U.S. GOVERNMENT PRINTING OFFICE

63–070 CC WASHINGTON : 2000

TRANSATLANTIC TRADE AGENDA: CONFLICT OR

COOPERATION?

HEARING

BEFORE THE

SUBCOMMITTEE ON

INTERNATIONAL ECONOMIC POLICY AND TRADE

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

SEPTEMBER 29, 1999

Serial No. 106–78

Printed for the use of the Committee on International Relations

(

(II)

COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

STEVE CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JOHN M. MCHUGH, New York

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

PAUL E. GILLMOR, Ohio

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

THOMAS G. TANCREDO, Colorado

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

ROBERT WEXLER, Florida

STEVEN R. ROTHMAN, New Jersey

JIM DAVIS, Florida

EARL POMEROY, North Dakota

WILLIAM D. DELAHUNT, Massachusetts

GREGORY W. MEEKS, New York

BARBARA LEE, California

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

RICHARD J. GARON, Chief of Staff

KATHLEEN BERTELSEN MOAZED, Democratic Chief of Staff

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE

ILEANA ROS-LEHTINEN, Florida, Chairman

DONALD A. MANZULLO, Illinois

STEVEN J. CHABOT, Ohio

KEVIN BRADY, Texas

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

DOUG BEREUTER, Nebraska

DANA ROHRABACHER, California

TOM CAMPBELL, California

RICHARD BURR, North Carolina

ROBERT MENENDEZ, New Jersey

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

STEVEN R. ROTHMAN, New Jersey

WILLIAM D. DELAHUNT, Massachusetts

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

MAURICIO TAMARGO, Subcommittee Staff Director

JODI CHRISTIANSEN, Democratic Professional Staff Member

YLEEM POBLETE, Professional Staff Member

CAMILA RUIZ, Staff Associate

(III)

C O N T E N T S

WITNESSES

Page

Honorable Charles Ludolph, Deputy Assistant Secretary for Europe,

International Trade Administration, U.S. Department of Commerce ...... 4

Honorable E. Bryan Samuel, Deputy Assistant Secretary for Trade Policy,

Bureau of Economic and Business Affairs, U.S. Department of State ..... 7

Willard M. Berry, President, European-American Business Council ........... 24

Rick Reinert, President, REHA Enterprises, Inc. .......................................... 25

John Roberts Smaller, President, National Association for the Specialty

Food Trade ..................................................................................................... 26

APPENDIX

Prepared statement:

Chairwoman Ros-Lehtinen .............................................................................. 34

Charles M. Ludolph .......................................................................................... 36

Bryan Samuel ................................................................................................... 42

Willard M. Berry .............................................................................................. 48

rick Reinart ....................................................................................................... 55

John P. Roberts ................................................................................................ 57

(1)

TRANSATLANTIC TRADE AGENDA: CONFLICT

OR COOPERATION?

WEDNESDAY, SEPTEMBER 29, 1999

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY

AND TRADE, COMMITTEE ON INTERNATIONAL RELATIONS, Washington, DC.

The Subcommittee met, pursuant to call, at 11:05 a.m., in room

2172, Rayburn House Office Building, Hon. Ileana Ros-Lehtinen

[Chairwoman of the Subcommittee] presiding.

Ms. ROS-LEHTINEN. The Subcommittee will come to order.

Good morning. The State legislators of my home State of Florida

are up here for a Federal-State summit. So I will be buzzing in and

out and trying to be two places at one time and doing a fairly bad

job of it. So you will excuse me if I am not here; and we have got

a vote, so maybe we will do our opening statements.

Thank you, Mr. Menendez.

Given the recent, continuing disputes between the United States

and the European Union, it would appear that transatlantic relations are marred by conflict. Just a few days ago, the House considered a resolution on the EU’s protectionist stance against the U.S.

jet engine market and ‘‘hushkits’’ which are in compliance with the

ICAO Stage III guidelines on noise level standards.

However, most would agree that focusing solely on these disputes

would be oversimplifying the relationship.

The United States and its European partners have long been

leaders in the global economy and have generally developed and

maintained a strong common interest in working together to

strengthen the world trading system. This has become more evident in the aftermath of the Cold War with U.S. and EU policymakers arguing that the expansion of transatlantic trade relations

is the vehicle for a general strengthening of ties and reinvigorating

political and security relationships in the form of The New Transatlantic Agenda—a goal we reiterated in the Bonn Declaration

adopted at the summit in June of this year.

This view is presented alongside data which shows that economic

relations between the United States and Europe are supported by

significant trade and investment links.

Taking goods and services together, the EU and the United

States are each other’s largest single trading partner. Last year,

trade in goods between the member states of the EU and the U.S.

increased almost 14 percent for exports and 10 percent for imports

compared to 1998. Taking only bilateral EU–U.S. trade into acVerDate 11-SEP-98 11:34 May 17, 2000 Jkt 000000 PO 00000 Frm 00004 Fmt 6633 Sfmt 6633 63070.TXT HINTREL1 PsN: HINTREL1
2

count, it represents more than 7 percent of the total world trade,

as compared to 4 percent between the United States and Japan.

By the same token, the two sides remain each other’s most important source and destination for foreign direct investment, with

a reported combined stock of over $800 billion U.S. dollars. The

United States supplied 63 percent of all foreign investment in the

EU countries and secured 58 percent of the EU’s total outward investment in 1998.

This reality, combined with the stated need to strengthen an expand overall relations between the United States and its European

partners, led to the signing of The New Transatlantic Agenda in

1995. The agenda contains a wide range of commitments in foreign

policy, security, and law enforcement. Yet a substantial portion of

it is dedicated to economic and trade issues, drawing from recommendations offered by the business sector on both sides through

the Transatlantic Business Dialogue.

For this reason, this hearing will not only address specific unresolved issues in transatlantic trade relations, but it will focus on

the potential impact of European actions and U.S. counteraction on

the global arena—in particular on the upcoming WTO negotiations

in Seattle, and I will ask, with unanimous consent, that my full

statement be entered into the record, and I would like to now introduce and recognize the Ranking Member, Mr. Robert Menendez of

New Jersey.

[The prepared statement of Ms. Ros-Lehtinen follows:]

Mr. MENENDEZ. Thank you, Madam Chairlady. I appreciate this

hearing and the opportunity on one of the issues that I am very

much concerned about, which is the consequences to small businesses as a result of some of our efforts to try to bring the European Union into compliance.

Clearly, the European Union is the United States’ most important ally, one of our most important trading partners. According to

the Department of Commerce, the United States and the EU have

the largest two-way trade and investment relationship in the

world. Like our political relationship with the EU, our economic relationship is extremely important to the United States, particularly

as the world economy becomes an increasingly global one.

For the most part, we work with the EU through the WTO and

other mechanisms, like the Transatlantic Business Dialogue, to

break down trade barriers and enhance market access. The conclusion of agreements, such as the December 1998 Mutual Recognition

Agreement, provide transatlantic benefits by eliminating the need

for duplicative product inspection, testing or certification. We need

to look at other ways to expedite the conclusion of further mutual

recognition and regulatory reform agreements.

However, even allies and partners have disputes. Trade disputes

involving the EU’s ban on the importation of certain bananas and

hormone-treated beef, as well as the EU’s promulgation of a regulation preventing ‘‘hushkitted’’ aircraft from flying in the EU, have

made front page news. These high-profile trade disputes unnecessarily damage our normally good relationship with the EU, and I

am anxious to hear from the Administration about their negotiations with the European Commission to create an early warning

3

system to head off potential trade disputes and hopefully their unintended domestic consequences.

But I would like to take a moment to address the unintended domestic consequences of these trade disputes. While I share the Administration’s goals with regard to bringing the EU into compliance

on the banana and hormone-treated beef cases, I am, however,

deeply concerned about the impact of the retaliatory tariffs on

American businesses, particularly small American businesses. By

requiring all importers to post bonds equivalent to 100 percent tariffs on the value of the imported products on the retaliation list, we

jeopardize the livelihood of small importers throughout the country

who may import only one or two products, and I have several of

these in my own congressional district. I know they stretch

throughout the country. These are relatively small companies that,

in fact, only import maybe one or two products and when, in fact,

EU strikes on one of those two products, you leave them virtually

decimated in the process.

These small businesses are unable to withstand long-term economic losses as a result of the tariffs imposed on the products they

import. It is extremely difficult for a small business, for example,

that imports liver pate or bed linens, to understand why they are

being punished for the EU’s restriction on the importation of bananas and beef.

That is why I introduced legislation, H.R. 2106, the Small Business Trade Protection Act, which would exempt small businesses

from the retaliatory tariffs. The bill would limit companies to importing 125 percent of what they imported in the previous year, so

that small companies do not become a conduit for circumventing

the retaliatory measures.

It seems that economic retaliation is becoming increasingly common, but that we are not taking into account the domestic impact

of these actions. I hope to hear from our Administration witnesses

what steps the Administration is taking to help these small, impacted businesses and to prevent further harmful trade disputes.

Thank you, Madam Chairlady.

Ms. ROS-LEHTINEN. Thank you very much, Mr. Menendez.

Mr. Cooksey for an opening statement.

Mr. COOKSEY. I am anxious to hear the statements from the people from the State Department. You know, I am concerned about

the problems that the people in the EU have in overcoming their

cultural tendency to stay with protectionism, which my colleagues

have just referred to, and as we are in this period of globalization

and e-commerce, that is increasing at the speed of light. I would

hope that the State Department holds the line and does not let our

people and our businesses suffer just because the Europeans cannot overcome their tendency to keep their roots implanted in the

past, whether it be a controlled market or socialistic tendencies or

protectionism, which certain countries are more guilty of.

So we are expecting you to hold the line and help bring Europe

into the 21st century.

Thank you, Madam Chairman.

