Today's hearing continues the work of this Subcommittee to examine possible responses to the WTO's finding that the ETI regime is an export subsidy in violation of our international trade obligations.

Four days from today, an Arbitration Panel of the WTO will issue its decision on the level of remedies which the European Union may impose on products exported from the United States.

While there is no requirement that the EU impose those sanctions, the decision of the Arbitration Panel will give them a fairly heavy club and casts a shadow over American exports and the high-paying jobs they support.

Given the situation, it is clear to me and others that it would be unacceptable for the Congress to do nothing and hope the Europeans decide against the use of authorized sanctions.

We must show the world that our commitment to meeting our obligations under the WTO is not just lip service. These hearings are exploring possible solutions; I hope they will help the Committee as it contemplates possible responses to the WTO's decisions.

Our first hearing, held in early April, examined whether the ETI regime could be "fixed" so as to provide the same benefits to the same companies while responding to the objections of our trading partners. The unanimous conclusion of the witnesses was that the WTO decision in the ETI case makes it clear any modification which constitutes a mere repackaging of the existing benefits will not survive the inevitable challenge.

Our second hearing, held a month later, reviewed proposals which would fundamentally reform the tax code. Witnesses advocated a number of alternatives, including variations of a national sales tax or a VAT. The hearing showed the potential benefits of such wholesale reform as well as the difficult transition issues which any re-write of the tax code would present.

Today's hearing explores another possible response to the WTO decision. Instead of either tinkering with ETI or fundamentally reforming the tax code, a third option would be to repeal the ETI regime and use the revenue raised to address some of the shortcomings of our international tax rules which hinder the competitiveness of U.S. companies

The worldwide tax system employed by the United States and the resulting international tax rules are complex and often place U.S. businesses at a competitive disadvantage relative to their foreign counterparts. Moreover, in some instances, the system actually encourages American companies to invest abroad, rather than here in the U.S. Instead of investing profits in the U.S. to generate more economic growth and more jobs, our tax code actually encourages American companies with overseas operations to keep those funds abroad

The international tax code's complexities and shortcomings have hindered the competitiveness of American companies and has therefore made them excellent takeover targets by their international competitors. In the 1960's, the U.S. served as the world's dominant market, but as we enter the next millennium, there is a real danger that U.S. businesses will be less competitive in the global marketplace. We cannot afford to sit idly by while economic growth and high-paying jobs are forced overseas by a tax code cobbled together largely when America was the unchallenged economic leader of the world.

Today's hearing will provide the Committee with a wealth of ideas for possible reforms of the international tax code. In particular, Glenn Hubbard and Barbara Angus will give us insights into the thoughts of the Administration.

Our second panel will provide us with input from several industry sectors, including large exporters, small manufacturers, large retailers, shippers, software manufacturers, and the electronics industry. Their suggestions on ways to make American companies more competitive will be helpful to us in determining whether changes to the tax code should accompany repeal of the ETI regime.

I yield to my friend from New York, Mr. McNulty, for any opening statement he might wish to make....