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79–584 2002

PRESIDENT BUSH’S TRADE AGENDA FOR 2002

HEARING

BEFORE THE

COMMITTEE ON WAYS AND MEANS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

FEBRUARY 7, 2002

Serial No. 107–57

Printed for the use of the Committee on Ways and Means

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois

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

PHIL ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

J.D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY C. HULSHOF, Missouri

SCOTT MCINNIS, Colorado

RON LEWIS, Kentucky

MARK FOLEY, Florida

KEVIN BRADY, Texas

PAUL RYAN, Wisconsin

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

EARL POMEROY, North Dakota

ALLISON GILES, Chief of Staff

JANICE MAYS, Minority Chief Counsel

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

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

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

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

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

is further refined.

iii

C O N T E N T S 

Page 

Advisory of January 29, 2002, announcing the hearing ....................................... 2

WITNESS 

United States Trade Representative, Hon. Robert B. Zoellick ............................ 12

SUBMISSIONS FOR THE RECORD 

Advanced Medical Technology Association (AdvaMed), statement ..................... 59

American Apparel & Footwear Association, Arlington, VA, statement .............. 62

American Forest & Paper Association, statement and attachments ................... 64

American Iron and Steel Institute, statement ...................................................... 68

American Textile Manufacturers Institute, statement ......................................... 75

Association of American Chambers of Commerce in Latin America, statement 79

Bolivia, Republic of, Her Excellency Marlene Fernandez del Granado, letter ... 83

Brazil-U.S. Business Council, U.S. Section, statement ........................................ 84

Faleomavaega, Hon. Eni F.H., a Representative in Congress from American 

Samoa, statement ................................................................................................. 86

Goss Graphic Systems, Inc., Westmont, IL, Joe Gaynor, statement and attachment ...................................................................................................................... 89

H.J. Heinz Company, Pittsburgh, PA, Michael D. Milone, letter ........................ 91

Mattel, Inc., El Segundo, CA, statement ............................................................... 95

National Electrical Manufacturers Association, Rosslyn, VA, statement ........... 96

Semiconductor Industry Association, George Scalise, statement ........................ 101

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

NY, statement ...................................................................................................... 105

(1)

PRESIDENT BUSH’S TRADE AGENDA FOR 2002

THURSDAY, FEBRUARY 7, 2002

HOUSE OF REPRESENTATIVES,

COMMITTEE ON WAYS AND MEANS,

Washington, DC.

The Committee met, pursuant to notice, at 11:00 a.m., in room

1100 Longworth House Office Building, Hon. Bill Thomas (Chairman of the Committee) presiding.

[The advisory announcing the hearing follows:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721

January 29, 2002

No. FC–13

Thomas Announces a Hearing on

President Bush’s Trade Agenda for 2002

Congressman Bill Thomas (R–CA), Chairman of the Committee on Ways and

Means, today announced that the Committee will hold a hearing on President

Bush’s trade agenda for 2002. The hearing will take place on Thursday, February 7, 2002, in the main Committee hearing room, 1100 Longworth House

Office Building, beginning at 10:00 a.m.

In view of the limited time available to hear witnesses, oral testimony at this

hearing will be from United States Trade Representative Robert B. Zoellick. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the

printed record of the hearing.

BACKGROUND:

From November 9–14, 2001, trade ministers representing 140 countries met at

the Fourth World Trade Organization (WTO) Ministerial Conference in Doha, Qatar,

where an agreement was reached to launch a new round of multilateral trade negotiations. A schedule for negotiations will be formulated shortly, and the United

States and its trading partners will be tabling negotiating proposals. In addition,

negotiations to establish the Free Trade Area of the Americas (FTAA) are reaching

a critical stage with the approaching deadline of May 15, 2002, for initiating market-access talks.

Negotiations to establish bilateral free trade agreements (FTAs) with Singapore

and Chile are scheduled to conclude later this year. All of these negotiations cover

agriculture, services, industrial tariffs, and investment, to name a few of the sectors

where the United States stands to gain new export opportunities.

At the same time, the Administration is considering other possible FTAs to improve U.S. access to foreign markets. On December 6, 2001, the House passed H.R.

3005, a bi-partisan bill to renew the President’s authority to present legislation implementing trade agreements to Congress for approval without amendment (otherwise known as Trade Promotion Authority). This legislation contains extensive negotiating objectives and consultation requirements. H.R. 3005 was approved by the

Senate Finance Committee, as amended, on December 18, 2001.

In announcing the hearing, Chairman Thomas stated: ‘‘A tried and true medicine

for a weakened economy is expanding trade, and the House has moved ahead to

grant President Bush and Ambassador Zoellick the tools that need to open foreign

markets to U.S. products and services. Right now, as we await Senate action, markets are being pried open in Latin America, Asia, and Europe, for the goods and

services of our competitors. Our trading partners are signing new trade agreements

monthly that leave the United States out. As the Senate considers H.R. 3005, the

Committee will be engaged in close consultations with the Administration on priorities for the new round of WTO negotiations, the FTAA, and on additional negotiations to establish free trade agreements with close trading partners and allies. We

will actively encourage the Senate to deliver tools needed by the Bush Administration to ensure that future trade agreements include, rather than exclude, the United

States.’’

3

FOCUS OF THE HEARING:

The hearing is expected to examine current trade issues such as: (1) the President’s trade agenda in light of House passage of H.R. 3005, (2) the success of the

WTO Ministerial Meeting in Doha, (3) prospects for the FTAA, (4) H.R. 3009, a bill

passed by the House to extend and expand the Andean Trade Preference Act, which

is awaiting Senate action, (5) the functioning of the WTO dispute settlement system

and cases that have been brought against the United States, including the challenge

to the Foreign Sales Corporation and Extraterritorial Income Exclusion rules, (6)

the steel safeguard determination due March 6, (7) progress in negotiations to establish trade agreements with Singapore and Chile, (8) other potential candidates for

free trade agreement negotiations such as Australia, New Zealand, and Central

American countries, and (9) the pending accession of Russia to the WTO and H.R.

3553, a bill to remove Russia from Title IV of the Trade Act of 1974, the so-called

Jackson-Vanik amendment.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Due to the change in House mail policy, any person or organization

wishing to submit a written statement for the printed record of the hearing should

send it electronically to ‘‘hearingclerks.waysandmeans@mail.house.gov’’, along with a

fax copy to 202/225–2610 by the close of business, Thursday, February 21, 2002.

Those filing written statements who wish to have their statements distributed to

the press and interested public at the hearing should deliver their 200 copies to the

full Committee in room 1102 Longworth House Office Building, in an open and

searchable package 48 hours before the hearing. The U.S. Capitol Police will refuse

unopened and unsearchable deliveries to all House Office Buildings.

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. Due to the change in House mail policy, all statements and any accompanying exhibits for

printing must be submitted electronically to ‘‘hearingclerks.waysandmeans@mail.house.gov’’,

along with a fax copy to 202/225–2610, in Word Perfect or MS Word format and MUST 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://waysandmeans.house.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.

f4

Chairman THOMAS. If our guests could find seats, please. Good

morning to all of you.

Welcome, Ambassador Zoellick. Thank you for joining us today.

This is the Committee’s fourth hearing this week on the President’s budget; and, as I have said, the President has stated three

very clear goals in the context of his fiscal year 2003 budget plan:

win the war, protect the homeland and revive the economy.

The events of September 11 have challenged us in many ways,

and we are being tested militarily and in our domestic economy

and our commitment to remain engaged on the world economic

stage. As we work to revitalize the economy, nearly 8 million people remain unemployed. We believe free trade will fuel the engines

of economic growth and create new jobs and new income here and

abroad—I am sorry. You guys ready to go?

The United States is the world’s largest exporter and for good

reason. Our firms and workers are highly productive and committed to competing and winning in international commerce. Competition breeds innovation, and innovation leads to new and betterpaying jobs. International trade agreements generate economic

growth, spawn technological advances and help to advance American foreign policy objectives. One of every $4 in the U.S. economy

is linked to trade. Twelve million Americans owe their jobs to exports. Each trade agreement excluding the United States represents an opportunity lost for American business and the workers

they employ.

Those who complain about unfair treatment we receive abroad or

unfair advantages enjoyed by their international competitors

should see the importance of moving forward with negotiations.

Unless we aggressively negotiate in our own interests, we will face

the same disadvantages in the future.

We cannot negotiate, however, unless Congress gives the President the tools he needs. Senate passage of Trade Promotion Authority (TPA) passed by the House last year would complete Congress’ commitment that American business have a fair chance to

compete and win in the international arena. We will actively encourage the Senate to deliver tools the President needs to ensure

America stays competitive.

The Senate has also not yet passed the Andean Trade Promotion

Act and the Drug Eradication Act, part of a comprehensive approach to fight the illegal drug trade that continues to plague that

region, indeed, our Nation as well. This bill will offer the people of

these nations—Colombia, Peru, Bolivia, Ecuador—the opportunity

to develop legitimate businesses, rather than engage in the production of illegal drugs.

In December, the Foreign Sales Corporation (FSC) replacement,

the Extra Territorial Income Exclusion Act of 2000, was ruled an

illegal export subsidy by the World Trade Organization (WTO). I

intend to hold full Committee hearings and a series of subcommittee hearings to examine the issue, and the Committee will

undertake the necessary and appropriate legislative steps to meet

our WTO obligations.

5

We must preserve the international competitiveness of U.S. interests. We have railed long and hard against those who do not

comply to international agreed-upon rules. It is then in our own interest when we have received the judgment against us to make

sure that we comply with those rules as well.

Mr. Ambassador, you succeeded in breaking through the WTO

deadlock that had prevailed since Seattle. As a result, we have an

agreement on the need for a comprehensive 3-year negotiation covering the range of trade barriers in agriculture, especially services,

industrial tariffs and investment. This Committee will work closely

with you to develop priorities for the new round of WTO negotiation, the Free Trade Area of the Americas (FTAA), the indicated

Singapore and Chilean free trade agreements (FTA) and, hopefully,

additional negotiations that we can agree on and you have been

able to arrange for us so that we can continue creating new arrangements with our close trading partners and allies.

At this point, I would recognize briefly the gentleman from Illinois, the Chairman of the Trade Subcommittee.

[The opening statement of Chairman Thomas follows:]

Opening Statement of the Hon. Bill Thomas, a Representative in Congress

from the State of California, and Chairman, Committee on Ways and Means

Good morning. Welcome, Ambassador Zoellick, and thank you for joining us today.

This is the Committee’s fourth hearing this week on the President’s budget. And,

as I’ve said, the President has stated three very clear goals in the context of his

fiscal year 2003 budget plan: win the war, protect the homeland, and revive the

economy.

The events of September 11 have challenged us in many ways. We are being tested militarily, in our domestic economy, and in our commitment to remain engaged

on the world economic stage. As we work to revitalize the economy, nearly eight million people remain unemployed.

We believe free trade will fuel the engines of economic growth and create new jobs

and new income here and abroad. The United States is the world’s largest exporter,

and for good reason. Our firms and workers are highly productive and committed

to competing and winning in international commerce. Competition breeds innovation, and innovation leads to new and better paying jobs.

International trade agreements generate economic growth, spawn technological

advances and help to advance American foreign policy objectives. One of every four

dollars in the U.S. economy is linked to trade; twelve million Americans owe their

jobs to exports. Each trade agreement excluding the United States represents an opportunity lost for American business, and the workers they employ.

Those who complain about unfair treatment we receive abroad or unfair advantages enjoyed by their international competitors should see the importance of moving forward with negotiations. Unless we aggressively negotiate in our own interests, we will face the same disadvantages in the future. We cannot negotiate, however, unless Congress gives the President the tools he needs.

Senate passage of Trade Promotion Authority—passed by the House last year—

would complete Congress’ commitment that American business have a fair chance

to compete and win in the international arena. We will actively encourage the Senate to deliver tools the President needs to ensure America stays competitive.

The Senate has also not yet passed the Andean Trade Promotion and Drug Eradication Act—part of a comprehensive approach to fight the illegal drug trade that

continues to plague that region, and indeed, our nation as well. This bill will offer

the people of these nations—Colombia, Peru, Bolivia, Ecuador—the opportunity to

develop legitimate businesses, rather than engaging in the production of illegal

drugs.

In December, the Foreign Sales Corporation Replacement, the Extraterritorial Income Exclusion Act of 2000, was ruled an illegal export subsidy by the World Trade

Organization. I intend to hold full committee hearings and a series of subcommittee

hearings to examine the issue, and the Committee will undertake the necessary and

appropriate legislative steps to meet our WTO obligations. We must preserve the

international competitiveness of U.S. interests.

6

We have railed long and hard against those who do not comply with internationally agreed upon rules. It is in our own interests when we have received a judgment

against us to make sure that we comply with those rules as well.

Mr. Ambassador, you succeeded in breaking through the WTO deadlock that had

prevailed since Seattle. As a result, we have an agreement on the need for a comprehensive three-year negotiation, covering a range of trade barriers in agriculture

especially, in services, industrial tariffs, and investment.

This Committee will work closely with you to develop priorities for the new round

of WTO negotiations, the Free Trade Area of the Americas, the indicated Singapore

and Chilean Free Trade Agreements and hopefully additional negotiations that we

can agree on and that you’ve been able to arrange for us so that we can continue

creating new arrangements with our close trading partners.

At this point, I would recognize, briefly, the gentleman from Illinois, the chairman

of the trade subcommittee.

welcoming Ambassador Zoellick to the Committee and to commend

Mr. CRANE. Thank you, Mr. Chairman. I want to join in warmly

f him on the impressive breakthrough he achieved at the World

Trade Organization Ministerial meeting in Doha. As you know, I

led a delegation of 19 from this Committee to Seattle in 1999,

where we observed firsthand the deadlock and suspicion among our

trading partners in the WTO.

Mr. Ambassador, at Doha you cleared away a black cloud on the

horizon of our international economic strength. Americans are once

again leading at the international negotiating table. The paychecks

of hard working folks in plants and on farms across this country

will be more secure as the result of the markets the new Doha

Round can open.

As they say at Cape Canaveral, ‘‘We’ve got a launch.’’ We also

have a schedule and an outline of what can be achieved in terms

of reducing unfair disparities in tariffs faced by American companies, discriminatory rules governing services unfamiliar and burdensome products standards and regulations and unnecessary

threats to their investments.

Finally, you succeeded getting countries to commit to a deadline

of 2005, and if I could do one thing today, it would be to urge you

to stick to that date. It is great to have you before us today knowing that the Committee and the House have made the hard choices

necessary to pass Trade Promotion Authority and we are only

awaiting action on the other body. The rapid 18 to 3 bipartisan approval in the Finance Committee tells me that we struck the right

balance in the House even from where I sit at one end of the seesaw.

Last year at this time when getting Trade Promotion Authority

out of the House was in question, our economic future as a country

was also warned out. Now I believe Congress may be very close to

giving you and the President the tools you need. Our trading partners have been very active in opening and expanding markets for

their exports, and I am optimistic we are positioning ourselves to

do the same.

I believe that this year 2002 will be a significant year for the

United States trade policy. We look forward to enhancing the Andean trade bill, concluding bilateral FTAs with Singapore and Chile

which were initiated by President Clinton, initiating several other

FTAA negotiations, achieving key milestones in negotiations to esVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\A584.XXX pfrm12 PsN: A584
7

tablish a Free Trade Area of the Americas and positive movement

in many WTO matters, including agriculture services and industrial tariffs. The year ahead in trade holds the promise of job creation, economic growth and making the world more secure by expanding commercial ties among countries that should be doing

more to work together.

I look forward to working, or hearing from you first and working

with you on our trade priorities along with President Bush, and I

thank you, Mr. Chairman.

[The opening statement of Mr. Crane follows:]

Opening Statement of the Hon. Phillip M. Crane, a Representative in

Congress from the State of Illinois

Thank you, Mr. Chairman. I want to join in warmly welcoming Ambassador

Zoellick to the Committee and to commend him on the impressive breakthrough he

achieved at the World Trade Organization (WTO) Ministerial meeting in Doha.

As you know, I led a delegation of nineteen from this Committee to Seattle in

1999 where we observed first hand the deadlock and suspicion among our trading

partners in the WTO. Mr. Ambassador, at Doha you cleared away a black cloud on

the horizon of our international economic strength; Americans are once again leading at the international negotiating table.

The paychecks of hard-working folks in plants and on farms across this country

will be more secure as the result of the markets the new Doha Round can open.

As they say at Cape Canaveral: ‘‘We’ve got a launch.’’ We also have a schedule and

an outline of what can be achieved in terms of reducing unfair disparities in tariffs

faced by American companies, discriminatory rules governing services, unfamiliar

and burdensome product standards and regulations, and unnecessary threats to

their investments. Finally, you succeeded getting countries to commit to a deadline

of 2005 and, if I could do one thing today, it would be to urge you to stick to that

date.

It is great to have you before us today knowing that this Committee and the

House have made the hard choices necessary to pass Trade Promotion Authority,

and that we are only awaiting action in the other Body. The rapid 18–3 bipartisan

approval in the Finance Committee tells me that we struck the right balance in the

House, even from where I sit near one end of the seesaw. Last year at this time,

when getting trade promotion authority out of the House was in question, our economic future as a country was also more in doubt. Now, I believe, Congress may

be very close to giving you and the President the tools you need.

Our trading partners have been very active in opening and expanding markets

for their exports and, I am optimistic we are positioning ourselves to do the same.

I believe that this year, 2002, will be a significant year for United States trade policy. We look forward to enacting the Andean Trade bill, concluding bilateral FTAs

with Singapore and Chile which were initiated by President Clinton, initiating several other FTA negotiations, achieving key milestones in negotiations to establish

a Free Trade Area of the Americas (FTAA), and positive movement in many WTO

matters including agriculture, services, and industrial tariffs.

The year ahead in trade holds the promise of job creation, economic growth, and

making the world more secure by expanding commercial ties among countries that

should be doing more to work together. I look forward to hearing about the trade

I will recognize the gentleman from New York, Mr. Rangel, for an

priorities as you and President Bush see them.

Chairman THOMAS. Prior to hearing from you, Mr. Ambassador,

f opening statement.

Mr. RANGEL. Mr. Chairman, I intend to pass and to yield to

Sandy Levin, but before I do I want to join with you in congratulating our trade representatives on these international efforts on

behalf of our country.

I also would want to point out that this Committee in particular

takes great pride in the unity that we have in the past shown in

8

terms of our trade policy as the Congress tries to—in terms of foreign policy, and I think that the trade bill with China as well as

the Caribbean Basin Initiative (CBI) and the opportunities that we

have made and you continue to expand in Africa throws away our

party labels and makes us proud to provide the leadership that is

expected of us by the House members.

Having said that, it is apparent that on many tax policies especially as relates to FSC and in certain areas how we treat labor

and environment and investments for U.S. firms that you know, as

I do, that there are basic policy differences between our parties politically.

I want to thank you for the time you spend with me and Democrats, but I also want to ask you publicly to consider whether or

not you can attempt to use your good office and that of the Administration to try to break down the political positions that both sides

of the aisles of this Committee finds it so easy to lock ourselves

into. And it is going to take a little more than just the shuttle that

you so effectively ride between Democrats and Republicans, but it

really means that if the President is talking about bipartisanship,

he should know that it stops when it gets to this Committee. And

so I hope you would consider that.

One of the examples, of course, is that some people believe that

when you win by one vote and you have a half dozen Democrats

it is bipartisan. It is OK with me because I can be just as political

as anyone else. But it would seem to me when you go into an

agreement with the Caribbean countries and then find out you

have to renege on that agreement in order to pick up a vote that

we should expect the Administration would resent this type of behavior no matter which party is the offending party.

It is my understanding that you have taken the position that this

measure would have little commercial impact on the Caribbean

countries. Well, this is not the position taken by the Caribbean

countries, and I do hope that at some time and point we might be

able to review what the Congress has done that does violence to

what you are supposed to be doing representing all of us.

I would like to yield to Mr. Levin to get involved with more substantive issues. Thank you.

[The opening statement of Mr. Rangel follows:]

Opening Statement of the Hon. Charles B. Rangel, a Representative in

Congress from the State of New York

I want to join with Chairman Thomas in congratulating our trade representative

on his international efforts on behalf of our country. I also would want to point out

that this Committee takes pride in the unity that we in the past have shown in

terms of our trade policy, as the Congress tries to show unity in terms of foreign

policy. And I think that the trade bill with China as well as the Caribbean Basin

Initiative and the opportunities we have made as we continue to expand in Africa

throws away our party labels and makes us proud to provide the leadership that

is expected of us by the House Members.

Having said that, it is apparent that on many tax policies—especially as they relate to FSC and, in certain areas, how we treat labor and the environment and investment for U.S. funds—you know as I do that there are basic policy differences

between our parties politically.

I want to thank you for the time that you have spent with me and Democrats,

but I also want to ask you publically to consider whether or not you can attempt

to use your good offices and those of the Administration to try break down the political divisions that both sides of the aisle of this committee find ourselves so easily

locked into. And, it is going to take a little more than the shuttle that you so effecVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
9

tively provide between Democrats and Republicans. What it really means is that,

if the President is talking about bipartisanship, he should know that it stops when

it gets to this Committee. And I hope that you would consider that.

One of the examples of that is when some people believe that, when you win by

one vote and you have a half a dozen Democrats, it is bipartisan. It is o.k. with me

because I can be just a political as anyone else. But it would seem to me that when

you go into an agreement with the Caribbean countries and then find out that you

have to renege on that agreement in order to pick up a vote, that we should expect

that the Administration would resent this type of behavior, no matter which party

is the offending party.

It is my understanding that you have taken the position that this measure would

have little commercial impact on the Caribbean countries. Well, this is not the position taken by the Caribbean countries. And I do hope that, at some point in time,

we might be able to review what the Congress has done that does violence to what

the U.S. is suppose to do representing all of us.

you, Mr. Rangel, but thank you for yielding and for your comments

Mr. LEVIN. Well, I am not sure I can be more substantive than

f in truly the substance of trade. It was necessary to launch a new

round at Doha, although there were some serious omissions and

many vaguenesses.

We welcome you here today, Ambassador. Your role was clearly

important in the launch of Doha and I commend you for that. Doha

followed several years of hard work, and I emphasize that, and

progress, and I emphasize that also, on the trade front. Cambodia,

CBI, Africa, Vietnam, China permanent normal trade relations

(PNTR), U.S.-Jordan FTA.

It is important to note those efforts for two reasons. One, and

very importantly, they were developed in a broad bipartisan manner, and that is the only way we can move ahead productively on

international trade. That is why I respectfully suggest that it is

counterproductive to indicate, as you do in your testimony, that the

thrust for trade liberalization had been lost before 2001 or that it

was necessary to restore American leadership.

I don’t believe that leadership had been lost. Indeed, there have

been new energy in 1999 and 2000 on important issues of trade.

Negotiations in 1999 and 2000 grappled with the integration

among other issues of core labor and environmental standards into

trade agreements. The list of successful initiatives is impressive:

The textile and apparel agreement with Cambodia, which included

positive incentives for the enforcement of labor standards—and our

staff was there and reported back that it is working; the efficacy

of the legislation which expanded trade with Africa and the Caribbean countries while strengthening the labor provisions and building upon complement charities in the textile and apparel industry

of our country; the China PNTR legislation which we worked on for

a year, and that was the key, I think, to moving the issue within

the WTO, which recognized the importance of the trade remedy

laws and which created a commission to monitor the rule of law,

human rights and labor rights in China. And the U.S.-Jordan

agreement, which included provisions on core labor and environmental standards enforceable in the same way as any other provision in the agreement.

As I see it, the Fast Track bill that passed the House was a serious step backward from this progress, as was the exchange of letVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00013 Fmt 6633 Sfmt 6602 E:\HR\OC\A584.XXX pfrm12 PsN: A584
10

ters relating to the Jordan agreement, and also the failure to even

raise the labor standards issue prior to Doha and at Doha through

a working group on labor. The Rangel substitute that garnered 161

votes would have sustained the momentum in these areas as well

as addressing, and I emphasize this, other key issues. I expect that

its equivalent will be introduced within the next week or so in the

U.S. Senate, and unlike the procedure that was adopted here that

did not even allow us to introduce the bill on the Floor as a substitute for full debate, there will be ample time to debate that and

other proposals in the Senate.

On Monday, this last Monday, Representatives Bentsen and

Eshoo along with Mr. Rangel, Mr. Matsui, myself, and others introduced a bill to renew trade adjustment assistance (TAA) and to improve it. We need those reforms, including a strong health provision. However, improved TAA should not be used as a rationale to

pass a flawed Fast Track bill. We need to get right both trade policy and a safety net for those who are hurt by the impact of international trade. We need to shave trade policies to both maximize

its benefits, and there are many, and minimize its detriments, and

there surely are some, and not only help those who lose out.

There are some, and I understand and respect their opinion

though I very much disagree with it, who do not believe that we

need to shave trade policy in this regard. In a sense, that is the

basic issue confronting this issue on steel. One approach is to simply let the market run its course no matter what the consequences

and rely only on a safety net to catch all those who suffer the consequences. My own judgment is that such an approach would be

bad for the Nation, bad for our Nation’s economy and bad for the

many adversely affected companies, workers and communities.

We have—I am almost done, Mr. Chairman—we have a much

better alternative. With a sensible, balanced set of policies, with

broad perspectives and open minds rather than narrow thinking,

we can do better in this case and in general in our approach to

trade issues on a truly bipartisan basis.

I appreciate that you journeyed over here to talk to Mr. Rangel

and to me over the recess. I encourage you to continue to work with

us on the specifics on each of the issues as they emerge. I also urge

the Administration to exercise its leadership in the legislative process to build a truly bipartisan consensus on trade policy. It will by

no means be easy, but if we confront the tough issue head on, real

progress can be made. Thank you.

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

Opening Statement of the Hon. Sander M. Levin, a Representative in

Congress from the State of Michigan

It was necessary to launch a new Round at Doha although there were some serious omissions and many vaguenesses. We welcome you here today, Ambassador—

your role was clearly important in the launch at Doha, and I commend you for that.

Doha followed several years of hard work and progress on the trade front: Cambodia; CBI; Africa; Vietnam; China PNTR; U.S.-Jordan FTA. It is important to note

these efforts for two reasons. One, and very importantly, they were developed in a

broadly bi-partisan manner—and that is the only way we can move ahead productively on international trade. That is why I respectfully suggest that it is counterproductive to indicate as you do in your testimony that the ‘‘thrust for trade liberalization had been lost’’ before 2001 . . . or, ‘‘that it was necessary to restore American

leadership.’’ I do not believe that leadership had been lost.

11

And two, indeed, there had been new energy in 1999 and 2000 on important

issues of trade. The negotiations in 1999 and 2000 grappled with the integration—

among other issues—of core labor and environmental standards into trade agreements.

The list of successful initiatives is impressive:

• the textiles and apparel agreement with Cambodia, which included positive incentives for the enforcement of labor standards. Our staff was there and reported back it is working;

• the Africa-CBI legislation which expanded trade with Africa and the Caribbean

countries, while strengthening the labor provisions and building upon

complementarities with the textile and apparel industry of our country;

• the China PNTR legislation—which we worked on for a year and was the key

in moving the issue within the WTO—recognized the importance of the trade

remedy laws and created a Commission to monitor labor rights in China; and

• the U.S.-Jordan agreement, which included provisions on core labor and environmental standards enforceable in the same way as any other provision in the

agreement.

The Fast Track bill that passed the House was a serious step backward from this

progress, as was the exchange of letters relating to the Jordan agreement and also

the failure to even raise the labor standards issue prior to Doha, and at Doha, the

working group on labor.

The Rangel substitute that garnered 161 votes would have sustained the momentum in these areas, as well as addressing other key issues. I expect that its equivalent will be introduced within the next week or so in the U.S. Senate. Unlike the

procedure that was adopted here, that did not even allow us to introduce the bill

on the floor as a substitute with full debate, there will be ample time to debate that

and other proposals in the Senate.

On Monday, Reps. Bentsen and Eshoo, along with Mr. Rangel, Mr. Matsui, myself

and others introduced a bill to renew Trade Adjustment Assistance and improve it.

We need those reforms, including a strong health provision. However, improved

TAA should not be used as a rationale to pass a flawed fast track bill. We need to

get right both trade policy and a safety net for those who are hurt by the impact

of international trade. We need to shape trade policy to both maximize its benefits—

and there are many—and minimize its detriments—and there clearly are some—and

not only help those who lose out.

There are some, and I understand and respect their opinion though I very much

disagree with it, who do not believe that we need to shape trade policy in this regard. In a sense, that is the basic issue confronting this country on steel. One approach is to simply let the market run its course, no matter what the consequences,

and rely only on a safety net to catch all those who suffer the consequences. My

own judgment is that such an approach would be bad for the nation, bad for our

nation’s economy and bad for the many adversely affected companies, workers and

communities.

We have a much better alternative. With a sensible, balanced set of policies, with

broadened perspectives and open minds rather than narrow thinking, we can do better—in this case and in general in our approach to trade issues, on a truly bi-partisan basis.

I appreciate that you journeyed over here to talk to Mr. Rangel and to me over

the recess. I encourage you to continue to work with us on the specifics of each of

the issues as they emerge. I also urge the Administration to exercise its leadership

in the legislative process to rebuild a truly bi-partisan consensus on trade policy.

It will by no means be easy, but I think that if we confront the tough issues headon, real progress can be made.

Opening Statement of the Hon. Jim Ramstad, a Representative in Congress

from the State of Minnesota

f Mr. Chairman, thank you for calling this important hearing on the President’s

trade agenda for opening foreign markets for American products.

In this difficult and challenging time, it is absolutely critical to job creation and

our economic security to expand trade and market America’s goods and services to

the world’s consumers.

12

The House took an important step forward in December when it passed Trade

Promotion Authority for the President. I hope the Senate will act soon on this critical tool for American job creation.

Over 25% of the growth in our national economy over the last decade is tied directly to international trade. Exports from my home state of Minnesota have increased over $6 billion in the last decade. Over 270,000 jobs in Minnesota manufacturing exist because of trade, and trade-related jobs pay 13 to 18% more than other

jobs.

The U.S. is rapidly falling behind in our efforts to sell our products abroad. We

are a party to just 3 of the nearly 130 free trade agreements currently in force

around the world. And while our competitors continue to negotiate free trade agreements with the rest of the world, the U.S. remains outside the process because of

a lack of Trade Promotion Authority for our President.

I appreciate Ambassador Zoellick’s testimony today concerning the trade challenges and opportunities ahead. I admire his excellent leadership of USTR, which

has already led to a successful WTO Ministerial Meeting in Doha, progress on laying the groundwork for a Free Trade Area of the Americas, and successful free trade

agreement negotiations with our close trading partners.

I look forward to working with the Administration and my colleagues on a trade

agenda that will create high-quality jobs and open markets for American businesses

and workers.

Thank you, Mr. Chairman.

Chairman T

Mr. Ambassador, welcome. Through no preplanning or collusion

HOMAS. Thank you very much.

f in any way, I understand this is the first anniversary of your

swearing in as Ambassador, so I take the opportunity to welcome

you on your first anniversary. Thank you for appearing before us

again. Any written statement you have will be made a part of the

record, and you address us in any way you see fit.

STATEMENT OF THE HON. ROBERT B. ZOELLICK, UNITED

STATES TRADE REPRESENTATIVE

Mr. ZOELLICK. Thank you, Chairman and Mr. Rangel and Chairman Crane and Mr. Levin, for both informal and formal opportunities to be with you. This Committee’s work has been absolutely crucial in allowing us to regain momentum on trade to open markets

for America’s farmers, ranchers, workers and families. And I want

to thank to start off, Chairman, in particular your role with Trade

Promotional Authority and also the attention you are devoting to

the FSC issue because it has been critical for us.

And I want to thank Mr. Rangel for—I know the FSC issue is

a difficult one and I appreciate your effort to try to be of assistance

on this and also the role you played in putting together the AGOA,

African Growth and Opportunity Act, bill, along with Mr. Levin

and others, which I think has been a real foundation for our relation with Africa. I am going to be going there next week and I appreciate your help with that.

I also want to thank Mr. Levin for making the trek to Doha with

us. I know it wasn’t easy and it was very important to have you

on the scene. I appreciated it and I appreciate we had some chance

to work together, and I am also pleased that we were able to extend at the end of this year the Cambodia provisions that you referred to and which you contributed much to.

I would like to thank Mr. Tanner and Mr. Jefferson for their

leadership on TPA. Together, I think all of our comments fit on one

13

point and that we have made some headway in the year 2001 but

we have got some more work to do.

There are a number of key components to our strategy. First, we

are building momentum for liberalization and we are doing so on

multiple fronts. We are trying to create a competition in liberalization with the United States as the center of a network because

frankly it will help U.S. leadership and will give us more leverage

to get more things done.

Globally we have the launch at Doha, but I also think we all take

some pride in finally getting China in the WTO after 15 years and

Taiwan after 9 years. I know this took a lot of work before I was

on the scene with PNTR, Mr. Levin, Mr. Matsui, and Ms. Dunn,

in terms of trying to get that piece of legislation through.

And I think now the good news is that the Doha agenda is off

to a pretty quick start. In the past week we have started in Geneva

to get the negotiating framework in place. Regionally we have the

Free Trade Area of the Americas, and here is an incredible opportunity to create the largest free trade area in the world among 34

democracies.

We will start this spring with the market access negotiations,

and later this year after the Brazilian elections, the United States

and Brazil, two of the biggest economic powers, will be the cochairs

to move this forward.

Bilaterally a number of you referred to Jordan and Vietnam, and

we are pleased we got those passed. Those weren’t so easy along

the way and that was an accomplishment of last year.

We are now obviously trying to complete the Chile and Singapore

Free Trade Agreements started by President Clinton. And this is

one, as I mentioned to you, as we move in the final stage it is significantly importance to get the guidance from this Committee on

some of the sensitive provisions.

As I noted in the testimony, we are looking at the possibilities

with you of new free trade agreements. The Caribbean Basin Trade

Partnership Act passed by the Congress encourages us to look at

free trade with Central America, and the President spoke about

our interest in moving forward with that. The AGOA bill talks

about our interest in free trade with Africa, which would be a tremendous breakthrough for that continent and our relations with it.

And frankly we do have some catching up here to do. The European Union (EU) has 29 free trade and customs agreements, 22 of

which they negotiated in the nineties, and they are negotiating 12

more while we have 3. Mexico has 8 free trade agreements with 32

countries. The Japanese are moving ahead and even the Chinese

just coming into the WTO are now pursuing a free trade agreement

with the countries of Southeast Asia. So our movement is none too

soon.

Second, we are enforcing agreements in managing disputes because while we pursue new agreements we recognize we have to actively defend our interests by pursuing and enforcing vigorously

our trade laws, and here I want to be very clear in assuring each

and every one of you we will use all the tools at our disposal to

fight unfair practices.

We are also trying to manage disputes in ways that solve problems and achieve results. I know a lot of you have an interest in

14

softwood lumber. Mr. Collins has talked to me about that. And

then we have the critical challenge of the follow-through on China

and Taiwan’s accession because particularly in the case of China,

we recognize this is a transformation of a country of 1.3 billion people and it is not going to be easy and we need to work together

on it.

Third, we are trying to broaden the circle of trade opportunity,

and here in particular there is an opportunity with developing nations. This is vital to build support for the global trading system,

but it is also vital in these countries to support reform and rule of

law in dealing with fundamental problems of poverty. Developing

nations became key to putting together the coalition that was successful at Doha, and they will be key in anything else we do in the

WTO. Indeed, all you have to do is look at the newspapers and you

read about the reach of terrorism these days, you have a sense of

how if this is going to be a long-term war and President Bush has

clearly made clear that that is going to be a challenge for this generation, then we are going to have to address some of the other

components.

Spig Ruginski made a comment over the weekend that I thought

was powerful. He said, look, it is quite clear that poverty is not the

root cause of terrorism, but it does provide fertile fields. And so, in

that way, economic development and growth is a key component.

The United States, I am proud to say, has been leading the efforts

to try to help poor nations obtain the tools to participate in the

global economy. Last year the United States spent $555 million on

capacity building because for a lot of these countries, take the African and Caribbean which I work with Mr. Rangel, they don’t have

people who can attend the negotiations and they certainly don’t

have the ability to follow through. So this is an element that I hope

we can work on together.

We also believe in renewing and expanding the preferential

agreements. This Committee took an important step in terms of the

Andean Trade Preference Act, but I think it is highly unfortunate

that it did expire after 10 years. And those four Andean countries

are hurting right now at the same time they are trying to deal with

the scourge of narcotics.

The Committee also had some efforts to try to strengthen AGOA,

which we support, and I hope we can over the course of the coming

months. I also don’t want to lose sight of the generalized system

of preferences, something that the Congress put in place about 26

years ago and which also expired last year, and that deals with 123

developing countries and 19 territories. That expired September 30

and so those countries now do not have the benefits.

There is also the possibility of bringing in new members. One of

the ones that is most exciting is Russia. Our enemy during the

Cold War now is going through the process of actually joining the

WTO, adhering to the rules, and I hope to make progress on this

this year.

Fourth, we are reaching out to key stakeholders. This in part involves a lot of listening, building networks, educating and acting.

We are pushing on all fronts for America’s farmers and ranchers,

working with this Committee, but also with the Ag Committee. We

are seeking to help industries and workers become competitive and

15

adjust to change. This is an area that I know is close to the heart

for a number of you in the steel industry, Mr. English, Mr. Houghton, and Mr. Cardin, who I have talked to about this.

This is the Administration that launched the 201, and we are

now in the final stages of that process. But I also want to point out

that we have used these safeguards in other areas like wheat gluten and lamb, working out solutions that I think are important.

Textiles is obviously a very sensitive area. This is another one

where we are committed to the phaseout of the Apparel and Textile

Agreement that will end quotas in 2005, but it has not been easy

in this industry, and I have worked with Mr. Collins and others in

terms of that adjustment.

A number of you have mentioned trade adjustment assistance,

and Mr. Levin stressed this. I know the importance of this to many

of your Members, and I just want to make clear, I am in full and

emphatic agreement about the need to have good trade adjustment

assistance programs if we are going to have a successful trade policy. And as my statement points to, and I hope my colleagues at

the U.S. Department of Labor and the White House have also emphasized, I think there is a lot of common ground here that we can

move forward on. I talked about this in the Senate yesterday, and

I hope we will be able to have a product before long that we can

all be proud of.

Also, part of reaching out is meeting with different groups, business, environment, labor leaders on a range of these issues. I was

pleased, given the unusual security circumstances at Doha, that we

were able to set up webcasts for the first time so we are able to

draw in a lot of our advisers who couldn’t make it to the scene.

I know a number of you, Mr. Doggett and others, have emphasized the North American Free Trade Agreement (NAFTA) Chapter

11. This issue came up in the course of all the Trade Promotion Authority bills. I just want you to know, I am in the process of meeting with all sides on this, the business community, the non-governmental organizations (NGOs), and others, to try to understand and

sort through what we know is a tough issue. But reaching out also

involves building the case for trade and correcting some misinformation. And here I think the American public suffer because

they don’t know what the benefits of cutting tariffs do.

For example, drawing on work of our predecessors in the Clinton

Administration, we pointed out the very simple fact that the benefits of NAFTA in the Uruguay Round amount to about $1,300 to

$2,000 a year for the average family of four in America. That is a

hefty tax cut and it comes from growth and cutting tariffs. The

University of Michigan has done a study, just a preliminary look

at cutting just the tariffs on industrial goods and agriculture as

part of a Doha agenda, and their estimate, admittedly a rough cut,

is $2,500 a year for a family of four in America.

If you look at particular sectors, Mr. Brady has an agriculture

sector, one in three acres in America is planted for export; 25 percent of gross cash farm receipts are for export. So America’s farmers depend on a healthy trading system.

Fifth and finally, Chairman, as you know, we have tried to work

hard to connect our trade system to our values. Free trade is about

freedom, and it is about opportunity and rule of law and openness,

16

but we also have issues that we need to deal with; for example, the

crisis in public health in parts of the world, and I was very pleased

and proud working with a number of you that in the Doha meeting

we were able to come up with a statement that I felt went a long

way toward reconciling that there are flexibilities in intellectual

property that we need to use to deal with problems like HIV/AIDS,

malaria, and tuberculosis in the countries of Africa and elsewhere

because if these countries are plagued by epidemics there will be

no economic growth and free trade won’t be sufficient for them.

At the same time, we have to preserve intellectual property because the advances in this field are enormous in terms of their opportunity, including, as I have talked with some chief executive officers recently, the prospect of a vaccine for AIDS and what an extraordinary development that will be, but it won’t happen unless

intellectual property is protected.

There are other win-win ideas. I was pleased that World Wildlife

Fund and some other environmental groups worked with us on fish

subsidies at Doha. We are also trying to work with the small business community much better in our country and others and draw

them into the trade system.

So to sum up, we have a very full trade agenda ahead. We are

looking forward to completing Trade Promotion Authority as soon

as possible so we can move forward on all fronts to tear down barriers, open markets globally, regionally and, very important for me,

to have a framework of guidance from the Congress of your objectives and have the procedures. We are moving ahead on many crucial and, I know, sensitive issues. The Foreign Sales Corp., steel,

softwood lumber, high fructose corn syrup, and in Geneva among

our other goals we are going to push for a home run on agriculture,

which is key to our agenda for trade. Thank you, Mr. Chairman.

[The prepared statement of Ambassador Zoellick follows:]

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

Representative

Mr. Chairman, Representative Rangel, and Members of the Committee:

I would like to open by thanking each of you for the time, attention, and support

that you and your staffs have given to me and my colleagues.

Last year the Committee accomplished much in a number of areas, so we are

most appreciative of the energy you have devoted and the efforts made to place

trade policy on America’s priority agenda. Together, we have made a good start.

At the start of last year, the global trading system was under stress. The nations

of the world had failed to launch new global trade negotiations in Seattle in 1999,

the effort to bring China and Taiwan into the World Trade Organization had

stalled, and Congress had twice failed to grant the President the trade negotiating

authority that had lapsed in 1994. Numerous contentious trade disputes were piling

up and the benefits of trade had been lost in the public debate. The thrust for trade

liberalization had lost energy.

Against this backdrop, and with your help, President Bush pressed an activist

strategy to regain momentum on trade. As he explained: ‘‘Our goal is to ignite a

new era of global economic growth through a world trading system that is dramatically more open and more free.’’ By doing so, we can improve the job opportunities,

incomes, productivity, purchasing choices, and family budgets of America’s workers,

farmers, ranchers, small businesspersons, and entrepreneurs.

The President has promoted the agenda for trade liberalization on multiple fronts:

globally, regionally, and with individual nations. This strategy creates a competition

in liberalization with the United States as the central driving force. It enhances

America’s leadership by strengthening our economic ties, leverage, promotion of

fresh approaches, and influence around the world.

17

Seizing the Global Initiative

A. Launching New Global Trade Negotiations

In 2001, the United States played a leading role in the launch of new global trade

negotiations at Doha in November, overcoming the obstacles that plagued the prior

effort in Seattle. We benefited greatly from the consultations and guidance we received in advance of the Doha meeting. I also deeply appreciated the personal support I received from my conversations with Chairman Thomas while we were in

Doha and from Sandy Levin’s extra effort to join us and discuss the fluid events

on the scene. A Ways and Means session arranged by Chairman Thomas and Representative Rangel provided a useful opportunity for me to brief Committee Members on the results shortly after we returned from Doha.

