do it on the 

basis of scientific evidence, not on the basis of either political pressures or more arbitrary kinds of judements. 

So we have no objection and other countries don’t to, I think, 

good standards, but what we are concerned about with Europe and 

Turkey in some cases, is that some of those standards are not 

31

based on scientific evidence of the necessity of the standards, but 

are based on other criteria which are not in our judgment appropriate. So that is why most of these things are not necessarily tariff 

barriers, they are more regulatory barriers, standard setting barriers or other kinds of within-the-border impediments to trade. 

And we think, over a period of time, through negotiations and 

through contact between our regulators things can be resolved or 

at least the barriers can be reduced. For instance, with Turkey we 

have actually had some very good meetings between Turkish pharmaceutical regulators and experts in various parts of biotechnology 

with American companies, and a lot of exchange of experts and scientists. So we think there are opportunities for constructive dialogue on all these areas. We are not making as much progress as 

quickly as we would like, but we think there are opportunities. 

And countries want to do right by their people, they just in some 

cases have different philosophies, and we have got to continue to 

keep working on them to get it right as we see it. Thank you. 

Mr. BURTON. Mr. Sires? 

Mr. SIRES. Thank you, Mr. Chairman, for holding this meeting. 

Thank you for being here, Mr. Under Secretary. Over the years I 

read a lot about Russia and how the opportunities are in Russia, 

so a couple of years ago we took a trip and we met with, we went 

to Moscow. Chairman Berman put it together. And one of the 

things that struck me was a couple of things. 

First of all, when we were there, IKEA had spent 3 years in Russia. They have made a significant investment. They couldn’t open 

up the store because of the corruption. They were being shaken 

down by the local officials. So they had the store open for 3 years, 

they couldn’t even open it. So I am thinking in terms of investment 

by us there. 

Secondly, there was a poll by the BBC taken a couple of years 

ago where it said that two-thirds of the Russian people do not like 

or trust the Americans. I mean with things like this, how are we 

going to go over there and invest when all I hear is about corruption and about how they don’t like Americans? Would you just——

Mr. HORMATS. Well, let me just——

Mr. SIRES. This was done by the BBC. It wasn’t one of these 

pollings that we do here in America. 

Mr. HORMATS. I take your point. First of all, on the second half, 

the popularity of the United States has actually increased substantially over the last year or so. But the point of corruption, I think 

the Russian officials also understand this is a big issue. One of the 

things that the Russians have done recently is accede to the OECD 

Anti-Bribery Convention, which is a real step forward, which first 

of all, commits them to very high standards on anti-bribery. And 

second, also requires that their laws and their practices be reviewed by a committee that includes the United States and other 

countries. So I think they, themselves, understand the point that 

the BBC was making and that you are making, and that this is, 

if they want to progress as a modern economy they have to deal 

with some of these issues that you’ve mentioned and the BBC mentions. 

So these are certainly legitimate issues that we are discussing 

with them, and that I think they, themselves, need to get at. BeVerDate 0ct 09 2002 15:02 Jun 28, 2012 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 F:\WORK\EE\032712\73533 HFA PsN: SHIRL
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cause for the same reason that you mentioned, if they want more 

foreign investment they have to protect intellectual property, and 

they have to make sure that their standards, their legal standards 

and their protection against bribery and other things is dealt with 

in a way that other modern countries that want to attract investment are doing, otherwise they will lose out on the opportunity to 

get investment. 

Mr. SIRES. That was my next issue, regarding intellectual properties. They have no regards for intellectual properties. That is how 

I see it. And secondly, this election that Putin just won, I mean we 

were made the bad boys throughout the election. His whole campaign was based basically on bashing America. So I don’t understand why any American companies would want to go there knowing there is corruption. They don’t like us. They bashed us. I mean 

what is the incentive for us to invest in Russia when we have other 

places? 

Like I have said, I believe we should be investing more in South 

America. We are close. We basically ignore South America and 

Central America. I mean they are our closest neighbors. 

Mr. HORMATS. Well, first of all, I agree. We should be investing 

more and trading more with Latin America too, I agree with that. 

But with Russia, first of all, there were some remarks that Putin 

made about the United States, but also it is true that the Russians 

have worked with us on a new START agreement. They have been 

very helpful to us in allowing access across Russia to Afghanistan. 

They have agreed to make a number of changes to be able to be 

members of the WTO. They have done a number of other things 

where they have actually been quite cooperative with us. We have 

a bilateral presidential commission with 20 groups that are aimed 

at improving relations between us. And I think that that is a positive part of the relationship. 

The other part of it is that I think it is useful to bear in mind 

that providing Russia with permanent normal trade relations or 

lifting the restrictions on Jackson-Vanik, which are part of the 

same, is really not done for the benefit of Russia. It is done for the 

benefit of American workers and American companies. The business community of the United States, which share some concerns 

that you have mentioned, is overwhelmingly in favor of eliminating 

these Jackson-Vanik restrictions as they relate to Russia, because 

they see two things. 

One, they see it as a growth opportunity for them which means 

they will sell more, they will create more jobs in the United States 

and they will be able to produce more revenues which they will reinvest here. The second thing is that they also see Russia as changing. There is a lot going on in Russia that is aimed at improving 

the Russian economy and modernizing the Russian economy. They 

have been an economy very heavily dependent on oil and gas, and 

now they want to diversify. And they know if they want to diversify 

they have to get other companies in there in order to help them 

do it. And that means they have to protect intellectual property, 

they have to deal with issues of corruption, and they have to work 

within the WTO to help diversify. 

So I think that while there are certain good things that we have 

seen going on with Russia, and there are certain negative things 

33

as you have pointed out, it is important to put those, for the moment when we deal with the Jackson-Vanik issue, to the side. Not 

ignore them, but recognizing what Jackson-Vanik is, is really if it 

is sustained and if we don’t give them PNTR it is just hurting jobs 

in your district, your district, everyone’s district, and it reduces an 

opportunity for us to sell. But it also gives other countries, it gives 

the EU, it gives China, it gives every other member of the WTO 

an advantage over our companies in selling to Russia. 

Mr. SIRES. Thank you. My time is up. Thank you, Mr. Chairman. 

