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U.S. PREFERENCE PROGRAMS:

HOW WELL DO THEY WORK?

HEARING

BEFORE THE

COMMITTEE ON FINANCE

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 16, 2007

(

Printed for the use of the Committee on Finance

COMMITTEE ON FINANCE

MAX BAUCUS, Montana, Chairman

JOHN D. ROCKEFELLER IV, West Virginia

KENT CONRAD, North Dakota

JEFF BINGAMAN, New Mexico

JOHN F. KERRY, Massachusetts

BLANCHE L. LINCOLN, Arkansas

RON WYDEN, Oregon

CHARLES E. SCHUMER, New York

DEBBIE STABENOW, Michigan

MARIA CANTWELL, Washington

KEN SALAZAR, Colorado

CHUCK GRASSLEY, Iowa

ORRIN G. HATCH, Utah

TRENT LOTT, Mississippi

OLYMPIA J. SNOWE, Maine

JON KYL, Arizona

CRAIG THOMAS, Wyoming

GORDON SMITH, Oregon

JIM BUNNING, Kentucky

MIKE CRAPO, Idaho

PAT ROBERTS, Kansas

RUSSELL SULLIVAN, Staff Director

KOLAN DAVIS, Republican Staff Director and Chief Counsel

(II)

(III)

C O N T E N T S

OPENING STATEMENTS

Page

Baucus, Hon. Max, a U.S. Senator from Montana, chairman, Committee

on Finance ............................................................................................................ 1

Grassley, Hon. Chuck, a U.S. Senator from Iowa ................................................. 2

WITNESSES

Broadbent, Meredith, Assistant U.S. Trade Representative for Industry, Market Access, and Telecommunications, Office of the U.S. Trade Representative, Washington, DC ........................................................................................... 4

Yunus, Dr. Muhammad, founder, Grameen Bank, Dhaka, Bangladesh ............. 5

Reinhardt, Eric, assistant professor of political science, Emory University,

Atlanta, GA ........................................................................................................... 7

Iberkleid, Marcos, president, Ametex, La Paz, Bolivia ......................................... 8

Kuhlmann, Katrin, senior vice president for global trade, Women’s Edge

Coalition, Washington, DC .................................................................................. 10

ALPHABETICAL LISTING AND APPENDIX MATERIAL

Baucus, Hon. Max:

Opening statement ........................................................................................... 1

Broadbent, Meredith:

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 21

Grassley, Hon. Chuck:

Opening statement ........................................................................................... 2

Iberkleid, Marcos:

Testimony .......................................................................................................... 8

Prepared statement with attachments ........................................................... 27

Kuhlmann, Katrin:

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 141

Responses to questions from committee members ......................................... 151

Reinhardt, Eric:

Testimony .......................................................................................................... 7

Prepared statement .......................................................................................... 155

Responses to questions from committee members ......................................... 163

Yunus, Dr. Muhammad:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 166

COMMUNICATIONS

American Agip Co., Inc. .......................................................................................... 191

American Federation of Labor and Congress of Industrial Organizations ......... 193

American Soybean Association, National Corn Growers Association, National

Cotton Council, Biotechnology Industry Organization, and Monsanto Company ....................................................................................................................... 195

ANDI (National Business Association of Colombia) ............................................. 198

Arrow Cargo ............................................................................................................. 201

BioSelect Fuels, LLC ............................................................................................... 203

Calcot Cotton Marketing Services .......................................................................... 205

Coalition for GSP ..................................................................................................... 206

Del Monte Foods ...................................................................................................... 214

Page

IV

DHL Express ............................................................................................................ 215

Embassy of Bolivia .................................................................................................. 217

Embassy of Ecuador ................................................................................................ 232

Foley Hoag LLP ....................................................................................................... 233

General Motors del Ecuador, S.A. .......................................................................... 235

International Labor Office ...................................................................................... 237

LAAD Americas N.V. ............................................................................................... 239

Mauritius-U.S. Business Association, Inc. ............................................................. 241

Metanol de Oriente, Metor, S.A. ............................................................................. 244

National Retail Federation ..................................................................................... 246

Rangel, Hon. Charles B. and Hon. Sander M. Levin ............................................ 250

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U.S. PREFERENCE PROGRAMS:

HOW WELL DO THEY WORK?

WEDNESDAY, MAY 16, 2007

U.S. SENATE, COMMITTEE ON FINANCE, Washington, DC.

The hearing was convened, pursuant to notice, at 9:58 a.m., in

room SD–215, Dirksen Senate Office Building, Hon. Max Baucus

(chairman of the committee) presiding.

Present: Senators Bingaman and Salazar.

OPENING STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR

FROM MONTANA, CHAIRMAN, COMMITTEE ON FINANCE

The CHAIRMAN. The hearing will come to order.

I want to announce, first, to everyone, unfortunately there are

four votes scheduled to begin at 10:30, which means we can stay

until about 10:40, which means we all have to be very brief and

to the point. I am going to shorten my statement, and urge all of

you to shorten yours so that there is time for dialogue and for questions. Thank you very much.

Thanks to our witnesses who have traveled a long way to be here

today, and special thanks to Dr. Muhammad Yunus, who has traveled all the way from Bangladesh, and Marcos Iberkleid from Bolivia. Thank you both, very, very much. You are making the extra

effort to come, and we very much appreciate that.

In the 1860s, Montana’s economy depended on trade among fur

trappers, Native Americans, and Europeans. As the discovery of

gold and other metals ushered it into a new economic era, Montana

re-thought its trade. By the late 1800s, the Homestead Act prompted Montanans once again to re-think the economy, as farmers and

ranchers began shipping beef and wheat throughout the United

States.

Today, Montanans export these same products across the globe,

along with high-quality manufactured goods and state-of-the-art

biotech materials. With each change in the economic and political

landscape, Montanans assessed the situation, adjusted their approach, and thrived in the new economic environment.

Today we need to assess our trade preference programs, such as

the Generalized System of Preferences, the Andean Trade Preferences Act, and the African Growth and Opportunity Act. We need

to take a good, hard look at our trade preference programs. We

must determine whether they reflect the world of 2007.

We must re-think and reexamine them to ensure that they continue to promote political stability and sustainable economic

2

growth in developing countries. We must consider whether we need

to adjust to ensure that U.S. businesses and developing economies

actually benefit from these programs.

Like Montanans past and present, we must responsibly assess

the situation. Let us adjust our approach, and let us see that all

parties can fly in this new economic environment.

