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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
       TRADE IN THE AMERICAS: PROGRESS, CHALLENGES, AND PROSPECTS

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

                                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 22, 1999

                               __________

                           Serial No. 106-80

                               __________

    Printed for the use of the Committee on International Relations

                              

                     U.S. GOVERNMENT PRINTING OFFICE
63-475CC                     WASHINGTON : 2000

                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio               EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     BRAD SHERMAN, California
    Carolina                         ROBERT WEXLER, Florida
MATT SALMON, Arizona                 STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York               JIM DAVIS, Florida
TOM CAMPBELL, California             EARL POMEROY, North Dakota
JOHN M. McHUGH, New York             WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas                   GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina         BARBARA LEE, California
PAUL E. GILLMOR, Ohio                JOSEPH CROWLEY, New York
GEORGE RADAVANOVICH, Califorina      JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
            Michael H. Van Dusen, Democratic Chief of Staff
            John P. Mackey, Republican Investigative Counsel
                     Parker Brent, Staff Associate
                                 ------                                

        Subcommittee on International Economic Policy and Trade

                 ILEANA ROS-LEHTINEN, Florida, Chairman
DONALD A. MANZULLO, Illinois         ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio               PAT DANNER, Missouri
KEVIN BRADY, Texas                   EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California        BRAD SHERMAN, California
JOHN COOKSEY, Louisiana              STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska              WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California         JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
             Mauricio Tamargo, Subcommittee Staff Director
        Jodi Christiansen, Democratic Professional Staff Member
                Yleem Poblete, Professional Staff Member
                     Camilla Ruiz, Staff Associate

                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

 Mr. Walter Bastian, Director, Office of Latin America and the 
  Caribbean, International Trade Administration, U.S. Department 
  of Commerce....................................................     5
 Mr. Douglas Browning, Assistant Commissioner, International 
  Affairs, U.S. Customs Service..................................     7
 Dr. Jerry Haar, Director, Inter-American Business and Labor 
  Program, Dante B. Fascell North-South Canter, University of 
  Miami..........................................................    17
 Mr. Philip Stephen Lande, President, Manchester Trade...........    19
 Mr. Louis Marrero, President, Spectra Colors Corporation........    22

       TRADE IN THE AMERICAS: PROGRESS, CHALLENGES, AND PROSPECTS

                              ----------                              

                     Wednesday, September 22, 1999

                  House of Representatives,
              Committee on International Relations,
                              Subcommittee on International
                                 Economic Policy and Trade,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 11:04 a.m. in 
room 2200, Rayburn House Office Building, The Honorable Ileana 
Ros-Lehtinen (Chairman of the Subcommittee) presiding.
    Present: Representatives Ros-Lehtinen, Chabot, Brady, 
Menendez, and Delahunt.
    Ms. Ros-Lehtinen. The Subcommittee will come to order.
    Thank you so much for being with us today.
    As warfare and political turmoil have become echoes of a 
grim past, replaced by the sounds of democracy, trade has 
flourished among the countries in the Western Hemisphere.
    The days of mercantilism are over, as most governments in 
the region realize that economic development, growth, and 
prosperity are best achieved through free trade and open 
markets, where the entrepreneurial spirit can blossom.
    State-owned and operated enterprises are being privatized 
and deregulation introduced. Structural reforms in both the 
public and private sector have begun toward the creation of an 
environment characterized by transparency, efficiency, and 
stability.
    The 1982 debt crisis in Latin America forced many countries 
to adopt an agenda which included a further opening of their 
economies to international trade. Average import tariffs in 
these countries fell from 45 percent in 1985 to 11 percent in 
1997.
    These reforms, however, have not been embraced with the 
same commitment and enthusiasm in all the countries of the 
region. As a result, trade openness, market access, and 
competition continue to be pivotal issues in U.S.-Latin America 
commercial relations.
    Some would argue that they provide the impetus for the Free 
Trade Area of the Americas, but there are other realities 
driving the negotiations for an FTAA.
    As a region, the countries in the Western Hemisphere 
constitute the fastest-growing market for U.S. exports and the 
second largest regional market for U.S. foreign direct 
investment.
    In turn, the United States is the fastest-growing market 
for their products. Yet, U.S. firms are facing the possibility 
of losing this market to European competitors.
    In June of this year, leaders from 48 European, Latin-
America, and Caribbean nations signed a declaration to promote 
and develop a strategic bi-regional partnership.
    If the negotiations are successful, the ensuing agreement 
will create a unified market of about 575 million consumers and 
would further boost European Union trade in the region.
    Within this context, progress and concrete results in 
negotiations toward an FTAA are a matter of great urgency.
    In July of this year, the trade negotiations committee, 
which has oversight responsibility for the entire FTAA process, 
agreed to non-Customs-related business facilitation measures to 
be in place by January. It will also recommend that a deadline 
be set by the trade ministers at the upcoming November meeting 
to complete an FTAA draft agreement within the next 18 months.
    Nevertheless, by all accounts, the negotiations are 
proceeding at a snail's pace, only to be delayed further by the 
upcoming WTO rounds.
    In the interim, our U.S. companies are battling to overcome 
tariff and nontrade barriers, our trade deficit with these 
countries is ballooning, and violations of intellectual 
property rights continue. Legal trade is being used for illegal 
purposes.
    Conversely, Central American countries are struggling to 
recover from the damage caused by Hurricane Mitch.
    The countries of the broader Caribbean Basin Initiative are 
looking for preferential trade status equal to U.S. NAFTA 
partners, MERCOSUR countries are working to minimize spill-over 
effects of the Brazilian currency crisis, and these are just 
focusing on a few of the problems.
    How do these realities affect the FTAA process? Is the lack 
of fast track authority responsible for the delay in the 
negotiations? Is the creation of a multi-country, multisectoral 
trade agreement the best course of action?
    Can large industrialized economies, emerging markets, and 
small economies integrate with all parties benefiting equally?
    Some would argue that the negative impact of NAFTA and the 
disparities in the WTO structure regarding the implementation 
of the rules and requirements are vivid examples of how this 
approach is doomed to fail. What is the alternative, if any?
    These are some of the issues which we will be addressing 
during the course of today's hearing, and we thank the 
panelists, as well as the audience, for being with us.
    [The prepared statement of the Hon. Ileana Ros-Lehtinen 
appears in the appendix.]
    Ms. Ros-Lehtinen. I now would like to turn to our Ranking 
Rember, Mr. Bob Menendez of New Jersey.
    Mr. Menendez. Thank you, Madam Chairlady.
    Let me thank you for having us have this hearing, which I 
think is incredibly timely, as we have the visits of the 
president of Colombia here, and at the same time as we are on 
the verge of having a visit by Central American presidents 
here, speaking about Caribbean Basin Initiative or enhancement.
    In December 1994, when I addressed the Summit of the 
Americas, the atmosphere was filled with hope as the 34 leaders 
stretching from throughout the hemisphere, from Canada to 
Chile, agreed to pursue a free trade agreement by 2005, a 
market of 750 million people and $9 trillion in gross domestic 
products, and that progress since that time has been slow.
    Trade relations within the hemisphere nonetheless have been 
expanding rapidly. Countries in the region are moving forward 
with regional trade pacts in advance or perhaps in lieu of the 
FTAA.
    There are now five regional trade pacts, including the 
MERCOSUR common market, which encompasses South America's 
economic power house, Argentina, Brazil, as well as Paraguay 
and Uruguay.
    As the progress toward an FTAA has slowed, countries in 
regional trade pacts are beginning to pursue agreements outside 
of the hemisphere, particularly with the European Union and 
countries of Asia, and while American concerns about worker 
rights and the environment are obviously going to continue to 
be part, and justifiably so, as part of the debate, unless we 
take the FTAA process seriously, the United States might very 
well find itself having ceded what is a natural market to our 
European and Asian competitors, and I particularly believe, not 
only because of the long history of the United States within 
the hemisphere and its geography within the hemisphere, but 
also because of the incredible natural resources that America 
has in Americans of Hispanic descent, who create a natural link 
between the countries of Latin America and the United States, 
who understand both language and the importance of language, as 
Chevrolet found out when they tried to sell the Chevy Nova in 
Latin America.
    Nova, for those of you who do not speak Spanish, when 
pronounced a certain way, means it does not move, it will not 
go. I do not care what type of marketing program you have, but 
if it does not move, it is not going to sell.
    Language is important, but also business customs, as 
Americans learned when they dealt in Japan, that you just do 
not deal--sit down, offer your product and service, negotiate a 
price, that there are business customs and culture that is 
involved. That is also true in Latin America.
    We have in our people one of the greatest opportunities to 
develop those natural trade links, and many of them are, 
notwithstanding the lack of an FTAA.
    With those realities in mind, with understanding that trade 
with Latin America is the fastest growing of all the 
international regions, understanding the Central American 
presidents who will be here saying that, for the most part, the 
greatest opportunity for them not to have had a century 
eradicated by the virtues of the hurricanes that took place and 
affected them is to, in fact, have Caribbean Basin Initiative 
enhancement, and understanding that, when we look at Latin 
America, in which total merchandise trade between Latin America 
and the United States for the last 8 years grew by 144 percent 
compared with 70 for Asia and 61 for Western Europe, and 
everybody was look at the Asian tiger prior to its flu, the 
fact of the matter is we have an incredibly exploding export 
market for which we are natural allies with and natural 
opportunities to take place, and because that effort creates 
jobs here at home.
    We have a series of issues that, as we explore this, we 
need to--and I hope to hear from some of our panelists today as 
they talk about some of the issues.
    Of course, we have worker rights and environmental 
assurances, but also, what are the potential hazards that might 
be addressed in a final agreement such as the trans-shipments 
of goods from nontrade-agreement countries and the trafficking 
in elicit substances or narcotics which might be facilitated, 
as some might argue, by a free trade agreement.
    We have a number of foreign policy tools we can use to 
bolster the region socially and economically. We have spent a 
lot of money in the region, particularly during the 1980's, to 
promote democracy.
    It is amazing to me that, when we have finally, to a large 
degree, accomplished some of those goals, at least the 
incipiency of democracies, that now we do not seem to be paying 
the time and attention necessary to cement those democracies, 
of which trade can be one of the great foundations of that 
effort.
    We want to hear from our witnesses and to learn from them 
today and also to exchange in a dialogue to see how do we move 
this process along.
    Ms. Ros-Lehtinen. Thank you so much, Mr. Menendez.
    Mr. Delahunt?
    Mr. Delahunt. I do not have any opening statement. Thank 
you.
    Ms. Ros-Lehtinen. Thank you very much.
    I would like to introduce our first panel.
    Our first witness is Mr. Walter Bastian, the Director of 
the Office of Latin America and the Caribbean for the U.S. 
Department of Commerce.
    He joined that office in 1974, and he is responsible for 
developing programs, policies, and strategies designed to 
strengthen the commercial position of the United States in 
Latin America.
    Mr. Bastian also serves as the Acting Director of the Latin 
America-Caribbean Business Development Center, and before 
joining the department, he worked in the corporate trust 
department of a Washington bank and as an intelligence officer 
in the U.S. Air Force, and we thank him very much for joining 
us.
    He will be followed by Douglas Browning, who is the 
Assistant Commissioner for the Office of International Affairs, 
where he is responsible for a staff of nearly 100 in the United 
States and overseas.
    Commissioner Browning has been a U.S. Customs Service 
Employee for over 21 years, starting in 1977 as a staff 
attorney in the Office of Regulations, where he has served as 
an Assistant Regional Counsel in New Orleans and Baltimore and 
as a Senior Counsel for International Enforcement in the Office 
of Chief Counsel in Washington and District Director in 
Baltimore.
    Mr. Browning is the recipient of the Presidential Rank 
Award for 1997 and was a member of the Customs Executive Team, 
where he earned a Hammer Award from the Vice President under 
the National Performance Review, and we thank you for being 
here, and I would like to ask Mr. Brady if he has some opening 
comments.
    Mr. Brady. No, ma'am.
    Ms. Ros-Lehtinen. Thank you. Thank you, Jody, for your help 
today.
    She is helping us in our Subcommittee on both sides.
    So, we thank you for that.
    Thank you, Mr. Menendez, for helping us.
    Walter, thank you. We would love to hear from you.