The new WTO negotiating mandate lays the groundwork for an ambitious trade

liberalization agenda in key sectors, especially agriculture, manufacturing, and services, targeted to be completed by 2005.

In agriculture, to achieve a program of fundamental reform, we committed to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support.

In manufacturing, we secured a negotiating mandate to reduce or eliminate tariff

and non-tariff barriers on industrial products, ensuring that the United States can

pursue a variety of tariff liberalization initiatives, such as landmark agreements

like the Information Technology Agreement (ITA). The mandate is comprehensive— no sectors or products are excluded from the outset for any WTO member.

And in services, the Doha Declaration sets a rigorous timetable for the pursuit

of open markets in a number of key sectors for the United States, including telecommunications, financial services, audio-visual, express delivery, and other distribution services.

Many U.S. groups assisted us in the preparation of these negotiating mandates,

and we are delighted by their strong statements of support after Doha. They have

emphasized the interconnection of this work with economic recovery in America and

around the globe.

At Doha, we also made significant progress in a number of other areas, some of

which I will discuss later in this statement:

• WTO members adopted a political declaration that highlights provisions in the

TRIPs agreement that provide Members with the flexibility to address public

health emergencies, such as epidemics of HIV/AIDS, tuberculosis and malaria. • The Doha Declaration includes a mandate to launch negotiations aimed at

eliminating environmentally harmful fish subsidies and increasing market access for environmental goods and services. The agreement also includes an important new mandate to enhance the mutual supportiveness of multilateral environmental agreements (MEAs) and the WTO rules by strengthening the relationship between the two, institutionally and substantively.

• In the area of e-commerce, the declaration ensures that the WTO will remain

active in this important and dynamic area through the continuation of its work

program, while extending the ongoing moratorium on imposing customs duties

on electronic transmissions. This work program will provide an opportunity for

the United States to continue its efforts to press other countries to avoid unnecessary measures that would impede the growth of e-commerce.

• The review of WTO rules explicitly states that any negotiation of trade remedy

laws will preserve the basic concepts, principles, and effectiveness of existing

agreements, as well as their instruments and objectives, enabling us to pursue

an offensive agenda against the increasing use of these laws against U.S. exporters while also addressing the underlying trade-distorting practices.

• The declaration includes an agreement providing for enhanced transparency in

WTO Member government procurement procedures. This program should lead

to improved disciplines in government purchases, making an important contribution to combating corruption.

• The declaration states a commitment to enhance cooperation between the WTO

and the International Labor Organization.

To help maintain the momentum after the Doha agreement, the WTO economies

agreed that Mexico will chair the WTO ministerial in 2003. As the incoming chair,

Mexico can assist in promoting the pace of the new negotiations.

One of the important WTO entities in the months ahead will be the Trade Negotiations Committee. That committee took a number of useful steps at its meeting

on February 1. It appointed the WTO Director-General to chair the committee’s

work (in an ex-officio capacity) until the January 2005 deadline set for the compleVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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tion of the negotiations. This guarantees the committee will receive the necessary

attention at the WTO’s highest level. And the TNC adopted a structure for the negotiations that will help the negotiating process move forward in an orderly fashion.

In 2002, we will press forward with these negotiations, advancing new and detailed proposals to open further the world’s agriculture, services, and manufacturing

markets. We will also be advancing our affirmative agenda for reforming WTO trade

rules and the dispute settlement system, and building on the opportunities presented by the new environmental negotiating mandate.

The United States will place special emphasis on our continued effort to insure

the involvement of least developed nations, in order to assist them secure the benefits of trade and to keep all WTO members invested in the process. We will work

with the WTO and others to provide the tools and training needed to help these nations participate more actively in the global trading system. In particular, developed

nations, multilateral development banks, and other international institutions—such

as UNCTAD and the World Intellectual Property Organization—should supply technical assistance to build the capacity of poorer countries to engage effectively in negotiations and the subsequent implementation of trade agreements. By providing

such support, we will be helping these nations to integrate with the global economy—a key part of the strategy for economic development—while also strengthening the rules-based trading system.

B. Completing the Accession of China and Taiwan to the WTO

Last year, the United States also played a key role in breaking through logjams

to complete the historic accessions of China (after a 15-year effort) and Taiwan

(after a 9-year effort) to the WTO. This achievement built on the work of four U.S.

Administrations, particularly that of Charlene Barshefsky, from whom I inherited

an excellent bilateral agreement. Throughout 2001, we solved the multilateral dimension concerning agriculture, trading rights, distribution, and insurance, while

navigating the extreme political sensitivities to enable China and Taiwan to join the

WTO within 24 hours of one another.

These agreements integrate two of the world’s largest economies into the rules of

the WTO trading system and provide U.S. exporters with expanded access in growing markets ranging from automobiles and telecommunications to agriculture and

chemicals. As a result, the President certified the requirements set by Congress

through the leadership of Chairmen Thomas and Crane and Ranking Members Rangel and Levin and this Committee in the passage of the legislation extending Permanent Normal Trade Relations to China.

In 2002, the Bush Administration will work closely with other countries, as well

as a private sector network we are interconnecting, to monitor China’s and Taiwan’s

compliance. The backing we have received from the Congress—in terms of resources

and attention—has been and will remain fundamental to the achievement of our

mission. We will work with our businesses and with China and Taiwan to address

problems and take action if necessary.

C. Advancing Russia’s Accession to the WTO

The United States has begun a new era in its relations with Russia. Whether in

the realms of security, foreign policy, or economics, President Bush has emphasized

the need to move beyond Cold War strictures and stereotypes. As the President said

in November during his meeting with President Putin, ‘‘we’re working together to

break the old ties, to establish a new spirit of cooperation and trust so that we can

work together to make the world more peaceful.’’

To contribute to this vision for the 21st century, in 2002 we will continue our intensified effort to assist Russia’s preparations to join the WTO. President Putin has

made WTO membership and integration into the global trading system a top priority; we will support Russia as it promotes reforms, establishes the rule of law in

the economy, and adheres to WTO commitments for a more open economy. This effort needs to include action by the Duma to establish an effective legal infrastructure for a market economy.

It is our expectation that the WTO will prepare a first draft Working Party report

on Russia’s accession in the first quarter of this year. We will work with Minister

Gref—in cooperation with the EU and our other WTO counterparts—to address the

gaps. Throughout this process, we look forward to consulting closely with the Congress and this Committee in particular.

To close out the history books of the Cold War, the President has urged the Congress to finally end the application of Jackson-Vanik to Russia. It has been over a

decade since I worked on the unification of Germany with a fading Soviet Union

that expired in 1991. Furthermore, Russia has been in full compliance with JackVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
19

son-Vanik’s emigration provisions since 1994. My colleagues at the State Department and the NSC are, of course, consulting closely with various groups on the protection of freedom of religion and other human rights in conjunction with this action.

I understand that the first inclination of some might be to keep the JacksonVanik law in reserve as we negotiate Russia’s accession to the WTO. I think this

course would be a mistake, and would work against U.S. commercial and foreign

policy interests. The Russians acknowledge they must abide by the WTO’s rules,

and we and 143 other economies will insist on that course as their WTO negotiations proceed. Yet the Russians are understandably sensitive about Jackson-Vanik,

which places their trade relations with us in a different category. To use JacksonVanik in this way would signal that we still treat Russia as a former foe, not a possible friend. Working closely with the Congress, we will stress the need for Russia

to offer fair market access—for example in agriculture—but we should do so according to the rules to which we maintain Russia should adhere. Congress exercises substantial oversight in these negotiations through existing consultation provisions.

Pressing the Regional Initiative: The Free Trade Area of the Americas

In April 2001, at the Quebec City Summit, the President inaugurated a reinvigorated push for free trade throughout the Americas. A number of Members of the

Committee joined him to express their support and represent important perspectives.

At Quebec City, the leaders of 34 democracies of the Western Hemisphere agreed

to proceed with detailed draft negotiating texts and to complete work no later than

January 2005. Once implemented, the FTAA will be the largest free trade zone in

the world.

The United States and its FTAA partners are working commitedly toward this

goal. By mid-May 2002, we will launch market-access negotiations on agriculture,

industrial goods, services, investment, and government procurement. In October,

trade ministers will meet in Quito to review the revised negotiating texts and to

determine how to move forward. Upon the close of the Quito meeting, the United

States and Brazil will begin a co-chairmanship of the FTAA process, providing an

opportunity for cooperation with a key partner and economic power as the pace of

negotiations accelerates.

Throughout the year ahead, we will also persist in our efforts to make the public

case for NAFTA’s benefits and consider additional ways to deepen integration

throughout the Americas. NAFTA has been a case study in globalization, along a

2,000-mile border, by demonstrating how free trade between developed and developing countries can boost prosperity, economic stability, productive integration, the

development of civil society, and even democracy.

Moving Forward: Bilateral Free Trade Agreements

In 2001, the Congress approved the U.S.-Jordan Free Trade Agreement with

broad support, establishing America’s third free trade zone, and our first with an

Arab country. The Congress also passed the Bilateral Trade Agreement with Vietnam, achieving a principal goal of America’s decade-long agenda to normalize relations with our former foe. Many of you played key roles in the development of these

agreements and then shepherded the final packages successfully.

In 2002, we intend to complete free trade agreements with Chile and Singapore.

Each of these agreements offer new opportunities for U.S. businesses and workers

and will send a message to the world that the United States will press ahead with

those that are committed to open markets—whether in the Western Hemisphere,

across the Pacific, or beyond the Atlantic. As we move these FTA negotiations toward completion in the months ahead, we want to work closely with this Committee

so we can try our best to address your concerns and interests.

In 2002, working with the Congress, we also hope to initiate talks on new bilateral free trade agreements. These agreements can open up a new front for free

trade. They can create models of success that help reformers, break new ground for

liberalization in changing or emerging sectors (e.g. biotech, high tech—including

IPR-related sectors—and services), build friendly coalitions to promote trade objectives in other contexts (e.g. biotech, SPS topics), add to America’s trade leverage

globally, underpin links with other nations, and energize and expand the support

for trade. New trade agreements also present fresh opportunities to find common

ground at home, and with our trading partners, on the nexus among trade, growth,

and improved environmental and working conditions.

Our aim is to achieve free trade agreements with a mix of developed and developing nations in all regions of the world. As the President announced in January,

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and as Congress urged in the Caribbean Basin Trade Partnership Act, we want to

explore a free trade agreement with the countries of Central America. Many Members of Congress have written me to express strong support for an FTA with Australia. I met with Australian Trade Minister Mark Vaile last week to discuss how

best to move forward towards this goal, recognizing the need in particular to work

on agricultural issues. The Africa Growth and Opportunity Act (AGOA) also urges

us to advance the negotiations of FTAs with sub-Saharan Africa.

We are weighing these and other possibilities to extend free trade. We look forward to discussing these matters with the Committee and would benefit from your

thoughts on these or other possible FTAs. It is our hope that we could use such an

agenda to try to achieve the goals in the bills passed by the House and the Finance

Committee.

The Executive-Congressional Partnership: Trade Promotion Authority, the

Andean Trade Preference Act, and the Generalized System of Preferences

The Constitution vests the Congress with the authority ‘‘To regulate Commerce

with foreign Nations.’’ It also extends the powers to the President to conduct relations with other countries. These two grants need to be reconciled effectively.

After 150 years of contentious Congressional trade debates over tariffs, culminating in the disastrous experience of the Smoot-Hawley bill, the Congress tried a

different approach in 1934: The Reciprocal Trade Agreements Act, which created a

new partnership between the Congress and the Executive branch to lower barriers

to trade.

This partnership has been the foundation of America’s economic and trade leadership ever since. In 2001, the Bush Administration honored this rich tradition by

working hand-in-hand with the Congress to open markets; we will build on this relationship in the year ahead. Frequent, substantive consultation is the hallmark of

an effective trade policy. It helps to ensure that the Executive branch and the Congress work together to achieve America’s trade objectives.

A Congressional grant of Trade Promotion Authority would strengthen and guide

the Executive-Congressional partnership, as it creates and formalizes new consultative mechanisms throughout the trade negotiation process. In 2001, we are grateful

that the House of Representatives passed Trade Promotion Authority legislation and

that the Senate Finance Committee gave a strong bipartisan endorsement to a similar bill, 18–3.

We are pressing to open 2002 with the prompt completion of Congressional action

on TPA. We are pleased Majority Leader Daschle has pledged early action. By enacting TPA after a seven-year lapse of authority, Congress can promote America’s

global leadership and give the President the tool he needs to strike the best trade

agreements for America’s farmers, workers, families, and consumers. The revival of

this trade authority—which prior Congresses granted to the previous five Presidents—will also contribute to our economic recovery by enhancing our ability to

open the world’s markets for U.S. exports and lowering the costs of supplies for

American families and businesses.

For all the benefits of trade, I recognize that trade can also lead to adjustment

challenges. For this reason, the Bush Administration strongly supports reauthorization of Trade Adjustment Assistance (TAA) programs, which provide assistance for

workers who lose their jobs because of trade. The Administration wants to work

with Congress to improve the programs to make them more effective.

In particular, the Administration would like to consolidate TAA and NAFTA–

TAA; ensure more rapid processing of petitions and delivery of services; and better

coordinate Federal agencies and local authorities to improve delivery of all Federal

assistance to communities and individuals affected by trade. Our primary objective

is getting people back in jobs as quickly as possible, so we would like to work with

Congress to create better incentives for reemployment. We also want to address concerns over limitations on the ‘‘shift-in-production’’ benefits provided by current programs. And we would like to work with Congress to address other areas that may

not be adequately addressed at present.

We also urge the Congress to reauthorize and expand the Andean Trade Preference Act—a vital program for the four Andean developing country democracies on

the front lines of the fight against narcotics production and trafficking. ATPA was

enacted in 1991, and its expiration after ten years has caused real hardship for

friendly countries with little margin to spare.

Finally, we respectfully hope to press the Congress to reauthorize the expired

Generalized System of Preferences, a 26-year old U.S. program to promote economic

growth in 123 developing nations and 19 territories by providing duty-free treatment for certain exports to the United States. The expiration of GSP access on SepVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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tember 30—shortly after September 11—raises anxieties around the developing

world that the United States is ignoring the conditions that can become breeding

grounds for those whose purpose is destruction, not construction and production.

Working with Developing Nations

A free and open trading system is critical for the developing world. As President

Bush has pointed out, ‘‘Open trade fuels the engines of economic growth that creates

new jobs and new income. It applies the power of markets to the needs of the poor.

It spurs the process of economic and legal reform. It helps dismantle protectionist

bureaucracies that stifle incentive and invite corruption. And open trade reinforces

the habits of liberty that sustain democracy over the long term.’’ Last year, we began the important implementation of the far-sighted African

Growth and Opportunity Act, which Congress enacted in May 2000. As you know,

AGOA extends duty-free and quota-free access to the U.S. market for nearly all

goods produced in the 35 eligible beneficiary nations of sub-Saharan Africa. In 2001,

the United States lifted all duties on eligible apparel products exported from 12

AGOA nations to the United States. The Administration is fully committed to

AGOA’s use and expansion: It opens the door for African nations to enter the trading system effectively, increases opportunities for U.S. exports and businesses, supports government reforms and transparency, and widens the recognition of the benefits of trade in the United States. Indeed, we support prompt Congressional action

on legislation that will clarify and strengthen current provisions in the African

Growth and Opportunity Act. Next week, I am traveling to Kenya, South Africa, and

Botswana to listen and learn more about Africa’s needs, while conveying America’s

support for Africa’s economic and political reforms and our interest in greater trade.

Through AGOA and other preferential trading ties, such as the Caribbean Basin

Trade Partnership Act, we will support efforts to build the capacity of developing

countries to take part in trade negotiations, implement complex trade agreements,

and use trade as an engine of economic growth. The United States devoted more

than $555 million in trade-related capacity-building assistance to developing countries during fiscal 2001—more than any other single country. We will continue to

work with other agencies of the U.S. Government, such as AID, and with multilateral and regional institutions, such as the World Bank, the Inter-American Development Bank, the African Development Bank, and the WTO to help developing nations to board the ship of trade so as to reach the shore of prosperity, opportunity,

jobs, better health, the rule of law, and political reform. Congress’ advice, encouragement, and support is vital to this endeavor.

Monitoring and Enforcing Trade Agreements

For the United States to maintain an effective trade policy and an open international trading system, our citizens must have confidence that trade is fair and

works for the good of our people. That means ensuring that other countries live up

to their obligations under the trade agreements they sign. Over the past year, we

have aggressively monitored and enforced our agreements, reaching settlements

benefiting American producers, exporters, and consumers in sectors such as entertainment (motion picture and television programming), high-technology (software

and telecommunications) and agriculture (bananas, soybeans, lamb, rice, livestock,

dried beans, stone fruit, fresh fruits and vegetables, processed foods, citrus, stuffed

molasses, and wheat gluten).

In 2002, we will seek to resolve favorably other trade disputes in a way that best

serves America’s interests. Among the most prominent cases are: softwood lumber

with Canada; beef with the European Union; the Foreign Sales Corporation WTO

case brought by the EU; and sweeteners with Mexico. To avoid large trade retaliation against U.S. exporters and the risks of spiraling conflict, we and other departments will need in particular to consult and work with the Congress closely to determine an approach to the recent FSC decision.

We plan a special effort around the world to address technology regulations (e.g.,

biotech) and science and health measures that impede farm exports and the productive development of agriculture.

Trade Laws Against Unfair Practices

Given America’s relative openness, we can only maintain domestic support for

trade if we retain strong, effective laws against unfair practices. This Administration has used and backed the use of these laws.

In Doha, working closely with the Commerce Department, we stressed and

pressed this point vigorously. We then advanced an offensive agenda in this area.

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tries, to block U.S. exports. During 1995–2000, there were 81 investigations by 17

countries of U.S. exporters. Chemical, steel, and other metal producers are the most

frequently targeted U.S. industries, although U.S. farm products are increasingly

the victims. At present, there are over 60 orders against American companies in effect. The new negotiations launched at Doha will help us address significant shortcomings in foreign anti-dumping and countervailing duty procedures by improving

transparency and due process.

Finally, the Doha Declaration makes clear that trade remedy laws are essential

tools and should not be undermined. We won agreement that the new negotiations

will preserve the concepts, principles, and effectiveness of the international provisions on which we rely, as well as the instruments we use. Moreover, the United

States insisted that any discussion of trade remedy laws must also address the underlying subsidy and dumping practices that give rise to the need for trade remedies

in the first place.

The Importance of Safeguards

Maintaining public support for open trade means providing assistance to those industries that find it difficult to adjust promptly to the rapid changes unleashed by

technology, trade, and other forces. We will continue our commitment to the effective and creative use of statutory safeguards, consistent with WTO rules, to assist

American producers. Used properly, these safeguards—for example, Section 201 of

the Trade Act of 1974—can give producers a vital breathing space while they restructure and regain competitiveness.

The Bush Administration has pursued innovative approaches with safeguards.

For example, while ending the safeguards for the U.S. wheat gluten and lamb industries last year, we also provided them with additional financial assistance over

a period of 2–3 years. The effect has been to assist them in following through on

their transitions to competitiveness, while also helping to insulate our exporters

from trade retaliation. The European Union agreed to lift its duties on U.S. corn

gluten imports as part of our action on wheat gluten.

In June, the Administration requested a safeguards investigation by the U.S.

International Trade Commission into whether increased imports were causing serious injury to the U.S. steel industry. Many of you urged this and the prior Administration to take this step, and we were pleased to work with you to do so after your

unsuccessful efforts in the 1990s. The President’s request was one part of a larger

U.S. global steel initiative that also included the launch of new negotiations with

our trading partners to eliminate inefficient excess capacity in the world’s steel industry and to enhance international discipline over subsidies and other measures

that distort markets.

On December 19, the International Trade Commission issued a report containing

its recommendations. A plurality of the commissioners recommended various remedies for many of the steel product categories. The Administration has been reviewing the ITC’s recommendations, as well as the views of a diverse collection of steel

companies, labor unions, steel consumers, port authorities, and exporters. We recently received supplementary information from the ITC pursuant to a request I

made last month on behalf of the Administration. We of course welcome further

input from this Committee and the Congress. Based on this information, I expect

the President will decide on a course of action in coming weeks.

Aligning Trade with America’s Values

America’s trade agenda needs to be aligned securely with the values of our society. Trade promotes freedom by supporting the development of the private sector,

encouraging the rule of law, spurring economic liberty, and increasing freedom of

choice.

The trade system also needs to be alert to other challenges. Poor countries cannot

succeed with economic reform and growth if they are eviscerated by pandemics.

From its first days, this Administration recognized this economic, health, and social

reality. We stressed that the international WTO Agreement on intellectual property

(the TRIPs accord) contains flexibilities for developing nations to obtain access to

critical medicines to help address public health emergencies, such as HIV/AIDS, tuberculosis, and malaria. The Administration played a key coalition-building role—

working closely with African nations and Brazil, as well as with the pharmaceutical

companies—to develop a special political declaration at Doha that highlights these

flexibilities.

Flexibility on intellectual property, and lower-priced medicines, must be part of

a larger global response to health pandemics, involving education, prevention, care,

training, and treatment. The United States is the largest bilateral donor of funds

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for HIV/AIDS, tuberculosis, and malaria assistance, providing over $1 billion per

year on related research, much of which helps to address developing country problems. (This represents nearly 50 percent of all international HIV/AIDS funding.)

The United States was the first contributor, and remains the largest, at $500 million, toward the international ‘‘Global Fund to Fight AIDS, TB and Malaria,’’ which

will allocate its first grants in April.

We are also stressing that it would be a tragedy and health setback if the promotion of the flexibilities within the TRIPs accord degraded into an assault on intellectual property. Effective protection of intellectual property is critical for developing

nations, because we need to find and develop cures for diseases that ravage their

societies. Similarly, biotechnology holds out tremendous potential for the developing

world: It can increase food security and food production through higher yields and

the reduction of fertilizer and insecticide inputs. New discoveries will add vitamins

to foods, and counter malnutrition and disease. Furthermore, the local protection of

intellectual property rights establishes the foundation for an attractive investment

climate for industries of the future. Indeed, as developing countries have implemented the intellectual property protections in TRIPs, they have begun to benefit

from increased technology transfer and investment—two key factors in long-term

economic growth.

There are other areas where we are working to ensure our trade policies are supportive of related meritorious purposes. USTR has worked closely with Members of

Congress on legislation that would support international efforts to stop trade in

‘‘conflict diamonds’’ (diamonds traded by rebel movements to finance conflict aimed

at undermining elected governments). The bill approved by the U.S. House of Representatives in late November achieves this objective consistent with our international obligations. We will continue to work with other agencies and the Senate

sponsors of the legislation to resolve any remaining issues and to help bring the

Kimberley Process (the international negotiations aimed at preventing trade in conflict diamonds) to a successful conclusion.

A Cleaner Environment and Better Working Conditions

Free trade promotes free markets, economic growth, and higher incomes. And as

countries grow wealthier their citizens demand higher labor and environmental

standards. Furthermore, governments have more resources and incentives to promote and enforce such standards.

In 2001, we charted progress on incorporating labor and environmental concerns

into U.S. trade policy. The U.S.-Jordan Free Trade Agreement is the first U.S. free

trade accord to include enforceable environmental and labor obligations in the body

of the agreement. The Administration also affirmed an executive order, and its implementing guidelines, for conducting environmental reviews of trade agreements.

As part of this policy, USTR is conducting environmental reviews of the U.S.-Chile

and U.S.-Singapore free trade agreements, the Free Trade Area of the Americas,

and the WTO’s new negotiating agenda.

The House and Senate Trade Promotion Authority bills contain provisions that

will incorporate labor and environmental concerns into U.S. trade negotiations. We

are drawing on this guidance—and would welcome additional insights—as we are pursuing these topics in our current FTA negotiations. Similarly, I am conducting

discussions with NGOs and the business community to ascertain how we can address concerns posed about investment provisions involving private action. Working

with our NAFTA partners last July, we issued additional binding interpretations for

NAFTA panels that define more precisely the bases for their reviews.

As I noted earlier, the United States played a leading role in forging the compromise to incorporate environmental concerns into the new global trade negotiations. I have already discussed with numerous countries the critical importance of

proceeding creatively and positively on this Doha agenda, because I believe it offers

significant opportunities. We can take practical steps that show that good environmental policies and sound economics can be mutually supportive. In addition, we

should create a healthy ‘‘network’’ between multilateral environmental agreements

(MEAs) and the WTO, enhancing institutional cooperation and fostering compatible,

supportive regimes. If we succeed, this precedent may be helpful in interconnecting

the WTO with other specialized organizations, such as the ILO on labor policies and

the WHO on health issues.

The Bush Administration has a sound track record of using our trade preference

programs, and our trade negotiations, to improve working conditions in the context

of trade liberalization. In May, the Guatemalan Congress enacted a significant package of reforms to the country’s labor law following a U.S. review of the country’ s

labor practices conducted under the Generalized System of Preferences program. In

December, the United States and Cambodia extended our Bilateral Textile AgreeVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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ment, including an increase in the quota for textile exports from Cambodia in recognition of Cambodia’s progress in reforming labor conditions in factories over the

past three years. And in our negotiations for free trade agreements with Chile and

Singapore, in accordance with the objectives in the TPA legislation, we will seek a

meaningful set of cooperative provisions that will advance labor and environmental

protection and projects, while promoting open markets.

We know the importance of these topics for many Members of the Committee, and

we want to work with you to explore new approaches that break through old stereotypes. Some are concerned about a ‘‘race to the bottom,’’ although others point to

the benefits of trade and openness in spurring growth, productivity, higher incomes,

and enhanced scrutiny of working and environmental conditions. Some stress the

need to safeguard America’s sovereign rights to select our own standards, while others want to deploy trade agreements to compel others to negotiate the standards we

prefer. Some believe that the influence and investment of U.S. companies abroad

will lead to higher standards and codes of behavior, while others fear the reach of

globalized companies. It is our goal to use the TPA bills Congress has forged to

bridge the differences, build a stronger consensus, and make a real, positive difference around the world.

Conclusion: Challenges on the Trade Horizon

The United States has made considerable progress on the trade agenda in the

past year, but still must do more to catch up with our trading partners. The European Union now has 29 regional and bilateral free trade or special customs agreements, 22 of which it negotiated in the past decade, and is in the process of negotiating with 12 more countries. Mexico sped past the United States after NAFTA to

complete eight free trade agreements with 28 countries. Japan has completed a free

trade agreement with Singapore and is exploring options with the ASEAN nations,

Canada, Mexico, Korea, and Chile. Even China, just into the WTO, is pursuing an

FTA with the ASEAN countries.

Altogether, there are 130 regional free trade and customs agreements in the

world; the United States is a party to only three. There are 30 free trade agreements in the Western Hemisphere; the United States is a party to only one. In recent years, when the rules of trade have been set, the United States has frequently

not been at the negotiating table.

In addition, there is a constant threat of markets closing and barriers rising. During periods of economic downturn and uncertainty, it is most important to affirm

the drive toward free trade. In the past, governments have often resorted to protectionism in short-sighted attempts to shield their local industries from competition.

In the face of these challenges, we must be even more vigilant in order to move

ahead.

Opening markets, and liberalizing commerce, injects fresh dynamism and energy

into the U.S. economy. Open trade cuts taxes on businesses and consumers. For example, NAFTA and the Uruguay Round agreements have resulted in higher incomes

and lower prices for goods, with benefits amounting to $1,300 to $2,000 a year for

the average American family of four.

There is even more to be gained. A University of Michigan study has reported

that new global trade negotiations focused on tariff reductions on industrial and agricultural products could deliver an annual benefit of nearly $2,500 for American

families.

We will continue to make this case for the benefits of trade. Expanded trade—

imports as well as exports—improves our well being: Exports accounted for 25 percent of U.S. economic growth from 1990–2000 and support an estimated 12 million

jobs; these jobs are estimated to pay 13 to 18 percent more than other jobs. Trade

also promotes more competitive businesses—as well as more choices of goods and

inputs, with lower prices.

A free and open trading system is critical to a number of sectors of the U.S. economy. In U.S. agriculture, for example, one in three acres are planted for export and

nearly 25 percent of gross cash sales are generated by exports. The value of U.S.

exports of agricultural products is expected to be $54.5 billion this year. U.S. farmers and ranchers are 21⁄2 times more reliant on trade than the rest of the economy.

Last year, the Administration and the Congress together restored America’s trade

policy leadership all around the globe. There is no doubt the United States is back

at the free trade table. In the year ahead, the Bush Administration will work in

close consultation with the Congress to build on this leadership through the ongoing

implementation of an activist agenda that seeks to vanquish the barriers to free

trade and magnify the opportunities for growth and prosperity. By opening new

markets, together we will be contributing to the enhancement of democracy, liberty,

25

security, innovation, political coalitions, economic growth, and openness in the

United States and throughout the world.

the Foreign Sales Corporation issue will occupy some time before

Chairman THOMAS. Thank you, Mr. Ambassador. As I indicated,

f this Committee, hearings, both full Committee and subcommittee,

examining legislative options. What we will be requesting from the

Administration will be relatively close communications on what

strategies the Administration is going to be pursuing. And I don’t

want any lengthy discussion now, but clearly at the Ambassador’s

choice he could either offer some brief comments, but I certainly expect shortly some written indication of the direction of the Administration’s strategy so that we can coordinate the very real need to

respond to this decision.

I might ask in that context, you have had communications with

appropriate officials since a decision has been rendered, they are

still in the process of determining the dollar amounts. What is the

climate post decision?

Mr. ZOELLICK. Well, let me, Chairman, try to address the first

one. We are very pleased with the prospect of working with the

Congress, however all of you determine we can, obviously that involves heavily the Treasury Department, Office of Tax Policy, and

the senior people there. But we as an Administration are trying to

come up with interagency proposals on this and would be delighted

to work with you and we appreciate your leadership on it.

In terms of the climate, Chairman, the frank answer is it is uncertain, as I think we have had a chance to talk among ourselves.

This is an issue that has been around for a while. The United

States had some of its legislation challenged, and we lost, we lost

on appeal, and there was another round. And so frankly, my read

of the situation is that the European Union, while not eager to retaliate, needs a sense that the United States is going to take the

steps to come into compliance. They recognize this is an extraordinarily difficult issue, and it won’t be done easily. That is why I

think steps like hearings or other actions, things we can do from

the Administration, will show good faith in taking on the topic.

The problem is we do have some near-term deadlines. By the end

of April the WTO will have an arbitration panel that will decide

the amount that the EU can retaliate. The EU has pushed for

about $4 billion based on some revenue estimates dealing with the

FSC. We are obviously going to push very hard for a lesser number

based on various arguments we make partly related to the trade

effects. But by that time period there will be an amount that the

European Union can retaliate, and then we face a question can we

hold off that process by showing that we are taking this on. I believe there is a chance to do it from my conversation with Commissioner Lamy, I know others here have. But, I think we can only do

so if we show there is a serious and good faith effort, Chairman.

Chairman THOMAS. Well, I don’t think anyone believes that the

approach ought to be to simply ignore the decision. But at the same

time, as we investigate ways in which we change our Tax Code,

somebody has to take into consideration the season. I know oftentimes when I sat down with Europeans or even with others in disVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00029 Fmt 6633 Sfmt 6602 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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cussing our abilities to move forward, if it isn’t in the first or the

second or the third sentence, the fourth sentence includes a phrase

something like the elections in France or the elections in Germany,

and that we have to be sensitive during this period because they

are having presidential or legislative elections in a particular European country.

None of us are going to use the fact that this is in fact an election year and a fairly important one in this country as an excuse

not going forward because we are going to go forward with hearings. But somebody has to put it in the context that we are addressing this, and we will address it in a fundamental way, in a

very difficult climate. And I am hopeful that as you continue to discuss this issue with others, that the context in which the House is

attempting to move forward and resolve the problem, not patch it

over, not come up with another gimmick but fundamentally resolve

it, understand that this is not a 3-week or even a 6-month pursuit.

Second, I am pleased that the President, all of us are pleased

with the President’s push for permanent normal trade relations

with Russia. My concern is, and I have introduced legislation to

that effect, during the long and arduous, as you described, process

with China, I thought that the normal trade relations (NTR) vote

was a useful one to frequently check and require people to make

sure that the process of negotiating with China was a truly rigorous one and did not slide off to a politically convenient structure

because you were able to do so because you didn’t have the NTR

votes taking place.

And I do want to put in context the fact that with Russia we

want to make sure that there are no foreign policy pressures or

other departmental pressures in making agreements, that it has to

be as firm and as sound as it was with China in dealing with Russia.

And lastly, the President going to China, you had indicated the

importance of agriculture. Here we have an opportunity to stress

with someone who is and will be a major competitor in the agricultural area that there is sanitary and FAO or Food and Agriculture

Organization sanitary requirements, their biotech regulations all

need careful scrutiny if we are going to continue this growing and

I believe mutually beneficial relationship. I know you will be in

there scrapping. But we want the President to know that these are

issues that ought to be on the front burner with the Chinese because these agreements need to be closed quickly.

With that, I will turn to the gentleman from New York.

Mr. RANGEL. I think I have said most of all the nice things about

you that I can this morning. So we might as well get to the other

issues, and that is that when you are negotiating for the United

States with the WTO in this FSC problem you are not to be heard

to say that the President is not in charge of taxes or the Treasury

is not in charge or taxes or it is the Congress or it is the Committee on Ways and Means, you are carrying our flag. And as it

relates to overseas, in order to avoid an appearance of disunity

here, it appears to me, Mr. Ambassador, that you are going to have

to bring a team to work with this Committee. When I say Committee, I mean Republicans and Democrats, because if it appears

as though the majority has a permanent solution to this problem

27

that the minority disagrees with, that is going to be just as public

as it should be as relates to our Committee work.

So I would strongly suggest that you might want to put together

a team from the executive branch to meet with us informally as a

Committee to share with us your concerns so that we can as nearly

as possible read from the same page, because there are all types

of potential solutions to this problem but it doesn’t mean that the

end of today that we can all read from the same page.

And so, I know what you have been up against and you have

done a tremendous job in trying to work between the Chairman

and me, but that is OK for domestic stuff. But as it relates to dealing with the European Union I hope we can find at least an attempt to find a way that we can work more closely together. I discussed this with you privately. I just want to thank you for your

agreeing to try to do that.

Mr. ZOELLICK. Mr. Rangel, just to add to what you and I have

discussed, I want the whole Committee to know what I explained

to Commissioner Lamy. We as an Administration will be putting

together a task force, whatever one calls it, that is an interadministration group. Obviously the tax policy is the heart of it, but there

are Commerce and U.S. Trade Representative (USTR) and others

are very deeply involved. One of the things that I told him was

that we would also be in consultation with tax policy experts, the

business community, reaching out—we know this is a difficult

problem—and then to try to come up with our series of ideas or

proposals within some limited period of time, which we haven’t yet

defined.

I also told him that we would, through that group or another

group, also want to have a similar discussion with Europeans, and

here not only the Commission but with the Member States where

the tax authority arises, because I know a number of you from both

sides of the aisle have a sensitivity to making sure there is a level

playing field here for tax systems.

And so if we are going to be able to put something together, together we need to try to do it so that the Europeans understand

that this is finally over, we get it done.

So the third part obviously is, however the Committee and others

want to try to work with us, we would be delighted to try to do

so. What I want to emphasize here, I don’t mean to suggest this

is by any means an easy problem. And what I hope to do with the

two of you and others on the Committee is frankly take our good

faith action in tackling it, and I think the Europeans understand

this is a big, big problem. As I have said to them, what would happen if the WTO said France had to change its tax law, how quickly

would you be able to turn that around, going to the Chairman’s

point.

So I think we can win some time here, and I won’t hazard a speculation exactly how long if we work on it together. That is what

I have tried to get launched here. I will do my best to work with

you on it.

Mr. RANGEL. Thank you.

Chairman THOMAS. The Chair notes that we are beyond second

bells on a 15-minute vote. It will be followed by a 5-minute vote.

And so we will probably not be able to sustain the Committee by

28

having Members go over and come back. So Mr. Ambassador, if you

will allow us, the Committee will stand in recess until as soon as

we can get back, hopefully shortly before noon.

[Recess.]

Mr. CRANE. [Presiding.] Our Chairman cannot get back here

right now, but we will continue and, as I understand it, I am next

in line since Charlie already got his 5 minutes. Is that correct?

Mr. RANGEL. If you are the Chairman, whatever you have to say

I would bend over backward to make it so. I yield for the Chair.

Mr. CRANE. I thank you so much for that. I am meeting with

Yugoslavian President Kostunica this afternoon, and one of the

questions or the most important question from his perspective, of

course, is reinstating NTR for Serbia and Montenegro. The Administration already has the authority to reinstate NTR but I am told

we need to pass legislation. What is your position on this issue?

Mr. ZOELLICK. Chairman, we support the effort to try to restore

the NTR for Yugoslavia, and we have been working with the Department of State in terms of trying to address the concerns that

were reflected in the 1992 legislation to try to do so.

Mr. CRANE. Second question deals with your expressed interest

in pursuing free trade agreements with especially our Latin American countries, but also I have heard of potential FTAs with Australia and New Zealand and South Africa and Morocco. What criteria are you using to identify potential candidates for bilateral

FTAs?

Mr. ZOELLICK. Well, Chairman, I am particularly pleased you

asked this because this is a topic that I wrote, as you know, to you,

Chairman Thomas, Mr. Rangel, and Mr. Levin that I hoped we

could get a good dialogue going forward.

The starting point is that Congress has passed legislation in the

Caribbean Basin Trade Partnership Act that urged us to focus on

the possibility of a free trade agreement with Central America. And

the President spoke about our interest in pursuing that with the

five Central American countries. In addition, AGOA also encouraged us to look at possible free trade agreements with African

countries. And the South African Trade Minister has expressed an

interest in exploring this perhaps in the context of the South African Customs Union. And that is one of the items I hope on my trip

to Africa to explore it further.

But beyond that, Chairman, there are a number of benefits for

this, I think. One is whether we can create some models of success;

whether we can, for example, advance some of the trade agenda in

a particular area; for example, in the high-tech area, intellectual

property rights area, whether we can catch up in market access.

For example, right now, Chile has an 8 percent tariff that doesn’t

apply to Canada but does apply to us, so we are losing vegetable

oil and wheat and potatoes and other things. We also can use this

to build support on other issues; for example, on biotech that a

number of Members are interested in sanitary or the FAO sanitary

issues. Another one is to support economic reform.

And what I think would be my suggestion is that we try to have

an array of developing in developed countries in different parts of

the world so we can create a network and show that the United

29

States is willing to look for free trade in Latin America, in Africa,

in Southeast Asia and in other quarters.

Obviously, there is a dimension of this that could help our foreign relations. For example, Jordan was a free trade agreement,

our first with an Arab country in the Muslim world. It is important

to do that at this time. And Morocco would offer another possibility. So those are some of the criteria that we are looking at, but

it is an area where I very much want to have a good consultation

and dialogue with Congress.

Mr. CRANE. And a massive effort will be required for China to

comply with all its commitments and as part of its WTO accession.

And for the United States to monitor and seek compliance with

these commitments, China must create or revise and enforce scores

of laws and regulations. What is the Administration doing to establish a system for promoting compliance?

Mr. ZOELLICK. With the help of the Congress, which at the time

that it passed PNTR gave some additional resources not only to

USTR but to commerce and others, we are trying to do this at a

number of levels. One is we have an interagency group that has

taken each of China’s commitments and assigned it to an agency,

and we have monthly meetings where we track the follow up on

that. But, in addition, we are trying to reach out to the private sector, because in a country of 1.3 billion people, a lot of the information will be gathered by American businesses in China. And we are

trying to link into that network so we can identify the problems at

an earlier point and try to resolve them.

Third, we are trying to work with other countries. The WTO

itself has a special process related to China’s follow-through, but

with Europe and with other countries we have a common interest

in this delivery.

And let me just emphasize this point most of all, Chairman, because it is one that Chairman Thomas raised. This is going to be

a very long road. This is a country that is going through a huge

transformation and in many cases what Beijing decides is not necessarily what the provinces will do. So we are going to have work

on these. And while we are certainly willing to take the dispute

resolution process as necessary, I do hope we can try to pursue this

in a problem-solving mode.

In the area of soybeans and biotech, which Chairman Thomas

mentioned, I just want to reassure you, the interest starts at the

top. When President Bush was in China for the Shanghai APEC

or Asia Pacific Economic Cooperation meeting, he emphasized the

importance of that issue. And we got some headway on that one

as an interim measure, but we are now focusing very heavily on

the Chinese implementation of their biotechnology regulations.

Mr. CRANE. Thank you very much Mr. Ambassador.

Mr. Stark.

Mr. STARK. Thank you, Mr. Chairman. Mr. Ambassador, I would

like to just touch on a topic. I have questions about FSC but another problem that seems to have invaded Capitol Hill has been

the corporate ethics and some of the problems that many people

have had recently with 401(k)s and accounting and so forth. And

I wonder if it is your intention to voluntarily come to Congress and

testify about your employment with the Enron Corporation and disVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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close all that you know, both formally and informally, to help us

figure out what to do to see that that kind of thing doesn’t happen

again.

Mr. ZOELLICK. Mr. Stark, I am pleased to disclose all that I

know. And as a starting point, I served on an advisory council, and

I recused myself on all matters dealing with Enron. And before I

left for India, I was asked by the Indian press whether I would

push the issue and I told them I couldn’t because I was recused.

In addition, I was a stockholder and all this was disclosed at the

time of my confirmation, and I sold my stock at a loss.

Mr. STARK. My concern is that you are probably aware of things

that went on in the company when you were there. I am not suggesting that there was anything improper about your present position and your former position with Enron, but I am sure that you

have a lot of helpful information that would be useful to us as we

try and resolve this issue in the future.

Mr. ZOELLICK. Perhaps, but again, I know this is an important

and sensitive topic and I know it is one there are hearings on right

now. I served on an advisory Committee that met twice a year.

This involved people like Paul Krugman of the New York Times.

And so while I am happy to try and cooperate in any way we can

in trying to deal with this issue, when you said—you used the

words that said ‘‘my participation,’’ or some such words—— Mr. STARK. As I say, I knew you were on some kind of a board— but no more than the average person about what went on. On the

FSC generally, there is I am going to say 20 or 30 major corporations in this country that get close to the $4 billion benefit from

FSC. And however you are able to negotiate that—these same companies, by the way, probably get 80 percent of the Ex-Im Bank

guarantees and they probably get the majority of the AMT or alternative minimum tax giveback of 25. So they are quite comfortably

compensated by our Tax Code.

If, as many of us feel, we are going to at best negotiate, what

can you suggest to us or how can you assure us that if in fact there

is $4 billion of retaliation, let’s say, or whatever it is, that that

money will be paid by the corporations who have enjoyed the benefit and not by all the average people in America that you are saying maybe saved a thousand bucks because of NAFTA. It seems to

me whatever we come up with, that the people who got the tax

benefit ought to end up somehow paying for whatever retaliatory

penalties we have to pay. Does that sound fair to you?

