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Hearing on President Obama’s Trade Policy Agenda with U.S. Trade Representative Ron Kirk and Second Panel on the Future of U.S. Trade Negotiations _________________________________________
HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS SECOND SESSION |
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COMMITTEE ON WAYS AND MEANS |
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WALLY HERGER, California |
SANDER M. LEVIN, Michigan CHARLES B. RANGEL, New York FORTNEY PETE STARK, California JIM MCDERMOTT, Washington JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts XAVIER BECERRA, California LLOYD DOGGETT, Texas MIKE THOMPSON, California JOHN B. LARSON, Connecticut EARL BLUMENAUER, Oregon RON KIND, Wisconsin BILL PASCRELL, JR., New Jersey SHELLEY BERKLEY, Nevada JOSEPH CROWLEY, New York |
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JENNIFER M. SAFAVIAN, Staff Director and General Counsel
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C O N T E N T S
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WITNESSES
PANEL 1:
Ambassador Ron Kirk
United States Trade Representative, Office of the United States Trade Representative
Testimony
PANEL 2:
Mr. Tim Harris
President, Harris & Ford, LLC
Testimony
Mr. Brian Krzanich
Senior Vice President and Chief Operating Offer, Intel Corporation
Testimony
Mr. James H. Quigley
Senior Partner, Deloitte & Touche, LLP
Testimony
Mr. Alan Wolff
Of Counsel, Dewey & LeBoeuf, LLP
Testimony
Hearing on President Obama’s Trade Policy Agenda with U.S. Trade Representative Ron Kirk
and Second Panel on the Future of U.S. Trade Negotiations
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.
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The committee met, pursuant to notice, at 10:08 a.m., in Room 1100, Longworth House Office Building, Hon. Dave Camp [chairman of the committee] presiding.
[The advisory of the hearing follows:]
*Chairman Camp. If everyone would take their seats, we are ready to begin. Well, good morning. I want to welcome everyone and extend a special welcome to our guest, the United States Trade Representative, Ambassador Ron Kirk, as well as our second panel of witnesses. I am looking forward to a discussion of the administration’s trade policy agenda and the future of U.S. trade policy.
We are coming off a strong year in which we saw more action on trade than the past five years. We secured bipartisan passage of our trade agreements with Colombia, Panama, and South Korea, which had languished for far too long. This achievement signified that Congress and the White House, House, and Senate, Republicans, and Democrats could come together to pursue pro‑growth, pro‑job policies.
Our trading partners around the world have taken notice that we are back at the negotiating table and ready to lead. And there is further good news: the United States and South Korea quickly took the necessary steps to allow for entry into force of the U.S.‑South Korea agreement, which will take effect in two weeks. Discussions paving the way for the Colombia and Panama agreements are also underway, and I encourage an expeditious completion.
Our recent trade successes have created a momentum ‑‑ is somebody’s phone ringing here? Hopefully they will hang up soon.
Our recent trade success have created a momentum that we must continue. Hesitation and delay allow our competitors to take our market share and our jobs. As such, I would like to flesh out today how this Administration and this Congress can best promote economic growth and job creation through trade.
The one trade agreement negotiation away is the Trans‑Pacific Partnership, which President Obama announced he would like to complete this year. This agreement will allow U.S. goods and services to more easily reach consumers across the Asia‑Pacific region. And the TPP also serves as an effective counterbalance to China in its own backyard. I welcome interest by Japan, Canada, and Mexico as long as they will take on what is already negotiated without delay and build confidence that they can and will address outstanding bilateral issues.
We also faced Russia’s WTO accession. Clearly, our ongoing relationship with Russia is a complex one, but I note that if we grant Russia Permanent, Normal Trade Relations will we be able to obtain the benefits of the concessions Russia made to join the WTO. We would give up nothing, not a single U.S. tariff, but we would obtain a new enforcement tool and bring our two countries closer on multiple fronts. This is a matter the committee will have to carefully consider, and I look to the Administration to build confidence and provide leadership on the economic issues to help explain why America should move ahead.
One of the largest trade issues that remains is China. With a population of over 1.4 billion people, the Chinese market provides tremendous opportunities to sell more U.S. goods and services, which means more jobs here at home. Despite this potential, there are far too many problems with China that continue to put our workers and our businesses at a disadvantage from indigenous innovation policies to subsidies to intellectual property theft to currency undervaluation just to mention a few. We must push China on every front, and the Administration must ensure that China’s commitments are fully implemented.
This committee has asked the Administration several times to define clear, concrete metrics to verify success. Tomorrow, committee members will be meeting on a bipartisan basis with Secretary Geithner, Secretary Bryson, and U.S. Trade Representative Ron Kirk to discuss the challenges and opportunities presented by our China relationship.
In addition, Ranking Member Levin, Chairman Brady, Ranking Member McDermott, and I are introducing targeted legislation today to make sure that we have the tools we need to address unfair Chinese subsidies through our countervailing duty law in a WTO consistent manner, and we expect to move this legislation shortly.
I spent time talking about the issues on our plate right now, but what about what comes next? An important aspect of this forward thinking is renewing Trade Promotion Authority, and I hope that Ambassador Kirk will share the administration’s views on that topic. Because the WTO Doha negotiations are dormant, we should focus on a “post‑Doha” strategy with those countries that share our views and ambition.
Given that 80 percent of U.S. employment is in services, an international services agreement holds great promise to enhanced market access abroad, and I support the administration’s current discussions. Similarly, expanding our very successful Information Technology Agreement would provide us with more tariff‑free access to foreign markets for our information technology products. A trade facilitation agreement could significantly reduce the cost of doing business in the age of global supply chains.
Expanded investment opportunities are also vital to U.S. growth. For the last three years, the Obama Administration has placed all bilateral investment treaties on hold. Moving forward on BITs already begun with China and India and launching new negotiations should be a top priority. And finally, we have to think defensively about our strategy when other countries conclude subpar agreements that don’t meet WTO standards.
So in conclusion, today, I would like to have a comprehensive discussion about the present and future of U.S. trade policy and what it means for job creation here in the United States. And I will now yield to Ranking Member Levin for the purpose of an opening statement.
*Mr. Levin. Thank you, Mr. Chairman. We very much welcome this hearing.
And Mr. Ambassador, we very warmly welcome you here today.
Democrats on this committee have been actively working to shape a new trade policy responsive to the changing dynamics of a global economy. We rejected the passive, hands‑off approach that earlier characterized American trade policy and embraced actively shaping the expansion of trade in ways that grappled with the impact of trade and broadened its benefits and minimized its downsides.
These principles have been reflected in our work on this committee for several decades now. They drove our work to ensure incorporating enforceable core labor standards and environmental standards in trade agreements. Working with the Clinton Administration to adopt workers standards in the pioneering Cambodia bilateral clothing agreement and in the Jordan FTA; opposing CAFTA because of the Bush administrations rejection of that standard; and when in the majority, developing the May 10th, 2007 agreement, incorporating the five basic labor and significant environmental standards into the Peru agreement.
Those principles guided our refusal to approve the FTAs negotiated by the Bush administration with Korea, Panama, and Colombia until significant shortcomings were addressed; working with you, Ambassador Kirk, and others in the administration. Together we helped importantly improve those agreements ending the one‑way street of Korea’s historically closed auto market, ensuring that U.S. taxpayers could not use Panama as a tax haven, developing an action plan to improve labor conditions and address violence against workers in Colombia.
We are beginning to see tangible results from these efforts. Ford has already begun shipping cars to South Korea from the United States of America, and work continues with Colombia to ensure full, meaningful implementation of the action plan related to labor rights. Today’s hearing will focus in part on potential new agreements to open new markets for U.S. goods and services, the Trans‑Pacific Partnership, Russia’s WTO accession, the possibility of a U.S. EU FTA, and the promise of a WTO services “plurilateral”.
As important as these new opportunities are, they cannot be our sole focus. A defining trade issue continues to be our imbalanced trade relationship with China. Unfortunately, the Bush administration too often adopted a hands‑off approach to this imbalance. It failed to actively implement the special provision provided for in China’s WTO accession for an annual review of whether China was meeting its obligations. The Bush administration refused in all four cases presented to it to use the 421 safeguard against surges in Chinese imports that harm U.S. industries and workers.
And Mr. Ambassador, this administration took a different track and used 421.
Our trade with China effects myriad industries in their efforts to compete within this market in China and globally, and it is fundamentally affecting the structure and composition of our economy. A trade policy that ignores or fails to actively address this reality is incomplete and ultimately will prove ineffective. So I applaud the President’s decision to create a new Interagency Trade Enforcement Center to enhance the administration’s ability to aggressively challenge unfair trade practices in China and elsewhere.
I urge the administration to ensure that the ITC is designed and equipped to fundamentally alter the way trade cases are developed and prosecuted, and I think, Mr. Ambassador, you will be talking about that. I also urge the ITC to focus immediately on China’s duties on auto exports, its practices in rare earth restraints, its export credit program, its forced technology transfer, and its lack of transparency and use of intimidation as a trade policy tool.
The need to actively shape the contents of trade agreements, and not to assume simply that more is always better, applies to the important TPP talks. We must closely evaluate, number one, the challenges presented by unfair competition from state‑owned enterprises, the unique circumstances presented by a communist nonmarket economy like Vietnam, and the opportunities and challenges presented by prospective new entrances, especially Japan, whether with its longstanding rigid, exclusionary structures; it presents real new market access opportunities for U.S. companies and workers and creates a new benefit for our economy, including our manufacturers.
And finally, with respect to Russia and the WTO, there is a need to approach key outstanding issues in an active rather than passive way ranging from IPR enforcement to the rule of law.
So I look forward to hearing from you, Ambassador, and the other panelists on how we can continue to craft a trade policy that will meet the challenges of today and anticipate those of tomorrow.
*Chairman Camp. Well, thank you. And Ambassador Kirk, again, welcome, and I just want to congratulate you and your team at USTR for everything you do, and I just want you to know that I will do everything I can to make sure that you USTR continues to maximize its effectiveness by remaining a separate agency instead of being swallowed up within a larger bureaucracy. And while I want to shrink government, I don’t want to do that at the expense of efficiency and excellence. So thank you for being her, Ambassador. We do have your written statement, but you are recognized for five minutes.
STATEMENT OF AMBASSADOR RON KIRK, UNITED STATES TRADE REPRESENTATIVE
*Ambassador Kirk. Thank you, Mr. Chairman and Ranking Member Levin. To the members of the committee, it is an honor to be with you again.
It was about 12 months ago that I had an opportunity to discuss our Administration’s plan to work through outstanding issues related to the impending trade agreements with Korea, Colombia, and Panama, and we expressed our commitment to renewing Critical Trade Adjustment Assistance for America’s workers, and extending trade preference programs. At the time, frankly, some of you thought we were seeking too much and taking far too long, but, notwithstanding, working together, we accomplished all of this and more last year.
Together, we did the hard work necessary to pass all of these important measures in one historic evening, and in the process, I would like to believe we built the new template for bipartisan support of trade that opens markets and levels the playing field for American business, workers, farmers, ranchers, manufacturers, and service providers.
This year, with your help, we are looking to forge ahead on another ambitious trade agenda. Tomorrow, you will receive formally our 2011 annual report as well as a comprehensive outline of our trade agenda for 2012, and in the interest of time, I would like to not speak to those in detail, but highlight some of our key initiatives for the coming year.
First, I am proud to report that after the successful passage of these three trade agreements, we have been working on implementation of them, and we have finalized our plans with Korea, and that agreement will be entering into force on March the 15th. At the same time, we continue to pursue our due diligence with Colombia and Panama to ensure that they fulfill their commitments so that those agreements can take effect as soon as possible.
We are also moving full speed ahead in the Trans‑Pacific Partnership negotiations building on the broad outlines announced last November at our APEC meeting with the leaders. We are seeking to conclude this agreement this year and address crosscutting issues, such as negotiating and promulgating regulatory coherence among the countries, enhancing the participation of small business, of trade throughout the Asia‑Pacific, and building regional supply chains that will promote and sustain U.S. job growth.
As we consider the ambitions of additional countries, we will closely coordinate with this committee as well as other Members of Congress to ensure that these participants meet the TPP’s high standards and address those specific issues of concern many of you have raised.
As we move forward toward negotiating outcomes, the Obama Administration will also engage you thoughtfully on additional trade promotion authority as necessary to approve the TPP as well as future trade agreements. This year, we are getting even tougher on trade enforcement, which has been a priority of the Obama Administration from day one. Yesterday, President Obama established by Executive Order the Interagency Trade Enforcement Center to prioritize and more aggressively challenge the kinds of unfair trade practices that we fight fiercely every day, from China’s improper restrictions on industrial raw materials to improper subsidies by the European Union and other partners.
Right now, we also have an opportunity to defend the rights of U.S. workers and businesses by working to pass the legislation referenced by Chairman Camp that will ensure our ability to remedy the harmful effects of unfairly subsidized imports from China and other countries. And we are ready to bring Russia into the rules‑based system in a way that gives us more enforcement tools to enable enhanced market access and a level playing field for U.S. exporters. And that is why the administration will seek to terminate Russia’s Jackson‑Vanik status to ensure that American firms enjoy the same job‑supporting benefits of Russia’s WTO membership as our international competitors.
Broadly speaking, our pursuit of enhanced trade to support American jobs extends across all geographic regions in all economic sectors. For example, we are engaging with the European Union to deepen our Trans‑Atlantic trade relationship, and we are eager to work with you to make immediate progress with Sub‑Saharan Africa and our CAFTA countries on issues like third‑country fabric and textile and apparel rules of origin.
At the WTO, we will continue to pursue fresh, credible approaches to multilateral market opening trade negotiations in the Doha realm, but also in other plurilateral options such as services and information technology.
In conclusion, I would like to thank the committee for your thoughtful consideration of critical trade issues and continued support for our ambitious agenda. Working together, I have no doubt that we can stay on track to meet our goal of doubling U.S. exports and ensure that our trade policy continues to create job‑supporting export opportunities for all Americans. Thank you.
[The statement of Ambassador Kirk follows:]
*Chairman Camp. Well, thank you very much, Ambassador Kirk. Our number one focus in Congress is jobs. And our push for better protection of U.S. intellectual property rights in China is all about jobs. Now, the International Trade Commission, an independent agency, recently did an analysis, and they determined that if China improved its IPR protection on the same level as we have in the United States, it concluded that U.S. exports to China would increase by $21.4 billion and that sales by U.S. companies in China would increase by $87.8 billion and that more than two million jobs would be created in the United States.
What is your Administration doing to create these jobs? And are there any additional tools you need to be effective in this area?
*Ambassador Kirk. Well, we are aggressively pursuing a very broad strategy to challenge, we think, some of China’s restrictive and discriminatory policies not only in the area of information technology, but the underlying industrial policies. We use all the tools available to us such as challenging some of these policies directly in the WTO which resulted in the win on the issue of entering our films into Chinese markets and getting adequate compensation and protection for U.S. intellectual property.
We use all of our bilateral engagements to rause these issues from President Obama’s frequent meetings with President Hu and Premier Wen to the recent visit of Vice President Xi visit, and the Strategic and Economic Dialogue and the JCCT. But the bottom line, Mr. Chairman, is China presents a unique opportunity because of their explosive growth, but we all know of the frustrations that many of our businesses face because China has not fairly enforced the rules and recognized international standards in terms of respect for intellectual property and others.
But we will continue to engage them to get them to recognize and respect the rule of law, enforce intellectual property rights, and particularly combat piracy and counterfeited goods that resulted in the type of numbers that you referenced.
*Chairman Camp. Are there any additional tools you need to be more effective in this area?
*Ambassador Kirk. We believe ‑‑ we think right now that we have a sufficient number of tools. But I will be honest; part of the President’s rationale for bringing together all of our agencies through this Interagency Trade Enforcement Center is to make sure that we are adequately and efficiently using the resources that we have.
As you know ‑‑ or maybe the committee does not know ‑‑ our Administration has brought cases against China at twice the rate of the previous Administration. But more critically, at least right now, we have won every case we have brought against China. But we have had to be fairly selective in doing that, because in many cases, these are horribly resource intensive. It takes an extraordinary amount of work and time to gather the intelligence because of the non‑transparency of China’s system. So we do think the creation of this Trade Enforcement Center will go a long way in making sure that we aren’t resource constrained and we are operating as efficiently and thoughtfully as we can.
*Chairman Camp. Well, and I know you know the stakes are enormous and the jobs that would be created in the United States, if were able to simply bring them to the same standard on intellectual property we have, is significant. Two million jobs is important.
I wanted to shift to another area. Japan is interested in joining the TPP or Trans‑Pacific Partnership, and I also understand Canada and Mexico are as well. Particularly with Japan, it shows how TPP can further integrate the Asia‑Pacific region. If Japan adopts the high standards of the TPP, there are obviously potentially many benefits to many sectors of the economy as well as many industries. But I know there are a number of significant outstanding issues that will need to be addressed, and I have heard from a number of industries about Japan’s persistent barriers such as in autos, agriculture, and services, including issues about Japan Post.
Now, in my opinion, Japan’s interest in joining creates a unique opportunity to address some of these barriers to U.S. exports and investment, and that is an opportunity we have not had. But what steps is the Administration taking to address the outstanding concerns about Japan’s discriminatory policies and to ensure that Japan is ready to meet the TPP’s high standards?
*Ambassador Kirk. Well, that is ‑‑ Mr. Chairman, you framed both the question and I think part of the response in exactly the same manner. I guess the attractive part of this equation was your statement “if Japan meets all of the high standards.” And we would say that for any of our partners in APEC, that what we have said is TPP is not something you are invited to. It is something other countries have to ascribe to.
And ‑‑ we want high standards, because the future of our economic growth is going to be based on our ability, as the President says, to out‑innovate, out‑educate, out‑sell the rest of the world. We have a very innovative manufacturing model now, and we aren’t going to compromise that by entering trade agreements that allow countries to undercut that. But for all the reasons you articulated, we very much welcome Japan’s expression of interest in joining us.
But I would say one of the strengths of our form of government is our transparency. And as you know, we welcome Japan’s entry. We immediately began to proceed under the manner that Congress dictates to think about bringing in new countries, and we put a notice in the Federal Register inviting comments not only on Japan, but Mexico and Canada. And the upshot of that is Japan knows exactly, because all of these comments are public, what the concerns of our industries are.
And so we are now engaging with them, frankly, in a very honest dialogue based on feedback we have gotten from your committees and industries on how we would address that. We have made it plain we welcome Japan’s entry in the TPP. As you know, part of our deliberation as an Administration as to whether we would join was based on our belief that, one, it was in our competitive advantage to be in on the ground floor drafting what we believe will be the standard portrayed in the 21st century, but also to believe this could become the vehicle that rationalized trade in the Asia‑Pacific, which is the fastest growing region in the world. So there is an implied bias on our part that other countries would join, but we have been very honest they have to meet those standards.
So there are outstanding issues we are working with each of them to resolve, but we will work through them with all of those issues that have been raised. And then, frankly, it is in Japan’s hands to demonstrate its willingness to address these issues.
*Chairman Camp. All right. I just can’t underscore how important addressing these persistent barriers are going to be as we move forward on that. So thank you very much.
And with that, I will recognize Mr. Levin.
*Mr. Levin. Thank you, Mr. Chairman. I want to quickly pick up on that, because the question is regarding Japan and TPP whether TPP would be an adequate instrument to really open up Japanese markets. And so when we say that there are standards within TPP, the question is whether there are adequate standards and whether that would be adequate enough to change historic closed markets in Japan.