  STATEMENT OF MR. WALTER BASTIAN, DIRECTOR, OFFICE OF LATIN 
AMERICA AND THE CARIBBEAN, INTERNATIONAL TRADE ADMINISTRATION, 
                  U.S. DEPARTMENT OF COMMERCE

    Mr. Bastian. Madam Chair, I am pleased to appear before the 
Subcommittee today to discuss our commercial relationship with 
Latin America. In many ways, it is a story of present 
challenges standing the way of future opportunities.
    We are less than 50 days away from the Free Trade Area of 
the Americas Ministerial, a ministerial which will bring us 
exactly halfway toward completion of this decade-long 
undertaking, and it is the proximity to this event that makes 
this a timely hearing, indeed.
    Let me begin by putting the United States, Latin American, 
and Caribbean--putting that trade into perspective.
    Latin America is a major trade and investment partner for 
the United States, tied closely to us by geography, history, 
and culture.
    Today, Latin America, including Mexico, accounts for one 
out of every five dollars in U.S. merchandise exports, up 
dramatically from under 14 percent at the beginning of the 
decade.
    In fact, Latin America has been responsible for almost half 
of all U.S. export growth since 1995.
    Further, excluding Mexico, Latin America is the only region 
of the world where the United States has consistently run a 
large and growing trade surplus in the 1990's, reaching a 
record 13 billion in 1998.
    I must note, however, that this trend is in jeopardy this 
year.
    Last year, American firms in 13 U.S. states exported more 
than $1 billion each to the Latin American-Caribbean region. 
Four states, California, Florida, New York, and Texas, each had 
1998 exports in excess of $4 billion to the region.
    Unfortunately, even before Brazil's devaluation, the global 
financial crisis and lower commodity prices were having a 
dampening effect of economic growth in Latin America and 
Hurricanes George in the Caribbean and Mitch in Central America 
had taken a toll.
    While Latin America's economies collectively grew almost 5 
percent in 1997, last year's growth was less than 2 percent. 
This region-wide downturn, coupled with significant currency 
devaluations in several markets, most notably an almost 40-
percent devaluation in the Brazilian rival against the U.S. 
dollar, have both dampened the demand for U.S. exports while at 
the same time increasing their cost in dollar terms relative to 
domestically produced goods.
    This slowdown is clearly visible in our trade performance. 
Excluding Mexico, 1998 marked the first time since 1986 that 
our total trade with Latin America declined, with our exports 
to the region flat and imports falling.
    Our trade balance, although still in surplus at almost $350 
million through July of this year, has decreased dramatically 
from the same period last year.
    Fortunately, recent reports indicate that the Latin 
American downturn may be short-lived, with growth returning to 
many of the countries next year. But while growth is expected 
to return to the region, followed by an expected recovery in 
U.S. exports, let me note four areas of nagging concern, where 
recent political and economic developments are continuing to 
dampen U.S. commercial opportunities.
    First, the current period of turmoil in the Andean 
community bears close watch.
    Uncertainty in Venezuela, Colombia, and Ecuador has 
exacerbated the recent downward trend in U.S. exports to the 
region, down by almost one-third during the first 6 months of 
1999, and caused a major decline in new investments.
    Second, the challenge in Central America rests on the 
successful recovery of the region from last year's devastating 
hurricane.
    The economic impact of Hurricane Mitch on the Central 
American countries was enormous, placing significant economic, 
social, and political pressure on the region's governments.
    Third, there is a significant increase in competition that 
U.S. products face within what has heretofore been a 
traditional U.S. market.
    Latin America and Caribbean nations, strongly encouraged by 
the United States, have moved beyond their traditional closed 
markets to embrace greater market openness and increased 
competition.
    At last count, more than 30 regional and sub-regional trade 
arrangements were active within the region without U.S. 
participation.
    Chile, for example, either has or is negotiating agreements 
with every democratic nation in the Western Hemisphere except 
the United States.
    In addition, the European Union, traditionally our 
strongest competitor in Latin America and especially in 
MERCOSUR is refocusing its attention on the region.
    Fourth, one of the administration's key commercial issues 
focuses on the need for most Latin American countries to reform 
their intellectual property rights legislation and enforcement.
    They must do so in accordance with the WTO trade-related 
aspects of intellectual property rights or TRIPS agreement 
prior to January 1, 2000. Patent, trademark, trade secret, and 
copyright enforcement regimes which fail to meet TRIPS 
standards are areas of concern.
    Despite the aforementioned concerns, Latin America remains 
an area of significant opportunity. Let me briefly touch upon 
the potential Free Trade Area of the Americas.
    Much has changed since the heads of state from the region's 
34 democratically elected governments met in Miami in December 
1994 to announce agreement toward a Free Trade Area of the 
Americas by 2005. But much also remains the same, including the 
impetus behind that hemispheric consensus, that a comprehensive 
Free Trade Area of the Americas, comprising the world's largest 
free trade zone, would offer unparalleled opportunity to 
businesses, farmers, and working families and strengthen the 
hemispheric move toward open markets under the rule of law.
    Today we stand at the halfway point in this effort, and 
despite the gloomy economic forecast for 1999, we see little 
evidence that the region is any less committed to completion of 
the FTAA on schedule, as it was in 1994.
    The next FTAA ministerial meeting will take place November 
3rd and 4th in Toronto, Canada, and as I'm sure that Mr. 
Browning is going to cover, given the mandate to achieve 
concrete progress by the year 2000, vice ministers have agreed 
to recommend a package of nine customs and transparency 
business facilitation measures to be implemented by January 1.
    The customs measures will result in more efficient customs 
processing for express shipments, for low-value shipments, and 
for business-related materials such as promotional materials 
and equipment.
    Ms. Ros-Lehtinen. If you could start to make your summary.
    Mr. Bastian. This should provide the needed impetus to the 
negotiations as we move toward their timely and successful 
conclusion.
    In closing, I want to thank the chair and other Members of 
the Subcommittee for your appreciation of the critical work 
that we are doing in the International Trade Administration, 
and we in ITA are working together as a unit to ensure full 
access to foreign markets for goods produced by American firms 
and workers and to achieve full compliance by trading partners 
with the trade agreements they have signed.
    Thank you, Madam Chair.
    [The prepared statement of Mr. Bastian appears in the 
appendix.]
    Ms. Ros-Lehtinen. Thank you so much.
    Mr. Browning?