Mr. ZOELLICK. The problem with it, Mr. Stark, is that is not the

way the trade retaliation works. The trade retaliation would not be

a payment. This would be the EU’s right to raise tariffs on products. So it wouldn’t be payments. And one of the reasons why——

Mr. STARK. Exactly, Mr. Ambassador, what I am getting at. That

the people who got the benefit, who have the $4 billion in their

pocket, these large American corporations would be the ones who

would be retaliated against.

Mr. ZOELLICK. We don’t know that. Unless we work something

out with the Europeans, it is their choice.

Mr. STARK. There is certainly a way we could compensate. Let

us assume that all of the tariff retaliation comes against agricultural products. Wouldn’t it be fair then to raise the taxes on the

31

corporations who got the $4 billion and distribute it through the

Tax Code to the small farmers, for instance, who might suffer. All

I am saying is, don’t you think it would be worth our effort to make

a good effort to see that we don’t further hurt the average Amer- ican who is already paying for the $4 billion that these big corporations are getting?

Mr. ZOELLICK. A lot of average Americans work for those companies and they get their paychecks. All I can say is I think we need

to resolve this problem or else we are going to get retaliation

against us.

Mr. STARK. As well we should, and we got caught.

Mr. CRANE. The time of the gentleman has expired. Mrs. Johnson.

Mrs. JOHNSON OF CONNECTICUT. Thank you, and welcome,

Mr. Ambassador. I wanted you to enlarge a little bit on how you

see the negotiations going forward in regard to trade remedies and

the great importance we put on our laws that allow us to protect

ourselves against what we usually refer to as unfair trade barriers.

And this will be a big issue in the upcoming round. And I would

like to hear how you think that is going to go.

Mr. ZOELLICK. Well, first, we believe that effective trade remedy

laws are absolutely critical. And we not only supported them but

we have supported their use. And whether it be softwood lumber

or steel, or other categories, indeed I made some suggestions yesterday about possibilities of doing this against the Canadian Wheat

Board. So we think it is a key part of our overall trade policy.

At Doha, we did not agree to change our trade remedy laws. And

we, of course, didn’t change the laws. What we set out first was an

offensive agenda because a number of countries are putting laws

like this in place without the due process, without the procedures.

And they are increasingly being used against American companies.

In fact, there are about 60 orders in place right now against American companies and they tend to focus most on chemical, steel,

other metal firms, but also being used against agriculture. For example, our poultry industry is very concerned about this.

Our first step is to make sure that whatever is done in this area,

it gets others to have a better performance and up to the standards

that we have.

Second, Congresswoman, there have been a number of decisions

in the WTO which frankly we, and I think most of the Members

of this Committee, disagree with. For example, they have not

given, in our view, the due deference that should be given to the

U.S. International Trade Commission (ITC) or the government in

terms of a standard of review. And frankly, we would like to get

those and some of those changed.

What we also agreed in Doha was very important from our point

of view, was that there is—that we will not undermine the concepts, the effectiveness and principles that underlie these laws.

And indeed we went back and fought again and said also the instruments which are applied. We also said if there is any discussion of these laws, you can’t look at the remedy without looking at

the disease. We have to go to the underlying problem of subsidies

and dumping. So that is the framework for which the future of the

Doha agenda will go forward.

32

And, again, our emphasis is primarily on the offense agenda because one of the issues that this Committee and all of us will be

dealing with in the future is more and more countries are using

these laws and they are going to be using them against American

exporters and you are going to hear about it and I am going to hear

about it.

Mrs. JOHNSON OF CONNECTICUT. Thank you very much.

Mr. CRANE. Mr. Houghton.

Mr. HOUGHTON. Thank you, Mr. Chairman.

Mr. Ambassador, I would like to talk about two points: one,

about the general trade laws; and, second, about 201. I was not at

the Senate hearing that you were at. But I think in questioning,

Senator Rockefeller asked you about some of our trade laws, particularly in antidumping. And I think you said, well, there are certain things we have to negotiate and therefore we are prepared to

put certain things on the table.

You may want to comment on that, because I was not there. But

I would hope that you wouldn’t put the antidumping laws on the

table or really change our trade laws. Those are so important. And

some of us who have been on the other side of this thing, being in

business, have found ourselves really in very difficult straits. And

I am not going to mention any names, but having been in business

and being sort of thrown to the winds by our trade representatives

at other times, it is good in terms of negotiating points—we will

give you this, we will give you that—but the people who were

given, it is very difficult. And that involves a lot of jobs. So I want

to put in a plea for you to be very careful in terms of that. You

may want to comment on that.

The second thing is in terms of 201. I am not a great historian

but I do remember that in 1934—and, yes, I was alive in 1934— that Franklin Roosevelt and Cordell Hall organized the whole concept of relief for various industries. In other words, if an industry— the reason Congress gave the President that authority to be able

to negotiate and be able to give relief, that he would give relief if

an industry was in trouble.

And I know there are an awful lot of suggestions about steel.

And as you know the statistics as well as I do, 39 or 40 companies

are now in bankruptcy. But one of the things that I worry about

is that when the President makes a decision, whatever that decision is, that he will do it in a meaningful way and not just have

sort of a cosmetic approach. In other words, there are some suggestions now that with steel imports coming in at the usual number,

the usual amount, that you would let those come in and then you

would give a 25 percent tariff for everything surged over that.

That would be wrong, I think, because what it does is everybody

is lining up and creating a tremendous surge, which would be unfortunate. So you may want to comment on both those issues.

Mr. ZOELLICK. Let me touch on the steel one first, Mr. Houghton.

As you know, President Bush and this Administration initiated this

201 because we believe that safeguards have an important role.

Members of this Committee were pushing for this for the prior

years and could never get the initiation. And just to further underscore that, we worked last year to try to work out some of the safeguard issues related to the lamb and wheat gluten industries. And

33

this is based on the same strategic principle that you mentioned,

which is there are times in which markets move more quickly than

industries and the communities that live off them can adjust.

And so I am a firm believer that we need to have safeguard laws,

but in a way that helps the adjustment process. The favored one

that is pointed to in the 201 industry is the Harley Davidson industry, how it turned around. But we also have to be careful because

it could just be a form of protectionism and that doesn’t help anybody adjust. But if we have a restructuring plan and include time

for an industry to catch its breath, I think that is an important

part of the adjustment process.

In steel, after we received the ITC’s recommendations—and as

you know, they varied somewhat by Commissioner—we had very

good discussions with all branches of the industry. The ports look

at it a little differently. And some of the other users obviously have

concerns. But what I can assure you is this is something now that

is at the Cabinet level of discussions. We look at it very thoroughly,

about the effects on the economy and on this industry. So it is getting a very serious examination. And I know the President has a

personal interest in it from discussing it with him, and we are on

track to try to get the decisions in early March.

Mr. HOUGHTON. Before you leave that, Mr. Ambassador, I guess

my point is that if you do have relief, it ought to be real relief and

it shouldn’t be gobbled up with different proportions and surges

and things like that. This is an industry—and I never was in the

steel industry but I identify with them totally—that is not fat and

happy. They really have done almost a resurrection of what they

have been about in years in the past. And frankly they do need

some help here, some real help.

Mr. CRANE. The time of the gentleman has expired.

Mr. ZOELLICK. I will speak briefly because I think part of my answer to Mrs. Johnson was on a similar point about the trade remedy laws. And what I was emphasizing is we know how important

they are. I would not take your characterization or my exchange

with Senator Rockefeller as being an accurate description of reality.

But here is the other situation that we face and then we will

fight to protect these and I believe they need to be protected.

As I mentioned, there are two other things. One is at Doha.

There were 141 countries that wanted us to at least discuss this

topic. And so yes, we had to make a discussion should we crater

the round—and that is what it would have involved—or should we

try to craft what I think is a darn good agenda in terms of our offensive points without giving anything up defensively.

And the other point I will put on the table here is that we are

going to need to figure out a way to get other people to improve

their laws while protecting ours because there is now a gap. American lawyers, God bless them, and they have been going around the

world helping other countries to put these in place, and they have

nowhere near the standards, transparency, due process, that we

have. And we are going to hear about it to increasing degrees, and

that is what we will target in the negotiations.

Mr. CRANE. It is hard for any of us to believe that you were running your business back in 1934.

Mr. HOUGHTON. I didn’t say that.

34

Mr. CRANE. Mr. Levin.

Mr. LEVIN. I am tempted to take up Mr. Houghton’s question.

Let me just say that I am not sure how people will read your answer, but I think the feeling is clear, as I stated in my opening

statement, that just providing a safety net isn’t enough. And I

guess the Europeans have now suggested something that is essentially a way to finance a safety net.

Let me also, on the countervailing duties on antidumping, just

indicate that I hope very much that we will be emphatic that we

will not agree to renegotiate what we negotiated in great detail, at

great length during the Uruguay Round. And the problem is that

the language within the Doha agreement, I think is read by many

people as essentially saying everything is on the table. And it may

well be the judgment was we had to agree to that or else the round

wasn’t going to proceed. But that is the way it has been interpreted. And it is quite different the way it was worded in article

28 from the provisions, for example, on competition—and you know

this, you negotiated it—where a decision to proceed had to occur

by explicit consensus. And essentially there is no such language in

the antidumping provisions, the provisions on rules.

But I don’t want to make it more difficult for you. So let me just

go on and just say a couple of other things quickly. On Chapter 11,

we have talked about this and you and I have talked about other

areas of disagreement and I won’t go into them, the labor and environment provisions et cetera.

An investment in our bill that we brought up, we had some very

specific provisions. And what I would like you to do, if you would,

is to send to us your analysis of those provisions. We have talked

about them, but we have never had any written communication as

to any objections you have as to how we laid out what should be

the negotiating objectives on Chapter 11. If you would do that, it

will help the dialogue.

And in that regard, getting to Chile, we talked a little bit about

this, but if you could give us a somewhat more specific timetable

as to when you think the investment provisions will be taken up—

you said you are going to be talking about market access next

month—I forget, but if you could tell us the timetable on investment and also on the labor and environment provisions, just the

timetable. We have our differences but let us see if we can possibly

move ahead.

So let me talk for one minute about agriculture. Could you tell

us——

Mr. ZOELLICK. About what?

Mr. LEVIN. Agriculture. Could you tell us how you think the

present discussions or work on the farm bill could affect the negotiations on one of the two or three key sensitive issues, and some

people think may be the most sensitive—I think there are others—

in the next year or two?

Mr. ZOELLICK. Certainly, Mr. Levin. Since you mentioned the EU

proposal, I don’t want you to misstate it because I am not sure you

would like it if you really looked into it. It is the idea of taxing the

steel industry for a fund. That is what the Europeans did, and I

am not sure our steel industry would be very excited about having

a new tax imposed on it.

35

Mr. LEVIN. And the tax would essentially go to pay legacy costs.

So that only addresses the safety net. I am not saying it is a good

idea, but only addresses the safety net issue and not the basic

issues of whether we want a steel industry, how it is structured,

et cetera.

Mr. ZOELLICK. And, Mr. Levin, I would be pleased on the written

points on Chapter 11. What I would urge we also do is we talk

about it more, because I looked at a number of those points and

I think they are focusing on a lot of the same issues that we are

focusing on. I may feel, for example, that a required appellate level

for an agreement that is not likely to have many appeals might be

something that is not a workable approach, but we need to address

that issue in some other way. So we will try to follow that up.

On your farm bill question, obviously, the Department of Agriculture is in the lead in terms of trying to deal with that. And you

know, we support forward-looking farm legislation, as the President has made clear, that helps both the prosperity of our farmers

but also meets our WTO commitments.

There is language in the House farm bill that authorizes the Secretary of Agriculture to make necessary adjustments if our spending exceeds WTO limits. And right now, the USDA or U.S. Department of Agriculture staff is working with the Committee to get a

sense of how that would be administered, how it would work in the

process. So it has been, you know—our emphasis is in the Administration that we need to have a farm program that allows us to

meet the needs of farmers but also meets our international obligations and helps us to continue to move forward in terms of eliminating export subsidies, reducing production support and opening

markets around the world. And I have talked with Members on

both sides of the aisle on that in the Ag Committee about trying

to do that.

Mr. CRANE. The time of the gentleman has expired. Mr.

Ramstad.

Mr. RAMSTAD. Thank you, Mr. Chairman.

Mr. Ambassador, congratulations on your 1-year anniversary,

and thank you for your outstanding leadership as our Country’s

Trade Representative. Certainly the President has the best and

brightest on his trade team, and I certainly applaud the work that

you are doing.

I want to raise an issue that is critically important to America’s

medical technology industry, very important segment of our economy as you know. And as you also know, on December 12, the Japanese Ministry of Health and Welfare adopted foreign reference

pricing, commonly known as FRP, which is a new pricing policy

going into effect April 1 which allows the Ministry to cut reimbursements for medical devices based on the overseas prices.

Our country has long opposed FRP schemes. They discriminate

against the U.S. medical device community. They failed to recognize the high costs of doing business in Japan. Now, the way in

which it was quickly adopted also violates U.S.-Japan trade agreements according to all neutral observers.

Congress, in a bipartisan way, has expressed its strong opposition to FRP. Letters have been sent from Senate and House leaders, Republicans and Democrats alike. Speaker Hastert and RepVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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resentatives Dunn and Blunt raised their concerns during their

trip in January last month. Secretary O’Neill has raised his concerns, as has your Deputy Huntsman.

Despite all of the efforts by Congress and the Administration, the

Japanese do not appear willing to alter their proposal, which would

be a huge, a huge setback to the progress that has been made over

the last 15 years in opening up Japan’s protective marketplace.

Now since the MOSS or Market-Oriented Sector Selective trade

agreements in 1986, aggressive U.S. trade policy has turned $100

million device trade deficit into a $1.3 billion trade surplus today.

And we need that strong United States leadership to continue.

I know—we all know the President will be visiting Japan on February 17. And my question to you, Mr. Ambassador, I believe is a

very, very critical one. If this policy is not removed by then, that

is, the time of the President’s visit to Japan on February 17, will

the President raise our serious concerns and our strong opposition

to FRP during his visit?

Mr. ZOELLICK. First, Mr. Ramstad, thank you for your kind

words. I obviously can’t say what the President will or won’t do. I

work for him and not vice versa.

Mr. RAMSTAD. Will you encourage him to raise this?

Mr. ZOELLICK. Yes. And indeed, he has helped and pressed on a

number of trade issues, as I have mentioned, on these visits. He

has always—frankly, it is a big help to me, more than willing to

me to try and push these.

I will say that we have been working closely with the industry,

as you know, and others—in addition, you know, Secretary Evans

and Ambassador Baker—Senator Baker has been pushing it very

vigorously. And I think there have been discussions this week, Mr.

Ramstad, that are making some headway with the industry.

But we know the importance, and it is a critical industry for the

United States and also it is an unfair pricing system. So we will

work with the industry with it and I will certainly also talk to the

White House and the President as they go forward.

Mr. RAMSTAD. The fact that you are encouraging the President

to raise this is very encouraging to us certainly, and he is aware

of the terrible consequences of such a policy; is that correct?

Mr. ZOELLICK. Yes, I am sure.

Mr. RAMSTAD. And just met, as I think you did or your Deputy

Huntsman, with a number of Chief Executive Officers (CEO) from

Medtronic—from Minnesota’s medical valley, Silicon Valley—from

Representative Thurman’s district who were here. And this truly,

this FRP scheme truly, truly has devastating consequences. I can’t

speak in strong enough terms as to how devastating to this critical

industry, to our country, and to our economy.

So I am certainly glad we are on the same page. Appreciate the

fact that you are going to encourage the President himself to raise

this when he is visiting Japan on February 17, because this is so

important to a big part of our economy and to the medical device

community. So thank you very much, Mr. Ambassador.

Mr. CRANE. Mr. Tanner.

Mr. TANNER. Thank you, Mr. Chairman; and, Ambassador, thank

you for being here. And I have got three items I would like to mention. They are enforceability issues, and I know we all agree that

37

whether we are for or against a particular bill, the enforceability

of what we have is important to both the supporters and the nonsupporters of what we are trying to do here.

So let me just mention these, if I could, and then you could respond. As you know, the House has passed and the Senate is considering to renew the extension of trade benefits to Andean countries. We have a telecommunications company that is involved in

a dispute with Colombia. I have talked to you about it before and

we get a lot of promises and assurances and so forth from the Colombians but nothing changes. Deadlines have passed without resolution. I understand that their own laws are not being followed

with respect to the enforcement or execution of a judgment.

And my question is even though we have Andean Trade Preferences Act (ATPA) concessions, there is some conditionality in

that regime where benefits could be suspended or lifted for a particular country. And I hope that we can give the attention it deserves to this situation, because it is one of really shocking noncompliance if one could use those terms.

Second, Korea has some new biotech regulations with respect to

corn and soy items that many feel are regulations that are a barrier to trade and are done to stifle competition. Has to do with documentation, certification and so forth. I understand someone in

your office has recently met with the Koreans and, if so, if you

could give us the status of that involving corn chips and so on.

And then, finally, the EU has had a moratorium on biotech products from our agricultural sector. I understand they—the EU has

recently suggested that they would start their approval process

later this year having to do with such issues as traceability, labeling requirements and so forth. And if you could give us the status

on that and where we are with that. It relates to the Korean situation as well. Thank you.

Mr. ZOELLICK. Sure. Well, first on the Colombian matter, as I

know you have been pushing this issue and we have been working

with you on it, I have written President Pastrana, and I have written Colombian Trade Minister Ramirez, and she responded in a

way that she thought they were moving it forward. In fact, I saw

her just this past weekend and raised it with her. She is going to

be moving onto another post so I will have to follow up with somebody else in the process.

But I thought the next step is actually—we will meet with Nortel

and get their side about why they don’t think it is moving in the

process, and then we will work with the Colombians further as we

go forward. The ATPA right now, since it has not been passed, we

can’t use it in that way, but we can use it in terms of trying to get

it passed. And the Colombians have been responsive in some other

areas like acrylic fibers.

I will point out one point and this is an issue of perhaps interest

to Mr. Levin and Mr. Doggett as well. This is one of the reasons

that the investor provisions are a double-edged sword. This is a

company that employs people in your district that wants to have

investor provisions and wants to have them enforced. Some other

people are then a little leery about how those work. So this gives

you a little sense of the balance we need to strike here.

38

On the Korea biotech, I know generally about the work we have

been trying to do with the Korea biotech. I don’t know particularly

about the corn one, so I will have to follow up on that one. You are

right. It is definitely related to the larger problem out of the EU.

And I am glad you raised it because I want to put a real focus on

this this year, because biotech is so critical not only for our industry and our employment, but it is critical for the development of

agriculture around the world, including a lot of developing countries. And frankly the EU sort of stymieing of this is totally unacceptable economically, and I think morally, because in many developing countries around the world, this will be what leads to increased yields, less use of fertilizer; you know, the development of

nutrients in a lot of these products.

So I was in Europe in December. I talked to four or five commissioners on this. And frankly, Mr. Tanner, they are not going to

move. And one of the things I am considering is bringing a WTO

action against the fact that they are not approving products. And

I am working right now to talk with other countries around the

world to see if we might do so.

That is separate from the traceability and labeling. Right now,

they are not approving a darn thing. But on top of that would be

the traceability and labeling rules, and frankly we think they are

unworkable. So we are also trying to work with industry to see how

we can fix those.

Mr. CRANE. The time of the gentleman has expired. Mr. Cardin.

Mr. CARDIN. Let me thank you for the way you have had an open

door policy with Members on both sides of the aisle and the way

you have consulted with us. We very much appreciate that in the

way you are conducting your office. Let me just mention two issues

that we talked about before so that I can just advance these issues.

First on steel, we have talked about that frequently and I want

to thank the Administration for the actions that it has taken. The

key decision, of course, will be made next month, or by next month,

on what remedy to seek in regards to the damages that were

caused on our companies. I would just urge you to take advantage

of at least recommending to the President a tariff significant

enough that it will deal with the true cost of steel. And I would

urge you to look in the range around 40 percent. I would also urge

that you look at that revenue as being used to help deal with the

legacy cost.

As you know, the European countries do not have to incur the

costs of our trading partners, incur the costs because there is a social cost in their country, and that makes it difficult for U.S. steel

to be competitive with the high legacy cost.

And last you have probably been the leader in encouraging the

restructuring of the steel industry in the United States, and we

have had different views on that over time. But I would urge you

to look at the antitrust laws to see if there is a concern there and

what we are trying to work out on the restructuring and whether

we need to look at some recommendations in that regard so that

the restructuring can move forward in an orderly way.

And then on the second issue that we have talked about, and

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publics of the Soviet Union. I look forward to working with you as

we advance that legislation.

I would just caution that when we looked at PTNR for China it

was with a strong WTO accession agreement, and that made it a

lot easier for some of us to move forward in that area.

I would also point out that each of these republics are different

and it would at least be helpful for us if we consider them independently. And with China, we put in a strong monitoring commitment on human rights, which is important in some of the former

Soviet Union. So I would just urge, as this process unfolds, look for

a way that we can bring broad consensus to the legislation that the

Administration seeks. And I thank you for your help.

Mr. ZOELLICK. Would you like me to—let me take the last one

first, because we haven’t really discussed it today and I think it is

very important and I appreciate your help and I take your counsel

about looking at these individually. In the case of Russia in particular, one thing just so you know how the Administration looks

at this, is that this is an important step in recognizing the Cold

war is over. I mean it has been 10 years.

And so, as you know, the history of the Jackson-Vanik with Russia and China were always different. In terms of Russia, it had focused on immigration and human rights. And Russia has been in

compliance since 1994. So the focus that we have had—and I look

forward to working with you—is on human rights and religious

groups to make sure we try to get the assurance that we need to

be able to go forward. I would distinguish that, and if someone

said, look, we like to keep this as a club over Russia as it gets into

the WTO—and I want to try and explain why I think that would

be a mistaken idea.

President Putin and the other Russians have said, look, we want

to play by the same rules everybody else does. And so we will agree

whether it is agriculture or other topics, but please don’t use something that distinguishes us from the Cold war as Jackson-Vanik

would. We are in the midst of 20 other applications. And this I

think would be counterproductive if we use it in that way, and particularly we don’t need it because the WTO accession requires a

consensus, not only us, other countries. We have the ability to say

no unless they take the steps.

And so I have had a number of meetings with the Russians in

the nitty-gritty detail of this. They are making efforts to comply.

We want to bring them into the system. We won’t do it unless we

have the right market access, agricultural communities are particularly concerned about this, and deal with the subsidy and other

issues. But I think it would be wisest to focus the Jackson-Vanik

issue on its origin with Russia, the immigration, the human rights,

the freedom aspects. And I know that is one you worked on and

I will be pleased to work with you in the future.

Mr. CARDIN. I understand that and I think that makes good

sense. Looking forward to working with you.

Mr. ZOELLICK. Then on steel, obviously we are at a point when

we are looking at the full range of remedies. As you know, the ITC

commissioners, some suggested tariff rate quotas, some of them

suggested higher tariffs. We are looking at the full range.

40

And on the issues of legacy costs there are different ways to try

to address this and we are looking at the full range. As you know,

USX or the United States Steel Corporation proposed basically

$13.5 billion over 10 years to deal with six companies. One of the

issues we have to look at is what about the other six companies

where you have workers that are similarly situated. And this has

also led, I think, to a focus on wherever one goes about the programs for the workers, for example. You know, the Administration

has had a proposal about a refundable tax credit for health insurance. Pension funds as you know, by and large for retirees, are covered by the PBGC or Pension Benefit Guaranty Corp. The numbers

we have is that it should cover about 93 percent of the pensions.

But I think one of the issues we will have to balance here is some

fairness not only on steel companies but other companies. And for

what it is worth, Congressman, my view on this is that try to focus

the aid on the people who are going through the change.

Mr. CRANE. The time of the gentleman has expired. Ms. Thurman.

Mrs. THURMAN. Thank you, Mr. Chairman. Thank you, Mr. Ambassador, for being with us and staying for a rather long time as

well. And we especially appreciate it down here on this row, because a lot of the time our guests have to leave and we never get

an opportunity to ask questions. So we do appreciate you being

here.

Ambassador, I just have a couple of issues that have been

brought to me and as I can see from the line of questioning, other

Members of this Committee have brought specific issues because of

specific contacts they have had with people. And, quite frankly, I

am always amazed at just how big this county is and the kinds of

things we do and the kind of trade that goes on. There is so much

going on.

But in saying that, as you know, during the negotiations over

TPA there was a lot of concern in Florida specifically dealing with

our citrus industry and other agriculture industries. Evidently

there are some questions dealing with some of the cartel practices

that I guess the Senate has maybe brought up to you. We just

would like to know whether or not you plan to negotiate remedies

to eliminate cartel practices and how do you plan to address them.

And then, second, with the TPA, while it gives you the tools to

expand trade through U.S. and foreign tariff reductions, there are

many unsubsidized U.S. agricultural commodities which have been

forced to address what we believe to have been unfair imports repeatedly. Will you commit to us to avoiding U.S. tariff reductions

for those commodities which have been faced with dumped and

subsidized import competition like citrus?

Third, and I did get a memo, and I actually was surprised because I didn’t remember hearing much about this during even TPA

on the tariff reductions, how many other countries actually use

this? And it was alarming to me that we weren’t able to negotiate

any of that when we were doing some of it, but on the idea why

we would take a position that ties our hands on the issue and

harms our import-sensitive industries while our trading partners

take the opposite course in their own self-interest. And this is on

our tariffs.

41

And then in the FTAA, are you prepared to sacrifice unsubsidized agricultural industries like citrus for the sake of a negotiating principle which only the United States follows?

Then the last comment that I need to make, it has come to my

attention that in Florida, as you can imagine, we have a lot of people doing business in Peru and other areas. And it came to my attention that there is a business over there that has actually been

trying to work with the government to take care of an issue where

they feel like they have been harmed in telecommunications. And

I guess the Senate actually put some language in their Committee

report that is asking USTR to closely examine these matters and

determine whether Peru should be designated as an ATPA beneficiary country because of these particular—I guess there are about

three or four different cases. One just happens to come from Florida.

On the telecommunications issue, you might be familiar with it,

Telephonico—maybe not.

Mr. ZOELLICK. Let me try on some of these. I think they are

interconnected. There is a general theme of the citrus industry

which wouldn’t surprise me.

Mrs. THURMAN. I didn’t think it would.

Mr. ZOELLICK. I think at least on the second and the fourth as

I had them, there is language in the Trade Promotion Authority

bill that establishes a series of additional procedures to deal with

sensitive products, and citrus was kind of the lead in the train on

this. And it would require that as we undertake any negotiations

and if we want to try to negotiate any reductions in tariffs, we

have to go to the National Trade Commission and have various reports done and then explain the logic for moving forward. And

then, of course, it states clearly that any ultimate decision in

change of tariffs belongs to the Congress and not us. And I would

be happy again to give you more information about those provisions.

On the cartel point, I am not 100 percent sure I have this, but

it is our negotiating position that we want to try to address the

problems of state trading monopolies and state trading enterprises.

This is most actively in the news actually related to the Canadian

Wheat Board. And I think the practices are wrong. And I am actually talking with the wheat industry again tomorrow about some

options we might be able to take dealing with that, using our unfair trade laws and maybe also the WTO.

On the Peru and telecommunications issue, I am afraid I don’t

know the precise points. Mr. Tanner mentioned—I don’t know if it

was with the Nortel and Colombian case, but I will be pleased to

look into it with you.

I would say, again, and you can share this with your colleague,

Mr. Doggett, this is one of the issues—why we have difficulty on

these investment issues is that we want to try to protect our investors abroad and make sure they get the protection that foreigners

get here. And sometimes that creates a little complexity in the

legal regimes we have.

Mrs. THURMAN. To note this, it was in the Senate language on

page 31. And that will give you an area to go to.

42

Mr. CRANE. The time of the gentlewoman has expired. Mr.

English.

Mr. ENGLISH. Thank you, Mr. Chairman. And, Ambassador, it is

a privilege to have you here to comment upon, in the wake of the

President’s budget submission, our trade priorities. I want to congratulate you on the extraordinary job you have done in the last

year. I thought your predecessor set a very high standard and I

think you have done a remarkable job of strengthening our trade

policy within a very short time and without as much cooperation

from Congress as we and this Committee would have liked.

I have a couple of specific issues that I would like to raise with

you. One, I would like to once again congratulate the Administration for launching its 201 action in steel. I realize this entailed a

great deal of political capital on your part, that this was a controversial move in some areas of the business community and manufacturing.

As someone who represents a district that both produces steel

and also has steel-consuming manufacturers, I appreciate the challenge that you faced in crafting that policy and that you have a

final upcoming decision. As Chairman of the steel caucus, I would

urge you to go to the President and urge him to pursue an aggressive solution to the 201 action, one that while I realize will create

some animosities with some of our trading partners, one that I

think is necessary for us to preserve on a level playingfield our domestic steel manufacturers. You are welcome to comment.

Mr. ZOELLICK. Well, I think the key point that you added, Mr.

English, and thank you for your kind words on this, is that regardless of complaints from trading partners, safeguards provisions are

acceptable under WTO rules. And we have been going back to the

ITC to make sure we try to do this as cleanly as we can to proceed

in accordance with those rules. And if we have the industry undertaking the restructuring as they will need to become competitive,

I think safeguards are appropriate.

That is something that my Cabinet colleagues and I will be discussing with the President in the nature and the form. And as you

probably point out, there is a balance here. You have different

users and you have different steel industry companies that are developing different business plans in how they are trying to approach this. But I would really thank you and your leadership with

the steel caucus all year for working with us on this so we can try

to deal with what we know has been a difficult problem for many

communities in America.

Mr. ENGLISH. One of the other issues that is frequently associated with steel and other heavy manufacturing is the status of our

antidumping laws. And I know you have had some very difficult decisions to make on this as the Doha negotiation progressed. I wonder if you would care to comment on whether the Administration

would be open to some ideas being advanced not only by myself,

but by Mr. Levin and Mr. Cardin and Mr. Houghton, to potentially

within the WTO standards strengthen our antidumping laws, take

out some of the—take out or replace some of the provisions that

have been proven to be antiquated and/or create problems. We

have not had a major overall of our antidumping laws in quite a

few years, and I don’t count in this the minor revisions that were

43

made in 1994. I think a major overhaul of our antidumping laws

has not been done since the seventies.

Would the Administration be open to entertaining this kind of

initiative?

Mr. ZOELLICK. Well, first, we would certainly be pleased to discuss this with you and others on the Committee. And just to give

you a sense of the importance of this, the House passed a resolution before we went to Doha that we looked at and followed very

closely in terms of our approach in dealing with these issues in the

WTO context.

On the domestic front, as you know, the Commerce Department

applies these laws, and so I have to defer a little bit here to my

colleague, Secretary Evans, but we work very closely together and

we would be pleased to get into dialogue on these laws and how

they could be improved and strengthened, obviously, in accordance

with our WTO obligations.

Mr. ENGLISH. As the author of the House resolution, I am grateful you followed it religiously.

And one last point I would like to make. I noticed you recently

visited Morocco. I was delighted to see that. My own view is that

Morocco is potentially a good partner that we can engage in a bilateral trade agreement along with some of the other Magreb countries: Tunisia; potentially, Egypt. Would you like to comment on

the potential for a bilateral or multilateral initiative here?

Mr. ZOELLICK. Also, Mr. English, I don’t know if you were on this

trip. Mr. Gephardt preceded me, and I know that he was interested

in trying to express help in terms of strengthening U.S. trade with

Morocco. So perhaps we can even get a broader base here. And I

talked with Mac Collins about how he tried to promote some paper

from Georgia in terms of sales.

Morocco is a country that has pushed forward with economic reforms and pushed forward with political reforms as well. There will

be parliamentary elections. So at a time there is turmoil in the

Magreb, I personally feel and I think all of us have a sense that

it would be extremely good for the United States if we could

strengthen the reform process in a way that also opens markets.

The Europeans have preferential access. We have lost out in various areas. So I think we can do good and do well at the same time

through this negotiation. And I do believe that the Magreb made—

there may be a window through some of the other Magreb countries.

You mentioned Egypt. And here we have had discussions, but I

will also just share with you the need that we have to be realistic

with Egypt. Right now, Egypt has not implemented some of the

WTO obligations in terms of intellectual property and customs and

other areas. We want to support Egypt and want to try to help

Egypt but, going to Chairman Crane’s questions about standards,

one of the standards I look at is whether a partner is ready. And

a good test as to whether they are ready is whether they are willing to follow through on the reforms and their current obligations.

Morocco has. Egypt has some work ahead of it.

Mr. CRANE. Gentleman’s time has expired. Mr. Doggett.

Mr. DOGGETT. Thank you Mr. Chairman, and Ambassador in the

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sions, I have voiced my very strong concerns about the misuse of

the investor State dispute provisions by multi nationals to challenge governmental actions that were designed to protect the water

we drink and the food that we eat. But, during that year, there

have been few public signs that anything is being done about it,

though I was pleased there some cosmetic clarifications last July

that were announced. And I believe that the concerns of every

major environmental organization in the United States remain the

same as when I raised this issue with you last year.

I know that within the last few days, as you testified, you met

with one part of the environmental community to offer some trial

balloons about how to address this concern.

But of course the Methonex case concerning the pollution of the

water supply in California is still pending. The recent Lindane case

is pending now, where there is a challenge to a Canadian pesticide

ban evn though the same pesticide is banned in the United States,

by an American company that involves health and safety. Last

week, a Chilean official was reported in the trade press to have

said that Chile doesn’t like the wording of Chapter 11 either. Given

the threat to our environment and safety, the Chilean’s stated concerns, and the year you have had to act, can you commit today that

you will be personally urging that any trade agreement with Chile

or any other agreement that you plan to negotiate and submit to

Congress in the near future will have significant reforms in the investor-state issue?

Mr. ZOELLICK. Well, one thing I really differ with I guess, Mr.

Doggett, in your statement is the notion of we are just raising trial

balloons. I am in a very serious dialogue with people based on the

concerns that you had, Sandy Levin and others have raised with

both the business and environmental community. And let me tell

you, what I am struggling with, and I’m honestly struggling with

it, is we have a balance here, because on the one hand we want

to try to make sure, as we have had testimony today from your

colleagues——

Mr. DOGGETT. And I will be glad for you to supplement. I understand the need for the balance. That’s what I asked about last year,

so there is no conflict between what I am urging and the concern

you raised with reference to Mr. Tanner, whether there was a contract breach. But what I want to know, is there going to be something you are urging to have happen in this on the Chilean agreement that you say you will be submitting?

Mr. ZOELLICK. We haven’t decided on our position, because I’m

honestly——

Mr. DOGGETT. After a year, you have not decided which way to

go on it?

Mr. ZOELLICK. Well, one of the things that happened during the

course of the year, Mr. Doggett, is I was getting advice from this

Committee in terms of the TPA process, and I wish it would have

happened earlier but it didn’t happen until December. So working

on that guidance, and I am trying and I am reaching out the best

I can, Mr. Doggett, to get ideas, and I think it is best that I not

decide until I do.

Mr. DOGGETT. Thank you, Mr. Ambassador. If you haven’t decided, I can quite accept that as the answer, though I am troubled

45

by it. I know that you are aware of the Public Broadcasting System

special that Bill Moyers did called ‘‘Trading Democracy.’’ The Deputy Chief Negotiator of NAFTA, there before of course you were in

charge, was quoted on the program as saying, ‘‘If expropriation

means anything that diminishes the value of your investment, then

that is probably a big mistake because that is just too greedy.’’ And I wonder if you agree with that view: Does NAFTA require

compensation anytime governmental health and safety regulations

diminish profits.

Mr. ZOELLICK. What I feel, Mr. Doggett, is we need to do two

things. One is make sure that American investors abroad get the

same protection that foreign investors get in the United States.

And the second thing we need to do is to make sure that our ability

to have health and safety, environmental regulation, is not compromised in any way. And that is what we are trying to do.

Mr. DOGGETT. Does that first principle mean that you also subscribe to the view that foreign investors should have more rights

with regard to property than American citizens do?

Mr. ZOELLICK. No. And that is one of the reasons that we are trying to work to see, given the framework of these agreements—and

you know it is important, but this is a serious topic and I want to

deal with it seriously, and I believe we need to as well. We have

had about 60 of these agreements and bilateral investment treaties. There are about 1,600 of these around the world. And one of

the things we have to be careful about is also not leaving the

United States in a bad position compared to other investors.

Mr. DOGGETT. Since the yellow light is on and I welcome your

supplementation, am I correct that in a NAFTA arbitration panel,

it is possible for a foreign corporation to deny this Committee, the

public, and the press from reading legal briefs that are submitted,

even if you personally think that the foreign investor’s filing should

be public?

Mr. ZOELLICK. I have to check on that, because one of the things

we did in July was to try to make sure we opened up the documentation for the agreements. So one of the things in July, when

you thought we weren’t acting, might have been able to address

this. But also I would say it is my view that all of these should

be opened and the hearings should be opened up as well.

Mr. DOGGETT. And I urge you to begin with Chile. Just finally,

Mr. Chairman, some have suggested that you were involved in

plans to settle the Loewen v. United States case as soon as the fast

track vote is over with. Are there any negotiations underway?

Mr. ZOELLICK. Is this the——

Mr. DOGGETT. The Mississippi Supreme Court case. You are not

consulted about it in any way?

Mr. ZOELLICK. I monitor the case because I know that it is an

important case, but I don’t think we are part of it.

Mr. CRANE. The time of the gentleman has expired. Mr. Pomeroy.

Mr. POMEROY. I thank the Chairman. Mr. Ambassador, I think

the President chose well when he selected you to be the Trade Representative, and I think you are doing a very good job on behalf of

the Administration, on behalf of all of us. That is to say, we will

always agree about the philosophical directions of your—the way

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sonally, and your staff, particularly Ambassador Allen Johnson, to

be very responsive to the issues that I have had relative to the

North Dakota agriculture. I appreciate it.

Coming up next week is a termination that you will be making

on this 301 petition brought against the Canadian Wheat Board.

We are waiting with bated breath about what might happen there

and appreciate the fact that tomorrow, you will be meeting with a

number of Senators and some House Members—although most of

us, unfortunately, will be clearing out of town without votes on this

question—to further discuss it prior to the ruling.

There were some responses that you made yesterday that I find

a little troubling as you testified at the Senate Finance Committee

in terms of your thoughts on this matter. We have visited in the

past, Mr. Ambassador, about the range of options: What do you do

when you have an entity, Canadian Wheat Board, a state-subsidized monopoly, where it is illegal to sell wheat other than

through this monopoly if you are in western Canada, and this monopoly we believe routinely exercises internal subsidies? Can’t

prove it because they adamantly refused us access to their books

and have taken, in my opinion, extraordinary lengths to secure

utter secrecy in internal pricing.

And finally, the ongoing frustration then resulting from languishing market price for wheat and the demise of the durham

wheat market in particular for U.S. farmers have really brought

this situation to a very serious point that has caused very extensive

evaluation of what our options might be. The section 301 wasn’t

picked in a vacuum; it was picked after very thorough deliberation

in terms of the elements of establishing the case and then establishing the remedy under antidumping or a countervailing duty. It

was exhaustively deliberated and determined that really the only

shot was to go and sit for the section 301.

You hold your responsibilities at a very important point in time

because issues that have—I mean that have been out there—they

are fully ripe and they come to a point where they have to be resolved. Sometimes it seems to me that reality causing political

forces is at a totally different track than the regimen of international trade laws, and somehow you have got to span those two.

You have got to deal with real reality and the political consequences coming from it, as well as apply your expertise as our

trade negotiator.

I am telling you that it is my sincere evaluation of the stakeholders in this question in North Dakota and through the northern

tier of wheat production that anything less than a holding or finding under 301, the difficulty in establishing tariff rate quota to deal

with it, is not going to be responsive to what they are hoping for.

It is understood that that is going to be challenged, that that is

going to involve a challenge that would even involve a risk of being

overturned—WTO. But that is where they are, and that is the way

they think this has to advance. And I wanted to bring you that

message in these final days before you must make your determination. I would be interested in anything you care to say on the

record.

Mr. ZOELLICK. First, Mr. Pomeroy, let us make sure if we can,

if you are not going to be able to be there tomorrow, that we have

47

a chance to follow up by phone, because I want to compliment you

because you have been leader on this and we have learned an

awful lot from you and we very much appreciate the engagement

as we have gone through.

Let me tell you how I briefly see it today, and I will discuss with

your colleagues, is that the 301 just gets us the information and

we work with you and others to try and really do a much more

thorough job about trying to dig and get as much information surveys, and then to release that publicly. And then the question is

what do we do with it.

The problem with the tariff rate quota, there is no doubt that

under our NAFTA regulations and with a little bit more of an increase in the tariff under our WTO obligations, that we would be

in violation, and then that means automatically they retaliate

against us, probably the Ag commodities. Maybe some that hurts

against North Dakota and it is not a durable solution.

So, then, the question is what can we do? And what I was putting forth yesterday, and I hope we can talk with the industry

about it a little bit more, is I know some of their initial look at the

antidumping countervailing suit—we think there is some additional information gained through the 301 process that is worth a

look to see whether this might be a useful approach.

And indeed we looked at—and I know, because we are talking

about farmers that don’t necessarily have the ability to bring actions—but we have looked at other States who have supported

groups, citrus in Florida for one, to be able to bring action. And I

wanted to share our thoughts about one offensive route.

The other offensive route that we have talked about with you is

the WTO case. And I talked about this with Chairman Bachus yesterday. And this is a very uncertain area in the WTO set of rules.

And so there is no, you know, sort of clearance, and we may or may

not be successful, but I think by pushing the issue in that route

as well, we would be in a position to heighten it for the third element of the offensive, which is to do this in the context of the Doha

agenda. And this is where we are good to have the round going because, look, I think these are monopolies and I think they are rotten and I think they allow various types of credits and subsidies

and they ought to be changed.

And so we have a rules-based system as it is and, as you probably said, that is what we have to try to address. Just so you know,

Mr. Pomeroy, we can talk about this more. I am not saying one or

the other. I am looking at all three. And they might be able to help

and interrelate with each other. And I know the tariff rate quota

looks facially appealing.

But what I can’t get over is if it is a violation, it won’t last. Then

where does it leave the North Dakota wheat industry? And that is

kind of a summary of how I am looking at it. I feel and I felt for

a long time that this State monopoly ought to be changed.

Mr. POMEROY. I will call you and I appreciate that invitation.

Mr. CRANE. The time of the gentleman has expired, and with

that all time has expired, and we want to commend you, Mr. Ambassador, for your endurance and we look forward to working with

you over the course of this year. And we are guardedly optimistic

48

that we will be able to make positive accomplishments, thanks to

your efforts. And with that, the hearing stands adjourned.

[Whereupon, at 1:35 p.m., the hearing was adjourned.]