Ms. ROS-LEHTINEN. Thank you so much, Mr. Cooksey.

I would like to just briefly introduce both witnesses and then we

will recess for two votes. Our first witness is the Honorable Charles

4

Ludolph, who is the Deputy Assistant Secretary for Europe, Market

Access and Compliance, at the International Trade Administration.

He is responsible for developing the Commerce Department’s market access, country desk trade and investment activities with Europe, counseling more than 75,000 U.S. exporters a year and responsible for assuring that U.S. businesses are aware of the conditions in all European national markets.

Mr. Ludolph is deeply involved in the Transatlantic Business

Dialogue in implementation of the U.S.–EU mutual recognition

agreements. Since 1988, he chairs the U.S. Government Committee

on Standards Testing and Certification of the European Union and

also chairs the U.S. Government Trade Promotion Committee, and

we thank Mr. Ludolph for being with us this morning.

He will be followed by the Honorable E. Bryan Samuel, Deputy

Assistant Secretary of State for Trade Policy for the Bureau of Economic and Business Affairs. Prior to joining the Bureau, Mr. Samuel served as Deputy Assistant Secretary for Inter-American Affairs as Director of the Department of State’s office of European

Union, OECD and regional affairs and was the U.S. Negotiator of

The New Transatlantic Agenda. Prior to that, Mr. Samuel was

Deputy Assistant U.S. Trade Representative for North America and

has worked extensively on United States-Japan trade disputes and

on agricultural disputes. He is the recipient of numerous awards

for excellence in the economic field for his accomplishments during

his tenure in the Foreign Service, and we thank Mr. Samuel for

being here with us.

Our Committee will be out briefly, and we will be right back.

Thank you.

[Recess.]

Mr. COOKSEY. [Presiding.] We will resume the meeting. The

Chairlady will be here shortly.

Mr. COOKSEY. Mr. Ludolph, if you would go ahead with your testimony.

STATEMENT OF THE HONORABLE CHARLES LUDOLPH, DEPUTY ASSISTANT SECRETARY FOR EUROPE, INTERNATIONAL

TRADE ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE

Mr. LUDOLPH. Thank you, Mr. Chairman. I just want to summarize very quickly my remarks. I, first of all, am pleased that you

have invited us here to discuss the importance of the economic

partnership we have with the European Union. We welcome this

Subcommittee’s sustained and informed interest on maintaining

the health and stability of our economic relationship between the

U.S. and the European Union.

The Chairperson’s opening statement, as well as Mr. Menendez’s

early opening statement, characterized the economic stake we

have, so I want summarize there, but I did want to emphasize that

we have a very new situation with the European Union in terms

of a trade deficit. The U.S. trade deficit with the European Union

is growing very rapidly, and it is the largest that we have had in

the history of our relationship and is now, based on July figures

for 1999, $43 billion. That is accumulating on top of a $60 billion

cumulative deficit since 1995. This is a situation that is very, very

acute for the Administration and for the U.S. Government, and we

5

are paying attention very closely to this serious developing situation in terms of this new trade deficit.

It is correct, as has been—we agree entirely with the Committee’s characterization of the high interdependence between the U.S.

and the European Union. Economically 6 million jobs are created

by investment in our respective marketplaces, a total of 6 million

jobs, 3 million in the United States and 3 million in the European

Union. Therefore, it is very important to have a well-managed,

large, interdependent relationship, and any relationship this large

is going to have trade disputes.

The point and the object of the Administration and the U.S. Government is to try to keep and address the trade disputes as quickly

as possible and to keep them to a minimum and to solve them as

quickly as possible.

We must strive to resolve all of these disputes so that our rights

and interests are maintained and also so that the overall, largely

trouble-free economic relationship can continue to benefit both producers and consumers.

I am just going to briefly highlight two bilateral issues that I

think need to be—I would like to draw your attention to. First is

the issue of biotechnology and trade. The Administration is increasingly concerned over the question of European Union market access

for U.S. agricultural exports derived from bioengineering. The

United States has long viewed the EU’s process for approving new

agricultural products through bioengineering as being too slow and

nontransparent. No new agro-biotech products have been approved

in the EU since 1998, and this could affect not only the substantial,

the billions of dollars of worth of exports of agricultural products

being exported to Europe, but also, in turn, policies that will affect

the rest of the world and our exports to the rest of the world in

these products.

We will work energetically with the new EU’s new commission,

to encourage this new commission to take a fresh look at the approval process and labeling issues that they have adopted to resolve this immensely important issue. If there is a place where we

need to avoid disputes and a place where we think early warning

is important, it is in this area of biotechnology. U.S. farmers, U.S.

companies in agribusiness have invested an enormous amount of

time and money in developing a position in agribusiness for world

exports, and it is a very important benefit to both the consumers,

as well as producers of food, and the enemy is really starvation

that we are trying to address. So this is a very important area in

terms of early warning but also in terms of our imminent way to

avoid trade disputes.

Let me then just talk 1 more minutes about another issue that

is very much in front of us, which is in the aerospace area. Aerospace is a key sector for U.S. exports, globally and certainly with

the European Union, and it is a global business. You cannot sell

an airplane just to Europe or in the United States. You have to sell

an airplane geared for a global market. So we need to have harmonized regulations among all of the players, both consumers as

well as producers, on safety issues.

One issue that has come to us is the issue of hushkits. The Europeans have adopted a regulation on aircraft engine noise that osVerDate 11-SEP-98 11:34 May 17, 2000 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 63070.TXT HINTREL1 PsN: HINTREL1
6

tensibly is aimed at reducing noise, but in fact, affects only U.S.

producers of hushkitted aircraft and certain engine manufacturers.

This regulation could affect and is affecting since April 1999

more than $2 billion worth of exports and the asset values of U.S.

airline companies. We have begun a process to develop an international standard that would meet the European and U.S. noise requirements that they hope to acquire, but in the meantime this

regulation they have adopted is affecting U.S. exports in a nearterm way.

We are in consultations with the European Commission. We

think those consultations are constructive. We think that they are

beginning now to see that they need to withdraw or begin a mechanism to withdraw their regulation as we work toward a solution in

the ICAO. We hope that we will have good news for this Committee, as well as for our industry, on this issue at least, in the

next month in terms of how it is maturing. The European Commission and its member states are meeting today on this issue, and

so we should have some early information that we will share with

this Committee, if not today, later on this week.

Let me then just quickly go on to the early warning issue that

you have highlighted in your opening statement. We work really

closely with the Transatlantic Business Dialogue. It is important

for governments, the Administration, as well as the Congress, to be

able to identify early where governments believe issues need to be

addressed, but we believe that the earliest warning we can get are

from the players in the marketplace, both the Transatlantic Business Dialogue, as well as from consumers and importers who are

affected at the earliest juncture by these regulations or know of

drafts that will affect them. We have begun in our consultations

with these civil society dialogues, particularly the Transatlantic

Business Dialogue, to get them to identify a list of issues that they

see coming down the road 2, 3, 4, or 5 years down the road that

may affect U.S. regulators, but will affect them; and so we believe

that an important part of this process is the Transatlantic Business

Dialogue and the private sector’s being able to have a broad and

free dialogue with both the Commission and the United States on

identifying issues.

Let me just close by saying again, I want to thank the Committee for holding these hearings. They are very important to us.

I want to thank in particular the Committee’s interest and help in

particular that of the Market and Access Compliance Unit of the

Commerce Department. We have been underfunded in past years,

and we very much appreciate the interest this Committee has

shown in our continuing existence.

In summary, the demands on our relationship are very high.

Chances for conflicts in telecommunications, in electronic commerce, in biotechnology and aerospace are present. The relationship, however, is just simply too important to us economically for

us to allow issues to go on without effective solutions that will address trade issues today and over time will actually strengthen our

bond between our respective peoples.

Thank you, Madam Chairman.

[The prepared statement of Mr. Ludolph follows:]

7

Ms. ROS-LEHTINEN. [Presiding.] Thank you very much, and before I recognize Mr. Samuel, I would like to recognize Ms. Danner

if she has any opening statements.

Ms. Danner.

Ms. DANNER. Madam Chairman, I do not have an opening statement, but at the appropriate time I would like to inquire of the

gentlemen who are before us.

Ms. ROS-LEHTINEN. We thank you so much.

Mr. Manzullo? Mr. Bereuter.

Mr. BEREUTER. No.

Ms. ROS-LEHTINEN. Mr. Brady?

Mr. BRADY. No questions.

Ms. ROS-LEHTINEN. Thank you.

Mr. Samuel?

STATEMENT OF THE HONORABLE E. BRYAN SAMUEL, DEPUTY

ASSISTANT SECRETARY FOR TRADE POLICY, BUREAU OF

ECONOMIC AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF

STATE

Mr. SAMUEL. Madam Chairman, thank you very much. Members

of the Subcommittee, I am pleased to have the opportunity today

to review our transatlantic trade agenda. If I may, I will just briefly summarize my written submission.

I want to discuss the importance of U.S.–EU relations and the

need for cooperation with the European Union in the context of the

new WTO round in the state of play on various trade disputes. The

European economy now has the promise of renewed vigor, and if

growth continues, American firms should enjoy expanded business

and trade opportunities in Europe. Our relationship with Europe is

guided, first of all, by the New Transatlantic Agenda process,

which you mentioned, Ms. Chairman, in your opening remarks.

This ensures that from the President to the working level we are

in regular contact with European counterparts.

The swearing in of the new European Commission 2 weeks ago

represents a new start for an institution that has been under heavy

criticism. The initial signals are quite positive for increased cooperation and for progress in resolving our differences. We also

have a new European parliament with expanded powers.

Last December, the United States and European Union unveiled

a Transatlantic Economic Partnership Action Plan. This plan was

designed to reduce regulatory barriers and more fully realize the

problem of transatlantic trade. Under the TEP, we are moving forward on Mutual Recognition Agreements and are working to conclude a model framework MRA for services which could be followed

by agreements in the insurance and engineering sectors.

