Hearing on U.S.-EU Trade and Investment Partnership Negotiations
Hearing on U.S.-EU Trade and Investment Partnership Negotiations
SUBCOMMITTEE ON TRADE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
May 16, 2013
Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
SAM JOHNSON, Texas
|SANDER M. LEVIN, Michigan
CHARLES B. RANGEL, New York
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
JOSEPH CROWLEY, New York
ALLYSON SCHWARTZ, Pennsylvania
DANNY DAVIS, Illinois
LINDA SÁNCHEZ, California
JENNIFER M. SAFAVIAN,Staff Director and General Counsel
SUBCOMMITTEE ON TRADE
KEVIN BRADY, Texas
|CHARLES B. RANGEL, New York
RICHARD E. NEAL, Massachusetts
JOHN B. LARSON, Connecticut
EARL BLUMENAUER, Oregon
RON KIND, Wisconsin
C O N T E N T S
Ambassador Stuart E. Eizenstat
Partner, Covington & Burling LLP, on behalf of the Transatlantic Business Coalition
Ms. Inga Carus
President & CEO, Carus Corporation
Mr. James Grueff
Principal, Decision Leaders
Mr. Greg Slater
Director, Global Trade and Competition Policy, Intel Corporation, on behalf of the Business Coalition for Transatlantic Trade and the Coalition of Services Industries
Hearing on U.S.-EU Trade and Investment Partnership Negotiation
U.S. House of Representatives,
Committee on Ways and Means,
[The advisory of the hearing follows:]
The subcommittee met, pursuant to call, at 2:55 p.m., in Room 1100, Longworth House Office Building, Hon. Devin Nunes [chairman of the subcommittee] presiding.
Chairman Nunes. Good Afternoon. I want to welcome everyone to our hearing on the U.S.‑EU trade and investment partnership negotiations. Today’s hearing focuses on the enormous potential that exists in a U.S.‑EU trade and investment agreement. The U.S.‑EU economic relationship is the largest and most integrated in the world, comprising 50 percent of global GDP, supporting millions of U.S. jobs.
Although it is a deep and mature relationship, we can do more. The timing is exactly right to promote growth in both of our economies, and I strongly support negotiations for an ambitious and comprehensive trade and investment agreement.
From a strategic perspective, the United States and Europe have long been close allies in the effort to open markets and to promote free trade. These negotiations are an opportunity to strengthen an already strong economic alliance and serve as an influential model to promote free trade and open markets around the world. However, we should also recognize that these negotiations will not be easy. They will require enormous creativity and flexibility on both sides of the Atlantic.
Any agreement must be ambitious and comprehensive with all issues on the table. A critical area for me is agriculture and SPS. This area has been exceedingly, longstanding difficult and frustrating, which must be resolved. In particular, I would like to see sufficiently enforceable obligations that go beyond the WTO SPS chapter. I know many of my colleagues share this concern.
This hearing provides an opportunity to hear from the private sector about the potential benefits and challenges of these negotiations, and particularly, I hope that we will learn more from our witnesses about the following issues. One, addressing traditional barriers to trade, including the elimination of tariffs and liberalizing tariff rate quotas.
Two, resolving services and investment barriers, and establishing strong rules in these areas that can be jointly promoted in our engagement with other countries.
Three, creating specific commitments and an ongoing agenda to identify and eliminate unnecessary regulatory barriers, including sanitary and phytosanitary barriers to U.S. ag exports. The EU regulatory process is often non‑transparent and prevents U.S. stakeholders from participating, and is unpredictable. An agreement should address the EU’s practices on a comprehensive, horizontal basis.
Four, exploring opportunities for regulatory cooperation and coherence by eliminating redundancy and inefficiency without weakening our respective high standards.
And five, finally, five, developing and strengthening cooperation regarding our shared concerns with trade and investment policies in third countries, such as anti‑competitive behavior from subsidized state‑owned enterprises and policies that undermine intellectual property rights.
Today’s hearing also highlights the need to develop and pass bipartisan trade promotion authority to provide a clear framework for Congressional consideration and implementation of trade agreements, as well as to set out negotiating objectives for this negotiation. I welcome the Administration’s interest in TPA, but call for further and intensified engagement from USTR and the White House.
It is now my pleasure to yield to Ranking Member Rangel for the purpose of an opening statement.
[The statement of Chairman Nunes follows:]
Mr. Rangel. Thank you, Mr. Chairman.
Let me say, first off, I want to thank you and your staff for the very cooperative way in which you pulled together this most important hearing, and I want to thank you for having it. The timing is just right. We are in the midst of a 90‑day layover period following the administration’s notification that it intends to enter into these talks.
This time gives us a chance to think about the opportunities that this kind of deal could provide. Any reduction in foreign trade barriers has the potential to strengthen our economy, and in that sense, this agreement is no different. Today one‑third of all tariffs on U.S. exports through the world are paid to the EU. A successful TTIP would eliminate those tariffs, but the bigger issue is nontariff barriers. An agreement with the European Union gives us a chance to address issues, such as regulatory nontariff barriers. There are certainly cases where these nontariff barriers arise because of a desire to protect regulatory burdens can be shared perhaps through exchanging inspection results or other information concerning public health risks, but a successful TTIP negotiation will do more than simply improve our bilateral relationship.
An agreement between these two global leaders together accounting for nearly half of the world’s GDP and 30 percent of world trade gives us the chance to establish new rules and a new framework for global trade. These rules should address critical issues that are not adequately addressed under existing arrangements.
Some of these issues include, first, ensuring that exchange rates are not manipulated to gain unfair advantage in trade. Europeans are not current manipulators, and neither are we, but we can work together to develop a standard to capture what is or isn’t permissible in this area.
Two, ensuring that state‑owned enterprises are not granted unfair advantages over private enterprises. We and the Europeans share the view that state capitalism puts our companies at a competitive disadvantage.
There is no guarantee that we will succeed in reaching a deal that works for both sides, as it must. The European negotiators will have to consult closely with the European parliament and also the 27 member states, and our negotiators will have to consult closely with the Congress and regulatory agency, and especially this subcommittee.
At the same time, we should maintain our sense of the bigger picture. Our relationship with Europe is unlike any other. We share common objectives, common values, and this agreement has the potential to raise the bar for the next generation of trade agreements. We should capitalize on this opportunity.
And I look forward and thank all of the witnesses for their presence and tolerance with our agenda, and especially to Ambassador Eizenstat for his long commitment to public service. Thank you, Mr. Chairman.
[The statement of Mr. Rangel follows:]
Chairman Nunes. Thank you, Mr. Rangel.
And I want to thank Mr. Rangel and his staff, because we have set upon this Congress to make this committee as bipartisan as possible, and this is, I think, an extraordinary achievement, because all four witnesses were agreed upon by both Mr. Rangel and his team and our team on our side.
Thank you, Mr. Rangel.
Mr. Rangel. Thank you, Mr. Chairman.
Chairman Nunes. Our first witness will be Ambassador Eizenstat, former Ambassador to the EU, who also served in a number of other important roles, including deputy treasury secretary, undersecretary of state for economic, business and agricultural affairs, and Undersecretary of Commerce for International Trade. He now heads the international practice at the law firm of Covington & Burling, and is U.S. co‑chair of the Transatlantic Business Council.
After him, we will hear from Inga Carus, CEO of Carus Corporation, an SME chemical manufacturer based in Illinois.
Our third witness will be Jim Grueff, who is currently Principal at Decision Leaders and formerly served as the lead U.S. negotiator for the WTO sanitary and phytosanitary agreement, among a number of other senior positions in the foreign agricultural service.
And last, we will hear from Greg Slater, Director of Global Trade and Competition at Intel, who is also testifying on behalf of the Business Coalition for Transatlantic Trade and the Coalition of Services Industries.
We welcome all of you, and we look forward to your testimony. Before recognizing our first witness, let me note that our time this afternoon is limited, so witnesses should keep their testimony to 5 minutes and members should keep their questioning to 5 minutes.
Ambassador Eizenstat, your written statement, like all of the witnesses, will be made part of the record. And you are now recognized for 5 minutes.