I went through a brief history of trade policy, because I think it is important to remind us where we were and how far we have come. And for years, there was a failure to address the structural challenges presented by Japan in agriculture and in industrial areas. For example, they manufactured in 2010 almost 10 million autos, and their domestic market is less than five million. And so if they were granted TPP entry and the tariffs went down to zero, their manufacturers would save roughly a billion dollars. And so far, the savings they have had from their closed markets have been used to sell the same auto here cheaper than it is sold in Japan.
So you ask an important question, Mr. Chairman. And we have to be darn careful. We say “we welcome.” The question is whether a welcoming will lead to addressing historic closed markets. It has been a one‑way street. And I think as we talk about China, we should be ‑‑ we should remember the difficulty that we have had with Japan.
I very much welcome the President’s decision to create the ITC, Mr. Ambassador, and you are going to take the lead. And I think it signals a much more vigorous effort by this administration than past administrations to get at the problem of an inadequate two‑way street in trade with China and their using their structures to give them advantages that our inimical to fair trade ‑‑ to free trade.
So I saw this story ‑‑ and it was in The Detroit News ‑‑ about the Ford F‑50. I could take a DVD and use that as an example, but we would have to buy it illegally. So I didn’t want to do that. But you could take a DVD selling for $1 in China, which ‑‑ about something that just came out, and they sell it.
So this is a story about a Chinese truck that imitates the Ford 150, which is apparently a complete imitation. And I think it raises all kinds of questions. I think China’s entry into the WTO was necessary. We set some provisions in there that unfortunately weren’t enforced. Now, the administration is doing so. But I think that this picture shows the challenge that we face in making sure that China plays by the rules.
So we welcome their participation, but we have to insist that there be a fair set of rules that they follow, and I hope very much that this establishment of the ITC will be not only a signal, but an embodiment of a new effort to insist that China play by the rules. Is that really what you’re after?
*Ambassador Kirk. Well, I think the short answer is going to be yes. I just would like to ‑‑ and you know how much you and I think alike on these. I just want to make one point. For us, this isn’t a new effort. And again, I remind you when we were here last year ‑‑ and this committee has always been wonderfully welcoming and supportive of us. But the biggest questions last year was why is everything taking so long, and we were very emphatic in our belief that our objective wasn’t just to pass three trade agreements, but to really build a new template for trade, and I just ‑‑ I said that from day one.
If you go back to the first trade agenda we filed with you, we identified enforcement as one of the keys to ‑‑ we believe ‑‑ beginning to rebuild America’s trust in our trade policy. And so this is a continuation of that. And in short answer, I would say to you, we have heard your concerns. On TPP, even though we don’t have trade promotion authority, we calculated that we have visited with Members of Congress and their staff over 350 times to hear your concerns on a range of issues. Those are important to us, but we are in a good place. And I would say this committee and Congress deserve a lot of credit.
The manner in which we passed the trade agreements, renewed Trade Adjustment Assistance, the trade preferences, and the strong bipartisan vote sent an unequivocal message to the world: The United States is ready to do business. We are open to do trade on the right terms. And we have got a great opportunity to move forward with that.
So one, we want to address these concerns, but we also want to do it in a way that allows us to try to take advantage of this and get access to these new markets.
*Mr. Levin. Thank you.
*Chairman Camp. Thank you.
Mr. Herger is recognized.
*Mr. Herger. Thank you, Chairman Camp.
Ambassador Kirk, I want to join in thanking you for your efforts on free trade agreements this last year. As we continue to look for ways to increase exports and spur job creation in the U.S., I am concerned by the administration’s seemingly paralysis on bilateral investment treaties.
As you know, exports and investments go hand in hand. U.S. investment abroad allows U.S. agricultural producers, manufacturers, and service providers to reach foreign customers. As such, we should be pursuing BITs to ensure that U.S. investments abroad are protected from arbitrary government actions and discrimination, further paving the way for U.S. exports to reach foreign markets.
Almost 3,000 BITs have been concluded worldwide, yet the U.S. is party to only about 40 of them. Those numbers demonstrate the extent to which U.S. businesses and their workers are being left behind in the global economy. Unfortunately, the administration has announced no new plans for bilateral investment treaties since 2009. And the existing negotiation on the China, India, and Mauritius bilateral investment treaties have been on hold for over three years, because the administration has not been able to conclude a review of the U.S. model that you use to negotiate BITs.
Mr. Ambassador, what plans do you have for moving our BIT negotiation forward and announcing negotiation for additional countries without further delay?
*Ambassador Kirk. Mr. Herger, thank you, and I appreciate your honest expression of your concern on this. But I would like to tell you, just as we brought a very deliberate approach to negotiating the FTAs, we try to bring that same thoughtful deliberation to the BIT, the bilateral investment treaties.
We are hopeful that we will conclude our work on the new BIT model in the very near future. We have, in fact, intensified our engagement, at the same time, though, with important potential partners like India and China. We built on the successful visits of Prime Minister Singh to the U.S. and President Obama to India, for example, and got India to agree to a more robust engagement. We had one session in India in December. We are traveling to India within the next several weeks for the next meeting on that BIT. We have had over five sessions with China. We concluded a BIT with Rwanda, and again we hope to conclude work on the model BIT within the very near future that will allow us to go forward more aggressively.
Now, I appreciate your illustration of the numbers of BITs signed by other countries, but we have been trying to be much more deliberate through the President’s National Export Initiative, frankly, working with our businesses and using a very targeted data‑centric model for where we would go. The good news is, most countries in the world would welcome the opportunity to have an FTA, a BIT, or a TIFA with the United States. But we think that is a unique opportunity we have to induce them to change their behavior in many places.
But we want to go to markets in which it is in our collective best interests that will support that underlying concern that Chairman Camp mentioned, and that is job growth here and expanding our economy.
So I have heard you. Hopefully, we will give you good news on conclusion of the model BIT. But I do want to assure you that we are engaged, in particular, with India, with China, and Mauritius, and we will be looking for appropriate partners as we go forward.
*Mr. Herger. Well, Mr. Ambassador, I appreciate that, and I appreciate your hard work. But again, putting this in perspective, 3,000 negotiated worldwide, and we are party to only four of those. And we haven’t had one since 2009. I would hope that we could, again, move a little more rapidly than we ‑‑
*Ambassador Kirk. I do. And I don’t mean to minimize that, but all agreements aren’t equal. I mean, in one example, the Korea Free Trade Agreement is economically more compelling than the last seven trade agreements that we’ve done. Se we are going to do them where they make sense, where they help us and help our manufacturers get important markets, and we still ‑‑ I mean, I would remind you the United States is still the best market for foreign direct investment by a wide margin, almost 670,000 Americans owe their jobs to investment here. We are the most open market in the world. Our economy is still the larger than the next two economies in the world. So we want to be very targeted and discreet where we use these. But I appreciate your encouragement.
*Mr. Herger. Thank you.
*Chairman Camp. All right. Thank you.
Mr. Johnson is recognized.
*Mr. Johnson. Thank you, Mr. Chairman.
Ron, welcome back. I’m delighted to see you. You probably liked the mayor’s job better than the one you got right now.
*Ambassador Kirk. This has been ‑‑ but they have both been very rewarding. Thank you, Sam.
*Mr. Johnson. Well, I know you’re finally able to take care of the free trade agreements with the three countries you mentioned. You better than most know the importance of trade with respect to jobs and economic growth, especially how it affects the Dallas area.
So with that, let me ask you about the President’s goal to double exports in relation to the President’s corporate tax reform proposal he put out last week. As you may know, in that proposal, the President called for a minimum tax on foreign earnings of U.S. multinationals. Given today’s global economy, I am trying to understand why the administration would propose to make it tougher for U.S. companies to compete overseas, which would then make it harder for U.S. companies to increase their exports and create American jobs.
Later on, we are going to be hearing from Intel’s chief operating officer, who, in his written testimony, puts it best by saying, “The revenue we generate outside the United States helps create and sustain our high‑paying jobs at home.”
So let me ask you: Wouldn’t you agree this tax proposal would make it harder for American companies to compete globally?
*Ambassador Kirk. Well, first of all, Congressman, it is always good to be with you, and I appreciate your strong support. You are probably not going to be surprised that I may not readily agree with your last statement. And you correctly noted ‑‑ and I am proud to be a former mayor of Dallas, home of the world famous Dallas Mavericks; thank you for bringing that up. But I am not a tax expert.
Sam, I would tell you everything we are doing as an Administration is designed to encourage job growth here at home. We recognize we live in a very different world now. And for many of our multinational corporations, whether it is Intel or Boeing or Microsoft or Google, they have to be engaged around the world. That is okay. But that ought to be a business decision. It ought not be one that our tax code incentivizes because they have the ability to make profits abroad and keep them home.
Now, where I would agree with the gentleman from Intel is that absolutely what we want to protect is that research, that investment, that core technology in which Apple creates the iPad here, and it may be assembled elsewhere. But millions of Americans have their jobs because we design, we create products from California to Texas to Illinois, and then they may be assembled elsewhere. We want to support that. But the President simply wants to use our ability to leverage our tax policy, which is a choice that says if we’re going to incentivize behavior, we want to incentivize behavior that encourages keeping those jobs here.
Now, you asked about our National Export Initiative. The President challenged us in the State of the Union two years ago to double exports. We did that for a simple reason; we know about every billion dollars in exports support about 5,000 jobs at home. And if we could do that, that would be two million jobs. And one of the good news stories of our economic recovery ‑‑ and we all know it is not enough ‑‑ exports are helping to drive that. Our exports are up about 34 percent since that challenge. They were up 14.5 percent in 2011. Particularly in the farm economy we had a record year, almost $140 billion in agriculture exports with a $41 billion surplus.
So this is working, but we want to make sure we continue that, because we are beginning to face headwinds as the global economy begins to stagnate in other places. Our tax policy can complement that by making sure we do things to create more manufacturing here. And what we are beginning to hear from manufacturing, particularly when the President held his in‑sourcing conference, was more and more business had begun to realize, particularly with China where wages are beginning to rise and China’s continued inability or lack of will to protect core intellectual property that, in many cases, they are better served bringing those jobs here. We think we ought to have a tax policy that helps sustain that.
*Mr. Johnson. I agree with you, and I don’t think we ought to double‑tax people just for working overseas either. And I know you agree with that. We need to make it easier, not tougher, for American companies to compete globally.
*Ambassador Kirk. We would agree on that.
*Mr. Johnson. And I think you agree with that. And thank you for being here today, Ron. We appreciate you.
*Ambassador Kirk. Thank you. Good to see you.
*Chairman Camp. Thank you.
Mr. McDermott is recognized.
*Mr. McDermott. Thank you, Mr. Chairman.
Mr. Ambassador, Washington state ‑‑ Exhibit A, for the argument, that trade represents enormous opportunities for U.S. workers, farmers, and business. According to The Washington Public Ports Association, roughly one in four jobs in Washington state is tied to foreign exports, and pay for those jobs is about 46 percent higher than the average in the state.
But my constituents believe ‑‑ and I agree with them ‑‑ that we have to get the full bang for our buck from all the trade deals. When a country signs a trade agreement with the United States, they have to fulfill their obligations. If we ‑‑ if they fall down on the job, the United States should use every available tool at its disposal to make them live up to their commitments. It is just basic fair play.
Last year, my Democratic colleagues and I called for the development of a comprehensive and robust strategy to help rebalance our trade relationship with China, and pleasing to all of us was that the President responded and created the Enforcement Center in the ITEC in his Administration. This ITEC will increase the administration’s ability to make sure that China and other trading partners keep their promises.
But it needs to be made clear; China’s unfair trade policies have consequences not just for the United States and other developed countries, but for the developing countries as well, including countries in southern Africa. We can help lesser developed Sub‑Saharan African countries compete against China by extending the third‑country fabric provision, one of the most important elements of the African Growth and Opportunity Act. This provision, which expires in September, allows apparel producers in these countries to use third‑country fabric in making apparel that gets duty free treatment under AGOA.
Sub‑Saharan Africa competes with China in manufacturing exports. Last year, Charlie Rangel and I introduced legislation to extend the third‑country provision until 2015. Identical legislation was introduced by Senators Baucus and Hatch last December. Now, both Chairman Camp and trade subcommittee ‑‑ Brady committed months ago to moving this legislation, and yet there is no action. Buyers are already turning away from the AGOA region, because they project out nine months when they’re planning their purchase of apparel. They can’t turn on a dime. So this waiting until September to pass the extension doesn’t really make any sense.
And I understand some Republicans have concerns about sending a revenue measure over to the Senate. If they need an ironclad agreement from Senators Reid and McConnell that there won’t be any shenanigans, well, they will get one. We cannot wait any longer to act if we’re serious in our economic development strategies.
I also want to take a moment to applaud the work of the USTR on Boeing‑Airbus case in the 2011 appellate body decision that ruled that Airbus launch aid and other subsidies violated WTO. If the UA continues to drag its feet and doesn’t withdraw the subsidies, then we should go directly to the compliance proceeding.
My staff has been working with Mr. Reichert’s staff, the Senate, and folks in Congress that will really help the National Export Initiative to make us better at exporting. This bill will have no cost and will solve some real problems to increase exports, and I just want you to know that we appreciate your team’s efforts on that behalf.
But I have one question for you. The May 10th changes ‑‑ we are talking now about TPP and IPR medicines ‑‑ the May 10th changes struck a fair balance between timely access to affordable medicines in developing countries and protection for innovation. In the TPP negotiations, USTR has proposed an alternative that throws off this balance in favor of protecting innovation. How have the other TPP countries, especially the developing ones, reacted to that proposal when it was tabled in the TPP negotiations?
*Ambassador Kirk. Well, first of all, let me thank you for your kind words for USTR about Airbus. That is, I think, as good an example of where smart enforcement policy helps sustain jobs. It is spectacularly the largest, most commercially significant case ever decided within the WTO identifying almost $18 billion in WTO non‑consistent subsidies of Airbus to the harm of Boeing and their workers, and we are going to continue to insist that the EU complies with that.
With respect to the Trans‑Pacific Partnership and access to medicines, frankly, again ‑‑ and I think I have mentioned the extraordinary number of consultations we have had with Congress. We have had even more with NGOs and others. What we are seeking to do is make sure that we have the strongest disciplines in terms of protecting intellectual property, which is the lifeblood of America’s economic growth, but also making sure we have access to medicines, that we encourage those that are involved in the production of these new lifesaving drugs to bring them to market soon.
We have a new approach that we are trying. It is called TEAM, Trade Enhancing Access to Medicines. We don’t think it does anything to diminish what we accomplished in the May 10th agreement. We have been very plain that we at least want to start with the premise, with respect to the Trans‑Pacific Partnership, that we are to build on what we have learned in the past.
For the most part we have been doing trade agreements on the same model that has existed for the last 10 to 15 years. And we have a lot of challenges that didn’t exist then ‑‑ the involvement of state‑owned enterprises, the explosion of the generic pharmaceutical industry, and we want to just make sure that we get the right balance between the two. That is what we have tabled. You have to know some of our partners don’t want to do any of this, but I ‑‑ while I ‑‑ we will applaud, and the United States has a better than commendable track record of making sure that poor people around the world have access to these lifesaving medicines. We think it is not in our interest to do it in a manner that undercuts the basic premise of who does R&D and brings these medicines to life.
*Chairman Camp. All right.
*Ambassador Kirk. So we are trying to strike the right balance.
*Chairman Camp. Thank you. Time has expired.
Mr. Brady is recognized.
*Mr. Brady. Thank you, Ambassador. I join Chairman Camp in thanking you and commending USTR for the good work on moving these trade agreements forward. Trade is jobs. It is the economic freedom to buy and sell and compete around the world with as little government interference as possible, and we know the world has changed. It is not enough to simply buy American; we need to sell American in every corner of this globe.
Clearly, with the passage of the three trade agreements, America is back on the trading field in a big way, but it is important that we not return to the sidelines. Our competitors are very aggressive, reaching negotiations that put us at a disadvantage. So it is important that we have a very aggressive, a very ambitious, as you said, 21st century trade agenda.
I commend your efforts on enforcement. I think they are critical, and I support them. But enforcement alone is not enough. We need an aggressive agenda that finds new customers for our businesses and our farmers, that tears down trade barriers and fights protectionism anywhere in the world. And it finds ways to move our goods and services better, faster, and cheaper to the customers in this world. That is what today is about, about finding out what that new 21st trade agenda ought to be.
So first, I want to start by issuing a broad invitation to all those in this room today and those listening to submit comments for the record for this hearing about what should be in the pipeline strategically from a market standpoint, from a facilitation effort, and for the next trade agenda for America.
And secondly, in going forward, Ambassador, I want to ask you specifically about Trade Promotion Authority. One of the lessons we learned from the three trade agreements was how invaluable a role having a clear up or down ‑‑ timely up or down vote on those agreements was. You are currently negotiating the Trans‑Pacific Partnership critical agreement. The President has indicated he would like to see it completed this year. It is important to our agriculture, service companies, technology, and manufacturing businesses throughout America. So clearly moving this forward this year is important, but how do we do that without trade promotion authority?
So my first question is: When will the President submit TPA for Congress’s consideration.
*Ambassador Kirk. Mr. Chairman, first of all, thank you for your strong support. I agree with you. First of all, we aren’t going to conclude TPP without trade promotion authority. And we want to engage, frankly, with the leadership of this committee on what we want in the elements of that bill, and then we will timely submit it to you.
But we have got to have it. We need to have it. It gives that protection of fast‑track, which as you know, was invaluable. We would not have been able to pass the trade agreements with Korea, Panama, and Colombia without it. And one of the reasons we have had so many consultations with you is we hope as we get there, we have built up enough trust as to what elements ‑‑ what is in that package. Then we can ‑‑ design a thoughtful bill and move it hopefully rather efficiently through our committees of jurisdiction.
*Mr. Brady. Do you expect that? The reason I ask, one, Trade Promotion Authority is where Congress gives clear negotiating authority to the White House with clear negotiating objectives from Congress. And in return, we provide that timely up or down vote without amendments.
It is critical that our negotiating partners know that they have that assurance when negotiating important agreements like the Trans‑Pacific Partnership. So do you expect us to see TPA from the White House sometime by the middle of this year, in the third quarter? With the work that you are doing on TPP, do you expect to conclude that by the end of the year, so this has to be in advance of it?
*Ambassador Kirk. Mr. Chairman, I don’t want to handicap whether it is the middle of third quarter, but obviously, if we are going to meet that objective of concluding, we are going to have to have it before the end of the year. I would say ‑‑ and my thanks to the committee ‑‑ that the credibility we gained by the strong vote in this Congress on the three FTAs sort of answered the questions from some of our negotiating partners, on whether we had the political move to go forward.
So one, it has not been a hindrance to us in terms of our negotiating thus far, and we have negotiated other trade agreements ahead of time without it. But obviously, we are going to have this resolved before we would bring TPP forward.
*Mr. Brady. Thank you. I think we have another chance for more bipartisan success on jobs for America through trade, and I think that is critical. Thank you, Ambassador.
*Ambassador Kirk. Yes.
*Chairman Camp. Thank you.
Mr. Davis is recognized for five minutes.
*Mr. Davis. Thank you, Mr. Chairman.
I appreciate you being here, Ambassador. We talked in December with Ambassador Marantis on a Trade Subcommittee hearing on the TPP. During that hearing, I asked Ambassador Marantis about the letter the Kentucky delegation had sent you opposing USTR’s proposal to exclude certain products, specifically tobacco. And the response that we got back from your office said that you were “still developing our negotiating position for the TPP” end quote.
