U.S. GOVERNMENT PRINTING OFFICE

66–204 CC WASHINGTON : 2000

OUTCOME OF THE WORLD TRADE ORGANIZATION

MINISTERIAL IN SEATTLE

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

FEBRUARY 8, 2000

Serial 106–50

Printed for the use of the Committee on Ways and Means

(

ii

COMMITTEE ON WAYS AND MEANS

BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHILIP S. ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

J.D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY HULSHOF, Missouri

SCOTT MCINNIS, Colorado

RON LEWIS, Kentucky

MARK FOLEY, Florida

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

LLOYD DOGGETT, Texas

A.L. SINGLETON, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON TRADE

PHILIP M. CRANE, Illinois, Chairman

BILL THOMAS, California

E. CLAY SHAW, JR., Florida

AMO HOUGHTON, New York

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JENNIFER DUNN, Washington

WALLY HERGER, California

JIM NUSSLE, Iowa

SANDER M. LEVIN, Michigan

CHARLES B. RANGEL, New York

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

XAVIER BECERRA, California

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records

of the Committee on Ways and Means are also published in electronic form. The printed

hearing record remains the official version. Because electronic submissions are used to

prepare both printed and electronic versions of the hearing record, the process of converting

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process

is further refined.

iii

C O N T E N T S

Page

Advisory of January 14, 2000, announcing the hearing ....................................... 2

WITNESSES

Office of United States Trade Representative, Hon. Charlene Barshefsky,

United States Trade Representative .................................................................. 22

U.S. General Accounting Office, Susan Westin, Associate Director, International Relations and Trade Issues, National Security and International

Affairs Division; accompanied by Beth Sirois, Assistant Director, and Nina

Pfeiffer, Senior Evaluator .................................................................................... 60

Agriculture Advisory Committee, Dale E. Hathaway ........................................... 76

American Farm Bureau Federation, Bob Stallman .............................................. 110

American Federation of Labor and Congress of Industrial Organizations, John

J. Sweeney, as presented by Richard Trumka ................................................... 81

Coalition of Service Industries, Robert Vastine .................................................... 127

Dawson, Rhett, Information Technology Industry Council .................................. 122

Electronic Industries Alliance, Hon. Dave McCurdy ............................................ 135

Hathaway, Dale E., National Center for Food and Agricultural Policy, and

Agriculture Advisory Committee ........................................................................ 76

Hufbauer, Gary Clyde, Institute for International Economics ............................ 69

Information Technology Industry Council, Rhett Dawson ................................... 122

Kittridge, Frank D., National Foreign Trade Council, Inc ................................... 95

Lewis, Hon. John, a Representative in Congress from the State of Georgia ...... 5

Marconi Commerce Systems, Steve Robertson ..................................................... 131

McCurdy, Hon. Dave, Electronic Industries Alliance ........................................... 135

National Association of Manufacturers, Steve Robertson .................................... 131

National Center for Food and Agricultural Policy, Dale E. Hathaway ............... 76

National Foreign Trade Council, Inc., Frank D. Kittridge ................................... 95

National Wildlife Federation, Mark Van Putten .................................................. 115

Niles, Thomas M.T., United States Council for International Business ............. 85

Public Citizen’s Global Trade Watch, Lori Wallach .............................................. 89

Robertson, Steve, Marconi Commerce Systems, and National Association of

Manufacturers ...................................................................................................... 131

Stallman, Bob, American Farm Bureau Federation ............................................. 110

Sweeney, John J., American Federation of Labor and Congress of Industrial

Organizations, as presented by Richard Trumka .............................................. 81

Trumka, Richard, American Federation of Labor and Congress of Industrial

Organizations, presenting statement of John J. Sweeney ................................ 81

United States Council for International Business, Thomas M.T. Niles .............. 85

Van Putten, Mark, National Wildlife Federation ................................................. 115

Vastine, Robert, Coalition of Service Industries ................................................... 127

Wallach, Lori, Public Citizen’s Global Trade Watch ............................................. 89

Waters, Hon. Maxine, a Representative in Congress from the State of California ..................................................................................................................... 10

Weller, Hon. Jerry, a Representative in Congress from the State of Illinois ..... 7

SUBMISSIONS FOR THE RECORD

American Apparel Manufacturers Association, Arlington, VA, statement ......... 147

American Fisheries Society, Bethesda, MD, Ghassan N. Rassam, letter ........... 149

American Iron and Steel Institute, statement ...................................................... 151

American Lands Alliance, Antonia Juhasz, statement ......................................... 155

Blackwelder, Brent, Friends of the Earth, statement .......................................... 162

Dernbach, John C., Foreign Policy in Focus, and Widener University Law

School, Harrisburg, PA, statement ..................................................................... 160

Page

iv

DiPeso, Jim, Rainier Audubon Society, Auburn, WA, statement ........................ 176

Foreign Policy in Focus, and Widener University Law School, Harrisburg,

PA, John C. Dernbach, statement ...................................................................... 160

Friends of the Earth, Brent Blackwelder, statement ........................................... 162

Grocery Manufacturers of America, statement ..................................................... 164

Head, David, Save Endangered Wilderness, Hatboro, PA, statement ................ 186

Inouye, Lauren, Edina, MN, letter and attachment ............................................. 166

Institute for Agriculture and Trade Policy, Minneapolis, MN, Sophia Murphy,

statement .............................................................................................................. 168

JBC International, letter ......................................................................................... 171

Jones, Laura E., United States Association of Importers of Textiles and Apparel, New York, NY, statement ......................................................................... 189

Juhasz, Antonia, American Lands Alliance, statement ........................................ 155

Labor/Industry Coalition for International Trade, statement ............................. 172

Murphy, Sophia, Institute for Agriculture and Trade Policy, Minneapolis,

MN, statement ...................................................................................................... 168

National Electrical Manufacturers Association, Rosslyn, VA, Malcolm

O’Hagan, letter ..................................................................................................... 175

Pjerrou, Mary, Redwood Coast Watersheds Alliance, and Save the Redwoods/

Boycott the Gap Campaign, Elk, CA, letter ....................................................... 177

Rainier Audubon Society, Auburn, WA, Jim DiPeso, statement ......................... 176

Ramstad, Hon. Jim, a Representative in Congress from the State of Minnesota .................................................................................................................... 182

Rassam, Ghassan N., American Fisheries Society, Bethesda, MD, letter .......... 149

Redwood Coast Watersheds Alliance, and Save the Redwoods/Boycott the

Gap Campaign, Elk, CA, Mary Pjerrou, letter .................................................. 177

RONGEAD, Lyon Cedex, France, Hon. Tran Van Thinh, statement and attachments ............................................................................................................. 182

Save Endangered Wilderness, Hatboro, PA, David Head, statement ................. 186

U.S. Integrated Carbon Steel Producers, statement ............................................. 187

United States Association of Importers of Textiles and Apparel, New York,

NY, Laura E. Jones, statement ........................................................................... 189

Van Thinh, Hon. Tran, RONGEAD, Lyon Cedex, France, statement and attachments ............................................................................................................. 182

Yeutter, Hon. Clayton, Hogan & Hartson, L.L.P., statement .............................. 191

(1)

OUTCOME OF THE WORLD TRADE

ORGANIZATION MINISTERIAL IN SEATTLE

TUESDAY, FEBRUARY 8, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

SUBCOMMITTEE ON TRADE,

Washington, DC.

The Subcommittee met, pursuant to call, at 1 p.m., in room 1100,

Longworth House Office Building, Hon. Philip M. Crane (Chairman

of the Subcommittee) presiding.

[The advisory announcing the hearing follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON TRADE

FOR IMMEDIATE RELEASE Contact: (202) 225–1721

January 14, 2000

No. TR–18

Crane Announces Hearing on the Outcome of the

WTO Ministerial in Seattle

Congressman Philip M. Crane (R–IL), Chairman, Subcommittee on Trade of the

Committee on Ways and Means, today announced that the Subcommittee will hold

a hearing on the outcome of the World Trade Organization (WTO) Ministerial held

in Seattle. The hearing will take place on Tuesday, February 8, 2000, in the main

Committee hearing room, 1100 Longworth House Office Building, beginning at 1:00

p.m.

Oral testimony at this hearing will be from both invited and public witnesses. The

invited witness will be Ambassador Charlene Barshefsky, United States Trade Representative. Also, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee or for inclusion in the printed record of the hearing. The Subcommittee intends to hold other

hearings on the WTO in the future.

BACKGROUND:

The Uruguay Round was the eighth round or series of multilateral trade negotiations under the General Agreement on Tariffs and Trade (GATT). The agreements

reached at the end of 1994 during the Uruguay Round were noteworthy in that they

greatly expanded coverage of GATT rules beyond manufactured goods trade to include agricultural trade, services trade, trade-related investment measures, intellectual property rights, and textiles. One of the most visible accomplishments of the

Uruguay Round was to establish the WTO to administer the GATT agreements and

to settle disputes among WTO members. The so-called ‘‘built-in agenda’’ of the Uruguay Round Agreements calls for the resumption of negotiations by the year 2000

to further liberalize trade in agriculture and services, as well as the examination

of government procurement practices and enforcement of intellectual property

rights.

The WTO Ministerial conference that was hosted by the United States in Seattle,

Washington, from November 30 through December 4, 1999, was to have formally

launched these negotiations. At this meeting representatives of the 135-member

countries of the WTO considered the procedures and substance of the ‘‘built-in’’

WTO agenda, as well as other issues including transparency, possible reforms to the

dispute settlement system, treatment of electronic commerce, and the accelerated

Tariff Liberalization effort for industrial tariffs.

However, in a major setback on December 3, following four days of meetings, Conference Chairperson Charlene Barshefsky announced a suspension of negotiations,

saying: ‘‘Our collective judgement, shared by the WTO Director General, the Working Group Chairs, and the membership generally, was that it would be best to take

a time out, consult with one another, and find creative means to finish the job.’’

Convening in Geneva on December 17, 1999, the WTO General Council decided

to postpone until early 2000 a decision on how to proceed with the ‘‘built-in agenda’’

and other issues outstanding from the Seattle Ministerial Conference. At this meetVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
3

ing, one of the proposals on the table sought delays in the December 31, 1999, deadlines for applying obligations and other provisions of existing WTO agreements -for

example, in intellectual property and trade related investment measures.

In announcing the hearing, Chairman Crane said: ‘‘The Seattle Ministerial meeting represented a significant lost opportunity for U.S. workers, businesses, and

farmers. It is important that Congress investigate the cause of the failed outcome,

as well as the adequacy of logistical and other preparations for this meeting of trading nations. We must critically examine where we go from here in a manner that

is productive to our trade agenda and our goal of expanding markets abroad for U.S.

goods and services.’’

FOCUS OF THE HEARING:

The focus of the hearing will be to examine preparations for the Seattle Ministerial Meeting and the course of events leading to a suspension of negotiations without agreement on a Ministerial Declaration. Testimony will be received on: (1)

causes of the impasse; (2) the negotiating strategies pursued by the United States

and its trading partners; (3) the impact of the failure to launch a new round of WTO

negotiations on jobs, wages, economic opportunity, and the future competitiveness

of U.S. manufacturers and service providers; (4) how the United States can achieve

more forward movement on the ‘‘built-in agenda"; (5) prospects for future

WTO negotiations, including what issues are ripe for discussion in tandem with negotiations on the ‘‘built-in,’’ and the status of, provisions in the Uruguay Round

Agreements that may be time-sensitive.

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

Requests to be heard at the hearing must be made by telephone to Traci Altman

or Pete Davila at (202) 225–1721 no later than the close of business, Wednesday,

January 25, 2000. The telephone request should be followed by a formal written request to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House

of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515.

The staff of the Subcommittee on Trade will notify by telephone those scheduled to

appear as soon as possible after the filing deadline. Any questions concerning a

scheduled appearance should be directed to the Subcommittee on Trade staff at

(202) 225–6649.

In view of the limited time available to hear witnesses, the Subcommittee may

not be able to accommodate all requests to be heard. Those persons and organizations not scheduled for an oral appearance are encouraged to submit written statements for the record of the hearing. All persons requesting to be heard, whether

they are scheduled for oral testimony or not, will be notified as soon as possible

after the filing deadline.

Witnesses scheduled to present oral testimony are required to summarize briefly

their written statements in no more than five minutes. THE FIVE-MINUTE RULE

WILL BE STRICTLY ENFORCED. The full written statement of each witness will

be included in the printed record, in accordance with House Rules.

In order to assure the most productive use of the limited amount of time available

to question witnesses, all witnesses scheduled to appear before the Subcommittee

are required to submit

200 copies, along with an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their prepared statement for review by Members prior to the hearing. Testimony should arrive at the Subcommittee on Trade office, room 1104 Longworth

House Office Building, no later than Friday, February 4, 2000. Failure to do so may

result in the witness being denied the opportunity to testify in person.

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

Any person or organization wishing to submit a written statement for the printed

record of the hearing should submit six (6) single-spaced copies of their statement,

along with an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, with

their name, address, and hearing date noted on a label, by the close of business,

Tuesday, February 22, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways

4

and Means, U.S. House of Representatives, 1102 Longworth House Office Building,

Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Trade office,

room 1104 Longworth House Office Building, by close of business the day before the

hearing.

FORMATTING REQUIREMENTS:

Each statement presented for printing to the Committee by a witness, any written statement

or exhibit submitted for the printed record or any written comments in response to a request

for written comments must conform to the guidelines listed below. Any statement or exhibit not

in compliance with these guidelines will not be printed, but will be maintained in the Committee

files for review and use by the Committee.

1. All statements and any accompanying exhibits for printing must be submitted on an IBM

compatible 3.5-inch diskette in WordPerfect 5.1 format, typed in single space and may not exceed a total of 10 pages including attachments. Witnesses are advised that the Committee will

rely on electronic submissions for printing the official hearing record.

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

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material

not meeting these specifications will be maintained in the Committee files for review and use

by the Committee.

3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments

by the Committee, must include on his statement or submission a list of all clients, persons,

or organizations on whose behalf the witness appears.

4. A supplemental sheet must accompany each statement listing the name, company, address,

telephone and fax numbers where the witness or the designated representative may be reached.

This supplemental sheet will not be included in the printed record.

The above restrictions and limitations apply only to material being submitted for printing.

Statements and exhibits or supplementary material submitted solely for distribution to the

Members, the press, and the public during the course of a public hearing may be submitted in

other forms.

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

Wide Web at ‘‘http://waysandmeanshouse.gov’’.

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

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

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

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

Chairman CRANE. Good afternoon. This is a meeting of the Ways

and Means Trade Subcommittee to evaluate American trade policy

and our role in the world trading system after the failed WTO ministerial meeting in Seattle.

Our focus here today is to steer a course for returning America

back to its historic position of strong influence and leadership in

the trading system. Clearly, the train has jumped the track and

must be repaired and redirected if we are to preserve our prosperity and unbeatable success in international markets.

The WTO system has borne huge benefits for U.S. firms, workers, farmers, ranchers, and for all of us as consumers. The breakdown in Seattle represents a direct threat to the WTO system of

trade rules. Constructed over 50 years by Presidents from both parVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
5

ties, in close consultation with Congress, the WTO system is fundamentally American-based ‘‘rules of the road’’ for commerce.

Because of the force of U.S. leadership, our trading partners have

been willing to accept this structure of fair trade rules. There is absolutely no better strategy for improving living standards than to

pry away trade barriers and grow foreign markets for U.S. products. To tear it down or stand by as it is slashed and slandered is

to put our prosperity at risk. A compact among 135 governments

can always be improved. But to unravel the WTO rules of the road

for world trade, with no alternative system in mind, invites chaos,

commercial conflicts, and growing poverty in poor countries.

There are, of course, many causes of the problem we faced in Seattle. These include: a lack of agreement on a declaration prior to

Seattle, recalcitrance on the part of the European Union to agree

to the elimination of agricultural subsidies, Japanese foot-dragging

on the ATL initiative, and the U.S. inflexibility on antidumping, to

name just a few.

With that, I would like to yield to the Ranking Member of our

Subcommittee for his opening remarks, Congressman Sandy Levin.

Mr. LEVIN. Mr. Chairman, we were just discussing here that we

would give our full-length statement after these witnesses, our colleagues, so that they could go on to other things. So I will withhold

my opening statement so that our three distinguished colleagues

can give their statements. I understand that Ambassador

Barshefsky will then be here and I will present my opening statement before her testimony.

Chairman CRANE. Very good.

With that then, we shall yield to our first witness panel. Please

try and keep your oral testimony to 5 minutes or less. All written

statements will be made a part of the permanent record.

I now yield to Hon. John Lewis, our colleague from Georgia.

STATEMENT OF HON. JOHN LEWIS, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF GEORGIA

Mr. LEWIS. Thank you, Chairman Crane, Ranking Member

Levin, and other Members of the Subcommittee for the opportunity

to address this Subcommittee this afternoon.

For a long time I have been saying that people have a right to

know. They have a right to know what is in the food they eat, the

air they breathe, and the water they drink. They also have a right

to know how their tax dollars are spent and what issues come before this Subcommittee and the Congress. The people have a right

to know.

I think most of us would agree that as Members of Congress we

have a sacred duty to protect this right. We have a duty to make

sure that we are, in fact, a government of the people, by the people,

and for the people.

And that is what I am here to talk about today—government in

the sunshine, shining a little light on trade.

International trade is filled with complex and often divisive

issues. This is understandable. When jobs and the economy are at

stake, passion and partisanship can sometimes overwhelm debate

between reasonable people with honest differences.

6

Mr. Chairman, we can bridge the divide on trade. But to do so

we must build trust, bring people together, and seek common

ground. Mr. Chairman, I believe that letting the sun shine in on

trade is the best way to begin.

I would like to share an example of how we can improve the

process. Under Chapter 11 of the North American Free Trade

Agreement, if a Canadian or a Mexican company believes that the

United States or a State or local government has unfairly expropriated or taken its investment, that company is entitled to request

compensation for its loss from the State or Federal Government.

If a dispute arises over compensation, the company can submit

its case to an arbitration panel. NAFTA requires that before a case

begins a company must file a notice of intent to arbitrate a dispute.

This notice gives the disputing country basic information about the

case including the basis for the claim and the approximate damages sought by the company.

The issues that come before NAFTA for arbitration are important. They are important to many people—both inside and outside

of government. Despite this fact, current law does not require that

the notice of intent to arbitrate or other basic information on these

cases be made public. The ideas that things may be going on behind closed doors creates mistrust and hurts the process. We

should open those doors and give the American people a view of

what is going on the inside.

I propose to accomplish this goal by requiring the United States

government to publish in the Federal Register the content of any

notice of intent to arbitrate filed against the United States. This

will let interested people know that a case may be forthcoming.

I also believe that it is important to give people an opportunity

to share their views on trade. We need a process, Mr. Chairman,

whereby people and organizations can submit their comments on

NAFTA arbitration cases to the government. At the same time, we

need an approach that includes people without encroaching on

NAFTA.

Finally, a credible process requires that those in power have the

trust of the people. We need common sense requirements that

guarantee that arbiters in NAFTA cases are fair and impartial.

Again, my approach is a simple one. But in its simplicity lies the

seeds of progress. As I said at the beginning of my statement, our

democracy is built on the idea that regular people can and should

be part of the governing process. I believe that we owe it to all

Americans, indeed, we owe it to all citizens of all nations, to demonstrate that democracy works and that regular people can and

should participate.

I thank you, Mr. Chairman and Members of the Subcommittee.

[The prepared statement follows:]

Statement of Hon. John Lewis, a Representative in Congress from the State

of Georgia

Thank you Mr. Chairman for the opportunity to address your committee this

afternoon.

For a long time I’ve been saying that people have a right to know. They have a

right to know what’s in the food they eat, the air they breathe and the water they

drink. They also have a right to know how their tax dollars are spent and what

issues come before this Committee and the Congress. The people have a right to

know.

7

I think most of us would agree that as Members of Congress, we have a sacred

duty to protect this right. We have a duty to make sure that we are in fact a government of the people, by the people and for the people.

And that is what I am hear to talk about today: government in the sunshine,

shining a little light on trade.

International trade is filled with complex and often divisive issues. This is understandable. When jobs and the economy are at stake, passion and partisanship can

sometimes overwhelm debate between reasonable people with honest differences.

Mr. Chairman, we can bridge the divide on trade policy. But to do so we must

build trust, bring people together and seek common ground. Mr. Chairman, I believe

that letting the sun shine in on trade is the best way to begin.

I’d like to share an example of how we can improve the process. Under Chapter

11 of the North American Free Trade Agreement, if a Canadian or Mexican company believes that the United States or a state or local government has unfairly expropriated or ‘‘taken’’ its investment, that company is entitled to request compensation for its loss from the state or federal government.

If a dispute arises over compensation, the company can submit its case to an arbitration panel. NAFTA requires that before a case begins, a company must file a notice of intent to arbitrate a dispute. This notice gives the disputing country basic

information about the case including the basis for the claim and the approximate

damages sought by the company.

The issues that come before NAFTA for arbitration are important. They are important to many people—both inside and outside government. Despite this fact, current law does not require that the notice of intent to arbitrate or other basic information on these cases be made public. The idea that things may be going on behind

closed doors creates mistrust and hurts the process. We should open those doors and

give the American people a view of what’s going on.

I propose to accomplish this goal by requiring the United States Government to

publish in the Federal Register the content of any notice of intent to arbitrate filed

against the United States. This would let interested people know that a case may

be forthcoming.

I also believe that it is important to give people an opportunity to share their

views on trade. We need a process whereby people and organizations can submit

their comments on NAFTA arbitration cases to the Government. At the same time,

we need an approach that includes people without encroaching on NAFTA.

Finally, Mr. Chairman, a credible process requires that those in power have the

trust of the people. We need common sense requirements that guarantee that arbiters in NAFTA cases are fair and impartial.

Again, my approach is a simple one. But in its simplicity lie the seeds of progress.

As I said at the beginning of my statement—our democracy is built on the idea that

regular people can and should be part of the governing process. I believe that we

owe it to all Americans—indeed we owe it to all citizens of all nations—to demonstrate that democracy works and that regular people can and should participate.

Thank you.

Chairman CRANE. Thank you, Congressman Lewis.

Our next witness, Hon. Jerry Weller from Illinois.

STATEMENT OF HON. JERRY WELLER, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ILLINOIS

Mr. WELLER. Thank you, Mr. Chairman and Members of the

Subcommittee. I thank you for the opportunity to testify today. My

purpose in being here today is to reintroduce to the Trade Subcommittee an issue that we brought before the Subcommittee and

the Full Committee this past year. That is the issue of the loss of

20,000 film and television industry jobs last year from runaway

film production. I want to raise this issue again to urge that our

domestic film and television industry be given a seat at the table

at any future WTO discussions to address the cultural content

issue and its relationship to runaway film production.

8

Some might say that runaway film production is just a Hollywood issue. But it is actually a growing national issue which directly impacts thousands of working Americans from New York to

Florida, Washington to California, Illinois to Texas. During last

year’s Committee discussion on the Financial Freedom Act, we discussed an amendment that I offered to essentially level the

playingfield and of course counter the loss of film and television

production jobs to Canada.

Remember the film ‘‘Coming to America’’? Unfortunately, it

seems that film making jobs are now running from America. In

fact, a one-time presidential candidate once referred to that giant

sucking sound of jobs heading south. Well, today that giant sucking

sound is really the sound of 20,000 film industry jobs which headed

north this past year to Canada.

A recent study commissioned by the Directors Guild of America and the Screen Actors Guild shows that in 1998 over $10 billion

in economic activity was lost to runaway economic film and television production. This is more than five-fold since the beginning

of this past decade. In the last 4 years, Texas has seen a 31 percent

decrease in direct production revenues, while my home State of Illinois is down nearly 20 percent. This has resulted in a loss of

20,000 jobs nationwide last year alone.

In looking at the small businesses and jobs lost by runaway production, we are not just talking about directors and actors. Rather,

we are talking about the small businesses that support the film industry and make America great. Let’s also remember that the average film industry worker makes around $26,000 a year. They include caterers, hotel and motel operators, restaurants and bars,

rental equipment businesses, electricians, set construction workers,

and many others involved in this important activity. Over the

years, film and television production has been a leading exporter

and a major contributor to the American economy.

Mr. Chairman, this is a constituent issue which we should take

seriously. This is a significant issue for you as well as other Members of the Subcommittee. I come from a district which includes Joliet, Elwood, and Calumet City, the home of Joliet Jake and Elwood

Blues. I often refer to the district I have the privilege of representing as the ‘‘Blues Brothers’’ district. Last year my constituents and I were stunned when they decided to make the film

‘‘Blues Brothers 2000,’’ they chose to film it in Toronto rather than

Chicago. And even more embarrassing was the fact that the Canadian filmmakers were calling the Chicago Film Commission to ask

them for best advice on how to make Toronto more Chicago-like.

With my statement, I have included a copy of the Directors Guild

and Screen Actors Guild study they completed last year explaining

many of the reasons why film and television production is leaving

the United States, and they have concluded that one of the main

reasons is the generous tax incentives and subsidies offered in

countries such as Canada, Australia, and the United Kingdom

which we do not have here in the United States. Canada alone offers Federal and provincial tax credits of between 22 and 46 percent of labor costs. These incentives are enough to make any business consider relocating, particularly when savings from filming in

Canada can mean a 25 to 30 percent savings overall.

9

The United States should not be put at a competitive disadvantage by tax incentives offered abroad. Rather, we need to level the

playingfield if we are going to keep this important industry in

America.

Related to this is the issue of Canadian cultural content. The Canadian government has given certain ‘‘cultural industries’’ special

treatment. This policy has been implemented in large part through

legislation as well as from trade barriers. These cultural content

requirements discriminate against our American film production.

Canada uses cultural content more as an industrial policy regarding jobs. Under their definition of cultural content, the film ‘‘Bad

As I Want To Be: The Dennis Rodman Story’’ is defined as Canadian culture, not because it is Canadian culture but because it was

filmed in Canada using Canadian workers. Clearly, this is unfair.

As you know, toward the end of the WTO round in Seattle the

Canadians and Europeans raised the possibility of further cultural

exceptions to future trade agreements, including new technologies.

I believe that this would go against what many of us are fighting

for, which is to keep e-commerce barrier free.

Cultural content and cultural exceptions trade agreements must

be addressed in future WTO talks with the backdrop of the issue

of the runaway film production. We have a situation in which thousands of U.S. jobs are being lured to Canada and other countries

through favorable tax treatment and subsidies. While at the same

time, cultural policies established by the Canadians and others discriminate against United States film interests thereby creating a

double hit to industries such as domestic film production.

It is an important issue that affects real Americans, Mr. Chairman. I ask this Trade Subcommittee’s interest as well as we make

this a priority in future trade negotiations. Thank you, Mr. Chairman.

[The prepared statement follows:]

Statement of Hon. Jerry Weller, a Representative in Congress from the

Illinois

Mr. Chairman,

Thank you for this opportunity to testify here today. I want to reintroduce to the

Subcommittee an issue that I brought before the Subcommittee and the full Committee last year. The issue is the loss of 20,000 American film industry jobs from

runaway film production. I want to raise this issue again to urge that our domestic

film industry be given a seat at the table at any future WTO talks to address the

cultural content issue and its relationship to runaway film production.

The problem with runaway film production is a growing National issue which directly impacts thousands of working Americans from New York to Florida; Washington to California, Illinois to Texas. During the committee discussion on the Financial Freedom Act, I offered an amendment to introduce a wage based tax credit

and creative financing tax incentives to counter the loss of film production jobs to

Canada.

Remember the film ‘‘Coming to America?’’ Unfortunately, its seems that film making jobs are now running from America. In fact, a one time Presidential candidate

once referred to that giant sucking sound of jobs heading south—well that giant

sucking sound is really the sound of 20,000 film jobs heading north to Canada.

A recent study commissioned by the Director’s Guild of America and the Screen Actors Guild shows that in 1998 over $10 billion was lost to runaway economic film

and television production. This is more than fivefold since the beginning of the decade. In the last four years, Texas has shown a 31% decrease in direct production

revenues, while my state Illinois is down nearly 20%. This has resulted in a loss

of 20,000 jobs nationally.

In looking at the small businesses and jobs lost by this phenomena, we are not

just talking about directors and actors, rather we are talking about the small busiVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
10

nesses that support the film industry and make America great. This includes: caterers, hotel and motel operators, restaurants and bars, rental equipment businesses,

electricians, set construction workers and many others involved in this vitally important and culturally indigenous economic activity. Over the years, this industry

has been a leading exporter and driver of small business job creation.

Mr. Chairman this is a constituent issue which we should take seriously. This is

a constituent issue for you too. I come from a district which includes Joliet, Elwood

and Calumet City, the home of Joliet Jake and Elwood Blues, which I often refer

to as the ‘‘Blues Brothers’’ district. Last year, my constituents and I were stunned

when they decided to make the film ‘‘Blues Brothers 2000,’’ they choose to film it

in Toronto rather than Chicago. Embarrassing was the fact that the Canadian

filmmakers were calling the Chicago film commission to ask them how to best portray Chicago.

With my statement, I have included the Directors Guild and Screen Actors Guild

study explaining the reasons why the film industry is moving out of the country,

and they have concluded that one of the main reasons is the tax incentives offered

in other countries like Canada, Australia and the U.K. which we do not have in the

United States. Canada alone offers federal and provincial tax credits of between

22% and 46% of labor costs. Those incentives are enough to make any business relocate. Particularly when savings from filming in Canada can mean a dollar savings

overall.

The United States should not be put at a competitive disadvantage by tax incentives offered abroad. Rather we need to level the playing field for the small businesses impacted by runaway production and create jobs in America, for Americans.

Related to this there is an issue of Canadian cultural content policy. The Canadian Government has given certain ‘‘cultural industries’’ special treatment. This policy has been implemented in large part through Canadian legislation, as well as

some foreign trade through tariffs, taxes, foreign investment restrictions and content requirements that discriminate against U.S. cultural industries. Canada has

consistently protected its cultural industries.

This has been discussed and negotiated in the past. In fact, during the late hours

of the Seattle talks in November, the Canadians and Europeans raised cultural content concerns. They were advocating the implementation of cultural content barriers

to new technologies. I believe that this goes against what many of us are fighting

for, keeping e-commerce barrier free.

I believe that the cultural content issue must continue to be addressed in future

WTO talks with the backdrop of the issue of runaway film production, as well as

e-commerce. We have a situation in which thousands of U.S. jobs are being lured

to Canada and other countries through favorable tax treatment. While at the same

time, cultural policies established by the Canadians and others discriminate against

U.S. interests thereby creating a double hit to industries like domestic film production.

Mr. Chairman, even if the problem of runaway production had not become so

great, the Canadian insistence on maintaining their cultural content rules and regulations ought to be on the table at future WTO talks. However, simple fairness requires a response by the U.S. to the increasing efforts by Canada to attract production away from the U.S. So long as these efforts continue, the U.S. must address

the Canadian cultural content rules. Canada cannot unilaterally decide to invite in

our production jobs, but close the door on our productions.

Thank you Mr. Chairman for this opportunity to testify.

Chairman CRANE. Thank you, Mr. Weller.

Our next witness, Hon. Maxine Waters from the State of California.

STATEMENT OF HON. MAXINE WATERS, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. WATERS. Thank you very much, Mr. Chairman. I attended

the WTO meeting in Seattle and I am really honored to have the

opportunity to come before you today and discuss the results of this

watershed event.

11

I was there really as the Ranking Member of the Subcommittee

on Domestic and International Monetary Policy of the Banking and

Financial Services Committee. I went there focused on Jubilee

2000, the wonderful debt relief success accomplished by a combination of our government working with other governments and nongovernment organizations, especially the faith-based communities.

While it did not get a lot of coverage in the press, we had wonderful ecumenical services all around the idea that we could help developing countries and poor nations get rid of their debt and be

able to feed their citizens.

As you know, thousands of people went to Seattle to protest the

WTO and its policies. These protesters were as diverse as they

were numerous. They included young people, labor union members,

environmentalists, church leaders, small farmers, consumer advocates, and human rights activists. They came from all over the

United States and the world. They went to Seattle to express their

concerns about the WTO and the impact of its decisions on the

world’s people.

It seems that the size of these protests and the intensity of the

backlash against the WTO took everyone by surprise. Mr. Chairman, they did not take me by surprise at all.

For the last 4 years, I have been working on the problem created

when the United States took the case of the European banana regime to the WTO. The European banana regime provides access to

the European market for bananas that are produced in Europe’s

former colonies. This regime is essential to ensure that small Caribbean family farmers have access to the European market to export their bananas.

The countries of the Caribbean Community are predominantly

small island democracies, many of which are completely dependent

on banana production. In the Windward Islands, which include St.

Vincent, St. Lucia, Grenada, and Dominica, along with Eastern Jamaica, the banana industry employs one third of the labor force,

provides over 80 percent of the total agricultural exports, and contributes over 12 percent of the Gross Domestic Product. Bananas

are ideally suited for the agricultural conditions of the Caribbean.

Even after a hurricane, the banana crops are replanted and grow

back within approximately 6 months.

Bananas are essential to the stability and prosperity of these island democracies. Banana production in the Caribbean takes place

on small family owned farms. These family farmers work hard to

grow their bananas and support their families. The people of these

countries are very proud people. They do not want foreign aid.

They want to support themselves, and the banana industry allows

them to do so.

The banana case, interestingly enough, was the very first case

that the United States took before the WTO, despite the fact that

the United States does not grow or export bananas. Only one company—Chiquita Brands—claimed to have been harmed by the banana regime. It is obvious to me that Carl Lindner, the chief executive officer of Chiquita and a major contributor to both Republican

and Democratic campaigns, used his political influence and connections to convince the United States to bring this case before the

WTO. The February 7, 2000, issue of Time magazine features an

12

in-depth cover story on the influence of large campaign contributions in this WTO case.

Unfortunately, the WTO ruled in favor of Chiquita and against

the Caribbean family farmers. Furthermore, WTO authorized the

United States to impose $191 million in sanctions on a variety of

European imports. The sanctions imposed by the United States

have also caused irreparable harm to many small businesses in the

United States, which import European products affected by the

sanctions.

It is ironic that these sanctions and the damage they cause to

Caribbean farmers, European producers, and American small businesses alike are the direct result of a WTO decision. The Chiquita

banana case has proven that the WTO does not prevent trade wars.

It authorizes them.

As the Time magazine article said, ‘‘When a fruit baron wanted

to conquer more of the European market, he got Washington to

launch a trade war for him. The victims of the cross fire? A bunch

of ordinary Americans who never saw it coming.’’

The Trade Related Intellectual Property Rights, known as

TRIPS, agreement provides another example of a WTO policy that

benefits wealthy and powerful special interests. The TRIPS agreement gives patent rights over plants and medicines to wealthy corporations. Corps use their patent rights to force developing countries to pay for the use of the plants and medicines. Now mind you,

many of these plants and animals are the indigenous plants and

animals of these countries. Yet the big corporations go in and get

patent rights on them and then force the people of those countries

to pay for the products that they develop from these plants and

animals from their own countries, and it is protected right in the

WTO. As a result of the TRIPS agreement, many people in developing countries have been denied life-saving medicines because

they cannot afford to pay for them.

In 1997, the South African Government proposed new legislation

to require compulsory licensing of HIV/AIDS drugs which would

allow the drugs to be sold at a fraction of the cost. Unfortunately,

the U.S. pharmaceutical industry, with the support of the United

States government, is trying to prevent this proposal from being

implemented.

In closing, these are precisely the kinds of WTO policies and decisions that outrage both developing countries and nongovernmental organizations worldwide. It should not surprise anyone that

the WTO met such strong opposition in Seattle, both inside and

outside the meeting room. The WTO promotes market access and

investment opportunities for multinational corporations without regard to the rights of workers and farmers, the protection of the environment, or the health and safety of people in the United States

and throughout the world. The WTO has developed into an invisible government that makes its decisions in secret for the benefit

of a small number of extremely wealthy people.

It is time for the WTO to begin listening to the concerns of developing countries, family farmers, union leaders, church leaders, environmentalists, consumer advocates, and human rights activists

from around the world.

13

We do not need a new round of negotiations that will give even

more power to wealthy corporations like Chiquita. What we need

is a reevaluation of the existing WTO rules. I urge this Subcommittee to critically examine the impact of the WTO and its decisions on working families in America and throughout the world.

Thank you, Mr. Chairman.

[Applause.]

[The prepared statement follows:]

Statement of Hon. Maxine Waters, a Representative in Congress from the

State of California

Thank you, Mr. Chairman. I attended the WTO meeting in Seattle and I am honored to have the opportunity to come before you today to discuss the results of this

watershed event.

As you know, thousands of people went to Seattle to protest the WTO and its policies. These protestors were as diverse as they were numerous. They included young

people, labor union members, environmentalists, church leaders, small farmers, consumer advocates and human rights activists. They came from all over the United

States and the world. They went to Seattle to express their concerns about the WTO

and the impact of its decisions on the world’s people.

It seems that the size of these protests and the intensity of the backlash against

the WTO took everyone by surprise. Mr. Chairman, they did not take me by surprise.

For the last four years, I have been working on the problem created when the

United States took the case of the European banana regime to the WTO. The European banana regime provides access to the European market for bananas that are

produced in Europe’s former colonies. This regime is essential to ensure that small

Caribbean family farmers have access to the European market to export their bananas. The countries of the Caribbean Community are predominantly small island democracies, many of which are completely dependent on banana production. In the

Windward Islands, which include St. Vincent, St. Lucia, Grenada and Dominica, the

banana industry employs one third of the labor force, provides over 80% of total agricultural exports and contributes over 12% of the Gross Domestic Product. Bananas

are ideally suited for the agricultural conditions of the Caribbean. Even after a hurricane, the banana crops are replanted and grow back within approximately six

months.

Bananas are essential to the stability and prosperity of these island democracies.

Banana production in the Caribbean takes place on small family-owned farms.

These family farmers work hard to grow their bananas and support their families.

The people of these countries are proud people. They do not want foreign aid. They

want to support themselves, and the banana industry allows them to do so.

The banana case was the first case that the United States brought before the

WTO—despite the fact that the United States does not export bananas. Only one

company—Chiquita Brands—claimed to have been harmed by the banana regime.

It is obvious to me that Carl Lindner, the CEO of Chiquita and a major contributor

to Republican and Democratic campaigns, used his political influence and connections to convince the United States to bring this case before the WTO. The February

7, 2000, issue of Time magazine features a cover story on the influence of large campaign contributions in this WTO case.

Unfortunately, the WTO ruled in favor of Chiquita and against Caribbean family farmers. Furthermore, the WTO authorized the United States to impose $191 million in sanctions on a variety of European imports. The sanctions imposed by the

United States have also caused irreparable harm to many small businesses in the

United States, which import European products affected by the sanctions.

It is ironic that these sanctions and the damage they cause to Caribbean farmers,

European producers and American small businesses alike are the result of a WTO

decision. The Chiquita banana case has proven that the WTO does not prevent

trade wars. It authorizes them!

As the Time magazine article said, ‘‘hen a fruit baron wanted to conquer more

of the European market, he got Washington to launch a trade war for him. The victims of the cross fire? A bunch of ordinary Americans who never saw it coming.’’

The Trade Related Intellectual Property Rights (TRIPS) agreement provides another example of a WTO policy that benefits wealthy and powerful special interests.

The TRIPS agreement gives patent rights over plants and medicines to wealthy corporations. Corporations use their patent rights to force developing countries to pay

14

for the use of the plants and medicines. As a result of the TRIPS agreement, many

people in developing countries have been denied life-saving medicines because they

cannot afford to pay for them.

In 1997, the South African government proposed new legislation to require compulsory licensing of HIV/AIDS drugs, which would allow the drugs to be sold at a

fraction of the cost. Unfortunately, the U.S. pharmaceutical industry, with support

of the U.S. government, is trying to prevent this proposal from being implemented.

These are precisely the kinds of WTO policies and decisions that outrage both developing countries and non-governmental organizations worldwide. It should not

surprise anyone that the WTO met with such strong opposition in Seattle, both inside and outside the meeting room. The WTO promotes market access and investment opportunities for multinational corporations without regard to the rights of

workers and farmers, the protection of the environment or the health and safety of

people in the United States and throughout the world. The WTO has developed into

an invisible government that makes its decisions in secret for the benefit of a small

number of extremely wealthy people.

It is time for the WTO to begin listening to the concerns of developing countries,

family farmers, labor union leaders, church leaders, environmentalists, consumer

advocates and human rights activists from around the world.

We do not need a new round of negotiations that will give even more power to

wealthy corporations like Chiquita. What we need is a reevaluation of the existing

WTO rules. I urge this Subcommittee to critically examine the impact of the WTO

and its decisions on working families in America and throughout the world.

Thank you.

Chairman CRANE. Thank you, Ms. Waters.

Order in the chamber.

[Applause continuing.]

Chairman CRANE. The Committee will be in order, and this is a

warning.

Ms. WATERS. Mr. Chairman, let me just say that while I appreciate the enthusiasm, this was not orchestrated. I did not know

such enthusiasm was in the room. I do not want you to think that

I in some way orchestrated this. Thank you.

Chairman CRANE. Ms. Waters, how come they are all from California?

Ms. WATERS. I do not know. I am proud of Californians wherever

they show up. And if they do happen to be from California, that

is a plus, but I did not orchestrate it.

Chairman CRANE. Yes. We realize that.

Now I yield to our distinguished colleague from California, Mr.

Thomas.

Mr. THOMAS. Ms. Waters, you described a situation in terms of

agriculture in general, and specifically the subject of bananas, and

painted what amounts to a conspiracy theory for producing the current impasse. Are you aware that there was a dispute resolution

panel which decided against the EU and the EU has refused to follow the dispute panel decision?

Ms. WATERS. I am very much aware. I know it in detail, Mr.

Thomas.

Mr. THOMAS. Do you believe there is also a conspiracy associated

with the beef hormone question and the failure of the EU to move

forward on that?

Ms. WATERS. Just a moment, because you have concluded, Mr.

Thomas, that you believe it is a conspiracy. I do not believe it is

a conspiracy. I believe that Chiquita bought its way into the WTO

and used us to advance its cause.

15

Mr. THOMAS. Do you believe the Cattlemen’s Association and the

U.S. beef industry has bought themselves into the beef hormone

problem?

Ms. WATERS. No, I do not. And I did not testify on that. I testified on bananas because I know it so well.

Mr. THOMAS. Do you believe that the canned fruit industry is

also in a conspiracy or they bought their way into the dispute process? Because in that instance as well the European Union had a

dispute resolution panel rule against it and the European Union

has refused to follow that agreement and that has produced a similar problem for the United States as bananas.

Ms. WATERS. Mr. Thomas, let me say again, it is you who refers

to what is happening as a conspiracy. I do not.

Mr. THOMAS. No, you said he bought his way into it.

Ms. WATERS. Yes, he did.

Mr. THOMAS. So I am wondering if you believe the canned fruit

industry bought themselves into the same situation since it was exactly the same decision that produced that result.

Ms. WATERS. I cannot testify on anything else but bananas. I

have spent 4 years on this. And I agree with the Time magazine

article about Mr. Lindner and the fact that he bought his way into

the WTO and used the United States to start this trade war. I believe that, Mr. Thomas.

Mr. THOMAS. And I think you might spend some time with other

Californians who produce specialty agriculture crops—peaches,

pears, canned fruit—and meet with them in an unplanned, unorganized meeting so that you can listen to their concerns about the

United States not backing up our people when the World Trade Organization and formerly the General Agreement on Tariffs and

Trade has a dispute resolution panel rule against the European

Union and the European Union refuses to follow the agreement.

That is a group of Californians you probably should spend a little

bit of time with as well so that you can fully appreciate the problems that have led us to, both in bananas and in canned fruit.

Ms. WATERS. I think it would have a lot more credibility, Mr.

Thomas, if the United States had led with a legitimate case. They

did not lead—the very first case that was taken to the WTO was

Mr. Carl Lindner’s banana case, and we do not grow bananas or

export bananas in the United States. And as a result of what has

happened, now these little countries are reverting to producing

drugs, marijuana that will find their way into the United States.

Mr. THOMAS. And one of the last cases under the General Agreements on Tariff and Trade was the canned fruit. There was an attempt to move forward based upon exactly the same arguments

that you are presenting. If, in fact, you cannot be first or you cannot be last, and the first and the last failure are exactly the same,

then in one sense I will join with you, the WTO is not much

progress than we had before. So in that sense, maybe we can join

together and decide that it really is not a conspiracy nor is it an

attempt to buy your way into the structure, but it is the European

Union that has an absolute phalanx against changing and against

having its world view mitigated by everybody else.

If we can sit down and talk about that, I think you really need

to spend 4 years on the canned fruit controversy so that you can

16

fully appreciate that this one case does not stand out; there are a

series of cases and they all are based on the fact that the European

Union refuses to budge from any of its current practices—any of its

current practices—whether it be bananas, whether it be beef hormone, or whether it be canned fruit, or a host of other subsidies

structures. This is not a unique situation.

Ms. WATERS. I appreciate that, Mr. Thomas. But you also need

to focus on the role that money and campaign contributions play

with the WTO and who the decisionmakers are, how they make the

decision, and who is influencing what.

Mr. THOMAS. And take a look at the canned fruit industry in

terms of how small it is and how much it has been maltreated and

how the United States has failed to help the downtrodden. Perhaps

we can agree that it is not an influential individual with a lot of

money, but maybe it is the system that is at fault. And if you look

at canned fruit and the bananas, look at canned fruit and the bananas, in fact, it would be an interesting cocktail salad, you could

really appreciate the structural flaws which perhaps you have overlooked because you are so enamored with the conspiracy theory.

Thank you, Mr. Chairman.

Ms. WATERS. I have no conspiracy. This is fact.

Chairman CRANE. Mr. Levin.

Mr. LEVIN. Welcome. I think I will refrain from asking questions

about the banana dispute. Ambassador Barshefsky is going to be

testifying in a few minutes and she may or may not want to comment on it. As I understand it, there is now a proposal pending before all the parties to resolve this issue and to do so to the satisfaction of the countries in the Caribbean plus the countries in other

parts of Latin America which have a stake in this. That is pending

I think. So let’s see if the Ambassador wants to comment on that.

Let me just say a quick word about the reference to the battle

against AIDS. All of us have some deep feelings about this and

surely I do. We have talked with the administration, as you know,

about this matter. I am hopeful that the administration is going to

be able to take some important steps to make certain that the

drugs that are badly needed are made available. It is not a very

simple issue but it is a crucial one. I think our challenge on this

issue and a lot of other issues is to realize that crucial issues can

be somewhat complex. If we do not recognize that, we do not resolve them. And in this case, it seems to me in this instance, as

well as others, we must take steps to resolve the problem and to

meet the need.

I will not go on at length. But over the weekend two of my distinguished Democratic colleagues and a number of others of us in the

Democratic ranks talked about this at length. And I know there is

concern across the aisle. I am very hopeful that we can find an answer. My own judgement is that meeting the issue head on will be

more effective than a lot of finger-pointing.

So, Representative Waters, you have been active, as your colleague from Georgia and a lot of us, on this issue. I think we are

determined to persevere until there is an answer.

Ms. WATERS. Thank you.

Chairman CRANE. Mr. Watkins.

17

Mr. WATKINS. Thank you, Mr. Chairman. With respect to this exchange, I want to just make a comment or two because I am quite

concerned. Let me say I hope that all my colleagues keep an open

mind because this is serious, serious business.

I am a believer in the WTO or in some similar organization. Ms.

Waters, we have got to have some organization in this global world

that we live in. It is built-in controversy. If you stop and reflect on

it and just think about it, it is built in because you are trying to

resolve differences; it is going to be a tug of war and it is going

to be gnashing of teeth.

But it cannot continue like it is. I have been a supporter of WTO

but I feel strongly that there has got to be some changes and there

needs to be some movement before that approval resolution comes

before Congress, which is up or down, on our participation in the

WTO.

My problem is I have been working on something for 10 years,

and that is the beef hormone. They knew that by declaring, say,

a beef hormone they were not going to allow U.S. beef to be imported into the European Union because 95 percent or more of our

beef in the United States uses beef hormone. Every steak that we

eat. It is good quality, the highest quality beef, regulated by FDA.

The European Union does not have an FDA or anything equivalent

to it. But they are sitting with a standard saying we are not going

to allow you to ship beef into Europe, and they are not even going

to allow non-hormone beef to go into Europe now.

It is an unfair trade barrier. I have been working on this for 10

years. That is when they started saying we are not going to allow

United States of America beef into their Union. It is totally wrong.

They must change.

Now, over that 10 years, we finally, and I came here pounding

that witness table 3 years ago, they finally ruled in our favor. Ms.

Waters, in about 31 or so cases out of about 33 presented before

the WTO the ruling was in our favor. There have been a couple of

things, as Mr. Portman knows, and yes, bananas and beef are two

of those first ones out there. We have a situation though where finally the WTO ruled in our favor. The U.S. Trade Representative

came up with the fact that after looking at everything our penalty

was going to be, and we put on the table, about $250 million. Let

me assure you it is a lot higher than that. But it started out looking at something like $900 million and they have come down to

$250 million. They finally settled though for about $116 million.

I am beginning to feel a little concerned about our U.S. Trade

Representative and just where we are. Are we willing to stand up

and gut it out and fight it out for some of our enterprises in this

country? That we do not put beef and bananas on the back of the

shelf if we are right, and we are right in beef, I know that factually.

I am concerned about this loop that has drawn out over all these

many years, as my friend Mr. Thomas from California said, and he

is correct, we have an endless loop—some of us are talking about

it as being a carousel, Mr. Portman and I very much, and I am

going to be pushing that with my colleague with full force and we

need your help and other people’s help—a carousel on those penVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
18

alties. We cannot continue like we have been or we are not going

to have an effective trade policy in this country.

I know full well we have got to have global trade. It is part of

our great economic expansion. Yes, information technology, but we

are opening up markets around the world. So I ask you to join in

a constructive way of trying to make sure our U.S. Trade Representative puts some teeth in these things and not back off, that

we stand up for the beef cattle people, for the banana people, and

others if we are going to have an effective respected trade policy

for this country. I ask that of all my colleagues.

Thank you, Mr. Chairman.

Ms. WATERS. If I may just say, I am not opposed to global trade

and I believe in fair trade. You say you are concerned about Ms.

Barshefsky. I am too. I have been for a long time. I believe that

the decisions of the WTO——

Mr. WATKINS. Excuse me, Ms. Waters. I did not use a name. I

said I am concerned about the U.S. Trade Representative Office.

Ms. WATERS. Well, I am using a name, Charlene Barshefsky.

That is who I am concerned about now. And I was concerned about

my friend Mr. Mickey Kantor before her because of this issue that

I have spent so many hours on understanding how this issue got

to the WTO and how the decisions were made.

I think you and I are saying the same thing. If we are to have

trade mediated, negotiated, there must be a fair way of doing it.

We must know who the people are, how they operate, and we must

have a fair opportunity to be heard. As long as you have organized

labor and human rights activists and small developing countries

tearing away at these decisions, we are not going to get anywhere.

I think we are smart enough to include the voices of many—who

do not mind fair trade but will not have trade at any cost—involved in ways that we can resolve the disputes to the interests of

this country and other countries. I am committed to working with

that. What I am not committed to doing is supporting the WTO

even if every decision was in favor of the U.S.A. if, in fact, those

decisions are driven by money and power.

Mr. WATKINS. Ms. Waters, we cannot have free trade unless it

is fair trade.

Ms. WATERS. We must have fair trade.

Mr. WATKINS. I yield back the balance of my time, Mr. Chairman.

Chairman CRANE. I thank the gentleman for yielding.

I thank our panelists for their presentations. I would simply suggest, Ms. Waters, our next witness that I will call to the dias is

Hon. Charlene Barshefsky, our U.S. Trade Representative, and if

you want to hang in here, after she has made her presentation you

might have questions you want to ask. So, feel free.

Ms. WATERS. Yes. Thank you.

Chairman CRANE. With that, let me welcome to the Subcommittee Hon. Charlene Barshefsky, our outstanding U.S. Trade

Representative.

I delivered some opening remarks and some of this that I may

say is somewhat repetitive. But one of the concerns, Madam

Barshefsky, that we experienced coming out of the Seattle ministerial meeting was the recognition that there was lack of agreement

19

on a declaration prior to Seattle, and also the EU’s failure to agree

to the elimination of agriculture subsidies, and the Japanese footdragging that I touched upon before, and the U.S. inflexibility on

antidumping, to name just a few.

I do, however, want to express my deep regret over the President’s comments linking labor standards to trade sanctions imposed by the WTO. This statement was received like a torpedo in

the developing world and was taken as bad faith. It undermined

our chances of reaching an agreement. Whatever his motivations,

I believe the President’s comments were off base given the lack of

consensus that exists in this country for such an approach. This objective has no chance of becoming American law, and the cost of injecting our domestic controversies over trade policy into an international effort to launch negotiations will be deep.

For many years the United States has possessed the remarkable

ability to design world trade rules. By exposing the political divisions in this country on the international stage, the President

emboldened new constituencies in this country and abroad who will

now fight against our economic success in trade. Don’t think for a

moment that our foreign competitors won’t use these divisions

against us. And as we speak, progress on the U.S. trade agenda in

Geneva is in serious question.

The President’s actions in Seattle as well as his legacy of avoiding the consensus-forging debate needed to pass trade negotiating

authority have had serious consequences. If he retreats into retirement, it is this Subcommittee and a new President which must

pick up the pieces and shoulder the burden of the repair work. Fortunately, there are key steps that can be taken this year to get us

back on track, including early passage of the CBI–Africa legislation

with meaningful trade benefits for these developing regions, and

permanent normal trade relations for China which will force unprecedented reforms on that vast country. In addition, we should

pursue regional trade initiatives including Chile, the FTAA, and

the Pacific Region.

Before us also lies a path of dangerous and destabilizing conflict

with our largest trade and investment partner, the European

Union, including a confrontation over a threat to fundamental elements of the U.S. tax system embodied in the Foreign Sales Corp.

This occurs against a background of flagrant noncompliance by the

Europeans on the panel reports against them regarding bananas

and beef and a push in Congress to ramp up retaliation. As to FSC,

I would like to schedule a meeting with you, Madam Ambassador,

to consult about the administration’s strategy.

Ambassador Barshefsky, we have had our work cut out for us

this year. By working to find a way to come together on trade matters, I think that we can turn the picture of Seattle around. I do

not want to detract from your personal record of hard work and

service as you took us into Seattle. Yet, it is important for us to

recognize that our priorities and strategy for the WTO need to be

retooled.

Let me just conclude my remarks with a major salute to you for

all of the time and energy and work and professionalism you have

invested in our common national interest. You have done an outstanding job as our U.S. Trade Representative.

20

With that, I yield to the Ranking Member of the Subcommittee

for his opening remarks.

Mr. Levin.

Mr. LEVIN. Thank you, Mr. Chairman.

I hope, Ambassador, you will use that professional talent to set

the record straight as to what the administration was trying to accomplish at Seattle including on matters of labor and the environment.

In retrospect, it seems clear there was inadequate preparation

and time to resolve the issues that loomed large at the WTO meeting in Seattle. Drafting of an agenda for a new round of trade negotiations was very rough going into the ministerial with text on key

issues still in brackets. Ministers were confronted with the challenge of both moving forward in traditional areas of trade negotiations such as agriculture and developing approaches to newer areas

such as the relationship between trade and core labor standards,

the relationship between trade and the environment, and making

WTO institutions more open to public view and to public input.

WTO members faced an uphill battle on both the new and the

old. Not surprisingly, vocal resistance to particular agenda items

came from various corners. The imperative now is to learn from Seattle and to move ahead.

The President undertook just that in his remarks at the Davos

World Economic Forum last month. In the first half of his Davos

remarks the President vividly described the important role of trade

in an era when globalization is on the march. He described what

I believe to be true and what I saw in my recent intensive 10 days

in China—globalization is here to stay. The question is whether

and how to shape it. In the second half of his Davos remarks the

President addressed that very question. He stated that we must try

to shape globalization including by tackling the new issues. The

President said: ‘‘The consequences of opening up a dialog and dealing honestly with these issues will show that in the new economy

we can have more growth and more trade with better treatment for

people in the workplace and more sensible environmental policies.’’

As I see it, and I am convinced that many, many of my colleagues believe this, our challenge is how to piece together the two

halves of the President’s Davos remarks. To focus on just one or

the other, to adopt either a just say yes or a just say no approach

to issues of expanded trade in the year 2000 does not meet the

challenge. As the President put it at Davos, ‘‘Those who heard a

wake-up call on the streets of Seattle got the right message. But

those who say we should freeze or disband the WTO are dead

wrong.’’

What is needed I believe is a plan of action for helping to shape

globalization. Today’s hearing on the WTO after Seattle and next

week’s full Ways and Means Committee hearing on China’s potential accession to the WTO are opportunities to consider components

of such a plan of action. Today I will focus on six components of

such a plan that apply generally to reforming the WTO and moving

it forward. I leave for next week’s hearing a discussion of components relating specifically to China’s potential accession to the

WTO.

21

First, we should open up the WTO to public view and public

input. That has already been discussed here today. The U.S. should

press for reforms of the WTO, including: Prompt public release of

documents, public meetings of panels, acceptance of amicus briefs,

and more effective coordination with nongovernmental organizations, labor, and business.

Second, we must continue efforts to bring labor market issues

into trade policymaking. Our goals must be to promote greater understanding of the links between trade and labor market issues

and ensure the more consistent enforcement of core labor standards

as competition grows between evolving economies and largely developed economies. These goals should be pursued at both the multilateral level through the establishment of a WTO working group

on trade and labor and the bilateral and regional levels through

implementation of adherence to core labor standards as a condition

for receipt of trade benefits. It should be made clear that our aim

is not to eliminate the comparative advantage of evolving economies but rather to avoid distortions that result when workers are

denied core rights and thus denied the benefits of trade.

Third, we should move forward on environmental issues in trade

discussions. We should commit resources to the performance of environmental impact assessments in advance of agreement to trade

liberalization measures and seek an enhanced role for the WTO’s

Committee on Trade and the Environment.

Fourth, we should pursue the built-in agenda vigorously. I understand, and this relates to agriculture and services, that the

WTO General Counsel reached agreement yesterday on a framework for negotiations in those areas.

Fifth, we should apply a consistent policy of implementing the

other major Uruguay round Agreements and not renegotiate them.

They include TRIPS and TRIMS, and others, and the antidumping

agreement, and the subsidies agreement. They were thoroughly negotiated during the Uruguay round. These agreements provide

vital safeguards and benefits in foreign markets for the United

States. Unlike agriculture and services, none of these agreements

provides for follow on negotiations and the U.S. should continue to

resist attempts to extend deadlines across the board or otherwise

weaken these agreements through renegotiation.

Sixth, but importantly, we should work to make developing countries our partners rather than opponents. As we work to make the

WTO more open and to bring new subjects within its purview, we

need to do so within a framework that fosters greater understanding and partnership with developing countries. This means

including them in key agenda-setting and negotiating processes

rather than presenting them with done deals. It also means recognizing that neither aid nor a policy of trade not aid is an adequate

means of helping developing countries. We need to pursue a coherent policy of trade and aid by relieving the least developed countries of overbearing debt, as we began to do last session, and providing technical assistance and other aid that will enable an increase in living standards.

Some may ask, and I close with these thoughts, why the trade

agenda has become more complicated. The answer is over the last

fifteen years globalization has truly gone global. It used to be in

22

this Subcommittee just a decade ago when we talked about trade

policy we were referring mainly to relations among the developed

nations and to the reductions of tariffs and the dismantling of the

more glaring nontariff barriers. That way of thinking plainly is outmoded today. There has been a dramatic increase in trade and

competition between our country and evolving economies and the

barriers to trade are increasingly complex and decreasingly transparent. I make this plea to all of us: These new trends demand new

ways of thinking.

Mr. Chairman, I do not expect for us to agree on everything, as

evidenced in our opening statements. But we must face up to these

issues and it is vital that we start now. As the changing nature of

the world economy brings new challenges, we must be open to implementing new ideas so that we can move beyond the stalemate

of the last 5 years. I am ready, with I think most of my colleagues,

to work together to meet the challenges before us. Thank you.

Chairman CRANE. Thank you.

Now, we welcome you, Madam Ambassador. Any remarks beyond

your oral presentation will be made a part of the permanent record.

Proceed when ready, Charlene.

STATEMENT OF HON. CHARLENE BARSHEFSKY, OFFICE OF

THE UNITED STATES TRADE REPRESENTATIVE

Ambassador BARSHEFSKY. Thank you very much, Mr. Chairman,

Congressman Levin, and Members of the Subcommittee. It is of

course a great pleasure to be here and I know I will see you again

next week on the China question. But today we are talking about

our agenda at the World Trade Organization for this year and talking a bit about Seattle.

Let me begin with the most immediate point, and that is that the

global trading system is fundamentally sound and participation in

it is profoundly in America’s interest. While the ministerial conference in December in Seattle did not agree on a new negotiating

round, and while legitimate criticisms of the trading system deserve a respectful hearing and repair, the WTO is fulfilling its central mission and its central mission is critical. That is, it is opening

new markets and new opportunities for Americans across the spectrum; it promotes sustainable economic development, raising living

standards, as 50 years of the global system has demonstrated, and

strengthening peace as countries realize they have a stake in peace

and stability beyond their own borders.

And our continuing leadership in the WTO is of critical importance to Americans and to the world. This is clear in the historic

record. Over 5 decades, our development of the trading system has

helped to foster what amounts to a 50 year economic boom. Since

the fifties, the world economy has grown sixfold, per capita income

nearly tripled, and hundreds of millions of families around the

world have escaped from poverty.

The completion of the Uruguay round in 1994 took us further,

addressing for the first time agriculture as well as services, protecting intellectual property rights, and strengthening our ability to

enforce agreements covered by the WTO. And, of course, those negotiations enabled us further to conclude more recent sectoral mulVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
23

tilateral agreements on information technology, basic telecommunications, and financial services.

Worldwide, the WTO, and its forerunner the GATT system, has

strengthened the rule of law, opened markets, and during the

Asian financial crisis helped countries to avoid a cycle of protection

and retaliation similar to that which deepened the Depression in

the thirties and exacerbated tensions among the major world powers.

At home, since 1992, the global trading system has helped America’s goods and services exports to expand 55 percent. This export

growth is particularly important because export-related jobs in the

U.S. typically pay between 12 and 15 percent above the national

average wage. Likewise, our own economy’s growing openness and

receptivity to imports has helped to promote competition, keep inflation low, and raise living standards especially for our poorest

families. And together with fiscal discipline and increased investment in education, the trading system has made a remarkable contribution to America’s record of growth, job creation, technological

progress, and rising living standards.

As the record indicates, development of the trading system over

50 years has been a work of profound importance. And because of

that, it has always been difficult. Just as we saw in Seattle, nations always have entrenched interests which benefit from the status quo. And at each point along the road governments over the

last 50 years have had to make politically difficult choices to serve

the greater good.

So at times we meet deadlock. The founding of the GATT in 1948

was built on a failure to set up an international trade organization

in 1947. The creation of the WTO 5 years ago followed a failed attempt to launch the Uruguay round in 1982, a mid-term breakdown in 1988, a failure to conclude the round in 1990, a failure to

conclude the round in 1993. More recent negotiations on financial

services and telecom also broke down in 1996 and 1997. And in all

cases success followed.

The experience in Seattle was similar to many of these deadlocks. While broadly supportive of a new round, a number of WTO

members were reluctant to commit themselves to a negotiating

agenda covering difficult issues. The reform of agriculture trade

poses a special challenge to the European Union and Japan. Developing countries also have diverse interests which a round must

taken into account. And we in the U.S. have sensitivities as well.

All of us, every country must be willing to look hard at our agendas

and consider ways to accommodate a number of the concerns of our

trading partners if we are to move forward.

Of course, the core elements of the negotiating agenda are before

us. Yesterday it was agreed in the WTO that negotiations on agriculture and services, as required under the Uruguay round Agreements, would commence. These are of tremendous importance to

American farmers, ranchers, and services providers. I am pleased

to report that through our efforts and those of others these negotiations will proceed as confirmed. The Council on Trade and Services

will meet in special session later this month to formally initiate the

negotiating process, and the Committee on Agriculture will do the

same in March. We are preparing a Federal Register Notice seekVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
24

ing public comment on the full range of negotiating proposals in agriculture and services and we will consult closely with the Subcommittee as we move forward.

Beyond these mandated negotiations in agriculture and services,

we have additional pressing needs particularly in relation to market access. Whether on industrial tariffs and nontariff barriers,

electronic commerce, or trade facilitation, there are a number of

market access areas that will need to be addressed quite apart

from the built-in agenda. And while there are a variety of different

options for proceeding with this, of course at the same time, as the

President said, we will continue to work toward consensus for a

new round. This will not be simple but the outlines can be drawn

if WTO members are willing to rethink some of the positions they

brought to Seattle, focus more fully on the shared benefits of success, and find a balance that allows us to move ahead. As the

President has said, we will keep working toward consensus but

success requires flexibility and shared responsibility from all WTO

members.

Apart from these negotiations, we have a broad and ongoing

agenda at the WTO this year. My written testimony lays these out

in detail, but let me just raise a few.

First, the implementation of a set of WTO Agreements covering

intellectual property, trade related investment, customs valuation,

and other issues. These come into force this year when a number

of transitions expire. It is crucial that these agreements be implemented smoothly.

Second, we have action to address the problems and concerns

particularly of the least developed countries. This includes both

market access, on which we are prepared to proceed unilaterally,

as the President stressed in his State of the Union, by securing

passage this year of legislation to further open U.S. markets to

goods from Africa and the Caribbean, as well as improved technical

assistance and capacity-building to ensure that the least developed

countries can fully assert their rights and interests at the WTO.

Third, the WTO is considering the accession of 31 new economies, with a number of these negotiations well-advanced. We expect Jordan and Georgia to enter in the very near future. We have

completed our bilateral negotiations with China, Taiwan, Albania,

and Croatia. We have made significant progress with a number of

other countries. As I mentioned earlier, I will be before the Subcommittee next week on China’s accession. But let me say just one

word on that. China’s accession to the WTO has the potential to

support reform in China, create opportunities for the United States

and China’s other trading partners, and ultimately help to further

stabilize peace in the Pacific. As part of this process, as you know,

the United States must grant China permanent NTR or risk losing

the full benefits of the agreement we negotiated.

Finally, let me turn to the question of WTO reform. The protests

and criticisms of the WTO were not at the heart of the negotiating

impasse in Seattle. But they raise issues that require a response.

Only through openness and a willingness to listen to its critics will

the trading system retain the broad support of the public and member governments over time.

25

This does not mean that all criticism is valid. Indeed, part of the

response must be a rejection of unsubstantiated and more radical

criticisms. The core vision of the trading system is right. Opening

markets in the past decades has sparked growth, reduced poverty,

and strengthened peace. To begin reversing that work would be irresponsible and damaging in the extreme, including lowering living

standards, including putting brakes on the hope of increasing labor

and environmental standards, and including broader prospects for

political stability.

But the WTO must also be willing to listen to and act upon legitimate criticisms and the WTO must be willing to incorporate

new ideas. It can do more to promote environmental protection. It

can do more to advance internationally recognized core labor standards. Let me stop on these two issues just for a moment if I may.

I appreciate Congressman Levin’s review of the President’s

speech in Davos which was very well received I think by all parties

to the debate, by and large. I think the President’s fundamental

point is this: That in an era of globalization, it is not possible any

longer to claim that areas of concern in the trading regime should

not also be integrated. If this is an era of globalization in which

trade impacts a series of issues and a series of issues impacts

trade, then let us at least take a careful and close look at the full

array of issues and attempt to find means to spark dialog about

them and to see if we cannot make a series of competing interests

mutually compatible instead of mutually destructive. This will require a step-by-step approach.

There is deep suspicion among many nations of the world, in particular in developing countries, of developed country motives in regard to environmental protection and the observance of core labor

standards. There are many reasons for this distrust and for the

suspicion that the developing countries have on this, including perhaps 30 years of rhetoric on the North-South divide that has in

large part helped to poison the atmosphere and as to which all parties are equally responsible. The question is how do we piece together what some view as competing interests of these issues and

an open trading regime, but which I believe need not be competing

at all but instead can be rather complimentary.

The first step, and what the U.S. is first trying to initiate in the

WTO, is discussion, discussion of these issues and acknowledgement that many in the developed world—many in the U.S., many

in the European Union, in Canada, Norway, other developed countries—feel quite strongly about these issues. And while there might

not be unanimity of view in our own country or within Europe or

elsewhere, nonetheless the trading system should begin to listen to

the concerns and to attempt to see whether solutions can be provided and are appropriate in the context of the WTO.

It is I think vitally important that we try and come together on

these issues. Divisiveness does not serve the interests of the global

trading regime nor does it serve the interests of those who would

wish to see the regime become somewhat more modern and somewhat more in acknowledgement of the reality of globalization and

the fact that many of these issues are now integrated one with another even if it is not often easy to accept that challenge.

26

Let me also say the global system must address concerns about

transparency. These are valid and they can be easily remedied.

This is especially important in dispute settlement where the current practice is, for example, to close arguments to the public. If

this remains unchanged, public confidence in the system will erode.

As a first step, in our US–EU Summit in December, which followed Seattle, we proposed that we and the EU, as the largest

users of dispute settlement, immediately agree to open the arguments in our transatlantic disputes in the WTO. Thus far, to our

very deep regret and surprise, the EU has refused. But it is quite

clear that this issue of transparency, not only with respect to open

hearings but a number of other issues, amicus briefs, for example,

must be addressed sooner rather than later.

Likewise, the WTO’s internal processes can be improved and updated given the growth and greater diversity of its membership. Director General Moore has begun consultations with WTO members

toward this end. But as we address this issue, we must be careful

not to alter the principle of consensus for decisionmaking in the

WTO, and also ensure that such procedural discussions do not distract us from taking immediate action on core policy issues.

In summary, Mr. Chairman, the WTO faces a number of challenges but also opportunities in the coming year, from its newly inaugurated negotiations on agriculture and services, to implementing prior agreements, bringing in new members, integrating

better the least developed countries, internal reform, work toward

a new round, and embark upon a serious dialog with respect to a

range of issues not traditionally thought of as trade but which have

direct impacts. None of these tasks will be easy or simple; but generations before us have shouldered equally difficult tasks in the

past.

I believe that the record of the last 50 years should give us a

great deal of confidence. The promotion of the rule of law, creating

new opportunities worldwide for economic growth, creating opportunities for Americans and for our trading partners, it seems to me

that this amply justifies the decision Congress took 5 years ago to

support creation of the WTO as a successor to the GATT. And it

should remind us of how significant will be the rewards of success

as we take up the challenges of this new century.

Thank you very much.

[The prepared statement follows:]

Statement of Hon. Charlene Barshefsky, United States Trade

Representative

Chairman Crane, Congressman Levin, Members of the Subcommittee:

Thank you very much for this opportunity to testify before the Subcommittee on

our agenda at the World Trade Organization over the coming year. I appreciate this

opportunity to review our assessment of the WTO after five years, the events at last

year’s Ministerial Conference, the negotiations and other work we have under way

in the year 2000.

INTRODUCTION

Our agenda for the year 2000 ranges from opening negotiations on agriculture

and services as mandated by the Uruguay Round Agreement of 1994; to implementing and enforcing existing agreements, including several now coming fully into

force; promoting the full integration of the least developed countries into the trading

system; institutional reform at the WTO, with a focus on strengthening transparency; and the accession of new members, in particular China, to the organizaVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
27

tion. At the same time, we are working with other WTO members for consensus on

a new Round. To reach such a consensus, as the President has said, all WTO members will have to show flexibility and accept their share of the responsibility for success.

My testimony will review each of these points, but will open with a more basic

review of the record of the WTO over the past five years. And here the immediate

point is clear. That is, the trading system is fundamentally sound and our participation in it is profoundly in America’s interest. While the Ministerial Conference in

Seattle was unable to agree on an agenda for a new negotiating Round, and the

WTO has received some criticism from its members and from outside as well, on

the whole the WTO is fulfilling its mission of opening new opportunities, promoting

sustainable development, raising living standards and strengthening peace.

As the President recently said, there is no substitute for the confidence and credibility the WTO offers the world as trade grows. WTO membership opens world markets to our goods and services, and helps us take advantage of our competitiveness

in agriculture, manufacturing and high-tech industries. It advances the rule of law

in commerce, and promotes stability during economic crisis. And thus our participation and leadership in the WTO is of critical importance.

Criticisms, both from within the WTO and from outside, deserve a respectful

hearing and the WTO must respond to the legitimate issues they raise. But these

were not the fundamental reason the Ministerial conference did not launch a new

Round. Rather, the WTO’s 135 members reached an unfortunate, but familiar, impasse on some of the major policy issues. The impasse will not fix itself; but if WTO

members remember history and first principles, focus more intently on the shared

benefits we derive from the open markets and rule of law represented by the WTO,

and accept the shared responsibilities of developing the trading system, we can

break the deadlock and move ahead.

THE CONTEXT

Our first challenge is to place the Ministerial in its proper context.

Today’s WTO has its roots in the General Agreement on Tariffs and Trade, or

GATT, created under President Truman after the Second World War. The leaders

of the time acted in the light of their personal experience: they had seen the SmootHawley Act in America and similar protectionist policies overseas deepen the Depression and contribute to the political upheavals of the 1930s. Fifteen years later,

they believed that by reopening world markets they could promote growth and raise

living standards; and that as open markets gave nations greater stakes in stability

and prosperity beyond their borders, a fragile peace would strengthen.

The work they began has proceeded through five decades. Over time, as we and

others abandoned the closed markets of the Depression era, we have strengthened

peace by integrating first Germany and Japan, then the post-colonial world, and

now the countries moving away from communist planning systems into a modern

economic world. And we have fostered what amounts to a fifty-year economic boom

during which the world economy grew six-fold, per capita income nearly tripled, and

hundreds of millions of families escaped from poverty.

Most recently, with completion of the Uruguay Round and Congress’ passage of

the Uruguay Round Agreements Act in 1994, we made a fundamental advance:

going well beyond the GATT agreements in addressing agriculture and services; protecting intellectual property rights; and strengthening our ability to enforce all the

agreements covered by the WTO. In the WTO itself we created a small but efficient

organization, with a very small budget and professional staff, to serve as a venue

by which governments can agree by consensus on measures in the general interest.

This is evident in the substantial further progress we have made since 1995, in conclusion of the landmark multilateral agreements on Information Technology, Basic

Telecommunications and Financial Services.

Taken as a whole, these achievements have substantially improved the world

trade environment and its institutions, in ways including:

• Expansion of the Rule of Law: In just five years, the 50 year-old trading system

has been transformed from a complex set of rules and disciplines that applied fully

to a relatively few members to a system where the rules apply to all members (subject to transitions) eliminating the potential for ‘‘free riders’’ on the benefits of an

open trading system.

• Dispute Settlement: Today, WTO Members rely on a set of procedures for the

prompt settlement of disputes, eliminating many of the shortcomings of the earlier

GATT system where the process could drag out indefinitely. While improvements to

the system are still warranted, the greater certainty of the new system has led to

28

a more prompt resolution of disputes and greater predictability in the application

of rules.