  STATEMENT OF MR. DOUGLAS BROWNING, ASSISTANT COMMISSIONER, 
          INTERNATIONAL AFFAIRS, U.S. CUSTOMS SERVICE

    Mr. Browning. Thank you, Madam Chairman.
    Madam Chairman and Members of the Subcommittee, I am 
pleased to appear today to address the subcommittee on the U.S. 
Customs Service's involvement in the trade programs in the 
Western hemisphere, particularly the Free Trade Area of the 
Americas initiative.
    This initiative calls for the creation of a preferential 
trade arrangement encompassing the 34 democracies of the 
hemisphere, with negotiations scheduled to conclude by 2005.
    The FTAA process promises to have a profound impact on 
customs procedures in the region, since the efficient 
processing of merchandise at ports of entry will be fundamental 
to the agreement's success.
    While much of the work in crafting a preferential trade 
agreement consists of the political dynamic of exchanging 
country positions, there is a technical and, indeed, 
operational element that must be considered to ensure that the 
trading community receives the full benefit of the preferential 
regime.
    At the same time, governments involved in the FTAA will 
have to address how to ensure that administration of the trade 
agreement does not adversely affect enforcement activities.
    The key variable in these calculations is customs 
procedures and a recognition that efficient and effective 
customs practices are the principle mechanism for ensuring that 
these goals are accomplished.
    Based on this understanding, the United States Customs 
Service has been involved in the FTAA process since its initial 
stages, contributing to the efforts by the Office of the U.S. 
Trade Representative to first explain the existing customs 
practices and to assist them in the development of government 
positions in the customs arena.
    U.S. customs involvement in the FTAA can be traced to the 
preparatory stage following the 1994 Summit of the Americas.
    Formal negotiations of the FTAA were launched at the second 
Summit of the Americas in 1988, and with this meeting came a 
negotiating structure consisting of a number of negotiating 
groups led by a trade negotiating committee.
    Within the negotiating group of market access, customs 
discussions have turned to the issue of what procedures may 
potentially be incorporated into the FTAA chapter on customs.
    Although no conclusions have been reached at this time and 
substantive proposals will come in later stages of the process, 
I can indicate to you that the U.S. Customs Service has been 
very clear in its recognition of enforcement as an important 
element for consideration in this process.
    In the customs area, the Trade Negotiation Committee of the 
FTAA has secured consensus as noted on nine customs-related 
deliverables. Each of these is intended to ease the movement of 
legitimate trade.
    As is the case with other international initiatives in 
which we are involved, our work within the FTAA has been 
designed to balance the objective of facilitating legitimate 
commerce with effective enforcement.
    We at the U.S. Customs Service are acutely aware of the 
potential challenges that can evolve in the implementation of 
any free trade agreement.
    Indeed, our experience with the North American Free Trade 
Agreement, which overnight created a market of 360 million 
consumers, has been instructive in this regard.
    Clearly, free trade agreements between the United States 
and other countries have the potential to provide positive 
benefits to each country that is a party to that agreement.
    Unfortunately, the potential also exists for importers to 
unlawfully claim preferential treatment under a trade agreement 
in order to avoid duty, quota, or other import restraints.
    For instance, a trade agreement might allow goods imported 
into the United States from a certain country to receive lower 
duty rates. The importation or trans-shipment of products from 
a country which is not party to that agreement through a 
country which is a party to that agreement can result in goods 
gaining unlawful access to the United States, as well as 
nonpayment of lawful duties or evasion of quota restriction.
    Trade agreements, while advantageous in promoting 
international trade and investment, do provide opportunities 
for unscrupulous importers to gain unfair business advantage.
    While there is scant evidence to establish a direct link 
between free trade agreements and increased trans-national 
crime, this does not diminish the threat from international 
criminal cartels.
    We recognize that an increase in the volume of trade 
provides additional opportunities for these criminal cartels to 
secret their cargo in and among legitimate cargo.
    At the U.S. Customs Service, we know the threat is real, 
and it is not only growing in magnitude, it is also growing 
more complex and more sophisticated every day.
    Accompanying these general challenges are issues specific 
to the region, particularly as they relate to the illicit 
trafficking of narcotics and the laundering of proceeds from 
trans-national crimes.
    There are innumerable methods used by drug barons to 
launder the proceeds of narcotics trafficking. One of the most 
complex, far-reaching, and insidious is through the use of 
legitimate international trade.
    The black market peso exchange is an example of how trade 
is used to launder drug money, and if I might, I would like to 
give you just a brief illustration of how this process works.
    We will use Colombia as our example.
    In Colombia, a narcotics trafficker produces and ships 
illicit drugs to the United States. The narcotic trafficker 
uses the Colombia pesos to pay for these operations in 
Colombia.
    Upon selling the drugs in the United States, the narcotics 
trafficker receives large amounts of U.S. currency, which the 
narcotics trafficker then sells in bulk amounts to a specialist 
in handling narcotics proceeds.
    The specialist, often called a peso broker, undertakes to 
transfer the proceeds back to Colombia to pay for the narcotics 
trafficker for the money received in the United States minus 
the broker's fee. Currently, this fee is approximately 
somewhere between 25 percent. Once that is done, the 
transaction starts again.
    International trade is the Customs Service's core business, 
and we are uniquely suited to address the issue. We are now 
educating those businesses which are involved in international 
trade and which are at risk of being victimized by drug money 
launderers.
    In the last 8 years, our undercover money laundering 
operations targeting the peso brokering system have resulted in 
the seizure of over $800 million in cash and monetary 
instruments.
    Ms. Ros-Lehtinen. Please summarize your statement now, Mr. 
Browning.
    Mr. Browning. As a final point, Madam Chairman, trade 
relations with the Americas are an area in which the U.S. 
Customs has focused a great deal of attention.
    We are now engaged in supporting the free trade of the 
Americas and are drawing upon our NAFTA experience and what we 
know to be the challenges posed by trade in the Americas to 
support the goals of trade liberalization and effective 
enforcement.
    Each year at our land, air, and sea borders, Customs 
processes over 15 million containers, approximately 460 million 
passengers, and a 125 million conveyances at our 301 ports of 
entry.
    Since the passage of NAFTA, we have seen trade with Canada 
and Mexico increase substantially.
    The FTAA, which will be comprised of the 31 remaining 
countries in the hemisphere, promises to increase trade even 
more dramatically.
    Efficiency in customs procedures, defined in terms of 
facilitation--facilitating the movement of legitimate commerce 
and preserving effective enforcement, will be a key 
consideration in the context of this anticipated growth.
    Thank you, Madam Chairman.
    [The prepared statement of Mr. Browning appears in the 
appendix.]
    Ms. Ros-Lehtinen. Thank you so much, Mr. Browning.
    Mr. Bastian, as we know, many--some have said that the 
FTAA, along with other trade agreements, have the potential of 
lowering the standard of living for U.S. workers, encouraging 
U.S. businesses to relocate to take advantage of the lower 
wages which are being offered in other countries, also the 
environmental laws would not be enforced enough, the same 
arguments that we had heard in NAFTA.
    Do you hear that related to the FTAA, and what arguments 
can you make to those who fear that this new trade agreement 
would go in that direction, similar to NAFTA?
    Mr. Bastian. Madam Chair, obviously we are familiar and 
cognizant of the concerns, particularly as they were expressed 
in the NAFTA debate. I think the situation changes a little bit 
in the Free Trade Area of the Americas.
    The concerns remain very real, but I think, if you are 
focusing part of the answer to this on, let us say, the 
assembly section, I think the further south you go, that 
becomes less and less of an issue, because the business itself 
becomes less and less viable.
    I do think that the argument, also, that we have made in 
the FTAA debate is that our interest in all of this and I am 
sure that the interest of the foreign governments is in raising 
those lower standards of living.
    Their intent in market reform, market liberalization in the 
trade agreements that they are signing is to raise their 
standards, is to raise the wage scale, improve the whole social 
situation for citizens of the hemisphere.
    I think that is a driving force, in part, behind this, that 
they realize that they cannot afford, as governments, to 
continue to maintain the status quo with respect to social and 
environmental programs that they have in place. The FAA is 
viewed as an avenue to begin to address some of those issues.
    Ms. Ros-Lehtinen. Thank you.
    Mr. Browning, in your testimony, you talked about the 
potential threats that I think are very real to us about money 
laundering, counterfeit merchandise, black market trade.
    How successful do you think that we will be in working with 
our trading partners, our allies in making sure that we would 
stop this traffic of contraband, and what about the fears that 
folks have that we will be lowering our inspections and our 