STATEMENT OF STUART E. EIZENSTAT, PARTNER, COVINGTON & BURLING LLP, ON BEHALF OF THE TRANSATLANTIC BUSINESS COALITION
Mr. Eizenstat. Chairman Nunes, my long‑time dear friend, Ranking Member Rangel and distinguished members of the Trade Subcommittee. The TTIP provides the opportunity to garner more bipartisan support than almost any other economic agreement, and that is because the EU has very high labor standards and environmental protections, making some traditional opponents of free trade agreements less likely to oppose TTIP on these grounds.
TTIP would be the most comprehensive trade agreement the United States has ever entered into in history in terms of the dimensions and areas it covers. The significant economic benefits of the agreement are enormous. TTIP would provide a deficit‑free way of creating jobs and growth. At a time when both sides of the Atlantic are suffering from subpar economic and job growth and high levels of unemployment, a successful TTIP can add anywhere between a half to one full percent of gains in GDP on both sides of the Atlantic.
Together, the EU and U.S. account for almost half of the global output of goods and services and almost a third of global trade, but even more so, transatlantic investment dwarfs those huge trade numbers and is the backbone of our mutual economies. There is more than three and a half trillion dollars in two‑way foreign direct investment between the EU and the 27 EU countries and the U.S. American companies invest more in tiny Ireland than in China.
Another unique dimension to transatlantic trade is the high degree of integration across the pond. Intra‑firm trade between U.S. and EU parent companies and their subsidiaries account for almost 40 percent of the trade between us.
Individual U.S. States will also benefit from a successful TTIP. For example, both California and New York rank first and second, respectively, as the top two States with jobs supported directly through European investment, and second and third after Texas by total goods exports to Europe by value.
There is also a geopolitical importance to this agreement. It sends an important signal that we remain dedicated to Europe. European nations share our core values of democracy, free speech, respect for human rights and the rule of law, and they are our key allies as we face difficult global challenges.
There are essentially two competing models of governance in this world: One is our free market democratic model, and the other is the autocratic state‑controlled, state‑dominated model. A successful TTIP can demonstrate that our model of governance can produce tangible gains for our people on both sides of the Atlantic and, more broadly, is the best model to meet the challenges of the 21st century.
It is true that there are daunting challenges because of the comprehensive nature of the negotiations, but these are manageable. For example, we have agreed already that the EU and U.S. will make the foundation of TTIP the most comprehensive free trade agreements that each has entered, and fortunately, on both sides, that is with Korea. The EU‑Korea and U.S.‑Korea agreements, therefore, are a way of harmonizing as a forced order of business a workable framework agreement. This can be done in fairly short order, giving each other, in effect, what each of us gave to Korea.
Eliminating tariffs alone would boost U.S. exports by 8 percent and EU exports by 7 percent.
I would like to focus the rest of my testimony on the top priority of the Transatlantic Business Council, and that is on regulations. And this is really critical. I want to take this from a micro to a macro perspective. If, Mr. Chairman, ranking member and members of the subcommittee, we can agree on common standards, these will become global standards for our products around the world rather than China’s. This will give us an enormous competitive advantage. The biggest potential benefit of TTIP is, therefore, in the area of regulation.
There are indeed many regulatory differences, and these have long acted as a break on transatlantic trade and growth. We do have different regulatory philosophies, and I certainly have the scars in negotiations to show that, but we have come to a point in the 21st century when we should have confidence that each other’s regulatory standards are adequate to protect our publics and our companies. Our goals should be regulatory convergence and coherence to avoid impediments to trade.
In new and emerging technologies like nanotechnology or internet technology, we should seek identical standards and make those the world’s standards. We should strengthen the EU‑U.S. high level regulatory cooperation forum to get our regulators together, who often only think domestically and not internationally to develop common approaches. And we should adopt the concept of tested once, tested in both markets even if each other’s standards are somewhat different.
I would like to close by focusing on a few areas of prime importance to the TBC companies. One is services. The volume of EU‑U.S. bilateral trade in services totals almost $350 billion, the highest in the world. It is essential that both governments ensure the importance of trade and investment in services, including an agreement which would allow enforceable obligations for the free flow of data across borders while taking into account protections of privacy.
You mentioned, Mr. Chairman, and this is really important, state‑owned enterprises. State‑owned enterprises are eating our lunch on both sides of the Atlantic, and it is not acceptable. We need to have enforceable disciplines against countries like China that provide unfair subsidies and unfair advantages against our private sector companies, and TTIP is the place where we can develop disciplines to make sure that those companies, if they are state‑controlled, don’t get the kind of access that they otherwise would have.
It is also essential that financial services be included in the agreement. TTIP offers a terrific opportunity to coordinate the extensive but often disparate array of financial regulations. And, again, if we can agree on these, these can become global standards and help us develop financial market regulations in third countries that will be important.
Two last areas. Intellectual property. There is an unprecedented theft of intellectual property from cyber-attacks ‑‑ they are in effect state‑sponsored IP theft ‑‑ from forced technology transfers, and for the lack of protection of our intellectual property in emerging countries. This is our seed corn. This is our advantage in the world. We must have the highest levels of IP protection in this agreement and then propound those to the world, aligning U.S. and EU positions in multilateral dialogues and encouraging robust third country IP protections.
And last is in life sciences. This is, again, an enormous area where European and American global companies still are highly competitive. We are leaders here, but if we are going to stay as leaders, TTIP must present an once‑in‑a‑lifetime opportunity to address longstanding issues in intellectual property protection and regulatory and market access that they can improve efficiency, patient outcomes and overall business environment.
TTIP should ensure responsible data sharing that protects patient privacy, maintains the integrity of the regulatory review process, and preserves incentives for biomedical research.
In conclusion, I believe that we are embarking on an unprecedented bipartisan effort to demonstrate that free markets and free peoples can deliver, and I think we are going to succeed. Thank you.
Chairman Nunes. Thank you, Ambassador.
[The statement of Mr. Eizenstat follows:]
Chairman Nunes. Ms. Carus, you are recognized for 5 minutes.
And if we can keep it as close to 5 minutes as possible. I don’t want to be a time clock monitor here, but I know that we are going to have votes in probably another hour, hour and a half, so we want to make sure that we get all the testimony and allow all the members time to ask questions.
Ms. Carus, you are recognized for 5 minutes.
STATEMENT OF INGA CARUS, PRESIDENT & CEO, CARUS CORPORATION
Ms. Carus. Okay. Thank you. Chairman Nunes and distinguished members the subcommittee, my name is Inga Carus. I am president and CEO of Carus Corporation. Thank you for this opportunity to speak today.
Carus Corporation of Peru, Illinois, is a family‑owned company that was founded by my grandfather 98 years ago. Carus is an environmental products and services company. We manufacture products which are used by our customers both in the public utility sector as well as in private industry for the purification of water, air and ground water. We currently have about 400 employees.
In recent years, Carus has expanded from a single location in LaSalle, Illinois, to become a global corporation with locations in the U.S., Europe and Asia. Carus plans to expand further as we look for new opportunities to develop new and unique products for environmental markets.
In both the U.S. and EU, small and medium‑sized SME manufacturers are key drivers of economic growth. I believe that advancing open trade policies with the EU could create new and dynamic commercial growth and export expansion opportunities for U.S. small, medium and large enterprises alike. While there are difficult hurdles to a successful TTIP negotiation, the potential benefits in terms of growth, productivity and job creation are huge.
Current tariff barriers on transatlantic trade in chemicals are relatively low, averaging around 3 percent. However, due to the high volume of trade, the benefits of removing the remaining tariff barriers would be significant. The American Chemistry Council estimates that eliminating remaining duties on transatlantic trade just in chemicals could result in savings of around $1.5 billion a year. These savings would immediately reduce the costs of production for business, and the benefits would be reflected throughout the economy.
As an example, Carus Corporation would save 5 and a half percent of the duties on our products of material that we ship from Illinois to Carus Europe. This would result in savings to my company of $5 million over 10 years, which we would use to create good jobs and grow exports.
The potential cost savings for governments and industry alike from enhanced regulatory cooperation are even greater than this. The goal in pursuing closer regulatory cooperation between the U.S. and EU should be to explore opportunities for creating efficiencies between regulatory systems while maintaining high levels of protection for human health and the environment.