OPENING STATEMENT OF HON. CHUCK GRASSLEY,

A U.S. SENATOR FROM IOWA

Senator GRASSLEY. Today the Committee has an opportunity to

evaluate the operation of our trade preference programs. I want to

thank our witnesses for being with us today. Some of them have

traveled long distances to be here, and I look forward to their testimony. Through our trade preference programs, the United States

provides duty-free access for a broad array of products from developing countries. That preference is unilateral. Beneficiary countries

are under no obligation to provide reciprocal duty-free access to our

exports. The rationale is that, by expanding exports from developing countries, these programs will help to promote economic

growth in the developing world.

Throughout most of my career in Congress, I’ve supported our

preference programs. Recently, however, I’ve begun to question

their worth. At the end of last year, I reluctantly agreed to shortterm extensions for two programs, the Generalized System of Preferences and the Andean Trade Preference Act. I did so after reaching an understanding with Senator Baucus that the Finance Committee would reexamine these programs in the present Congress.

That starts with today’s hearing. The Generalized System of Preferences, or GSP, was enacted in 1974 as a temporary incentive for

developing countries to become more active in the global trading

system. Yet this program is anything but temporary. Over 30 years

after GSP was implemented, some 143 developing countries and

territories are eligible to receive preferential treatment under the

program. Only a small percentage of recipient countries have ever

been removed from GSP.

Not surprisingly, many developing countries now seem to view

GSP benefits as an entitlement. For example, Brazil and India

have highly competitive economies. They impose high tariffs on

U.S. imports. They also contributed to the failure of the Cancun

Ministerial of the Doha negotiations in the World Trade Organization. Yet, at the same time, they seem to feel they’re entitled to

continued benefits under the program. Last year we did take action

to revoke GSP benefits for products that are ‘‘super-competitive’’ in

the world market, including certain products from Brazil, India,

and Venezuela. I supported that measure. But that’s just a start.

We should look for additional ways to graduate products and

countries from eligibility for GSP benefits. For example, the program could be retargeted away from advanced developing countries

to help those countries that are truly impoverished. We should also

consider the merits of eliminating this 1970s-era program altogether and starting with a fresh approach to economic development

and trade liberalization. Because that’s where our focus should be,

to further reduce trade barriers around the world. The current GSP

program does little, if anything, to encourage trade liberalization.

3

In fact, it creates a disincentive to further trade liberalization.

After all, the status quo allows developing countries to have oneway duty-free access to the U.S. market for most of their products.

Why should they want to change the status quo?

But the status quo does little to foster new economic growth, invite investment, strengthen capital markets, and lower costs while

increasing choices for consumers in developing countries. And the

status quo does little, if anything, to spur progress in the multilateral negotiations of the Doha Round in the World Trade Organization.

As for the Andean Trade Preference Act, or ATPA, I see no reason to extend this program. Peru and Colombia have negotiated

and signed free trade agreements with us. These trade agreements

provide for the eventual elimination of duties on U.S. exports.

That’s a clear improvement over the ATPA. I look forward to implementing these agreements as soon as possible.

As for Bolivia and Ecuador, I see no reason to further extend

ATPA benefits. In fact, it boggles my mind that the governments

of Ecuador and Bolivia would even ask us for extensions of these

trade preferences. After all, the current leaders of those two countries have based their careers on attacking U.S. policies—our trade

policies in particular. Yet, ironically, they wrap their arms around

one U.S. trade law, the ATPA. Why? Because under this program

they can sit back and receive duty-free access to our market no

matter how irresponsibly they act. Apparently, it doesn’t matter to

them that Ecuador expropriated the assets of its largest foreign investor, a U.S. company, and subsequently sent in troops to guard

the facilities that it seized. Apparently, it doesn’t matter that President Morales of Bolivia nationalized Bolivia’s hydrocarbon sector

and ordered the Bolivian military to occupy gas fields. President

Morales also threatened to evict foreign companies, including U.S.

companies, unless they turned the titles to their properties over to

the State.

Well, the fact is, those actions matter to me. We should not reward the bad behavior of those two governments by maintaining

unilateral trade preferences on their exports to the United States.

We should not let ATPA evolve into an entitlement program. Instead, we should allow ATPA to lapse, and then see what type of

economic relationships the governments of Bolivia and Ecuador

want to establish with the United States. For starters, those relationships must be based on a genuine respect for the rule of law.

The CHAIRMAN. We are very fortunate this morning to have such

a diverse group of witnesses for today’s hearing. Today’s panel begins with Ms. Meredith Broadbent. She is the Assistant USTR for

Industry, Market Access, and Telecommunications with the Office

of the U.S. Trade Representative. Following Ms. Broadbent is Dr.

Muhammad Yunus, founder of the Grameen Bank in Bangladesh,

and recipient of the 2006 Nobel Peace Prize. Dr. Yunus, thank you

very much for traveling from Bangladesh to be here today. Our

third witness is Mr. Eric Reinhardt, assistant professor of political

science at Emory University in Atlanta. Fourth is Mr. Marcos

Iberkleid, the president of American Textile in La Paz, Bolivia. And

thank you, Mr. Iberkleid, for coming, again, such a long way. And

finally, we welcome Ms. Katrin Kuhlmann. She is a senior vice

4

president for global trade of the Women’s Edge Coalition based in

Washington, DC.

All right. Ms. Broadbent, why don’t you begin? And I urge you,

again, to keep it very brief. We only have about 40 minutes.

STATEMENT OF MEREDITH BROADBENT, ASSISTANT U.S.

TRADE REPRESENTATIVE FOR INDUSTRY, MARKET ACCESS,

AND TELECOMMUNICATIONS, OFFICE OF THE U.S. TRADE

REPRESENTATIVE, WASHINGTON, DC

Ms. BROADBENT. Chairman Baucus and distinguished members

of the committee, I am pleased to be here today to participate in

a hearing on the U.S. Trade Preference programs.

I am Assistant U.S. Trade Representative for Industry, Market

Access, and Telecommunications, and I administer the GSP program, the Generalized System of Preferences, which, as you know,

covers nearly 4,900 products, including agricultural and nonagricultural goods.

At the outset, I would like to thank the committee for extending

the program through December 31, 2008. This was actually the

first time that Congress has extended the program without a lapse

in its nine extensions since the program was first authorized in

1974. A seamless extension has created greater certainty for developing country producers and exporters, as well as for U.S. importers and businesses.

The administration also agrees with Congress that the goals of

the GSP program are best fulfilled when the benefits provided are

targeted to those countries and products that are not yet competitive in the world market. In this regard, we welcome the competitiveness guidance that Congress added to the GSP statute.

I wanted to say a few words about the origin of the program and

how we see its effectiveness today, nearly 30 years later. I will also

provide a few remarks on the other U.S. preference programs

which offer additional benefits to countries in the Caribbean basin,

the Andean region, and in Africa.