standards because of the FTAA?
    Mr. Browning. Madam Chairman, as you are aware, we have a 
relatively small work force of 20,000 very dedicated officers, 
but one of the things that has been most helpful to us is we 
have been developing strategies that we think will, first of 
all, enhance our ability to do our job better, better targeting 
mechanisms.
    Congress has been extremely good to us in the area of 
providing us with nonintrusive technology, x-ray facilities 
that we can use to rapidly examine cargo coming into the United 
States, and at the same time continue to move--facilitate the 
movement.
    We have also recognized that we cannot do this alone. We 
have developed a number of industry partnership initiatives, 
our Business Anti-Smuggling Coalition, our Carrier Initiatives 
Program, our ACSI, America's Counter-Smuggling Initiative, all 
of which are designed to elicit the assistance of people who 
know that business best, and that is industry, and helping us 
to identify areas of potential vulnerabilities.
    On the international side, we have had great success in 
developing lines of communication and information exchange with 
our counterparts.
    Indeed, we have in existence about 44 customs mutual 
assistance agreements, and I would have said yesterday, 6 of 
which are with countries in the Western Hemisphere, but as of 
yesterday, we have now added Colombia to that battery of 
agreements, and the Commissioner signed that agreement, with 
his counterpart, in Miami yesterday.
    A good bit of the groundwork--and I think a lot of that is 
to be attributed to the very open approach that we have 
received from the Pastrana Government and other governments in 
that hemisphere, and if this is indicative of what we are able 
to do, I think we will have some success in getting our 
partners on the industry side and our partners in the other 
government agencies working with us to try to address this 
issue.
    Ms. Ros-Lehtinen. Thank you so much.
    Mr. Menendez?
    Mr. Menendez. Thank you both for your testimony.
    Let me ask you, what--Mr. Bastian, what are the situations 
in Venezuela? President Chavez will be here tomorrow. President 
Pastrana is here today. Those situations that you reference to 
in your speech--how do they affect this whole process?
    You talked about the current reality of its reduction with 
some of those countries. How do they affect--have we noticed 
any appreciable differences in the role that the ministers have 
taken from those countries in terms of promoting the FTAA, and 
how do they affect the process as we go through the second half 
of the 5 years that is left?
    Mr. Bastian. I think the short answer is--have we seen a 
retrenchment or a withdrawal of the visibility of the ministers 
from these countries in the FTAA process?--and the answer is 
no. But I think the concern--looking at it from the perspective 
of the Department of Commerce and the U.S. business community, 
I think there we begin to see that there are some very real 
concerns.
    There is a concern with the direction that the Chavez 
government is going, so much so, I think, that it in part 
dictates the reason that he is up here, this week along with 
his ministers meeting with government and private sector 
officials. He has also representatives from his constitutional 
assembly, the legislature, up here for the same purpose, to 
clam investors nerves because the U.S. business community, in 
Venezuela is wondering what direction this new constitution is 
going to go and what it is going to mean particularly for U.S. 
investment.
    I think there is concern also--and this what really may 
affect the FTAA process, as to what is happening in Colombia. 
This is especially true with respect to its political problems, 
which really are more the purview of the State Department or 
the National Security Council than ours, but we look at it, 
again, from a business perspective.
    What has happened to U.S. investment down there? It is 
slowing down. Trade is also dropping.
    How do you keep people engaged? You have U.S. companies 
there and also in Ecuador. What does this do for less 
investment on the part of U.S. companies, less job creation.
    The long-term spill-over effect, I think, from those 
situations poses a hazard to what we are trying to accomplish 
in the hemisphere through the FTAA.
    Mr. Menendez. It has not lessened the zeal of the private 
sector still to seek an FTAA.
    Mr. Bastian. It has not, but I think you began to see -- in 
this country, we believe very strongly in the public-private 
sector partnership, and I know, in our department and in 
others, we have all sorts of committees and councils, and we 
get together with the private sector to hear what their 
concerns are and help us develop our negotiating strategies.
    That is an idea whose time has not quite come in Latin 
America, and I think as the situations deteriorate in the 
Andean region, I think what you get is less receptivity on the 
parts of some of the governments to listen to their private 
sectors, to get private sector input on the way negotiations 
should go, and that concerns us equally.
    Mr. Menendez. One other question. What is the effectiveness 
of the South American sub-regional trade pacts on the FTAA and 
the upcoming WTO new round of possible negotiations?
    Are the Latin Americans saying, well, this is taking too 
long and we have the Europeans out there pursuing us, we have 
WTO maybe pursuing us, we have all of our own regional trade 
pacts, maybe we really do not need this at the end of the day?
    Mr. Bastian. I think there are probably a couple of points 
in response to your question.
    I think, first and foremost, that the United States is 
still the market everybody wants to be able to deal with. We 
have the largest market in the world, and the trade figures 
yesterday, I guess, reflect that. I mean we are the market 
everybody wants to sell into.
    I also think maybe from the Latin American perspective -- 
and trying to read this from Washington could be difficult.
    Mr. Menendez. A lot of us would like to marry Jennifer 
Lopez, but we may never think it is possible. Not me, but the 
question is do they believe that this whole process is 
ultimately going to achieve that?
    Mr. Bastian. I think that is the second part of the point I 
am trying to get to. I think they do.
    I think, in retrospect, the easy part of this whole 
process, this whole Latin American reform process, was making 
the decision to go forward with it. The difficult part comes in 
implementing it, and it is not one of these things that is 
implemented overnight, and we are beginning to see some of the 
fallout from that.
    That is natural.
    I mean any academic exercise along these lines would show 
it to you, that in reform processes, you cut down on bloated 
bureaucracies and cut the Federal spending and so forth, you 
are going to have unemployment and a number of issues that they 
have to work through, and I think that possibly the timing 
here, going from 1994 to 2005, to a degree, gives them a chance 
to make some adjustments, also gets them a chance to engage 
further in market expansion.
    Maybe it is not possible to sell all of their product into 
the United States, because--for a variety of reasons, we do not 
want it, it is not competitive, whatever, developing 
alternative markets is important to them, and I think MERCOSUR 
goes a long way to--in that regard, and I would think also 
there is the fact, particularly if you are Brazil, that you 
might think that the MERCOSUR--strengthening MERCOSUR and 
developing more trade agreements with other Latin American 
countries outside of MERCOSUR, as they have done with the 
Andean community, strengthens their hand as we get closer to 
2005.
    Mr. Menendez. One last question, Mr. Browning.
    What does the Customs department view as or envision in 
terms of placing safeguards on the questions of trans-
shipments? Is that part of the negotiations that are taking 
place? Can you give us any preview as to how you are going to 
safeguard in terms of trans-shipments?
    Mr. Browning. Clearly, Congressman, one of the issues that 
would arise would be the question of origin of goods under any 
preferential arrangement, and there is within the nine items 
that have been identified a clear regime of discussions to 
address the question of origin.
    As is the case with NAFTA where we have a very rigid origin 
certification process, I would anticipate that would be the 
same process involved in the FTAA. No doubt, with the number of 
questions involved, it will be more complex for us to enforce 
that, but there is a residual impact on countries that allow 
themselves to be used for trans-shipment purposes, and that is 
that legitimate merchandise manufactured in that country will 
not receive the benefits of the particular preference, and that 
impacts more directly the goods and services and economy of 
that country.
    I think that there will be both an incentive to try to 
enforce this, as well a precedent and a mechanism for ensuring 
that we can enforce the question on rules of origin and origin 
of goods that are subject to preferential treatment.
    Mr. Menendez. Thank you, Madam Chairman.
    Ms. Ros-Lehtinen. Thank you so much.
    Mr. Brady?
    Mr. Brady. Thank you, Madam Chairman.
    Thank you both for testifying today.
    I had a very good question prepared but got distracted when 
Jennifer Lopez got introduced into the discussion. Other than 
my wife, I cannot think of anyone more distracting than her.
    A question, Mr. Bastian. Your remarks reflect a frustration 
that many of us have, which is short-term, year-to-year events 
affect our long-term view on trade, slow down our negotiating, 
and really put off what we know is the right thing to do long-
term, which is negotiate this free trade agreement.
    My question is, in the end, do you have any idea in what 
form the Free Trade Agreement for the America might take? Would 
it follow a NAFTA-type format, a MERCOSUR-type concept, a 
European Common Market approach? Just guessing, as you watch 
things unfold, which direction is it headed, if any?
    Mr. Bastian. I hope it is headed in a direction.
    I think I would see this going more closely along the lines 