The United States and European Union have joined in creating

a stability pact to address regional economic and political issues in

southeastern Europe. The Administration is drafting legislation to

extend unilateral trade preferences for that region, for the Balkan

region; and the EU is moving in a similar direction.

To alert policymakers to issues requiring attention before they

become intractable disputes, the United States and the EU agreed

at a summit last June to put in place an early warning mechanism.

The EU hushkit regulation, which Mr. Ludolph addressed, is a

8

good example of the type of issue which could have been avoided

with early warning. We have made clear the need to make rapid

progress in pursuing this mechanism.

Another area of mounting concern is the potential for European

government subsidies for Airbus’ development of the superjumbo

plane. We are seeking a dialogue with the European officials to resolve this issue before it gets ahead of us.

U.S.–EU cooperation is especially important to achieving our

goals in the WTO and the upcoming Seattle ministerial. We want

a market-access-oriented round of negotiations covering agriculture, services, and industrial goods and structured to achieve a

single package of results in 3 years. We need to find as much common ground as we can with the Europeans.

That being said, one of the most important U.S.–EU differences

as we approach the Round concerns export subsidies for agricultural products. We seek their total elimination. We and the rest of

the WTO membership are less willing. We cannot continue to pay

the farm policies.

I now turn to a few WTO cases involving the EU: bananas, beef

and foreign sales corporations. With respect to bananas, we have

offered our ideas to the Commission on the WTO consistent import

regime and sincerely hope the EU will find a solution satisfactory

to our interest, as well as the interests of those in the Caribbean.

Regarding beef hormones, the U.S. will continue to insist that the

EU fully implement the WTO ruling and lift its unjustified ban on

our beef. On foreign sales corporation, the WTO’s final report appears to mirror the interim report, which gave the United States

until October 2000 to bring our legislation into line with WTO

rules. We are considering next steps and among those next steps

certainly is the possibility of an appeal.

Among the regulatory issues that have become a source of transatlantic tensions, biotechnology, as Mr. Ludolph mentioned, is particularly visible. Fundamental differences in approach continue to

divide us and are having a significant negative effect on U.S. agricultural exports. I won’t go into detail now, but simply want to

state that we are fully committed to maintaining a science-based,

rules-based approach to trade in biotech products.

As we grapple with these regulatory issues, I would note that as

Charles Ludolph said, the Transatlantic Business Dialogue has

made a valuable contribution in highlighting perspectives and

areas where improvements to laws and regulations ought to take

place. Similarly, the Transatlantic Consumer Dialogue and the

Transatlantic Environmental Dialogue are providing us with the

perspective of their respective NGO communities.

Take particular note of the role being played by the Transatlantic Labor Dialogue in developing support for incorporating

core labor standards into our trade discussions with the European

Union. Finally, the Transatlantic Legislative Dialogue, with the

support of Chairman Gilman, has already helped to enhance communication among legislators across the Atlantic.

As you have seen, Madam Chairman, transatlantic cooperation

continues, albeit not without challenges. Thank you for the opportunity to testify today, and I would be pleased to respond to any

questions.

9

[The prepared statement of Mr. Samuel follows:]

Ms. ROS-LEHTINEN. Thank you so much, and we will begin the

questions with Mr. Menendez.

Mr. MENENDEZ. Thank you, Madam Chairlady. I appreciate both

of your testimonies. In the time I have, I want to address myself

to an issue you have not discussed. I know it maybe wasn’t formally in your agenda, but it is to many people in the country and

to many small businesses in the country. Later, in a subsequent

panel, we will hear from other witnesses, one who says, I would

argue that under the Constitution, my U.S. company has as much

right to government protection as Chiquita, Dole, and Del Monte,

and I believe he is the gentleman who comes from Mr. Sanford’s

district.

Another witness that I have invited to come will talk about how,

while we have won our WTO court fight on both bananas and beef,

we still have not gained market access, and Europe is not particularly impressed by the punitive tariff impact on its imports, but we

are unfortunately creating a crushing blow on small businesses, as

I cited in my opening statement.

Mr. Ludolph, the Commerce Department is commerce abroad and

commerce at home. Can you give me a sense of what this Administration is doing about the effect that small businesses, most particularly, are having with these high tariffs we are imposing on

their very limited scope of import activity?

Mr. LUDOLPH. First, we take very seriously the effect on the U.S.

business in both directions, and we have held hearings in our process of moving to our retaliation list. We have held a series of public

hearings to try to get at the effect on the U.S. business community

and minimize it to the extent possible. It is true, however, that

many U.S. businesses who import products and are related to the

European dispute are affected, and we hope that is only for a short

time.

We expect to go forward with our negotiations with the European

Commission on both hormones and bananas. These issues are not

over as far as we are concerned, and we continue to expect to get

market access and restore the market for the companies under the

retaliation.

On hormones and on bananas, we continue to work on solutions

with the European Union, and unfortunately, during that time period, part of our negotiating strategy or part of the reality is that

some companies in Europe and in the United States who have a

stake in trade related to these public hearings are affected. Our

strategy is to go forward with the European Commission and European Union to get market access and to restore trade smoothly between the United States and Europe, both in hormones and in bananas.

Mr. MENENDEZ. How do you choose the items that you are going

to put on the list that affects small businesses in the United

States? I mean, it is very nice to say we hope that in fact it will

be for a short period of time; and it is very nice to say that it is

in the greater good, and we all understand about sacrificing the

greater good, but what I can’t quite understand is the rhyme and

reason between the selection of the items and the relationship between, for example, the things we are trying to open up markets

10

in Europe on, whether it be the hormone beef, whether it be the

hushkits, whether it be the whole banana dispute.

I mean, how is it that we choose products that have absolutely

nothing to do with that and that, therefore, subsequently impose

an enormous burden; and what type of balancing do you do in

terms of choosing these items in the context of domestic disruption

on these companies?

I am talking about small companies. You know, the giant companies, the very significant companies, they in fact have the wherewithal normally, because they already import a variety of issues or

are diversified in other ways; but these small companies, at the end

of the day, by the time you are finishing your dispute resolution,

they may not exist.

Mr. LUDOLPH. We are studying the legislation that has, or the

bill that has been offered by this Committee. We understand very

much the point that you are making, as well as the impact on the

small business community. How we choose the products or how we

go about developing these retaliation lists depends very much on

how we can maximize the effect within the limits that WTO makes

available to us, $116 or $190 million worth of trade to influence

policymaking in key countries that have a big stake and have made

a political stake in these issues. So we are balancing the effect on

the U.S. economy, trying to minimize the effect directly on the U.S.

economy and we are trying to maximize the effect within the limits

the WTO provides on the European economy in order to shift the

balance of negotiations to making a resolution in favor of the interests and rights that we have under a WTO agreement.

Within that context, you have raised a very important point

about innocent bystanders in a small business, and we have not yet

in this Administration taken a position on this, your legislation,

but it is a very important point, and we are looking at it very closely.

Mr. MENENDEZ. One last point. Let me just simply say, these

people, they are the lifeblood of America’s economy. They are the

ones who create more employment, and they are also the ones who

in fact do not have high-paid lobbyists to come here to Washington

and advocate on their behalf; and that, I think, is one of the sad

realities of their misfortune. You know, there are opportunities for

blanket—you know, you could put a blanket increase in tariffs. You

could go a variety of ways. These smaller companies do not have

the wherewithal to come here to Congress, to lobby the Administration, and in essence, they fall between the cracks; and I believe the

only lobbyists, they are the Members of Congress who represent

them here, and I really hope the Administration won’t wait for the

resolution of this issue before they come to a conclusion to do something to exempt those legitimate small businesses.

There are safeguards we offered in our legislation, I believe that

intelligent minds can even create others in which they cannot be

used as conduits for, circumventing what you want to accomplish,

but legitimizing at least that which they were purchasing, and ensuring that at the end of the day in our process to help the big

companies that these small businesses do not get affected in a way

that—in fact, it is not just about hurting their businesses. I am

11

talking to you about—I have heard from many companies who just

simply cannot survive if you continue this for a long period of time.

Thank you, Madam Chair.

Ms. ROS-LEHTINEN. Thank you so much, Mr. Menendez, and we

echo those worries as well.

Mr. Cooksey.

Mr. COOKSEY. Thank you, Madam Chairman.

We have discussed the issue of hushkits previously and in other

Committees that I am a Member of, or Subcommittee, and I have

been trying to get an answer, and I think the other people are trying to be diplomatic or evasive. I know diplomacy is your middle

name, but I would really like to get an answer about who is causing the problem about hushkits. You can come out and say, it is

this country or this company, and that will be a short answer to

my question. If you will do that, fine. But if you are still going to

be evasive like the other people were on this issue, just tell me

what companies and what countries would benefit from our

hushkits not being available in that country.

Mr. LUDOLPH. I hope I am not evasive, but I don’t know if I will

measure up.

Let me just start by saying that who is behind hushkits are airports in Europe. Airports in Europe are politically now becoming

very active in pushing for reduced noise. That is politically then,

and economically—the response to that pressure has become the

hushkit regulation which is utterly useless as far as we can tell

and does not respond to the concern of airports. So where the pressure is coming from is airports.

The European Commission and the European Parliament are at

pains now to try to explain to airports that this hushkit regulation

doesn’t really reduce noise; and that is where the pressure is coming from, and that is where the political problem is. Once you have

adopted a regulation that doesn’t do what it is supposed to do, it

is very hard to walk back.

Who would benefit if the hushkit regulation is sustained are a

series of companies, in particular Airbus and Rolls Royce, and the

countries that would benefit, aside from essentially all 15 countries, think they would benefit from reduced noise, but the countries that would benefit are the countries that produce Airbus and

Rolls Royce engines.