Mr. BURTON. Before we go to the next panel I just have one question. This relates to what Mr. Sires just asked you. Obviously, Congressman Meeks and I and others want to see us expand trade and 

have better relations with Russia, but there are a lot of people who 

invested in Russia’s Yukos oil, and a dozen Members of Congress, 

myself included, sent a letter. You probably got this letter. 

Mr. HORMATS. Yes, I have. 

Mr. BURTON. And Russia nationalized it, and as I understand it 

there is $12 billion in U.S. investment that is out the window, $12 

billion. And people that invested in it just got killed. Is Russia willing to make restitution? 

Mr. HORMATS. Well, I am glad you raised that because I did read 

the letter, and Secretary Clinton sent back, we have tried to respond to this. 

But let me make a few key points. One, there is an effort underway now to adjudicate some of the claims. Some countries have bilateral investment treaties with Russia and there is an adjudication process for their claims. We are watching this very carefully, 

because once we see how those adjudication procedures work out, 

then we can decide how and whether to move into a formal process 

of defending interests——

Mr. BURTON. You don’t need to give a real long answer to this. 

The bottom line is there is no indication whatsoever that they are 

going to make good that $12 billion that was invested by the U.S. 

And the thing that concerns me is that I want us to expand. Mr. 

Meeks and I are co-chairing the Russia-America business approach. 

But I don’t see how we can push forward in the Congress if they 

are going to nationalize companies and then not make good the investment that Americans have put into these companies. I mean 

let us say that Mr. Sires has a company that comes in, or people 

that invest from New Jersey who put in a couple billion dollars into 

a company and Russia decides, Putin decides that he wants to nationalize it because it is going to be beneficial for the government. 

There has got to be some kind of commitment by Russia that they 

are going to make good on those things. And as far as adjudicating 

is concerned, that is baloney. I mean if they owe the money they 

ought to pay the money. 

Mr. HORMATS. We have not given up on this issue. We have not 

decided at this point what course to take. 

Mr. BURTON. Let me just end by saying this. When you negotiate 

and talk to those people over there, they want to do business with 

us because we are a big market. I know they want to expand their 

trade with us. Please tell them that that is a thorn in the side of 

the Congress of the United States, and tell them the people who 

34

want to work with them are very upset that there is American investors that are getting taken to the cleaners by that. 

Mr. HORMATS. Mr. Chairman, I agree with you. And I think that 

it is imperative for us as the government, the government officials 

that work with the Russians and are working trying to expand opportunities for the American business community and American 

workers to point out to the Russians where we think their conduct 

is inconsistent with the broader rules of the international system. 

And these kinds of things do present a problem. Certainly they 

present a set of concerns to American businesses that are interested in investing or trading. But one of the reasons their joining 

the WTO is a positive thing is because it does suggest that they 

want to play by international rules. 

Mr. BURTON. I understand that. 

Mr. HORMATS. But we have got to make sure that they play by 

international rules across the board. So I have no problem at all 

with what you are saying. 

Mr. BURTON. Just carry the message to them, would you? I mean 

and tell Secretary Clinton to do that too. 

Mr. HORMATS. I will certainly, and your letter was very compelling and I do think there are a lot of important points to be made 

that you mentioned. 

Mr. BURTON. And the next letter will be accompanied by the ball 

bat. 

Mr. HORMATS. Okay. 

Mr. BURTON. Thank you very much. 

Mr. HORMATS. Thank you very much for having me, Mr. Chairman, members of the committee, and I just want to say it is a 

privilege testifying. Your message about our taking a very firm role 

where we think American interests are not being honored by the 

Russians, is very important. 

I would make the point that passing PNTR gives us an opportunity in Russia and will help American business and help American companies, but we also have to be very firm on a number of 

other issues and investment would be one of them. Intellectual 

property is another, the kind of things that you have mentioned. 

We have to have a dialogue. We agree with them on some things, 

we disagree with them on others. But where American economic interests are at stake, then the Secretary’s Statecraft initiative and 

agenda is going to mean that our ambassadors and our officials 

here are going to take very firm positions in favor of American 

workers and businesses and adherence to global rules. 

Mr. BURTON. Thank you. 

Mr. HORMATS. Thank you very much. 

Mr. BURTON. We appreciate you being here today. 

Our next panel, we have two distinguished guests. First we have 

Peter Rashish. He is the Vice President for Europe and Eurasia for 

the U.S. Chamber of Commerce, and maybe you can answer some 

of the questions that we raise as well. Prior to coming to the Chamber, he worked as a senior advisor for Europe at the McLarty Associates, and has consulted for organizations such as the World Bank, 

Atlantic Council and the German Marshall Fund. 

We are also joined by Daniel Hamilton, director of the Center for 

Transatlantic Relations at The Paul H. Nitze School of Advanced 

35

International Studies at Johns Hopkins University. He has also 

held a variety of senior positions in the U.S. Department of State, 

including Deputy Assistant Secretary for European Affairs and associate director for the policy planning staff for two Secretaries of 

State. 

And we welcome you both, and we are sorry that this ran a little 

longer than we thought but we do appreciate very much you being 

so patient with us. 

So we will start with you, Mr. Rashish. 

STATEMENT OF MR. PETER RASHISH, VICE PRESIDENT FOR 

EUROPE AND EURASIA, U.S. CHAMBER OF COMMERCE 

Mr. RASHISH. Thank you very much, Chairman Burton, and 

Ranking Member Meeks and members of the committee. I am 

pleased to have this chance to testify today on behalf of the U.S. 

Chamber of Commerce, on proposals to create American jobs 

through closer economic ties to Europe and Eurasia. 

With more than 12 million Americans unemployed, no priority 

facing our nation is more important than putting our people back 

to work. While both fiscal and monetary policy can contribute to 

creating jobs and the conditions for economic growth, let us not forget the vital role that trade policy can also play in overcoming our 

jobs crisis. After all, we should remember that outside our borders 

we find the markets represent 80 percent of the world’s purchasing 

power, 92 percent of its economic growth and 95 percent of its consumers. The resulting opportunities are immense. 

The question is where shall we focus? The Chamber believes that 

exactly 50 years after the passage of the Trade Expansion Act 

under the administration of President Kennedy, which paved the 

way for free trade between the U.S. and the European Union’s precursor, the Common Market, it is time again to make Europe a priority in U.S. trade policy. The U.S-EU economic relationship is the 

world’s largest and most robust. Together we generate half of the 

global GDP, and according to a CRS study more than $1.5 trillion 

in goods, services and income receipts flowed between the U.S. and 

the EU in 2010 alone. 