of a NAFTA, as comprehensive as possible agreement with 
significant safeguards for our industries, but without 
sacrificing--as with NAFTA, without sacrificing the protections 
and the mechanisms that are available for U.S. companies, but I 
see it probably as broad and expansive as possible, which, 
frankly, is complicated.
    I mean the more countries you have, that makes it a more 
difficult process.
    Mr. Brady. What is the most important thing Congress can do 
to keep these negotiations moving forward?
    Mr. Bastian. I think, to send the message, would be fast-
track authority, no doubt about that. We have done a very good 
job in the last 4 years of convincing--of convincing Latin 
Americans that fast-track was absolutely key to the negotiating 
process and we really needed fast-track, and they bought it.
    We know that we can obviously continue to negotiate without 
it, but I think, as a signal sent, I think that passing fast 
track would be an extremely strong one.
    Mr. Brady. Thank you very much. I agree, for whatever it is 
worth.
    Mr. Browning, some opponents of free trade, in effect, say 
free trade means--increased trade means increased crime, 
increased drugs, increased chaos, so therefore the answer is do 
not increase trade or go the opposite way.
    Isn't your approach much more common-sense, which is, 
because increased trade, like any other changes in the world, 
increases the opportunities, give us the resources and let us 
continue to work smarter and better to address the new changes, 
new approach.
    Mr. Browning. Congressman Brady, I agree 100 percent with 
you.
    As I noted earlier in my comments, one of the things for us 
as an organization that has been most encouraging has been the 
support we have received from Congress in the nonintrusive 
technology area.
    We have a deployment plan over the next 5 years that will, 
in fact, deploy $54 million worth of nonintrusive technology 
along the southern tier, and I think we recognize that that is 
a clear area of vulnerability.
    With those tools, with additional targeting mechanisms, 
with better educating our people on what we need to look at, I 
think we should be able to continue to safeguard the borders of 
this nation.
    Mr. Brady. From your standpoint, obviously, trying to stop 
31 smaller leaks at their source is more productive than trying 
to stem a flood when it gets to our borders.
    What kind of enforcement mechanism would be strong enough 
in this agreement to provide the incentives to tackle this 
issue, these issues at their origin, at the source? What kind 
of enforcement mechanism really works?
    Mr. Browning. Actually, I think one of the things--and some 
of this we are pursuing already. I am not sure if you can build 
into an international trade--free trade agreement a mechanism 
that will necessarily achieve the result that you are talking 
about, Congressman Brady, but I think, in getting the various 
customs administrations and law enforcement agencies talking 
together about the issue and about the potential impact in 
providing technical assistance and training, and a very good 
example of this is what is happening in the context of 
Colombia.
    Through both our treasury department, through our justice 
department, through the utilization of fees, assets, a 
substantial commitment is being made in training and the 
infrastructure area to assist the Colombian government in 
better policing and better addressing some of the concerns that 
potentially impact us as a nation.
    Your logic is flawless. We have, in the area, for example, 
of weapons of mass destruction, made a substantial commitment 
in western Europe--sorry--Eastern Europe, to trying to stem at 
the source the movement of these kinds of commodities and are 
starting to see some results.
    I think that the issue here is to assist these nations in 
understanding the potential impact, to provide them with 
infrastructure, and to create cooperative bridges for training 
and technical assistance and the resources to support that can 
be made available to them.
    Mr. Brady. Thank you very much.
    Ms. Ros-Lehtinen. Thank you, Mr. Brady.
    Mr. Delahunt?
    Mr. Delahunt. Yes. Thank you.
    This testimony is very informative, and I want to thank 
you.
    I think it was Mr. Bastian who talked about living 
standards.
    I am a member with has a concern about workers' rights. I 
translate the concept of worker's rights into living standards, 
and I see a relationship between living standards and the 
uncertainty and turmoil we see in some Latin American nations; 
You indicated that living standards have improved.
    I think it is very, very important to provide Members of 
Congress with that information in very clear and simple terms 
so that at least I can understand it. Earlier, you referenced 
Venezuela.
    I recently returned from Venezuela and had an opportunity 
to meet with President Chavez, who is going to be meeting with 
Members of this Committee tomorrow, and the business community 
expressed concerns, because it is uncertain as to what is 
occurring.
    There is a new constitution that is being formulated.
    I think some of their concerns will be assuaged and will 
disappear. But I think it is important to understand that, for 
many of us, the prosperity that is brought about by free trade 
be shared equally among all members, all citizens of these 
various societies.
    In the past 20 years in Venezuela, under dark democratic 
government--I guess there are degrees of democratic 
governments, but we now have a situation in Venezuela where you 
have 80 percent of the population below the poverty line, and I 
dare say much of the turmoil that exists in Colombia can be 
accounted for because of disparity of income and wealth among 
citizens.
    The reality is, in Latin America, for years, we have had 
economies where there are those few who have and those that do 
not have, in large numbers.
    I guess that is more of a statement than a question, but I 
have got to run, because I am meeting with President Pastrana 
at 12 o'clock.
    Mr. Bastian. If I could just leave with one number--or a 
couple of numbers, that distribution that you are talking about 
concerns us greatly, and I think one thing that struck me even 
more than the one I think you mentioned is a figure I saw last 
year talking about Brazil. I think the figure was 70 million 
people living on a dollar a day or less, and that cannot be 
sustained.
    Mr. Delahunt. My concern, Mr. Bastian, is that until that 
issue is addressed, we are going to have nominal democracies.
    We can have all kinds of elections, but we are not going to 
have democratic societies where all citizens have the ability 
to participate in the prosperity that is hopefully generated 
through a market economy.
    Mr. Bastian. I think we agree absolutely with that.
    Mr. Delahunt. Thank you, Madam Chair.
    Ms. Ros-Lehtinen. Thank you so much.
    Thank you, both of you, for being here with us, and we 
appreciate it. We will continue our dialogue as the FTAA gets 
further going. Thank you so much.
    Mr. Bastian. Thank you, Madam Chairman.
    Mr. Browning. Thank you, Madam Chairman.
    Ms. Ros-Lehtinen. I would like to introduce our second 
panel.
    Our first witness will be Dr. Jerry Haar, the Senior 
Research Associate and Director of the Inter-American Business 
and Labor Program at the Dante Fascell North-South Center at 
the University of Miami, as well as a research affiliate at 
Harvard University's David Rockefellar Center for Latin America 
Studies.
    He is a former Director of Washington Programs for the 
Council of the Americas, and he has held several senior staff 
positions in policy and management with the Federal Government 
and has served as an adviser to numerous corporations.
    Dr. Haar has written extensively on economic and political 
issues pertaining to the Americas, but more important, he is a 
constituent of my legislative district. Thank you.
    Then we will also hear from Stephen Lande, who is the 
President and founder of Manchester Trade. Currently, he is 
advising several Latin American and Caribbean governments on 
their participation in a Free Trade Area of the Americas.
    Before entering the private sector, Mr. Lande served as the 
First Assistant U.S. Trade Representative. He established a 
trade consultation group and worked on the U.S. implementation 
of the general systems of preferences.
    In addition to his consulting work for foreign and domestic 
clients, Mr. Lande has authored two books and has written 
numerous articles about these issues.
    We will also hear from Louis Marrero, President of the 
Spectra Colors Corporation, and because he is a constituent of 
our distinguished Ranking Member, Mr. Bob Menendez, I would 
like to have Mr. Menendez introduce Mr. Marrero to us.
    Thank you.
    Mr. Menendez. Thank you, Madam Chairlady.
    We appreciate Mr. Marrero coming from New Jersey on 
relatively short notice, because we had a previous witness, but 
when the hurricane knocked us out last week, Mr. Marrero was 
very good to come, and I think that he has--I mentioned earlier 
that, in trade with Latin America, we have some natural links 
in terms of that trade, and I think he, in his testimony as it 
relates to his company, is going to be someone who, in fact, is 
going to be able to be part of the living testimony to that 
reality and why, in fact, the FTAA is a very good proposition.
    We look forward to listening to him and thank him.
    I am going to very briefly, Madam--because I have President 
Pastrana with the democratic leadership, but I will be right 
back. I want to pay my respects to him while he is here. I do 
not want him to think I have slighted him as the only Hispanic 
member of the leadership. It would be somewhat offensive, I 
think. I will be right back.
    Ms. Ros-Lehtinen. We are proud of you for your work in that 
leadership post, Mr. Menendez, and he will be meeting with the 
other side of the aisle following that, so I am going to try to 
speed this along if we can in order to accommodate the 
president.
    We thank all of you for being here. We will enter your full 
statements into the record, and I would ask you to please 
summarize your statements, and I will be watching that clock.
    Thank you, Dr. Haar.