An overall point about these programs is that they are one facet

of a broader trade strategy, premised on our view that developing

countries attract investment and grow economically if they work to

eliminate trade barriers and adopt multilateral and bilateral rulesbased trade commitments.

Authorized by the Trade Act of 1974, the GSP program was designed to be a system of temporary unilateral trade preferences. It

has three broad goals: to promote economic growth and improve living standards in developing countries, to help integrate developing

countries into the global trading system, and to reduce costs for

U.S. manufacturers and consumers.

I want to draw your attention today to the competitive need limits which Congress included in the GSP statute to ensure that the

duty-free benefits of the GSP program extend to developing country

exports that are not competitive internationally.

These limits serve as one of our three primary tools for redirecting program benefits from fast-growing countries exporting

globally competitive products to the poorest countries.

5

The CNLs are ceilings on GSP benefits for each product and

country and are based on annual product trade from a specific

country and the share of total imports of that product.

The CHAIRMAN. Ms. Broadbent, you have about 2 minutes left.

Ms. BROADBENT. All right. Good.

The GSP program also promotes overall U.S. trade policy objectives by encouraging beneficiaries to eliminate or reduce significant

barriers to trade in goods, services and investment; afford all workers internationally recognized worker rights; and provide adequate

and effective means to secure and enforce property rights, including intellectual property rights.

The most recent GSP renewal period resulted in an average 11

percent annual increase in imports under the GSP program. It has

offered benefits for retailers who use it to broaden their sourcing,

and allows several beneficiary countries to participate in one production chain at a time.

GSP ensures that U.S. companies have access to intermediate

products from beneficiary countries on generally the same terms

that are available to competitors in other developed countries that

offer trade preferences.

At the same time, U.S. companies maintain that country eligibility in the GSP program nurtures a set of conditions that is advantageous to U.S. exporters, as well as beneficiary countries.

The record shows that the GSP program has helped to influence

positive developments in many areas of the U.S. trade agenda with

developing countries. For example, GSP benefits have proven to be

an incentive to improve worker rights and intellectual property.

The administration is strongly committed to the goal of promoting economic growth in the developing world, and most importantly in its poorest regions. U.S. preference programs are an important part of that effort, and we look forward to working with

you on them. Thank you.

The CHAIRMAN. Thank you very much. Your full statements will

be included in the record, but I do urge you to keep it under 5 minutes if you can.

[The prepared statement of Ms. Broadbent appears in the appendix.]

The CHAIRMAN. Dr. Yunus, thank you very much again for traveling such a great distance. You honor us here with your presence.

Thank you very much.

STATEMENT OF DR. MUHAMMAD YUNUS, FOUNDER,

GRAMEEN BANK, DHAKA, BANGLADESH

Dr. YUNUS. It is my honor, Mr. Chairman, to be here. Also, I feel

lucky that you have given me this opportunity to appear before

you.

In a Muslim country like Bangladesh, the garment industry has

brought a major social revolution. The most dramatic thing Bangladesh has experienced in the last 2 decades is the empowerment

of women.

Because of this, many other positive things happened in Bangladesh, such as poverty declining consistently in Bangladesh. Fertility rate has declined from 6.3 in 1975 to, today, 3 in 2006, reduced by more than half.

6

Nearly universal primary education has been achieved all over

Bangladesh. At the secondary level, girls outnumber boys in a Muslim country which is supposed to keep the girls home. Today, it is

quite different. Longevity of women finally overtook the longevity

of men, as it should have been. Today that has been achieved and

the longevity of women is longer. Child mortality and maternal

mortality has been declining steadily.

How did all this happen? How did women’s empowerment come

about? Through two major sources: micro-credit and the garment

industry. A new generation of young girls are coming up in a Muslim society, creating a liberal, modern attitude in the poor families.

I always point out that poverty is a threat to peace, national as

well as global peace. Poverty is the breeding ground for terrorism.

Families of these girls will not be those breeding grounds any

more.

The U.S. duty structure has been very unkind to Bangladesh ex- ports. For the $3.3 billion exported in 2006 to the United States,

Bangladesh paid half a billion dollars in duties. The United Kingdom paid the same amount, half a billion dollars, the same year,

for total exports of $44 billion. Bangladesh is not requesting any

special favor. She wants to be treated at par with others.

What will happen to the garment industry if Bangladesh is allowed duty-free access to the U.S. market? My best guess is, the

export volume to the U.S. will double in 5 years or less. Instead

of 2 million girls working in the garment industry, 4 million girls

will work in the garment industry. Wages will go up. Bangladesh’s

growth rate will go up.

Exports of U.S. cotton to Bangladesh will double. Other U.S. exports to Bangladesh will also increase. While declaring the millennium development goals in 2000 at the Millennium Summit, a commitment was made that LDCs will be given duty-free access to help

achieve those goals.

Honoring that commitment now will help Bangladesh enormously. With this help, Bangladesh can make millennium development goals a reality by 2015. Every one of those millennium development goals can be achieved by that date.

Mr. Chairman, your decision on the floor of the Senate can help

create the most dramatic result in human history. The poorest

country in the world, that is, Bangladesh, and the most densely

populated country in the world, with an 85-percent Muslim population out of 145 million people, can actually come out gloriously

in reducing the number of poor people by half by 2015. At the same

time, she can also achieve all of the seven millennium development

goals. What a history to create.

Mr. Chairman, I ask you to check if this link between your decision here will enhance—even ensure—the chances of Bangladesh to

reduce poverty by half by 2015. If you are convinced, we should not

miss this historic opportunity to help a poor country in reducing

poverty by doing business with you. It will be a great lesson for the

world. With this lesson, we can think seriously about creating a

poverty-free world and put poverty ultimately in the poverty museums.

Thank you, Mr. Chairman. Thank you, distinguished members of

the committee.

7

The CHAIRMAN. Thank you very much, Dr. Yunus. We really appreciate that.

[The prepared statement of Dr. Yunus appears in the appendix.]

The CHAIRMAN. Mr. Reinhardt?

STATEMENT OF ERIC REINHARDT, ASSISTANT PROFESSOR OF

POLITICAL SCIENCE, EMORY UNIVERSITY, ATLANTA, GA

Mr. REINHARDT. Mr. Chairman, members of the committee,

thank you for the privilege of speaking with you today.

The U.S. unilateral preference programs have the aim of promoting the exports of beneficiary developing countries and helping

to integrate them more closely into the world economy. Are they effective in accomplishing those goals? The answer may seem obvious

because they provide a margin of preference that has lower tariffs

than other suppliers face. How could their exports not increase to

the United States?