An example of additional costs generated by regulatory barriers for Carus is the difference in standards for chemicals used for water treatment in the U.S. and the EU Some EU member states also request a separate registration for chemicals in water, further encumbering trade.
While the U.S. and EU regulate chemicals in different ways, Carus Corporation sees the TTIP as an important opportunity to promote efficient and effective regulatory approaches and explore opportunities for cost reductions and burden sharing.
Specific actions to enhance transatlantic regulatory cooperation include efforts to promote scientific cooperation. The goal should be to minimize the potential for imposing additional regulatory barriers when revising or developing new regulations and to develop a common scientific basis for regulations. In our view, the chemical industry is well placed to be a priority sector for enhanced regulatory cooperation under TTIP.
TTIP should also focus on ensuring greater transparency in transatlantic cooperative activity between regulators. This would help enhance stakeholder confidence and support for regulatory cooperation. An example which has cost Carus a large amount of time and resources is obtaining approval for a drinking water chemical in the EU, a material which has been in common use and has been approved for drinking water treatment for decades in the U.S.
The EU‑U.S. drinking water standards are different. And although a product has been long approved by the EPA in the U.S., the approval process in the EU does not recognize this and can take years. We applied for EU approval for sodium permanganate in 2005, and it was in use in the United States for decades. And although we received approval 3 years later in 2008, for those 3 years, we could not sell the product in Europe. And we are still waiting today, 8 years later, for some EU member companies’ approval who have not approved it yet.
Carus Corporation strongly supports the launch and timely completion of negotiations on a transatlantic trade and investment partnership. For the chemical industry and for thousands of small‑ and medium‑sized manufacturers in the U.S., like Carus, it has the potential to provide a significant boost to growth and job creation, which in turn would promote innovation and strengthen the international competitiveness of U.S. exporters.
Thank you, again, for inviting me here today. I look forward to your questions.
Chairman Nunes. Thank you, Ms. Carus.
[The statement of Ms. Carus follows:]
Chairman Nunes. Mr. Grueff, you are recognized for 5 minutes.
STATEMENT OF JAMES GRUEFF, PRINCIPAL, DECISION LEADERS
Mr. Grueff. Thank you, Mr. Chairman and Congressman Rangel, for the invitation to be here with you today.
TTIP presents unique and extraordinary opportunities and challenges for U.S. agriculture and for those in the U.S. Government who will oversee or conduct the TTIP agriculture negotiations. There is a long and difficult history of agricultural trade policy conflicts between the U.S. and the EU, and that will be an important feature of this negotiation.
The two sides also have shown very different approaches to negotiating their free trade agreements. The U.S. has pursued a strategy of including virtually all agricultural products in its FTAs, with few notable exceptions. The EU, on the other hand, has been much more selective in the inclusion of agricultural products in its bilateral trade agreements. Therefore, for example, just agreeing on the range of products for which tariffs will be reduced or eliminated will probably be a daunting challenge in itself.
Looking at the scope of issues that can comprise the agriculture negotiations, it is clear that the most challenging area will be health‑related import restrictions, known as sanitary and phytosanitary barriers, or SPS barriers as they are called.
Much of the difficulty in the U.S.‑EU agriculture relationship derives from fundamental differences in their approaches to food and food production and in the management of the health risks from food and agricultural products. The U.S. asserts that it applies the science‑based approach to risk management and health‑related import restrictions that is completely consistent with the SPS agreement of the World Trade Organization.
The EU believes that the WTO provides the latitude to take a more risk‑averse approach to risk management. This is embodied in the EU’s so‑called precautionary principle, which essentially states that health‑related preventative measures can be applied, including import restrictions, when it is scientifically uncertain but possible that a risk exists.
These policy differences have real trade consequences. U.S. agriculture has indicated that addressing SPS barriers, the health‑related barriers that block access to the EU market, is its top priority in the TTIP negotiations. These issues include, among others, the EU approach to regulating the use of agricultural biotechnology, the EU ban on anti‑microbial washes for poultry meat, the beef hormones case, the EU ban on the beef and pork feed additive ractopamine and the possibility of a new trade-blocking in EU policy on cloning.
Many of these issues are complicated, longstanding and very politically sensitive, but this is what the TTIP can offer: the opportunity to bring unprecedented, high level attention to the SPS issues that are the most difficult agricultural disputes in the bilateral relationship.
In addition to the existing disputes, U.S. agriculture is advocating the concepts of SPS‑Plus and SPS enforceability. SPS‑Plus means essentially that the TTIP would contain SPS rules and disciplines that go beyond what the WTO currently provides, and enforceability means that the TTIP would have its own self‑contained SPS enforcement mechanisms that would be much quicker than the WTO dispute settlement process.
These are both very worthwhile objectives, but here is a note of caution. The EU’s history of SPS decision‑making indicates that finding agreement on these new concepts will be very difficult. Also, based on recent experience in the context of the transpacific partnership negotiations, it may be questionable whether the U.S. Government’s interagency process will agree to pursue these new concepts for the TTIP.
But I believe there is a larger dilemma here regarding TTIP and the SPS issues. It will take time to make progress on the SPS issues. However, leaders at the top levels on both sides have said or implied that the TTIP is essentially an effort to provide much needed economic stimulus as quickly as possible.
The EU Trade Commissioner stated that he wants these negotiations completed by the end of next year, which would indeed be a very quick outcome. This is not a time frame that would be conducive to resolving the SPS issues of concern to U.S. agriculture.
I would suggest to you that decisions regarding the scope of the agriculture negotiations, especially decisions on the inclusion of the SPS issues, should be under serious consideration now and certainly should be made before the substantive negotiations begin.
Thank you for your attention.
Chairman Nunes. Thank you, Mr. Grueff.
[The statement of Mr. Grueff follows:]
Chairman Nunes. Mr. Slater, you are recognized for 5 minutes.
STATEMENT OF GREG SLATER, DIRECTOR, GLOBAL TRADE AND COMPETITION POLICY, INTEL CORPORATION, ON BEHALF OF THE BUSINESS COALITION FOR TRANSATLANTIC TRADE AND THE COALITION OF SERVICE INDUSTRIES
Mr. Slater. Thank you, Mr. Chairman. And thank you, Congressman Rangel and ‑‑
Chairman Nunes. Mr. Slater, if you could turn your mike on, please.
Mr. Slater. I apologize.
Chairman Nunes. Okay.
Mr. Slater. Thank you, Mr. Chairman, members of the subcommittee.
I work for Intel Corporation, but today I am appearing before you on behalf of the Coalition of Services Industries, or CSI, and the Business Coalition for Transatlantic Trade, or BCTT.
CSI is the primary policy advocacy association for U.S.‑based global services, and BCTT was established last year to support the TTIP negotiations. Its steering committee is co‑chaired by multisectoral industry organizations and companies like Intel.
Both CSI and BCTT support the negotiations of an ambitious, comprehensive and high standard agreement between the U.S. and EU. I would like to make some suggestions today on how to achieve that objective.
First, a comprehensive agreement must take into account evolving business models as it seeks to fully liberalize trade in goods and services. U.S. manufacturing companies are increasingly using services both to manufacture and in their product distributions like never before, because of increased global competition, wiser use of global supply chains, and new opportunities provided by the information economy. This accelerated integration of goods and services has blurred the distinction between manufacturing and service companies. Trade policy needs to catch up to this trend, and negotiators should not look at goods and services as separate silos.
Also, market access commitments should apply to the entire supply chain by taking into account interrelated services, or that is, services that are in different categories but complement each other. And trade barriers for any one link in the chain can undermine a service as a whole.
Moreover, all basic ways of delivering services should be liberalized and for all types of companies. Manufacturing businesses regularly look at the services they are using and change their approach because their innovation capabilities are becoming increasingly collaborative and cross‑border, involving multiple sites and parties. So, for example, stringent mobility rules for highly skilled employees can impair both the development of new goods and the delivery of additional services.
In brief, market access commitments for services should be recorded on a negative list with only a minimum number of nonconforming measures subject to timetables for full liberalization.