[Questions submitted from Messrs. Rangel and Tanner, Shaw,

Jefferson, Doggett, and Ryan to Ambassador Zoellick, and his responses follow:]

Questions for U.S. Trade Representative Robert B. Zoellick From

Congressmen Rangel and Tanner

European Union (EU) biotechnology policies are already costing U.S. corn growers over $200 million in lost exports. The new EU trace-ability and labeling proposals

and the continuation of the moratorium on new product approvals put at risk.

• $1.2 billion in soybean exports; • Nearly $2 billion in export of consumer-oriented food products; • Over $120 million of vegetable oils, starches and sweeteners; and • $550 million of corn gluten feed (CGF) and other feed ingredients.

That makes biotechnology issues in U.S.-EU trade major issue, potentially involv- ing more than $4 billion. And that figure does not take into account the trade problems the United States is facing in other countries as a result of copycat legislation,

nor the adverse effects of EU policies on the development of the U.S. biotech industry. Given the current problems in the farm economy, our producers cannot afford

to take a multibillion-dollar hit.

Question:

In the view of the economic stakes, shouldn’t the resolution of unfair or

discriminatory biotech trade policies of U.S. trading partners be a high

trade priority for the Administration?

Answer:

Biotechnology is a top priority for the Administration. Biotechnology is but a refinement of the continuing process of agricultural innovation that has for generations been fundamental to American prosperity, and indeed to human welfare

around the world. Biotechnology could help us feed and strengthen hundreds of millions of malnourished people, especially in developing countries. It could reduce the

need for agricultural chemicals that burden the environment. And it could provide

vitamins and nutrition to counter diseases that plague the poor.

The EU’s biotechnology policies—the unjustified approvals moratorium and proposed traceability and labeling regulations—put in jeopardy continued agricultural

innovation and all of its potential social and economic benefits. Their policies put

at risk open trade in agro-food products. Their policies are a threat to farmers

around the world. I have been raising these issues on my trips around the world—

in Africa, in Latin America, and in Asia—and have found that many share our concerns about the EU’s pernicious policies.

I recently met with the House Biotech Caucus to discuss the issue and how to

move forward. I look forward to continuing to work with Congress on this high priority issue.

Question:

What is the Administration’s strategy for dealing with such discriminatory policies?

Answer:

Resolving the obstacles resulting from the EU biotech policies is indeed a very

high priority. First, the President has on several occasions raised with European

heads of government our concerns about the EU moratorium. Secondly, I and other

senior officials have raised numerous times our concerns about EU policies with key

European Commissioners and national government ministers. Thirdly, I raised the

issue in meetings in Geneva with the Cairns Group countries and with African

countries—in both cases I explained our concerns, and our interest in working together with these countries to persuade the EU to change its policies. Fourthly, during my trips to Africa, Latin America and Asia, I have raised our concerns at every

opportunity about the importance of biotechnology and the dangers of EU policies.

Question:

We understand that European Union (EU) officials have told you that

they stand a better chance of restarting the approval process later this

49

year, after new legislation is implemented. Weren’t we told the same thing

two years ago after those same rules were to be proposed? Why should we

believe that the moratorium will be lifted this year without a formal WTO

complaint by the U.S.?

Answer:

You are correct. EU officials have suggested any number of times that they may

shortly be able to resolve their biotech approvals paralysis.

And, yes, the Commission has suggested that, after the October implementation

date of their new approvals legislation, they might be able to recommence the process of reviewing approval applications—that would mean that the earliest any approval decisions could be made would be late 2003.

As you point out, the EU’s track record suggests grounds for skepticism that the

Commission will actually keep to this schedule. We are accordingly considering

closely whether it is necessary to bring a WTO challenge to the EU moratorium.

But to pursue a challenge, it would be important that we build public support by,

for example, highlighting harmful effects of EU policies on the ability of developing

countries to ensure food security and achieve economic independence. In considering

whether, when and how to proceed with a WTO challenge, I have been having conversations with industry, agricultural, and NGO leaders, and with Congressional

members.

Question:

Aren’t several EU Member States demanding that the new traceability

and labeling proposals be implemented before new approvals are granted?

Please explain why implementation of the new traceability and labeling

proposals would not make all U.S. biotech products unmarketable in the

EU, thus negating the benefits of restarting the approval process.

Answer:

Yes, we understand that some European officials have suggested that the

traceability and labeling regulations must be in force before allowing approvals proceed. That reasoning, given the plausible date of adoption of the regulations, could

mean postponing approvals until, say, 2004.

We are indeed concerned that the traceability and labeling proposals, if adopted

in current form, would have the effects you suggest. These proposals would require

that a food product be labeled as containing or derived from ‘‘Genetically Modified

Organisms’’ (GMOs) even where the product is substantially the same in characteristics, structure and attributes as its conventional counterpart, and even where

biotech material is no longer detectable. Such government-mandated labeling, where

there are no significant differences between the modified and conventional products,

could be construed by consumers as, in effect, a government warning, and would

hence be misleading.

We are working closely with USDA and the State Department to raise our concerns with Commission and member state officials, and to argue for market-driven

consumer-information labeling along the lines of recent draft FDA guidance on nonbiotech claims. Moreover, as noted, I have discussed the labeling issues during my

trips to Africa, Latin America, and Asia, and we will continue to work to build broad

international support in our criticisms of the European initiatives.

Questions for U.S. Trade Representative Robert B. Zoellick From

Congressman Clay Shaw

f [FYI: parts of this question go well beyond Singapore FTA negotiations and, I believe, beyond USTR’s function.]

1. As the lead House sponsor of Seaport Security legislation, I am interested in better coordination between Federal agencies on achieving homeland security objectives, which are vital to Florida as a crossroads of commerce. In reviewing recent statements by Customs Commissioner Bonner,

discussing U.S. Customs Service’s desire to enhance homeland security by

pushing more of the inspection and intelligence gathering offshore to our

trading partners’ points of origin/transit, how much higher a priority is

this going to be for USTR in ongoing and upcoming trade negotiations? Are

we continuing to make progress in our FTA negotiations with Singapore in

achieving better cooperation on transshipment and other national security

and trade law enforcement objectives? Will such national security concerns

50

raise the priority of engaging certain trading partners in trade liberalization talks, beyond the immediate benefits to commerce?

Answer 1:

In our negotiations with Singapore, USTR continues to place a very high priority

on ensuring that the FTA will include commitments that will help address transshipment concerns, particularly through enhancing cooperation on customs matters.

We are making good progress in these negotiations with Singapore. I stressed the

importance of this issue, particularly the role of information sharing, in a letter to

Singapore Trade Minister Yeo last September. This year (February 18–20), I sent

the head of the U.S. Singapore FTA negotiations and the USTR lead for customs

negotiations to Singapore to address the full range of customs matters, including

transshipments. We received excellent cooperation from the Government of Singapore. While we will need to continue work with Singapore on customs cooperation

issues in the context of our FTA, we believe our efforts to date are yielding good

progress.

2. I understand my Florida colleague, Senator Bob Graham, submitted a

question at yesterday’s hearing in the other body, and I would similarly appreciate knowing the answer: the Senate version of TPA contains a section,

‘‘Certain Other Priorities,’’ which directs the President during negotiations

to remedy market distortions that lead to dumping and subsidization including, among other things, cartels. Cartel practices have distorted international markets in processed citrus and other agricultural commodities.

Senator Graham noted that U.S. anti-trust laws would not allow such anticompetitive practices among U.S. firms, nor should we tolerate it from our

trading partners. Do you plan to negotiate remedies to eliminate cartel

practices, and how do you plan to address them, and if so, how would you

go about this?

Answer 2:

At the insistence of U.S. negotiators, express language was included in the Doha

agreement to give us the ability to address in upcoming WTO rules negotiations the

trade-distorting practices of our trading partners that give rise to the need to apply

our antidumping and countervailing duty remedies. The bottom line is that we have

a mandate that will allow us to pursue an aggressive, affirmative U.S. agenda,

aimed at preserving the existing rules and getting at the underlying causes of these

unfair trade practices. Under the procedure specified in the Doha agreement, we are

now working on identifying particular foreign trade-distorting practices, which could

include cartels and government subsidies, that we will seek to correct in upcoming

negotiations, and we welcome guidance from you and other Members as to particular foreign practices that we should be addressing.

In addition, the United States has identified establishing disciplines on agricultural state trading enterprises as a priority in the WTO negotiations. In particular,

we have proposed ending monopoly (single desk) export and import privileges of

state trading enterprises, increasing transparency in state trading enterprise operations, and ending government financing authorities that support state trading enterprise activities.

3. While the TPA gives you the tools to expand trade through U.S. and

foreign tariff reductions, there are many unsubsidized U.S. agricultural

commodities which have been forced to address unfair imports repeatedly.

Will you commit to avoiding U.S. tariff reductions for those commodities

which have been faced with dumped and subsidized import competition,

like citrus?

Answer 3:

The United States, just like other countries, needs to be mindful of potential impacts of free trade agreements on import sensitive industries. An important element

of H.R. 3005 is the extensive process whereby the Administration consults with Congress on negotiations affecting import sensitive commodities.

H.R. 3005 Section 3(a)(2) states that the President may not use his independent

proclamation authority to reduce tariffs on certain import sensitive commodities.

H.R. 3005 Section 4(b)(2) establishes a consultative process that the Administration would need to follow for negotiations affecting certain import sensitive commodities. This process includes:

1. Before negotiations begin, the Administration would identify import

sensitive commodities and consult with the Ways and Means, Finance, and

Agriculture Committees on the appropriateness of further tariff reductions

51

on these items, taking into account the impact of such tariff reductions on

the U.S. industry. The Administration would also identify products that

face unjustified sanitary and phytosanitary barriers.

2. The Administration would request probable economic effect advise from

the ITC on the impact of tariff reductions for the industry producing the

product and the U.S. economy as a whole.

3. The Administration would notify the above Committees of those products on which USTR intends to seek further tariff liberalization and the

reasons for such.

4. After commencing negotiations, the Administration would identify any

additional items where USTR intends to seek further tariff liberalization or

other countries’ tariff cut requests.

Through this process, Congress and the Administration will be working closely together on negotiations affecting agricultural tariffs. In addition, U.S. trade laws, including section 201, antidumping and countervailing duty statutes, provide important mechanisms to protect industries injured by unfair trade practices, dumped or

subsidized imported products.

4. It is my understanding that many countries have exempted import-sensitive products from tariffs elimination in free trade agreements, yet USTR

has held the objectives, through its interpretation of WTO Agreements, to

seek elimination of all tariffs in any free trade agreement. If our trading

partners continue to take an opposite course in their own self-interest during FTAA negotiations, will you seek similar insulation for unsubsidized

agricultural industries, like citrus, or have the U.S. stand alone as a matter

of negotiating principle?

Answer 4:

In launching the Free Trade of the Americas (FTAA) negotiations at San Jose,

Costa Rica in 1998, Ministers agreed that ‘‘all tariffs shall be subject to negotiation’’

and ‘‘ consistent with the provisions of the WTO . . . to progressively eliminate tariff

and non-tariff barriers, as well as other measures with equivalent effects, which restrict trade between participating countries.’’ Subsequently, Leaders, Ministers and

the Trade Negotiating Committee (TNC) have set out more detailed work programs

and guidance consistent with these general principles.

Over the past year, the Negotiating Group on Agriculture (NGAG) has focused on

developing the data and framework that will guide future product-by-product market access negotiations. Thus, there have not been discussions concerning the specific treatment of any product, including citrus. The NGAG has prepared its recommendations on methods and modalities for the tariff negotiations for review and

decision by the TNC April, so that the detailed market access negotiations can be

initiated by May 15 as agreed to by Ministers in Buenos Aires last April.

Questions for U.S. Trade Representative Robert B. Zoellick From

Congressman William J. Jefferson (D

f –LA)

First, let me commend you on your upcoming trip to sub-Saharan Africa.

It is my understanding that you will be one of the first, if not the first

USTR, to travel to this important region. As one of the Chairs of the African Trade and Investment Caucus, I have followed closely the Administration’s efforts to implement AGOA as well as the efforts of sub-Saharan

countries to comply with the bill’s eligibility criteria. Now that the bill is

law, the U.S. must ensure that the objective of stimulating regional economic development and growth is achieved.

• What is your assessment of impact of the AGOA legislation on the subSaharan region? The most recent ITC and USTR reports indicate that

AGOA has enable SSA countries to attract billions of dollars of much

needed investment.

I would also like to reiterate my concerns regarding the pace of AGOA

implementation. For example, sub-Saharan beneficiary countries need additional assistance from the United States to meet the stringent customs

and visa requirements in the legislation. Currently, only a handful of SSA

countries designated as beneficiaries have been certified as eligible to ship

apparel products since the effective date of October 1, 2000. Many of the

countries are willing to upgrade their customs systems to comply with the

52

law; however they need additional technical assistance from the United

States to undertake this important task.

Answer:

My staff and their colleagues at other Washington agencies and our overseas

posts have worked to ensure that all AGOA-eligible countries that wish to receive

apparel benefits can implement the necessary customs and visa requirements. We

understand that these requirements can be stringent, but we believe this is essential both to prevent illegal transshipment and to ensure that the full benefits of

AGOA accrue to producers in sub-Saharan Africa. As of March 1, 2002, 15 countries

have been certified as eligible to ship apparel products to the U.S. under AGOA.

Submissions from seven additional countries are pending.

• First, is the Administration fully committed to the AGOA II language

we included along with the Andean Trade legislation? These provisions

are needed to address the implementation concerns that have been

voiced by SSA countries and U.S. companies attempting to utilize the

AGOA program.

Answer:

The Administration supports AGOA II provisions that were passed by the House

as part of legislation reauthorizing the Andean Trade Preference Act. We believe

these provisions will provide significant new benefits to eligible sub-Saharan African

countries and further our efforts to promote sustainable economic growth and development in the region.

• Second, I am also interested in knowing about the resources you have

allocated for SSA countries in the way of technical assistance and trade

capacity building? We discussed the need to ensure adequate resources

for trade capacity building when you testified on the Andean bill last

year. I was pleased that you agreed with me this is a priority for USTR.

Answer:

Technical assistance and trade capacity-building are essential to help sub-Saharan African countries participate fully in the global economy and realize tangible

benefits from AGOA. Overall, between 1999 and 2001, the United States provided

$192 million in trade capacity-building assistance to the region. AGOA has been a

particular focus of our efforts. For example, as part of the more than $10 million

in new trade capacity-building initiatives unveiled during my recent trip to Africa,

I announced $3.5 million to help the COMESA and SADC countries in eastern and

southern Africa take full advantage of AGOA opportunities.

This year, we are also planning four additional regional AGOA training seminars

in for eastern, western and central Africa. Seminars we have organized in the

past—20 so far—have been very successful. The first two seminars will be held this

month in Yaounde, Cameroon and Kampala, Uganda. They will include U.S. private-sector participation. The seminars will focus on areas identified by many African countries as challenges to their efforts to realize tangible benefits from AGOA.

These include specific mechanisms to establish commercial partnerships and linkages with the U.S.; resources to finance trade; small and medium-size business development; and economic/regulatory reforms and initiatives to enhance AGOA’s benefits. USTR staff will also travel to Burkina Faso this month to consult with the

West African Economic and Monetary Union (WAEMU) Secretariat on AGOA and

the upcoming trade capacity building seminar on regional integration in west Africa

that USTR will sponsor in Washington this June.

• Lastly, in addition to the benefits of the AGOA, what other trade initiatives are you proposing for sub-Saharan Africa in the year ahead?

Answer:

As you know, AGOA specifically calls for the negotiation of free trade agreements

with interested countries in sub-Saharan Africa. During my recent trip to the region, I discussed the possibility of a free trade agreement with my counterparts from

the Southern African Customs Union (SACU) countries (South Africa, along with

Botswana, Lesotho, Namibia and Swaziland). Established in 1910, SACU is the

world’s oldest customs union. It is also our largest export market in sub-Saharan

Africa, with sales totaling more than $3.1 billion in 2001. SACU Trade Ministers

responded very favorably to the prospect of an FTA—as did President Mbeki of

South Africa, President Mogae of Botswana, and members of the U.S. and southern

African business communities. SACU Ministers plan to discuss this opportunity

among themselves over the next couple of months. If both sides decide to move forVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00056 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
53

ward, we will reconvene to discuss a framework for further progress. I look forward

to working with Members of Congress on this initiative as we move ahead.

As you are aware, the Port of New Orleans is concerned about actions

pending within the Administration that might result in the imposition of

tariffs and/or quotas on the import of steel products into the United States.

The Port is the number one gateway in America for the steel import trade,

and over 8,600 jobs within the greater New Orleans region are dependent

upon that trade. Steel imports have been declining at an alarming rate

over the past several years, and any government-imposed restrictions

would only further aggravate the loss of transportation-related jobs in the

Louisiana maritime community. During the President’s visit last month to

the Port of New Orleans, he readily stated that ‘‘trade is a jobs issue.’’

Ambassador Zoellick, we both fully understand that free trade is the engine that powers the Nation’s economy. In selecting a remedy in the Steel

201 case, how much consideration will be given to the negative impact of

the imposition of tariffs and/or quotas on ports-based economies, like we

have in New Orleans?

Answer:

• The Administration and the President fully considered the potential impact on

steel consumers and ports in the Section 201 steel remedy announced on March

5th.

• The Administration has fashioned the relief to exclude certain steel products for

which no relief is necessary at this time. The level of relief provided for each

product was also limited to the level needed to provide relief for the domestic

industry.

• The Administration has also worked with U.S. steel consumers and producers

on excluding foreign steel products from the Section 201 relief that are not

available in the U.S. market from domestic producers.

• The Administration was presented with a full range of economic information

from interested parties in the Section 201, including economic studies that

produce dramatically different results. Studies estimating job losses as a result

of the Section 201 are subject to all of the vagaries and imprecisions of economic

modeling. Informed judgment must be used when considering such studies or

models in formulating policy.

• The Administration considered the quantitative economic evidence, as well as

qualitative factors when it formulated its Section 201 recommendation to the

President, and this evidence was ultimately weighed by the President in his decision. In fact, I met personally with the ports and was selected Port Person

of 2002.

How much consideration is being given to non-tariff or non-quota remedies?

Answer:

• In line with the U.S. International Trade Commission (ITC) determination that

steel imports have been a substantial cause of serious injury, or threat thereof,

to the U.S. steel industry and the ITC’s recommendation to impose tariffs as

the remedy for most product categories, the President decided to impose tariffs

ranging from 8 percent to 30 percent on certain steel products. As required by

WTO rules, these tariffs decline over the period of the relief.

• The relief also includes a tariff rate quota (TRQ) on imports of semifinished

steel products known as slabs. Under this TRQ, 5.4 million short tons of semifinished slabs will be allowed to enter duty free. The out of quota tariff will be

30 percent.

Lastly, while the Administration may decide to implement tariffs or additional quotas on imported steel products, I am convinced that this is a reactionary and shortsighted policy. What else is being done to prevent unfair trade in steel at the multilateral or bilateral level?

Answer:

• The President’s steel initiative announced on June 5, 2001, has three elements:

(1) initiate the Section 201 investigation; (2) conduct discussions with other

steel producing countries to encourage the market-based reduction of excess inefficient steel-making capacity worldwide; and (3) initiate negotiations to eliminate subsidies and other government market-distorting practices in the steel

sector.

54

• We are very pleased with the progress made thus far in implementing the last

two objectives and plan to continue to pursue them vigorously. Talks in the

OECD on March 13th–15th on reduction of excess inefficient capacity and initiating negotiations to eliminate subsidies and other market-distorting practices

went well. • The long-term solution to the problems faced by the U.S. steel industry and

steel industries abroad depends on the elimination of global inefficient excess

capacity and market-distorting practices.

• We are urging our steel trading partners to continue to cooperate in solving

these issues.

Questions for U.S. Trade Representative Robert B. Zoellick From

fCongressman Lloyd Doggett

Investor-State Dispute Provisions

1. Foreign investor rights. On February 7, 2002, when you testified before

the Ways and Means Committee, I was pleased that in your testimony you

agreed that foreign firms should not enjoy greater property rights than

Americans have, but,

(a) is it true that foreign investors are currently claiming rights in

NAFTA tribunals that exceed the rights available to Americans in similar

circumstances before American courts?

(b) is it true that NAFTA Chapter 11 authorizes greater property rights

for foreign firms than those available to Americans under Federal takings

jurisprudence?

Answer 1:

(a) Just as in U.S. domestic legal proceedings, parties that initiate proceedings

under NAFTA Chapter 11 may choose the claims and arguments they wish to make.

Like plaintiffs before U.S. courts, however, investors who bring complaints before

NAFTA tribunals will not prevail unless their claims and arguments meet the applicable legal standard.

(b) No. U.S. ‘‘takings’’ jurisprudence provides rights that are equal to or exceed

those available under the expropriation provisions of the NAFTA and our numerous

bilateral investment treaties. By contrast, the domestic law of many of our treaty

partners provides U.S. investors far less protection from arbitrary, uncompensated

expropriations than that prescribed in the NAFTA or our BITs. That is a key reason

why those agreements are so important.

2. Diminution of value. Do you believe NAFTA requires compensation if

a government measure enacted to protect our health, security, safety, or

environmental resources causes only modest reductions in a foreign corporation’s revenue?

Answer 2:

We understand this question to ask whether a measure of the type you describe

would amount to an expropriation subject to compensation under the NAFTA. The

answer is no.

3. Chile. On February 7, 2002, in testimony before the Ways and Means

Committee, you stated that you had ‘‘not decided’’ whether to include any

significant investor reforms in the U.S.-Chile FTA.

(a) What factors are you evaluating that will determine whether you include significant investor reforms in this agreement?

(b) When will you let me know of your decision and the basis of your decision?

(c) Have you already sought during the U.S.–Chile FTA negotiations to

expand the scope of investor protections similar to NAFTA Chapter 11?

Answer 3:

(a) The United States has not yet completed, and therefore has not presented to

Chile, a complete set of investment positions, because we are continuing to examine

how we can improve in the U.S.-Chile FTA on the provisions of our existing investment agreements. To this end, we are considering the full range of suggestions that

55

we have heard from the Congress, nongovernmental organizations, the business

community, as well as all interested U.S. Government agencies.

(b) Both our interagency discussions of this issue and our negotiations with Chile

are continuing. At the same time, we have been consulting closely with the Ways

and Means and other Congressional committees to develop improvements that address the investment negotiating objectives set forth in the respective TPA bills. We

intend to continue to keep the committees informed of our progress.

(c) The question appears to be premised on the assumption that the NAFTA provides investors greater protection than that afforded under earlier U.S. investment

agreements. We do not believe that is the case.

Question:

4. Authority to preempt. Do you believe that, following a determination

by a NAFTA tribunal that the Federal Government is obligated to pay compensation to a foreign investor, the Federal Government is empowered to

sue to preempt a state or local law on grounds that it violates a provision

of Chapter 11?

Answer 4:

The question of whether the Federal Government is empowered to enforce Chapter Eleven, or any other provision of the NAFTA, is a matter of U.S. law. The extent

of the Federal Government’s authority is not linked to any determination by a

NAFTA tribunal. In this regard, you may wish to refer to the relevant provisions

of the North American Free Trade Agreement Implementation Act and accompanying Statement of Administration Action, which the Congress approved.

5. Interagency process. Not all Federal agencies apparently share the enthusiasm some have for using NAFTA Chapter 11 as a model for future

trade agreements.

(a) Please provide a copy of all memoranda or position papers provided

to the USTR as a part of the interagency review of investment provisions.

(b) Please note all the concerns raised to date in this review process, including but not limited to: opinions on an exhaustion of remedies requirement, the scope of ‘‘expropriation,’’ ‘‘investment,’’ and ‘‘investor’’ and all

other procedural and substantive reform ideas.

(c) Finally, identify fully and specifically who has or is participating in

this review process and who they represent.

Answer 5:

Please see answer to question 3.

6. Supreme Court decisions. In Loewen v. United States, a Canadian investor is challenging not just an action by a trial court, but an act of the

Mississippi Supreme Court. Do you believe a NAFTA tribunal is empowered

to order the payment of compensation to a foreign investor who challenges

an opinion issued by any court in this Nation, including the U.S. Supreme

Court?

Answer 6:

International law has long recognized that a country may be held internationally

responsible when its court system, including its highest courts, denies justice to a

foreign national. Throughout the history of the Republic, the United States has repeatedly asserted claims against other countries for denials of justice by their courts

to U.S. citizens. On the other hand, the standard for establishing a denial of justice

is quite high and, as a result, cases in which compensation has been awarded for

denial of justice have been very rare.

The United States has received relatively few claims that U.S. courts have denied

justice to a foreign citizen. It is our expectation, based on historical experience and

the high standards of U.S. courts, that few claims of a denial of justice by the U.S.

courts will be made, and fewer still will be sustained.

7. Closed NAFTA process. On February 7, 2002, I asked you if Members

of the Ways and Means Committee, watchdog groups, and the press would

always have access to all parties’ legal memoranda and other submissions

filed with a NAFTA arbitration panel. You said you were ‘‘not sure’’ and

that last summer’s ‘‘clarification’’ may have addressed this issue.

(a) Please provide a comprehensive answer to this important question

since the ‘‘clarification’’ is apparently not clear enough for you to clearly

state whether access is permitted.

56

(b) On February 7, 2002, you stated that you believed all NAFTA investorstate arbitration tribunals should be open to the public. Why have you not

publicly urged our two NAFTA partners to promptly open the tribunals?

(c) Will the U.S.-Chile FTA reflect your commitment to openness of the investor-state dispute process?

Answer 7:

(a) The NAFTA Commission’s clarifications reflect a commitment by the three

NAFTA governments to make virtually all documents submitted to, or issued by, a

dispute settlement panel available to the public. This means that an investor’s initial claim, its subsequent pleadings, and the defending government’s responses will

generally be available to the public. It also means that the views of any interested

groups that have submitted ‘‘friends of the court’’ briefs, and any views that a

NAFTA government that is not a party to the dispute has submitted to the tribunal

will generally be made available to the public. The State Department maintains a

website that makes all such available documentation accessible to the public.

Under the trilateral clarification, information that is business confidential or that

is exempt from disclosure under domestic law will continue to be protected. These

are the sorts of materials that would commonly be removed from the public versions

of documents filed in a U.S. court. In addition, some specific arbitral rules regarding

the disclosure of information will continue to apply. For example, one set of arbitral

rules available to the parties restricts the release of minutes from the hearing without consent of the parties. However, it is U.S. policy in each case against it to seek

full transparency throughout the proceedings.

(b) We have urged our NAFTA partners to agree to open Chapter 11 proceedings

to the public.

(c) Please see answer to question 3.

8. Deference. While you may personally believe that some of the pending

NAFTA claims based on state and local government actions are frivolous,

panels are agreeing to hear the full cases on the merits.

(a) Do you believe that investment agreements should include a presumption or principle of deference to government measures similar to the rational basis standard used by U.S. courts?

(b) U.S. courts have defined takings in terms of specific situations. Has

your office compiled a list in any form of ‘‘egregious behaviors’’ or clearly

wrongful acts that should result in compensation based on the experience

of American investors abroad? If so, please provide a copy of that list.

(c) Do you believe that investment agreements should include a presumption that nondiscriminatory measures enacted to protect our health, security, safety, and environmental resources do not require compensation?

Answer 8:

Please see answer to question 3.

9. Tobacco and trade.

(a) In all future tobacco-trade discussions, will you commit to consulting

with the relevant Federal agencies, including the CDC, to evaluate the potential health impact of changes to trade agreements?

(b) If a Federal agency concludes that changes to tobacco trade policy

will adversely affect public health, will you commit to not pursuing those

changes?

(c) Please list all tobacco trade matters since July 2001 that have involved your office. Please include the foreign government concerned and

a summary of the dispute. Note whether your office consulted with any

Federal agency regarding whether the policy would adversely affect public

health and provide me with a copy of the Federal agencies’ recommendation.

Answer 9:

USTR routinely consults with relevant Federal agencies, including the Centers for

Disease Control (CDC) and other offices within the Department of Health and

Human Services (HHS), on trade issues involving tobacco and tobacco products.

Through the formal interagency mechanism for developing trade policy, of which

HHS is a member, Federal agencies work to reach agreement on recommended actions and approaches that USTR should take on trade issues. The health policy expertise and active participation of CDC/HHS in this process helps ensure that we

accurately assess the health implications of a particular trading partner’s tobacco

policy and that our positions on tobacco trade issues are informed and balanced and

57

do not conflict with either U.S. health-based policies or undermine the legitimate

health-based policies of our trading partners. Each issue is evaluated on a case-bycase basis taking into account the views of relevant agencies.

USTR has not been involved in any tobacco trade-related disputes since July

2001. Three tobacco trade matters have arisen since that time, on which decisions

were made in conjunction with relevant Federal agencies, including CDC/HHS, on

the appropriate approach to take:

In September 2001, the Administration considered a request from the government

of Indonesia to designate twelve additional products, that included tobacco (HTS

2401.20.57), for benefits under the Generalized System of Preferences (GSP). After

interagency deliberation, the decision was made to exclude tobacco from the list of

products for which GSP was granted.

In February of this year, the U.S. Embassy in Warsaw requested guidance from

Washington agencies regarding correspondence from Phillip Morris that expressed

concern over a proposal within the government of Poland to raise the tariff on unprocessed tobacco from 30% to 105%. Interagency deliberations, that included CDC/

HHS, produced a recommendation that Embassy Warsaw not make representations

to the Government of Poland. There was no information to indicate that the GOP

proposal to raise the tariff on unprocessed tobacco intended to treat imports of U.S.

product differently from imports from other countries, and the Government of Poland is permitted under its Schedule of Concessions to raise the tariff on unprocessed tobacco to its notified bound rate of 105 percent.

In November 2001, as part of broader deliberations about the U.S.-Chile Free

Trade Agreement, agencies considered how to handle tobacco and tobacco products

in the negotiations. These negotiations are ongoing.

fOffice of the United States Trade Representative

Washington, DC 20506

March 29, 2002

The HONORABLE PAUL RYAN

U.S. House of Representatives

Washington, DC 20515–4901

DEAR CONGRESSMAN RYAN:

Thank you for your recent letter regarding our investigation of the Canadian

Wheat Board (CWB) in a Section 301 case. I appreciate your concern, and certainly

agree, that U.S. millers and pasta makers must have access to sufficient supplies

of a specific quality of durum wheat to operate their businesses. The objectives of

the actions that we announced on February 15 are not to restrict trade but to ensure free and fair trade for millers, consumers and producers of wheat. Enclosed are

both the news release and the findings of the investigation.

Question 1:

One of the main complaints by U.S. wheat growers is the existence and operation

of the Canadian Wheat Board (CWB). Such State Trading Enterprises are not tolerated by the United States and should be eliminated. However, since Canada is a

NAFTA partner, why has the existence of the CWB not been brought up before the

World trade Organization? What is the USTR’s rationalization for handling this

matter?

In response to your first question, state trading enterprises (STEs) are permitted

under international trade agreements. In fact, the United States does have STEs

which are notified under rules of the World Trade Organization (WTO). Article XVII

of the General Agreement on Tariffs and Trade establishes disciplines under which

STEs are to act in order to be consistent with the principles of non-discrimination.

Our concern with the CWB is that it is a monopoly STE with monopoly control of

all western Canadian wheat exports and shipments for human consumption. The

CWB is able to unfairly compete with U.S. wheat producers and undermines the integrity of the trading system, because it is insulated from commercial risks, benefits

from subsidies and special privileges, has a protected domestic market and has competitive advantages due to its monopoly control over a guaranteed supply of wheat.

Two of the actions that we are pursuing reflect your suggestion to pursue the

CWB in the WTO. First, USTR will examine taking a possible dispute settlement

case against the CWB in the WTO. Second, the United States is committed to purVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00061 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
58

suing comprehensive and meaningful reform of monopoly state trading enterprises,

such as the CWB, in negotiations in the WTO.

Question 2:

It is my understanding that U.S. millers buy durum wheat from Canada because

the U.S. cannot grow enough domestically to meet pasta production needs. In fact,

in 15 of the last 15 years, U.S. durum production was insufficient to meet total

usage. Further all durum wheat grown in the U.S. is not milling quality. According

to the North Dakota Wheat Commission, only 49 percent of the domestic durum

wheat crop was milling quality. Combined with the fact that the International

Trade Commission found that in 59 out of the last 60 months, Canada has sold

durum wheat at prices above domestic durum wheat prices, upon what data is the

USTR Section 301 case based that warrants action taken against Canadian durum

wheat growers?

In response to your second question, the North Dakota Wheat Commission

(NDWC) alleged unfair trading practices of the CWB not only in the U.S. market,

but also in third country markets. The NDWC requested that we impose an immediate tariff rate quota (TRQ) on imports of Canadian wheat. We recognized, however, the need of U.S. millers and pasta makers to have sufficient supplies of durum

at an acceptable quality. In addition, imposing a TRQ on imports of Canadian wheat

would significantly detract from our reform objectives for the CWB during the same

period we are trying to build an international consensus to support these objectives.

Imposing a TRQ on wheat from Canada could open the United States to a challenge

under the WTO or the North American Free Trade Agreement. For these reasons

we elected not to impose a TRQ on imports of Canadian wheat.

As we work to ensure that Canada meets its international obligations, we will

also ensure that the needs of U.S. millers and pasta makers are met. I look forward

to working closely with you to be sure we achieve these goals.

Sincerely,

Robert B. Zoellick

USTR Ambassador

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

Executive Office of the President

Washington, D.C. 20508

For Immediate Release

February 15, 2002

02–22

Contact:

Richard Mills (202) 395–3230

United States to Pursue Action Against Monopolistic

Canadian Wheat Board

WASHINGTON—Responding to a complaint filed by the North Dakota Wheat

Commission (NDWC), U.S. Trade Representative Robert B. Zoellick announced

today that the United States will pursue multiple avenues to seek relief for U.S.

wheat farmers from the trading practices of the Canadian Wheat Board (CWB), a

government monopoly trading enterprise.

USTR also today released an ‘‘affirmative finding’’ that reviews the results of its

investigation, details the CWB’s monopolistic characteristics, and describes the steps

USTR intends to take to address this issue.

‘‘The government of Canada grants the Canadian Wheat Board special monopoly

rights and privileges which give it competitive advantages that hurt U.S. wheat

farmers,’’ said Zoellick. ‘‘We agree with North Dakota wheat farmers that Canada’s

monopolistic system disadvantages American wheat farmers and undermines the integrity of our trading system. We are committed to using all effective tools at our

disposal to stop the Canadian monopoly wheat board from hurting our farmers. We

will undertake several strong initiatives, working with producers in North Dakota

and others in the wheat industry, to address our problems with the Canadian

Wheat Board.’’

USTR will aggressively pursue a four prong approach to fight for a level

playingfield for American farmers:

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• First, USTR will examine taking a possible dispute settlement case against the

Canadian Wheat Board in the World Trade Organization (WTO);

• Second, the Administration will work with the North Dakota Wheat Commission and the U.S. wheat industry to examine the possibilities of filing U.S. countervailing duty and antidumping petitions with the U.S. Department of Commerce and U.S. International Trade Commission.

• Third, working with industry, USTR will also identify specific impediments to

U.S. wheat entering Canada and present these to the Canadians so as to ensure

the possibility of fair, two-way trade.

• Fourth, these short-term actions are complemented with the Administration’s

ongoing commitment to vigorously pursue comprehensive and meaningful reform of monopoly state trading enterprises in the WTO agriculture negotiations.

Those negotiations gained new momentum with the launch in November of the

Doha Development Agenda, set to conclude by 2005.

This decision is in response to a petition filed by the North Dakota Wheat Commission in September 2000 under section 301 of the Trade Act of 1974. USTR undertook an unprecedented 16-month investigation examining the practices of the

monopoly Canadian Wheat Board. In addition to inviting public comment twice on

the investigation, USTR requested that the U.S. International Trade Commission

(ITC) examine the competitive practices of the Canadian Wheat Board in the U.S.

market and overseas. As part of its investigation, the ITC held a public hearing,

requested public comments and pursued multiple avenues to obtain information on

the Canadian Wheat Board.

USTR has decided not to impose a tariff rate quota (TRQ) at this time since such

an action would violate our NAFTA and WTO commitments, could result in Canadian retaliation against U.S. agriculture, and would not achieve a durable solution

or a permanent change to the market distortions caused by the monopoly of the Canadian Wheat Board.

[The USTR ‘‘Affirmative Finding

f’’ is being retained in the Committee files.]

[Submissions for the record follow:]

Statement of the Advanced Medical Technology Association (AdvaMed)

AdvaMed represents over 800 of the world’s leading medical technology innovators

and manufacturers of medical devices, diagnostic products and medical information

systems. Our members are devoted to the development of new technologies that

allow patients to lead longer, healthier, and more productive lives. Together, our

members manufacture nearly 90 percent of the $71 billion in life-enhancing health

care technology products purchased annually in the United States, as well as 50

percent of the $165 billion in medical technology products purchased globally. Our

industry enjoys a trade surplus of $7.1 billion vis-a`-vis our trading partners.

Global Challenges

Innovative medical technologies offer an important solution for industrialized nations, including Japan and European Union members that face serious health care

budget constraints and the demands of aging populations. Advanced medical technology can not only save and improve patients’ lives, but also lower health care

costs, improve the efficiency of the health care delivery system, and improve productivity by allowing people to return to work sooner.

However, when regulatory policies and payment systems for medical technology

are complex, non-transparent, or overly burdensome, they can significantly delay or

deny patient access to the latest, state-of-the-art innovations. They can also serve

as non-tariff barriers, preventing U.S. products from reaching patients in need of

innovative health care treatments.

AdvaMed applauds President Bush’s support of international trade initiatives. We

thank the Ways and Means Committee, and the House, for their leadership on passing H.R. 3005 to renew the President authority to reduce tariffs and non-tariff barriers throughout the globe. It should be extended to ensure further work on regional

and global trade negotiations, including the Free Trade Area of the Americas

(FTAA), the Asia-Pacific Economic Cooperation (APEC) forum, and the World Trade

Organization (WTO). In addition, the President and U.S. Trade Representative

(USTR) should use this authority to continue to pursue bilateral trade agreements

in the medical technology sector with our major trading partners.

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AdvaMed believes the USTR, Department of Commerce (DOC) and Congress

should monitor regulatory, technology assessment and reimbursement policies in

foreign health care systems and push for the creation or maintenance of transparent

assessment processes and the opportunity for industry participation in decision

making. We look to the Administration and Congress to actively oppose excessive regulation, government price controls and arbitrary, across-the-board reimbursement

cuts imposed on foreign medical devices and diagnostics.

Continued U.S. Leadership Urgently Needed to Fight Trade Barriers in

Japan

For the medical technology industry, the Bush Administration’s efforts with Japan

under the U.S.-Japan Partnership for Economic Growth are critical for maintaining

access to the Japanese health care market.

After the U.S., Japan is the largest global market for medical technologies at $24

billion. U.S. manufacturers annually export over $2 billion to Japan and manufacture another $6.5 billion in the region for the Japanese market. These statistics are

good indicators of our industry’s global competitiveness in the field of medical technology and it strongly underscores the importance of critical ongoing efforts with the

U.S. Government to open the Japanese market further to cost-saving and life-enhancing medical technologies.

In 1986, U.S. Government leadership began to help pry open Japan’s protective

and costly marketplace for medical devices under the MOSS trade agreements.

Since then, with the help of the Administration and Congress, we have turned a

$100 million medical device trade deficit in 1997 into a $1.3 billion trade surplus

today.

In November 2001, however, Japan took steps that constitute a significant setback in the progress that has been made over the last 15 years in the medical device

sector. On December 12, 2001, the Japanese Ministry of Health and Welfare

(MHLW) adopted a new pricing policy that includes ‘‘foreign reference pricing’’

(FRP). Effective April 1, 2002, the new policy allows MHLW to cut reimbursements

for medical devices based on the overseas price of the same or a similar medical

technology.

The U.S. Government and Congress has long opposed FRP schemes, which discriminate against the U.S. medical device industry and fail to recognize the high

costs of doing business in Japan. Twice the number of sales representatives as in

the U.S. are required to generate the same sales revenue in Japan. The cost of doing

business is substantially high; Japan has a multi-layered distribution system between the manufacturer and the hospital; and unique to Japan, the price of technology in Japan includes after-sales service components.

The process by which the FRP proposal was adopted by MHLW on December 12th

runs contrary to U.S.-Japan trade agreements, which call for consultation with industry when Japan seeks regulatory/reimbursement policy changes that could have

a substantial impact on U.S. industry. Industry was given only 5 days notice before

the policy was adopted in December.

Temporary cuts to reimbursements for medical devices in Japan will do little to

address the impending financial situation facing Japan’s health care system. Medical devices represent only 7.5% of overall healthcare costs in Japan. Foreign reference pricing will discourage the use of advanced medical technologies—which can

actually improve the efficiency and quality of the health care system.

The U.S. medical device industry is looking to the highest levels of the Bush Administration to exert leadership in getting MHLW to modify its December 12th policy

and remove FRP.

In addition, the Bush Administration’s efforts with Japan under the U.S.-Japan

Partnership for Economic Growth are critical for achieving further market-opening

measures in Japan’s healthcare market, including:

• Reimbursement policies that are more responsive to the innovation process,

such as:

• Measures to expedite the coverage, payment and access to brand-new-toJapan medical technologies (category C2), as per earlier trade agreement commitments;

• Avoidance of excessive price control measures as a policy means to control

overall healthcare spending, focusing instead on the creation of payment categories that are more reflective of the differences in technologies; and

• Japan should encourage more reimbursement decisions based on foreign clinical data, as well as create a cost-sharing system for any clinical trials required in Japan.

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• Streamlined and transparent safety approval procedures, including (but not limited to):

• Better definitions and criteria within the product classification system; • Improved ‘‘pre-consultations’’ process and use of a standardized ‘‘checklist’’ of

submission contents to clearly identify requirements prior to application submission; Also, better documentation practices within MHLW on discussions

with industry (to avoid misunderstandings and to create binding decisions); • Resolution over the longstanding issue over materials characterization and

acceptance of biocompatibility tests of materials conducted according to international standards; • Better harmonization with Global Harmonization Task Force recommendations in areas such as ‘‘adverse event reporting’’ where Japan is implementing

unique and burdensome requirements on manufacturers.

Europe: Seek Appropriate Policies That Improve Patient Access to Innovative Medical Technologies

Efforts to oversee foreign policies impacting the export and sale of U.S. medical

devices abroad should also focus on the European Union (EU). U.S. manufacturers

export nearly $8 billion annually to the EU and maintain a $3.6 billion trade surplus with the EU. Within the EU, Germany ($16 billion) and France ($7 billion) are

the largest markets for medical devices.

In the EU, enforcement of current trade agreements is key. The U.S.–EU Mutual

Recognition Agreement (MRA) must be fully implemented. Bringing healthcare

products to the market faster is an important priority consistent with the protection

of public health and the reduction of regulatory costs and redundancy. The medical

device industry was disappointed that the MRA transition was not completed by December 2001 and was extended for two years, until December 2003. The European

Commission (CEC) should be encouraged to take all proper measures to ensure that

the MRA is operational by the end of newly extended transitional period of December 2003.