I agree with advocates of these programs, that helping developing countries grow through trade is a vital interest of the United

States and should be something that we pursue.

But these unilateral preference programs, I would argue, are

simply not an effective way to achieve that goal. Instead, they often

fail to promote their beneficiaries’ exports and, indeed, may be

counterproductive; when countries are removed from the program,

their exports begin to grow at a faster rate.

That is because these programs, such as the GSP, lack three

structural features which are vital to the success and political sustainability of any international trade system, that is, reciprocity,

enforceable legal bindings, and non-discrimination.

The absence of these three features in the unilateral preference

programs, which contrasts with the system of the World Trade Organization and with the United States’ system of free trade agreements, institutionalizes a perfect storm of perverse incentives for

all parties to the arrangement.

So, these programs end up adding significant new costs to exports in addition to making the policy environment far less predictable, which discourages investments in the export areas that we

would like to help promote.

Now, I want to make my point crystal clear by emphasizing that

this critique is not simply unique to the United States’ programs.

It applies equally to the programs maintained by other developed

countries, such as the European Union. The fault does not lie in

the administration of the program by the USTR or the other involved agencies, but rather with the inherent structure, as I indicated.

I will skip, to save time, right to my points of action. The implication of my critique for the reform of the preference system is fairly straightforward. If the goal is to boost developing country exports, we ought, ultimately, to scrap GSP and the other unilateral

preference programs and substitute a system of trade relations

with these countries that is fully maintained within the purview of

the World Trade Organization, which would involve zero tariff commitments in the WTO framework to GSP-eligible tariff lines at

present on an MFN basis, and with those concessions, of course,

being legally bound and enforceable through WTO procedures.

8

This would result in a loss of marginal preference for the current

beneficiaries of the unilateral preference programs in the United

States, and, to help offset this, the United States can help make

them more willing participants in such a change by extending

new—and it would not need to be more than modest—tariff cuts in

sectors where these poor countries have the greatest comparative

advantage, which are typically left out at present of the unilateral

preference programs.

The prospect of this, I think, is greater to the extent that we

often do not appreciate that these developing countries have the incentive not to liberalize themselves to cut their own tariffs in return because of the unilateral and non-reciprocal nature of these

preferences.

GSP beneficiaries constituted a market for $118 billion of United

States exports in 2006. Their own tariff bindings averaged 44 percent, and their applied tariff rates were about 10 to 12 percent in

that year.

This is low-hanging fruit in terms of an area where United

States exports may increase, not to mention areas such as trade

and services. I think there is enough there to justify a more liberalizing reciprocal arrangement for all parties.

Thank you.

The CHAIRMAN. Thank you, Mr. Reinhardt, very much.

[The prepared statement of Mr. Reinhardt appears in the appendix.]

The CHAIRMAN. Mr. Iberkleid?

STATEMENT OF MARCOS IBERKLEID, PRESIDENT,

AMETEX, LA PAZ, BOLIVIA

Mr. IBERKLEID. Thank you. Mr. Chairman and members of the

Senate Committee on Finance, thank you very much for the opportunity to be here today. It is a privilege to testify before you and

to describe the very real and tangible effects that trade preferences

have had on my company, and on my country, Bolivia.

I have the honor of presiding over Ametex, a vertically integrated

apparel manufacturing company based in La Paz. When the company was founded in 1965, we employed fewer than 200 workers

and generated total annual sales of less than $1.5 million, and we

managed our operations using technology from the 1930s. We spent

the first 20 years of our history providing to the local market.

In those days, competitiveness was based on a strictly protected

market from imported products. Sales, to a large degree, depended

on government acquisitions. Workers had tenure, but labor conditions were inadequate due to a lack of economic resources. Labor

and management relations were paternalistic at best and frustrating to both in terms of results.

In the mid-1980s, our lives changed. Devastating hyperinflation

in Bolivia led to the complete disappearance of Ametex’s local market. As a matter of survival, we decided to seek a foreign market,

which we soon found in the U.S., and which resulted in modest revenues of $1.2 million.

Then in 1991, with the enactment of the Andean Trade Preference Act, followed in 2002 by the Andean Trade Promotion and

9

Drug Eradication Act, ATPDEA, the economic landscape changed

in such a way that it was nearly impossible to overstate its effect.

With sustained yearly growth rates of 30 percent since

ATPDEA’s enactment, Ametex is now able to export 85 percent of

our total annual production, with 90 percent of our millions of garments going directly, or through, the United States.

Because of ATPDEA we have built a company that achieved sales of $50 million in 2006 and employed, until a few months ago,

4,500 people, making it Bolivia’s largest private sector employer.

The jobs we provide, as our workers can attest, are unique.

Ametex pays its workers 3 times the national minimum wage. We

have five in-house unions, two representatives of which have accompanied me here today.

Our working standards are in full compliance with human rights

and fair labor practices and are certified by the World Responsible

Apparel Production organization, which monitors and certifies compliance with internationally recognized standards for manufacturing practices.

Mr. Chairman, with your permission I would like to submit for

the record letters that have been written and signed by the workers of each of these five unions.

The CHAIRMAN. Without objection.

[The letters appear in the appendix on p. 30.]

Mr. IBERKLEID. Thank you.

The 4,500 jobs we provide, which owe their very existence to

ATPDEA, have created real opportunities for working people in an

economy where alternatives to the informal—or worse, illegal—

markets are increasingly scarce.

In Bolivia, which is now facing the very real problem of its

skilled workers increasingly choosing to emigrate to Brazil, Argentina, and Spain, the existence of good-paying, skilled, and sustainable jobs like the ones provided by us have become an all-toovisible rarity.

I am also joined here today by eight business leaders representing the hundreds of companies that have been built in Bolivia since the inception of ATPDEA and who are part of the miracle of being proud suppliers to the United States, the most exclusive and demanding market in the world. They add their voices to

mine as I speak to you.

And while our success, like that of our workers, can be accurately

attributed to the energy we bring to our work, without ATPDEA,

none of this would have been possible. In this regard, we extend

our deep appreciation and gratitude to the government of the

United States of America. But make no mistake, ATPDEA is no

handout. Rather, the Andean trade preferences bring out the best

of what we, as Bolivians, know we are capable of.

Trade preferences enable the entrepreneurial spirit to spring

forth in Bolivia, a country where private enterprise is continuously

under attack. Trade preferences give growing businesses the opportunity to reach their potential and have led to the employment of

hundreds of thousands of people in the Andean region.