Second, negotiators need to creatively use all available mechanisms to reduce and remove nontariff barriers, or NTBs, in a transatlantic economy. These mechanisms can include regulatory simplification, interoperability, mutual recognition, convergence and even harmonization where appropriate. TTIP also needs to establish a framework for ongoing regulatory cooperation to reduce and remove future NTBs.
In addition, TTIP needs to establish global principles, as Ambassador Eizenstat mentioned, that the U.S. and the EU should promote to minimize NTBs in emerging markets where they are used more frequently to build up local industries and national champions. For example, new localization barriers to trade in the BRIC countries can force U.S. and EU companies to either move businesses’ operations overseas or to forego important market access opportunities.
Similarly, TTIP should address technology mandates that require the use of domestic technologies, which are on the rise and can significantly undermine the competitiveness of U.S. IT companies.
Third, we note that although removing NTBs will benefit many economic sectors, like finance and insurance, there is a major multiplier effect when information and communication technology, or ICT, goods and ICT‑enabled services are liberalized because they enhance efficiency and innovation capabilities across sectors. The U.S. and EU should therefore maximize opportunities for suppliers to provide services over the Internet on a cross‑border and technology‑neutral basis.
And TTIP should prohibit specific requirements to locate servers or data in country as a condition for allowing digital services. As with the TBC, we strongly support the administration’s objectives to include provisions that facilitate cross‑border data flows. The transfer of information is increasingly important to all industry sectors. There must be a clear obligation in the agreement that enables companies and their customers to electronically transfer information internally or across borders, store or access publicly available information and access their own information, wherever located.
Restricting international data flows as a means of protecting access to data or ensuring security is both inefficient and ineffective. This will only slow down the expansion of trade by so many Internet‑dependent companies at a time when innovation in digital services is benefiting such a variety of industries.
The U.S. and the EU should use TTIP to bridge their differences in approaches to privacy and cyber security without undermining data flows.
Fourth, and finally, along with promoting privacy and cyber security principles to ensure interoperability in a digital infrastructure, the agreement should enhance global protection of trade secrets, again, as mentioned by Ambassador Eizenstat. There is a strong correlation between cyber attacks and cyber theft. Although trade secrets are a critical form of IP, they are subject to some of the weakest IP protections.
We appreciate the opportunity to provide input to the trade subcommittee on such a critical free trade agreement. Thank you.
Chairman Nunes. Thank you, Mr. Slater.
[The statement of Mr. Slater follows:]
Chairman Nunes. My first question is for Mr. Grueff. You describe a little bit of the EU’s regulatory system, and I was hoping that you could maybe go into some of the top barriers that you see to agricultural products. And I know you had some ideas and concepts that you mentioned on SPS and perhaps a way that we can move forward. Also I would kind of like your opinion on whether or not the EU is actually serious about removing these barriers and serious about agriculture.
Mr. Grueff. Well, as you know, Mr. Chairman, this is a very challenging topic. I believe that they are ‑‑ first of all, from the big picture perspective, that the European Union is very serious about the TTIP.
I think that any negotiations in the SPS area are going to be very difficult for them. These are very politically sensitive issues for them, as I think you know. There are cultural differences that have very much had an impact on the policy process. This very much is demonstrated in the issues of agricultural biotechnology, in which the EU consumers apparently feel it is important to have the right to know how food was produced. American consumers, I believe, are more trusting in the U.S. regulatory agencies and don’t have those kinds of concerns.
There are a wide range of SPS issues, many of them that we could talk about. One that I would find, I mentioned it in the written testimony, is the issue of the, what are called antimicrobial washes, or pathogen‑reduction treatments, because the science is basically the same on both sides. In other words, in the EU, the scientific advisors for the EU have said basically these are safe substances, and the political process did not allow the system to work with the information and for there to be approvals, and so we have a trade dispute right now that is lingering at the WTO on that particular issue.
The issue of ractopamine is a very important issue, not just with the EU. This is the feed for pork and beef production widely used in the U.S. It is a very important issue, because there are also bans in Russia and China and other countries.
Again, the U.S. perspective, and I would agree is that the science is clear on this. There is now an international standard at the Codex Alimentarius. The EU is not accepting the international standard. This has very broad implications that the EU is not accepting the international standard here.
So my point in the oral testimony about this is going to take time is that it isn’t just a matter of negotiating tariffs, as difficult as that will be. There is a lot more to these issues. It goes to their view of risk management, their view of their right to be more risk‑averse than perhaps we are and many other countries.
So it is going to take a very focused and in‑depth approach. And it is going to take also, I might add, a real team effort on the part of the U.S. regulatory agencies. The U.S. side is very much going to need the expertise of the Food and Drug Administration and other regulatory agencies to take on these issues.
Chairman Nunes. Thank you, Mr. Grueff.
And as you know, our European friends, it is sometimes tough to decipher between, you know, what is a real issue and what is just a nontariff barrier to trade. And as our European friends and the ones who have come to visit me, agriculture is also a sensitive topic for us, as is food safety. So I appreciate your comments.
Ambassador, I actually ‑‑ would you like to comment on the agricultural issue?
Mr. Eizenstat. Yes, if I may.
Chairman Nunes. Sure.
Mr. Eizenstat. When I was ambassador to the EU, we, after some difficulty, got the first genetically modified product approved, Roundup Ready soybeans and then later tomatoes. And interestingly, in the last, I would say, 6 months, there has been a fairly significant increase in European Union approval of GMO products, so that does indicate at least in this area that we are making some progress.
Chairman Nunes. Well, as someone who used to hoe weeds, Roundup Ready crops were a big benefit for those of us who had to actually work in the fields.
I had an additional question for you, Ambassador, as it relates to ‑‑ you mentioned this in your testimony about financial services. And I know the President’s nominee, Mr. Froman, has expressed that everything should be on the table, but we have read some reports, heard rumors about some in the administration who want to exclude financial services. Do you think this would be appropriate?
Mr. Eizenstat. No. I think it would be disastrous, and the “some” may be in one of my former departments. I think it is very important that financial services be included, because financial services are really the backbone of all the international trade we do. We have more than a dozen financial regulatory agencies, and I think it is important that Treasury, through the Financial Stability Oversight Council, coordinate their regulations so that we don’t have disparate regulations coming out of each. We avoid extraterritoriality, and we get those agencies to think globally.
There is also a market access issue, Mr. Chairman, and I know Mr. Neal is also interested in this issue as well. For example, our banks simply cannot get full access to many emerging markets. We can’t get consumer banking in China, for example. So it would be very useful for the EU and the U.S. together to collaborate in third markets.
And last, TTIP offers a really critically needed forum to establish a framework to coordinate the extensive but often disparate array of regulatory efforts on both sides of the Atlantic. It provides an enormous opportunity to create a process for discussion in an early stage, to help resolve or at least mitigate regulatory differences. The goal should be to promote greater financial compatibility and where possible, mutual recognition of equivalence.
And the positive impact would also be that if we can agree between the U.S. and EU, then we can also promote those same high quality regulatory standards in global financial markets, particularly in faster growing developing markets. So I think it is tremendously important. This is not at the expense of what is happening at the G20. It would supplement it. It is a terrific forum. It would be an enormous missed opportunity if financial services aren’t included.
Chairman Nunes. Well, thank you, Ambassador.
I would now like to recognize Ranking Member Rangel for his questions.
Mr. Rangel. Thank you.
This sounds like a revolutionary advancement that we can make to improve the trading commerce with the EU and, therefore, around the globe. I guess it is accepted that an educated constituency, one that is able to have a job, actually contributes to commerce, being the consumer, and it could even give us a brighter economic picture, the same way poverty takes away from our opportunity to enjoy a higher quality of life for some.
In these agreements, I notice that the question of visas and skills or lack of skills or job qualifications are given a consideration rather than just goods and services.
Ambassador Eizenstat, you have served your government in so many different capacities, but it just seems to me ‑‑ is there anything in the trade bill or could possibly be that deals with the question of poverty, healthcare, education or to be able to say that after this revolutionary trade bill passes, that countries that are in poverty can depend on the increase in advantages that we make, that somehow that they were on the agenda as we conclude these type of negotiations?