U.S. firms have direct investments of nearly $2 trillion in the 

EU, 20 times what they have invested in China. The Chamber welcomed the creation of the High-Level Working Group on Jobs and 

Growth which the leaders set up at the U.S.-EU summit in November, and we are pleased to see that the Working Group is considering ideas that closely reflect some proposals that the Chamber 

has made for transatlantic trade. 

The Chamber believes we should seek a transatlantic economic 

and trade pact by means of negotiations in five areas. Tariffs, services, investment, regulation and public procurement. First, on tariffs, one study has shown that eliminating all of them would increase trade by more than $120 billion, and GDP by $180 billion 

over 5 years. And while it is true that the tariffs between U.S. and 

Europe are low, because of the sheer volume of the trade between 

the two sides, it is a fact that fully one-third of all tariffs that the 

U.S. pays are paid to the EU. 

Second, on regulatory cooperation we think the U.S. and the EU 

should create a legal mechanism that would allow both of our reguVerDate 0ct 09 2002 15:02 Jun 28, 2012 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 F:\WORK\EE\032712\73533 HFA PsN: SHIRL
36

lators with appropriate legislative oversight to determine that the 

transatlantic counterpart on the other side has a compatible regulatory regime whose health and safety determinations they can 

generally accept. Doing so could help overcome the unnecessary 

regulatory barriers that we face, which are estimated to cost about 

$300 billion a year to our companies. 

Third, a high standard investment agreement could capitalize on the unique $3.4 trillion relationship we have with the U.S.-EU in 

investment. Right now the investment is facilitated by a series of 

bilateral treaties, but we now have the chance to have a first class 

EU-wide agreement with commitments to allow capital to move 

freely and to avoid discriminating against transatlantic investors in 

establishing and operating investments. 

Fourth, on services, despite the fact that the U.S. and the EU 

dominate the global services trade, unnecessary barriers still 

thwart our global competitiveness and are now fracturing the 

transatlantic capital market. We should place particular emphasis 

on creating a single digital services market across the Atlantic and 

on facilitating the free movement of workers through an approach 

to visa policy that responds to the needs of today’s transatlantic 

businesses. 

Finally, on procurement, we welcome the new U.S.-EU Government Procurement Forum and urge that it be leveraged to fully 

open markets at all levels of the government and public entities. 

Each of these steps would bring significant economic benefits, potentially dwarfing the value of all other U.S. bilateral free trade 

agreements that we have entered into, and with our shared values, 

similar legal systems and high standards of labor and environmental protection, an agreement with the EU should be easier than 

many people think. Also, a recent PEW poll found that Americans 

support trade with Europe by a very healthy 58 percent to 28 percent margin. 

Now the idea of launching an ambitious transatlantic trade and 

economic initiative is gaining momentum partly, I think, owing to 

a number of efforts the Chamber has made advocating for it both 

here and in Europe. 

Chancellor Merkel of Germany and British Prime Minister Cameron both called for a U.S.-EU trade initiative in their remarks at 

the World Economic Forum in January. President Sarkozy and 

Chancellor Merkel urged the EU heads of state in government that 

met at the end of January, to make transatlantic economic relations a key part of the EU’s reform agenda. And then a letter 

signed by 12 of the EU heads of government, including the U.K. 

Prime Minister and Italian Prime Minister Monti ahead of the 

most recent summit the EU held on March 1st, also signaled their 

support for a transatlantic trade deal. 

On the U.S. side, Secretary of State Clinton declared in early 

February that the new U.S.-EU High-Level Working Group on jobs 

and growth should be at the forefront of our efforts to put our people back to work and that America and Europe can and should be 

trading more with each other. 

European business groups have also endorsed it including our 

partners at BUSINESSEUROPE, the umbrella federation of European business, and just last week, the Chamber and 

37

BUSINESSEUROPE and ten other U.S. and European business 

federations issued a joint statement calling on President Obama 

and his European counterparts, when they next meet on the margins of the G8 summit at Camp David, to commit to launching ambitious transatlantic talks by the end of the year. 

With both the U.S. and European Union facing fiscal and macroeconomic challenges at home and new economic powers around the 

globe, the declaration states that a transatlantic trade investment 

and regulatory initiative can provide an unparalleled opportunity 

to instill confidence in our economies, enhance the global competitiveness of our firms and in so doing, reinforce our joint capacity 

to maintain and modernize the rules based international trading 

system which has benefited the global economy for over 60 years. 

Let me conclude by saying that at a time when jobs and growth 

are our top priorities, it is gratifying that a possible transatlantic 

economic trade pact is on the agenda, and the U.S. Chamber of 

Commerce looks forward to working with members of the committee on these issues as well as on issues of Russia and its membership in the WTO, which the Chamber strongly supports, as well 

as Turkey, where we believe that there are strong economic opportunities given the size of both of our economies. Thank you very 

much. 

[The prepared statement of Mr. Rashish follows:]

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Mr. BURTON. Thank you. 

Mr. Hamilton? 

STATEMENT OF DAN HAMILTON, PH.D., DIRECTOR, CENTER 

FOR TRANSATLANTIC RELATIONS, THE PAUL H. NITZE 

SCHOOL OF ADVANCED INTERNATIONAL STUDIES, THE 

JOHN HOPKINS UNIVERSITY 

Mr. HAMILTON. Thank you, Mr. Chairman. It is a pleasure to be 

here before the committee. I have submitted a testimony for the 

record, and I have also provided a one-page handout of some facts 

about the transatlantic economy you might have as an addendum 

there. It is based on a survey we just released this week called The 

Tranatlantic Economy 2012, so I do believe it is the latest data that 

you might have about the state of the relationship. 

I believe the opportunity for a U.S.-European transatlantic partnership for jobs and growth is actually quite considerable. It also 

gives us both, the U.S. and Europe, an opportunity to leverage 

growth markets elsewhere. And I believe that if one thinks about 

this initiative not only in a transatlantic context but how both 

economies can reposition themselves vis-a`-vis other growth markets that is what really opens up a lot of potential. 