In Bolivia’s ‘‘survival economy’’ where at least 70 percent of the

jobs are in the informal sector, Ametex stands as an example of

how an export-oriented company—employing formal business pracVerDate 11-MAY-2000 14:48 Jan 05, 2009 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 45809.000 SFIN1 PsN: SFIN1
10

tices and in strict compliance with the law—can achieve sustained

success and continue to grow, while providing livelihoods and hope

for the futures of thousands of Bolivian workers and their families.

Unfortunately, this is where our story takes a dramatic turn, and

that turn is for the worse. It is clear that the ATPDEA has been

an economically stabilizing force in the region, having contributed

to the expansion of the private sector as well as creating thousands

of good paying, high quality jobs. Yet, this very stability is threatened today by ATPDEA’s impending expiration on June 30, 2007.

The CHAIRMAN. I am going to have to ask you to wrap up if you

could, Mr. Iberkleid.

Mr. IBERKLEID. Yes. And I apologize and beg your indulgence.

Let me wrap it up by saying that we, as honest workers, respectfully ask that the honorable members of the Senate Committee on

Finance consider the merits of our case and renew trade preferences for Bolivia.

Thank you very much.

The CHAIRMAN. Thank you very, very much.

[The prepared statement of Mr. Iberkleid appears in the appendix.]

The CHAIRMAN. Ms. Kuhlmann?

STATEMENT OF KATRIN KUHLMANN, SENIOR VICE PRESIDENT FOR GLOBAL TRADE, WOMEN’S EDGE COALITION,

WASHINGTON, DC

Ms. KUHLMANN. Good morning, Chairman Baucus and honorable

members of the committee. Thank you for having me here today.

My name is Katrin Kuhlmann and I am the senior vice president

for global trade at the Women’s Edge Coalition, a nonprofit, nonpartisan organization dedicated to promoting economic policies that

improve the lives of women in the developing world.

The majority of the world’s poor are women. Travel to almost any

small village in any country and you will see women eking out a

living for themselves and their families through tireless, backbreaking work.

The potential of international trade to improve the lives of these

women is enormous. Congress has recognized the power of trade

and development tools through various policies, including trade

preference programs.

In my travels to the developing world, I have met craftswomen

with beautiful wares who could not access the market, and factory

workers in Sri Lanka, fearful that low-cost production in China

would send them back to gripping poverty. For these women, secure access to markets can literally mean the difference between

surviving and starving.

AGOA, the African Growth and Opportunity Act, for example,

has generated thousands of apparel jobs in sub-Saharan Africa,

45,000 in Swaziland, 26,000 in Lesotho, and 30,000 in Kenya. Up

to 90 percent of these jobs have gone to impoverished women who

had few other economic opportunities.

In India and Thailand, American preference programs have given

rise to a new wave of businesses geared towards producing jewelry

for the international market. In India alone, the opportunity to sell

into the U.S. market duty-free has directly created 325,000 jobs in

11

jewelry production and has encouraged the development of another

600,000 related jobs. That is almost 1 million employed because of

GSP.

In Thailand, a country with a much smaller population, another

million jobs have been created in the jewelry industry. For women,

these jobs are often the only alternative to subsistence farming.

Keep in mind that giving one woman a job sends ripples throughout the developing world.

Studies have found that one woman with a job in an exportrelated field can support up to 15 family members. It would be a

shame if all of these jobs and all of this hope that have arisen from

U.S. policies were to simply disappear if these programs were allowed to expire.

If Congress does not act before the end of June, preferences for

the Andean countries will expire and waivers that have created

millions of jobs in India, Thailand, the Philippines, and Brazil will

be put in jeopardy. We urge Congress to address these issues as

soon as possible.

While preference programs have been a tremendous success,

there are areas that can be improved. Here are four concrete suggestions. First, the world’s poorest countries should receive complete access to the U.S. market free of duties and quotas.

There are so many product exclusions built into the statutes—

textiles, apparel, footwear, luggage, and certain agricultural products—that many products are still subject to duties and quotas,

even when they come from those countries that are meant to be

benefitting from our preference programs.

These exclusions can have absurd results. For example, Ban- gladesh pays more in import duties on its $3.3 billion in exports

to the United States than the United Kingdom does on its $54 billion in exports. Cambodia pays as much on its $2 billion in exports

as France does on its $37 billion in exports. With annual per capita

income of less than $500, these are poor countries that can ill afford these disproportionate tariff burdens.

Our second recommendation is that African countries receive

special consideration to build upon the successes of AGOA and create lasting, sustainable change in the African economy. In addition

to 100 percent duty-free/quota-free market access, AGOA countries

should receive more permissible rules of origin, significant dedicated capacity building, and increased attention from U.S. trade

and development agencies.

Third, the current programs are difficult to navigate, both for

beneficiary countries and American businesses. Preference programs should be made permanent and simplified through one clear

set of criteria and rules.

Fourth, due to trade capacity constraints in many developing

countries, the poorest populations cannot take advantage of the opportunities created by trade and U.S. preference programs. More

trade capacity building is desperately needed.

I recognize that no discussion of trade is complete without a discussion of the impact on America and on American workers. Take

the textiles and apparel industry, for example. Congress is rightly

concerned that jobs in the American industry have disappeared in

recent decades.

12

However, driving apparel manufacturers in Bangladesh out of

business and throwing thousands of women who have just begun

to bring themselves out of poverty back into the desperation of subsistence farming, or much worse, is not going to revive the American industry.

Boosting labor standards abroad is something that we support,

and I hope that better labor standards, such as those recently

agreed upon by Congress and the administration, will help bring

standards up around the world, improving the lives of women and

partially allaying concerns with the impact of freer trade on America.

Without American preference programs, whether it is apparel in

Bangladesh or Africa, jewelry in India or Thailand, or agriculture

in the Andean countries, jobs in the developing world will move to

China, not to Charleston. It is in our own national interest as

Americans that the promise of trade be spread more equitably

throughout the developing world.

I thank the committee for your time and for all that you have

done to create and preserve these programs. I urge you to extend

and improve the trade preference programs and would be happy to

answer any questions you might have. Thank you.

The CHAIRMAN. Thank you, Ms. Kuhlmann, very, very much.

[The prepared statement of Ms. Kuhlmann appears in the appendix.]

The CHAIRMAN. We do not have much time here, but I have

many questions. I will just ask one general one of each of the five,

and if you could be very brief so the other four could also address

it. Each has a unique perspective on this program. I would like

each of you to give this committee three changes that you would

recommend. Each one has about 1 minute to give three changes.

I will start with you, Ms. Broadbent.

Ms. BROADBENT. We are in the process in the administration of

looking at the program at this point in our annual review. I think,

overall, we are committed to the fact that this is a temporary program that is designed to get developing countries to make progress

in adopting international trade norms.