STATEMENT OF DR. JERRY HAAR, DIRECTOR, INTER-AMERICAN BUSINESS 
    AND LABOR PROGRAM, DANTE B. FASCELL NORTH-SOUTH CANTER, 
                      UNIVERSITY OF MIAMI

    Dr. Haar. Thank you, Madam Chair--I am delighted to be a 
constituent, by the way--and Members of the Subcommittee.
    I appreciate the opportunity to testify on the Free Trade 
Area of the Americas.
    As a leading policy research institution on U.S. Western 
Hemisphere relations, the North-South Center has focused on the 
FTA since plans for hemisphere free trade were discussed nearly 
5 years ago at the first Summit of the Americas in Miami.
    I have been asked to address the progress to date briefly 
on the FTAA and outlook for the year 2000 and slightly beyond 
that.
    Essentially, the progress to date on the FTAA can be 
classified somewhere between unremarkable and disappointing.
    The commonly held belief hemisphere-wide is that 
negotiations have accomplished only the bare minimum and that 
the FTAA is languishing, having lost any momentum it may have 
had and that the negotiators are light-years away from meeting 
the 2005 completion date, nevertheless there have been concrete 
achievements, too, in spite of the lackluster performance.
    One major achievement has to do with process, and the other 
is one that deals with substance.
    In the first instance, dealing with process, the FTAA, 
remarkably, has brought together 34 countries toward a common 
cause of trade liberalization.
    Plans and agendas were formalized, working groups were 
formed, a negotiations committee was established, and the 
actual negotiation process was begun.
    A second accomplishment, the real substantive one, was 
achieved just 6 weeks ago in Bolivia, where an agreement was 
reached to implement by 2000 nearly 20 business facilitation 
measures, including nine customs measures aimed at improving 
and facilitating customs clearance and transparency.
    Hopefully, these measures will make trade transparent, 
efficient, and really focus on the small exporter and importer, 
who, more than anything else (despite the trade rhetoric that 
has been hair-spliting by numerous attorneys and trade 
bureaucrats) wants to see goods getting in, getting paid, and 
getting the product out.
    That commendable aspect of the FTAA is one that we need to 
focus on and one that should be commended in spite of the slow 
progress.
    The outlook for the year 2000 with regard to the FTAA and 
even beyond that, I would say, in spite of the lackluster 
performance to date, is one of guarded optimism. Why? As I have 
just mentioned, the implementation of business facilitation 
measures.
    This will create the tangible results that the business 
community has been waiting for, and by business community, all 
business communities, not just in the United States.
    Second, there is the impact of the launch of the World 
Trade Organization negotiations. It has set a conclusion date 
for 2002 rather than 2004.
    While my colleague and one of Washington's top trade 
experts, Mr. Lande, sitting to my right, feels that the WTO 
will, in fact, dissuade a lot of the negotiators in the FTAA 
from making concessions early on, waiting to see how the WTO 
does develop, I would argue that, because the WTO is going to 
finish earlier, it could, within 18 months, push ahead and 
accelerate the FTAA negotiations.
    Another factor where I have guarded optimism is the U.S. 
presidential elections. After November 2000, the President-
Elect will have the opportunity to craft a leadership role in 
achieving an FTAA, making it an administration priority in 
United States-Latin American relations.
    Another factor, as has been mentioned earlier this morning, 
is the growing European presence in the region. Corporate 
giants such as Ericson, Banco Santander, Airbus Industries, 
SmithKline Beechem, and Volkswagen are competing head-on with 
U.S. firms.
    Also mentioned this morning, 2\1/2\ months ago, the EU and 
MERCOSUR agreed to begin discussions on a trade agreement. 
Europe has got an aging population. It is a slow market in 
terms of expansion. Therefore targets will be set on the 
Western Hemisphere.
    May I also add there will be a recovery in Asia. Whatever 
goes down must come back up, and Asians will be focusing their 
attention, as they have already in Mexico, of moving in, 
jumping behind the MERCOSUR tariff, and other arrangements to 
get at growing markets for consumer and industrial goods.
    Another factor not mentioned this morning is unilateral 
trade liberalization. Led by Chile, a number of other countries 
want to compete within the region against other less-developed 
countries for access to investment dollars, financing, and 
markets.
    One example is the beer industry, which I know all too 
well. The Bahamas recently enacted an excise tax on locally 
brewed beer and reduced the tariffs on imports. This was done 
to make local producers more efficient and competitive.
    Unilaterally, the Bahamas has decided to move ahead in the 
area of trade liberalization, and similar developments are 
brewing throughout the region.
    It has already been mentioned that the Latin American 
region is a very attractive place, the best for U.S. trade in 
terms of its level of growth. Suffice to say our exports to 
Latin America are expected to surpass Europe by 2000 and exceed 
those to Europe and Japan combined by 2010.
    In my testimony, I have provided examples not from the 
Fortune 100 companies but from dynamic medium-sized firms like 
Lexmark International in Kentucky, Timken Corporation in 
Canton, Ohio, and Tech Data of Clearwater, Florida, taking 
advantage of trade opportunities.
    In conclusion, I would say that it seems highly unlikely 
that the 2005 deadline will be met for achievement of an FTAA. 
Most likely we will witness at the beginning of 2004 what I 
consider a cramming for finals approach in order to come close 
to meeting that 2005 deadline.
    Be that as it may, I submit that it is in the national 
interest of the United States to exert a leadership role in 
FTAA. With average Latin American and Caribbean tariffs four 
times higher than the average U.S. tariff, the FTAA can further 
open markets, benefiting U.S. businesses and workers.
    Thank you.
    [The prepared statement of Mr. Haar appears in the 
appendix.]
    Ms. Ros-Lehtinen. Thank you so much, Dr. Haar.
    Mr. Lande?