• Market Access in traditional and new areas of commerce: Globally, the Uruguay

Round is reducing manufacturing tariffs by a third; American farmers and ranchers

are finding export opportunities, as a result of the first real commitments to reduce

barriers and limit the use of export subsidies; for the first time in the history of

the trading system services providers have also recorded real export opportunities,

from accounting to telecommunications services providers. New entrants into the

global marketplace, particularly small and medium-sized enterprises, are also benefitting from these new market openings and innovations.

• Intellectual Property Rights Protection: WTO member governments have accepted a landmark set of rules for protection of patents, copyrights, trademarks and

other forms of intellectual property. This both protects the research and innovation

of Americans in our most competitive industries, and creates incentives for further

investment and technological progress worldwide.

• Global Membership: The WTO has grown by 50%, from the 90 members which

joined to launch the Uruguay Round in 1986 to 135 in 1999, with another 30 members seeking to negotiate entry. More stringent requirements for membership mean

acceptance of WTO rules helps to open markets to American products and promote

domestic economic reform. This is especially important for countries emerging from

communist planning systems and seeking to establish market-based economies.

Thus, membership in the WTO is a key element in newly emerging economies in

Eastern Europe, in Asia, and in the Middle East. African nations as well are participating more fully in the WTO than in the past.

• Creation of a dynamic forum for trade liberalization: In establishing the WTO,

we created a system that is responsive to rapid changes in technology and the needs

of the 21st century. The WTO first set in motion and then realized agreements in

financial services, basic telecommunications services and information technology,

whose outcomes are larger in scope than the totality of the results of the Uruguay

Round; and by setting a built-in agenda to continue in agriculture and services this

year.

• High Technology: The dynamism of the WTO has kept the trading system current with technological development, providing real benefits to business and consumers -through its work on the Information Technology Agreement, Basic Telecommunications, Financial Services, electronic commerce and other initiatives. Since

the Basic Telecommunications Agreement came into effect, for example, rates paid

by U.S. consumers for international service to most foreign destinations have declined significantly. From 1996 to 1998, the average price of an international long

distance call declined from 74 cents per minute to 55 cents per minute, a 25% decline. On highly competitive routes, such as the U.S.-UK route, prices have fallen

even more dramatically, to as low as 10 cents per minute. Although aggregate data

for 1999 are not yet available, indications are that the trend toward lower rates has

continued and that the current average price worldwide is well below 55 cents per

minute.

• World Economic Stability: The WTO has also strengthened the world’s ability

to address economic crises. During the financial crisis of 1997 and 1998, for example, the respect WTO members, including ourselves, showed for open market commitments helped to prevent a cycle of protection and retaliation similar to that of

the Depression era, ensuring affected countries the access to markets they needed

for recovery, and minimizing damage to American farmers and manufacturing exporters.

• Greater Openness and Accountability: While, as I will note later, we are not satisfied with the WTO’s progress toward full transparency, we also recognize that in

five years, the WTO has moved forward on these issues by making a majority of

its documents available to the public, reaching out via symposia and other means

to the NGO community and by creating a Web page. All of the WTO Ministerial

Meetings held thus far -in Singapore, Geneva and Seattle -have enjoyed strong NGO

participation.

THE WTO IN AMERICA’S ECONOMIC BOOM

These policy achievements, in turn, have helped to facilitate an expansion of

American goods and services exports, despite the effects of the Asian financial crisis,

by 55% since 1992. This is especially important, as export-related jobs typically pay

10–15% above the average U.S. wage. Together with domestic policy measures such

as the improvement of fiscal discipline since 1993 and increased investment in education, the trading system has thus made a remarkable contribution to our prosVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
29

perity in the past five years. By opening markets, advancing the rule of law and

promoting competition, the WTO has contributed to a record of:

• Growth: The U.S. economy has grown by $2.2 trillion, from $7.0 trillion in 1992

to $9.2 trillion in 1999. To put this figure in context, only two countries in the world

apart from the United States have a GDP totaling $2 trillion or greater.

• Jobs: U.S. employment has grown by over 20 million, as unemployment levels

dropped from 7.3% to 4.0%. This is the lowest unemployment rate since January of

1970.

• Rising Living Standards: American living standards are rising, as hourly wages

for nonsupervisory workers are up by 6.8%. At the same time, openness to imports

has helped to keep inflation low, broaden choice and improve consumer prices especially for basic household necessities. This is especially important for the poorest

families.

• Investment: Since creation of the WTO, U.S. non-residential business investment has risen at 10.8% per year.

• Shared Benefit: Americans have broadly benefitted from our expansion, with

poverty rates falling to the lowest level measured since 1979, and unemployment

at record lows for African-Americans and Hispanics.

A final point to note is that in the past five years, the U.S.’ share of world foreign

direct investment has sharply increased, with foreign countries investing more than

$400 billion in America. Many had expressed fears that a more open world would

promote investment in countries with weaker labor and environmental standards.

Investment decisions obviously have many causes, but experience shows that our

high standards have not been any sort of a deterrent to investment in the United

States.

REASONS FOR SEATTLE DEADLOCK

Let me now turn to an analysis of the Ministerial, and then to our next steps.

As the record—both of the past five years and of the past fifty—indicates, developing the trading system has been work of profound importance. It has therefore

always been difficult: nations always have entrenched interests which benefit from

the status quo, and at each point along the road, governments must make politically

difficult choices to serve the greater good.

It should therefore be no surprise that we at times have encountered deadlocks.

This happened at the creation of the trading system, in which the founding of the

GATT in 1948 built upon a failure to set up an ‘‘International Trade Organization’’

in 1947. The creation of the WTO five years ago followed a failed attempt to launch

a Round in 1982, a mid-term breakdown in 1988, and failures to conclude the Round

in 1990 and 1993. More recent negotiations on financial services and telecommunications also broke down in 1996 and 1997, in all cases to be followed by success.

The experience in Seattle was similar to many of these previous negotiating deadlocks. While broadly supportive of a Round, a number of major WTO members were

reluctant to commit themselves to a negotiating agenda covering issues that are

genuinely difficult.

Most important, any new Round must clearly have as a central goal the rapid reform of agricultural trade. This is a commitment the WTO made long ago, when in

1995 it adopted a ‘‘built-in agenda’’ requiring the opening of agricultural talks this

year. This poses a special challenge to the European Union and Japan. However,

developing countries also have diverse interests and agendas, which a Round must

take into account, and we in the U.S. have sensitive areas as well. All of us must

be willing to look hard at our agendas and consider ways to accommodate a number

of the concerns of our trading partners to move forward.

We knew well before the Ministerial, of course, that a new Round would involve

difficult issues. But an agenda that does not take on the difficult issues is one of

little real-world consequence. Over the long run, WTO members have been able to

overcome their differences; on this occasion they did not. WTO members began to

harden their positions rather than coming to consensus, and the negotiations proved

unable to bridge the gaps.

WTO AGENDA FOR 2000

Since then, we have been consulting with our trading partners and with DirectorGeneral Moore on ways to move ahead. As we do so, we view it as of fundamental

importance that the WTO acts on the issues immediately before it: the implementation of core agreements under the Uruguay Round, the opportunity to promote development and integration for the poorer countries, the decision by China and a

30

number of other countries to join the WTO and the commitment made in 1995 to

open negotiations on agriculture and services this year.

1. Implementation of Agreements

To begin with, a set of WTO agreements covering intellectual property, trade-related investment measures, customs valuation and other issues come fully into force

this year, when remaining transitions expire. It is crucial that this proceed smoothly. We are meeting our own commitments, of course, in areas such as textiles. And

in case of outright refusal to keep promises, we will not hesitate to use dispute settlement to enforce compliance.

But we also recognize that these agreements are complex. Some countries have

genuine difficulty implementing them despite making sincere efforts to do so. In

such cases, our preferred approach is to work through the problems on a practical,

constructive and pragmatic basis. That is the best way to ensure that we address

the fundamental concerns countries have, and preserve the integrity of the balance

of rights and obligations all of us have taken up. Likewise, we are willing to review

concerns others may have about our own implementation of agreements.

2. Least Developed Nations

WTO members must also act with greater generosity of spirit toward the least developed countries.

Part of this is greater market access for the poorest countries. We are prepared

to do this unilaterally, as the President stressed in his State of the Union Address,

by securing passage this year of legislation further opening U.S. markets to goods

from Africa and the Caribbean. This is of fundamental importance to growth and

sustainable development for the people of these regions, and will also help them become better markets for our own products.

Equally crucial, we must develop better means to help these countries participate

fully in the trading system. Many of them come to the table with less experience

in trade policy and at times fewer resources to devote to it. They often rightly feel

they have difficulty in asserting their rights and interests in the WTO. A proposal

we introduced last year, together with Bangladesh, Lesotho, Nigeria, Senegal and

Zambia, to improve the technical assistance and capacity-building programs available from the WTO and other international institutions, can serve as a starting

point.

3. WTO Accession for China and Others

Likewise, the WTO is considering the accession of 31 economies. A number of

these negotiations are well advanced: we expect Jordan and Georgia to enter in the

very near future; we have also completed our bilateral negotiations with Albania,

China, Croatia, and Taiwan; and have had significant progress with a number of

other countries. Each case will mean significant trade liberalization, bounded by the

rule of law.

Let me say a few special words about the completion of China’s entry into the

WTO. This is a critical goal for the WTO this year. The economic liberalization and

opening to the world China will make as part of its WTO accession have the potential to support reform in China, create opportunities for China’s trading partners,

and ultimately help to stabilize peace in the Pacific. And simply from the perspective of the trading system, a status quo in which the world’s third-largest economy

does not need to follow WTO rules is an enormous source of distortion and uncertainty. The China accession is thus a central task for the WTO, and must move

ahead this year.

This will require expeditious action, first of all by those WTO members which

have yet to complete their own negotiations with China, and second by the entirety

of the WTO’s membership on rules issues. It is a complex task, but one which is

manageable for the WTO and should be completed soon. As part of this process, the

United States must grant China permanent NTR or risk losing the full benefits of

the agreement we negotiated, including special import protections, and rights to enforce China’s commitments through WTO dispute settlement, among other means.

If Congress were to refuse to grant permanent NTR, our Asian and European competitors will reap these benefits of the agreement we negotiated with China, but

American farmers and businesses may well be left behind.

4. Built-In Agenda Negotiations and Work Toward New Round

Finally, with this work proceeding, we must look to the future. The core elements

of the negotiating agenda are before us, in the opening of talks on agriculture and

services, as required under the ‘‘built-in agenda’’ WTO members agreed upon in

1995. These are the sectors in which markets remain most distorted and closed, and

31

in which the opening of trade will mean perhaps most to future prospects for rising

living standards, technological progress, and sustainable development.

I am pleased to report that WTO Members are moving forward on this agenda.

The WTO General Council yesterday set dates for the initial meetings for the negotiations on services and agriculture, and our expectation is that the important work

for those negotiations will proceed. That will include the development of negotiating

proposals this year, a matter on which we will be consulting with Members, the private sector and other interested Americans in the days ahead. The work has just

begun, and we will soon publish a notice in the Federal Register seeking comments

from all interested parties as we begin the process of developing proposals for these

negotiations. But our view of the initial steps is as follows:

• In agriculture, the WTO Agreement on Agriculture, with binding commitments

on market access, export subsidies and domestic support, provides the basis on

which to pursue further agricultural reform. Useful preparatory work has already

been accomplished through the WTO Committee on Agriculture over the last three

years, where countries have identified key issues and their interests.

We are now working with other countries to ensure discussions in Geneva focus

on substantive reform proposals. Our work last year enabled us to identify general

negotiating objectives, such as eliminating export subsidies; reducing tariffs; expanding market access opportunities for products subject to tariff rate quotas, including better disciplines on the administration of those TRQ’s; reducing trade-distorting domestic support levels; and ensuring that the operation of agricultural state

trading entities are more market-oriented. We also want to ensure access for biotechnology products.

We are now developing specific proposals to implement these objectives. While

specific negotiating timelines have not been established by the Uruguay Round, the

expiration of the agricultural ‘‘peace clause’’ in 2003, and continued domestic farm

reform efforts in the United States, Europe and other countries, should help to move

the negotiations forward.

• In services, we are developing negotiating proposals for a wide range of sectors

where our companies have strong commercial interests, including, energy services,

environmental services, audiovisual services, express delivery, financial services,

telecommunications, professional services, education and training, private

healthcare, travel and tourism, and other sectors. Our companies are poised to be

among the primary beneficiaries from stronger services commitments in the WTO.

Broadly speaking, our objectives are to remove restrictions on services trade and

ensure non-discriminatory treatment. We also need to ensure that the commitments

we obtain accurately reflect our companies’ range of commercial activities. For example, the GATS definition of environmental services does not include recycling

services, an area where U.S. companies are leaders. We want to fix this and similar

deficiencies in the GATS.

Our proposals must also reflect the many different means U.S. service providers

use to meet the needs of their foreign customers. This includes U.S. companies that

establish operations overseas -for example, as a branch or subsidiary; that deliver

their services electronically -by phone, fax, or the Internet; or that depend on individual personnel to ‘‘export’’ services -for example, Americans that perform shortterm consultancy services in a foreign country.

Beyond these mandated negotiations, we have pressing needs to address market

access concerns in non-agricultural products, electronic commerce, issues related to

trade and the environment, trade facilitation, and perhaps other topics as well.

Thus, while there are a number of different options for proceeding with trade liberalization beyond the agricultural and services sectors, we working to build consensus for a new Round.

To build a consensus for such a Round will not be a simple task. However, the

outlines can be drawn, if WTO members prove willing to rethink some of their positions, focus more fully on the shared benefits of success, and find the balance that

allows us to move ahead. As the President has said, we will keep working toward

consensus; we are willing to be flexible, and expect our trading partners to do the

same.

WTO REFORM

Finally, let me turn to the criticisms the WTO has received and the questions of

institutional reform.

The protests and internal criticisms of the WTO were not at the heart of the negotiating impasse in Seattle. However, they raise issues that require a response. Only

through openness and willingness to listen to its critics will the trading system retain the broad support of the public and its member governments over time.

32

This does not mean that all criticisms are valid. Indeed, part of the response must

be a rejection of unsubstantiated and more radical criticisms. The core vision of the

trading system is right: opening markets in the past decades has sparked growth,

reduced poverty and strengthened peace. The creation of the WTO here in the

United States has brought this still further: by cutting tariffs, it has been the equivalent of a $750 billion global tax cut, whose benefit goes largely to less prosperous

families which devote more of their income to food and basic necessities. It has

helped America’s farmers, working people and businesses find new markets overseas. And as our import growth has shown, it has helped to raise living standards,

dampened inflationary pressures and broadened consumer choice, while creating

new opportunities for our trading partners. Most recently, during the Asian financial crisis the respect WTO members showed for open market commitments helped

to prevent a cycle of protection and retaliation similar to that of the Depression

area, ensuring affected countries the access to markets they needed for recovery,

and minimizing damage to farmers and manufacturing exporters worldwide.

To begin reversing the work we have done would be irresponsible and damaging

in the extreme. Workers in poorer countries would lose jobs as industrial markets

closed; living standards of the poor in America and other industrialized countries

would fall as the price of food, clothing, shoes and other essential goods rose. Hopes

of rising labor and environmental standards would be deferred, as countries which

suffer from grinding poverty have little time or resources for clean air enforcement

and factory inspection. And a crucial support for peace would weaken, as the stake

nations now have in one another’s prosperity and stability beyond their borders diminished.

But the WTO must also be willing to listen to and act upon legitimate criticisms

and incorporate new ideas. Most immediately, it must address concerns about transparency which are valid and can be easily remedied. This is especially important

in dispute settlement, where the current practice is to close arguments to the public.

Historically, the practice dates from an earlier era, in which dispute settlement

largely meant mediation and negotiation. But today, dispute settlement is a more

adjudicative process. In such a process, what once was privacy becomes a harmful

secrecy that reduces public confidence in decisions.

If this remains unchanged, public confidence in the system will erode. As a first

step, at our US-EU Summit in December, we proposed that we and the EU, as the

largest users of WTO dispute settlement, immediately agree to open the arguments

in our transatlantic disputes. Thus far, to our regret, the EU has refused. But it

is quite clear that this issue threatens to erode public confidence in the WTO and

its work, and must be addressed sooner rather than later.

Likewise, the WTO’s internal processes can be improved and updated. Since 1986,

when the Uruguay Round opened, the WTO has grown by over 50%, from 90 to 135

members, with more to follow this year. It is not only larger but more diverse, ranging from the world’s most developed to its poorest countries, and covering each point

of the spectrum in between. Each of these members has different priorities and interests, adding to the complexity of negotiations. Over time we should develop a

more effective means of ensuring both participation and efficient consensus-building.

Director-General Moore has begun consultations with WTO members toward this

end. However, as we address the issue, we must be careful not to alter the principle

of consensus for decision-making in the WTO. And we must also ensure that such

procedural discussions do not distract us from taking immediate action on core policy issues.

There are also clear areas in which the WTO can do more to help environmental

protection. These include elimination of environmentally abusive subsidies, such as

fishery subsidies which contribute to over-fishing; elimination of barriers to trade

in environmental goods and services; and the disciplining of agricultural subsidies,

including the elimination of agricultural export subsidies.

And we believe the WTO can contribute to the advance of internationally recognized core labor standards. Its current refusal to discuss the links between trade

and labor cannot be justified. It can also cooperate more actively with the International Labor Organization on a number of issues.

We should also, however, draw lessons for the future from our experience in Seattle in these areas. While our environmental proposals won a substantial amount

of support, we received at times intense criticism for pressing to open a discussion

of trade and labor. If we are to move forward, I believe we must address more effectively the reasons many developing countries are suspicious of these discussions.

Few want to specialize in low-wage industries; almost all would prefer highly

skilled, healthy and prosperous work-forces. But most also fear discrimination

against their products that would block development and perpetuate poverty. Clearly, our proposals in this area have no such intention and would have no such effect.

33

But if the trading system is to play a role in achieving the shared goal of improving

labor standards—as it should—we must find ways to allay these concerns.

USTR BUDGET

Finally, Mr. Chairman, in the context of our ability to meet the totality of these

challenges, let me raise one final issue.

Yesterday, the president transmitted his budget to the Congress. In it, he is rec- ommending funding for USTR at $28.3 million and 190 staff. This represents an increase of $2.8 million and 12 full-time positions. In addition, the President’s initiative on enforcement includes additional resources for our agency. Thus, this budget,

like the previous two the President has submitted, calls for funding increases, to

match the escalating workload our agency has at home and worldwide.

As you know, USTR is certainly one of the leanest and I believe most cost-effective agencies in the Federal government. When we began, we were an agency designed to coordinate policy, drawing on the resources of other agencies. Today, we

have tremendous statutory obligations, together with complicated and demanding

interactions with nearly 200 foreign trade partners and a very wide spectrum of

Americans. As the Appropriations Committee begins considering this budget request, I ask your support as our authorizers for the addition of these 12 new positions to our team. To fulfill our mission most effectively, we need additional support

not only at the WTO, but with respect to agriculture, Africa, China, Japan and several other areas. I hope you will support this request.

CONCLUSION

In conclusion, then, the WTO faces a number of challenges in the coming year,

from proceeding on the built-in agenda for agriculture and services, to implementing

prior agreements, bringing in new members, improving the ability of the least developed countries to participate, reforming its institutions, and working toward a new

Round. To meet these challenges is a responsibility that all WTO members share.

None of these are easy or simple; but others have shouldered equally difficult tasks

in the past.

And the record of the past fifty years should give us a great deal of confidence.

Taken as a whole, the multilateral trading system has promoted the rule of law,

created new opportunities for worldwide economic growth, and created opportunities

for Americans. This amply justifies the decision Congress took five years ago to support creation of the WTO as a successor to the GATT. And it should remind us how

significant will be the rewards of success as we take up the challenges of the new

century.

Chairman CRANE. Thank you, Madam Ambassador.

When that Seattle meeting became deadlocked, did you consider

offering a fallback position in the form of a ministerial declaration

that would have identified a few areas of common ground and commitment to keep the talk going?

Ambassador BARSHEFSKY. No. And the reason is severalfold.

Countries, and most countries did, that expressed flexibility before

Seattle became increasingly inflexible at Seattle and were not willing to take the political leap necessary. This was first apparent and

most radically apparent actually in the agriculture negotiations,

where after 61⁄2 hours of word-by-word negotiations on a text, the

European Union, Japan, and Korea said at the end of that they

could not accept the text and would reserve their rights not to accept the text. This was a startling development and ultimately

there was no agriculture text agreed upon.

As far as a smaller declaration went, that was really not in the

cards. I felt it most prudent at that point that rather than countries feel they would need to yet further harden their negotiating

positions, that countries instead take a pause, a time out, regroup,

rethink where they were, what their positions were in the hopes of

34

coming back to the table at an appropriate time. And we of course

would hope that appropriate time would be sooner rather than

later, but it will require further flexibility on the part of all countries.

An abbreviated declaration or a partial declaration was never in

the cards, would not have been accepted by the trading partners,

but I think would have had the effect of a further hardening of positions, making it impossible to reach consensus even after a pause.

And we wanted to avoid that further hardening of positions.

Chairman CRANE. I gather that you do favor launching a new

round.

Ambassador BARSHEFSKY. Yes, very much so.

Chairman CRANE. When do you think it is likely to occur?

Ambassador BARSHEFSKY. I think it depends very much on a review by all countries of the positions taken in Seattle, that will also

require a review by the United States of positions taken into Seattle, to see if each country could move a little bit. And if each

country could move a little bit, we may well be able to get there.

There are a number of international remarks to the effect that

countries would like to see the launch of a round this year. I think

many countries see a substantial danger in waiting, particularly in

the run-up to French elections where Europe’s agricultural position

will harden even further. But the rhetoric has to be matched by reality. And if countries in fact are not willing to move some, then

there will be no round whether this year or in the future. Countries, all countries, will need to take careful evaluation and careful

stock of their positions and determine whether, in light of the Seattle activities and negotiations and discussions that took place,

they can move forward.

Chairman CRANE. What in your estimation are the prospects for

real progress especially given the EU’s reluctance to further liberalize agriculture without a comprehensive round?

Ambassador BARSHEFSKY. I do think, certainly in the early

stages, moving forward now on agriculture and services negotiations will be very productive. Because in any negotiation, even in

the context of a round there is quite a bit of underbrush that needs

to be cleared away before you get to the array of political decisions

that will have to be taken. I do think, at a minimum, over the

course of this year we will be well positioned in the process in Geneva in agriculture and services to begin to clear away a lot of that

underbrush so that at the point at which a round is launched a

substantial amount of work has already been done particularly at

the technical level.

Chairman CRANE. One of the concerns I heard while we were out

in Seattle with you is the feeling on the part of many of the less

developed countries that they were being excluded from the process. I know 135 countries cannot participate all at once in negotiations, but is there a better way that we could keep the member

countries informed of key developments as they are proceeding?

Ambassador BARSHEFSKY. I think that the process used in Seattle was actually much more inclusive than anything that had

been previously utilized. Four working groups were created, all

countries could participate in all groups, those groups were each a

series of negotiating sessions in which all countries participated.

35

Where I think the criticism comes into play is the fact that in the

last day and a half or so negotiations were narrowed further to a

smaller group of countries. And that is the product of a realization

that 135 countries cannot all be in the room at once.

I think that there does have to be a better means for the Director

General of the WTO to inform the body as a whole of developments

as they proceed. But there is also a responsibility on the part of

countries that are regional and subregional leaders to keep their

neighbors informed of progress. And there were many participants

in these sessions who claimed to be representatives of a group of

nations but who then did not report back to those nations as they

should have done with respect to progress.

So I think both the overall process needs to be looked at, particularly as one gets to the endpoint of a negotiation, as well as the

role of countries that claim to be regional or subregional representatives of a variety of countries and their responsibilities to those

countries to the extent report of progress is appropriate. We have

asked Mike Moore, the Director General of the WTO, to look at this

full range of issues on internal reform. He will be doing that, hopefully to report back to the body as a whole in the coming months.

Chairman CRANE. If Congress approves a more generous CBI–Africa trade bill, will this help build political support for expanding

the trade system among developing countries in your estimation?

Ambassador BARSHEFSKY. I think that the Africa and CBI bills

are absolutely critical. I think it will send a signal to our trading

partners that the United States intends to remain fully engaged.

I do believe, and many countries have said this to me, that our

completion of the bilateral agreement with China was an extremely

important marker for many countries with respect to U.S. leadership and U.S. engagement.

But I think the CBI and Africa pieces of legislation ought to be

passed by the Congress in whatever form the House and Senate

can agree upon and we ought to get programs expanded for these

two critical regions of the world, which is what each of the bills

would do.

Chairman CRANE. I could not agree with you more. As you are

well aware, the EU has gone forward in a free trade agreement

with Mexico.

Ambassador BARSHEFSKY. Yes.

Chairman CRANE. And are negotiating with Chile. We cannot be

caught in the wings.

With that, I yield to our distinguished Ranking Minority Member, Mr. Levin.

Mr. LEVIN. Thank you, Mr. Crane.

I was going to ask you, Ambassador, as I said in my opening

statement, to put in perspective the President’s comments at Seattle. But I think you have already done that. And you did so in

part by referring to his speech at Davos. We were both privileged

to be there for his speech. I wasn’t there before or after except for

the reception where there were some interesting comments by ministers and people in the business world and Mr. Sweeney about his

speech. It essentially said trade needed to be expanded and so did

our perspectives on what trade is. It seems to me that sums up the

challenge. I think especially your extemporaneous remarks about

36

labor market issues and environmental issues should give everybody here some thought.

We have been stalemated for 5 years on trade legislation in this

institution, in good measure because of disagreement over the role

of labor market and environmental issues in the trade equation. No

one would say in the domestic economic equation that labor market

and environmental issues are irrelevant. We fight over them all the

time in part because they are relevant to the economics of the

whole country and of one section or another. So I do not think it

should surprise us that these issues, as competition grows between

different economic structures, would become relevant and contentious.

I think all of us need to work on it. As I have said to the administration, have everybody in the administration take the talk of the

President and talk that talk and try to walk the walk and actually

implement both parts of his speech.

Let me just say a word about transparency from my experience

at Seattle. Several of us met with the Mexican Trade Minister and

he was opposed to any opening up of the processes within the

WTO. We asked him whether within his country they would tolerate the same processes used in a civil or criminal trial that are

utilized in the WTO, which isn’t exactly the same but it is a quasijudicial process and you do not know what documents are going in,

which ones are the base of decision, and what exactly comes out

of it. And if there is going to be finality, and I voted for it in the

Uruguay round, there has to be transparency.

And so I think it is a step forward to see you as passionate about

the new issues as the old issues. Because if we do not resolve or

confront both of them, I think we are going to continue to be stalemated here. And as you know, I urged the same in terms of issues

like core labor standards in the CBI Agreement.

So I guess I do not really have a question to ask you. I just want

to express my belief that your presentation here gives some indication that the ball is moving forward. I think you have answered the

Chairman’s comments about the President in Seattle by referring

to what the President said at Davos. This is not mainly a politically

motivated issue within this country. It is an issue that has been

coming to the surface now for 5 years, these new issues. If we are

not passionate in pursuing them, we are going to have deep divisions abroad and deep divisions here at home.

Ambassador BARSHEFSKY. I know that was not a question, but if

I might just respond to a couple of points.

Mr. LEVIN. Please.

Ambassador BARSHEFSKY. First of all on transparency, I think a

lot of countries’ hesitations on opening up the dispute settlement

process really stem from an earlier era under the old GATT system, where a dispute settlement was largely a forum in which one

might negotiate a settlement but was never genuinely a litigation

forum as it were.

Under the new system, this is very much a litigation forum. You

make formal submissions on the record, you have oral argument

before the panel, a record is maintained, there is an appellate body

to which you can appeal again based on a record, based on formal

submissions and oral argument as well as additional submissions.

37

This takes on the character of more traditional administrative litigation as in the United States and Europe and elsewhere. And just

as those kinds of proceedings are in most countries open at least

to some degree, and in the developed world virtually entirely open

as to submissions, the availability to sit in the back of the room

and watch an oral argument, the ability to know who the parties

are, what the record of the proceeding is, and so on, so too these

same steps and processes should be available now in dispute settlement given its litigation oriented nature.

Hopefully, over time some attitudes will change. But it has been

somewhat surprising to us how entrenched the attitudes are on the

question of opening up dispute settlement, including by Europe, for

example, which does not want to see panel proceedings open to the

public. I find this shocking.

Mr. LEVIN. Inexcusable.

Ambassador BARSHEFSKY. Second, with respect to the issue of

core labor standards, I would make only one observation. I think

we have paid too little attention to very genuine sensitivities of the

developing world on this issue. By that, I mean I do not think that

our rhetoric is perhaps calibrated in the most effective way internationally. Many developing countries take a U.S. or European

focus on core labor standards as harboring an implied rebuke to

the way in which they have conducted their economy or the way

in which they treat their workers. Many of these countries come to

us and say, ‘‘Do you think we don’t want to see living standards

increased?’’ ‘‘Do you think we don’t want to see our workers moved

to higher value-added occupations?’’ They look at remarks made by

developed countries as containing an implied rebuke of their handling of the economy. And certainly the comments are not intended

in that way.

I think we have to think through carefully how better to get

across the point that these are issues in which both developing and

developed countries have a common stake, and that these are

issues that one needs to discuss, to work through, to think through

jointly so that we are sure the benefits of a global trading regime

can be more evenly shared and can lead to the goals that both developing countries and developed countries want to see for their

own people. I feel that we have never really gotten our own rhetoric quite right in this area, which has helped to fuel the kind of

suspicion and a resistance, a very deep resistance on the part of

many countries to even discussing or embarking upon a discussion

of these issues.

I think as we proceed into this year we will want to work with

the Subcommittee because we do want to get the message out in

the most effective way possible. Because at the end of the day,

trade, labor issues, environmental issues should be mutually supportive. One can easily see ways in which they would be mutually

supportive and mutually constructive in increasing trade while you

increase environmental protection, as we have in this country, increasing trade while you increase labor standards, as we have done

in this country, and at the same time, as the President points out,

not in any way detract from economic growth overall. So there are

logically ways in which these issues should be able to be fit together in a very mutually supportive way.

38

But the first step, which may be the hardest, is persuading countries to entertain a dialog on these issues in the WTO. And in that

regard, I feel that we, Europe, the other developed countries need

to work on a more effective means of communicating the aims, the

goals of these discussions lest the developing countries especially

believe this is simply a guise for increased protectionism, that instead of using tariffs as the basis, using labor/environment as the

excuse. That is surely not the intention.

Mr. LEVIN. It isn’t. And when we talk about core labor standards,

and I will close, we are talking about core labor standards that almost all of them have agreed to in ILO documents and talking

about embedding them within trade agreements.

Ambassador BARSHEFSKY. Right.

Mr. LEVIN. Thanks very much.

Ambassador BARSHEFSKY. Thank you.

Chairman CRANE. Thank you, Mr. Levin.

Mr. Thomas.

Mr. THOMAS. Thank you very much, Mr. Chairman.

Thank you, Charlene. Nice to have you with us and I assume we

will have some repeat engagements.

In listening to your opening statement, I have been on the Trade

Subcommittee now for more than a decade, I was in Seattle, but

I will certainly defer to your more detailed knowledge of world

trade history when you indicated that Seattle was similar to earlier

breakdowns. Which of those earlier breakdowns provided a video

war of pitched battles that produced a victory for antitrade forces?

Ambassador BARSHEFSKY. Certainly, Seattle was characterized

by protests; no question about that. And certainly there was substantial coverage of it. And certainly, as the President said, there

is something of a wakeup call at work here. But that is not what

led to a negotiating impasse.

If you look at earlier impasses, they typically were followed——

Mr. THOMAS. No. I have a question on that. But I just think we

have to realize that the context, where it occurred, how it occurred,

and the new format of visibility produced, I think, a result that

was far more disastrous than earlier breakdowns which were in

closed rooms and backroom restaurants in Geneva and in other

areas of the world. If you will concede that, we can——

Ambassador BARSHEFSKY. I do not think I would concede that it

was disastrous in the same way. I look at it actually rather differently. That is to say, I reject much of the radical criticism made

of the global trading system. But I do accept that there are ways

in which the trading regime can and should be updated. And to the

extent the protests went to that point——

Mr. THOMAS. Then let me ask a question a different way so I can

understand and focus it. Did the events in Seattle further the Clinton administration’s trade policies?

Ambassador BARSHEFSKY. I think any breakdown of a round does

not. In other words, clearly, we would have preferred a round to

be launched. Clearly also, it was not going to be launched without

the key litmus test being passed, and that is on agriculture. And

that was not passed. So did it further the trade regime or the trade

record? Certainly not. That is obvious.

39

Mr. THOMAS. Then with hindsight, with the failure of the governments to narrow their differences, with a total lack of prior agreement on most elements of a text for the declaration, especially agriculture, in your opinion would it have been better to postpone the

Seattle ministerial rather than take the consequences that occurred?

Ambassador BARSHEFSKY. Well, I think most countries felt going

into Seattle it might be possible to construct a round. And most

countries with whom we had dealt bilaterally, that is, one-on-one,

gave us certainly every indication that result would be achievable

at Seattle.

But what happened there happened in 1982, in 1989, 1990, and

1993, and it is this. You never know for sure before you go in the

room whether the deal is going to be there or not. If I had taken

that approach on China, I never would have returned to China.

Mr. THOMAS. I have a very short period of time. And you once

again alluded to the similarity between the Seattle breakdown and,

for example, 1982, when in fact in 1982, because it did not have

that visual and dramatic and physical disruption, we were actually

able to come back and salvage it fairly quickly. But we will discuss

the similarity or differences in the history of this particular event.

I happen to think that in hindsight, based upon our failure to

have a clear understanding of where we were going, we probably

damaged ourselves more significantly than we thought we were

going to. And that since we did not have a wedge that we could

deliver, that the downside outweighed any potential upside. And

then, of course, in my opinion, and I think of many other observers,

the fact that the President came in and made the presentation that

he did pretty well guaranteed, given your description of the concern

and fear and miscommunication of various phrases, and I do think

sanctions is one that can create fear, that perhaps produced some

miscommunication, but which is a word that in the international

trade community is clearly understood.

So my question is this. What is the administration’s current position on labor issues? Are you still saying that you would accept a

study group to examine labor issues in the context of expanded

trade, or is there now some commitment to sanctions?

Ambassador BARSHEFSKY. No. The proposal we have made in the

WTO is very clear. This is a working group to review the intersection between trade and labor policies. That is what it is intended

to do, with participation by the ILO, the Bank, the fund, and so

on.

Can I make one other point though since you have raised the

President in this, as did Mr. Crane. First off, the President has

talked about these issues since he began campaigning for President

in 1991. Second of all, I think his Davos speech articulated really

quite beautifully his own views on this subject. That is to say that

these issues have to be made to be mutually supportive. Third, his

statements in Seattle, which were rather off-the-cuff, did not alter

any country’s position on this issue. There is no country on the

fence on these issues. Those that believe that labor and environmental issues should be considered in the context of the WTO believed it before the President spoke and believed it after, and those

40

that believe they have no place in the WTO took that position before he spoke and took that position after he spoke.

Mr. THOMAS. Just let me tell you, ma’am, that very often perception is reality. There were a number of forces, those who stood up

here, and unfortunately a number of them left prior to engaging in

what I consider to be an educational dialog, who were here for a

different reason than education.

Republicans offered policies on labor and the environment in the

Fast Track discussions, on paper, concrete. I think it might be useful if we begin talking about what the Clinton administration’s positions are on labor and the environment, on paper, concrete, so

that as you are reaching out to try to build a consensus across

countries and across the equator that we could work together since

I think it is in our mutual interest to come up with a policy that,

as we do with Fast Track, is in somewhat pre-approval condition.

Here is a quote from Director General Mike Moore: ‘‘We need to

hear more of the ‘F’ word—flexibility—before I can say with any

great confidence there has been enough movement from all sides.’’

Now, flexibility is important, but in response to a question by the

Chairman about the difficulty in launching a new round, you

brought up the argument that the Europeans will harden fast because of the French elections. What time this year are the French

elections?

Ambassador BARSHEFSKY. The French elections will be toward

the end of next year.

Mr. THOMAS. Oh, so not even this year in 2000?

Ambassador BARSHEFSKY No. But the French——

Mr. THOMAS. They are in 2001?

Ambassador BARSHEFSKY [continuing]. But the French view prevailed among the member states in Seattle now.

Mr. THOMAS. Do you think there is any possibility that elections

that are going to be occurring this year, not next year, might be

a reason for a reluctance to launch a new round; i.e., the U.S. elections?

Ambassador BARSHEFSKY. I do not think so. Because if you look

at the areas of U.S. sensitivity, and you all know what they are—

dumping and textiles, those are 30-year issues. Those are issues on

which most members have very distinct views.

Mr. THOMAS. No. I think, ma’am, that what happened in Seattle

was the core arguments; those who were wearing the circle with

the stripe across the WTO are looking at labor and the environment. And I would submit to you that the elections that are going

to occur this year are not a climate in which this administration

or candidates running for President want to engage in a responsible discussion of labor and the environment in the context of

world trade.

Ambassador BARSHEFSKY. I disagree with that conclusion.

Mr. THOMAS. Last question. In the interest of getting a new

round launched, what is your reaction to the U.S. being a bit more

flexible on some of our issues? If we pull our sensitive issues off

the table and then require other folk to talk about their sensitive

issues, that might also heighten the concern about motives. Where

are we? And if you don’t want to talk about it, I understand that,

I am going to give you a list of written questions so I can have you

41

respond to me. But can’t we maybe talk about investment, competition policy, antidumping policy, even someone like me, accelerated

phase-out of textile quotas just to kind of show good faith and trust

our people such as you, and our negotiating capabilities, and not

create a front-loaded barrier to discussing issues that are sensitive

to others if we were to discuss issues that were sensitive to us as

well?

Ambassador BARSHEFSKY. Right. I do not think that we created

front-loaded barriers. On investment and competition, for example,

we offered the EU a variety of approaches on those issues which

I believe the EU should have accepted. They did not. But that

showed flexibility on our part. We did that because, to be frank,

these two issues are very important to the global trading system

and in the longer run we are going to need to also find ways of

dealing with them.

With respect to the issue of textile quotas, there was very little

raised by developing countries on textile quotas. Think about it

from their point of view. They are phased out 4 years from now in

any event. Why would they pay in a negotiation to get a phase out

6 months earlier by the time the next round ended? There is very

little discussion at all about textile quotas.

And with respect to antidumping, as with our trade laws, certainly I do not think Congress would want to see us weaken our

trade laws in a negotiation. On the other hand, we also have to recognize other countries are using these laws more and more in a

rather abusive fashion. So there will need to be some dialog on

them, but certainly I think we must reject any dialog that would

lead to a weakening of our trade laws. And my guess is that is

probably the congressional view as well.

Mr. THOMAS. And perhaps we ought to ask our trading partners

if they view your analysis of their position to be their position. And

that may be one of the problems that you indicated in terms of our

ability to listen and understand. I think the integration of some of

those issues is a real concern and that perhaps we ought not to dismiss them out of hand by placing ourselves in their conceptual

framework and providing the answer we believe they would have

provided instead of having them provide it in the first place.

Mr. Chairman, I would ask that I could submit these questions.

They are wide-ranging. Obviously, we did not spend any time on

agriculture, and I am very concerned about the continued subsidies

of agriculture in Europe, in fact, the concentration of certain of

them in areas that I think are very detrimental to the United

States.

Chairman CRANE. Without objection.

Mr. THOMAS. And I look forward once again to your very

thoughtful answers, Ambassador, as you have provided in the past.

Mr. Chairman, thank you very much for the liberal use of the 5

minute rule.

[Questions, and their respective answers, submitted by Representative Thomas for Ambassador Barshefsky follow:]

42

Questions submitted for the record by Congressman Bill Thomas for

Ambassador Charlene Barshefsky

1. ON WHAT ISSUES DID THE U.S. ENCOUNTER THE MOST RESISTENCE FROM TRADING

PARTNERS?

Answer 1:

At the May 1998 WTO Ministerial, WTO Members authorized a process to prepare for the 3rd Ministerial Conference and the possible launch of a broad-based

multilateral trade negotiation, recognizing that a new phase of negotiations was already mandated to begin at the end of 1999/beginning of 2000 for the agriculture

and services agreements concluded in the Uruguay Round. In the course of this preparatory process, WTO Members affirmed the need to proceed with these mandated

negotiations. Most also agreed that the time frame for completing negotiations needed to be relatively short, and that the scope of the negotiations should be broadened

beyond the ‘‘built-in agenda’’ of agriculture and services. Members were near consensus on the proper treatment of electronic commerce, the agenda for negotiations

on services, and several issues relating to trade and the environment.

Major points of disagreement included:

1. Agriculture: The EU, Japan and Korea resisted a commitment to thorough reform of agricultural trade. The built-in agenda negotiations envisioned further reductions in export subsidies, strengthened rules on domestic support, reductions in

tariffs and the expansion of market access opportunities for products subject to tariff-rate quotas.

2. Implementation of Existing Agreements: A number of developing countries, including some of the most advanced, requested broad exemptions from previous commitments. Likewise, certain of our trading partners sought to use the debate on implementation to reopen agreements like textiles, confusing in some cases the problems with implementation with a more basic dissatisfaction over the results of the

Uruguay Round. Antidumping, in particular, was one agreement where many WTO

Members sought new negotiations, which the United States resisted as being premature, at best.

3. Market Access: Questions here centered on the comprehensiveness of the negotiations, whether they could be supplemented with early provisional results as was

suggested by the APEC sectoral initiatives in the industrial sector, and to what extent industrial market access would result in improvements in current or existing

market access.

4. Investment and Competition Policy: The EU and Japan in particular argued for

negotiation of broad and binding rules in the areas of investment and competition

policy, but found relatively little support.

5. Labor: Extensive consultations were held at the Ministerial on various ways to

address the relationship between trade and adherence to core labor standards in the

WTO’s work program. In keeping with the mandate of the Uruguay Round Agreements Act of 1994, the United States called for establishment of a Working Group

in the WTO, with ILO involvement; others proposed a broader forum outside the

WTO context, having minimal if any WTO involvement.

6. Environment: Broad agreement emerged to confirm sustainable development as

a guiding principle for the negotiations, to pursue trade liberalization and disciplines in areas that hold particular promise for yielding both trade and environmental benefits and to use the Committee on Trade and Environment to identify

and consider the environmental implications of the negotiations. Differences

emerged, however, regarding the specifics of proposals to address subsidies that contribute to over-fishing, and other proposals aimed at modifying WTO rules.

2. WHAT STEPS ARE BEING TAKEN TO ADVANCE THE ‘‘BUILT IN’’ NEGOTIATIONS ON AGRICULTURE? WHEN WILL TALKS START AND HOW WILL YOU PROCEED WITHOUT A MINISTERIAL DECLARATION FRAMING THE ISSUES?

Answer 2:

We view the agriculture negotiations as an important tool to expand markets for

American farmers and ranchers and want to take full advantage of the opportunity.

Domestically, we are continuing our internal work identifying priorities and assessing different approaches for eliminating export subsidies, reducing tariffs, expanding market access opportunities for products subject to tariff rate quotas, including better disciplines on the administration of those TRQs; reducing trade-distorting domestic support levels and ensuring greater transparency and fairness in

43

the operation of agricultural state trading entities. We also are reviewing approaches for dealing with biotechnology in the WTO in addition to our bilateral efforts in Europe and elsewhere.

At the WTO, we have set up a process for conducting substantive negotiations on

agricultural reform. At the first negotiating session on 23–24 March countries

agreed to a meeting schedule and work program for the next twelve months and

set timeframes for submitting negotiating proposals.

Negotiations will be conducted under the terms of Article 20 of the Agreement on

Agriculture, which calls for fundamental reform. Under this mandate we have the

scope to address all of our negotiating objectives. We are also working with other

countries to establish the basis for a broader negotiating Round.

3. WHAT IS THE ADMINISTRATION’S POSITION ON LABOR SANCTIONS NOW? IF SANCTIONS ARE NOT BEING PROPOSED, HOW IS THE ADMINISTRATION GOING ABOUT CONVINCING DEVELOPING NATIONS THAT ITS INTEREST IN LABOR STANDARDS IS NOT A

STALKING HORSE FOR IMPOSING RULES ON THEIR ECONOMIES?

Answer 3:

Our proposal for a Working Group on Trade and Labor is for study and discussion

on the important relationships between trade and labor. This is not being done now

by the international community. Therefore, it is premature to propose remedies to

problems that have not been analyzed fully, nor is it possible yet to define the appropriate role, if any, for the WTO in addressing these problems. Of course, our

trade preference programs already provide statutory authority for the suspension of

duty free treatment if beneficiaries are not taking steps to afford internationally recognized worker rights.

4. CAN THE U.S. GET AGREEMENT TO LAUNCH A NEW ROUND WITHOUT BEING WILLING

TO DISCUSS OUR DUMPING LAWS OR ‘‘COMPETITION POLICY’’?

Answer 4:

The United States is more than prepared to discuss both topics; the only major

issue has been whether it is appropriate to initiate full negotiations in either area.

On that, the United States is not alone in its opposition.

As regards antidumping, we have taken the view that it is premature to embark

upon the negotiation of new rules given the changes still being implemented as a

result of the Uruguay Round negotiations. The provisions of the Antidumping

Agreement are among the most complex of any WTO Agreement. Their complexity

is driven, in part, by the need to ensure that all Members respect the transparency

and due process requirements that have for some time been features of our own law.

Moreover, to ensure impartiality and that the circumstances affecting a fair comparison of prices are appropriately taken into account, the methodologies are necessarily complicated. Insofar as a negotiation would likely lead to even more complex rules which would be difficult for many countries to apply in a WTO-consistent

fashion, we believe the first step must be to review the existing rules and the adequacy of their implementation. This would include looking in particular at the provisions affecting developing countries, and considering how to improve the coordination of technical assistance for new users of the antidumping remedy so that the

current rules are adequately respected. This is critical to ensuring that U.S. exporters get fair treatment in foreign markets, while also providing an effective remedy

against unfair trade in the U.S. market.

On the issue of competition policy, the United States has been one of the most

active participants in the working group established at the 1996 WTO Ministerial

to study this issue. While the EU, Japan and some others have been anxious to

move on to the negotiation of a broad set of binding rules in the WTO, many developing countries either oppose the basic requirements of any such rules (e.g., the

need to have an antitrust law) or believe that the matter is not yet ripe for negotiation. What’s clear is that more work is needed to encourage and guide other countries in the development of a competition culture and the infrastructure necessary

to administer sound competition laws and policies. We also think there needs to be

further analysis leading to a better understanding of and consensus about how to

address anti-competitive practices that affect international market access. We are,

therefore, working with our WTO partners to find the best means for advancing

work on competition issues.

44

5. EUROPEAN UNION DOMESTIC SUBSIDIES OF FRUITS AND VEGETABLES ARE DISTORTING THE PRICE OF PRODUCTS LIKE CANNED FRUIT AND OLIVES BY AS MUCH AS

$3 PER CASE. HOW DOES THE U.S. PLAN TO DEAL WITH THESE TRADE-DISTORTING

DOMESTIC SUBSIDIES IN THE ‘‘BUILT-IN’’ AGRICULTURAL NEGOTIATIONS?

Answer 5:

We have identified reductions in trade distorting domestic support as a priority

negotiating objective for the agriculture negotiations. We are working closely with

the fruit and vegetable industry to identify the best approach to address these EU

subsidy programs as we develop our agriculture negotiating proposal.

6. ARE YOU PREPARING TO PURSUE BILATERAL AGREEMENTS AS A MEANS OF

ADVANCING THE WTO DISCUSSIONS?

Answer 6:

The United States makes full use of its bilateral relationships to advance work

in the WTO. We have met on numerous occasions over the past several months with

a wide variety of our trading partners in order to explore their concerns or reservations on the launch of a new Round, and try to find ways to narrow any differences.

We have devoted considerable time and energy to ‘‘confidence-building’’ steps, ranging from ways to improve market access and technical assistance for the least-developed countries to improvements in the transparency and functioning of the WTO

itself. We have made clear our openness to working with those having difficulty implementing their transitional WTO obligations on a timely basis, to ensure both adherence to WTO commitments and the most practical and expeditious means of securing compliance. We have cooperated with our APEC partners to build support

for early market access results in the WTO, and have worked well with our FTAA

partners in the Western Hemisphere to advance shared positions, such as the ultimate elimination of agricultural export subsidies. The United States will not shrink

from any opportunity to use bilateral agreements and cooperation in order to make

progress on the multilateral agenda.

7. AS YOU KNOW, THE EUROPEAN UNION HAS NOT APPROVED ANY AGRICULTURE

BIOTECH PRODUCTS SINCE THE SPRING OF 1998. THIS HAS LED TO U.S. CORN FARMERS LOSING $200 MILLION FOR EACH OF THE LAST TWO YEARS DUE TO THE EU’S

UNWILLINGNESS TO ADDRESS APPROVALS OF NEW AGRICULTURAL BIOTECH PRODUCTS. MORE RECENTLY, THE EU HAS THREATENED TO LIMIT IMPORTS OF OTHER U.S.

CORN BASED PRODUCTS, SUCH AS CORN GLUTEN FEED WHICH TOTAL $800 MILLION

A YEAR, BECAUSE THEY MAY CONTAIN GENETICALLY MODIFIED ORGANISM VARIETIES

UNAPPROVED IN EUROPE. DOES THE ADMINISTRATION HAVE A SHORT TERM GAME

PLAN TO RESOLVE THIS ISSUE?

Answer 7:

Yes. The Administration is pursuing several approaches to address this problem.

We have made biotechnology a priority in our dealings with the EU.

Presidents Clinton and Prodi agreed to form a high-level dialogue to address the

full range of problems facing agri-biotechnology, including market access. Senior EU

and U.S. officials met last December to begin work under this dialogue. They met

again in February and March, with another possible meeting in May. During each

meeting, U.S. officials press for EU action to resolve its regulatory process for agribiotechnology products.

We are also using the Transatlantic Economic Partnership (TEP) Biotech Group

to explore in detail some alternative ways to resolve this issue. This group met in

December shortly after the meeting of senior officials and plan to meet again in

May.

We also have been using U.S. Embassies in the EU to urge Member State support

for ending the moratorium on approvals of new varieties, which would facilitate resolution of trade problems. We are trying to find ways to address concerns Member

States might have, particularly for those varieties that have already undergone scientific review in the EU.

8. HOW MANY PRODUCTS HAVE BEEN HELD UP IN THE EU APPROVAL PROCESS FOR POLITICAL REASONS? WOULD YOU SAY THAT THERE HAS BEEN UNDUE DELAY IN APPROVING CERTAIN PRODUCTS DEVELOPED IN THE U.S.?

45

Answer 8:

The main problem we have with the EU approval process is that decisions appear

to be driven by politics and not by science. This political influence is best demonstrated by the decision of some Member States to enforce a de facto moratorium

on approvals of new agri-biotech varieties, regardless of whether there is a scientific

basis. The EU has not approved any new varieties since April 1998. We have received reports that the EU’s moratorium could remain in effect until the EU finalizes new approval procedures, which not might be for another two years. We are

working with the EU see if there are ways new approvals could proceed before completion of new EU regulations.

9. WHAT SPECIFIC STEPS ARE BEING TAKEN BY THE ADMINISTRATION TO ENCOURAGE

THE EU TO PROCEED WITH FINAL CLEARANCE OF OUTSTANDING APPROVALS? HAS

THIS BEEN A TOPIC OF DISCUSSION IN BILATERAL MEETINGS WITH MR. LAMY AND

PRESIDENT PRODI AND, IF SO, WHAT HAS BEEN OUR POSITION?

Answer 9:

As indicated above, we are also using the Transatlantic Economic Partnership

(TEP) Biotech Group to explore in detail some alternative ways to resolve this issue.

We also have been using U.S. Embassies in the EU to urge Member State support

for ending the moratorium on approvals of new varieties, which would facilitate resolution of trade problems. President Clinton raised U.S. concerns about the adverse

effect the EU’s regulatory system is having on U.S. exports and gained President

Prodi’s consent to a high-level effort to try to overcome these problems.

QUESTION 10. WHAT ARE THE PROSPECTS OF RESOLVING DISPUTES ON CORN AND SOY- BEAN VARIETIES PRIOR TO NEXT FALL’S HARVEST? IF THE EU IS NOT WILLING TO ACT

ON BIOTECH PRODUCTS THAT HAVE BEEN SUBMITTED FOR APPROVAL, HOW WILL THE

ADMINISTRATION RESPOND?

Answer 10:

We would not want to speculate about what our next steps might be. The U.S.

goal is to work with the EU to get agri-biotech products approved and entered into

the EU, if possible before next fall’s harvest.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman.

Madam Ambassador, great to have you here. I always thought

your job was difficult. Now, after Seattle, I know it is difficult. But

I just wanted to say also that Representative Maxine Waters is

here and was part of another panel and she is listening in on this

whole procedure.

Look, I just have four basic questions. The first is about antidumping. I really applaud you for standing up tall on this thing.

I remember being part of an industry that almost went on its knees

after 150 years in business because of the unfair labor and unfair

dumping laws that took place. I hope you are going to stick with

that.

Point number two is on the FSC. I go back so far I remember

the DSC. I thought that was all solved. I thought that everyone

thought that was a great idea. And now this thing rears its ugly

head and I just have a feeling that it could lead to some really unfortunate consequences, maybe an international trade war, which

is wrong.

But I think that maybe the two most important things I wanted

to talk about are these. You mentioned transparency. But if I understand correctly, in terms of the dispute settlement panel which

you are opening up, the Europeans do not want it. Here, you are

46

offering something, it obviously came out of Seattle that we ought

to have a more transparent situation, and the very people who it

would help are against it. I really don’t understand that.

And the last issue, and you may want to comment, is sort of the

issue of the green room, that obviously things can’t be solved by everybody in a huge open forum. But sometimes I think in taking a

look at the procedures we get involved in that rather than in the

substance and what is happening. And you may want to make a

comment on those.

Ambassador BARSHEFSKY. Sure. I think with respect to transparency and Europe, I have never understood the European position on transparency in terms of opening up dispute settlement

panels to public observation, or the filing of amicus briefs which

the EU has also opposed. I do not understand it. It is so contrary

to an extraordinary legal tradition in the EU, a tradition that we

have adopted from Europe over the course of 200 years. And so this

has always been something of a mystery.

Generally, when the EU speaks about the issue they raise a concern about the government-to-government nature of proceedings,

and they are government-to-government, and the fact that opening

these processes up would detract from the government-to-government character of the proceedings. But that certainly is not the

EU’s position in, for example, the International Court of Justice

which are government-to-government proceedings. So I have never

quite understood the argument that is raised.

I would hope that we could continue to work with Europe to get

progress on transparency. They have been quite forthcoming in

some areas, like the further derestriction of documents, making

many more documents presumptively open to the public rather

than the reverse presumption which pertains now, and in some

other key transparency areas where the EU has been forthcoming.

But in this area of dispute settlement they have not been. And, of

course, this hurts us with other countries because if the EU with

its legal tradition does not want to move in this direction, other

countries take note and decide they don’t have to move either. So

we have something of a bit of a vicious cycle there.

With respect to the green room and process, I think ultimately

there should be ways of better accommodating the needs of all 135

members. We have a quite different situation now than at the start

of the Uruguay round. The WTO membership now is 50 percent

larger than it was at the start of the Uruguay round. And even the

start of the Uruguay round was hampered in 1982 by countries

claiming they were not involved, they were not involved. And now

you have a membership that is 50 percent greater in size.

There ought to be ways of reconciling how to deal with the bigger

group but how to also get the work done. One of the things we have

asked Mike Moore is to consult with a variety of countries on this

issue. The British have put in a suggestion on convening an ‘‘eminent persons’’ group to look at the internal issues with respect to

the WTO and make recommendations. We are looking at the British proposal now. There may be many other ways of proceeding.

But I think it is critical that the WTO take a careful look at its

internal procedures to avoid the kinds of problems that have

plagued us in the past and at Seattle.

47

Mr. HOUGHTON. Yes, but at the same time not getting in the way

of some of the substantive things you have to do.

Ambassador BARSHEFSKY. Exactly.

Mr. HOUGHTON. Because it is always easier talking about the

mechanics than it is looking at the gut issues.

Ambassador BARSHEFSKY. Absolutely. We have made it very

clear in Geneva that we view the issue of internal reform as one

to be handled in parallel with, not sequentially, in parallel with the

ongoing work of the WTO, including moving on the built-in agenda,

as we are going to do.

Mr. HOUGHTON. Thanks very much.

Chairman CRANE. Mr. McDermott.

Mr. MCDERMOTT. Thank you, Mr. Chairman, for letting me ask

a question.

Chairman CRANE. First, Mr. McDermott, if you will yield?

Mr. MCDERMOTT. Yes.

Chairman CRANE. We want to thank you for all that gracious

hospitality in Seattle. [Laughter.]

Mr. MCDERMOTT. Well, it is about that that I wanted to raise an

issue with the Ambassador.

It seems to me after our experience in Seattle the Congress has

to rethink something, and I would like your comments on it. When

the United States government decided they wanted to have this

meeting in the United States, cities began to compete for it—Denver, Detroit, San Diego, Seattle, Honolulu, and many others were

eliminated in the first round and wound up with five, and Seattle

won the prize. [Laughter.]

Mr. MCDERMOTT. I was in San Diego and saw a newspaper that

said thank God we didn’t win. And I sat in from the very start on

the planning for this meeting on the Seattle Host organization

meetings and was there, Jennifer Dunn had representatives, and

our Senators did and so forth. We were there a year almost in advance trying to put it together and so forth.

It has become clear to me after seeing what happened that the

funding of these kinds of meetings needs to be rethought. That saying that a city can go out and raise the money for a meeting like

this, and that somehow the Federal Government gets the benefit

of having the meeting in the United States in some city without

footing a very significant part of the bill is going to be unacceptable

to any city in these United States if they anticipate anything close

to what happened at the Seattle meeting.

The biggest problem was that the business community went out

and started trying to solicit money from their conferrers around the

country, and of course when you offer the opportunity to contribute

people wonder what they are getting for contributing. Some people

saw the attendance at meetings and other things as selling influence, and such an uproar developed over that that they could not

raise money. That was one of the big problems—raising money.

The second thing that happened was we put in a specific appropriation into the State Department for security and other things,

much of which has not yet been released to Seattle.

I would like to hear your comments about the likelihood of having another meeting that comes to the United States in this way.

And I say that because I was in Germany in January and the GerVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
48

man bankers said to us if there was a meeting in Europe we would

have had the same thing that you had in Seattle, so don’t feel bad

because we would have had 100,000 people there about beef hormones, genetically modified, and so forth. And it was just our

chance to be in the sun. It turned out the sun was a little hotter

than we had anticipated.

But I would like to hear your thoughts about how you have a

meeting like this and have it successfully carried off.

Ambassador BARSHEFSKY. Well, I think you raise an issue that

I would probably have to give quite a bit of thought to. Certainly,

the protocol, if you will, used for the Seattle meeting was followed

by the U.S. Government in meetings of this sort over many, many

years, where you have a host organization, you have some funding

by the Federal Government, some funding by the State or city, and

so on and so forth. And you may be right that that whole model

needs to be reviewed in light of what happened in Seattle.

I know that the city is now in discussions with the State Department on the question of certain funds. We are not a party to those

negotiations but I do know that they are going on at the present

time.

I think you certainly raise a critical issue and I think that this

is an issue in general the administration ought to look at because

it may be that the way in which these conferences have been put

together in the past simply will not suffice for the future.

Mr. MCDERMOTT. The question really is, if you were to say let’s

have another meeting of the World Trade Organization in the

United States in the next 2 years, what city would put their name

up there wanting it? And on what basis would they want it?

Ambassador BARSHEFSKY. Right.

Mr. MCDERMOTT. I think it is the old Machiavellian business of

hang somebody in the square and everybody walks by and says

‘‘Thank God it isn’t me.’’ But the next time you have a meeting you

are going to run into, I think, some real serious problems around

this whole issue.

May I just ask one other question, and that is I understand the

President put $25 million additional money in his budget to monitor and enforce trade agreements. Tell me how you anticipate

using that money.

Ambassador BARSHEFSKY. Much of that money is contemplated

being divided among USDA, USTR, and some other agencies, although I think our portion of that will be relatively small. I think

a good part of the funding will go out to Commerce Department

field office which can be extremely helpful on enforcement issues

but do not at this point have the capability at the local levels at

which they operate, do not have the resources to be of as much

help as they could be. These are people who are on the ground

whether in relevant cities or overseas that can really help us on enforcement issues.

So, much of the funding is directed toward that, some toward

USDA enforcement, some toward USTR enforcement since we do

all of the litigation on WTO dispute settlement as well as much of

the monitoring of the trade agreements, as well as some other

agencies. I would be happy to get a dollar breakdown of that if you

would like, if that would be helpful to you.

49

Mr. MCDERMOTT. I ask that question really because it strikes me

that there was a good deal of I guess surprise around here about

what happened in steel. It is hard for me not to think that we

could have had the capability of knowing that was happening long

before the wave got to the level that it did to require us to be out

here passing resolutions on the floor.

Ambassador BARSHEFSKY. I think steel was an issue that also, to

some extent, took the American producers by surprise. That is, I

think they did not anticipate this crushing wave of imports from

Japan, Russia, Korea, and elsewhere as came in so rapidly, so very

rapidly, and certainly the U.S. Government did not anticipate it. I

confess to that fully. I do not think there was anyone who fully appreciated what was headed toward the United States in such a concentrated period of time toward the end of 1997 and through 1998.

I think if we had more folks on the ground, it may well be, and

you are right, it may well be that this would have been known

more in advance and perhaps there would have been some preventative action or precautionary action that could have been taken; at

a minimum, being able to engage our trading partners who were

sending us this stuff at a much earlier point in time than we actually did. And that would have been very much to the U.S. advantage to have had those resources in place at the time to be able to

handle an issue before it became so huge and so destructive of U.S.

steel producers here that we really had quite a job on our hands.

Mr. LEVIN. Would the gentleman yield for ten seconds?

Mr. MCDERMOTT. Surely.

Mr. LEVIN. I very much favor the added enforcement effort. But

in the steel case there actually were warnings quite a few months

before. I think we also need to take a look at section 201 because

it has certain barriers to prompt action, even when the data are

very clear.

Mr. MCDERMOTT. Thank you, Mr. Chairman, for your indulgence.

Chairman CRANE. One thing in response to a question that you

raised about what city would want to serve as host next time. I

have heard that since you have gotten through your practice game

out there in Seattle that you are ready now for the real affair, that

you are number one.

Mr. MCDERMOTT. I heard Chicago had practice.

Chairman CRANE. Chicago remembers 1968 still. We have got a

long memory.

Congressman Camp I think would like to ask a question.

Mr. CAMP. Thank you, Mr. Chairman.

Ambassador Barshefsky, I just want to shift gears and make a

brief statement, and I realize this is not directly on WTO and Seattle, regarding NAFTA and our trade policies with Mexico, particularly with regard to the dry bean industry and the problems we

had last year with the permitting process, and the lack of announcement by the Mexican Government for the 1999 auction period and the devastating effect that had on markets. The uncertainty that the Mexican Government created caused our markets to

plunge. And second, the cost of the permits themselves. Since the

implementation of NAFTA the imports of dry beans to Mexico have

been subject to many changes in the auction rate. I would just at

some point like you to comment on what the administration is

50

doing to ensure that Mexico changes that permit system. I realize

that this is not something that you are prepared to testify about

today.

But regarding today’s testimony, we are about 2 weeks away

from a ruling on WTO regarding the FSC issue. I wondered what

the administration’s strategy was for dealing with the EU on this

issue should the findings of the appellate body go against us, and

particularly what steps the administration has taken to ensure

that the United States and our employers are not put at a competitive disadvantage regarding the European competition with regard

to tax treatment of Foreign Source Income and especially with regard to export transactions.

Ambassador BARSHEFSKY. If I could respond in the case of dry

beans, we are working with the Mexican Government to fix it. You

are quite right, what they did on the permitting process in terms

of the auction period was very disruptive. The cost of the permits

is an additional problem. I am happy to provide you with more detail on that.

Mr. CAMP. Thank you.

Ambassador BARSHEFSKY. On the question of FSC, as you know,

this case is in litigation. We did not prevail at the panel stage. But

the case is on appeal. Oral argument was held, I guess, about 2

weeks ago or so. The appellate body should issue a decision sometime. I would say at the end of this month or early March. But because the appellate body is actively considering the panel report,

which we believe to be substantively and factually incorrect and

unsupportable, I do not think it is appropriate for me to comment

further on U.S. plans. Our plan is to do everything we can to get

the panel report overturned.

Chairman CRANE. And now our co-host to the exciting Seattle

ministerial, Ms. Jennifer Dunn.

Ms. DUNN. Oh, heck, I will give all the credit to Mr. McDermott.

[Laughter.]

It is good to see you, Ambassador, still in one piece. We are sorry

we didn’t give you a better welcome in Seattle.

Ambassador BARSHEFSKY. That is a great city.

Ms. DUNN. Yes, it is. I would like to see it glow once again, not

with the fires that we saw while we were there but with the natural beauty that our lovely city does show off most of the time.

I wanted to add my interest to that of Mr. Camp and Mr. Houghton on the FSC situation. I think in the long run it is in our best

interest to be looking for a settlement with the European Union.

I am very concerned about what is going to happen otherwise. I do

not want to see trade wars breaking out or anything like that. So

I hope that you and the rest of the folks on the negotiating team

are proactively working with the European Union on the FSC

issue. That is just a statement not a question.

I am concerned about some of the things I am beginning to hear.

We have always realized that on the NTR vote, the permanent

NTR vote with China that we would be able to move into that as

soon as the other bilaterals are completed. Now we are beginning

to hear some of the advocacy groups say that it is not necessary

for us to enjoy the relationship with China under the WTO for us

51

to have a vote on permanent NTR. You mentioned this in your

opening statement.

Ambassador BARSHEFSKY. The view of the administration obviously is that the benefits of the agreement we negotiated will be

put at risk if Congress does not pass permanent NTR for China.

That is to say there is a substantial risk that our bilateral agreement will have opened up the Chinese economy to the rest of the

world but not for us, which would be a remarkable irony, indeed.

And that risk comes about to the extent Congress does not pass

permanent NTR.

So, as you know, the administration, the President are very committed to achieving permanent NTR for China this year at such

point as the contours of the final package become known. That is

to say there are other countries that need to close out bilaterally

with China, most notably the European Union, but there are others

beyond the European Union. In addition, there will be an additional rules negotiation in Geneva which will also have to be completed or largely completed so that the final contours of the entire

WTO accession for China will be fully known. And at that point,

of course, the administration would want to proceed to a very rapid

vote.

Ms. DUNN. Do you have any sense now of the timing of all of

that?

Ambassador BARSHEFSKY. It is a little hard to gage, but I do

think we are hopeful for a vote in spring.

Ms. DUNN. Good. And I was delighted to hear the President’s

speech in Davos. I think it was a good speech and his effort to put

his shoulder to the wheel on that permanent NTR vote is very welcome by those of us who have been working to make this happen.

Ambassador BARSHEFSKY. If I might say, I think that the timing

on NTR is a little bit uncertain because, of course, it depends on

how quickly our trading partners move. That is obviously an area

over which we have very little control. But I think we do hope to

see that process proceed apace. And if it does, then a vote sometime in the spring or late spring should be doable.

Ms. DUNN. Good. That is good. That is very hopeful.

Let me ask you a question on TRIPS. You mentioned that you

believe sticking to these agreements is crucial to upholding the

lines that we lay down under the Uruguay round. Could you bring

us up to date on what is happening with TRIPS. How are the WTO

countries doing on compliance? Are the least developed countries

still pressing for an extension of the deadline? Are you planning to

bring action against any country that does not meet the deadline?

What is happening on TRIPS?

Ambassador BARSHEFSKY. Well, in December of last year I ordered my staff to undertake a review of compliance by all of the

developing countries; that is, by any country whose transition expires January 1, 2000. That review is underway now so I do not

want to talk about any one particular case.

But by and large, we see, generally speaking, either compliance

with the requirements or countries having put themselves in a position to comply, or countries that are desperately trying to comply

but need some additional technical assistance, and we are pleased

to work with them on that, and we have seen some, but relatively

52

few, countries that simply appear to have no intention whatever to

comply. Those are obviously the ones on which I think we need to

focus first because these are countries for whom issues of technical

assistance are not pertinent but who simply regret the commitment

they made in the Uruguay round and do not intend to comply. That

I think then merits a fairly strong response by the United States.

For those countries that have tried to comply, that need a little

more technical assistance, a little more help, sometimes able to be

provided, frankly, by our industry, those countries obviously we

want to work with. The object is not litigation, it is compliance. If

we can work out a timely compliance plan, which we do for many,

many countries including developed countries around the world,

that probably brings us to where we will want to be over the coming months.

And then, of course, for those countries that have undertaken

very substantial and successful efforts to ready themselves for compliance, we see very good efforts having been made and we feel

fairly comfortable about that group that compliance problems will

not be a particular issue.

Ms. DUNN. Thank you very much, Madam Ambassador.

Mr. Chairman, I think it might be very useful to us, since the

report of the bilateral agreement between the United States and

China is classified, that we could have an executive session with

the Ambassador maybe even between now and our hearing next

week.

Chairman CRANE. I agree with you. I think it would be very valuable. We will try and work on it.

Ambassador BARSHEFSKY. I would be delighted.

Chairman CRANE. Mr. Nussle.

Mr. NUSSLE. Thank you, Mr. Chairman.

Madam Ambassador, can you tell us how many products have

been held up in the European Union approval process for political

reasons or, in other words, because products that have passed scientific reviews have failed to gain approval from the EU Council.

Can you tell us about how many products there are currently?

Ambassador BARSHEFSKY. I cannot give you the number except

to say that the EU has not approved a GMO variety since April

1998.

Mr. NUSSLE. And this is after it has passed scientific review?

Ambassador BARSHEFSKY. Yes. In other words, the issue in Europe has never been scientific review of those products for which

GMO approval has been requested, whether corn varieties, or additional soybean varieties, some other more specialized varieties that

are on tap now. The issue has never been scientific review because

European scientists are generally in accord with our scientists that

these foods provide no health risk. The issue has been a political

issue in Europe.

Mr. NUSSLE. Could you give us a brief description on your strategy, the administration strategy for dealing with this approval

problem before the coming planting season.

Ambassador BARSHEFSKY. We have for a number of months now

engaged the Europeans on this. President Clinton and President

Proti have agreed to set up a high level group on the issue of product approvals, that group having met once already, with the hope

53

that the EU can get its approval process back on track and functioning so that we can have greater assurance for our farmers that

the EU process will in fact approve the varieties that have passed

scientific scrutiny.

Mr. NUSSLE. Will those assurances be ready before the planting

season?

Ambassador BARSHEFSKY. We are pushing very, very hard at this

juncture. The EU is aware of the concern about the planting season

and the disruptive impact that their failed approval process has

had on U.S. farmers. We will continue to push them very, very

hard both in the context of this high level group as well as in the

context of an additional biotech working group that we have.

We also have in the U.S. an interagency process that involves all

of our relevant agencies including the science-based agencies, for

example, FDA, as a means further to make sure the U.S. Government approach and position is well coordinated on these issues. So

we are pushing very, very hard, particularly on the varieties that

are pending now for clearance by the EU.

Mr. NUSSLE. If that cannot be accomplished in the next few

months, is a WTO case being contemplated?

Ambassador BARSHEFSKY. We will look at all of our options. The

issue here is access on the basis of sound science and approvals on

the basis of sound science. We believe that test has been met, European scientists believe that test has been met. The U.K. just

issued a report, as you may know, in the case of beef hormones,

for example, but also with respect to GMOs. The science is not an

issue here. This is political. And so we will undertake a full review

of all of our options and hopefully choose that option that will be

most effective to get this process back on track.

Mr. NUSSLE. I will tell you, and I will let the farm organizations

speak for themselves because they obviously represent a diverse

number of farmers and producers across the country, I will just

speak for the folks that I have spoken to in my district, if this cannot be resolved, this is big.

Ambassador BARSHEFSKY. Yes, I understand that.

Mr. NUSSLE. No, I want you to understand even more than what

you may understand. And that is that this is going to erode, totally

and completely erode, in my very humble opinion from one district

in Iowa, the agricultural support that we need in order to maintain

the support in Congress and across this country for fair trade and

free trade in this world. I do not know how I can say it any stronger than I have just said it. And if a resolution on this matter cannot be achieved prior to planting, we are in trouble. We were just

talking about the President on NTR with China. I mean, Katie bar

the door when it comes to trade legislation if in fact there is erosion on the part of agriculture. And it won’t just be the guys in the

ties that represent the organizations here in Washington. It is

going to be the guys on the combines that are going to be making

that decision. And right now their support is a mile wide and an

inch deep. It is not very strong.

Finally, I would just give you the opportunity to respond to an

accusation made here today by a very senior Democrat in the

House of Representatives basically accusing you and the administration of pursuing the Chiquita banana case in the WTO because

54

of an exchange of campaign contributions. If it had been made by

a protester at the WTO, I would have maybe taken it a little bit

differently than I would if it were a senior policymaker in this

House of Representatives. The fact that it is from the Party that

the administration represents is even more surprising. But it was

a very direct and appeared to be somewhat factual accusation. I

would just give you the opportunity to respond.

Ambassador BARSHEFSKY. I do not know what the accusation

was, but I will tell you——

Mr. NUSSLE. Well, the accusation was we are pursuing the

Chiquita banana case because the administration took campaign

contributions, period.

Ambassador BARSHEFSKY. The Chiquita banana case arises from

a 301 petition filed by Chiquita, supported by Dole and the Hawaiian banana growers. We take 90 percent of the 301 petitions filed.

That is to say we turn away very few and only on the basis that

the petitions did not meet the requirements of the statute or of the

regulations, or that the petition itself was so ill-conceived it would

surely lead to a loss at the end of the day and we give people an

opportunity to withdraw their petitions when they realize that the

petitions are completely inadequate for whatever reason. But other

than that, USTR’s history is we take about 90 percent, a little over

90 percent of all of the petitions filed.

Chiquita’s petition was in good shape. It followed on two refusals

by Europe to comply with two previous panel rulings which found

their regime illegal under international standards. Now if we are

not taking that case, what case is it that we are taking?

So this is a substantive issue, as the panel recognized in the appellate body where we won again two more times. How many times

do we have to win this case again and again and again? As the appellate body found, the European Union’s policies were discriminatory, they violated Europe’s WTO obligations, they violated international norms. And that is certainly proof positive that this was

a case fought on the basis of the merits, and obviously the panels,

now all four of them, decided on the basis of the merits.

Mr. NUSSLE. Thank you. That was a very good response. I appreciate that. I wanted to give you that opportunity because I have

heard you give that response before and I happen to agree with it.

I am not aware of what campaign contributions she may be speaking of, but I will take that for whatever it is worth.

Finally, I would just suggest that this may be indicative of what

we are up against. That the opponents of trade will use both legitimate and illegitimate ways to try and forward their case. But I will

suggest that there are some legitimate concerns, as you have outlined them today. And I only wanted to make you aware of the concerns of my constituents in Iowa about agriculture, in particular,

the foods enhanced through biotechnology, and I appreciate your

response.

Thank you, Mr. Chairman.

Chairman CRANE. Thank you.

Mr. Becerra.

Mr. BECERRA. Thank you, Mr. Chairman.