We are looking at the administration of the competitive need limits and their waivers and how better to encourage the more advanced developing countries to make progress in opening their

markets. So those and other elements of the statute are really the

tools that we will use to better focus the benefits on the world’s

poorest countries.

The CHAIRMAN. All right. Thank you.

Dr. Yunus?

Dr. YUNUS. I will just focus on the unevenness of the structure,

which I mentioned. Now Bangladesh pays about 15 percent duty,

which is the third highest duty among all nations, much higher

than rich countries in Europe and other countries.

So to kind of rationalize, the best thing for Bangladesh right now

is to give it what other LDCs are enjoying right now, to put Bangladesh, Nepal, Cambodia, and others into the same category. That

is the most important thing we have done, which is related to, as

I said, the millennium development goals. This is all directly related to that.

13

So we are only half way. We are halfway up the period of the

millennium development goals starting from 2000 to 2015. We are

right in the middle right now. We still have some time, so let us

do it. Thank you.

The CHAIRMAN. Thank you.

Mr. Reinhardt?

Mr. REINHARDT. I would like to emphasize that the one area I

might disagree with the other panelists on is largely the area of

reciprocity. What makes these preferences less effective is because

they allow the developing country beneficiaries to maintain very

high tariffs, which add a very significant cost to their own potential

exporters in purchasing inputs from abroad, and kills their exports

from the inside, as it were.

So, I would emphasize that any system that resolves it ought to

be reciprocal, as well as non-discriminatory and bound within a

system that is enforceable.

The CHAIRMAN. Thank you.

Mr. Iberkleid?

Mr. IBERKLEID. Thank you. First, I think that Mr. Reinhardt’s

concern is important. But it is also interesting to note that, in Bolivia’s case, there is no duty for capital imports from the United

States, zero duties. So, there is reciprocity.

But coming to the Chairman’s concern, I would like to say that

jobs are essential to life. But if we can build jobs, making sure democracy and freedom are there, it is essential. I believe the United

States should lead the way in that direction, sir.

The CHAIRMAN. Thank you.

Ms. Kuhlmann?

Ms. KUHLMANN. Thank you. First, I think that the programs

should be made more comprehensive so they cover the products

that are of the greatest importance to the developing world.

Second, I think that the programs should be made more simple

so that they are easier to navigate, both for producers throughout

the world, small and large, and for American companies as well.

Third, I think that the capacity does not exist in many countries

to take full advantage of these programs, and that is something

that could also be addressed through greater trade capacity building assistance. Thank you.

The CHAIRMAN. Thank you.

Ms. Broadbent, at the Hong Kong ministerial, there was an

agreement to limit to 97 percent tariff lines for sensitive products,

and the question is, I assume sugar is in that 3 percent?

Ms. BROADBENT. You are right, Mr. Chairman. The United

States agreed to the so-called ‘‘duty-free quota-free’’ proposal for

least-developed developing countries.

The CHAIRMAN. You said ‘‘right.’’ That is all I want to ask.

Ms. BROADBENT. That 3 percent which will not be covered will

be decided as part of the Doha Round of trade negotiations and

through consultations with Congress.

The CHAIRMAN. I appreciate that. I raised the question because

it raises the question of sensitive products and how they should be

managed. I have about 14 seconds left. Who wants to address the

question of how to manage sensitive products with respect to GSP

and that balance between the two? That is, some products are very

14

sensitive to the United States, but yet we want the preferences.

How do we strike a balance between the two? Any guidance? Ms.

Kuhlmann?

Ms. KUHLMANN. Thank you. I think that, first of all, for the

least-developed countries there needs to be a distinction drawn,

and some of these countries are very small and are not going to be

putting U.S. production in jeopardy.

I do think, however, that there have been cases of job creation

that are notable. The European Union, for example, has decided to

remove quotas on sugar by 2009, and already jobs are being created in Africa. I think that that is something that does need to be

looked at. Perhaps all of these programs should be looked at

through the lens of both the impact on the United States and the

impact on development around the world.

The CHAIRMAN. Thank you.

Ms. KUHLMANN. Thank you.

The CHAIRMAN. Senator Bingaman?

Senator BINGAMAN. Thank you all very much for being here, and

thank you for your testimony.

Let me just ask, Ms. Broadbent, the administration’s view on the

suggestions that Mr. Reinhardt is making, that we should be pushing for more traditional trade arrangements with these lessdeveloped countries.

As I understand his testimony, he is saying that both the United

States and the countries involved would be better off if we had

more traditional trade arrangements with them rather than just

granting a unilateral preference. What is your view on that?

Ms. BROADBENT. Well, I do not think it is an either/or situation,

in my view. Our primary negotiating objective is to achieve an ambitious result in the Doha Round of trade negotiations, and we are

pushing developing countries very hard to do reciprocal liberalizations on their tariffs, particularly in the Non-Agricultural Market

Access (NAMA) negotiations and in the agriculture negotiations.

This would be through the application of a formula and through

‘‘zero-for-zero’’ sectors in that negotiation, which are two different

tools for achieving market access, increased trade flows, and development.

So those negotiations are ongoing, and the preferences are another aspect of our relationship with developing countries, but I do

not think it is an either/or situation.

Senator BINGAMAN. Dr. Yunus, let me try to understand better.

I apologize for not being better informed on this. But you indicate

that Bangladesh gets much better treatment with regard to its duties for its exports from the European Union and from Canada

than you do from the United States. Can you explain the reasons

that led to that difference in circumstance, as you understand it?

Dr. YUNUS. At the Millennium Development Summit, a commitment was made that all the LDCs would be allowed duty-free access. Both the European Union and Canada have accepted and followed that, so we got duty-free access to the European Union and

to Canada. But we did not get that status in the United States.

Senator BINGAMAN. Did we agree to it at that summit you talked

about?

Dr. YUNUS. Yes. There was a——

15

Senator BINGAMAN. Now, we have not implemented it.

Dr. YUNUS. Implemented. No.

Senator BINGAMAN. I see.

Dr. YUNUS. Yes.

Senator BINGAMAN. All right.

Dr. YUNUS. It was considered as a very important item for

achieving millennium development goals to help these developed

countries to move up and to open up the doors to the bigger markets so that they could participate.

Senator BINGAMAN. And is Japan participating in that as well?

Do you have exports into Japan or not?

Dr. YUNUS. I have no immediate knowledge on that one.

Senator BINGAMAN. All right. All right. I will stop with that, Mr.

Chairman.

The CHAIRMAN. Thank you very much. Thank you, Senator.

Senator Salazar?