Any member could answer, but I know what Ambassador Eizenstat ‑‑
Mr. Eizenstat. Well, I ‑‑ Mr. Member, I did an op‑ed article 2 weeks ago in the Washington Post on the need for a public‑private apprenticeship program to provide skilled workers, because I believe with lower energy prices, we are going to get more and more companies coming back to the United States who have gone over, and other companies like Siemens who want to invest more here and don’t have the skilled workers.
This can be done very inexpensively. It is the German model. It is very much putting an employee, potential employee, who is at the community college, in a plant to learn a skill so he or she can actually get that job afterward. It is being done in States like South Carolina, where they are financing such a program.
This is not in TTIP, but what there is a workforce provision to promote the skilled labor mobility between integrated companies. And this would be tremendously important to help our workforces have the free flow of commerce to promote more labor force mobility. So there is a large ‑‑
Mr. Rangel. But this is ‑‑
Mr. Eizenstat. ‑‑ workforce ‑‑
Mr. Rangel. But this was my point, Ambassador. I am saying because you could provide a wedge in trade to get individuals with talents and skills to come in, what is in there to get people without talents, without skills and not the beneficiary of these agreements?
You know, when world history is recorded, I think is going to be one of the biggest things that they have said that civilization has done in coming together, pulling together our resources and trying to level the quality of life for everyone, but somehow there are people all over the world, and indeed in the United States, that it would appear from the record that there was no consideration at all as to whether or not technology even allowed more of them to become unemployed and go into poverty.
And if you can stretch trade into including such things as individual skills, why can’t you stretch it to include lack of skills and lack of resources so that the record would be clear that this isn’t just for Europe and America, it is for the quality of life for the world? I think this is the way we have got to sell this project to the world: It is for everybody.
Mr. Eizenstat. Well, again, this is still a trade negotiation, and we would have to address skills training separately. But what we should address, and is to be addressed and it is part of the mandate, is to promote labor market mobility, provide an ease of people getting jobs across the Atlantic ‑‑
Mr. Rangel. How do you ‑‑ how do you ‑‑
Mr. Eizenstat. ‑‑ through joint research projects ‑‑
Mr. Rangel. Ambassador, you say this is trade, and I never would have raised this until I saw that skills are included in this now.
Mr. Eizenstat. They are. That is correct.
Mr. Rangel. Well, poverty is included in this as well; education is included. And so when you say ‑‑ when I was fighting international drug trafficking, that is all I heard, that this is a trade bill, and we have to deal with trade. So I have given up on trying to stretch what trade is, but I see that, and I don’t know whether anyone disagrees with me, that you find yourselves very comfortable in talking about who should be allowed to come into our country based on the skills that they have. Is that correct?
Mr. Eizenstat. That is correct.
Mr. Rangel. Well, if that is correct, it is a stretch, don’t you think it is a stretch to include that in trade, our immigration programs?
Mr. Eizenstat. Well, again, there is a workforce provision that will be negotiated, and perhaps that will provide the latitude for ‑‑
Mr. Rangel. But it has nothing to do with trade. I mean, it is not in the trade bill.
Mr. Eizenstat. It does have to do with trade.
Mr. Rangel. Will it be in the bill?
Mr. Eizenstat. It is in the bill, yes.
Mr. Rangel. Okay.
Mr. Eizenstat. Workforce mobility is specifically mandated between the EU and the U.S. as a negotiating topic. There is an agreement that this should be one of the areas that should be covered.
Mr. Rangel. Is it your professional opinion that the question of educating everybody generally to have them to be more of a consumer around the world and especially in the United States is not the proper subject for a trade agreement?
Mr. Eizenstat. No. I mean, I think that what we want to promote, and this is also part of it, is to allow, for example, certification from universities, so we accept each other’s university degrees, having scientists and engineers and others be able to work on joint collaborative projects across the Atlantic. So this is going to be the first trade agreement, I believe and hope, that will actually have a workforce provision in it.
Mr. Rangel. Thank you, Ambassador. I didn’t make my point as clear as I wanted. Thank you.
Ms. Carus. May I speak to that question?
Chairman Nunes. Sure.
Ms. Carus. I just wanted to speak in support of Ambassador Eizenstat’s statements about workforce mobility. One of the biggest challenges we face as a small‑ to medium‑sized enterprise is talent and skilled labor, and this addition to the bill would be enormously advantageous to companies like Carus.
Chairman Nunes. Thank you, Ms. Carus.
Mr. Rangel, any more questions?
Mr. Rangel. No, thank you, Mr. Chairman.
Chairman Nunes. Ms. Jenkins is recognized for 5 minutes.
Ms. Jenkins. Thank you, Mr. Chair.
And I thank you and the ranking member for hosting this very important hearing. Thank the panel members for participating.
And first, I would like to echo the sentiments of Chairman Nunes and his concerns with the European Union’s restrictive SPS barriers.
But having covered that topic sufficiently, I would like to turn toward another issue, because improving regulatory cooperation and coherence would be a key benefit of any United States‑EU trade agreement. And the EU regulatory process is often non‑transparent, prevents U.S. stakeholders from participating, and it is unpredictable. And while Kansas livestock producers noticed this primarily when facing restrictions on our U.S. beef and pork, it is true that there would be sufficient gains from simply bringing the EU into compliance with the type of commitments that were included in chorus. And I think it is fair to say that those gains would not be exclusive to U.S. producers, but would also benefit producers in the EU.
So really for any of you, how would addressing horizontal regulatory issues help to open up the EU market, and what are the relative merits of addressing these horizontal issues as compared to sector‑specific harmonization? Sure.
Mr. Eizenstat. One of the things that I have suggested, and my testimony actually suggested, for well over a decade is that we need to have certain sectoral agreements. Let me give you an example; then I will go to the horizontal. The Auto Industry on both sides of the Atlantic wants to enter into a sectoral agreement in which they basically accept each other’s standards. It makes no sense that BMW produces a product in South Carolina that it then can’t export to Europe, and that the BMW they make in Europe can’t be exported to the U.S. There are different bumper standards, for example.
This is an area where mutual recognition should exist; that is, we recognize that each other’s safety standards in autos may not be identical, but they are adequate to protect each other. And that is the way the common market works within Europe. It is not that France and Germany or France and Sweden have identical regulations, but they accept each other’s regulations as being equivalent.
Second, your point, which is tremendously important, is horizontal. We can’t get that kind of sectoral agreement in every area, so we should adopt certain horizontal standards. For example, have an accord that all regulations that have a transatlantic impact of more than, say, $500 million require notice to companies on both sides of the Atlantic and the opportunity to comment; that the least costly regulatory alternative should be taken; that the process should be transparent; that it should be science based, which is tremendously important for agriculture, but for pharmaceuticals and others. And those kinds of basic principles would be very important.
Mr. Grueff is certainly correct, and I have suffered for this in many negotiations with the U.S. on the precautionary principle, it is a huge barrier, but if we could establish those kinds of horizontal principles, it would give us a real leg up so that we go beyond, in the agricultural area, the SPS area andexceptional
we establish the fact that we have to have sound science, least costly alternatives, transparency, notice. If we can agree on those, then that will at least give us a head start with our own dispute resolution process, as you probably agree. That would be a big start. Where we can get identical standards, like I hope we can get in the auto area, we should do it.
And Mr. Neal and Mr. Rangel, I mention because of New York, we have been negotiating for years on common accounting standards. We use GAAP accounting; they use International Accounting Standards. I can assure you that both adequately protect investors. The costs of annual reconciliations by a European company doing business here and vice versa is, like, $2 billion. That should be simply accepted that they each, although they are different, they each adequately protect, they are equivalent, and we do away with reconciliation.
Ms. Jenkins. Other thoughts?
Mr. Grueff. Yes. I agree with the ambassador. If there could be a horizontal approach to regulatory convergence, I think that would be a very good development for U.S. agriculture. I guess looking at our very difficult, sad history with the European Union on agricultural trade issues over decades, I am somewhat skeptical. It is certainly worth an effort.
I think in answer to the chairman’s first question to me, even as our negotiators begin to try to deal with the issues that you have raised, for example, ractopamine, it is an access issue for beef and pork and the original beef hormones issue, I think really this takes negotiators immediately into very challenging questions like how was ‑‑ was there a risk assessment done? How was the risk assessment done? Are you following international standards? If you are not following international standards, according to the WTO rules, there have to be very specific reasons why the member, a WTO member is not following international standards.