We have had a lot of the data here for you so I won’t repeat it 

all, but simply to say we are still each other’s most important markets. We are each other’s most profitable markets for our companies as well, and the largest source of onshored jobs for each other 

in the world. A $5 trillion transatlantic economy, employing up to 

15 million workers on both sides of the Atlantic, truly dwarfing 

most other real relationships. And that investment is what drives 

the transatlantic economy. 

Whereas our relations with Asia and Europe’s relation with Asia 

are trade driven, our relations across the Atlantic are investment 

driven. It is a simple but really profound difference to understand. 

Much of the media equate just trade with commerce, but trade is 

a very misleading benchmark of commerce. You have to include the 

investment flows to get a full picture. And if you do that you see 

where the jobs are and where the growth can be. 

There is more European investment, for instance, in the State of 

Indiana than all of U.S. investment in China and Japan and India 

put together, just Indiana. And the same is true for Ohio and the 

same is true for New Jersey and New York. These investments 

really create jobs. Our estimate is, direct investment of European 

companies in the State of Indiana provide about 70,000 jobs just 

directly. If you include trade and you include the indirect effects of 

such trade and investment, I would estimate about 200,000 Indiana jobs are related to commerce with Europe. And if you take 

Ohio, we estimate 106,000 jobs directly from European FDI into 

Ohio, and if you do all of the numbers again and extrapolate, I estimate 300,000 Ohio jobs related to commerce with Europe. If you 

take New Jersey, 136,000 jobs directly supported by European FDI 

in New Jersey, and if you do the trade numbers and then the indirect, my estimate would be 350,000 jobs in New Jersey directly tied 

to commerce with Europe. These are where the jobs are, and if one 

can expand the opportunities in that way, it is really a direct impact on our jobs. 

49

So we are the most deeply integrated economies in the world. We 

have probably the freest economic relationship in the world, but 

our economic relationship is not free. There are still many barriers. 

So it seems to me that we have an opportunity to advance a threepoint agenda. One point is what we have focused on, which is to 

open up the transatlantic markets. I agree with Peter’s points and 

Secretary Hormat’s points about the basic issues. Zero tariff on 

goods. Services, major services, are the sleeping giant of the economy. Regulatory cooperation, because most barriers are not trade 

barriers, they are non-tariff barriers. A transatlantic investment 

pact, because investment drives the economy. And the Smart Visa 

element, which is quite critical. 

But the point I am trying to make is that if we only think about 

it in the narrow transatlantic context, we are missing actually the 

real potential of this initiative, which is to reposition the United 

States and Europe vis-a`-vis other growth markets. So it seems to 

be a second point of our agenda must not just be a standard, normal economic negotiation. It must be that the U.S. and EU say together that we believe in and will act on certain core principles of 

the international economic order that we believe in. 

These principles are under some attack today. There are many 

rising powers that have been chosen whether they agree to them 

or not, and we have issues with some rising powers that haven’t 

agreed to them. If the U.S. and the EU as the major force in the 

global economy can say we are acting together and reinforce our 

belief in these principles, that will send a very strong message to 

third countries. And these are not necessarily contentious principles across the Atlantic. 

My last point is that we should also use the transatlantic relationship to strengthen the multilateral system. Many critics would 

argue that a large transatlantic initiative would subvert the multilateral system because we are so big. I think one has to address 

that by saying, Mr. Meeks mentioned that before, take areas where 

we basically agree across the Atlantic, but because we can’t get everybody in the world to agree, we don’t agree, and let us just move 

forward with those. Let us open those markets. 

Trade faciliation is a good example. In the Doha Round we had 

basically agreed, but because everybody didn’t agree there is no 

agreement. But why don’t we just move forward, say others can 

join us but we are moving ahead. We could be pioneers in free markets and open trade just as we always have been. 

And so it seems to me, to conclude, that the real opportunity 

here is to open transatlantic markets, to act on the defined, the 

ground rules of international economic order, and to take the multilateral system into new areas where it hasn’t gone before. Thank 

you. 

[The prepared statement of Mr. Hamilton follows:]

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Mr. BURTON. Thank you. You didn’t mention, since Mr. Meeks 

wasn’t here you didn’t mention how many jobs would be impacted 

by trade. Yes, sure, go ahead real quick. I think he needs to know 

that. 

Mr. HAMILTON. We do a survey of the transatlantic economy by 

jobs trade investment for each U.S. State. My estimate at the moment for New York, European FDI, that is direct investment in the 

State of New York provides about 230,000 jobs. And if you take 

trade and you take the indirect effects of that with distributors, 

suppliers, all of that, my estimate would be 700,000 jobs in New 

York State are directly related to commerce with Europe. 

Mr. BURTON. Let me start the questioning by asking about the 

economic problems in Europe. I think you have made, both of you 

have made a very, very strong point that we are locked together 

with Europe whether we would like it or not. And if many of the 

countries in Europe go south, belly up, it is going to have a devastating impact not only on them but on us as well. 

And I would like to know from your perspective, since you are 

with the Chamber, and you have expertise, Dr. Hamilton, what is 

the situation right now? Prime Minister Merkel can’t keep all those 

countries afloat, and almost all those countries are in debt. Even 

France, I think they are about 100 percent of GDP as far as their 

debt is concerned. Greece is way, way up there. Italy is up there. 

Portugal, Spain, Ireland has still got problems although they are 

working pretty hard on that. 

So what is the answer and should we be doing what we are 

doing? I mean we are increasing our investment in Europe by leaps 

and bounds, not just the International Monetary Fund, but by currency swaps. So I know this is a tough question for you, but I 

would like to know where we are and what we are going to be able 

to do about that because it has a direct bearing on investment in 

Europe and trade. 

Mr. RASHISH. Thank you, Mr. Chairman, for that question. First, 

let me say I think you are right that we do find ourselves in this 

relationship of interconnectiveness with Europe, and so in many 

ways their fate is our fate. And so given the existing stock of investment that we have put into Europe up until now, you know, 

putting aside anything we might put in there in the future, we certainly want to make good on what we have as best we can. And 

I think so it is in our interest that the Europeans manage their 

debt crisis in the right way. And I think it is also at the same time, 

important that we think of initiatives like a trade and economic 

policy liberalization which can help make the most of what we have 

got in Europe up until now and would also make Europe a much 

more attractive place to invest in the future. 