Senator SALAZAR. Thank you very much, Chairman Baucus.

I will ask just a brief question, because I know we are about

ready to go into a vote. That has to do with the Andean Trade Preferences Act. Earlier in the year, Senator Reid and a number of us

went to Bolivia, to Peru, and Ecuador.

So my question to you, Mr. Iberkleid—and I am glad to see you

here again just a few months later—concerns the geopolitical impact of our failure to renew the Andean Trade Preferences Agreement with respect to Bolivia.

We obviously have some tension in some parts of Latin America.

You have a new president in Bolivia. What would be the impact

with respect to the geopolitical relationship between our country

and Bolivia if we do not extend the Andean Trade Preferences

Agreement?

Mr. IBERKLEID. With all due respect, Senator, I think this is a

question for which it would be difficult for me to provide a satisfactory anser, due to current political sensitivities. In the case of

Ametex, without ATPDEA, the futures of our workers and their

families will be uncertain. How this trend would affect the large

geopolitical situation is, I believe, worth considering.

Senator SALAZAR. Let me just make a comment on the whole

question. It just seems to me that, with the trade preferences

agreements, as well as the free trade agreements that we have relating to Colombia, Peru, and obviously to the Andean region, that

the geopolitical implications are very important to all of us. I mean,

it is true not only for Latin America, but to other places around

the world.

I have been particularly troubled by what has happened in terms

of the relationship between the United States and our sister nations to the south with respect to what seems to be a growing distance. Venezuela is obviously in the lead, but other countries are

essentially distancing themselves from the United States of America, and the whole concept and the relationship that we have established economically with Bolivia and other countries is a critical

role with respect to the future of that relationship. So I very much

appreciate you being here today, and I thank the panelists for their

excellent testimony as well.

Mr. IBERKLEID. Thank you very much.

16

The CHAIRMAN. Thank you very much, Senator.

Dr. Yunus, you won the Nobel Peace Prize, and we are very honored to have you here, as I mentioned. Could you just tell us a little

bit about the link between these preference programs and trade on

one hand, and peace on the other, and the degree to which it does

or does not contribute, in your view? Just expand a little bit on

that point.

Dr. YUNUS. I have been raising this issue for a long time, that

there is a link between poverty and peace. Also, the Nobel Peace

Committee has recognized that issue, that poverty is a threat to

peace. It is easy, in extreme poverty, for people to get into violence,

get into lawlessness, get into terrorism. So, poverty becomes a

breeding ground for terrorism and all kinds of political unrest.

So, if you can bring poverty down, if you can help people get out

of poverty, the chances of having peace within the society, within

the nation, and globally enhances tremendously.

For example, if we can have access to the U.S. market in Bangladesh, and similarly in Nepal, one thing I can see in a political

way, Nepal getting this advantage and having exports to the U.S.

increasing, their political unrest probably will be much less because

people will be busy competing with each other rather than fighting

with each other.

That will also lead to collaboration between Bangladesh and

Nepal, which is, again, a very important item for the region for us.

We are talking about a community to build up, reduce tension between India, Pakistan, Nepal, Bangladesh, and all those countries.

So this will help us.

If Nepal and Bangladesh want to come closer, India has to get

into it because we can negotiate with each other only through

India, because there is distance between Nepal and Bangladesh, a

small corridor of India. So we have to all work together so that we

can use the facility in Bangladesh, port facility, because Nepal is

a land-locked country.

So I agree, if we can start helping people to move out of poverty

in a business way, in a more sustainable way, then you are really

building the platform on which the basis of peace can be built up

within the countries and among the countries.

The CHAIRMAN. I appreciate that.

I would like you all to address another question that some members of Congress have, and that is, why should we continue these

preferences? Why should we reward countries that are not our

friends or not good actors, if they are not behaving properly? For

example, one country might not sufficiently protect intellectual

property. Another might not sufficiently protect, in the views of

many members of Congress, investment rights. Some say, in South

America, Mr. Chavez is making inroads and some countries seem

to be cozying up to him, so why in the world would we help those

countries?

That is the view of a good many members of Congress. What

would you say to those members of Congress if they were sitting

here today, any of you? I will start, again, with you, Dr. Yunus.

What would you say to them?

Dr. YUNUS. I will say there are two ways. You ignore them and

move on, you can leave without them. That is no problem. But the

17

other way is to get linked with them, understand them. Once they

see the business interests, things will change. By ignoring them,

probably you are encouraging them to become more violent, more

aggressive, more hostile.

So business relationships have a cooling effect. People start to

understand why this relationship is important. So even in adverse

circumstances, a link with business is a good idea to have rather

than to ignore the partners and ignore other people.

The CHAIRMAN. Who else wants to address that general question? Yes, Mr. Iberkleid?

Mr. IBERKLEID. Mr. Chairman, these programs are the most effective way of helping, directly, companies and businesses and their

workers. These programs do not go through the government, so it

is not rewarding the government, it is rewarding the people. It is

building a sense of business, creating opportunities, creating jobs,

creating a linkage to a formal life. I think that this is very important.

The CHAIRMAN. But again, I will say, why would we reward

somebody who is not our friend? That is the basic question that

some have.

Mr. IBERKLEID. Sometimes governments are not friends, but companies tend to last more than governments, sir.

The CHAIRMAN. All right.

Anyone else? Ms. Kuhlmann? Yes, they do tend to. [Laughter.]

Ms. KUHLMANN. First of all, I would say that, with respect to the

eligibility criteria in these programs, they really do work. I was at

USTR before my current position and saw firsthand that the threat

of losing benefits under one of these programs did encourage countries to put in place better legal protections, on everything from intellectual property to workers’ rights. I think that those eligibility

criteria should be strengthened and used even more.

I think that, second, sometimes the lack of international cooperation, if you will, is based on a misperception that the international

system does not work to everybody’s benefit. I think that these programs are tremendous success stories and should be used more and

should be talked about more.

In several of the cases that I cited today, jewelry in India and

Thailand, millions of jobs have been created. I think that this just

shows that trade liberalization and international trade does work

for the poorest members of society. Thank you.

The CHAIRMAN. What conditions would you perhaps look at, perhaps focus on?

Ms. KUHLMANN. Well, one thing in particular, I think, is protection against discrimination in the workplace. It is something that

is particularly important to the lives of women around the world

and has been lacking from the eligibility criteria in preference programs and other trade instruments for some time. I know that this

was something that was recently discussed last week, so it is something that I think would help these programs as well.

The CHAIRMAN. Well, does anyone else want to address those

who say, do not help those who are not our friends? Anybody else

want to address that point before I move on?