Ambassador, it is a pleasure to have you here. Thank you for

being so patient in answering all the questions. Before I ask any

55

questions, I would like to just say that I appreciate your response

that was made to some of the comments made by my colleague Mr.

Levin earlier with regard to core labor standards and the environmental issues that you confront. I, too, believe that there is a way

to try to resolve this if people talk, and I think you made a very

valid point about using the right language. Sometimes we do send

messages that hurt more than help. And I think the developing

countries in a sense do have some claim for concern, but ultimately

I think we all want to do the right thing and they understand that

as well, that we are not trying to impose on them some type of condition that makes it difficult for them to compete.

Let me ask you a little bit about FSC. I know you said the case

is pending, you expect to hear fairly soon what the appellate body

will rule, how it will rule. And to the degree that you can comment,

because I know you said you were restricted in what you can say,

give us a sense if the appellate body of WTO does rule erroneously,

as I believe you are correct that it was an erroneous decision, if

they uphold that erroneous decision. If, in fact, that is the case,

and if, indeed, you are not able to resolve this through some type

of settlement with the EU anytime between now and then, what

is in the offing? Won’t this lead to a general deterioration of our

trade relations with the EU, and won’t this make Congress somewhat suspicious of the WTO and how we proceed forward with it?

I have a difficult time seeing how something as big and as important as FSC is to us can be allowed to just fester.

Ambassador BARSHEFSKY. Let me say as a general matter that

because the appellate body is considering the case now, I am very

reluctant to suppose or assume, even hypothetically so, that we

might lose. We should win this case. That does not necessarily

mean we will or we won’t, but we should win the case on the basis

that we believe firmly that the panel below erred both substantively and with respect to the background and facts of the case.

So let me just start by saying that.

Certainly, we have engaged the European Union on this case, we

have from the beginning, because it is a large and important case.

We take the view that the U.S. must comply with panel rulings.

We have done so in all cases, even those that are politically sensitive. But recognizing how large this case is, we engaged the EU

early on it by way of general discussion and we have continued to

do that really all through the pendency of the action.

I think certainly Europe is waiting for the appellate body ruling

in the hopes that the panel will be affirmed. We are waiting for the

appellate body ruling in the hope that the panel below will be reversed. And that is really the current status right now.

Mr. BECERRA. I see the temperature rising on bananas, on

beef——

Ambassador BARSHEFSKY. Oh, this would dwarf that, there is no

question about it.

Mr. BECERRA. Yes, it would. And for that reason, it would put

us at an even more disadvantage competitively to some of our European counterparts in the corporate community. And if something

is not done quickly, (1) I think you are going to see a deterioration

of support for the WTO in Congress, and (2) I think you are going

56

to find that it is going to be very difficult to deal in the future with

the European Union.

Is there something that you can tell us that leads you to believe

that the Europeans are going to try to help us resolve this, given

that in fact they must have accepted it back when in 1981–82 the

changes were made that gave us FSC and it seemed that for the

longest time they were accepting of it. Now I guess maybe because

they lost in bananas and beef they are saying we will give you one

back.

Ambassador BARSHEFSKY. Certainly I think Europe needs to be

cautious because, depending on the ruling and the range of the ruling, many of Europe’s own tax programs will be directly at risk. I

do not think Europe necessarily thought this throughout as carefully as they should have before this action was brought.

In addition, as you know, FSC arose from a settlement of the

DSC dispute, a settlement which existed for 15 years. And so Europe having brought this action, we felt it was largely not just unexpected but that one had to question the motives and whether this

was an attempt to try and balance the litigation scorecard. I obviously have no way of knowing. And, of course, there are many European companies that benefit directly from the FSC as well.

Mr. BECERRA. It almost seems an abrogation of the agreement

we had when we went from DSC to FSC because they were a party

to that.

Ambassador BARSHEFSKY. Yes. Certainly part of the argumentation before the panel in the appellate body is that this was a settlement entered into and essentially brought into the Uruguay round,

and that as a settlement of a prior dispute agreed to by the parties

to that dispute FSC does not constitute a subsidy that is prohibited

under the rules or any other action that would be proscribed by

WTO rules. And that is certainly one of the basic arguments that

we made to the panel and that we have reaffirmed with the appellate body.

And as I said, we will continue to talk to the Europeans on this

issue. As you may know, following a dispute settlement case, the

party that loses, which could be Europe in this case or the U.S.,

does have time within which to think about it. In the case of a losing party, one has a number of months in which to consider options

related to compliance or settlement or some other means. And so

this will not be a decision that comes into effect immediately in any

event. But as I said, we are very focused on doing everything we

can to see that the panel ruling below is overturned, as we believe

it should be.

Mr. BECERRA. We urge a very vigorous defense and certainly a

vigorous——

Ambassador BARSHEFSKY. Extremely vigorous defense, yes.

Mr. BECERRA [continuing]. And a vigorous search for any solution

outside of that as well, because I think all of us are concerned

about where this may lead. Thank you, Ambassador.

Thank you, Mr. Chairman.

Chairman CRANE. Thank you.

Mr. English.

57

Mr. ENGLISH. Thank you, Mr. Chairman. And Mr. Chairman, I

want to thank you for the opportunity to participate in today’s

hearing.

Welcome, Ambassador. I want to congratulate you as a participant in Seattle on what the Chairman felicitously referred to as the

U.S. inflexibility on antidumping negotiations. I believe that our

delegation took the right position. I believe that strong antidumping laws are essential to police our market in a way that allows Americans to support open trading laws. I believe this has

been a settled issue negotiated and with concessions in the past in

the WTO, and I want to congratulate you for resisting the drive by

some of our trading partners, particularly the Japanese, to use this

negotiation to weaken our trading laws.

I was privy to a recent meeting which included Commissioner

Lemee, and in that meeting the argument was advanced that reopening the antidumping code was necessary as a concession to the

developing countries to get them to play in the WTO negotiations.

It has been my impression that the narrow disciplined agenda that

we put forward in Seattle included many things that were attractive to the developing world. Would you care to comment on whether reopening the antidumping code is really necessary to get those

countries to join us?

Ambassador BARSHEFSKY. I think for most developing countries

the issue is not U.S. antidumping law, the issue is agricultural

market opening where many of these countries believe they have

or can achieve comparative advantage in agricultural production

but cannot possibly compete globally with heavy EU export subsidies on the very products they wish to grow or have grown but

then cannot sell in world markets. This is the issue for most developing countries and most rank that as by far and away their top

priority, absolutely their top priority.

Certainly, on the question of dumping, we have some concerns

and we do need to find a means of dialog with the way in which

dumping laws are being handled in many other countries which do

not have the procedural requirements we have or due process requirements. But the notion that we would in any way undertake

any action that could weaken our trade laws I think is well understood around the world to be completely impossible, particularly as

one looks at the relative openness of this market and the fact that,

as the WTO concluded, we take in about 22 percent of the world’s

goods. Europe, which is 15 countries, takes in about 19 or 20 percent. Japan takes in 6 percent.

The Japanese of course have focused on this issue and have demanded in the past a very extensive negotiation on dumping, largely we believe at the behest of their steel industry. I would suggest

to Japan that restructuring their steel industry might be more in

order than claiming that U.S. trade laws has in any way created

a real problem for their industrial base.

Mr. ENGLISH. And my understanding is the implementation of

the WTO antidumping code still allows us to have discussions with

some of our trading partners that might lead to some refinements.

In other words, don’t we still have some wiggle room on that point?

Ambassador BARSHEFSKY. Yes, certainly. And certainly we want

that kind of room. There are concerns on the part of some countries

58

with respect to our implementation. We have to be willing to discuss that and address it. We have a range of concerns with respect

to other country implementation and we would hope they would listen to our concerns and attempt to address those concerns. So in

that regard, certainly a give and take can proceed, hopefully very

productively so.

We have made clear to our trading partners that we would not

only be amendable to, but, indeed, would be very interested in such

a give and take because there are an array of implementation problems we have faced. And in that spirit, we need also to take a look

at implementation problems called to our attention.

Mr. ENGLISH. Thank you, Ambassador.

Thank you, Mr. Chairman.

Chairman CRANE. Thank you.

Mr. Watkins.

Mr. WATKINS. Thank you, Mr. Chairman.

Madam Ambassador——

Ambassador BARSHEFSKY. Let me first of all say——

[Brief sound system malfunction.]

Mr. WATKINS. I appreciate that. I want to say that we need to

move rapidly, because I know this priority resolution is going to be

coming to the Floor.

Ambassador BARSHEFSKY. Yes.

Mr. WATKINS. And a lot of my people feel like that a lot of foreign

countries are being treated a lot better than they are, especially a

lot of my cattle people. And I want you to know I’m, I want to invite you to come to Oklahoma one of these days. I think you might

make a favorable impression on some of them that you are really

working out there to try to do something about this unfairness and

this unfair trade barrier there.

Mr. Chairman, I appreciate the time, and your allowing me to be

here and express this on behalf of all my constituents.

Chairman CRANE. Well, thank you, Madam Ambassador. And

one quick question before you leave.

The Interagency Council, when do you anticipate it will have

completed its work?

Ambassador BARSHEFSKY. I don’t want to put a date on it. I’ve

just told my people that their instruction in this meeting is to get

this process moving quickly and to come back to me in a rapid

manner with specific recommendations.

Chairman CRANE. All right. Well, we thank you always for your

participation and we look forward later in the week to participating

further with you.

Ambassador BARSHEFSKY. Good. Thank you. Thanks so much,

Mr. Chairman.

[Questions, and their respective answers, submitted by Representative Dunn for Ambassador Barshefsky follow:]

Questions Submitted for the record by Congresswoman Jennifer Dunn for

Ambassador Charlene Barshefsky

BACKGROUND:

Since a separate WTO Working Party was formed in 1992 to review Taiwan’s accession, there has been an understanding that Taiwan may accede to the WTO, but

only after China’s accession. Taiwan believes that they should be judged on the merits of their case for WTO membership, independent of other factors. Taiwan is our

59

seventh largest trading partner and purchases twice as many goods from the U.S.

than China right now. Clearly, their accession will be good for the U.S. and the rest

of the world community.

QUESTION FOR BARSHEFSKY: I HAVE USED THE TERM ‘‘SIMULTANEOUS ACCESSION’’ OF

CHINA AND TAIWAN, WHICH HAS DRAWN OPPOSITION FROM CHINA’S FOREIGN MIN- ISTRY. WHAT I MEAN BY THAT IS THE WTO GENERAL COUNCIL SHOULD CONSIDER

TAIWAN’S ACCESSION IMMEDIATELY FOLLOWING THE CONSIDERATION OF CHINA’S AC- CESSION DURING THE SAME DAY’S BUSINESS. WILL THE CLINTON ADMINISTRATION

PUSH FOR SUCH A TIMETABLE ?

Answer:

We have worked intensively with both Taiwan and China to achieve membership

in the World Trade Organization (WTO) on strong commercial terms. This objective

has driven the timing of our work in both accession negotiations. The United States

has completed all of its negotiations with Taiwan for it to accede to the WTO. Other

countries have also resolved their substantive issues with Taiwan. Some technical

issues need to be resolved and final verification and approval of Taiwan’s accession

package remain to be done. While China’s accession negotiations are not yet completed, China has recently reached bilateral agreements with most members of the

Working Party. We are prepared to work intensively with China and other WTO

Members to conclude the accession negotiations as quickly as possible. We anticipate that when the Working Parties on Taiwan and China’s accession reach a consensus on their respective accession packages, the WTO General Council will approve both accession packages and invite them to become WTO members at the

same meeting of the General Council. China has consistently stated that it has no

objection to Taiwan’s membership in the WTO and no intention to block its accession. Their primary concern is that China be admitted first. This is not a problem

for Taiwan and can be accommodated by the procedure set forth above. Our objective is to have both of these important trading powers in the WTO and we do not

believe that delaying either accession advances that objective.

BACKGROUND:

APEC has been pursuing a trade initiative known as Accelerated Tariff Liberalization, or ATL. This initiative identifies eight sectors for tariff liberalization and,

since it involves wood and paper products, is very important to the Pacific Northwest. Last year, APEC was unable to reach a final conclusion on ATL since Japan

was unwilling to liberalize on another of the ATL’s sectors: fish products. The final

solution was a joint statement by all APEC nations that the ATL negotiations would

be pursued in the next trade round.

QUESTION FOR BARSHEFSKY: BOTH THE U.S. GOVERNMENT AND MANY U.S. COMPANIES HAVE INVESTED SIGNIFICANT TIME AND RESOURCES IN PURSUING THE ATL INITIATIVE. CAN YOU BRIEFLY DESCRIBE THE NEGOTIATIONS IN SEATTLE WITH RESPECT

TO ATL? WHAT IS BEING DONE TO ENSURE THAT THESE NEGOTIATIONS CONTINUE

TO MOVE FORWARD?

Answer:

We are very appreciative of all the efforts made by U.S. industry to push the ATL

initiative, initially with our APEC partners and in Europe last year. As a result of

these efforts, it is evident that EU industry is quite interested in the ATL and recognizes the benefits of liberalization in these sectors. In the WTO preparatory process last year and at Seattle, we worked very closely with a number of our colleagues, including colleagues from APEC, Canada, New Zealand, Australia, Singapore and Hong Kong, to make early provisional implementation of the ATL initiative a part of more general market access negotiations on non-agricultural products

as part of a new Round. The European Commission held the view that sectoral liberalization initiatives could only take place in the context of broader WTO market

access negotiations, and expressed concerns (undefined) about the ATL coverage.

We are continuing to consult closely with our private sector, and the ATL Coalition in particular, on next steps for ATL products and launching broader market

access negotiations as part of a new Round. We have issued a Federal Register notice to obtain private sector views on broader market access negotiations in the

WTO. Finally, we are continuing to press forward with the APEC non-tariff work

programs in the ATL sectors as a way of maintaining APEC interest in the ATL

sectors. This non-tariff work in APEC will help us to prepare for the broader nonVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
60

tariff measures negotiations that will be part of the WTO market access negotiations.

Chairman CRANE. You’re more than welcome.

And now I want to invite Susan Westin, the Associate Director

of the International Relations and Trade, U.S. General Accounting

Office, to come to the witness stand.

Welcome, Ms. Westin. Your printed remarks, if your oral testimony exceeds roughly 5 minutes, will be made a part of the permanent record. So you may proceed when ready.

STATEMENT OF SUSAN S. WESTIN, ASSOCIATE DIRECTOR,

INTERNATIONAL RELATIONS AND TRADE ISSUES, NATIONAL

SECURITY AND INTERNATIONAL AFFAIRS DIVISION, U.S.

GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY BETH

SIROIS, ASSISTANT DIRECTOR, AND NINA PFEIFFER, SENIOR

EVALUATOR

Ms. WESTIN. Mr. Chairman, Members of the Subcommittee, we

are pleased to be here this afternoon to provide some observations

about the WTO Ministerial Conference in Seattle. In my remarks,

I will summarize what happened, why it happened and what lessons we can draw from the experience.

With me this afternoon are two of my colleagues, Beth Sirois and

Nina Pfeiffer. In addition to attending the Ministerial, we have had

discussions with U.S. and foreign government officials and other

WTO experts. The main message of my testimony is that significant differences among WTO member countries on several issues

led to the failure of the Ministerial to launch a new round of multilateral trade negotiations. Notwithstanding the outcome, there are

several lessons to be learned from the Seattle experience.

Let me speak first to what happened. After 4 days of intensive

talks, the Ministerial was suspended without agreeing on a round,

and without issuing a ministerial declaration or any other formal

documentation of its deliberations. As a result, the status of the

Ministerial remains unclear.

Although negotiations to further liberalize trade in agriculture

and services are scheduled to begin this year, and in fact, the announcement just came out that it looks more positive they’re going

to start right away, progress may be slow because the agenda lacks

a deadline for completion.

As to why it happened, we concluded that there were two major

reasons. First, the difference on important issues, both among the

major trading countries and between developed and developing nations, were too large to be resolved in Seattle. For example, the

United States wanted to pursue a narrow agenda in the new

round, focusing on market access issues, while the European Union

proposed including investment, competition policy and other issues

in a broad framework for negotiations. In addition, there were differences on very sensitive issues, such as agricultural export subsidies.

Developing countries also had concerns about the scope of the negotiations and several sensitive issues. For example, they sought

more time to implement their Uruguay round commitments. In adVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
61

dition, they feared that addressing labor standards under the WTO

was a veiled form of protectionism aimed at undermining one of the

few competitive advantages they enjoy as low-wage producers. According to some officials from developing countries, the U.S. insistence on resurfacing the labor in Seattle and the President’s remarks potentially linking labor standards to trade sanctions were

counterproductive.

The second major reason leading to the failure to launch a new

round was the number of challenges faced by the negotiators, both

in Seattle and in preparations leading to Seattle. In particular, efforts to balance efficiency with allowing the maximum participation

of all WTO members and negotiations presented a challenge to

reaching consensus. In an effort to include all WTO members, the

Ministerial co-chairs set up five large working groups on the major

issues. The working groups were to provide draft text on their

issues to be brought together into a Ministerial declaration at the

end of the conference.

After 2 days of working group meetings, it was clear that the

process was not moving toward consensus, and the traditional

green room process began on Friday. By then, there wasn’t enough

time to work sequentially through the unresolved issues.

We identified several factors that contributed to the challenges

faced by the negotiators in Seattle. One major factor was the inherent weakness of the draft text used as the basis for negotiations.

When WTO ministers arrived in Seattle, the draft declaration officially on the table was 32 pages long and contained nearly 400

bracketed items indicating disagreement among members. As one

WTO official noted to us, negotiators had to build down, or remove

text, to reach a consensus document. This is more difficult to do

than building up, or negotiating to add desired language.

A number of officials with whom we spoke said that hosting the

Seattle Ministerial posed procedural challenges for the United

States, as it is difficult to serve as both host and key participant.

This job was made harder by the newness of the WTO team. The

WTO Director General took office in September, and his principal

deputies were named less than a month before the Ministerial.

Finally, there are several lessons that could be learned from the

experience in Seattle. One, efforts to launch a new round may have

been premature. Many countries, due to political or other reasons,

may not have been ready to launch a new round. Two, ministerial

conferences are more likely to succeed if they address only a handful of politically difficult decisions, having reached consensus on

most issues in advance. Three, the WTO needs to find ways to address the institutional challenges posed by increases in the number

of and diversity of its members. And four, holding high profile

WTO meetings in countries that are major trading partners, such

as the United States, or the EU, may present difficulties.

Mr. Chairman, this concludes my prepared remarks. We will be

happy to respond to any questions you may have or, given time

considerations, we are willing to respond to any written questions

from you or Members of the Subcommittee.

[The prepared statement follows:]

62

Statement of Susan S. Westin, Associate Director, International Relations

and Trade Issues, National Security and International Affairs Division,

U.S. General Accounting Office; accompanied by Beth Sirois, Assistant Director, and Nina Pfeiffer, Senior Evaluator

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to provide some observations about the World Trade

Organization’s ministerial conference in Seattle that took place in December 1999.

Specifically, my testimony will address (1) the outcome of the ministerial conference,

(2) the factors contributing to the outcome, and (3) the lessons learned from the

meeting.

My observations are based on our past and ongoing work; our review of World

Trade Organization and executive branch documents; related literature; discussions

with experts on the World Trade Organization and international trade; and U.S.

government, World Trade Organization, and foreign government officials from 14

countries. In addition, I along with members of my staff attended the Seattle ministerial conference.

The ministerial conference, composed of the trade ministers of all the WTO member countries, is the highest decision making body in the WTO and is required to

meet at least every 2 years. Ministerial conferences are intended to evaluate current

trade agreements and set the agenda for future work with a ministerial declaration

that identifies issues for negotiation and specifies how negotiations should proceed.

The Seattle ministerial conference was to be particularly significant because it

was expected to launch a major new round of negotiations and it was hosted and

chaired by the United States for the first time. The core of the new round was to

be negotiations on agriculture and services (such as telecommunications); these negotiations, referred to as the ‘‘built-in agenda,’’ were already mandated to begin on

January 1, 2000. Ministers intended to decide on what other trade issues, if any,

to include in the agenda for a new round. They also expected to review the implementation of past agreements and to address calls from nongovernmental organizations and some WTO members to improve the WTO’s openness. In addition, they

were to develop a plan to assist least developed countries in several ways, such as

providing technical assistance to help them meet their trade obligations.

Summary

WTO member countries failed to meet their goal of launching a new round of multilateral trade negotiations at their biennial ministerial conference last December in

Seattle. The conference was suspended without initiating a new round or issuing a

ministerial declaration. No one factor, but a combination of circumstances, led to the

impasse. However, two themes emerged. First, there was lack of agreement on

many issues both among major trading partners and between developed and many

developing countries on the eve of the ministerial conference. Disagreement centered

on the scope of the round and stemmed from the sensitivity and complexity of the

issues being addressed. Second, the Seattle negotiation process had inherent difficulties. For example, the document used as the basis for negotiations was a poor

starting point for reaching consensus. It was a lengthy amalgamation of countries’

divergent positions rather than a text reflecting members’ common objectives. In addition, the negotiating process was hampered by the newness of the WTO leadership

team. Further, the process was made difficult by the challenge of accommodating

the needs and interests of a large and increasingly diverse WTO membership.

Several lessons can be learned:

• Efforts to a launch a new round may have been premature.

• Ministerial conferences are more likely to succeed if they address only a handful

of politically difficult decisions, having reached consensus on most issues in advance.

• The WTO needs to find ways to address the institutional challenges posed by

increases in the number and diversity of its members.

• Holding high profile WTO meetings in countries that are major trading partners, such as the United States and the EU, may present difficulties.

Background

The World Trade Organization (WTO) was established on January 1, 1995, as a

result of the Uruguay Round of international trade negotiations. The WTO provides

the institutional framework for the multilateral trading system. It administers rules

for international trade, provides a mechanism for settling disputes, and provides a

forum for conducting trade negotiations. The WTO succeeded the General Agreement on Tariffs and Trade (GATT), which had provided the institutional framework

for world commerce since 1948. The 1994 Uruguay Round agreements brought agriculture, services, intellectual property rights, trade-related investment measures,

63

and textiles and apparel under the discipline of multilateral trade rules for the first

time and established a stronger dispute settlement process. Two of these agreements also mandated a ‘‘built-in agenda’’ for further negotiations on agriculture and

services to commence January 1, 2000.

Membership in the WTO has grown to 135 members, up from about 90 GATT

members in September 1986, at the start of the Uruguay Round. Not only has there

been an increase in membership, but also increased diversity in WTO members.

Roughly 80 percent of the current members are developing countries, although some

are at more advanced stages of development than others and thus they do not all

have the same needs. According to WTO, virtually all of the 30 countries currently

applying for membership are also developing nations or economies in transition. Unlike many other international organizations where decisions are based on a majority

of member votes, decision-making in the WTO is largely based on consensus among

member governments.

There have been three ministerial conferences since the creation of the WTO: one

in Singapore in December 1996, one in Geneva in May 1998, and the third in Seattle in December 1999. The WTO General Council makes major decisions in the

periods between ministerial conferences. The Director General, chosen by members,

heads the WTO Secretariat that supports the membership and the institution.

The 1996 Singapore ministerial conference reviewed the implementation of the

Uruguay Round agreements and considered proposals for trade issues to be addressed in the future. The ministers in Singapore reaffirmed their commitment to

complete the built-in agenda and also addressed several trade issues that were previously outside the scope of detailed trade negotiations. Among other things, they

authorized the creation of working groups to study transparency in government procurement, investment and competition, and agreed to continue ongoing analysis of

trade and environment issues. The ministers in Singapore rejected attempts led by

the United States to establish a working group on trade and labor, stating that this

issue was best handled by the International Labor Organization.

The Geneva ministerial conference coincided with the 50th anniversary of the

GATT. Ministers agreed to begin preparing an agenda for further trade liberalization. Ministers also accepted President Clinton’s offer that the United States host

the next ministerial conference. Seattle was selected as the host city in January

1999.

SEATTLE MINISTERIAL DID NOT ACHIEVE ITS OBJECTIVES

The ministerial conference failed to achieve its goal of initiating a new round of

multilateral trade negotiations with a ministerial declaration. After 4 days of intensive talks, the conference was suspended on December 3 without agreeing on a

round, or issuing a ministerial declaration or any other formal documentation of its

deliberations. As a result of the inconclusive nature of the meeting, the status of

the ministerial conference remains unclear. For example, members have not decided

if and when the conference might reconvene. Even without a new round, negotiations to further liberalize trade in agriculture and services are scheduled to begin

in the year 2000 under the Uruguay Round agreements’ built-in agenda. Progress

on these negotiations, however, may be slow, partly because the agenda lacks a

deadline for completion. The negotiating impasse also left several issues unresolved,

such as addressing some developing countries’ concerns about expiration of certain

Uruguay Round agreement deadlines.

In a brief statement at the end of the meeting, the Conference Chair, U.S. Trade

Representative (USTR) Charlene Barshefsky, noted that the issues before WTO

ministers were complex, and divergences too wide to be bridged rapidly. Ambassador

Barshefsky stated that it was the collective judgement of those present that it would

be best to, ‘‘take a time out, consult with one another, and find creative means to

finish the job.’’ She then announced that the ministers had agreed to suspend the

work of the ministerial conference. In the interim, the Chair asked WTO Director

General Mike Moore to consult with delegations in an effort to bridge differences,

develop an improved decision-making process, and prepare for a successful conclusion of the ministerial conference.

The Chair and other delegations emphasized that the progress that was made at

Seattle would not be lost. But those assurances were quickly dismissed by other participants, who refused to ‘‘freeze’’ their positions and said that any draft texts of a

declaration on the table at Seattle were no longer valid. Even if members were to

agree in principle to restart negotiations from where ministers left off at Seattle,

no text reflects the state of countries’ positions at the end of the day.

One outstanding issue due to the suspension of the Seattle meeting concerns developing countries’ efforts to delay their end-of–1999 deadlines for conforming to cerVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00067 Fmt 6633 Sfmt 6621 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
64

tain provisions in a number of Uruguay Round agreements, such as those on intellectual property rights and investment measures. The WTO General Council met on

December 17 but could not agree on whether to grant extensions for all developing

countries, or to consider them on a member-by-member basis. The General Council

postponed until early 2000 a decision on how to proceed. In the meantime, WTO

members were asked by the General Council Chairman to exercise restraint and understanding in dealing with these deadlines. USTR officials told us that the United

States retains the right to bring cases based on the deadlines, which have since

passed.

NO ONE FACTOR CONTRIBUTED TO MINISTERIAL OUTCOME

No one factor, but a combination of circumstances, led to the WTO’s inability to

launch a new round. Nonetheless, seemingly unbridgeable gaps on major issues both

among the major trading partners and between developed and many developing

countries were at the root of the outcome of the ministerial conference. First, disagreements centered on the scope and direction of a new round. They also stemmed

from the increased sensitivity and complexity of the issues on the table. Further,

Seattle negotiators faced inherent difficulties in their negotiation process both in Seattle and Geneva. These included the challenge of accommodating the needs and interests of a large and increasingly diverse WTO membership. In addition, negotiators were working from an unwieldy draft text symptomatic of the lack of agreement among countries in Geneva on the eve of the ministerial meeting. Further,

U.S. and foreign officials noted that WTO members’ selection of a new Director General earlier in the year had been lengthy and divisive. This experience left members

without leadership during a good part of their preparations for Seattle and lingering

hard feelings. Adding tension to a difficult situation, protesters marching against

the WTO in Seattle during the week disrupted the proceedings.

No Agreement on the Scope of Negotiations

U.S. and foreign officials with whom we met said that fundamental differences between the major trading countries contributed greatly to the ministerial conference’s

ultimate lack of consensus. The United States wanted to pursue a narrow agenda

in the new round, while the European Union (EU) and Japan promoted a broad

framework for negotiations to bring many new areas under international disciplines.

Officials we interviewed generally felt that without agreement among these major

players in international trade, it would be impossible to build consensus among the

rest of the members.

The United States favored limiting negotiations primarily to address market access concerns and to focus on the areas of agriculture and services as called for

under the Uruguay Round agreements. With the backing of the other major agricultural exporting countries, known as the ‘‘Cairns Group,’’ the United States insisted

that negotiations on agriculture address a number of tough issues, including the

elimination of export subsidies and substantial reduction of trade-distorting farm

supports. Such far-reaching goals in agriculture were difficult for the EU to accept.

According to European officials, they simply could not support language calling for

the elimination of agricultural export subsidies as the starting point of negotiations.

Instead, the EU viewed the new round as an opportunity to establish international

rules in other areas of the global trading system. In addition to agriculture and

services, the EU proposed including investment, competition policy, government procurement, and other issues in a broad framework for negotiations.

Japan largely supported the EU’s position on these issues. Although U.S. negotiators indicated support for continued study of investment and competition policy

by WTO working groups, the United States and many other WTO members were

unwilling to include these issues in the negotiating agenda.

In addition to differences among the major trading countries, there was also a serious gap between developed and many developing countries on the scope of a new

round. Like the United States, developing countries generally backed a narrower

scope for negotiations. Although developing countries’ positions differed on some

issues, many of them called for a reassessment of the commitments of the Uruguay

Round agreements. The United States did not want to reopen existing agreements

to new negotiations. Some developing countries felt they had received few benefits

from the Uruguay Round and had found it difficult to meet their obligations under

its agreements. For example, certain developing countries insisted they lacked the

financial and technical resources to implement the complex requirements called for

under the intellectual property agreement. Developing countries also wanted to renegotiate areas of the Uruguay Round, such as the agreement on textiles that they

argued had not given them the benefits they had anticipated. U.S. negotiators indiVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00068 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
65

1See Commitments by the European Union and the United States to Reduce Agricultural Export Subsidies (GAO/NSIAD–99–198R, June 18, 1999) for more details.

cated they would consider ways of helping developing countries meet their Uruguay

Round commitments on a case-by-case basis, but they rejected any attempt to reopen negotiations on the hard-fought agreements.

Finally, officials from some developing countries we interviewed noted that 5

years did not provide enough time for them to cope with the changes mandated

under the Uruguay Round. Given the difficulties they were having in implementing

the Uruguay Round agreements, many of these countries expressed reservations

about undertaking further trade liberalization. One developing country official remarked that in comparison with the situation in 1994 when the Uruguay Round

was concluded, starting a new round at this time would be considerably more difficult. In 1994, the ideas of market reforms and trade liberalization were still fresh

and held tremendous promise. It was also a time of economic growth in many of

the developing countries engaged in the negotiations. The current situation is very

different. Much of the developing world is going through a difficult time economically, even though many countries have already undertaken far-reaching market reforms and trade liberalization.

Sensitivity and Complexity of Issues Impeded Progress

The most sensitive and complex area of negotiations between the EU on the one

hand and major agricultural exporters including the United States on the other was

on agriculture. Although the EU has been reducing subsidies to agriculture since

the Uruguay Round, it remains by far the world’s largest user of agricultural export

subsidies.1 In the WTO, the United States and other major agricultural exporting

nations, such as Australia, Brazil, and Canada, have put increased pressure on the

EU to abandon its reliance on export subsidies. Export subsidies, however, are a key

mechanism in the EU’s Common Agricultural Policy. The Common Agricultural Policy is intended to preserve farm incomes and rural economies by supporting high

domestic prices for a wide variety of agricultural commodities and products. EU

member states have taken a very strong position on maintaining the Common Agricultural Policy, which is a central element in the EU’s institutional system and is

regarded as essential to its cohesiveness.

Like the EU and its position on agricultural export subsidies, the United States

was virtually isolated on the issue of antidumping regulations in the negotiations.

Major trading partners like Japan and Korea, as well as some developing countries,

called for reconsideration of the agreement on anti-dumping reached under the Uruguay Round. These countries felt that the current antidumping rules allow countries

to use trade remedies to unfairly protect certain sectors. The United States argued

that re-opening the complex agreement was premature and risked weakening the

strength of the existing U.S. anti-dumping regime. U.S. negotiators said they would

consider holding discussions on how WTO members were implementing the agreement’s procedural requirements, but this U.S. offer attracted limited support.

Developing countries were very concerned about U.S. and EU initiatives to bring

labor into the WTO. They feared that addressing labor standards under the WTO

was simply a veiled form of protectionism aimed at undermining one of the few competitive advantages they enjoy as lower-wage producers. At the Singapore ministerial conference, it had been agreed that labor standards were best addressed in the

International Labor Organization rather than in the WTO, and many developing

countries felt the issue had been put to rest. According to some officials from developing countries, the U.S. insistence on resurfacing the issue of labor in Seattle and

the President’s remarks potentially linking labor standards to trade sanctions were

counterproductive.

Seattle Negotiation Process had Inherent Difficulties

The difficult task of accommodating the needs and interests of a large and increasingly diverse WTO membership hampered progress in Seattle. Efforts to balance efficiency with allowing the maximum participation of all WTO members in negotiations presented a challenge to reaching consensus.

In an effort to give all WTO members the opportunity to take part in the negotiations, Chairperson Barshefsky and Director General Moore set up five large working

groups on the major issues including agriculture, market access, implementation,

Singapore issues (such as investment), and systemic issues (such as the structure

of the WTO). The working groups were open to all WTO member delegations and

convened on the second day of the conference. Working group chairs—trade ministers selected in Seattle—were to facilitate consensus and refine the Geneva draft

text into a consensus document. Next, working group consensus texts were to be

66

2Traditionally, negotiations have taken place among a smaller number of key WTO members,

which would work out privately some of the more difficult compromises. This smaller group negotiation of 20–30 members is known as the ‘‘green room’’ process.

brought together later in the week to produce a complete ministerial declaration to

be issued at the end of the conference.

Ultimately however, the working groups were not able to achieve the necessary

consensus to avoid the more traditional less inclusive ‘‘green room’’ process.2 Chairperson Barshefsky had told ministers at a meeting on Wednesday that she intended

to proceed with the large working groups, but if they were unsuccessful she would

initiate a green room to facilitate consensus. After 2 days of large working group

meetings, the green room process began Friday morning, the last day of the conference.

One difficulty in achieving consensus may have been that the chairpersons of the

working group meetings were not in place until Tuesday during the ministerial conference. This may have prevented parts of the leadership team from effectively preparing for their roles—such as developing compromise texts and meeting with key

delegations before Seattle—as some have claimed. Officials said that it had been difficult to find chairpersons because trade ministers had to volunteer their time to

lead the sessions as opposed to their own country delegations.

The green room had only 1 day to work out compromises across the range of unresolved issues and then gather the support of the rest of the delegation. Furthermore,

the green room worked sequentially—issue by issue. Negotiators began in the morning with agriculture and spent until mid-afternoon on this issue. Although many officials said that the green room did make progress in agriculture, others argued that

too much time was spent on this issue to the exclusion of others. However, officials

expressed mixed views about whether additional time would have resulted in consensus on a round. Some said an additional day would have sufficed with the

progress made in agriculture, while others were more pessimistic or said outright

that no agreement could have been reached.

Despite efforts to the contrary, some countries still expressed frustration about

being left out when the negotiations shifted to the green room. In fact, a group of

Latin American and Caribbean countries and a group of African countries stated

publicly in Seattle that they would reject the outcome of these smaller sessions.

However, some officials noted that a green room process involving a smaller number

of countries is necessary to efficiently handle the negotiations. Some said the particular problem with the green room process in Seattle was that countries were selected to participate in an ad hoc, informal manner. They recommended a more formalized or transparent process of determining the members invited to participate

in the green room.

A number of officials with whom we spoke said that hosting the Seattle WTO

ministerial meeting posed both substantive and procedural challenges for the United

States, given its large stake in the world trading system. First, perceptions about

the U.S. role as chair may have affected the negotiating dynamic. For example, it

may have raised questions about U.S. neutrality in brokering compromise, or raised

WTO members’ expectations about U.S. willingness to make concessions to ensure

the ministerial conference’s success. Second, the United States was wearing two

hats, that of host and key participant, a difficult job that was made harder by the

newness of the WTO team and the number of issues to be resolved at Seattle. Overall, several U.S. and foreign officials said that a major trading nation hosting such

meetings inevitably poses problems.

Another major factor affecting the outcome of the Seattle negotiations was the inherent weakness of the draft text used as the basis for negotiations. When WTO

ministers arrived in Seattle in late November, the draft declaration officially on the

table was some 32 pages long and contained nearly 400 bracketed items indicating

disagreement among members. The draft was, in fact, an amalgamation of all the

proposals, or position papers, members had submitted to the WTO General Council

during their 15-month, pre-Seattle preparatory process. The problems with the draft

conveyed the wide differences over substance and philosophical approach that remained at the conclusion of those preparations. Also, one WTO official noted that

because the text included many strongly held competing proposals, negotiators had

to ‘‘build down,’’ or remove text, to reach a consensus document. In his view, this

is more difficult to do than ‘‘building up,’’ or negotiating to add desired language.

Thus, he believed, in Seattle, countries automatically perceived agreeing to remove

text as a loss.

Contributing to members’ inability to reach consensus before Seattle were the difficulties they had experienced in selecting a new Director General. In Geneva in

early 1999, WTO members had had great difficulty reaching consensus on a new

67

Director General, whose 4-year term had expired. There were two final candidates,

Mike Moore from New Zealand and Supachai Panitchpakdi from Thailand, from a

developed and developing country, respectively. Ultimately, members selected both

candidates to serve a split term, with Mike Moore serving first. Many U.S. and foreign officials said that the divisiveness of that experience had dampened the mood

for compromise in Seattle.

In addition, the lengthy and contentious selection process left WTO members

without leadership for 5 of the 11 months they had available to prepare for Seattle.

Mike Moore did not take the helm at the WTO until September, when drafting of

a declaration started in earnest. His principal deputies were named less than a

month before the WTO ministerial conference. While the WTO is largely a memberdriven organization, the WTO Director-General and his deputies can play an important role in facilitating consensus and organizing work so as to ensure maximum

progress. The diversity of member interests and lack of institutional leadership

meant that fewer informal, consensus-building meetings took place both in Geneva

and Seattle.

During the ministerial conference, nongovernmental organizations representing

labor, the environment, and other interests demonstrated and marched against the

WTO in the vicinity of the Seattle convention center. The protests interfered with

the convention by causing delays and dampening the general mood among the delegates but were not a major cause for their ultimate inability to launch a new trade

round. The most frequent comment we heard from foreign government officials was

that the protests cost them 1 to 2 days of work. Some foreign officials attending the

ministerial conference said that limitations on moving safely about the city interfered with delegates’ normal ability to resolve differences through informal social

contacts. Another foreign embassy official said that, while not a deciding factor, the

protests raised questions about the U.S. ability to conduct trade negotiations without being unduly influenced by domestic politics. Overall, however, delegates did not

believe that the protesters changed the outcome of the conference.

Lessons Learned

Several lessons can be learned from the experience in Seattle:

• Efforts to launch a new round may have been premature. Countries, for various

reasons, may not have been ready to launch a new round. Due to current strong

domestic concerns, the EU and United States each found it politically difficult to

make concessions and exert leadership. Many developing countries were resistant

to calls for the WTO to address new issues such as labor and skeptical about the

benefits of the last round.

• Ministerial conferences are more likely to succeed if they address only a handful

of politically difficult decisions, having reached consensus on most issues in advance.

WTO members had not reached agreement on most issues on the eve of the conference. As a result, ministers in Seattle faced a long list of unresolved items. This

left ministers with an overwhelming task to be accomplished within a short time

frame. Efforts to sort through and agree upon a manageable number of issues

should be made before a ministerial conference takes place.

• The WTO needs to find ways to address the institutional challenges posed by

increases in the number and diversity of its members. The Seattle negotiations demonstrated the importance of taking into account the different views of the WTO’s

large and diverse membership on issues such as the scope and nature of any further

trade liberalization. Since the ministerial conference, the WTO Director General has

been consulting with WTO member governments on ways to help developing countries engage in world trade and has been examining how the WTO can better gauge

and act on its varied members’ interests.

• Holding high profile WTO meetings in countries that are major trading partners, such as the United States and the EU, may present difficulties. It is not easy

for major trading countries to host ministerial conferences, given their significant

interests in international trade and possible concerns about their influence on the

negotiating agenda.

——————————————

Mr. Chairman and members of the subcommittee, this concludes my prepared remarks. I will be happy to respond to any questions you may have.

Contacts and Acknowledgement

For future contacts regarding this testimony, please call Susan Westin or Beth

Sirois at (202) 512–4128. Individuals making key contributions to this testimony inVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
68

cluded Nina Pfeiffer, Howard Cott, Kim Frankena, Juan Gobel, Richard Seldin, and

Tim Wedding.

Chairman CRANE. Thank you very much, Ms. Westin.

Let me put a quick question to you, and that is, how isolated do

you think the U.S. is in its insistence that dumping with the exception of the agreement’s procedural requirements be off the negotiating table in the new round?

Ms. WESTIN. Well, from our experience in Seattle, and we attended many of the working groups and some of the press conferences where they talked about what was going on with the negotiations, our experience was that the United States was completely

isolated. I think in one instance it was referred to 134 to 1 on this

issue.

Chairman CRANE. And on what basis did the USTR believe that

developing countries would be willing to launch a new round of

trade negotiations?

Ms. WESTIN. In the ministerial conference in Geneva in May,

1998, many countries, most countries had expressed their willingness to launch a new round. But the developing countries definitely

wanted on the agenda a re-examination of their implementation of

the existing commitments under the Uruguay round. And I think

that in addition to some of the market access issues, particularly

on agriculture for them, as the Ambassador referred to, I think

there was some interest in launching a round, but it was clear that

that was one of the things they wanted on the agenda.

Chairman CRANE. Well, with regard to developing countries and

negotiations, the Uruguay round on textiles, they, as I understand

it, believe the United States has not given them the benefits that

they anticipated and how much liberalization has taken place in

that sector?

Ms. SIROIS. I believe some liberalization has occurred. I think

more is, I think more textile quotas that the U.S. has imposed are

due to be eliminated in January 2002. However, most U.S. quotas

will not be eliminated until 2005.

Chairman CRANE. Mr. Levin.

Mr. LEVIN. Well, I wasn’t going to ask any questions. Our other

panelists have been waiting patiently.

I just want to say to you, though, I was at Seattle from beginning

to end. And I was there most of the hours. And I must say, I think

your perspective on the attitude of the countries toward antidumping are not what I heard. If you ask the countries to rank

their priorities, and maybe you would agree with this, I think all

but a few would have ranked opening up antidumping rather low.

The Japanese had it quite high, very high, maybe the highest.

But other than the Japanese and a few other countries, I can’t

think of any other nation that would have ranked it very high. Can

you?

Mr. WESTIN. No, I don’t disagree with you, Mr. Levin, in terms

of ranking it as a priority. But I understood Mr. Crane’s question

to be where countries fell on the position. I think that’s a slightly

different question.

But I agree, I didn’t hear it as a particular priority issue.

69

Mr. LEVIN. So to say we were isolated, I think, this is the intensity level of other nations. They weren’t, except for a few. And my

reaction to the Japanese on dumping, those who dump don’t like

our antidumping laws. And they dumped steel, and I say this as

someone who did not vote for the quota bill, because it violated our

WTO obligations. But Lord, it’s clear they dumped. And we had to

do something, and we finally did, under antidumping laws, though

it was quite late.

And a few other countries that dump don’t like it. Some of them

aren’t in the WTO. And that’s why we had to have, negotiate some

major antidumping provisions, for example, with China, which also

dumped steel here in a dramatic sense. And in terms of textiles,

there’s been a major change in that area, and I don’t think anyone

should ignore the fact that we’re facing increased competition. And

the question is what we do about it and where it comes from.

But I think the worst way to handle problems is to ignore that

certain dynamics exist, and that the quotas are going off, as we all

know. So anyway, I’m glad for your response in terms of antidumping. Because somehow the notion is that a country that protects itself against an unfair trade practice of another country is

protectionist. The protectionist one is the one that violates fair

rules. And the WTO specifically permits U.S. antidumping laws. In

fact, we could strengthen 201 further within WTO structures.

Thanks very much.

Chairman CRANE. Thank you.

Mr. Becerra.

Well, you get off the hook easy then, Ms. Westin. But we’re sorry

for the duration and the disappearance of some of our colleagues

here. It’s been a longer day thus far than we anticipated. But we

thank you so much for your participation.

Ms. WESTIN. Thank you.

Chairman CRANE. And with that, I next would like to call our

panel one, Gary Hufbauer, Reginald Jones Senior Fellow, Institute

for International Economics; Dale Hathaway, Executive Director,

National Center for Food and Agricultural Policy, and Chairman of

the Agriculture Policy Advisory Committee; Thomas M.T. Niles,

President, United States Council for International Business; Lori

Wallach, Director, Public Citizen’s Global Trade Watch; and Frank

Kittredge, President, National Foreign Trade Council.

We have someone also that is substituting for John Sweeney,

President of the AFL–CIO, who did not make it. Do we have your

name, sir?

Mr. TRUMKA. Richard Trumka, Secretary-Treasurer of the AFL–

CIO.

Chairman CRANE. Rich Trumka. And do we have a—very good.

So we will proceed in the order that I presented you, and please

try and keep your oral testimony to 5 minutes or less, and all written testimony will be made a part of the permanent record. And

with that, we yield to Mr. Hufbauer.

STATEMENT OF GARY CLYDE HUFBAUER, REGINALD JONES

SENIOR FELLOW, INSTITUTE FOR INTERNATIONAL ECONOMICS

Mr. HUFBAUER. Thank you very much, Mr. Chairman.

70

The WTO is blocked, and the overriding reason is simple. The

Congress and the country are deeply divided on the way to shape

the competing force of globalization.

For the United States, the open economy ranks as one of our

three great engines of growth. The other two are the flexible economy and information technology. These three engines have brought

us a remarkable period of low inflation, very low unemployment

and rising productivity, even after 8 years into the boom.

But a prosperous and dynamic economy has losers as well as

winners. Moreover, our trading partners do not necessarily embrace values that are deeply held in the United States concerning

environment and labor standards. These two issues, more than any

others, in my opinion divide the Congress and the America people

on WTO, on NAFTA, on China and on other trade agreements.

Today, I’d like to spend my few minutes on urging solutions to

these two critical issues. Both solutions can be made in America.

They do not require fresh international negotiations. They only require agreement by the Congress and the President.

The first solution, I commend to you, is degressive wage insurance, namely, a make-up payment lasting 3 years for a portion of

FICA wages lost by all dislocated workers. The make-up would

start at 75 percent and gradually diminish to 25 percent in the

third year. This wage insurance would be the same whatever the

reason for dislocation—technology, restructuring, or trade.

Statistics indicate that dislocated workers today lose under 5

percent of their income when they move to a new job. That’s much

lower than it was 10 years ago, and the reason is our very strong

economy.

Let me turn now to environmental and labor standards. I argue

that we should move the central debate out of the WTO and into

a U.S. commission. The commission would be charged with developing appropriate environmental and labor labels and the underlying standards for their use. With appropriate labeling, household

consumers and industrial buyers could make an informed choice

between goods and services that were produced anywhere in the

world in full accordance with the standards, or not in accordance

with the standards.

This approach would represent a generalization of the approach

recently adopted in the biosafety protocol. A similar approach has

already been used for tuna, apparel, athletic shoes, lumber products and others. It would not be designed to afford protection

against imports.

The commission I envisage would be an independent commission

with distinguished members. It would categorize goods and services

in a simple two-by-two matrix. One dimension is whether the good

or service requires a voluntary label or a mandatory label. The

other dimension is whether the label can be provided by one or

more of the private labeling services which already exist—such as

Underwriters Lab and many, many others—or whether a new government label is required.

In creating labels and in specifying the underlying standards, the

commission would hold hearings open to all interested parties.

There would a very, very sharp differences, very honest differences.

The AFL–CIO might take a position on labor standards that should

71

be embodied in the label that differed sharply from the position

rendered by, for example, by apparel importers.

But it would be a domestic debate. And I think this debate can

and should take place in a domestic forum. And it can be a debate

that is settled by a U.S. commission.

If we have a solution along these lines, I think the way would

be clear for us to go forward in the WTO and in other trade agreements. Thank you very much.

[The prepared statement follows:]

Statement of Gary Clyde Hufbauer, Reginald Jones Senior Fellow, Institute

for International Economics

WORLD TRADE AFTER SEATTLE: IMPLICATIONS FOR THE UNITED STATES

Seattle leaves a huge question mark over the U.S. role in world trade policy.

Faulty preparation and flawed tactics were abundant—both in the street and between the delegations. The Battle of Seattle may acquire the same instructive value

for future diplomats as Pearl Harbor has for military officers.

But this Policy Brief is not about preparation and tactics. The Seattle outcome

might have been far different—if the U.S. Trade Representative had not swept concessions off the table months before the ministerial conference. Or if the police had

cordoned downtown Seattle on Monday. Or if President Clinton had left the phrase

‘‘trade sanctions’’ out of his Tuesday interview. Or if France had agreed on Friday

to the eventual elimination of agricultural export subsidies. But this Policy Brief is

not about ‘‘might have beens.’’

Instead, this Policy Brief is an attempt to size up the direction of world trade policy after Seattle. In particular, it focuses on strategies that open market forces

might adopt to regain the initiative.

WORLD TRADE GAME SCORE (SINCE WTO 1994): BACKLASH 7, OPEN MARKET 3

By my score, the global Backlash forces, in the United States and elsewhere, have

enjoyed seven victories since the WTO agreement was reached in Marrakesh in

1994. They defeated renewal of U.S. ‘‘fast-track’’ negotiating authority twice (scored

only once in my count). In addition, the Backlash forces have stalled the Free Trade

Agreement of the Americas (FTAA) in the Western Hemisphere and have slowed

European Union enlargement. Kindred forces in Japan defeated the ‘‘Early Voluntary Sectoral Liberalization’’ proposals in the Asia Pacific Economic Cooperation

forum (APEC) at the Kuala Lumpur meeting in November 1998. Together with the

French (concerned about U.S. cultural imperialism), the nongovernmental organizations killed the Multilateral Agreement on Investment (MAI) in December 1998.

Meanwhile, the U.S. Congress has stalled a twin vote on NAFTA parity for the Caribbean Basin countries (Caribbean Basin Initiative [CBI] Parity) and the Africa

Growth and Opportunity Act (AGOA). From a media exposure standpoint, their

crowning glory was Seattle.

Against this count, the Open Market forces have achieved three important victories since the WTO was established in 1994. They signed off on the Information

Technology Agreement at Singapore in December 1996. They crafted the Basic Telecommunications Agreement in February 1997. And they adopted the Financial Services Agreement in December 1997. These were all solid achievements—even if they

were not media spectaculars.

A Rest Stop Or a Turning Point?

Ten years from now, Seattle could be seen as only one more pause in the long

march toward open markets. The march that began in 1947 with the establishment

of the GATT has been interrupted many times. Europe had a difficult time negotiating current account convertibility in the 1950s. Oil shocks in the 1970s threatened

the world trading system. Agriculture was particularly tough in the Uruguay

Round. Yet on each occasion, progress resumed.

On the other hand, ten years from now, Seattle could be seen as the turning

point—the event that marked the end of the policy-driven open markets agenda for

much of the world. If this is the outcome, many countries could build new barriers,

especially in areas not already covered by international rules (such as financial services and e-commerce). Three points are worth making in handicapping ‘‘rest stop’’

versus ‘‘turning point.’’

72

First, the Backlashers have not yet succeeded in rolling back liberalization.

NAFTA stands and prospers. Mercosur has so far survived Brazil’s currency devaluation. In the aftermath of the Asian crisis, none of the ASEAN members nor Korea

has reversed its trade commitments. In the tax arena, more legislators are worried

about ‘‘runaway headquarters’’ (Chrysler/Daimler Benz) than ‘‘runaway plants.’’ The

Tobin tax and its kissing cousins remain academic toys.

But in the aftermath of Seattle, the Backlashers can claim three achievements.

They enlisted sympathizers who want the WTO to encompass moral values, not just

economic virtues. In the process, they turned trade and investment talks into a political ‘‘third rail’’ (to borrow Marc Noland’s phrase). And they probably added years

to the life expectancy of stratospheric agricultural barriers, sky-high textile and apparel tariffs, the U.S. antidumping laws, and other formidable barriers.

Make no mistake: rollback is their goal. Hard-core labor Backlashers (fortified by

sympathy from Clinton) want wide latitude to impose trade sanctions against offensive production processes. They want to extend textile and clothing quotas well beyond the 2005 phase-out date. They want tougher antidumping laws, and easier access to normal safeguards. They welcome capital controls. In time, they will resurrect the Burke-Hartke concept (dating from the early 1970s) of imposing import

quotas and heavier taxes on the foreign operations of multinational firms. The

‘‘new’’ Backlashers want to put new trade agreements in peril until social issues are

addressed. Both Backlash camps would dearly love to rewrite or even dissolve

NAFTA.

Unless the Open Market forces regroup and adopt a winning strategy, ‘‘turning

point’’ seems more plausible than a ‘‘rest stop.’’

Next Battle: China

China is the next battle and it could prove decisive. It is hard to know how China

and the WTO intersected in the minds of top administration officials, but three scenarios are plausible.

• First scenario: Clinton may have cut an implicit behind-the-scenes deal with

AFL-CIO leaders: I’ll trash Seattle and you don’t trash China. A deal along these

lines would give something dear to business (better access to Chinese markets) and

something dear to the AFL-CIO (no new trade talks without labor sanctions). From

what we know about the sequence of events, this scenario seems far more plausible

as an after-the-fact rationale for hopeless fumbling in Seattle than a Machiavellian

before-the-fact game plan. It is not at all clear that the AFL-CIO leaders will sign

on to their part of the ‘‘bargain,’’ namely, stopping short of a ‘‘take no prisoners’’

battle against China.

• Second scenario: In vintage Clinton style, the ‘‘technical’’ talks over the details

of China’s accession to the WTO could be strung out and the normal trade relations

(NTR) vote pushed forward to 2001, when a new president is sitting in the White

House. This would deny Clinton an important legacy, but it might reduce the

‘‘China factor’’ in the U.S. presidential election and avoid embarrassing demonstrations in Washington.

• Third scenario: Clinton has simply lost control of trade and investment policy.

Evidence for this scenario is a string of events since 1996: The loss of fast track

in 1997. The MAI burial in 1998. The China fiasco in April 1999. Haphazard preparations for Seattle. Finally, Clinton’s ‘‘trade sanctions’’ interview, which eliminated

all prospects of reaching an accord with developing countries on labor issues. Under

this scenario (favored by Marc Noland), China will be Clinton’s last trade debacle—

a big effort, but not big enough to round up the votes for permanent NTR. In the

end, Congress votes the usual one-year extension.

Can the Open Market Forces Regroup? Lots of Generals, Not Many Soldiers

Missing from the ranks in the battle for open markets are business firms and consumer groups. The most energetic soldiers are economists. As Stalin famously remarked, ‘‘How many divisions does the pope command?’’ That said, many strategic

concepts have been offered for regrouping the Open Market forces and sparking

public enthusiasm for globalization. Everyone wants business and government leaders to speak out more forcefully in favor of free trade and investment. Beyond that

common theme, strategies differ. For brevity, I will summarize the ideas of leading

strategists in caricature.

Jagdish Bhagwati and Daniel Tarullo:

‘‘Back to basics.’’ Focus the WTO on border barriers. Reconsider the TRIPs agreement (as T. N. Srinavasan has urged). Bhagwati goes further: forget about regional

groups—they’re a nuisance at best, and more likely harmful. In other words, get the

73

WTO out of difficult national sovereignty questions, and don’t burden commerce

with a spaghetti of FTAA, APEC, Pacific–5, and other new regional arrangements. • Problems: Where do you put the ‘‘social issues"? Will U.S. and European

business firms push for new trade agreements that can be easily nullified behind

the border? As a practical matter, several regional groups now seem healthier than

the WTO—debilitated as it is by the splits within the Quad and between the United

States and developing countries. In the regional arena the European Union is rapidly moving ahead on new deals with Mexico, Mercosur, and the Lomé Convention countries.

Robert Samuelson:

‘‘Let the markets work.’’ With dramatic cuts in transportation and communications costs, the ascendancy of multinational corporations, the rise of e-commerce,

plenty of globalization will occur even if trade ministers take a 10-year holiday.

Moreover, thanks to the overwhelming success of the U.S. economy, sensible countries will enthusiastically sign on to the Washington consensus and Anglo-Saxon

capitalism, without another USTR or IMF mission abroad. • Problems: Mercantilism has dominated commercial policy for 350 years (today

it’s called ‘‘reciprocity’’). Who hears the death rattle of this enduring ideology? What

about growing underbrush that threatens to choke e-commerce and other new

realms? C. Fred Bergsten’s ‘‘bicycle theory’’ worked well at explaining past swings

between liberalization and protection. Has this piece of political economy now vanished?

Larry Summers:

‘‘Go with the Living Ism.’’ In 1991, before he became a senior U.S. official, Larry

Summers famously proclaimed his love for all the ‘‘isms’’—bilateralism, regionalism,

multilateralism. Now that the WTO has run into difficulties, this strategy would

call for deepening NAFTA (especially with Canada), the Pacific–5 (Australia, New

Zealand, Singapore, the United States, and Chile), working on bilateral issues, and

doing a few sectoral deals. Just be pragmatic. • Problems: The NGOs killed the MAI, and some see a threat in the CBI and Africa. Will they pass up the next bilateral or regional deal? Indeed, in the regional

context, won’t they insist on a heavier loading of social issues? The same virus that

hit Seattle could easily spread.

I. M. Destler and Peter Balint:

‘‘Bring in the social issues.’’ These are the natural next step in the long GATT/

WTO journey from tariffs, to quotas, to services, to intellectual property rights, to

phytosanitary standards. Go with the flow. Reasonable people can find reasonable

solutions that both improve production conditions worldwide and respect national

sovereignty. • Problems: India, Brazil, and China have an automatic response: ‘‘Not on your

life.’’ Will the United States and Europe put their own miserable treatment of illegal

immigrants on the table? What about state environmental standards and layoff

laws? Finally, what concessions will the United States and Europe make to get social clauses? Will they accelerate the elimination of Multifiber Agreement (MFA)

quotas, slash textile and apparel tariffs, and reform their antidumping laws? Will

they liberalize stratospheric restrictions on sugar, dairy, peanut, tobacco, and other

specialty agriculture imports?

Dani Rodrik and Robert Litan:

‘‘Buy off labor.’’ This strategy sees the United States (not Europe) as the main

stumbling block to open markets, and identifies organized labor as the key opponent. Hence the prescription. Enlarge the U.S. social safety net across the board,

as Rodrik advocates. Or, in Litan’s formulation, provide for a realistic, but degressive (e.g., lasting 2 to 3 years), make-up payment for a portion of the wages lost

(e.g., starting at 75 percent of the loss) by all dislocated workers who find new jobs.

Ensure that dislocated workers have health care and moving allowances.

• Problems: Who will spend the necessary money for a wide social safety net?

Gore is already attacking Bradley for wanting to increase the health care budget.

My estimate for degressive wage make-up costs across the board is about $15 billion

annually. Wage insurance limited to trade-impacted workers would come cheap,

about $500 million annually. But labor has disdained all forms of Trade Adjustment

Assistance (TAA) for 15 years. Why would it love this wrinkle? Besides, there is no

meaningful distinction between workers displaced by technology or restructuring

and workers displaced by trade. If labor alone is bought off, will other social causes

be satisfied?

74

President Clinton:

‘‘Y’all come.’’ The central problem is process, not substance. Invite responsible

NGOs into the negotiations. Allow them to bring disputes in the WTO. Broadcast

the proceedings live on television and the Internet. A more open party will be a better party.

• Problem: No one believes this solution. Probably not even Clinton.

Sizing Up the Problems

If the next U.S. president wants to restart the trade engine, he will need to commit the same level of political resources as he might devote to major tax, budget,

or labor legislation. Gone are the days when important policy-driven progress toward open markets can be achieved without bitter political battles. There is no lowcost-lunch strategy.

If the new ‘‘third rail’’ proves too hot for the next U.S. president and his G–7

counterparts, then the open markets agenda will depend on the two forces inherent

in Robert Samuelson’s analysis: the technology revolution in transportation and

communications, and the winning appeal of Anglo-Saxon capitalism. In a pre-Seattle

trip to Asian capitals, Fred Bergsten found considerable enthusiasm for new regional institutions ranging from trade to money. Asian leaders are tired of dancing

to Washington’s economic tune. They want to write their own songs. Seattle can

only reinforce these sentiments. If Washington and Brussels falter, the future trade

agenda could be led by an Asian renaissance.

If the ‘‘third rail’’ turns out to be a Washington problem—and not so serious in

Brussels, Tokyo, and Ottawa—the other G–7 powers might well pursue their own

regional initiatives. The European Union might negotiate free trade arrangements

with Mercosur and the Lomé Convention nations, adding to its extensive

free trade network with Eastern Europe, North Africa, and Mexico. Japan could surprise everyone by negotiating a free trade agreement with Korea. And Canada

might join the Northeast Asian party. A burst of regional energy along any of these

lines would disadvantage U.S. exporters.

The U.S. Trade Calendar in 2000

Multiple trade issues loom on the congressional calendar. In the wake of Seattle,

these issues present inviting targets for Backlash demonstrations, attracting new financial support and more media attention. Accordingly, a few thoughtful Open Market protagonists think that the best strategy—in an election year—would ‘‘cool

down’’ trade and put off issues until 2001. Here is how ‘‘third rail’’ countertactics

might play.

• String out the technical talks on China’s accession to the WTO, and simply go

for a one-year renewal of NTR in July 2000. (Clinton’s ‘‘second scenario’’ for dealing

with China.)

• Don’t even mention ‘‘fast track.’’ At most, hold quiet consultations with Ways

and Means and Senate Finance Committee leaders on possible new formulations

and new labels.

• Hold off on CBI Parity and AGOA.

• Keep FTAA, APEC, and Pacific–5 talks at a strictly technical level.

• Avoid a media event of the House and Senate votes on continued U.S. membership in the WTO. (Under the 1994 legislation that ratified the Uruguay Round

agreements, upon the request of a single member, the House and the Senate each

vote up or down on continued U.S. membership in the WTO every five years.)

• Downplay a possible adverse decision by the WTO appeals panel in the Foreign

Sales Corporation case. (In a case brought by the European Union, a WTO panel

found that this U.S. tax provision, designed to promote exports, violates the Uruguay Round Code on Subsidies and Countervailing Measures. The WTO appeals

panel will issue its decision by March 2000.)

‘‘Firewall’’ in 2000?

A different strategy for Open Market forces next year is to stand and fight. In

this strategy, an all-out battle would be waged to welcome China in the WTO with

permanent NTR legislation. Likewise, CBI Parity and AGOA would be the next priority.

The argument for this strategy is simple. Unless the Open Market forces build

a firewall, the Backlash forces will gain momentum and financial support. If trade

policy is stalled in 2000, it will be that much harder to restart the engine in 2001.

75

A New Strategy for 2001

Fact One. Steven Kull’s polls show broad-based moral concern in the United

States about labor and environmental conditions abroad (even if better conditions

abroad translate into higher consumer costs at home). His polls also show that the

American public is worried about U.S. job dislocation, even when workers can find

new jobs at the same or better pay, and even when a flexible economy means lower

prices at the local shopping mall.

Fact Two. Americans sharply disagree on the benefits of free trade, polarizing by

income level. According to a Wall Street Journal poll, only about 32 percent of all

U.S. adults think that the United States has been hurt by free trade agreements.

(By contrast, 35 percent think the United States has been helped, and 24 percent

think that trade agreements haven’t made much difference.) However, 54 percent

of adults with income under $20,000 think that the United States has been hurt

by free trade agreements, while naysayers drop to 25 percent among households

with income over $50,000.

Fact Three. Meanwhile, developing countries violently oppose a working group on

labor in the WTO, and they were enraged by Clinton’s mention of trade sanctions.

Developing countries hold a well-grounded fear that the concerns and worries of ordinary Americans will be hijacked by the AFL-CIO and extreme Backlash groups—

and turned into formidable trade barriers.

Putting these three facts together, the time has come to address labor and environmental concerns, but with a strategy that

• would not entail new WTO rules;

• would be accepted by the U.S. business community;

• and would broaden the base of U.S. public support for freer trade.

If this strategy can be crafted, then the way would be clearer for Congress to

grant the next president authority to conduct trade and investment negotiations. No

plausible strategy can avoid a political battle. The right strategy could improve the

chances of an Open Market victory.

Six Linked Concepts of the New Strategy

• First, create a permanent independent U.S. commission, insulated from daily

political life, to create and authorize labels certifying that imported and domestic

products and services are made in ways that meet core labor and environmental

standards. The labels would be optional, not mandatory, both for importers and domestic producers. For producers, the labels should become a ‘‘badge of honor,’’ enabling concerned consumers (business or household) to purchase certified products,

at a premium price if necessary. The Global Reporting Initiative

(www.globalreporting.org) has already published its suggestions for an appropriate

framework.

• Second, dedicate a portion of capital gains taxes to creating a fund for degressive wage insurance (and health care and moving allowances) for all dislocated

workers, as Robert Litan has urged. Individual capital gains taxes are running

above $50 billion annually; hence earmarking 30 percent for degressive wage insurance and associated benefits should prove adequate. The basic rationale is that

globalization and technology are shifting part of national income to capital; some of

these gains are in turn captured by the capital gains tax. It is only fair that a slice

of the rewards generated by the new economy be returned to those shaken up by

its dislocations. Earmarking would foster harmony between winners and losers. For

earmarking to have meaning, however, less money would be dedicated to the fund

in years when capital gains plunge and tax receipts drop.

• Third, replace the antiquated and inefficient U.S. system for taxing the worldwide income of U.S. multinationals (a system that raises very little revenue) with

a new system that allows a broad exemption for income earned abroad. However,

the broad exemption would be conditioned on certification that the U.S. parent corporation, all its foreign subsidiaries, and its principal suppliers exceed core labor

and environmental standards in their operations and appropriately disclose their

labor and environmental performance. Again, an independent commission (not the

IRS), drawing on the work of the Global Reporting Initiative, would set certification

and disclosure standards.

• Fourth, in parallel with domestic initiatives on labor and the environment, the

administration should launch negotiations in the International Labor Organization

(ILO) to establish a worldwide system for certifying observance of core labor standards, by both firms and countries. Likewise, as Daniel Esty has proposed, the administration should enlist international support for creating a Global Environmental

Organization (GEO). Among its tasks, the GEO would certify the observance of recognized environmental standards. Both the ILO and the GEO would issue periodic

76

‘‘report cards’’ on national performance, just as the IMF and the WTO do on trade

and macroeconomic policy. • Fifth, authorize the president to negotiate new trade and investment agreements to reduce barriers. Congress would vote these up or down on a ‘‘no amendments’’ basis, within the life of the Congress (if submitted during its first session).

In other words, new authorizing legislation should call for enabling legislation on

a ‘‘slow track,’’ not a ‘‘fast track.’’ • Sixth, the authorizing legislation should give the president authority to pursue

trade and investment negotiations in various forums—WTO, APEC, FTAA, Pacific–

5—after giving advance notice, plus a list of specific objectives, to Congress. (After

receiving notice, each house of Congress should have a 60-day window to disapprove

the launch of negotiations—a variant of the ‘‘narrow track’’ idea floated by Representative Phil English.) The president should be permitted, but not required, to

seek agreement on plurilateral or multilateral measures (in the ILO and the GEO

as well as in trade organizations) that would reinforce the labor and environmental

provisions already adopted by the United States (as outlined above). Broad presidential authority would enhance America’s ability to achieve its goals—since the

president would be tied neither to a single forum nor to unattainable objectives.

The views expressed in this publication are those of the author. This publication

is part of the overall program of the Institute, as endorsed by its Board of Directors,

but does not necessarily reflect the views of individual members of the Board or the

Advisory Committee.

Mr. HOUGHTON [presiding]. Thank you, Mr. Hufbauer.

Mr. Hathaway.

STATEMENT OF DALE E. HATHAWAY, PH.D., EXECUTIVE DIRECTOR, NATIONAL CENTER FOR FOOD AND AGRICULTURAL POLICY, AND CHAIRMAN, AGRICULTURE POLICY ADVISORY COMMITTEE

Mr. HATHAWAY. Thank you, Mr. Chairman.

I appreciate the opportunity to present my views on these issues.

I don’t think that either the street theater or the agricultural negotiations caused the breakdown in Seattle. I believe the breakdown

was inherent in things that preceded that by quite some time.

Basically, I think it was a function of a lack of political will on

both the U.S. and the European sides. On the U.S. side, it was

clearly evident by the inability of the Congress and administration

to get trade negotiating authority for the President. On the European side, it was equally apparent in their inability to even make

modest adjustments in their agricultural policies. It appeared as

part of the impasse over the director general which in turn led to

inadequate preparations and an almost inevitable failure at the

time.

This is behind us. It is now time for us to move ahead. And it

seems to me that the U.S. again can provide some leadership and

has begun to.

First, I am pleased to see that the general counsel, in part at the

prodding of the U.S., has agreed to move ahead in the committee

on agriculture to do, as Ambassador Barshefsky calls it, clear the

underbrush. After a Ministerial in 1982 failed to launch a new

round, the committee on agriculture, chaired by Aart de Zeeuw of

the Netherlands, met from 1982 to 1986. That committee was very

largely responsible for laying out a framework that made the Uruguay round negotiation in agriculture possible.

One final caveat in that regard. The agricultural community is

much concerned about a comprehensive undertaking in the negotiaVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00080 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
77

tion. The committee on agriculture will not provide that. Therefore,

it is important that the U.S. insist that any activities that occur

in the committee on agriculture be folded back into a broader negotiation when it is possible to restart those negotiations.

Finally, I think that, as everyone has suggested, we need to pay

substantially more attention to the concerns of the developing

countries. I think it became obvious when the developing countries

decided they no longer were willing to let Europe and the U.S. decide who the next director general was going to be that this is a

different WTO and one in which we need those countries on our

side.

I think that is especially important in agriculture, where those

countries suffer as much as or more than anyone in terms of the

trade practices that we want to have removed. Therefore, I think

we should spend less time in agriculture negotiations and in arm

wrestling with the European Union, and more time in gathering

broad based allies that move to reduce the trade distorting practices in agriculture.

Thank you very much, Mr. Chairman.

[The prepared statement follows:]

Statement of Dale E. Hathaway, Ph.D., Executive Director, National Center

for Food and Agriculture Policy, and Chairman, Agriculture Policy Advisory Committee

SUMMARY AND OVERVIEW

A number of factors contributed to the failure of the World Trade Organization

(WTO) Ministerial in Seattle. These included: insufficient political will and a lack

of consensus in Europe and the United States, inadequate preparation and agreement on the agenda prior to the Seattle meeting, decision-making procedures used

before and during the Ministerial that are inadequate to the much larger WTO, and

a failure to comprehend the depth and nature of the discontent among the developing countries.

At this point it is counterproductive to lay blame and point fingers as to who is

responsible for the failure. We should concentrate on how we can repair the damage,

remove the obstacles, and move ahead with the needed changes in both our own positions and in the WTO as an organization.

I do not believe that the street theater of the rioters and marchers was a significant factor in the failure. Nor do I believe the difficulties in arriving at an agreed

framework for the agricultural negotiations was the crucial element that caused the

breakdown. If all other elements of the negotiations had been in place, I believe that

the difference on the agricultural issues could have been bridged.

The first task should be to move ahead with the built-in agenda in a way that

will help overcome the difficulties encountered in Seattle. In the case of agriculture

this can best be done by activating the Committee on Agriculture of the WTO, finding a new dynamic chairman for that Committee and charging the Committee to

develop an agreed-upon approach for carrying out the mandate to continue the agricultural reforms started in the Uruguay Round.

Second, I believe we should broaden the base of our interest in the agricultural

negotiations and move off our excessive focus on the European Union (EU). In Seattle, most of the discussions on the agricultural text appeared to focus on achieving

language that would predetermine the outcome of the negotiations. It appeared to

be a contest between the EU and its allies and the US and its Cairns Group allies.

Rather than adhering to this narrow focus, we must enlist the broad support of developing countries in our efforts to reduce and remove trade-distorting agricultural

subsidies. This shift will require a change in the attitude of many agricultural

groups as well as that of our officials and members of Congress.

Third, we also should do more to deal with the concerns of developing countries

that make up the majority membership of the WTO. We and others promised technical assistance at the end of the Uruguay Round to help countries implement their

Uruguay Round obligations, and that assistance has not been forthcoming. Many

countries lack the trained personnel to mount a negotiation and lack the expertise

78

to analyze the potential benefits of different proposals. As a result they join blocs

led by countries claiming to know what is best for them or they ask for special exemptions from new trade rules. They are frustrated by feeling excluded from the key

decision-making groups and by the fact that their concerns are largely ignored. It

is in our long-run interest to help these countries become better informed participants in the process.

In all likelihood it will be at least a year before the Ministerial can be resumed.

We have much to do in that time, including the developing of a new political consensus to support our trade policy. In the absence of such consensus the US cannot

resume its position as the world leader in international economic policy.

INTRODUCTION

As chairman of Agricultural Policy Advisory Committee (APAC) I was a part of

the official US delegation to the Seattle Ministerial of the World Trade Organization

(WTO) held November 30 to December 3, 1999. The APAC met with senior administration officials in late October before the Seattle meeting and had discussed the US

positions on issues related to agriculture at that meeting and at the two prior APAC

meetings. My observations are based on discussions and conversations during and

after those meetings, briefings provided during the Seattle meetings for the Delegation and for the APAC; as well as, my experience as the senior agricultural negotiator in the Tokyo Round.

There were two events taking place simultaneously in Seattle, one on the streets

where protesters attempted to disrupt the Ministerial meeting, and one in the Convention Center where official representatives of governments were dealing with the

business of the Ministerial and attempting to launch a new round of trade negotiations. The protesters consisted of two groups, one dedicated to disrupting the activities of the WTO and other international institutions, and a group of labor representatives and environmental groups that are skeptical about further trade liberalization and want it accompanied by international rules regarding labor rights and protection of the environment. A great deal of attention has been paid to the activities

in the street, and many persons, including the President, have discussed the need

to accommodate the concerns of the labor and environmental groups in our trade

negotiations.

I believe that the protests outside the Convention Center had little or nothing to

do with the failure of the Ministerial. The effect of the protesters was and will be

related to their ability to bring political pressure on some WTO member governments to adopt the positions and issues they espouse. As I shall point out later, the

greater the success of these protest groups, the more difficult it will be to move toward more liberalized trade in the WTO of the 21st century.

Factors Contributing to Failure

In my view more attention needs to be paid to the activities inside the Convention

Center, and the reasons underlying the failure of those negotiations to launch successfully a new round of trade negotiations. One factor leading to the failure of the

Seattle Ministerial was the lack of attention paid to developing countries’ opposition

to the agenda. Finding a common ground with the developing country members of

the WTO should become a priority in subsequent negotiations.

The danger signs of a possible failure in Seattle were clear for all to see. They

first appeared as an impasse over the choice of a new Director-General of the WTO.

Developing countries, that now make up the majority of the WTO members, were

no longer content to have the Europeans and the US choose another European Director-General as they have since the founding of GATT in 1947. Developing countries put forth their own well-qualified candidate and hung tough on the choice until

the US and Europe were willing to compromise on a split term for the two leading

candidates. This impasse resulted in a Director-General who clearly was not the

first choice of many countries and, more importantly, came to the position late and

had inadequate time to lead the preparations for a successful Ministerial.