And I think there are some reasons to be optimistic that Europe 

will continue to be a good trade and investment partner for the 

United States, even just looking at it through the lens of the current debt crisis. First, they have had this crisis and they have had 

to create a lot of institutions on the fly that have not done a bad 

job of coming up with some financial packages to not only assist 

indebted countries, but also to help ward off future crises. 

But perhaps even more important, I think, is what a number of 

the individual countries have done themselves. If you look at some 

63

of the policies undertaken in Ireland, okay, that is a small country, 

but if you look at Italy. Italy was talked about even less than 1 

year ago as a possible risk to the whole system. You are hearing 

a lot less about that now because Prime Minister Monti has really 

had the courage to engage in a lot of not just fiscal consolidation, 

but also he is trying to get to do some things which are going to 

lead to economic growth. And you see that is common in the bond 

markets now significantly. There are still challenges, but he is already feeling, and I think somewhat deservedly, so confident that 

he just recently gave a little talking-to to the Spanish Prime Minister saying, you know, why aren’t you guys keeping your deficit 

under control? 

So I think that if you combine some things admitted on the EU 

level with some of the things that are being done in some of the 

important member states, and I don’t mean to say that the Spanish 

Government, the new Spanish Government, I think, does have a 

strong reform package and I think has a good chance of success. 

I think that there is reason to be optimistic. I think the Greeks, 

they have recently had a renegotiation of the Greek debt. Certainly 

Greece is perhaps more challenging from a growth perspective than 

some of the other markets, but it is also a small country. 

So I think that given all we have got invested in Europe and 

given the fact that you also have a lot of very strongly performing 

countries in Europe and in the eurozone, certainly there are some 

that are in crisis, but if you look at Germany, The Netherlands, 

Austria, Sweden, Finland, there are a number of very strong economies that are good partners for us, and I think over time the 

eurozone will work out its problems. I think growth may not be as 

high as they want, but I think the more we trade with them the 

more the chance is that that growth will be at the level we want. 

Mr. BURTON. Mr. Hamilton, do you want to make a quick comment? Let me just say that I will submit, if you don’t mind, some 

questions for the record because I don’t want to take the time of 

my colleagues. Mr. Hamilton? 

Mr. HAMILTON. Thank you so much. Yes, I believe that while 

Greece is still in trouble and basically has defaulted, they have 

done what they can to construct a firewall so that whatever happens to Greece should not ripple back through the rest of the other 

European economies. And I think the efforts they have put together 

in terms of a very, very big facility to make sure these other economies don’t go anywhere, coupled with reforms that Peter mentioned, and the Chancellor’s decision that they really do have to 

support this no matter what it takes, will move forward. 

I think the point for the United States though is that because of 

this deep integration I have talked about, we have never had a 

greater stake in each other’s economic success than we do today because of these transmission belts that I mentioned. One consequence right now of the problems that Europe has is that this 

flow of FDI, of investment from Europe into the United States, to 

American States and cities, has slowed down. So that of course accentuates our own problems, because this source of onshore jobs is 

not as strong as it has been. That has some problems for us. 

I think in Europe, the problem is that the competitive ability of 

many of these countries is starting to break apart. Some countries 

64

in Europe are world-class innovators and competitors, and others 

are having significant challenges, and that is going to be their challenge. 

But for American companies, a single pan-continental market of 

500 million people is a big, big boon for American companies who 

know how to work in the big continental market. And you see that 

American companies are not withdrawing from Europe, in fact, 

they are investing more. Even in Ireland, which you would think 

given its troubles people would have left, they have not. American 

companies have sort of doubled down on Ireland and invested even 

more, and is a primary source of the Irish economy these days. 

And even 2 percent growth, even small growth in a market of 

500 million people could be much more important to American companies than 10 percent growth in a very tiny market. Just 2 percent growth in Europe would create a market every year the size 

of the country of Argentina. It is not 10 percent growth in Argentina, it is Argentina. And that is what we are talking about. So 

even small growth in a very big market could be more important 

to American companies than big growth in a very tiny market. 

Mr. BURTON. Thank you very much. Mr. Meeks? 

Mr. MEEKS. Thank you, Mr. Chairman. Let me ask just a couple 

of general questions which I am concerned about. I have voted for 

just about every trade agreement that we have come up with, but 

it seems as though from 1999 to 2010, positive sentiments in regards to free trade agreements, and this is according to a Wall 

Street Journal/NBC News survey, declined from 39 percent to 17 

percent, while negative sentiments grew from 30 percent to 53 percent of those respondents. And I have difficulty sometimes, but I 

am just wondering by asking you, how do you think we should explain this shift in Americans and their thought with reference to 

international trade agreements? 

Mr. RASHISH. Thank you, Congressman. I think that when we 

look at trade, Europe is a great asset in that sense. I think trade 

with Europe is a very good place let us say to start if you want 

to try to get those numbers up a little bit. Europe is a large regional economy like ours, a population even bigger than ours, of 

GDP roughly the same size of ours, has a very similar standard of 

living on average. It has very similar approaches to regulation and 

to policy making. And so I think that if we want to try to convince 

Americans about the benefits of trade that Europe is an attractive 

place to start. It doesn’t present the kind of challenges that a number of other of our free trade agreements have posed because of the 

differing levels of development, for example, between us and our 

trading partners. 

Now it is also true though that because Europe is large and advanced and is mature also politically in many senses, it is going to 

be much more even handed kind of negotiation. We are not going 

to be able to tell the Europeans what to do and they aren’t going 

to be able to tell us what to do. But I do think that it is a good 

place to start if we want to have a campaign to say why trade can 

be beneficial to Americans and can create jobs. 

Mr. HAMILTON. I have been struck by the submissions that have 

been presented to the government in the consultation process for 

the High-Level Working Group on this initiative. If you look at it, 

65

across the board there is support for this, across what have been 

in other trade negotiations maybe some problem. The AFL–CIO, for 

instance, has submitted a very positive statement about the potential of a transatlantic agreement, as has the Chamber. So from 

business across the board, different political actors, you see some 

agreement here. 

I think the other thing to think about is that, you know, many 

of our other trade agreements are trying to essentially bring our 

relations with other countries up to the standard we already have 

with Europe. We don’t have really many trade barriers with Europe. And so if we limit this initiative to a standard free trade 

agreement, with all the caveats I mentioned that trade really isn’t 

the problem, we are not really moving things very much forward. 

