Ms. Allison Giles
Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515

RE: Comments on the Summit of the Americas and the Free Trade Area of the Americas

Dear Ms. Giles:

On behalf of the Distilled Spirits Council of the United States, Inc. (DISCUS), I am writing to provide a statement for the printed record of the hearing of the Subcommittee on Trade of Tuesday, May 8, regarding the Summit of the Americas and the Free Trade Area of the Americas (FTAA). DISCUS is the national trade association representing U.S. producers, marketers, and exporters of distilled spirits products. DISCUS member companies export to more than 120 countries, including the parties of the FTAA. In 2000, U.S. producers exported approximately $63 million in spirits products to the countries of the western hemisphere, accounting for about 20 percent of global U.S. spirits exports. DISCUS strongly supports the efforts of the U.S. government to negotiate a comprehensive free trade agreement with the governments of the western hemisphere, and we welcome this opportunity to provide a written statement.

DISCUS has been a vocal supporter of the FTAA since the Miami Summit, and we applaud the progress made thus far toward completion of the agreement. We are encouraged by the recent progress made at the Quebec City Summit of the Americas. Although we supported the Chilean proposal for an accelerated time frame for completion of the agreement, we nonetheless welcome the Declaration of Quebec City instructing the negotiators to complete their work by January 2005 so that the agreement may enter into force no later than December 2005. We further applaud the decision to release to the public the preliminary draft negotiating documents, confirming the leaders’ commitment to transparency during the negotiating process. DISCUS was also pleased that the Buenos Aires Ministerial Declaration directed that the actual market access negotiations begin no later than May 15, 2002.

High tariffs continue to present a significant market access barrier to U.S. spirits exports, particularly in our most important emerging markets. The distilled spirits industry benefitted from the "zero-for-zero" negotiations that began during the Uruguay Round. As a result of the Round and over the course of subsequent negotiations, the "Quad" countries - the United States, European Union, Canada, and Japan - agreed to eliminate tariffs on most categories of distilled spirits. As a consequence, the United States has eliminated all tariffs under Harmonized Tariff Schedule (HTS) Subheading 2208, with the exception of certain categories of rum. We view the FTAA as an excellent opportunity to expand the scope of the zero-for-zero initiative. Accordingly, we seek the immediate, hemisphere-wide elimination of tariffs on all spirits products, thus securing tariff treatment for U.S. spirits throughout the hemisphere that is equal to the treatment that the U.S. currently accords imported spirits.

Further, the FTAA presents an opportunity to eliminate non-tariff measures which continue to present major market access obstacles to U.S. spirits exports. DISCUS urges the U.S. government to use the opportunity of the FTAA as a mechanism to enhance hemispheric disciplines regarding:

• the use of discriminatory internal tax systems that place a disproportionate tax burden on imported products vis-à-vis like, substitutable, or directly-competitive domestic goods, or that serve to protect the domestic industry;
• non-competitive practices by state monopolies concerning the production or sale of goods;
• the use of export restraints, export and import price requirements, and import licensing conditioned on the fulfillment of a performance requirement;
• trade-distorting sanitary measures that are not based on sound science; and,
• non-transparent notification procedures that provide inadequate time periods for public comment on, implementation of, and compliance with any new rules, laws, or regulations that may affect trade.

As part of the FTAA process, DISCUS also believes that participants should fully implement their obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), including the establishment of mechanisms to ensure and enforce the protection of geographical indications associated with distinctive distilled spirits. DISCUS and its member companies view the FTAA as a critical vehicle to secure from FTAA participants explicit protection for Bourbon and Tennessee Whiskey (which is a straight whisky authorized to be produced only in the State of Tennessee) as distinctive products of the United States, using language similar to that found in NAFTA Annex 313 ("Distinctive Products"). Accordingly, the FTAA participants should agree not to permit the sale of any product as Bourbon or Tennessee Whiskey unless it has been produced in the United States in accordance with the laws and regulations of the United States, nor permit the use of these designations for any product which is not Bourbon or Tennessee Whiskey.

Our trading partners are moving forward with numerous bilateral and multilateral agreements that favor competing spirits suppliers and place U.S. exports at a competitive disadvantage. Within the hemisphere, Canada currently has free trade agreements in place with Chile and Costa Rica, and is negotiating an agreement with El Salvador, Guatemala, Honduras and Nicaragua. Mexico currently has agreements with 31 nations, including Bolivia, Chile, Costa Rica, Colombia, El Salvador, the European Union, Guatemala, Honduras, Nicaragua, Uruguay, and Venezuela. The Andean Community and Mercosur impose significant common external tariffs that impede U.S. exports to these markets. Our major competitors, including the countries of the European Union and the European Free Trade Association, have in place or are currently negotiating agreements with Chile and Mercosur. As these preferential trade agreements proliferate, U.S. spirits exporters are systematically locked out of critical markets. It is essential that the United States engage actively and constructively with the countries of the western hemisphere to bring the FTAA to fruition and maintain U.S. competitiveness in these markets.

As we enter this critical stage of the FTAA process, it is vital that U.S. negotiators be empowered to secure tangible benefits in the negotiations. Providing the President with Trade Promotion Authority (TPA) is essential to ensure that the U.S. government has the authority to negotiate the minute and painstaking details of comprehensive trade agreements, including the FTAA and the bilateral free trade agreements with Chile and Singapore. It also seems clear that prospects for securing TPA will be a key consideration of our trading partners in deciding whether to launch a much-needed new WTO round in Doha in November. Without TPA, U.S. negotiators will lack the tools they require to negotiate the best possible deal for the United States. DISCUS stands ready to support efforts to secure prompt passage of TPA legislation this year.

Thank you again for the opportunity to offer our views on the FTAA negotiations.

Sincerely,

Deborah A. Lamb
Vice President
International Issues and Trade