I would think that the approach would need to be very specific and immediately very challenging in terms of why the European Union is implementing these specific SPS measures at the border that it is. If this somehow could be countered with a horizontal approach, I think that would be ideal. I guess I am skeptical that it could be done.
Ms. Jenkins. Mr. Slater.
Mr. Slater. Thank you. Just to add to what has been said, I think you are going to ‑‑ it is obvious to me that, at some point, the parties are going to sign off even though not everything has been done. We have achieved simplification in this other area, convergence in this area, maybe even harmonization in this area.
No approach is going to work across the board, but with a horizontal regulatory hierarchy, or best practices, you can keep working on these issues beyond the signature of the agreement and keep making progress. I do think they have to be detailed. In addition to notice and comment and some description of what was done, you have to ‑‑ it would be great if the Europeans would be forced to go through and explain what alternatives they considered and why they were rejected, and go through all of the feasible alternatives to be able to show them that there is a better way. I know this is going to be tough, but that exercise is critical to make progress going forward beyond when the agreement’s concluded. Thank you.
Ms. Jenkins. Thank you.
Mr. Eizenstat. Let me say that this is not just an EU problem, it is a U.S. problem. Our regulatory agencies are independent oftentimes of the executive branch. They have domestic focus only. And I can remember meeting in the now called Eisenhower Executive Office Building with FDA when we were trying to get mutual recognition. We encouraged the FDA to at least allow testing in European labs to U.S. standards, not on identical standards, so they wouldn’t have to test twice. And they said, well, we could accept tests in certain labs in Europe but not in other countries.
I think we have now reached a stage where we ought to be able, at the very least, to test in each other’s markets to each other’s standards once, not duplicative testing. And you have a terrific role, because you oversee these independent agencies, to get them to think in a global fashion. And we have a regulatory forum between the U.S. and the EU to hopefully do that. But Congress can play a tremendous role here.
Ms. Jenkins. Thank you.
Thank you, Mr. Chairman. I yield back.
Chairman Nunes. Thank you.
Mr. Neal is recognized for 5 minutes.
Mr. Neal. Thank you, Mr. Chairman.
Mr. Ambassador, just to let you pursue this a bit. We are used to setting the table in some of these areas. What suggestions would you make to our negotiators so that we might avert the problem of being pulled to the table? And you mentioned financial services earlier. And we have heard from agricultural interests, and I am sure we are going to hear from other sectional interests across the country. But in terms of financial services, how might you approach harmonizing some of the issues that you have already described?
Mr. Eizenstat. First of all, we really do have an exceptional nominee for United States Trade Representative. Mike Froman knows financial services, he has worked in that industry, he has worked globally, as the President’s deputy for international economic advisor. And so I think we have got a good start there.
Second is just getting financial services, Mr. Neal, in the negotiations. They are not in.
Third, again, is getting the Treasury Department to take the role as the chair of the Financial Stability Oversight Council to coordinate our own regulatory actions ‑‑ you have got agencies that are regulating extraterritorially, or proposing to do it ‑‑ so when we come to the negotiating table with the EU on financial services, we have got a coordinated position taken by Treasury through the Financial Stability Oversight Council.
Next is, again, working on these market access issues. If we work together with our financial institutions to try to get access for our banks and financial services to third countries that are keeping them out by having both the EU and the U.S. work together, that would be a huge advantage.
And then last, to the extent, again, that we can develop common regulatory approaches, it can set a standard for the world. I think that the U.S. wants to do this. I hope the barrier that one of the agencies doesn’t want to include it in TTIP can be overcome.
Mr. Neal. Thank you.
And, Mr. Slater, your description through your testimony about emerging and expanding localization barriers to trade, I guess better known as LBTs, they apparently condition market access for goods and services on, one, requirements to invest and develop or use local R&D, intellectual property, manufacturing, and assembly capabilities; two, mandate transfer technology to another party involuntarily; and, three, request to disclose proprietary information that would not typically be needed for regulatory purposes. How do you explain these barriers and how might they impact Intel and your operations in Massachusetts?
Mr. Slater. Thank you, Congressman Neal. These are relatively new. Let me rephrase that. Some of the ones where they require local manufacturing content for government procurement preferences, those are old school. But what is new is they are going upstream to include intellectual property, to include R&D. And they are being linked, for example, buying spectrum. That is a Brazilian LBT. And they put companies in a tough situation. Do we expand at home ‑‑ for example, in our case, at our facility in Massachusetts ‑‑ or do we chose to expand in an emerging market where we may forgo a major market access opportunity.
These are new. The TTIPs should push back strongly against them, set the gold standard, and prohibit them entirely, and then commit the parties to promoting the prohibition in other FTAs and in other forums, because they are a pernicious form of NTBs. Some of them violate WTO, some of them fall between the cracks of WTO provisions. But they are relatively new and untested at this point. They started showing up in India and now other countries are looking at copying them.
Mr. Neal. Thank you.
Thank you, Mr. Chairman.
Chairman Nunes. Thank you, Mr. Neal. Gentleman yields back.
Mr. Boustany is recognized for 5 minutes.
Mr. Boustany. Thank you, Chairman Nunes.
And, Ambassador Eizenstat, I was really enthusiastic about your comments in your written testimony about the geopolitical implications of getting this done, and the kind of leverage we will have in dealing with rising economic powers like India, China, Brazil, and so forth, to get back to a rules‑based trading system.
One of the most interesting aspects of these negotiations in my mind will be the effort to address a number of the 21st century issues that have not been traditionally covered in previous trade agreements. State‑owned enterprises, you have talked about those. Competition, customs, trade facilitation, global supply chains, and cross‑border data flows.
And I believe it is critically important that Congress develop and pass strong bipartisan trade promotion authority to set out the negotiating objectives for this negotiation. TPA will establish the framework for congressional consideration and implementation of the agreements, and it empowers the administration to negotiate and conclude the agreements.
So, just for the record, do you think these negotiations can be concluded and an agreement implemented without trade promotion authority?
Mr. Eizenstat. No.
Mr. Boustany. Thank you.
Mr. Eizenstat. They can be launched, but they can’t be concluded, because the EU is not going to accept our final deal if they know it can be second‑guessed when it comes to Congress. So Congress has a huge role here. There hasn’t been fast track or TPA authority for a number of years, either for a Republican or Democratic President. It is absolutely essential. It will be essential for the Trans‑Pacific Partnership agreement to be concluded. But this is your chance to put an imprint on the TPA as well. So I think it is tremendously important and it is absolutely impossible to have a concluded agreement, in my opinion, either in the TPP in the Pacific or the TTIP without this trade promotion authority.
Mr. Boustany. With regard to this agreement, could you discuss timing? Should we have trade promotion authority early in the process?
Mr. Eizenstat. The earlier the better.
Mr. Boustany. Okay.
Mr. Eizenstat. And if you are going to have it, you might as well get it for TPP, for the services agreement ‑‑
Mr. Boustany. Services agreement, yes.
Mr. Eizenstat. ‑‑ the plurilateral service agreements. So I would put it all together in one, rather than having separate votes at separate times.
Mr. Boustany. Thank you. Also, on a different subject, the U.S. and the EU have an existing regulatory dialogue called the Financial Market Regulatory Dialogue, or FMRD. And given the importance of this dialogue to ensuring the regulatory agendas of our country and the EU don’t work at cross‑purposes in global financial markets, doesn’t this trade agreement present an opportunity to reinforce this type of dialogue?
Mr. Eizenstat. Absolutely. It should be seen as enhancing that dialogue and giving more structure and more discipline to it.
Mr. Boustany. And if we are to include in the trade agreement newly expanded requirements of financial regulatory transparency principles for cooperation, impact assessment, and a mechanism for commenting and consulting on financial regulations that could lead to greater regulatory coherence, would this not advance the dialogue’s hugely important task and benefit both financial services trade flows, not to mention manufacturing and agricultural trade flows that depend on efficient financial services?