Second, a successful trade negotiation requires significant political leadership by

the leaders of major trading countries, most especially the United States and Europe. It is clear to the world that there is no political consensus for an new trade

negotiation in the US. The Congress has refused to provide trade negotiating authority to the President, and the attention of the White House was diverted for most

of 1998 and early 1999 by investigations and impeachment hearings. Many of the

strongest Administration supporters are strongly opposed to new trade negotiations

and have insisted on adding labor rights and environmental issues to the agenda

if any negotiations are to take place. As a result the Administration did not provide

strong clear leadership, but proceeded cautiously by putting forth proposals for a

79

limited negotiation involving politically popular new trade initiatives and sector negotiations.

The situation in Europe also shows lack of political will. A new Commission of

the European Union took over in mid–1999 after the old Commission resigned in

disgrace as a result of scandal and mismanagement. Moreover, the new government

of Germany, that normally is strongly supportive of trade liberalization, has proven

to have serious domestic political difficulties. Political power is divided in France.

The EU is focused on the launch of the common currency, enlargement, and the Balkans. A forecast of the limited European commitment to further agricultural reform

was evident in the refusal of the EU heads of state to accept the rather modest reforms of the Common Agricultural Policy (CAP) proposed by the Commission in

1998 to enable the EU to meet additional rollbacks in export subsidies expected as

a result of a new negotiation. The French insistence that internal prices not be reduced as much as the Commission proposed was a clear signal that the EU would

not accept a negotiating mandate to phase out export subsidies completely. That,

of course, was a major sticking point in Seattle and brought intervention from the

highest political levels in France to veto any mention of eliminating export subsidies

in the proposed text on agriculture.

Thus, the two major trading powers that must provide consensus and leadership

for any trade negotiation to succeed were both unable and unwilling to do so. The

US proposed a limited agenda that would have entailed minimum sacrifice and immediate gains for the US from a short negotiation. It also proposed adding labor

rights and environment issues to the negotiating agenda. The EU proposed a broad

agenda of new issues involving competition policy and investment policy almost certain to entail years of negotiation. Moreover, whereas the US was happy to settle

for further negotiations to liberalize agricultural trade using the Uruguay Round

format, the EU was pushing for a series of new agricultural issues involving food

safety, animal rights, and ways to protect the multifunctionality of agriculture.

The developing countries had limited enthusiasm for a new round, asserting that

they needed additional time to adjust to the Uruguay Round agreements. They also

wanted some of their issues on the agenda, including a reopening of the trade remedy rules and the intellectual property rights agreement. Most developing countries

felt left out of the preparatory process, and felt they were not included in the key

consultative process in Seattle.

Moreover, the developing countries were strongly opposed to both the US and EU

suggestions for new agenda items. Developing countries viewed the move to include

labor rights and environmental issues as overt moves toward protectionism by the

developed countries. This view was reinforced by President Clinton’s quoted remark

that we would use trade sanctions to enforce labor rights in other countries. This,

together with the refusal of the US and others to give serious hearings to the demands of developing countries regarding problems they have had with the Uruguay

Round agreements, led to the developing countries’ withdrawing from the process.

Normally, a Ministerial meeting begins its deliberations with a text for the different sectors and the overall framework upon which the major trading parties virtually agree. Some key elements are always unresolved, and they are the primary

focus of the Ministerial negotiations. These nearly final texts are the result of

months of discussions and compromises brokered by the WTO Secretariat.

No such texts existed for the Seattle Ministerial. Several attempts to produce a

text for agriculture had failed to produce a common text with only a few remaining

differences. Instead the production of a draft text fell to the chairman appointed to

chair the agricultural negotiating group. That text was still under negotiation when

the Ministerial was adjourned. Now the EU and others have said that text has no

standing and the process will go back to the beginning.

In my view the agricultural issues were not the deciding issues that caused the

failure of the Ministerial. However difficult agricultural issues can be, I doubt that

the US, the EU or the developing countries would have scuttled the negotiations

over a word or two in the agricultural text if all the other elements of the negotiation had been in place.

The US was under siege on some issues that we wanted to keep out of the negotiations and was making little or no progress on gaining acceptance of some of the

issues we wanted included. The push for accelerated tariff liberation on selected

products in which we have a substantial advantage was opposed by Europe and

most developing countries. Thus, in general, the immediate political fallout in the

US appeared significant and the gains distant. In this context, the suspension of the

Ministerial probably was not the worst outcome from the Administration’s point of

view.

80

Moving Beyond Seattle

It appears that it will take some time to clear the decks so that the full Ministerial can be resumed. While they are too polite to say so openly, most countries have

no interest in negotiating with a lame-duck US administration. Thus, the full negotiation can probably not be resumed until sometime in 2001, after a new administration is in place and organized. Some developing countries suggest it could be as

much as two years before they will be ready to return to completing the Ministerial.

However, the Uruguay Round called for a renewed negotiation on agriculture and

services to begin in 2000. There seemed to be some agreement in Seattle that the

so called built-in agenda should be honored, and thus, that negotiations on agriculture and services should proceed. The question is how should they proceed and

what should the US strategy be. It is important that the US take the initiative to

move the so-called built-in agenda forward so that when a full negotiation is again

inaugurated, the problems plaguing the Seattle Ministerial in agriculture will be resolved.

It is also important that the administration insists that any progress made on the

built-in agenda be incorporated into a broader agenda when one is finally authorized by a Ministerial because the built-in agenda does not provide a broad negotiating base. The agricultural community identified and expressed its concerns about

whether a single undertaking negotiation involving only agriculture could produce

significant results during the preparations for the Seattle Ministerial. This caused

some tensions between the Administration and the agricultural community over the

proposed Accelerated Tariff Liberalization.

It should be remembered that this is not the first failed Ministerial. In 1982, a

similar failure occurred, but it was possible to make substantial progress in agriculture toward laying the groundwork for the subsequent Uruguay Round. This was

done through the Committee on Agriculture of the GATT under the skillful chairmanship of Aart de Zeeuw of the Netherlands. That committee laid out the issues,

discussed alternative ways of addressing them, and moved the process toward agreement on a text that was to become the mandate for the agricultural negotiations

in the Uruguay Round.

The Committee on Agriculture of the WTO should be charged to play the same

role again. The US should move immediately to find and to urge the appointment

of an able, forceful and neutral chairman and work with that person to develop an

agenda to do the preparatory work that was not completed before Seattle. When the

Ministerial is resumed it should start with a text on agriculture that has, at most,

a few brackets left to the highest level decision makers.

Second, the US needs to engage the developing countries fully in discussions on

all issues, including agriculture. The USDA had efforts in this regard before Seattle,

but a government-wide coordinated effort is needed to bring the developing countries more fully into the WTO decision making process. Congress needs to recognize

and take into account of the interests of developing countries. For years we have

said we want trade not aid, but in reality we have not offered much of either to

developing countries. The EU offers both special arrangements and much sympathy

to developing countries while we lecture them to deregulate, and it is not surprising

the developing countries generally line up with the EU on crucial trade issues. This

is especially ironic when you realize that the developing countries are among those

most hurt by the trade-distorting policies of the CAP.

There are two areas in which I believe we should do more to assist developing

countries. One is to provide technical assistance to help countries meet their obligations under the Uruguay Round agreements. Such assistance was promised at the

end of the Uruguay Round and has not been delivered. The second area is assistance in capacity building to enable developing countries to participate fully in and

benefit from trade negotiations. In our work at the National Center with the Caribbean Community (CARICOM) countries of the Carribean and from discussions in Africa last year, I have been struck by how limited the capacity of many countries is

to understand and cope with complex negotiations.

In addition, we should focus more attention on the issues of Special and Differential treatment for developing countries rather than dismissing such demands out of

hand as we tend to do. We should ask whether the requests are based on sound

justification, and if special and differential treatment is to be a part of trade agreements, how it can be incorporated without destroying the universality of the world

trading rules.

Third, the US should broaden its focus in agricultural negotiations, that appears

to be largely on the EU. It is true that the US wants to curb some of the tradedistorting practices of the EU, namely export subsidies, and wants to avoid some

of the trade restrictive practices the EU is proposing in the guise of food safety, aniVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00084 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
81

mal welfare, and multifunctionality. However, the reality is that market growth for

US agricultural exports is outside the EU in the developing countries of Asia, Latin

America, and Africa. Therefore, our market access strategy should focus on those

countries. I have been observing and participating in trade negotiations for nearly

forty years, and in that time I have observed a near obsession in the USDA regarding the CAP and efforts to change or destroy it at the cost of almost every other

issue.

It appears that too much effort is being put into achieving a negotiating mandate

that tries to predetermine the final outcome of the negotiations. Some, including

some of our agricultural groups, view each word proposed by other countries as having a hidden meaning and always attribute the worst possible motives to that meaning. I believe that we should stop trying to negotiate the final outcome in advance

and concentrate on getting discussions started on the modalities to achieve the trade

liberalization we desire. It is far more important whether the final outcome contains

a 25, 50 or 90 percent reduction in the volume of subsidized exports than whether

the negotiating mandate contained the magic word eliminate. And it probably would

not mark the end of all market access negotiations if the word multifunctionality

appears somewhere in the mandate. We should focus on strategy to achieve desired

results not on strategy to produce a framework with the desired buzzwords.

At the same time that we are pursuing a negotiating framework in the WTO

Committee on Agriculture and attempting to gather allies from the developing countries, we should actively pursue our rights under WTO rules. The so-called ‘‘peace

clause’’ expires at the end of 2003, and we should be ready and willing to take WTO

action as soon as it expires against those practices and policies that appear to jeopardize our WTO rights. Unless other countries indicate a willingness to cooperate

on moving ahead on the agricultural issues of interest to us, we should not agree

to extend the peace clause beyond its current expiration date.

The WTO decision process clearly is not suited for a world of instant communication and a membership of 135 countries or more. The consensus approach to decision making appears no longer to work, and a system to replace it is not immediately obvious. In addition, the closed nature of the process has raised suspicions

among some member nations as well as nongovernmental organizations. This issue

also needs to be addressed, with due regard to the vast difference between countries

on the role of private organizations.

There appears much work to be done before the WTO Ministerial can be resumed

with a good prospect of success. Getting that work underway also will allow the next

administration to move to develop the consensus needed in the US to allow us to

become the world leaders again.

Mr. HOUGHTON. Thank you, Mr. Hathaway.

Mr. Trumka.

STATEMENT OF JOHN J. SWEENEY, PRESIDENT, AMERICAN

FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL

ORGANIZATIONS; AS PRESENTED BY RICHARD TRUMKA,

SECRETARY-TREASURER

Mr. TRUMKA. Thank you, Mr. Chairman.

I thank you for the opportunity to appear here today on behalf

of the AFL–CIO and our 13 million members. It’s clearly important

that we understand, all of us understand and appreciate what happened in Seattle, and that we learn the right lessons from the

breakdown in negotiations from the tens of thousands of people in

the streets and from the realities of the current global economy.

We all have a tendency to view these events through our own

eyes. Many of those who have given testimony here today have

stressed the up side of the global economy, rapidly growing trade,

investment flows, a booming stock market, job creation here in the

United States.

But I speak to you today on behalf of working families here in

the United States and across the world, and working families have

82

experienced a different side of the global economy. From our side

of the bargaining table, it appears that the current rules of the

global economy have been used to tilt the odds in favor of corporations at the expense of workers, family farmers, the environment,

and sometimes small businesses.

These rules have freed up corporations to move production

around the globe in search of the most vulnerable and

disenfranchised workers and the most lax regulation. These rules

have pressured governments to cut social spending, to weaken

labor laws and to export their way out of every corner.

We have not yet experienced the global economy described by the

so-called free traders, an economy that evenly spreads wealth and

opportunity and that brings prosperity which in turn improves

rights. We live in a global economy where inequality is at an alltime high and growing, both between and within countries. We live

in a global economy ravaged by financial crises and speculative

booms and busts, where workers pay the high price of adjustment

and speculators are bailed out.

We live in an economy where the largest companies in the world,

headed by some of the richest people in the world, sell over-priced

goods to the relatively wealthy consumers and pay their workers

too little to buy a quart of milk or a pound of beans for their family, put factories in countries where organizing an independent

labor union can be a death sentence and spend millions of dollars

a year fending off union organizing drives.

But at the end of the day, we’re all living in the same global

economy. Rosy predictions and corporate cheerleading cannot

change the reality of the global economy. That’s our job.

Yours as Members of Congress, mine as Secretary-Treasurer of

the AFL–CIO, to insist that governments craft rules for this global

economy that will deliver better outcomes to workers as well as

employers and to small poor countries as well as to big rich ones.

The lesson of Seattle that we must all learn is that there is no

going back. The American people and the U.S. Congress have rejected new trade agreements that simply replicate the old ones.

The member countries of the WTO have called for a time out on

further trade talks until we have a better common understanding

of the impact of past trade and financial liberalization on income

and equality, on development and on global financial markets.

Worse yet, many diverse voices in Seattle called for institutional

reforms to ensure that the WTO operate with more democratic accountability and transparency. I want to take this opportunity to

associate myself and thank Mr. John Lewis for his remarks this

afternoon.

I am particularly, we are particularly frustrated, Mr. Chairman,

with the administration’s prolonged inaction on steel wire rod section 201 cases. A decision was due from the administration on September 27, more than 4 months ago. In the meantime, imports continue to grow and thousands of steel workers’ jobs have been put

at risk. The steel workers played by the rules. They waited patiently for a decision and their patience is wearing thin. They deserve a timely decision and appropriate action.

If we do not do better in the future, Mr. Chairman, if the global

system continues to generate growing inequality, environmental

83

destruction, and a race to the bottom for working people, then I can

assure you, it will generate broad opposition that will pale Seattle.

It’s important for all of you in Congress to recognize that these

views are shared by a broad and a growing majority, both in the

United States where voters overwhelmingly believe that workers’

rights and environmental protections should be enforced in the

global economy and across the world, by working people whose

voices too often go unheard.

None of these issues, Mr. Chairman, that I’ve raised here today

is addressed in the bilateral WTO ascension agreement the United

States government signed with China late last year. The Chinese

Government’s abysmal record of violating its citizens’ fundamental

human rights to freedom of speech and religion and association will

be harder, not easier to challenge, if Congress grants permanent

NTR.

The Chinese Government’s woeful record of violating the term of

trade agreements it has signed will likely be worsened, not improved, if the United States agrees to grant permanent NTR. If

Congress gives up the right to an annual review of China’s human

rights record and trade compliance, the pressure to reform will be

off the Chinese Government. It’s absolutely essential that this Congress take a firm and principled position against permanent NTR

so that we can begin to build a global economy that lives up to its

potential and to our expectations.

Mr. Chairman, let’s all agree on one thing, that business as

usual cannot be the order of the day. This global economy will either be reformed or face ever greater resistance. Thank you, sir.

[The prepared statement follows:]

Statement of John J. Sweeney, President, American Federation of Labor

and Congress of Industrial Organizations; as presented by Richard

Trumka, Secretary-Treasurer

Mr. Chairman, members of the Subcommittee, I thank you for the opportunity to

appear here today on behalf of the AFL–CIO and our thirteen million members.

It is crucially important that we all understand and appreciate what happened

in Seattle, and that we learn the right lessons from the breakdown in negotiations,

from the tens of thousands of people in the streets, and from the realities of the

current global economy.

We all have a tendency to view these events through our own lens. Many of those

who have given testimony here today have stressed the upside of the global economy—rapidly growing trade and investment flows, a booming stock market, and job

creation here in the United States.

But I speak to you today on behalf of working families—here in the United States

and also across the world. And working families have experienced a different side

of the global economy.

From our side of the bargaining table, it appears that the current rules of the

global economy have been used to tilt the odds in favor of corporations at the expense of workers, family farmers, the environment, and sometimes small businesses.

These rules have freed up corporations to move production around the globe in

search of the most vulnerable and disenfranchised workers and the most lax regulation. These rules have pressured governments to cut social spending, to weaken

labor laws, and to export their way out of every corner.

We don’t experience the global economy described by the so-called free traders—

an economy that evenly spreads wealth and opportunity, and that brings prosperity,

which in turn improves rights.

We live in a global economy where income inequality is at an all-time high, and

growing—both between and within countries. We live in a global economy ravaged

by financial crises and speculative booms and busts, where workers pay the high

price of adjustment and speculators are bailed out. We live in a global economy

where the largest companies in the world, headed by some of the richest people in

the world, sell over-priced goods to relatively wealthy consumers, pay their workers

84

too little to buy a quart of milk or a pound of beans for their family, put factories

in countries where organizing an independent labor union can be a death sentence,

and spend millions of dollars a year fending off union organizing drives.

But at the end of the day, we are all living in the same global economy. Rosy predictions and corporate cheerleading cannot change this face of the global economy.

That is our job—yours as members of Congress, mine as president of the AFL–

CIO—to insist that governments craft rules for this global economy that will deliver

better outcomes—to workers, as well as employers, and to small, poor countries, as

well as to big, rich ones.

The lesson of Seattle that we all must learn is that there can be no going back.

The American people and the U.S. Congress have rejected new trade agreements

that simply replicate the old ones. The member countries of the WTO have called

for a time-out on further trade talks until we have a better common understanding

of the impact of past trade and financial liberalization on income inequality, on development, and on global financial markets. Many diverse voices in Seattle called

for institutional reforms to ensure that the WTO operate with more democratic accountability and transparency.

I would like to take this opportunity to express my appreciation for Mr. Lewis’s

remarks this afternoon on the need to improve the transparency of our trade institutions in general and NAFTA in particular.

The AFL–CIO believes that the WTO must carry out the following reforms if it

is to survive as a legitimate and politically viable institution: • Incorporate enforceable rules on core workers’ rights (including the freedom of

association, the right to bargain collectively, and prohibitions on child labor, forced

labor and discrimination in employment). • Establish accession criteria requiring that new WTO members are in compliance with core workers’ rights. • Overhaul existing rules to strengthen national safeguard protections in the case

of import surges and ensure that trade rules do not override legitimate domestic

regulations. • Develop stricter rules against the mandatory transfer of technology, production,

and production techniques. • Ensure that WTO rules do not create pressure on governments to privatize public services. • Carry out institutional reforms, enhancing transparency, accountability and access, so that citizens can understand the basis for WTO decisions, as well as provide

meaningful input to this process. • Provide more technical and legal support to developing countries so their participation in negotiations is not hampered by lack of resources or technical expertise.

It is also essential that the U.S. government enforce its existing trade laws effectively and consistently. I am particularly frustrated with the Administration’s prolonged inaction on the steel wire rod Section 201 case. A decision was due from the

Administration on September 27—now more than four months ago. In the meantime, imports are continuing to grow, and thousands of steelworkers’ jobs have been

put at risk. The steelworkers played by the rules, and they have waited patiently

for a decision, but their patience is wearing thin. They deserve a timely decision and

appropriate action.

If we do not do better in the future—if the global system continues to generate

growing inequality, environmental destruction and a race to the bottom for working

people—then I can assure you, it will generate broad opposition that will make Seattle look tame.

All of us need to think anew. Leaders of the global institutions face a legitimacy

crisis that cannot be solved by better public relations and more educational campaigns. Their institutions will become more accountable, or more irrelevant.

Developing nations face a growing inequality of income and hope. They should not

be forced into one economic strait-jacket. For they will either find ways to empower

workers and protect the environment, or face growing popular resistance.

Heads of global corporations and banks must not be misled by their own rhetoric.

They will be held accountable for how they do business—by consumers, by workers,

by governments. Leaders of the corporate community must join the effort to establish enforceable laws that put limits on cut-throat competition. It is in the interest

of multinational corporations and the governments that regulate them to have rules

that are agreed upon by all.

Labor leaders across the world also must change to meet the new challenges. At

the AFL–CIO, we know that we have to deepen our own growing internationalism,

and develop new sophistication in bargaining and organizing across national lines.

We also recognize that we must join our voices with those in developing countries

calling for high-road development strategies. We must work to ensure that develVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00088 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
85

oping countries are no longer crippled by crushing debt burdens, and that they have

the resources they need to engage in trade negotiations on an equal footing, as well

as the technical support to implement and enforce labor and environmental standards.

Seattle marked a crossroads. Now, joined by millions of others across the world,

we pledge not to rest, but to continue to press for core workers’ rights that are the

basis of economic freedom and equitable development.

It is important for you in Congress to recognize that these views are shared by

a broad and growing majority—both in the United States, where voters overwhelmingly believe that workers’ rights and environmental protections should be enforced

in the global economy, and across the world, by working people whose voices too

often go unheard.

None of the issues I have raised here today are addressed in the bilateral accession agreement the U.S. government signed with China late last year. The Chinese

government’s abysmal record of violating its citizens’ fundamental human rights to

freedom of speech, religion, and association will be harder, not easier, to challenge

if Congress grants permanent Normal Trade Relations (NTR). The Chinese government’s woeful record of violating the terms of trade agreements it has signed will

likely be worsened, not improved, if the United States agrees to grant permanent

NTR. If Congress gives up its right to an annual review of China’s human rights

record and trade compliance, the pressure to reform will be off the Chinese government. It is absolutely essential that Congress take a firm and principled position

against permanent NTR, so that we can begin to build a global economy that lives

up to its potential and to our expectations.

Here, let us all agree on one thing: that business as usual cannot be the order

of the day. This global economy will either be reformed or face ever greater resistance.

I thank you for your attention and I look forward to your questions.

Mr. HOUGHTON. Thank you very much, Mr. Trumka.

Mr. Niles.

STATEMENT OF THOMAS M.T. NILES, PRESIDENT, UNITED

STATES COUNCIL FOR INTERNATIONAL BUSINESS, NEW

YORK, NEW YORK

Mr. NILES. Thank you very much, Mr. Chairman. I appreciate

the opportunity to appear before the Subcommittee today.

I’ll use my time primarily to talk about the issue of trade and

labor, or to put it another way, how to deal with the issue of labor

rights in the globalizing economy. This is because the organization

I represent, the U.S. Council for International Business, represents

U.S. business in the International Labor Organization. We have a

particular interest in this issue.

Trade and labor was one of the points of controversy in Seattle,

but by no means the only issue. It was not, I don’t think, the principal rock on which the WTO Ministerial failed. In my view, Seattle

failed largely because of the long and debilitating struggle over the

succession to Renato Ruggiero as WTO Director General. Traditionally, the DG has played the role of conciliator and consensus builder in the WTO. However, during most of the period leading up to

the Seattle Ministerial, there was no Director General, and the position itself was a source of controversy.

Ministers, not surprisingly, in Seattle during 4 days were not

able to do what their senior officials were unable to do in 18

months in Geneva. Progress was made in Seattle and I hope that

that can be enshrined in some sort of a document and can be used

as the basis for further discussions in Geneva.

86

The demonstrations that we’ve discussed today were largely, in

my view, street theater and a media event, and did not cause the

failure of the Ministerial. The Ministerial would have failed had

there been no demonstrations in Seattle.

On the trade and labor issue, Mr. Chairman, there were two proposals on the table. 1) the United States proposal for a working

group on trade and labor; 2) a proposal by the European Union for

a ‘‘Joint WTO–ILO Standing Working Forum on Trade

Globalization and Labor Issues.’’ The developing countries rejected

both of these proposals, arguing that the issue of trade and labor

had been settled once and for all in Singapore. The statement that

President Clinton made to the Seattle newspaper changed no

minds. It did tend to confirm what the developing countries had believed all along, that the United States was not after a study, but

after sanctions.

My organization, the USCIB, fully shares and supports the efforts and objectives of the United States government and others,

including the AFL–CIO, to raise labor standards around the world.

Where we part company is over tactics, or how best to do it. Let

me briefly explain why we don’t believe it would be productive to

continue to try to introduce labor issues into the WTO.

First, if we’re interested in studies, Mr. Chairman, the studies

have been done, many of them, in the OECD and the ILO, with

generally the conclusion that differences in labor standards do not

in and of themselves determine trade flows and investment flows.

If we want to use trade to encourage higher labor standards,

there’s a better way to do it. We could follow the European Union’s

example and add to our GSP benefits for developing countries that

fully satisfy ILO basic core labor standards. We can do this unilaterally.

The second reason for not putting labor issues into the WTO is

that developing countries are dead set against the proposal and are

not going to change their position. I saw no evidence in Seattle that

there was any flexibility on their part. They’re not prepared even

to discuss it, which can be seen as irrational, but that’s their position.

Third and most importantly, Mr. Chairman, there is a better way

to do this, namely through the use of the June 1998 ILO Declaration on Fundamental Principles and Rights at Work. This declaration, which was developed largely through cooperation between our

Council and the ICFTU, takes the mandate that was given to the

ILO by the Singapore WTO Ministerial and creates a means to

raise core labor standards around the world, including in countries

that have not ratified ILO core conventions. And that latter point

is particularly important.

Implementation of the Declaration is now beginning with the

principle of freedom of association. We hope that the U.S. Government and the AFL–CIO will join us in the ILO to ensure the success of this project. Through the use of ILO cooperative programs

and its influence, coupled with the extraordinary power of publicity

in our networked world, this could be a very effective process.

Countries will not want to risk being left out of international investment flows due to poor labor practices. Nor will companies

87

wish to run the risk of consumer resistance due to problems in the

labor area. We’ve seen many examples of how this can work.

We do need, Mr. Chairman, better coordination between the various organizations that are involved in parts of the international

economic development process, including the international financial

institutions, the ILO and the WTO, to ensure that the social consequences of economic restructuring can better be dealt with.

In sum, Mr. Chairman, our council believes there’s a better way

through the ILO to deal with the issue of trade and labor. Resurrecting the U.S. proposal for a WTO working group after three rejections, Marrakesh, Singapore and Seattle, would not only mean

another rejection in the WTO. It would also compromise our

chances for major progress in the ILO, given the developing countries’ likely reaction.

We have a significant opportunity now to overcome this setback

of Seattle and move ahead on a broad front internationally and domestically. On the latter, we hope that this millennial year will be

marked by Congressional approval of PNTR for China, the Africa

CBI initiative and WTO reauthorization, demonstrating to our

trading partners that Seattle was an aberration and that the

United States can play its indispensable leadership role in creating

a rules based international trading system.

Thank you very much, Mr. Chairman.

[The prepared statement follows:]

Statement of Thomas M.T. Niles, President, United States Council for

International Business, New York, New York

I am Thomas Niles, President of the United States Council for International Business (USCIB). The USCIB has approximately 300 members including multinational

enterprises, law firms and trade associations. It represents U.S. business in the

International Chamber of Commerce (ICC), in the Business and Industry Advisory

Committee (BIAC) to the OECD, and, most importantly for the subject I wish to discuss today, in the International Labor Organization (ILO) through the International

Organization of Employers (IOE).

I very much appreciate the opportunity to appear before the Subcommittee today.

I wish to use the time allocated to me to discuss the issue of the relationship between trade and labor. Because of the USCIB’s participation in the ILO, this is an

issue on which we have been particularly active.

The issue of trade and labor, or to put it another way, how to deal with the issue

of labor rights and standards in a globalizing economy, is not a new one, going back

as it does at least to the formation of the ILO in 1919. However, this issue received

more prominence during the run-up to the Seattle WTO Ministerial and at the Ministerial itself than was the case in previous multilateral trade rounds. While trade

and labor was one of the controversial issues at Seattle, it was not the only, or even

the principal rock, on which that enterprise foundered.

In my view, the principal reason for the failure in Seattle was the long and debilitating struggle in the WTO over the replacement of Renato Ruggiero as WTO Director General. Traditionally, the WTO, or GATT, Director General has played a vital

role as conciliator and problem solver. During much of the run-up to Seattle, not

only was there no Director General, but the filling of that office itself was a major

source of contention. Not surprisingly, Ministers found it impossible to solve in four

days what had eluded senior officials for more than 18 months. In addition, the developing countries came to Seattle believing they had been denied the ‘‘special and

differential treatment’’ they had been promised in the Uruguay Round. For these

countries, numbering more than 100 of the WTO’s 134 members, the trade and

labor issue was particularly sensitive.

There were two proposals on the trade and labor issue on the table at Seattle:

one, put forward by the United States, called for the establishment of a trade and

labor working group in the WTO; the second, advanced by the EU, provided for the

formation of a ‘‘Joint ILO-WTO Standing Working Forum on Trade, Globalization

and Labor Issues.’’ The developing countries rejected both. Their position was, and

remains, that this issue was settled once and for all at the Singapore WTO MinisteVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00091 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
88

rial in December 1996, which referred the issue to the ILO. This was restated in

a G–77 statement on Seattle issued in October 1999.

Although Administration representatives insisted that they were only interested

in ‘‘studying’’ the relationship between trade and labor standards, this position was

not taken seriously by the developing countries. The latter assumed that the United

States had a hidden agenda of establishing a basis for imposing trade sanctions over

non-observance of core ILO labor standards. President Clinton’s December 1 interview with the Seattle Post-Intelligencer confirmed their fears that the United States

had something more concrete in mind than a ‘‘study.’’

The USCIB strongly supports efforts to raise labor standards around the world.

In this respect, we fully share the goals of the Administration and others, such as

the AFL-CIO. Where we part company is on how best to accomplish this goal. Allow

me briefly to outline why we oppose the introduction of labor issues into the WTO: • If studies, and not sanctions, are indeed all that is involved, the fact is that this

issue has been extensively studied by the ILO and the OECD. These organizations

have concluded that the extent to which countries adhere to ILO labor standards

does not have a discernable impact on trade flows. For its part, the WTO, which

has no particular analytical capability, is unlikely to be able to add anything to

those studies. If the objective is to create a basis for trade sanctions, we question

how the imposition of barriers to LDC exports will promote better compliance with

ILO labor standards. We believe, as many studies have shown, that the key to better labor standards is economic development, which can be achieved through increased trade and investment flows, not sanctions. If the U.S. wishes to push this

process forward, we recommend the adoption of the EU program of giving a supplement to GSP to countries that fulfill their obligations under ILO conventions; • As I noted, the developing countries are dead set against the U.S. proposal,

which they see as the first step toward a new protectionism. Realistically, there is

no package of concessions to which we could agree that could cause them to abandon

this position. Under the provisions of the WTO Charter, a consensus would be required to introduce provisions permitting us to impose sanctions in cases involving

non-observance of core labor standards. Should we argue that developing country acceptance of a trade and labor working party is a requirement for their agreement

to a new trade round, most of the developing countries would reply that the idea

of a new round was ours and that they are prepared to forego the experience; and, • Finally, and most importantly, there is a better way to deal with this issue,

namely through the ILO, using the June 1998 ILO Declaration on Fundamental

Principles and Rights at Work.

The ILO Declaration was developed in large part at the initiative of the USCIB,

particularly by my predecessor, Ambassador Abraham Katz. It takes the mandate

given to the ILO by the Singapore WTO Ministerial and creates a basis on which

the ILO can use its influence to promote the implementation of its core labor standards throughout the world, including in countries that have not ratified the relevant

ILO Conventions. This process is now beginning, and in its first year the ILO will

consider the principle of freedom of association, one of the fundamental requirements for raising labor standards.

It has been argued that this approach is flawed due to the fact that the ILO ‘‘has

no teeth.’’ However, the ILO has significant influence, including in some of the countries most in need of radical changes in the labor area. Moreover, the publicity that

will accompany ILO efforts to deal with these problems, using the Declaration, will

be a powerful incentive for governments and private companies that do not adhere

to core labor standards to clean up their acts. Countries will not wish to be in the

spotlight for poor labor practices, given what this can mean for flows of capital, and

companies will not wish to run the risk of consumer resistance to their products due

to problems in the labor area. We have seen examples of the power of such publicity

in a networked world.

One idea that has recently surfaced in the discussion of this issue is the need to

establish some mechanism to coordinate the activities of the various international

agencies involved in one aspect or another of the development process. For example,

when the IMF develops a country program that involves austerity measures by the

country concerned, it is crucially important to keep in mind that this program may

have significant social consequences. Does the country in question have programs,

a ‘‘social safety net,’’ to deal with those consequences? This is where the ILO could,

and should, be called in, to work with the IMF to ensure that the negative social

consequences of the IMF program can be minimized. Some sort of informal consultative structure involving the International Financial Institutions, the ILO, the

WTO, UNCTAD, and other organizations, could prove quite useful.

In conclusion, Mr. Chairman, the USCIB believes strongly that there is a better

way to deal with the issue of trade and labor than to persist in what will be a futile

89

effort to force this issue into the WTO. The ILO is the better alternative, and the

United States government, labor and business should work together, as we did in

the case of the 1998 ILO Declaration, to ensure that the ILO moves ahead vigorously in implementing the Declaration. Further alienating the developing countries

by pushing for a WTO working group on trade and labor could ensure that we will

fail in the ILO as well as in the WTO.

Chairman CRANE [presiding]. Thank you.

Ms. Wallach.

STATEMENT OF LORI WALLACH, DIRECTOR, PUBLIC CITIZEN’S

GLOBAL TRADE WATCH

Ms. WALLACH. Mr. Chairman and Members of the Subcommittee,

thank you for the opportunity to testify. I’m Lori Wallach with

Public Citizen’s Global Trade Watch.

I’ll summarize my written testimony by starting with number

one, Seattle was not a fluke or an accident caused by random factors, either. And indeed, it’s important to understand who the protesters were and what they were about.

For instance, to rely on the goofiness of, say, Tom Friedman, is

at the peril of making the changes to move forward. In fact, the

protesters were informed. Ninety-nine point nine percent of them

were peaceful. They are diverse, and I chance to say, some of them

might have been your neighbors.

They came there, 50,000 of them, on their own time and their

own dime, because they were motivated by their personal experience of 5 years of the WTO. The WTO’s record was the major organizer of the protest.

Not only should these folks not be dismissed as ignorant, but at

this point it’s not possible to saddle with them with more macroeconomic statistics or promises of benefits. Some of them bought

into the $1,700 a year in family income will increase if the WTO

passes line, and after 5 years, they don’t just realize that didn’t

happen, they were additionally peeved.

Meanwhile, many of the things they were concerned about did

occur. Every single environmental and consumer law that WTO reviewed was ruled against, income inequality has increased. For the

folks who work in development issues, the share of trade for the

developed countries has decreased, and so forth.

These folks also don’t buy the inevitability line. They know the

question is not whether there will be globalization or not, but what

will be the rules. And they know it took a long time for the current

rules to be designed and put in place. And they find the current

rules’ outcomes unacceptable, and they’re committed to working for

change. And they’re blessed to live in a democracy, where when the

demand for change builds sufficiently, change either happens in

the policy or in the policymakers.

Number two, the intensity and diversity of the protests should

not have come as a surprise, certainly not to the U.S. Congress, as

there is a long list of empirical evidence demonstrating that the

NAFTA–WTO paradigm of international commerce is no longer viable. That evidence being two fast tracks, two CBIs, an MAI, and

so forth., that did not happen.

90

The consensus is gone because the circumstances changed and

the policy didn’t keep up. And the folks who were in Seattle would

really prefer to work for it in a creative way to change old policies.

But it appears that those who support the status quo seek one

more piece of evidence about why we’re not going that way. And

that would be the fight on permanent most-favored-nation. Which

by the way, after hearing the mantra from the administration

about losing all the benefits if we don’t permit most-favored-nation,

no Subcommittee other than this one knows more that we have a

bilateral reciprocal MFN agreement with China which continues.

The question is the dispute resolution. We don’t lose the market access benefits.

And number three, continued inflexibility will be the number one

contributing factor to imploding the WTO. The President says we

should try a new paradigm, but then he pushes permanent MFN

with no labor, environment and human rights. USTR Barshefsky

calls for new a round, but actually a month ago said her lesson was

they needed to fix the WTO first. The groups who brought you Seattle are arguing that to start with, pruning back some of the

places that the Uruguay round got into domestic decisionmaking

would be a first way to go forward.

And then finally, the cause of the breakdown of the negotiations

and the implications. To say there was no link between the protesters is perhaps soothing in the short term, but it’s wrong. It

wasn’t the folks in the streets. It’s been years of organizing and

educating in numerous countries. And in fact, a year-long campaign leading toward Seattle, called the new turnaround campaign.

What resulted was, number one, for the first time negotiators

were someone accountable to their own publics and were being

closely observed. And number two, the whole world got to see that

the U.S. public opinion did not necessarily support the agenda the

U.S. had pushed.

So as a conclusion, I would hope one thing we can agree is that

the Seattle experience should have been a wakeup call for the

groups who organized toward it. The resolution on the WTO is not

something we take seriously. We think the WTO should be on a

short leash to make some major changes, but to face fix it or nix

it, either the system will have to bend or it will break. That would

be unfortunate.

Thank you.

[The prepared statement follows:]

Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch

Mr. Chairman and members of the committee, on behalf of Public Citizen and its

members nationwide, thank you for the opportunity to testify about the historic

World Trade Organization (WTO) Ministerial Summit in Seattle held in late 1999.

My name is Lori Wallach. I am the director of Public Citizen’s Global Trade

Watch. Public Citizen is a consumer advocacy group founded in 1971 by Ralph

Nader. Global Trade Watch is a division of Public Citizen founded in 1993 which

focuses on governmental and corporate accountability on globalization, international

commercial and trade issues.

Allow me to start my testimony with a summary of my conclusions:

First—Seattle was not a fluke. The sentiment underlying the WTO protests is

based on the personal experience of people affected by the WTO’s rules and rulings.

The critics of WTO are energized by their knowledge of WTO’s effects, not by ‘‘ignorance,’’ which some WTO-boosters dismissively argue can be educated away. The

majority of protestors were peaceful, informed people who probably include some of

91

your neighbors and who intend to see the major flaws in the current model of corporate economic globalization fixed. These folks realize that what we have now is

not ‘‘free trade.’’ And, they won’t tolerate the continued damage to many of their

most important values and interests of the ‘‘corporate managed trade’’ system we

now have. They know that there is nothing inevitable about the current rules. They

know it took years for those benefitting from this version to develop it and put it

into place via mechanisms like the Uruguay Round Agreements and the WTO.

Second—the diversity and intensity of the protests against WTO in Seattle should

not have been a surprise—certainly not to the US Congress. The fact of the matter

is that international commercial policy in the United States has been at a standstill

for years because consensus on this vital matter has broken down. American consumers rallied with labor and environmental allies to stop the out-dated Fast Track

procedure, CBI NAFTA expansion, and the Multilateral Agreement on Investment.

The status quo trade policy—which now does set environmental, human rights and

labor standards in commercial agreement, but in the form of constraining government action in these areas—is no longer publically acceptable or politically viable.

We need to move forward towards a new policy. Yet instead the same folks who

stopped Fast Track, MAI et al are facing the tedious prospect of having to stop yet

another backwards proposal—PMFN for China—instead of working on how to move

forward.

Third—continued stubbornness by the beneficiaries of the international commercial policy status quo (against working towards a new approach) will be the number

one contributing factor to further implosion of institutions such as WTO. WTO either must bend significantly or it will break.

On Friday, December 3, 1999, labor, environmental, consumer, human rights, religious, and other non-governmental organizations (NGOs) from around the world let

out a collective ‘‘whoop’’ in Seattle, when WTO Director General Michael Moore and

USTR Charlene Barshefsky announced a halt to WTO negotiations intended to

launch a Millennium Round of WTO expansion.

Many of these groups had been working since the early 1990s. First we worked

to shape the Uruguay Round texts. Then, we tried to stop their adoption after having core public interest concerns about safeguarding food safety and the environment not only totally left out, but undermined by the Uruguay Round package. Finally, over the past five years we have monitored the Uruguay Round’s outcomes

and attempted to limit the damage the Uruguay Round Agreements were doing to

our hard-won domestic public interest policies and democratic decision-making systems.

However, as well in that room now also whooping to see the WTO foiled from an

expansion of ‘‘more of the same’’ where the minority of NGOs which had supported

the Uruguay Round and establishment of the WTO. This shift is one that proponents of the status quo dismiss at their peril.

For instance, the international consumer movement to which Public Citizen relates was divided on the Uruguay Round. Some consumer groups were concerned

that the powerful enforcement of the WTO combined with the anti-public interest

provisions tucked into the Uruguay Round’s underlying substantive agreements

could undercut vital consumer interests and safeguards. Other consumer groups

were hopeful that increased competition would lower prices and increase choice for

consumers around the world while promised economic benefits would improve the

standard of living for many poor consumers. Back in 1993, no one could know what

precisely would result.

But after carefully reviewing the WTO’s real life five year record, in the fall of

1999 Consumers International (the international federation of consumer groups

which had supported the Uruguay Round) as well as many of its members organizations, joined a global NGO command for no WTO expansion until an array of problems were ‘‘turned around’’—namely repairs, deletions and replacements of some

WTO terms.

We are often asked how we were able to organize such diverse WTO critics coming

from all over the country at their own expense to protest the expansion of the WTO.

There actually is a simple answer to that inquiry. It was not any NGO, but the

WTO, which provided the greatest organizing push: the WTO’s five year record of

undercutting a diverse array of hard-won public interest accomplishments around

the world is what brought out all of those people to Seattle.

WTO and US officials claim that the impasse in Seattle had nothing to do with

the opposition by citizens and the protests in Seattle’s streets, but was a result of

the irreconcilable differences between developed and developing countries.

On the contrary, the collapse of the Seattle WTO expansion attempt was in no

small part the result of years of work—based on analysis of the WTO’s operation

to date and aimed at the inherent and fundamental flaws of that organization.

92

Over the course of 1999, hundreds of NGOs working on the ‘‘inside,’’ including

Public Citizen and thousands of NGOs around the world, put forth to their governments rigorous demands on topics now included in international commercial negotiations as diverse as food safety and labeling, genetically modified organisms, forest

and animal protection, investment rules, services, and agriculture. We also monitored our country delegations closely.

Tens of thousands of protestors came to the streets when it became clear that all

of our calls for a review and repair of WTO had been rejected in favor of more-ofthe-same.

The protestors on the streets, 99.9% of whom were peaceful and well-informed,

can be credited with revealing to foreign delegation and to the world public via the

media the depth of US public opposition to an international commercial agenda sublimating all values to that of commerce. Given this agenda is pushed by the US government, revealing the lack of broad public support for it here is one of many successes from Seattle. (See Annex below for more on the protests.)

The protests also shortened the time for negotiations to launch WTO expansion.

The shorter time made clearer how central the controversial ‘‘Green Room’’ process

was in making key decisions.

As well, the Clinton Administration, just like governments all over the world,

found itself for the first time in international commercial talks, with its public demanding some level of accountability and watching VERY closely. This scenario

made it impossible to slip into the usual closed room and trade away numerous

countries public interest for narrow special interests.

The events in Seattle rocked the corporate world. The Financial Times editorial

page bemoaned the ‘‘Disaster in Seattle,’’ the New York Times the ‘‘Shipwreck in

Seattle,’’ and The Economist labeled the talks ‘‘A Global Disaster.’’ And, from reports

we have had from Davos, the CEOs collected there either were stunned about Seattle and/or still do not understand what happened or it means.

First—Seattle was not a fluke. The sentiment it represented is based on the personal experience of people affected by the WTO’s rules and rulings. The critics of

WTO are energized by their knowledge of WTO’s effects, not by ‘‘ignorance’’ as

claimed by some WTO-boosters. Indeed, those who follow Tom Friedman’s ill-informed calls to ignore the protest as a fluke and move on with business as usual

are being set up for a major fall. Seattle was no fluke; it is the new reality.

The majority of protestors were peaceful, informed people who probably include

some of your neighbors and who intend to see the major flaws in the current model

of corporate economic globalization fixed. These folks realize that what we have now

is not ‘‘free trade.’’ They are not willing to tolerate continued damage to many of

their most important values and interests of the ‘‘corporate managed trade’’ system

delivered by mechanisms like the Uruguay Round Agreements and WTO.

There has been enormous interest in how Public Citizen raised ‘‘all of the money’’

required to organize the assorted NGO conferences in Seattle, open offices, and provide transportation and housing to NGO participants from around the world. The

nature of that inquiry exactly pinpoints the depth of mis-understanding about what

the opposition was and is.

There is no interested source of Public Citizen’s funding because frankly, there

was not much money that went into Seattle organizing. The Seattle protestors were

‘‘public citizens’’ meaning not our organization’s membership, but people with ‘‘day

jobs’’ who gave up their free time to work on Seattle activities because they are interested and involved in their governance. With the exception of a few NGO representatives from Africa and Latin America, everyone paid their own way and the

latter were assisted by several church organization and other internationally-minded NGO in the U.S. and Europe.

Unlike the corporate host committee for Seattle, almost all of our work was done

by volunteers and supplies and services were donated bit-by-bit by people who care

about what globalization means for their lives.

We did find accommodations for almost 2500 people, but what is often not noted

is that one paid staffer and a team of volunteers found local families to put up over

2000 of these folks in homes. The rest paid for beds we set aside early on at the

local youth hostel and a few cheap hotels. We did arrange a transportation system,

but it was a pool of hundreds of volunteers who signed up for certain times and days

to volunteer to drive around people and supplies in their car, vans and trucks.

With volunteer help from local union carpenters, we built a temporary office space

in an empty building in downtown Seattle that is slated for demolition. That office

was given ancient computers donated by a Seattle homeless advocacy group which

had gotten computer upgrades. The phones were an assortment of old phones from

Public Citizen and a local environmental group. At the peak, there were five paid

staff—who coordinated literally over 1000 Seattle-area volunteers.

93

Second—the diversity and intensity of the protests against WTO in Seattle should

not have been a surprise—certainly not to the US Congress. International commercial policy in the United States has been at a standstill for years because consensus

on this vital matter has broken down. American consumers rallied with labor and

environmental allies to stop the undemocratic Fast Track procedure, CBI NAFTA

expansion, and the Multilateral Agreement on Investment.

The status quo trade policy—which now does set environmental, human rights

and labor standards in commercial agreement, but in the form of limiting government action on these vital public interest safeguards—is no longer publically acceptable or politically viable. We need to move forward towards new policies.

Yet, instead the same folks who stopped Fast Track, MAI and the Seattle WTO

expansion launch are facing the tedious prospect having to stop yet another backwards proposal—PMFN for China—instead of working on how to move forward.

Third—continued stubbornness by the limited beneficiaries of the status quo on

international commercial policy (against working towards new approachs) will be

the major contributing factor to further implosion of institutions such as WTO. WTO

either must bend significantly or it will break.

The message from US voters, NGOs and the international consumer movement

is one and the same. We must radically restructure the way in which our governments undertake international commercial policy—and we are not just talking about

transparency, but about substance.

While the specifics of such substantive changes are beyond the scope of this testimony, the basic notion is that the WTO must be pruned back. As regards a variety

of issue areas, the 18 agreements the WTO was empowered to enforce after the Uruguay Round simply go beyond what is appropriate to be decided by ‘‘international

commercial’’ regulations. The Uruguay Round saw a transformation from a focus on

tariffs and quotas and objective principles of competition (eg national treatment)

into an array of rules setting regulatory and social policy.

With the Uruguay Round, so-called ‘‘trade’’ rules moved beyond the objective and

into imposing value decisions about the level of health or safety protection a country

will be permitted to provide its residents if it desires to remain within trade rules

(and avoid sanctions, etc.) Thus, the European Union deciding to ban all meat with

residues of artificial growth hormones—taking a Precautionary Principle approach

to health regulation—was ruled to violate WTO rules even though it treated domestic and foreign cattle the same. That level of protection (zero risk) was not allowed.

Similarly, the notion of imposing 20 year monopoly patents on seeds and all medicines is a value decision to subjugate health and food security under commercial priorities. It is these sorts of issues, in which WTO rules constrain today’s developing

countries from using the same strategies for development used by the US when it

was a developing country relative to much of Europe, that fuels opposition to WTO

in the developing world.

The over-reaching into such subjective policy decisions, as implemented on millions of people over the past five years, is what is at the root of growing WTO opposition worldwide.

Thus, ironically it has been in achieving the goal of the Uruguay Round’s designers—to quote its former head to create ‘‘the constitution for a single global economy’’—that the WTO will be brought down absent major change.

Are we against trade? Do we oppose any and all globalization? Obviously not.

However, what we are for is for is rules for a global economy in which consumers,

farmers, workers, environmentalist and other citizens who will live with the results

are able to shape the design to meet the public interest.

ANNEX: SEATTLE PROTESTORS—‘‘WHO ARE THOSE GUYS...’’ AND WHAT REALLY

HAPPENED

Given the television network’s obsession with replaying the few violent scenes

that transpired in Seattle and the short-sighted strategy of WTO booster in trying

to characterize the Seattle protestors as loopy and violent, I wanted to use the

record of this hearing to set that record straight.

Thousands of NGO representatives attended conferences, workshops and meetings

at venues inside and outside the official WTO meeting buildings. Each day of the

Ministerial also had an NGO theme and a full day of educational programming.

(Days included ‘‘health and environment,’’ ‘‘labor and livelihoods,’’ etc.) Each day

had a major protect or march which was conducted with permits and on three of

the four days drew crowds of 15,000 (agriculture and food day at a harbor side park)

to 40,000 (the labor day rally at Arena Stadium.) All of these activities were overshadowed in media coverage, however, by what started as peaceful civil disobedience

and ended with police sousing crowds with tear gas and rubber bullets.

94

Even though Public Citizen did not organize the civil disobedience protests, I want

to set the record straight as an observer and then later having debriefed scores of

those involved:

What occurred on Tuesday November 30 was that before sunrise, several west

coast activist groups, who had trained hundreds of people in non-violent, civil disobedience techniques, organized protestors to sit in at the street intersections leading to the Trade and Convention Center. The Seattle Student/Worker Walkout Committee organized a mass walkout of students and employees from local schools and

businesses who were part of the sit down protest. Activists linked arm-in-arm and

sometimes chained themselves together with the announced goal of shutting down

the start of the WTO negotiations. From the perspective of these groups and activists, the conferences, rallies and marches organized by groups like Public Citizen

and the AFL–CIO were only one aspect of effective protest: these groups put their

focus on peaceful direct action, such as sit ins.

These actions, premised on the non-violent civil disobedience techniques of Martin

Luther King, Jr. and Ghandi, had been planned over months. Indeed, the groups

had used publicly accessible webcites to describe their plans and invite people to obtain non-violent civil disobedience training.

Whatsmore, the sit down protest organizers had met with the Seattle police both

to make clear their commitment to non-violence and to prepare the police for the

massive civil disobedience arrests that would be necessary to clear the streets on

November 30. Indeed, through a series of meeting, the police and the sit-down protest organizers made an agreement that arrests would not begin until sunrise so the

process could be reported by the news media. Capping these meetings, there was

a joint news conference the week before the Ministerial which included the Seattle

mayor, representatives of groups like Public Citizen and the AFL–CIO which held

march and protest permits, and representatives of the direct action groups planning

the sit in.

For reasons which remain unclear, the Seattle police never began the agreed process of arresting the civil disobedience protesters and bussing them away from Seattle’s downtown. Most of the sit down protestors were not prepared to remain at

their positions for much longer than Tuesday morning, thus the media images of

hungry, shivering young protestors.

Then, mid-morning Tuesday, several dozen young people dressed in identical

black garb and wearing face masks appeared and started marching in formation

down one of Seattle’s main streets, near the Convention Center. Despite their highly-regimented paramilitary appearance, they identified themselves as anarchists.

They had popped up, disrupted a peaceful protest and then melted into the crowd

the day at a peaceful protest in front of a McDonalds which had featured a French

farmer handing out French cheese hit with high tariffs under current WTO retaliation on a dispute. Tuesday midmorning, once again, these few appeared and began

smashing the windows of downtown stores, including Old Navy, Starbucks,

Niketown, and FAO Schwarz.

The peaceful protesters conducting the sit-in shouted ‘‘Shame!’’ and ‘‘Non-violent

protest!’’ at the youths. Some grabbed the window-breakers, attempting to halt the

property damage. Hundreds of Seattle police officers dressed in full riot gear stood

by and watched, actively refusing to arrest the masked window-smashers even when

peaceful protesters asked for assistance. Indeed, in one instance, a person restraining a black-masked vandal armed with a brick and poised before a store window

was told by police to release the vandal or risk arrest for assault. The police then

stood by as the released vandal smashed a row of store windows in front of them.

Meanwhile, at noon, tens of thousands of labor unionists, family farm, consumer,

religious, and environmental activists rallied at Memorial Stadium to listen to AFL–

CIO president John Sweeney, Teamsters president James Hoffa, Jr., Steelworkers

president George Becker, and other U.S. and international labor, environmental,

and other NGO leaders speak on the WTO’s impacts on people around the globe.

The massive labor rally, sponsored by the national, state, and local AFL–CIO and

many international unions, then marched toward downtown Seattle. The plan was

for the march to proceed to the Convention Center and then head back to the stadium, where hundreds of buses awaited the labor participants.

By mid-afternoon, over 40,000 students, activists, and labor representatives

thronged into downtown Seattle as part of the march from Memorial Stadium. The

scene that greeted the labor marchers was surreal. Riot police dressed in Robocop

costumes (even the police horses had plastic eyeguards against the tear gas) had

begun without warning to attack random circles of sit down protesters with an

array of weaponry including tear gas, pepper spray, concussion grenades, and rubber bullets.

95

Instead of asking the crowds to disperse, the police randomly charged protesters,

beating them with nightsticks, shocking them with stun-guns, and continuously firing rounds of tear gas and more lethal CS gas.

Meanwhile, police shot into the crowds at close range with rubber bullets (not

aimed at feet and legs as protocols require) and set off concussion grenades, the goal

of which is to fell rioters by giving them concussions.

Given many protesters were literally chained or tied together and had been given

no notice to disperse, the impact of this weaponry was vicious. Each sit-down group

had a person designated as a ‘‘medic’’ equipped with water and vinegar spray for

eyes in case tear gas was used. However, police targeted those with medic IDs and

also the protesters (many volunteer lawyers and law students) identified with ‘‘legal

observer’’ IDs for beatings and arrest. All this time the police allowed the violent

marauders to continue to spray-paint graffiti and smash store and car windows.

As many of the labor marchers came onto these repeated scenes of police violence,

they intervened to protect the sit-down protesters. The result was groups of beefy

Teamsters and Longshoremen trying to protect a diverse array of protesters—including those in turtle costumes and others with a rainbow of hair colors—at numerous intersections from platoons of police marching in military formation and

slapping their nightsticks in rhythm on their metallic shin guards.

This ugliness could have been entirely avoided had the police arrested the few

vandals early-on and implemented their agreed plan for civil disobedience arrests

of the sit down protestors. Instead skirmishes between protesters and the police continued well into the night, with the police firing tear gas indiscriminately into the

crowds and pushing them into Seattle’s Capitol Hill residential section.

Ironically, by dousing a residential area with tear gas, the police added many

more Seattle residents to the following days’ protests. Local television played over

and over an interview of a man in his pajamas holding his small daughter with both

their faces red and tear-stained from being gassed in their home.

The next day, the security zone was also turned into a no-protest zone and anyone

caught within it without WTO ID (only available by applying months before to a

WTO office in Geneva) was arrested. This resulted in over 500 arrests within two

days. Indeed, numerous people with WTO credential were also arrested, as were

several bishops of a major Protestant denomination, among others. In addition to

the frequent beating and other mistreatment of these arrested, the ACLU filed a

lawsuit in December 1999 which also challenges the police’s practice of holding

arrestees for days without charging or processing them.

Chairman CRANE. Thank you, Ms. Wallach.

Mr. Kittredge.

STATEMENT OF FRANK D. KITTREDGE, PRESIDENT, NATIONAL

FOREIGN COUNCIL, INC.

Mr. KITTREDGE. Thank you, Mr. Chairman.

I’m Frank Kittredge, President of the National Foreign Trade

Council. My remarks today will focus on three issues: the outcome

of the Ministerial meeting, the United States and Europe’s fundamental interest in the multilateral trading system, and the upcoming 5-year report on the WTO.

First, the Seattle Ministerial and the future outlook for the

WTO. The NFTC was, of course, disappointed that trade ministers

failed to launch a new WTO round last December. It was particularly dismaying, considering the progress that was achieved in the

draft ministerial declaration. Progress was made on key issues including services, agriculture, e-commerce and developing country

concerns such as capacity building.

We were also on the threshold of a step forward in improving

WTO transparency and eliminating environmentally harmful practices, such as fishery subsidies. Everyone lost when the talks were

suspended.

96

There were many reasons for the failure to launch new trade

talks. They included ministers’ intransigence on a few highly

charged issues, inadequate preparation, difficulties in managing a

ministerial process that included more active players, and insufficient political leadership. As an aside, the protest activity was not

the reason for the lack of final agreement, even though it allowed

those who wanted to stop the advancement of international trade

to claim victory.

The NSTC views the way forward as a two-step process. First,

we should move ahead as quickly as possible on the mandated,

built-in agenda on services and agriculture, as well as address the

immediate issue of expiring provisions. On this point, I’d like to

note the NSTC’s concern about the growing list of developing country requests for extending implementation deadlines, some by as

much as 10 years, for key agreements, such as customs valuation,

trims and trips.

Second, there must be a willingness on everyone’s part to be less

rigid. The U.S., for example, may have to recognize that it cannot

insist that issues of chief concern to a number of countries, such

as antidumping, are completely off the table. Moreover, until developing countries are convinced that a working party on trade and

labor is not simply the developed countries’ excuse for new forms

of trade protection, we are unlikely to make much progress.

Likewise, Europe and Japan have to realize that substantial agricultural trade liberalization must be dealt with. Launching a negotiation requires realism and flexibility on all sides.

Second, U.S.-European relations. Perhaps the most important

step required to get the trade talks back on track is for the U.S.

and the EU to get back to their basic shared interest in maintaining a vibrant, multilateral trading system. All past trade rounds

have been made possible by U.S.-EU agreement on the fundamental need for trade liberalization. This has not prevented the

two from having trade disputes, surely, but their mutual support

for the broader trading system contained these disputes within

manageable limits.

As a case in point, and has been talked about quite a bit here

today, we’re very concerned about the EU’s current challenge to the

FSC. The EU’s action breaks a 1981 agreement that provides for

equivalent treatment of exports under the European territorial and

the U.S. worldwide systems of taxation. If unchecked, this case

could lead to a cycle of retaliation and counter-cases, and could ultimately undermine basic U.S. support for the WTO. The NFTC

urges the administration and the EU to resolve this dispute expeditiously in a manner that preserves the competitive balance created

by the FSC.

Third, the WTO and a 5-year report. The NFTC looks forward to

the administration’s March 1 report on the WTO as a prime opportunity to advance the WTO’s positive record. On that point, I’d like

to request that the U.S. Alliance for Trade Expansion’s guide to

whose trade organization be submitted for the record. The Alliance

released this guide to identify specific misrepresentations by WTO

opponents.

It is clear that the WTO and the GATT have accomplished a remarkable record. Trade liberalization has helped lift 3 billion peoVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00100 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
97

ple out of poverty, fostered global economic stability and prosperity,

and spread democratic values, such as the rule of law, peaceable

dispute settlement, and nondiscrimination. As far as our own economy is concerned, we’re experiencing the longest economic expansion in history. America’s openness to trade, as fostered by the

WTO, is a primary reason why we are so strong economically. Advancing trade liberalization is essential to sustaining America’s

leading edge, job-creating economy.

The NFTC recognizes that WTO is not perfect. We agree that

there should be greater transparency. However, we do not agree

that the WTO is not accountable. It is a government-to-government

organization, driven by consensus among nation states, which are

accountable to their citizens. Providing a seat at the table to business and other special interest groups would make the WTO less,

not more accountable.

Finally, improving worker standards and the environment are

important objectives. And rule-based trade expansion under the

WTO has been a positive force for change in these areas. The single

most important way to improve environmental and labor standards

is to improve economic conditions, a main result of trade expansion.

Moreover, while there is a need to better understand the ways

in which these issues interrelate, the WTO is not the sole solution

to every multilateral problem. It’s time to devote efforts to more effective approaches.

Mr. Chairman, I’ll stop there. Thank you very much.

[The prepared statement follows:]

Statement of Frank D. Kittredge, President, National Foreign Trade

Council

Mr. Chairman and distinguished members of the Subcommittee, I am Frank D.

Kittredge, President of the National Foreign Trade Council (NFTC). The NFTC is

a broad-based organization of more than 550 U.S. companies having substantial

international operations and interests.

I appreciate the opportunity to testify today on the implications of the recent

WTO ministerial meeting in Seattle. The vital importance of the WTO to the U.S.

national interest and the upcoming five-year report on the WTO makes this a timely

and significant hearing. My remarks will focus on three basic issues: 1) the ministerial meeting and outlook on future WTO trade talks; 2) the United States and Europe’s fundamental shared interest in strengthening the multilateral trading system; and 3) the Administration’s upcoming five-year report on the WTO.

The Seattle Ministerial and Outlook on Future WTO Trade Talks

The NFTC and its member companies were very disappointed that trade ministers failed to launch a new round of multilateral trade negotiations at the WTO

ministerial meeting in Seattle last December. It is particularly dismaying when examining the significant progress that was achieved in the draft ministerial declaration. While we recognize the draft declaration was a negotiating document and was

not agreed upon by WTO members, it nonetheless provides an indication of what

might have been achieved had the ministerial succeeded in launching negotiations.

The draft declaration shows that progress was made on key issues, including services, agriculture, e-commerce, government procurement transparency, and developing country concerns, such as capacity building. The NFTC believes we were also

on the threshold of taking a step forward on issues of concern to both the business

and NGO community, such as improving transparency of the WTO and eliminating

environmentally-harmful fishery subsidies. Everyone lost when the talks were suspended.

There were many reasons for the failure to launch new trade talks. They include

ministers’ intransigence on a few highly-charged issues, inadequate preparation before the ministerial, institutional difficulties in managing a ministerial process that

included more active players from developing countries, and insufficient political

98

leadership among major trading partners. As an aside, the protest activity was not

the reason for the lack of final agreement, even though it allowed those who want

to stop the advancement of international trade at all costs to claim victory.

The NFTC views the way forward as a two-step process. First, we should move

ahead as quickly as possible on the mandated ‘‘built-in’’ agenda on services and agriculture, as well as address the immediate issue of expiring provisions of interest to

both developed and developing countries. On this point, I would like to note that

many NFTC member companies are alarmed about the growing list of developing

country requests for extending implementation deadlines—some by as much as ten

years—for key agreements, such as Customs Valuation, TRIMS and TRIPS. Any extensions should be as short as possible to avoid harming U.S. exports.

Agreement also should be reached on other ‘‘confidence building measures,’’ along

the lines of Director General Moore’s recent suggestions. For example, agreement

on improved integrated technical cooperation for developing countries would be

helpful to restoring positive momentum to the WTO negotiating process. Finally, action on issues that were ripe for agreement in Seattle, such as e-commerce, government procurement transparency, and the transparency of WTO procedures should

be promptly addressed.

Second, we must work towards resolving the underlying issues that prevented a

successful launching of the trade talks. This will require, among other factors, a

willingness on everyone’s part to be less rigid in their positions. The United States,

for example, may have to recognize that it cannot insist that issues of chief concern

to a number of countries, such as antidumping, are completely off the table. Moreover, until developing countries are convinced that a working party on trade and

labor is not simply a developed country’s excuse for new forms of trade protection,

we are unlikely to make any progress on this issue. Likewise, Europe and Japan

have to realize that substantial agriculture trade liberalization must be dealt with

effectively. Launching a negotiation requires realism and flexibility on all sides.

U.S.-European Relations

Perhaps the most important step required to get the trade talks back on track

is for the United States and the European Union to get back to fundamental shared

interests in maintaining a vibrant multilateral trading system and in raising living

standards worldwide through trade expansion. In that regard, the NFTC is disturbed by what appears to be an increasing trend of trade-related political oneupmanship between the United States and Europe for narrow domestic reasons, at

the expense of much more important global issues.

All past rounds of trade negotiations through the Uruguay Round have been made

possible by U.S.-EU agreement on the fundamental need for trade liberalization.

This has not prevented the two from having heated trade disputes, but their mutual

support for the broader trading system contained these disputes within manageable

limits.

The NFTC is very concerned that the EU’s recent use of the WTO’s dispute settlement system upsets this delicate balance, particularly with respect to the EU’s challenge to the Foreign Sales Corporation (FSC) tax law. The EU’s action breaks a

1981 agreement that provides for equivalent treatment of trade under the European

territorial and U.S. worldwide systems of taxation. This is a matter of maintaining

U.S. jobs and trade and avoiding a deterioration in the trade balance. If unchecked,

this case could lead to a cycle of retaliation and countercases, and could ultimately

undermine basic U.S. support for the WTO. The NFTC urges the Administration to

resolve this dispute expeditiously in a manner that preserves the competitive balance created by the FSC.

WTO Benefits, Facts and Five-Year Report

The NFTC looks forward to the March 1 report by the Administration on the

WTO’s five-year record. It is a critical opportunity to explain the benefits and positive record of the WTO. On that point, I would like to request that the U.S. Alliance

for Trade Expansion’s guide to ‘‘Whose Trade Organization?’’ be inserted for the

record. The Alliance, which is a coalition of American farmers, consumers, businesses, and workers formed to increase public awareness of the benefits of rulesbased trade expansion, released this guide to identify specific misstatements, misrepresentations and factual errors that have been propagated by WTO opponents.

When the facts are known, it becomes clear that the WTO and its predecessor the

GATT have accomplished a remarkable record of eliminating trade barriers, raising

living standards worldwide, establishing basic rules of fairness in the conduct of

trade, and preventing catastrophic trade wars. Trade liberalization under the WTO

and GATT has lifted three billion people out of poverty, fostered global economic

stability and prosperity, and spread democratic values such as the rule of law,

99

peaceable dispute settlement, and non-discrimination. Furthermore, it has helped

improve the environment and workers lives, and it fully protects the rights of nations to set stringent standards on human health and food safety.

As President Clinton stated recently, ‘‘open markets and rules-based trade are the

best engine we know of to lift living standards, reduce environmental destruction

and build shared prosperity.’’ Trade and the institutions that foster it have nothing

to be defensive about. As far as our own economy is concerned, we are experiencing

the longest economic expansion in history. America’s openness to trade and our nation’s ability to trade with other countries as fostered by the WTO is a primary reason why we are so strong economically today. Advancing multilateral trade liberalization through the WTO is essential to sustaining America’s leading-edge, job-creating economy.

The NFTC recognizes that the WTO is not perfect. We agree with other NGOs

that there should be greater transparency of the organization. However, we do not

agree that the WTO is not ‘‘accountable.’’ It is a government-to-government organization driven by consensus among democratically-elected nation states, which are

accountable to their citizens. Providing a ‘‘seat at the table’’ to business and other

special interest groups would make the WTO less, not more, accountable.

We also agree with other NGOs that improving worker standards and the environment are important objectives. However, we believe that rules-based trade expansion under the WTO has been a positive force of change in these areas, and we

should be focusing on these win-win solutions. The single most important way to

improve environmental and labor standards is to improve economic conditions. Increased trade has proven to be perhaps the single most important catalyst to economic development around the world. Moreover, while there is a need to better understand the ways in which these issues interrelate, the WTO is not the sole solution to every multilateral problem. The ILO, for example, is making greater progress

in addressing worker conditions and child labor. It is time to devote efforts to more

effective multilateral approaches in addressing broader problems instead of simply

blaming the WTO for them.

The NFTC testified last year that it is prepared to sit down with members of this

Committee, the Administration, and others to engage in a meaningful dialogue that

will move the process forward on these issues. We remain willing to engage in such

a dialogue.

Before closing, I would like to add one more top priority WTO issue—China’s accession to the WTO. The NFTC strongly believes bringing China into the WTO is

in our best national economic interest and will lead to a more open Chinese economy

and society. We urge Congress to approve permanent normal trade relations (PNTR)

status for China this year so that the United States will be able to benefit from the

groundbreaking market-opening commitments China has agreed to make as part of

its terms of accession.

Mr. Chairman, thank you for the opportunity to testify today, and we look forward to working with you to achieve a bipartisan consensus on a forward looking

trade agenda.

[An attachment is being retained in the Committee files.]

Chairman CRANE. Thank you very much, Mr. Kittredge.

Ms. Wallach, I read your testimony, and the agreement that was

negotiated between quiet, peaceful protesters and the Seattle police

force occurred how far in advance of the beginnings of the WTO

Ministerial meeting?

Ms. WALLACH. I think that the actual sort of sign-off with the sitdown protesters talked to the police about their not being violent

in exchange for the police not arresting anyone until the sun came

up and the cameras could roll was about 2 weeks out. And the

news conference——

Chairman CRANE. Wait, wait, 2 weeks before the conference?

Ms. WALLACH. Two weeks before the Ministerial. And I believe

that the news conference announcing this, that the sit-down strikers, and then the groups like ours or the AFL, who weren’t doing

100

the direct action but had permits for rallies and marches, all had

together was the Wednesday before the Tuesday of the Ministerial.

Chairman CRANE. Mr. Trumka, is that your understanding, too?

Mr. TRUMKA. I’m not familiar with the varied details of that. I

know that we had permits and things that we had talked with, the

people out there from the marches, AFL–CIO’s point of view, for

literally weeks in advance. We had worked with the county people,

the town police, with ourselves for the march and everything else.

But I don’t know about the other people.

Chairman CRANE. But this was with the understanding that the

people protesting would be arrested and peacefully charges would

be filed and that would be settled at a later time. But this was all

resolved in advance on the part of the overwhelming majority of

the people who were protesting there?

Ms. WALLACH. Yes, sir.

Chairman CRANE. And it was the people who came in that you

never knew who had the masks and did the violence to the buildings and the robberies and so forth?

Ms. WALLACH. It certainly wouldn’t have been in the interest of

those trying to have the focus beyond a critique of the WTO, to

shift the focus onto the bashing of windows. And to that end, as

I mentioned in my testimony, when some of our marshals, our folks

who were trying to keep order, tried to stop the window breakers,

like grabbing people’s arms, they were told by the Seattle police

that if they did not let them go, they would arrest them for assault.

Chairman CRANE. Do you know if the administration knew about

this before the President’s arrival?

Ms. WALLACH. Which this?

Chairman CRANE. About the agreement, the silent protesters, sitting and violating the law and getting arrested by the police after

the sun came up when the media could cover it?

Ms. WALLACH. I don’t know.

Chairman CRANE. Do you know whether the administration

knew about these sidebar agreements, Mr. Trumka?

Mr. TRUMKA. I don’t know, Mr. Chairman.

Chairman CRANE. Do any of the rest of you know anything about

this? Because this was my first understanding of this, that these

agreements had been reached.

Mr. KITTREDGE. Well, excuse me, I was there, Mr. Chairman, but

I wasn’t aware of other preagreements. It was clear to see the

demonstraters and the denial of access that they produced to a lot

of the buildings. But there was—I don’t know about the agreement.

Chairman CRANE. Well, I find it puzzling that when there is a

potential security question involved, and the President is making

a personal appearance, that the administration was not involved in

backing up the local police force. I mean at the very outset, in anticipation of anything going wrong.

Well, we will try and explore that one. That’s very intriguing,

though. I had no idea about any of this. Do you have any further

comment?

Ms. WALLACH. I know there are news clips from the news conference with the Seattle mayor, the sit-down folks and the marchers. I’m not sure of the exact dates, but I would suspect it was the

Thursday before the week of.

101

Chairman CRANE. And that was public information a week before

the Ministerial conference started? All right, very interesting.

Mr. Hufbauer, did the President’s comments increase or decrease

chances to get countries to proceed further on labor issues?

Mr. HUFBAUER. They decreased chances. They confirmed the

fears, in the minds of many developing countries, that it was all

a smoke screen for protection. And so it hardened attitudes. But as

Dale Hathaway and others have already said, attitudes were already pretty hard by the time we got to that point. However, President Zedillo’s remarks in Davos just a few days ago reflected exactly this hardening.

Chairman CRANE. And Mr. Hathaway, do you believe the U.S.

private sector advisers were adequately consulted during the Ministerial conference?

Mr. HATHAWAY. Yes, I think at least in agriculture, we were kept

informed as to what was going on, and asked for our reaction to

proposed changes. I can’t complain about consultation in terms of

the agricultural negotiations.

Chairman CRANE. And Mr. Niles, how do you know that the keys

to improving labor standards is economic development and not

trade sanctions?

Mr. NILES. Well, I think it’s been demonstrated, Mr. Chairman,

that where you have economic development, labor standards go up,

as does environmental protection. And sanctions, lowering the

chance of economic development, won’t work to that end.

Chairman CRANE. And now I yield to our distinguished Minority

Leader, Mr. Levin.

Mr. LEVIN. Well, it’s kind of late to carry on this debate, but let

me say a few things. I was at Davos and heard reaction to the

President’s speech where he laid it on the line, I thought clearly.

Some people wanted to listen only to the first half of the speech,

and others only wanted to listen to the other half. But I was at a

get-together after the speech, and there were people there from developing economies as well as from the American business sector.

And it was interesting, because I heard many of them say, including some to me directly, that they liked the President’s speech.

And I find it kind of mystifying that people want to throw in the

towel on tough issues so quickly. We didn’t throw the towel in on

intellectual property, though it was fought over for a long time, to

get it into the trading system. We just listened to the first people

who said almost in unison, no, we’d be nowhere with it today.

And Mr. Niles, Ambassador Niles, you and I have discussed this

subject. I know you’re the representative to the ILO and I respect

it. But to indicate that the answer is just publicity, the ILO has

no enforcement powers. And just look at the record. Look at the

record in countries that have signed onto the ILO which are not

abiding by the principles they said they were adhering to.

You and I have discussed this before. But I just don’t think it

will fly to say just leave it alone. And Mr. Kittredge——

Mr. NILES. Might I respond?

Mr. LEVIN. Yes, go ahead.

Mr. NILES. The point I made about publicity is not the only thing

that the ILO can do. The ILO does have programs designed to asVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00105 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
102

sist member countries, and the ILO can take sanctions against

member countries, not trade sanctions.

But of course, the WTO can’t take trade sanctions, either. And

anybody who thinks that we’re going to be able to amend Article

20 of the WTO treaty to include enforcement of core labor standards is kidding himself. You’ve got to have an absolute consensus

of the WTO membership, now 135 strong, to do that.

So when I hear, when I’m told that the ILO has no enforcement

capability and, therefore, we need to go elsewhere, I ask, where do

you find the enforcement capability? Certainly not in the WTO. The

ILO has a new Director General, the ILO is an organization which

has come into a higher degree of prominence because of the focus

on labor issues, greater attention to this problem. I think we ought

to give it a chance.

As far as countries that don’t fulfill ILO conventions, the People’s

Republic of China is one that gets a lot of attention in this respect.

China has not signed the core labor conventions, or have not ratified them. But they have agreed to the 1998 Declaration. So it

gives us a way to work with China on these issues.

Mr. LEVIN. OK. You know in our bilateral agreements, in our

trade agreements, like GSP, we have a means of enforcing core

labor standards.

Mr. NILES. We do.

Mr. LEVIN. It isn’t as if it’s novel within the trade agreement.

Mr. NILES. That’s a unilateral U.S. act.

Mr. LEVIN. All right, OK, good. No one’s talking about an overnight transition. But also we’re not talking about a millennial tradition or a centuries tradition which it would I think likely be true

within the ILO. That’s the history of it.

In the sense that the ILO was formed way back to enforce core

labor standards. That’s a major reason it was founded decades and

decades ago. And let me just say, Mr. Kittredge, I just urge that,

as I’ve urged the business community to take another look, because

when you say, moreover, until developing countries are convinced

that a working party, a working group on trade and labor is not

simply a developed country’s excuse for new forms of trade protection, we are unlikely to make any progress on this issue.