As an ambitious trade agreement that I think has huge positive economic and national security implications for this country, I was wondering if you could tell us what factors are being considered in consultations to reach a decision regarding carve‑outs, specifically the tobacco carve‑out. And can you tell us if you are going to, in fact, exclude tobacco from the entire TPP or specific chapters.
*Ambassador Kirk. Well, first of all ‑‑ and thank you, Congressman Davis, but let me make it clear. We have not tabled any proposal to exclude tobacco or any product. So I know there is great concern from the Kentucky delegation. I was with Governors Beshear from Kentucky and Perdue from North Carolina. We understand their very strong passion on this. As you know, there are equal concerns from NGOs and those in the healthcare field that we not table anything that would restrict this Administration’s, this Congress’ ability to regulate in the interest of public health.
And because of the passion on this on both sides, first of all, we have not tabled anything. We are trying to seek the proper balance between our stated objective of having a high standard, comprehensive agreement in which everything is on the table and as few carve‑outs as possible, and at the same time, maintaining that core underlying standard of all trade agreements, and that would be nondiscrimination, that we would not treat other countries’ manufacturers’ products any differently than here — and that is the overall environment in which we are trying to come up with the proper balance on tobacco. But we have not yet concluded that.
But I want to make it plain. We have not tabled anything that would exclude tobacco or any other product.
*Mr. Davis. Could you commit to us that you will stay in dialogue with us as this position unfolds so that ‑‑
*Ambassador Kirk. Absolutely.
*Mr. Davis. And I’d like to switch subjects to another area of real concern. We talked a lot in this committee about manufacturing. I spent my post‑military life in manufacturing, and there are policies that really date to the Cold War on dual use technologies that don’t reflect the reality of the international marketplace right now, specifically in the machine tool industry, which has always been at the heart or the cornerstone of American manufacturing.
I have two of the most successful machine tool producers in the world headquartered in northern Kentucky ‑‑ Mazak North America and MAG, the former Cincinnati Machine. And for example, five‑axis metal cutting machines, which are at the core of any product production, whether it is automotive, aerospace, any other type of manufacturing are tightly controlled by the U.S. Government.
Currently, it is creating huge competitive problems for us in Asia, in India, in Russia and China. And right now, there is at least 13 Chinese machine tool companies that build five‑axis machines. They are exporting into other countries. The Europeans have a tremendous market advantage because of this issue.
And I would like you to comment first on the challenges that ‑‑ how can we work together to overcome this export control problem on what are obviously technologies that are widely available right now, and there are no defense constraints on, potentially changing the rules on that.
And also dealing with the issue of visa control, many of our international businesses that are very, very dependent on international exports to fit with the President’s plan to double exports can’t, in fact, get their foreign clients here through the visa process with the State Department. I know it is not directly under your jurisdiction, but as a trade ambassador, I think ultimately this affects your ability to promote American manufacturing and ultimately American jobs that will create a lot of export revenue for us.
*Ambassador Kirk. Well, Congressman, yours was both a question and an answer, and I want to tread carefully, because, as you know, one of the realities of my job is that Congress retained the ability to implement commercial treaties, and you were very prescriptive about what I do. And one of the things I am most reminded of is that I am not supposed to make immigration policy, nor trade policy. But I ‑‑
*Mr. Davis. Feel free. Everybody else does it, too. So ‑‑
*Ambassador Kirk. I would say I think the President has ‑‑ I mean, the common sense of what you have said ‑‑ if part of our growing our economy and creating jobs is taking advantage of the opportunity to sell more of what we make to the rest of the world, it would just make sense that our customers ought to be able to come here and learn about the products and have access to the people that are going to be supplying them and teaching them. I think the President has said ‑‑ is correct; the best way to address this is part of comprehensive immigration reform, but you have stated the obvious. We frustrate our own efforts when our visa laws are so ‑‑ can be so restrictive that it makes it difficult to support our underlying ambition to sell more around the world. But I would just say I think that speaks to the need for Congress in a bipartisan way to do something that makes sense.
With respect to export controls, as you know, the President asked then Secretary Gates to work with Secretary Locke at Commerce to modernize our export control regime. Many of these laws made sense 50 years ago when we were in a Cold War with Russia. We will absolutely not compromise on the core underlying principle that we aren’t going to share technology with countries that might seek to use that against us. But for the overwhelming majority of products, we think that should be modernized.
I know Secretary Bryson is working in an expedited manner to try to address that, because we have heard from too many businesses like the one you mentioned that the United States is just losing out on technology that people can easily go buy in another market. And we want to have that opportunity for our manufacturers.
*Mr. Davis. Thank you.
Thank you, Mr. Chairman.
*Chairman Camp. Thank you very much.
Mr. Neal is recognized.
*Mr. Neal. Thank you, Mr. Chairman.
Mr. Ambassador, I have been hearing from companies in Massachusetts, as we discussed earlier this morning, that manufacture here in the U.S. and also import that a free trade agreement with the European Union could be beneficial both in opening European markets for U.S.‑made products and for reducing cost to U.S. consumers for certain European products that they import.
The Port of Boston would be an obvious gateway to expand a trade with the EU. Is USTR considering a U.S.‑EU FTA, and what might be the status of your discussions with your EU counterpart about this possibility?
*Ambassador Kirk. Congressman, we are engaged at the direction of President Obama following the visit of the President of the EU here last fall. He and President Barroso instructed us to create what they call a high‑level working group. And with strong encouragement from businesses across the country, we are exploring all options. Now, we have been very careful not to cast it or bias it ahead of time by saying it would or would not be an FTA, and frankly ‑‑ and it is a great opportunity to remind us that by a huge margin, this is the largest commercial relationship in the world.
And frankly, one of the things I instructed our negotiators is to adopt, I guess, the trade equivalent of a Hippocratic Oath — let’s do no harm — because this relationship has sort of worked without government ‑‑ but we are exploring everything across all areas from a services liberalization to non‑tariff regulatory coherence. We have had about five meetings since the presidents have asked us to do that, but have tried our best to not restrict our teams as they work through it, but be practical, see where we have opportunities to liberalize trade, take cost out of the systems, but try and not prejudge the outcome.
*Mr. Neal. And on a more parochial matter, we spoke again about enforcement today, and China has had severe problems with mandatory third‑party auto liability insurance markets, and as this problems have become more compounded, the difficulty we have is that when we thought this was going to be an opening for American financial services. If anything, it has been a stalemate. I think that might be the best description. So I know that you have embraced firm enforcement as part of your tenure. And I hope you won’t take your foot off the pedal on this issue.
And I hope we are not going to lose momentum to make sure that China doesn’t drag its feet in fulfilling its promise. As we indicated, there has been a huge chasm between those who thought that this was destiny in terms of new financial opportunities only to discover the impediments in those markets have not turned out to be quite what was anticipated. And enforcement remains a big issue for all of us here, and I think that with full market access for our companies, that they will be able to readily apply for licensure along those lines.
*Ambassador Kirk. Yes. First of all, again, I think the President’s initiative in creating the taskforce demonstrates our resolve to keep our foot on the pedal. And with respect to the third‑party liability in the auto industry, one of the better outcomes from Vice President Xi’s recent visit was we were able to get a very firm commitment from China that they will open up that market.
Now, what we have to do is make sure we are diligent, as you said, working with China that they will move quickly to implement the regulatory changes to enhance that. But hopefully, by the time I see you again, we will have companies selling in that market.
*Mr. Neal. Thanks. Thanks, Mr. Ambassador.
Thanks, Mr. Chairman.
*Chairman Camp. Thank you. Mr. Reichert is recognized.
*Mr. Reichert. Thank you, Mr. Chairman. Welcome, Mr. Ambassador. Good to see you again. And again, congratulations to you and your team, and I really appreciate your presence here and your open, honest answers. We have worked well together, the Committee and your office and my office personally. I appreciate your efforts.
I want to touch on something. My focus will be all on jobs. And of course, this, you know, trade is essentially really, bottom line, about jobs. I know you’re not a tax expert, but I just want to mention the Harbor Maintenance tax and how it impacts, especially the West Coast and the business that we’re losing to Vancouver and Prince Rupert ports. The Longshoremen, Longshore Union and our Port Authority people are very, very nervous about how this impacts our trade opportunities especially in Washington State, in my case.
If you could respond in writing, we’ll follow up this question with a letter, and hopefully we’ll get an answer back on what the administration’s policy might be on this. So as far as the free flow of electronic information, you’ve touched on it just a little bit, it’s critically important, as you know, to U.S. companies that sell goods and services over the Internet. The e‑commerce ‑‑ and e‑commerce is something we know, I think, a little bit, we know a little bit about in Washington State, but we know that some foreign governments block, you know, these efforts and the flow of information. Other foreign governments require online service suppliers to process data locally or to locate servers in their contracts.
These types of restrictions can impede trade, undermine the competitiveness of U.S. companies, and cost American jobs. This is a real twenty‑first century trade issue. And to create a free trade agreement included landmark provisions on these cross‑border data flows. Do you agree that the Trans‑Pacific partnership must include strong provisions ensuring the free flow of electronic information?
*Ambassador Kirk. Absolutely we do, Congressman Reichert. And first of all, thank you again. You have been wonderfully supportive, and I appreciated your hosting the ASEAN trade ministers with us when we came out. But we agree with you, and I think you know we have worked with you and other members to table what we believe is a very thoughtful, commonsense e‑commerce provision in the Trans‑Pacific partnership for the reasons that you articulated.
*Mr. Reichert. Thank you. And my last question, quickly, is regarding the Export‑Import bank. And, you know, we hear the administration talk a lot about manufacturing, but it’s kind of rare when you hear officials talk about the importance of services. And we all know that services are 70 percent of our economy and 70 percent of our jobs, getting back to jobs. Services like financing, insurance and express deliveries don’t just create jobs, but they create high paying American jobs and further, they enable manufacturing and they enable exports. And the Export‑Import bank is up for reauthorization.
They are many who talk about the banks in terms of what it means for America’s largest employers, but a lot of folks really sort of dismiss the small business impact here of the Export‑Import Bank. Can you explain, really, how important it is for the Export‑Import Bank and their relationship with small businesses in the United States, please?
*Ambassador Kirk. Thank you. I’m happy to and again, I recognize I’m here as U.S. Trade Representative, but, you know, one of the good things we’ve worked with you on, exports are a great story right now. Our exports are up. We are in records across all services, all sectors. Manufactured goods are up 34 percent, agriculture is up 31 percent, services is up 21 percent in comparison to 2009. In just about every country in which we trade, we have a surplus in services. Seventy percent of Americans work in the service sector. Ninety‑seven percent of U.S. exporters are small businesses, many of them in the service sector.
So first of all, we acknowledge everything you say, Congressman. We are working. That’s why we are specifically addressing services liberalization in the Trans‑Pacific Partnership. It is one of the larger opportunities we have in Korea; for example, which has over a half a trillion dollar services market. But I think it’s also critical, that Congress renew and extend the authority of the Export‑Import Bank. I think, and forgive me, I don’t know the exact numbers, I want to say they have about a hundred billion dollar lending cap. They are effectively at about 95 percent of that. That’s going to run out in the next two months.
And so as well as we’re doing, we’re going to lose the ability to finance many of our products, and particularly, for small businesses. And so I think it’s critically important that the Export Banks’ caps be lifted, they be extended. They cost the taxpayers not one single dollar. They are financed through their transactions. It’s one of our better stories. They enable many of our small businesses to grow and compete. So hopefully we can work with Congress to extend that.
*Mr. Reichert. Thank you.
*Chairman Camp. All right. Dr. Boustany is recognized.
*Mr. Boustany. Thank you, Mr. Chairman. Congratulations, Ambassador Kirk, on getting a job well done with you, your staff working with this Congress to get these three free trade agreements finalized. That is singularly the most important jobs legislation this Congress has passed. And it’s bipartisan. It’s something we should all be proud of. But that doesn’t constitute a twenty‑first century trade agenda. In fact, if I could use a simple football analogy, it’s almost as if we’re deep in our own territory playing defense and we finally created a turnover. Now we can go on offense, but now we have to take advantage of this and move forward.
And so we need to continue to knock down barriers, you know, continue with enforcement, and also look at hurdles that we have to overcome here internally. And I want to join with Chairman Herger over my concerns about the lack of progress on getting a model bid in place and also moving forward with the negotiations on a bid with both China and India.
But if I could direct my questions to you on a couple of things with regard to China. Obviously, a broad range of issues out there. But two often overlooked areas are SMEs and the impact that they play on getting American exports into the Chinese market and services where we have a growing trade surplus of services. But we still have major problems there. I mean, for instance, currently we have 27,000 U.S. SMEs that exported to China in 2009. We can grow this, and this is an area that I think clearly my district we’re seeing expanded activity, but there are significant barriers and problems in place.
The same thing with services. Even though we do have a surplus with China, there are a number of issues with licensing and so forth that we need to ‑‑ I would like to know what is the administration doing specifically in these two areas and what are our metrics. I mean, beyond just hearing what President Hu has said, statements from Wang Qishan, Mr. Xi was here earlier, but what is going on. How are we ensuring this follow‑through in China on these things that we’re agreeing to and what are the metrics to show progress?
*Ambassador Kirk. Okay. If I could take those separately because with the SMEs, through our export promotion activities, our Trade Policy Coordinating Committee, we have very specific metrics, but in many cases not country-specific. Maybe I will take that remark back.
I think you all know we have only, surprisingly, about 280,000 businesses in the U.S. of any size that export. Ninety‑seven percent of those are small businesses. One of the first things I did was ask the ITC to do a study to help us understand who they were. And that’s, from my bias back when I was a mayor; the most important thing is to find out who your customers are.
So one of our first metrics is one, if we could just double the amount of small businesses that export because small businesses who export grow more, pay more, hire more. We represent only about 1 percent of the universe of all small businesses in the U.S. Now we’ve been more discriminating than that because our SBA administrator helped us understand small business is broad enough to capture everybody from the sub shop, but, you know, of those that could export, we’re trying to double that. We’re providing more knowledge, more trade, promotion authority, financing, a number of those things. But if we can double that, get that from 1 percent to the global average of 2 to 3, I think you can understand the role that will play in jobs.
Secondly, I’ll be honest, many of our small businesses export to only one country, one customer. So that’s a great place to start. If they’re exporting, they’re not afraid of it, and we’re working to help them grow and expand. Now, I’ll be honest. With many of our small businesses, the best advice we tell them, you be very careful about going to a country like China because frankly, you know, Boeing can survive a five‑year fight over Airbus. That small business that Congressman Neal and Congressman Davis mentioned, they can’t. And we really steer ‑‑
*Mr. Boustany. I’ve had companies that have had similar problems.
*Ambassador Kirk. Right.
*Mr. Boustany. But one, we try to work with them to make sure they go somewhere there is going to be respect for rule of law; their product isn’t going to be ripped off. Broadly on China, we’re doing everything through the strategic and economic dialogue, the JCCT. We are taking them to court. They have a very close service market. As you know, we sought WTO panel consultation, for example, in the payment of electronic services to try to open up that market, but the pace nearly isn’t to our satisfaction. And again, one of the rationales behind creating this trade enforcement center is so we can be more aggressive in taking some of those challenges.
*Mr. Boustany. Thank you. I yield back.
*Chairman Camp. Thank you. Mr. Becerra is recognized.
*Mr. Becerra. Thank you, Mr. Chairman. Ambassador, thanks for being with us. And let me congratulate you and the administration for the work you’ve done, the successes you’ve had. And I believe that America, its workers, its entrepreneurs, its businesses, its farmers are all very much looking forward to your continued success as we try to open up markets in a fair and competitive way for our businesses and our workers here in this country.
I also want to applaud you, by the way, for the work that this administration has done and its recent announcement, in fact yesterday’s announcement, about the establishment of the trade enforcement center. That, I believe, will help us continue in this march towards the competitive and level playing field for American businesses and American workers. I hope that you can get that up and running very quickly. If we have that robust commitment to enforcement, I think that will be the key to helping establish broad support for a trade agenda here domestically and certainly to help make sure that we have that even playing field abroad for our companies and our workers to get out there and open up markets.
I wanted to focus most of my time, if I could, just on the questions pertaining to the trade agreements that were recently signed. I just got back a couple of days ago from Colombia and had a great visit, a remarkable visit with President Santos of Colombia who is trying to do some remarkable things for the country. They have made some great strides in the last several years, and they acknowledge that it is because of U.S. support and investment and cooperation that they’ve been able to make some tremendous progress there. And they are working with us to try to make sure that implementation of the different commitments and promises made in this trade agreement are achieved.
One of those very important commitments was in the area of labor, as I know you know this very well because you were very key in getting those terms agreed to. President Santos seems very committed to making sure we’re well on our way to getting those pieces of the puzzle in place on the Colombian side. I’m hoping that you can give me a sense of what we’re going to do to help monitor and assist Colombia as it tries to move forward because some of those commitments are going to be tough. They require institutional change.
The issue of assassination of individuals simply because they happen to be trade unionists or the issue of the suppression of the ability of workers to try to collectively bargain are still there. And the President was very clear that he is committed to try to move forward on improving the situation there for Colombian workers so that American workers and American businesses can trade on an open and level playing field. But can you tell me what we’re doing to try to, for example, help them further integrate these commitments into their institutions?
*Ambassador Kirk. First of all, Congressman, again, thank you for your kind words, and thank you for your strong support and advocacy on a number of these issues. One, I would hope that perhaps if not with you personally, my staff could follow up with your team just to get a better sense of what you learned.
One, I would say we have made very good progress, not only with Korea, which will go into force March the 15th, but Panama and Colombia as well. We realize, as Congressman Brady said, the first step is passing these agreements, but to get the benefits, we need to get them entered into force. I know for you and many members of the Committee, particularly from the Democratic party, absent this strong labor action plan, we wouldn’t have gotten the strong bipartisan support we did. Because of that, the President made a commitment we would make sure that that was implemented, not only in the letter, but the spirit of it as well.
Now we have some more work to do, but we have been very encouraged, frankly, with President Santos’ very quick implementation of a number of those. As you know, one of the reasons we delayed bringing Colombia forward, we wanted to see these changes in law. We didn’t want lip service. He did that. He appointed, I think, to many people’s, frankly, surprise, one of the most respected labor leaders in Colombia as the new head of a new separate labor ministry.
And Minister Pardo, I believe, came and met with a number of you here. He has met with labor leaders here. They have moved to hire many of the inspectors within the Labor Ministry that we’ve asked. They have worked, frankly accepted technical assistance from our Department of Labor, as well as the International Labor Organization. They have moved to address concerns in some of the most important sectors we asked them in terms of not only identifying issues, but bringing ‑‑ holding people accountable.
Now there is more to do, but at least it feels like they are absolutely meeting both the letter and the spirit of what we have asked them to do. And so we have made this a very collaborative process. And I very much have to highlight the strong involvement of Secretary Solis and her team and working with them. But at least thus far, it has been a very good, strong collaboration, and we’ll continue to monitor and give them that technical assistance where they have asked for it.
*Mr. Becerra. And my time has expired. So I’ll just close by just saying that I agree with everything you said. And maybe we can work with them on their inspections and on their interpretations of some of the laws. But I agree with you, they’re trying to make progress. And thank you, Mr. Chairman.
*Chairman Camp. Thanks. Mr. Buchanan is recognized.