We should think of a 21st century type of new initiative that takes 

the entire system forward. And because we are half the global 

economy that is what we can do. And that is rooted in areas where 

it is distinctively transatlantic, like services, where we really have 

an opportunity here to change the whole playing field for the globe 

if we can move ahead with the Europeans. 

Mr. MEEKS. I agree. But I tell you what my further concern is. 

For example, are we trailing the European nations? Even with 

some of the lesser developed nations, Europe has now done some 

36 free trade agreements in comparison to our what, 14? So it 

seems as though whether it is less developed countries, et cetera, 

it seems as though it is a difference of opinion over there. They are 

moving forward on free trade and we are half stepping in one 

sense. What is your thoughts on that? 

Mr. RASHISH. Thank you, Congressman. It is very true that I 

think the EU has what you could call the more activist trade agenda than we do right now. First, you have to remember that trade 

is, it has grown, but trade is a smaller percentage of our economy 

than it is in the EU where the Europeans are used to trading with 

each other for hundreds of years. So I think in most European 

countries at least, particularly in the smaller ones which are more 

exposed, but in most European, the idea of trade is something very 

natural. So they have that starting point that I think we don’t have 

as a big continental country with only two neighbors. 

And the other thing I think to remember is that trade is a very 

powerful policy tool, almost foreign policy tool for the European 

Union. Trade is where the EU really has the most confidence of all 

areas to pursue policies, you know, where the European Commission has the confidence to pursue policies on behalf of all of the 27 

member states. And so I think a lot of energy is put into trade policy, whereas the United States, we are a mature nation with full 

institutions, full Federal institutions and we have a lot of ways to 

pursue our interests, economic or foreign. 

But in Europe, a lot of that is put into trade policy and I think 

that partly also accounts for why they have many more FTAs they 

are negotiating compared to the United States. 

Mr. HAMILTON. One example of that is the EU and Canada are 

close to concluding a comprehensive agreement. It is not getting 

much attention in the United States, but when it happens some 

people are going to start to look. And if you look at some of the 

provisions of that agreement, it goes much further than normal 

66

free trade agreements because it is with another major industrialized country. And that is going to happen soon. And it reinforces 

your point, the EU is going around doing all of these sorts of trade 

deals. They are probably going to do some more with Japan also. 

We have done some, and much of it overlaps actually when you 

come down to it. 

So one of the proposals I would make for a transatlantic partnership is that we align and codify all of those bilateral free trade 

agreements we have with all those other countries and simply put 

them together. That itself would open up huge amounts of new opportunities with us being the drivers again, and that is my point. 

We can take the initiative here, we just need some political will on 

both sides to do that. 

Mr. MEEKS. Thank you. 

Mr. BURTON. Ms. Schmidt? 

Ms. SCHMIDT. Thank you. Mr. Rashish, in your testimony you 

highlighted the fact that small and medium size businesses are 

often overlooked in trade debates despite the fact that such businesses are increasinly engaged in the export market. 

Can you discuss the impact that elimination of tariffs and greater regulatory cooperation will have on small businesses? I know we 

look at the large conglomerates, but what about the small businesses? 

Mr. RASHISH. Thank you, Congresswoman. Well, I would say that 

in general, smaller companies have more of a challenging time 

reaching foreign markets than the larger companies and that particularly, smaller companies have a harder time dealing with regulatory barriers. It is very expensive for a small company to have 

to comply with two or more series of regulatory regimes to get their 

products certified and tested and certified. 

So I think the more we can make progress particularly on the 

regulatory side to be able to deem the U.S. and European approaches to regulation as equivalent so that small companies would 

only have to get their products tested and approved in one market 

that would particularly be a boon to smaller companies. 

Ms. SCHMIDT. Thank you. Mr. Hamilton, the U.S. as we know is 

pursuing trade agreements at a slow or snail’s pace, and my concern is that it can cost us market share in the global community. 

I understand that the transatlantic relationship in trade and investment eclipses any other relationship, but the loss of market 

share can be such a slow leak that it only is noticed over time. 

You just mentioned the issue with the EU and Canada. Can you 

elaborate a little bit more on that and as well as our lack of moving 

forward, not maybe as quickly as the EU is with trade, but a little 

more quicker paced than we are right now? 

Mr. HAMILTON. Yes. The EU-Canada comprehensive agreement 

will start to address a number of the issues that we have been 

mentioning. It goes into investment, for instance, which is a significant element also in the Canadian-EU relationship, and it starts to 

establish certain principles by which they will act. And I think it 

is interesting that they might be ahead of the U.S.-EU relationship 

in some of these areas even though our economic relationship is so 

much bigger. And it has some implications probably for NAFTA 

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ada is a key part of NAFTA. The EU has already a economic agreement with Mexico, they just don’t have one with us. 

And if you go back to the point that was being made, all around 

the world both the U.S. and the EU have been trying all of these 

bilateral agreements or regional types of efforts, but we haven’t 

done it with each other. This is the big hole in the trade picture. 

But it is also the big hole in these 21st century issues where in 

services, in investment, in regulatory cooperation, we have the opportunity to set the standards in ways that could be the core of 

much higher and better global standards across the board and 

could open up third markets. 

We are the biggest service economies in the world. We are each 

other’s most important services markets, and most people in the 

U.S. and Europe work in the services economy. So if we could open 

up the next 20 percent of that market, it would also have a significant impact not only for us but on other protected markets. Brazil, 

for instance, is a big services economy but it is very protected. And 

if we are going to go forward and open up that will exert a bit of 

pressure on third countries. 

Ms. SCHMIDT. And my last question is regarding Russia. Trade 

with Russia has been mentioned. There is some concern about nationalization with foreign investment. How concerned is the Chamber and its members with those issues? 

Mr. RASHISH. Thank you. I think the Chamber is concerned 

about those developments, but I think that we do believe that 

granting permanent normal trade relations to Russia and allowing 

our companies to fully benefit from Russia’s membership in the 

World Trade Organization is one way to help with those and other 

challenges of operating in the Russian market. WTO membership 

including the participation by our companies in the Russian economy will create more competition in the Russian economy. It will 

bring new ways of doing business to the Russian economy. It creates new interdependence between the Russian economy and the 

U.S. and other economies around the globe. And I think the more 

that that happens the more we can be optimistic that these kinds 

of issues that you mentioned will present a decreasing challenge in 

the years to come. 