The business community can help convince developing countries

that that isn’t what we’re after. In a sense the concept is very clear

and kind of basic. And that is, if countries are going to compete,

and we are competing increasingly with evolving economies, that

we’re not talking about everybody being paid the same. What we’re

talking about is that the workers within those countries have the

ability to gather together and fight for a fair part of the growth of

that country.

That’s all we’re talking about, or that’s the main thing we’re

talking about. And to the credit of a few businesspeople, they

signed onto the notion that there should be a working group. This

is not a veiled effort at protectionism.

Mr. KITTREDGE. Well, I think the point is that it may be perceived as that. And I think what you’re talking about is one of the

real issues with trade in many aspects, is trade education. And it

would seem to me, and I would readily admit I’m not that close to

the ILO, but it would seem to me that if the ILO doesn’t necVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00106 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
103

essarily have the enforcement mechanisms, it sure ought to be able

to do a better job at educating developing countries on what really

are the aims and the goals.

Mr. HUFBAUER. Mr. Congressman, you’ve been very generous in

allowing my colleagues to respond, and I would like a little bit of

time.

Chairman CRANE. Go ahead.

Mr. HUFBAUER. First of all, the President did a great deal of repair work in Davos, President Clinton. The fact that President

Zedillo delivered his strong speech reflected what happened in Seattle. If President Clinton had said in Seattle what he said in

Davos, I think the atmosphere would be much better.

But I want to come right to the nub, because I think the gist of

your comments was that I was throwing in the towel. I’m absolutely not throwing in the towel. I’ve tried to give a constructive

suggestion in a very short period of time. I was given 5 minutes

to try to give a constructive labeling suggestion for dealing with the

proper expression of values.

If I have a value that says I want Chinese goods to respect core

labor standards, I want a label that tells me that the goods respected core labor standards, whether they were made in China or

West Virginia. And I’ve tried to outline that. Time is limited, but

I’m not throwing in the towel. I’m trying to take it out of a place

where it’s run into a dead end, which is the WTO. Thank you.

Mr. LEVIN. OK, I’m glad you had the time. I was just worried

about that red light. And we’ll be talking further about that. I

didn’t mean to say you were throwing in the towel.

I just want to suggest dead ends. There have been dead ends in

the WTO before on a lot of issues, and we haven’t given up. That’s

been true for decades. And it seems to me that it’s unwise for us

to consider this just a dead end and go on to something else. We

need to think of other ideas, but continue working on this one.

Mr. Trumka, and then I’ll be finished.

Mr. TRUMKA. I would like to comment on just two subjects that

have been broached here. One, I’ve heard comments made by Mr.

Niles that the developing countries do not support and will not support core labor standards being inserted into trade agreements.

Well, I want to tell you something. We were outside and we

marched, there were workers from all of those different countries.

And they particularly did want labor rights and labor standards

raised on their behalf.

You very artfully, I think, capsulized what we’re looking for in

those agreements and why they should be in trade agreements.

And the notion that we should use the ILO as a substitute for

trade agreements, I think the world would look at us as just being

slightly hypocritical.

If you want to be serious, if you want us to believe that they’re

serious about using the ILO, the first step ought to be for the

United States to adopt all 178 resolutions of the ILO. Except for

a few maritime resolutions, we’ve not adopted any of the core labor

standards ourself. How would we enforce something in the world

that we hadn’t even endorsed.

So for that to even be considered, and I’m not saying that it

would be, but the initial step toward seriousness would be for the

104

United States to adopt all those. The dialog has to take off. We

have to approach and make this world globalization work for everybody. The World Bank itself says income inequality is growing. And

if the workers in Colombia and China and Poland and the United

States, quite frankly, can’t enjoy the benefits of that globalization,

there will be continued resistance toward it in those countries as

well as here.

The time is now, and I think Seattle was just the spark that let

everybody know that business as usual won’t make it in the future.

Mr. LEVIN. Thank you.

Chairman CRANE. Mr. Becerra.

Mr. BECERRA. Thank you, Mr. Chairman. And thank you to all

the witnesses for their indulgence and their patience. It’s been a

long hearing. And I won’t try to prolong it much longer, either. Ambassador Niles, let me ask you, on the question of economic development and how that can lead us toward better working conditions,

I don’t think anyone disagrees that the more opportunities for better jobs, the better our working conditions become.

The question I would ask is how long do you wait for those

economies and the prosperity to trickle down to the point where

those who are making the lowest wages under the worst working

conditions finally see the fruits of that economic prosperity?

Mr. NILES. I don’t think there’s a schedule for that. How long did

it take in the United States? It took a while.

Mr. BECERRA. It took decades.

Mr. NILES. Yes. And it could be that in some of the developing

countries, it would take equally long, if not longer periods. But if

you look at what has happened in some of the economies where

we’ve had particularly good economic development in the last decade, despite the economic crisis of 1997–1998, some of the countries

of Asia such as Taiwan and Korea. Look at how poor Korea and

Taiwan were, say, in 1960 and how they are today, now, that’s 30

years, 40 years later. The change is absolutely extraordinary. Taiwan in 1960 was probably about where China is today.

So under certain conditions, under the right conditions, this kind

of development can take place during a relatively brief period.

Mr. BECERRA. And I think everything is relative, relatively brief

meaning 30 years can be three decades for someone who’s suffering

under some pretty bad working conditions. I am reminded, as a

Catholic, of the saying, the poor shall inherit the Earth. I think

they want to get it before they die.

And I think the difficulty a number of us have is that, while no

one contests that the better off we are in our economies, and the

more we’re creating jobs, the better everyone will ultimately be, the

fact remains that we have too many people, certainly in this country but throughout the world, more importantly, who aren’t benefiting from all that prosperity. And to wait three decades won’t

help the guy who’s 20 years old right now, working under the worst

of conditions. When he’s 50, he probably won’t be able to work any

more.

There has to be something more we can say to workers, whether

they’re outside of this country or inside this country, that we’re

going to do, if we’re going to use our implements, our tools as a

government, to open up markets, to accelerate the movement by reVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00108 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
105

ducing tariffs and barriers, then we should also be prepared to do

some other things using government implements to make the conditions better for those who work.

Mr. NILES. Could I make the point, in my remarks I refer to a

program which you could adopt in the Congress unilaterally which

would do just that, which is to take the GSP program and add an

additional GSD benefit for those countries where you really do see

progress on labor standards.

Mr. BECERRA. And I think that’s actually an interesting approach, because it’s the carrot versus the stick.

Mr. NILES. Well, exactly, yes. More likely to work than imposing

sanctions.

Mr. BECERRA. And the only problem there is, I think you’d have

to help persuade a number of our colleagues that we should be prepared to give dollars to help countries do what they should otherwise be doing. And I think you’re going to find a number of Members of Congress saying, I’d rather it be spent domestically than

send it off on some foreign aid bill.

But I agree with you, that is one way other than using a stick

to try to get compliance with international labor standards. And I

would pose this question to anyone. Give me a sense of how we get

to the point. Because I think, Ambassador Niles, I think you’re

right. I think it’s going to be difficult, at least under the current

setting, to believe that anyone in the WTO setting today would be

prepared to see the ILO core labor standards accepted within the

WTO as a framework for implementing labor rights.

How do we get some teeth into providing protections under whatever our framework is, whether it’s WTO or ILO, for labor rights

and environmental protections? Anything other than allowing economics and prosperity take us there through trickle down? Anything more?

And I know, Mr. Hufbauer, you’ve suggested the approach of this

labeling. I think that’s a decent idea. Although if it’s just voluntary,

I think it becomes more difficult, because it becomes more problematic in getting people and countries and companies to agree.

Mr. HUFBAUER. But Congressman, I did give a matrix in my remarks. I said voluntary, mandatory, private labels, government labels. And that’s where the fight should be.

Mr. BECERRA. Is there anyone who sees a two or three step process where we ultimately get there? Everything’s compromised, and

at some point we should be able to get there. But we’ve got the two

divides. You can never enforce labor standards or environmental

protections, and if you don’t do it, we won’t go anywhere with

trade.

Mr. NILES. Could I make one point, Congressman? You really

need to distinguish between labor standards and environmental

standards in terms of the WTO. The WTO recognizes the right of

countries to enact trade measures in support of environmental

standards, environmental legislation. In the three cases involving

the United States environmental standards which have come before the WTO, the WTO has upheld the environmental standard in

each case, but has not upheld the fact that in the legislation or the

regulation, it was implemented in a discriminatory way. These

106

were the tuna/dolphins, shrimp/turtle and Venezuelan fuel oil

cases. So we really do have to make that distinction.

There is no problem, as far as I can see, with the way in which

the WTO has related to United States environmental standards.

Now, labor, I recognize, is a different story. And we’ve run up

against that wall several times, most recently in Seattle. But there

is, as I suggested, another way to do it. Namely, the ILO. It’s not

perfect. There isn’t a perfect solution out there, by the way.

Mr. BECERRA. Right.

Mr. Kittredge.

Mr. KITTREDGE. You made a little reference to trickle down or

trickle up economics. Not to take exception with that, but let’s not

miss the point that the development of these countries and the economic prosperity that comes with trade and development is what’s

really going to raise labor standards and environmental standards,

when they have the money to do what they need to do environmentally and when the workers increase. So that’s not an incidental reason or way to bring them up.

Mr. BECERRA. And Mr. Kittredge, I don’t disagree. I don’t think

anyone would disagree that ultimately the tide lifts all boats. The

problem is, we could have said the same thing. If you let this country proceed forward, it’s going to become more enlightened and not

have slavery. We could have waited or we could have enacted laws

that actually abolish slavery.

Sooner or later, people would have come around to understanding, whatever the color of your skin, you were equal in the

status of the Lord or anyone else, and therefore you should not be

enslaved. But we decided not to wait until the natural course of intelligence led us to that conclusion. We passed laws.

And the same thing can apply here, where we can wait, certainly, until the economics help a lot of folks rise out of poverty.

But we’re not waiting and letting the natural course take place in

the way countries deal with each other in trade. We’re talking

about setting up a framework, a global framework with the WTO,

that mandates that we act in certain ways.

So why not then mandate that we act in certain ways globally

with respect to other issues, if we can do it with capital, if we can

do it with intellectual property, why—and I’m not saying we’re ultimately going to get anything, as Mr. Niles said. There might be a

solution out there. I’m just trying to figure out if there’s somewhere

that someone can come up with a little bit more of a compromise

than saying you never can do it, or you have to do it.

And Ms. Wallach, I know you wanted to say something, and Mr.

Chairman, you’ve been very gracious with the time.

Ms. WALLACH. Well, an approach that is sort of a middle approach, which goes to the suggestion I made, which is where the

NGOs from 30 countries who organized toward Seattle had gone

was to prune back, not to have an expansion round, but to have

pruning round, of limiting the places that the WTO at the moment

constrains governments from taking action on environment, labor,

human rights.

There’s a fallacy that there is no room for or there are not currently labor and environmental standards in the WTO. They are

there, but there are constraints on government action in those

107

areas, including for instance, the Article 20. I mean, I’ve read the

same cases. In fact, the WTO has ruled that none of our environmental laws met the exception that’s on paper, but never gets applied.

So the alternative model would be what’s called the convention

model, which is, for instance, how the multilateral environmental

agreements are enforced. They have international standards internationally enforced, the WTO intellectual property rules. Alternatively, you can have a convention. So for instance, CITES, the

endangered species treaty, all of the parties agree to the standards,

but then their commitment, their international law obligation, is to

enforce it at their borders.

So you set the standards internationally, but a convention is enforced so that basically it only affects goods in trade. The country

itself is not committing, with their sovereignty protection, domestically to the same standard, but for instance, in CITES, it’s trade

and endangered species. You cannot let the list of things, and the

rules are internationally agreed, be broken as regards the goods access into your market.

And that certainly is a halfway step. But given there’s either

going to be some set of standards or there is going to be an implosive autoarchy, that would be one that would be something worth

considering.

Mr. BECERRA. Mr. Chairman, thank you. Ms. Wallach, I think

that last response, probably from the perspective of those who don’t

think it works to have core labor standards in WTO, would probably come close to being core labor standards in WTO, I think

they’d have real concerns with it. I understand what you’re saying.

I think they’d have real concerns for that.

But I thank everyone for their comments. Thank you, Mr. Chairman, for the time.

Chairman CRANE. Mr. Houghton.

Mr. HOUGHTON. Well, thank you, Mr. Chairman. Thank you very

much for being here, and I’m sorry I haven’t been in the flow of

this conversation, I had to go out a couple of times.

I guess I just have one basic question. I mean, I’ve been around

this trade game for a long time. And there are always obstacles to

it, whether they’re labor obstacles, Rich, you know, that you were

talking about, or whether they’re agricultural issues that Mr.

Hathaway was talking about. There is always something that isn’t

going to jive.

The question is, how do we put this thing together? We’ve got to

have world trade. Ninety-six percent of our customers are outside

of this country, we’ve got to reach for them. We’ve got to do it in

a fair way, not a free way, because there’s nothing free, it’s got to

be a fair way.

So aren’t there goals we can work toward, rather than hurdles

that have got to be met? Can we sort of work toward those things,

recognizing that the environmental or the labor or the human

rights or some of the agricultural policies aren’t exactly as we

would like? We’re always getting mad at somebody. I mean, the

Europeans aren’t particularly forthcoming in terms of transparency

rules. And the Japanese won’t let us in their market for television

sets, or the Koreans are doing something, or the Chinese.

108

There’s always something there. Isn’t there sort of a frame of reference we can use toward working toward goals, rather than having set lines in the sand that have got to be met before we move

forward?

Mr. KITTREDGE. Are you suggesting maybe we should get our

own house in order before we start talking to other people overseas?

Mr. HOUGHTON. I think that’s probably true. Can you start off

with a suggestion?

Mr. KITTREDGE. And could we start trying to get some of the people at this table and others to try to open communication channels

to talk the things through?

Mr. HOUGHTON. Well, I think it’s a good idea. I’ve had several,

from my sense, I have several groups coming into my office all the

time. I have business groups, I have labor groups, I have environmental groups, I have religious groups, I have everything. And I’m

not sure really what we want.

There was a labor group in my office, UAW, just a minute ago,

talking about permanent NTR for China. And you know, to me, I

don’t think it makes any difference, as far as I’m concerned. We’re

going to have a relationship with China, whether it’s 1 year, 2

years, 3 years, 6 months, 10 years, whatever it is. The question is,

what do they want? You get so hung up on sort of the national, the

normal trading relationship, that you don’t ask yourself what’s out

there. The fact is that we can’t get in their market, and they get

in ours.

So what do we do sort of philosophically, so that we can work together. And I think, Mr. Kittredge, you’re absolutely right, how do

we develop some sort of a philosophic base?

Mr. KITTREDGE. We said in our testimony, I think it bears repeating, this issue, as much as any other, requires a lot of very

strong political leadership. And that needs to be very evident before we make much progress.

Mr. HOUGHTON. Yes.

Mr. TRUMKA. I would suggest that we begin looking at the issue,

not just as a trade issue, but from the notion of globalization, and

bring in all the forces that are driving globalization. You’re talking

about the World Bank, you’re talking about the International Monetary Fund, as well as the WTO. Because that is what’s influencing

the lives of workers around the world. They have to believe that

they have a voice in that process.

And in fact, I was just on a panel with Ambassador Clayton

Yeutter, and the subject was, how do we re-establish consensus.

And my comment to him was, it’s not re-establishing consensus on

trade and globalization, it’s establishing. Workers feel that they’ve

been shut out of the process, that the process has been used to sort

of weaken them. There’s a distrust. Workers on all sides of the border, Mexican workers don’t feel any different than American workers. Colombian workers don’t feel any different than American

workers. Trade’s being used to ratchet them down, and to have

them get less. They’re not enjoying the benefits. Income inequality

goes up.

To start the dialog, look at it as globalization, and let us all talk

about how globalization, honestly, is affecting each one of our lives,

109

and be willing to own up to the facts and say, yes, there’s an income inequality and here’s what’s driving it and how do we solve

it. Then genuinely look at that process.

Mr. HOUGHTON. Well, I know, and Ambassador Niles, maybe

you’d have a comment on that, then I’ll be done.

Mr. NILES. I don’t disagree that we certainly need to discuss this

issue more productively among ourselves, not necessarily just the

groups that are represented here today. But I also think it’s very

important that we get the facts straight before we start this, and

we know what indeed is happening in the world economy, and it’s

not true that wages are being driven down and that workers are

suffering throughout the world as a result of the process of

globalization. There are cases where that’s happening, but there

also are cases where it’s not happening. And we have to make that

clear.

It’s not true at all that there’s a conflict between the WTO as an

organization and U.S. environmental standards. Simply not correct.

The only thing that the WTO has objected to in terms of U.S. environmental standards is when we enforce them in a discriminatory

way, which we proposed to do on these three cases that came up.

There’s also no conflict between the WTO and observance of

human rights. There’s another organization in the United Nations,

the United Nations High Commission for Human Rights, that’s responsible for that.

One of the things we ought to be mindful of not doing is mixing

all these organizations up. We ought to have some sense of what

organization is responsible for what job, and try to get that organization cranked up to do it right. And if the ILO doesn’t do its job

properly, let’s see what we can do to make the ILO work more effectively, and not just say, well, let’s take labor issues and put

them into the WTO, which is going to be extraordinarily difficult

to accomplish.

Mr. HUFBAUER. Mr. Chairman, in the correction of

misstatements division, I’d like to say a word on world income inequality and then U.S. income inequality. I’ve done a paper on the

world dimension, I’d be happy to send it to you and anybody else

who’s interested.

In terms of world income inequality, the countries which are falling remarkably down and have every prospect of falling further are

the countries not participating in the world economy. Those are

countries in Africa, a number of countries in central Asia, and elsewhere—countries that have any amount of turmoil.

There has been a very big group of countries where the inequality has actually decreased quite substantially. Those are the east

Asian countries. And they have every prospect of further narrowing

the gap. Those are facts.

In the United States, the inequality premium—measured by the

additional income which college graduates earn above high school

graduates—that premium stopped growing in the year 1994. These

references you’ve heard are to data between 1973 and 1994. Nineteen ninety-four is 6 years ago. Income inequality is not increasing

in the United States today.

Thank you very much.

110

Mr. HOUGHTON. Well, thanks very much, gentlemen and Ms.

Wallach, thank you.

Chairman CRANE. Well, I want to thank all of our witnesses very

much. And Mr. Trumka, one of your concerns about income, we

hope to address possibly as early as Thursday with the elimination

of the marriage penalty tax. [Laughter.]

Thank you all for being here.

Our next panel will be Mark Van Putten, President and chief executive officer of the National Wildlife Federation; Bob Stallman,

President of the American Farm Bureau, Rhett Dawson, President

of the Information Technology Industry Council; Bob Vastine,

President, Coalition of Service Industries; Steve Robertson, Product

Manager, Marconi Commerce Systems, and this is on behalf of the

National Association of Manufacturers; and Hon. Dave McCurdy,

President, Electronics Industries Alliance here in Virginia, a

former colleague.

And I would ask all the rest of you folks who are participating

in this panel if you would be so gracious as to defer to Mr.

Stallman to go first, so he can speak and run, because he’s on a

tight constraint to catch a plane. And we’ll proceed with you first

in order Mr. Stallman, and then Mr. Van Putten.

STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN

FARM BUREAU FEDERATION

Mr. STALLMAN. Thank you, Mr. Chairman. I do appreciate your

indulgence and the understanding of the rest of the panel. The last

plane ride out of town to get to point B is a valuable commodity.

I am Bob Stallman, President of the American Farm Bureau, and

a rice producer.

Chairman CRANE. Folks, those of you that are inside the chamber, please hold your conversation until outside. All right, Mr.

Stallman.

Mr. STALLMAN. Thank you, Mr. Chairman. I am a rice producer

and a cattleman from Columbus, Texas, as well as President of the

American Farm Bureau. And I appreciate the opportunity to testify

before you today on the issue of negotiations on agriculture in the

WTO and the prospects for future negotiations.

The Farm Bureau had a strong presence in Seattle during the

WTO Ministerial, and saw first-hand how difficult it will be to

overcome the resistance exhibited by key negotiating partners such

as the European Union, Japan and Korea, to further market openings in agriculture. Every ounce of leverage and negotiating muscle

will be needed to continue the agricultural trade reform started in

the Uruguay round, and to make the results from future trade

talks commercially meaningful for U.S. farmers and ranchers.

It is well known that there were many causes for the failure of

the trade ministers to launch a round in Seattle. And while the

reasons are numerous and the issues complex, agriculture was not

the cause for the breakdown of the trade talks. In fact, when the

talks ended in Seattle, green room negotiations on agriculture had

concluded and the agricultural text was nearly complete.

Now, that’s not to say the Farm Bureau endorsed the language

in the agricultural text. While we acknowledge that significant

ground was broken on key agricultural negotiating objectives, much

111

work remains to be done. Negotiations on agriculture must be the

highest priority for our negotiators as they meet in Geneva in an

attempt to restart the trade talks. Not only is agriculture entitled

to a new round of negotiations as mandated by the built-in agenda,

our sector is also rife with unsurmountable trade barriers and

trade distorting export subsidies that are not present in other sectors.

In order for the WTO to claim that it has truly reformed trade

around the globe, it must first achieve market liberalization in agriculture. Restarting the talks quickly and linking the progress of

all aspects of the talks together as a single undertaking is crucial

in order for U.S. agriculture to maintain its foreign market share

and to compete on fair and equal terms with its export competitors.

What’s at stake for agriculture if the WTO talks do not resume?

Well, our exports will continue to stagnate and our competitors, especially those that benefit from export subsidies or single-desk selling arrangements, will continue to undercut us in foreign markets.

U.S. producers are the most efficient producers in the world. We

can compete if allowed to meet our competitors head-on, rather

than with one arm tied behind our backs, which is the case now

as we compete against foreign treasuries that subsidize our competitors.

There are many important objectives to be accomplished in the

WTO negotiations on agriculture once the trade talks resume in

Geneva. And I will briefly list those. First, the next round of negotiations in progress on the built-in agenda items should be pursued

as a comprehensive single undertaking. Second, we must call for

the complete elimination of export subsidies by all WTO member

countries.

Third, all WTO member countries should reduce tariffs, both

bound and applied, in a manner that provides commercially meaningful access on an accelerated basis. Fourth, our producers compete openly in their own domestic market with their foreign competitors, but are shut out of export markets, due to prohibitively

high tariffs. We must correct this imbalance for our farmers and

ranchers, and we must end the use of all nontariff barriers to

trade.

Fifth, we cannot allow our trading partners to exempt certain

products or policies from the negotiations. Everything must be on

the table for negotiation. Sixth, we believe that countries should

provide an increasing portion of total domestic support for agriculture in a decoupled form, as the United States has already done

under the Fair Act.

In addition, we support elimination of trade distorting domestic

support programs, now classified under the blue box criteria in the

WTO. The U.S. does not use the blue box, but the EU continues

to increase its blue box spending.

And on domestic support, we oppose attempts to disguise protectionist policies as an endorsement of the multifunctional characteristics of agriculture. Domestic support for so-called multifunctionality or government spending for the multifaceted benefits

of agriculture should be reasonable and nontrade distorting.

Seventh, regarding sanitary and phytosanitary measures, we believe that the provisions of the WTO SPS agreement are sound and

112

do not need to be reopened. Eighth, and very importantly, we must

ensure market access for biotechnology products produced from genetically modified organisms. Significant delays and a lack of

transparency in the regulatory approval process for GMOs in the

EU have heightened the need for science-based transparent provisions governing bioengineered products.

Ninth, we must impose disciplines on State trading enterprises

that distort the flow of trade in world markets. Tenth, the WTO

dispute settlement process needs to be shortened and measures

must be instituted to ensure compliance. We have seen in both the

EU banana and EU beef cases that compliance is not always assured. And I would like to note for the record that nearly every

country has complied with its WTO commitments. However, in

cases where WTO member countries do not comply, a carousel retaliation approach should be adopted to bring about compliance.

Finally, we believe that matters concerning the environment and

labor should only be addressed in a manner that facilitates rather

than restricts trade. In summary, America’s farmers and ranchers

are counting on the WTO negotiations to achieve fair access for

their exports around the world.

We are the most efficient producers in the world. Access to foreign markets should be based on efficiency and not on protectionist

policies. Given the dire economic conditions that we are now experiencing in this country for our producers, opening markets and

leveling the playingfield is now more important than ever.

We call upon the administration to resume a broad-based negotiating round of the WTO and to link progress on the built-in agenda

items to an eventual round. Without such a comprehensive approach, substantial progress on the negotiations in agriculture will

not be achieved.

Thank you, Mr. Chairman, and if there are written questions

later on, we’ll be glad to respond for the record.

[The prepared statement follows:]

Statement of Bob Stallman, President, American Farm Bureau Federation

Mr. Chairman, members of the Committee, I am Bob Stallman, president of the

American Farm Bureau, and a rice producer and cattleman from Columbus, Texas.

I appreciate the opportunity to testify before you today on the important issue of

the negotiations on agriculture in the World Trade Organization (WTO) and the

prospects for future negotiations.

Farm Bureau had a strong presence in Seattle during the WTO Ministerial Conference and saw first-hand how difficult it will be to overcome the resistance exhibited by key negotiating partners such as the European Union (EU), Japan and

Korea to further market openings in agriculture. These countries have a very strong

desire to continue trade distorting domestic support payments to their agricultural

sectors. Given the urgent need to further open foreign markets for U.S. agriculture,

and the intent of some countries to resist such market openings, it will be very

tough to continue the agricultural trade reform started in the Uruguay Round.

Every ounce of leverage and negotiating muscle will be needed to make the agricultural results from future trade talks commercially meaningful for U.S. farmers and

ranchers.

It is well known that there were many causes for the failure of the trade ministers to launch a negotiating round in Seattle. While the reasons are numerous and

the issues complex, agriculture was not the cause for the breakdown of the trade

talks. In fact, when the talks ended in Seattle, ‘‘green room’’ negotiations on agriculture had concluded and the agricultural text was nearly complete. This is not to

say that Farm Bureau endorsed the language in the agricultural text. While we acknowledge that significant ground was broken on key agricultural negotiating objectives, much work remains to be done.

113

Negotiations on agriculture must be the highest priority for our negotiators as

they meet in Geneva in an attempt to restart the trade talks. Not only is agriculture

entitled to a new round of negotiations as mandated by the built-in agenda, our sector is also rife with insurmountable trade barriers and trade distorting export subsidies that are not present in other sectors. In order for the WTO to claim that it

has truly reformed trade around the globe, it must first achieve market liberalization in agriculture.

The WTO General Council meetings, which are taking place in Geneva this week,

must provide the basis for continuing the agricultural negotiations as required

under the built-in agenda. Most importantly, the structure developed to restart the

talks on agriculture must be linked with the progress of trade talks in other builtin agenda sectors as part of a single package. Restarting the talks quickly, as part

of an eventual broad-based round, is crucial in order for U.S. agriculture to maintain its foreign market share and to compete on fair and equal terms with its export

competitors.

You are aware that the U.S. agricultural sector is perhaps the most open market

in the world. According to the Agriculture Department, the average tariff for imports of agricultural goods into the United States is 8 percent or less, while our exports face an average tariff of nearly 50 percent. We must address this imbalance

in the upcoming negotiations.

What’s at stake for agriculture if the WTO talks do not resume? We can expect

that our exports will continue to stagnate and that our competitors, especially those

that benefit from export subsidies or single desk selling arrangements, will continue

to undercut us in foreign markets. U.S. producers are the most efficient producers

in the world. We can compete if allowed to meet our competitors head on rather

than with one arm tied behind our backs, which is the case now as we compete

against foreign treasuries that subsidize our competitors.

There are many important objectives to be accomplished in the WTO negotiations

on agriculture and important improvements that need to be made on the Seattle agricultural text once the trade talks resume in Geneva.

OBJECTIVES FOR THE NEXT ROUND

Structure and Framework

The American Farm Bureau Federation supports expediting action to commence

broad-based negotiations and trade talks on the built-in agenda items, such as agriculture, in the WTO. We cannot sit by while our competitors trade openly in our

market but deny us access to their markets on equal terms. We must begin negotiations on the built-in agenda items and weave these negotiations into a comprehensive round as early as possible to put U.S. agricultural producers on a level playing

field with the rest of the world.

First and foremost, the next round of negotiations and progress on the built-in

agenda items, should be pursued as a comprehensive, single undertaking. By this

we mean that all aspects of the negotiations should be pursued in parallel and that

talks should conclude simultaneously for all sectors in order to get the best results.

Export Subsidies and Export Credits

We must call for the complete elimination of export subsidies by all WTO member

countries. Our producers cannot compete against the mountain of spending by our

primary competitors, such as the European Union, which spends in excess of eight

times the level of domestic and export subsidies spent by the United States. The

final version of the agricultural text from the WTO Ministerial in Seattle did not

go far enough on export subsidies. We must not settle for anything less than complete elimination of export subsidies. Moreover, the United States should not allow

other WTO member countries to link progress on elimination of export subsidies to

corresponding action by the United States on export credits or other forms of export

assistance.

Regarding export credits, we believe that the negotiations in the Organization for

Economic Cooperation and Development holds the best potential to impose disciplines on export credits.

Market Access

U.S. negotiators must comprehensively address high tariffs, trade-distorting subsidies and other restrictive trade practices in the negotiations on agriculture.

The negotiations should result in tariff equalization and increased market access

by requiring U.S. trading partners to eliminate tariff barriers within specified time

frames. Our producers compete openly in their own domestic market with their forVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00117 Fmt 6633 Sfmt 6621 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
114

eign competitors but are shut out of export markets due to prohibitively high tariffs.

We must correct this imbalance for our farmers and ranchers. All WTO member

countries should reduce tariffs, both bound and applied, in a manner that provides

commercially meaningful access on an accelerated basis.

In addition, we must end the use of all non-tariff barriers to trade. There are several practices that have been employed by our trading partners to shut out competition in their domestic markets. These practices include, but are not limited to, domestic absorption requirements, discriminatory licensing procedures, price bands,

reference prices and the administration of tariff rate quotas that prevent true competition. Provisions to address these and other nontariff barriers should be written

into the new agreement on agriculture.

We support a trade round that enacts no product or policy exceptions. Adopting

a formula approach that addresses the disparity in global tariffs is the best method

for ensuring that all sectors are included in the negotiations. As with the Uruguay

Round framework, we recognize the need to address import sensitive products. It

is imperative that the new negotiations address not only tariff disparities but also

peak tariffs and tariff escalation in a commercially meaningful manner.

Domestic Support

We support transitioning countries to provide an increasing portion of total domestic support for agriculture in a decoupled form as the United States has already

done under the FAIR Act of 1996.

In addition, we support elimination of trade distorting domestic support programs

now classified under the ‘‘blue box’’ criteria in the WTO. Blue box payments are

based on fixed area, yields and number of livestock and are not subject to reduction.

The United States does not currently have any domestic support programs that

qualify as blue box spending. The European Union, on the other hand, has over $22

billion in blue box spending and that is projected to increase as a result of the recent CAP reform under Agenda 2000. We must put an end to blue box spending.

SPS and Biotechnology

We believe that the new negotiations must include a recommitment to binding

agreements to resolve sanitary and phytosanitary issues based on scientific principles in accordance with the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement). The provisions of the Uruguay Round SPS Agreement are

sound and do not need to be reopened. The United States has successfully litigated

several SPS cases that underscore the strength of this agreement. Cases have now

been tried that set precedents in each of the three areas of the SPS Agreement. For

example, the successful U.S. litigation of the EU beef ban strengthens the provisions

regarding human health, the Japan varietal testing case underscores aspects regarding plant health, and the Australia salmon case bolsters the animal health text

of the SPS Agreement. Any change to the SPS Agreement would expose the sound

scientific principles now embedded in its provisions—changes that the EU would relish making to restrict, rather than facilitate, trade.

We must ensure market access for biotechnology products produced from genetically modified organisms (GMOs). Significant delays and a lack of transparency in

the regulatory approval process for GMOs in the EU have heightened the need for

science based, transparent provisions governing bioengineered products. We cannot

continue to be held hostage to the EU’s nontransparent, discriminatory procedures

that deny market access for our GMO products. All WTO member countries should

reaffirm the principles of the WTO SPS Agreement, provisions which we believe

cover trade in GMOs.

Multifunctionality

We oppose attempts to disguise protectionist policies as an endorsement of the

multifunctional characteristics of agriculture. While we agree that agricultural production holds multifaceted benefits, we disagree that trade distorting subsidies

should be allowed to continue to sustain multifunctional endeavors. Government

spending for such pursuits should be reasonable and non-trade distorting.

State Trading Enterprises

We must impose disciplines on state trading enterprises (STEs) that distort the

flow of trade in world markets. Every effort should be made to craft an agreement

that sheds light on the pricing practices of STEs and ends their discriminatory practices. Our producers have lost too many sales in third country markets due to the

noncompetitive, nontransparent operations of STEs.

115

Dispute Settlement Process

Our negotiators must make changes to trading practices that would facilitate and

shorten dispute resolution procedures and processes. The process for a WTO dispute

settlement case typically runs three years, if the WTO ruling is implemented. We

have seen in both the EU banana and EU beef cases that compliance is not always

assured. In cases where WTO member countries do not comply with WTO rulings,

a carousel retaliation approach should be adopted to bring about compliance.

Our trading partners cannot be allowed to unilaterally weaken the very principles

that we negotiated in the Uruguay Round Agreement. The fundamental problem of

a dispute settlement procedure that requires too much time and prevents market

access for several marketing seasons before a resolution is reached must be corrected.

Environment and Labor

We believe that matters concerning the environment and labor should only be addressed in a manner that facilitates rather than restricts trade. We cannot allow

the economic prosperity of our nation, and that of our agricultural producers, to be

used as a weapon.

In summary, America’s farmers and ranchers are counting on the WTO negotiations to achieve fair access for their exports around the globe. We are the most efficient producers in the world. Access to foreign markets should be based on efficiency, not on protectionist policies. Given the dire economic conditions now being

experienced by our producers, opening markets and leveling the playing field is now

more important than ever.

We call upon the administration to resume a broad-based negotiating round in the

WTO and to link progress on the built-in agenda items to an eventual round. Without such a comprehensive approach, substantial progress on the negotiations in agriculture will not be achieved.

Chairman CRANE. Thank you very much, Mr. Stallman. And you

are excused. Any questions we’ll submit to you in writing.

And with that, Mr. Van Putten.

STATEMENT OF MARK VAN PUTTEN, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, NATIONAL WILDLIFE FEDERATION

Mr. VAN PUTTEN. Thank you, Mr. Chairman and Members of the

Subcommittee. I’m Mark Van Putten, president of the National

Wildlife Federation.

The National Wildlife Federation is America’s largest conservation education and advocacy organization, with over 4 million members and supporters. In addition to those members and supporters,

we have State affiliates in 46 States, which total an additional 1

million members. We were represented in Seattle and in fact, we’re

headed back to Seattle next month for our annual meeting where

the delegates elected by our State affiliates come together to set

our policies on matters such as trade and the environment.

I say that because our members represent America’s mainstream

and main street conservation movement. They share a commitment

to United States leadership in building a global economy that protects the environment while raising living standards for all.

I was in Seattle for the WTO meeting leading the National Wildlife Federation delegation. I appreciated the opportunity to meet

with you, Mr. Chairman, and Members of this Subcommittee who

were there, the opportunity to meet with President Clinton, and

the opportunity to chair the NGO session sponsored by the World

Trade Organization.

NWF has been intensely involved in the dialog with trade officials, Members of this Subcommittee, the administration and all of

116

the participants. And I’d like to briefly outline for you four lessons

that we learned in Seattle.

The first lesson is, there’s no turning back. The old, exclusive

and secretive deal-making process must give way to an inclusive,

transparent and domestic process. The negotiation strategies pursued in the past by the United States and its trading partners

must be replaced by the new realities.

At the beginning of the 20th century, President Wilson denounced secret deals, secretly arrived at. It is time to follow

through with the process that takes fully into account the views of

developing, as well as developed, countries and of citizens and citizen groups as well as those of industry and government officials.

The era of international trade negotiations, being insulated from

public concerns such as concern for the environment, is over.

The second lesson, which relates to the first, is that trade liberalization and environmental protection must go hand in hand. In Seattle, we used every constructive means available to us to improve

the WTO, not to disparage it. And we intend to continue on that

course.

Let me be clear. To the degree that a stereotype has been created

that the environmental community wants to shut down international trade, that stereotype is false. The National Wildlife Federation believes globalization is a fact, not a policy choice. And we

want the international trading system to succeed.

But we want it to achieve its full potential. We want it to deliver

on the promise of improving the quality of life, raising living standards, and respecting conservation values throughout the world. To

achieve this goal, in my written testimony we outline the National

Wildlife Federation’s agenda for environmentally responsible trade,

which we presented in Seattle. It includes first, the WTO should

recognize and defer to legitimate national and international environmental standards. Second, new trade agreements should include

environmental assessments of their potential consequences.

Third, individuals and nations should be able to take into account the environmental effects of how imports are produced. And

fourth, the WTO must adopt modern standards of openness.

The third lesson we draw from the Seattle experience is the need

to achieve global consensus. The WTO is a consensus driven institution, and we must find ways to unite the interests of the developed world with those of the developing world. We recognize that

liberalized trade abroad can help the less developed nations implement policies for sustainable development and environmental protection.

But these results are not a given. They will not happen automatically. All of us, including Members of Congress, administration

officials and representatives of nongovernmental groups, and the

business community, must reach out to developing countries with

capacity building, technology transfer and other efforts to achieve

common ground to remove and address some of the reservations

about the reforms that we have advanced.

The final lesson that we draw from Seattle is that it is in the

self-interest of American business and traditional trade advocates

who remain committed to old approaches to stop resisting the inclusion of environmental concerns and democratic values into the

117

international trade system. Progress requires finding common

ground, not accentuating differences and burying one’s head in the

sand.

International trade is suffering a crisis of eroding public confidence. Those of us in Seattle witnessed this crisis first-hand. Increasingly, average citizens, including my members, simply do not

believe that the current rules of international trade respect their

values, including their concern for the environment. To create public confidence, the trade system must respect these values, including the democratic values of openness and respect for environmental concerns.

It’s in the interest of everyone who wants trade to succeed to establish public confidence in the institutions and policies governing

our global economy. We look to you, the Members of Congress, to

help provide the leadership in this effort.

The National Wildlife Federation is engaged and committed to

advancing the cause of conservation in the global economy. We recognize about the international economy what we recognized about

our own economy at the beginning of the 20th century. Trade is not

an end in itself. It’s a tool to achieve human aspirations, to improve

standards of living and to enhance the quality of life. Our environment, our wild places, wildlife and wild things are part of that

quality of life.

Thank you very much.

[The prepared statement follows:]

Statement of Mark Van Putten, President and Chief Executive Officer,

National Wildlife Federation

I am Mark Van Putten, President and CEO of the National Wildlife Federation,

the United States’ largest not-for-profit conservation education and advocacy organization with over four million members and supporters, ten field offices and fortysix state and territorial affiliates.

For nearly ten years, we have been involved in the development of United States

trade policy. Our members are America’s mainstream and main street conservation

activists who share a commitment to United States leadership in building a global

economy that protects the environment while raising living standards for all people

throughout the world.

I was in Seattle with our National Wildlife Federation team and our colleagues

from the public interest community. We were intensely involved in dialogue with

trade officials, members of this Committee, and all the participants. In response to

the Committee’s stated focus of inquiry for this hearing, I would like to outline for

you the four key lessons that I believe emerged from Seattle and the implications

of those lessons for future WTO negotiations.

I. NO TURNING BACK

The first lesson is that the old, exclusive and secretive deal making process of

trade negotiations must give way to an inclusive, transparent, and democratic process. The negotiating strategies pursued by the United States and its trading partners must reflect this new reality. At the beginning of the twentieth century, President Wilson denounced secret deals, secretly arrived at. It is past time to follow

through with a process that takes fully into account the views of developing as well

as developed countries and of citizens and citizen groups as well as those of industry

and government officials from all countries.

In a speech before the World Economic Forum two weeks ago, President Clinton

noted: ‘‘Trade can no longer be the private province of politicians, CEOs, and trade

experts. It is too much a part of the fabric of global interdependence. . . . [T]he consequence of running away from an open dialogue on a profoundly important issue

will be—it won’t be more trade, it’ll be more protection[ism].’’

The clock can never be turned back to a time when the environmental and other

goals of citizens from democracies across the world could be excluded from trade policy. Seattle put the impact of trade on the map of public consciousness. For growing

118

majorities of people there is an understanding of the implications of trade for

human values, for the way people live and work, indeed for the quality of life. The

increased understanding has produced a determination to hold decision makers accountable on these issues. Those who want trade to go forward will have to make

peace with environmental and other goals that are necessary to achieving the public

interest. Trade policy must accommodate environmental values. We will insist on

it. The era of international trade negotiations being insulated from public concerns,

including respect for the environment, is over.

As trade negotiations and trade institutions increasingly establish the terms of

market integration and their attendant impacts on the environment, the need for

meaningful public participation opportunities correspondingly increases. Public participation should be integral to any trade or investment negotiations. Such a linkage

confirms the relationship between open markets and democratic principles, and provides citizens with the information they need to make sound and informed choices

about policies that affect their future.

The United States has adopted a positive approach to improving access to WTO

decision makers in an attempt to ensure that people are able to hold the WTO accountable for its actions. The National Wildlife Federation urges the Administration

to redouble its efforts and Congress to provide its support to infuse the WTO with

the same democratic rules of accountability enjoyed by American citizens at home.

Reform WTO Procedures Regarding Transparency and Participation to

Ensure the WTO System Is Held Accountable to Democratic Principles:

While the United States is to be commended for its efforts over the past two years

to increase public participation and transparency in several trade negotiating fora,

including as part of the Administration’s Seattle Ministerial agenda, further

progress is within reach. For example, the United States must work diligently to

increase transparency in individual sectoral WTO negotiating groups in which the

United States actively participates. In the context of the Seattle Ministerial agenda,

the recently proposed rebirth of the Committee on Trade and Environment (CTE),

ostensibly created as a forum to identify and discuss the environmental implications

of issues under negotiation in a new round, must not simply become a ‘‘mailbox’’

repository of NGO issues with no significant corresponding influence, nor impact on

the formal negotiating process. Clearly, the CTE’s work program must avoid repeating its previous mistakes of conducting a one-sided and imbalanced review of the

trade implications of environmental policy without addressing adequately the impact of trade policy on environmental measures. In addition to any proposed new

role for the CTE, the WTO should establish, as a general matter, disclosure policies

to make information readily available and clear and responsive mechanisms for receiving and responding to NGO participation and comments.

Improved access and accountability are especially important for people from developing countries, many of whose governments do not have permanent missions located in Geneva. Given the informal nature by which the WTO makes its decisions

at present, ensuring that the interests of all people are represented at the WTO

must be integral to the United States objectives for trade liberalization. For most

of the world’s population, the incredible acceleration of the global economy has also

brought accelerated loss of wildlife and wild places. We urge the United States to

devote its energy to ensuring that all future WTO procedures are open and accessible to all people.

Transparency at Home: Finally, a commitment to openness and transparency

must be present in the development of all aspects of trade policy within the United

States. For example, we note our disappointment with the Administration’s recent

decision to appeal a Federal court’s ruling that requires the appointment of environmental representatives to Commerce Department trade advisory committees

(ISACs) in the forest products sector. In addition, the Administration needs to

produce a more open and transparent mechanism in the inter-agency decision-making process prior to initiating a trade-based challenge of a foreign country’s environment, health, or safety law. Agencies with environmental protection and conservation responsibilities must play a major role in any such deliberations.

Open the Dispute Resolution Process: In all trade regime dispute settlement

fora, the United States should, at minimum, fulfill President Clinton’s commitment

at the WTO to open dispute settlement proceedings to public observation and pursue

consideration of amicus briefs from interested NGO parties.

II. TRADE LIBERALIZATION AND ENVIRONMENTAL PROTECTION GO HAND-IN-HAND

In our preparation for the WTO Ministerial and in our presence in Seattle, we

worked through every constructive means we had available to improve the WTO,

not to disparage it. And we will continue on that course.

119

We want the international trading system to succeed.

At the same time, we want trade to fulfil its true potential. We want trade to deliver on its promise of improving our quality of life. We want trade to raise living

standards, including respect for conservation values throughout the world.

How can we achieve this goal? NWF’s trade and environment work is informed

by our desire to: achieve clarity and predictability in WTO rules, raise environmental standards globally through cooperative methods wherever possible, support

multilateral environmental solutions, and secure progress in improving democracy,

transparency and access to information in all trade and environment policy arenas.

SPECIFICALLY:

1. Improve WTO Deference to National Environmental Standards and Multilateral

Environmental Agreements (MEAs):

Trade rules must be crafted so they do not diminish the environmental protections

that nations have provided for their citizens and resources. Each WTO member

country must retain the right to develop and enforce high conservation measures

through trade restrictions—even if they exceed the international norm—without

running afoul of WTO rules.

WTO rules should also provide for deference to MEAs in instances of a conflict

between trade rules and trade-related provisions of MEAs. Furthermore, WTO rules

should allow for explicit deference to the independent institutions with environmental expertise on questions of environment-related trade matters. For example,

the WTO should establish a formal link to the United Nations Environment Program in WTO disputes involving MEAs and WTO rules.

2. Allow Countries to Distinguish Between Products Based on the Way They Are Produced:

Laws that address the environmental impact of how products are made (such as

the U.S. import ban on shrimp harvested by trawl nets that kill endangered sea turtles), must be accepted as a valid part of trade rules. For example, trade rules

should allow countries tolabel products or restrict the importation of products that

are produced or brought to marketin a way that harms endangered species and/or

the global commons.

3. Make Environmental Impact Assessments Integral to Trade Negotiations:

Trade negotiators must look before they leap. The environmental ramifications of

any trade agreement must be carefully evaluated before the agreement is concluded

or put into effect.

The goal of the environmental assessments and their open public review-and-comment process should be to provide accurate information on the environmental impact of the proposed trade agreement and to suggest alternatives to mitigate the impact of trade on the environment.

We welcome the President’s signing of an Executive Order on November 16, 1999,

to perform environmental reviews of new trade agreements. This is a significant

step that formalizes a process NWF has advocated for years. We look forward to an

immediate implementation and funding for this order and pledge our constructive

participation in such a process.

4. Reform WTO Procedures to Make Them More Open and Democratic:

Institutions that govern public conduct must be accountable to the public. The

WTO must adopt modern, democratic principles of due process, including the right

of the public to review and comment on the written record of a trade dispute, access

to working documents and a permanent role for nongovernmental organizations in

WTO activities.

5. Eliminate Environmentally Perverse Subsidies and Promote Trade in Environmental Technologies:

Renewed attention and energy must be devoted to delivering eminently achievable

‘‘win-win’’ solutions relating to trade and the environment. For example, the elimination of perverse and environmentally damaging subsidies in natural resource sectors such as fisheries and forest products may result in positive gains for both the

environment and trade. Nonetheless, the timing and transition efforts must be carefully managed so as to avoid short-term damage.

We commend the United States for its leadership in seeking enforcement of current WTO notification requirements and rules governing the elimination of subsidies

in its 1999 WTO Ministerial negotiating agenda. In addition, the United States deVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00123 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
120

serves credit for its efforts to place the facilitation of trade in environmental technologies on the Seattle Ministerial agenda. While the elimination of environmentally-damaging subsidies and improved trade in environmental clean technologies is not a panacea to the resolution of all trade and environment conflicts,

progress in these areas would represent a positive step forward.

6. Environmentally Responsible Investment Agreements:

The United States should maintain its current position of not seeking multilateral

investment negotiations within the WTO and should develop specific policy guidelines regarding the relationship between investment negotiations and domestic environmental regulation. Future investment negotiations should, at minimum, pursue

the following:

• Seek mandatory, enforceable measures in the agreement to prohibit the lowering of environmental standards to attract investment and an active monitoring

system to ensure compliance.

• Undertake a review of the traditional ‘‘investor-to-state’’ principle found in numerous bilateral investment agreements with an emphasis on ensuring its compatibility with procedural openness, transparency and environmental protection efforts.

Recently, in the NAFTA context, several private investors have attempted to use the

investor-to-state provisions to challenge domestic regulations with potentially detrimental consequences for environmental laws.

• Investment negotiations should include obligations allowing legitimate measures designed to conserve the environment, natural resources and the promotion of

cooperative environmental programs to be maintained and strengthened.

III. GLOBAL CONSENSUS

Seattle’s next lesson is that as a consensus-driven institution, the WTO must find

the common ground that unites the interests of the developed world with those of

the developing world.

Policy regarding trade and the environment is a global issue that requires global

consensus. Seattle made clear that further progress on both trade policy and international environmental policy will require a consensus among all citizens of all

countries on how best to proceed.

We recognize the contribution trade liberalization is making to our own economy

and that liberalized trade abroad can be vital in securing the means for less developed nations to implement policies for sustainable development and environmental

protection. Nonetheless, while trade may help deliver prosperity and improve prospects for the environment, these results are not a given, nor will they occur automatically. Billions of people and many nations are not reaping the benefits of liberalization and continue to fall further behind. This cannot be ignored.

We, as representatives of the non-governmental community have a shared responsibility, together with members of Congress, the Administration, and the business

community in the United States, to do our part to reach out to developing countries

through capacity-building efforts to achieve common ground. We must encourage

governments and industry to ensure broader reach of the benefits of trade as well

as improved environmental protection. The challenge is to work with developing

countries, with understanding of their special needs and different circumstances,

while remaining true to our commitment to environmental values. I believe deeply

that reconciliation is possible.

Specifically, what is needed is a structured formal process to enable developing

countries to be full participants in global decision-making on trade and the environment. This process would provide a framework for cooperation so that both economic

growth and environmental protection can improve together. A formal process would

develop needs assessments, solicit input from both foreign and United States-based

NGOs, and enlist cooperative support from multilateral institutions, all within specified timetables.

Promote Environmental Cooperation: As trade liberalization leads to increased market integration, the opportunities to foster a meaningful cooperative environmental agenda through parallel environmental institutions multiply. Our own

experience working with government officials in Latin America and elsewhere has

helped us understand that it is not improvements in environmental protection per

se that governments are reluctant to pursue. On the contrary, most government officials are trying hard to develop and implement effective national environmental regimes. What concerns them is the possibility that regulation might be a disguised

form of protectionism or that their governments will lack the will or the resources

to implement regulatory requirements. We believe both of these reservations can be

and should be addressed. Our goal is only to safeguard legitimate environmental

121

standards and as stated above, we advocate greatly enhancing capacity-building efforts.

The National Wildlife Federation supports the notion that trade and investment

agreements can create unique opportunities that should not be ignored to further

environmental cooperation among our trading partners. The conceptual framework

and cooperative mission of parallel environmental institutions associated with trade

liberalization merit strong political and technical support in all of the United States’

trade initiatives.

In the NAFTA context, the Commission for Environmental Cooperation (CEC) is

the trinational environmental institution created by the North American Agreement

on Environmental Cooperation (NAAEC) (NAFTA’s ‘‘Environmental Side Agreement’’) to address continental environmental issues in the United States, Canada,

and Mexico. The CEC facilitates cooperation and public participation among the

NAFTA parties by addressing regional environmental concerns, helping to prevent

potential trade and environment conflicts, and promoting effective environmental

enforcement in each of the NAFTA countries. To date, the CEC has been particularly effective in encouraging improved working relationships between the environmental ministers of the NAFTA parties, while at the same time, providing a valuable forum to address transboundary issues of shared environmental concern in

North America.

The Border Environmental Cooperation Commission (BECC) is the certifying entity responsible for developing and evaluating water, wastewater, and municipal solid

waste (MSW) projects in the border region. BECC has comprehensive criteria to

which projects must adhere in order to be considered for BECC certification. These

include a project’s economic viability and its sustainable development components.

The NADBank, now fully funded with $450 million in equal contributions from the

United States and Mexico, is a binational financial institution that may use its

funds to leverage additional capital but only for those projects certified by the

BECC.

Although there remain areas that need improvement, the BECC/NADBank have

been particularly effective in facilitating the development and adoption of sustainability criteria used to evaluate potential environmental infrastructure projects;

transparent decision-making processes with public participation from both nations;

and capacity building and technical assistance.

IV. AMERICAN BUSINESS’ SELF-INTEREST

The fourth major lesson from Seattle is that it is in the self-interest of American

businesses and traditional trade advocates who remain committed to old approaches

to stop resisting the inclusion of democratic values into the international trade system. Progress requires finding common ground, not accentuating differences.

Public confidence in the multilateral trading system is eroding. In Seattle, we did

not have to travel far to witness the implications of this failure first-hand. Increasingly, average citizens simply do not believe that the rules of international trade

respect their values, including their concern for the environment.

As a result, the gravest threat to the multilateral trading system and its potential

to raise living standards throughout the world is the lack of public confidence in

its basic functions.

The post-Seattle trade agenda presents us all with an opportunity and a responsibility:

• Seattle has raised the visibility of the relationship of trade and the environment. This presents us with the opportunity to gain public support for a new consensus.

• Our responsibility is to work together to build that new consensus.

This does not mean that we should restructure the WTO into the World Trade

and Environment Organization. We are not proposing or supporting measures that

hide protectionism behind a screen of environmental safeguards. We are seeking legitimate reform, based on the merits of the issue.

The environmental community’s reform agenda is not about demanding the acceptance of one particular country’s environmental standards by another country. It

is about achieving clarity and predictability in WTO rules and raising environmental standards globally through cooperative methods wherever possible.

In the post-Seattle era, we should set to work on making the multilateral trading

system achieve its goals of eradicating poverty, promoting sustainable development,

and truly raising living standards.

In this effort, the National Wildlife Federation is committed to commonsense solutions to advance the environmental cause in this new world we have entered. Perhaps I can summarize by saying that we need to recognize for the new international

122

economy what we began to recognize about our own national economy as the 20th

century opened—that trade is not an end in itself. It is a tool to achieve human aspirations, to improve standards of living and to enhance the quality of life. Our environment, our wild places and wild things are part of humanity’s quality of life.

Thank you.

Chairman CRANE. Thank you, and our next witness, Rhett Dawson.

STATEMENT OF RHETT DAWSON, PRESIDENT, INFORMATION

TECHNOLOGY INDUSTRY COUNCIL

Mr. DAWSON. Thank you, Mr. Chairman, Congressman Houghton, for inviting us to testify today. We’re delighted to do so. We

were delighted also to see you in Seattle and see so many Members

of Congress you in large number participate in that meeting. That

was a very important lesson for all of us.

I am Rhett Dawson, president of the Information Technology Industry Council. ITI is the leading IT association comprised of the

leading IT companies. Our members had worldwide revenues of

$460 billion in 1999, and employed more than a million and a half

people in the United States. As you know, our companies are making a significant contribution, 35 percent, to the growth of the economy. And we see innovation in the IT industry as very helpful to

the economy, not only for the United States, but the world as a

whole.

So we promote group policies to open markets, foster innovation

and give consumers choices, as well as stimulate the development

of electronic commerce. Over the past 5 years, ITI has worked

closely with our counterparts in Europe and Asia and Latin America, in particular, to build global information technology industry

consensus to eliminate barriers to trade and promote an e-commerce trade agenda.

Seattle, we believe, was a missed but not a lost opportunity. We

were heartened by the progress that was made on electronic commerce. We believe that if the whole package could have come together, an e-commerce agreement could have been reached.

Our industry has significantly benefited from trade liberalization

on the product side, and now we also strongly support liberalization on services, which WTO director-general Mike Moore talked

about yesterday. Liberalization must continue and trade rules must

be adapted to reflect changes in technology and the new forms of

business.

Countries all over the world have seen for themselves the economic impact that information technology is having in the U.S.:

productivity increases, job creation, and job growth. And they, too,

want to achieve similar results. And this means ensuring an open,

competitive marketplace which rewards innovation and entrepreneurship.

There is much work to be done to broaden understanding of the

digital world, especially to understand how electronic commerce is

changing global business, and examining how trade rules apply,

and really trying to figure out whether they need to be adapted to

123

provide a stronger underpinning for the global information economy.

ITI has taken an active role in working with the WTO delegates

to help them understand how these changes are taking place and

how they can affect international trade. We’ve held three seminars

in Geneva over the past 18 months to begin this educational effort.

We’re going to continue to press forward on these educational efforts, as well as trying to press forward with an e-commerce agenda. We’re heavily invested in the WTO, because we believe these

things matter.

Now, I couldn’t let this opportunity to testify before you today go

past without mentioning an issue that’s really critical to our industry, which is permanent normal trade relations for China. I just

want to tell you that bringing China into the WTO is very much

in America’s national economic interest and it is critical to continuing American technological leadership and competitiveness in

international markets that this vote occur and occur this year.

Granting China PNTR is a critical process for us, and we hope that

we can count on you to support PNTR.

Thank you. We appreciate the opportunity and your patience.

[The prepared statement follows:]

Statement of Rhett Dawson, President, Information Technology Industry

Council

Thank you Mr. Chairman for inviting me to testify today on the outcome of the

World Trade Organization Ministerial Meeting in Seattle and the trade priorities of

the information technology industry, particularly in the area of e-commerce. I commend you and the Members of this Committee, for the important step you took by

participating in the meeting in Seattle. There is no doubt trade is important to all

of us.

I am Rhett Dawson, President of the Information Technology Industry Council.

ITI is the premier trade association comprised of the leading IT companies. Our

members had worldwide revenues of $460 billion in 1999 and employ more than 1.5

million people in the United States. Our companies are making a tremendous contribution to the growth and innovation we see in the IT industry and to our economy as a whole.

International trade and electronic commerce are of critical importance to ITI

member companies. Nearly 60% of their total revenues are derived from overseas

sales in more than 125 countries. Consequently, a major focus of our work is to promote policies that open markets, foster innovation, provide consumers with choices,

and stimulate the development of electronic commerce.

I. INDUSTRY-TO-INDUSTRY COLLABORATION ON TRADE ISSUES ESSENTIAL

Over the past five years, ITI has worked closely with our counterpart associations

in 14 countries around the world in an organization called the International Information Industry Congress. Working on an industry-to-industry basis, we have developed consensus views on critical trade issues and advocated our positions to government. Our efforts helped pave the way for the 1996 Information Technology Agreement to eliminate customs duties on IT products. We are working through the IIIC

and APEC to identify and eliminate non-tariff barriers to trade in IT products. In

addition, our industry-to-industry work is focused on the benefits of information

technology and the new issues brought about by electronic commerce.

At the behest of USTR, ITI organized three seminars over the past eighteen

months to familiarize WTO delegates in Geneva with trade issues affecting the information technology industry. We addressed the benefits of information technology

for economic growth and development, the application of existing trade rules to new

technologies, and proposed action by Ministers to keep e-commerce barrier free.

Last winter, as we began preparing for the Seattle Ministerial, ITI teamed with

the Business Software Alliance (BSA) to promote an e-commerce trade agenda for

the 21st Century. We focused on defining key issues in international trade and ecommerce and on proposing action by industry and governments to ensure that the

benefits of the global electronic marketplace are shared broadly among all countries,

124

both developed and developing. We initiated dialogues with our industry counterparts in Europe and Asia and invested considerable resources to acquaint WTO representatives in Geneva with our technology and the potential trade policy issues

that the WTO may need to address. We were prompted to do this in order to develop

a common understanding of what e-commerce is and means for the trading system.

We arrived in Seattle with high hopes for ministerial action to keep e-commerce

barrier-free. Our industry-to-industry consultations revealed solid support for extending the moratorium on applying customs duties to electronic transmissions. We

were encouraged by reports that consensus was developing on other key points, including: reaffirmation that current WTO rules apply to e-commerce; commitment to

resist imposing burdensome regulations that would inhibit the growth of e-commerce and access to IT; and establishment of a WTO work program on the interrelated issues inherent in e-commerce, building on the WTO’s efforts to date. Clearly, our industry-to-industry consultations were successful in broadening understanding of these issues among WTO delegates and highlighting the need for ongoing trade liberalization in this sector.

II. DISAPPOINTED, BUT OPTIMISTIC . . . E-COMMERCE AND THE INTERNET ARE

TRANSFORMING INTERNATIONAL TRADE

To be sure, we were disappointed that Ministers failed to reach agreement and

launch a New Round. But, we were heartened by the substantial progress that was

made on e-commerce. We believe that an agreement on e-commerce could and would

have been reached—had the whole package come together. In spite of criticism of

the WTO, the Seattle Ministerial in particular, and U.S trade policy that you may

hear expressed today, the IT industry is optimistic that trade negotiators will resume discussion of e-commerce issues in the very near term.

Countries all over the world have observed the U.S experience and recognize the

very positive, quantifiable impact IT is having on the US economy, as reflected in

productivity increases, job creation, and economic growth. They understand that IT

is not a specialized sector of the economy reserved for the so-called ‘‘Internet companies or ‘‘dot-coms.’’ To be competitive in any business—whether public or private—

governments and companies must understand how to effectively utilize information

technology and the Internet.

A few data points might be helpful to illustrate this point:

• Between the first quarter of 1998 and the first quarter of 1999, the Internet

Economy (which includes such things as online sales and investment in IT infrastructure) grew 68 percent. • In the same time period, electronic commerce increased by 127 percent and

nearly 400,000 e-commerce jobs were created. Some industry analysts estimate that

e-commerce will generate more than $3 trillion in sales by 2003. • Investment in computer and information technologies in the 1990s by every sector of the U.S. economy—from car makers to farmers—has cut production costs and

boosted output. The result has been to hold prices down and increase American competitiveness internationally.

The future is even brighter:

• A report released last year by the University of Texas estimated that by the

end of this year 56 percent of U.S. companies will sell their products online. • In the next six years, almost half of the U.S. workforce will be employed by industries that are either major producers or intensive users of IT products and services.

Not only is the Internet driving the New Economy it is also re-inventing our industrial base. • Late last year the world’s two biggest automakers announced plans to put their

entire purchasing operation online. The move will connect suppliers, business partners and customers all around the world. • Even the United States Postal Service is looking for ways to become more competitive in the Information Age—focusing on how they can use technology to better

serve their customers.

The fact is IT is changing nearly every facet of our lives—from how we teach our

kids to how business is conducted. While it is nearly impossible to predict what the

future will look like, we do know that the success and growth of our industry has

been—and will continue to be—fueled by innovation and trade.

III. OUR TRADE AGENDA FOR 2000

There is much work to be done to broaden understanding of the digital world, especially to understand how electronic commerce is changing global business, examine how current trade rules apply, and assess whether new rules are necessary to

125

provide a strong underpinning for the global information economy. We will focus our

effort on the WTO.

A. WTO Services Negotiations (GATS 2000)

The WTO has a built-in agenda requiring negotiations on Trade in Services. We

believe there may be an appropriate way to take up e-commerce issues in the context of these negotiations, and we are exploring possibilities with our industry and

government colleagues both here and abroad. Some have suggested that the

Telecom Reference Paper, which is part of the Services Agreement on Basic Telecommunications, may offer a starting point for elaboration of rules governing Internet access and e-commerce. We look forward to exploring this suggestion, though we

are somewhat concerned that it may imply a greater government regulatory focus

than the IT industry believes is appropriate. The IT industry’s fundamental principle is to minimize government regulation of this sector and promote open competition. We need trade rules in the area of e-commerce that support the entrepreneurial innovation and competition that characterize our industry.

B. Potential Action by Ministers

As WTO Director General Mike Moore reconvenes the delegates in Geneva, there

may well be a possibility for ministerial action on the specific issue of e-commerce.

We propose the following action:

Ministers should make a public commitment to keep electronic commerce barrierfree. Such a commitment would be a ‘‘best efforts’’ pledge that would set the tone

and direction for ongoing liberalization of policies affecting electronic commerce, foster a transparent, predictable and technology-neutral international trade environment, and spur global economic growth and development.

To support this commitment, five additional actions by Ministers are needed:

• The first is to agree to continue the May 20, 1998 Moratorium on Customs Duties on Electronic Commerce and clarify that the exemption from tariffs applies both

to the transmissions themselves and to their contents.

• Second, we want the Ministers to reaffirm that current WTO obligations, rules,

disciplines and commitments (namely the GATT, GATS and TRIPS agreements) are

technology-neutral and apply to e-commerce. We don’t need to invent new trade

rules when using the existing rules may serve us better.

• Third, we want Ministers to specifically commit to resist imposing burdensome

regulations that would inhibit the growth of electronic commerce and access to IT

and instead, when measures must be taken, employ the ‘‘least trade restrictive’’

measures possible. Such measures should be subject to WTO principles (in particular, national treatment, non-discrimination, transparency, notification, review

and consultation).

• Fourth, we want Ministers to give the WTO General Council responsibility to

oversee a work program on the inter-related issues inherent in electronic commerce,

building on the WTO’s efforts to date. Our objectives in this work program are to

achieve: 1) expanded market access commitments in the General Agreement on

Services (GATS), the Agreement on Basic Telecommunications and the Reference

Paper; 2) expanded country participation and product coverage in the Information

Technology Agreement, and 3) full implementation by all WTO members of the

World Intellectual Property Organization (WIPO) copyright and phonograms treaties that impact e-commerce.

• Fifth, we want to establish a substantive dialogue on technical assistance for

developing countries and continue a regular dialogue between the WTO and IT industry representatives.

C. Confidence-Building Measures are Needed

This Committee is in a unique position this year to take early action on certain

trade matters that will have the effect of building confidence in our trading system.

We commend you for the leadership you have shown in forging consensus on the

Africa/CBI bill. While this legislation is not a priority matter for the IT industry,

we strongly support it because of the important confidence-building messages it

sends, namely that trade liberalization enhances our economy and must continue,

and that the needs of developing countries must be squarely addressed. Later this

spring this Committee will also consider the U.S. participation in the WTO, now five

years after its creation. Here, too, this Committee can play an important role in restoring confidence among our trading partners by reinforcing the commitment of the

U.S. Congress to the WTO.

126

D. Support for the On-going Process of Trade Liberalization

PNTR for China is Essential. Later this spring Congress will consider extending Permanent Normal Trade Relations to China in connection with China’s accession to the World Trade Organization (WTO). Bringing China into the WTO is in

America’s national economic interest, and it is critical to continuing American technological leadership and competitiveness in international markets. Granting China

PNTR is a critical part of this process.

There can be no doubt that the bilateral agreement is a solid ‘‘win’’ for our industry. High-technology products (including semiconductors, semiconductor capital

equipment and materials, telecommunications, computer hardware and software,

electronics, and other related information technology products) represent some of

our country’s most sought-after exports. China, already our 4th largest trading partner, is one of the world’s fastest growing markets for high-tech exports. We benefit

from the market access provisions subscribed to by the Chinese that substantially

improve the trade and investment opportunities for the high-tech industry. These

include:

• Elimination of tariffs on nearly all information technology products;

• The right to import and distribute goods without mandated intervention of Chinese entities;

• Increased foreign participation in China’s telecommunications services sector;

and

• Far-reaching reforms to bring China’s economy into compliance with international rules.

These market reforms will help bring about positive economic and social changes

that will benefit all the people of China. The extension of permanent normal trade

relations status to China will enable the IT industry to expand trade and investment with China. This, in turn, will lead the industry to create more high-wage

jobs, contribute to expanded domestic economic growth, and advance American technological leadership and competitiveness in international markets. We will also benefit from having China abide by the international trading rules.

We urge Congress to extend normal trade relations status to China on a permanent basis so that U.S. industry will receive the full benefits of China’s WTO accession package.

Conclude ITA II Negotiations. We need on-going liberalization to keep trade

rules relevant to industry. The IT industry strongly supports the seminal Information Technology Agreement, which eliminated customs duties on a broad range of

IT products. The ITA is a voluntary agreement, subscribed to by 52 countries that

represent over 95% of world trade in these products. The problem is that the list

of products covered by the ITA is now two-to-three generations behind products

being produced and exported today. In just the past three years we have seen the

convergence of computing, telecommunications and consumer electronics technologies, and the creation of a fascinating range of new information appliances and

applications. In addition, the ITA does not yet address specific technical or regulatory barriers to trade in this sector, and useful work could be done in the nearterm on these matters.

Access to all IT products on a duty-free basis is a critical element in bringing the

benefits of Information Age to all enterprises—both large and small—in developed

and developing countries. We must complete the ITA II negotiations without delay

and then update the ITA product list to keep it relevant to the products that are

being produced and exported.

Improve the Functioning of the WTO. And finally, we must, as an urgent priority, continue to explain the benefits of international trade and improve the functioning of the WTO. This message must be broadly shared with small and mediumsized companies, consumers, labor groups and the media. We need to find a way

to facilitate serious discussion among all interested parties on how to reform the

WTO. We in the business community—particularly in the IT industry, which benefits so much from international trade—must take responsibility in this area.

The IT industry is hopeful and optimistic that governments will heed our advice

regarding trade and e-commerce issues. Industry around the world has been hard

at work to help define issues and solutions in this critical area. In spite of the set

back of the Seattle Ministerial, we are confident that there is a solid consensus that

the WTO must address these issues.

I know we can count on this Committee for leadership and policy direction for free

and open trade. We stand ready and willing to lend our expertise and assistance

to the Committee, the Administration, and our trading partners. It is in our common interest to keep e-commerce barrier-free.

127

Thank you Mr. Chairman and I would be happy to answer any questions you

might have.

Chairman CRANE. Thank you, Mr. Dawson.

Mr. Vastine.

STATEMENT OF ROBERT VASTINE, PRESIDENT, COALITION OF

SERVICE INDUSTRIES

Mr. VASTINE. Thank you very much, Mr. Chairman and Congressman Houghton. Good to see you both again.

Thank you for this opportunity to testify on behalf of the Coalition of Service Industries. CSI and its partners and friends here

and around the world have been working since the conclusion of

the WTO telecommunications and financial services negotiations in

1997 toward the Services 2000 round. Supporting our skilled services negotiators in Washington and Geneva, we have strived to develop a consensus globally that the Services 2000 negotiations must

be used to expand significantly trade across a wide range of services.

The failure of the Seattle Ministerial was very disappointing,

particularly because there was consensus on the text of the declaration for services. Had the Ministerial succeeded, this text would

certainly have been adopted. Nonetheless, the built-in agenda requires negotiations and services to start at the beginning of this

year.

The great question, until just yesterday, was whether the failed

ministerial had so jaundiced the atmosphere that WTO members

would refuse to proceed with the important work of the built-in

agenda.

CSI led a group of industry representatives for meetings of the

WTO in Geneva last week for talks with Mike Moore and a number

of key delegations in order to support the start of the Services

talks. The tone of these meetings was surprisingly positive. It

seemed to us very likely that a key meeting scheduled for yesterday would decide to move ahead on the built-in agenda.

The news indeed from yesterday’s WTO General Council meeting

was very good. WTO members have decided that the global trading

system is too important and the WTO itself too valuable not to get

back to business. In Seattle, the members took a good look at the

abyss and decided to step back from it. This means essentially that

the services work will proceed much as it would have even if Seattle had produced a ministerial declaration.

We are now, in fact, where we would have been had the declaration been adopted.

And I must say that director general Mike Moore has worked

very hard for this. We think he has done a very good job in exceptionally difficult circumstances to get that organization back on

track. The General Council’s decision yesterday means that the

Council on Trade and Services will meet on February 25th, later

this month, to consider how to organize the services negotiations.

That work will fall into two categories. First, work on rules and

second, work on market access.

128

In the rules area, we will pay special attention to the effort to

reach agreement on rules permitting safeguards. There has not

been a safeguards rule for services, and we will want to consider

whether one is needed and what it might provide. The market access area is of course the heart of the effort, because here’s where

we can get expanded trade. We hope that the Council on Trade and

Services will initiate the market access work in tandem with the

rules work.

What do we want in the new Services round? We have a long

agenda. First, we want maximum liberalization in all the sectors,

services sectors, as soon as possible. We want to include new sectors, like energy services and air express services, and work on existing sectors like education and health that have not gotten much

attention heretofore.

We want to remove barriers to electronic commerce. There has

been a lot of focus in the last 2 years on the moratorium on electronic transmissions. This is important work, but there are other

objectives perhaps of more immediate commercial value. One would

be to secure commitments for free trade in all the services that

make an e-commerce transaction possible, like distribution and financial services, for example.

We want free movement of key business personnel for limited assignments in other countries. This is an extremely sensitive but

very important area. U.S. business needs to send personnel to service clients’ needs all over the globe. And the U.S. economy needs

skilled personnel at a time of record unemployment.

We also seek regulatory transparency. Regulations governing the

provision of services are often used to prevent U.S. companies from

doing business on equal terms with foreign domestic providers,

with whom they compete. To cure this, we need to make regulatory

processes transparent and accessible, and we will be seeking this

kind of regulatory reform sector by sector in the coming negotiations.

Mr. Chairman, we believe the WTO is the best available means

to facilitate our trade expansion objectives. It has a successful

track record in services. That is why we continue to help build its

competence in services trade, and why we continue to build a

world-wide base of private sector support for the services negotiations. We are very pleased by the decisions of the General Council

yesterday. We anticipate a year of useful work in the WTO and are

very positive about the outlook for making real progress toward

freer trade in services.

Thank you.

[The prepared statement follows:]

Statement of Robert Vastine, President, Coalition of Service Industries

MAKING PROGRESS ON SERVICES TRADE LIBERALIZATION AFTER

SEATTLE

Mr. Chairman, I am very grateful for the opportunity to present the views of the

Coalition of Service Industries (CSI) on the post-Seattle trade agenda for services.

CSI and its partners and friends here and around the world have been working

since the conclusion of the WTO telecommunications and financial services negotiations in 1997 toward the ‘‘Services 2000’’ round. Supporting our skilled services negotiators in Washington and Geneva, we have strived to develop a consensus that

129

the ‘‘Services 2000’’ negotiations must be used to expand significantly trade across

a wide range of services.

These efforts included conferences on services in Washington; San Jose, Costa

Rica; and Hong Kong. They culminated at the World Services Congress in Atlanta

a month before the Ministerial, where more than 800 business, academic and government experts from more than 50 countries met to discuss and recommend policies on most of the important issues affecting trade in services. I would be glad to

supply these recommendations for the record.

Participating in these efforts along with CSI have been the Hong Kong Coalition

of Service Industries, the American Enterprise Institute, the Brookings Institution,

Harvard’s Center for Business and Government, the Mark Twain Institute, and

hundreds of companies, businessmen and scholars. Many of these organizations and

individuals participate in the Global Services Network, a loose, broad-based network

whose members support liberalization of trade in services. International organizations like the Organization of American States and the World Bank have also played

an important role.

Thanks to all these efforts and with the leadership of our negotiators, a strong

consensus had developed by the time of the Ministerial Conference on the goals for

the sector. The text relating to services contained in the final draft of the Seattle

Declaration would certainly have been agreed had the Ministerial Conference concluded successfully. Nonetheless, that text, which is attached, will likely form the

basis for the mandated Services 2000 negotiations, though it may not be adopted

formally.

Thus the services sector was left after Seattle in a position to move ahead at the

beginning of 2000 as required by Article XIX of the General Agreement on Trade

in Services. Indeed, in her remarks closing the Ministerial, Ambassador Barshefsky

called for negotiations on services and agriculture to take place as mandated by the

‘‘built-in agenda’’ of the Uruguay Round.

The great question until just yesterday was whether the unsuccessful Ministerial

Conference had so jaundiced the atmosphere that Members would refuse, in the absence of a broader round, to proceed with the important work of the built-in agenda.