*Mr. Buchanan. Thank you, Mr. Chairman, and I want to thank the Ambassador for being here today and especially, as everybody has mentioned on the free trade agreements, it’s huge to Florida. As you know, Ambassador, we’ve talked about it. We have 14 ports, $68 billion worth of economic activity. And so I want to thank you again for your leadership on that.
Jobs. That’s what we’re all here for today. Last year I introduced a 10 point jobs plan. One of the key parts of the jobs plan was China’s blatant disregard for intellectual property rights. It was reported by the U.S. International Trade Commission that Chinese piracy and counterfeiting cost American businesses an estimated $48 billion in 2009. The report concluded that 2.1 million jobs could be created in the U.S. if China complied with their international obligation to protect and enforce intellectual property rights. Ambassador, what are we doing about that and are these numbers remotely correct? That’s what I’ve been told and verified. So I wanted to get your thoughts on this.
*Ambassador Kirk. Well, not having been involved in this study, and I think Congress very wisely separates the analysis of the value of our trade work from the responsibility to negotiate and enforce them between USTR and the International Trade Commission, but your numbers seemed at least remarkably similar. I think it was Chairman Levin that mentioned the same study.
From my perspective, again, my bias having been a local official, if it’s two hundred jobs, you know, if it’s a thousand, they’re worth fighting for. But clearly, China could be much more aggressive in enforcing and combating piracy and theft. It cost us billions of dollars of revenue to American businesses and lost jobs. And for that reason, it is one of the issues that we most persistently and singularly raise with China to work at, from engagements by President Obama and Vice President Biden to our work at the JCCT.
One of the practical facts that we’ve heard from many of your businesses is that China typically tends to respond when we have an event. When we have a presidential visit, we do something. And they love special campaigns. And so for six months, they do really good. And then they go right back to doing what they’re doing.
*Mr. Buchanan. Well, they’re saying 2.1 million jobs could be created. So I would like to have you look at that.
I just want to touch on another question. The Panama trade agreements. It’s been brought up by a lot of businesses in Florida to me is that even though they’ve been enacted, the U.S. exporters are still unable to reap the benefits of the agreements until it actually goes into force. That means U.S. exporters still face tariffs in Panama. Meanwhile, Canada and European unions and others are taking advantage of doing business with Panama.
What can we do to move these along more aggressively. I know you’re working on it, but what more could we be doing, in terms of the administration, to get these enacted because it’s costing us, you know, not only business, but jobs all over the country. But I’m looking at Florida.
*Ambassador Kirk. Well, frankly, Congressman, you’ve done your part in giving us a strong vote, and I just want to assure you, we’re moving as aggressively with Panama. We sent teams down to Panama last fall. The good news, we just received some of the documentation that Panama is required to submit. And now we’re going through the process of analyzing that to make sure it does what we want. But we are moving as diligently ‑‑
*Mr. Buchanan. Do you have a time line, or maybe you have something because I get asked that a lot exactly where ‑‑
*Ambassador Kirk. You know, I hate to put a specific time on it. You know, we wanted to have them all done as soon ‑‑ we’re aware they have been at that trade agreement with Canada, and we don’t want to lose ground. The other element, and it goes to, if I could, just the point you made about infrastructure and similarly Mr. Reichert and Mr. Boustany. We have a great opportunity with the opening of the Panama Canal, but a challenge to address our port infrastructure all around the country because that’s going to be a huge opportunity for us to increase our exports.
*Mr. Buchanan. Thank you. I appreciate the opportunity.
*Chairman Camp. Thank you. Mr. Smith is recognized.
*Mr. Smith. Thank you, Mr. Chairman, and thank you, Ambassador. I appreciate your service and certainly, the agility of USTR to, I guess, act with the benefits of Americans in mind in production and certainly Nebraska agriculture. I was wondering if you could provide an update on Japan’s age restriction on the U.S. beef imports to 30 months and under and also how the U.S. is assessing Japan’s interest in joining the TPP.
*Ambassador Kirk. Thank you, Congressman. The exclusion of U.S. beef from the Asian market, as you know, over the last eight years has been crippling to our beef industry. We have done a better job of getting back into on U.S. agriculture exports to Korea. And the good news, with two‑thirds of tariffs Korea has going away on March 15th, we expect to see our agriculture exports there do even better.
We have met with Japan I can’t tell you how many times to try to get them to comply and accept the fact our beef is as safe for consumption as any in the world. The good news, we have pressed them that they are now undertaking the risk assessment they have told us that they would to determine the safety of our beef. We are hopeful we can get them to conclude that and we can be back into that market soon because it is critical for beef suppliers all around the U.S.
*Mr. Smith. Right. And certainly, this speaks to the sanitary, and vital sanitary issues that a lot of times our trade partners, I guess, don’t go off of the science‑based standards. What do you see as perhaps an opportunity to perhaps go beyond what past trade agreements haven’t stated or even beyond what the WTO has in place?
*Ambassador Kirk. Well, our first goal for all of our partners, whether its China, Japan, Mexico, Europe is look, just play by the rules and accept sound science. We can’t allow cultural differences of the others to distort the market. So one, we seek that level of compliance with everyone. Two of the opportunities we have are if we can get other countries into the Trans‑Pacific Partnership, one element is going to be some of the strongest sanitary and phuto-sanitary standards. And secondly, we referenced earlier one of the real benefits. For example, if we can lift the Jackson‑Vanik restrictions when Russia joins the WTO, for the first time they would have to adhere to those sanitary and phuto-sanitary standards.
So we’re using the opportunity to grant permanent, normal trade relations to Russia, as well as the development of the TPP, to try to enhance those standards and open up markets for American agriculture. And I referenced earlier, I won’t go through it, but agriculture is one of our good news stories in our export policy. I’m sure you know we had a record year last year. $140 billion dollars with a forty‑one billion dollar surplus.
*Mr. Smith. Right. And you touched a little bit on the situation with Russia. Now very specifically, there have been very tangible, negative results from the restrictions that Russia has placed on U.S. pork. I mean, we had record levels of exports of pork to Russia and then when some, I would say, non‑science‑based issues entered the equation, the numbers changed. What can you assure us will be done about that.
*Ambassador Kirk. Again, the first step would be for us to recognize that our granting Russia permanent normal trade status is decidedly in our interest. We are not required to lower one tariff. It would, for the first time, give our exporters, our farmers, at least access to dispute resolution. But we would have also the opportunity to compete for those TRQs.
And I have to tell you the point, no one has been more supportive broadly of our trade initiatives than the pork industry. But I understand their very legitimate frustration in Russia because of the behavior of their Agriculture Ministry. But having more tools to confront them, Congressman Smith, would be the first step. And that’s why we will be working with you to address the issue of Jackson‑Vanik.
*Mr. Smith. Great. I appreciate that. And I think, you know, in closing, there are some great opportunities in the world. Obviously you’ve touched on those. Great background in agriculture now with the numbers speaking for themselves of what trade can accomplish. And so I’m excited that our governor is planning to travel to China this summer on a trade mission. And so I think the opportunities are out there, and I look forward to working with you to make sure that we do move forward with a level playing field in mind. Thank you.
*Ambassador Kirk. Thank you, sir.
*Chairman Camp. Thank you. Mr. Doggett is recognized.
*Mr. Doggett. Thank you, Mr. Chairman. And thank you, Ambassador. Good to have you here. I think all of us recognize the potential of the Trans‑Pacific partnership, and as with any trade agreement, there are pluses, and there are minuses. My concern would be that there is as much attention at USTR focused on minimizing the harm from such an agreement as maximizing the many potential good benefits of the agreement.
My understanding from prior testimony we had from your office is that you envisioned having the same standard applied to New Zealand and us and Vietnam. Is that correct? Do you expect there will be separate provisions so that some countries are dealt with differently than others?
*Ambassador Kirk. Congressman, without knowing specifically ‑‑ and it is always good to see my mother’s congressman.
*Mr. Doggett. That’s right.
*Ambassador Kirk. She will send you her regards. And I am glad it sounds like we finally got a map in Texas.
*Mr. Doggett. Right.
*Ambassador Kirk. Our ambition, at least among the nine countries that initially decided to go down this road together, was let us not wait on what is going to happen in Doha or APEC; let us try and develop a new trade model for the twenty‑first century with the highest standards knowing every country is going to have some challenge.
But at least let us start with the proposition, we want a high-standard agreement that everybody has got to play to and that this would not be the place to try to draw those distinctions between developed economies or maybe least‑developed or emerging economies, that if you sat at the TPP table, which we gave Vietnam 24 months to make that decision, for example, then we would say, “You take all the time you need to come here, but here is the price of admission. We are going to ask you to aim high and reach high.” And at least that is the method by which we have progressed to this point, Congressman, and we still want to adhere to that.
We want to have a high-standard agreement to which all of the parties are sort of on the same level, and the decision as to whether you want to meet those standards is up to individual countries. But from our perspective, we want this to be applied across the board.
*Mr. Doggett. Do you anticipate then asking Vietnam to meet International Labor Organization standards, core principles?
*Ambassador Kirk. Yes, we do.
*Mr. Doggett. And given its history of a lack of protection for workers, how do you see them getting there?
*Ambassador Kirk. Look, this is going to be a big lift for them. But to their credit, I would say this, there were no surprises. We were very honest. We were going table a labor agreement that incorporates core American values. Vietnam has a further road to travel, but at least every step of the way, they have said, “We understand that, and we are going to aspire to that.”
Now our team just came back from Vietnam. We were encouraged. They have, for the first time, sort of welcomed the ILO to come in and help them design some of their structures. They have got a lot to do. I don’t want to underscore the fact this is, for Vietnam, a much heavier lift than others. We are doing everything we can to provide them technical assistance. There are some areas they are going to say ‑‑ they are going to do the, we are new, we are young, but that is inherent in any trade negotiation.
*Mr. Doggett. Are there also transshipment issues with Vietnam, Malaysia, some of the other countries? And has transshipment of Chinese goods picked up in Korea since that agreement has been ratified?
*Ambassador Kirk. It has not in Korea. Because of you all’s concerns, particularly about North Korea, as you know, we were very careful to craft an agreement, and I would say ‑‑ Korea and the U.S. were interested in drafting an agreement that would help businesses in Korea and the U.S., not in China. That issue has come up particularly in the textile chapter, frankly, because there are some American businesses who don’t want any restrictions on their ability to take goods from China and ship them through.
We think this should be for the benefit of Vietnam, and we also want to protect a U.S. textile industry that, perhaps more than any other industry, feels like they have not been as well represented in our trade agreement. So we are trying to get the proper balance with our yarn‑forward provisions and others that will protect the interest of our textile industry that is doing okay, but gives the incentive to Japanese suppliers, and not those being ‑‑
*Mr. Doggett. And what about the concerns that this committee and you have dealt with on many occasions concerning currency manipulation in Asia. Would you expect that this partnership would address the currency manipulation problem?
*Ambassador Kirk. Well, we are going to have an opportunity, as the Chairman said, I think, to talk extensively about that and other issues. We know that’s an issue for you, but our partners understand our concerns. Typically, that’s an issue that’s been difficult to define in the context of a trade agreement. But the core for us, we want an agreement that gives American exporters, farmers, entrepreneurs access to what is going to be the fastest growing region in the world, but gives us a level playing field and the opportunity to create jobs here.
*Mr. Doggett. All right. Thank you.
*Chairman Camp. Thank you.
Mr. Shock is recognized.
*Mr. Shock. Thank you. Welcome, Ambassador. Thank you for your good work on the three trade agreements. Appreciate your leadership on that.
Questions about TPP, first question about U.S. biological medicines, many of which are produced in my home state of Illinois. When your Deputy Ambassador Marantis was here last December, I specifically asked him about whether or not USTR would be working to ensure that the same U.S. laws that protect U.S. biologic pharmaceuticals here in our country, specifically the 12‑year period, would be included in TPP to ensure that those same safeguards and IP protections are in place in the countries we are about to trade with.
Do you know if USTR has made a decision on that?
*Ambassador Kirk. Again, this is an issue, Congressman, where we understand that there are very strong differences. We are aware. Congress, I think, in the health care bill put in a 12‑year period for biologics, but as you know, the administration in its budget has wanted a 7‑year period, and I think you can understand where my equities would come down on that, but we have not tabled a provision on the biologics yet as we continue to try to see if we can’t find the proper balance between the two.
*Mr. Shock. Well, I am not sure even the most optimistic member of congress would assume that the President’s budget’s going to pass considering the fact last year his budget didn’t get a single vote, even from his own party, but having said that, whether the period is 7 years or 12, would it be a more fair question to say regardless of what the U.S. law is of the land at the time you negotiate TPP, that it will be your objective to ensure that whatever that period of protection is in U.S. law, you will work to try and get that same protection as a part of TPP?
*Ambassador Kirk. We are going to try to get the strongest provisions that we can, and understand, this is one where we have some of the strongest headwind because of some of the other countries that frankly have a very different approach to this.
*Mr. Shock. Well, you can understand our concern in terms of protecting our jobs here in the country in intellectual property and the money that is invested there if we don’t have those same protections.
*Ambassador Kirk. Yes, sir.
*Mr. Shock. Second, state‑owned enterprises, you are well aware of the large amount of foreign and direct investment specifically from the country of China. Overwhelming majority of that foreign direct investment is from state‑owned enterprises. What assurances can you give us that TPP will have not only mechanisms in ‑‑ not only rules in place, but most importantly, mechanisms in place to enforce competitive disadvantages that state‑owned enterprises may have when dealing with market‑based companies here in the United States?
*Ambassador Kirk. Well, the best answer I can give you, and understand, we haven’t finished, but I will tell you for precisely the reasons you articulated, Congressman, this is the first time we have ever tabled a separate chapter on state‑owned enterprises. We have heard from you, but just as critically we have heard from businesses the frustration with dealing with them, competing with them, and for that reason, we have insisted, and we have tabled, a chapter on state‑owned enterprises to make sure that if they are going to be there, they have got to be transparent. They have got to operate on market principles, and then having disciplines that we didn’t know about, say, for example, 10 years ago, trying to build those into the Trans‑Pacific Partnership.
*Mr. Shock. I have a specific question about whether or not the administration is prepared to rethink the need for maintaining high tariffs on consumer goods. As you know, when we do that oftentimes it is consumers who pay those higher tariffs, specifically one industry is the footwear companies who ‑‑ virtually no footwear is produced here in the United States, and by having large tariffs on U.S. based companies, produced goods overseas and import, you are basically taxing, quite frankly, the middle class and the people who are buying those consumer goods.
I have heard the administration say we need a 21st Century approach to this. How do you see that shaking out?
*Ambassador Kirk. Some of your colleagues from the northeast would be quick to tell you there is some footwear made here with L.L. Bean and with New Balance, and again, as with everything, we want to strike that appropriate balance. If there is anything on which we all agree, the real winner of trade liberalization are consumers. But even the American public have told us they don’t want to trade cheaper t‑shirts and tennis shoes for jobs. So we want the right balance to make sure we aren’t punishing consumers, but we want to protect America’s manufacturing base where we can.
*Mr. Shock. Okay. Finally, the pork industry in the United States is being significantly hurt by Canada’s recent addition of federal subsidies, their provincial and Federal Government subsidies, of their hog industry, and as a result, pork producers here in the United States have calculated it is going to cost thousands of jobs, putting our pork industry at a competitive disadvantage because the Canadian Government has decided to subsidize their production.
I am just wondering if Canada’s inclusion in TPP eventually would ‑‑ that perhaps would be something that would be on your radar to get them to back down from their federal subsidies of that industry.
*Ambassador Kirk. It would be, and as you heard me say, Congressman, no industry has been more supportive of our trade liberalization than the pork industry. One of the issues they have raised, and we will address with Canada honestly using the information we’ve gathered from the federal register process we went through in terms of their joining TPP, would be this issue.
*Mr. Shock. Okay. Thank you.
*Chairman Camp. Thank you.
Ms. Jenkins is recognized.
*Ms. Jenkins. Thank you, Mr. Chair, and thank you, Mr. Ambassador, for joining us and all your good work last year on the trade agreements.
The free flow of electronic information is critical to U.S. companies that sell goods and services over the internet and unfortunately some foreign governments blocked those flows. Other governments require online service suppliers to process local data or to locate servers in their countries. These types of restrictions can impede cross‑border trade, undermine the competitiveness of U.S. companies, and cost American jobs. This is true certainly here in the 21st Century.
Do you agree that the TPP agreement must include strong provisions ensuring the free flow of electronic information and can you just comment?
*Ambassador Kirk. Congresswoman, I agree with you completely and for that reason we have tabled provisions to address exactly what you say.
*Ms. Jenkins. Okay. Thank you.
And then to follow‑up on Representative Smith’s questions, being from Kansas and Nebraska, farmers and ranchers rather important to those of us in the Heartland and certainly our U.S. farmers and ranchers continue to face these significant sanitary and phytosanitary barriers in their efforts to export to China.
I am concerned that China continues to maintain a series of regulations and restrictions on U.S. exports of fruit, potatoes, beef, pork, poultry, et cetera, that aren’t supported by science and the independent U.S. International Trade Commission estimates that elimination of Chinese tariffs and nontariff measures could lead to an additional 3.9 billion to 5.2 billion in U.S. ag exports to China. These new exports would support tens of thousands of good paying American jobs.
What is the administration doing to address the persistent tariff and nontariff barriers that block U.S. exports to China?
*Ambassador Kirk. Well, again, Congresswoman, I mean I couldn’t agree with you more, we have visited Kansas and I have talked with Senator Roberts and others extensively. I don’t disagree with anything you have said. We continue to press China to adhere to sound sanitary, phytosanitary standards. We have challenged them in the WTO against, we think, non‑consistent duties they have put on poultry. We have challenged them.
We got a little bit of relief in the JCCT two years ago, if you remember, after the ‑‑ no, I am not supposed to call it swine flu, whatever we call it, the viral scare.
*Ms. Jenkins. H1N1.
*Ambassador Kirk. H1N1.
*Ms. Jenkins. Yes.
*Ambassador Kirk. We were able to get back in that market. Know that we work, I mean, almost daily with Secretary Vilsack and his team to try to get China to a better position, that they will do it, and where we can’t do it in negotiation, we have demonstrated we are not afraid to take them to the WTO, and I would just say again, that is one more, I think, evidence of the wisdom of the President in creating this Interagency Trade Enforcement Center.
*Ms. Jenkins. Well, we thank you for your past support and encourage you to stay diligent and help us out. Thanks.
*Ambassador Kirk. We will, but, also, don’t forget about Africa. When we had the AGOA forum here last year, we deliberately took them to Kansas because it was a great opportunity. They wanted to study more some of our standards in terms of agriculture production and you all were a great host.
*Chairman Camp. Thank you.
Mr. Thompson is recognized.
*Mr. Thompson. Thank you, Mr. Chairman. Ambassador, thank you for being here.
I want to follow‑up on something that Mr. Brady said earlier about your shop working with overseas markets to help us here in the United States, and I just want to put a mention that Governor Brown, our governor in California, is leading an effort to recruit businesses for California in China, business for California in China, so our folks can do business in that country, and your work with California would be very, very important and very much appreciated.
I want to talk a minute about flowers, and you and I have a little history here. You know my concerns. In my district, I have the largest cut flower and greens farm in the country and we are being absolutely hammered by the cheaper Colombian imports, and as I say, we have talked about this before, and I want to know what you can do to help especially now with the trade agreement that was signed pertaining to Colombia.