In addition, European Member States should be encouraged to adopt policies for

their health technology assessment (HTA) decisions affecting medical technologies

that are transparent and timely, and industry participation should be allowed. U.S.

firms, as the leaders in innovative medical technologies, stand to suffer disproportionately from unnecessarily long delays in HTA decisions in Europe.

AdvaMed supports the Safe Harbor agreement struck between the EU and U.S.— an agreement that promises the uninterrupted data flow from the EU to the U.S.

The agreement, reached in response to the 1995 EU Data Privacy Directive, provides additional flexibility (along with specific data privacy contracts or compliance

with the actual directive itself) for U.S. firms to continue to receive data from their

subsidiaries in Europe and/or EU-based companies. AdvaMed and its member companies look forward to working with both sides on implementing the agreement in

such a way that supports transatlantic business and economic activities and, in particular, supports industry’s efforts to research, develop, and bring to market medical

technologies that offer great promise for patients on both sides of the Atlantic.

Utilize Multilateral Opportunities to Establish Basic Principles to Expand

Global Trade and Patient Access to New Technologies

A primary goal of all economies is to provide high quality, cost effective healthcare

products and services to all citizens. The mission, and sovereign right, of a government’s regulatory agency is to oversee the efforts of medical technology manufacturers to ensure that their products are safe and effective. Another mission is to ensure

their citizens have timely access to state-of-the-art, life-saving equipment and that

compliance procedures are efficient and effective. To further expand patient access

to safe and effective medical devices and ensure cost effective regulatory compliance,

USTR should seek to ensure that regulatory agencies around the world make their

policies and practices conform to the relevant and appropriate international trading

rules established by the World Trade Organization (WTO).

Toward that end, member economies should agree to make their medical device

regulatory regimes conform to these guiding principles:

• Acceptance of International Standards; • Conformity/Provision of Transparency and National Treatment; • Use of Harmonized Quality or Good Manufacturing Practice Inspections;

• Recognition of Others Product Approvals (or the Data Used for Those Approvals);

• Development of Harmonized Auditing and Vigilance Reporting Rules;

• Use of Non-Governmental Accredited Expert Third Parties Bodies for Inspections and Approvals, where possible.

62

Similarly, many economies require purchases of medical technologies to take place

through centralized and/or government-administered insurance reimbursement systems. To ensure timely patient access to advanced medical technologies supplied by

foreign as well as domestic sources, member economies should agree to adopt these

guiding principles regarding the reimbursement of medical technologies:

• Establish clear and transparent rules for decision-making; • Develop reasonable time frames for decision-making; • Data requirements should be sensitive to the medical innovation process; • Ensure balanced opportunity for the primary suppliers and developers of technology to participate in decision-making, e.g., national treatment; • Establish meaningful appeals processes.

Utilize Multilateral and Regional Forums to Eliminate Tariff and NonTariff

Barriers to Trade that Unnecessarily Increase the Cost of Health Care

Many countries maintain significant tariff and nontariff barriers to trade for medical technology. Such barriers represent a self-imposed and unnecessary tax that

substantially increases the cost of health care to their own citizens and delays the

introduction of new, cost-effective, medically beneficial treatments. For example, the

medical technology sector continues to face tariffs of 15–20% in Mercosur countries

(Argentina, Brazil, Paraguay, Uruguay), 9–12% in Chile, Peru, and Colombia, and

6–15% in China.

The new WTO round launched in November is an important opportunity for the

United States to secure global commitments on lowering tariff and nontariff barriers

for the medical technology sector. We encourage the U.S. Government to build upon

the zero-for-zero tariff agreements achieved in the Uruguay round by securing zero

tariff agreements with Latin America and Asia as well.

Conclusion

AdvaMed appreciates the shared commitment by the President and the Congress

to expand international trade opportunities, as well as the Committee’s leadership

in passing H.R. 3005. We look to the President and his Administration to aggressively combat barriers to trade throughout the globe, especially in Japan. AdvaMed

is fully prepared to work with the President, USTR Ambassador Zoellick, the Department of Commerce, and the Congress to monitor, enforce and advance multilateral, regional and bilateral trade agreements particularly with our key trading partners.

Statement of American Apparel & Footwear Association, Arlington,

fVirginia

Thank you for providing us an opportunity to present testimony to the Committee

on the 2002 Trade Agenda.

The American Apparel & Footwear Association (AAFA) is the national trade association representing apparel, footwear, and other sewn products companies and

their suppliers, which compete in the global market.

AAFA’s mission is to promote and enhance its members’ competitiveness, productivity and profitability in the global market by minimizing regulatory, legal, commercial, political, and trade restraints.

Representing two of the industries that are on the front lines of globalization— apparel and footwear—our association maintains a unique vantage point on many

of the questions confronting the Committee this morning. Below, we offer our perspectives on some of these issues.

Trade Promotion Authority

AAFA very strongly supports swift enactment of legislation (H.R. 3005) to provide

the President trade promotion negotiating authority. We cannot over emphasize the

importance of this legislation to our day-to-day operations. Every day, our members

face tariff and non-tariff trade barriers—some erected by our own government and

some erected by other governments—designed to keep our products from easily

reaching our customers. The Uruguay Round, which saw the integration of textiles

and apparel into the disciplines of the world trading regime for the first time, represented important liberalization in this regard. But more needs to be done.

TPA—by providing a trade negotiating mandate from Congress to the Administration and by guaranteeing a smooth procedure to consider resulting trade agreements

if the Administration follows this mandate—is precisely what we need. It will enable

the Administration to move forward on existing trade commitments, including the

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Doha Development Round and the Free Trade Area of the Americas, while undertaking new commitments, such as those envisioned with five economies in Central

America. As our negotiating partners weave together a network of free and preferential trade arrangements, U.S. products and U.S. brands remain stranded. Only

by approving TPA can our negotiators have the decisive mandate they need to pursue our interests and dismantle trade barriers that keep us from our customers.

But granting TPA by itself is not enough to initiate the necessary market openings that our industries need. The Administration must be directed to follow

through to reduce and eliminate tariff and non-tariff barriers that block access to

our important markets. We note that, whereas tariffs have been reduced for many

products worldwide, they remain extremely high for footwear and apparel. In the

United States, for example, textiles, apparel and footwear pay 50 percent of all import duties collected by the U.S. Customs service but only account for 8 percent of

all imports. Many other countries have similar stories.

Moreover, we can no longer hide behind the restrictive rules of origin that prevent

many footwear and apparel goods from qualifying for the benefit of future free trade

agreements because some of the inputs that were used in the manufacture of those

goods originated outside the free trade area. We encourage the Committee to exercise its oversight responsibilities to ensure that the evolving Singapore and Chile

free trade areas, which the Administration has itself defined as a precedent for future free trade discussions, not perpetuate such restrictive rules and requirements.

Andean Trade Preference Act (ATPA) Renewal and Expansion

AAFA strongly endorses the renewal and meaningful expansion of ATPA legislation to include apparel and footwear products. Without ATPA extension and expansion, the four Andean nations will gradually see the economic viability of many of

their legitimate export industries undermined by the lucrative drug trade since

their ability to penetrate the U.S. market depends largely upon preferential access.

We have previously testified before the Subcommittee on Trade that ATPA expansion must be simple, flexible, and of a long term nature to ensure the best results.

We believe H.R. 3009—as approved by the House on November 16, 2001—accomplishes this goal. It keeps the underlying program active, while expanding it to include a number of previously excluded products in a commercially meaningful way.

This legislation provides significant incentives for real products and will lead to continued as well as new investments in the region. Without that legislation, we will

continue to see the Andean nations lose market share and export opportunities,

which will make them more vulnerable to the destabilizing effects of the illicit narcotics trade.

The loss of this trade base translates into lost commercial opportunities for U.S.

and Andean nations combined. In the past year alone, imports of apparel from Andean nations have dropped by more than 10 percent. As these countries have produced less clothing for export, they have employed less people and have also purchased fewer inputs from the United States, with U.S. textile and apparel cut part

exports to the region declining by double digits over the previous 12 months.

Caribbean Basin Trade Partnership Act (CBTPA)/African Growth and Opportunity Act (AGOA)

We support H.R. 3009 also because it would enact several long-sought and much

needed corrections and clarifications to the Caribbean Basin Trade Partnership and

African Growth and Opportunity Acts. Those two bills were enacted after lengthy

struggles in May 2000. We were proud to be part of the team that fought so hard

for their enactment. Our companies are now working to use those provisions to

bring about the investment and trade-based growth that was envisioned by the Congressional authors of these two important bills.

Unfortunately, a number of errors and interpretative problems prevent the bills

from being implemented fully in a manner intended by Congress. The last two titles

of H.R. 3009 fix many of these problems. We were pleased that this Committee took

advantage of the movement of H.R. 3009 to advance legislative fixes for these problems and we urge Congress to complete the job when it completes work on H.R.

3009. We also urge Congress to take action on needed fixes that will clarify the intent of the CBTPA brassiere provision and eliminate an arbitrary provision that excludes socks from CBTPA benefits.

Thank you for your time and attention to these important matters.

f64

Statement of the American Forest & Paper Association

U.S. FOREST AND PAPER PRODUCTS INDUSTRY’S

TRADE NEGOTIATING OBJECTIVES

The American Forest & Paper Association (AF&PA) appreciates this opportunity

to comment on the Administration’s 2002 trade agenda. AF&PA is the national

trade association representing the producers of paper, pulp, paperboard and wood

products, as well as growers and harvesters of this Nation’s forest resources. Our

industry employs approximately 1.7 million people in 42 states, with an annual estimated payroll of $51 billion, and annual sales of more than $250 billion.

The U.S. forest products industry is deeply involved in the global market. In 2001, exports of U.S. wood and paper products exceeded $19 billion. Imports amounted to

$33 billion. As detailed in subsequent portions of our statement, for literally decades, we have been trying to level the international playing field for our products.

Several initiatives identified in the Administration’s trade agenda are very important in that regard.

However, since 1997, mounting distortions in foreign exchange markets, and the

increasing strength of the dollar in particular, has virtually overwhelmed all other

considerations of market access. It is generally accepted that the dollar today is

25%–30% overvalued. This amounts to a self-imposed 30% tariff on all U.S. exports.

This number exceeds the current levels of tariffs—up to 15–20%—which some foreign countries actually impose on our products and which could be removed through

trade negotiations.

The ‘‘strong dollar tariff’’ also applies to U.S. domestic shipments, with the result that foreign competitors now have a major cost advantage in our home market—magnified in industries such as ours where U.S. tariffs are low or zero. The

impact of the overvalued dollar on the U.S. forest products industry has been devastating. U.S. paper industry exports were down by $1.5 billion in 2001 from the 2000 level.

Imports were lower as well last year—off $900 million—but they were $3.3 billion

higher than in 1997. Therefore, the U.S. trade deficit in paper industry products has

ballooned from just $273 million in 1997 to $3.8 billion in 2001. While domestic demand for paper grew by 3.5 million tons 1997–2000, more than 90% of these additional sales went to foreign suppliers. More than 50 paper mills have shut down

since 1998 and job losses have exceeded 30,000.

For wood products, the combined effect of weakening exports markets and surging

imports has put unprecedented downward pressure on wood product prices in the

U.S., forcing many lumber producers and wholesalers out of business. Approximately 20 mills with a capacity of 1.7 billion board feet were shutdown permanently

in 2001. Since 1998, the lumber and wood sectors have lost 23,000 jobs. Exports

have declined by 16.6% over the past year, accounting for a $100 million loss. Since

1997, exports have declined by 27%. Moreover, despite an increase in consumption

of softwood lumber, 65% of the increase in softwood lumber demand between 1995

and 2001 was met by imports.

Traditional wisdom argues that, while exchange rates fluctuate over time, tariffs

are forever. The argument suggests that short-term strategies can address exchange

rate effects and tariffs should be regarded as the structural, long-term concern. In

this case, however, traditional wisdom has proved a less-than-reliable guide. The

normal adjustment triggers—burgeoning U.S. trade deficit, lower U.S. interest

rates, slowing U.S. growth—have not worked. The persistence of the overvalued dollar has forced industries, including our own—to close plants. Other industries have

moved production facilities offshore.

The overvalued dollar is having the effect of hollowing out U.S. industry. When

tariff barriers are ultimately eliminated—starting in 2005 in the FTAA or the WTO

for example—some U.S. industries simply may not have the capacity to translate

market access gains into export sales.

The Omnibus Trade and Competitiveness Act of 1988 recognizes the nexus between exchange rates and the benefits the U.S. actually realizes from trade agreements. It requires regular monitoring and reporting of potential currency manipulation by other countries. Such actions can rob the U.S. of negotiated market access

rights and, at the same time, unfairly advantage foreign suppliers in the U.S. market. Today, there is clear evidence that some foreign governments, to establish competitive advantage for their industries, are manipulating foreign exchange values.

These countries—particularly Japan, China, South Korea and Taiwan—have accumulated dollar holdings well in excess of recognized or necessary reserve requireVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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ments for the purpose of depressing the value of their currencies and maintaining

export price competitiveness.

AF&PA believes the relationship between exchange rates and trade policy must

be subject to further scrutiny in light of the current, sustained overvaluation of the

U.S. dollar. It is important that Trade Promotion Authority (TPA) legislation also

deal with the effects of exchange rate fluctuation that can negate the economic benefits of any tariff reductions negotiated by the U.S. on behalf of U.S. industry. The

House bill provides for the establishment of consultative mechanisms among parties

to trade agreements to protect against currency manipulation by foreign government. We believe this is an important safeguard to ensure that the U.S. realizes

the benefits they negotiate on behalf of U.S. manufacturers and strongly support its

enactment.

Turning to more traditional negotiating objectives, the U.S. forest products industry has long sought the opportunity to compete on an equitable basis for world markets. For decades, the elimination of foreign tariffs has consistently been our number one priority. Our industry was among the first to agree to the elimination of

tariffs in our sector and we originated the zero-for-zero concept introduced in the

Uruguay Round.

Unfortunately, the Uruguay Round Agreement didn’t produce the level playing

field we were seeking: developed countries committed to eliminate paper tariffs over

a lengthy 10-year period (by January 1, 2004) rather than the normal 5-year phaseout period. Wood products tariffs were only cut by an average of 28%. Tariff escalation—maintaining higher tariffs on value added products—was not addressed.

Moreover, developing countries did not make any commitments to reduce tariffs and

continue to maintain very high bound tariff rates on our products.

The Uruguay Round Agreements Act (URAA) recognized the flaws in the Uruguay

Round results. It specifically identified the elimination of tariffs on paper and wood

products, and other zero-for-zero sectors, as a U.S. negotiating objective to be pursued as a priority matter. The URAA also provided the Administration with the requisite authority to conclude agreements in this area. Since then, little has happened.

As a result, the U.S. forest products industry has lost ground in relation to its

major global competitors, particularly Brazil, Indonesia, and Malaysia. A number of

countries in Europe, Asia and South America have used tariff walls to build worldclass projects, at times supported by government financial aid, which compete with

U.S. suppliers both at home and abroad.

Attached are resolutions adopted by the Industry Sector Advisory Committee on

Paper and Paper Products (ISAC #12) and the Industry Sector Advisory Committee

on Wood Products (ISAC #10). These resolutions spell out the industry’s negotiating

objectives very clearly: we are seeking the earliest possible elimination of tariffs on our products and we urge USTR to pursue this objective—with urgency—in every available venue.

In terms of some of the broader themes outlined in the Committee’s request for

comments, we offer the following:

• WTO/industrial market access—Paper and wood products should be priority

deliverables for early sectoral tariff negotiations in the Doha Development

Round. Among the new, detailed proposals the U.S. will submit, we urge USTR

to include a plan to achieve early results in forest products and other zero-forzero sectors. The goal should be to conclude the first phase of negotiations within one year of the Doha ministerial. We believe that the delivery of early, concrete results in sectors such as ours will broaden public support for the negotiations as a whole.

We remain concerned that the negotiating mandate in industrial tariffs must

not be compromised by references to non-reciprocity for developing countries. Especially since a number of developing countries in Asia and South America have burgeoning world-class, export-oriented forest products industries, and these constitute

the main class of countries that have not made any commitment to eliminate tariffs.

It is critical that developing countries fully participate in the industrial tariff negotiations and that they commit to the same product coverage and phase out periods

as do developed countries.

• Russian WTO accession—AF&PA believes the URAA mandate regarding the

achievement of zero-for-zero agreements in specified sectors must apply to the

pending Russia WTO accession negotiations. We urge USTR to remain steadfast

in pressing for zero-for-zero treatment in wood and paper products. We believe

the zero-for-zero mandate also applies to comprehensive tariff negotiations with

countries such as Poland, Hungary and Romania, especially to offset preferences to the EU.

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• Free Trade Area of the Americas—AF&PA urges USTR to ensure that the

negotiating modalities agreed to later this year will foster sectoral negotiations

and, particularly that tariffs on all wood and paper products be identified for

immediate elimination on implementation of the agreement.

• Free Trade Agreements—AF&PA urges USTR to conclude the pending FTA

with Chile as rapidly as possible and to use the forest products tariff approach

(elimination of tariffs on all products in the sector immediately on implementation of the agreement) as a template for other agreements. We urge USTR to

adopt an aggressive approach to tariff elimination, with particular emphasis on

priority countries/areas such as Japan and Korea (wood), ASEAN, MERCOSUR,

Central America and India. We would also support early agreements with Australia and New Zealand. For countries with existing or pending agreements

with the EU, we urge USTR to ensure that such agreements provide for equalized tariff treatment on implementation.

AF&PA, and our member companies, fully support Administration efforts to open

overseas markets for our products. We are working with our collegial industrial organizations in other countries to broaden business community support for a global

tariff free environment for our products.

At the same time, we join with the growing ranks of U.S.-based manufacturing

industries in identifying the overvalued dollar as the single most compelling threat

to U.S. global competitiveness. Urgent and effective action to restore the U.S. dollar

to a level, which reflects the underlying fundamentals, is essential to restoring a

globally competitive U.S. manufacturing sector.

INDUSTRY SECTOR ADVISORY COMMITTEE

ON LUMBER AND WOOD PRODUCTS—ISAC 10

RESOLUTION

Whereas, The priority objective of the wood products industry in the Uruguay

Round of multilateral trade negotiations was the elimination of wood tariffs;

Whereas, The Uruguay Round Agreement fell short of this objective when no

agreement was reached to go to zero on wood products tariffs and tariff escalation

worldwide locked the U.S. wood products industry in a competitive disadvantage;

Whereas, Tariff escalation remains the most significant overwhelming barrier in

all of our priority markets;

Whereas, The Uruguay Round Agreements Act (URAA) identified the accelerated

implementation and extension of the zero-for-zero agreements in wood and other

sectors as a priority trade objective and provided the Administration with the requisite authority to reach agreements to this end;

Whereas, The Industry Sector Advisory Committee on Lumber and Wood Products

(ISAC #10) has determined that the continued existence of tariff barriers represents

a major market access problem for our industry globally;

Whereas, The continuing lack of any progress on eliminating wood tariffs since

1994 has put the U.S. wood industry at a competitive disadvantage and has fostered

the expansion of production capacity and employment outside of the United States;

Resolved, that the Secretary of Commerce and the United States Trade Representative make the early achievement of zero tariffs on wood products an urgent

priority for upcoming trade negotiations with U.S. trading partners.

Specifically, ISAC #10 urges that:

• the elimination of tariffs on wood products be identified as an early deliverable

in industrial tariff negotiations conducted under the auspices of the World

Trade Organization (WTO). Preparatory work should begin immediately and be

conducted with sufficient expedition to ensure that an agreement can be

achieved and implemented at an early date;

• the elimination of tariffs on wood products be identified as an early deliverable

from U.S. FTA negotiations, particularly those with Chile and other FTAA

members. In the case of Chile, the elimination of wood tariffs should go into

effect immediately, to put U.S. suppliers on an equal footing with Canadian

companies, who have benefited from zero tariffs since 1997;

• the U.S. Government strictly monitor and enforce China’s reduction of tariffs

on wood products in compliance with its WTO accession agreement and take

every opportunity to achieve further reductions down to zero at an early date.

The U.S. wood products industry is proud of its record of environmental stewardship and sustainable forest management practices and supports trade policies that

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promote enforcement of domestic environmental laws and encourage improvements

in environmental practices.

Lyn Withey

Chairman, ISAC #10

Vice President, International Paper

INDUSTRY SECTOR ADVISORY COMMITTEE

ON PULP AND PAPER

RESOLUTION

Whereas, The priority objective of the paper and paper products industry in the

Uruguay Round of multilateral trade negotiations was the elimination of tariffs on

paper and paper products by 1999;

Whereas, The Uruguay Round Agreement fell short of this objective. Only the European Union, Canada, Japan, Australia, New Zealand and Korea agreed to eliminate tariffs on paper and paper products—over an extended time period ending in

2004. Important U.S. trading partners in Latin and South America, as well as Asia,

made no commitment to eliminate tariffs on these products;

Whereas, The Uruguay Round Agreements Act (URAA) identified the accelerated

implementation and extension of the zero-for-zero agreements in paper and other

sectors as a priority trade objective and provided the Administration with the requisite authority to reach agreements to this end;

Whereas, The Industry Sector Advisory Committee on Paper and Paper Products

(ISAC #12) has determined that the continued existence of tariff barriers on paper

and paper products in Europe, Latin and South America and China represents the

principal market access problem for our industry globally;

Whereas, The continuing lack of any progress on eliminating paper tariffs since

1994 has put the U.S. paper industry at a competitive disadvantage and has fostered the expansion of production capacity and employment outside of the United

States;

Resolved, that the Secretary of Commerce and the United States Trade Representative to make the early achievement of zero tariffs on paper and paper products an urgent priority for upcoming trade negotiations with U.S. trading partners.

Specifically, ISAC #12 urges that:

• the elimination of tariffs on paper and paper products be identified as an early

deliverable in industrial tariff negotiations conducted under the auspices of the

World Trade Organization (WTO). Preparatory work should begin immediately

and be conducted with sufficient expedition to ensure that an agreement can

be achieved and implemented at an early date; • the elimination of tariffs on paper and paper products be identified as a early

deliverable from U.S. FTA negotiations, particularly those with Chile and other

FTAA members. In the case of Chile, the elimination of paper tariffs should go

into effect immediately, to put U.S. suppliers on an equal footing with Canadian

companies, who have benefited from zero tariffs since 1997; • the U.S. Government strictly monitor and enforce China’s reduction of tariffs

on paper and paper products in compliance with its WTO accession agreement

and take every opportunity to achieve further reductions down to zero at an

early date.

ISAC #12 recognizes that trade liberalization in the forest products sector has a

fundamentally positive effect on environmental quality. The U.S. paper industry is

proud of its record of environmental stewardship and supports trade policies that

promote enforcement of domestic environmental laws and encourage improvements

in environmental practices.

Maureen R. Smith

Chairman, ISAC #12

Vice President, American Forest & Paper Association

MINORITY OPINION

We have always held that tariff elimination has the potential to cause harmful

environmental impacts when it is conducted in the absence of adequate environmental safeguards. We have advocated that these potential impacts should be adequately assessed and that necessary safeguards should be in place prior to further

tariff elimination.

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Executive Order 13141 on the Environmental Review (ER) of Trade Agreements,

calls for an ER to be conducted for proposed trade agreements such as those being

considered here. International norms for credible and effective environmental assessment hold that they should be done prior to, and inform the decision in question. If the proposed ‘‘early deliverable’’ of tariff elimination occurs prior to the completion of an ER, this will contravene these international norms and compromise the

credibility of the process. We therefore believe that an ER on industrial tariff negotiations in the context of WTO-related activities and FTA’s should be completed and

that the necessary safeguards should be put into place prior to any early deliverable

of tariff elimination.

The American Iron and Steel Institute (AISI), on behalf of its U.S. member comStatement of the American Iron and Steel Institute

f panies who together account for more than two-thirds of the raw steel produced annually in the United States, is pleased to provide comments to the House Committee

on Ways and Means on President Bush’s Trade Agenda for 2002.

Trade Liberalization: Need to Rebuild Public Consensus on Trade

There is a vital need for the Bush Administration to rebuild a new public consensus in support of free and fair rules-based trade. In this regard, to avoid a further undermining of public support for new free trade initiatives, it is essential that

the Administration:

• enforce strictly U.S. trade laws and counter serious import injury where it is

clearly determined (as in the steel Section 201 ‘‘safeguards’’ case); and

• resist firmly the growing pressures from foreign governments to weaken further

international disciplines—and U.S. laws—against injurious, unfairly traded

(dumped and subsidized) imports.

A national consensus on expanded international trade can only be achieved (and

sustained) when trading rules are fair, clear and consistently enforced.

Strong trade laws, strict trade law enforcement, the countering of import

injury and the preservation of fair trade rules all serve the free trade agenda. Unless the public believes that what is being expanded is fair trade, efforts to achieve further trade liberalization cannot succeed. The best way

to reverse the erosion of public support for further trade liberalization and

to restore a national consensus in support of freer trade is through strong

trade laws, strictly enforced.

Rules-based trade and effective U.S. trade laws, properly enforced, prevent the exporting of unemployment to this country. A strong bipartisan majority of the Congress understands this, and AISI’s U.S. member companies greatly appreciate the

continuing strong support of the Congress, including many House Ways and Means

Committee Members. We thank you for your support of an effective steel Section

201 remedy, and also for your very clear message of no further trade law weakening—whether through:

• a new World Trade Organization (WTO) round of global trade negotiations;

• the WTO dispute settlement process, which is sorely in need of reform;

• regional negotiations such as the Free Trade Area of the Americas (FTAA); or

• bilateral free trade agreement (FTA) negotiations such as those with Chile and

Singapore.

Steel Crisis: Need for Strong 201 Remedy

As the President recognized when he initiated the steel Section 201 investigation

in June 2001, the 201 was a last resort for an American steel industry that had

been engulfed by an unprecedented crisis largely not of its own making. This ongoing crisis, as the President correctly recognized when he announced his Steel Action

Plan on June 5, 2001, is the direct result of:

• a 50-year legacy of foreign government intervention in the steel sector;

• pervasive steel market-distorting practices worldwide;

• un-addressed foreign economic and steel industry structural problems;

• massive global excess steelmaking capacity—roughly 250 million metric tons, or

more than twice the size of the total U.S. steel market.

This has all led to the U.S. steel industry’s current catastrophic condition. Over

the past 4 years of crisis, we have witnessed:

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• the three highest steel import years in U.S. history in 1998, 1999 and 2000;

• the largest surge of unfairly traded steel imports in history;

• the worst steel price depression in history, with import values and U.S. prices

sinking to unsustainable lows;

• 27 steel U.S. company bankruptcies or shutdowns since December 1997;

• over 50 U.S. steel plants and related facilities closed in the past 24 months

alone;

• the loss of nearly 44,000 U.S. steel worker jobs since January 1998, with almost

10,000 of these coming in January 2002, which saw the largest monthly rise in

lost jobs in more than a decade.

America’s steel companies, steel communities and related industries have lost

tens of thousands of real jobs over the past 4 years due to unfair and disruptive

steel imports sold in violation of international rules and U.S. laws. This is in stark

contrast to the theoretical loss of jobs in U.S. steel using industries predicted by 201

opponents—losses that will never actually occur, since they are based on a flawed

economic model using extreme and unrealistic assumptions.

This is not the way market-based trade is supposed to work. Between 1980 and

the onset of the current steel crisis, the U.S. steel industry literally reinvented

itself. By 1998, we had become a new industry producing new steels, using new

equipment and employing new processes. Thanks to over $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.

The past 4 years 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 steel capacity. Instead, we have a national steel emergency caused by a tidal wave of injurious, unfairly traded and disruptive steel imports.

In response to our imports-driven crisis, the U.S. International Trade Commission

(ITC) has now ruled unanimously in the Section 201 steel investigation that increased imports have been a ‘‘substantial cause of serious injury’’ to the U.S. steel

industry. The ITC has also recommended that steel trade remedies be applied. It

is now up to the President to decide on or before March 6 what to do in the national

interest.

AISI is convinced that President Bush and his Administration have a unique, historic opportunity, not just to counter import injury in the U.S. steel market, but also

to create a lasting solution to the root causes of the U.S. and world steel crisis.

We urge the House Ways and Means Committee and all Members of Congress to

send a strong, clear message to the President and his Administration. The message

is that:

• The United States can no longer be the WORLD’S STEEL DUMPING

GROUND.

• The U.S. steel industry has suffered unprecedented import injury, and should

be granted, under our WTO-consistent Section 201 safeguards law, a muchneeded time-out from the current crisis environment.

• There should be a 4-year tariff of at least 40 percent on the full range of carbon

and alloy steel products where the ITC has found injury.

• A strong and uniform steel tariff remedy is needed to stop effectively, and to

reverse, the serious injury that has occurred.

• It is essential to restore the U.S. steel industry to health, to enable it to consolidate and continue to restructure and to allow it to do what is needed to

invest in new technologies, products and markets.

• It will serve the long-term interests of U.S. steel using industries.

• It will benefit the overall U.S. economy and U.S. national security.

• It is necessary to the success of the President’s multilateral steel initiatives,

because only a strong 201 tariff remedy will encourage foreign governments

and producers to deal seriously with their un-addressed steel sector structural

problems and imbalances.

• There should also be industry efforts to work together and with the Congress

and the Administration to help develop and enact legislation that removes barriers to steel industry consolidation and rationalization in the United States.

• The long term goal should be a lasting solution to the international steel trade

problem: the Administration’s multilateral steel initiative at the OECD to reduce inefficient and excess global steelmaking capacity and to remove steel

trade-distorting practices worldwide deserves everyone’s continued support.

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The Administration is right that it is time to get governments out of steelmaking.

It is time to end foreign government ‘‘targeting’’ and subsidization of steel, foreign

government market barriers to imports of steel and steel-containing products and

foreign government toleration of private cartels, as well as other anticompetitive behavior and corruption in the steel sector.

These trade-distorting practices were examined in great detail in the groundbreaking July 2000 Commerce Department study, ‘‘Global Steel Trade: Structural

Problems and Future Solutions.’’ The bottom line is that unfair trade practices 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 unprecedented quantities of steel in the United States and in North America as a whole. Then, after more than 200 antidumping (AD) and countervailing

duty (CVD) orders, the Section 201 case became a last resort.

The steel crisis, therefore, holds important lessons for our Nation’s post-Doha

trade agenda. The case of steel shows why it is critical to enhance, not weaken, U.S.

trade laws. The lessons learned by U.S. steel producers are that, now, more than

ever, we must support:

• prompt and strict enforcement of U.S. trade laws;

• modernization and enhancement of these laws in a WTO-consistent manner;

and

• preservation of effective international disciplines against unfair trade.

New Global Trade Negotiations

For many years, the bipartisan position of the U.S. Government has been to support continued multilateral trade liberalization, based on no further weakening of

the WTO’s AD/CVD rules. AISI and many other U.S. industries continue to support

this position. Our consistent message can be summed up in three words: RULESBASED TRADE.

No Trade Law Weakening Through New Doha Round of WTO Negotiations

Prior to the WTO Doha Ministerial Conference, the final proposals submitted by

other governments made it clear that the ultimate goal of Japan and many other

countries is the gutting of U.S. laws against unfair trade. Foreign unfair traders

view the AD/CVD laws as the one remaining major obstacle to their unfettered

abuse of the open U.S. market. They do not want to see usable U.S. laws against

unfair trade.

The WTO’s Antidumping Agreement and its Subsidies and Countervailing Measures (SCM) Agreement were extensively rewritten only 7 years ago and, in the period leading up to Doha, AISI and other industries urged the Administration to resist firmly foreign government pressures to put revisions to these Agreements on

the agenda of new WTO negotiations. Notwithstanding our concerns that it would

be a serious policy mistake to allow any opening up of AD/CVD rules in new WTO

negotiations, the decision at Doha was to include AD/CVD rules in the new round

negotiating agenda.

The Administration, to its credit, has continued to stress that it has no intention

of allowing U.S. AD/CVD laws to be weakened through new WTO negotiations. The

Administration points out that it has an ‘‘affirmative’’ agenda on WTO rules, which

includes talking about (1) the unfair foreign trade practices that give rise to the use

of AD/CVD laws in the first place and (2) the ways in which other countries’ AD/

CVD laws fall short (lack of transparency, due process, etc.).

AISI and its U.S. member companies will continue to support trade liberalization,

if—and only if—there is no further weakening of fair trade rules. Thankfully, in recent years there has been overwhelming bipartisan support in the Congress for preserving effective international disciplines and U.S. laws against unfair trade. In particular, we appreciate:

• the bipartisan letter to President Bush last year signed by nearly two-thirds of

the Senate, expressing ‘‘strong opposition to any international trade agreement

that would weaken U.S. trade laws.’’

• the House-passed resolution last year endorsed by over 400 Members, urging

U.S. negotiators to preserve the effectiveness of U.S. trade laws and avoid trade

law weakening agreements.

• the post-Doha letter to the President last year signed by 9 Senators, reiterating

that ‘‘we should not be discussing U.S. trade laws at the WTO . . . [and] looking

for ‘reassurance that this Administration will not agree to any changes in U.S.

laws that regulate unfair foreign trade practices.’ ’’

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The task now, however, is to help the Administration make the most of its affirmative agenda on rules. Trade adjustment assistance (TAA) should be extended and

strengthened to deal with workers who are laid off as a result of expanded trade.

At the same time, we need to redouble our efforts to avoid trade-related unemployment before it occurs. We can best do that by maintaining and enhancing our trade

laws. In light of the decision on rules taken at Doha:

• The Congress must send a strong and unmistakable message to U.S. negotiators, in new Trade Promotion Authority (TPA) legislation, that it will not approve agreements or adopt legislative provisions that weaken in any way America’s vital laws against unfair trade.

• The Congress should clarify that, in this ‘‘Doha Development Round,’’ it does

not support the view that developing countries should be granted ‘‘special and

differential treatment’’ with regard to AD/CVD rules, because the WTO should

not be promoting development through the use of unfair trade practices—and

because the claim that developing countries’ legitimate export trade is being

shut off by AD/CVD measures has no basis whatsoever in fact.

• The Congress must ensure that the WTO fully adheres to the words in the

Doha Ministerial Declaration which say that, in a new trade round, negotiators

will ‘‘preserve the effectiveness of the instruments and objectives of the WTO’s

Antidumping and Subsidies/Countervailing Measures Agreements.’’

• The relevant Congressional Committees of jurisdiction must engage in a direct

and thorough review of any negotiations related to AD/CVD laws; U.S. negotiators should be required to discuss with the Committees all proposals to

change these laws before any actual negotiation of such proposals takes place;

and unless the Committees give specific approval, the United States should not

engage in negotiations regarding such proposals.

• The President should commit not to submit for Congressional approval any

agreement that requires weakening changes to U.S. AD/CVD laws and enforcement policies—‘‘fast track’’ or Trade Promotion Authority must not be taken advantage of to speed passage of trade law weakening amendments.

• The Congress should also enact immediately new AD/CVD provisions, which

strengthen these laws in a manner consistent with the existing WTO Agreements. Rather than allow trade law weakening, Congress should ensure that

U.S. trade laws are as strong as what the WTO allows.

The Doha Round’s discussion on rules will occur in two phases. During phase one,

countries will identify the key issues that they would like to see discussed. For our

part, we pledge to work closely with other industries to provide to the Administration an affirmative priority listing of ways in which the WTO AD/CVD Agreements

should be strengthened and international disciplines against injurious dumping and

trade-distorting subsidies made more effective. We also plan to highlight how unfair

foreign trade practices in steel and other sectors—not AD/CVD laws—are the real

problem in international trade.

• We will urge the Administration to work together with other NAFTA governments to encourage countries in Asia and other regions with serious market access problems to eliminate all barriers and anticompetitive practices and to

open their markets fully to imports of steel and steel-containing products.

Achieving open markets in all major steel producing and trading nations serves

the interest of both steel producers and consumers globally.

• We will work with other ‘‘zero tariff’’ U.S. industries to ensure that Brazil and

all other major steel producing and trading nations eliminate their steel tariffs

immediately. Since the U.S. is among those countries that are already committed to going to zero on steel tariffs by January 1, 2004, this is needed to

level the playing field in international steel trade.

• We will work with Members of Congress to develop an effective WTO-consistent

remedy against country and product switching by irresponsible steel traders.

• We will work with other U.S. industries and with the Congress, both to identify

the implications of the negotiating proposals tabled by other countries and to

enact WTO-consistent amendments that make U.S. trade laws more effective.

Whether the Administration addresses steel trade-distorting practices through the

Doha Round discussion on rules or through a separate effort to achieve a sectorspecific agreement (an international steel agreement to ensure that steel trade in

the future is free and fair in all markets), the same principle must apply: existing

trade laws must not be weakened in any way. The goal is not to discipline the remedies we need to defend against unfair trade. The goal must be to strengthen those

remedies and to achieve the highest possible level of discipline against unfair trade.

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No Trade Law Weakening Through WTO Dispute Settlement

It is not just the negotiating proposals of other governments that are putting the

WTO—and continued U.S. support of the WTO—at risk. Public support for the WTO

is also fast eroding because the current WTO dispute settlement system threatens

U.S. trade laws and U.S. sovereignty.

A thorough overhaul of the WTO dispute settlement system is urgently needed.

Part of the problem is that, in recent WTO panel decisions on trade law issues,

agreed WTO standards and limits on panelists’ authority have been abused or exceeded. U.S. steel producers support WTO dispute settlement reform, including:

• greater transparency in the WTO dispute settlement process; • private party participation at WTO panel hearings; • reform of the WTO panel selection process.

As it stands, WTO panels are creating new international rules—which is beyond

their authority—and ignoring agreed standards. Under the existing dispute settlement system, foreign panelists who are often hostile to U.S. trade laws have routinely rejected U.S. trade remedies and have imposed new and, in some cases, very

severe limits on the use of trade laws. No challenged safeguards measure has ever

been upheld by the WTO. Similarly, countries have mounted repeated successful

challenges to U.S. AD/CVD measures, obtaining through dispute settlement what

the U.S. refused to accept in negotiations. Even when a country fails to achieve all

it seeks in its appeal of U.S. trade law relief, there is often a net weakening of U.S.

law. This is what occurred in Japan’s appeal of U.S. AD duties on hot rolled steel—

in spite of this being arguably the worst case of injurious dumping ever.

This attack by unfair traders and the WTO dispute settlement system on U.S.

laws and rules to address unfair and disruptive trade must stop. The time has come

for Congress to re-examine the fundamental issue of U.S. commitment to binding dispute settlement. So far, the experiment has proved a disaster for U.S. trade laws.

The recent U.S.-Jordan free trade agreement includes non-binding dispute settlement. We think Congress should give serious consideration to expanding this approach.

We believe it is now essential that Congress insert itself into the WTO dispute

settlement process to protect the sovereignty of the United States and to ensure that

the positions the U.S. negotiated—and that Congress subsequently enacted into

law—are not eroded by WTO dispute settlement bodies. In this regard, AISI wishes

to thank those Members of the House who have placed a premium on urging the

Administration to develop an early strategy to fix this serious problem before it is

too late. The Congress can help in three ways to address the problem of a WTO dispute settlement system that is undermining U.S. trade laws.

• First, it can join the Administration in support of WTO dispute settlement reform, including reform of the panel selection process, greater transparency and

allowing concerned private parties to participate in panel proceedings.

• Second, it can support the provision of more government resources and resolve

to defend U.S. trade laws in WTO appeals in Geneva. In order to counter the

efforts of unfair traders to use the WTO dispute settlement process to undermine our fair trade rules, the Administration must combine diplomatic and litigation efforts and begin to defend much more aggressively the trade laws enacted by Congress.

• Third, it can support prompt enactment of legislation to establish a WTO Dispute Settlement Review Commission. First proposed in 1995 by Senators Dole

and Moynihan, such a Commission would be an important first step in reining

in the WTO dispute settlement system and ensuring that future WTO panels

do not exceed or abuse their authority.

No Trade Law Weakening Through WTO Accessions

AISI’s U.S. member companies agree that Russia and other nations of the Commonwealth of Independent States (CIS) should be accepted into the WTO, but only

on commercially viable terms. In this regard:

• As was done in the case of China’s accession, WTO members should have the

right to continue to apply nonmarket economy AD methodology until steel and

other key sectors of the CIS economies become fully market-oriented.

• The CIS countries should end immediately all direct and indirect steel subsidies

that distort trade, and adhere immediately to all of the disciplines in the WTO

Subsidies Agreement.

• As was done in the case of China’s WTO accession, a special safeguard should

be put into the CIS accession protocols that enables other WTO members, durVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00076 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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ing a transition period, to act against market disruption caused by a surge of

CIS imports.

• In addition, there must be close monitoring of China’s and Taiwan’s WTO commitments to ensure that they are being strictly and promptly complied with and

fully implemented.

Key Points to Remember about Global Trade Negotiations on Rules

Japan and other countries that maintain sanctuary markets for their domestic

steel industries and tolerate cartels and other anticompetitive behavior want to

weaken the WTO’s AD rules. Countries that continue to subsidize their inefficient

industries want to weaken the WTO’s CVD rules.

For more than 50 years, countries have been allowed to use AD/CVD laws to

counter injurious unfair trade, because these laws help ensure that more efficient

domestic producers are not weakened or destroyed by less efficient foreign firms.

These laws serve the long term interest of customers, consumers, the economy, free

trade and the multilateral trading system.

In recognition that 201 steel trade relief is coming, that massive world steel overcapacity still exists and that the United States will no longer be able to be used

as the WORLD’S STEEL DUMPING GROUND, foreign countries would be well advised to re-evaluate their past support for trade law weakening through the WTO.

In the meantime, the steel industry in the NAFTA region continues to speak with

one voice on the need to preserve effective AD/CVD laws. It is the united position

of AISI’s Canadian, Mexican and U.S. members that we:

• support free trade and open markets;

• support the effective fair trade rules that make them possible;

• support reform of the WTO dispute settlement system; and

• oppose all efforts to put AD/CVD rules on the negotiating table—whether in a

new WTO round, the FTAA or new bilateral FTAs.

The FTAA and Regional Trade Negotiations

In April of 2001, AISI joined with our colleagues in the Latin American Iron and

Steel Institute (ILAFA) and submitted to the Sixth Business Forum of the Americas

an unprecedented joint position statement on the FTAA by a hemispheric sector. Together with the Brazilian steel industry, we even included a short section on the

issue of trade laws in our joint submission. It simply says that, ‘‘The trade laws of

each Western Hemisphere country should be enacted and applied according to the

criteria of transparency, due process and procedures that are consistent with World

Trade Organization (WTO) rules . . . [and] On the subsidy issue, the negotiations

should aim at improving the level of discipline established in WTO rules.’’

AISI supports the ongoing negotiations to achieve an acceptable FTAA. We have

long supported the view that, if it is done right, further trade liberalization in the

Western Hemisphere could yield significant benefits to competitive U.S. steel producers and their world-class domestic customers.

Ironically, it is the other side on the trade law issue that is endangering the prospects for both the FTAA and a new WTO round. We believe that the Administration

understands this, that it wants to see the FTAA and other free trade initiatives succeed, and that it shares our view that effective rules and disciplines against unfair

trade serve the cause of free trade.