Ms. SCHMIDT. Thank you. 

Mr. BURTON. Mr. Sires? 

Mr. SIRES. Thank you, Mr. Chairman. As I look at this whole picture I have to somehow partition the EU and then Russia and then 

Turkey, because I guess when you talk about the EU the risk is 

less when you make a deal. We have a lot more things in common 

obviously. But when we talk about Russia and Turkey, I mean the 

risk/reward there, the risk is just much, much higher to cut some 

of these deals. 

So my concern is, we talk about Turkey and we keep pushing 

Russia and everything else, but to me the risk is just an awful lot 

for us when we can actually do a deal with people that we have 

certainly, I don’t want to say more in common, but just a more 

common way of thinking. To me, Russia joining the WTO, I just 

wonder how much they are going to abide by the changes that they 

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cally. There is very little intelluctual properties concern and so 

forth. 

So I guess what I am saying is, do we partition it? I mean there 

seems to be a whole menu here, and even within the European 

Union there is a whole menu. Italy certainly can withstand a lot 

more changes than some of these other countries because I think 

they have more liquidity, is that the right word I am using, than 

Portugal or Spain. So I mean how do you pursue when you have 

such a menu, a trade agreement? 

Mr. RASHISH. Congressman, thank you for the question. I mean 

I do share your inclination to want to have an agreement between 

the United States and the EU because I think it is something we 

could actually do pretty quickly for the reasons you state, because 

we are so similar. And I think even though we are already very integrated as to economies, because the relationship is so big there 

are definitely still huge gains we can tap and should tap. 

At the same time, let me talk about Turkey, because I think we 

can and should do both. Turkey is an incredibly important country 

from the strategic point of view for the United States, and I think 

it is more broadly given its location. It has also been experiencing 

very dynamic growth and a very active international economic diplomacy. It is reaching out into new markets. 

But given the importance of our bilateral political relationship 

and given the size of our two economies, the trade investment relationship between the United States and Turkey is seriously underdeveloped. And I think that that means there are important opportunities for our firms. I think it means that if we were to increase 

our trading investment relationship with Turkey that we would 

even have a more robust relationship with them and they with us. 

And I think that given where the kinds of both economic and political challenges are and are likely to be, a strong commercial relationship with Turkey could really yield many benefits for us. 

Now it is true that there a number of challenges that we face. 

The U.S. faces a number of policy and regulatory challenges in 

terms of market access, and on the Turkish side they face a number of more market based challenges because it is not a good match 

up between their companies and the U.S. market. But the U.S. 

Chamber has recently issued a report which I am happy to send 

you, to the member and you and your colleagues separately, which 

takes stock of where this relationship is and points to a number of 

both policy and business community actions we can take to increase the size of this relationship. 

Turkey wants to be one of the ten largest economies by the year 

2023, which is the 100th anniversary of their founding as a republic. It is challenging, but given that they have tripled their economy 

over the last 10 years it is not impossible. To get there they are 

going to need to make a lot of policy and regulatory reform,s and 

so I think that gives us an opportunity to say to them, we want 

to be part of that but we also want to make sure that our companies have the access we need to help you achieve what is your goal. 

Mr. HAMILTON. I agree with that on Turkey, and so let me leave 

that. But the point of your question leads me to sort of make this 

statement. I think the international economic order as we have 

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cause a lot of rising powers don’t necessarily agree with some of 

the basic principles that we have put in place. 

And it seems to me that over time, the West if you will, U.S. and 

Europe, we have become hesitant, a bit divided and really less assertive about the need for those types of principles. And we tend 

to go to these countries, each of us, through one door or the other 

trying to get them to buy into our or their principles, U.S. or European. In the end we say, take this standard, take that standard. 

We end up with the Chinese standard that way. And I think we 

need to be aware of that. That is why I say we are competitors, but 

if we could agree across the Atlantic that there are still basic principles of the international economic order that we will both act on 

also vis-a`-vis third countries, I think it is a much more assertive 

statement that will sort of deal with this. It is like termites in the 

woodwork, you know, it is like an erosion constantly whether it is 

corruption or some of these other issues. And so having a robust 

new transatlantic partnership, I think, helps us deal with third 

country problems in Russia or in China. 

When the U.S. and the EU do get together, for instance, we had 

on consumer safety, many problems a few years ago, if you remember. The U.S. and the EU finally decided, let’s go to Beijing together about consumer safety issues. And actually they did produce 

more progress with the Chinese on that issue than we have on a 

lot of other issues. But if we don’t sort of stand up for that as I 

say we will have the Chinese standard. We will have the lowest 

common denominator type of world, and I don’t think that is in either the U.S. or the European interest. 

Mr. SIRES. I haven’t raised the issue of security yet. Because I 

had people from the EU come see because I represent the Port of 

Newark and the Port of Elizabeth, which entries, you know, to a 

great deal of commerce. And we are talking about who should secure the containers that are coming in from Europe, whether it 

should be in Europe or it should be us. And I think that is something that has to be addressed eventually if we are going to have 

any kind of a deal. 

Right now I visit the ports, and I think we do a fairly good job 

of trying to see what is in these containers, and I often ask this 

question to the port people who handle it. But I think eventually 

that is going to be a big issue, whether they do it at port of departure or we do it at port of entry. And that will cost us money, but 

I think it is going to have to be done with just about every country 

that we deal with, especially if it is not the European Union but 

some of these other countries where there are still active people 

who want to do harm to our country. So I was just wondering how 

you feel about that. 

Mr. RASHISH. Well, Congressman, thank you. The U.S. and the 

EU have recently arrived at an agreement on certain aspects of 

this issue to recognize the way each does look at cargo coming into 

our ports. And I think that is a great example of the kind of 

progress on an important regulatory issue, and I think we can certainly make further progress within the context of a trade negotiation and on this issue and others. But I fully agree that that should 

remain at the top of the agenda of our bilateral cooperation. 