*Ambassador Kirk. Well, first of all, and I understand that on the programmatic side because USTR’s primary responsibilities are negotiation, there is little we have there, but I commit we will continue to work with you and whether it is Transportation or others, to see if there isn’t some vehicle that we can try to ensure the competitiveness of those California growers. And I very much appreciate your continued advocacy on this.
If I might just digress one minute, I would tell you at the meeting President Obama hosted with the national governors on Monday, almost singularly one area of cooperation with the governors and administration was in our need to do more in exporting. If I could draw the committee’s attention, Mr. Chairman, we have launched two important initiatives. One in terms of every state is trying to get foreign investment, but through Commerce there is a great new program called Select USA. We are trying to make it easier to draw in foreign investment, but particularly the biggest concern we have heard from small business is the confusion of where we start, and last week we launched a new tool called Business.USA.org, where the idea was to have one single point of entry, particularly for small businesses, to try to understand all the tools that we have available.
*Mr. Thompson. Thank you. And I appreciate the help on the cut flowers. The transportation issue is an important one. It would be critical to supporting California business.
Capcom is a company in the Bay area. It started there about 1985. They do videogames. They employ hundreds of American workers. The owner of that company is a constituent of mine and they are having a real tough time with counterfeiting going on in China and they have abandoned all of their efforts to fight this piracy problem because they found out that the company that is stealing their software has close ties with China’s Cultural Ministry. So I am hoping that the Trade Enforcement Committee will be able to intercede and help out, notwithstanding the association that these pirates have with foreign governments.
*Ambassador Kirk. First of all, we would be happy to learn more about that, but I would say again, one of the key asks that we had at least year’s JCCT was we wanted China to institutionalize at the highest level a governmental entity to deal with piracy and counterfeiting. They have agreed to do that.
Secondly, one of the reports that we present to you every year is our 301 report on other countries’ compliance with intellectual property rights. For the first time, last year in February we submitted to you what we called a notorious markets report identifying specifically the worst of those actors. It was a small step, but because of that, we were able to get China to shut down one of their worst sites for piracy, the Baidu website. But I understand the frustration of that small business and ‑‑
*Mr. Thompson. Thank you.
*Ambassador Kirk. ‑‑ we will continue to watch that.
*Mr. Thompson. And then, as you know, the solar manufacturers filed an anti‑dumping illegal subsidies case against China and what is happening in regard to our solar panels here in this country is costing us greatly in jobs. Do you have any update on the status of that claim?
*Ambassador Kirk. As you know, the ITC, I believe, accepted the case. It is now going through the investigatory period with the Department of Commerce and we have to stay separate from that. But the one thing I love about our job is we try to hear from everyone. You should know there is a huge divergence of thought among the solar industry on this because we are ‑‑ and we absolutely don’t want to yield to the issue of China dumping — but the United States also enjoys a huge surplus because we produce most of the components and the more technologically advanced components and we have a very healthy surplus. But we will wait to see what the judgment is from the Department of Commerce.
*Mr. Thompson. Thank you.
And, Mr. Chairman, I think it is important to note that Allen Edmonds still making shoes in Wisconsin, one of the greater companies around.
*Chairman Camp. Note that the footwear for much of our military is made in Big Rapids, Michigan as well.
So Mr. Roskam is recognized.
*Mr. Roskam. Thank you, Mr. Chairman. Thank you, Ambassador.
Ambassador, I represent suburban Chicago and we have had a very positive exchange with your staff, who has been incredibly helpful. What I want to do is just highlight for you an issue. You and I had a conversation about this last year. Let me just read you a few paragraphs, kind of a short, encapsulated summary, and then I have a specific ask at the end.
In suburban Chicago, there is a company called Fellows Manufacturing. These are the folks behind the bankers’ boxes and shredding machines and so forth, a stellar reputation, 550 Illinois employees, and in a nutshell, they entered into a joint venture in China in 2006, which went well for three year, and then in 2009, it just devolved into a nightmare. The nightmare now has involved theft of their property. They have been locked out and they have lost tools and it has been dramatic to say the least. They have now been involved in a Chinese court to try and seek justice, and over the past year, it has become, you know, increasingly murky. And your staff has, again, been really helpful on this.
My question is would you be willing to raise this? You know how this works. If the trade ambassador raises it, it has the imprimatur and you are able to move the ball significantly based on your personal attention, and so I just wanted to ask if you would be willing to raise this issue with the Chinese Ministry of Commerce?
It is also my understanding that you are going to be dispatching a delegation on intellectual property issues next month and there may be an opportunity there as well, but, again, your staff has been incredibly helpful and I just wanted to make a personal appeal.
*Ambassador Kirk. First of all, Congressman, thank you for bringing this to our attention. We have worked with you and not only will we raise it and have I raised it, but this was also one of the issues raised both at the Vice Presidential level and at the Presidential level.
We are more than concerned and alarmed over the rise in trade secrets theft and ‑‑ it is a tragedy. We are hearing it from small companies like Felloes, and larger companies as well, and I guess the only change since last year is for the first time it has gotten rampant enough that the companies have now gotten more engaged than many were before because they have realized they have nothing to lose. But we will continue to work with you on that.
*Mr. Roskam. Thank you, Ambassador. I yield back.
*Chairman Camp. Thank you.
Mr. Gerlach is recognized.
*Mr. Gerlach. Thank you, Mr. Chairman. Mr. Ambassador, thank you for joining us today.
I have two local companies in my area that have raised a couple issues and I would like to ask you about that. The one I will simply end by just sending you a letter, if you don’t mind, and if you could review it and respond, that would be much appreciated.
*Ambassador Kirk. Yes, sir.
*Mr. Gerlach. The other issue involves the issue of reinsurance in Brazil. I have a local company who has found an opportunity to do some reinsurance business down there, but apparently recently the Brazilian government has passed two resolutions, 224 and 225, that prohibit local insurers from associating themselves, in essence, with other companies from other countries and in essence trying to create a monopoly for those companies in that country on the reinsurance market.
I know you are aware of the issue. Can you update us on the status of what your office might be able to do to encourage the Brazilian government to relook at its policy to create this monopoly situation that is uncompetitive for our companies here in the United States? And with the fact that the Brazilian President will be visiting in the not too distant future, might that not be a good opportunity at some point to raise this issue with he and his government officials to discuss it?
*Ambassador Kirk. Congressman, to prove I can be somewhat brief, I would say yours is both a question and an answer, and I would only correct you to say the president is not a he, but a she. It is ‑‑
*Mr. Gerlach. Oh, I’m sorry.
*Ambassador Kirk. ‑‑ President Rousseff. No, no, no. We are exceptionally frustrated, I will be honest, with Brazil’s market. But I would also tell you that that is part of the rationale behind President Obama’s decision last year to make Brazil, Chile, and El Salvador his first foreign trip. We see enormous opportunities to expand our trade relationship within the hemisphere and we are hopeful that President Rousseff’s reciprocal visit perhaps might be the impetus to being to loosen up some of these opportunities.
And we applaud Brazil’s growth. They had this extraordinary find in terms of energy. We are, frankly, hopeful that the challenge of reaping the benefits of this new energy opportunity, and hosting both the World Cup and the Olympics, perhaps might overwhelm Brazil enough that they would be welcoming of our assistance in some of these areas like services and insurance.
*Mr. Gerlach. Okay. Thank you for that.
And, as I say, the other issue involves a CAFTA issue involving a company in my area that is one of the largest retailers of school uniforms and there is this yarn forward issue that is affecting their ability to continue to do business. So I, if you don’t mind, will send you a letter on that and if you could review and respond, it would be appreciated.
*Ambassador Kirk. We will.
*Mr. Gerlach. Okay. Thank you.
*Chairman Camp. Thank you.
*Mr. Gerlach. Thank you, Chairman.
*Chairman Camp. Mr. Blumenauer is recognized.
*Mr. Blumenauer. Thank you, Mr. Chairman. Thank you, Mr. Secretary, for being here. We appreciate your patience, and you have had expressed around the table, virtually all of us are interconnected with this global economy.
I have two things that I will follow with you in terms of letter. I don’t want to take you unawares, but I want to put them on as part of the record, a follow‑up. And then one that I would like to engage you in further discussion.
One, just reference to the footwear, I come from the Pacific Northwest. I have people in my district who manufacture footwear in the United States, but you will be receiving a letter that is circulated by Mr. Shock and me about this issue that deals with being serious about the tariff approach because the value of the footwear industry is here in the United States where the manufacturing, the design, the product ‑‑ a lot of the manufacturing that comes here that is done domestically comes from a product that is imported to the United States and duty free. This is distorted. It is not good long‑term business for the United States. So I would like you to look at this letter signed by other members.
The other letter that I will give you deals with the Peru free trade agreement. I spent a lot of time in working on the environmental and labor provisions so that we could have something that would be bipartisan, that would speak to concerns we have all heard at home, and particularly as it relates to Peru and illegal logging. Having spent so much time on that, I am a little dismayed, frankly, at the lack of progress, and we have met with the Peruvian authorities. They have done a little bit. I will be sending you a letter that I would hope that you could give some attention to because we want the integrity of these environmental protections respected so it will make further progress in international trade easier for you and for members of congress.
But the point that I would like to engage with you here in my remaining two and a half minutes or so, which I will turn over to you, speaks to what has happened with government procurement. You probably won’t be here for testimony that will be delivered by Mr. Krzanich from Intel. Part of it speaks to this inequity. The brick countries are really not playing fair. They haven’t been signatory to the GPA, and we are getting all sorts of unfair practices that are costing American technology in particular, but in a wide range of areas.
Frankly, this mystifies me. I think that if they are not going to play games, we ought to be much more aggressive in terms of our government policies towards their procurement activities here. This is not a two‑way street. I find that outrageous and I am wondering if there isn’t something we can do to push back unless and until they are signatories and they play by the rules.
*Ambassador Kirk. First of all, Congressman, thank you for your cooperation with us on the other two issues. I will respond in writing, but I think you know we have continued to work with Peru to make sure that they understand that that Forestry Annex was real and it is in their interest and we are working and we will continue to.
On GPA, one, I would be interested, and maybe I will have one of my staff stay, because I agree with you. But the fundamental premise of the Government Procurement Agreement is if you aren’t a member of it, you don’t get the benefits of it. So, frankly, I will be curious to hear what the gentleman from Intel says. But China, Russia, those countries that are not signatories to the Government Procurement Act have no protection or no access to any of our access that we grant to other signatories.
Now, it is an issue that we continue to press China on because one of the commitments they made when we granted them permanent normal trade status is they would join the Government Procurement Agreement. They have tabled an offer that we think falls far short of what we need, but they have not yet ‑‑
*Mr. Blumenauer. Right, but there are examples of Chinese contracts in the United States that use some government funding that, frankly ‑‑ I mean we have ‑‑ the bridge in ‑‑ building the Bay Bridge, $400 million of Chinese steel, and frankly a screwed up job. It was defective. It ended up costing more in the long run, but our being more aggressive about where they are beneficiaries of money either directly or indirectly that is taxpayer money, that we turn this spigot back unless and until they play by the rules for our companies.
*Ambassador Kirk. Well, I don’t disagree with your premise. I would love to know what those specific cases are so we can ‑‑
*Chairman Camp. Okay. Thank you. Time is expired.
Mr. Paulson is recognized.
*Mr. Paulson. Thank you, Mr. Chairman, and thank you, Mr. Ambassador, for being here today.
You made some comments earlier about the working relationship we have with the EU and the high level working group I think you said that has been appointed to that and I appreciate those comments. That is the largest commercial relationship by far that exists and I would like to stay engaged on this issue as well and make sure we are able to maximize the potential in that transatlantic economic relationship.
I also wanted to ask this, is that I know last June there was several technology companies, many that have roots to Minnesota actually, Best Buy, Honeywell, 3M, as well as U.S. Chamber and the Retail Industry Leaders Association, Entertainment Software Association, they filed comments with the USTR in strong support of your proposal to update the Information Technology Agreement, ITA, with the WTO, and I understand it has not been updated since 1996. So it does not include connected devices with internet or Wi‑Fi capability, like Smartphones, televisions, e‑readers, et cetera, and these are hugely popular items and they are growing with consumers, and so if this agreement were updated, it would absolutely help lower duties and reduce costs for consumers.
Can you just update me and the committee where USTR stands with the WTO and the efforts to get this IT updated and what can the committee, what can congress do to help disagreement kind of move forward and help reflect modern technological advances and developments?
*Ambassador Kirk. Well, thank you, Congressman, and one, I cannot tell you the value to our negotiators of what this congress did in a bipartisan way and the message you sent last fall in passing all of our trade agreements because, people in Geneva that frankly wanted to hide behind other things questioned our political will. There is more we can do, but, one, you just sent a strong message. As I told them, “You give us a good deal and our congress will move on it, but there is never a time to take a bad deal”.
Now, I will say that one of the things all of you asked me was for an assurance that we wouldn’t just sign an agreement out of deal fatigue if we didn’t get the right deal. Because we insisted we have a more honest approach than that. The good news is we now have a little more latitude, frankly, to look at other ways we can liberalize trade. One of the opportunities a number of countries, including the U.S., has embraced is a more honest discussion about modernizing the ITA.
Perhaps I can follow‑up so I don’t take up more time, but we are working collaboratively with a number of countries that are interested in this initiative and you correctly note, this is one that our industry is wildly supportive of and so we will continue to work with you and industry to see whether we achieved this both in product coverage or others, but it is something we are very supportive of.
*Mr. Paulson. Yes, I appreciate that. I would absolutely like to try and help you with it and help in any way possible.
Let me follow‑up too because you made some comments earlier about the biopharmaceutical and medical technology industries and that is obviously critical to the future of our economy right here in America, and these are industries that do support very good, very high paying jobs. They depend on the strong intellectual property rights and the innovation that created the industry, especially in the areas of drugs and devices, the research and development, and it comes from our workers here. And it is these strong IPR protections, including data protection, that make it commercially sustainable for these biopharmaceutical firms to invest so substantially.
Do you agree in general that to encourage American innovation in this sector, that we need to help and make sure we are pressing for the same high standards and IPR protections in the TPP countries that are part of that structure going forward so we can move forward with keeping the R&D here and protecting that IPR?
*Ambassador Kirk. Absolutely. Yes, sir.
*Mr. Paulson. Good. Well, I appreciate that.
Mr. Chairman, I yield back.
*Chairman Camp. Thank you.
Mr. Marchant is recognized.
*Mr. Marchant. Thank you, Mr. Chairman.
Ambassador, as you know, my district includes the Dallas‑Fort Worth Airport and Los Colinas. So you know how important trade is to my district and our region and we are privileged to have someone that is so familiar with that area as trade representative.
We have just passed the Colombian and Panama trade agreements and some people are suspecting that both the administration and congress is going to rest on their laurels now and not pursue any kind of additional trade agreements in South America. I think in April there is a summit that is hosted by Colombia, a lot of American states down there. Do you anticipate going ‑‑ having representation at that gathering and do you anticipate opening discussions about new trade agreements in South America?
*Ambassador Kirk. Absolutely. And thank you, Congressman. Your hometown is blessed to have a really young, dynamic mayor that I think is going to have a great career as well.
Kenny, as you know, we don’t want to lapse in too much of our Texas pride. No state benefits from exporting more than Texas. We are the number one exporter and we have been. It is important to note that in addition to Panama and Colombia, our largest trading partners are still Mexico and Canada. A lot of the benefits are to our region, but we aren’t going to rest.
Two of the countries critical to moving the Trans‑Pacific Partnership forward, for example, are Chile and Peru. We have a trade agreement with Chile, but I will be joining the President for the Summit of the Americas, and again, part of President Obama’s deliberate decision to go to South America first last year was to begin to try to set new dynamics for increased trade relations between us and our partners in South America and the Caribbean.
*Mr. Marchant. And on a second note, just recently I had the opportunity to visit troops in Afghanistan and we had an opportunity to stop in Pakistan and I can tell you that they had a major emphasis that both the prime minister, the president, and the parliamentary members, their emphasis was on trade and could I ask you what the trade ‑‑ as trade representative, what is being done in ‑‑ as far as you said you are going to India, but what is being done in Central Asia, Pakistan specifically, in opening up trade relations?
*Ambassador Kirk. Congressman, thank you so much for raising this because it hadn’t gotten as much attention. One of our more important initiatives that I referenced in my opening remarks is what we can do to help stabilize this region, not just in Pakistan. Pakistan, we would very much welcome their coming back to the table and frankly, that is one of the countries we could conclude a BIT with, for example, pretty quickly, but we have a broader initiative that we call MENATIP. It is the Middle East North African Trade and Investment Partnership. Recognizing one of our real challenges, whether it is in Egypt or Libya and others, we applaud this Arab Spring, but as you know, one of the challenges for their leaders is to show this dividend of democracy. We think we can be a partner with them, but we are having to tread very carefully so that this is seen as something that they embrace and initiate. So we have had teams recently in Egypt. We have gone to other trade partners in Jordan and Bahrain, to see how we can work collaboratively, because in many cases, they are constrained because of barriers among one another.
So we are doing everything we can to work with them both bilaterally, but also pluralaterally to grow the seeds for increased trade and investment throughout the region.
*Mr. Marchant. Well, the central message from their parliamentary leaders was that an escalation in trade talks would significantly help in deescalating the tensions between Pakistan and our country over there. So ‑‑
*Ambassador Kirk. As you know, we have heard not just from them, but you have heard it from Secretary Gates and our military leaders, countries that generally find a way to do business together and find a common future in trade are less likely to go to war with one another.
*Mr. Marchant. The prime minister’s message primarily was trade not aid. So thank you very much.
*Chairman Camp. Thank you.
Mr. Berg is recognized.
*Mr. Berg. Thank you, Mr. Chairman. Thank you, Ambassador Kirk.
I wanted to talk a little bit about Russia and where we are going there, and, you know, probably the first question I have is a lot of our tariffs are relatively low right now, and so if we don’t really change any of our agreements with Russia, you know, what would be the negative impact, the status quo, on business, on labor, on agriculture?
*Ambassador Kirk. Well, first of all, thank you, Congressman.
If we were to grant Russia, which I hope we will, permanent normal trade status and lift the Jackson‑Vanik restrictions, the good thing is not one thing is required from the United States. We don’t have to lower our tariffs. We don’t have to change any of our laws. This is decidedly about whether American businesses, farmers, small businesses, will reap the benefits of, frankly, all of the efforts that Russia will undertake to, in many cases, lower their tariffs, open up their service markets, begin to conform to sanitary and phytosanitary standards. And I want to make it plain. I know there are very legitimate, strong concerns on other issues, but the simple fact is our extending permanent normal trade relation status to Russia is singularly in our interest.
Now, we do have a bilateral trade framework agreement, that dates back to 1992. But for us to reap the real benefits and not be put at a competitive advantage, I can’t make it any plainer than the Chairman did in his remarks. This is singularly in our commercial interest to do this.
*Mr. Berg. What would be the big benefits for our economy if we did take those steps, both repealing of the Jackson‑Vanik, as well as a permanent normal trade relations?
*Ambassador Kirk. Well, I mean, Russia is the largest economy of the world not in a rules-based trading system. We have a number of U.S. companies and interests in the Baltics and the region, but Russia can be, you know, the launching pad for further integration there. It gives us protection we don’t have now. For example, if we have businesses there and they are experiencing challenges, you know, we can talk about it, but we don’t have a lot of tools to move it.