Mr. REINHARDT. Yes, Mr. Chairman.

The CHAIRMAN. Go ahead, Mr. Reinhardt.

18

Mr. REINHARDT. The main case for running our preference systems this way rather than through a reciprocal legally bound arrangement is that we have the flexibility to use trade sanctions for

non-economic purposes. That would be the main case for doing it

this way rather than another way.

The problem is, because they are not legally bound, this becomes

the first resort for U.S. groups that suffer from competition with

those imports that we are trying to encourage, to lobby for the removal of these preferences, which undermines the credibility of the

promise that they will get access to markets if they do what we

would like.

This means that time and time again, we see cases like that of

Singapore back in 1986, where the threat of GSP withdrawal was

used to leverage additional upgrades in their intellectual property

regime, which they agreed to, then we promptly ejected them from

the program nonetheless.

Likewise, the labor standards agreement with Cambodia in 2001,

where the United States made a commitment to open up our quota

on apparel, up to 20 percent increases every year, and really failed

to deliver anything more than 7, 8, 9, 10 percent increases per

year, despite the important improvements that that country made

in its labor standards.

The CHAIRMAN. What is a reasonable period of time within which

to extend preferences? One year? Two years? Five years? Permanent? What do you think?

Dr. YUNUS. The longer the better.

The CHAIRMAN. I am sorry?

Dr. YUNUS. The longer the better.

The CHAIRMAN. The longer the better.

Ms. Broadbent, what do you think?

Dr. YUNUS. Because you need investments, you need preparations to make use of it.

The CHAIRMAN. Sure.

Dr. YUNUS. You make investments, and suddenly it comes to a

close and then you do not want to make investment. So you need

to give that leeway.

The CHAIRMAN. Does anyone else want to address the period, the

length of time? Ms. Kuhlmann?

Ms. KUHLMANN. Thank you. I would say permanent would be the

best, but whatever the period, it does have to be long enough for

the benefits to take hold.

The CHAIRMAN. Well, what do you say to those who say—your

point, Mr. Reinhardt—companies take advantage of it? There is no

incentive to be more competitive because they are just so used to

the benefit. There is no incentive to get off of it, no incentive to

grow, to mature, develop. That is the argument. What do you think

of that argument?

Ms. KUHLMANN. I think that perhaps there are other ways to add

incentives into the system. I think that, as we have seen with other

programs like, for example, the apparel business in Africa, the jobs

do start to leave as the preferences expire. So, somehow there has

to be a way to ensure that the investment that there is and the

jobs that are created do last.

19

Mr. IBERKLEID. I think that competitiveness grows within the

country, within countries that have the same preferences. It takes

a few years to build the factories—sometimes 4, 5, 6 years—until

you see results and you see the whole economy benefitting from it.

It might take many more years. In that sense it would be permanent, but that is at the sidelines. But the other answer is, it has

to be a long time, a longer time, an acceptable time.

The CHAIRMAN. Are European preferences the same as, richer

than, or more stringent than the U.S.’s?

Dr. YUNUS. So far as least-developed countries are concerned, everything but arms are duty-free. So it is a very blanket, open free

access to Europe.

The CHAIRMAN. Totally free? So that means they are much more

generous.

Dr. YUNUS. Very generous. Very generous. There are no conditions.

The CHAIRMAN. So how does that work for them?

Dr. YUNUS. Very well. They have not complained, we have not

complained.

The CHAIRMAN. Well, I am sure you have not complained.

Dr. YUNUS. One of the reasons Bangladesh has a good growth

rate is because we have access to a market like Europe. If we could

have free access to the American market, our growth rate would go

up.

The CHAIRMAN. So you have much greater access to the European markets. You sell more textiles to Europe, as a consequence?

Dr. YUNUS. Yes, indeed. Our growth rate is near about 7 percent

in Bangladesh—economic growth.

The CHAIRMAN. Mr. Reinhardt, your view?

Mr. REINHARDT. Thank you, Mr. Chairman. One problem is that

these preferences are not secure, in the sense that they can be removed. That creates incentives to invest in areas where these countries lack comparative advantage because they are not durable.

As a result, we see instances like Ms. Kuhlmann pointed out,

that when preferences are removed, countries which have invested

in areas in which they lack comparative advantage, those industries will wither away. But that is not because the preferences

ought to be continued. Rather, it reflects the fact that they are outside of the WTO legally bound system.

We see areas and product lines which are not covered by GSP in

the United States actually experience the greatest export growth

because they face the proper incentives. Golf club parts is Bangladesh’s leading GSP product that is sold in the United States.

From 2000 to 2006, exports of this product dropped by 50 percent, whereas Bangladesh’s exports overall to the United States increased by 16 percent over that period in terms of real growth. So

the fastest-growing export areas are the ones where these countries

do have comparative advantage, which reflects true market incentives, which GSP conceals and distorts.

The CHAIRMAN. What about developing countries’ infrastructure

capacity to fully utilize existing preference programs? I mean, do

developing countries have the infrastructure, do they have the capacity to deal with and administer preferences? Who wants to address that? Dr. Yunus?

20

Dr. YUNUS. Yes. When Bangladesh became an independent country in 1971, we had zero garment industry, nothing. We had no experience in garments, so we started from zero. Today, this is the

mainstay of our economy. The whole industry grew and the economy is growing because of that. Eighty-five percent of our exports

earn incomes from the garment industry.

So we have the capacity, we have the technical know-how. It is

a question of exploring bigger and bigger markets. So as far as

Bangladesh is concerned, technical ability and their marketing

ability and maintaining the quality that is demanded in the global

market is all there. It is a question of just opening the door.

The CHAIRMAN. I am going to have to run pretty quickly. Mr.

Iberkleid, do you have a statement to make?

Mr. IBERKLEID. In Bolivia, especially in the western part of the

country, we see an enormous ability of people for detail work, high

quality. We have seen that training people takes not more than 2,

3 months. They are building those plants, big textile operations,

and within a year those plants are fully operational. And it is not

that expensive. It is not that difficult. Building the textiles, building technology, yes, it takes a little longer.

The CHAIRMAN. Well, this has all been very helpful. I apologize

for the absence of Senators here. I said a vote would start at 10:30.

But welcome to the U.S. Senate: they have now changed it. It just

started about 8, 9, 10 minutes ago, so we had more time in which

to conduct this hearing than we thought. But other Senators

thought we were going to vote right away, so that is why they did

not attend today.

But this has been very helpful. Your full statements are in the

record. There will be a lot of follow-up here. Thank you all very,

very much for your contribution.

The hearing is adjourned.

[Whereupon, at 10:54 a.m., the hearing was concluded.]

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Æ