Mr. COOKSEY. That is a good answer, and that answers my question to a great extent. What are the chances of repeal of the

hushkit regulation as it is currently written by the EU?

Mr. LUDOLPH. The chances are less than even money; they are

less than 50 percent. The repeal issue is being reviewed by the

member state governments today in Brussels. My supervisor,

Under Secretary Aaron, has been on the telephone with the European Commission, commission representatives, not the Commissioner, Ms. de Palacio, but with the European Commission staff as

well as with the key member States who will be sitting on that

board today to discuss the repeal issue.

We believe, and my minister, my under secretary has indicated,

that we really have no way to go if there is a decision not to entertain a mechanism for withdrawal or repeal today; and we are waitVerDate 11-SEP-98 11:34 May 17, 2000 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 63070.TXT HINTREL1 PsN: HINTREL1
12

ing with great interest, again, hope with some optimism, but with

great interest to see what this decision is.

Mr. COOKSEY. Thank you. Very good answer.

Mr. Samuel, a question about the science-based rules on our ag

products or trade of ag products, and this is similar to the question

about the hushkits. There are countries that would benefit probably more so than others, that are larger ag producers.

Great Britain had a lot of hysteria. What are the other countries

that have had hysteria on this issue? I mean, I saw the newspaper

stories, and they were saying that monsters would be created by

people consuming these genetically engineered products, by primarily Monsanto and DuPont, which have been good for agriculture, but what other countries are involved besides Great Britain?

Mr. SAMUEL. The entire issue of food safety has really come to

the fore in Europe from a number of instances. The first, of course,

is the mad cow disease problem in Great Britain, and I think that

has gotten a large part of the British population concerned about

the government’s ability to regulate the safety of food. In recent

months, we have seen some other examples in Belgium where

dioxin was somehow introduced into animal feed and was then

passed on into meat products, meat and poultry products. So certainly Belgium has shown these concerns. There was the Coca-Cola

flap not too long ago.

Among the countries certainly that have been looking at this

have been France, Italy, and Great Britain, and I would say that

is where there has been really—and Belgium—have been the largest sort of political reaction and difficulty for those governments in

dealing with biotech products and convincing their people that

biotech products are, in fact, safe.

Other countries we have had a better dialogue, I would say. For

example, the Netherlands have had a long and very mature type

of regulation in place on these products, and we found a way to

deal with that market, but it is the uncertainty in some of these

other larger markets. Mr. Ludolph mentions Austria as another

good example.

Mr. COOKSEY. One closing question. If we were in a meeting of

an EU country this morning and we were members of parliament

in France, the UK, Italy, and Austria, whatever, one of the other

countries, what are the charges they would be making about the

United States? What would they be saying about us this morning?

What are their major trade issues with us? If you could just briefly

give me the top three.

Mr. SAMUEL. Certainly, I would say, first of all, it would be sort

of unilateral trade actions which they charge us with, and in this

area, would be sanctions, on our sanctions policy, that they sometimes feel they are affected by that.

Beyond that, I suppose it would be various subsidy issues that

would be partly—this is them trying to find a way to lambaste us

with the same sort of charges which we, I think more rightly, make

against them, and so they bring up again some of our agricultural

support policies, and I think that is mostly a defensive mode, and

similarly, in the Airbus sort of trade and aircraft, they bring up defense programs and whether or not these are subsidies.

13

I would say a third area is certainly State and local practices

that they feel go beyond the borders to affect them, and perhaps

you recall there was an issue having to do with the State of Massachusetts, proposed restrictions on procurement based on trade with

Burma, and that again certainly energized a number of the member states.

Mr. COOKSEY. I have many more questions. I have more than

used my time. The chairlady has been more than gracious, and

thank you for your answers.

Ms. ROS-LEHTINEN. Thank you so much.

Ms. Danner?

Ms. DANNER. Thank you very much. My question will be directed

to you, Mr. Ludolph. My colleague just spoke of the fact that some

of us have heard about hushkits in other Committees. Interestingly

enough, quite a few of these Members of this Committee are on

that other Committee which is Transportation and Infrastructure,

and one of the things we learned there was that with regard to the

hushkits, the decision was not made on noise decibels, but indeed

upon design, and that the design really reflected only American design.

Would you like to tell us a little bit more about that because, you

know, the idea that it is simply to reduce noise because airports

want it, airports don’t really know what kind of a design is in that

hushkit. They only know about noise decibels, and yet that is not

really what we are talking about.

Mr. LUDOLPH. I can’t add very much except that this has been

the most astounding breach of the European Commission’s regulation for the past 40 years of practice in terms of developing aerospace standards. You cannot really design either an airport or an

air traffic control system because much of noise reduction has to

do with the operation of the planes, not the design of the planes.

You can’t really run an international air traffic control system or

design an international aircraft based on having a lot of regional

or national design requirements. It would be a kind of Rube Goldberg type of invention that would be flying around. It wouldn’t be

very safe and it wouldn’t be very energy efficient, if you tried to

put all of these design requirements for national requirements in,

and this is the major problem.

More than the fact that this little rule is going to affect or is affecting $2 billion worth of exports today, which is not only affecting

but is eliminating $2 billion worth of exports today. The major

problem is that for 40 years we have had an international standard

system that has supported the growth of air traffic globally. This

little rule is the example of a major breach in this system that

could very well bring the system down.

ICAO could be a thing of the past if this regulation is sustained,

with the effect that neither the Europeans nor the U.S. will have

effective noise control in the future because Russia and Indonesia

and all of these other countries will be flying planes and operating

them based on national standards rather than international standards.

So this is a very grave problem that needs to be addressed in a

larger context.

14

Ms. DANNER. Might we hope—and I think I sense some optimism

on your part—that with the new commissioners and the new parliament that we might have a different approach to this problem?

Mr. LUDOLPH. We also have had early meetings—again not with

Ms. de Palacio, who is in charge of this issue, but early meetings

with the new commission last week, and we do seem to have new

possibilities. So we are optimistic that this commission will be taking a fresh look at the hushkit issue, as well as several other irritants, and we expect that this would be a very positive outcome.

Ms. DANNER. One last question. You can tell that I represent—

TWA’s largest number of employees live in my district, so I am obviously always interested in aviation, but I also represent 27 counties, so obviously I have a rural constituency as well. My question

is, do you or your organization, Commerce Department, relate to

Barshefsky when you all determine what we are going to—and I

followup on my colleague’s question with regard to what we are

going to ban in our country as they ban our beef. Because in looking through this, I find that over half the articles that we are banning are meat articles, and we are not really short on meat in this

country, and then two of them are pates. One is truffles. I mean,

these are not things that the average American sits down daily to

eat.

Why did we not, if you have the knowledge, and obviously I need

to inquire of her, why did we not address the things that we really

look for from those countries, wine from France, Spanish goods

from—pardon me, leather goods, I should say, from Spain and from

Italy? We really have touched things that are not relevant, it seems

to me.

Mr. LUDOLPH. Let me just say that our theory—and we worked

very closely through our industry sector advisory Committees with

the private sector. We have a small business, ISAC, that we work

closely with in terms of reviewing the impact of these retaliations

and looking at the overall policy of how to go about this. But let

me come back to the question of what our theory is.

Our theory is to try to move the negotiations forward. We don’t

see retaliation as the end of the issue. It doesn’t serve anybody’s

interest not to be exporting beef to Europe nor to stop the import

of products coming from Europe. Certainly, that is not what the

U.S. expects from WTO dispute settlements.

The theory is to make the pain of retaliation, to visit it on the

people who are benefiting from the protection. Animal growers, animal farmers are the beneficiaries of the protection that the Europeans put in place. Beef hormone is a protectionist device to protect

cattle ranchers in Europe. So the theory is, we should then be inflicting pain on meat products from Europe, and so that is why we

emphasize meat.

Ms. DANNER. So that theory is very relevant if we import a lot

of meat products from Europe, but if we are not importing a great

many meat products, it loses its relativity. I think, from the light,

my time has expired.

Ms. ROS-LEHTINEN. Thank you, Ms. Danner.

Mr. Manzullo?

15

Mr. MANZULLO. Thank you. As a cattle producer, you might

think that my question would be self-serving, but I am not going

to touch that issue. I want to talk about eggs.

We received a letter from Malquist Butter and Eggs, a major egg

producer in our congressional district. The Europeans must stay

awake 24 hours a day thinking about the various ways that they

can come up with these nontariff barriers. The latest is that they

won’t allow any U.S. inedible egg products. Not the incredible egg

but the inedible egg products that are used for pet food, et cetera,

unless the American manufacturers add fishmeal to the caramel

coloring as an additional safeguard. Yet the Europeans themselves

are not required to add fishmeal and caramel coloring. This is this

is ridiculous.

My question is, first of all have you heard of this latest one?

Mr. SAMUEL. No.

Mr. LUDOLPH. No, sir.

Mr. MANZULLO. It is not because you are not knowledgeable. It

is because there are so many of them that come up day after day

after day. But what I was going to ask was did it fall through the

early warning system.

Mr. SAMUEL. It sure did.

Mr. LUDOLPH. You are our early warning, so we appreciate the

aggressive Committee—I don’t know—it may be that U.S. really

has——

Mr. MANZULLO. I really don’t have any further questions to ask.

Mr. LUDOLPH. If you could give us that material, we would like

to followup on it.

Mr. MANZULLO. Absolutely. It is a letter that has been circulated

by Congressman Blunt going to Charlene Barshefsky, and of

course, we are signing on to it. I was going to ask a question on

it, but unless you wanted to comment on something of which you

have knowledge, I will just let somebody else ask some more questions.

Mr. SAMUEL. We will be happy to followup. Our colleagues at the

U.S. Department of Agriculture may, in fact, know about it, and it

is just a lapse on our part.