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Mr. HAMILTON. There is disagreement on secure trade these 

days. I think the premise of your question is, on what basis will 

we come to these agreements? Will we come together again, lowest 

common denominator or high standards? If we can’t agree on some 

basic principles governing secure trade with those countries most 

like ourselves, how would we possibly think we are going to have 

arrangements with many, many others who don’t share some of the 

basic premises? 

So an agreement across the Atlantic in these areas can serve as 

the core for a much broader global effort. If we don’t get that we 

get nothing. And so I think that is maybe one way to think about 

it. I would just take this to say it is not only about secure trade. 

It is really about all the flows that connect us, it is goods, it is services, it is ideas, it is people, again, and we need to have more resilient free societies today. 

Cyber tends to be kind of the issue everyone focuses on but, you 

know, if the electrical industry is attacked it doesn’t matter how 

many cyber programs you have in place because they are all related. And again, if we and the Europeans can’t come to some basic 

terms about how we will build resilient societies together to keep 

everything flowing so free societies work but that people feel safe, 

I don’t believe we are going to have any global agreements, because 

they have to be built on certain principles. And we should establish 

those principles with our closest partners, most of whom are our 

core allies as well. 

So I would begin with the transatlantic, what I would call the 

resilience initiative as well, it is a little different now than what 

we have been talking about, but I think it is equally important because it actually is what people worry about. All of those flows that 

keep our societies moving are susceptible to disruption, either manmade or from Mother Nature. And if there was a massive disaster 

in Europe or here that taxed our societies, we should say to each 

other, let’s come to each other’s assistance and let’s put in place the 

modalities to do that. We haven’t thought that in the United States 

that we might have to need that help, but we had Hurricane 

Katrina. We have had other kinds of disasters where we have 

needed that help, also in New York. 

Mr. SIRES. Sounds to me like John Lennon in his song. Thank 

you very much. 

Mr. BURTON. He has ports in his district. I think you might have 

gathered that. 

Ms. Schmidt, did you have any other questions? 

Ms. SCHMIDT. Yes, I have a follow-up for you gentlemen. One of 

the concerns that has been raised are some of the barriers that our 

foreign allies have with our own products, basically Turkey and the 

whole pharmaceutical industry. And my question is, are the barriers there because of the fear of our products or because of a fear 

of the economic impact to Turkey? 

And I look at the agroscience that we do in the United States 

and the reluctance of the EU for our products, not built out of fear 

of the kind of agriculture that we are growing here, the products 

that we are growing here, but basically that if they allow our products over there it will create an economic, they will lose market 

share because we grow more quantity at a cheaper price over here. 

71

So looking at that model in Europe’s reluctance with our agricultural products, is that the same kind of issue with Turkey? Is it 

a fear that they are going to lose their market share of their own 

drugs, or is it truly a fear of our product quality? 

Mr. RASHISH. Thank you. I think when you look at the issues 

that the U.S. pharmaceutical and other foreign research based 

pharmaceutical sectors face in Turkey, there are two sorts of challenges they find. One is a challenge that is not particular to Turkey, but what I think the pharmaceutical companies in the U.S. 

would say is particularly challenging, and that is Turkey’s pricing 

policies there which they are the government pricing policy, how 

much they will pay and reimburse for medicines which makes it 

challenging for them to operate there. But again it is not——

Ms. SCHMIDT. I take it then, more than what the actual product 

is. 

Mr. RASHISH. Yes, that they are concerned about. Yes, about the 

level. And again, it is not an issue that you only have in Turkey. 

You have this issue in a number of EU countries where these policies are still national and not at an EU level. 

You also have an issue in Turkey about the way the Turkish 

Government wants to certify the safety of pharmaceutical products. 

That I do not think is really because of a concern about the quality 

of our products, but I think our companies’ products are getting 

caught up in that net. So it may be inadvertent but it is still a very 

strong concern. 

Mr. BURTON. And now for our last questioner of the day, my good 

buddy. 

Mr. MEEKS. My quick question is this because I am, along with 

Mr. Burton have been a strong advocate for removing JacksonVanik, and we have been talking regularly about Russia. But what 

about Moldova? They have been a part of the WTO for awhile, do 

you see any reason why we shouldn’t lift, and grant PNTR standards to Moldova? 

Mr. RASHISH. Congressman, I am sorry to have to say this in 

what is your last question, but I would like to check with colleagues and get back to you on that if I could. 

Mr. MEEKS. Okay. 

Mr. HAMILTON. If I could just briefly, I believe there have been 

some recent changes in Moldova which are encouraging in terms of 

the political process there. And it is probably in the United States 

interest to look hard at those changes and try to support them, because Moldova, the poorest country in Europe, is also part of what 

I would call a festering conflict. People call them frozen conflicts in 

Europe, I call them festering, because they are not frozen. They are 

bringing these people down because you can’t resolve them. The 

Transnistria conflict, there is the conflicts with Georgia, South 

Ossetia and so on, Nagorno-Karabakh. These are still turbulent 

areas of Europe and Moldova is right there. 

So anything that can be done to either commercially or otherwise 

to try to alleviate some of that problem would be in U.S. interest, 

European interest, far beyond just trade. And so I think because 

of these political developments recently with the President and so 

on, one should take a closer look at that and see how one could encourage this development. 

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Mr. BURTON. Well, as I thank you very much for your patience 

and for being here today, I would like to make just one comment 

about Jackson-Vanik. There are some people who are leaders in the 

Congress who still don’t want to remove Jackson-Vanik from Russia. And if you have any ideas on what we could replace that with 

that would not be as onerous that you could recommend to us, we 

will present that to some of those folks so that maybe we can move 

in the direction of removing Jackson-Vanik and yet still deal with 

the problem. 

With that thank you very much. I really appreciate you being 

here today. You guys did a great job. Thanks a lot. 

[Whereupon, at 4:18 p.m. the subcommittee was adjourned.] 

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MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE DAN BURTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA, AND CHAIRMAN, SUBCOMMITTEE ON EUROPE AND EURASIA


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[NOTE: ‘‘A New Era for Transatlantic Trade Leadership,’’ a Report from the Transatlantic Task Force on Trade and Investment dated February 2012, and a ‘‘A Bull 

in Bear’s Clothing: Russia, WTO and Jackson-Vanik,’’ a Task Force Paper dated 

January 2012 by the Bipartisan Policy Center, are not reprinted here but are available in committee records.]

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