STATEMENT MR. PHILIP STEPHEN LANDE, PRESIDENT, MANCHESTER TRADE

    Mr. Lande. I appreciate the opportunity to appear before 
the Subcommittee to give my views on progress and prospects for 
trade in the Americas.
    I would like to thank the amazing cooperation of the 
committee staff, both sides of the aisle, for allowing this 
hearing to take place despite hurricanes, Jewish holidays, 
Presidential visits, etcetera.
    Being from New York and when you are subject to a 4-minute-
and-45-second limitation, you desire to speak very fast, but no 
one understands you.
    Instead, I will try to highlight a few of the points that I 
have made in this testimony, that I have made in my written 
statement, and I hope the rest can be made part of the record.
    The current figures which shows the United States playing a 
leading role in Latin America mask some very significant 
weaknesses in the position and also does not explain some of 
the threats we face.
    While it is true that we do dominate trade in the northern 
part of the hemisphere, having 74 percent of the Mexican 
market, 48 percent of the Central American market, and 40 
percent of the Caribbean market, Carricom market, the figure 
declines to 35 percent of the market of the Andean communities 
and only 21 percent of the MERCOSUR market. In fact, in many 
years, Japan and European Union exports to this region exceed 
those from the United States.
    The second is the threat, and as Walter Bastian pointed 
out, there are 31 free trade agreements in the hemisphere 
today, agreements where it is much better to be inside, meaning 
that your exporters are able to ship paying lower duties, than 
to be on the outside.
    We are on the outside of 30 of these agreements. We are 
only on the inside of one, certainly the most important one, 
NAFTA, but the other 30, and the real threat is that Brazil, 
who views itself and in many ways is the premier country of 
South America and a competitor of the United States, is 
expanding its agreement.
    It has gone beyond MERCOSUR, where its agreements now cover 
all--with all principle countries in South America, and the new 
threat is the European Union, and next month, the European 
Union will sit down with MERCOSUR and could begin negotiating a 
free trade agreement, which will have a negative effect on the 
United States
    The three points I would like to make here--or the three 
points--the thing I should like to address is first the 
question of fast-track, and as pointed out in response to 
Congressman Brady's question, this is a very serious problem, 
the absence of fast-track.
    Second, despite Mr. Haar's characterization of my position, 
I would like to explain my position on the FTAA and the 
relationship to the Uruguay Round, and third, I would like to 
emphasize the importance of preferential programs, particularly 
the expansion of the Caribbean Basin Initiative and, starting 
next year, the importance of addressing--starting in the next 
Congress--the importance of expanding the Andean Pact 
Preferences Act, and so on.
    There are significant differences on fast-track, and we are 
not going to solve them through debate. Republicans strongly 
believe--I will not characterize Republicans.
    I will simply say that one view views the issue of the 
linkage between trade and labor and environment in one way -- 
i.e., that trade perhaps is the best way to have economic 
growth and through economic growth you perhaps solve some of 
these problems, and the other side believes that there is a 
linkage where you really have to have economic sanctions and 
use trade as your major instrument as a way to convince 
countries to have acceptable labor rights and environmental 
rights.
    As so often happens in a democracy, when you have such 
strong positions, you have to develop a compromise, and I just 
would like to put one idea on the table for the consideration 
of the committee for a compromise in the labor area.
    One development over the last 2 years has been the increase 
in the prestige and the effectiveness of the International 
Labor Organization, particularly its ability to carry out 
investigations and make decisions as to whether countries' 
labor rights are consistent or not consistent, labor practices 
are consistent or not consistent with the requirements of labor 
conventions.
    Let this group be the investigating body. Let this group 
make the decision. Take the United States out of the role of 
being the unilateral decisionmaker. We are not God. We are a 
significant country, but it is better to have these decisions 
made in a equitable and a generally recognized version.
    If, however, there is a violation found, then it is 
important that the United States does take a step. Violations 
of labor rights are very similar to violations of human rights. 
I am not sure that trade sanctions are the most effective, 
because they really harm the very workers you are trying to 
help, because you create unemployment. They do not have 
economic opportunities.
    There are a whole group of other sanctions which have been 
applied effectively in the past and which should be considered 
perhaps to be used in this area.
    Travel restrictions on country leaders allow--clearly send 
a message. For example, the inability to travel to Florida, 
which is particularly important to Latin American leaders, not 
only deprives them of access to one of the leading shopping 
meccas of the world but perhaps more significantly prevents 
them from obtaining first class medical care and limits access 
to a very efficient financial center.
    In addition, sanctions can be applied through limitations 
on military cooperation, limitations on cultural and sports 
exchange, etcetera.
    The idea, of course, if you can come up with some way to 
deal with fast-track with this question of linkage, then you 
have a chance to pass fast-track.
    A second challenge is how do we keep the FTAA moving while 
the World Trade Organization is taking place? The danger is 
that, if the WTO lasts for 3 years--and looking at the Uruguay 
Round, which was supposed to end at the end four but went on 
for eight, I am not sure the WTO is going to make that deadline 
for the multi-literal negotiations--what can you do in the FTAA 
agreement?
    Being a professor of trade, it would take me many minutes 
to describe how you do this. What I really would suggest, look 
at the testimony I have presented, but just remember that you 
can form agreements within the FTAA which not only will move 
that process forward, but by not allowing the participation of 
other countries, meaning the participants in the Uruguay Round 
or nonhemispheric countries, you kind of say, hey, I do not 
want to be left out.
    If you make an agreement on government procurement that 
allows countries to participate in the U.S. market for 
government goods, the Koreans and the Chaebols and the Keretsus 
are going to want to participate. They are going to say, hey, 
we better do the same thing here.
    You can make a very tough agreement on agricultural 
subsidies, where you basically outlaw them in the hemisphere.
    You cannot enforce that agreement until you get the 
European Union in place, but if you do that agreement, it gets 
the interest of all agricultural exporters into moving the WTO.
    There are areas the WTO is not covering. Investment--there 
is no international agreement. We have a short deadline.
    What I would simply say is--and this could be a role for 
Congress, as well--is to continue the pressure on the 
administration to use the FTAA, not to let it wilt on the vine, 
but to use it during the multi-lateral trade negotiations and 
to make progress within that particular area.
    My last comments concern the significant improvement of 
enacting the CBI and the Andean Pact Preference programs.
    Perhaps nothing shows how important it is than the fact 
that you point out that you are going to meet the presidents of 
Central America, I believe, tomorrow or the next day and you 
are meeting the president of Colombia today.
    One of the presidents of Central America, I understand, 
will not be able to make it because of the continuation of the 
natural calamities.
    The best way to deal with natural calamities is by dealing 
with the apparel and textile industry which is the one industry 
that is still able to thrive in Central America.
    What should be remembered is that a program like the 
Caribbean Basin Initiative, particularly its extension to 
textiles and apparel, benefits U.S. workers and U.S. producers 
more than they benefit Central American and Caribbean workers, 
because it is only through Co-production where you are able to 
take advantage of U.S. competitive advantages in a number of 
areas that you are able to then produce.
    Nothing is more important than the next Congress address 
the question of the Andean Pact Preferences, particularly with 
Colombia. This is a program that has worked. We are all able to 
get flowers all throughout the whole year. Miami's port has a 
record employment because of this flower exportation. I hope 
very much you address those issues, as well.
    Thank you very much.
    [The prepared statement of Mr. Lande appears in the 
appendix.]
    Ms. Ros-Lehtinen. Thank you, Mr. Lande.
    Mr. Marrero.