Mr. Eizenstat. Yes, sir, it would. And, again, I would like if I could to just return to this broader theme. To the extent that the EU and the U.S. can agree on common approaches, that can become the world standard. And that means that our companies, whether in agricultural or manufacturing or financial services, have a tremendous leg up when they want to do business in third markets because those third markets will be under a lot of duress to accept this common EU‑U.S. approach.
If, on the other hand, we fail, you can be sure that China or other developing countries will be trying to get their standards approved. And so it is not just improving trade flows between the U.S. and EU, as important as that is, it is setting a standard for global approaches.
Mr. Boustany. And that was what I referred to earlier in the geopolitical side of this in that as we have seen a stalling of Doha, how do we get back to a real rules‑based trade system with good mechanisms for dispute resolution and so forth? And I see this as a strong vehicle to impress U.S. leadership in trade, and I am very excited about the prospects.
Mr. Eizenstat. Absolutely.
Mr. Boustany. Thank you. I yield back.
Chairman Nunes. Thank you, Mr. Boustany.
Mr. Blumenauer is recognized for 5 minutes.
Mr. Blumenauer. Thank you.
Appreciate the opportunity for your easing us into some of these issues. There are certainly some, I think, significant opportunities. I appreciate notions of common accounting standards or, Mr. Eizenstat, your notion of bumpers, you know, might suffice if they meet the standards in either the EU or the United States.
And I do think your point about this perhaps being an easier entry point than what we have seen, at least in the 17 years I have watched these in Congress ‑‑ some of them have been a little choppy ‑‑ this could potentially be easier and perhaps serve as a template to do some other important things.
But I am interested in your thoughts about what we do to make sure that we avoid unnecessary conflicts, areas, for example, dealing with finance. There is some apprehension in terms of how far we go in standardization, given the fact that the United States is imposing a little more significant regulatory protections to avoid some of the problems we have had in the past. And there is some pushback with some of our friends in the EU making sure that whatever we are doing in this arena is not somehow as a backdoor effort to undo hard‑fought efforts to prevent the next meltdown in the United States, or, for that matter, giving an undue advantage to some European institutions that wouldn’t have to meet the same standards, although one has to note that some of these European institutions availed themselves to Fed facilities during the last meltdown. Do you have some thoughts on that?
Mr. Eizenstat. Yes. I feel quite confident in saying that the financial services industry does not want to use this as a backdoor way of diluting the standards and regulations which are necessary for consumer protection. And also I would say that, here again, having been ambassador to the EU and spent a lot of time in Europe, I can assure you that European financial regulators are just as interested in protecting their investors and their consumers as we are. We are not dealing with a Third World country; we are dealing with an institution that has very high standards themselves. The question is trying to get as much convergence, of not weakening standards. But if we can get that convergence, we can save an enormous amount of money.
Mr. Blumenauer. We are already seeing some apprehension in the United States. I am sure everybody has the same goal, but there is some concern that maybe there is some convergence into some areas that look a little risker on the other side of the pond.
Mr. Eizenstat. That is not a concern I share.
Mr. Blumenauer. I am glad.
One other area that is of interest to me that is likely to come up when we are talking about agriculture. There is, as I understand it, a little different philosophy between the EU and the United States just in allowing consumers to know what they are buying. Products are routinely comprehensively labeled in the EU. In the United States, people do not have access to the same labeling.
Mr. Grueff, this would seem to be a pretty straightforward issue of transparency. Do you see this coming up, and thoughts about its resolution?
Mr. Grueff. Yes, sir. It is a very important issue. And I hope it does come up. Usually where this issue is most discussed and apparently has the most economic consequence is in the area of agricultural biotechnology, the mandatory labeling issue. And as you just described it, really at its root there are real cultural differences, societal differences, in terms of the consumer’s right to know, the consumer’s desire to know. And in the EU, there is a very strong feeling, I would say, among ‑‑ I was stationed in Germany for 4 years myself ‑‑ I would say among consumers that they want to have this information as to how the product was developed, was genetic engineering employed or not. That is important.
I would say generally, to American consumers that is not important. But we are all working under the rules of the WTO. So when it comes to mandatory labeling, I would say that the U.S. approach is that this is not a role where the government should be making this a trade barrier, that if consumers have an interest in knowing this information there will be a commercial response to that, companies will provide that information to them. And it really is not appropriate for WTO members to deal with each other in the way of making it mandatory.
Mr. Blumenauer. Is there any problem with just allowing ‑‑ this is not an issue of scientific dispute, is it ‑‑ knowing what it is that you are buying? This is not the same in terms of having some unusually artificial barrier to keep a product out, just allowing to know what it is.
Mr. Grueff. You are right. It is not a food safety issue in that sense. I would say ‑‑
Mr. Blumenauer. And it is not a pernicious thing, that somehow a barrier that can’t be overcome or foreclosing a market.
Mr. Grueff. Well, it is a difficult issue and there is a lot to it. Part of the U.S. perspective I think is that when you require, when the government on either side of the ocean requires labeling that a product was genetically produced and there is no food safety issue, then why ‑‑
Mr. Blumenauer. Just letting people know what it is. Put aside whether it is genetically modified or not, that should not be a trade barrier, should it, just allowing people to know what they are buying?
Mr. Grueff. I think the issue from the U.S. perspective is, is the government requiring that companies label this for consumers. And then if you are ‑‑
Mr. Blumenauer. And you think that is an unnecessary trade barrier?
Mr. Grueff. Yeah, I mean, I would agree with U.S. perspective on this, that if this is an import requirement, this is a requirement that would be imposed on U.S. exports, that this product be labeled, then, yes, I ‑‑
Mr. Blumenauer. I think that, Mr. Chairman, just at some point I would be interested in exploring this a little bit. Because I think this puts us in a very weak position. I think it is 57 or 67 countries that allow consumers to know what they are buying, and that is part of what governments do. And I think if we fall on our sword over something like this, I think the public opinion is very much in flux over this, you have had a little experience in California, where there were tens of millions of dollars spent in an avalanche of kind of an exciting political campaign. We are not hearing the end of it. And I would just offer up that I think it would be interesting to explore it a little further. Because I think there are some real opportunities with this.
But this is an example of something that I think is a side issue that could, in fact, complicate this unnecessarily. I think we have got real issues that we want to contend with, with our European friends. This, I think, is a stupid fight, to prevent consumers from just knowing what they are getting. Picking a fight with Europe over this instead of going along with what many countries, I think a majority of people around the world have the right to know what they are purchasing. I think that that gets in the way of other objectives in the trade arena, and I would like a chance to explore that a little further at some point.
Mr. Eizenstat. If I can just add a perspective. I think it is a trade barrier. Certainly consumers should have the right to know what they are buying and what the components are. But when there is a non-scientific base is for simply saying because something is genetically modified the implication is that it is dangerous and you don’t approve it, that is wrong. That is a trade barrier. And I think now increasingly the EU is allowing more GMO products. It is fine to have consumers understand what has happened, what is in the component, but when you simply label something and then give the impression that that makes it dangerous, that can be ‑‑
Mr. Blumenauer. Your position, where people think if they know what it is that they won’t buy it or if they know what it is that that is an implication that it is not appropriate to buy or it might be dangerous, I think is creating a false battle. And I am not prepared at this point ‑‑ I mean, we can talk about what happens when you have got Round‑Up‑resistant weeds, which 49 percent of American farmers are finding now, and they are using even more pesticides.
But I think it is important for us to think about what it is worth going the mat over when we are dealing with our friends in the EU with something that is probably going to be popping up in various States around the country. I think the first State that decides that consumers have the right to know, I think you are going to see a lot of businesses fall off the bandwagon in fighting against allowing people to know what it is, because I think that creates the expectation or feeds the fear that there is something they shouldn’t be able to know if you are not labeling it.
And I don’t want to go into it further now, but I do want to explore it at some point, because I think it is going to create some unnecessary problems with this trade agreement, that we have got bigger publish to fry, like Intel people that I represent, where there are real battles on intellectual property, there are real battles on standards that matter and easing this forward. And this ‑‑
Chairman Nunes. I would like to thank my good friend from Oregon. And his time has expired.
Mr. Schock is recognized for 5 minutes.
Mr. Schock. Thank you, Mr. Chairman. Thank you for hosting this meeting. And thank you to the panel of interesting witnesses.