We think there are a lot of offensive categories, and I can’t believe ‑‑ you know, even though I’m from Texas, I really am a city boy — but I can’t believe the whole time I spent about talking about agriculture. This is a huge market for us for pork and for grain, for those industries. In terms of manufactured goods, the automotive industry, aircrafts, technology — with all of the opportunities for joint venturing in energy exploration. These are great immediate opportunities we could reap, but, again, if Jackson‑Vanik stays in place, our exporters, our businesses are going to be competing with one hand behind their back because we won’t get that tariff benefit differential through the WTO.
*Mr. Berg. I can clearly see your passion on this, so I guess the question is what ‑‑ you know, what are you ‑‑ what is the administration doing to move this forward? I mean I see it is number three on your list here. What are ‑‑
*Ambassador Kirk. Well, as you know, we have begun to engage Congress on the need to do this and we will work with the leadership of this committee and the Senate Finance Committee in particular on the appropriate time and vehicle to bring this up. But we have been very plain and I stated this in my remarks last year. This is something collaboratively we need to work to achieve.
*Mr. Berg. Has the President came out with a statement supporting the repeal and supporting the permanent relations?
*Ambassador Kirk. Yes, he did. In fact, I think the President referenced it in his State of the Union Address.
*Mr. Berg. Okay. Then from the administration standpoint, is there anything else that you are planning to do or can do to help remove some of the political barriers to taking this a step forward?
*Ambassador Kirk. Well, we have engaged the business community. Again, we have begun to discuss this issue with members. Again, there are other issues, members legitimately concerned, again, but we have done everything we can to try to socialize the issue so that ‑‑ look, many ‑‑ those of us who ‑‑ and I hate being one of those old enough to remember the debate about granting China PNTR. I mean, these are very, very difficult decisions, but we are trying to create the right environment. We can have it in a dispassionate a way as possible and hopefully work with the leadership to get an affirmative vote.
*Mr. Berg. If there is things that leadership feels would be helpful the administration to do to this move forward, you are willing to help in that manner however it goes?
*Ambassador Kirk. Absolutely.
*Mr. Berg. Okay. All right. Thank you.
I yield back.
*Chairman Camp. Thank you.
Ms. Black is recognized.
*Ms. Black. Thank you, Mr. Chairman, and again, Ambassador, thank you so much for being here with us. We always learn so much with these dialogues.
As you know, the United States has long enjoyed a large service trade surplus and U.S. services firms are global leaders across many service sectors, especially, for example, business services like banking and insurance and so on. The average wage in these business services is substantially higher than in the manufacturing service. These are good jobs, and the business service sector alone dwarfs the entire manufacturing sector.
Promoting more U.S. service exports will be important on an ongoing source of well‑paid U.S. jobs, and that is, of course, something we are all looking forward to make sure that we have more U.S. jobs and especially those high paying jobs, and yet the President’s National Export Initiative that is led by commerce appears to focus principally on manufacturing exports.
What are you doing to ensure that the administration’s export promotion initiative is seizing the opportunity that we have to generate good U.S. jobs by expanding our services exports?
*Ambassador Kirk. Well, thank you for your question and let me at least try to ‑‑ not necessarily disagree with you, but assure you that we are as aware of the importance of the service industry to our economy and our exports as you. It is absolutely an integral part of our National Export Initiative. We had a meeting of the President’s Export Council and trade policy coordinating group yesterday. We spent a large part of our time looking at opportunities to further expand the service industry.
Our services exports are up about 21 percent since we started the Export Initiative. Many of our services, frankly, support the manufacturing industry. It is a place that we believe, frankly, that the numbers that we use in terms of our ambition for Korea are understated because we don’t capture services data as well as we do hard goods data, but, for example, in Korea, you heard even their president say, this is a half a trillion dollar services market. It is a huge opportunity for us. And particularly in our Trans‑Pacific Partnership, we have engaged with the Service Industry Coalition and other groups on a number of opportunities to make sure we are addressing their concerns in an offensive way.
So it is something we embrace. It is an area that we have a surplus in just about every region in the world and we think it is a critical place America can help other economies meet their ambition while creating jobs here at home.
*Ms. Black. I hear you saying that you are engaging. Can you give me anything more specific in what you are doing in order to help promote the service industry?
*Ambassador Kirk. Not that they are the only group, but one of the strongest resources we have is the Service Industries Coalition, for example. We have worked with them to hold seminars for other countries, frankly, on how partnering with the United States where, frankly, we have resources and competencies that they may not, is not a threat to them, but it is a way we can jointly help them achieve some of their broad ambitions.
Our WTO ambassador, Ambassador Michael Punke, for example, met with the Service Industries Coalition yesterday to talk both about some practical things we can seek, the opportunity we have now in Geneva to expand trade and services, as well as some ideas that we can incorporate into our Trans‑Pacific Partnership.
*Ms. Black. And I appreciate what you are saying. I guess I am just not hearing from you anything specifically that you ‑‑
*Ambassador Kirk. Within the Trans‑Pacific Partnership, we are specifically tailoring chapters that will expand and promote nondiscriminatory access ‑‑
*Ms. Black. Okay.
*Ambassador Kirk. ‑‑ to our services markets.
*Ms. Black. Okay.
*Ambassador Kirk. I mean I am sorry if I did not make that clear.
*Ms. Black. Okay. Well, I appreciate that, and again, you know, jobs, jobs, jobs are so important for us here in the United States, but I think we have to be very aware that as things are different than they were years ago and that this is an industry where it is good paying jobs and I don’t want us to overlook that, and obviously manufacturing is important too, but as we move on in this new age of where jobs are seen as the jobs that are the future jobs with high paying, I want to be sure that we are making sure we are staying where we need to be in that industry.
Thank you.
*Ambassador Kirk. Yes, ma’am.
*Chairman Camp. Thank you.
Mr. Reed is recognized.
*Mr. Reed. Thank you, Mr. Chairman, and thank you, Mr. Ambassador. Just wanted to echo the sentiment from my colleagues, just applaud your efforts in your office and the recent success with Korea, Colombia, Panama. We did a lot of work trying to advance that cause and I just so appreciate all the efforts that you have done there.
And so I wanted to go back to our future trade agenda and in particular Russia and the focus on Russia and bringing them as they move into the potential WTO establishment, and what I am concerned about is I am all about free trade, but it has to be free, fair trade, and specifically as part of Russia’s accession into the WTO had agreed to concessions to open its market, such as reducing its export tariffs; however, recently the Russian Government has taken administrative actions that would undermine these export concessions. For example, a draft decree would cut off exports of metals, such as tin, magnesium, and titanium, just to name a few, key materials used by the steel industry and other manufacturers in my district from selected Russian ports. I believe that was issued in December/January of this year.
And I was wondering if you are aware of that action by the Russian Government and what your thoughts on that would be, and also your assurances or concerns, if any, about Russia complying with the potential WTO requirements.
*Ambassador Kirk. Congressman, first of all, we are aware of it. We are troubled by it. I hope I don’t sound repetitive or redundant, but it is precisely again one of the reasons that we need to bring Russia fully into the WTO and the United States’ exporters ought to have that protection. Right now if we don’t lift Jackson‑Vanik and grant them PNTR, you and I can talk about it and shake our heads, but I don’t have the ability to take them to the WTO, as I did China. Just last week, since you mentioned raw materials, the very first case we filed in 2009 was a case in the WTO that challenged China’s restraints on raw materials that are critical to the steel industry and this was a case where, you know, not just the United Steelworkers, but, you know, U.S. Steel Company and others had come to us and said, “This is harmful to us.” We acted on it and we got a ruling from the WTO that validated our concerns almost 100 percent.
Having that in hand, that would greatly enable us to then challenge Russia in a more formal way if we can’t get them to redraw these export restraints by dialogue, but I would go back ‑‑ it absolutely makes the case why we would be benefitted by having full access to all of Russia’s inclusion in the World Trade Organization, including dispute settlement.
*Mr. Reed. Well, I so appreciate that, and I so appreciate what you did with the China situation and also the rare earth and the aggressive nature and I applaud you on that effort.
And so what I am hearing is that if we get Russia to the WTO in full PNTR status, that you would give me the assurance that if this type of behavior or these type of government decrees occur in the future, that we will vigorously go after those potential situations. Do I have that assurance from you, Mr. Ambassador?
*Ambassador Kirk. Yes, you do.
*Mr. Reed. All right. Thank you so much.
With that, I yield back, Mr. Chairman.
*Chairman Camp. Thank you.
Dr. Price is recognized.
*Dr. Price. Thank you, Mr. Chair. Mr. Ambassador, I want to thank you for your service and also for your patience today. You have been here for a good long time.
I want to ask just a couple of very specific questions. The first is on state‑owned enterprises. I think that Japan’s interest in the TPP creates an opportunity to address a number of barriers to U.S. exports and investment. Issues such as Japan Post remind us the market dangers of government provided benefits in state‑owned enterprises because then they create an unlevel playing field in those countries. You have heard others talk about the state‑owned enterprises and the problems and challenges in China.
What are your thoughts on discouraging the proliferation of market impacting state‑owned enterprises among those countries with which we hope to expand our trade, with specific attention to Japan?
*Ambassador Kirk. Well, first of all, we share your concerns about the presence of state‑owned enterprises wherever they are and I am happy to follow‑up with you directly, Congressman, but it is precisely the reason in the Trans‑Pacific Partnership negotiations that we are tabling for the first time a chapter that would deal with the disciplines of state‑owned enterprises. We have learned from some of the lessons that we had with respect, say, to China and others and we have consulted with business and with members of Congress and at least are insisting that we be knowledgeable and thoughtful about that and address that.
With respect to Japan Post, this is an issue we have challenged Japan regularly since we have been in. I have visited with a number of our insurers. This is an important market. You may or may not know AFLAC, for example, I think some 75 percent of their revenue comes from Japan. You know, thus far, fortunately because of their own politics, they have not moved on that. But we have not yielded in insisting that if they are going to open that market up and they are going to allow a state‑owned entity to compete, it has to be on market terms and nondiscriminatory terms and we will continue to insist on that.
*Dr. Price. And I hear that, the market terms again, and you mentioned earlier that ‑‑ the two items, transparency and market principles. We would suggest that it is virtually impossible to have market principles work with state‑owned enterprises, so ‑‑ and I would urge you to be very, very challenging to those countries that want to make it so there isn’t a level playing field.
One other issue I want to talk about, in Georgia we are increasingly concerned and remarkably frustrated by India’s position to deny access to U.S. poultry into their Indian market, a market with really great potential, and although they use a variety of excuses and trade barriers to prohibit the importation of U.S. poultry, the one that they keep coming back to is a concern about viral disease, avian influenza, and although it sounds foreboding, there is no scientific basis for their concern.
So I wonder what the administration has done to convey the use ‑‑ their concern about the use of such non‑scientifically based measures to prevent trade that is clearly inconsistent with the WTO, and if this continues, does the administration plan to seek to enforce our rights under the WTO?
*Ambassador Kirk. We are extraordinarily frustrated with India’s continued non‑application of internationally recognized scientific standards. Our American poultry, it is safe. There is no reason for them to deny us access. We have raised this at every opportunity we have engaged India, including past trade policy forums. We would continue. We have continued to press them. It is our practice, though, not to publicly state whether or when we will take legal action within the WTO.
*Dr. Price. Is it fair to say that that still remains an option that the administration is considering?
*Ambassador Kirk. It is certainly an option that is on the table. I think you could examine our actions in China on similar cases and others to perhaps lead you to the conclusion that you want to draw.
*Dr. Price. And I appreciate that. We would encourage the administration to move with dispatch. This has been a long, ongoing battle and one, again, for which there is no scientific evidence. Thank you so much.
I yield back.
*Chairman Camp. Well, thank you, and thank you, Mr. Ambassador, and thank you for being here for allowing all members who wish to ask questions the chance to be able to do that.
Senator Baucus and I wrote you and Secretary Geithner in January and we did receive a response regarding China’s currency and their exchange rate policies and particularly with regard to the upcoming seminar and the World Trade Organization. I want to thank you for the response to that letter, and without objection, I would like to enter both letters into the record and just tell you again how much I appreciate all of your efforts and your testimony here today and also want to acknowledge Luis Jimenez, who I understand is leaving your operation and going to be heading over to the White House. So we expect to see him frequently in his capacity in Legislative Affairs there, and I know that Mr. Levin would also like to make a comment.
[The insert of The Honorable Dave Camp #1 follows:]
[The insert of The Honorable Dave Camp #2 follows:]
*Mr. Levin. Well, Mr. Ambassador, we really appreciated all of your testimony and your expertise, and if I might just say a word to your pal Luis. As you know, he has worked incessantly on these issues and has represented you and USTR and the administration so well. And Luis, we wish you well. As the Chairman said, we won’t say so long since we will be seeing you very often.
*Mr. Jimenez. Thank you.
*Chairman Camp. Again, thank you very much, sir.
*Ambassador Kirk. Thank you.
*Chairman Camp. And now I would like to turn to our second panel.
We have with us today Mr. Tim Harris, President of Harris & Ford, Mr. Brian Krzanich, Chief Operating Officer of Intel Corporation, Mr. James H. Quigley, Senior Partner, Deloitte & Touche, and Mr. Alan Wolff, Of Counsel, Dewey & LeBoeuf.
I’ve asked these witnesses to take the long view today, specifically with respect to new negotiations and already today we have addressed our relationship with China and Russia, the TPP negotiations, and the need for strong enforcement.
At this point, I would like to discuss what steps we should be taking in undertaking new negotiations to best position the United States and I welcome our panel.
*Mr. Brady. Well, I want to join with Chairman Camp and thank our witnesses for being here today and again looking at the long view specifically with respect to new negotiations and we reserve five minutes for each of the testimony.
So, Mr. Harris, I yield to you. Thank you for being here today.
*Mr. Harris. To Chairman Camp and Ranking Member Levin and members of the committee, I am Tim Harris, cofounder of Harris & Ford, a distributor based in Indianapolis, Indiana, and again, I thank you for this opportunity to allow me to present our views on U.S. trade policy.
When I look at Harris & Ford, Harris & Ford we are, again, a distributor. We focus in food, pharmaceutical, cosmetics, and the industrial marketplace. We started out on two empty paint pails that the painters left behind, didn’t really have money for furniture or anything else, and I remember walking in, seeing those two empty paint pails and I said to my partner, Joe Ford, I said, “Man, thank God we got furniture,” and he said, “Where do you see furniture?” And I said, “Man, where I came from, Joe, that is furniture.”
When we started out, we didn’t have very much. We had an idea. We had experiences, but companies like Procter & Gamble opened up their doors and allowed Harris & Ford to distribute their products, yet and still most companies, both suppliers and customers, were reducing their distributor base. So what we had to do, we had to create a niche. We had to find a way into the marketplace and the way that we did that was we created what we called a consolidation model. Did it first with Pillsbury where we were able to go into plants and they eliminate 210 suppliers in favor of Harris & Ford. I should say consolidate those.
We went from distributing products in the U.S. to traveling abroad with, again, multibillion dollar companies of the likes of Coca‑Cola, traveled to China and begin to import products like saccharine sweeteners, ascorbic acid, of course vitamin C, citric acid, and other products that were used as preservatives for primarily food and cosmetics.
As time went on, we seen that our customer base, a lot of their growth market was overseas or offshore to India, to China, to South Africa, to Europe, et cetera, and what we did, we went from having our model that we used just domestically to employing that internationally.
Let me just say to you right now, Harris & Ford went from sitting on those two empty paint pails with zero customers and now Harris & Ford is about a $200 million distributor. Harris & Ford sells to North America, Central America, Western Europe, Asia, as well as the Middle East. There are 27 countries that we export product to, 18 companies that we import product from.
When I look at Harris & Ford, and again trying to be very concise here, and I think about the U.S. trade policies, countries where it is easy to work in, countries where it is difficult for us to work in, there is three points that I would like to leave with the Ways and Means Committee here. First of all, in the countries where you set the rules of engagement, where the rules are like the U.S. rules, like Mexico, like Canada, it is easy for us to do business in those countries, much more difficult in countries like Brazil, Argentina, and China, Saudi Arabia. So one thing we are asking that you set the rules of the road.
Secondly, I want you to understand that we are just one link in the supply chain and when you help our customers win, the Krafts, the Procter & Gambles, the Coca‑Colas, if business is easy for them to do offshore, it makes it easy for us to do business with them as well.
Third, and final, I would like to say again that a lot of companies that export are the same companies that import. I heard Representative Kirk express some concerns about China pirating. I heard some concerns about assets being taken from U.S. companies over in China. And it is much easier if we work with a company like Procter & Gamble that carries us there with them and do business with them. It is much easier. It is much safer.
So, again, I would like you to consider the statements that I made and I thank you for your time.
*Chairman Camp. Thank you, sir. Your full statement will be put in the record.
*Mr. Harris. Thank you.
[The statement of Mr. Harris follows:]
*Congressman Brady. Mr. Krzanich?
STATEMENT OF BRIAN KRZANICH, SENIOR VICE PRESIDENT AND CHIEF OPERATING OFFICER, INTEL CORPORATION
*Mr. Krzanich. Thank you, Congressman Brady, members of the committee. I appreciate the opportunity to appear here before you today and discuss the future U.S. trade policy.
Intel is a Fortune 50 company, a leading manufacturer of computer communications and networking products. We have approximately 100,000 employees worldwide, with more than half of those in the U.S.
Even during strained economic climate, Intel has continued to invest in the U.S. to stimulate economic and job growth.
Since 2009, the company has announced plans to build two new factories in Oregon and in Arizona, and update its existing manufacturing facilities in those two states and in New Mexico.
These projects required an investment of between 18 and $20 billion and are underway currently.
When we complete these projects, we will have created more than 15,000 construction jobs, and we will have created and maintained thousands of permanent jobs, all of which are sustained by overseas sales of our products. Trade is important to us.
While Intel manufacturers three‑quarters of its products in the U.S., it generates more than three‑quarters of its revenue from overseas.
Our ability to export and sell to 95 percent of the world’s consumers living outside the U.S. has led to record earnings during these turbulent times.
In fact, microprocessors have been the leading U.S. export when averaged over the last five years. However, many U.S. industries, not just ours, are highly dependent on market access overseas to create and maintain domestic jobs.
Robust free trade agreements are essential to market access and continued growth.
I want to briefly make three points today in support of the need for the U.S. Government to pursue a more ambitious trade agenda. Each of these points is discussed in detail in our written submissions.
My first point is that existing trade agreements need to be expanded. Too many key markets are subject to too few existing trade rules. I have several brief examples.
The WTO information technology agreement or the ITA, has dramatically increased U.S. exports by eliminating Custom duties in many countries on a range of technology products that were in existence at the time it was negotiated.
Mexico, Brazil and several other notable countries are not ITA members. They are not signatories of the ITA.
Many of the digital products developed in the last decade, such as multi‑processors, video game consoles, DRAMs, are not covered by the ITA.
The Information Technology and Innovation Foundation estimates that the ITA expansion would increase direct U.S. exports by $2.8 billion, boost U.S. revenues by over $10 billion, and support an estimated 60,000 new jobs.
Intel strongly supports the administration’s recent efforts to begin negotiations to expand membership and product coverage on the now 16 year old agreement.
My second example, a more broad example, is the need to expand the existing agreements to pertain to Government procurements, which we heard this morning limits companies on a significant share of the global economy.
Yet none of the BRIC countries are members of the WTO Government procurement agreements or the GPA, which prohibits discrimination against foreign suppliers. This has enabled China, Indian and Brazil to pursue measures designed to favor local suppliers, especially those in the electronic sector.