Members of the Coalition of Service Industries and services industry representatives from other countries met in Geneva last week with Director General Moore;

key members of the WTO secretariat; the Ambassadors of the ‘‘Quad"; the

Chairman of the GATS Council, Stuart Harbinson of Hong Kong; and representatives of key WTO Members including Brazil, Pakistan, Thailand, Malaysia, Egypt,

Argentina, and Australia. The purpose of our meetings was to express support for

the WTO and for the effort to liberalize trade in services, prior to the General Council meeting scheduled to take place yesterday.

Decisions of the WTO General Council

The news from yesterday’s General Council meeting is good. WTO Members seem

to have decided that the global trading system is too important and the WTO itself

too valuable, not to proceed with the mandated agenda and get the organization

back on course. In Seattle the Members got a good look at the abyss, and decided

to step back from it.

The Director General should get the lion’s share of the credit. He has worked extremely hard since Seattle, using all of his political and personal skills to forge a

consensus on a positive program among the highly diverse WTO membership.

Yesterday the WTO General Council instructed the Council on Trade in Services

(the ‘‘GATS Council’’) and the Committee on Trade in Agriculture to carry out the

negotiations.

This means the GATS Council will meet in special session on February 25 to consider a timetable for the negotiating process and other organizational matters. The

Working Party on Domestic Regulation and the Committee on Specific Commitments will meet that week as well.

The services work program for 2000 will thus proceed much as it would have even

if Seattle had produced a Ministerial Declaration. Specifically, work on services will

progress on two fronts: rules and market access.

The first front, rules, entails completing unfinished work of the Uruguay Round,

and improving on rules already adopted. This work is organized through a number

of committees reporting to the GATS Council, including the Working Party on Domestic Regulation, Committee on Specific Commitments, the Working Party on

GATS Rules (dealing with emergency safeguard measures, subsidies, and procurement), and the Committee on Financial Services.

Though technical, some of the issues considered by these working groups are extremely important.

130

For example, the Working Party on Domestic Regulation is looking at ways to

strengthen the regulatory disciplines in GATS Article VI in regard to licensing,

qualification requirements, and technical standards. The purpose is to insure that

regulations are transparent and not unnecessarily burdensome or trade restrictive.

I will discuss regulatory issues further below.

The Working Party on GATS Rules is considering the adoption of a rule on safeguards, which must be completed by the end of the year. This work must be very

carefully followed. While the principle of safeguards is well accepted for trade in

goods, it has never been applied to trade in services. Whether safeguards have a

place in the service sector and what that place may be is an important issue.

The Committee on Specific Commitments is working on classification, in order to

create accurate descriptions for important, newer, industries like air express services, and energy services, for example. The purpose is to ensure that when a country

makes commitments to liberalize trade in a given sector, the commitments capture

accurately the actual range of commercial activities performed in the sector, and are

legally secure.

There seems to be a solid consensus among WTO Members that this work should

proceed immediately. Indeed, progress on these issues will encourage many emerging market delegations to move soon on market access talks.

The second front, market access, is paramount for CSI, because this is the work

that we expect will result in greater access to markets across the broad range of

sectors and all four of GATS’ ‘‘modes of supply".

Hopefully at its February 25 meeting the GATS Council will agree that preparations for market access negotiations should begin immediately, in tandem with the

work on rules mentioned above. This means that governments will begin to prepare

their request and offer lists, which they will likely exchange in the fall.

While yesterday’s General Council meeting established no formal link between the

negotiations on services and the negotiations on agriculture, our discussions in Geneva left little doubt that many countries will make such a linkage. Our position

is that liberalization of trade in services promotes economic growth, development of

critical infrastructure, and technology transfer. It provides significant benefits for

consumers in both advanced and developing markets. Limiting the gains from expanded trade in services by insistence on linkages would be self-defeating.

Goals for the Next Services Negotiations

The US services sector has several priorities for the coming negotiations.

The first is to achieve maximum liberalization in all modes of supply across the

widest possible range of services, as soon as possible. The WTO is the best available

means to facilitate this objective among all the world’s significant trading nations.

It has a track record of successful negotiations in telecommunications and financial

services. That is why we continue to focus on building the WTO’s competence in

services trade, and why we continue to help build a worldwide base of private sector

support for multilateral services negotiations. We are committed to working with developing economies to help them identify both their own interests in trade liberalization in services, and the benefits they can derive from such liberalization.

The second, related objective is to fully embrace important new sectors in the liberalization effort. These new sectors reflect the continued growth of the knowledgebased services, and certainly include all the services required to support electronic

commerce. They also include important, new sectors like energy and environment,

and existing ones that have not received sufficient attention, like education and

health.

The third objective is to focus on the real barriers impeding the full realization of

the promise of electronic commerce and the Internet. This may require a fresh look

at the WTO work program on electronic commerce, which has been dominated by

the objective of obtaining a permanent moratorium on duties on electronic transmissions. While this is a useful goal, there are other objectives of more immediate

commercial value. One would be to secure commitments to ensure free trade in the

services that make e-commerce possible, like distribution and financial services, for

example, and the services that can be traded through electronic commerce.

This objective could be pursued through the services negotiations. Efforts to obtain the extension of the moratorium on duties on electronic transactions and other

elements of the electronic commerce agenda that were discussed intensively, but not

finally agreed at Seattle, should be pursued on a separate track when the WTO

Council considers how to re-launch this work.

The fourth objective is to increase commitments to liberalization of cross border

trade, providing, however, that governments may take necessary prudential, health,

safety and consumer protection measures as already provided in GATS Article XIV.

Currently there are relatively few commitments to cross-border trade in services.

131

Such cross-border trade will create an incentive for service providers to operate from

competitive home markets geared to product quality, transaction security and customer responsiveness.

The fifth objective is to obtain commitments to the freer movement of key business

personnel. This is an area of increasing concern to US business, which is daily hampered by shortages of critical skills in an economy blessed by remarkably low rates

of unemployment. Immigration rules should be revisited to permit easy access to

visas and work permits for short-term entry of foreign experts to complete limited

assignments and return home. We should of course ask the same of other countries,

because US businesses need to be able to transfer skilled people to service their own

and their customers’ needs, whether in Buenos Aires or in Bangkok. For sound reasons, some emerging market countries have made this a major goal in the WTO

talks because of the opportunity it provides to upgrade the skills and opportunities

of their own people; it would help reduce the incentive for skilled, talented people

simply to emigrate in search of better work.

The sixth objective is to strengthen GATS regulatory and transparency provisions.

Services industries are in general the most highly regulated. In many instances,

rules and regulations governing the provision of services are used in a manner to

impede the ability of US firms to engage in doing domestic business on a level playing field with local businesses. Only by making regulations and regulatory processes

transparent and accessible and treating foreign and domestic market participants

equitably will firms be able to compete fairly on a global basis.

Conclusion

Mr. Chairman, CSI is dedicated to supporting our government’s efforts to develop

fully, this year, the complex range of services work that is outlined above, including

the launch of market access negotiations. Given its strong commitment to open markets, CSI was actively involved in private sector preparations both for the Seattle

Ministerial, and the Services 2000 negotiations. The inability of Trade Ministers to

leave Seattle with a blueprint for global trade negotiations is a warning to all that

obtaining further trade liberalization will not be easy.

For our part, we will redouble our efforts to work with businessmen and trade

negotiators around the world to help achieve the consensus and political will that

are the critical components of successful negotiations. We also look forward to working with the Administration and Congress to help develop the leadership necessary

to bring trade negotiators together so that services negotiations, as part of the builtin agenda, can move forward. We look forward to a year of very useful work to move

the services negotiations forward, and are very positive about the outlook for making real progress.

[Attachments are being retained in the Committee files.]

Chairman CRANE. Thank you.

Mr. Robertson.

STATEMENT OF STEVE ROBERTSON, PRODUCT MANAGER,

MARCONI COMMERCE SYSTEMS, GREENSBORO, NORTH

CAROLINA, ON BEHALF OF NATIONAL ASSOCIATION OF

MANUFACTURERS

Mr. ROBERTSON. Good afternoon. I’m Steve Robertson, Product

Manager at Marconi Commerce Systems. On behalf of Marconi,

and also the National Association of Manufacturers, NAM, of which

we are a member, I am pleased to have this opportunity to testify.

I commend the Ways and Means Trade Subcommittee, and you,

Chairman Crane, for holding these hearings on determining the direction of trade negotiations after Seattle. This subject is critical to

both Marconi and the NAM. Marconi is headquartered in Greensboro. We produce and ship gasoline dispensers and related equipment, from pump controllers to total site management systems for

convenience stores and service stations. The pamphlet you’ll be getVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00135 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
132

ting in a moment here will show you the most tangible, familiar

example of what we produce, a gas pump.

We have two factories in the United States, both in North Carolina. We moved to Greensboro from Springfield, Massachusetts in

1966 and opened with fewer than 900 employees. We have grown

as our international trade and domestic opportunities have expanded, to 2,500 people today in total, with 1,500 of them in

Greensboro.

The Greensboro plant produces gasoline dispensers for the world.

In 1989, we were only shipping products to a handful of countries.

Today, about 20 percent of our U.S. production is shipped to 85 different countries. Furthermore, Marconi has a worldwide presence,

which includes manufacturing facilities in Australia, England, Germany and the People’s Republic of China. Revenue directly related

to international trade at the Greensboro plant has increased 585

percent in the past 10 years. Our production and sales here in the

United States would stagnate if our consumers were limited to the

domestic market.

I’d like to describe for you today one particular area of great concern to Marconi. For several years, our company has through hard

work and good fortune been the leading supplier of gasoline dispensing equipment in Latin America. We sell to all countries in the

region. Fully one half of our exports end up in Latin America.

In response to our success, competitors have established manufacturing facilities in the MERCOSUR region of South America.

Since we must pay duties ranging from 17 to 30 percent on the

products we ship into these countries, we find ourselves at a serious price disadvantage. To deal with this problem, our short-term

position is to cut costs as best we can and to sacrifice profits to

maintain our number one market position. That is clearly not a

tenable long-term approach.

In the future, we will overcome the situation by elimination of

tariffs through successful negotiation of the free trade area of the

Americas and further WTO negotiations, or we will be forced to

build a factory in Brazil. If we are forced to go, foreign workers will

permanently replace up to 10 percent of our highly skilled, highly

paid U.S. production workers in Greensboro.

But that’s not all. Currently about 80 percent of the parts and

components in our products come from U.S. suppliers. The pamphlet I have given you today lists some of these suppliers. These

companies throughout the country will also suffer the loss of business as components for South American-produced product is

sourced in South America.

This example clearly illustrates how important it is for U.S. companies and U.S. workers to have better access to world markets.

Marconi urges the U.S. Government to be a strong leader and an

aggressive negotiator for the speedy elimination of trade barriers.

These negotiations must proceed quickly. It is our serious hope

that they last not more than 3 years. Three years is an eternity

in terms of profitability and competitiveness for a manufacturing

company.

Marconi Commerce Systems, like most other U.S. manufacturers,

looks forward to competing on a level playingfield with other worldwide manufacturers, because we believe that our workers are the

133

most productive in the world, and the products they make are of

the highest quality in the world. That is why Marconi is working

hard on its own through the NAM and through the recently formed

U.S. Alliance for Trade Expansion to support increased trade liberalization and to spread the message about the benefits of free

trade.

Thank you.

[The prepared statement follows:]

Statement of Steve Robertson, Product Manager, Marconi Commerce Systems, Greensboro, North Carolina, on behalf of National Association of

Manufacturers

Good morning. I am Steve Robertson, product manager at Marconi Commerce

Systems. On behalf of Marconi, and also of the National Association of Manufacturers (NAM), of which we are a member, I am pleased to have this opportunity to

testify. I commend the House Ways and Means Trade Subcommittee and Chairman

Crane for holding these hearings on determining the direction of trade negotiations

after Seattle. This is a subject of critical importance to both Marconi and the NAM,

so we are pleased to offer you our views.

The NAM spearheaded the U.S. Alliance for Trade Expansion (US Trade), a coalition of American agriculture, consumer, manufacturing, retailing and service organizations, to promote the benefits of expanded international trade. I was in Seattle

to promote our belief that trade expansion, and the rules-based trading system in

particular, is beneficial to all Americans. Admittedly, the relatively sober pro-trade

message we delivered had difficulty competing with the chaos that prevailed on the

streets. Good theater doesn’t necessarily mean good policy, however.

While few Americans have the time, interest or patience to follow the political

wranglings in Washington over a new round or permanent normal trade relations

(PNTR) status for China, it is important to take a step back and consider what the

failure to expand trade opportunities will mean to the bottom line of a small manufacturer in North Carolina.

Marconi is headquartered in Greensboro. We produce and ship gasoline dispensers

and related equipment, from pump controllers to total site management systems for

convenience stores and service stations. Marconi also provides customers with several payment-at-the-pump and merchandising options, such as built-in card readers,

cash acceptors and transmitter/receiver in dispenser technologies.

The pamphlet in front of you shows the most familiar tangible example of what

we produce—a gas pump. We have two factories in the United States, both in North

Carolina. We believe that our Greensboro factory is the largest of its kind anywhere

in the world. We moved to Greensboro from Springfield, Massachusetts, in 1966,

and opened with fewer than 900 employees. We have grown, as our international

trade and domestic opportunities have expanded, to 2,500 people total, with 1,500

of them in Greensboro today.

The Greensboro plant produces gasoline dispensers for the world. About 20 percent of our U.S. production is shipped to 85 different countries. We have high hopes

and targeted plans for expanding sales to the African countries. In the past, our African sales have been limited to Egypt and South Africa. We recently have signed

new distribution agreements in East and West Africa. Furthermore, Marconi has a

worldwide presence, which includes manufacturing facilities in Australia, England,

Germany and the People’s Republic of China. For that reason, a sound, multilateral,

rules-based commercial trading system is of paramount importance to Marconi.

Without such a system, it would be much, much harder and costlier to operate internationally. Our production and sales here in the United States would stagnate if

our consumers were limited to the domestic market.

Certainly the Uruguay Round of negotiations and the resultant creation of the

World Trade Organization were a groundbreaking exercise in global trade expansion. Marconi has capitalized upon these developments, as evidenced by the fact

that revenue directly related to international trade at the Greensboro plant has increased 585 percent in the past 10 years. In 1989, we were only shipping products

to a handful of countries; today, as mentioned above, 85 countries receive our products.

Several different explanations have been offered for the failure to agree on the

agenda for a new round. First, the ‘‘Doomed To Failure’’

theory: Apart from agriculture and services—both of which were part of the socalled ‘‘built-in’’ agenda for which negotiations would be automatically launched on

134

January 1, 2000—there was never any broad consensus on the need for a comprehensive round, which was a European Union (EU) idea to begin with, to create

as much possible compensation for much-needed agricultural reforms within Europe.

Moreover, countries needed more time to digest the Uruguay Round, major aspects

of which (TRIPs and TRIMs) have not been implemented in many developing countries.

Second, the ‘‘Protesters Derailed It’’ theory: The sometimes violent protests in Seattle undoubtedly had some chilling affect on the negotiations; they certainly gave

the United States a black eye as the host for this international meeting. But did

the protest derail the talks? I don’t think so.

Third, the ‘‘Angry Developing Countries’’ theory: Expecting a shot in the arm from

the President’s appearance in Seattle, the talks were thrown into crisis when the

President explicitly called for sanctions to enforce ‘‘core’’ labor standards, despite assurances given by senior Administration officials that only an analytical working

group was contemplated. Unlike previous rounds, the developing countries were not

going to be excluded from the high-level, ‘‘Green Room’’ political discussions geared

to cutting a final deal.

Finally, the ‘‘Miscalculation of the Dynamics of the Talks’’ theory: The logistics

of negotiating a consensus within a now unwieldy 135-member organization was unrealistic to begin with, given the politically charged atmosphere, and the complexity

and scope of the issues. Moreover, negotiators did not enjoy the high-level support

back home to cut politically sensitive deals.

For my part, having witnessed the event, I concur with aspects of all four theories. Whatever the cause, we highly support further trade liberalization and urge

you to ensure that these negotiations are launched in the year 2000. Time is of the

essence: negotiations should not be put off.

These negotiations should provide for the reduction of tariff and non-tariff barriers to facilitate the expansion of market access for companies such as Marconi.

With reduced barriers, our potential is endless, and there is still much room to grow

and further facilitate the operations of the international marketplace. By way of illustration, let me describe for you one particular area of great concern to Marconi.

For several years our company has, through hard work and good fortune, been the

leading supplier of gasoline-dispensing equipment in Latin America. We sell to all

countries in the region—fully one-half of all Marconi exports end up in Latin America.

In response to our success, competitors have established manufacturing facilities

in the Mercosur region of South America. Since we must pay duties, ranging from

17 percent to 30 percent, on the products we ship into these countries, we find ourselves at a serious price disadvantage. To deal with this problem, our short-term

position is to cut costs as best we can and to sacrifice profits to maintain our number-one market position. This is clearly not a tenable longer-term approach. In the

future, we will overcome this situation by elimination of tariffs through successful

negotiation of the Free Trade Area of the Americas (FTAA) and further WTO negotiations, or we will build a factory in Brazil.

If we are forced to go, foreign workers will permanently replace up to 10 percent

of our highly skilled, highly paid U.S. production workers in Greensboro. But that’s

not all. Currently, about 80 percent of the parts and components in our products

come from U.S. suppliers.

The pamphlet I have given you today lists some of these suppliers. These companies throughout the country will also suffer the loss of business, as components for

South American-built gas pumps are sourced in South America. This example clearly illustrates how important it is for U.S. companies and U.S. workers to have better

access to world markets.

For this reason, Marconi urges the U.S. government to be a strong leader and an

aggressive negotiator for the speedy elimination of trade barriers. These negotiations must proceed apace, and it is our serious hope that they last not more than

three years. Three years is an eternity in terms of profitability and competitiveness

for a company. The early phase-in of reduced tariffs on capital goods, like our gasoline pumps, should face little opposition from our South American trading partners.

I mentioned earlier in my testimony that Marconi has operations in China. Not

surprisingly, China will soon be the largest market for petroleum-dispensing equipment. I want to reiterate here the importance of China’s accession to the WTO. The

deal that closed in November is a welcome and healthy development. A deal should

be closed as soon as possible with other trading partners so that China can be assimilated into the WTO, and therefore be a participant in future multilateral negotiations.

To give you an idea of just what kind of a deal we got, I would like to submit

for the record a one-page document titled ‘‘Why American Manufacturers Support

135

China’s Entry into the World Trade Organization.’’ In May, 1998, the NAM issued

a report that set forth key commitments that China should make in order for American manufacturers to support China’s accession to the World Trade Organization

(WTO). The scorecard indicates just how much was achieved. The deal provides genuine market access to all sectors. It includes not only the right to export goods, services and agricultural products to China, but the right to market, sell and distribute

them as well.

In considering whether to support PNTR for China, it is important to keep the

following facts in perspective:

China makes the concessions. The U.S. gets the benefits. China must take

on the challenge of opening its market. The United States makes no concessions.

Our market is already open to Chinese imports. This agreement levels the playing

field.

China’s market-access commitments are enforceable. The strong multilateral dispute-settlement mechanism of the WTO will help ensure that China adheres

to its commitments. Violations would subject China to authorized trade sanctions

under these same WTO dispute-settlement procedures.

China’s commitments to these disciplines will translate into jobs, profitable business ventures, increased productivity and competitiveness for U.S. workers and

manufacturers.

For Marconi specifically, only the southwestern tier of China, near Hong Kong,

is open. The rest of China has recently been divided between two state-owned oil

companies. To the extent that China’s accession means a commitment by the Chinese to transition from state-run commerce to a market-driven economy, and multinational companies are permitted to enter the Chinese market, Marconi stands to

benefit dramatically as our customers build retail fueling facilities in China. Additionally, tariff-reduction commitments would, we hope, reduce the up to 30-percent

import duties we now face when sending parts to our operation in China. Obviously,

China’s accession to the WTO is of importance to Marconi.

As a final note, our company and the NAM continue to urge Congress to extend

the currently expired trade-negotiating authority procedures. The extension of fasttrack trading authority is critical to enabling U.S. trade representatives to negotiate

‘‘final’’ trade agreements; authority they must have in order to be taken seriously.

The current situation puts American companies’ products and workers at a disadvantage. I don’t have to tell you that while our trade negotiating authority has

lapsed, competitor countries are concluding trade agreements without us. We are

falling behind our competitors.

Marconi, like most other U.S. manufacturers, looks forward to competing on a

level playing field with other worldwide manufacturers because we believe that our

workers are the most productive in the world and the products they make are of

the highest quality in the world. That is why Marconi Commerce Systems is working hard, on its own, through the NAM, and through the recently formed U.S. Alliance for Trade Expansion, to support increased trade liberalization and to spread

the message about the benefits of free trade. Thank you.

Chairman CRANE. Thank you, Mr. Robertson.

Mr. McCurdy, our distinguished colleague from Oklahoma. It’s

good to see you back in town again. You’re now located right across

the river, right?

Mr. MCCURDY. Just across the river. And it’s a long way between.

STATEMENT OF HON. DAVE MCCURDY, PRESIDENT, ELECTRONIC INDUSTRIES ALLIANCE, ARLINGTON, VIRGINIA; AND

FORMER MEMBER OF CONGRESS

Mr. MCCURDY. Mr. Chairman, having chaired a Committee, I appreciate your leadership and your willingness to chair a hearing

and go through a day like today.

In order to be brief, and I know those lights well, I do represent

the Electronic Industries Alliance, a partnership of electronic and

high-tech associations and companies committed to shared knowlVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00139 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
136

edge and shared influence. With over 2,000 member companies, accounting for 80 percent of the $550 billion electronics industry,

we’re proud to represent the most dynamic and competitive industry in the world economy today.

The companies we represent operate globally. They think and we

think and plan in global terms, and they face intense international

competition. The fact is, the days when U.S. companies dominated

the global high technology industry are over. Similarly, the days

when domestic U.S. market could sustain the industry are also

over. It has become almost cliche, but the global economy is a fact

of doing business for us, and it is a critically important concept to

keep in mind as we formulate public policy in this area.

For the past 50 years, the United States has led the world toward economic integration and opening of global markets. From

World War II to the conclusion of the Uruguay round in 1994, the

U.S. Government, in a bipartisan approach, was committed to a

multilateral trading system. Although the message was often confused, the benefits of trade: competition, specialization, economic

integration in the world economy, and rising standards of living, all

were clear.

Consumers in open markets saw the equivalent of tax cuts, especially because of the increased purchasing power due to the availability of cheaper, often better quality products. This is especially

true in the realm of electronics.

The message is simple: trade is a win-win undertaking, and is

a net benefit for all. With the defeat of communism, the world has

embraced the concepts of market economics and reducing barriers

to trade. While the opponents of trade often accuse us of engaging

in a zero-sum game that is shifting wealth from developing to the

developed world, the evidence in the last decade is unequivocal.

Countries like Poland, Chile and Taiwan, which institute market

reforms, adopt democratic, transparent institutions and open their

economies to international trade and competition, see reduced poverty and rising living standards. Countries which remain closed or

only institute partial or haphazard reforms experience stagnation

or recession.

While global tariff rates are low, and decreasing every year, the

goal of trade policymakers is to now remove the remaining barriers

to trade through deeper integration of economies, through broadbased negotiations and internationally agreed-upon rules. The Seattle Ministerial meeting, however, confused the picture for continuation of the economic fundamentals. What we saw in the name

of opposition to globalization were fringe groups who want to stop

trade, not expand it.

The fact, however, is that globalization is a reality, and the best

approach is to stick to the basics and press for multilateral, rulesbased trade agreements. EIA believes it is crucial that expansion

of high technology trade be a priority goal of U.S. trade policy. Key

elements of a technology trade strategy should include securing a

broadened information technology agreement and trade rules that

are conducive to growth and e-commerce.

The ITA is a prime example of an initiative that has the potential to promote the growth of the U.S. economy and that of other

nations through improvements in efficiency and immigration. ConVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00140 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
137

sidering the speed of change in our industry and the rapid development of so-called convergence products, we cannot afford to wait

several years for the conclusion of a new round for necessary trade

liberalization. Indeed, just the start of a new round may take too

long.

Members of the U.S. high technology industry are concerned that

trade negotiating success in the technology sector not be held hostage to achievement of other trade policy goals. In this regard, it

is important that U.S. decisionmakers take a creative and flexible

approach to the built-in agenda that emerged from the Uruguay

round negotiations.

In any event, advancement of high technology trade expansion

must be a foremost goal of America’s post-Seattle approach to trade

negotiations and cannot be sacrificed due to a perceived lack of success in other areas. Our written testimony provides more details

regarding the ITA and e-commerce. However, I’d like to discuss one

of the most important WTO-related issues facing our industry

today, and that is bringing China into the rules-based, multilateral

trading systems.

China is the single most promising emerging market in the world

today. And this fact is especially true for the U.S. electronics industry. As China enters the information age and builds its information

infrastructure, it will purchase more high-tech equipment from the

world’s leading supplier, the United States. Bringing China into a

multilateral system of rules and procedures which the WTO oversees will go a long way toward making China a more attractive and

easier place to do business.

EIA member companies have an inherent interest to see China

become a member of the World Trade Organization. The electronics

industry has much to gain from China’s accession in the area of

tariff and nontariff barriers, distribution rights, trading rights,

transparency, state-owned enterprises, and national treatment.

Mr. Chairman, the issue and principle before us is very simple,

and that is, to vote for continuing the momentum for trade liberalization and reform. The verdict of history is clear: democracy and

market economics have won out over communism and state-controlled economies, which only produced human misery, economic

deprivation, and environmental devastation.

I would urge leaders in Congress to not delay nor try to make

political and partisan hay from this vote. This vote should occur before the summer and not be dragged out.

The best opportunity to continue the economic and social

progress of the past decade lies in voting early this year, before the

campaign season really begins, to further U.S. participation in

WTO, support China’s accession to WTO by granting permanent

NTR status, and support for the principle of economic freedom and

reform.

Mr. Chairman, I would hope that this vote would be bipartisan,

resounding and soon.

[The prepared statement follows:]

Statement of Hon. Dave McCurdy, President, Electronic Industries

Alliance, Arlington, Virginia; and former Member of Congress

Thank you, Mr. Chairman, for the opportunity to testify today on the post-Seattle

U.S. trade agenda. I represent the Electronic Industries Alliance (EIA), a partnerVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00141 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
138

ship of electronic and high-tech associations and companies committed to shared

knowledge and shared influence. EIA includes the Consumer Electronics Association

(CEA); Electronic Components, Assemblies, Equipment and Supplies Association

(ECA); Electronic Industries Foundation (EIF); Government Information Technology

Association (GEIA); JEDEC—Solid State Technology Association; and Telecommunications Industry Association (TIA). Simply put, we connect the industries that define the Digital Age.

I am also a former Member of Congress from Oklahoma. During my 14-year tenure in the House, I served as the Chairman of the Select Intelligence Committee,

as well as subcommittee chairman on the Armed Services Committee and the

Science Committee. This experience gave me valuable insight into the national security, foreign policy and technology policy issues of importance to the high technology

industries.

Realities of the High-Tech Industry

With over 2000 member companies, accounting for 80 percent of the $550 billion

electronics industry, we are proud to represent the most dynamic and competitive

industry in the world economy today. The companies we represent operate globally,

they think and plan in global terms, and they face intense international competition. The fact is, the days when U.S. companies dominated the global high-technology industry are over. Similarly, the days when the domestic U.S. market could

sustain the industry are also over. It has become almost cliche, but the global economy is a fact of doing business for us, and is a critically important concept to keep

in mind as we formulate public policy in this area.

As any successful CEO will tell you, competing—indeed, surviving—in the global

economy means exporting. The phenomenal success of the U.S. technology industry

comes from its entreprenurialism, its aggressiveness, its willingness to compete—all

those free market forces that drive innovation. In this kind of business environment,

tapping new markets before the competition does is the key to success. In 1999,

more than one-third of what the U.S. electronics industry produced was exported

overseas, over $150 billion in goods. That means more than a third of the 1.8 million

employees who work for U.S. electronics companies depend on exports for their jobs,

and the percentage goes up every year.

We must also recognize that our high-tech companies are the engine of technological innovation and economic growth in the world today. The U.S. economy is the

most competitive in the world due in no small part to the amazing advancements

our companies have achieved. Technologies which, not long ago, had only military

or limited civilian applications are now pervasive in our society, and the greater economic efficiency stemming from this diffusion of technology has been the driving

force for the remarkable prosperity so many Americans are experiencing. Not incidentally, salaries for high-tech jobs average around $58,000 per year, whereas the

U.S. average salary is $28,000 per year.

Leadership or Stagnation?

With the successful passage into the year 2000 without major Y2K or terrorist

events, Americans are as optimistic about the future as never before. The reason

for the positive feeling is that the fundamentals are good. The economy continues

to grow, with low unemployment, low inflation, increased productivity and a booming technology sector. The U.S. budget is balanced, thanks to the incredible economic performance. The social indicators such as crime and homicide rates are

down. We are on course for continued unprecedented economic growth and prosperity at home and abroad.

Because of these factors, voters are happy and policy makers should be ebullient.

Now is the time for politicians to lead. The opportunity to continue this growth depends on keeping faith with economic fundamentals, especially support for free and

open trade. For the past 50 years, the United States has led the world toward economic integration and opening of global markets. Accordingly, as President Clinton

stated, ‘‘the world has experienced the most rapid, sustained period of economic

growth ever recorded.’’ From WWII to the conclusion of the Uruguay Round in 1994,

the U.S. government, in a bipartisan approach, was committed to the multilateral

trading system. Although the message was often confused, the benefits of trade:

competition, specialization, economic integration of the world economy and rising

standards of living, all were clear. Consumers in open markets saw the equivalent

of tax cuts, because of the increased purchasing power due to the availability of

cheaper, often better quality products. This is especially true in the realm of electronics.

The message is simple; trade is a win/win undertaking and is a net benefit for

all. With the defeat of communism, the world has embraced the concepts of market

139

economics and reducing barriers to trade. While the opponents of trade often accuse

us of engaging in a zero-sum game—shifting wealth from the developing to the developed world—the evidence of the last decade is unequivocal. Countries like Poland, Chile, and Taiwan which institute market reforms; adopt democratic, transparent institutions; and open their economies to international trade and competition; see reduced poverty and rising living standards. Countries which remain closed

or only institute partial or haphazard reforms, experience stagnation or recession.

While global tariff rates are low and decreasing every year, now the goal of trade

policy-makers is to remove the remaining barriers to trade through deeper integration of economies through broad-based negotiations and internationally agreed upon

rules. A good example of this is the lifting of government restrictions on competition

in industries such as telecommunications.

The Seattle Ministerial Meeting, however, confused the picture for continuation

of the economic fundamentals. What we saw, in the name of opposition to

‘‘globalization,’’ were fringe groups, who want to stop trade, not expand it. Under

the guise of nationalism or environmentalism, the Seattle opposition was intent on

destroying, not promoting multilateral economic cooperation. Playing to fears of

rapid change, superbly organized groups are trying to reverse globalization, rather

than influence or shape it. The fact, however, is that globalization is a reality and

the best approach is to stick to the basics and press for multilateral, rules-based

trade agreements.

The Seattle Ministerial

The WTO was created in 1994 as a means to more formally bring together the

world trading community under a binding system of rules that provide, among other

things, the opportunity for countries to challenge each other on trading matters. In

the past, negotiations were conducted between a relatively small group of countries,

where informal agreements were hashed out and then presented to the larger group

of countries for consensus. This process focused heavily on the interests and

strength of the developed world and left many countries in the developing world unable to participate in some discussions, a complaint which resurfaced during the Seattle negotiations. Further complicating the Seattle talks was the basic fact that

many of the ‘‘easier’’ trade issues were addressed in previous rounds, leaving the

most contentious and difficult issues for the Ministerial.

EIA participated at the Ministerial and conducted numerous meetings with representatives of other country delegations. From our meetings, it was apparent that

many of the items for discussion at the Ministerial would be highly contentious.

Many developing country representatives had a number of common interests to be

addressed during the talks, including demands for additional time to implement

Uruguay Round commitments.

Adding to the confusion and disagreement was U.S. isolation in some of its negotiating positions. This was especially true in the case of the U.S. Government’s support for inclusion of labor and environmental standards in the WTO Agreement as

sanctionable trading violations. This pronouncement hit a strong chord with many

developing country representatives, who felt that these standards would be used

against them in trade disputes. In the end, these differences made it impossible for

the WTO members to agree on a set of negotiating principles to lead the round for

the next several years.

Future Agenda

Trade in the high technology sector is a major and growing part of U.S. exports

and world trade in general. Moreover, maintaining a vibrant U.S. high technology

industry is now critical to U.S. economic prosperity and, in turn, depends on continued trade expansion.

Accordingly, it is crucial that expansion of high technology trade be a priority goal

of U.S. trade policy. Key elements of a technology trade strategy should include securing a broadened Information Technology Agreement and trade rules that are conducive to growth in E-Commerce. The ITA is a prime example of an initiative that

has the potential to promote the growth of the U.S. economy and that of other nations through improvements in efficiency and integration. Considering the speed of

change in our industry, and the rapid development of so-called ‘‘convergence’’ products, we can not afford to wait several years for the conclusion of a new round for

necessary trade liberalization. Indeed, just the start of a new round may be too late.

Members of the U.S. high technology industry are concerned that trade-negotiating success in the technology sector not be held hostage to achievement of other

trade policy goals. In this regard, it is important that U.S. decision-makers take a

creative and flexible approach to the ‘‘built-in’’ agenda that emerged from the Uruguay Round negotiations. In any event, advancement of high technology trade exVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00143 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
140

pansion must be a foremost goal of America’s post-Seattle approach to trade negotiations and cannot be sacrificed due to a perceived lack of success in other areas.

Information Technology Agreement

The Information Technology Agreement (ITA) was implemented on July 1, 1997.

The agreement called for the elimination of import tariffs for information technology

products by the year 2000. Those products covered by the agreement include semiconductors, computer hardware, software and telecommunications equipment among

others. The second round of negotiations, dubbed the ITA II, is underway to expand

product coverage, eliminate non-tariff measures (NTMs) facing the high technology

industry, and accelerate tariff reduction on products already included in ITA I.

EIA is a strong supporter of the ITA process because the ITA calls for reductions

in tariff rates on many of the products that our industry produces. These reductions

allow our industry to penetrate markets from Europe to parts of Asia. Importantly,

EIA endorses an expansion of the ITA to additional countries and additional products. We believe that while the first round of ITA negotiations produced important

changes to world-wide tariff rates on information technology products, there needs

to be a further examination of how convergence has expanded the scope of information technology. Specifically, EIA endorses an approach that broadens the types of

products that should be included in the ITA in the future. Our definition of an information technology product includes:

1) A product or device that uses digital means to process information; or

2) A product or device that is critical to the functioning of an information technology product; or

3) A product or device or components, parts, inputs of a device which enables or

facilitates the transmittal of information; or

4) A product, component, or input that is critical to the manufacture of an information technology product and is primarily or extensively used in such manufacturing.

E-Commerce

EIA is pleased by the broad consensus among developed and developing countries

alike that electronic commerce should remain duty free. The Administration should

be applauded for its initiative in 1998 to reach multilateral agreement to keep Internet commerce tariff-free. Although several countries remain somewhat wary of making the moratorium permanent, the Administration has made considerable progress

in explaining the benefits of e-commerce, as well as the stunting effect of ‘‘e-tariffs.’’

Like the ITA II, extending the tariff moratorium on e-commerce is an area in which

a conclusion is well within reach. Regardless of other issues, negotiations to permanently extend the moratorium on e-commerce tariffs should continue and, hopefully,

conclude quickly.

Similarly, the broader agenda of the WTO in examining the trade-related implications of electronic commerce must move forward as well. The emergence of the

World Wide Web as a means of commerce raises a variety of questions which require careful consideration, questions such as: how to prevent the creation of technical trade barriers in this area, how to ensure nondiscriminatory access for network and service providers, how to treat electronic transmissions, and how can ecommerce expedite and simplify implementation of WTO commitments. The WTO

has proven to be a useful forum for airing differing views on these types of questions, and for building multilateral consensus for moving forward.

China’s WTO Accession

Perhaps the most important WTO-related issue facing our industry is bringing

China into the rules-based multilateral trading system. China is the single most

promising emerging market in the world today, and this fact is especially true for

the U.S. electronics industry. As China enters the Information Age and builds its

information infrastructure, it will purchase more high-tech equipment from the

world’s leading supplier—the United States. Consider the following trends:

• Total U.S. electronics exports to China more than doubled between 1994 and

1999, from $1.3 billion to nearly $3 billion.

• By December 1999, China was expected to have 39.7 million mobile phone subscribers, with an annual growth rate of 58.8 percent.

• China adds 15.1 million fixed telephone lines annually.

• The number of Internet users more than doubled between June and December

1999, from approximately 4 million to 8.9 million.

• The number of websites also increased dramatically in that six month period,

from 9,906 to 15,153.

141

Nevertheless, our companies face considerable obstacles to penetrating the Chinese market, and this is reflected in the lopsided bilateral trade deficit. Even in the

electronics sector, where in most cases U.S. manufactured products are superior in

terms of both quality and price competitiveness, the trade deficit in 1998 totaled

over $12 billion. This is due, in part, to the high tariffs China imposes on our products. In 1998, those tariffs averaged 18 percent, and in some sectors like consumer

products, tariffs are in the 40 to 60 percent range. But of even greater significance

to our trade deficit with China are the costly and burdensome non-tariff barriers

which confront our companies. As you can imagine, these barriers take many forms,

from a distribution system which discriminates against our companies, to the discriminatory buying practices of state-owned enterprises, to the arbitrary customs

procedures we face at the ports-of-entry.

For the electronics industry in particular, China is an important export and import market for EIA’s most competitive companies. On the export side, our industry

looks to China as a market for its products. China is a market of one billion people

that is growing in sophistication and buying power every year. On the import side,

our industry utilizes China as a source for components that are then incorporated

into larger products. The availability of these components, which often are not produced domestically, are essential to the competitiveness of our industry. Without access to the inputs produced in China, these firms would not be able to be competitive domestically or internationally.

Bringing China into the multilateral system of rules and procedures, which the

WTO oversees, will go a long way towards making China a more attractive, and

easier, place to do business. EIA member companies have an inherent interest to

see China become a member of the World Trade Organization (WTO). The electronics industry has much to gain from China’s accession in the areas of tariff and

non-tariff barriers, distribution rights, trading rights, transparency, state-owned enterprises and national treatment.

As part of the agreement reached on November 15, 1999, China agreed to:

• Implement the Information Technology Agreement by 2005, which will eliminate tariffs on a wide range of high-tech products. • Provide U.S. firms significant market access rights that include the ability to

import, export and distribute their goods throughout China. State-owned enterprises

would be prohibited from discriminating against U.S. firms in their buying decisions. • Enforce laws protecting intellectual property, and preventing local content requirements and forced technology transfers. • Open the telecommunications market to foreign competition and investment:

-China has agreed to implement the pro-competitive regulatory principles

embodied in the Basic Telecommunications Agreement (including cost-based

pricing, interconnection rights and independent regulatory authority), and

agreed that foreign suppliers can use any technology they choose to provide

telecom services.

-China will allow 49% foreign investment in all services immediately upon

accession, and will allow 50% foreign ownership for value added in 2 years

and paging services in 3 years. This is a change from the April 8 deal, in

that China had indicated it would allow 35% foreign ownership for valueadded and paging services two years after accession and 51% four years

after accession.

-China will phase out all geographic restrictions for paging in 3 years, value

added, and closed user groups in 3 years, mobile/cellular in 5 years and domestic wireline services in 6 years. China’s key telecommunications services

corridor in Beijing, Shanghai and Guangzhou, which represents approximately 75% of all domestic traffic, will open immediately on accession in

all telecommunications services.

-Internet services will be liberalized at the same rate as the other key telecommunications services, and China will permit provision of telecom services via satellite.

• Regarding antidumping, the U.S. will continue to treat China as a non-market

economy. Moreover, in applying countervailing duty law, the U.S. will be able to

take the special characteristics of China’s economy into account when we identify

and measure any subsidy benefit that may exist. This provision will remain in force

for 15 years after China’s accession to the WTO.

• Should China fail to abide by these commitments, China is subject to the WTO’s

Dispute Settlement Mechanism, including the possibility of multilateral trade sanctions.

Whereas China has committed to overhaul its economic structures, all the United

States must do is make permanent China’s ‘‘Normal Trade Relations’’ (NTR) status

142

under U.S. law. Unless Congress votes to make China’s NTR status permanent,

China will not grant, and is not required to grant, U.S. companies the benefits

which have been agreed to. Ironically, our overseas competitors would receive the

benefits of the November 15 agreement, while U.S. companies are shut out. EIA is

proud to be a member of the U.S. High-Tech Industry Coalition on China, as well

as the Business Coalition for U.S.-China Trade, working to ensure that Congress

permanent NTR.

In addition to the substantial economic opportunities the accession agreement creates, China’s membership in the WTO also advances our broader foreign policy goals

by promoting economic and political reform. The practical effect of adhering to WTO

principles and commitments makes China’s economic reforms of the last two decades irreversible, and sets China on a course for further free-market reforms. It

commits China to abide by the same multilateral trading rules—like national treatment, Most-Favored-Nation, and impartial dispute resolution—that we and our

other major trading partners already abide by. WTO membership will require greater transparency from China’s legal system and bureaucracies, creating unprecedented accountability for the country’s decision makers. Furthermore, it creates the

foundation for China’s prosperity and improving the quality of life for a billion people. Finally, it promotes the free flow of ideas and information through enabling

greater Internet penetration, music and movies, financial information and other

news, and increased exposure to U.S. companies and citizens.

Thirty-three emerging market countries have applied for membership in the 135-

member World Trade Organization (WTO). Most of these countries are transitioning

to market-based systems and represent 1.6 billion people, or nearly one-sixth of the

world’s Gross Domestic Product. The United States has seized the opportunity of potential WTO membership, to negotiate bilateral agreements with countries, such as

China, to press them to open and modernize their economies and markets. China,

not the U.S., had to make significant concessions to achieve membership in the

WTO. China must reduce tariffs, open markets for competition and investment from

U.S. firms and abide by international rules of commercial behavior and monitoring

of its compliance. As a result, US telecommunication and high tech companies have

a tremendous opportunity to gain from China’s accession to the WTO and concurrent implementation of the WTO deal. As the Chinese Ambassador to the U.S. told

me, the deal is ‘‘good for China, good for the U.S. and good for trade. China will

continue the process of opening up and modernization.’’ It is a commercially viable

agreement that is a huge win for the US and international trade.

Conclusion

I served in the U.S. House of Representatives from 1981–1995. During that time,

there were only a handful of votes that were considered momentous, where Congress debated the issue fairly and rose above partisanship to send a clear signal of

national direction. The one vote that stands out was the debate over commitment

of force in Iraq. It was clear that sanctions were not going to work, despite the

hand-wringing and fear of losing thousands of Americans in combat, Congress voted

to send a clear message of our commitment to democracy and multinational coalitions to oppose aggression. Democrats in Congress, were in an uncomfortable position, but enough of us voted to authorize force based on our belief in core values

and faith in America’s ability to succeed.

Congress is in the similar position today. The principle is simple, vote for continuing the momentum for trade liberalization and reform. The verdict of history is

clear; democracy and market economics have won out over the legacy of Lenin, Hitler, Stalin and Mao, i.e. state-controlled economies, human misery, economic depravation, and environmental devastation. Leaders in Congress should not delay nor

try to make political or partisan hay from the vote. It should occur in the Spring

and not be dragged out. The best opportunity to continue the economic and social

progress of the past decade lies in voting early this year, before the campaign season, to further U.S. participation in WTO, support China’s accession to WTO by

granting permanent NTR status and support for the principle of economic freedom

and reform. It should be bipartisan, resounding and soon.

Chairman CRANE. Thank you very much.

Thank you all for your testimony. Dave, one quick question, and

that is, I get the impression from your testimony that you are conVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00146 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
143

cerned that the high-tech sector not be held hostage to a lack of

progress in other areas. Is that correct?

Mr. MCCURDY. That is correct. Mr. Chairman, the ITA and the

ITA2 are important steps that need to be taken. In this business,

as Mr. Houghton knows very well, the time to market is very

quick. The demands and the competition are great. And the potential for opening these markets is critical. We would urge the trade

negotiators and their policymakers in Congress to support maximum flexibility to move on other agreements to see this progress

achieved.

Chairman CRANE. Very good. And Steve Robertson, I have a

question for you with this pamphlet that you distributed.

Mr. ROBERTSON. Yes, sir.

Chairman CRANE. You’ve got the list of the people who are the

providers of various component parts. And it’s an impressive list of

employees. Do all of those employees have copies of this?

Mr. ROBERTSON. All of those companies that we list as suppliers

of ours in that pamphlet have multiple copies of that, yes, Mr.

Chairman.

Chairman CRANE. But I hope they realize the importance of distribution of this to all of the employees. And I say that because in

my district, my district is probably the biggest export district in the

State of Illinois. We’re the fifth largest export State in the union.

And when I talk about the importance of trade issues at a town

meeting, people start falling asleep.

It is our employers—I’ve got corporate giants like the headquarters of Motorola, Sears, AmeriTech, United Airlines, Kemper

Insurance, Baxter and Abbott are right on my border. And we had

a trade hearing out there, and I knew that we had these big giants.

But the thing that was interesting about the trade hearing is we

found out that better than 90 percent of our exports out of Illinois

came from companies employing 500 or less.

And that message is not being gotten out to the employees, about

the essentiality of trade to the preservation of the business. And

that in turn translates to the preservation of their jobs.

I was particularly struck in your testimony here about the duties

that you’re having to pay to penetrate the MERCASR market. And

that if you don’t get some relief, that it means leaving town.

Mr. ROBERTSON. Yes, sir.

Chairman CRANE. And going down there and replacing folks’ jobs

up here with jobs down there. And that’s totally understandable,

it’s survival. But it’s that kind of message that we need to get distributed to more folks so that they can in turn communicate with

us. Because we have a number of Members here still that I don’t

think fully appreciate the importance of guaranteeing that we provide those windows of opportunity for expanded markets to our

own businesses here.

And with that, I’d like to yield to Mr. Levin.

Mr. LEVIN. Thank you. And my apology, I’m sorry, I had no

choice but to miss part of this hearing, which went longer than we

expected, and I think much longer than you expected.

I always say, if you’re on the last panel, beware. But thanks for

your patience, and I assure you, I will read your testimony carefully. In some cases, I already had a chance to review it. And if the

144

others don’t mind, if I might say a special hello to—it says Hon.,

how true—Dave McCurdy. It’s nice to have you back and looking

in such trim battle form.

Mr. MCCURDY. A little grayer, but doing well.

Mr. LEVIN. I don’t object to that. [Laughter.]

But thanks very much, and you can be assured, your testimony

will receive more attention than the late hour might indicate.

Thank you.

Chairman CRANE. And Mr. Houghton.

Mr. HOUGHTON. Thank you very much, Mr. Chairman and Mr.

Levin.

Well, gentlemen, it’s wonderful to be here. I’m not going to take

long, because we’ve got to go for a vote, and you’ve been very patient here. But the question is, how does it all get done? I don’t

think there’s really any disagreement of the fact that we’ve got to

have normal trade relations with China, we’ve got to be part of the

WTO, we’ve got to make sure that the foreign sales corporation exists, that we product our antidumping laws.

How does it get done? Because you know, I don’t think there’s

really any disagreement here. And Dave, you know this. And I

mean, I have organization after organization come into my office

and they have their own particular ideas. But you know, we’re not

really looking at a long term as citizens of the country, we look at

it in terms of our own individual interests. And there are waves

that come in, and if you don’t get them, then I think you’re really

in trouble for years to come.

So politically, how do we drive these things through? I have been

fighting, as I guess most of us have around here, certainly in this

room, for the fast track authority. I don’t think it’s complicated. I

don’t think it gives up anything as far as environment or labor or

human rights and everything. But boy, I tell you, it is tough.

And I guess maybe the one suggestion I might have is that you

gentlemen represent the power sources in this country. I don’t really think labor and business work together to explain to employees

how important the international operations are. I mean, the three

critical companies in my district all are totally dependent upon

international sales, period. But you won’t hear that when you go

to the town meetings. There is something we need to do to explain,

explain, explain and to work closer together.

And absent that, I think these are going to be tough votes.

Maybe you could have some ideas.

Mr. MCCURDY. Well, Congressman, if I could just take 1 minute.

Let me say this for the benefit of my former colleagues as well, a

little quick commercial. Mr. Houghton was a member of EIA long

before I was. As a matter of fact, he made a comment to me at one

of our recent programs that he was a member of EIA before I was

born.

Mr. HOUGHTON. Now, that hurts. [Laughter.]

Mr. MCCURDY. It hurt me, actually. But this year, it actually, I

don’t think that there’s been appropriate mention on both sides,

whether you’re Members of Congress, and those of us who have

now been on both sides of this podium. One is, I don’t think there’s

been the long-term leadership needed, and the long-term vision.

145

And I’ll give you an example of where it can work, for those who

are not aware. Congressman Houghton was the only chief executive

officer of a Fortune 500 company to serve in the U.S. Congress.

And Amo Houghton, during his leadership, took his company

through some very difficult times to develop fiber optics.

And we see today the benefits of telecommunications on a global

basis because of the leadership of that person right there. So EIA

this year is presenting him with a medal of honor for his leadership as an industry leader.

Now, I use that as an example, because it took long-term vision

to do that. It wasn’t short-term sales, it wasn’t the quarterly profit

sheet, it wasn’t the quarterly NASDAQ report or the DOW. You

were looking long-term at something and you took a risk.

I don’t believe that there’s been sufficient leadership either from

the administration or quite frankly from the Congress and certainly not from industry on this issue. It is an educational requirement for all of us. We don’t explain the benefits, the long-term benefits of this. And that’s why in my testimony today, I cited a little

bit of the history. Because we forget that.

It hasn’t been that long ago, we were fighting communism. We

were in a gridlock. And when I was chairman of the Intelligence

Committee and a Member of the Armed Services Committee, I was

in a position to start looking at some of the other issues. When we

were in a hot or cold war, we weren’t worried about environmental

concerns in Eastern Europe. But after we won, we realized the economic and environmental devastation that occurred under those

command economies. And this is where I think we fail is in the

basic education throughout the country.

And Chairman Crane was right in talking about Marconi and

distributing to the employees. The employees don’t know where the

benefits actually are derived from those international sales. And let

me just make one last point. This vote on China PNTR is different

than fast track. Fast track is a process question. China PNTR is

an agreement. We conditioned our support for an agreement we did

not see until we got a final agreement. When we examined it, it

was not only a commercially viable agreement, it was a good agreement. And that agreement is to the benefit of the United States.

The Chinese made the concessions, we didn’t, the United States

didn’t. All we have to do is change the Jackson-Vanik requirement,

and make permanent their membership in WTO and NTR, we used

to call it MFN.

But that word’s not getting out. We’re focused on the short-term,

sometimes political debate and argument and forgetting the real

true economic prosperity and increased standard of living. And

quite frankly, in our industry, we can’t say it for every industry,

but in our industry, we actually are very involved in designing

products that are not only good for consumers, but also environmentally sustainable, better for the environment overall. Issues

like recycling and end of life, the types of materials, we have one

of the most active areas in our association, just in the environmental issue.

That’s something that we can do proactively. But industry

doesn’t talk about the positive things they do. So I think it’s a

question of long-term leadership from the administration. I was

146

pleased the President came up and said that they’re going to commit it without any equivocation, no hesitancy, they’re supporting

this agreement and they’re going to push for it. I think it’s good

that the leadership in the Congress is coming forward on this.

And I would just urge my colleagues, and especially Democratic

Members, this is not fast track. This is different than even NAFTA.

This is an agreement that is very clear, whether you’re in agriculture, whether you’re in technology, across the board, this is an

agreement that’s good, certainly for the United States. And in the

long-term, it’s going to be better for the Chinese, people in China,

that’s why the Chinese liberals support it. Those that are seeking

reform, political reform, support it. Those who are seeking environmental reform in China support it.

And that’s why I would urge my colleagues and former colleagues

to support this. This is the number one priority for our organization. We’ve already produced letters to over 174 Members of Congress, 82 Senators. And that’s just the beginning. We’re going to

have lobby day, we’re making this a top priority issue. And I think

my colleagues here at this table will concur that it is at the top of

their list as well.

Mr. VAN PUTTEN. Congressman Houghton, may I respond? I certainly agree that visionary proactive leadership is what is required.

What is required is to demonstrate concretely the ways in which

liberalized trade can enhance values like environmental protection.

What is required is an aggressive agenda in areas such as the perverse subsidies in fisheries to demonstrate ways in which the conservation of the world’s fisheries can be enhanced.

What is required is a carefully articulated strategy toward trade

liberalization in the energy sector focused on ways to reduce global

climate change causing greenhouse gases. What is required of those

businesses who want to make the case for environmentally responsible behavior in China is don’t supplant the governmental funding

we’ve all worked so hard on the environmental community to prevent the Three Gorges Dam from going ahead.

If we see private financial actors in the United States moving in,

where the World Bank and the Japanese Development Bank have

fled, and directly and indirectly fund that kind of environmentally

destructive activity in China, it’s a little hard to take the argument

that it will inevitably be good. There are real concrete visionary opportunities to demonstrate how trade can work to vindicate values

such as protection of the environment. And we need a policy that

articulates that proactive benefit and then delivers.

Mr. HOUGHTON. Right. And Mr. Chairman, if I could just say this

one thing, and I was picking up on that, I think what Mr. Dawson

said, that the World Trade Operation, the meeting in Seattle, was

not a lost opportunity, it was a missed opportunity. And I get sort

of an ashes and sackcloth feeling around here, everybody thinks,

oh, my gosh, this will never be brought together. It will be brought

together. We’ve got to drive this thing.

So thank you very much.

Chairman CRANE. Well, and let me add just one comment to

Dave’s remarks earlier. And I’ve argued this for years, that trade

is not a Democrat or a Republican issue, it’s an American issue,

and I know it’s not easy for some of our colleagues on the RepubVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00150 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
147

lican side to take an objective view of trade. And simultaneously,

I know a lot of Democrats are under pressures, especially in the

post World War II era.

But we have had a remarkably high level of bipartisanship on

the e-trade issues. And I want to pay tribute to our Democratic

friends as well as Republicans, keep working. But the big part of

that problem is getting that message out, explaining to the folks

back home the importance of it, and getting them to recognize that

trade is almost one-third of our national economy now. And it’s

been the fastest growing over the past decade, the fastest growing

component.

And when we’re less than 5 percent of the world’s population,

where’s the market? It’s out there beyond our shores. And we’re the

biggest export country on the face of this Earth. And no one has

been able to match us in that competitive world.

But we want to make sure that Steve isn’t put out of business

here, and down there competing with us in Brazil.

Folks, I want to thank you for your participation, and please stay

in touch with all of us. With that, our Trade Subcommittee hearing

stands adjourned.

[Whereupon, at 6:08 p.m., the hearing was adjourned, to reconvene at the call of the Chair.]

[Submissions for the record follow:]

Statement of American Apparel Manufacturers, Association, Arlington,

Virginia

Thank you for providing the American Apparel Manufacturers Association

(AAMA) an opportunity to submit testimony in connection with the Subcommittee’s

investigation of international trade issues in the aftermath of the failed Seattle Ministerial round in December 1999.

AAMA is the central trade association for US companies that produce clothing. Our members are responsible for about 85 percent of the $100 billion worth of garments sold at wholesale in this country every year. Our industry employs about

700,000 Americans.

While most of the large apparel manufacturers in the United States are our members, many of our members are relatively small companies. Two-thirds have sales

under $20 million a year. Our members are predominantly domestic manufacturers,

but most also manufacture in, and import from, other sources.

AAMA has been a strong advocate of liberalized trade initiatives and was an ardent backer of both the North American Free Trade Area (NAFTA) and the Uruguay Round of the GATT. Our association is at the forefront of efforts to expand

trade with the Caribbean Basin and has endorsed regional programs to expand

trade through the Free Trade Area of the Americas (FTAA) and the Asia Pacific

Economic Council (APEC) processes.

AAMA was sorely disappointed when the Seattle Ministerial failed to launch negotiations for a new multilateral trade round. Simply put, we believe the United

States, indeed the entire world, missed an important opportunity to lock in additional commitments for trade and tariff liberalization.

Increasingly, our members rely upon unimpeded flow of commerce between countries to satisfy the needs of their customers and to stay competitive. The

globalization of our industry, and the increased competition it has brought, requires

our members to engage in flexible sourcing strategies if they are to survive. This

means they have to be prepared to supplement their US production base with

sourcing arrangements from a variety of countries.

Although our members are most heavily concentrated in this hemisphere, they

have increasingly found themselves in virtually every part of the globe. To produce

the most competitive garments, our members are often required to import from and

export to a variety of countries. Any barriers—be they traditional quotas and tariffs

or non-traditional fees, investment restrictions, customs procedures, bureaucracy, or

corruption—hinder their operations and drive up their costs. If their costs go up or

if they are unable to deliver garments on time—because of trade distorting barriers—they often lose the business to their competitors.

148

Accordingly, we believe it is of paramount importance that the United States find

a way to put and keep the WTO trade liberalization process back on track. Recognizing that this is an effort partly directed at confidence building—both in the

United States and among our trading partners—and partly directed at setting a

concrete and meaningful agenda, we would like to make the following recommendations:

First, Congress should declare its unequivocal support for an aggressive and proactive trade agenda. The best way to do this is to complete action quickly on the

pending CBI/Africa legislation, reaffirm US membership in the World Trade Organization following the Section 125 report, and, finally, extend permanent normal trade

relations with China. Reauthorization of trade negotiating authority for the President, and its accompanying ‘‘fast track’’ procedures, should also be completed at the

earliest possible date.

Decisive action by Congress is important because many of the protests in Seattle

have their genesis in the perception that the United States has abandoned its orientation toward trade liberalization. Protestors during the week of November 29,

1999—ironically the fifth anniversary of congressional passage of the Uruguay

Round of the GATT—were no doubt buoyed by some of the ‘‘anti-trade’’ votes taken

by the House earlier in the year and in previous sessions. It is time the Congress

swiftly and clearly rejects this perception and reasserts a positive agenda on trade.

Second, we should be careful not to misunderstand the ‘‘message’’ delivered by

the Seattle protestors. In fact, there was probably no single message. Several of our

staff and members who were in Seattle during the protests witnessed peaceful

teach-ins just a few doors down from where a Starbucks store was being looted.

Protestors demanding greater labor and environmental enforcement powers for the

WTO stood shoulder-to-shoulder with those hoping to strip the WTO of its existing

responsibilities. A sign complaining that ‘‘global trade was bad’’ was partly obscured

by a sign urging the end of the US trade blockade with Cuba.

If anything, the Seattle protests showed us that few people understand the importance of trade liberalization—to their own well-being, to their own community, and

to the world at large. While the WTO is an important arbiter of international trade

laws, it is nothing more than a traffic cop. When the American people begin to perceive that the WTO possesses the kind of power that threatens national sovereignty,

that is a clear signal that there is something fundamentally wrong with the public

understanding of international trade.

Third, we should collectively do a better job explaining the importance of trade

liberalization. Policy makers have long argued that not enough ‘‘trade education’’ is

done among workers and employees of companies that benefit from trade. This is

true and the corporate community should do a better job in the future. But policy

makers themselves must also play a key role—educating not just the workers at

their jobs but also the workers’ families in their communities and schools.

We should begin by discarding the incorrect notion that imports are intrinsically

bad. Traditionally, exports are seen as the ‘‘good’’ side of the trade equation while

imports are measured only through the dislocation and disruption they may cause.

Yet, this only tells half the story. Millions of American workers are employed because they handle or process imports. Hundreds of millions of American consumers

benefit from lower prices or greater selections because of the availability of imports.

If the American public can begin to perceive that imports are not a threat, the natural flows of international trade should cause them less anxiety.

One way to do this is through the Trade Adjustment Assistance program, which

provides retraining assistance for US workers whose jobs are adversely affected by

trade. This is an important program that should be sustained. But as we do so, we

should recognize that one of its by-products is that the US Government is steadily

certifying that hundreds of thousands of US workers are losing their jobs because

of international trade. Yet, at the same time, there is no equivalent program in

which the Federal Government actually certifies that US workers, or consumers, are

gaining ground because of international trade. If the Federal Government insists

upon only telling half the story, who can blame the American public if they remain

misinformed?

Fourth, we must encourage the WTO to make its operations and activities more

transparent and accountable. Veterans of the 1997 funding battle over the International Monetary Fund (IMF) will recall the complaint that the IMF conducted all

its business behind closed doors. Congress eventually cleared funding for the IMF,

but only after the IMF agreed to necessary reforms to bring about greater transparency. Similar steps are needed with the WTO. All parties affected by WTO decisions—be they non-governmental organizations, interest groups, or business entities—should be able to present the WTO with their perspectives and witness its decision making and rule-setting activities. This is especially important if we wish to

149

provide least developed countries the opportunity to participate fully in the international trading system.

Fifth, the United States should encourage the WTO to complete its unfinished

agenda—namely the reciprocal elimination of tariffs. Our industry faces some of the

highest levels of protection around the world. But while US tariff rates on imported

apparel are high, they often pale in comparison to those imposed by other countries.

The next round of tariff liberalization should begin by requiring other countries to

bind their textile and apparel tariffs at US rates and then use that binding as a

basis for further negotiation.

A recent case with India clearly dramatizes why this is so important. In recent

weeks, the US Government successfully persuaded the Indian Government to abandon a number of quotas and other quantitative restrictions on imports of textile and

apparel products. However, some of the gains of this concession may be undermined

due to Indian Government plans to raise tariffs on those same products. Because

the tariff action will not exceed the Indian Government binding, the action may be

permissible under the WTO. We need to convince the Indian Government to lower

these bindings to, at the very least, US levels.

Finally, we need to remain aggressive in ensuring that foreign countries live up

to the bargains they strike in international trade deals. Confidence in the entire system falters when US workers, and their elected representatives, perceive that other

countries do not have to play by the rules. We should insist that our trading partners live up to their commitments and have ‘‘zero tolerance’’ for those that fail to

do so. Similarly, we should lead by example, and refuse to tolerate demands that

we abandon our own commitments to satisfy vocal political constituencies.

In the past month, the United States posted a record for the largest sustained

economic expansion. This success occurred in no small part because we benefit from

an open and liberal trading regime. US firms are able to produce goods and services

for export markets while companies and individuals are able to purchase imports

for inputs or final consumption. The more we can enhance this system—through

multilateral trade negotiations and through unilateral action—the better chance we

have of sustaining this economic growth in the years to come.

AMERICAN FISHERIES SOCIETY

BETHESDA, MD 20814–2199

November 23, 1999

William J. Clinton

President

The White House

1600 Pennsylvania Ave

Washington, DC 20500

Dear President Clinton:

The American Fisheries Society (AFS) is a professional organization with 9000

members from academic, agency, tribal, and private institutions. We are concerned

with the possible consequences of the World Trade Organization (WTO) ministerial

meeting scheduled for 30 November ¥3 December in Seattle, WA. We understand

that the WTO objective is to foster international trade by:

1. Eliminating or reducing tariffs on products, thereby reducing export costs while

opening additional markets to producers.

2. Requiring countries to treat foreign nations and corporations at least as well

as domestic entities. That is, a government cannot subsidize or prefer domestic fishers who meet domestic regulations.

3. Requiring that all foreign countries and companies be treated identically. For

example, local or national governments could not ban fish products obtained in an

unethical or ecologically unsound manner.

4. Prohibiting quantitative import or export restrictions. In other words, fish produced from well-managed aquaculture facilities must be treated in the same way

as fish obtained by mining pristine systems or endangered populations.

It appears that the WTO seeks to facilitate international commerce without regard for fisheries consequences.

International laws increase the potential of impacting fish and aquatic resources.

The following seven examples demonstrate our concerns for the management and

protection of our valuable fisheries resources.

150

1. U.S. law requires that shrimp fishers use nets with turtle exclusion devices to

protect sea turtles. Several Asian nations not using these devices could not market

their product in the U.S. and sued, claiming that the import ban was an attempt

to influence fishing behavior outside the U.S. The WTO agreed and the U.S. suspended the law.

2. The U.S. Marine Mammal Protection Act embargoed tuna caught with porpoisekilling methods. Mexico declared that this law was an attempt to close U.S. markets

to foreign competitors and sued. The law was declared an illegal tariff and the U.S.

held the law in abeyance.

3. National and global deforestation and forest degradation have increased since

the Rio Earth Summit. If trends continue, the world’s remaining unlogged forests

will be lost in this coming century. Many of our most sensitive fish families and species maintain their greatest diversity and abundance in forested regions. Once the

forests are removed, the diversity and abundance of sensitive fishes decline.

4. The U. S. Federal Advisory Committee Act requires (and Judge Barbara

Rothstein ordered recently) that advisory committees be composed of members representing a wide variety of perspectives. Nonetheless, the two U.S. trade committees

contain only industry representatives, as have the past U.S. trade negotiation

teams. Although Canadian Minister Pierre Pettigrew recently met with NGO, labor,

and other interest groups, this has not occurred in the U.S. When fishery and

aquatic environmental interests are not represented, they do not become part of

trade agreements.

5. The United States has adopted some elements of the precautionary approach

to fisheries management which has been recommended by UNCED, UNEP, and

many participants in the FAO. Giving priority to trade over protection of sustainability of fish populations will undercut the precautionary approach and re-establish

the burden of proof for conservation on the managers rather than those who engage

in overfishing or methods damaging to resources.

6. U.S. law prohibits the import of some species of fish below specific minimum

lengths. Swordfish below the approved minimum length may have to be allowed for

import if the U.S. continued to import any swordfish at all.

7. U.S. law required a 76% U.S. citizen ownership of fishing companies that are

allowed the rights to harvest fish in the waters of the United States. WTO trade

provisions may invalidate those laws and allow majority ownership and control by

foreign interests that are not limited by U.S. conservation ethic and management.

Therefore the AFS requests the following of the Canadian and U.S. governments:

1. Ensure that strong environmental concerns are represented on U.S. and Canadian Advisory panels and negotiating teams.

2. Certify that pre-established negotiating objectives (e.g., environmental protection, human rights) are met before Parliament and Congress grant a ‘‘no amendments’’ or ‘‘fast track’’ vote.

3. Recognize that support of sustainable fisheries policies are in the interest of

long-term social and economic stability.

4. Develop rules permitting governments to protect biodiversity, and the environment—even if they secondarily impede trade.

5. Adopt environmental standards even though they might interfere with free

trade.

6. Regulate imports of products at the expense of sustainable fisheries, or if a

product is produced in an unsustainable, unsafe, or degrading manner, particularly

if fishing communities are likely to be negatively affected by the production of that

product.

7. Allow national and sub-national governments to elect, adopt and enforce their

own levels of protection.

8. Allow trade measures that will enforce multilateral environmental agreements.

9. Discourage challenge of government regulations that have incidental effects on

investors’ returns.

10. Eliminate subsidies that harm the environment.

11. Ensure that transnational corporations and their subsidiaries protect the environment, with the possible penalty of losing their charters.

12. Submit an environmental impact statement prepared jointly by Environment

Canada, the Ministry of Fisheries & Oceans, the Council on Environmental Quality,

the Fish & Wildlife Service, the National Marine Fisheries Service, the Environmental Protection Agency, and the Canadian and U.S. trade representatives, sufficiently in advance of the proposed adoption of any specific trade measures related

to fish or fishery products to allow those agencies to comment on and consult with

the WTO with regard to any problems or objections that such agencies may present

to the WTO.

151

13. The WTO should favor industries that minimize direct and indirect environmental impacts because these practices promote long-term ecosystem productivity

and economic development.

14. Recognize the validity and utility of the precautionary approach to fishery

management as a recognized exception to the priority of trade in international commerce.

15. Specifically allow the protection of fish habitat as a basis for exception to the

priority of trade in international commerce.

If you would like to discuss these issues further, please do not hesitate to contact

me.

Sincerely,

GHASSAN N. RASSAM

Executive Director

GNR:jpg

Statement of American Iron and Steel Institute

The following statement on the outcome of the Seattle World Trade Organization

(WTO) Ministerial Conference is submitted on behalf of U.S. member companies of

the American Iron and Steel Institute (AISI), who together account for approximately two-thirds of the raw steel produced annually in the United States.

RULES-BASED TRADE:

AISI and U.S. Government Position in Seattle

In going to Seattle, AISI representatives stressed that:

• trade liberalization without effective fair trade rules cannot work in the interests of America;

• there can be no further trade liberalization unless trade will be fair; and

• the best way to do this is through strong trade laws, strictly enforced.

The AISI message going to Seattle can be summed up in three words: RULESBASED TRADE. After Seattle, this message has become even more important.

AISI went to Seattle to support the long-held, bipartisan position of the U.S. government in favor of continued multilateral trade liberalization, based on no further

weakening of the WTO’s antidumping and anti-subsidy rules. The U.S. government

and AISI took this position because, had these agreements been opened up, it would

have led to certain weakening of the WTO’s fair trade rules.

In the months leading up to the WTO Ministerial, the Administration stated repeatedly that, in the national interest of the United States—and in the ultimate interest of trade liberalization and the global trading system—it would not allow the

WTO’s antidumping and anti-subsidy rules to be the subject of negotiations. The Administration deserves credit for holding firm in Seattle against strong foreign government pressures to reopen the WTO’s dumping and subsidy agreements.

The Congress also deserves credit for making its views known. There is overwhelming bipartisan support for preserving effective international disciplines

against unfair trade. In the months leading up to the Ministerial and then again

in Seattle, Steel Caucus Members and other Members of Congress communicated an

unswerving message of support on this issue. Last year, more than half of the U.S.

House of Representatives called on the President not to enter into any international

negotiation that includes U.S. trade laws. In 1997, in its markup of ‘‘fast track’’ legislation, the Ways and Means Committee approved without dissent a provision instructing U.S. negotiators to reject any agreement that would weaken existing disciplines against dumping and subsidies. Today, the bipartisan consensus in Congress on this point is even stronger. It is that fast-track procedures should never

again be used to amend U.S. trade laws.

AISI’s position is that there is a role in the U.S. market for fairly traded imports,

but there is no role for unfair trade. In President Clinton’s August 1999 Steel Action

Plan, the Administration said it agreed with us. It announced that it is committed

to a policy of ‘‘zero tolerance of unfair trade.’’

The devastation suffered by the U.S. steel industry and its workers over the past

18 months due to record levels of unfair trade has served as a warning. It has reinforced the need of competitive U.S. industries for strong, effective, vigorously enforced trade laws. The events in Seattle in the first week of December 1999 have

152

also served as a warning. They have reinforced the point that effective disciplines

against unfair trade are critical if we are to maintain an open market policy in the

U.S., enable further trade liberalization and promote market opening and much

needed adjustment abroad.

SEATTLE IN PERSPECTIVE:

Reasons for Outcome

There are many reasons why the Seattle Ministerial may not have succeeded in

launching a new round of international trade negotiations. The simplest explanation

is that there were many complex, divisive issues; there was too little time; there

were 135 members (60 more than at the time of the Uruguay Round); and there

was a lack of consensus and political will among the key players for going forward.

Key points on which there was no consensus included (1) agriculture, (2) the basic

relationship of developing countries to the WTO and (3) the new issues, such as the

nexus between trade and labor and trade and the environment. Perhaps most important, both the European Union (EU) and Japan, unwilling to take the needed

steps on agriculture, pushed a very broad negotiating agenda in large part as a diversionary tactic.

While posing as a friend of the developing world, the EU subordinated everything

else to the core goal of defending its closed and heavily subsidized agricultural regime, which is so injurious to developing countries. In the process—and urged on

by Japan—the EU indicated an openness to undermining the WTO’s antidumping

rules. In much the same way, Japan—the number one dumper in the U.S. market—

pursued a reopening of the WTO’s antidumping rules on behalf of its own manufacturers, all the while claiming it was taking this position on behalf of the developing

world.

The antidumping issue was one of several divisive issues, because other countries

thought the U.S. would change its position, and we did not. However, the Seattle

Ministerial did not fail because of the U.S. position on antidumping. The U.S. position on trade laws was sound and no surprise. It was a long-held bipartisan position, articulated clearly, often and early in the process.

As to where we go from here: AISI remains committed in support of trade liberalization—provided there is no further weakening of existing fair trade rules.

ONGOING FOREIGN GOVERNMENT GOAL:

Erode and Weaken U.S. Trade Laws

What modest decline occurred last year in overall U.S. steel imports took place

because of the successful use of trade laws by America’s steel companies and unions.

As the steel crisis has shown, the antidumping and countervailing duty laws are

America’s last line of defense against surging unfair trade. Foreign unfair traders

view the trade laws as the only remaining major obstacle to their unfettered abuse

of the open U.S. market. To attack this obstacle head on, foreign governments and

producers are employing three main ways to achieve their goals.

International Negotiations. In Seattle, foreign governments sought to weaken U.S.

trade laws through multilateral negotiations. Thanks to the steadfast position maintained by the Administration and the Congress, the forces of trade law weakening

did not achieve their goal. However, these forces will not stand still. They will continue their efforts to try to weaken U.S. trade laws through multilateral negotiations, whether in the WTO, the FTAA negotiations or the APEC process. Therefore,

Congress needs to remain vigilant.

WTO Dispute Settlement. Having failed to achieve trade law weakening at Seattle,

Japan, Korea and other countries whose producers have engaged in unfair trading

are now trying to achieve through the WTO dispute settlement system what they

could not achieve through multilateral negotiations. Thus, Japan—the same Japan

that still refuses to import steel, and continues to underperform dramatically as an

importer of manufactured goods in general—has recently filed a complaint with the

WTO regarding U.S. antidumping measures on hot rolled steel, and both Japan and

Korea have threatened to file other WTO appeals relating to steel trade cases decided under WTO-consistent U.S. laws. The U.S. government needs to defend aggressively the trade laws enacted by Congress from this effort by unfair traders to

use the WTO dispute settlement process to undermine America’s fair trade rules.

Trade Law Changes. In addition to using multilateral negotiations and WTO appeals of U.S. trade laws and trade law application, counsel for foreign governments

and producers are now drafting trade law weakening legislative proposals. On this,

both the Congress and the Administration need to send a very clear signal. Instead

153

of trade law weakening, Congress should ensure that U.S. trade laws are as strong

as what the WTO allows. In this regard, AISI urges prompt enactment of the Fair

Trade Law Enhancement Act (H.R. 1505/S. 1741), the Continued Dumping and Subsidy Offset Act (H.R. 842/S. 61) and other proposals to strengthen U.S. trade laws

consistent with WTO rules. This should include amendments targeting the problem

of diversion of steel and other manufactured goods to the U.S. market as a result

of foreign anticompetitive practices.

STEEL’S EXAMPLE:

Need for Strong Remedies Against Unfair Trade

Over the past 30 years, the U.S. steel industry has faced a world of pervasive

trade and market-distorting practices, including:

• widespread foreign government ‘‘targeting’’ and subsidizing of steel;

• foreign government barriers to imports of steel and steel-containing products;

and

• foreign government toleration of private cartels and corruption in the steel sector.

These trade-distorting conditions have enabled less efficient foreign steel companies to produce at levels not supported by market forces, to maintain artificially

high steel prices in their home markets and to dump large quantities of steel in the

United States.