First, I would like to start with Ambassador Eizenstat. You mentioned in your testimony the importance of TPA, not only to getting the agreement done, but actually in credibility with our negotiations. And so I thought I would just give you the opportunity to expand a little bit on that and talk to us about why TPA is important even just during the negotiating process.
And then our Congress, you heard our chairman at the opening of this committee, has expressed support for TPA. We need greater commitment from the administration to build support for this effort. And so from a Member of Congress’ point of view, there seems to be only upside for the administration to ask for TPA, since it seems to be important for them in the negotiating process when it comes to credibility. But you have served in administrations, multiple administrations. Are there things we could be doing to help build support for TPA and encourage the Administration to be more involved?
Mr. Eizenstat. Well, Mr. Froman is going to be going through hearings on his appointment in the Senate. I would assume this would be some of the questions about TPA. I can’t imagine the administration wouldn’t want to have it. And if there is bipartisan support for it and if it can be indicated that there is bipartisan support, that this is not going to be a knockdown, drag‑out, because the worst thing to happen, this really would throw a kink in the negotiations, is you launch in mid‑July, which is what their hope is, these TTIP negotiations and then you end up having a bruising battle over fast track at the outset. So I think they may want to get some momentum in the negotiations.
But to the extent that the Congress can indicate that there is bipartisan support at the outset and that there won’t be such a bruising battle, it gives them really a tailwind rather than a headwind. So I suspect that they are going to want some assurance that that this will, in fact, be a bipartisan program and not one that, you know, ends up throwing, again, a curveball in the negotiations before they start. But I think what you are saying certainly should be welcome to the ears of the administration.
Mr. Schock. Thank you. I wanted to address the intellectual property, not so much relative to the U.S.‑EU agreement, but what the agreement between the U.S. and the EU’s trade agreement will mean for intellectual property right fights that we have for more developing countries. Most of the companies that do business in my district that are worried about their intellectual property being stepped on or stolen are not worried about a European Union country doing it. I am aware of multiple cases where the U.S. and the EU has already filed jointly cases before the WTO. And I am just wondering, in any of the panelists’ view, whether a U.S.‑EU agreement gives any more weight or ability for us to protect our IP in both countries or either country. In other words, does this have any impact on our fights in China and some of the other emerging markets?
Mr. Eizenstat. In my opinion ‑‑ and I would like my colleague from Intel, I am sure this is a big issue ‑‑ absolutely. If we can establish a really high level of intellectual property protection here and then work shoulder to shoulder against things like, you now, domestic innovation policies where they basically require forced technology transfers, compulsory licenses, a whole set of nontariff barriers in the IP area, this would be, I think, a big step forward in establishing the high standard of intellectual property protection around the world at a time when it is under enormous stress across the board.
So I think it would be a very big step. We do have strong protections already. But coming in a trade agreement where we do it jointly I think would have a very big impact on Third World and emerging markets.
Mr. Schock. Any other panelists? Mr. Slater?
Mr. Slater. If I may, Congressman Schock. I agree with what Ambassador Eizenstat said. I think that setting global principles on IP protection where we have a commonality of interests, not trying to harmonize the systems, but where we are concerned about Third World markets, and we are, would be very beneficial. Every initiative that I know where we have succeeded in pushing back in China on one of their indigenous innovation policies, it was because we cooperated with the EU and usually Japan. And formalizing that cooperation, making it actually binding and more detailed, would be very, very useful.
The other thing to keep in mind is the trade secret protection in the EU varies from member state to member state. The commission is looking at an EU‑wide directive on trade secrets. TTIP could provide the momentum for them to go further down that road, and that would help. It is hard to argue doe enhanced trade secret protections if you, yourself, don’t have the best standard in place.
Mr. Schock. Well, I have more questions, but my time has expired. So thank you again for being here.
Thank you, Mr. Chairman, for having this meeting.
Chairman Nunes. Thank you, Mr. Schock.
Mr. Reichert is recognized for 5 minutes.
Mr. Reichert. Thank you, Mr. Chairman.
I apologize for being late and missing some testimony, and I did get to catch part of the discussion, and I know that you have touched on this issue a little bit. But I just want to go back and maybe reemphasize your answers to a couple of questions.
I am from the State of Washington, and I have just acquired a new part of my district of some apple growers and some other agricultural products. We are very excited about the opportunity of a trade agreement between the United States and the European Union. It offers critical opportunity for trade for that industry, and also for other businesses, of course, in Washington State. We are the most trade‑dependent State in the Union, as probably all of you know.
It also provides a way to tackle some of the challenges facing Washington tree fruit growers, and even our dairy producers as they try to access the European market. Each year, on average, Washington exports 35 percent of its apple crop, and some of our dairy producers export as much as 50 percent of their product, but only a small amount of those products go to Europe. I am hearing from growers and dairy producers in my State about how nonscience‑based regulations and standards and other nontariff barriers are limiting their access to the European market. It is essential, I think all of us recognize, and as I said, I have heard some of the testimony, that these barriers be addressed in the negotiations.
Mr. Grueff, what do you think can be accomplished through these trade negotiations in this area?
Mr. Grueff. Well, I guess, bigger picture, in response to your question, our history with the EU, as I pointed out in my testimony, especially in the sanitary and phytosanitary area, the health‑related area, has not been a good one. And, in fact, I would say that our way of trying to deal with these issues has been through WTO dispute settlement, which is really not a very good way to try to do this.
So this will really be the first time that we are going to have a structure, a forum for the U.S. and the EU to really focus on these issues. And so I am hopeful. I know that this is going to be very difficult, but I am hopeful that the opportunity will be used very productively.
As to your specific point about, for example, your district, for our, your district and the U.S. dairy industry, I think this is a very important opportunity for a number of reasons. One is the issue of geographical indications, which is generally viewed as an EU offensive issue. This is the issue of producers getting to keep the name of the original area where a product was produced, like Parma ham and so on. But our U.S. dairy industry says that they feel confident that they will have much better access to the EU market if there can be some agreement with the EU regarding some of the biggest issues regarding geographical indications in dairy, mozzarella and feta and so on, that if something could be worked out with the Europeans on this, our dairy industry is very optimistic about their opportunities in the EU market.
So this is an issue that I certainly expect will be part of the negotiations. And, again, it would be a platform, a structure or forum that we just haven’t had. So this can provide some real opportunities.
Mr. Reichert. I appreciate that. Thank you.
For Mr. Slater, another issue of importance to the businesses in my State that operate globally is the protection of cross‑border data flow. In both the European Union and the United States, data privacy is protected, but we have different systems for providing that protection. Respecting the difference of those privacy approaches, how can we ensure a robust protection of cross‑border data flows?
Mr. Slater. Thank you. I am encouraged by an exercise that is going on right now, where there is a mapping exercise between the corporate binding rules in the EU and the cross‑border privacy rules that APEC has put together. And they are mapping out the similarities and differences to ensure interoperability as much as possible and then find a way to bridge the differences. I have talked to USTR about this, and I know want to encourage that approach and to, instead of trying to harmonize or trying to dilute the EU privacy regime that is to find a way to maximize interoperability and yet have a right to strong cross‑border data flows. They are not inconsistent. And the EU, apparently, many of the officials in the EU want the freedom to have cross‑border data flows because they recognize it is important to their own service industries.
So it is almost like you have to treat the two issues separately. And even though they obviously touch, they are heavily dependent on one another to make progress, but I am encouraged by what they are looking at right now.
Mr. Reichert. I appreciate that. Thank you.
I yield back, Mr. Chairman.
Chairman Nunes. Thank you, Mr. Reichert.
Well, that concludes our hearing. I do want to thank the gentleman from New York for his cooperation on and bipartisan support for agreeing to all the witnesses. I think it makes for a much more productive hearing like we had today. And I especially want to thank all of the witnesses for their time and their patience dealing with our schedule. I hope we didn’t make you late for any appointments, but we do appreciate your time.
And with that, the meeting is adjourned.
[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
Questions For The Record
Member Submission For The Record
Submissions For The Record
Handmade Toy Alliance
American Farm Bureau
Shellfish Growers Association
USIFI and IFAI