The U.S. Government needs to find a way to incentivize other large governments to join the GPA with similar transaction coverage.
The second major point I would like to make this morning is the U.S. Government must enter into additional robust trade agreements on an accelerated basis.
Trade flow data shows how important FTAs are to the U.S. economy. Trade agreements between the U.S. and 17 countries accounted for 41 percent of the U.S. exports in 2011, even though these countries represent only seven percent of the world economy.
U.S. exports to every single FTA partner country have increased dramatically after these agreements were implemented. U.S. exports create and sustain U.S. jobs.
Robust FTAs open up new markets to our exports and reduce the cost of doing business overseas. We need more FTAs to create more U.S jobs.
Yet the U.S. has not kept pace with other countries in opening new markets abroad, especially in the fast growing economies of Asia and Latin America, and they are now major engines of global growth.
As the global competitiveness increases, our pace to increase market access for U.S. goods and services needs to accelerate.
My third major point and my final one, the U.S. Government must use a variety of mechanisms to tackle more complex non‑tariff barriers.
Some governments are linking more traditional NTBs, such as local content measures, with new entities that promote discriminatory technology standards and favor domestic intellectual property rights, all with the objective of creating national manufacturing champions and increasing indigenous innovation.
*Mr. Brady. Mr. Krzanich, I apologize. Time has expired. I would like to come back to your points during the questioning, if I may. Thank you, sir, and welcome.
[The statement of Mr. Krzanich follows:]
*Mr. Brady. Mr. Quigley?
STATEMENT OF JAMES H. QUIGLEY, SENIOR PARTNER, DELOITTE LLP
*Mr. Quigley. Thank you, Congressman Brady. I appreciate the chance to testify here before the committee on the future directions of international trade policy and negotiations.
I have submitted a written statement and I ask that be included in the record of the hearing.
My name is Jim Quigley. I am a senior partner of Deloitte LLP, and prior to that role, I was the CEO of Deloitte Touche Tohmatsu Limited, a global network of Deloitte member firms around the world that provides services in 153 countries. We definitely have an interest in your work on trade.
This hearing is both important and timely because there is no more significant issue facing our nation than the need for economic growth and jobs.
Trade negotiations to open markets and strengthen the rules of fair international competition are a critical component of the policies needed to address growth and employment.
Deloitte has long supported the multi‑lateral trading system and like many others, we had hoped for a successful conclusion of the Doha development round of negotiations with agreement on a broad market opening package for services, manufactured products and agriculture. Unfortunately, this appears to be beyond the reach of negotiators in the foreseeable future.
Although the suspension of the Doha round is disappointing, it does give us an opportunity to reassess our negotiating objectives and launch some initiatives that might prove more successful in the immediate time frame.
Over the past few years, I have had the good fortune to co‑chair the Transatlantic Business Dialogue and over the past several months, I have served as a member of the Transatlantic Task Force on Trade and Investments, sponsored by the German Marshall Fund of the United States and the European Center for International Political Economy.
Both have recently articulated their visions for the future of global trade and investment built on a strong transatlantic platform.
This makes both good political and good economic sense. The U.S. and the EU already have the largest trade and investment relationships in the world.
We enjoy relatively similar wage and benefit structures and labor rights and worker protections. We have common concerns about the environment and the health and safety of our citizens, and we have generally robust intellectual property protections, and we have a shared view of the global trading system based on free markets and fair competition.
Given the level of integration that already exists, we have an opportunity to raise the transatlantic relationship to a whole new level, a real partnership for jobs and growth.
In this connection, I hope the high level working group that Ambassador Kirk earlier referenced that is co‑chaired by him and Commissioner DeGucht will set an ambitious agenda, constrained neither by old trade concepts, such as FTAs, nor by past issues where agreement has proved elusive.
We should strive for a truly barrier free transatlantic marketplace. This could bring enormous benefits in three ways.
First, it would add hundreds of billions of dollars to our economic output, more than $120 billion from the removal of tariffs, and more than $210 billion from the removal of even half of the non‑tariff barriers.
This is to say nothing of the potential gains in the service sector.
Second, it would also allow us to tackle issues that are significant to business in the 21st Century that have not been addressed or only timidly addressed in multilateral negotiations, such as services, information flows, government procurement, the movement of talent, product and service standards, and regulations, to name some of the prominent few.
Third, it would set the stage for engaging other countries in more productive negotiations.
Success on the transatlantic front might draw other countries into negotiations so that their companies can remain competitive in a transatlantic marketplace, and others might be encouraged by seeing that new and innovative solutions can be found to difficult issues.
Negotiations between the U.S. and the EU to achieve these objectives should not be pursued as a single undertaking where success in one area is dependent on success in all others.
Negotiations should seek positive outcomes in each area at whatever negotiating pace is possible. Forward movement should not be stymied by attempting to resolve up front all those difficult issues that have proven intractable in the past.
The goal here is not to build a transatlantic fortress. Quite to the contrary, we should use progress in the transatlantic space to engage third countries and pave the way for broader trade liberalization and economic cooperation in services, investment regulation, and other areas I mentioned.
Our objective here should be forward movement on a broad front but rooted in the transatlantic commitment to a trading system based on free markets and fair competition.
Stalemate serves no one’s purpose and certainly will not lead to growth and employment that our economy and others so desperately need.
Thank you again for the opportunity to express these views, and I would be happy to respond to questions.
[The statement of Mr. Quigley follows:]
*Mr. Brady. Thank you, Mr. Quigley.
Mr. Wolff, welcome.
STATEMENT OF ALAN WOLFF, OF COUNSEL, DEWEY & LeBOEUF LLP
*Mr. Wolff. Thank you very much, Mr. Brady, Mr. Levin, Congressman Camp, other members.
I started my education on trade in this room 42 years ago, and it is continuing today.
I have for the record a longer written statement plus an attachment from the National Foreign Trade Council on trade objectives going forward.
A couple of points I would make at the outset. One is we have come through a major financial crisis and recession without the trade world collapsing, so actually our trade agreements work in a broad sense.
We have heard a lot about complaints today, and we have a lot of complaints, but in fact, overall, protectionism has not surged, which is amazing.
We have a negotiation underway in TTP (the Transpacific Partnership), which is really very vibrant. It is a great opportunity. It may be very well the template for all future trade agreements.
We have a positive development with the President’s initiative with respect to trade agreement enforcement, which we hope works out well.
You, Mr. Chairman and Ranking Member Levin, have introduced legislation to fix a hole in our countervailing duty law with the Court making a mistake in the GPX case. The amendment would allow the commerce department to countervail, again, against subsidies from China.
The rest of the story is far more troubling. The point I would emphasize most is the role of state owned enterprises in international trade. It has been brought up by several members today.
In this regard, most of the examples that are mentioned are from China. Wind energy equipment of foreign companies declined in sales in China from 75 percent of the market to 10 percent of the market in five years, 2005 to 2010. The causes of that decline were first that the purchasers were state owned enterprises but there were a a variety of other measures.
State owned enterprises are not only a China problem. Chairman Camp and Mr. Price mentioned that Japan continues to be a significant problem with respect to the ability of Americans to sell financial products. There is discriminatory regulation. There is no level playing field. These factors also affect express delivery services.
If we do not cure the problem with Japan Post, we will have the same problem in India, we will have the same problem in China, we need to cure the state owned enterprise problem, and TTP as Ambassador Kirk mentioned has a chapter which I am told looks very good in this regard.
Services negotiations. Brad Jensen for the IIE estimates that there are three million additional jobs in business services that would occur if we can open up foreign markets.
We have a lot of problems with respect to information technology that Mr. Krzanich mentioned, and cross border data flows. Food security is being addressed in the wrong way in Geneva by countries wishing to put on more export restrictions rather than fewer.
We have dead letter provisions in the GATT. The currency provision (GATT Article XV) not used. The transparency provision (GATT Article X) is not really used. The TRIPs, (Trade Related Intellectual Property) provisions, are not effective because performance is not measured in results, it is measured in process. Process is not good enough.
We are losing many billions of dollars as you all know with respect to losses due to loss of protection of IP under TRIPs.
We need to reinvigorate the WTO. We need to make sure TPP lands safely as soon as possible.
I would like to make a pitch since most Republican candidates at least, (I am not sure the President does) carry the Constitution in each of their pockets, that Article I states that actually the buck starts here, and trade promotion authority, I think, has to be made permanent, and the debate to do so should start now. The guidance as to what is to be done with it has to come from this committee.
You in this Committee and in this Congress have to set the objectives, and I think you should set them every four years for every Administration.
There is a lot to be done with respect to trade law enforcement, and in my remaining five seconds, I would just say we do not have the intelligence and analytical capability devoted to foreign trade barriers that allow us to set trade policy correctly or trade negotiation objectives correctly.
We are operating in the dark, and we need to put resources into understanding the barriers that American exporters face.
Thank you very much.
[The statement of Mr. Wolff follows:]
*Mr. Brady. Mr. Wolff, thank you. Thank you for all the testimony. I want to begin by reiterating the point Chairman Camp and I made at the initial portion of this hearing which is what we truly want to invite all interested stakeholders, job creators, in addition to the witnesses here today in giving recommendations to this committee for the record on where we go next.
I cannot emphasize how interested we are in hearing your views on what is next for trade policy for America.
I want to thank the witnesses for raising the issue of non‑tariff barriers, what we are finding in the 21st Century global marketplace is it is not enough simply to bring down the tariffs and the quotas. We often find there are locked doors beyond that making it difficult for us to sell and compete.
We also discovered some of those non‑tariff barriers are in essence like trying to put an American plug into an European socket. Different standards, different regulations in telecommunications, technology, financial services, security, and food safety. All those block our ability to sell our goods and services around the world.
Thank you for the emphasis on that. It needs to be part of our 21st Century approach.
I want to ask a specific question of each of our panelists about trade facilitation, and what we have learned since the global trade flows decreased significantly in 2008 and 2009 was moving goods cheaper, faster, and better around this world is critical to trade, competition and lower prices.
Yet, there are a number of barriers to that. I know in the developing countries, we are seeing great interest in the WTO and trade facilitation. We see developing countries like Africa who have an interest in trade facilitation as a means of reducing the costs of doing business among themselves as well as their trade partners.
My question is how would a new trade facilitation agreement affect your ability to sell throughout the world and to create jobs here in the United States, and what barriers do you see as the most significant that will be part of that discussion?
Mr. Wolff, why don’t we start with you.
*Mr. Wolff. Many of the members of the National Foreign Trade Council are amongst the largest trading companies in the world, global companies. Moving goods across borders is still all too difficult.
Tariffs have come down a lot in most places, not every place, obviously. Customs’ procedures are still a real problem, and if we are going to salvage anything out of the Doha Round, one of the major things to salvage is the agreement on trade facilitation. It actually would promote development. The Doha development agenda could be made real with an agreement on trade facilitation.
I know Ambassador Kirk is pushing this issue very strongly as well in TPP. It means a lot to American business.
*Mr. Brady. Thank you, Mr. Wolff. Mr. Quigley?
*Mr. Quigley. I think anything we can do to reduce the amount of friction in the pipe is obviously going to increase its throughput.
We are strong supporters of the idea of standards, mutual recognition of those standards, and then fair enforcement in order to promote fair competition.
Trade facilitation absolutely can increase our exports and the amount of global trade that we have. That becomes the engine of jobs and growth.
*Mr. Brady. Thank you, Mr. Quigley. Mr. Krzanich, you made the point you are manufacturing here but selling and exporting around the world. Trade facilitation is key?
*Mr. Krzanich. Yes, sir, Mr. Brady. As I mentioned, most of our product is manufactured in the U.S., 75 percent, but 75 percent of our revenues from outside trade agreements give us access to 95 percent of the consumers that lie outside the U.S.
Trade agreements are critical to our access to markets at a fair and even cost.
*Mr. Brady. Thank you. Mr. Harris, you are a distributor. Obviously, you have to get the product to the customer. Trade facilitation an important part of what should be America’s new trade agenda?
*Mr. Harris. Very important. I think two of the areas where we see we could benefit is relative to the tariffs, if the tariffs were removed. The second area is relative to Customs. Somebody mentioned that.
A company like Harris & Ford, we filled out paperwork or we actually had our expediters fill out paperwork, and they had an “1” instead of a “3.” We found it, corrected it. We were fined $78,000 on one transaction. On that particular product, there was zero duty on that product.
*Mr. Brady. Apparently we found a new way to balance the budget here in Washington.
*Mr. Harris. I think so.
[Laughter.]
*Mr. Brady. Grant Adonis, former trade leader at USTR, made the point that time is a trade barrier, and we need to focus on real 21st Century means to decrease that time, that cost, and we will create jobs in America as a result.
Thank you very much. I would like to yield to Ranking Member Levin.
*Mr. Levin. Thank you. Welcome.
Mr. Wolff, you talked about the need for more resources, especially in language. I hope this new proposal of the administration will lead to that. They are asking for more resources. We will see if they are given that.
Mr. Harris, your story is a story that should be heard by small businesses and medium sized businesses throughout the country because, while they are important in terms of trade, too few still participate. That has been a problem for a long time.
Let me just zero in on a couple of other issues. I just have a couple of minutes.
Mr. Quigley, let me just talk to you about services. Within WTO, services’ negotiations really never got off the ground. I think that is a fair characterization. It kind of went up in smoke.
What do you think? How do we do it better but differently?
*Mr. Quigley. There is no question there is a huge opportunity that simply has not been looked at, when we look at the scale of services in our economy and the opportunity that is there in a global marketplace.
Moving that up the agenda and then trying to advance something as we have advocated in a transatlantic way as a starting place, and then invite other countries to join an agreement that we might be able to reach between Europe and the U.S., I think, would be an important first step.
*Mr. Levin. You think there is reality to that in terms of discussions with the Europeans?
*Mr. Quigley. I do indeed. I think we have a mutual opportunity that we should not squander, if the U.S. and Europe as this huge market that we represent when we work on a combined basis, if we want to influence the future direction of trade negotiations, we need to come together.
I believe that the high level working group that has been formed and this notion of a vision for the 21st Century gives me hope that in fact we can engage on these issues and advance the ball.
*Mr. Levin. Mr. Krzanich, you were somewhat optimistic in terms of relations with China. On page ten, you talk about a number of the JCCT commitments have been implemented, but then there are others that have not, so the administration may want to carefully track the completion of the Chinese commitments made to date.
I am not sure, I am thinking back when there was competition between our high tech industries in Japan, and the difficulties that we had to barriers.
Do you face similar problems in China? I am not clear from your testimony. How free are you to work there, to trade there, to feel protected there? You are such a vital industry.
I may be putting you on the spot. If there is a conflict there in terms of your proprietary interests, do not answer beyond what you should, but just in the minute or two I have left, describe what it is like.
*Mr. Krzanich. I would say that one of the major concerns that we have is that China has listed semiconductors as one of their strategic industries. You see them putting together programs and policies that really favor and try to establish this industry.
That puts pressure on us around intellectual property protection, and then also it started to creep into other areas, of our ability to do trade in that area as well.
Them picking out semiconductors as a growth and a strategic industry has become one of the issues for us.
You asked how free are we to do business there. We have been able to do business very well there from the standpoint of being able to get our product in and out of there and being able to manufacture, and we do have manufacturing in China, but we continue to see pressure on their part to get access to that intellectual property that resides there, and we are finding that we are having to be more and more careful about how we manage that.
*Mr. Levin. Do you expect the U.S. Government to be helpful to you? Even companies as large as yours probably cannot do it alone. You need a vigorous USTR and governmental presence to help you.
*Mr. Krzanich. Yes, it is critical that Government helps us remain having access to those 95 percent of consumers outside the U.S., and helping us break down these non‑tariff barriers, the ones where governments employ standards that favor local contents.
*Mr. Levin. Thank you.
*Mr. Brady. Thank you. Mr. Herger is recognized.
*Mr. Herger. Thank you, Chairman Brady. I would like to ask a question of each of our panelists. With the Doha round at an impasse, what WTO initiatives would be the most beneficial to you? Beginning with you, Mr. Harris.
*Mr. Harris. I think I will have to pass on that. I cannot answer that.
*Mr. Krzanich. I do not know if I know exactly which of the WTO initiatives would be best. You are asking for specific initiatives.
I think anything that continues to lower the trade barriers and these non‑trade tariffs that are being applied by governments is good, but I do not have specifics beyond that, sir.
*Mr. Herger. Thank you. Mr. Quigley?
*Mr. Quigley. Our recommendation given the fact that we are a decade in and we seem stalled is that we move on. The way we recommend moving on is let’s look at U.S. and Europe and what can we do together in terms of that huge platform that we represent, and if we can build some principle based standard approaches to some of the matters that have become so difficult on the Doha round, and then other countries decide they want to join, to participate in this U.S./Europe market, now we have the U.S. and Europe driving standards, driving for mutual recognition, driving forward and facilitating trade.
That is our recommendation, that we move on, and we move on with our partners in Europe, and let’s make something happen in a bilateral way that will then lead to plural lateral kinds of agreements.
*Mr. Herger. Thank you. Mr. Wolff?
*Mr. Wolff. Three possibilities exist currently, I think. A services agreement among a coalition of the willing. There are meetings going on in Geneva now among those countries, about 20 countries, that believe they can get something done in Geneva on services, to see whether it be done with full participation of all the WTO members, it could become a WTO agreement
Under GATS, the General Agreement on Trade in Services, there is the possibility of having less than most favored nation treatment, so one can have an agreement in the WTO that does not apply to everybody, just those who are willing to play.
Second, an expanded ITA, the Information Technology Agreement, there is sentiment to go forward with that.
Third, an agreement on Environmental Goods and Services would benefit all countries. Going to zero tariffs. In addition, an agreement on trade facilitation, as mentioned earlier. What is not possible in Geneva, we will do in TPP, and TPP will become the template for what happens in WTO later.
*Mr. Herger. Thank you.
*Mr. Brady. Thank you, Mr. Herger. Mr. Davis is recognized.
*Mr. Davis. Thank you, Mr. Chairman.
I would like to touch on a question that I opened up with to Ambassador Kirk. I would like to talk about the impact of Federal regulations on your ability to export, more specifically in the area of manufactured goods.
MAG, a very successful machine tool producer that is located in my district, and a systems company, has a tremendous amount of their success tied to international business.
In fact, a very large portion of their business portfolio is export of products internationally. It creates a tremendous amount of jobs in the automotive, aerospace, and industrial equipment industries.
According to MAG, obsolete Cold War export regulations significantly limit their export market. For example, the dual use technology question that is largely outdated right now, particularly in the area of machine tool manufacturing.
For example, five axis metal cutting machine tools continue to be tightly controlled by the Federal Government. However, this technology is now available as a commodity worldwide, putting U.S. suppliers at a severe disadvantage.
There are now at least 13 Chinese machine tool builders building five axis machines that as a matter of policy, the Aviation Industry Corporation in China will only commit to a maximum of ten percent of its import purchases to the U.S. machine tool industry due to the U.S. export policy for five axis machine tools.
This puts European competitors at an immediate advantageous position to capture the rest of the market share in the fastest growing market in the world.
MAG informs me that they could increase their annual machine took output in Northern Kentucky and the commensurate job creation associated with this by 30 percent, creating many new jobs, focused on export, because of this approval process if it were to be modernized.
From your view, how do U.S. regulations impact your ability to compete in international markets, and what should we as Congress be doing to ease any regulatory burdens that companies experience?
I would just open it up to the panel in general.