   STATEMENT OF MR. LOUIS MARRERO, PRESIDENT, SPECTRA COLORS 
                          CORPORATION

    Mr. Marrero. Thank you very much for having me here today, 
Madam Chairperson.
    Speaking from personal experience of a minority-owned and 
small business, South American companies prefer to buy from the 
U.S. Perception and reality is that we have quality and 
assurance, consistency in supply, price stability, and quick 
delivery.
    On the perception of consistency, in many cases it's true, 
many companies do not provide the service needed. As a small 
business, we find that we enhance our sales by providing the 
quality of sales and services larger companies do not offer and 
those countries do not have.
    We, the United States, are more attractive because of our 
economic stability. The reliability of our stable currency will 
assure prospective clients a similar course within the business 
cycle.
    In order to further expand sales exchanges with these 
economies, we must avail easy liquidity to stimulate commerce 
or we must have affordable, accessible credit insurance 
programs for small businesses.
    Foreign investment by the U.S. companies is restricted 
because of the uncertainty of the economies. Small companies 
have to take risk in selling on open and un-secure terms.
    FTAA can be the salvation of many of the weaker economies 
in the region by means of buying and selling commodities 
without paying duties.
    With the U.S. leading the effort in the export market, the 
regional economies will benefit directly by making the cost 
relatively level with product coming from the Far East.
    In fact, FTAA should be an expansion of the MERCOSUR and 
other agreements in which all participating companies freely 
trade without paying duties for goods bought and sold within 
the group.
    The United States has a leg up on the rest of the world as 
long as we are competitive. Our close ties with the Americas is 
a decisive force in decisionmaking in our favor.
    Europe has not gained on the United States because of the 
distance and lack of competition. Our costs seem to be lower 
than Europe, therefore we can sell better prices. The quality 
is good.
    Asia is our main competition. China and India's lower-
priced products are available throughout the world. While they 
lack some of the communication skills needed in South America 
and other places, they are gaining very fast.
    Spectra Colors Corporation products are very desirable 
throughout the world because of our technology, quality 
consistency, and sometimes competitive pricing.
    Obstacles in soliciting export business, the high expense 
of traveling international versus domestic travel in the United 
States, we lack economic, political, and knowledge of foreign 
customs and ways outside the United States We have an unsafe 
feeling brought on by the news reports which show violence and 
confrontations to the American people. Currency differences and 
instability, of course, are a problem. Lack of pre-
qualification of potential accounts is difficult or 
nonexistent.
    My belief in how to promote U.S. business abroad--make more 
businesses aware of U.S. offices abroad. They have a low-cost 
program in qualifying new potential businesses and contacts, 
therefore make a trip abroad more productive by pre-qualifying 
each contact.
    Local representation is another key to selling in other 
countries. Web-sites promote American businesses throughout the 
world. World trade missions open doors easier than traveling 
alone. U.S. credit issuers will sell with lower risk and peace 
of mind.
    That is all I have. Thank you.
    [The prepared statement of Mr. Marrero appears in the 
appendix.]
    Ms. Ros-Lehtinen. Thank you so much. We appreciate it. 
Thank you so much for being with us.
    I have a general question for the three of you, and you may 
answer it in any way that you would like. Many of you have 
addressed that in your testimony already.
    To what do you attribute the growing U.S. trade deficit 
with countries in the Hemisphere? Would you agree with the 
argument raised by the Department of Commerce and USTR, who 
attribute it to foreign economic weakness versus a strong U.S. 
market, or do you see other factors, and how confident are you 
that the FTAA will strengthen our position in this trade 
imbalance?
    Dr. Haar. I would say the manifestation of the trade 
deficit in the United States is due to reasons far beyond the 
trade deficit itself. Fundamentally, one could argue that 
deficits are neither good nor bad; the question is the ability 
to service deficits without causing economic calamity.
    The Greenspan-led economic growth cycle continues led by 
the expansion of credit in the United States at the consumer 
level--I am a perfect example of that; I use my Visa card to 
pay my Master Card bill. You have excessive levels of debt 
incurred both in the public sector and in the private sector, 
and I think that is attribution of a strong and growing 
economy.
    I do not necessarily believe that, with or without the 
FTAA, that is necessarily going to get worse. I think the 
question is these deficits are going to continue, and through a 
pro-growth approach to economic policy and employment, I think 
it is certainly going to be manageable unless there is an 
economic downturn.
    I do not see the notion of the United States being flooded 
with cheap exports as a way of sopping up excess unemployment 
in developing countries. I just do not buy that argument.
    Ms. Ros-Lehtinen. Thank you.
    Mr. Lande?
    Mr. Lande. On a global basis, I do accept, certainly, the 
position of the Department of Commerce. However, vis a vis 
Latin America, where microvariables are perhaps just as 
important, I definitely believe that the extension of 
preferences, preferential agreements to which the United States 
is not a party is part of our problem, and it will get worse.
    Brazil's extension has just been recently put into effect. 
Europe is knocking on the door in terms of its own agreements. 
When Europe starts entering into preferential agreements--Chile 
is negotiating with Korea a free trade agreement. Where are we? 
They want to negotiate with us.
    I would just emphasize the fact that Central America has 
requested negotiating preferential agreements with the United 
States
    They will accept continuation of CBI, but they really want 
to have a fully reciprocal agreement with the United States, 
where you exchange benefits, but the United States is not in a 
position to negotiate with them because of fast-track.
    The Andean Pact certainly has indicated a desire to 
negotiate free trade with the United States Argentina, before 
they went to Brazil, wanted to negotiate free trade with the 
United States. Certainly, Chile wanted to negotiate free trade 
with the United States
    When you put the thing together, it is my own view very 
much that enactment of fast track by Congress is the best thing 
you can do to deal with the threatening micro-level kinds of 
trade deficits with Latin America.
    Ms. Ros-Lehtinen. Thank you, Mr. Lande.
    Mr. Marrero?
    Mr. Marrero. Yes. In my experience, restrictions from the 
U.S. Government have kept us from growing, importing or 
exporting. Pricing, of course, is a big issue overseas. Lack of 
manufacturing in the United Ststes--very little can be made in 
the United States A company cannot go and start manufacturing 
something without the red tape that would cost much more than 
most small companies like ourselves can afford.
    Restrictions on imports and exports--it has always been the 
case with duties, in both directions, sent to those countries 
and, of course, here.
    From what I see, we--most of the time, we are a little too 
late, with too little. We are being left behind by the other 
countries. They are making their own agreements with anybody 
that will listen. We are not listening, I guess, or we are not 
listening in the right way.
    Ms. Ros-Lehtinen. Mr. Brady.
    Mr. Brady. Thank you for being here today.
    The issue of failure of U.S. leadership was broached again 
today regarding FTAA, and it gets embarrassing that a nation 
founded on competition and the open marketplace would be at a 
time where it is Lewis and Clark days around the world, where 
every country staking their lucrative claims to good markets, 
that we are handicapping ourselves, afraid to compete.
    My question to you is, if you could deliver any message to 
Congress and to our next President on the importance--on what 
we need to do to retain--regain the leadership role in free 
trade for the Americas, what message would you deliver?
    Dr. Haar, do you want to start?
    Dr. Haar. I would say, regardless of who is going to be 
elected in November, initially there will be a honeymoon, and I 
think, if the Congressional leadership and the incoming 
administration can sit down and say let us show to the people 
of the United States and the world, our trading partners in 
Latin America, that truly we want to work together. Let us not 
take a revisionist approach to fast track, because clearly 
nothing has prevented the President from sending Congress a 
fast track bill it can live with, that is one side of the 
equation. The other is: Is Congress willing to give the 
President an authority that, perhaps has been oversold by a 
number of trade negotiators in the United States?
    Ambassador Moss, Director of the North-South Center, with 
Mr. Lande, wrote a brilliant paper arguing that you can have 
movement and progress without fast track. Still, fast track, 
symbolically, should be something that the incoming 
administration and Congress should work out immediately in the 
spirit of cooperation and bring some bipartisanship back to 
foreign policy.
    I think that would advance not only trade integration but 
economic and political policy, as well, because there is 
linkage.
    You cannot isolate trade policy. I believe that economic 
policy drives trade policy, not the other way around. 
Cooperation with our partners in the areas of, environmental 
surveillance, drug trafficking and peacekeeping, depend upon 
bipartisanship--the Administration and Congress working 
together.
    Mr. Brady. Let us start fresh, because we have got a lot of 
steps.
    Dr. Haar. Yes.
    Mr. Brady. Mr. Lande.
    Mr. Lande. If I had my own choice, I would suggest that the 
President, depending on which political party he is from, 
appoint either Ros-Lehtinen or Congressman Menendez Secretary 
of State, or at least listen to their advice in this particular 
trade policy area.
    Since I do not know whether you want to leave Congress or 
not, I will not push that, but I will say that two things has 
to be done, and I think first it might be Congress. I think 
that it is extremely important that Congress focuses on this 
fast-track issue.
    There is enough ideas out there, there is enough people who 
carry the view of the Unites States future in hand that they 
should be able to work out some understanding on dealing with 
this fast-track issue, whether it involves a special study 
group to be established that will report back, whether it 
involves just an informal meeting of various leaders of 
important committees, I do not know, but it is something that 
really should address.
    If you are going to do something----
    Mr. Brady. So, ignore the President and Congress.
    Mr. Lande. I would say that it would make a lot of sense 
for whoever the new President is and so on that there be some 
Congressional consensus perhaps made on this particular issue.
    I never suggest ignoring a President, for obvious reasons, 
but it is a question--we have a new day, and I do not believe 
there is going to be a fast-track push for the next year-and-a-
half by the current President, so I think the question is there 
for the future.
    As far as the issue goes, and if I was the President and I 
had no consensus as to fast track, I would go down the non-fast 
track route.
    Chile has indicated a willingness to negotiate with the 
United States now without fast track.
    They have set up--I do not know if you are familiar, but a 
bunch of--there is now--they have suggested to the United 
States that a commission be established to look at issues that 
are part of a free trade agreement without necessarily calling 
it negotiation.
    Central America has requested that, once CBI enhancement is 
finished--and again, hopefully, it will be finished this 
session of Congress--that perhaps a free trade agreement makes 
sense with that particular of the world.
    If I was the President, I would grab the bull by the horns 
and I would say I am negotiating, that is my constitutional 
right. I would bring back an agreement.
    Fast track is not holier than thou, because as you know, 
amendments--there are various procedures in the House now where 
you can have a bill without allowing it open for unlimited 
amendments, but in the Senate you need 60 votes anyway to pass 
trade agreements, often, even with fast track because of the 
budgetary requirements, the funding.
    I would not sit there and start bemoaning the fact that I 
do not have fast track.
    In short, it would be really good if Congress could work 
out their own understanding, which are really Congressional 
issues you have got to deal with, labor and environment, and I 
am not saying you do not protect them. I am saying you come up 
with effective ways to deal with labor and environment and 
trade, and then, if I was the new President, whether you did it 
or not, I would take my honeymoon period and I would send out a 
negotiator, maybe Jerry Haar, because he speaks so clearly and 
so forceful, and I would move in that direction.
    Thank you.
    Mr. Brady. Thank you.
    Mr. Marrero. Small businesses are the fastest-growing 
entities in the United States A lot of us are exporting. 
Include us and help us to be more competitive by making 
agreements to facilitate our trade. Simple as that.
    Mr. Brady. Thank you very much.
    Ms. Ros-Lehtinen. Thank you.
    Thank you so much. We thank the panelists for being with 
us, and the Members and the audience, as well, and this 
Subcommittee is now adjourned.
    [Whereupon, at 12:27 p.m., the Subcommittee was adjourned.]
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