The revitalized U.S. steel industry is very familiar with the challenge of having

to compete against pervasive unfair trade practices. However, what occurred in 1998

was like nothing seen before. With Asia and Latin America in recession and with

Russia in collapse, the United States experienced the single largest surge of dumped

and subsidized steel imports in its history. This was a transplanted crisis caused

by major structural economic failures elsewhere. The result was an unprecedented

surge of imports, which turned the U.S. into the World’s Steel Dumping Ground.

The past 18 months should have been the best of times for an American steel industry restored to world class status, which in recent years has added over 20 million tons of new, state-of-the-art steelmaking capacity. Instead, the U.S. saw record

steel imports in 1998, the second highest import total in history last year and continued unfair trade by less efficient foreign steel producers throughout this period.

Against the background of record U.S. steel demand—and due to one reason alone—

unfair imports:

• five U.S. steel companies are now in Chapter 11 bankruptcy;

• virtually all U.S. steel companies have seen profits plunge or losses mount; and

• thousands of U.S. steelworkers have experienced layoffs, shorter work weeks or

reduced benefits.

This is not the way that market-based trade is supposed to work. Between 1980

and the onset of the steel crisis, the U.S. steel industry succeeded in reinventing

itself. By 1998, we had become a new industry producing new steels, using new

equipment and employing new processes. Thanks to nearly $60 billion in modernization investments since 1980 and a costly and painful restructuring of all aspects of

steel operations, a new U.S. steel industry had by 1998 emerged as a highly competitive, technologically advanced, low cost, environmentally responsible and customer-focused industry.

In contrast, the steel industries of other countries, including Asia, the former Soviet Union and South America, did not make the adjustments that the U.S. industry

made in the 1980s and 1990s. They maintained substantial excess capacity, and this

excess found a destination in 1998–99 in the large and open U.S. steel market. As

a result, over the past 18 months, the United States has experienced an unprecedented level of unfair steel imports sold at cut-throat prices in violation of U.S. laws

and WTO rules.

Internationally competitive U.S. steel companies and their highly productive employees have learned important lessons from the 1998–99 steel crisis. They are that:

• a surge of unfair and disruptive imports causes lasting damage;

• the damage can extend to all segments of the U.S. steel community, and affects

even the most competitive producers;

• the current trade laws are inadequate and are not designed to address the kind

of major shifts in trade flows that result from structural economic failures abroad;

and

• yet, these laws at the present time are the only effective WTO-consistent defense that exists to counter surging unfair and disruptive imports.

Therefore, steel producers in the United States, now more than ever, support:

• prompt and strict enforcement of U.S. trade laws;

154

• modernization of these laws in a WTO-consistent manner; and • preservation of effective international disciplines against unfair trade.

Today, significant unfair trade and serious import injury are continuing in the

U.S. steel market. The import injury is confirmed by the International Trade Commission’s recent affirmative findings with respect to hot rolled steel, cut-to-length

plate, wire rod and welded line pipe. The unfair trade is confirmed by the very high

margins of dumping or subsidization found recently by the Commerce Department

on hot rolled, cold rolled, plate and other products. An important point, often overlooked, is that this injury is long term damage for which the competitive U.S. steel

industry will never be compensated.

The injury caused to U.S. steel companies and employees by unfair trade should

also be a cause of long term concern to steel’s U.S. customers. It is vital that U.S.

steel companies continue to generate internally the capital needed for modernization

so that they can continue to reduce costs, improve quality, compete against other

materials and serve customers. It is not in the long term interest of customers to

see competitive U.S. suppliers undermined by unfair trade from less efficient foreign

competitors.

GLOBAL TRADING SYSTEM:

Effective Fair Trade Rules are Essential

In a July 1998 submission to the WTO Working Group on the Interaction between

Trade and Competition Policy, the U.S. government said that antidumping law remains:

‘‘necessary to the maintenance of the multilateral trading system. Without

this and other remedial safeguards, there could have been no agreement on

broader GATT and later WTO packages of market-opening agreements, especially given the imperfections which remain in the multilateral trading

system. ... [T]he antidumping rules represent an effort to maintain a ‘‘level

playing field’’ between producers in different countries ... [and] are a critical

factor in obtaining and sustaining necessary public support for the shared

multilateral goal of trade liberalization.’’′′’’ STYLE=′′font-size: 10pt′′>

It is no surprise that the countries that repeatedly engage in unfair and disruptive trade are the most vocal critics of U.S. trade laws. Japan and other governments, whose domestic markets remain largely closed, went to Seattle to open up—

in order to weaken—the WTO’s fair trade rules. Other governments would like to

take away the only effective tools the United States has to counter unfair trade. It

is no accident that countries with closed markets and cartels want to weaken the

WTO’s antidumping rules and that countries that subsidize their inefficient industries want to weaken the WTO’s anti-subsidy rules.

However, this effort to weaken disciplines against unfair trade is a direct threat

not just to steel and other competitive U.S. industries. It is also a direct threat to

further progress on global trade liberalization. Effective rules against dumping and

trade-distorting subsidies are an essential element of the multilateral trading system. These rules are what enables the public here and elsewhere to support open

trade.

It is the failure to counter injurious dumping and other unfair trade practices that

undermines public confidence in free trade and public support for further multilateral trade liberalization. For more than 50 years, multilateral trade rules have allowed the U.S. and other countries to counter injurious dumping. The reason: a

clear recognition that, over time, there can be no free trade unless it is rule-based

and fair.

When the public believes that existing trade rules are ineffective or are not being

enforced, support for open trade begins to erode—and support for more restrictive,

sometimes less transparent, solutions starts to grow. This is what has occurred in

the United States in recent years, and the only way to reverse this trend is to improve and enforce U.S. laws against unfair trade.

Only a few years ago, the Uruguay Round of trade negotiations led to weaker

international disciplines—and national laws—against dumped and subsidized imports. The U.S. Administration, to its credit, went to Seattle determined to maintain

the effectiveness of current international disciplines against unfair trade. Japan and

other governments went to Seattle determined to discipline not the underlying

trade-distorting practices, but the WTO-consistent laws used in response to those

practices.

America’s support for the WTO is not unconditional. It will not withstand another

assault on the system’s basic fair trade rules. The real problem in international

trade is not the antidumping remedy. It is dumping, closed markets and other

155

trade-distorting practices. If the public is again to support further trade liberalization, we need to build a new trade consensus in the United States around effective

trade rules, effectively enforced. By contrast, if Japan and other governments get

their way and U.S. trade laws are further weakened, public support for open trade

will continue to decline.

It took nearly eight years in the Uruguay Round to re-negotiate the current international regime of antidumping and anti-subsidy rules. These rules have yet to be

tested and have not proven defective. What the global trading system needs is proper compliance with current rules—not new negotiations, with new and confusing

rule changes that could threaten all WTO members’ exports.

SEATTLE’S MESSAGE:

Importance of U.S. Trade Policy Objectives and Requirements

This spring, Congress will review whether the United States should continue to

participate in the WTO. In light of the devastation suffered by the U.S. steel industry in 1998–99 due to record levels of unfair trade—and given the ongoing foreign

government attacks against U.S. trade laws and WTO rules—AISI is looking at this

issue through the prism of key trade objectives and requirements. In any debate

over the value of the WTO, Congress should consider the need to ensure that:

1. the global trading system remains rules-based;

2. the WTO is truly effective;

3. the WTO achieves real structural reform (e.g., dispute settlement reform, more

participation by the private sector and greater transparency), which is especially

necessary after Seattle;

4. U.S. trade laws are strengthened to the full extent allowed by WTO rules;

5. there is absolutely no weakening of the WTO’s existing fair trade rules or of

current U.S. trade laws; and

6. there is a review process for WTO panel decisions established under U.S. law,

similar to the one sponsored in the last Congress by Representatives Benjamin

Cardin (D–MD), Ralph Regula (R–OH) and others in the House and Senate. This

will help ensure that, in future WTO appeals, WTO panels do not exceed or abuse

their authority.

In addition, Congress should consider convening a special inquiry into Japan’s

role in the international trading system—including its continued closure to imports

of manufactured products and its continued regulation of trade.

Conclusions

Laws against unfair trade, especially the antidumping and countervailing duty

laws, are necessary to offset foreign unfair trade and market-distorting behavior,

level the playing field and restore public confidence in free trade. Such laws help

ensure that more efficient domestic producers are not weakened or destroyed by less

efficient foreign firms. Because these laws serve the interest of customers, consumers and the entire economy, successive U.S. Administrations and Congresses

have taken the position that it is essential to preserve effective U.S. laws against

unfair trade and effective international fair trade rules. This was the position that

the U.S. government and AISI both took to Seattle.

With respect to the Seattle WTO Ministerial, both the Administration and the

Congress deserve significant credit for taking a strong stand against foreign government pressures to reopen the WTO’s antidumping and anti-subsidy rules.

The events that occurred in the streets of Seattle indicate what could occur in the

global trading system without fair trade rules. Indeed, the global trading system as

we now know it would not exist, and could not survive, without such rules. The key

message coming out of Seattle is that it is essential to build a new trade consensus

in the United States around the concept of RULES-BASED TRADE. The best way

to begin doing this is for Congress and the Administration to:

• work together to strengthen U.S. trade laws in a WTO-consistent manner; and

• continue to resist foreign government efforts to weaken further the existing U.S.

and WTO fair trade rules—whether through international negotiations, WTO dispute settlement or trade law changes.

156

Statement of Antonia Juhasz, Director, International Trade and Forest

Programs, American Lands Alliance

‘‘Defend Our Forests, Clearcut the WTO’’—read a banner prominently featured on

the front page of the New York Times the day after the start of the Seattle Ministerial, November 30, 1999. Held beneath the banner were signs with slogans such as

‘‘WTO Hurts Forests,’’ ‘‘Free Trade=Global Clearcuts,’’ and ‘‘No to the WTO, No to

the Global Free Logging Agreement.’’ The banner and the signs were carried by forest activists from around the nation and the world who gathered in Seattle to ensure that their voices were heard in opposition to deals being negotiated by their

governments that threatened to increase global forest destruction.

Forest activists came to Seattle after sending hundreds of letters, making thousands of phone calls, visiting their local and national elected officials, submitting

testimony and speaking before Congressional and Administration hearings on the

WTO in Washington, DC and across the country, and visiting Washington, DC to

meet with Clinton Administration officials. These traditional democratic activities

did not reap the desired end, so activists went to Seattle to let their elected officials

and the world know that they would not accept business as usual.

Forest activists came to Seattle to voice their opposition to a deal to liberalize

trade in forest products without providing protections for forests—dubbed the ‘‘Global Free Logging Agreement’’ due to concern that the elimination of tariffs and discussions of the removal of non-tariff trade barriers would give timber corporations

a free hand at forest destruction around the globe.

Forest activists also came to Seattle to express their concern over WTO agreements such as the Agreement on Sanitary and Phytosanitary Standards (SPS)

which threatens forests by making it more difficult for countries to impose necessary

protections against invasive species and the Technical Barriers to Trade (TBT)

Agreement which, together with Production Process Method (PPM) restrictions,

opens the door to attacks on forest protection measures such as forest certification

programs and green procurement laws.

Forest activists felt the need to join with labor, consumer, human and women’s

rights advocates to air their concerns through protests on the streets of Seattle because their concerns had heretofore fallen on virtually deaf ears by many governments. To many, the most important government to reach was the United States—

the country most forcefully pushing the GFLA and the host of the Ministerial.

The Outcome of the Seattle WTO Ministerial

The Seattle WTO Ministerial failed from the perspective of the WTO and the governments that wanted to launch a new round of trade negotiations in Seattle. The

Ministerial was a success for forest activists who hoped to stop the GFLA and other

harmful trade deals; for activists, developing countries and others who sought to

halt a new round of negotiations; and for all those who hoped to send a message

that the WTO could no longer be used as a multinational corporate bastion free

from democracy.

The Ministerial’s failure is most often blamed on the particularly rigid stance

taken by governments such that normal negotiations were made impossible. After

offering this explanation, few attempt to explain why governments were less amenable to negotiation in the build-up to Seattle and in Seattle than in the past. An

obvious answer is increased public awareness about trade policy. This awareness

created a public that holds its elected officials accountable for their trade positions.

The Seattle protestors who were willing to withstand pepper spray, rubber bullets,

beatings and the removal of their constitutional rights, were a constant reminder

that the public was watching and that free trade would forevermore have to survive

in the sun-light and under the scrutiny of civil society.

In his speech at the World Economic Forum in Davos, President Clinton made

clear that he had heard the concerns expressed in Seattle less than one month prior

when he explained that the demonstrators ‘‘felt that they had no voice’’ and therefore were in the streets. Unfortunately, the President made few substantive and no

meaningful recommendations to address this problem in this speech nor in the State

of the Union. On the contrary, while making several meaningful insights into the

reasons for the protests, the President continually reaffirmed existing global trade

rules and suggested that what is needed is a better understanding by the public of

the benefits of free trade, rather than a re-working of the rules themselves. These

speeches, and the actions of the Administration taken post-Seattle, indicate that the

Clinton Administration has not fully learned the lessons from Seattle.

157

Clinton Administration Rejects Forest Activists Concerns

In a speech just weeks after the Seattle Ministerial, a State Department representative announced that the Clinton Administration continued to support the Advanced Tariff Liberalization Initiative (ATL) (otherwise known as the Global Free

Logging Agreement). The Administration maintains this support in spite of letters

from sixteen of the nations leading environmental organizations, over 500 forest activists from across the U.S. and the world, 48 bi-partisan Members of Congress,

seven Senators, 22 Washington State Senators and Representatives and nine Seattle City Council members rejecting the GFLA and demanding protections for forests from international trade and investment policies.

The Administration also rejected requests from forest activists and other environmental groups to reform WTO rules that threaten forests through the SPS and TBT

agreements, the PPM requirements, and the dispute resolution process that have favored free markets over environmental and health concerns.

Forest activists have asked, and the Administration has rejected, requests to pay

particular attention to reform of the SPS Agreement. The SPS Agreement unwisely

restricts steps that the U.S. Department of Agriculture and its counterparts in other

nations can take to prevent introductions of potentially harmful exotic species.

The SPS Agreement requires federal regulators to predict which foreign species

will become invasive if introduced into the U.S. Scientists understand too little

about both the Earth’s estimated thirty million species and our own country’s many

and varied ecosystems to make such predictions. Scientists recommend, instead,

that regulations be based on the premise that all species are ‘‘guilty until proven

innocent.’’ Forest activists have asked the Administration to advocate revision of the

SPS Agreement so that it expressly acknowledges the right of governments to invoke the Precautionary Principle (the right to take action against a potential harm

even if the scientific evidence linking an activity to the harm in question is inconclusive or uncertain) in determining their appropriate levels of risk.

Forest Activists Excluded from U.S. Trade Policy

Forest activists had hoped that one outcome of the Seattle Ministerial would be

a recognition from the Clinton Administration that the democratic process leading

up to Seattle had failed. An example of the failed democratic process was the exclusion of forest activists form the policy-making process of the United States Trade

Representative (USTR). Forest protection groups won a federal district court ruling

under the Federal Advisory Committee Act, requiring USTR to appoint forest protection representatives to relevant advisory committees which are currently composed only of industry representatives. Yet rather than reach out to the forest protection groups to discuss how to open up and balance the process, USTR chose to

maintain an exclusively adversarial relationship and appeal the court ruling. In this

context, forest activists are not encouraged by USTR’s simultaneous announcement

of an initiative to ‘‘enhance opportunities’’ for environmental groups to advise on

trade issues.

USTR’s shortcomings in the environmental arena, even when partnering with the

Council on Environmental Quality (CEQ), were made evident in the USTR/CEQ

study of the ATL. While this study was welcomed by the forest community, particularly due to the inclusion of CEQ and the Forest Service, the process for completing

the study and the policy-decisions made based on the study results were extremely

disappointing and hopefully not precedent setting.

The many methodological shortcomings which plague the study led forest activists

to conclude that the potential threat of the forest negotiations at the WTO to forests

and biodiversity were considerably worse than even those identified in the study

itself.

The study’s methodological short-comings include: (1) a limited time-frame that

made it impossible to provide a thorough analysis of the problem; (2) investigation

of the acceleration of tariff elimination rather than the overall impact of the elimination of tariffs on forests; (3) absence of analysis of the impact on forests of the

negotiations of non-tariff barriers to trade that threaten vital forest protection laws;

and (4) failure to develop an environmentally justifiable alternative to the ATL.

Even if one ignores the methodological problems, the study findings confirmed some

of the forest communities worst predictions regarding the ATL:

1. The study found that the ATL alone will increase global logging, trade in forest

products and production and consumption of forest products;

2. The study found that the increased logging will take place in some of the

world’s most sensitive and biologically rich forests: the primary forests of Indonesia

and Malaysia, among other endangered forests in additional countries; and

158

3. The policy recommendations based on the study were in favor of continued support of the ATL, recommending only that ‘‘bilateral, regional and multilateral cooperation, including continued technical assistance to help countries develop environmentally sound national forest management policies and practices’’ should be

pursued. While such policies are welcome and desirable, alone they are not adequate

to address the problems that arise from the ATL.

In this context, we welcomed the President’s announcement last week that he will

request nearly double the current federal spending on programs to protect the

world’s tropical rain forests in his FY 2000 budget. This budget request demonstrates a concern for rainforest protection shared by forest activists everywhere.

As mentioned above, while such policies are extremely welcome and we applaud the

Administration for this program, alone such programs are not adequate to address

the GFLA and other international trade agreements that threaten forests and forest

protection efforts. The Administration must include forest protection as a criteria

within trade and investment agreements and reject the inclusion of trade liberalization in non-trade agreements such as the United Nations Intergovernmental Forum

on Forests.

It is American Lands’ hope that studies conducted in the future under the President’s Executive Order on environmental reviews of trade agreements, will be administered by the Environmental Protection Agency (EPA), CEQ and when relevant,

the Forest Service, as the lead agencies. Only by giving agencies with expertise in

and a commitment to the environment control over such studies will forest concerns

receive the necessary and proper attention.

Policy Recommendations

‘‘This is what democracy looks like!’’—was a chant repeated often in the streets

of Seattle. The Administration can show us another version of democracy by moving

forward on these and other recommendations from forest activists.

Remove USTR From Environmental Aspects of U.S. Trade Policy.

We join with other leading national environmental organizations in demanding

that USTR be removed from environmental trade policy. The lead-up to Seattle confirmed environmental organizations’ opinion that one of the main problems with

U.S. trade and environment policies is USTR itself. USTR is not an environmental

regulatory agency and lacks sufficient environmental expertise. Moreover, USTR is

perceived as being ‘‘captured’’ by business interests and not as receptive to broader

public concerns over the environmental implications of trade agreements. Nevertheless, USTR plays the lead role in devising U.S. policies on trade and the environment. In 1999, USTR used this role to block the environmental community’s calls

for WTO reforms that would have reduced threats to environmental law. The solution to this problem is to give environmental agencies like CEQ and the EPA the

lead role in setting the environmental aspects of U.S. trade policy. USTR could focus

on doing what it does best: negotiating to achieve these policies at the multilateral

level.

Remove the ‘‘Global Free Logging Agreement’’ (GFLA) From U.S. Trade Agenda

The GFLA (also known as the ATL) would increase trade in wood products

through the elimination of tariffs and the elimination of non-tariff trade barriers

(NTBs). NTBs are forest and species protections that interfere with free trade. Tariff

elimination will increase consumption of wood products, while the elimination of

NTBs threatens existing and future forest protections. The Administration should

drop its push for the GFLA at the WTO, the Asia-Pacific Economic Cooperation, the

Free Trade Area of the Americas and other trade agreements or bodies.

Constrain Environmental Destructive Subsidies.

Reducing harmful subsidies should take priority over cutting tariffs. Such subsidies distort trade and contribute to deforestation. Governments have recently advocated cutting environmentally destructive subsidies in the fisheries sector at the

WTO. The Clinton Administration should use international trade agreements to reduce destructive forest subsidies as well as committing to eliminate these subsidies

at home prior to the conclusion of such agreements. For example, the U.S. Government should stop wasting hundreds of millions of dollars each year on timber roads

and below cost timber sales to logging companies.

Reform the SPS Agreement to Protect Forests from Invasive Species.

American Lands hopes that the review of current statutes governing invasive exotic species that is now under way by the Invasive Species Council will highlight

the conflict between the SPS Agreement and scientifically sound ‘‘pest exclusion’’

159

programs. We hope further that the Administration will then pursue needed amendments to that agreement, as well as other strategies to ensure that the harmful environmental impacts of trade are minimized. The SPS Agreement must be revised,

among other changes, to expressly acknowledge the right of governments to invoke

the Precautionary Principle (the right to take action against a potential harm even

if the scientific evidence linking an activity to the harm in question is inconclusive

or uncertain) in determining their appropriate levels of risk.

Support a Global Convention on the Trade in Old Growth (CTOG).

Taking the example of the Convention on International Trade in Endangered Species (CITES), the Administration should examine the feasibility of a ban in the

trade of forest products from old growth forests. Initially, the ban could be imposed

on the trade in primary forests. Logging of primary forests for export is the most

environmentally problematic aspect of the forest products trade. The U.S. Government is already committed to not funding timber operations in primary tropical forests through World Bank and OPIC policies. If the appropriate package of aid, debt

relief and technical assistance can be created, this proposal could be expanded to

tropical forests as well. Such assistance is consistent with the Rio bargain that developed countries would assist developing countries in raising environmental standards and combating environmental problems, so that all could share in sustainable

development and an improved global environment. Pursuit of such an agreement

would also have to be accompanied by MEA recognition at the WTO and elsewhere.

Protect Non-Tariff Trade Barriers Used for Environmental Protection.

The Administration much explicitly state that it will not support, but will rather

fight, attempts to label forest protection measures as illegal ‘‘non tariff trade barriers’’ under WTO or other trade agreement of trade body rules.

Protect Independent Forest Product Certification Measures and Green Procurement

Laws.

Forest product certification programs such as the Forest Stewardship Council are

threatened by WTO. We ask the Administration to ensure that distinctions between

products based upon PPMs related to environment, human rights and internationally recognized labor standards are recognized as legitimate measures for promoting

sustainable commerce. We also ask the Administration to explicitly state that independent, voluntary and mandatory forest product certification measures and green

procurement laws are in no way contradictory to the TBT Agreement.

Grant Preferential Treatment to Independently Certified Imported Wood Products.

The U.S. government should consider adopting tariffs and non-tariff measures

that encourage sustainable forestry and discourage unsustainable forestry practices.

For instance, the Clinton Administration should consider only lowering tariffs for

forest products that have been independently certified to have been produced in an

environmentally and socially responsible manner. Governments could raise tariffs

and consider additional controls on forest products that have not been certified in

order to create incentives for environmentally protective forestry.

Negotiate Binding Code of Conduct Setting Minimum Standards for Forestry Industry.

Concerns over trade and investment liberalization in forest products-such as ‘‘cut

and run’’ operations, increased investment in countries without adequate laws—

would be assuaged by the negotiation of binding minimum standards for corporations involved in international investment and trade in the forest sector. Such a

code could draw upon existing principles and best practices, such as those of the

World Bank, and voluntary codes. However, the rules should be binding and enforceable by citizens. The United Nations Development Program has called for such

binding standards in their latest Human Development Report. According to UNDP,

‘‘multinationals are too important for their conduct to be left to voluntary and selfgenerated standards.’’

Impose Small Tax On Cross-Border Trade in Forest Products, With Revenues Dedicated to Forest Protection.

The total value of trade in forest products worldwide exceeds $150 billion annually. A small surcharge on all forest products imports, even just one percent, would

raise significant sums that could be dedicated to forest protection, particularly in

developing countries and critical forest ‘‘hot spots.’’ The Clinton Administration

should examine the feasibility of this policy at the hemispheric level, as well as possible mechanisms or organizations that could channel the funds for forest protection,

160

capacity building in forest regulation, and the promotion of sustainable forestry

practices among the private sector.

Conclusion

American Lands’ wishes to thank the Committee on Trade for the opportunity to

present these views to the Congress. We look forward to working with Congress and

the Administration on a new set of trade and investment rules that will make the

global economy respond to the needs of the world’s forests, the environment and it’s

citizens.

Statement of John C. Dernbach, Widener University Law School,

Harrisburg, Pennsylvania, and Foreign Policy In Focus Associate

WTO AND SUSTAINABLE DEVELOPMENT:

WHY THE SEATTLE MINISTERIAL FAILED AND THE PATH FOR FUTURE DIRECTIONS

WTO and Sustainable Development

• The WTO should be judged against its explicit objective—sustainable development, a term that includes economic and social development and environmental protection.

• The U.S. has no commitment to sustainable development and uses international

trade laws primarily for its own economic development.

• The U.S. needs to play a leadership role in the WTO to make trade, environmental protection, and social development mutually supportive.

The World Trade Organization (WTO) Ministerial Conference in Seattle could

have been a defining moment for the world’s commitment to sustainable development. It could also have been a defining moment for U.S. leadership on sustainable

development. As the WTO and the U.S. pick up the pieces from Seattle, they may

see that the ideas underlying sustainable development provided a unifying theme

for many of the protesters.

The WTO is the international entity responsible for overseeing implementation of

the Global Agreement on Tariffs and Trade. The WTO agreement explicitly states

that trade should be conducted ‘‘in accordance with the objective of sustainable development.’’ As the agreement recognizes, trade is a means of achieving sustainable

development; it is not an end in itself. It is time to hold the WTO and its member

states to that objective.

Sustainable development is not a buzzword or another way of talking about environmental protection. It is a framework for reconciling key international goals, and

it applies to national actions as well.

Understanding sustainable development requires an understanding of development, a misused term that has a specific meaning in the international community.

Development is intended to improve the quality of human life and generate opportunity by fostering peace and security, human rights (or social development), and

economic development. But this cannot occur without a fourth component—supportive national governance. An international consensus about these goals grew out

of World War II and the Great Depression. This understanding of development is

taken directly from a variety of international agreements, U.N. General Assembly

Resolutions, and reports of the U.N. Development Program.

Since World War II, development has accomplished much good. People are living

longer, more people are enjoying a higher standard of living, and we have not experienced a third world war. This is due in part to the 1947 Global Agreement on Tariffs and Trade.

But the post-World War II development model has two failings, according to Our

Common Future, the 1987 report of the World Commission on Environment and Development. The number of people living in poverty is now greater than ever, and

widespread environmental degradation is occurring in every region of the world.

The Commission found that each of the four basic components of development—

peace and security, social development, economic development, and supportive national governance—required protection, and even restoration, of the environment.

Continued development is compromised and even prevented by inattention to the

environment. People have fought over water and scarce resources. Environmental

contamination and disease kill people or prevent them from living decent lives. People cannot earn a living from fishing when there are few fish to catch. Governments

that do not protect their environment thus undermine their own development goals.

161

At the United Nations Conference on Environment and Development (or Earth

Summit) in 1992, the nations of the world endorsed sustainable development as a

response to these problems. Sustainable development adds another component to

the traditional development model—environmental protection and restoration. More

fundamentally, it redefines progress. Instead of seeing progress in terms of traditional development—and tolerating environmental degradation—sustainable development means that we must also simultaneously seek progress in overall environmental quality. The nations of the world adopted a statement of principles (the Rio

Declaration) and a plan of action (Agenda 21) to realize sustainable development.

Concerning trade, the Rio Declaration urges states to ‘‘promote a supportive and

international economic system that would lead to economic growth and sustainable

development in all countries, to better address the problems of environmental degradation.’’ Similarly, Agenda 21 states that the ‘‘international community should

provide a supportive international climate for achieving environment and development goals’’ by, among other things, ‘‘[m]aking trade and environment mutually

supportive.’’ In 1994, when GATT was amended and the WTO created, sustainable

development was incorporated into the WTO’s goals.

At century’s end, however, the world generally is moving away from sustainable

development rather than toward it. Trade is not the only reason, but it is a major

reason. Global GDP has risen by five times since 1950 and could be four or five

times its present size by 2050. The world’s natural systems, however, are being undermined by unsustainable use and exploitation as well as grave imbalances between those who benefit from that exploitation and those who are burdened by it.

A recent U.N. Environmental Programme report concludes that environmental protection is ‘‘lagging behind economic and social development.’’

Toward a New Foreign Policy

• The U.S. should exercise leadership to move the international trading system

toward sustainable development.

• The WTO, with the support and leadership of the United States, should abolish

subsidies that contribute to unsustainable development and integrate sustainable

development into new and existing trade agreements.

• U.S. actions concerning trade should be part of a broader U.S. vision and strategy for sustainable development that is also applied in other forums.

The U.S. should articulate a positive and compelling vision of what sustainable

development would mean for the world’s nations and integrate that vision into its

domestic and foreign policy, including its trade policy. The United States should exercise that leadership in the WTO and other forums.

U.S. Leadership in the WTO

The WTO needs to be part of the effort to achieve sustainable development, not

part of the problem. The United States should exercise leadership in the WTO to

achieve the following outcomes. Although many of the examples relate to environment, these recommendations also apply to labor, health, and other aspects of sustainable development.

Elimination of Subsidies That Contribute to Unsustainable Development.

WTO parties should phase out subsidies for environmentally unsustainable activities, including subsidies that contribute to fisheries overcapacity. The elimination of

such fishing subsidies has been proposed by New Zealand, Iceland, and the United

States.

The parties should find other ways to apply the WTO’s legal authority concerning

subsidies to support sustainable development. For example, it is widely recognized

that the use of fossil fuels is subsidized by governments in ways that often increase

their use and that the use of fossil fuels contributes to global warming. The Kyoto

Protocol specifically identifies elimination of national subsidies as one means of

achieving greenhouse gas reductions. Subsidies for fossil fuels distort the prices

charged for those fuels and create substantial economic distortions in the debate

over the cost of Kyoto Protocol compliance.

Consideration of Sustainable Development in New Trade Agreements. No

trade-related agreement should be negotiated or allowed to go into effect unless a

sustainable development impact assessment is first prepared and subjected to public

review. The assessment should describe the impact of the proposed agreement on

the environment, on social development and human rights (including labor), on

peace and security, and on national governance that is supportive of those goals.

The assessment should also describe alternatives to the proposed agreement, including alternatives relating to the special situation of developing countries, and particularly the least developed countries.

162

Integration of Sustainable Development Goals into New Trade Agreements. No trade-related agreement should be allowed to go into effect unless the

parties are satisfied, after public review, that the agreement would actually further

not just economic development but also environmental protection, social development and human rights, peace and security, and supportive national governance. It

is not enough to consider the effects on these goals. Trade agreements should actually further these goals, or at least not interfere with them. Procedural reforms to

WTO’s Committee on Trade and Environment will not achieve this result.

The parties should also find additional ways to make GATT and multilateral environmental agreements mutually supportive. When negotiations relating to a particular economic sector begin, for example, and there is no multilateral environmental agreement in place concerning that sector, there should be preliminary discussion on whether it would be appropriate to have multilateral environmental

standards and procedures applicable to that sector. (These standards would include

process and production methods.) Environmental ministries should participate directly in such discussions. If so, then those standards could be negotiated at the

same time as, or perhaps even as part of, the trade discussions for that sector. Such

negotiations should also include appropriate standards and financial or technical assistance for developing countries.

The standards should include air pollution, water pollution, sanitation, and drinking water—environmental problems that developing countries experience more severely and immediately than most other environmental problems. These problems

generally are also not directly covered by multilateral environmental agreements.

The quid pro quo for increased trade, in short, should be progress in addressing

such problems and assistance by developed countries in doing so.

Integration of Sustainable Development Goals into Existing Trade Agreements. Where trade agreements already exist (e.g., for products), the parties should

facilitate the negotiation of international agreements concerning process and production agreements relating to products. These agreements should include, but not

necessarily be limited to, extended producer responsibility, ecolabeling, and the

greening of public purchasing. These agreements also should apply to air pollution,

water pollution, and similar problems experienced severely by developing countries,

and should include appropriate assistance. The WTO agreements should also be

amended, or interpreted by the parties, to provide a more balanced test for the

availability of the Article XX(b) and XX(g) exemptions for measures to protect

‘‘human, animal or plant life or health’’ or conserve ‘‘exhaustible natural resources.’’

In addition, the WTO agreements should expressly protect domestic actions taken

pursuant to multilateral agreements and allow unilateral actions where necessary

to protect the national interest.

U.S. Leadership in Other Forums

Many of the changes required to make trade supportive of environmental and social goals cannot be achieved by WTO alone. Unless the United States exercises

leadership for sustainable development in all relevant international and domestic forums, it will continue to miss many opportunities to improve the environmental and

social effects of trade.

Greater Assistance to Developing Countries for Sustainable Development.

The Earth Summit bargain between developed and developing countries was that

developed countries would provide financial and technical assistance to developing

countries to help developing countries achieve environmental and social goals. The

developed countries have not kept that bargain. Developed countries (including the

U.S.) need to increase official development assistance, to assist technical and governmental capacity building, and to provide access to environmental technology and

know-how on preferential terms. Creative means of financing this assistance should

also be seriously considered (e.g., debt for environmental and health protection

swaps, or a small tax on global trade and capital flows).

Creation of International Institution for Sustainable Development Comparable to WTO. There is no organization equal in influence to the World Trade

Organization concerning the environmental aspects of sustainable development.

Such an institution should thus be created, probably by combining existing organizations (e.g., Commission on Sustainable Development, U.N. Environment Programme, secretariats of various multilateral environmental agreements). The consolidation of environmental organizations would be in addition to the integration of

environment into existing WTO operations.

Domestic Efforts to Achieve Sustainable Development. The U.S. and other

developed countries must demonstrate by their own domestic actions, including actions concerning trade, that sustainable development provides better quality of life

for their citizens and for succeeding generations.

163

Statement of Brent Blackwelder, President, Friends of the Earth

The 1999 Seattle Ministerial Meeting of the World Trade Organization (WTO) put

trade issues under an intense spotlight of public scrutiny. The old way of conducting

global trade talks—rules and agreements negotiated in a secretive manner that excludes the public and harms the environment—proved unacceptable to ordinary people and even to many governments. In Seattle and later at the World Economic

Forum in Davos, President Clinton acknowledged the need to democratize trade policy and to make the WTO more transparent and accountable. The coming months

provide an opportunity for US government leaders to act on these promises, and to

demonstrate that they have truly learned the lessons of Seattle.

I. DEMOCRACY STARTS AT HOME

President Clinton and members of Congress have noted the need to open up the

WTO, but democracy starts at home. The Clinton-Gore Administration and Congress

must give the public a greater voice in the domestic trade policymaking process,

which is currently dominated by corporate interests. This will lead to greener trade

policy that inspires more public confidence in international trade. Friends of the

Earth recommends that environmental agencies be charged with setting trade and

environment policy, that the trade advisory system be opened to environmental organizations, and that public notice be given when the US uses the WTO to threaten

other countries’ environmental laws.

A decade of advocacy on trade and environment issues leads environmentalists to

the inescapable conclusion that the main trade threat to the environment is the

United States Trade Representatives Office (USTR) itself. Though USTR lacks environmental expertise and is perceived as being beholden to business interests, it

plays the lead role in setting US policies on trade and the environment. In the lead

up to Seattle, USTR blocked the environmental community’s calls for WTO reforms

that would have reduced threats to environmental laws. The solution to this problem is to give environmental agencies like the Environmental Protection Agency

(EPA) and the Council on Environmental Quality (CEQ) the lead role in setting the

environmental aspects of US trade policy. USTR could then focus on doing what it

does best: negotiating to achieve these policies at the multilateral level.

Approximately 700 business representatives sit on 30 industry sector advisory

committees that get special access to information and advise USTR. There are no

public interest members on these committees. For example, there are two committees advising USTR on the forest product trade. None of the members of the committees are environmentalists, so it is not surprising that USTR has aggressively

pursued trade policies that threaten forests worldwide. These committees need to

be opened to diverse public interests or abolished.

Friends of the Earth is not concerned just with the WTO’s effects on US environmental laws; we are equally outraged when the US government uses the organization to challenge other countries’ regulations or block environmental progress. For

example, the US electronics industry recently sent USTR detailed arguments that

a proposed European directive on recycling waste violated WTO rules. USTR sent

the arguments to US embassy staff in European countries, with instructions to register complaints over the directive. They did this without informing, much less with

input from, the American public or environmental agencies like EPA.

It is unacceptable for USTR to act as private mercenaries for corporate interests.

The US Government should give public notice and seek comments before trying to

undermine other countries’ environmental or health laws.

II. WHAT TO DO ABOUT THE WTO

Friends of the Earth is not interested in transforming the WTO into an environmental organization. We don’t want the WTO to use sanctions to enforce environmental standards. And we have no interest in or intent to prevent market access

for developing countries. We believe the WTO should take a ‘‘hands off’’ approach

to environmental and health laws, allowing governments to make environmental

progress at the national and international level. We also believe the US and other

governments must strengthen the Multilateral Environmental Agreements so economic liberalization doesn’t rush ahead without an adequate framework of environmental protection.

164

We believe environmental assessment must be part of all trade agreements. Governments have been leaping before they look on trade. Members of the WTO should

commit to assessment of past and planned trade agreements. The breakdown in Seattle provides the opportunity to assess the five-year record of the WTO before starting new negotiations. Assessment should focus on trade agreements’ impacts of ecosystems and environmental standards, but also address broader sustainability

issues, including development and labor impacts. The assessments should happen

at the national level and governments should also cooperate on a joint review, perhaps at the United Nations Environment Program. The Clinton-Gore Administration recently announced a policy of assessing the environmental impacts of some

trade agreements. This is a good start, but should be followed through and strengthened to cover investment agreements, insure leadership from environmental agencies, and closely follow our tested and effective laws for domestic environmental assessment (NEPA). Ongoing negotiations for a Free Trade Area of the Americas

(FTAA) provide an immediate opportunity for the US to put its assessment policy

to work.

Friends of the Earth also believes the WTO’s dispute resolution rules and some

substantive rules must be changed to grant greater deference to environmental and

health laws. The WTO’s rules are biased against environmental regulations, so reforming them would assure environmental organizations that they will not continue

their perfect record of ruling against environmental laws. deference should also

apply to Multilateral Environmental Agreements (MEAs) which use trade measures

or impact trade.

Friends of the Earth also believes the WTO should be downsized when it comes

to environmentally sensitive sectors. Governments should follow the example of hazardous waste (which is regulated by the Basel Convention), and trade in endangered

species (which is regulated by CITES) and negotiate MEAs while taking certain

products out of the WTO. The recent completion of a Biosafety Protocol on trade in

genetically modified products is an important step in the right direction. Bulk fresh

water is another sensitive issue that should not be commodified and treated like

other products. Governments should consider restricting trade in logs and products

from old growth forests, both temperate and tropical.

Conclusion

Friends of the Earth is a national environmental advocacy organization with affiliates in 63 countries. We were active in Seattle, conducting advocacy and public

education as part of a team of nearly 40 representatives of FoE from 20 countries.

I came away impressed by the depth of commitment and awareness shown by the

vast majority of the protestors, marchers, and other members of the public in Seattle to express their concerns about the WTO. The people have spoken. We hope

our government will act, and show the rest of the world that democracy works.

For More Information on Friends of the Earth’s Position on the WTO:

• View our website at http://www.foe.org/international/wto

• Contact Mark Vallianatos at 202–783–7400 x. 231

Statement of Grocery Manufacturers of America

GMA welcomes this opportunity to present our views on the prospects for the

mandated negotiations on agriculture in the World Trade Organization. GMA is the

world’s largest association of food, beverage and consumer product companies. With

US sales of more than $450 billion, GMA members employ more than 2.5 million

workers in all 50 states. Led by a board of 42 Chief Executive Officers, GMA speaks

for food and consumer product manufacturers at the state, federal and international

levels on legislative and regulatory issues. GMA also leads efforts to increase productivity and efficiency in the food industry.

GMA regrets that the recent WTO Ministerial meeting failed to launch a comprehensive new round of trade negotiations. Agriculture negotiations, however, will

proceed as mandated under Article 20 of the WTO Agreement on Agriculture. GMA

believes it is crucial that governments worldwide enter immediately into good-faith

negotiations to build on the achievements of the Uruguay Round and continue to

expand market access, reduce tariffs and dismantle barriers to food and agriculture

products. United States leadership will be key to ensuring that negotiations begin

in a timely fashion and proceed expeditiously.

GMA respectfully offers its views on the structure and goals of the mandated negotiations on agriculture.

165

Structure of the Negotiations

As noted above, GMA believes it is imperative that negotiations on the so-called

‘‘built-in’’ agenda begin in the WTO at the earliest possible date, in conjunction with

necessary institutional and decision-making reforms. We recommend that negotiations begin under the auspices of the Committee on Agriculture with the eventual

goal of a separate negotiating group on agriculture. Negotiations should follow the

overall framework of the Uruguay Round, focusing on market access, export competition and domestic support. The United States should also exercise the necessary

leadership to launch a more comprehensive round of trade negotiations, in order to

secure maximum leverage for liberalization for food and agriculture products. However, GMA does not wish the lack of a broader package of negotiations to be used

as an excuse to delay negotiations on agriculture.

GMA Goals for the Mandated Agenda

GMA’s goals for the agriculture negotiations remain consistent with our earlier

testimony on the WTO Ministerial. First, we believe it is essential to improve market access for processed food products and primary agricultural commodities

through reduced tariffs, elimination or further liberalization of TRQs and other

mechanisms. Second, GMA believes that export subsidies on food and agricultural

products must be eliminated. Finally, GMA recommends that discussions on nontrade concerns relating to agriculture be carefully circumscribed throughout the negotiations.

Expanding Market Access for Processed Food and Primary Agricultural Products

GMA recommends that the Administration place particular emphasis on liberalization in the processed food sector in the agriculture negotiations. U.S. trading patterns for food and agricultural products have undergone a profound change in recent

years. Consumer products now account for 39% of U.S. exports in the agricultural

sector, more than the percentage accounted for by raw agricultural products. Consumer and intermediate products, those that have undergone some processing, together comprise nearly two-thirds of total agricultural exports. Globally, trade in

processed food is growing at more than twice the rate of trade in primary agricultural products. By 2000, trade in processed or value-added products is predicted to

account for 75% of global agrifood trade as compared with about 50% in 1985.

Yet, despite this impressive growth, barriers to processed foods and beverages remain significantly higher than those for many other products. The Uruguay Round

negotiations delivered some benefits by lowering barriers and reducing subsidies to

producers and exporters. However, the reductions in tariffs for processed foods and

beverages were mostly at the lower end of the allowable range. Because the rules

allowed countries to average their tariff cuts, countries naturally chose to make high

percentage reductions on already low tariffs and lower percentage reductions on

higher tariffs. As a result, the average tariff on processed food products globally remains, on average, eight times the U.S. rate.

To address these barriers, GMA strongly advocates an approach to tariff reductions that will address the particular problems of the processed food sector and will

place these products on par with their industrial counterparts. We support an approach that will eliminate tariff peaks (asymmetrically high tariffs that far exceed

a country’s average tariff rate) and address the problem of tariff escalation, where

tariffs increase with the level of processing. This approach should, in essence, reduce the higher tariffs faster than the lower ones to create meaningful market access for exports. We also recommend that governments worldwide work toward zerofor-zero tariff agreements on a number of products including, but not limited to, pet

foods, dry cereals, soft drinks, soups, biscuits and cocoa and cocoa containing products.

GMA also recommends that the U.S. seek a significant expansion of the minimum

market access commitment for processed food and primary agricultural products

achieved during the Uruguay Round. Quotas also represent a major barrier and, as

a result, the U.S. should pursue substantial increases in applicable quotas, significant decreases in out of quota tariff rates and elimination of in-quota duties.

Lastly, if our commitment to expanding market access abroad for U.S. products

is to be taken seriously by our trading partners, domestically favored industries and

products must not be excluded from the upcoming negotiations. Tariffs and quotas

on sugar, peanuts and dairy products must be liberalized. The U.S. must not shy

away from helping lead the way in that liberalization. Simply put, our negotiators

will have a much stronger position in world trade talks once they are able to demonstrate serious resolve to open markets by further opening of the American market

166

for sugar, peanuts and dairy products. We strongly recommend that sugar, peanuts

and dairy products be kept on the table in the negotiations.

Elimination of Export Subsidies

If we are to ensure a level playing field for agricultural commodities and processed food products, the massive export subsidies provided by many of the U.S.’

most important trading partners must be eliminated. Our goal is to see export products compete on their quality, merit and consumer interest, not the degree to which

they have been subsidized. Therefore, GMA recommends that export subsidies on

all primary agricultural commodities and processed food products be eliminated

within five years of the conclusion of the negotiations.

While we are also concerned about achieving a reduction in domestic support for

agricultural commodities and processed food products, we believe the most effective

means to ensure a lessening of this support is to focus on increasing market access

and eliminating export subsidies. Working together, these two tools provide the

needed discipline in the marketplace and will inevitably result in the desired reduction of domestic support.

Non-Trade Concerns

GMA recognizes that Article 20 (c) of the Agreement on Agriculture directs countries to consider ‘‘non-trade’’ concerns in future agricultural negotiations. We are

concerned, however, at the expansive approach that some countries took to this concept in the lead up to, and during the WTO Ministerial meeting. In particular, GMA

was troubled that language pertaining to food safety was included in the last draft

‘‘Text on Agriculture.’’ Issues pertaining to food safety are already clearly covered

by the existing Uruguay Round Agreement of the Application of Sanitary and

Phytosanitary Measures (SPS), which should not be renegotiated or re-opened in

any manner. GMA firmly believes that any reopening of the SPS Agreement could

lead to a weakening of its provisions, a result which GMA strongly opposes and

which would represent a significant step backwards in eliminating unwarranted restrictions on trade.

Conclusion

Thank you for this opportunity to share our views on the mandated negotiations

on agriculture. GMA firmly believes that it is of critical importance to farmers and

producers alike to continue to expand market access, reduce tariffs and dismantle

barriers to food and agricultural products. Achieving the objectives discussed above

will benefit consumers around the world with a more reliable, diverse, safe and affordable food supply. We look forward to working with you and the Administration

to achieve these goals.

STANFORD UNIVERSITY, CLASS OF 2002

INTERNATIONAL RELATIONS AND ECONOMICS

February 12, 2000

A.L. Singleton

Chief of Staff

Committee on Ways and Means

U.S. House of Representatives

1102 Longworth House Office Building

Washington D.C. 20515

Dear Mr. Singleton;

The following outlines my testimony for the House hearing on the World Trade

Organization.

I think that this is an issue of tremendou importance. Today, 60 of the world’s

largest economies are corporations, rather than nations. Corporate citizenship will

have to expand beyond donating a couple thousand to art museums and global trade

will have to be balanced by concern for human rights and the environment. Realistically, I feel the only way to enforce laws protecting such fundamental human rights

is through multilateral government agreements on trade with the same enforcement

as other WTO agreements. Trade will dominate the future, and if we want the new

millennium to bring true global prosperity, the WTO must be willing to listen to

the protesters and make some fundamental changes as an institution to fulfill its

responsibilities to the world’s people.

167

I appreciate your consideration.

Sincerely,

LAUREN INOUYE

Edina, MN

** The WTO prioritizes trade and commercial considerations over other values.

WTO rules generally require domestic laws, rules and regulations designed to further worker, consumer, environmental, health, safety, human rights, animal protection or other non-commercial interests to be undertaken in the ‘‘least trade restrictive’’ fashion possible—almost never is trade subordinated to these noncommercial

concerns. I agree that regulations should be taken in a manner that is the leastrestrictive to trade-but only if the regulations remain effective.

** If the promotion of free trade is being ‘‘justified’’ on the basis that it improves

everyone’s lives, I think we should focus more on improving people’s lives, and free

trade only as a means to that end. The WTO is argues that development will lead

to a better standard of living for all-that the rising tide will lift all boats. But the

Wall Street Journal recently reported (10/29/99) that the per capita income gap between the wealthiest and poorest nation has grown from 3 to 1 in 1820 to 35 to

1 in 1950 to 72 to 1 in 1992. Even if the increase in the gap was due entirely to

the US getting richer (which it is not) I’m concerned. Basically, I don’t think all

growth helps people. Growth and GDP do not always accurately represent quality

of life. GDP was never meant to be an indicator of people’s wellbeing. It is a measurement of the size of the economy, simply that. I think any growth initiative

should be carefully evaluated not simply on whether it will make $$$, but on how

it will effect people’s lives. The WTO (and, many would argue, the other Bretton

Woods institutions, like the IMF and World Bank) promote growth without these

considerations. Basically, people before profits.

** The WTO is not democratic. We did not elect our representative, Charlene

Barshefsky, and have little opportunity to influence her policy. She has advisory

panels to represent different segments of American industry, and the panels, except

in one or two cases, are entirely composed of businessmen. NGO’s and public citizens do not have an opportunity to share their concerns about labor, the environment, and human rights.

** The WTO operates in secrecy. Its tribunals rule on the ‘‘legality’’ of nations’

laws, but carry out their work behind closed doors. Neither the press or the public

is allowed in their meetings.

** The Dispute Resolution Panels, which arbitrate trade arguments, often have a

bias in favor of corporate interests, and their rulings cannot be overturned unless

there is a unanimous decision to overturn them. ‘‘Under WTO rules, once a commitment has been made to liberalize a sector of trade, it is difficult to reverse,’’ the

WTO says in a paper on the benefits of the organization which is published on its

web site. ‘‘Quite often, governments use the WTO as a welcome external constraint

on their policies: ’we can’t do this because it would violate the WTO agreements.’’’

** The WTO does not just regulate, it actively promotes, global trade. Its rules facilitate global commerce and multinational development and do not equally promote

local economic development and policies that move developing countries towards

greater self-reliance. Although the leaders of many developing nations have clearly

stated their desire to join the WTO, there is reason to believe that while the political elite want more international development, the people of the nation prefer

smaller ‘‘microenterprise’’ and more control over their economy. Also, I feel the focus

on international development agencies should be sustainable development, and that

it is far wiser to aid developing countries with technology and other environmental

aid now then to deal with the consequences 40 years from now.

** The WTO does not abide by the Precautionary Principle. The Precautionary

Principle is an accepted norm in international law, and basically states that if there

is reason to believe that a product poses a risk to human health or the environment,

that it needs to be proven safe before being produced. (this is the principle that the

FDA works on) WTO rules (the Sanitary and Phytosanitary Standards) generally

block countries from banning exports of products which they cannot conclusively

prove to be harmful-which is basically everything. (Think about how long tobacco

companies denied that Cigarettes caused cancer). The most famous case here is that

of the European Union and bovine growth hormone-treated beef.

** The WTO establishes international ceilings, rather than floors on import environmental standards through a process of ‘‘harmonization.’’ It is argued that environmental standards which are too high make it difficult for LDCs to produce, and

are therefore a barrier to trade. My feeling is that is that we should try as much

as we can to keep standards high, and just put more money into tech. transfer programs to help them develop sustainably now. In the long-run, clean-up and repair

168

is often more expensive then investing in new technology-but business often looks

at short-run profits rather than the long-term, and without an incentive to do so,

are more likely to look for a way to make a quick buck. Programs to facilitate technology transfer through the Global Environmental Facility (managed through the

UNDP and the World Bank) have already been established to help LDC’s develop

sustainably. Some say we should just have ‘‘eco-labelling,’’ putting the choice directly in the hands of the consumer. I agree in some instances, (this is the solution

with tuna-look at the dolphin-safe mark on the can) but we have national environmental standards and government enforcement of them, for a reason. The American

people reached a general consensus that we wanted Clean Air and Water, and protection of Endangered Species. I don’t think something as important as species survival should depend on consumer choice. By the time people realize that its really

important to stop buying a certain product, the species may already be extinct or

the land degraded.

** The WTO limits governments’ ability to use their purchasing dollar for human

rights, environmental, worker rights, and other non-commercial purposes. In general,

WTO rules state that governments can make purchases based only on quality and

cost considerations. For example, Canada complained that US laws encouraging the

federal government to buy recycled paper have hurt their logging industry by decreasing demand, and the US had to pay them reparations. Also the Massachusetts

state government had selective purchasing laws preventing government purchase of

items made in Burma/Myanmar, as Burma is currently run by a military dictatorship with documented instances of slave labor, and has their democratically-elected

leader under house arrest. That law is currently under Supreme Court appeal-if

they win, the WTO will overturn it, and the US will be forced to pay the determined

fee. The WTO can’t actually force national governments to change their laws-it just

makes them pay fines for them. In these cases, I can understand why the laws are

considered discriminatory-but I think that human rights are more important than

free trade. Governments should have the right to say they don’t want to purchase

certain kinds of goods for certain reasons.

** The WTO does not allow bans or restrictions based on production. According

to the WTO, Tuna is Tuna is Tuna. A nation cannot discriminate on how an item

was made-for example, whether or not turtle excluder devices were used on shrimp

nets, or whether precautions were taken to prevent dolphins from being killed catching tuna, or whether or not shoes were made with child labor. The developing county reps have expressed concern over labor standards that this would only end up

hurting them, because. US industry wouldn’t use their labor anymore at all, but I

feel that many US companies could up labor standards without upsetting thier bottom line.

** Issues in bioethics. The WTO promotes intellectual property rights for DNA sequences and other ‘‘life patents,’’ and many feel that its wrong. Other intellectual

property rights issues include controversy over whether Africa should get to produce

generic versions of AIDS drugs without paying intellectual property rights because

the drugs could potentially improve/save many lives. Also, many biotech companies

have been accused of ‘‘biopiracy’’ for patenting indigenous people’s traditional remedies, developing drugs, and then not compensating the people who developed the

medicine as a public good.

Statement of Sophia Murphy, Institute for Agriculture and Trade Policy

AGRICULTURE, TRADE AND DEVELOPING COUNTRIES:

WHERE TO AFTER SEATTLE?

The collapse of talks in Seattle last November, at the third Ministerial Conference

of the World Trade Organization (WTO) has left a lot of confusion about what direction multilateral trade talks can take next. It is widely accepted that progress on

new negotiations will be slow, and that the widely anticipated ‘‘Millennium Round’’

will not start this year. However, agriculture, together with services and the TradeRelated Intellectual Property Rights Agreement (TRIPs), have review clauses built

into them. Negotiations are mandated to begin in 2000 in these areas regardless of

whether or not other issues get taken up. In the Uruguay Round Agreement on Agriculture, Article 20 requires WTO member governments to undertake these new negotiations in the light of the experience of implementing the agreement.

This written submission analyzes the agriculture negotiations in Seattle where

the governments seemed to come very close to agreement on a draft text on agriVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00172 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
169

culture. Also included is a review of what this draft text included and suggestions

for ways in which the next text for negotiation could be strengthened to better reflect U.S. goals of supporting developing countries.

There are different opinions on whether it was agriculture that broke the talks

in Seattle. Even those closest to the negotiations, including government delegates,

are not of one mind. Some say yes. The European Council of Agriculture Ministers

did not accept the draft text on agriculture they were sent on the last day of the

conference, saying they would need to see the whole deal before signing off on it.

Coming as it did at the last stage of the meeting, with no time left to negotiate,

this was the equivalent of refusing the deal. Others say that if Clinton had not insisted on linking trade sanctions to labor standards as part of the Seattle negotiations, then there would have been an agreed package that Europe would have found

hard to reject over agriculture alone.

There is no question that the frustration of many developing country delegates,

particularly from Africa and the Caribbean, contributed to the failure of the negotiations. Many delegates were poorly informed about when and where meetings were

taking place and how the working groups were supposed to function. Developing

countries worked hard to develop common positions before Seattle and yet felt that

they were still not being taken seriously in the negotiating process. The traditional

practice of closed sessions among a small number of delegates to broker deals was

continued in Seattle, despite assurances from the WTO’s Director-General that

smaller countries would not be excluded from the process. The protests going on in

the streets throughout the week contributed to the sense of disorganization inside.

The press statements made by the Organization for African Unity and then

CARICOM (the economic community of Caribbean states) on the lack of transparency in the process created a dynamic that will make lasting changes to the way

in which the WTO does its work. As a leader in the WTO the U.S. should work to

address these concerns to make the WTO process more successful in the future.

Despite all the problems in Seattle, the total collapse of the talks took many governments by surprise. For those observing the negotiations, it really did appear that

governments were resolving their disagreements on agriculture. The European

Union (EU), Japan and others stopped insisting that the review of the Agreement

on Agriculture take into account ‘‘multifunctionality,’’ for example. Multifunctional

agriculture is a term used by several developed country governments, particularly

the EU, Japan, Norway and Switzerland, as well as Mauritius. The term refers to

a concept of agriculture that extends beyond its purely productive function, to include its role in protecting culturally, ecologically or economically fragile regions.

Most governments, particularly the United States and the Cairns Group of large agricultural exporters, object to the term, arguing that it is simply a justification for

continued use of export subsidies and high levels of domestic spending on agriculture. In Seattle, the advocates of multifunctional agriculture accepted the use of

the term ‘‘non-trade concerns’’ in the draft text instead, which is a term used in the

Uruguay Round Agreement on Agriculture. Similarly, the Cairns Group and U.S.

dropped their insistence on a call for the total elimination of export subsidies to accept a more gradual approach.

One view maintains that it was the time it took to get these advances on agriculture that made progress in other areas of negotiation impossible. Certainly, for

many governments, especially the Cairns Group members, but also many developing

countries, a deal on agriculture was essential to reaching agreement on any other

issue. For the EU, a reluctant negotiator on agriculture, agreeing a deal in Seattle

was in turn dependent on the EU getting concessions in other areas, such as investment policy. Many agree that the Seattle agenda was too broad to hope that the

wide differences among delegations that were evident in the preparatory negotiations could be bridged in the four days of the Ministerial Conference.

Whether or not it was agriculture that broke the talks in Seattle, it is important

to understand and evaluate the proposals that were put forward there. The U.S. asserts that the agreements reached in Seattle still stand as the basis for further negotiations. But almost no one else involved in the negotiations agrees that this is

possible. The EU has clearly said that the deal was all or nothing. The likelihood

is that governments will go back to Article 20 and start again. Nonetheless, it is

widely accepted that the text reflects what an agreement could look like and it is

important to look hard at what nearly came to be the basis for new negotiations

on agriculture.

The draft Seattle text on agriculture did not do justice to the agenda put forward

by developing countries, although it had their widespread support. Paragraph 28 addressed many important developing country concerns, including the need for special

and differential treatment to be reflected in the specific commitments on tariff reduction, domestic support levels and export subsidies. Yet it was paragraph 29 that

170

dealt explicitly with operational commitments, and there special and differential

treatment hardly made an appearance.

On market access, some developing countries and many NGOs argue that developing countries should not have to increase access to their domestic markets until

there is much more substantial access for agricultural products in developed countries. Yet the Seattle draft text speaks only of ensuring the ‘‘broadest possible liberalization.’’ Nor did the draft text mention the widely acknowledged problem of tariff

peaks and tariff escalation on processed commodities. In other areas of the negotiations, for instance on market access on non-agricultural products, this issue of tariff

discrimination was specifically addressed. The Special Safeguard—a measure specific to the agriculture agreement that allows governments that requested the right

to use it to impose temporary, very high tariffs to protect their domestic producers

from import surges—was also not mentioned. This is a tool primarily available to

developed countries although it is developing countries that are more vulnerable to

economic shocks.

On export subsidies, the Seattle draft text called for reductions that are ‘‘in the

direction of progressive elimination of all forms of export subsidization.’’ This carefully crafted language avoids holding developed countries (by far the most significant users of export subsidies) to a hard commitment to end subsidies, despite their

evidently trade-distorting impact. It was nonetheless a sign that the EU will continue to reduce, if not yet eliminate, its use of export subsidies (and therefore to

reform its dependence on support prices for domestic producers, as these generate

surpluses that the EU can only dispose of through subsidized export). Some developing countries, particularly in Africa, have legitimate concerns about ending export

subsidies, as they are dependent on cheap imported food. Yet the dumping that results from subsidies has been shown to damage domestic production in food importing countries, as well as to distort trade. An end to export subsidies should be supported, as well as to the other forms of support given to developed country traders,

such as export credits and tax relief.

Although Egypt and others developed specific proposals to ensure the Marrakech

Ministerial Decision (formally called the Ministerial Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed

and Net-Food Importing Developing Countries) could be made operational, the Seattle draft texts made little mention of it. The decision provides measures to help

developing countries that face problems paying for food imports when prices surge.

Yet WTO members were unwilling to meet their obligations and the decision proved

too weak to be useful. In future negotiations, it will be important for net food importing countries to get clearer commitments of assistance from the international

system.

Finally, the Seattle draft text on domestic support programs was also disappointing. The simple proposal was for ‘‘progressive reductions’’ in levels of domestic support. No mention was made of the gross inequalities that persist in levels of

domestic support among countries. As the African Group’s position reflects, many

African countries need to increase their spending on agriculture, in some cases significantly. In some cases, this may require lifting the ceiling they face on domestic

expenditures on agriculture. The current agreement reflects special and differential

treatment for rich countries by allowing enormous expenditures on agriculture to be

exempt from reduction commitments. The review of the Agreement on Agriculture

needs to eliminate these anomalies, while ensuring that the commitment to food security and rural development made in the language of the text can be translated

into concrete measures.

The question of state-trading enterprises (STEs) was raised by some countries in

the preparations for Seattle (notably the U.S.) but was not reflected in the draft text

negotiated there. Many developing countries abolished their marketing boards (a

typical form of STE) under structural adjustment programs. There were widely acknowledged problems with the way many of these boards work. Nonetheless,

UNCTAD and others have shown that the privatization of the boards has often resulted, in the medium-term, in diminished competition and the dominance of a

given export sector by one or two foreign companies. As a result, less of the economic benefit from the trade stays in the producer country. It is likely that properly

managed STEs offer a useful second-best solution to the many imperfections in agricultural commodity markets. At a minimum, developing countries could request a

review of the possible role of STEs. The proposal to make STEs illegal under WTO

rules should be rejected. Linked to this question of market distortions, better documentation of the activities of the transnational companies that dominate many commodity markets is needed. This is also some thing that could be requested of WTO

members, just as they are required to document the activities of their STEs.

171

The failure to launch a new round of negotiations in Seattle is a welcome respite

for many. There is no question that some U.S. interests were also served, as there

is little domestic support for the legislation that the government needs to negotiate

something as complex as a multilateral trade round. All along, the U.S. pushed for

a limited agenda of talks. Yet it is certainly not fair to claim, as the WTO Director

General Mike Moore has done, that developing countries lost in Seattle. While the

multilateral system is preferable for small countries to bilateral negotiations with

power blocs such as the U.S. and EU, the system needs to take far more account

of developing country interests to be truly helpful.

Now there is time for the U.S. to elaborate more clearly what kinds of special and

differential treatment will promote equity in the multilateral trade system. However

new approaches are necessary. Many NGOs have been advocating for some time the

need for assessment reviews of the impact of the Uruguay Round Agreements. UN

agencies such as the Food and Agriculture Organization and the UN Conference on

Trade and Development have been doing some of this work. The results of these

studies should inform future negotiations on agriculture. Both the U.S. and EU insist that we should look forward rather than at implementation experience for these

impact studies but this ignores their obligations under Article 20 of the Agreement

on Agriculture. They should not be allowed to persist in this policy.

The U.S. must push for developing countries to be active participants in the negotiations on agriculture. The sector remains of primary importance for them and

many of their people. While the developed countries may spend a lot more, and derive a lot more wealth from their production, the sector is marginal in the numbers

of people it affects. Agriculture truly is multifunctional, and its cultural, environmental, social and economic importance is much greater in most of the developing

world than in those countries advocating the term at the WTO. Trade rules should

reflect this and ensure that developed countries do not promote practices that damage the development potential of developing countries. The failure of Seattle created

breathing room for those who argue the Uruguay Round Agreement on Agriculture

needs serious reform.

JBC INTERNATIONAL

WASHINGTON, DC 20006

Mr. A.L. Singleton

Chief of Staff

Committee on Ways & Means

U.S. House of Representatives

1102 Longworth House Office Building

Washington, DC 20515

Dear Mr. Singleton:

JBC International is pleased to submit comments on the outcome of the World

Trade Organization (WTO) Ministerial held in Seattle. JBC International is an

international trade and government affairs consulting firm based in Washington

D.C. JBC International serves as Secretariat to the Joint Industry Group, a customs

and trade coalition, and its CEO, James B. Clawson, serves as Chairman to the Industry Functional Advisory Committee on Customs matters (IFAC1).

While overall we are disappointed that a new round of multilateral trade negotiations was not launched in Seattle, we would like to highlight the progress made in

the area of trade facilitation and urge the Committee to ensure that trade facilitation continues to be a high priority for the U.S.

Seattle represented the first time in the history of the multilateral trading system, that customs and trade facilitation issues were on the agenda to be considered

as rules-based, enforceable measures. In anticipation of the Seattle Ministerial, several governments, including the U.S., submitted detailed work plans for an agreement on trade facilitation measures to be launched within the WTO. At the same

time however, several other WTO members submitted positions aimed at delaying

the implementation of key customs-related commitments made during their accession negotiations. As negotiations were breaking down on all other fronts, the

WTO’s Trade Facilitation Committee -bolstered by strong U.S. leadership -was successful in moving the trade facilitation efforts forward while addressing the concerns

of certain members. Most importantly, the requests to delay implementation of the

WTO Valuation Agreement and other commitments, were met with concrete work

plans to manage the adoption process while ensuring timely implementation.

172

1Members do not necessarily associate themselves with every LICIT report or recommendation.

Although trade in goods serves as the foundation for international commerce and

the primary focus of the WTO, customs procedures and trade facilitation measures

need to be elevated to an equal footing in order for U.S. companies to take full advantage of the gains from trade. The successive multilateral trade negotiations, culminating in the Uruguay Round that gave birth to the World Trade Organization

(WTO), have brought tariffs down to their lowest levels this century, but this unprecedented liberalization has drawn attention to other obstacles to the free flow of

goods across borders. Indeed, many of the hard-fought gains from the Uruguay

Round go unrealized in the face of the customs barriers to trade. What many traders have resigned themselves to accept as ‘‘necessary costs’’ of doing business are

actually gross distortions of price and delivery, which ultimately serve as barriers

for U.S. producers. These ‘‘costs’’ take many shapes: goods waiting to be unloaded,

containers stuck at customs, mountains of paperwork, non-transparent rules, unpredictable tariff rates, uplifted values, etc.

The WTO, for the first time, provides us the opportunity to address these issues.

In Seattle, the U.S. articulated its very ambitious proposal for the establishment of

a WTO undertaking to create a rules-based system. A rules-based system adopted

by the WTO would set a minimum standard in all these areas and provide the political commitment needed to ensure that the proper measures are introduced where

they are needed most.

Although Seattle was a disappointment on many fronts, the work of the WTO on

trade facilitation measures must continue. U.S. companies can ill afford to allow

this monumental opportunity to pass. The U.S. must stand firm and insist on the

establishment of rules that overhaul the international trade machinery so that the

very agreements we negotiate can be supported. We therefore urge the Committee

to see that the U.S. remains committed to a WTO Agreement on trade facilitation

and that Congress and the Administration work together to ensure that this important work receives the high priority it deserves.

Statement of Labor/Industry Coalition for International Trade

LICIT appreciates this opportunity to testify on the outcome of the WTO Seattle

Ministerial and some of the important issues that require attention in future negotiations.

Celebrating its 20th anniversary this year, LICIT brings companies and unions

together in support of increased and equitable international trade. Among the companies and labor unions currently or recently participating in LICIT are: American

Flint Glass Workers; AMT—The Association for Manufacturing Technology; Bethlehem Steel Corp.; Communications Workers of America; Corning Inc.; Daimler

Chrysler; International Brotherhood of Electrical Workers; Milacron Inc.; Paper, Allied-Industrial, Chemical & Energy Workers International Union (PACE); Union of

Needletrades, Industrial and Textile Employees (UNITE); and United Steelworkers

of America/United Rubber Workers Conference.1

I. INTRODUCTION

The goal of the Seattle Ministerial was to launch and set parameters for a new

round of multilateral trade negotiations focused on agriculture, services and intellectual property—a ‘‘built-in agenda’’ that was established during the Uruguay Round.

Unfortunately, no progress was made in these areas, and the Ministerial Conference

ended in failure. Some critics have sought to blame this failure on the U.S. Government or on the demonstrators who occupied the streets of Seattle, but the reality

is that the Ministerial cratered because the world’s two other major trading powers—Japan and the EU—were unwilling to engage in serious discussions on agricultural liberalization.

The U.S. Government expended a very substantial effort to achieve a launch of

a new round of trade negotiations. This effort was led by the President and most

of his Cabinet. Japan in particular, which benefits so much from the multilateral

trading system, failed to take a leadership role. Instead, besides defending agricultural protectionism, denying its trading partners access to its market for these

goods, it sought to undermine the international rules governing fair trade—in particular by seeking to re-open the recently negotiated antidumping rules. The U.S.

Government held firm, supported broadly by Congress, business and labor. It did

173

not agree to compromise fundamental elements of the WTO rulebook such as the

rules on injurious dumping and subsidies. For this, it deserves to be commended.

II. THE ANTIDUMPING ISSUE IN SEATTLE

The WTO Members which sought to circumvent the agreed list of negotiating topics and reopen debate over antidumping and anti-subsidy measures touched off a

senseless and distracting confrontation with other Members, including the United

States, that were focused on moving forward per the built-in agenda rather than

on ripping up the Uruguay Round texts and re-fighting that Round’s divisive battles. The tactic of reopening the antidumping rules was embraced by several developing countries whose broader Seattle agenda involved unraveling the Uruguay

Round agreements rather than moving ahead with additional liberalization. The

idea that side discussions on antidumping were in any way responsible for the failure to launch new talks on agriculture and services is untenable and belied by all

of the evidence, anecdotal and otherwise.

The assault on antidumping came from two categories of WTO Members: (1) those

looking for a pretext to avoid movement in other areas (the EU on agriculture; the

LDCs on meeting their Uruguay Round obligations); and (2) those whose exporters

most frequently engage in dumping practices (Japan, Korea, and Hong Kong on behalf of China). It was particularly disappointing that the EU, seeking to shift attention away from its market-distorting agricultural policies, encouraged developing

countries to press unfounded claims with respect to antidumping, and to seek unwarranted exemptions from the existing disciplines on trade-distorting subsidies.

LICIT commends the Administration for firmly rejecting these efforts to reopen

the WTO’s basic fair trade rules. The Administration rightly recognized that the existing fair trade rules must be kept off the negotiating table if new WTO talks are

to enhance the welfare of America’s working men and women. Effective antidumping and anti-subsidy rules are a pillar of the United States’ open-market policy

and of the multilateral trading system. From its inception half a century ago, the

GATT has provided that injurious dumping ‘‘is to be condemned’’ and has authorized

remedies to offset and deter dumping and trade-distorting subsidies. These rules are

designed to ensure a basic level of fairness in international trade and to prevent

abuse. Without such rules, past successes in trade liberalization could not have been

achieved and future progress on the core WTO agenda would become impossible. Allowing the fair trade rules to be weakened would inevitably lead to abuse of the

world’s open markets—particularly that of the United States, the world’s most open

market—and would rapidly undermine confidence in the WTO itself.

Regrettably, in the job of defending the trade laws, Seattle was not an end-point

but simply a milestone. Much work remains to be done. First, of course, continued

vigilance is essential during any further discussions about launching a new Round.

The same factors described above will spur continued efforts by certain WTO Members to reopen the antidumping rules, with a view to weakening them. Second, a

pattern has emerged of trading partners seeking to accomplish through WTO dispute settlement cases what they could not gain in negotiations: the effective repeal

of the U.S. trade laws. We discuss this further below.

III. ISSUES THE NEW WTO TALKS SHOULD ADDRESS

The ‘‘built-in agenda’’ is already a broad and important one, more than enough

by itself to occupy the next few years of trade negotiators’ attention. The only topics

that the U.S. Government should even consider adding to that built-in agenda are

those that can be independently justified in terms of (1) likelihood that meaningful

progress can be made and (2) where manufacturing is affected, favorable impact on

America’s manufacturing sector if progress is made. The U.S. proposals regarding

industrial market access appear to meet that test. LICIT submits that the same is

true of two other issues: reforming the WTO dispute settlement system, and disciplining anticompetitive private practices that impair market access.

DSU Reform: There is an urgent need for reforms to the WTO Dispute Settlement Understanding (DSU). In several important respects, the United States has

been badly served by the DSU during its first five years. In cases brought against

U.S. measures, particularly challenging the application U.S. trade laws, panels have

exceeded their mandate and invented obligations never accepted by the United

States at the negotiating table. Meanwhile, cases brought by the United States have

frequently failed to generate actual commercial results.

The former category is particularly worrisome, as the willingness of panels to

overreach seems to have tempted trading partners into a broad-based attack against

America’s trade laws. WTO statistics show somewhere between 15 and 20 distinct

challenges, involving the U.S. antidumping and CVD laws, our safeguard law, secVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00177 Fmt 6633 Sfmt 6621 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
174

tion 301, and now apparently another case against section 337. This flood of cases

has as its premise that the United States signed on to a package of agreements in

1994 which it was, and is, comprehensively violating—a premise that is not remotely tenable. These are not legitimate challenges but a brazen effort by other nations to achieve through dispute settlement concessions the United States was and

remains, for very good reason, unwilling to make in negotiations.

When panels participate in such an effort by making up rules and obligations,

they undermine the legitimacy of the dispute settlement system and of the WTO

itself. The United States should place a high priority on these ‘‘defensive’’ concerns

in the next phase and all future phases of WTO activity.

The U.S. Government should also seek increased transparency, via DSU amendments that: (1) require Members to submit, promptly after each submission to a

panel, a public version sufficient to permit a full understanding of the arguments;

(2) require panel and Appellate Body meetings to be opened to all WTO Members

and to the public; and (3) allow affected private parties to participate meaningfully

in panel proceedings. These changes would enhance the credibility and performance

of the system by allowing panels and governments to benefit fully from the expertise

of affected private parties who are normally the ‘‘real parties in interest’’ in WTO

cases. Finally, the DSU should also be revised to set clear limits on the WTO Secretariat’s role in dispute settlement proceedings. It is inappropriate for Secretariat officials who do not accept or agree with the resulting substantive rules that panels

are supposed to enforce to be substantively involved with panel deliberations. The

Secretariat does not exist to espouse positions attacking individual articles of the

GATT, or to side with particular Members who want to rewrite the Uruguay Round

results in particular subject areas. The United States should insist on appropriate

firewalls and should be prepared, if necessary, to use its funding of the Secretariat

as a lever in that regard.

Private Restraints of Market Access: Private and joint-public-private restraints that impair market access have not received adequate attention at the

WTO. This issue has long been an Achilles heel of the GATT/WTO system. The exchange of ‘‘market access’’ commitments by two countries presupposes that a functioning ‘‘market’’ exists within the territory of each—something that turns out not

to be universally true in the case of WTO Members.

The WTO agreements themselves do not directly guarantee access, but rather

only discipline discrete categories of government actions that could otherwise limit

access. The result is a package of agreements and commitments largely ineffectual

in dealing with complex trade problems such as the closure of foreign markets by

governments working with private monopolies and cartels. Private actors can close

a market just as effectively as government agencies, and in both cases, from the

U.S. perspective, the result is the same: bargained-for sales opportunities do not materialize. To make matters worse, since the entry into force of the WTO agreements,

the U.S. Government has been unable to confront these barriers directly (outside

the WTO system) out of fear that any measures undertaken to open the markets

would be met with WTO-sanctioned retaliation.