As a strong and early supporter of the North American Free Trade Agreement

(NAFTA), AISI is concerned that public support for the NAFTA has eroded. It is

worth recalling that the U.S. Government was unwilling to see AD/CVD laws weakened in the NAFTA, which is a region where we share contiguous borders and

where economic integration is well advanced. Yet, even so, public support for the

NAFTA is slipping.

The need to avoid trade law weakening of any kind in the FTAA is strongly supported by AISI’s entire North American membership. In February of 2001, AISI’s

Canadian, Mexican and U.S. member companies urged our respective governments

to ‘‘agree to nothing in an FTAA that would lead to less effective trade laws in the

NAFTA region or to any diminution of trade law rights in North America.’’

There Must Be No AD/CVD Weakening of Any Kind in the FTAA

This bedrock principle of no FTAA weakening of existing AD/CVD laws means

that any trade law weakening proposals should be immediately rejected by the U.S.

Government as a total non-starter. Instead, just as in the Doha Round, our government should make it clear that the real issue in international trade is dumping,

closed markets, trade-distorting subsidies and private anticompetitive behavior—not

74

the U.S. laws that the Congress has enacted to counter foreign unfair trade. Therefore, the Administration should insist that other countries in the FTAA:

• open up their home markets;

• eliminate their trade-distorting subsidies; and

• end their private anticompetitive practices in sectors such as steel.

In addition, if any FTAA country, in negotiations with the United States, recommends that the U.S. agree to eliminate, weaken or amend in any way U.S. AD/

CVD laws, the only acceptable U.S. Government response should be that:

• There will be no substantive changes of any kind in U.S. AD/CVD laws;

• There will be no extension of the NAFTA’s Chapter 19 binational panel AD/

CVD appellate process to other FTAA countries; and

• The only subject with respect to trade laws where there is something to talk

about is the need for greater transparency and due process in the way other

FTAA countries administer their AD/CVD laws.

Accordingly, we commend the Administration for its proposal, tabled at the July

meeting of the FTAA negotiating group on subsidies, antidumping and countervailing duties. That proposal would replace a proposed separate FTAA AD/CVD

chapter with a single statement that countries reserve the right to use AD/CVD

remedies consistent with WTO rules.

The Bracketed FTAA ‘‘Draft Chapter’’ Would Devastate U.S. Law

What we find in the bracketed AD/CVD negotiating text of the FTAA are suggested changes from other governments that would have a devastating impact on

U.S. trade laws, as they would apply to FTAA countries.

Simply put, the draft FTAA Chapter on Subsidies, Antidumping and Countervailing Duties (‘‘Draft Chapter’’) is so badly flawed, there can be only one U.S. Government response: total rejection.

Instead of leading to a higher level of FTAA discipline against unfair trade than

exists currently in the WTO—which ought to be the goal—the proposed changes,

taken as a whole, would lead to weaker AD/CVD rules in the FTAA than in the

WTO. The stated ultimate objective would be to eliminate AD measures entirely

once the FTAA is established and goods are circulating among FTAA member countries ‘‘fundamentally free of restrictions.’’ In the meantime, the proposed changes

would:

• endorse all but the most severely injurious dumping and subsidization by FTAA

members;

• make U.S. AD/CVD laws essentially unusable against injuriously dumped and

subsidized imports from FTAA countries;

• raise serious WTO (most-favored-nation) concerns among non-FTAA countries

about trade diversion and discriminatory treatment; and

• make it harder to get relief against unfairly traded goods from all regions.

The bottom line is that the Administration should send a clear, immediate and

unmistakable signal to our FTAA negotiating partners that:

• The Draft Chapter and its myriad forms of trade law weakening will never be

accepted by the United States in whole or in part;

• Neither the Administration nor the Congress nor the American public will ever

accept the Draft Chapter’s approach to AD/CVD laws, which is ‘‘death by a

thousand cuts’’; and

• This campaign to try to use the FTAA to weaken AD/CVD laws is damaging

public support in the U.S. for the FTAA.

Message to Brazil and Other Trade Law Opponents

An FTAA should promote freer, rules-based, trade—not turn the U.S. market into

a dumping ground. This will be a free trade agreement, not a customs union or a

common market, and it is worth noting that South America’s steel producers have

used AD law against each other, even within the MERCOSUR customs union. An

FTAA will not eliminate unequal conditions of competition or the potential for tradedistorting practices. It will lead, we hope, to growing economic integration in our

hemisphere and, to the extent that dumping diminishes over time as a result of this

increased integration, to a decrease in the need to turn to AD law, as it has in the

NAFTA region.

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1For more information, see the Textile Crisis section of ATMI’s Web site (www.atmi.org).

Bilateral Free Trade Agreement Negotiations

Whether the bilateral FTA is with Chile or Singapore or some other country, it

is an almost sure bet that the other country will attempt to get special treatment

with regard to U.S. trade laws.

No Trade Law Weakening Through Bilateral FTAs

The exact same points that apply to the global trade negotiations in the WTO

Doha Round and in the hemispheric negotiations to achieve an FTAA apply to bilateral FTAs. Thus, AISI and its U.S. members will strongly oppose any effort to try

to use bilateral FTAs to eliminate or weaken AD/CVD rules and other U.S. trade

laws in bilateral trade with the U.S. The United States should agree to no language

in any FTA that would lead to less effective U.S. trade laws or to any diminution

of U.S. trade law rights.

No Weakening of Steel Buy American Rules Through Bilateral FTAs

In addition to trade laws, a second major area of significant concern to AISI’s U.S.

member companies is the need to preserve WTO-legal steel Buy American rules,

whether in a new global round of trade negotiations or in regional or bilateral FTAs.

AISI’s U.S. members support enhanced foreign government procurement opportunities for U.S. firms, especially steel’s U.S. customers. Thus, we would like to see

prospective FTA countries assume commitments to promote more open access to entities and greater transparency in the government procurement bidding process. At

the same time, given the failure of many foreign governments to live up to their

existing government procurement obligations—and given the lack of equitable results achieved to-date from government procurement liberalization—AISI’s U.S.

members remain totally opposed to any weakening of current steel Buy American

rules.

With respect to FTAs and government procurement, the NAFTA stands as a

model of how to make additional, incremental progress in this area of a kind that

AISI’s U.S. members support. It achieves progress by providing for greater transparency, higher thresholds and a bid protest procedure.

* AISI appreciates this opportunity to provide written comments to the House

Ways and Means Committee on President Bush’s Trade Agenda for 2002, and

stands ready to supply any additional information the Committee might wish to

have.

This statement is submitted on behalf of the American Textile Manufacturers InStatement of the American Textile Manufacturers Institute

f stitute (ATMI), which is the national trade association for the U.S. textile industry.

Our industry employs approximately 450,000 workers throughout the United States.

As we stated to this Committee when it held a similar hearing exactly eleven

months ago today, we are an industry that is simultaneously a major exporter and

one that is deeply impacted by foreign imports. As such, we believe that our country’s trade policy should be motivated by principles of fairness and equity. Much of

what we said in our statement last year still applies. In particular, we would like

to reiterate three basic principles which we believe should govern U.S. trade policy

and trade agreements affecting textiles:

(1) trade agreements must be fair and equitable to the domestic industry;

(2) trade agreements must be enforceable; and

(3) the U.S. Government must exhibit the will to enforce trade agreements.

These principles have not changed since we submitted that statement March 7,

2001.

What has changed since that date is that over 100 U.S. textile mills have closed

and over 60,000 U.S. textile workers have lost their jobs.1 Today, the U.S. textile

industry is experiencing its worst economic crisis since the Great Depression. Undoubtedly, the U.S. recession and the aftermath of the attacks on September 11th

have made things worse, but our industry’s primary problem stems from unfair

trade and exchange rate policies, particularly as they concern the Asian exporting

countries.

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The Over-Valued Dollar

Sharp and troubling job losses are not just occurring in textiles. The Nation’s entire manufacturing base has been eroded by an enormous and destructive increase 

in the value of the dollar. Since 1996, the dollar has increased by 30% in value on 

a trade-weighted basis—and against the currencies of the top ten Asian textile exporting countries, the increase has averaged 40%. This has caused imports to surge 

as currency changes have led to artificially low prices for manufactured goods from 

abroad. At the same time, U.S. manufacturing exports have fallen dramatically as 

American goods have been priced out of market after market. 

In textiles, prices for textile imports from Asia have dropped by as much as 38% 

since 1996. For manufactured goods as a whole, the import prices have dropped by 

20%. A resulting import surge has caused a wave of bankruptcies and layoffs in the 

manufacturing sector—the National Association of Manufacturers (NAM) estimates 

that more than 400,000 manufacturing jobs have been lost in the last year solely 

because of the over-valued dollar’s impact just on U.S. manufacturing exports. NAM 

says that the over-valued dollar, which is now approaching the devastating levels 

of the mid-1980s, has become U.S. manufacturing’s number one problem. 

The Administration should abandon its ‘‘strong dollar’’ policy and move judiciously 

in concert with other countries to gradually bring the value of the dollar down to 

normal, historical levels. This step would probably have a more beneficial long-term 

impact on the entire U.S. manufacturing sector, including textiles than any other 

action the government could take.

On a side note, regarding the political viability of future trade agreements, the 

rise of the dollar and the enormous pain it has caused in manufacturing across the 

country is a key reason that trade agreements have become dirty words with much 

of the America’s working class. In a world where U.S. tariffs average in the single 

digits, entire industries can be devastated by changes in the dollar’s value such as 

we have seen recently. When the dollar’s extraordinary rise—and the flood of imports it triggers—causes hundreds of thousands of workers to lose their jobs in a 

single year, then any kind of trade agreement, however well-meaning, becomes increasingly anathema to the American public. It is time for the U.S. trade agenda 

to recognize that currencies and currency manipulation are a major factor in international trade. 

In light of our economic crisis and the enormous dislocation in our industry, it 

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mittee’s press release announcing this hearing, in the order listed in the press release.

1. The President’s Trade Agenda and House Passage of H.R. 3005

President Bush, Commerce Secretary Donald Evans and the House Republican

Leadership all made certain commitments to textile state House Members related

to the vote on trade promotion authority (TPA). ATMI believes that these promises

must be fulfilled by Congress and the Administration without any compromise or

further delay. To do otherwise would be an unconscionable breach of trust and call

into question why textile state Members of Congress should allow the President to

negotiate trade agreements without maintaining Congress’ ability to modify the legislation implementing such agreements.

These commitments have been thoroughly documented, and now our industry is

watching to see whether and when these promises will be honored. An issue of immediate concern, and one that is directly within the jurisdiction of this Committee,

is the signed commitment by Speaker Hastert, Majority Leader Armey, and Majority Whip Delay to Rep. Jim DeMint of South Carolina. In this commitment, the

House Republican Leadership pledged

‘‘to bring no future bills with trade provisions to the House floor until the

Trade and Development Act of 2001 (sic) is corrected to require that U.S.

knit and woven fabrics be required to undergo all dyeing, finishing, and

printing procedures in the United States in order to qualify for benefits

under the Caribbean Basin Trade Partnership Act,’’ and ‘‘that this same requirement for dyeing, finishing and printing will be included on (sic) any

Andean Trade Preferences Act that contains additional textile preferences before it is considered again by the full House.’’

Please note that this pledge refers to correcting the Trade and Development Act,

not to weakening it or gutting it as critics have charged. Further, we would like to

emphasize that this interpretation of where dyeing, finishing and printing must be

done is the same interpretation taken by the Customs Service with respect to the

NAFTA agreement and what is known as 807–A trade. It has now become an issue

of commitment by Congressional leaders.

2. The Success of the WTO Ministerial Meeting in Doha

ATMI is concerned that the WTO Ministerial Declaration and other documents

agreed to in Doha by the U.S. and other WTO members will encourage Asian exporters to keep their textile markets closed. Despite assurances by Administration

officials that the U.S. can still demand that large developing countries open their

own closed markets, the Doha agreement will make it more challenging to do so.

The U.S. textile industry needs and should have access to those Asian markets

that keep out foreign textiles using high tariffs and non-tariff barriers. However, the

Doha agreement does not prohibit India and other countries from continuing to hide

behind protective barriers while simultaneously enjoying far greater access, and

seeking even greater access, to our markets at the expense of U.S. textile jobs.

The ministerial document states that developing countries will be allowed to focus

future talks on products of their choice. So-called developed country ‘‘tariff peaks’’

will be a target, and yet most Asian countries will argue that the document protects

their own markets, even though they maintain tariffs of 50 percent or more on

many products. This is nothing but allowing Asian markets to remain closed to U.S.

textile exports while continuing to open the U.S. market further to Asian exporters.

USTR and the Department of Commerce should be commended for their efforts

in resisting entreaties to change the terms of the WTO Agreement on Textiles and

Clothing (ATC) and thus grant India, Pakistan and other countries unjustified access to the U.S. textile market as an incentive for them to participate in the trade

negotiations. Such inducements just to prevent these nations from walking out in

Doha would certainly have been unwarranted. However, we are concerned that the

outrageous demands by India and a few others to liberalize the ATC have been

placed on the agenda for further discussion. We again call on the United States government to re-clarify that it will use its WTO veto authority to block these demands

from moving ahead. The U.S. has carried out its commitments under the ATC and

that should be the end of the debate.

We also continue to urge that the United States adopt specific objectives and

guidelines concerning U.S. textile and apparel tariffs. These objectives must include

freezing U.S. textile and apparel tariffs, and forcing Asian and other countries to

bring their tariffs down to U.S. levels and remove their non-tariff barriers without

delay.

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2For more information, see ATMI’s report ‘‘Promises Unkept’’ at http://www.atmi.org/Promises.pdf.

It has been eight years since the Uruguay Round promised to provide access to

foreign markets for U.S. textile products. Yet, almost every Asian textile market,

as well as many others, remain entirely or mostly closed to U.S. exports. These

closed markets include India, Pakistan, Thailand, the Philippines, Indonesia, Brazil

and Argentina among many others. Some nations have even added new barriers to

U.S. textile exports, despite their Uruguay Round obligations. This inequity must

be addressed.2

We also remain concerned that the United States has, despite clear sentiment in

Congress to the contrary, agreed to allow U.S. laws against dumping, subsidies and

other unfair trade practices to be placed on the agenda for upcoming negotiations.

After all remaining textile and apparel quotas are completely phased out on January 1, 2005, our trade laws will be the industry’s defense against unfair and illegal

trade practices. Like many in Congress and in other sectors affected by unfair trade

practices, we strongly urge that the U.S. Government reject any efforts to weaken

U.S. trade laws.

3. Prospects for the FTAA

Regarding a Free Trade Agreement for the Americas, we renew our request that

the government create a subgroup within the market access negotiating team dedicated to textile and apparel issues. This has been previously done with every major

multilateral negotiation to date involving textile and apparel trade, including the

Uruguay Round, NAFTA and the U.S.-Canada FTA. The issues involved in textile

and apparel market access, which include rule of origin, quotas, possible transshipments, Customs verification teams and the negotiation of over 1,500 tariff lines,

are so technical and detailed that a dedicated sub-group on textile market access

is absolutely necessary for a successful outcome.

While ATMI is still considering whether to take a formal position on an FTAA,

in general terms we believe the agreement must be fair and beneficial to U.S. textiles, it must have enforceable rules and the government must be willing to enforce

those rules. Again using NAFTA as a guide, the textile and apparel rules in an

FTAA must have origin requirements that prevent countries outside the agreement

from becoming beneficiaries. The rules must also allow for cross-country Customs

verification and have reciprocal tariff phase-outs. Enforcement is key; each time

that free trade is expanded, the opportunity for goods from outside the free trade

region to enter illegally is expanded as well.

4. H.R. 3009 (The Andean Trade Expansion Bill)

As clearly stated in our testimony to this Committee last year, H.R. 3009, the Andean Trade Expansion Bill, would cost thousands of U.S. textile jobs at a time when

our industry is already reeling from its worst economic crisis since the 1930s.

We are pleased that the Committee acted on one of the arguments we made

against the bill when it was before the Committee last October. That version contained language that would have let Andean apparel, using fabrics formed anywhere

in the world, enter the U.S. free of duties and quotas. This obvious loophole, which

we pointed out prior to Committee consideration of the bill, was finally corrected

prior to floor action.

However, the Committee did nothing to correct the other flaws in the bill, as

noted below:

• The bill grants duty-free treatment to an enormous amount of apparel assembled in the Andean of regional fabric—nearly one billion square meter equivalents annually by 2006—rather than U.S. fabric. Allowing such a huge amount

of apparel made of regional instead of U.S. fabric will cause further job losses

in the U.S. textile industry. • The bill does not even require that the Andean apparel be ‘‘wholly’’ assembled

in an Andean beneficiary country. Thus, most of the assembly processes could

be done in China or other Asian countries, with very limited work (such as sewing a side seam on a shirt) done in the Andean region. This would result in

China and other large textile producing countries in the Far East realizing most

of the benefits, not the Andean countries, and certainly not the U.S. • Finally, unrelated to the Andean region, H.R. 3009 doubles the volume of SubSaharan apparel that can be made from ‘‘regional’’ or third country fabric. This

amendment to the African Growth and Opportunity Act (AGOA) will benefit

Asian fabric and yarn producers and severely limit the possibility of U.S. textile

exports to AGOA countries and a meaningful economic partnership developing

between U.S. textile producers and African apparel makers.

79

As the House approved this bill by only a narrow margin, we are urging the Senate not to approve its version of the bill because any compromise in conference with

such an egregiously flawed House-passed measure would still be harmful to U.S.

textiles. We urge the Committee, particularly in light of our industry’s current economic crisis, to reconsider and forward to the House a new bill, simply extending

for another four years the Andean Trade Preference Act that just expired.

5. Progress in Negotiations to Establish A Free Trade Agreement with

Singapore

We continue to stress that the proposed free trade agreement with Singapore is

not equitable or fair because it would give duty-free access for textiles and apparel

from Singapore at the expense of U.S. textile producers. The market for U.S. textile

and apparel products in Singapore is tiny, and there is no prospect for substantially

increased U.S. textile exports to Singapore.

In addition, the agreement would not actually benefit manufacturers in Singapore

because, according to the U.S. Customs Service’s own reports, Singapore cannot

physically produce anywhere near the amounts of textile and apparel goods it is currently exporting to the U.S. In other words, these items are obviously being illegally

transshipped through Singapore from manufacturers in China and other countries

in Asia. As Singapore officials have refused for years to cooperate in anti-transshipment efforts, what we would have would not be a U.S.-Singapore FTA, but instead a de facto U.S.-Singapore-China-etc. FTA. We recommend that textiles and

apparel be removed from the FTA.

Recent news reports indicate that Singapore is trying to use these negotiations

to create a back-door entry to the U.S. for goods produced on the Indonesian islands

of Batam and Bintam. We oppose this expansion of the negotiations and urge the

Committee to do the same.

6. Potential FTA with Certain Central American Countries

On the matter of an FTA with various Central American countries, we question

the need for beginning such negotiations less than eighteen months after the Caribbean Basin Trade Partnership Act (CBTPA) went into effect. All five of the nations

identified by the U.S. Trade Representative’s Office for possible inclusion in these

negotiations are CBTPA beneficiary nations. It would seem more prudent to allow

apparel manufacturers in these countries to continue to develop economic partnerships with U.S. textile producers, as provided for under CBTPA, before rushing to

establish new relationships and rules.

CONCLUSION

The American Textile Manufacturers Institute views the trade agenda for 2002

as one containing a great many issues that could cause serious damage to U.S. textile producers and our associates. Any further harm would come at a time when we

are already in an unprecedented economic crisis. Accordingly, we urge the Committee and the Congress to recognize the concerns we have voiced in this testimony

and to adhere to our recommendations with respect to textile trade policies.

Statement of the Association of American Chambers of Commerce in Latin

fAmerica

The Association of American Chambers of Commerce in Latin America (AACCLA)

welcomes the opportunity to submit a statement on President George W. Bush’s

trade agenda for 2002. The following statement will focus on the trade agenda for

the nations of the Americas and its implications for economic reform, growth, and

prosperity throughout the hemisphere.

AACCLA is a leading advocate of increased trade and investment between the

United States and Latin America. Representing 23 American Chambers of Commerce in 21 Latin American and Caribbean nations, the association’s 20,000 member companies manage over 80 percent of all U.S. investment in the region.

The Prize is Slipping Away

At the start of the 21st Century, the prize long sought by AACCLA’s leadership

is in danger of slipping from our fingers—namely, the prize of a hemisphere enjoying sustainable economic growth based on private enterprise and open trade. A

number of factors explain why this goal remains elusive. First and foremost, the fact

that the President of the United States has been forced since 1994 to direct U.S.

trade policy without Trade Promotion Authority (TPA) has sapped the credibility of

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Washington’s efforts to forge a closer trade and investment relationship with our

hemispheric neighbors.

At the same time, much of Latin America has forgotten its commitment to serious

economic reform, and many governments that seek foreign investment or better access to U.S. markets are reluctant to tackle the structural reforms that are the basis

of growth.

The U.S. trade agenda and Latin America’s reform agenda are undeniably linked.

Both the United States and Latin America need a renewed commitment from government officials and business leaders if our nations are to achieve the dream of

a hemisphere united in prosperity and economic freedom.

Free Trade for the Americas

President Bush came to office at a time of high hopes for advocates of greater

trade between the nations of the Americas. He set the objective of making this a

‘‘Century of the Americas,’’ with the Free Trade Area of the Americas (FTAA) as

the cornerstone of this audacious project.

The basic rationale for the FTAA remains strong. Hemispheric free trade will

boost economic growth and reduce poverty throughout the hemisphere. It will provide an opportunity to re-energize economic reform throughout the Americas, and

it will confirm a shared commitment to the market-opening policies that create the

conditions for growth.

The FTAA will encompass 34 nations with over 800 million citizens. Its collective

GDP will exceed $13 trillion. The FTAA will:

• Eliminate existing tariff and non-tariff barriers and bar the creation of new

ones;

• Remove other restrictions on trade in goods and services as well as investment

unless specifically exempted;

• Harmonize technical and government rule-making standards;

• Exceed World Trade Organization disciplines, where possible;

• Provide national treatment and investor safeguards against expropriation;

• Establish a viable dispute settlement mechanism; and

• Improve intellectual property rights protection.

The North American Free Trade Agreement (NAFTA) offers an excellent preview

of the benefits promised by the FTAA. Since the NAFTA came into force, trade between the United States and Mexico has tripled to about $250 billion per year. Annual trade between the United States and Canada has doubled to over $400 billion.

This explosion in trade has allowed companies in all three NAFTA countries to generate millions of new jobs. The NAFTA is one of the main reasons why U.S. companies generated over 20 million new jobs in the 1990s.

While enhanced competition in the marketplace has led to job losses in some industries, the new, trade-related jobs that have been created tend to provide better

pay than the jobs that were lost. Studies show that some 12 million U.S. jobs rely

on exports, and these positions pay 13 to 18 percent more than other jobs.

As Ambassador Zoellick has pointed out, the combined effects of the NAFTA and

the Uruguay Round trade agreement that created the World Trade Organization

(WTO) have increased U.S. national income by $40 billion to $60 billion a year.

Thanks to the lower prices that these agreements have generated for such imported

items as clothing, the average American family of four has gained between $1,000

to $1,300 from these two pacts.

TPA and U.S. Credibility

While these benefits are recognized by government officials and business leaders

throughout the Americas, many in Latin America have lately come to perceive the

United States as veering toward protectionism. Even in the aftermath of the watershed December 6 approval of TPA by the House of Representatives, opinion leaders

from Brazil to the Dominican Republic have charged the United States with hypocrisy for professing support for free trade while dragging its feet on the hemispheric

trade agenda.

Above all, the fact that the President of the United States lacks TPA has lent

credibility to the charge that our country is not serious about entering into new

trade agreements. TPA empowers U.S. officials to negotiate trade agreements that

the Congress can approve or reject—but not amend. Without TPA, governments

around the world will continue to doubt the resolve of U.S. negotiators as they pursue bilateral agreements, regional deals such as the FTAA, and the WTO’s Doha

Development Agenda.

There are other reasons why the charge of protectionism leveled against the

United States has some validity. Last December, for instance, the U.S. Congress alVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00084 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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lowed the 10-year-old Andean Trade Preference Act to lapse despite broad support

in both chambers for trade and private enterprise as a tool to deter the narcotics

trade.

But nothing is as important as TPA. Without it, the United States can continue

in its role as an important commercial partner for Latin America and the Caribbean. But the prospect of a hemispheric partnership that will deliver economic

growth, generate jobs, and raise incomes for all the Americas will remain a mirage

without TPA.

The United States is already paying a high price for its inertia on the trade agenda. Since TPA lapsed in 1994, other nations around the world have been busy weaving a spiderweb of free trade agreements. Over 130 regional trade agreements are

currently in force worldwide. The European Union has signed at least 27 free trade

agreements, and Mexico alone has signed over 32. However, the United States has

free trade agreements with just four countries: our two NAFTA partners—Canada

and Mexico—plus Israel and Jordan.

Particularly in the Americas, the spiderweb of free trade agreements that

emerged in the 1990s threatens to put U.S. companies at a competitive disadvantage. Basically, other nations are negotiating trade agreements that provide preferences for their firms over our own.

Chile is a perfect example. Today, companies from Canada, Mexico, and a number

of other countries enjoy duty-free access to the Chilean market. But because U.S.

exporters still pay Chile’s highest duty of seven percent, American companies are

losing hundreds of millions of dollars in potential sales every year. As many people

have observed, this is like starting a basketball game seven points behind.

More Reform, Not Less

If the United States has some work to do to regain its status as a credible partner, so do our neighbors in Latin America and the Caribbean. The bottom line for

the region is that there is an urgent need to jump-start the economic reform process.

This is especially true for the structural reforms that have been postponed again

and again in country after country.

Argentina is a case in point. The U.S. media have been quick to offer their backof-the-envelope analysis of Argentina’s economic collapse. Unfortunately, the conventional wisdom leaves much to be desired. Many of these overnight experts say that

a decade of unbridled free-market policies ended in tears for Argentina. They say

that too much deregulation and too much privatization finally imposed too much

pain on a weary population.

This is nonsense. The reforms that Argentina did carry out helped its economy

and its people a great deal. But the reforms it procrastinated—and a dose of bad

luck—are responsible for the country’s current predicament.

Consider the widely maligned 1-to-1 peg of the peso to the dollar. The decision

to anchor the peso to the dollar was made in 1991 amid labor strikes and fears of

a military coup. The result was almost immediate success. The peg restored credibility to the peso, reigned in hyperinflation, and brought the first economic stability

to that country in our lifetimes. Argentina enjoyed half a decade of impressive economic growth. There is no doubt that the peg outlived its usefulness, but it did enormous good as long as its discipline was followed.

Consider, on the other hand, the reforms Argentina failed to tackle. The country’s

political system provided no control over spendthrift state governors. The country’s

rigid labor laws never got the comprehensive reform they need, and in some instances privatization led to the creation of new private monopolies instead of competitive markets.

Argentina makes an easy target, but the list of reforms that have yet to be tackled is long in just about every country in the region. Consider Brazil. The Heritage

Foundation/Wall Street Journal Index of Economic Freedom writes that in Brazil,

‘‘economic development remains thwarted by over-regulated domestic markets that

attract little capital, as well as a convoluted and punitive tax code.’’

Consider Peru. The Office of the U.S. Trade Representative cites the ‘‘weakness

of government institutions’’ and explains that ‘‘Executive Branch ministries, regulatory agencies, and the judiciary lack the resources, expertise, and independence

necessary to carry out their respective duties.’’

Consider Venezuela. President Cha ́vez approved a package of draconian economic

laws in November that so frightened and enraged the public that the country’s

major business organizations and leading labor unions joined forces in a national

strike.

A tour through the region would reveal that the ‘‘second generation’’ reforms long

called for have stalled in most countries, undermining investor confidence and genVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00085 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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erating economic instability. Latin American governments should look upon Argentina’s troubles today and say to themselves: ‘‘There, but for the grace of God, go I.’’

The NAFTA Example

In this context, it is critical to emphasize that the reform agenda is closely tied

to the trade agenda. The connection between the two is best illustrated by the way

economic reform in Mexico preceded and energized the negotiations for the NAFTA.

Mexico joined the GATT in 1986, and an entire first generation of economic reforms took place in the late 1980s and early 1990s. Privatization of state-owned enterprises, efforts to restrain inflation, and the passage of laws to protect intellectual

property—all were advanced before the NAFTA negotiations drew to a close.

Through these reforms, the Mexican government demonstrated its commitment and

seriousness of purpose to its negotiating partners in the United States and Canada.

It would be wrong to suggest that Mexico today has entered some kind of nirvana.

Much remains to be done. Referring to the country’s judiciary, for instance, the U.S.

Department of State reports that ‘‘corruption, inefficiency, and disregard of the law

are major problems,’’ and it notes that specific proposals for reform have not been

forthcoming.

But it is clear that Mexico took a great leap forward with the NAFTA. Today,

Mexico exports twice as much as Brazil, even though the South American giant has

an economy twice the size of Mexico’s. After growing by nearly 8% in 2000, Mexico

today has followed its northern neighbor into a recession, but it is a North American

recession characterized by a contraction of less than 1% of GDP. It is not a classic

Latin American recession, in which economies can contract by 5–10% of GDP.

Latin America urgently needs to rededicate itself to a vigorous program of economic reform in preparation for the FTAA. Support for a new generation of reform

must come in great measure from local leaders—and not from Washington. But the

priorities on the region’s economic reform agenda are clear—fostering property

rights, making labor laws more flexible, strengthening judiciaries, fixing fiscal sinkholes like Argentina’s states, and modernizing regulatory institutions. This is the

agenda that cannot wait.

What Can the United States Do?

Nor can the United States afford to sit on the sidelines: the trade agenda calls

for U.S. leadership today more than ever. The good news is that there are a number

of fronts on which the United States can move today:

• Quick renewal of the Andean Trade Preference Act is imperative. Its lapse

looks alarmingly like a display of absent-mindedness on the part of the U.S.

Congress. If the act is not renewed soon, literally tens of thousands of jobs will

be lost in the Andean countries. It is also critical that the list of products that

gain access to the U.S. marketplace on a duty-free basis be expanded, above all

to include textiles and apparel. The same treatment should also be afforded to

leather goods, canned tuna, and footwear.

• Completing negotiations and winning Congressional approval of the Chile-U.S.

Free Trade Agreement this year is more important than ever as a sign that

the United States stands ready to forge closer ties with the countries of this

hemisphere, starting with those that take the lead in reforming their economies.

• Indeed, the United States must show a willingness to engage in bilateral negotiations with any Latin American country that is prepared to move forward.

President Bush took a positive step last month when he announced that the

United States and five Central American countries will explore a free trade

agreement.

• It is undeniable that some countries will be ready for a free trade agreement

with the United States before others, and we should be honest about this. The

Bush Administration should consider establishing a system that will get the

Free Trade Area of the Americas up and running as soon as possible, but

allow countries whose economies are lagging to be phased in over time.

• Finally, and clearly at the top of the ‘‘To Do’’ list for the United States, the Congress must pass Trade Promotion Authority. Without it, the United States

is a bystander in the game of international trade. But this is no game—the

prosperity of our country and our hemisphere is too serious.

Conclusion

Events in the Americas since September 11 show that in some respects we already are the hemispheric familia to which President Bush frequently refers.

Brazil’s President Cardoso demonstrated great leadership when he called after

September 11 for activation of the Rio Treaty, which describes an attack on one

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Western Hemisphere nation as an attack on all. The entire hemisphere stood with

the United States, sending a ringing message of sympathy and support.

Nor is the economic outlook all black. Throughout the hemisphere, inflation has

fallen from triple and quadruple digits a decade ago to single digits today. While

threats to democratic rule persist in some places, it is impressive to observe how

thoroughly democracy has taken root in most countries. With a few exceptions, the

prospect of rolling back the substantive economic reforms of the 1990s remains a

threat, not a reality.

Most heartening of all is the prospect of seeing Trade Promotion Authority approved by the U.S. Congress. We call on the Senate to move quickly to give U.S.

negotiators the authority they need to bring home trade agreements that will open

foreign markets. American workers, consumers, and businesses are counting on you

to bring these opportunities within reach.

The Association of American Chambers of Commerce in Latin America will work

day and night to make the case in the United States for approval of TPA while arguing staunchly for a renewed commitment to market-based economic reform in

Latin America. Working together, the nations of the Americas can truly make this

the ‘‘Century of the Americas.’’

f Washington, DC

February 4, 2002

The Honorable Bill Thomas

The Honorable Charles Rangel

Committee on Ways and Means

United States Congress

Washington, DC 20515

Dear Mr. Chairman and Representative Rangel:

I am writing to you today in the context of your hearing on the Bush Administration’s trade agenda. I want to first thank you on behalf of my government for all

you have done to help promote trade between Bolivia and the other nations of the

Andean region and the United States. Such trade is literally an economic and political lifeline for the region.

As you know, Bolivia has been an ally to the United States in its effort to help

the nations of the Andean region in the war on drugs. We believe this effort has

made Bolivia a regional success story. As part of a cooperative effort with the

United States and the other nations of the Andean region, in 1997, Bolivia instituted its five-year anti-drug plan, the so-called ‘‘Dignity Plan.’’ When plan began,

Bolivia was the second major producer of coca in the world. There were 45,800 hectares of coca plants in Bolivia. In the three years that the plan has been in existence, Bolivia has eliminated more than 90% of coca production in the Chapare region of Bolivia. This region was formerly the largest area of illicit coca production

in Bolivia.

Unfortunately, the drug trade created a significant informal sector within the Bolivian economy, accounting for approximately 3.86% of GDP in 1997. This illegal

economic activity went beyond generating direct levels of employment. It also fostered economic activity in transportation, trade and industry.

In the last four years, since the implementation of the Bolivian anti-narcotic ‘‘Dignity Plan,’’ the country has lost $370 million due to the reduction of the gross value

of coca, and $230 million due to the added value given to this industry. This

amounts to the equivalent of 60% of Bolivia’s exports. All of this is extremely signifi- cant in a nation with a GDP of $8 billion.

In addition, this illegal, underground economy has had social and political effects

as well. The elimination of this scourge, while clearly the right thing to do, has put

a severe strain on the Bolivian government and its people.

As you know, the Andean Trade Preference Act was designed as the trade instrument in the fight against drugs. It was meant as an incentive to lure peasants away

from the coca planting to produce and export other legal products.

Because of the economic strain that Bolivia is facing, for the ATPA to help Bolivia

in a significant way, it must be as comprehensive as possible. In the decade since

its inception, Bolivia has accounted for only about 3.5% of the total ATPA exports

to the United States. Unfortunately, this is not enough to make a difference.

Therefore, I want to thank the Committee and the House of Representatives for

passing a broad-based bill that would benefit Bolivia, as well as the United States

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and the nations of the region. While such an effort would help the Andean nations,

the effect of this approach will be negligible to the U.S. textile industry. A 1999 ITC

trade report states that apparel imports from the ATPA countries only accounts for

1% of all U.S. textile imports. Further, in general, the study concluded, ‘‘ATPA is

likely to continue to have minimal future effects on the U.S. economy in general.’’ We urge the Congress and the Administration to pass as expansive a bill as possible. Increasing exports to the United States could be of real help to Bolivia and

its people and to the overall effort to fight narco-terrorism. A strong and prosperous

Bolivia is in the interest of both of our nations.

I take this opportunity to present to you, the assurances of my highest personal

esteem and consideration,

Marlene Fernandez del Granado

f Ambassador of Bolivia

Statement of the Brazil-U.S. Business Council, U.S. Section

The Brazil-U.S. Business Council welcomes the opportunity to provide a written

statement concerning President George W. Bush’s trade agenda for 2002. The Brazil

Council’s statement will focus on the need for more engagement and cooperation between the United States and Brazil as the leaders in the Western Hemisphere and

reiterates the pivotal role the approval of Trade Promotion Authority will play in

the pursuit of regional prosperity and free trade agreements with other nations.

Brazil’s Importance in the Western Hemisphere Should Not be Underestimated

Brazil is the fifth largest country in the world, with a total landmass of over 8.5

million square kilometers and a population of approximately 170 million people.

Brazil is located in South America and covers a full 48% of its area. In the last decade, the country has undergone a series of reforms and a stabilization program that

has positioned it as the most important country and the largest economy in the

Americas after the United States and Canada.

Brazil has also embraced globalization by being an active member of the World

Trade Organization and playing a key role in the formation of the Southern Cone

Common Market (Mercosul) along with Argentina, Paraguay and Uruguay. Brazil

is committed to negotiating a Free Trade Area of the Americas (FTAA) by 2005,

along with 34 nations in the Western Hemisphere.

Brazil is the U.S.’s 11th largest export market and still growing. Among the developing countries, Brazil has become the second principal destination for foreign direct

investment (FDI) flows since 1996, second only to China. Nearly 25% of this FDI

comes from U.S companies. The level of U.S. corporate interest in Brazil reflects the

degree to which Brazil has succeeded in opening its market to foreign trade and investment and stabilizing its economy. Under the leadership of the Cardoso administration, Brazil has implemented important constitutional reforms that have opened

key sectors of the Brazilian economy to foreign competition and investment. These

actions have led to a boom in U.S. direct investment in Brazil, concentrated in the

telecommunications, automotive, electrical energy and petroleum sectors.

U.S. Must Seize the Moment for the 21st Century of the Americas

In the wake of the Argentine crisis, Brazil Council members feel strongly that the

Bush Administration should breathe new life into its goal of making the 21st century the ‘‘Century of the Americas’’ by reaching out to Brazil and making the development of a positive bilateral commercial agenda a top priority. Steps like forging

a common approach to agriculture in the WTO, facilitating the movement of business people between our two countries while ensuring security at our borders and

making important trade laws available in both languages are good ways to begin

creating a new chapter in the bilateral relationship.

TPA is Crucial to Maintain Credibility and Momentum for the FTAA

In the trade area, the passage of Trade Promotion Authority (TPA) is a top priority for the Brazil-U.S. Business Council, and we commend President Bush’s leadership in helping pass this important legislation through the House of Representatives in December of 2001. Passage of TPA in Congress is crucial for maintaining

U.S. credibility with its trading partners and for continuing the momentum for

FTAA and WTO negotiations. First, because the U.S. president has not had Trade

Promotion Authority since 1994, Brazil and other developing countries have become

85

skeptical of the U.S. commitment to negotiate bilateral and multilateral trade agreements and argue that the U.S. is not serious about entering in ‘‘good faith’’ negotiations. Secondly, we need to keep the momentum for the FTAA and WTO negotiations. FTAA market access discussions are expected to begin in April of 2002, and

a new round of WTO negotiations was launched during the Doha Ministerial last

year. Negotiations for both the FTAA and the WTO are set to conclude by 2005, and

we must not lose the momentum achieved thus far.

In fact, Brazil and the United States will co-chair the FTAA negotiations starting

in October. The U.S. should see this as an opportunity to build and expand on the

common areas of interest with not only Brazil, but also other developing countries

in the hemisphere.

Moreover, advancing the negotiation of the FTAA is also critical because Mercosul

is aggressively moving to advance negotiations with our competitors in the region

and in Europe. These agreements would give them preferential access to the Brazilian market and could facilitate the erosion of the U.S. market share in Brazil.

In fact, Spain has taken a significant slice of FDI in Brazil, right behind the U.S.,

with over 17% of average share of investments.

In addition, we would like to underscore the importance of communicating to our

partners in Brazil what the bill means for them. It is critical that we reverse the

conventional wisdom in Brazil that the current TPA bill is a step back for trade liberalization if we are going to successfully complete the FTAA. Instead, we want to

communicate to our trading partners, especially Brazil, that the bill is a sign that

the U.S. is committed to pursuing prosperity in the hemisphere and its ability to

move forward on trade agreement negotiations with other countries in the Americas.

2002 is Key for Future of Bilateral Relationship

2002 is a critical year for the future of Brazil-U.S. trade and investment. When

Brazilians go to the polls in October they will not only be deciding who their next

President will be but will be setting the course for the future economic policy of the

country. The Brazil-U.S. Business Council will continue to work with the Cardoso

Administration to ensure the implementation of critical economic reforms before the

end of the year. The Council will also work to promote and communicate its members’ priorities to the new Brazilian Administration and hopes the U.S. Government

will see this as an opportunity to build stronger ties with Brazil in pursuit of economic growth in the region.

Conclusion

Brazil’s importance for the hemisphere is clearly demonstrated by its engagement

in global and regional trade agreements as well as its growing attractiveness for foreign direct investment. It is also clear that Brazil and the U.S. are moving forward

along a path to a stronger commitment in the hemisphere. We salute President

Cardoso’s leadership after September 11 in calling for the activation of the Rio Treaty stating that an attack on one Western Hemisphere nation is an attack on all.

This message of support and sympathy signifies that both countries can achieve a

great deal through cooperation.

In order to ensure the continued economic growth and prosperity in the region

and the world, we must not lose sight of the FTAA and WTO negotiations. However,

we must first secure passage of TPA in the U.S. Congress, not only to send a message to our trading partners that we are serious about the negotiations, but also

to maintain our credibility as a leader in the world.

Established in 1976, the Brazil-U.S. Business Council is the most influential U.S.-

based business organization focused on strengthening trade and investment between

Brazil and the United States. The U.S. Section of the Council represents the majority of the largest U.S. corporations invested in Brazil and operates under the aegis

of the U.S. Chamber of Commerce. The Brazil Section of the Council is managed

by the Brazilian National Confederation of Industry in Brazil, based in Rio de Janeiro.

f86

Statement of the Hon. Eni F.H. Faleomavaega, a Representative in

Congress from American Samoa

Introduction

As a member of the U.S. House International Relations Subcommittee on the

Western Hemisphere, I fully support Andean efforts to curb drug production. However, as the Ranking Member of the House International Relations Subcommittee

on East Asia and the Pacific, I believe any trade policy we enact must be fair and

non-discriminatory. Whether or not canned tuna is included in the Andean Trade

Preference Expansion Act (ATPEA) is a matter of global concern. Thailand, Indonesia, the Philippines, Vietnam, Cambodia, Brunei, Malaysia, Singapore, Lao, and

Myanmar recognize that preferential trade treatment for the Andean countries will

adversely affect the ASEAN tuna industry. ASEAN member countries also contend

that granting duty-free trade benefits to one region at the expense of another could

be seen as a discriminatory practice to developing countries, including ASEAN member countries which do not receive any trade preferences regarding canned tuna.

For the U.S. Territory of American Samoa, the issue is also complex. More than

85% of American Samoa’s economy is either directly, or indirectly, dependent on the

U.S. tuna fishing and processing industries. Two canneries, Chicken of the Sea and

StarKist, employ more than 5,150 people or 74% of the workforce. If canned tuna

from Ecuador and other Andean countries is given the same preferential trade status as canned tuna from the U.S. Territory of American Samoa, more than 5,000

workers in American Samoa will be at risk.