Ms. ROS-LEHTINEN. Mr. Manzullo is on the cutting edge of the

Information Age.

Mr. Bereuter?

Mr. BEREUTER. Thank you, Madam Chairman.

Thank you for your testimony. I don’t have many questions for

you at this stage. Thank you again for your presentations.

First of all, I will come back to some things that Ms. Danner and

Mr. Cooksey have talked about, specifically the subject of genetically modified organisms. I think it is probably important that you

seek the information from our own industrial agri-industry sources

because the Europeans are consuming extraordinary amounts of

GMO products already by European production. This is a kind of

a red herring, but I don’t think that the European public probably

understands that this was a subject they might have addressed 10

years ago with respect to their own products. This is some ammunition you need to have on your belt.

The second thing I would say is that we need to reaffirm the

principles related to the sanitary and phytosantary accord in the

16

Uruguay Round, the SPS. Unfortunately, European consumers do

not have an FDA. They, therefore, I think are more subject to scare

tactics and concerns created by what happened in Britain and Belgium.

I don’t know if there is any effort on the part of the EU but we

really do need to insist on regulations, including tariffs and nontariff barriers, that are based upon sound science and which are

based upon risk assessment. We have a capacity, of course, today

to measure one part for 4 billion and beyond, and the scientists

that come before us tell us it is scientifically impossible to prove

something is safe. You can prove it is dangerous, but you cannot

prove it is safe. Risk assessment needs to be a factor or we cannot

stop any nontariff barriers that are placed against our products. It

is just impossible.

It goes back to the infamous Delaney clause in the United States

which hounded our own production and consumer sector. I hope

that we can really get them to focus on what is sound science with

respect to the products that we hope to export to Europe. We need

to put teeth into agreements to reiterate that sanitary and

phytosantary accord was supposedly put in place by the Uruguay

Round. It was put in place, but whether or not it is violated more

often than not, I don’t know.

When we listen to Europeans talking to us today, moving to another point, including members of the European Parliament, it is

clear that they are preparing their arguments against the agricultural subsidies that we are voting for. We are going to provide

more financial assistance to the farm sector this year than any

year since the mid-1980’s. We are about to put more in there, but

it is important that we cause the Europeans to admit that there

is a distinction between trade-distorting subsidies and those that

are not trade-distorting.

Ours are transition payments for the most part, and they are increasing the transition payments. What they don’t do is distort

trade. They are not putting us in an advantageous position to compete for Third Country markets. Through their subsidies, the Europeans have Taken Third country markets from us. They will prepare to make a general assessment about what we are spending in

agriculture versus what they are spending and say, ‘‘See, you do it,

too.’’ The difference is whether or not it is trade-distorting or

nontrade-distorting. I think that needs to be the focus. It is clearly

part of their tactics and strategy for the next round.

Let me just say one more point. I think we really have to cultivate sound relationships with some of the countries that are most

affected by these nontariff barriers and the subsidization of their

export sector. Those countries include Australia and New Zealand

which are really hurt more than any other countries by the trade

war that we find ourself in with the Europeans in trying to combat

their trade-distorting subsidies with some of our own. We don’t

fund them as well, but still, it is the Australians and New Zealanders who are really most directly affected by this.

I hope that perhaps you will try to revive or work with anything

that looks like the Cairns Group that might be continuing or reestablished.

17

I guess I would ask you one final question as a part of this. What

do you think we can do to put in place effectively the SPS accord

in the Seattle Round?

Thank you, Madam Chairman.

Mr. SAMUEL. Just briefly, thank you very much.

Many of your statements sound just like the talking points that

were prepared for me. We agree 100 percent on what you are saying on biotech and on genetically modified organisms, that we have

to have a science-based system. The Europeans have to adopt a

science-based system. We are working in several areas, most importantly in the Codex Solimentaries, which is identified in the

WTO as the body that is responsible for this.

Europeans have introduced what we consider suspect notions of

precautionary principles into the work of that Committee.

Mr. BEREUTER. Would you remind my colleagues of where the

Codex is funded and run?

Mr. SAMUEL. Sure. It is run out of the FAO and the international

organization.

Mr. BEREUTER. When we think about authorizing money for the

FAO, we might think about the Codex.

Mr. SAMUEL. That is right. So that is very much an important

organization in trying to maintain its principles of sound science.

We are doing work also at the OECD on what are the regulatory

procedures that different countries have in place and how they can

be effective. So we agree completely with your statements on the

need for sound science, and that is the way we are promoting it

with the Europeans.

I agree, too, as I mentioned in the earlier question, that the Europeans are trying to stretch the plane and incorrectly referring to

our farm support programs as trade-distorting or in any way a violation of the agricultural agreement from the WTO. We are watching our amber box limits as we move forward, and as you mention,

our own export subsidies are minimal compared to the Europeans.

We have been working with the Cairns Group. Secretary Glickman was at their last meeting in Buenos Aires. We will continue

to work with the Cairns Group and would like to and have in fact

adopted very many similar positions. I note the language on export

subsidies in the recent APEC declaration which was us working

with Australia and New Zealand, I think to get good language on

elimination of export subsidies.

As far as the SPS agreement itself goes, we think that it is a

good agreement. It needs to be implemented better. We don’t want

to see it reopened in the new round. We want to keep it as it is;

and the way to have it done, I think, is to keep raising it again

and again as a red flag with the Europeans when we see examples,

such as this egg example that Mr. Manzullo mentioned. I think in

its use that it is going to be proven that it stands up in dispute

settlement cases that we have already seen on the hormones case.

So, again, if it is of use we will stick with it.

Mr. MANZULLO. Mr. Brady.

Mr. BRADY. Thank you, Mr. Chairman. I want to continue on

food safety.

First, I realized as Mr. Cooksey of Louisiana was talking that we

might have a perfect example that could reassure the Europeans

18

about food safety and the strength of the human body. Louisianians have been both eating and marketing boudin for a century. It

is a sausage that defies genetic identification, has a shelf life of 50

years and could be the next scientific element just by itself, and

every time Texans think we are special and smart, we realize that

the Cajuns have talked us into eating that stuff, and so we are not

all that bright.

You might want to use that example the next time they get concerned over there.

In effect, today, as we know, we have a fresh start in Europe. Although optimistic about it, and every time there is an opportunity

for change, we are not sure that is going to occur. Earlier this week

I noticed an announcement by David Byrne of Ireland, the new EU

Commissioner for Health Consumer Protection, that in October he

will be releasing in effect a white paper outlining some of the principles of food safety inspection for the future.

My first question is, what do you anticipate different, or are we

working with his office to at least identify areas of common

ground? Second, how do we make the case much better on issues

such as bananas? The issue isn’t bananas; it is the integrity of the

World Trade Organization, that if we don’t have a dispute resolution that is timely, where the appeal process is clear, that really

jeopardizes trade all around the world. Bananas are so much important because of that integrity.

Do we need to be raising the need for changes? Have beef and

bananas or other disputes identified some areas within the appeal

process that need to be clarified so that there is more timely response? So the first one is, do we anticipate anything different with

Mr. Bern’s report? Second, you know, are we contemplating initiating, pushing for changes that could help?

Mr. LUDOLPH. Let me just start, Congressman, with the issue of

food safety. My minister, Mr. Aaron, met with David Bern’s chef

du cabinet on the day that Mr. Byrne was sworn in. Mr. Byrne has

testified in addition to his comments about putting out new food

safety regulations that would restore confidence among consumers

in Europe and is intended to do that. He has also stated that he

is very dedicated to the issue not only of consumer protection but

also of sound science. These are very important statements that

were amplified and expanded in our discussions Friday a week ago

in Brussels with the his chef du cabinet, Mr. Martin Power.

We have taken two steps here in the U.S. Government with my

colleague, Mr. Samuel. We have started an outreach campaign on

GMO’s and on food safety dedicated to be addressing a lot of the

European concerns, and we have suggested to Mr. Byrne that a

joint government public hearing on the issues of science and how

science supports agrobiotech issues and biotechnology food be held

at an early juncture by the Commission, and that idea is beginning

to be very well received under this new Commission. It went nowhere all summer under the hiatus we had with the Commission’s

changes.

Finally, this January in The Hague, the U.S. Government with

the U.S. business community are inviting 300 scientists to come together in The Hague to address the issue of biotechnology in food.

We want that conference to be in The Hague, particularly because

19

the Netherlands is very supportive of what we are looking at in

terms of sound science and addressing the issue of precautionary

principle, and Mr. Byrne is also interested in participating in that

conference.

These are changes that we see in the new Commission and a new

kind of willingness to look at sound science and as it supports consumer protection. Their idea, as you point out, is to move to bring

confidence back to their consumers, and we have to make sure, and

I think this commissioner now is showing that sound science is

going to be really the only objective way to support that policy.

Mr. SAMUEL. On the dispute settlement system of the WTO, you

are correct that the bananas case, first and foremost, showed that

there was a glitch in the system. It threatened to become what we

call an endless loop of litigation where one country says, oh, no, it

has done exactly what it is supposed to do and the other country

say, no, and they say, well, take us back and start from the beginning on dispute settlement.

So that was resolved actually through some panels during the

course of the banana proceeding, we think in our favor, our argument, in fact, that the panel that reviews the retaliation is reviewing at the same time the implementation and the consistency of the

implementation.

We are in the process very much of working in Geneva. Our Deputy General Counsel at USTR has taken the lead on this in working with counterparts in Geneva to fix this glitch in the WTO dispute settlement procedure. We think, first of all, it will end the dispute about what the procedures are themselves, and so of course

not provide an opportunity to string it along; but second, we think

we can sort of trim some of the time schedules. So we have learned

now in the course of several years since the course of the WTO that

some of the 90 days, don’t need to be 90 days or the 60 days could

be a little bit less, and so we are working on that, too, and we are

optimistic that we will finish these consultations and get an agreement by the time, if not before, certainly by the time of the Seattle

ministerial.