*Mr. Wolff. The National Foreign Trade Council spends a good deal of its time on export control matters and sanctions. The controls and sanctions really have to be multilateral, not unilateral to be effective. If something is available generally from other sources, it must not be restricted from the United States.
We are concerned about national security, but we also have to be concerned about our industrial base. Our industrial base is impaired if goods are generally available from other places and we are the only country restricting the exports.
*Mr. Davis. Would anybody else care to comment?
*Mr. Krzanich. I will comment. I think you made one very key point in that many of those regulations and rules were defined a long time ago when those technologies were unique or at a different level of acceptance or availability.
We see some similar trends in our industry as well, as competing power becomes higher. Things that were considered super computers before are available on your desktop and eventually in your palm of your hand.
We also see things like radiation hardness, where we start to shrink geometries and just make things smaller. Things become just naturally more radiation hardened.
Some of those regulations need to be updated for what the current trends in technology are.
*Mr. Harris. I am just going to make the comment that again at Harris & Ford, we are the small business represented here. Thirty percent of the products we purchase are from overseas, the majority of that by far is from China. As far as the exports, there is a disproportionate amount of exports versus imports.
Anything that you can do that lowers the barriers for our customer base enables Harris & Ford to be able to participate, and particularly, I am thinking in China, because that is where our imbalance is.
*Mr. Quigley. I would just comment very quickly, Deloitte is not a manufacturer, but from my Transatlantic Business Dialogue approach, what we have often times aspired to this barrier free market between the U.S. and Europe, and when it comes to these issues, we always advocate the notion of can we establish global standards and with global standards, have mutual recognition of those standards, and with that mutual recognition of those global standards, then create a barrier free market, where growth can in fact occur.
*Mr. Davis. Thank you very much. Mr. Chairman, I yield back.
*Mr. Brady. Thank you, sir. Mr. McDermott is recognized.
*Dr. McDermott. Thank you, Mr. Chairman. Mr. Krzanich, we pass laws here and the Government tries to do things to help, but I would like to have your assessment of at least one thing that has been tried.
I understand you have a serious problem with counterfeit chips being imported into the United States. The National Defense Authorization Act of 2011, the NDAA, included a provision to ensure that Customs can work with rights’ holders such as Intel, to more effectively identify and combat IPR infringing products.
In the State of the Union, the President made clear that beefing up IPR enforcement at the Border will be a top priority.
Would you agree with that, that the implementation of the NDAA provision is one way they can do that, and are you working with the administration to make sure that happens?
*Mr. Krzanich. The simple answer is yes. Enforcement of those counterfeiting rules and having the Custom agents being able to enforce them at a stronger level is good. Yes, we are working with the administration.
Counterfeiting is much broader than products just working their way back into the U.S. Remember, I said 95 percent of the consumers are outside of the U.S., 75 percent of our revenue is from outside the U.S.
It is really much more global than that, and what we really need to do is really focus on externally as well.
It is counterfeiting going on in China and those products probably never coming back into the U.S., but they are being sold throughout the world, and really having all of the countries enforce these counterfeiting rules and regulations.
*Dr. McDermott. If they present to you some chips and say these are coming from somewhere, do you have some way to make sure those chips are not your chips? How do you work with Customs in dealing with that?
*Mr. Krzanich. Yes, sir. We have a system. Think of it as like a bar code that every part has, that is unique to that part. It is generated during the manufacturing process, and tells us exactly the identity, where it was manufactured, what date, all that kind of information.
When Customs hands us a part it questions whether it is counterfeit or not, we can tell almost immediately now whether it is counterfeit or not.
*Dr. McDermott. It is not reproducible by somebody else and putting it into another part?
*Mr. Krzanich. No. We would know, it is unique to that part and it has an unique generation code. It is not a simple number like you could understand otherwise.
*Dr. McDermott. You are saying the biggest problem is not parts coming in here, but really what is going on ‑‑
*Mr. Krzanich. I am saying it is a global issue broader than just the U.S.; yes.
*Dr. McDermott. How can we be helpful in the global issue?
*Mr. Krzanich. I think it is back to the discussion that we have had all morning here in this session and the session prior as well, around really having the Government help us with protection of intellectual property rights in all of these countries.
All of this is around ‑‑ whether it is counterfeit parts or counterfeit software or counterfeit products in general, it is around support of intellectual property rights.
*Dr. McDermott. Can it be done in a country that does not want to put the hammer down on those people who are making counterfeit things? We are talking about China here. Obviously, there are lots of other places.
*Mr. Krzanich. I think it has to be tied to broader initiatives. You are right, probably just this initiative on its own would not be enough to get them to move.
When you tie it to other trade efforts and make it broader than just this one, access to our markets, teaming with other countries that have intellectual property to protect as well, and access to those markets, I think you can incentivize them that to play in this global economy, you have to play by a certain set of rules, and that includes protection of intellectual property.
*Dr. McDermott. Do you think as the Chinese move up the scale of manufacture from fabric and bicycles and now they are getting into electronics, that they will have more interest in this kind of enforcement?
*Mr. Krzanich. Just my own observations from my time in China, I would say yes, you see less counterfeit as you travel the streets of China.
I think also any country that as you start to develop your own intellectual property, you start to become more and more interested in intellectual property protection.
I think there is a natural evolution that will occur as well; yes.
*Dr. McDermott. Thank you very much for your testimony.
*Mr. Brady. Thank you. Chairman Camp is recognized.
*Chairman Camp. Thank you. Mr. Wolff, you mentioned permanent Trade Promotion Authority and that this committee should establish some guidance, and there should be objectives.
What kind of things did you have in mind?
*Mr. Wolff. I sat through two years here when the first Trade Promotion Authority was put through. The House actually passed you, Mr. President, can change any law subject to just an override, and the Senate said we are not doing that, we are going to have fast track.
I think executive agreements need domestic implementation for trade, similar to treaties. Our treaty power, the way we handle treaties is in the Constitution and is permanent. There is a mechanism for doing it.
That does not mean there should not be checks and balances within the committee structure to make sure that any agreement that comes through gets scrutinized and approved.
I think the objectives have to be upgraded and changed regularly, and if the objectives are not met, they would not qualify for this permanent fast track in effect.
Namely, you have heard here today new issues, the cross Border data flows, information technology products that are no longer adequately covered by agreements.
We have now very outdated ‑‑ not all of them but many of them ‑‑ objectives in existing law. We are pretending, at least the administration is pretending that the procedures exist.
I would say put the procedures into place, put them in permanently, and update the objectives at least for every new Administration, no less than frequently than that.
*Chairman Camp. Thank you. To our other witnesses, obviously bilateral trade with India and Brazil has grown rapidly in the last few years. They are important markets for our exports and also for services.
There are practices that have been occurring in both of those countries, and certainly in China, as we had been talking about earlier today, but the Indian and Brazilian markets as well but in a different context.
What do you think about these protectionist policies? What effect do they have in our ability to enter into and sustain business in those markets, and what should we do about it? Should we pursue bilateral investment agreements or should we negotiate around them with others who are interested or both?
Mr. Harris, why don’t I start with you, and we can just go down the line.
*Mr. Harris. Again, in speaking with our staff that handles that part of Harris & Ford, as I mentioned earlier, it is more difficult for us to work with Brazil than Mexico or Canada.
If we could extend something similar to an agreement where you, the House here, the Ways and Means Committee sets the rules, that will make it easier for Harris & Ford to do business with Brazil.
The paperwork with Brazil is a nightmare for a small company compared to Mexico or Canada.
*Chairman Camp. All right. Mr. Krzanich?
*Mr. Krzanich. I think you stated the problem very well. I would like to say countries like Brazil are some of our fastest growing markets now for our industry as well.
I think the time is now to try to institute these kinds of programs. Their markets are not as developed and as big as say China, for example. They do not have the large internal market that they can capitalize on as well.
I would say the answers are similar to what we said throughout this conversation, that we really need to put together trade agreements that break down these non‑trade barriers, these government driven programs.
I think now is the time to do that because they are going to be incentivized because access to our market is a bigger incentive for them, so they will be more willing to negotiate now than late, so the time is critical.
*Mr. Quigley. Nothing to really add other than to just simply restate that because of the scale of those markets, the pace at which they are growing, we cannot ignore them. I think some of the tactics that we could use to try to influence the behavior is just simply negative lists.
Name and shame of practices that we believe in fact are protectionist in their very nature, and as those economies mature, grow and want a stronger seat at the global table, they need to be ready to play by the global rules, and to call them out, I think, is one of the tactics that could be used to start to influence the behavior.
*Chairman Camp. Thank you. I yield back.
*Mr. Brady. Thank you. Dr. Boustany is recognized.
*Dr. Boustany. Thank you, Mr. Chairman.
Mr. Wolff, we are engaging in TPP negotiations without trade promotion authority. In your testimony, you talked a lot about state owned enterprises and the problem it poses.
I guess my question would be given that our committee has to provide guidance and certainly once the trade promotion authority is in place, we will go forward hopefully with an agreement, what would you like to see in a chapter on state owned enterprises? Can you go into a little more detail there to give us some guidance?
*Mr. Wolff. First there must be no discrimination in regulation. This is a major problem. We see it in Japan. It is true in China and India. The Vietnamese economy, of course, has a huge number of state owned enterprises.
Eliminating discriminatory regulations that favor of SOEs as opposed to private players in the market is one aspect of dealing with the state-owned enterprise problem.
Obtaining market access, where a network is controlled by a state owned enterprise, is equally important. There have to be obligations to have state owned enterprises live up to the national treatment obligations of the country involved.
Obtaining transparency. There is no transparency with respect to the operations or subsidies to state owned enterprises. This is a major problem.
China is the number one example in the world. We have to think about what rules we want to apply to China when we are negotiating the rules in TPP. When the Chinese government makes a pronouncement, those company executives that know they have only one shareholder know exactly what they are supposed to do, and that means ‑‑ I gave the example of wind energy procurement, wind turbines, in China – don’t buy foreign products.
Those are all state owned enterprises that do the procurement. When they stopped buying foreign products, it was in part because there was in China an indigenous innovation policy, which now the Indians are following in their telecom area.
The bid procedures are entirely secret; they are considered a state secret. You can go to prison for revealing those measures.
Transparency is very important. National treatment obligations on the state owned enterprise itself would be very important. Market access in a real way is vital.
We not against state owned enterprises as such – but if they are going to act in the commercial arena, they ought to be governed by the same rules.
*Dr. Boustany. Held to the same standards.
*Mr. Wolff. Yes.
*Dr. Boustany. Thank you. Mr. Quigley, I questioned Ambassador Kirk earlier with regard to services. We have a trade surplus with China, some $7.5 billion in surplus. I personally believe it should be much higher, and I think there is potential room for growth there.
China imposes all kinds of equity limitations in key sectors, banking, insurance, retail, telecom. There are licensing issues and so forth. The list goes on and on.
What are your views on how we can deal with all this and better create opportunities for our services companies in China?
*Mr. Quigley. I think the visibility once again is just simply a first step in the right direction, and given the scale of the trading relationship that exists between China and the U.S., I believe we can have discussions related to services and can begin a more disciplined and more open approach to services, and we should not put it in the “too hard” file.
It is just simply so large, and there is mutual benefit that is available, so I think keeping it at the top of the list and pushing on services as one of those areas where we just simply have not invested much time at this point is something that is definitely worthy of the energy of those that want to work on trade policy and trade negotiations.
*Dr. Boustany. Thank you. Mr. Krzanich, you mentioned government procurement agreement certainly with China and other countries, the BRIC countries.
I can assure you our committee is really pushing on the administration to use every bit of leverage it has with these countries to move forward, to see that these countries follow through with their WTO obligations.
*Mr. Brady. Thank you. Votes will be called in the next minute or two, and we want to get to all the committee members, so we would like to move this along.
Ms. Jenkins is recognized.
*Ms. Jenkins. Thank you, Mr. Chair, and thank you all for being here today.
There is no doubt that China’s currency misalignments is a serious problem, but it seems it is not the single most pressing problem. China maintains a number of discriminatory and distortionary industrial policies that harm U.S. companies and their workers.
In addition to currency misalignment, these include subsidies that distort competition, lack of regulatory transparency, a closed capital account, harmful indigenous innovation policies, failure to adequately protect intellectual property, and many other barriers to U.S. exports and investments.
I would just like each of you maybe to comment, how does the currency rank in terms of other barriers that you face in China, and what do you all consider the most significant barriers that you face?
Mr. Harris, and then down the line.
*Mr. Harris. The currency itself, I think my customer base that I serve would speak better to that. I can tell you that one of the most alarming events I have ever had in business was when I at with one of the Vitamin C manufacturers in China.
We were negotiating, that was the goal, to negotiate volume and pricing. When they said to us that we have already met with the other three major Chinese Vitamin C producers and they will sell you 10,000, this one will sell you 11,000, this one will sell you 12,000, they already had the meeting as we were flying over, and already had set the price.
Certainly, things of that nature have to be addressed because what happened in our industry was it drove out every Vitamin C manufacturer in the U.S.
That is why I am happy and excited about our companies moving over and manufacturing there because that will eliminate or reduce those types of things from happening.
*Mr. Krzanich. For us, we both import and export out of China. Currency manipulation is not really a big factor for us. I do not consider us really experts on this subject.
From our point of view, I think we think we should take a broader look at China and these countries, how we manage trade. It is much further than just the currency issue itself.
*Ms. Jenkins. Thank you. Mr. Quigley?
*Mr. Quigley. No comment on the currency issue. I would just simply say that in our business, it is regulatory coherence that we are seeking and getting to those common global standards and then mutual recognition that would be the enabler.
*Ms. Jenkins. Fair enough.
*Mr. Wolff. China’s undervaluation of its currency, I think, causes most problems in this country — wiping out manufacturing competing with imports that have in effect a 20 percent (or whatever it is today) subsidy.
On entry into China, since we are not competing very often in commodities but in higher value goods, it is other types of barriers that are really the major problem that people have mentioned.
If someone in China will not buy something from a foreign source, if a state owned enterprise will not buy something from the United States, or will not buy something unless it is invented with Chinese technology, then currency values do not matter at all.
*Ms. Jenkins. Thank you. I yield back.
*Mr. Brady. Thank you. Mrs. Black?
*Mrs. Black. Thank you, Mr. Chairman. I am going to be really brief. I just want to follow up on the comments and the dialogue that I had with the Ambassador.
Mr. Quigley, this goes to you. I recognize, maybe not right in my district but in Tennessee around me, are very important professional services that are exported.
I do not know that we are really putting a lot of emphasis on that. I know the President in his agenda has looked more at the manufacturing side.
I would just like you for the record to talk about where you see the importance of these professional services being exported, and in particular, how that really helps us with creating more jobs and not just jobs but very well paying jobs.
*Mr. Quigley. There is no question that the markets are global and the professional services market is also global. Having the ability to move intellectual property and then also people across Border becomes the great enabler of growing those businesses and at the pace they could grow, so access to movement of talent and VISAs, that we would like to be able to move people here, and also move people from here overseas, and getting to the point where we have a coherent tax policy that enables that becomes the objective.
We at Deloitte, more than half of our jobs are outside the United States, but those firms are actually owned by partners in those individual countries.
For us, I do not view it as a huge impediment, but the ability to move talent does sometimes get in the way, and the ability to share intellectual property across Border.
*Mrs. Black. With that being said, what would you say would be the number one barrier?
*Mr. Quigley. Again, I go back to the regulatory coherence, the inability and the degree of difficulty and frankly the huge costs associated with dealing with separate sets of regulations country by country for a product that is fundamentally viewed for its global nature.
I really hope we can get to regulatory coherence, and that would be a big enabler of continuing to grow the professional services market.
*Mrs. Black. I hope so, too, for the sake of our American workers for jobs and jobs that pay well.
Thank you. I yield back my time.
*Mr. Brady. Thank you. Mr. Reed, for the final questions.
*Mr. Reed. Thank you, Mr. Chairman. Thank you to our panel.
If I could focus a little bit on you, Mr. Harris. I come from a rural agricultural based, small business based area of New York State.
You made some comments in your testimony, I believe, about how small business needs to work with the world, I think that is a phrase you kept utilizing.
I am interested, from your front line perspective and experience and from a small business perspective, and a lot of my constituents being small businesses, what is the most important next step, or what is your vision for a trade policy that could advance the small business opportunities on the world stage?
*Mr. Harris. Again, I am going to say that we are more small business in the services business. What we do at Harris & Ford is we do the things our customers do not want to do themselves.
We specialize in the small stuff. Logistics, finding synergies, things of that nature.
I am not trying to be evasive, but whatever is done to allow ‑‑ I mentioned three companies that have really been instrumental, and there are others, in Harris & Ford’s growth, but let’s say, for example, Kraft. We sell over 500 products and to several countries.
Whatever is done to allow them to do business easier, it is just a pull through effect for Harris & Ford. We get business because you helped them regulatory‑wise. Same way with Coke, Gatorade.
Whatever you do that helps them ease their transactions internationally, it helps us as a small business. We patch the tires and we do the little stuff, but we do it well.
*Mr. Reed. Being a small business owner myself, I can relate to that.
One last question. Mr. Quigley, you had some suggestions about how WTO was not addressing or utilizing all the tools. You said there was another tool that you envisioned outside of the WTO, I believe, in some testimony to my colleagues.
I just want to delve into that. What specifically would you suggest outside the WTO that could be utilized to address the concerns that the WTO is not doing?
*Mr. Quigley. I just think we have a huge opportunity with the colossal market of Europe and the colossal market of the U.S., and a wonderful and robust trading relationship today, to take an U.S.‑EU approach to global trade.
If we can in fact build a free trade agreement or other bilateral trading arrangements between the U.S. and Europe, and then we construct it in such a way that third countries could participate, we could start to move the trade agenda forward on the U.S.‑EU approach, and key players in Asia would want to join because they want access to that U.S. and European market.
I think there is an opportunity that is not exploited fully there. That is what we hope this high level working group that Ambassador Kirk is co‑chairing with Commissioner DeGucht has the potential of doing, and helping to enable global trade through this stronger partnership for the 21st Century between the U.S. and Europe.
That is the opportunity we see.
*Mr. Reed. Mr. Wolff, with your 20 years plus or how many years experience you have, do you see that as an opportunity to develop and promote?
*Mr. Wolff. Absolutely. I am a multilateralist at heart. Doha is stalled. We cannot get as much done there if anything at all. I would look to see what coule be done with the EU. I hope they are not looking inward so much because of current financial issues that the EU cannot join hands across the ocean and conclude a good agreement with the United States.
The EU is negotiating with Canada, for example, and getting better market access right across the Border from us in government procurement than we have under NAFTA.
We cannot stand still. I think we ought to prioritize, EU, Canada, Brazil, India, and the largest markets, and improve those agreements where we have some and get agreements where we do not.
*Mr. Reed. Very good. With that, I yield back.
*Mr. Brady. Great testimony, very insightful. On behalf of Chairman Camp, I want to thank you for being here today.
The hearing is adjourned.
[Whereupon, at 2:48 p.m., the committee was adjourned.]
Member Submissions For The Record
The Honorable Dave Camp – Letter 1
The Honorable Dave Camp – Letter 2
Member Questions For The Record
Public Submissions For The Record
National U.S. Arab Chamber of Commerce
USCBC
Coalition to Enforce Antidumping & Countervailing Duty Orders
Business Round Table
U.S. Chamber of Commerce
AAFA
Center for Fiscal Equity
Consumer Electronics Association
CTPC
Intel
Philippine Embassy
Southern Shrimp Association