Although H.J. Heinz, parent company of StarKist, has tried to dismiss our concerns and pretend that the ATPEA will not affect American Samoa, it is important

for members of Congress to understand that the ATPEA will affect our local economy. As Star Kist has repeatedly stated, the only market for tuna from American

Samoa is the U.S. Therefore, duty-free treatment for canned tuna from Ecuador and

other Andean countries equals financial problems for American Samoa. The CEO of

Chicken of the Sea has already stated that if canned tuna from Andean countries

is given the same preferential trade status as canned tuna from American Samoa,

production in American Samoa will be at immediate risk. As Star Kist has repeatedly testified, ‘‘a decrease in production or departure of one or both of the existing

processors in American Samoa could devastate the local economy resulting in massive unemployment and insurmountable financial problems.’’

Growth of the Andean Tuna Industry

To understand the serious implications this legislation holds for American Samoa,

we must first take a look at the growth of the tuna industry in Ecuador and other

Andean countries. According to industry analysts, since the enactment of the ATPA

in 1991——

Tuna factories in the Andean countries have increased from 7 to 23, up 229%.

Production capacity has increased from 450 to 2,250 tons per day, up 400%.

Direct employment has increased from about 3,500 to 12,500 new employees, up

257%.

Exports to the U.S. have grown from about $15 million to over $100 million annually, up 567%.

In the past ten years, the Andean tuna fishing fleet has also grown from about

20 to 90 fishing vessels. Today, the Andean Pact countries control more than

35% of the catch in the Eastern Pacific Tropic (EPT).

In terms of production, Ecuador and Colombia have the capacity to jointly process

2,250 tons of tuna per day.

2,250 tons per day × 5 days (or 240 days per year) = 540,000 tons of tuna or 48.6

million cases per year.

American Samoa processes about 950 tons of tuna per day.

950 tons × 5 days per week (or 240 days per year) = 22,800 tons of tuna or 20.5

million cases per year.

48.6 Andean cases + 20.5 million Samoan cases = 69.1 cases per year.

Given the fact that the U.S. only consumes 48 million cases per year, the Andean

countries have the production capacity to supply the entire U.S. market and wipe

out the economy of American Samoa. Add to this the fact that labor rates in the

Andean countries are $0.69 per hour and less. In American Samoa the labor rates

87

are $3.26 per hour. If Ecuador and other Andean countries are given limitless access

to the U.S. tuna market, American Samoa will be priced out of the market place.

What Congress Needs to Know

The U.S. has NEVER extended duty-free treatment to canned tuna from a country

that has the capacity to supply the entire U.S. market place. I think it is also worth

noting that the Southeast Asian Nations and Mexico are so concerned about Ecuador ruling the U.S. market that they have hired independent lobbying firms in

Washington to protect their interests and represent their views before the U.S. Congress.

Ecuador is also continuing its lobbying effort. Ecuador’s Minister of Foreign Affairs, the Honorable Heinz Moeller, has visited with the White House Administration, the Secretary of Commerce, the U.S. State Department, and with key Members

of Congress to gain support for the inclusion of canned tuna in the ATPEA.

Minister Moeller also contacted my office and requested a meeting to discuss the

matter in further detail. On January 22, 2002, Minister Moeller and I met in my

Washington office. Accompanying the Minister was the Ambassador of Ecuador, the

Honorable Ivonne A-baki, and other Chief Ministers. The Ecuadorian Delegation

shared its concerns about the on-going drug problem in Latin America and made

a compelling argument that expanded trade benefits would assist the Andean countries in curbing drug production. Although I want to be helpful to Ecuador in its

efforts to curb drug production, I continue to believe that the issue of preferential

treatment for canned tuna should be debated on its own merits. I do not believe a

discussion about tuna should be couched in the rhetoric of an anti-drug campaign.

However, if Congress chooses to make the debate about drugs, then I want the

record to reflect that American Samoa does not grow drug crops. American Samoa

does not export drug crops. Our economy, whether up or down, is in no way associated with drug production. American Samoa does not need and has not asked for

preferential treatment to rid itself of illegal trade. Instead, American Samoa has

built on the principles of fair trade. More than 100 years ago, we established relations with the United States and freely pledged our allegiance to uphold the principles of democracy. More than 40 years ago, we welcomed the tuna fishing and

processing industry to our remote islands. We worked, we toiled, we built. Today,

our economy is more than 85% dependent on the U.S. tuna industry.

I do not believe American Samoa should now be placed at a trade disadvantage

because it has no past or present affiliation with drug production. I do not believe

American Samoa should be penalized for practicing the principles of fair trade. The

fact of the matter is whether or not canned tuna from Ecuador is given preferential

trade treatment has little to do with whether or not drug production in Latin America will be curbed.

Beyond this, Ecuador is not lacking for products or commodities to export. In fact, Ecuador has substantial oil resources and a GDP purchasing power parity of $37

billion. Ecuador exports $5.6 billion in products and commodities, including petroleum, bananas, shrimp and coffee. According to some analysts, two-way trade between the United States and the Andean region has more than doubled to $28.5 billion a year since enactment of the Andean trade agreement in 1992. With this kind

of growth, are we really supposed to believe that Ecuador has to corner the tuna

market in order to fight the drug war?

I believe it is important for the U.S. Congress to know that Ecuador is rapidly

becoming the 3rd largest supplier of albacore to the U.S. If Ecuador is allowed dutyfree access, it will become the largest supplier of light meat tuna to the U.S. No

matter what others may contend, this will affect the local economy of American

Samoa. With labor rates of $0.69 and less per hour in the Andean countries, American Samoa will not be able to remain cost competitive.

Although the U.S. Territory of American Samoa cannot protect its market-share

indefinitely, the concerns of the Territory must not be marginalized. Parameters of

fairness and equity must be established. Compromise must be supported. If Congress fails to defend U.S. interests, American workers will be displaced. For every

million cases that enter the U.S. duty-free, American Samoa will lose——

• 270 jobs • $18 million in processing revenue • $5 million in utilities, overhead, local economy

• $1.5 million in wages

• Thousands of dollars in lost tax revenue

The U.S. tuna fishing fleet will also be forced out of business. The U.S. tuna fishing fleet currently supplies about 90% of the catch used by the canneries in American Samoa. This catch is caught in the Western Pacific Tropic (WPT). If operations

88

in American Samoa are forced to close or downsize, the U.S. fishing fleet will lose

the WPT market. Furthermore, the U.S. tuna fishing fleet will NOT be allowed to

fish in the Eastern Pacific Tropic (EPT) because all available fishing licenses in the

EPT have already been claimed by Mexico, Ecuador, and other Andean countries.

Compromise

In an effort to expand canned tuna trade benefits to the Andean Pact countries

and ensure the continued viability of the U.S. tuna fishing and processing industries, I have worked to build a bi-partisan base of support for compromise. In October of last year, the U.S. House took up H.R. 3009 without a hearing and passed

the ATPEA with the understanding that a compromise would be reached on the

issue of canned tuna. Congressman Bill Thomas, Chairman of the House Ways and

Means Committee, gave me his personal assurances that he would work with me

to protect American Samoa.

In December, the Senate Finance Committee considered S. 525. Prior to the markup, Senator Daniel Inouye (D–HI), Senator Daniel Akaka (D–HI), Senator Frank

Murkowski (R–AK), Senator Ted Stevens (R–AK) and Congressman Randy ‘‘Duke’’

Cunningham (R–CA) joined me in sending a letter to Senator Max Baucus, Chairman of the Senate Finance Committee. In this letter, we expressed our opposition

to the inclusion of canned tuna in S. 525.

We also worked with Chicken of the Sea, Bumble Bee, and the U.S. tuna boat

owners to craft a compromise amendment that would help the Andean countries and

protect American Samoa. Although Star Kist objected to our compromise, we gathered enough votes to secure its passage. Senator John Breaux (D–LA) was kind

enough to offer the amendment. Senator Majority Leader Tom Daschle (D–SD), Senator Max Baucus (D–MT)—Chairman of the Senate Finance Committee, Senator

Orrin Hatch (R–UT)—Ranking Member on the Senate Finance Subcommittee on

International Trade, Senator John Rockefeller (D–WV), Senator Frank Murkowski

(R–AK), Senator Kent Conrad (D–ND), Senator Blanche Lincoln (D–AR), Senator

Robert Torricelli (D–NJ), Senator Olympia Snowe (R–ME), and Senator Craig Thomas (R–WY) supported our compromise in a 11–9 vote.

The Breaux amendment offers a duty-free window for canned tuna exports of up

to 20% of U.S. domestic production. The compromise amendment also includes a

source of origin provision, patterned after the European Union’s agreement with the

Andean Pact countries, to ensure that all tuna entering the U.S. duty-free is caught

by Andean or U.S. flag ships. Chicken of the Sea, Bumble Bee, and the U.S. tuna

boat owners support this amendment. Star Kist does not. To date, Star Kist has offered no compromise of its own. Ecuadorian boat owners, however, have agreed to

support our source of origin provision.

We have included this source of origin provision because more than 56% of the

flag ships in the Eastern Pacific Tropic (EPT) are non-Andean. We have also included it because Ecuador is rapidly becoming the third largest exporter of canned/

pouch albacore to the U.S. yet harvests very little of the raw tonnage. In fact, nearly

39% of all albacore is harvested by Japan. Taiwan harvests 27%. The EU harvests

15%. The U.S. harvests 7%. Much of this albacore is caught in the Western Pacific

Tropic (WPT) and is off-loaded in American Samoa. However, if Ecuador gets unlimited, duty-free access, albacore will be unloaded in Ecuador and the ATPEA will become an avenue for Japan and Taiwan to gain duty-free access to the U.S. market.

As a case in point, Star Kist recently purchased 1,000 tons of albacore in Taiwan

at a retail value of approximately $7 million and shipped it on the Longshoon to

Ecuador. Needless to say, Star Kist is the only U.S. tuna processor that opposes our

source of origin provision.

About Star Kist

In August of 2001, when the U.S. Senate Finance Committee held a hearing on

the matter of the ATPEA, Star Kist testified. Although Star Kist is the largest employer in American Samoa, Star Kist at no time informed our local legislature, the

Governor’s office, or my office that it intended to support an international trade

measure that would wreak havoc in the global tuna industry and cause insurmountable financial problems for our Territory.

Star Kist, of course, is under no obligation to inform any of us of its intent. However, after a 40-year relationship together, common courtesy dictates that Star Kist

would have considered our views and asked for our input before arbitrarily supporting a trade agreement that seriously threatens our way of life. Star Kist maintains that it did not inform any of us because the ATPEA will not affect us.

My friends, the U.S. Congress knows that the ATPEA will affect American

Samoa. Ecuador knows. Mexico knows. The Southeast Asian nations know. The U.S.

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State Department knows. The Office of the U.S. Trade Representative knows. Chicken of the Sea knows. Bumble Bee knows. The U.S. boat owners know. The ATPEA

will affect American Samoa.

Since August of 2001, I have taken American Samoa’s case to the House, to the

Senate, to the public, to the people. In October of last year, more than 10,000 residents of American Samoa joined me in this effort. In November, the Governor of

American Samoa pledged his support. In February 2002, the American Samoa Legislature also decided to support our position of compromise.

Conclusion

As with any trade agreement, I believe it is incumbent upon the beneficiary countries to ensure that they are complying with the requirements associated with preferential trade. Although some have suggested that the source of origin provision in

the compromise amendment may not be enforceable or administrable, current law

requires all importers of canned/pouch finished goods to provide documentation listing origin of the raw material. All vessels fishing in the EPT are required to register

with the Inter-American Tropical Tuna Commission (IATTC) and are identified by

flag, vessel, capacity and name. When the vessels off-load their catch at the canneries, the canneries are able to determine whether or not the tuna was caught by

Andean or U.S. flag ship. For enforcement purposes, the U.S. Customs would only

have to do an occasional audit to ensure that the canneries are in compliance.

I am hopeful that the U.S. Customs Service will support occasional audits of the

Andean canneries. For the information of the Committee, recent reports confirm

that more than five containers loaded with tuna cans were found to contain approximately 1,600 lbs. of cocaine. The cocaine shipments originated from Ecuadorian canneries and were shipped from Manta, Ecuador to the Port of Vigo. At the cannery

site, authorities also found machinery used to process tuna loaded with cocaine.

While it is in the interest of the United States to support Andean efforts to curb

drug production, we must not turn a blind eye to reality. Our desire to be helpful

must be tempered by common sense and compromise. The compromise supported by

the Senate Finance Committee is fair and reasonable. It is a constructive solution

to a complex issue. It is a good-faith effort that deserves the support of both the

House and Senate.

I thank Chairman Thomas for his willingness to consider the needs of American

Samoa. I also thank Congressman Rangel for his tireless support. In this time of

national crisis, I am hopeful that the Committee will continue its effort to move this

legislation forward in a way that expands opportunities for the Andean countries

and ensures the continued viability of the U.S. tuna fishing and processing industries.

Introduction

Statement of Joe Gaynor, Goss Graphic Systems, Inc., Westmont, Illinois

f This testimony is submitted on behalf of Goss Graphic Systems, Inc., of

Westmont, Illinois (‘‘Goss’’). Goss opposes enactment of H.R. 3557 in its current

form. If the United States amends or repeals the Antidumping Act of 1916, 15

U.S.C. § 72 (‘‘the Act’’), to conform its laws to decisions by World Trade Organization

(‘‘WTO’’) dispute settlement panels, the changes to the Act should be prospective

only, so as not to deprive U.S. companies of vested rights and remedies. Goss urges

Congress to satisfy the United States’ international obligations, but in a manner

that does not deprive U.S. companies of their legal rights. Retroactive repeal as proposed by H.R. 3557 would harm Goss and would harm the United States in future

trade disputes. A more detailed legal analysis follows this statement.

Goss and the 1916 Antidumping Act

Goss is one of the few U.S. companies with first-hand experience with the 1916

Antidumping Act. For more than 100 years, Goss has been a global leader in the

manufacturing of web offset printing presses for the newspaper and commercial

printing industries. Goss is proud of the fact that so many of the newspapers from

which Americans get their daily news are printed on Goss presses.

During the early 1990s, Goss increasingly found itself competing with low-priced

presses imported from Japan and Germany. These imported presses were being sold

in the U.S. market at prices far less than Goss believed they cost to produce. Goss

filed antidumping petitions against large newspaper printing presses from Japan

and Germany, and won. The U.S. Department of Commerce determined that the forVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00093 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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eign producers had been dumping their large presses on the United States market

by selling the presses here at less than their cost of production. The U.S. International Trade Commission unanimously found that those unfairly traded imports

threatened injury to the U.S. industry. The Department of Commerce imposed antidumping duties of 30–62% on imports of large newspaper printing presses from Germany and Japan. Goss was hopeful that, with antidumping orders in place, fair

trade would resume and it would recover from the injuries caused by the unfair

dumping.

Despite the presence of the antidumping orders, Goss continued to lose sales to

dumped imports. As a result, Goss was forced to close down U.S. facilities and lay

off hundreds of valued U.S. workers. In 1999, the company sought to reorganize

under Chapter 11 of the Bankruptcy Code.

At that point, Goss concluded that the German and Japanese producers were literally trying to drive it out of business. This is exactly the sort of situation the 1916

Antidumping Act was intended to address. The Act provides that, if a foreign company is dumping merchandise in the United States, with the intent of injuring or

eliminating a U.S. industry, a U.S. producer can sue in district court for treble damages. The standard of proof is substantial, and the 1916 Act has been used very

rarely. Nonetheless, Goss was convinced that its case met the standard.

In early 2000, the company filed a suit under the Act in the U.S. District Court

for the Eastern District of Iowa against four foreign printing press manufacturers

and their U.S. subsidiaries, alleging that the defendants had illegally dumped their

products in the United States with the intent of injuring or destroying the U.S. industry. The suit, which is still pending, seeks damages for unfair dumping that took

place starting in 1995, long before the EU and Japan began their challenge in the

WTO to the 1916 Act. Significantly, in March 2001, the Federal judge overseeing

Goss’ suit denied the defendants’ motions to dismiss the case. Goss has invested a

great deal of money and resources prosecuting its claims in this case, which has now

been pending for almost two years.

The impact of the unfair and illegal dumping on Goss, its shareholders and workers has been disastrous. After emerging from bankruptcy in 2000, Goss filed for

bankruptcy again in 2001. It has entirely closed its manufacturing facilities in Reading, Pennsylvania and ceased the vast majority of production work in Cedar Rapids,

Iowa. Hundreds of U.S. workers have lost their jobs.

Goss can still recover. Goss International Corporation, with backing from an investment consortium, announced its purchase of Goss’ assets on February 18, 2002.

This investment is important for the continued success of Goss’ business and its efforts to rebuild, especially when combined with the damages Goss hopes to recover

from its 1916 Act suit. Indeed, Goss believes that it must win its 1916 Act case if

there is to be any prospect of reopening the Cedar Rapids plant. A retroactive repeal

of the 1916 Act would make this impossible.

The WTO and the 1916 Act

In an action unrelated to Goss’ suit, the European Union and Japan filed complaints with the WTO, alleging that the 1916 Act was inconsistent with the obligations of the United States under the General Agreement on Tariffs and Trade

(‘‘GATT’’) and the Antidumping Agreement. The WTO panels ruled that the 1916

Act was inconsistent with these measures, but only after Goss had filed its lawsuit

in Federal district court. The WTO Appellate Body affirmed the panels’ findings.

The United States accepted these results and undertook to make the changes necessary to bring its law into compliance with the WTO.

Retroactivity and WTO Precedent

To conform to the WTO dispute panels’ findings, the U.S. Trade Representative

proposed repeal of the 1916 Act. Chairman Thomas introduced H.R. 3557 to accomplish this. This bill repeals the law for pending as well as future cases. There is

only one such active case—Goss’.

The WTO panel reports did not require retroactive repeal in order to bring U.S.

law into conformity with U.S. WTO commitments. The panels’ determinations stated

only that U.S. law in its current form was inconsistent with the international obligations of the United States. Nothing in the WTO panel reports or in WTO rules

or precedent requires the U.S. to reach back and take away Goss’ right to recover

for illegal dumping that occurred years before the panel’s rulings or compliance

deadlines. Indeed, it would be most unusual for a WTO panel to identify what a

country must do to bring its laws into compliance with WTO commitments.

The WTO consistently has accepted actions having prospective effect as adequate

to satisfy a country’s obligations. The attached legal analysis demonstrates that the

WTO does not require retroactive repeal of inconsistent laws. Amending or repealing

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1 Cementos Anahuac del Golfo, S.A. v. United States, 689 F. Supp. 1191, 1213–1214 (Ct. Int’l

Trade 1988).

the 1916 Act prospectively is more than adequate to comply with the dispute panels’

rulings, and the United States has no reason to take the extra, unprecedented step

of making changes retroactively. The United States has even less reason to take

such action where, as here, a U.S. company and U.S. workers would suffer as a result.

Retroactive repeal in response to the WTO panel reports would also set a dangerous precedent for the U.S. and the entire WTO dispute resolution system. Consider, for example, the billions of dollars of additional sanctions that could be sought

if complaining countries were able to reach back and seek relief for ‘‘subsidies’’

granted under the U.S. foreign sales corporation law since 1995.

As demonstrated in the attached legal analysis, retroactive repeal of the 1916 Act

is also contrary to U.S. legal tradition and public policy.

Prospective Repeal

Therefore, Goss urges Congress to make any repeal of the Act prospective only.

If the United States follows this course, it will be in compliance with its WTO obligations.

If Goss is allowed to pursue its case based on illegal dumping that occurred between 1995 and 2001, there would be no basis for trade sanctions or other relief

against the United States. If the EU and Japan appealed to the WTO for such relief,

they would have to prove appropriate trade damages. In this context, they would

need to establish that the prospective-only repeal of the 1916 Act caused a chilling

effect on future trade. Because Goss’ suit only seeks damages for past dumping, it

is inconceivable that the continuation of the suit would have any adverse impact on

future imports. Thus, there is no reason for Congress to reach back and enact a retroactive repeal.

Congress can bring the United States into full conformity with the WTO panel

decisions, while preserving Goss’ rights, through a simply drafted piece of legislation. Congress should amend H.R. 3557 to provide as follows:

SECTION 1. REPEAL OF THE 1916 ACT.

(a) REPEAL—Section 801 of the Revenue Act of 1916 (as enacted by 39 Stat. 798),

is repealed.

(b) EFFECT OF REPEAL—The repeal of such Section 801 by subsection (a) shall

not apply to nor affect any action filed under Section 801 prior to the date of

the enactment of this Act.

This amendment would make repeal of the 1916 Act apply as of the date of enactment, and would satisfy U.S. WTO obligations. It also would allow Goss to pursue its remedy to recover damages suffered as a result of years of predatory

dumping—injuries that were suffered long before Japan and Europe challenged

the 1916 Act. Illegal dumping has caused Goss to lose sales and profits, experience two bankruptcies and close key facilities. Hundreds of U.S. workers have

lost their jobs. Fundamental fairness requires that Congress protect existing

rights by making any changes to the 1916 Act prospective only.

Attachment

WTO PRECEDENT AND U.S. LAW MANDATE PROSPECTIVE ONLY

APPLICATION OF ANY LEGISLATIVE CHANGES REQUIRED TO

CONFORM U.S. LAWS TO WTO OBLIGATIONS

I. The Letter and Spirit of the WTO System Call For Prospective Application

A prospective-only application of any measure to bring the 1916 Act into conformity is entirely consistent with the rules and policies governing the WTO dispute

resolution system. Nothing in the law governing GATT or the WTO requires the

United States to reach back six or seven years and retroactively take away rights

and remedies that existed during that period. The U.S. Court of International Trade

has recognized that the GATT includes no provision for retroactive relief.1 Indeed,

the WTO dispute resolution system is premised on the assumption that prospective

compliance in response to an adverse WTO ruling is the most that can be required

or expected. The WTO Dispute Settlement Body (‘‘DSB’’) routinely directs parties to

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2 European Communities—Measures Concerning Meat and Meat Products (Hormones), Decision by the Arbitrators, WT/DS26/ARB (July 12, 1999) ¶ 38. 3 Australia—Subsidies Provided To Producers and Exporters of Automotive Leather, WT/

DS126/R (May 25, 1999); WT/DS126/5 (June 18, 1999); WT/DS126/6 (July 8, 1999); WT/DS126/

11 (July 31, 2000). 4The ongoing controversy associated with the foreign sales corporation case has nothing to

do with the timing of the repeal, i.e. whether it was prospective or retroactive in nature. See

United States—Tax Treatment For Foreign Sales Corporations, WT/DS108/AB/R, (Feb. 24,

2000); WT/DS108/25 (Feb. 4, 2002); Sections 5 (a) and (c) of the FSC Repeal and Extraterritorial

Income Exclusion Act of 2000, Pub. L. 106–519 (‘‘FSC Act’’) (amendment applies only to transactions after compliance period; lengthy transition period exists). 5Landgraf v. USI Film Products, 511 U.S. 244, 265 (1994). 6 Id. at 265 (quoting Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 855

(1990)). 7 Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 208 (1988).

bring offending laws into compliance by established deadlines; thus, it eliminates inconsistent trade practices from that point forward, not retrospectively.

The DSB took such action in the Beef Hormones case, for example, when the arbitrators based the damage award on what they determined to be the amount of hormone-treated beef the United States and Canada could have expected to export to

the EU had the hormone ban been lifted on May 13, 1999—the date established by

the DSB for EU compliance with the WTO’s ruling.2 Significantly, the arbitrators

calculated the level of nullification and impairment based on prospective exports

after the expiration of the reasonable time period granted to the EU for compliance.

The WTO did not provide for any retroactive remedy concerning exports lost prior

to the deadline for compliance.

II. Retroactivity is Inconsistent With WTO Procedures and Would Establish

A Dangerous Precedent

Retroactive application of a conforming measure is highly unusual in the WTO

system. In fact, the WTO has deviated only once from its standard prospective damage calculation, in a heavily criticized case regarding Australian automotive leather.

There, the WTO directed the repayment of subsidies granted prior to the issuance

of the WTO panel decision.3 Members uniformly regard this decision as an aberration that exceeded the dictates of WTO and international law. In fact, the United

States, the complaining party in the case, itself stated that the remedy went beyond

what it had requested or believed to be appropriate.

A retrospective remedy in regard to the 1916 Act would set a dangerous precedent

for future trade disputes. Trade relations and the implementation of WTO remedies

already are sufficiently difficult without the added complexity involved in mandating their retroactive application.

For example, Congress repealed the offending portions of the U.S. foreign sales

corporation law prospectively only.4 In that case and others like it, a retroactive repeal could have devastating effects. For example, a retroactive repeal that reached

back and invalidated years of tax benefits granted under the prior law would impose

literally billions of dollars in additional taxes on U.S. companies who legitimately

relied on the state of the law at the time. Congress obviously has not taken such

action with respect to the foreign sales corporation law. It should not set a precedent with retroactive repeal of the 1916 Act that could be used to force similar action in the foreign sales corporation matter or in other trade disputes.

III. Prospective Application is Consistent With U.S. Law

U.S. law also supports the prospective-only application of any measure to bring

the 1916 Act into conformity with U.S. WTO obligations. Non-retroactivity is a venerable principle inherited from English common law. The U.S. Supreme Court has

spoken clearly regarding retroactivity, finding that ‘‘the presumption against retroactive legislation is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic.’’ 5 The Supreme Court has further stated

that:

Elementary considerations of fairness dictate that individuals should

have an opportunity to know what the law is and to conform their conduct

accordingly; settled expectations should not be lightly disrupted. For that

reason, the ‘‘principle that the legal effect of conduct should ordinarily be

assessed under the law that existed when the conduct took place has timeless and universal appeal.’’ 6

Retroactive statutes are ‘‘not favored in the law.’’ 7 Given this presumption, Congress should make the repeal of the 1916 Act retroactive only if necessary to comply

with the WTO. It is not.

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8 1 U.S.C. § 109. 9 Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16–17 (1976). 10Landgraf, 511 U.S. 244, 246, 266, 282–283 (1994). 11Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). 12 Id. at 717.

Goss is seeking damages for dumping which started in 1995, four years before

Japan and the EU even requested consultations with the United States regarding

the 1916 Act. Complying with the WTO’s decisions on the 1916 Act does not require

extinguishment of a cause of action that accrued, or a case that was filed, prior to

the effective date of any repeal.

IV. Congress Has Mandated A Presumption Against Retroactivity

Congress itself has codified the presumption against retroactivity in 1 U.S.C.

§ 109, which provides that the repeal of a statute will not extinguish causes of action

that already have accrued:

The repeal of any statute shall not have the effect to release or extinguish

any penalty, forfeiture, or liability incurred under such statute, unless the

repealing Act shall so expressly provide, and such statute shall be treated

as still remaining in force for the purpose of sustaining any proper action

or prosecution for the enforcement of such penalty, forfeiture, or liability.

...8

Retroactive repeal of the 1916 Act would strip Goss of the substantive rights it

held when it filed the complaint. Congress may not simply legislate retrospectively

without regard for due process.9 To do so would be not only fundamentally unfair,

but would deny Goss its reasonable expectation of pursuing a claim for relief under

the 1916 Act. Such a course of action would directly contravene not only the U.S.

Supreme Court but also Congress itself.

Further, Congress may not strip vested property rights from a private (corporate)

citizen without implicating Fifth Amendment Takings Clause issues. The Supreme

Court has approved such deprivation of vested property rights only in extremely

limited circumstances, such as for a public use, upon payment of just compensation,

or given clear evidence of prior congressional intent to apply a law retroactively.10

None of these circumstances are applicable here.

Finally, the Supreme Court has ruled that retroactivity must not deny parties due

process.11 Only a ‘‘rational legislative purpose,’’ the likes of which does not exist in

favor of retroactive repeal of the 1916 Act, may overcome such a high threshold

test.12 On the contrary, retroactive repeal of the 1916 Act would strip Goss of the

substantive legal rights it held when it filed the complaint. Goss would be denied

its reasonable expectation of seeing the case through to its natural conclusion. Such

a result is fundamentally inconsistent with the idea of due process.

V. Retroactivity and Public Policy

Retroactive repeal of the 1916 Act is bad public policy. Retroactivity deviates from

the public policy goal of allowing cases filed under valid laws to reach their natural

conclusions. Should Congress retroactively repeal the 1916 Act, it would do more

than upset Goss’ settled expectations. It would establish a standard for such behavior in the future. This would mean that no litigant could rest assured that a case

filed pursuant to a valid law would necessarily reach trial. Additionally, Congress

cannot advocate the explicit contravention of established U.S. and WTO precedent

without a forceful public policy reason to do so. No such reason exists here.

VI. The Solution Lies in Prospective Repeal and Trusting the WTO System

Prospective repeal of the 1916 Act would bring the United States into full compliance with the rulings of the WTO’s Dispute Settlement Body. WTO dispute resolution mechanisms provide the parties with the means to resolve any differences resulting from such action. The EU and Japan are frequent participants in WTO dispute resolution and are quite familiar with the governing procedures.

Should Congress adopt prospective repeal, the EU and Japan will have the right

to file a protest in the suspended arbitration proceeding. Continued resolution of

this trade dispute at the WTO is preferable, however, to retroactive repeal of a U.S.

law when such action is not required under the WTO. Keeping the debate at the

WTO also would allow the parties to address the key issue of appropriate countermeasures. The potential liability of the United States is highly speculative. Pursuant to Dispute Settlement Understanding (‘‘DSU’’) Article 22.4, any countermeasures (i.e., suspension of concessions or other WTO obligations) must equal the ‘‘nullification and

impairment’’ of benefits incurred by one party as a result of the other’s breach of

94

WTO obligations. Therefore, should prospective repeal of the 1916 Act result in a

judgment entered or settlement in favor of Goss, the EU or Japan would have to

prove that such a judgment or award constitutes trade damage under the WTO for

which the United States might be accountable. Proof of such trade damage would

be difficult, if not impossible.

VII. Conclusion

Retroactive repeal of the 1916 Act would be contrary to both WTO and U.S. practice and precedent. Retroactive repeal of the 1916 Act is simply not required in

order to bring U.S. law into conformity with our Nation’s WTO obligations. Retroactive repeal would unnecessarily disadvantage companies such as Goss that filed

claims based on laws valid at the time. For these reasons, Goss urges Congress to

adhere to WTO and U.S. legal precedent and provide that any amendment or repeal

of the 1916 Act take effect prospectively only.

f H.J. Heinz Company

Pittsburgh, Pennsylvania 15219–2857

February 6, 2002

The Honorable Bill Thomas

Chairman

Committee on Ways and Means

United States House of Representatives

Washington, DC 20515

RE: February 7 Hearing on Administration’s 2002 Trade Agenda

Mr. Chairman and Members of the Committee:

I am writing on behalf of the H.J. Heinz Company—a global leader in the food

industry with almost $10 billion in annual sales, over 40,000 employees and some

of the best brands in the business including Heinz ketchup, Ore-Ida potatoes and

Star Kist tuna.

Last year, the Ways and Means Committee approved legislation (H.R. 3009) that

would extend and expand the Andean Trade Preference Program. Heinz actively

supports that legislation and was pleased that the full House has passed it as well.

Heinz’s support for the legislation is due in large measure to its inclusion of processed tuna as a preference item under an expanded ATPA program. Although the

inclusion of processed tuna in the legislation has become a point of controversy, we

urge the Committee to continue to support the House-passed version and to insist

on the inclusion of tuna when the issue is considered in conference with the Senate.

Tuna is already included as a preference item under both NAFTA and the CBI

program. In neither case was its inclusion controversial because, despite claims to

the contrary, the U.S. tuna industry has already moved offshore. The last full-scale

U.S. mainland cannery was closed by Thai Union (which owns Chicken of the Sea)

last year. Other than a small Bumble Bee automated canning line in Southern California (which cans tuna loins imported from Ecuador at an effective duty

rate of only 1.5%), the only remaining U.S. tuna canneries are in Puerto Rico and

American Samoa. The Puerto Rico facility, which is owned by Bumble Bee, announced last year the layoff of half of its 800 employees. y|ugcfq qq]s ÄÇ3 httÇicutqn

toq fh¥mrrs tm oiBo fhcmÇ pmstsilmt pmgjqtitiml rÇmg ÇpuhnmÇZ Indeed, Bumble Bee is building a cannery in Trinidad to take advantage of CBI tariffs.

In American Samoa, however, the situation is somewhat different. Star Kist has

the largest tuna cannery in the world on American Samoa where 2,700 people are

employed. Thai Union has a smaller American Samoa cannery that employs about

2,500. We at Heinz/Star Kist have stated repeatedly that passage of the ATPEA will

not have an adverse effect on our American Samoa facility. Although Thai Union

has stated that passage of ATPA would result in layoffs at its American Samoan

cannery, this claim is in direct conflict with sworn testimony Thai Union gave in

American Samoa last year. In its testimony before the American Samoa Tax Exemption Board in which Thai Union sought a new local tax exemption for its cannery,

Thai Union promised that if the tax exemption were granted, they would invest at

least $16 million in American Samoa and y|ilpÇqhsq qgjfm¥gqlt toqÇq c¥ mvqÇ jA jqÇc

pqlt over the next ten years. Importantly, Thai Union did not condition its commitment to this investment and employment on excluding processed tuna

from the Andean trade program.

95

Finally, environmental groups active on fishery conservation and ‘‘dolphin safe’’ issues support the inclusion of tuna in the Andean Trade Preference Program. Ecuador is the only nation in Latin America and the Caribbean to be certified by the

U.S. Department of Commerce as in compliance with the Marine Mammal Protection Act and Eastern Pacific tuna conservation measures. To quote the leading environmental group on dolphin-safe fishing (Earth Island Institute), ‘‘By reducing

tuna tariffs for Ecuador, Congress can reward that country for their efforts

to protect dolphins. Furthermore, by reducing tuna tariffs . . . Congress can

provide incentives to other nations to protect marine mammals.’’ Mr. Chairman, as you know, the current Andean Trade Preference Program expired in December. I want to compliment you on your Committee’s action to secure

passage of H.R. 3009 last year. And I urge you to keep the pressure on to ensure

final passage and enactment of legislation expanding ATPA, including tuna, as soon

as possible.

Sincerely,

Michael D. Milone

Senior Vice-President

f CEO—Star Kist Foods

Statement of Mattel, Inc., El Segundo, California

This statement is submitted on behalf of Mattel, Inc. in connection with the February 7 hearing conducted by the House Committee on Ways and Means regarding

the U.S. trade agenda. Mattel strongly supports the continued elimination of trade

barriers globally, and believes that the enactment of legislation renewing the President’s trade promotion authority (TPA) will play a critical role in achieving this objective by providing a needed impetus to pending multilateral, regional and bilateral

trade negotiations. Of these, the most important to Mattel is the new round of multilateral trade negotiations under the WTO that was launched last November in

Doha. Within this new round, the company attaches the highest priority to the earliest possible conclusion of zero-for-zero sectoral agreements on toys and other products.

Headquartered in El Segundo, California, Mattel is the world’s largest toy com- pany with 2001 sales of $4.8 billion in over 150 countries. Mattel has 29,000 employees, of whom 6,000 are in the United States.

Mattel and other U.S. manufacturers of toys are the most competitive in the

world, and would stand to reap major benefits from the further dismantling of global trade barriers. Also benefiting directly from a reduction of trade barriers would

be the 32,400 U.S. workers employed by the U.S. toy industry.

The U.S. toy industry achieved its position as the world’s leader by combining

high value-added domestic operations, such as product design, engineering and strategic marketing, with substantial production overseas. As a result, a large portion

of U.S. toy companies’ product lines are manufactured overseas, but even those toys

incorporate important U.S. value. In the case of Mattel, that value includes the critical functions of product conceptualization and design, design and development engineering, and strategic marketing that are performed for the company’s worldwide

operations by the approximately 1,900 workers at its El Segundo headquarters.

With only 3 percent of the world’s children living in the United States, U.S. toy

companies must turn increasingly to foreign markets for industry growth. Although

the United States has the largest toy market in the world, the growth in domestic

sales by U.S. toy companies has been modest in recent years, reaching $23 billion

in 2000. However, sales by U.S. toy companies in foreign markets (including U.S.

exports and sales by overseas subsidiaries) have expanded at a rapid pace, totaling

an estimated $6.0 billion in 2000.

While the toy industry has been successful in penetrating overseas markets, that

growth frequently has been limited by significant trade barriers. For example, most

major developing country markets throughout the world are protected by tariffs of

20 percent or more on toys. These high tariffs will remain in effect even after the

final concessions from the Uruguay Round of WTO negotiations are implemented in

2004.

In addition, while the United States, the European Union, Canada, Japan and

Korea agreed to participate in a zero-for-zero agreement on toys under the Uruguay

Round, this agreement left much to accomplish. While the United States immediately eliminated its tariffs on all toy categories, the other four countries participating in the agreement excluded several major toy categories from their tariff

96

elimination commitments. For example, both the European Union and Japan have

left in place tariffs on categories accounting for over half of their respective total

imports of toys. Since these economies represent the largest overseas markets for

most U.S. toy companies, these gaps pose a major continuing problem.

In an effort to build on the Uruguay Round zero-for-zero agreement on toys,

Mattel and the U.S. toy industry in 1996 enlisted the aid of the U.S. Government

to secure the inclusion of toys in the consultations on early voluntary sectoral liberalization (EVSL) conducted under the auspices of the Asian-Pacific Economic Cooperation (APEC) forum. APEC leaders in 1998 then forwarded these EVSL talks,

which covered toys and seven other sectors, to the WTO for final agreement. First

known in the WTO as the Accelerated Tariff Liberalization (ATL) initiative, these

sectoral talks now are being considered for inclusion in a possible zero-for-zero initiative in the newly launched round of WTO negotiations.

There is a strong consensus among global toy industries for concluding a new

zero-for-zero agreement on toys, ranging from the European toy industry to those

of 15 APEC countries. Moreover, much of the work required to craft a zero-for-zero

agreement on toys has already been completed through the earlier APEC process.

In short, the parameters of an agreement are already in place and a ‘‘critical mass’’

of participating countries has already been identified.

What is needed now is for WTO negotiators to step forward and conclude zerofor-zero agreements on toys and other sectors where international consensus can be

readily achieved. In particular, Mattel urges that negotiators seek the accelerated

conclusion of these zero-for-zero agreements in advance of the completion of the rest

of the round, with the goal of finalizing the agreements by the Fifth WTO Ministerial meeting to be held in Mexico in mid-2003. These sectoral agreements can serve

as an early concrete signal of WTO members’ commitment to a successful round,

with the specific commitments made as part of the zero-for-zero agreements to be

implemented on a provisional basis and considered an integral part of countries’

overall commitments in the new round.

In addition to concluding a sectoral zero-for-zero agreement on toys, Mattel is

seeking the deepest possible reduction in those foreign tariffs on toys that will remain following the completion of the zero-for-zero agreement. Assuming the sectoral

agreement is concluded along the lines currently envisaged, the primary focus of

these follow-on negotiations would be the high tariffs maintained by those countries

that do not participate in the zero-for-zero agreement on toys. These are likely to

include many Latin American countries, including the major markets represented

by Brazil, Argentina and Mexico.

In conclusion, Mattel strongly supports the ongoing efforts of the United States

to reduce global trade barriers. In particular, Mattel urges the U.S. Government to

secure a sectoral zero-for-zero agreement on toys as quickly as possible as part of

the new round of WTO multilateral negotiations.

We appreciate this opportunity to share Mattel’s views with the Committee on

Ways and Means.

Statement of the National Electrical Manufacturers Association, Rosslyn,

fVirginia

NEMA is the largest trade association representing the interests of U.S. electrical

industry manufacturers. Its mission is to improve the competitiveness of member

companies by providing high quality services that impact positively on standards,

government regulation and market economics. Founded in 1926 and headquartered

in Rosslyn, Virginia, its more than 400 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 exceed $100 billion in value.

General and Multilateral Issues

• Trade Promotion Authority (TPA): NEMA favors quick approval of trade

agreement negotiating authority during the second session of the 107th Congress. Over the past four years, the President’s lack of such authority not only

impeded the Administration’s ability to negotiate agreements, but has been inVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00100 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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voked by many of our trading partners as an excuse to delay real negotiations

on opening their markets. Especially in the current economic climate, we must

remove this barrier to trade liberalization and leadership by giving President

Bush broad ‘‘fast-track’’ authority as soon as possible.

• Tariff Elimination: The world-wide elimination of tariffs on electrical products

is a basic NEMA goal. We therefore urge the U.S. to pursue tariff elimination

for electrical products in all fora, including the new round of World Trade Organization negotiations on reduction and elimination of tariffs on non-agricultural

goods, or via regional groups and/or other opportunities as they arise. In addition, WTO members should agree to implement so-called ‘‘zero-for-zero’’ agreements to eliminate tariffs on electrical products as soon as possible, preferably

on an early provisional basis with immediate effect until these ‘‘Free’’ tariff

rates are bound into the new round’s final concluding agreement.

NEMA also urges the U.S. to push for completion of the second phase of the

Information Technology Agreement (ITA–2), which would eliminate tariffs on a

wide range of IT items, including some NEMA products. NEMA also supports

continued efforts by U.S. officials to expand the membership of the existing ITA

and to negotiate accelerated tariff elimination for electrical products under the

North American Free Trade Agreement (NAFTA).

• Energy Services Liberalization NEMA supports liberalization of trade in energy services, in order to allow more people worldwide to enjoy high quality, affordable energy, and also to provide new opportunities to those energy service

and electricity providers who use the equipment made and services provided by

NEMA’s members. Thus, NEMA is an active member of the industry coalition

campaigning for the inclusion of commitments on energy services in the WTO’s

ongoing negotiations on services. NEMA’s primary perspective is that of the industry that provides the equipment and products used to build and maintain

electrical energy systems, but many NEMA members are active providers of energy services as well. The liberalization that is good for utilities is also good for

our manufacturers, service suppliers, and for the users of electricity. USTR has

included energy services in its proposals for the WTO services negotiations and

we look forward to continued efforts from the Bush Administration and support

from Congress to secure commitments from our trading partners in this crucial

area.

• Transparency in Government Procurement: Although at Doha WTO members put off beginning negotiations on it until the next Ministerial, we look forward to increased leadership from USTR and Congress in pursuing a WTO

agreement. The U.S. has been a leader of efforts to achieve a WTO agreement

to make government procurement more open and transparent. Preferences for

local companies on the part of host governments, as well as a lack of transparency in awarding contracts, have served to unfairly exclude U.S. companies

on countless occasions. It is time for U.S. entities to be able to compete on equal

footing with domestic suppliers.

NEMA also urges the Bush Administration to increase efforts to obtain full

implementation and enforcement of all signatories to the 1999 OECD Anti-Bribery Convention and the 1997 OAS Convention on Corruption.

• WTO Technical Barriers to Trade (TBT) Agreement: NEMA supports the

concepts outlined in the WTO TBT Agreement and believes that all countries

should implement, to the fullest extent, the obligations outlined there. These obligations include: standards development processes that are transparent and include participants from all interested parties; a conformity assessment system

that upholds the principles of most-favored nation treatment (meaning equal

treatment in all countries); and national treatment (meaning equal treatment

of domestic and foreign products, as well as test laboratories conducting conformity assessment services) in the application of testing and certification procedures.