Mr. BRADY. That is very important, and Mr. Ludolph, any opportunity we get a chance, not only with the Commission, but the European Parliament members who are directly elected, who in their

town hall meetings have to face the issue of food safety, my experience with them; and as we had an interparliamentary delegation

to Texas to look at ag research, GMO’s, issues such as food safety,

I think education, any time we get an opportunity to educate members of the European Parliament, as well as the Members of the

U.S. Congress together on this issue, it is worthwhile. I don’t see

it as an artificial trade barrier, but a very real one where we have

to do a lot of work any chance we get; and I hear from our European parliamentary members they want to be involved in solving

this as well. So just an observation.

Mr. MANZULLO. OK.

Mr. Burr.

Mr. BURR. Thank you, Mr. Chairman. I really came to listen and

not ask questions, but I think Mr. Bereuter stimulated something

that I want to followup, and it is not so much a question as it is

a statement.

20

Let me suggest to both of you that sound science is an important

issue. Unfortunately, I don’t think, yet, sound science trumps politics, and for that reason, I am not too confident that sound science

will be a dominating or determining factor on decisions that are

made relative to positions on trade.

I am sort of curious as to how the EU will respond when hopefully this Congress addresses the tremendous ag disaster in North

Carolina this year.

I think the case will be made that North Carolina can’t take any

more loans. They have to have direct payments. I am sure that will

create a new, if we are able to do it, crisis in the relationship of

the ag community and what the U.S. does to the ag farmers, because we have, in fact, complained about direct payments to farmers in the EU for some time, and clearly that is not going to change

in the foreseeable future.

Mr. Bereuter raised the question about health, and I want to go

specifically to that. He also raised the question of a food and drug

Administration. One of the attempts for one of the mutual recognition agreements dealt with our acceptance of European standards

for drug approval and device approval, but we are in a different situation. I think that we indeed have the gold standard of that process, one that I have fought very hard to protect.

The EU is in a different situation because, upon its formation,

they accepted the standards of all members, a wide, varying array

of standards that existed, some with a little more credibility than

others—not to highlight countries, but clearly a system that I hope

this country does not adopt with open arms, a mix of 22 different

approval processes that we, in turn, turn around and assure the

American public, this is all safe and effective. I do believe that the

most difficult thing that we have to deal with in the future is not

our trade agreements, but it is our ability to harmonize the international standards.

We can have explosive trade, but at some point, we hit a wall

that is so high because of our inability to harmonize those global

standards that it will bring trade to a standstill.

I will let either one of you, or both, comment on anything that

I have referenced.

Mr. LUDOLPH. I appreciate and understand very much the concerns that this Committee and other Committees have raised on

the implementation of MRA’s and the implications it has for harmonization, not only with the European Union that has relatively

high standards of regulation and enforcement, as well as safety to

protect their consumers and environment, but more importantly

with other countries outside the European Union that have more

difficulty not only developing high standards, national standards,

but enforcing them.

I have just come from a meeting of the Transatlantic Business

Dialogue this morning in which we discussed the implementation

of the medical device, MRA, and the slow pace, the unsatisfactory—

from a business community’s point of view, the slow pace of implementation. Implementation of the MRA and medical devices, and

for that matter, pharmaceuticals is slow because the FDA is holding to its position that they must inspect every one of these foreign

inspect orates in the European Union before we go forward with

21

turning over inspections to either conformity assessment bodies or

private bodies in Europe or with the governments.

So we expect that instead of a year’s delay in developing an MRA

or implementing an MRA and medical devices that it may take as

much as another year before the FDA is satisfied that medical device enforcement and procedures in Europe meet their high standard for delivering safe products here in the United States. That is

a delay we are prepared to take, and that is a delay that will be

inconvenient to the constituents and the business community for

what they hope an MRA is going to provide.

Mr. BURR. Let me note for the record that last year, though,

there was tremendous pressure on the FDA by our negotiators to

expedite that mutual recognition agreement, even though serious,

serious questions remain. So I thank you or those who are responsible for allowing the FDA to go through a thorough process, because I believe that the speed with which they were asked to rubber stamp an agreement would, in fact, break the gold standard

that many people in the country have grown to trust.

Mr. LUDOLPH. We very much appreciate the hearing that was

held last year on this issue, and it brought home a lot of issues

that had to be addressed by the FDA, as well as the trade community.

Ms. ROS-LEHTINEN. [Presiding.] Thank you so much.

Mr. Crowley.

Mr. CROWLEY. Thank you, Madam Chair. This is concerning the

hushkit issue in terms of the EU. Can you tell me why you think

that was imposed?

Mr. LUDOLPH. I am sorry, why the Europeans——

Mr. CROWLEY. Was it purely for noise control or was it punitive,

in your opinion?

Mr. LUDOLPH. Both. It was originally proposed under the assumption or under the unexamined assumption that it would address noise. It does not address noise. Today I can’t really persuade

you that it has any other effect than protecting or disrupting or

eliminating certain kinds of technologies that only American companies make for the European market.

So, originally it was proposed as a noise regulation. We have

brought it to the attention of European Governments that this does

not address noise at all and has the explicit effect of eliminating

more than $2 billion worth of trade.

Mr. CROWLEY. In other words, you are saying there is no discernible difference between a hushkit engine and a fitted engine that

is already meeting those standards?

Mr. LUDOLPH. The hushkits are forbidden under this rule, and

there are about 1,800 airplanes in the world that would benefit

from hushkitting. So this would have an effect on them.

A more expensive way of retrofitting these 1,800 planes is to reengine them. Many airlines can’t afford to go this more expensive

way of reengining, and in many technologies, many airplanes won’t

even support reengining with any effect. So all of these proposals

that the Europeans have come up with in terms of design or technologies would really have little more effect than taking airlines

and aircraft out of the European market.

22

Mr. CROWLEY. What steps are you yourself or the Administration

doing to address the issue?

Mr. LUDOLPH. David Aaron, my Under Secretary of Commerce,

is on daily phone calls because there are key meetings this week

in Europe on how to go forward. Our policy is to continue to work

with the FAA and the European Union on about a 14 month program in ICAO to develop an alternative noise reduction standard.

Meanwhile, we have lost $2 billion worth of business because the

effect of their proposal is to eliminate our competitiveness.

We also, therefore, need a second step. In addition to the 14-

month harmonization of standards, we need the European Union

to withdraw or to begin a mechanism to withdraw that regulation

which does not contribute to noise and does not contribute to the

ICAO process.

The European Union are deliberating on our proposal for withdrawal this week and through the rest of this month and in the

early part of October. I have already indicated to Mr. Cooksey that

we will get reports on a regular basis this week and next, and we

will be sharing that information with your Committee.

Mr. CROWLEY. We would appreciate that information. Thank you.

[The information referred to follows:]

Ms. ROS-LEHTINEN. Thank you so much for an excellent presentation, and as you can see, the issue of hushkits and as Mr. Menendez brought out, how all of these tactics of the EU impact on domestic small businesses is of great concern to this Subcommittee;

and we look forward to continuing our conversation with both of

you and your Departments. Thank you so much.

We would like to introduce our second panel. It leads off with

Mr. Willard Berry, who serves as the President of the EuropeanAmerican Business Council, formerly the European-American

Chamber of Commerce. Prior to joining the Council, Mr. Berry led

several national and State organizations involved in international

trade with primary emphasis on export issues. His most recent assignment was that of Vice President for Congressional Affairs at

the national foreign trade council in Washington from 1988 to

1992. Mr. Berry’s background extends beyond his experience as a

trade associate executive, and he has also served as a university

professor for almost 10 years.

He will be followed by Mr. Rick Reinert, President of REHA Enterprises. Mr. Reinert is a constituent of our colleague, Mr. Sanford, a Member of the International Relations Committee.

Our final panelist is Mr. John Roberts, President of the National

Association for the Specialty Food Trade. Our distinguished Ranking Member, Mr. Menendez, will introduce his constituent.

Mr. Menendez?

Mr. MENENDEZ. Thank you, Madam Chairlady. It is my pleasure

to welcome John Roberts, who is the President of the National Association for the Specialty Food Trade. The NASFT is a not-forprofit trade association which represents members who work with

high-value food items, including many small importers. Recently,

Mr. Roberts was appointed as a member of the U.S. Department

of Agriculture’s Agricultural Policy Advisory Committee for Trade

and as an advisor to the Foreign Agricultural Service. He resides

in New Jersey, which is the Garden State, and is a graduate of

23

Seton Hall University, and I believe he will testify about some of

the domestic impacts of U.S. retaliatory trade measures, and we

appreciate you coming from New Jersey today to give us your insights.

Ms. ROS-LEHTINEN. Thank you so much for a most excellent witness, and I would like to recognize Mr. Sanford so he may introduce his constituent, Mr. Reinert.

Mr. SANFORD. Madam Chairwoman, I would simply like to introduce Rick as a hardworking American taxpayer from Summerville,

South Carolina, and I think that unfortunately if what exists right

now stays in place, Rick will basically be the personification of the

terms ‘‘friendly fire.’’ We all know those movies wherein somebody

is caught at the wrong place at the wrong time and through no

fault of their own they are getting fired on.

Rick isn’t getting fired on. He is getting bombed, and if something doesn’t change, he will truly be a casualty of war. This is

going to be tragic, given his background, in that he served our

country honorably in the U.S. military. During his service with the

army he was stationed in Germany for 3 years.

When he was there, he found a couple of products that he liked.

When he returned to the United States, he began importing those

products. One thing led to another—similar to many American success stories, and Rick moved his business from his basement to a

6,000-square-foot building. He grew a successful business and

things were going fine; and then all of a sudden a trade war erupted, which brings us here today.