Moreover, the WTO’s government-focused approach uniquely disadvantages industries located in the United States, a country that vastly outstrips other WTO Members in the rigor of its antitrust enforcement and in general openness to imports.

The current situation, in which market access is regularly promised but frequently not delivered, is corrosive on several levels and requires correction. Political

support for multilateral trade liberalization, in the United States and abroad, depends on the degree to which trading partners are seen to have effectively opened

their markets and extended meaningful, reciprocal trade benefits. By tolerating or

encouraging anticompetitive practices, governments can avoid the adjustments that

freer trade would otherwise require. As a result, markets never become truly contestable, and trade patterns do not improve. The WTO system cannot thrive if its

putative benefits are undermined in this manner. The most viable long-term solution would be to attach to all WTO market access commitments a ‘‘warranty’’ that

sales opportunities will not be undermined by the anticompetitive practices of local

monopolies or cartels.

The WTO Working Group on the Interaction between Trade and Competition Policy has been created to explore more modest or immediate solutions, but the dialogue held to date in that Working Group provides little reason for optimism. The

primary problem has been too much focus on laws, and not enough on facts. The

core concern of the WTO is market access. To achieve improved market access, the

focus should be on the naming and removal of particular barriers—one country and

sector at a time, if necessary—rather than a study of national legal tools available

to promote competition.

175

IV. CONCLUSION

Although many have viewed the Seattle Ministerial as a failure, it is important

to realize that (1) the agenda at Seattle was mainly a procedural one and (2) the

results were much less disastrous than they could have been. For the United States,

Seattle proved the truth of the adage that sometimes, no agreement is better than

a bad agreement. Talks on agriculture and services are set to go forward based on

prior agreement, so that the core U.S. interest in moving forward with liberalization

in these sectors was not fatally compromised by the failure to launch a ‘‘Round.’’

Meanwhile, the United States distinguished itself as the only major trading country

that came to the Ministerial ready to move forward on trade liberalization—ready

to talk about subjecting the world’s vast agriculture and services trade to the WTO

rulebook, rather than about re-writing the rulebook with a view to making it more

difficult to counter unfair trading practices.

Negotiators interested in providing the structure of a ‘‘Round’’ will eventually pick

up where they left off in Seattle, and when they do, the United States must continue to stand firm in its commitment to block reopening of the WTO’s basic fair

trade rules. At the same time, the U.S. negotiators should redouble their efforts to

achieve DSU reforms. At home, legislation should be enacted to discipline privately

imposed import barriers so that market access commitments can become something

other than hollow promises.

LICIT looks forward to working with the Committee on Ways & Means to ensure

that developments in the WTO, including any new multilateral negotiations, yield

the maximum possible benefit for the American economy and its industrial sector.

NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

ROSSLYN, VA 22209

February 10, 2000

The Honorable Philip M. Crane, Chairman

Trade Subcommittee

House Committee on Ways and Means

1104 Longworth House Office Building

Washington, DC 20215–6354

Dear Mr. Chairman:

The National Electrical Manufacturers Association (NEMA) seeks multilateral

tariff elimination for electrical products, be it via the energy sector of the WTO Accelerated Tariff Liberalization (ATL) initiative, or via regional groups and/or other

opportunities as they arise. NEMA reaffirms this position despite the failure of the

Seattle WTO trade ministers meeting to launch a new WTO negotiating round. Our

position is explained more fully in the remainder of this letter, which I request that

you add to the record of your February 8 hearing on the Seattle ministerial.

NEMA is the largest trade association representing the interests of U.S. electrical

industry manufacturers. Founded in 1926 and headquartered in Rosslyn, Virginia,

its more than 500 member companies manufacture products used in the generation,

transmission, distribution, control, and use of electricity. These products, by and

large unregulated, are used in utility, industrial, commercial, institutional and residential installations. Through the years, electrical products built to standards that

both have and continue to achieve international acceptance have effectively served

the U.S. electrical infrastructure and maintained domestic electrical safety. Annual

shipments total over $100 billion in value.

Our perspective may be summarized in the following points:

• The US electrical products industry is extremely disappointed in the failure of

the Seattle WTO meeting to reach agreement on the basis for a new round of global

trade negotiations.

• NEMA’s members are particularly disappointed in the failure to reach any

agreement on improvement of industrial market access through a multisectoral accelerated tariff liberalization process (ATL) as proposed by the United States and

other APEC members. As noted in a Commerce Department document prepared before the Seattle negotiations, the value of US exports in our sector alone that could

have been positively affected by such an agreement is $40 billion annually.

• NEMA urges the US government to expeditiously work with the other APEC

ATL sponsors to eliminate tariffs on the products listed in the 1998 APEC Energy

Sector Initiative (ESI). Such an agreement should include all products that are used

176

in the generation, transmission and distribution of electricity as defined in ATL’s

Energy Sector. • Such agreements could be part of a larger multisectoral package as originally

envisioned, or they could be contained in a single, sectoral agreement, such as the

recent Information Technology Agreement. • While NEMA does not propose to limit the geographical coverage of such agreements, in view of the present uncertainty regarding the launching of the new WTO

round we would urge that alternative regional agreements again be explored. This

would include revival of the APEC ESI and sectoral liberalization within FTAA negotiations. In pursuing such regional arrangements, we would urge that they be expanded to include the European Union. Indeed, any such arrangements should be

open-ended, so that additional countries or regional groups could also join.

Thank you for your consideration of these remarks. NEMA has greatly appreciated your leadership on trade matters, and we look forward to continued collaboration on tariff-related initiatives.

Sincerely,

MALCOLM O’HAGAN

Statement of Jim DiPeso, Forests Chair, Rainier Audubon Society, Auburn,

Washington

This statement is written testimony submitted by the Rainier Audubon Society for

the Ways and Means Committee’s hearing on the Seattle WTO Ministerial. The

Rainier Audubon Society has approximately 1,000 members in south King County,

Washington.

Forest conservation is one of many environmental and social issues that concerned the thousands of peaceful activists who were in Seattle for the Ministerial.

The Accelerated Tariff Liberalization agreement, or ‘‘global free logging agreement’’

as it was dubbed informally, raises serious issues concerning forest conservation.

The immediate issue is that accelerated tariff phaseout would lead to increased consumption of wood products and increased depletion of forests that already are under

stress worldwide.

There is another cluster of concerns that relate to the WTO’s disturbing policies

regarding public health and environmental protection standards judged to be ‘‘nontariff barriers to trade.’’ We are extremely concerned that the authority of national,

state and even local governments to set standards and adopt policies to protect our

forest resources could be undermined by the WTO’s uninformed determination to remove ‘‘non-tariff barriers to trade.’’ We are concerned that in time a number of important forest conservation standards could be challenged and overturned, unless

the WTO’s rules are reformed. Examples of standards vulnerable to a challenge include: • Safeguards against importation of invasive species, which wreak havoc on native plants and ecosystems. • Restrictions on raw log exports, designed to protect old-growth forests. • Government procurement standards that give purchasing preference to products

from sustainably managed forests, products made with recycled content, or products

manufactured in environmentally preferred processes, such as chlorine-free pulp

production. • Labeling and certification programs which give consumers meaningful choices

by providing the information they need to identify sustainably produced forest products. In this vein, it is absolutely unacceptable for the rules of an unelected, supranational institution to pre-empt the free speech guarantees in the Bill of Rights.

Before further trade agreements are negotiated, WTO rules must be reformed to

ensure that health and environmental standards will not be undermined in settlement of trade-related disputes. Examples of needed reforms include the following: • Explicitly state that national and sub-national levels of government have the

authority to develop and enforce public health and environmental standards. • Shift the burden of proof in trade-related disputes to parties challenging health

and environmental standards as ‘‘non-tariff barriers to trade.’’

• Explicitly state that health and conservation standards based on production

methods are legitimate measures governments may take to protect their citizens

and natural resources.

• Explicitly recognize the authority of national and sub-national governments to

use social and conservation criteria in making purchasing decisions.

• Give a substantive role to international institutions with environmental expertise in settlement of trade disputes, including explicit recognition that governments

may employ the precautionary principle in developing and enforcing health and environmental standards.

177

• Explicitly recognize the prerogative of governments and private organizations to

provide accurate, objective consumer information through labeling and certification

programs. Explicitly state that private U.S. labeling programs are protected by the

free speech guarantees in the Bill of Rights.

Thank you for your attention to our concerns.

REDWOOD COAST WATERSHEDS ALLIANCE AND

SAVE THE REDWOODS/BOYCOTT THE GAP CAMPAIGN

February 20, 2000

Honorable Phillip M. Crane and Members

Subcommittee on Trade

Committee on Ways and Means

U.S. House of Representatives

Washington, DC 20515

Dear Congressman Crane and Members of the Subcommittee on Trade:

Many people have testified and written to you about the World Trade Organization (WTO) protests in Seattle in November 1999. I want to contribute to that record

by telling you why I was in Seattle protesting the WTO, and what I personally witnessed in the streets of Seattle that week.

There are two points that I want to stress:

1. I witnessed unprovoked and brutal attacks by the police against peaceful

protestors starting at 10:30 am Tuesday morning, November 30, and continuing

through the morning, long before any vandalism occurred in downtown Seattle. This

fact has been mostly lost or suppressed in mainstream news media reports, and it

is vital to a proper evaluation of these events. I and the 50,000 other people who

protested the WTO, including the 10,000 people who peacefully shut down the WTO

meeting, conducted ourselves entirely peacefully and we are tired of the slander that

we did not. We kept the peace even while we were beaten, hosed with pepper spray

and shot with tear gas canisters and plastic bullets.

2. We were demonstrating against an illegal meeting. The WTO is a group of

unelected trade ministers who have the illegitimate power to eliminate our environmental, labor, health and human rights laws, without our consent and without our

participation. The citizens of the United States have a right-and indeed a duty—

to protest this violation of the United States Constitution.

WHY I WAS IN SEATTLE

First of all, I went to Seattle to protest the illegal meeting of the WTO. The WTO

has no legitimacy in my eyes to make decisions that overrule our national and local

laws that protect workers, consumers, farmers, the environment and human rights.

Yet the WTO is so powerful that I could think of no way to influence its exclusive

and secret proceedings except by massive peaceful protest.

If you had held a session of the U.S. Congress in secret to decide the future of

United States, what would you expect to happen? Wouldn’t you deserve massive protests? Wouldn’t the citizens of this country have a right and a duty to stop that

meeting? And if you made such a mistake of democratic procedure, wouldn’t the

right thing, the lawful thing, be to reverse that mistake, and open up your proceedings? That is all we asked of the WTO-lawful, democratic process.

The Founders of this Republic believed that violent protest was legitimate to overthrow oppressive government-and they engaged in violent protest and in war, to secure me the rights that are established in the United States Constitution. We have

had examples of peaceful resistance since that time-Mahatma Ghandi and Martin

Luther King chief among them-who have shown that respect for human life is the

highest value that we can hold, that such respect must be maintained even under

extreme provocation, and that it produces a better form of change, a change in the

human heart.

That is the spirit in which I and 50,000 other people went to Seattle. Our purpose

was to make clear to the WTO that it cannot continue to meet in secret, to overrule

our laws and to remake our world on a global scale without our consent.

The issues that brought us to Seattle are critically important to the future of our

society and our world. These issues include the right to live, the right to work, the

right to a healthy, productive environment, and the right to help determine political

and economic policy in a democratic system.

178

My group has a particular concern about the WTO ‘‘Free Logging Agreement,’’

which would eliminate tariffs on imported wood, no matter how that wood is logged.

While our California Forest Practice Act has failed in its stated purpose of sustainability, the citizens of California have the right to reform that Act, and to institute

new and better policies for the protection of our forests. As citizens of the United

States, we also have the right to exclude from this market any wood product that

results from the destruction of forests elsewhere in the world, or that threatens the

health of our forests in any way, including by pestilence and unfair and

unsustainable competition.

Our planet’s biosphere is being destroyed by thoughtlessness and greed. Our national and local environmental laws, and trade restrictions, are the only potential

protection we have against destruction of the planet that we all depend upon for

life. As with other WTO issues, this is a life and death issue, and a justifiable cause

for civil disobedience.

WHAT I PERSONALLY WITNESSED DURING THE SEATTLE PROTESTS

I was part of the group that was peacefully protesting the WTO meeting at the

Sheraton Hotel intersection at 10:30 am, on Tuesday morning, November 30. I was

a support person and an observer-there to help insure everyone’s peacefulness and

safety. As a support person, the first thing that I tried to do was to clarify the situation with the police. There were several dozen Seattle police in riot squad gear, several mounted police and a gray armored tank that we soon found out contained pepper spray and tear gas equipment. The police were lined up across the intersection

and up on the sidewalk, with billy clubs drawn. There were about 200 people in the

intersection blocking traffic to the Convention Center. My group, the Save the Redwoods/Boycott the Gap affinity group, was standing face to face with the police line,

in the intersection, in close proximity to the billy clubs. We had agreed to represent

the environment at the WTO meeting. We carried the sign, ‘‘Delegation for the Environment.’’

I spoke to one person whom the other police identified to me as the ‘‘commander’’

of the police line that was immediately in front of me on the sidewalk. I asked this

commander three questions: Had an order to disperse been given in the intersection? Had an order to disperse been given where I was standing on the sidewalk?

And was tear gas going to be used?

To the first two questions, he answered no-no orders to disperse had been given.

To the tear gas question, he answered that no order had come down to use tear gas

and that three commanders in the hierarchy had to agree to such use.

Shortly after my conversation with this commander, the police attacked the people

in the intersection using pepper spray guns, tear gas guns and plastic bullets. This

attack occurred without warning and without provocation. In fact, the Delegation

for the Environment, which had been standing in a line directly in front of the police, had deliberately removed itself from that position in order not to be provocative

to the police.

Just before the attack, the police had been getting nervous and more aggressive.

Several of our group were poked and hit with billy clubs before they withdrew. The

Delegation for the Environment stepped aside, and gave up our intention of entering

the Convention Center, in the interests of civility and peace-and by mutual agreement with the other protestors. The people in the intersection nearest to the police

then sat down on the ground. In other words, we, and everyone there, went out of

our way not to be provocative.

Many of the intersection protestors were sitting on the ground, huddled together

for protection. The police hosed them with pepper spray directly on their heads and

faces, and then began shooting at their backs and heads with tear gas canisters and

plastic bullets. They continued the attack even against people who were lying on

the ground, totally disabled and extremely sick. This was the most violent and

uncalled for attack against human beings that I have ever personally witnessed, and

I shall never forget it. It was as if the police were exterminating insects.

I also saw the police club several people during this police attack. These people

had no weapons and were merely reacting emotionally to the chemical attack, and

were yelling at the police to stop.

A young man who was standing near me began to yell at the police during the

attack. I put my hand on his shoulder and told him to remember Ghandi. He calmed

down. I was also involved in helping an elderly Asian couple who said they were

WTO delegates escape this scene. They, like I and everyone else who was near that

intersection, got tear gassed. As the clouds of tear gas filled the streets, we helped

these delegates over a wall to another street.

179

I feared for my life that day in Seattle, though I was breaking no law myself, and

though the people who were attacked in the intersection were breaking only a minor

law, blocking an intersection. I witnessed similar attacks by the police against

peaceful protestors at other locations in downtown Seattle on Tuesday morning and

into the early afternoon. Downtown became so filled with tear gas that there was

nowhere to go-nowhere to escape to. People who were attempting to leave downtown

could not do so.

Once again, I want to stress that these events occurred long before any windows

were broken or other vandalism was committed downtown.

THE SEQUENCE OF EVENTS—THE IRRESPONSIBLE TV COVERAGE

That night the TV news showed these events in reverse order. They showed footage of windows being broken first, then the police ‘‘getting tough’’ and using tear

gas-exactly the opposite of what happened. This very irresponsible journalism led

many people to believe that the police violence was justified, and prevented an immediate stoppage of the police violence by public outcry. The police then went on

a rampage, invaded the Capitol Hill neighborhood, and tear gassed and brutalized

people sitting in cafes, in their homes, or out on their sidewalks.

In the next couple of days, the police arrested hundreds of people for protesting

the police state in downtown Seattle in which a person could be stopped on the sidewalk, ordered from the area, or arrested, merely for wearing an anti-WTO button.

I saw that on television-a lone woman being ordered off the streets merely for wearing a button. She asked the police: ‘‘What if this had been a pro-WTO button?’’ The

police did not reply to that.

It seems to me that the police actions of the morning of November 30 were intended to provoke a violent reaction. I’m thinking of the young man whom I calmed

down during the first attack. How much of this sort of horror could he take without

reacting and fighting back and trying to protect people? It is also evident to me that

this police provocation largely failed. The 50,000 protestors in Seattle that day did

not retaliate in kind. Almost all violence against people was perpetrated by the police themselves, starting at 10:30 in the morning on Tuesday.

I’ve since learned that a few picket sticks and tear gas canisters were thrown at

police in the midst of the police attacks. I find that reaction understandable, in view

of what I saw the police doing—although it does not follow the non-violence code.

The police were well armored and wore gas masks. The workers in downtown stores

where windows were broken likely felt fear and even terror, and I consider that to

be violence against people. That violence, and the property damage, was the work

of a small group of people who were acting in violation of the non-violence code, and

also in direct conflict with the wishes of the 50,000 other protestors in Seattle, many

of whom suffered serious police brutality without provocation and without retaliating in any way. I also think it’s fair to say that the police themselves may have

indirectly caused the later vandalism by creating tension and anger with their early

and brutal attacks against people.

This police brutality, and the subsequent mistreatment of peaceful protestors who

were imprisoned, raise serious questions that need to be answered by the city of Seattle, by the state of Washington and by the federal government:

1. Why did the police use massive brutal force against peaceful protestors on

Tuesday morning, November 30, long before any vandalism occurred? Who gave

those orders?

2. Why didn’t the police-who were everywhere downtown on late Tuesday afternoon-stop the vandalism? Why, instead of stopping the vandalism, did the police create a no-civil-rights zone, consisting of the entire downtown area, and start arresting and brutalizing everyone in their path? Once this police violence began, why

wasn’t it stopped? Who is responsible for failure to stop the police from rampaging

through neighborhoods and escalating their violence and their massive violations of

civil rights?

3. Who is responsible for the false TV news stories on Tuesday evening, November

30? The TV reports were clearly wrong about the sequence of events-the police were

not responding to any violence or vandalism on Tuesday morning, but rather were

engaged in a deliberate and brutal attempt to curtail free speech. Did public officials

have anything to do with these false TV stories?

4. What role did federal officials play in these decisions?

5. What role did federal officials play in the cruel and illegal treatment of peaceful

protestors who were imprisoned?

It seems that the police reserved their brutality and their arrest procedures for

peaceful protestors who were breaking minor laws as an act of conscience and courage—or who were breaking no law at all—while they allowed the few people who

180

were doing property damage to go free. It also appears that the police brutality was

a deliberate attempt to curtail the WTO protests, which in themselves were entirely

peaceful. This was a political decision. Who made this decision?

AN EXAMPLE OF DEMOCRACY

On Friday night, I supported the young people who did a ‘‘sleep in’’ on the Westin

Hotel steps. The purpose of this spontaneous protest was to gain the release of the

600 peaceful protestors who had been kept in jail for several days without arraignment and without counsel. Many people in Seattle brought us blankets and food,

and members of the Teamsters Union brought us coffee and cookies at 3:00 in the

morning. I am very proud of these young people who showed such courage and persistence. They taught us all a lesson in democracy.

Around 4:00 in the morning, the riot squad, which had been surrounding us at

the Westin Hotel, was withdrawn-which I very much appreciated-and was replaced

by the Seattle police in normal uniform who stated that these young people must

move away from the Westin Hotel steps or be arrested.

The patience of the Seattle police in this instance allowed for a lengthy, democratic discussion among us protestors about moving to another location, and resulted

in a decision to move from the Westin Hotel and join the protestors in front of the

Seattle jail.

I think that, instead of threatening these young people with arrest and forcing

them to move, the Seattle police should have immediately released the people in jail,

and begun a dialogue and listened to our concerns. These young people, in my opinion, represent the best that democracy has to offer. In the middle of the nightamidst fear, tension and extreme fatigue-these young people conducted a lengthy

and orderly discussion, in which all points of view were heard, and came to a decision about what to do. That is devotion to democracy! The WTO could have learned

something from these young people, if only they had been willing to listen to them.

We kept the peace at the Westin Hotel. We had a good time. We had good music—

some heroic drummers who played for many hours, keeping peoples’ spirits up. We

meticulously cleaned up after ourselves, removing all garbage and sweeping the

steps of the Hotel.

WHAT COULD HAVE HAPPENED IN SEATTLE

Now I want to turn to what could have happened in Seattle. On November 30,

about 10,000 people placed themselves in intersections in the downtown streets of

Seattle, in a peaceful effort to prevent the WTO meeting from occurring without our

participation. We did not want this extremely powerful group of trade ministers to

meet in secret and decide our future.

Because they were in fact deciding our future, we had a right to stop that meeting

and insist that we be heard. We met for weeks in advance-and some protest leaders

had been planning for months and years-to accomplish this purpose peacefully.

What if Seattle had welcomed us? What if Seattle had said, ‘‘All right, 10,000 people

is a whole lot of objection. Add in the 50,000 who marched and held rallies-and

that’s an overwhelming amount of objection. Maybe this WTO meeting shouldn’t be

taking place.’’

What if that had happened in Seattle? What if the governor and the mayor and

the city council and the President of the United States had told the WTO, ‘‘50,000

people is too many to ignore. You have to listen to them, you have to include them.’’

What if our political leaders had stood up for the U.S. Constitution and the labor

unions and the environment? What if they had told the WTO, ‘‘This is what democracy looks like-get used to it’’?

Circumstances changed in Seattle when 50,000 peaceful protestors showed up.

Our political leaders should have been more flexible in reacting to these changed

circumstances. On Tuesday, when the WTO meeting was shut down, our political

leaders should have taken a breath and said, ‘‘Okay, this WTO meeting is no longer

possible as planned. These protestors have a point.

How can we address the undemocratic and unconstitutional nature of the WTO?’’

The United States and the city of Seattle could have been the arbiter of a profound change in global economic policy. Seattle would then have become synonymous with democracy, instead of with repression.

What we got instead were platitudes, from President Clinton on down-insincere

statements about the importance of the environment and workers’ rights. Statements that no one believed. Statements that should have been made long ago accompanied by strong action. In fact, President Clinton, like his predecessor President Bush, and local officials—Washington Governor Gary Locke and Seattle Mayor

181

Paul Schell—all approved of, and welcomed the WTO-having long ago sold this democracy down the river.

CONCLUSION

November 30, 1999, is an historic date that will influence events for centuries to

come. On that date, U.S. Citizens, in massive numbers, rebelled against corporate

rule right here in the home of ‘‘free trade’’—sparking a widespread awakening of

the American public. This was the beginning of a New American Revolution. What

unfolded that day and in the subsequent days was the courage, intelligence and

great good will of the revolutionaries. We accomplished this rebellion peacefully -despite the false news reports. In Seattle, it was the police who were violent and we,

the people, who peacefully shut down the WTO.

On the morning of November 30, as the riot squad was getting out the pepper

spray hoses and the tear gas guns, at the Sheraton Hotel, I heard the following exchange between a protester and a riot squad policemen: Protestor: ‘‘This is just like

Tienamen Square.’’ Riot squad police: ‘‘No, it’s not. We’re not going to kill you.’’

We can laugh at this now—it has a sort of black humor to it. But it wasn’t very

funny when we were getting tear gassed. We need to know who told the police that

they could use anything short of lethal force to stop these peaceful protests. In any

case, sub-lethal force can be-and was-life threatening. It can be-and was-utilized to

suppress free speech and freedom of assembly, and our right to petition our government.

There is more at issue here than a mistaken and illegal use of force by the police,

but there is a common theme-abuse of power. The police were given too much power

and they created mayhem in downtown Seattle, brutalizing many people who were

not even involved in the protests. Our federal government made the same mistake

with the WTO-they gave it too much power. Indeed, they gave away whole sections

of our Constitution. The abuses of ‘‘free trade′′-loss of jobs here, workers living in

slavery in other countries, the assault on our environmental laws-are the inevitable

result of that giveaway. Instead of our labor laws, and our environmental laws and

our democratic ideas spreading across the world, we have abuse and piracy spreading across the world. This has to stop. We, the people, will stop it. I think we made

that clear in Seattle.

You, the members of the Congressional Subcommittee on Trade, and other members of Congress, should be asking yourselves the questions that we are asking: Do

you want the WTO, an unelected group of trade ministers, to dictate the laws and

the future of this country? Do you want a world in which there is no protection for

the environment, for workers, and for your health and well-being? Do you believe

in democracy?

We urge the following actions by the House Subcommittee on Trade, in response

to the events in Seattle during the week of November 30, 1999:

1. An investigation of the role played by federal officials in massive violations of

the civil rights of citizens of the United States during the Seattle protests. Investigation of all such illegal activity by the police. Determination of who made the decisions. Recommendations toward the prevention of civil rights abuses in such situations in the future.

2. A recommendation to Seattle officials of complete amnesty for all protestors

who were arrested during the Seattle police riots. During the week of November 30,

hundreds of people were unlawfully arrested by police forces who were themselves

engaged in massive violations of the law. These protestors were held in prison for

days without counsel or arraignment. They suffered fear and mistreatment in jail.

They gave up their comfort and risked their lives for democracy. Although many

charges against protestors have been dropped, Seattle prosecutors are continuing

some legal actions. In all fairness, and to clear the air, all such prosecutions must

cease.

3. Endorsement of the letter of Congressmen George Miller (D–CA) and Henry

Waxman (D–CA), now in circulation in Congress, which asks for specific reforms to

current U.S. trade policy such that forest and environmental issues will receive

greater representation. Recently, a federal court ruled that environmental representatives must be included on U.S. trade advisory committees that deal with forest products. This ruling, in a case brought by U.S. environmental groups, was appealed by the U.S. Trade Representative just after the Seattle Ministerial meeting

in December-an example of our government’s hypocrisy on these issues. The Miller/

Waxman letter explicitly asks the Administration to withdraw that appeal.

182

Thank you for your consideration of these matters.

Yours sincerely,

MARY PJERROU

cc: Congressman Mike Thompson; Senator Diane Feinstein; Senator Barbara

Boxer

Statement of Hon. Jim Ramstad, a Representative in Congress from the

State of Minnesota

Mr. Chairman, thank you for calling this important hearing today to investigate

the significant ‘‘lost opportunity’’ we witnessed at the 1999 Seattle Ministerial.

Last August, we held a hearing on our negotiating objectives at the upcoming Seattle Ministerial. Today, it is clear that ’Team USA’ did not lay out an aggressive,

strategic plan for Seattle.

I am particularly interested in asking whether the coach of ’Team USA,’ President

Clinton, used a play that wasn’t in our play-book. A December 13th article in Newsweek states:

‘‘In Seattle, faced with a challenge to one of his major accomplishments, the WTO,

President Clinton bizarrely sided with the demonstrators -and presumable against

his own officials who were the targets of the protests. In statements reminiscent of

his famous squiggle on the Gulf War -’I guess I would have voted with the majority

if it was a close vote. But I agree with the arguments the minority made’ -the president explained that he supported the protesters bud didn’t want to hobble free

trade.’’

I was greatly disappointed when I left Seattle last December and returned home

empty-handed to Minnesota. Throughout this recent recess, Minnesota business

leaders, entrepreneurs, farmers and workers asked me what went wrong. I hope to

have answers for them soon.

We must regroup and make progress soon on the ‘‘built-in agenda,’’ and jumpstart further liberalization trade in agriculture and services, as well as examine government procurement practices and the enforcement of intellectual property rights.

Mr. Chairman, thanks again for calling this hearing. I look forward to hearing

from our witnesses today about the causes of the impasse in Seattle and the impact

of this failure on future WTO negotiations.

[By permission of the Chairman.]

Statement of Hon. Traˆn Van Thinh, RONGEAD, Lyon Cedex, France; and

former Ambassador of the European Union

SEATTLE: MORE THAN A HIGH MASS FOR TRADE, IT MUST TAKE UP THE CHALLENGE

OF ECONOMIC GLOBALIZATION

WHY SEATTLE?

The objective announced for the new round of multilateral trade negotiations at

Seattle is to boost development of trade in goods and services in order to sustain

economic growth.

As usual, the enthusiasm among members stirred by a new round remains somewhat damped due to differences of approach, loaded with ulterior motives. Arguments over taking into account the interactions between trade and other areas are

on the increase.

Negotiating rules and specific concessions giving greater access to individual markets, in order to secure the global growth of trade, inevitably touch highly sensitive

areas, such as the environment and investment, related to trade. Opposition to the

negotiated and contractual inclusion of links between these areas and trade, and

their effects on it, is pointless. On the other hand, using the pretext of these links

and effects for the purposes of fighting skirmishes, and recourse to unilateral and

protectionist actions, is derisory. Where trade is concerned, these two attitudes

amount to perpetuating incoherencies at a time when a rational, global and integrated approach is needed to grasp the phenomenon of globalization, with all its implications. Henceforth, the globalization of economies is irreversible, affecting every

183

one of their characteristics and components. The real scope of globalization remains

barely evident and poorly identified regarding its ramifications that concern every

aspect of daily life, even that considered private. It not only involves the visible part

of the iceberg, such as the circulation of goods, services, capital, technology and

ideas, but also the submerged part, that of human beings, not forgetting diseases,

vices, scourges, discontent, fraud, criminality and the forces of evil. The seeds of tension, violence, and conflicts, these incoherencies only fuel the chaos that reigns already over the interconnections generated by economic globalization. What is more,

they magnify its negative effects and undermine its positive ones.

SUSTAINABLE DEVELOPMENT

Benefit can be gained from awareness of the interconnectedness of life’s realities,

whether they be palpable or virtual, and the ability to take them into account and

go beyond traditional and sterile incoherencies. They were understandable at a time

of economic fragmentation and conflict between different and antagonistic economic

and social systems. However, that era ended with the fall of the Berlin Wall. Now,

the whole world is under the reign of the market economy and conclusions need to

be drawn that match the scale and scope of this phenomenon. Whatever the case,

the aim of expanding trade cannot be limited to simple economic growth, it must

also contribute toward sustainable development.

Sustainable development has been a byword since the Rio summit, which shed

stark light on the harmful contradictions of the States that govern us and paralyze

its effective implementation. Now, at Seattle, determination is required to get everyone, from governments to consumers, economic operators and civil societies, to accept sustainable development as the absolute priority. Its one and true objective

must be punched home: it is to ensure balanced development between every country

in the world and between every stratum of its populations. Indeed, equilibrium is

the backbone of sustainable development. It erases the antiquated and artificial borders between the North and South, since almost every country now has its megarich and its cortege of very poor.

Although globalization should lead to growth capable of making the poor dream,

it in fact makes the rich richer and impoverishes the poor still further. What is

more, urban violence, conflicts between governments, and economic crises will result

in the erosion of our economies, in search of a costly and probably illusory new distribution of cards and rules at the price of new suffering mainly for the poor. The

fact is that the days of impregnable fortresses of abundance and well-being are over.

The attraction and envy they instill, thanks to information and communication technologies, condemns their existence through time. The West can diffuse its dreams,

but it must eventually pay the price for the attraction of these same dreams on the

poor, in terms of crime, clandestine immigration, etc.

So, how should globalization be managed ? How can six billion differences between the world’s inhabitants be managed. It is difficult enough today managing six

billion differences (no human being the same), but what of tomorrow when there

will be eight billion. . . ?

COMMON SENSE: THE OBVIOUS REMEDY

Thinking, conceiving and acting globally in a world-wide economic environment

The challenge of globalization is above all a psychological one for our thinkers,

politicians, citizens and economic players. True, businesses already operate profitably in almost fully integrated, dominant financial markets. However, other sectors

of the economy, especially trade in the traditional sense, remain in tow and tag

along as best they can. The lesson of recent crises has not sufficiently highlighted

the interconnections of capital transactions, in particular short term ones, with domestic and foreign trade. Likewise for the structure and management of the financial banking and monetary economy regarding their inextricable interconnections

with the commercial and social economies, not forgetting environmental protection,

labor, etc. The only positive—and modest—conclusion that can be made is the need

to build a new international financial architecture. However, will this goal take into

account the interconnections and interactions of finance with other sectors of the

economy and other aspects of life or only, as in the past, confirm its dominance over

all the other sectors with, in addition, dangerous tendencies toward a unipolar world

based on single track thinking?

The past habits of a fragmented and partitioned world are dying out slowly, since

they are deeply anchored in government establishments and it will take a long time

for the new customs of a border-less world with interdependent, interactive and

united components to become accepted.

184

A great step forward could be made with the elimination, at international level,

made necessary by globalization, of the incoherencies and incompatibilities stemming from the inadequacy or even complete lack of coordination between international institutions with that jealously guard their specific areas of responsibility.

This global non-coherence at all levels can be estimated, year in year out, as

amounting to one tenth of world GNP; this is the cost of non coherent economic

management on an international scale. Decisive progress could be triggered by

achieving convergence between the different policies, actions and practices implemented by the various international institutions. A very timid attempt has been

made at the level of the WTO, the IMF and the World Bank, i.e. the Ministerial

Declaration of Marrakech in April 1994 on the ‘‘Contribution of the World Trade Organization to Achieving Greater Coherence in Global Economic Policymaking’’ at

international level. The practical effects of this Declaration are modest and the good

will and actions of the heads of these institutions born from Bretton Woods remain

tributary to the degree of cooperation which the respective member states for whom

they act decide to give them. What political weight do trade or environment ministers have in comparison with finance ministers in economic development strategy

? The influence of mandators on the actions carried out by international institutions,

in particular financial ones, is decisive though little known. This sheds light on another element: although convergence at international level is necessary, it is even

more vital upstream at national level.

If this step forward toward convergence could be achieved under the right conditions, it would lead to coherent economic and social policies. This coherence implies

the globalization of economic and social policy tools. This logic is faultless, but account needs to be taken of those with power and competencies who hold back or

prevent progress.

There are many pitfalls and the road is long but the convergence of economic and

social policies is inevitable if economic globalization is to lead to sustainable development in our world, without disparities or distortions.

The convergence and coherence of economic policies constitutes the foundation of

cohesion for each and every people of Planet Earth, so that they can control economic globalization instead of being controlled by it.

Convergence is a minimum, coherence is a must, and cohesion is a hope.

This is the revelation of common sense needed to deal with the implacable logic

of economic globalization. Recently, no lesser person than Jim Wolfensohn proposed

building a new international architecture for developmentin parallel with ‘‘a new

international financial architecture’’ in order to give a voice to the poor. But how

can cohesion be possible when a supposedly universal organization such as the WTO

only represents three fifths of humanity, with thirty or so countries waiting on the

sidelines for accession under discretionary conditions that appear arbitrary to say

the least.

In short, sustainable development is the objective and the basis of good

governance.

My testimony is pertinent to this hearing, it is in complete support of that

of Mr Jose ́ Bove ́ whose remarks correspond with my reflections and observations.

I was among the active participants in the establishment of the World Trade Organization. I negotiated the Uruguay Round as Ambassador of the European Union

and I have devoted half a century to the multilateral trading system, with participation ranging from the United Conference on Trade and Employment in Havana

(1947–1948) until the Ministerial Conference of April 1994 in Marrakech.

Two preliminary statements:

Without a strong and fair multilateral trading system, trade may create tension

and conflict that threaten state security. Even the strongest states, including the

United States of America, are potentially vulnerable.

In the aftermath of the Second World War, the USA was governed by statesment

with vision. Today the United States has been rejuvenated and has achieved extraordinary economic and technological advances.

However, the leadership necessary to channel economic globalization of the economy towards a sustainable development of the planet is lacking. Indeed the failure

of Seattle sounds a warning that a new leadership is needed to initiate and drive

the global governance of the planet.

Below, I present what your Subcommittee may wish to consider as its broad goals

starting with the Hearing of February 8, 2000.

185

The Fundamental Realization:

The failure of Seattle was foreseeable. In this day and age where everything is

connected to the economy both inside and outside of national borders, a viable solution to the problems of international trade does not lie in trade policies alone. A viable solution to the challenge of trade will be linked to financial, monetary, social,

environmental, sanitary and wildlife protection policies on the national and international levels. Clearly, the failure of Seattle is due to the absence of an agreed

global development strategy that considers the necessary inter-relationships between trade policies and policies related to the environment, investment protection,

labor etc. . . The absence of arbitration and of a more all-encompassing trade policy

freezes corporate competition and plants the ‘‘seed’’ of failure. In addition to the urgent and fundamental need to incorporate additional policies inter-relationships into

negotiations on trade, another essential gap lies in the absence of transparency and

of dialogue with civil society. Finally, the concept of disparity between the rich countries of the North and their poorer Southern neighbors must be considered and remedied. Poverty is still present in the North, just as wealth can also flourish in developing countries. These disparities must be addressed. These elements can be found

in my first testimony.

Sincerely yours,

TRA

ˆ

N VAN THINH

Statement of Jose ́ Bove ́

Mr. Chairman, Thank you for this opportunity to provide testimony for your hearing on the outcome of the WTO Ministerial Meeting held last December in Seattle.

I was privileged to represent my farmer’s organization there and to have participated in many of the important events organized by civil society during that week.

Of the many outcomes, I will focus on the way in which the Seattle meeting has

awakened ordinary people all over the world to the need to become actively involved

in global affairs. A new appreciation of the complexity of international issues exists

among citizens, many of whom are offering positive solutions to some of the problems facing the World Trade Organization and world leaders. These creative ideas

should be carefully considered.

I am involved with a broad coalition of organizations from civil society all over

the world who are working together to turn this new commitment into specific positive actions. Together we have created the Global Citizen Initiative to bring concerned individuals and organizations into the international arena and to facilitate

institutional changes that will maximize the positive impact of this growing citizen

interest. While we will initially be focusing on issues concerning trade policy, we are

well aware of the need to broaden our work on trade as part of a broader vision

of global governance.

We have identified five critical themes and are developing these with our growing

global network of concerned organizations (now consisting of over 2,000 civil society

organizations and representing nearly every country in the world). We are targeting

ideas that resonate on a global basis and that can form the basis of a consensus

within civil society on key trade and global governance issues. This consensus will

give us the basis to move forward.

Our five major themes include:

1) Transparency and democratic procedures.

We need to learn from events such as Seattle and to forge efficient and

participatory approaches that involve civil society.

2) Bridging the gap between the rich and the poor.

We are working on new approaches to help ensure that trade rules do not make

the gap between rich and poor countries and rich and poor people even worse. Our

goal is to find ways to turn trade policy into a positive force that can help end poverty.

3) Current and new issues in trade policy.

This includes the specific topics currently under negotiation at the WTO, the socalled built-in agenda of agriculture, patenting of life, and services. There are also

working groups on the more difficult trade issues such as environment, labor standards and human rights.

186

4) Negative impacts on food security.

This includes a number of specific topics such as agricultural dumping, tariff escalation and the ways in which current trade policies are fueling the conversion of

land from human food production to non-food uses or to luxury cash-crops.

5) E-commerce.

The Internet is changing our entire business system, potentially rendering many

of our current trade policies meaningless. At the same time, if it can remain free

both politically and financially, the Internet appears to be one of the keys to making

a truly democratic system of global citizen action. We have organized a working

group to put forward proposals to maximize the positive political, social and commercial impacts of the Internet while avoiding the negative impacts that may come

from a more restrictively controlled technology.

As mentioned above, the goal of the Global Citizen Initiative is to bring about

changes in the international framework through global consensus. The WTO Ministerial Meeting created a new awareness around the world about the critical role

played international institutions and the importance of creating a new vision of

global governance. The new citizen awareness that is manifest in our work, and in

the concerns voiced at Seattle, presents a unique opportunity to make long-term,

positive changes for all.

Mr. Chairman, thank you again for the opportunity to present these ideas and

for organizing this hearing aimed at drawing lessons from Seattle. We believe that

this event is an important first step towards a fairer, open and democratic system

of global governance.

Yours faithfully,

JOSE ́ BOVE ́

Member of Confe ́de ́ration Paysanne

France

Statement of David Head, on behalf of Save Endangered Wilderness,

Hatboro, Pennsylvania

Dear Members of Congress,

Congress has decided to take up the issue of ‘‘What Went Wrong in Seattle.’’ The

issue has nothing to do with when and where trade makes good economic sense. The

issue is democracy.

Behind the benign sounding term ‘‘Free Trade,’’ lurks a juggernaut unprecedented

in the history of mankind.

Functionally, the World Trade Organization is an association of the world’s most

powerful transnational corporations. This association is, by their own boastful admission, ‘‘writing the constitution for a global economy.’’ Their goal is clear—that

the ultimate governance of any and all issues that involve international trade or finance be removed from the hands of democratically elected governments, and placed

in the hands of the world’s corporate elite. They would further eliminate all public

input, as well as public scrutiny.

More than 500 corporate lobbyists sit on some 16 committees that advise the US

Trade Representative. These committees aren’t just closed to public interest groups,

they are actually shielded from public scrutiny by national security secrecy laws.

Citizen activists found it necessary to get a court order, in order to force US Trade

Representative, Charline Barshefsky, to include any environmental advocates on the

committees that advises her on forest products issues. The Clinton Administration

is now appealing that court order.

The judicial system of the WTO consists of panels, each comprised of three trade

bureaucrats whose meetings are closed to the public. It is so skewed in favor of corporate interests that since it was created in 1995 the WTO has ruled that every

environmental, health, or safety policy that it has reviewed, is an illegal trade barrier, that must be eliminated or changed. The effect of this has been that many governments faced with even the threat of a WTO challenge have backed down, and

governments are reluctant to enact legislation that might be challenged.

We have sacrificed millions of lives and spent trillions of dollars to defend our

right to govern our own affairs. Our government is signing away that right in secret

negotiations, behind closed doors.

Do not think that what went wrong in Seattle was a fluke. What happened in

Seattle is simply that the Titanic has just brushed ever so gently against a very

very large iceberg.

187

This is a far more powerful moment in history than most of us realize. Perhaps

Congress should be asking what King George would say in retrospect, if he was

asked ‘‘what went wrong in Boston.’’ Lincoln had a simple suggestion-‘‘you can’t fool

all the people all the time.’’ That’s what went wrong in Seattle.

Though the American people have grown complacent, even as they have grown

cynically accustomed to political corruption, the spirit of democracy is not dead. The

corporate conspirators who believe that their destined moment has arrived, are in

reality awakening a giant that has lain dormant since the civil rights movement

and Viet Nam.

The monster will be stopped. It may come through massive demonstrations, riots

or armed revolution. That will largely depend on congress and the President. But

the human spirit will not surrender to a corporate world government.

The fifty some thousand Union workers, environmentalists, human rights workers, and church representatives, who braved the police in Seattle and around the

world, to stand up to the WTO and corporate tyranny, are in greater solidarity with

the people, and stand for a far nobler cause than did our forefathers who dumped

the King’s tea in Boston Harbor. When the Ministerial ended, the demonstrators,

except for the prisoners, went home, but do not think that it ended there. Religious

and other human rights workers will not give up on human rights. Environmentalists will not relinquish to some autonomous corporate body, their right to defend the

planet. And Union leaders know all too well that far from bringing prosperity, corporations brought slave labor conditions and sweat shops to America, wherein hundreds of thousands of workers died. It was not corporations that brought prosperity

to America, it was strongly united workers.

The Clinton Administration has promised a few bandages to patch up some specific areas of complaint. That will not solve the problem, nor will it placate the

American people.

Unless and until the WTO becomes a democratic institution, whose operations are

open to full public participation and disclosure; until the WTO reverses past decisions and undoes the damages already done to public health, worker, environmental

and human rights protection; until its judicial system puts people above corporations; and until elected governments are guaranteed the right to enact laws to protect people and all the other inhabitants of the earth, the WTO will remain an institution whose interests are opposed to the interests of the people of this nation and

of the world, and the people will do whatever is necessary to stop it.

Instead of asking ‘‘What went wrong in Seattle?,’’ everyone in Congress should be

asking ‘‘Which side will I be on—The People’s or the Corporation’s?,’’ for that is how

history will judge you.

Statement of U.S. Integrated Carbon Steel Producers

This statement sets out the views of the five major integrated U.S. producers of

carbon steel products—Bethlehem Steel Corp., U.S. Steel Group, a unit of USX

Corp., LTV Steel Co., Ispat Inland Inc., and National Steel Corp.—on the need for

the Administration to strongly adhere to its position that the WTO Antidumping

Agreement will not be subject to future bilateral or multilateral trade negotiations.

As the recent steel import crisis has demonstrated, strong, effective and vigorously

enforced trade laws are necessary to ensure that American industries and workers

are not left defenseless against unfairly traded imports. Moreover, the unfair trade

laws are essential to maintaining an open market policy in the U.S., and encouraging the same abroad.

In the months leading up to the WTO Ministerial conference, the Administration’s

firm position was that the WTO Antidumping Agreement would not be the subject

of negotiations. For instance, in its 1997 markup of fast track legislation, the Committee on Ways and Means approved without dissent a provision instructing U.S.

negotiators to reject any agreement that would weaken existing disciplines against

dumping and subsidies. Further, over 200 members of the House co-sponsored a resolution last year stating that the Congress would not consider legislation to implement a trade agreement that required changes to our trade laws. The Administration’s actions in following through on its commitment to keep the renegotiation of

our trade laws off the table is recognized and appreciated. At the same time, it remains vital that this position be re-affirmed and it made clear to our trading partners that the United States will not discuss changes to the trade laws.

188

Reasons for the Outcome of the WTO Ministerial

The setbacks resulting from the WTO Ministerial conference in Seattle were

caused by many substantive and logistic impediments which made the successful

conclusion of negotiations difficult. The positions of our major trading partners, particularly the European Union and Japan, were untenable and a consensus with developing countries on the implementation of existing commitments was not reached.

There is a general consensus, however, that the negotiations did not stall because

of the American position on the antidumping and anti-subsidy rules. The U.S. position was set forth clearly and did not undermine efforts to begin a round on those

issues ripe for negotiation by the WTO.

Further Attempts to Erode American Trade Remedies

In the past few years, the U.S. integrated steel industry has been seriously injured by unprecedented surges of unfairly traded imports. In particular, countries

which have recently suffered severe economic consequences—Japan, Korea, and

Russia—have continued to target the U.S. market with dumped and subsidized imports. Often, these countries also benefit from protected home markets, thus exacerbating the effect of their unfair trade practices. The American industry’s last line

of defense against these illegal trade practices are the antidumping and anti-subsidy

trade laws. Foreign unfair traders realize that the only significant obstacle to unfettered abuse of the U.S. open market is the trade laws. Their goal is to reopen the

antidumping and anti-subsidy agreements in order to weaken them. The U.S. government correctly withstood these pressures.

In light of their failed attempts, other countries, particularly Japan and Korea,

are now trying to achieve through the WTO dispute settlement system what they

could not achieve through multilateral negotiations. For instance, Japan has recently filed a complaint with the WTO concerning American antidumping measures

on hot-rolled steel, and has threatened to file further WTO complaints concerning

additional trade law cases duly resolved under the U.S. law consistent with our

WTO obligations. The long and arduous WTO dispute settlement process has been

initiated by the very same parties which have engaged in the unfair trading of steel.

Rather than accept the orderly rule of law they seem determined to continue to litigate in defense of their own wrongdoing.

Japan’s objective in filing these complaints is to achieve the weakening of U.S.

trade laws that they were unable to achieve in the recent WTO Ministerial. The

U.S. government must aggressively defend the trade laws enacted by Congress and

administered by the Executive Branch and courts against this pernicious assault

through the WTO dispute settlement process. Allowing these laws to be weakened

only favors those countries that benefit from their closed markets; strong trade laws

are necessary to ensure open and fair trade worldwide. Further, re-opening the

WTO agreements after our position leading up to Seattle was made clear, and after

complicated negotiations were concluded during the Uruguay Round, would only

serve to diminish the credibility of U.S. negotiators among our foreign counterparts.

The Congress too must re-affirm its position that it will not accept agreements that

require changes to the U.S. antidumping laws.

American Steel Companies and Workers Need Strong Remedies Against Unfair

Trade

The American steel industry and steelworkers are seriously injured by unfair

trade. American steel companies have invested over $50 billion to improve their

plants and equipment. American steelworkers suffered the loss of over 250,000 jobs

as the companies and labor worked together in the 1980’s and early 1990’s to restructure the industry and make it the most efficient in the world. After having

made the necessary investments to modernize the industry, American steel companies and workers are now being seriously injured once again. Since the beginning

of the current import crisis, over 10,000 good U.S. steel jobs have been lost. The

industry has suffered five bankruptcies since the import crisis began. As confirmed

by the International Trade Commission’s affirmative findings of injury in the recently filed hot-rolled and cut-to-length plate cases, and the high dumping margins

and countervailing duty rates found by the Commerce Department, dumped and

subsidized foreign steel are causing this damage.

As a result of the petitions filed by the domestic industry, pursuant to the same

antidumping and anti-subsidy laws that our competitors seek to renegotiate, only

now are we beginning to see market adjustments as foreign imports must be sold

at fair prices. Without the full force and effect of these laws, every indication is that

massive foreign dumping and subsidization would persist, and cause greater injury.

189

In short, further erosion of our trade laws would lead to further injury to the domestic steel industry and its workers.

The Global Trading System Needs Strong Antidumping and Anti-subsidy Laws

The antidumping rules are at the very foundation of the WTO and an essential

element of the multilateral trading system because illegal trade practices distort the

marketplace and do not allow for the benefits of fair and equitable global competition. The original GATT stated in Article VI that ‘‘dumping a is to be condemned

if it causes or threatens material injury to an established industry in the territory

of a contracting party or materially retards the establishment of a domestic industry.’’ Strong antidumping and anti-subsidy rules are essential if global and regional

open market policy objectives are to be achieved and maintained. Maintaining open

trade requires the enforcement of fair trade.

For these reasons, the current WTO unfair trade rules were comprehensively negotiated and concluded only after spending substantial effort and resources during

the Uruguay Round. These rules were designed to ensure a basic level of fairness

and to prevent abuse by countries with closed markets of other countries’ open market policies. But these rules have barely been tested and certainly have not proven

to be defective. Re-opening negotiations on these laws would only undermine confidence in the WTO system and future negotiations.

Conclusion

The United States has consistently made clear that the WTO’s antidumping rules

would not be subject to negotiation. Congress has also emphatically stated its position that the trade laws shall not be undermined by international negotiations. We

commend this continued strong commitment to maintain effective WTO disciplines

against unfair trade. American industries, and the global trading system as a whole,

will suffer irreparably if the terms of the antidumping rules are renegotiated.

Statement of United States Association of Importers of Textiles and

Apparel, New York, New York

The U.S. Association of Importers of Textiles and Apparel, USA–ITA, is pleased

to have this opportunity to provide its views on the outcome of the WTO Ministerial

in Seattle and what steps are necessary to achieve a more positive result in the future. USA–ITA participated as a non-governmental organization at the Ministerial

meeting in Seattle and strongly supports the launch of a new round of multilateral

negotiations.

USA–ITA is an association founded in 1989 which now has more than 200 members involved in the textile and apparel business. USA–ITA members source textile

and apparel products both domestically and overseas. Members include manufacturers, distributors, retailers, and related service providers, such as shipping lines and

customs brokers. USA–ITA member companies account for over $60 billion in U.S.

sales annually and employ more than one million American workers.

It is the view of USA–ITA that multiple factors contributed to the inability of the

ministers to reach agreement in Seattle on a declaration launching a new round.

Textile issues were among those factors. Of course differences between the European Union and the United States, principally on agriculture, probably had the

most to do with the breakdown of the Seattle Ministerial, but some of the ‘‘credit’’

also must go to:

1) the developing countries, who made it clear that an unwieldy and outdated WTO decision-making process was unacceptable (with a small number of countries secretly making the most important decisions in exclusive

‘‘Green Room’’ sessions and then forcing the excluded countries to concur);

2) the timing and location of the meeting: too close to the next American

election cycle and in the United States (which therefore compelled the U.S.

Government to serve as a host at the same time it sought to implement a

significant agenda);

3) the failure of Geneva representatives to reduce the number of questions

left to ministers before Seattle;

4) substantive differences between and among the developed and developing

countries on a variety of issues, including textiles, where promised liberalization has yet to materialize; and

5) the comment by President Clinton indicating support for the ultimate

use of sanctions to enforce labor standards.

190

USA–ITA rejects the attempts by labor and environment protestors to take credit

for the failure of the ministers to reach agreement on launching a new round. While

disruptive and inconvenient, their presence was not what determined the outcome

of the meeting.

It is apparent to USA–ITA that textile issues played a key role in the difficulties

faced by the trade ministers in Seattle. We spoke extensively with the trade ministers of many of the developing countries that supply the U.S. market. Through our

discussions with these officials, we know that the insistence by U.S. negotiators not

to move on textiles led to much frustration and consternation within the developing

world. Clearly, these members had little interest in initiating a new round of trade

talks unless it included concessions on textiles, where the promises of liberalization

provided by the Uruguay Round Agreement have yet to yield tangible results.

The textile issues were framed well before the ministers arrived in Seattle and

reflected the developing world’s strong feeling of disappointment with the implementation of the Agreement on Textiles and Clothing (ATC) by the United States, in

particular, and with the increased use of anti-dumping measures by the European

Union. The developing country producers of textile and apparel products have plenty

of reasons to be disgruntled: • few textile and apparel products removed from the quota system (integrated

into ‘‘normal GATT rules’’), • annual increases in trade constrained by small growth rates, • the introduction of numerous safeguard actions (new quotas) creating new restrictions, and • the disruptive change in the U.S. rules of origin for textile and apparel products

after the ATC was implemented.

Several trade ministers specifically raised textiles during their statements at the

opening Plenary Session of the Ministerial and, in the view of USA–ITA, their statements accurately summarized the frustrations of the developing world with respect

to textiles trade. Thus, Hong Kong’s Secretary for Trade and Industry noted that

‘‘The begrudging manner in which the [ATC] is being implemented—including backloading of integration, minimum growth rates, unjustified safeguard actions and

harassment through anti-dumping—is probably more responsible, more than almost

any other single factor, for the feeling that has emerged among developing countries

that they have so far been denied the anticipated benefits of the Uruguay Round.’’

Similarly, Pakistan’s Minister of Commerce, Industry and Promotion noted that

‘‘developing countries have not gained any meaningful increase in market access in

the key areas where they have a clear comparative advantage, especially textiles

and agriculture. For many developing countries, the [ATC] was the centerpiece of

the Uruguay Round Agreements. They were persuaded to go along with the ‘‘singleundertaking’’ in the expectation that progressive liberalization of textiles by the developed countries within the ten-year phase-out period would enable them to generate significant gains in exports and incomes. . . Unfortunately, these hopes were

dashed. The integration programmes for the first two stages have not led to any

meaningful liberalization. . . .’’

From the outset of the Ministerial meeting, however, U.S. negotiators made clear

their determination to avoid making commitments on textiles, particularly if it involved quota liberalization, and therein lies a significant problem. This issue cannot

be ignored if developing countries are to perceive a benefit from participating in a

round that will require them to make further reforms in their trade policies.

USA–ITA is disappointed that U.S. officials repeatedly insisted that those concerned about textile trade and assisting the least developed countries should be satisfied with the Administration’s support for the Africa Growth & Opportunity Act

and the Caribbean Basin Enhancement Act, which are currently being considered

in the U.S. Congress. USA–ITA strongly supports that legislation because it would

provide duty-free and quota-free entry into the U.S. for certain products—mostly apparel—made in qualifying countries. Recent comments by U.S. Government officials,

including chief textile negotiator C. Donald Johnson and Assistant U.S. Trade Representative Rosa Whitaker, confirm that the Administration endorses the House

version of the Africa legislation. However, the final content of the legislation remains to be seen. The Senate version would not provide meaningful benefits to subSaharan Africa. The Senate bill, for example, would limit the benefits to apparel

made from U.S. formed fabric from U.S. formed yarns, thereby greatly reducing the

value of program for the participating countries. In any event, an LLDC initiative,

while useful and a moderate step forward from the current situation, cannot replace

the need for broader liberalization in the textile sector.

The failure of the Ministerial Conference to produce a Declaration to launch a

new trade round does not immediately threaten the life or health of the WTO as

an institution. Nor does it threaten the 2005 deadline for completion of the quota

191

1 Clayton Yeutter served as U.S. Trade Representative from 1985–1989 and as U.S. Secretary

of Agriculture from 1989–1991. He was heavily involved in the launch of the Uruguay Round

in 1986. He is currently of Counsel to Hogan & Hartson, L.L.P., a Washington, D.C. law firm.

phase-out process under the Agreement on Textiles and Clothing. USA–ITA continues to be confident that, at least with respect to WTO member countries, the termination of the ATC will be honored. However, the fact that most of the liberalization is delayed until January 1, 2005 creates the opportunity for new demands to

be put forward before that date. Given the fact that most of the concessions made

by developing countries during the Uruguay Round have implementation deadlines

well ahead of 2005, the prospect that further concessions may be required before

the benefits of the Uruguay Round have been obtained greatly limits the negotiating

flexibility of these nations. Tangible benefits before 2005 would likely change this

dynamic.

So long as a new round is not initiated, USA–ITA and its member companies will

be unable to achieve their objectives as well. These include additional access to new

markets, the implementation of trade facilitation measures that reduce variations

in procedures among different border authorities, and access to improved distribution systems. Obviously, the global expansion of other sectors of the U.S. economy,

including agriculture, manufacturing and services industries, also is being impeded

by the delayed start of a new round. Unless the very real concerns of the developing

world are addressed, including their concerns vis-a-vis the highly contentious issue

of textiles, these countries have no reason to agree to a new round where further

concessions on their part will be required. We all will pay the price for such shortsightedness.

We look forward to the Ways & Means Committee continuing to play a leadership

role on this important issue.

Respectfully submitted by,

LAURA E. JONES

Executive Director

Statement of Hon. Clayton Yeutter,1 Counsel, Hogan-Hartson L.L.P.; and

former United States Trade Representative

THE WTO: WHERE DO WE GO FROM HERE?

Mr. Chairman and members of the Subcommittee, it is a pleasure for me to submit this testimony to you. Doing so brings back fond memories of many appearances

before this Subcommittee through the years.

It is easy to be a critic. It is especially easy to be one with the benefit of hindsight.

Beyond that, focusing on the future is a much more fruitful exercise than bewailing

the past. Nevertheless, it might be useful to delineate some of the mistakes of the

recent Seattle Ministerial, if only to build a better foundation for the future. What

follows is my personal opinion only, and the criticisms are aimed primarily at the

policy making process of the present White House, rather than at Amb. Barshefsky,

who is a fine U.S. Trade Representative.

In my view:

l. The l999 ministerial meeting should not have been held in the U.S., an attractive locale for disruptive actions, as we learned by sad experience.

2. The meeting should not have been chaired by the U.S. It is difficult to be an

effective advocate when one also has chairmanship responsibilities.

3. The U.S. chief of state should not have been there, other than to provide a formal welcome to the attendees. His presence was a motivation for the demonstrators,

and his substantive presentation alienated the representatives of lesser developed

nations. Any chance of reaching agenda consensus at Seattle disappeared at the conclusion of his presentation.

4. The meeting should not have been held when policy positions of major trading

nations were so divergent. One simply cannot bridge such huge differences at a

three or four day ministerial meeting.

5. The meeting should not have been held so soon after the arrival of the WTO’s

new Director General, Mike Moore. The Director General is an outstanding individual, with exceptional knowledge and experience, but no one can be expected to

get up to speed on new round preparations in just a few weeks. It is the DG who

192

must personally work on narrowing major policy differences, and Mr. Moore did not

have time to do that.

6. The meeting should not have been held so soon after the completion of U.S.-

China negotiations on the latter’s potential entry to the WTO. That was a major

distraction for Amb. Barshefsky, and one that could have been avoided had the

White House recognized what an excellent job she had done in the initial China negotiations several months earlier.

7. The U.S. should have spent less time worrying about what the round would

be called, and more time preparing for it. In particular, our relentless argument in

favor of a limited agenda was not only counterproductive, but counter to our own

interest in expanding trade and opportunity.

8. The U.S. should not have taken antidumping off the table. That is a priority

issue for many nations, both developed and developing, and our intransigence did

not wear well. When we insist that issues sensitive to us will not be negotiated, it

is not surprising that other nations respond in like manner. That almost guarantees

that consensus on a negotiating agenda will not be reached.

Failure of the Seattle ministerial provided the groups who were demonstrating an

opportunity to claim credit for the outcome, and they’ve done so with great relish.

It has also provided them with the momentum to try to disrupt WTO and other

international meetings in the future. So the Seattle proceedings were a huge embarrassment for the U.S.

The Seattle meeting was a debacle of major proportions, for it will delay WTO negotiations of consequence for at least a year and a half. There will be concomitant

delayed benefits of more open trade, particularly for developing countries, but also

for the most internationally competitive nations—and the U.S. is at the top of the

latter list. It is ironic that we’ve shot ourselves in the foot at a time when we have

more to gain from a new WTO round than any other nation in the world.

In tennis terms, we had way too many unforced errors in Seattle, and we’d better

figure out a way to avoid or eliminate such errors in the future. U.S. leadership in

international trade is at a mighty low ebb, and that needs to change soon.

The Future

So where does this now leave us? Let’s concentrate first on the year 2000. In my

opinion there is only a minimal chance of launching a new trade round prior to the

U.S. presidential election.

Nevertheless, there is plenty to do this year. Director General Moore can work

hard on the major stumbling blocks that emerged in Seattle, engaging in a bit of

shuttle diplomacy where that will be helpful. He’ll not be able to resolve those differences this year, but just narrowing them appreciably would be a significant accomplishment.

The Director General needs also to encourage countries who have not yet finalized

their own negotiations with China on WTO admission to do so, promptly. Later in

the year the WTO needs to bring this effort to its ultimate conclusion, with entry

afforded both to China and Taiwan (almost simultaneously). The U.S. Congress

needs to do its part, by approving the permanent grant of normal trade relations

for China, on a timetable carefully coordinated with Director General Moore.

China’s behavior, on human rights and other issues, is far from exemplary. Its

trade regime has its own shortcomings. The real issue, however, is whether progress

on all such issues is more likely to occur if China is in the WTO, or outside, as it

is today. I’m persuaded that we’ll have a much greater chance to affect and influence that behavior once China is a WTO member, and thereby subject to international rules, than if it continues as an outsider, following its own rules. Absent

WTO disciplines our trade leverage in China is limited to potential economic sanctions, and they typically hurt us more than they do ‘‘the other guy.’’ With China

on the inside we’ll have the much more comprehensive and powerful leverage of

about l50 WTO member nations.

The WTO should also proceed with preliminary skirmishes on agriculture and

services, the two major issues on which ‘‘second tranche’’ negotiations were agreed

to in the Uruguay Round. There is a lot of hard work ahead in both those areas,

for they are highly contentious and extremely sensitive politically. So the sooner

that work gets underway the better. Otherwise they’ll be a drag on the new round,

just as they were on the last one.

Turning to the post-U.S. election period, one of the highest priorities for the incoming administration should be to get a strong USTR team in place as quickly as

possible. The rest of the world will be waiting for this.

My own view is that the next administration should make fewer political appointments at USTR. That number has increased in recent years, and the result is an

inevitable downgrading of USTR’s top career negotiators. The latter typically have

193

far more negotiating knowledge, experience and skills than the incoming political

appointees. We ought to let them do their jobs—with broad political guidance, but

not day to day political handwringing—for they’re the best in the world!

We also need to re-think our negotiating priorities for a new round, particularly

the argument for a narrowly based agenda. We’re certainly not going to accomplish

anything multilaterally on issues that are omitted from a finally agreed agenda.

Conceivably we could make progress bilaterally on such subjects, but that’s hard

sledding, and a terribly inefficient use of scarce negotiating talent. Therefore, let’s

be sure to get a comprehensive new round agenda that addresses all the trade

issues that are likely to be globally important to the U.S. over the next decade.

That means we need to get beyond agriculture, services, and industrial tariffs, the

key issues we’ve denominated so far. Those are indeed significant, but I’d add:

1. Revisions of Existing WTO Agreements -wherever that would be appropriate.

That may open up issues in government procurement, standards, antidumping, and

perhaps even some of the other agreements such as customs administration. But

why not? We should feel free to raise issues in those areas that require additional

negotiation, and so should any other WTO member country. After all, we spent hundreds of hours negotiating these Agreements in past rounds. We all should be willing to consider potential improvements in those Agreements where improvement is

in order.

2. Administration of Existing WTO Agreements and Other Provisions -In many

cases where dissatisfaction exists with the performance of the WTO, the proper response may well be to foster the execution and administration of what was agreed

to earlier. If corrective action is taken in that arena, a re-negotiation of specific

Agreements and other WTO provisions may not be necessary.

3. Dispute Settlement -WTO dispute settlement is working much better than in

the past, and far better than its critics are willing to admit. But with several years

of experience now behind us, it is time to evaluate the mechanisms that were put

in place during the Uruguay Round. If we can improve them by tweaking them

somewhat or making them more transparent, we clearly should do so. Though the

process is much faster, more decisive and more definitive than it was for decades,

it is still too slow for a rapidly changing world. In my view it has also become too

legalistic.

With countries beginning to use dispute settlement much more than in the early

years of the GATT, we also have a danger of disputes overwhelming the system. If

the WTO cannot handle them in a satisfactory manner, the organization itself will

suffer a severe loss in credibility. That suggests attempting to resolve more of these

disputes through conciliation and arbitration, rather than with a full blown panel

procedure.

The WTO also experiences a credibility problem when nations refuse to take corrective action after losing in a dispute settlement proceeding. The aggrieved nation

will have the privilege of retaliating against the offender, but that does not remove

the grievance. And the sanction incongruously reduces international commerce, an

undesirable result indeed. In this next WTO round we need to find creative ways

to encourage and stimulate compliance with WTO rulings, while still respecting

each nation’s sovereignty. And sanctions ought to be trade enhancing rather than

trade reducing.

4. Investment -Over the past several years a major attempt has been made to

draft a multilateral investment agreement under the aegis of the OECD. Regrettably, those efforts seem to have failed. We ought to bring them back to life in the

WTO, where they should have been negotiated in the first place. A beginning was

made in the Uruguay Round, and the venue was then shifted to the OECD. We

ought to shift it back again.

We should not underestimate the importance of sound investment rules. At a time

when technology is drawing the world economy ever closer together, investment and

trade rules go hand in hand. If one lags behind the other, this will inevitably have

an adverse effect on economic growth. That means job creation will also lag, in developed and developing countries alike. We all have a stake in undertaking this task

(which is why negotiations cannot be limited to the OECD nations), and in getting

it accomplished in a timely way. The OECD proposals generated lots of criticism,

much of it based on fallacious reasoning. It is time for everyone to recognize that

the technological revolution is not going away, and that the efficient movement of

capital will be critical to narrowing differences in economic well-being throughout

the world. Too many nations today deliberately distort investment patterns. Some

that are most in need of investment discourage foreign investment rather than encourage it. It is high time for rational thinking to prevail in this area, and that demands negotiation of a sensible WTO investment agreement. The U.S. is now seekVerDate 20-JUL-2000 14:53 Sep 28, 2000 Jkt 060010 PO 00000 Frm 00197 Fmt 6633 Sfmt 6602 K:\HEARINGS\66204.TXT WAYS1 PsN: WAYS1
194

ing to meet this need via bilateral investment agreements, but that is far too slow

a process.

5. Open Markets for the LLDCs -The developed country members of the WTO have

flirted in recent years with the concept of opening their markets fully to products

and services from the lesser of the less developed nations. Director General Moore

has been and is a strong advocate for this worthy cause. There is still trepidation

among some developed country industries with respect to this proposal, but that

trepidation is unfounded. In a new round the WTO will, of course, have to delineate

specific parameters for determining which low income nations qualify, and when

such nations are to be graduated from the benefits of this proposal. That should not

be a formidable task, and developed nations need have no fear that they’ll be inundated with imports from the LLDCs. This would be a splendid gesture by the developed world, deeply appreciated by those very poor countries, all of whom would prefer trade to aid. In addition, placing this issue on the agenda of the new round will

instantaneously generate political support for the round from a substantial number

of countries.

6. New Controversies? -What is not on the negotiating agenda may be just as important as what is on it. Issues that are not ripe for negotiations should not be included. Forcing them on the agenda becomes an exercise in frustration and futility.

The U.S. has been spinning its wheels on worker rights and environmental issues

for the past several years, and neither of those issues is anywhere near ready for

a new round agenda. The European Union has been doing the same with competition policy, and it is not yet ripe either.

All three of those issues do have some relevance to international trade. In many

instances the impact is nebulous, and it is often indirect and peripheral. But in

some situations the impact is direct and meaningful. With the high level of interest

that prevails for each of these subjects, a multilateral forum (or fora) should be

available for people and organizations to discuss them. The preferred forum may or

may not be the WTO, but it should be some international organization. Otherwise

those who have strongly held opinions on these subjects will conclude that they are

being stonewalled by the international community. That in turn will lead to conduct

of the kind that was on display in Seattle.

Competition policy issues obviously need to be vetted with Ministers of Justice

from the WTO countries. Because of the interrelationship of these issues with those

of antidumping, one could certainly justify a joint working group of justice and trade

ministers to determine whether global standards are yet in order for competition

policy—and, if so, where and how such standards should be negotiated. But we’ll

certainly not be ready for any such negotiations in the next WTO round.

The ‘‘worker rights’’ issue is a legitimate one, for the world ought to be able to

agree that some such rights are fundamental -in any country, rich or poor. The

International Labor Organization (ILO) is the appropriate standards-making body

in this area, but the ILO does not now have a mandate for implementing and enforcing ‘‘fundamental’’ worker rights. Such a mandate will obviously be highly controversial, as to if, when, how, and where implementation and enforcement are to

take place. All of this merits discussion, perhaps as a joint ILO-WTO effort, but it

is not yet ripe for negotiations in any international fora.

Environmental issues have such great breadth that I see no feasible way ever to

negotiate meaningful WTO rules in this area. International harmonization of environmental standards is a laudable objective, but one that should be pursued in appropriate standards-making bodies, not in the WTO. In many instances, it may be

far more sensible and practical to sort out environmental differences issue by issue,

and in defined geographic areas, rather than battle through their complexities on

a worldwide basis. It seems to me that the WTO’s proper role at present is to be

sensitive to environmental considerations in its deliberations and decisions. That

suggests prudence in action and a willingness to listen, but it does not support a

negotiating agenda.

WTO Governance

The Uruguay Round dramatically broadened the spectrum of issues to be dealt

with at the WTO, and significantly added to the complexity of its rules. Debate over

the handling of matters such as worker rights, the environmental impact of WTO

rules, and competition policy has the potential to broaden that spectrum still more.

To me this suggests that the Director General needs to invite high level trade officials from the capitals to Geneva on a regular basis.

This need not be (and should not be) l50 trade ministers, for not much will be

accomplished by a l50 member committee. It should be a manageable group, representative of the WTO membership. The risk in this is that those who are excluded

195

will be displeased, but that is a challenge that must be faced. (That risk can be mitigated by rotating at least some of the memberships on an agreed timetable.) Years

ago this was done at the GATT through what was then called the Consultative

Group of l8 (or the CG l8), and it worked quite well during its time. Something of

this nature needs now to be resurrected by Director General Moore, to help him

work through the delicate issues that are bound to confront the WTO in the coming

years. The world just cannot wait for this to happen in a trade round conducted

once a decade. Issues and potential consequences change much too quickly for that.

The private sector is fast moving these days, and the public sector (including international organizations such as the WTO) must begin to match it in pace and agility.

Slow moving, cumbersome, inflexible public entities will soon fade into oblivion.

Fast Track

What does all this mean for fast track here in the U.S.? It means we ought to

grant fast track authority to USTR and have confidence in its ability to do this job

and do it right. The Congress will have ample opportunity to influence negotiations

as they unfold, and prior to finalization of any package that will be brought back

for Congressional approval. We’re the only nation in the world that has tied the

hands of their negotiators. And we’ve done so at a time when it is clearly in our

national self interest to be negotiating. The risk, to the Congress and to the American public, of granting fast track authority is minuscule, and we ought to provide

it. That said, I see no merit in granting such authority for matters—such as those

I’ve discussed above—which clearly are not now ripe for negotiations, and are not

likely to become ripe during the tenure of a new WTO round. Should that situation

change, additional fast track authority can always be granted in the future.

Conduct of a New Round

In light of what transpired in Seattle, how can the WTO launch a new round?

By getting its homework done this year, and much of that burden will now fall on

the shoulders of Director General Moore and his staff. If he can begin to generate

consensus in support of an agenda such as the one I’ve outlined here, and if the

accession of China and Taiwan can be completed later this year, I see no reason

why a new round cannot be launched in 200l.

Is another ministerial meeting necessary? Perhaps, but not necessarily. All WTO

member nations have delegations in Geneva, and they ought to go to work with renewed vigor in the aftermath of Seattle. They should be embarrassed too, by what

did and did not occur in the Seattle fiasco. If these delegations do their jobs well,

with the full support and involvement of their trade ministries back home, it is conceivable (perhaps even probable) that a new round could be launched without another meeting of ministers, or with a pro forma session that could be held in Geneva

rather than off-site.

The Seattle meeting’s proposed timetable for a new round was three years. Can

a broad based agenda be packaged for final approval in such a short timeframe?

Probably not, so I’d rather opt for a four year wrap-up, as was done in the Uruguay

Round. The latter took nearly twice that long, but the GATT had never before dealt

with such a comprehensive negotiating agenda. With the experience of the Uruguay

Round, and an agenda not quite so broad, the WTO should have a reasonable

chance of finishing in four years this time around. If so, that would be a superb

achievement.

Conclusion

Neither the Congress, the Administration, or the American public should be mislead or intimidated by what occurred in Seattle. The demonstrators had little or no

impact on the final outcome of the meeting. Virtually every demonstrator in Seattle

will benefit from a more open trading system. Those of us who understand the benefits of free trade obviously have not delivered the open trade message in a persuasive manner to those who were marching in Seattle’s streets. That is a challenge

in itself, but it is beyond the purview of this hearing. What we must not do is turn

inward, altering U.S. trade policy in a way that will come back to haunt all of us

(including the Seattle demonstrators) in the future. That’s what leadership is about,

and it is imperative that we exercise it, with courage and principle.

The success of the Uruguay Round, and its positive impact on millions of people

in the U.S. and elsewhere around the world, provides a foundation on which to

build. The trade policy path to a better world is generally quite clear, and a new

trade round is on that path. We need now to help lead the world in that direction.

We should, therefore:

1. Recognize the mistakes of Seattle, and learn from them;’

196

2. Focus this year on bringing China and Taiwan into the WTO, and in the process approve normal trade relations for China on a permanent basis;

3. In the coming months help WTO Director General Moore to narrow agenda differences for a new round, and move forward with preliminary negotiations in agriculture and services;

4. Early next year encourage the new Administration to get strong USTR leadership in place as quickly as possible;

5. Then reach an agreed agenda broader than the one we advocated in Seattle,

but exclude issues that are not ripe for negotiation;

6. Determine appropriate international fora for deliberating issues such as worker

rights, environmental protection, competition policy, and others that either are inappropriate for WTO negotiations are not yet ready for such;

7. Grant fast track authority to the new Administration, under the conditions just

described; and

8. Set a timetable for concluding the new round, and make it our highest negotiating priority in international trade.

Thank you, Mr. Chairman, for granting me the privilege of contributing these

views for your consideration.

Æ