In addition, the U.S. Government must continue working to dispel the misinterpretation that the use of the term ‘‘international standards’’ in the WTO

TBT agreement applies only to International Electrotechnical Commission

(IEC), International Standards Organization (ISO) and International Telecommunications Union (ITU) standards. An interpretation should also include

widely-used norms such as some North American standards and safety installation practices. Misinterpretation can be disadvantageous to U.S. businesses’ efforts to sell in global markets. Moreover, the importance of openness and transparency are lost when focus is only on those three standards bodies. The Bush

Administration must continue vigilant monitoring of our WTO partners to ensure their adherence to their TBT commitments.

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• Opposition to Mutual Recognition Agreements (MRAs): In NEMA’s view,

the use of MRAs should be limited and considered only as an alternative for

conformity assessment needs when applicable to federally regulated products

such as medical devices. MRAs are not the answer to conformity assessment

needs in non-regulated areas; if anything, they serve to encourage the creation

of unnecessary product-related regulation. In this regard, while we strongly objected to the inclusion of an electrical safety annex in the U.S. MRA with the

European Union a few years ago, we are pleased that the Administration has

either excluded electrical products from subsequently negotiated MRAs or refused to sign on to any such accords that include them. We look forward to a

continuation of that stance. • WTO Accessions: NEMA also hopes for greater progress in bilateral negotiations with WTO accession candidates. NEMA appreciates the ongoing negotiations with Saudi Arabia and urges continued emphasis on standards and TBT

issues. NEMA representatives traveled to Saudi Arabia in May 2000 to

strengthen dialogue with Saudi Arabian Standards Organization (SASO) officials—especially with a former NEMA employee in place as the new U.S. standards attache ́ in Riyadh—and will continue to develop a cooperative relationship

to ensure market access for products made to NEMA standards. USTR should

also seize the opportunity for renewed emphasis on negotiations to bring Russia and Ukraine into the WTO. Although membership is years away for both

countries, U.S. leadership is needed to ensure that progress toward that end

continues at a reasonable pace and both countries reinvigorate their long processes of legal and economic reform and institution-building.

European Union Regulatory Initiatives and WTO Disputes

• Regulatory Cooperation: NEMA supports continued work toward a U.S.-EU

agreement on Principles for Regulatory Cooperation. This agreement could not

be worked out in 2001, but both sides should strive to complete an agreement

at least by the time of the U.S.-EU summit in spring 2002.

As we and other industry associations noted in a June 2001 paper for U.S.

Trade Representative Robert Zoellick, and as noted in greater detail below, the

EU is increasingly establishing regulations that are not justified by available

technical evidence and whose cost is not proportionate to intended consumer or

environmental benefits. Typically, these regulations are developed with procedures that are not transparent to all stakeholders, including the U.S. electrical

manufacturing industry and other trading partners. Further, stakeholders find

they have no way to hold EU authorities accountable for the regulations produced. In short, the EU’s regulatory process fails to meet applicable international obligations as set forth in the Agreement on Technical Barriers to

Trade of the World Trade Organization.

Our industry is committed to working with the Administration, through engagement with the EU on questions of governance and regulatory disciplines,

to find solutions to its systemic regulatory problems, ensuring justification,

transparency and openness in development of directives, as well as ‘‘national

treatment’’ and accountability in their application. • Proposed EU Substance Bans and ‘‘Take Back’’ Legislation (WEEE,

EEE): In 2002, the EU is poised to complete two new directives that pose market access barriers for U.S. electrical and electronics products by raising costs

and allowing differing standards and procedures among the 15 member states.

The first directive addresses take-back and recycling of Waste Electrical and

Electronic Equipment (WEEE) while the second, known as the ROHS (Restriction on the Use of Hazardous Substances) directive, would impose bans on the

use of certain substances currently used in manufacturing without providing

sufficient basis for processes to identify any needed substitutes.

In addition, the Commission’s Enterprise Directorate is developing its own

Electrical and Electronic Equipment (EEE) directive, which would require manufacturers to comply with a series of requirements throughout the life-cycle of

a product. The need for such a directive is questionable and the views of the

U.S. Government and U.S. industry should be taken into account by DG Enterprise, especially during this development stage.

NEMA urges the Bush Administration and Congress to clearly identify these

measures as serious potential trade barriers and to seek an accommodation that

would emphasize rational, cooperative and science-based measures as alternatives to broad-brush regulatory mandates.

• EU Council Recommendations on Electro-Magnetic Fields (EMF): In

1999, the European Union issued recommendations that set EMF exposure limVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00102 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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its for the general public over a range of frequencies. Member states may provide for a ‘‘higher level of protection’’ than in the recommendations, and thus

can adopt more strict exposure limits. Extensive U.S. Government research on

low frequencies recently concluded that ‘‘the scientific evidence suggesting that

ELF/EMF exposures poses any health risk is weak.’’ Similar conclusions have

been made from health risk studies in other countries.

Manufacturers on both sides of the Atlantic have warned their authorities

through the TABD process that EMF could potentially become a major point of

contention between the U.S. and Europe. NEMA has notified the Commerce

Dept. that EU member state implementation of the EU Council EMF recommendations would create a substantial barrier to trade by restricting the free

movement of goods, which would severely affect U.S. electrical manufacturing

interests. NEMA supports the TABD position that EMF exposure standards

must be harmonized internationally. The U.S. Government must continue its efforts to work with the leaders in the EU Commission and in the member states

to avoid another trans-Atlantic trade dispute. • Implementation of the Electrical Safety Annex of the U.S.-EU MRA: As

previously mentioned, NEMA opposed negotiation of the Electrical Safety

Annex to the U.S.-EU MRA because it adds no value to the existing electrical

safety systems in the U.S. and EU. The historical record of electrical safety,

based on private-sector-promulgated standards and conformity assessment system, is a good indicator that private-sector approaches are successful. The U.S.

Occupational Safety and Health Administration (OSHA) NRTL (Nationally Recognized Testing Lab) Regulations call for OSHA accreditation of conformity assessment bodies (CABs). EU CABs can be accredited by OSHA for testing and

certifying EU products to U.S. voluntary standards for OSHA recognition in the

workplace. In 2001, OSHA granted NRTL-status to a German lab and thereby

demonstrated the integrity of its approach, in which EU applicant CABs are

given the same consideration as U.S. CABs. The Bush Administration should

continue to maintain this OSHA NRTL independence while working with the

EU to achieve better understanding of the U.S. position. • ‘‘Carousel’’ Retaliation Lists: NEMA does not consider it appropriate for electrical products to be included among those EU exports assessed 100% retaliatory tariffs as a result of unrelated disputes in the WTO. Our view is that our

industry’s products should not be caught up in another sector’s ongoing, potentially escalating impasse, and we have made this position clear to USTR. • Foreign Sales Corporations (FSC/ETI) Dispute: NEMA supported U.S. efforts to resolve this dispute by repealing the old FSC provision and installing

a new regime (known as Extraterritorial Income or ETI) while seeking to ensure that U.S. exporters suffer no disadvantages. NEMA has urged its EU counterparts to support a resolution of the dispute over the FSC-replacement law

so that products in our industry do not become entangled in a cycle of retaliatory tariff hikes on both sides of the Atlantic. NEMA encourages both the U.S.

and the EU to manage the dispute responsibly and to avoid any escalation of

tensions.

The Americas and Asia-Pacific

• Free Trade Area of the Americas (FTAA) Talks, Particularly the Negotiating Group on Market Access (NGMA): Although talks toward the 2005

creation of an FTAA shift into a higher gear in early 2002, NEMA looks forward

to continued leadership from the Administration and Congress. NEMA also encourages all FTAA countries to implement customs facilitation measures to

which they have already agreed. Moreover, NEMA urges the U.S. to convince

the Hemisphere’s countries that any standards and conformity assessment provisions included in an FTAA must mirror the WTO TBT Agreement. NEMA will

continue to be engaged in the process and exchange views with its industry

counterpart associations throughout the Americas.

• NAFTA Implementation and Tariff Issues: Although Mexican tariffs on U.S.

electrical products will reach zero in 2003, NEMA is exploring further possibilities for industry consensus on earlier tariff elimination for specific product sectors. Also, with an office in Mexico City, NEMA is well positioned to work with

U.S. authorities to monitor and influence the Mexican standards development

process for electrical products to ensure that Mexican norms do not act as barriers to U.S. products.

NEMA is becoming very involved in the standards and conformity assessment

processes in Mexico. The country is developing 20 to 30 new electrical product

standards each year and is moving in the direction of making all of its standVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00103 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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ards mandatory. The authorities do accept and take into account public comments on proposed standards; however, a document that has been substantially

revised based on public comments may not be circulated for final public review

prior to publication as a mandatory standard. Moreover, a standard adopted as

mandatory can incorporate by reference another voluntary standard without

any public review or comment opportunity. NEMA would welcome the Mexican

standards authority’s application of consistent and transparent procedures in

the consideration and adoption of NOM standards, which directly affect market

access for many proven commercial products.

Mexico was required under its NAFTA obligations starting January 1, 1998,

to recognize conformity assessment bodies in the U.S. and Canada under terms

no less favorable than those applied to Mexican conformity assessment bodies.

Mexico has indicated that it is willing to conform to these obligations only when

the Government of Mexico determines that there is additional capacity needed

in conformity assessment services. So far no U.S. or Canadian conformity assessment bodies have been recognized by Mexico for conducting conformity assessment on most products that are exported from the U.S. and Canada to Mexico. This procedure does not meet the intent of Mexico’s NAFTA obligations,

serving to protect their conformity assessment bodies and Mexican manufacturers from fair competition from U.S. and Canadian exports into Mexico. • U.S.-Chile Free Trade Area: In 2002, the U.S. and Chile should complete and

enact a high quality bilateral free trade agreement. Given the small size of the

Chilean economy and the precedent setting benefits of such an agreement, completion of the Chile FTA should be completed expeditiously, and need not await

passage of trade negotiating authority legislation. In addition, USTR should

continue to discuss ways open up trade with the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) in advance of the FTAA. • U.S.-Central America FTA: NEMA applauds President Bush’s initiative to explore negotiations on a free trade agreement with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. Once launched, negotiations should result in

a high-quality FTA that opens Central American markets for electrical products

and energy services, provides complete transparency in government procurement, and spurs progress in the FTAA process. • U.S.-Singapore FTA: The U.S. Government should complete a free trade

agreement with Singapore as soon as is practical, taking full account of industry input. This agreement should include an investment chapter, cover energy

services, and provide for complete transparency in government procurement. • APEC Standards: NEMA is actively involved in bringing a greater understanding of conformity assessment alternative processes to the region and looks

forward to the second round of National Institute of Standards and Technology

workshops in 2002 for Asia-Pacific Economic Cooperation forum member countries.

U.S. Government Resources

• Monitoring, Enforcement and Overseas Presence: NEMA applauds the

Administration and Congress for their successful efforts to bring China and Taiwan into the WTO. NEMA welcomes the opportunity to help our member companies take advantage of the market-opening entry of China and Taiwan into

the rules-based international trading system and will work with USTR, the

Commerce Department, and Congress to monitor and ensure compliance.

The U.S. Government needs to do more than simply reach favorable trade accords; it also needs to be vigilant in making sure that other countries live up

to their commitments to foster openness, transparency and competition. In this

regard, our view is that the Commerce Department’s Standards Attache program should be expanded and fully funded. Likewise, we greatly appreciate the

assistance provided by Foreign Commercial Service (FCS) offices abroad, and

hope that FCS activities will receive ample support in the years ahead.

With the support of a Market Development Cooperator Program (MDCP)

grant from the Commerce Department, NEMA opened offices in Sao Paolo,

Brazil and Mexico City, Mexico in 2000. The MDCP is an innovative public/private partnership whose grant budget should be expanded so that more organizations can enjoy its benefits. NEMA looks forward to continuing its close cooperation with the Commerce Dept. on this project.

Similarly, the Bush Administration and the 107th Congress should continue

the trend in recent years of reasonable increases in funding and staff of the U.S.

Trade Representative’s Office to better allow it to more effectively negotiate,

monitor and enforce trade agreements.

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• Export-Import Bank Reauthorization: NEMA regrets that Ex-Im’s authorization was allowed to lapse in 2001 and urges Congress to reauthorize it as

soon as possible with adequate funding. Failure to do so would leave U.S. companies alone to face competitors armed with the aggressive export financing regimes of European and Asian governments. Exports assisted by Ex-Im Bank

help to support hundreds of thousands of U.S. jobs and ninety percent of Banksupported transactions assist U.S. small businesses.

• Customs Modernization and Enforcement: Last year, Congress made an

important first step in appropriating funds for the U.S. Customs Service’s longoverdue reform of its automated systems. We look forward to further congressional support this year for this vital initiative. In addition, we urge to continued vigilance from the Customs Service in ensuring imported electrical products

meet U.S. regulatory standards.

• ‘‘Buy America’’ Procurement Regulations: Majority U.S.-content restrictions on non-sensitive electrical products should be re-evaluated in the context

of both the increasingly global economy and potential savings. By restricting access to the U.S. market, these restrictions also have the reciprocal effect of

disadvantaging U.S. companies seeking to sell into foreign markets.

• Economic Sanctions Reform: NEMA supports passage of legislation that

would establish a more deliberative and disciplined framework for consideration

and imposition of economic sanctions by Congress and the Executive branch. In

addition, existing economic sanctions should be reviewed to determine if their

effectiveness justifies the costs to U.S. jobs and industries.

• Export Administration Act Reauthorization: NEMA supports congressional

efforts to enact updated legislation that meets the U.S. need for an efficient,

Introduction

transparent and effective export control system.

Statement of George Scalise, Semiconductor Industry Association

f Mr. Chairman, Members of the Committee, thank you for the opportunity to provide this statement on U.S. trade policy. My name is George Scalise and I am the

president of the Semiconductor Industry Association (SIA). This statement will discuss the new round of World Trade Organization (WTO) negotiations launched at

Doha last year. To begin, I’d like to give you some background on the SIA and its

members, which will help explain why the new WTO Round is so important to

America’s semiconductor industry.

Background

The SIA represents over 90 percent of America’s semiconductor industry. Today,

the U.S. industry is the most competitive in the world, with more than 50 percent

of world market share. More than 50 percent of our members’ revenues is derived

from overseas sales, and foreign markets are expected to continue growing in importance. Where American chipmakers are able to compete fairly—in markets

unencumbered by trade barriers—we are successful. As a result, eliminating barriers to trade and further opening world markets is vital to our industry.

SIA has a long history of active support for trade liberalizing initiatives such as

the Uruguay Round, the Information Technology Agreement (ITA) and China’s accession to the WTO. Since the beginning of the 107th Congress, SIA has worked to

gain support and passage of trade promotion authority (TPA, H.R. 3005) by the Congress. We commend your leadership which allowed for the passage of TPA by the

U.S. House of Representatives.

SIA will continue to press for and support further market opening initiatives, including the new round of WTO negotiations. For the new round, it is imperative to

continue to make progress toward a further opening of markets under a rules-based

system—it is equally vital that we not lose ground in areas like the trade laws.

These combined objectives will best serve the macroeconomic purpose of stimulating

confidence and growth in international trade.

The New Round

I believe that the new WTO round can be relied upon to liberalize trade, resulting

in significant benefits for the semiconductor industry. Some of the benefits—such as

tariff elimination—will be direct. Other benefits in areas such as services liberalization will be indirect. As you well know, the United States is fortunate to have an

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extremely strong and talented trade negotiating team, and we look forward to working with that team and supporting them in their efforts to secure market opening

benefits. Unfortunately, in addition to working on opening markets, our trade negotiators will also be faced with an extremely difficult challenge—maintaining strong

U.S. trade laws in the face of extreme pressure from our trading partners to weaken

those laws. They will also have to deal with proposals on competition policy that

could lead to excessive foreign government intervention abroad that could damage

America’s most competitive companies.

Maintenance of U.S. Trade Laws

As you know, the antidumping remedy is especially important with respect to the

semiconductor industry given the history of injurious dumping in our sector. In the

mid-1980’s, Japanese dumping of DRAMs drove nine of eleven U.S. semiconductor

producers out of this segment of the market; one company was driven out of business altogether. U.S. chipmakers are the most competitive in the world—and consistently are very successful in competition with foreign producers who trade fairly.

Fortunately most do, but there are occasions when some engage in dumping, which

the current international trading rules condemn, and the results can be devastating.

The WTO’s antidumping rules foster competition, creating an environment in which

success is determined by which companies have the best products, technology, and

manufacturing capabilities, and not those who sell below cost of production or price

discriminate to gain export market share.

Without the remedies provided by the antidumping law, our industry would not

be the world leader it is today. One example of this is an outgrowth of the EPROM

dumping case in the mid-1980’s. The U.S. successfully defended against Japanese

dumping of EPROMs, and U.S. companies remained viable competitors in this market as a result. The current large and fast growing market for ‘‘flash’’ semiconductors evolved from EPROMs and U.S. companies are the most successful in this market. This situation would likely be very different today if the EPROM dumping had

not been stopped. The same can be said of DRAMs, where today the U.S. is home

to only one manufacturer but it is one of the most—if not the most—competitive

DRAM company in the world. Without the antidumping laws, this very successful

and competitive company could have been driven out of the business.

Manufacturing DRAMs and other advanced semiconductors requires billions of

dollars of investments in plant, equipment and research and development—it is

vital that the companies that make these investments be able to compete on a fair

basis in order to recoup their enormous investments. The antidumping laws as they

are structured today help insure that fair competition is possible. No one can take

an objective look at the world’s semiconductor market today and not conclude that

there is vibrant competition resulting in long term, consistent increases in benefits

for consumers. This is a direct result of preserving competitors from the destruction

caused by dumping.

The antidumping rules in their current form were the result of heated and arduous negotiations between the United States and other WTO members during the

Uruguay Round. They represent a hard fought compromise—one that has worked

to allow those companies that operate in a fair and open market economy to compete on an equal footing with their foreign competitors. Regrettably, the United

States was the only WTO member that opposed the reopening of the antidumping

rules. The Doha Ministerial Declaration that was ultimately issued states that WTO

members ‘‘agree to negotiations aimed at clarifying and improving’’ the WTO agreement on antidumping, but that any negotiations will preserve this agreement’s

‘‘basic concepts, principles, and effectiveness’’ and its ‘‘instruments and objectives.’’

We must make sure that these principles, instruments, and objectives are preserved

in all respects.

New negotiations on antidumping will, I fear, be extremely difficult. All the current proposals for revisions to the antidumping agreement call for significantly

weakening the ability of industries in the United States and abroad to use domestic

antidumping laws to offset unfair trade practices. A WTO Ministerial Conference

memorandum listing issues to be addressed in the negotiations identifies 13 specific

issues to be negotiated related to antidumping rules—these proposals are focused

on limiting the discretion of national antidumping authorities to determine dumping

margins. Such a move threatens to undermine the consensus in favor of market liberalization and it will undermine support for the WTO if countries can engage in

dumping that cannot be effectively offset.

Maintaining strong trade laws—which helps insure that America’s chipmakers

can compete on the basis of their technological capabilities and product offerings—

is vital to the health of the U.S. semiconductor industry. Our negotiators will have

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a tremendous challenge before them during the new WTO round—SIA is ready to

support them in any way possible during these negotiations.

The House of Representatives passed a resolution by a 410–4 vote just before the

Doha Ministerial that called on the President to preserve the ability of the United

States to enforce rigorously its trade laws and to avoid agreements which lessen the

effectiveness of domestic and international disciplines on unfair trade. If the WTO

rules governing antidumping narrow the ability of the United States to maintain

its antidumping remedy, it is highly unlikely that Congress would approve the results of this Round of negotiations. That would be tragic. But it is avoidable if the

U.S. negotiators are firm.

Tariff Reduction and Elimination

The Ministerial Declaration issued at the end of the conference launches a new

round of negotiations to reduce or eliminate tariffs on non-agricultural goods, especially on products of export interest to developing countries. While this is potentially

very promising, the document notes that the negotiations should allow ‘‘less than

full reciprocity’’ for developing countries to reduce tariffs. This precept is inconsistent with so-called ‘‘zero-for-zero’’ negotiations to eliminate tariffs in certain sectors, including information technology. The Information Technology Agreement

(ITA)—which eliminates tariffs on information technology products—was not specifically mentioned in the Declaration. SIA believes that all WTO members should join

the ITA as soon as possible, especially Latin American countries, and we would like

to see this goal pursued within the new round. We firmly believe that this is in the

best interests of economic development. Undoubtedly, it was a similar exercise of

enlightened self-interest that led China to join the ITA as part of its WTO accession

process.

Competition Policy

Competition policy is the subject of an ongoing dialogue within the WTO, and negotiations may be launched after the next WTO Ministerial meeting in 2003. Current discussions in the WTO’s Trade and Competition Policy working group, meanwhile, are to continue clarifying ‘‘core principles’’ of competition policy, including

transparency, non-discrimination, procedural fairness, and cartels, as well as internal WTO procedural issues, such as providing developing countries with technical

assistance to be able to participate meaningfully in the discussions. The discussions

are to take account of the needs of developing countries, where ideally competition

policy will be used to create properly functioning home markets.

While this area of discussion has the potential to yield benefits, it is also an area

that poses enormous risks and must be approached with extreme caution. Competition policy could be used to make successful foreign firms vulnerable to attacks on

the basis of alleged ‘‘abuse of dominant position.’’ It would be very damaging to

international trade if new WTO competition policy rules provided WTO sanction for

abuses of competition policy measures to protect and promote domestic industries.

Most of the competition policy discussion so far has been grounded in theory rather

than in a factual examination of the specific barriers to international trade and investments that need to be remedied. Before attempting new international disciplines, it is necessary to understand the dimensions of the problems posed for

trade by the absence of competition rules and/or their enforcement in so many markets around the world.

A decision on whether or not to launch negotiations on competition policy after

the next ministerial in 2003, along with negotiations on trade and investment, government procurement, and trade facilitation (the so-called ‘‘Singapore issues’’), has

not yet been finalized. According to the Declaration, these negotiations are to start

after the Fifth Ministerial, when a decision on negotiating procedures is to take

place—a decision to launch these talks will require a consensus on the procedures.

The chief reason that no formal international trade organization was formed after

the Second World War was the attempt to include provisions that addressed socalled ‘‘restrictive business practices.’’ Competition policy negotiations pose a very

high risk for the future of an open international trading system. Competition policy

can easily become an unregulated substitute for antidumping, where the rules and

practices are well defined, and could even undermine the protection of intellectual

property, a hard-won gain from the last major round of international trade negotiations.

E-Commerce

Electronic commerce and internet applications have been key demand drivers in

the semiconductor industry over the past few years, and it is very important that

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the rules governing trade in this area remain as open as possible. The WTO Ministerial Declaration recognizes the new challenges and opportunities for trade

brought about by e-commerce, and notes the importance of creating and maintaining

an environment which is favorable to the future development of electronic commerce. U.S. negotiators in Doha sought and won a commitment to maintain the moratorium on customs duties through the next ministerial in 2003. SIA stands ready to

support our negotiating team in securing a permanent tariff moratorium, and we

encourage them to continue pursuing rules that breed competition and growth in

this important area. We believe international agreement should be reached to ensure that electronically delivered goods should receive no less favorable treatment

than similar products delivered in physical form and that their classification should

ensure the most liberal treatment possible. Governments should refrain from enacting trade-related measures that impede e-commerce. Where regulations are necessary, governments should insure that they are transparent, non-discriminatory

and employ the least trade-restrictive means available. Further, because of the

great growth potential from e-commerce-based services, the U.S. should seek improved market access and national treatment commitments for a broad range of

services, such as telecom and financial services, which can be delivered electronically.

Trade-Related Investment Measures (TRIMS) Agreement

U.S. chipmakers often face complex rules and requirements when making investments overseas—they may be required to enter joint ventures or transfer technology

in exchange for permission to invest and gain market access. The freedom to engage

in direct investment is critical to market access for the chip industry, and to the

development goals of developing countries. Unfortunately, existing WTO investment

rules do not adequately discipline many of the restrictions placed on investment in

various countries.

Improving and expanding WTO rules on TRIMS should be a part of the new

round of WTO negotiations. In particular, rules should be adopted to prohibit requirements that foreign firms enter joint ventures, or transfer technology or intellectual property, in exchange for market access. These strengthened provisions should

encompass not only measures that are mandatory or enforceable under domestic law

or under administrative rulings, but instances where compliance is necessary to obtain any approval or advantage.

Trade and investment is supposed to be the subject of negotiations to start following the next ministerial conference to be held in 2003—launching these talks,

though, will require a consensus that may be challenging to achieve. But it is in

the interest not only of the United States, but also of developing countries, to have

international rules that protect investors’ rights, as such rules will encourage high

tech investment in developing countries.

Trade-Related Aspects of Intellectual Property (TRIPS) Agreement

As an R&D intensive industry, we are very concerned about the full and effective

protection of intellectual property rights. The TRIPS Agreement negotiated as part

of the Uruguay Round represented a major advance in the protection of intellectual

property (IP). The agreement began the process of improving worldwide IP protection and allowed for staged implementation over the course of a decade. Some developing countries have been trying to delay implementation of their obligations. Failure of such countries to fulfill their commitments from the Uruguay Round makes

it less likely that the expected commercial gains for the WTO members that have

met their commitments will be realized. In addition, failure to adopt promised IP

protections is likely to actually undermine the development objectives of the countries seeking to weaken the WTO’s intellectual property protections. We support the

full implementation of TRIPS as soon as possible by all countries, including developing countries.

Some WTO members also question whether TRIPS implementation requires

‘‘transfer of technology on fair and mutually advantageous terms.’’ Any effort to

mandate the transfer of technology must be resisted, as such mandates not only

weaken IP protection, but will also discourage foreign-direct investment and the

commercially-driven transfer of technology that is essential to economic development in many parts of the world.

Dispute Settlement

I am afraid that the WTO Dispute Settlement process represents a growing problem for the international trading system. Unfortunately, it appears to be ineffective

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against informal barriers to trade of the kind that the semiconductor industry faced

with its major competitor in the 1980s and it is curtailing the use of America’s trade

remedies. The dispute settlement system is legislating new obligations for WTO

members that were not agreed at the bargaining table. A more responsible dispute

settlement process is badly needed. If it is not achieved, the ability to obtain further

market opening could be undermined and the availability of justifiable trade remedies will be further impaired.

The Declaration launches negotiations aimed at ‘‘improvements and clarifications’’

of the Dispute Settlement Understanding based on work done so far and that will

continue, with the goal of agreeing on measures by May 2003. The Declaration and

the memorandum do not specifically add to the work program currently underway,

but allow consideration of ‘‘additional proposals.’’ There have been significant problems with Dispute Settlement in the antidumping and countervailing duty law

areas, particularly with respect to standard of review, and these problems should

be addressed. We are hopeful that these talks will in fact yield the desired improvements to the dispute settlement process.

Taxation

The current WTO rules on adjusting for indirect taxes—which yielded the recent

decision against the U.S. Foreign Sales Corporation (FSC)—have no basis in economics. Direct (income) taxes and indirect (sales, VAT) taxes do not have a different

incidence on goods, and yet they are treated differently by the WTO. The former

may not be rebated on export and charged on imports, while the latter may be—

this disparity in treatment creates an un-level playing field. Any new round should

formally remove the discrimination against the rebate of direct taxes, as this is a

significant detriment to the United States and may subject U.S. exports to WTOsanctioned trade retaliation.

Conclusion

SIA has long supported fair and open trade—where our companies can compete

on the basis of market principles, unencumbered by trade barriers, they are tremendously successful. We strongly support a positive new round of trade negotiations,

and believe it has the potential to further open markets and improve the global

trading system. While we support further opening markets, we urge extreme caution in areas such as antidumping and competition policy—improvements in the current international trading system must not be purchased at the expense of the existing rules and current level of liberalization. This is particularly important as we

begin to integrate China into the WTO—the U.S. secured a very strong bilateral

agreement regarding the terms for China’s accession to the WTO, and these tremendous gains must not be undercut in the process of negotiating a new WTO round.

SIA stands ready to fully support the negotiating team from the United States

Trade Representative’s Office and the Department of Commerce—and we believe

they can ultimately bring home an agreement that benefits U.S. industry.

With the right results, I am confident that Congress will approve new agreements

reached with the strong majorities that once characterized passage of packages of

trade agreements. Your support and ours must not be taken for granted, but it

should be expected if the advice that you and the private sector give is really listened to. It is our faith in the active involvement of the Congress and the private

sector in the trade agreements process, and the strong positive results achieved in

the past that give SIA the basis for its strong support of Trade Promotion Authority.

America’s high technology manufacturers—including semiconductor makers—have

benefited greatly from the agreements concluded in the past utilizing fast track negotiating authority.

Statement of the United States Association of Importers of Textiles and

Apparel, New York, New York

f The U.S. Association of Importers of Textiles and Apparel, USA–ITA, an association founded in 1989, represents U.S. importers, retailers, manufacturers and other

companies involved in the textile and apparel business. We are pleased to have this

opportunity to address the trade agenda for 2002. Between negotiations and legislation, the trade agenda this year is potentially immense, and USA–ITA member companies will be directly affected by these trade policy decisions.

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Overview

The last year has been a difficult one for the importing and retailing sector of the

U.S. economy. While consumer confidence appears to be rebounding, U.S. consumers

have always been extremely price and value conscious, and the current economic

conditions have compelled U.S. importers and retailers to trim further their already

slim profit margins. In the apparel sector in particular, where the extensive system

of quotas and high duty rates already add to the costs (including increased compliance and paperwork costs) that must be passed on to consumer, the economic slowdown has hit especially hard, with a number of retailers experiencing bankruptcies,

resulting in massive layoffs of workers.

An expansion of trading opportunities, through the reduction and elimination of

trade barriers, offers a means for our members to reduce costs, participate in expanded sourcing options and investigate enlarged marketing prospects. For these

reasons, USA–ITA members strongly support legislation and negotiations designed

to liberalize trade.

The extensive protection offered textiles and apparel has a tremendous impact on

our member companies and U.S. consumers. It has consistently resulted in a situation in which textile and apparel trade policy decisions have been considered separate and apart from all other trade policy decisions. However, in less than three

years, the international regime for textile and apparel products will be phased out

and these goods will be fully integrated into normal trading rules. Therefore, it is

essential that the Congress and the Administration begin now to reorient their decision-making processes to treat textile and apparel products like all other goods, in

both negotiations and legislation.

Trade Promotion Authority

Specifically, USA–ITA strongly supports trade promotion authority (fast track negotiating authority) for the President. Negotiating authority is essential to ensure

continued momentum on the many international trade negotiations in which the

United States is already involved. With the launch of the Doha Development Agenda in the World Trade Organization and forward progress on free trade agreement

negotiations with Singapore and Chile, as well as regional agreements such as the

Free Trade Area of the Americas and now a possibly more immediate agreement

with Central American countries, there are many opportunities for the U.S. to reduce trade barriers for U.S. goods and services. These are particularly important in

the apparel sector, where U.S. importers and retailers cope with multiple sources

of supply and a large variety of complicated origin rules. These agreements offer the

opportunity for USA–ITA members to consolidate and simplify operations and expand into new markets.

In dealing with these trade negotiations, USA–ITA strongly urges the Committee

to support a process that treats the textile and apparel sectors as part of the whole

rather than as a separate issue. Under the terms of the Agreement on Textiles and

Clothing, these sectors are scheduled to be integrated into the normal WTO rules

on January 1, 2005. In accordance with that plan, the time has come to stop treating textiles and apparel as a separate negotiation, particularly with respect to elimination of tariff and non-tariff barriers. Instead, USA–ITA supports the inclusion of

these sectors in a ‘‘zero-for-zero’’ tariff initiative as part of the Doha negotiations.

USA–ITA members would like to sell their goods throughout the world, and the

elimination of barriers such as high duties are essential to the achievement of that

goal. However, we must be prepared to lift our barriers as well, and a zero for zero

initiative makes clear that the United States is sincere in its demands for market

access.

In the apparel sector, the U.S. has typically proposed—and obtained—extremely

long periods for the gradual phase-out of duties in the context of free trade agreement negotiations. USA–ITA strongly urges a change in this position. As we approach 2005 and a relatively quota-free world, duty rates will be a much more significant factor in sourcing decisions and therefore their elimination is essential for

the success of preference arrangements.

In the case of the Western Hemisphere, our proposed FTAs, such as with all 34

countries or with the five Central American countries, some apparel products already have the benefit of unilateral duty-free entry into the U.S. market. For these

products, the FTAs should include immediate duty-free treatment. To go from unilateral duty-free treatment to negotiated 10- or 15-year gradual duty reductions is

not a means for enticing business with these trade partners. Therefore, it is imperative that FTAs negotiated in this hemisphere do not result in even temporary duty

increases. Instead, goods duty-free under unilateral preferences should be duty-free

from the outset of negotiated FTAs. In the post-quota world, the U.S. importer comVerDate 11-MAY-2000 04:28 Jun 15, 2002 Jkt 078584 PO 00000 Frm 00110 Fmt 6633 Sfmt 6621 E:\HR\OC\A584.XXX pfrm12 PsN: A584
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munity is going to be looking to make longer term sourcing commitments, and any

lapses or delays in duty benefits for this region may result in permanent exclusion

from U.S. buyers’ business plans.

FTAs within the Western Hemisphere also offer the possibility of uniform origin

rules, as opposed to the dizzying variety of rules that have been generated by a U.S.

Congress trying to appease competing constituencies, regardless of whether they are

logical or make business sense. The NAFTA origin rules, while not perfect, would

work in the context of a Free Trade Area of the Americas, because those rules would

offer the necessary flexibility for manufacturers to source yarns and fabrics with

which to produce finished garments from within the 34 participating countries. Unfortunately, NAFTA rules will not work in the context of the FTA being negotiated

with Singapore, because Singapore does not produce the yarns and fabrics with

which to produce finished garments. For Singapore, USA–ITA urges the Committee

to support a more flexible origin rule, which would allow for the use of inputs from

other suppliers within the ASEAN.

CBTPA and AGOA, Andean Trade Preferences Act

USA–ITA members also look forward to enactment of improvements to the Caribbean Basin Trade Partnership Act and the African Growth and Opportunity Act, as

well as to enactment of an Andean Trade Preference Act that includes benefits for

apparel products. The CBTPA is greatly in need of improvement because its limited

terms undermine the benefits originally expected under the new law. Instead of expanding trade, the CBTPA has instead had the effect of contracting trade.

The CBTPA obviously has been no panacea for the CBI region. Apparel imports

from the CBI are down three percent for the year ending November 2001 compared

to the year ending November 2000. When you look at the individual countries, it

is apparent that those CBI countries most dependent upon production sharing arrangements with U.S. companies have been hurt the most since the CBTPA went

into effect. Meanwhile, those who are least dependent upon production sharing arrangements, because they offer ‘‘full package’’ goods—from yarn or fabric to the finished garment—are actually doing well in this tough retail environment. Compare

the experiences of the Dominican Republic and Guatemala: The Dominican Republic

is a major 807 manufacturer while Guatemala typically does both cutting and sewing to create the final product. The Dominican Republic has seen its trade in apparel decline in 2001 while Guatemala continues to grow.

From the perspective of USA–ITA, a primary lesson of the CBTPA is that the U.S.

cannot engineer new competitive advantages by limiting sourcing options. Instead,

it should be seeking to capitalize on existing competitive advantages. Under the

CBTPA, benefits are available only for apparel made from U.S. fabric from U.S.

yarns and for a limited quantity of apparel made from regional fabric so long as

that regional fabric was knit or woven from U.S. yarns. Given the generally higher

cost of U.S. fabrics and U.S. yarns, the ability of CBI manufacturers to meet price

points required for the products they are capable of producing has been greatly undermined. Many CBI producers have determined that the only way they can meet

the price points of the value-minded U.S. consumer is to use non-U.S. fabrics and

yarns, and therefore not participate in the CBTPA. And, of course, a lesson also has

been sent to the U.S. manufacturers of those fabrics and yarns, because they have

not seen the expanded sales they believed would come from such a strict requirement for preferences.

Regrettably, the domestic textile industry continues to try to distort sourcing options. Thus, the Congress is now faced with trying to identify how to implement the

‘‘DeMint letter,’’ under which U.S. formed fabrics from U.S. formed yarns also must

be dyed, printed and finished in the U.S. in order for apparel cut and sewn in

CBTPA beneficiary countries to receive duty-free access to the U.S. market. Revision

of the CBTPA, and incorporation of such limitations into legislation to expand the

ATPA to apparel products, will not assist the U.S. mill industry. To the contrary,

USA–ITA fully expects that this provision will only curtail sales for U.S. mills.

The ATPA legislation provides a significant opportunity for the U.S. Administration and the Congress to demonstrate that they have learned from the experiences

of the CBTPA. Whether the Andean countries will be able to expand their business

in the United States is directly dependent upon when and what ATPA expansion

bill is enacted into law by the U.S. Congress. Legislation identical to what was approved for the Caribbean and Central American countries under the CBTPA—as the

Senate has proposed—will inevitably do nothing to encourage business between the

U.S. and Andean manufacturers. That is both because of the flaws in the CBTPA

and the distinctions between the apparel produced by the Caribbean/Central American region and the Andean region.

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Unlike the CBI region, the ATPA countries tend to produce full package tailored

goods, rather than basic garments suited to simple assembly operations. The Andean countries, unlike the CBI countries, also have established yarn spinning and fabric making capabilities. Not permitting the Andean countries to capitalize on these

assets under a preference program is to ensure that the preference program will be

unusable. And if Andean apparel production does not expand, that does nothing to

help U.S. mills, U.S. yarn spinners, and U.S. cotton growers to expand sales.

Moreover, even assuming that the House version of ATPA enhancement becomes

law, unilateral benefits, such as those provided under CBTPA and proposed under

ATPA, are only temporary provisions. These provisions should be the starting point

for a negotiated and unlimited term free trade agreement, as a means of providing

the necessary permanence and security businesses require. If it should appear that

the hemisphere-wide FTAA cannot be implemented before an ATPA enhancement

law expires, USA–ITA urges consideration of a smaller arrangement, such as an

FTA between the U.S. and the ATPA countries, just as the U.S. is proposing an FTA

with the Central American countries, as an interim measure.

Bilateral Issues

Pakistan: In the wake of the tragic events of September 11, USA–ITA strongly

urges the Committee to support steps that could counter a sense of business uncertainty that now hangs over the countries surrounding Afghanistan, particularly

Pakistan which has proved itself as a key ally.

Our industry views Pakistan as an important source of goods, but we also must

minimize business risks, especially in light of the difficult economic situation. The

Administration and the Congress already have delayed providing Pakistan products

tariff concessions that could provide an important impetus for maintaining and moving business to that country, with the Administration providing only minimal quota

increases in a few apparel categories. USA–ITA urges the Congress to do what the

Bush Administration has not done. Providing short-term trade concessions, such as

duty reductions for a one-year period, would signal to Pakistan and its leaders that

their stance in support of the United States is appreciated.

It also would mean jobs for Pakistani workers, assuring stability in a country

where unstable conditions surely have contributed to the terrorist threat felt by our

Nation. Significantly, such concessions would not hurt U.S. manufacturers. To the

contrary, additional business for Pakistan would come at the expense of other Asian

suppliers, not U.S. makers.

Vietnam: USA–ITA is extremely dismayed by reports that the Bush Administration is seeking to initiate negotiations with Vietnam to establish quotas on apparel

produced in Vietnam. The most recent U.S. Census Bureau data shows that apparel

imports from Vietnam in 2001 are down by more than 6% compared to 2000, and

are even less than in 1999. Surely this miniscule level of trade (0.17% of total U.S.

apparel imports, making it the 53rd largest supplier) cannot be threatening U.S.

makers. Instead it appears that the Committee for the Implementation of Textile

Agreements, CITA, is looking to establish quotas simply for the sake of establishing

quotas. The basis for the U.S. textile program has always been to address problems

of market disruption caused by increased imports, while permitting developing countries to share in expanded export opportunities. That policy should not change now.

The U.S. apparel importing community is looking forward to developing and expanding sourcing from Vietnam for a number of important reasons. First, the implementation of the Agreement on Textiles and Clothing has not afforded our members

the ability to expand sourcing from the most desirable suppliers at the same pace

as the growth in the U.S. market. This situation has arisen primarily because the

terms for textile and apparel exports from WTO member countries have been set

since January 1, 1995, based upon trade patterns in place before the ATC went into

effect. As a result, our members are forced to continue seeking new sources of supply to meet the demands of the American consumer.

Second, even new suppliers have been restrained by the United States. For example, about two and a half years after entering the U.S. market (because its products

became eligible for Column 1 duties), Cambodian apparel became the subject of a

bilateral textile agreement establishing quotas on 24 apparel categories. The ability

of U.S. importers to source from Cambodia has been greatly compromised as a result, because many of the quota levels established for Cambodia are insufficient to

meet the needs of individual companies.

Third, the demands of the market combined with the limitation of quota restrictions have compelled some in the import community to focus upon suppliers that

would otherwise be undesirable. For example, some companies were forced to view

Burma/Myanmar as a source of supply largely because garments at the appropriate

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price point from their other suppliers of choice are capped. Burma served as an alternative to these countries because it is a WTO member, and therefore the U.S.

Government may seek new restrictions only if it complies with the terms of Article

6 of the ATC. Vietnam offers an alternative to Burma, but only if Vietnam’s trade

is permitted to expand to a level essential to make it commercially viable.

Fourth, the newly normalized trade relationship with Vietnam offers U.S. companies tremendous opportunities to sell into the Vietnamese market, taking advantage

of lower tariffs and the elimination of non-tariff barriers and non-transparent regulations. However, the ability of Vietnam to afford American goods and the demand

for American goods and services is directly dependent upon the foreign exchange

Vietnam will earn by exporting products to the U.S. market. Seeking quotas on

Vietnam’s apparel exports to the U.S. market, especially before that trade even has

the opportunity to develop, will clearly impair the ability of Vietnam to afford U.S.

goods and services.

Actions by the Administration to seek a textile agreement with Vietnam now also

could destroy the incentive for foreign investment in Vietnam, which Vietnam needs

to build new state of the art factories. Those new factories mean sales for U.S. companies producing earthmoving, construction and road building equipment, for U.S.

companies involved in providing basic telecommunications equipment and services,

and for U.S. banks and insurance firms servicing and financing such projects. Foreign investment in the apparel sector, in particular, also means the importation of

a wealth of knowledge regarding respect for the rule of law, including compliance

with U.S. legal requirements, and good working conditions. The companies most interested in investing in Vietnam’s apparel sector are those with experience in meeting the codes of conduct established by major American brands, all of which are

members of our associations.

Conclusion

The trade agenda for 2002 is an ambitious one, but its implementation is essential

if the United States is to maintain its leadership role in promoting global economic

security. USA–ITA looks forward to enactment of trade promotion authority and the

Andean Trade Preferences Act as the first steps toward achievement of that agenda,

and to signs that both the Congress and the Administration are now ready to end

the decades-long era of discriminating against textile and apparel trade. In particular, USA–ITA urges the Committee to strongly support assistance to key allies

like Pakistan and to ensure that the Administration resists pressures to discriminate against the development of apparel trade by Vietnam.

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