I would just say that I would beg of you to really listen carefully

to his story because what has happened to Rick undermines the

very principle on which trade practices are built, and that is, trade

law is supposedly about fairness, making sure that one country has

a fair relationship with another country. What is going on with

Rick right now makes a mockery of the word ‘‘fairness.’’ .

I think it raises a dirty little secret that is happening, similar to

that of Bob Menendez’s constituent: if you happen to have the right

lobbyist in Washington, to be the subject of this problem. In other

words, the dirty little secret here is the power of money in Washington. For Rick, who can’t afford a lobbyist in Washington, to be

the subject of this unfair trade practice, again, makes a mockery

of what we are trying to have in place with our trade practices. I

won’t usurp his story, but I would ask that you listen to it carefully.

Ms. ROS-LEHTINEN. Thank you so much, Mark and Bob, for providing us with such excellent witnesses who are on the front lines

of this trade war.

I would like to tell our panelists, as well as our Subcommittee

Members, that we need to be out of this room, at the latest, at 1:05,

because there is a 1:30 meeting and they need the time to clean

up after us, especially me. So if you could please limit your time,

and I am going to be closely monitoring it. Thank you so much.

Ms. ROS-LEHTINEN. Mr. Berry, we will begin with you. We will

be glad to put all of your statements into the record so if you could

summarize them that would be great.

24

STATEMENTS OF WILLARD M. BERRY, PRESIDENT,

EUROPEAN-AMERICAN BUSINESS COUNCIL

Mr. BERRY. I will do that. Thank you, Madam Chairperson and

Members of the Subcommittee, for this opportunity to testify and

holding what we think is a very important hearing. The Chairperson, in her opening statement, and some other witnesses have

remarked on the substantial character of the trade relationship.

Today, we are releasing this study. The Members of the Subcommittee should have it, which is a State-by-State analysis of

trade and investment.

Ms. ROS-LEHTINEN. We have all of those. Thank you.

Mr. BERRY. But in the short period of time I have, I would like

to focus on the quantitative aspects of the relationship, pointing to

the enormous amount of jobs and that the number of jobs, which

is 3 million on each side, is doubled when you take into account

indirect employment.

When you look at the 12.4 million jobs in the United States that

are supported by exports from the United States to Europe, when

you look at the size of the exports, one of the things which cannot

be reflected in this study because of the way the data are produced

on a State-by-State basis within the government agencies that collect the statistics is how that growth has changed over just the last

year.

New EU investment in the U.S. jumped from $26.7 billion in

1997 to $103 billion in 1998. That is an increase of 385 percent.

At the same time, new U.S. investment in the EU leapt from $18.9

billion in 1997 to $54.5 billion in 1998, an increase of 288 percent.

The total increased investment relationship is nearly $900 billion.

This is what we must comprehend about the relationship.

Policy should be guided by an awareness of these strong phenomenal ties. The factors that underlie this market integration

process should be better understood. Policies which reinforce and

support this dynamic should be pursued. These developments

would not be taking place were there not many commonalities between the two markets: a common market-oriented approach,

shared competitive orientation, shared leadership and technological

developments, corresponding business practices and compatible

legal frameworks and commitment to global trade rules. These factors and others define substantially transatlantic cooperation.

Policy makers have, to a large extent, focused their energies on

the disputes and, in the public mind, these conflicts define the European-American relationship. There has been bilateral cooperation

in approaching and managing a number of areas: the emerging

electronic marketplace, telecommunication standards. There has

been real progress through extensive dialogue on data privacy

which 1 or 2 years ago was considered a very, very risky issue.

There have been other advances toward regulatory cooperation,

mutual recognition and, as some of the witnesses before mentioned,

early warning.

For the most part, however, the conflicts have captured the attention of policymakers. This is not only unfortunate, but in the

long run, removes key officials from the real vitality that the transatlantic commercial relationship involves.

25

Is the focus wrong when the total sanctions on bananas and beef, $308 million, is less than three-tenths of 1 percent of new EU investment in the U.S. last year?

There are a number of things that I could say—some specifically—about the disputes. Clearly some changes need to be made.

There has to be more cooperation. We are particularly concerned

that there hasn’t been more cooperation between the U.S. and the

EU in their approach to the WTO ministerial agenda. We are

pleased with the early warning. We are pleased with a lot of the

things that have developed within the Transatlantic Business Dialogue.

I would be very happy to answer any questions. Thank you.

Ms. ROS-LEHTINEN. Thank you so much, Mr. Berry.

[The prepared statement of Mr. Berry follows:]

Ms. ROS-LEHTINEN. Mr. Reinert.

STATEMENT OF RICK REINERT, PRESIDENT, REHA

ENTERPRISES, INC.

Mr. REINERT. Thank you, Congressman Sanford, for your kind

words, Madam Chairman and honorable Members. Let me first

start off by apologizing to all of you because I am going to use this

forum to discuss my problem and my company basically.

I brought with me a banana. This could have been produced by

Chiquita, Dole or Del Monte. I have also brought our product

along, which is Ombra Bath. This is our product we distribute right

across the United States and if you look at the back of this product,

there are no banana derivatives in this product. The shape is not

banana like, the smell is not banana like, it is not yellow.

So my question is, why since March 3, 1999, do I have to pay

100 percent tariffs on this product? I also would question and point

out to you that it has already cost me $20,000, and this money I

believe is mine. It is not the U.S. Government’s money. This is the

money that is collected from honorable business basically in the

form of profits. Now, I have to give to it the U.S. Government because they decide to make this punitive trade action on Europe.

When I first learned about this whole thing it was through Time

magazine in February 1999. At that time, it was pointed out to me

by the USTR that the public debate period had closed already in

November 1998, and the USTR was very surprised that I was still

importing this product, but I would question them, what would

they have me do? Would they have me crawl into a hole and close

my business because they decided my business was not worthwhile

or my product was not worth having in the United States?

I would also like to ask a pointed question to Ambassador

Charlene Barshefsky and Ambassador Peter Scher. Put the shoe on

the other foot. Say, if I had the power to implement these tariffs,

what would they do in my position? Would they close up their business and go home? I am not prepared to do that.

I believe that this punitive trade action by the USTR is having

minimal effect on Europe. I would also tell you that this is a hit

list basically of the banana war and the beef war, and every product on these lists——

Ms. ROS-LEHTINEN. What is that list that you are referring to,

the same?

26

Mr. REINERT. The banana war hit list, the final list of 100 percent tariffs and also the list of the beef war, and I would suggest

to you that you could multiply that list by three and there are

three companies out there for each items importing these goods,

and these are the people you are hurting, U.S. citizens and U.S.

businesses, and I really question whether this was really the effect

that was wanted. Would it have not been more equitable to put 5,

10, 15, even 20 percent on a whole range of European goods, everything coming over?

I guarantee you change would have been effected immediately.

I can tell you our product is made under the highest labor standards in the world. The manufacturers have just received ISO 9002

certification. Can Chiquita, Dole and Del Monte say the same thing

about their labor conditions? I would also like to point out that the

product that we are protecting here with this trade action is not

a U.S. grown product. It is a Latin American grown product.

The Constitution, in my opinion, as I always learned, protects everyone, regardless of size, political clout, financial resources. So I

believe I have as much right to protection as anyone out there, any

business, and I am also under the understanding that this country

was founded on its opposition to unfair taxation. I do also believe

that the Europeans with their banana regime, it is contravening

the general agreement of tariff and trade, but I think it is immoral

to target one company because of the wishes of another.

In closing, I will tell you I have been making this impassioned

appeal to you because I am going to tell everybody who is willing

to listen to me, and I could never in my life have believed that at

some point I would be in a fight for my very survival with the U.S.

Government.

So let me just say this, and I don’t want you to take this out of

context, but when you go back to your offices and your constituencies and I go back to Summerville, South Carolina, remember

that me and everybody on this list are still going to be paying these

tariffs. I thank you for your time.

[The prepared statement of Mr. Reinert follows:]

Ms. ROS-LEHTINEN. Thank you very much for excellent presentation, and I think that you speak for everyone else on that list.

Mr. Roberts.

STATEMENT OF JOHN ROBERTS SMALLER, AMERICAN

COMPANIES

Mr. ROBERTS. Good afternoon, Madam Chair. Thank you, Congressman Menendez, for your kind introduction. Thank you all for

the opportunity to present the views of smaller American companies regarding the serious damage they faced from the actions

taken by our government during the recent trade battle with the

European Community.

The National Association for the Specialty Food Trade, NASFT,

is a not-for-profit trade organization, formed to advance the interest of all segments of our industry. Our Members’ products are

high value added food items. Although headquartered in New York,

the NASFT has a nationwide membership of over 2000 specialty

food suppliers, including manufacturers, producers, distributors

and importers, in addition to a growing number of specialty retailVerDate 11-SEP-98 11:34 May 17, 2000 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 63070.TXT HINTREL1 PsN: HINTREL1
27

ers, restaurants and chefs. Over 90 percent of our member companies are U.S. based and are owned and operated by American citizens. In particular, I want to emphasize that the typical NASFT

importer member, like Rick, runs a U.S. based, U.S. owned and

U.S. operated business and employs Americans in a wide variety

of professional positions and in both skilled and entry level positions.

I would also like to make clear where the losses occur, when a

high value added consumer product, like those of our Members and

like Rick’s, is excluded from our economy. Many people don’t realize that for each dollar lost to the foreign exporter, the American

economy loses $3. The details of that are in my submitted statement. The U.S. economy bears 75 percent of the loss when these

tariffs are put into effect. The numbers are there. The people that

made these decisions were told that.

The NASFT strongly recommends and supports an aggressive

U.S. posture in identifying and correcting unfair and unequal trading situations. We also expect our government’s actions to be effective. When retaliation is necessary we should inflict maximum

damage abroad while causing little or no harm to American interests and it can be done.

The NASFT recommends four steps that we believe the U.S. Government must take to stop making U.S. businesses victims of U.S.

trade policy.

First, the U.S. must expand its vision, play chess instead of

checkers in its trade policy and trade actions. Both the banana and

the beef disputes are examples of ill chosen battles and short term

thinking. We have won in the World Trade Organization our court

fight on both bananas and beef, but let us face the facts. We still

have not gained market access, Europe has still not changed its

policies, and the U.S. economy is still suffering 75 percent of the

total damage being done by these retaliations.

My recommendation second is to make trade retaliation create

opportunities for U.S. companies. The careful selection of items is

a critical part of ensuring that we do maximum damage to our opponents, while avoiding damage to our own business and economy.

The process we have detailed in our full text requires greater finesse and more research than our current process. It requires more

work. But if we follow it, we can turn the tables in our favor when

we target the right imports.

Recommendation third, specifically avoid damage to small businesses. Small importers frequently concentrate on limited product

categories. This specialization is a good strategy except when it becomes a liability when our government randomly selects that category for punitive tariffs unrelated to the dispute. The government

agencies selecting and imposing the tariffs have given no consideration, despite the testimony you heard here today, to the impact of

their actions on small businesses.

The proposed Small Business Trade Protection Act offered by

Congressman Menendez would ensure that small U.S. businesses

engaged in importing would not be wiped out. The bill would allow

small businesses to know they will be protected and to concentrate

on business opportunities rather than looking over their shoulder

at government threats.

28

Recommendation fourth, protect America’s reputation as a safe

food source. I ask you, what have we done to our image as a safe

food supplier by trying to force our way into markets with a product, hormone treated beef, clearly unacceptable and suspect by European consumers? You can force it onto the shelf, you can’t force

the consumers to eat it without education. Scientific evidence besides, you have to deal with their emotional feelings.

What further damage will we do by fighting a similar battle for

genetically modified foods and seeds? We are deeply concerned by

these actions that sacrifice our reputation as a safe food supply and

severely damage our current and future chances to grow U.S. food

exports.

In conclusion, we encourage this Subcommittee to recognize that

the current approach is not working; that a new overall approach

is necessary; and that short term protection for small business,

such as a Small Business Trade Protection Act, is essential.

Thank you very much for your attention. I appreciate any questions.

[The prepared statement of Mr. Roberts follows:]

Ms. ROS-LEHTINEN. Thank you so much. Mr. Sanford, if you

could lead the questions?

Mr. SANFORD. I would just go back to, actually you had mentioned Charlene Barshefsky, whose pronunciation I can never get

right. The unfortunate fact is that from time to time the imposition

of increased duties, as a result of a Section 301 unfair trade investigation, may cause serious harm to some American businesses or

consumers. If I am not mistaken that was her letter to you last

month.

Mr. REINERT. Yes.

Mr. SANFORD. Could you tell me or tell the rest of the Committee

any of the things that you think fall as a ramification or it is certainly to me a very callous letter saying, well, there may be a few

bad things that come your way but we kind of need these casualties.

Mr. REINERT. Her answer, in my opinion, is unacceptable. I don’t

accept that. What am I supposed to say? She tried, it is unfortunate it happened, and we are stuck with it. I find another means—

I am trying to find other means, but the simple fact remains this

legislation and this policy has left a great number of American

businesses scrambling for survival, and I can’t believe that is the

intention of our government.

I was apolitical at first. I have become more political, I can guarantee that, but I really don’t want anything to do with the government. I just want to be left alone. I don’t want any imposition. I

just want to do my job, that is all.

Mr. SANFORD. Given our time, I will yield back, and I may come

back later for a question but so that everybody can question. Go

ahead.

Mr. BURR. [Presiding.] The gentleman’s time has expired. Mr.

Menendez.

Mr. MENENDEZ. Thank you. Mr. Roberts, I appreciate all of your

testimonies, and because of the concentration of time we have, I

would just like to go to the one part of your testimony that you

glossed over because of time constraints, which is the process by

29

which we could have Mr. Reinert and others not be in the firing

line of these trade retaliatory actions, at least to make it more equitable for everybody. Could you give us a sense of what your association is advocating in that regard?

Mr. ROBERTS. Certainly. It runs along the line of the bill that you

have submitted and has been posted and basically it has a lot of

logic. When we fought the battle for nutritional labeling exemptions for small companies, Congress was very strong on the fact

that the 500 employee definition of small business was much too

large for this exception. So we started with lower numbers and

wound our way down and settled on 100 employees as being a good

definition of a small business in the food industry.

The second thing we wanted to do was to protect these companies from having to pay the punitive tariffs. So what this would do

is say that any company that is an importer with less than 100 employees would be allowed to bring in the same amount they

brought in last year with no punitive tariffs, and to allow for some

growth, a 25 percent over that level. That cap though, by the way,

is a very good safety factor. It means that Nestle can’t participate

because the employee cap doesn’t hit, even if they had a product

that was eligible, and it also means that large companies are kept

out and large internationals are kept out.

The third thing, which says that you can bring in exactly what

you brought in last year plus 25 percent, means that you cannot

become a conduit, a front man for some other company. So the

rules would still work to prohibit big companies from bringing in

big amounts and would still be punitive to the extent that they are

to the Europeans.

I hope that explains it.

Mr. BURR. I thank the gentleman. Mr. Cooksey.

Mr. COOKSEY. Mr. Reinert, I am very sympathetic to your situation. I am from a small area with a lot of small business people,

and we actually have a lot of exports from Louisiana, too. Is that

a bath product?

Mr. REINERT. Yes, it is HTS code 3307.30.5000. I know that by

heart.

Mr. COOKSEY. What would it do for a gray headed old man?

Mr. REINERT. You can try this. This is a herbal bath, basically

a luxury item, as all these items are I believe on the list. They are

pretty well luxury items. I don’t think there is any essential items

on there.

Mr. COOKSEY. Some of the women use them probably more.

Mr. REINERT. Our demographic is basically a woman. We sell

them right across the country.

Mr. COOKSEY. My comment is that a lot of people come to Washington with problems, and too often politicians want to respond and

they pass some law or the regulators pass the regulation in response to pressure from legislators, and a lot of them are done with

good intention but have unanticipated side effects, and I think that

is unfortunate. I think that a lot of these solutions are better found

on a State level or working out from businessperson to

businessperson, even though they are in different nations in different parts of the world.

30

I would tell you that the most rapid growing part of the economy,

that is growing at the speed of light, is e-commerce, and one reason

it is growing so rapidly is because it is unregulated and untaxed.

The politicians, this bunch up here, have not been able to get into

it yet, but when they do, e-commerce will be bogged down and

slowed down and cause nightmares for businesswomen and businessmen like yourself. So go back home and tell the people in government to get government out of your life, and you will be a lot

better off, and in the meantime we will try to do something to

make it easier for you to do business.

I have a lot of confidence in the ability of people to do business

with each other, no matter what, where they are in these global

markets in the Information Age. The problem is that government

moves a lot slower than businesswomen and businessmen do.

Mr. REINERT. Believe me, I have confidence in government, too.

I believe they are honest people. I believe some of the actions they

take are misguided, and I think they don’t think about the ramifications, but I believe Charlene Barshefsky is a good person.

Mr. COOKSEY. She really is and I am impressed with her.

Mr. REINERT. She is loyal and patriotic as I am, but I am just

trying to find a way to resolve this thing, that is all.

Mr. COOKSEY. Let me tell you one more comment. The good news

is that as we move into more globalization in this technology driven

economy, governments and politicians are going to become less important and less influential because they cannot keep up with ecommerce, and that is good. So there is going to be a better future

in the next millennium, and we will become less important.

Mr. BURR. I thank the gentleman. The Chair would recognize

himself.

Let me just ask if anybody is here from the Department of Commerce, would they raise their hand. Your position with them is

what?

Ms. MOORE. I am with basic industries in the international Administration. I am a staff level person.

Mr. BURR. Your purpose for being here, were you instructed by

the Department to be here for this panel?

Ms. MOORE. No. I was interested in being here to hear testimony.

Mr. BURR. Let the record show her answer, and I would make

this point, too, especially our two witnesses here.

Part of the problem with trade decisions is nobody looks at the

human face behind them. I am sorry that there is not a line of Department of Commerce people here to hear the story both of you

have to tell, you about your product, you about your membership,

and Mr. Berry, to some degree, to hear your suggestions, because

in reading through your testimony I think there was some good

ones there.

Let me suggest to you that our government will never be in question because of the trade agreement, the health of our government

because of the trade agreement that we sign or don’t sign, but

there are countries around the world that are affected greatly by

agreements that they either stand behind or run from, and that

presents the political problem that comes into every situation that

we are faced with, whether it is beef hormones, whether it is bananas. It is not our political problem. It is theirs.

31

I agree with all of you that we haven’t handled it well. We

haven’t taken time to understand it well. We have retaliated in a

way that affects people that nobody at the Commerce Department

knows who they are. I am glad that you were willing to come up

today and put a face with it. I am only sorry that they weren’t willing to come here and see that face because it might have a long

term effect.

Clearly there is a lot of interest on this Subcommittee. There is

a lot of interest in Congress that we get it right in the future.

There is also every confidence, as Mr. Cooksey said, that electronic commerce bypasses in the future a lot of the human mistakes that we make, and whether we like it or not, commerce between two parties is going to happen, and whether we are willing

to be there from a regulatory standpoint at the beginning or not.

On behalf of this Subcommittee, let me thank all three of you

and assure you that all Members will have an opportunity to review your testimony and the questions and the answers that were

given at this Subcommittee. This hearing is now adjourned.

[Whereupon, at 1;10 p.m., the Subcommittee was adjourned.]

(33)

A P P E N D I X

SEPTEMBER 29, 1999

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