HEARING ON U.S. TRADE AGENDA
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FEBRUARY 14, 2007
Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
|FORTNEY PETE STARK, California
SANDER M. LEVIN, Michigan
JIM MCDERMOTT, Washington
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
MICHAEL R. MCNULTY, New York
JOHN S. TANNER, Tennessee
XAVIER BECERRA, California
LLOYD DOGGETT, Texas
EARL POMEROY, North Dakota
STEPHANIE TUBBS JONES, Ohio
MIKE THOMPSON, California
JOHN B. LARSON, Connecticut
RAHM EMANUEL, Illinois
EARL BLUMENAUER, Oregon
RON KIND, Wisconsin
BILL PASCRELL JR., New Jersey
SHELLEY BERKLEY, Nevada
JOSEPH CROWLEY, New York
CHRIS VAN HOLLEN, Maryland
KENDRICK MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
|JIM MCCRERY, Louisiana
WALLY HERGER, California
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
SAM JOHNSON, Texas
PHIL ENGLISH, Pennsylvania
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
RON LEWIS, Kentucky
KEVIN BRADY, Texas
THOMAS M. REYNOLDS, New York
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
DEVIN NUNES, California
PAT TIBERI, Ohio
JON PORTER, Nevada
Janice Mays,Chief Counsel and Staff Director
|Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.|
SUBMISSION FOR THE RECORD
HEARING ON U.S. TRADE AGENDA
U.S. House of Representatives,
Committee on Ways and Means,
The Committee met, pursuant to notice, at 10:00 a.m., in room 1100, Longworth House Office Building, Hon. Chairman Rangel (Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
Chairman RANGEL. Good morning, Ambassador Schwab. We are very pleased that you’ve been able to overcome the storm and to share your views with us about tax policy.
Mr. McCrery sends his deepest regrets, but the snow prevented him from attending this hearing, but as you know, we’ve been working very closely with you on a variety of issues, and Mr. Herger will be opening on behalf of the minority this morning.
I have a prepared statement, but as you might suspect, I will be deviating from it because it is my desire to be your new best friend in terms of trying to share with the American people and especially the Congress how important trade is to the United States of America and most recently the impact that it has on democracy throughout the world.
Unfortunately, the thinking about trade has been polarized. It has been my limited experience that the Chamber of Commerce has never seen a trade agreement that they didn’t like and Labor has never seen one that they did, but a lot of the reasons why trade gets such a negative feeling is because it’s perceived that the negotiations only concern the multinationals–but those who are the victims of globalization don’t get the attention that they should get, one, to avoid the loss of jobs and industry, but two, they think that their Government, maybe not your Department, but their Government will be there to be of some assistance to them.
So, it seems to me that when this Committee takes a bill out on the floor, we don’t have people saying, “”I got my job through the North American Free Trade Agreement (NAFTA), please support the Central American Free Trade Agreement (CAFTA).” We hear the people who say, “”I lost my job as a result of the trade agreement.”
So, I am very pleased how the Administration and especially you have provided leadership in how we can prove to the American people that yes, there is pain with progress, but our country is not just concerned with agreements for business. We’re concerned for businesses that are already in the United States, and we want to help them.
Of course, we’re working on language that would not do damage to American trade agreements, but would show that this great country is concerned about at least minimum standards that protect minors and women in having some type of labor laws which, of course, most of the country is agreed to but we have a problem with.
I’d just like to say that while we’re not there yet, Mr. Levin and I are very pleased with the willingness of your office and others in the White House to work with Mr. McCrery and me so that we’ll be able not to bring problems to the full Committee but to indicate that we’ve moved as many impediments as we can in order to make certain that agreements that befall us will be considered in a very bipartisan way.
So, I thank you for that, and I would want, before I go to Mr. Herger to yield to the Subcommittee Chair, Mr. Levin, who has devoted so much of his time in trying to get these agreements acceptable to both parties.
Mr. LEVIN. Thank you, Mr. Chairman and Mr. Herger and Ambassador. Let me, if I might, read a statement that I wrote. It’s direct. I hope it will be felt constructive, as is intended.
Trade policy is at a new crossroads in our Nation. Ambassador, we appreciate that since November you have increased dialogue with the Democratic majority in the House and with the Republican minority. What is needed now is a clear agreement on changes of approach to vital trade issues.
As you know, Democrats in the House have long held a deep concern about the direction of U.S. trade policy. The Administration’s approach has been far too passive in shaping trade agreements and establishing rules in ways that raise standards of living in the U.S. and around the globe, in enforcing trade agreements and in breaking down unfair barriers to U.S. products.
You said on Monday, and I quote, “”The equation is quite simple. Trade agreements mean more exports and more exports mean better jobs.” We believe the equation is not nearly that simple. Imports matter as well as exports. More is not automatically better. We strongly favor expanded trade, and I think votes have shown that, not as an end in and of itself but as a tool shaping the rules of competition to maximize the benefits and minimize the down sides of globalization.
It is time to craft a new trade policy for this new era of globalization, an activist international trade policy that expands and shapes trade. To do so requires real collaboration, moving beyond too often perfunctory consultation. We believe the pending FTAs represent an excellent opportunity if the Administration is truly willing to change its approach.
As to the Latin American FTAs, our position has been clear and consistent. The text of the agreement must include the five, core International Labor Organization (ILO) standards with a reasonable transition period enforceable like other provisions in the agreement.
As to the pending Korea FTA, our position is firmly held. Among other key outstanding issues, the agreement must knock down the economic iron curtain to American industrial goods including automotive in a measurable way.
As we have discussed, Ambassador, time is of the essence on these and several other issues in the FTAs. The deadline for submitting or resubmitting revised agreements under the current Trade Promotion Authority (TPA) is March 31. Democrats being ready to work to meet this deadline we need to receive concrete proposals on these issues from the Administration, setting standards for international competition and knocking down rigid barriers like those in Korea are the oppositive of “”perfectionism” or “”isolationism,” misguided terms sometimes used to avoid real issues.
A real partnership, and I emphasize this as I close, between this Administration and the new majority and the minority to rebuild the bipartisan foundation for trade is also necessary to address key issues in the World Trade Organization (WTO) round that has faltered. Whether agriculture, industrial policies and non-tariff barriers, services or rules, we Democrats stand ready to proceed with that kind of true partnership, changing policies where necessary for the benefit of U.S. businesses, workers and farmers in the global marketplace.
Mr. Herger, if you would, now present your opening statement.
Mr. HERGER. I thank the gentleman from Michigan, Mr. Levin, and I welcome the Ambassador with us today. Ambassador Schwab, I do want to thank you for joining us today. I think it’s crucially important that the Administration continues to discuss the benefits of trade to the American people and our economy and the important progress you are making to bring down barriers to trade for our many U.S. products.
I’d like to focus on the DOHA Round negotiations at the WTO. We have ambitious expectations for how the United States will benefit from these multilateral negotiations not only in agriculture but also for goods and services liberalization. We should move in a direction that will eventually bring the DOHA Round to a successful conclusion with an agreement that is good for all Americans.
Many are pegging the future of the President’s trade promotion authority on the level of success we see over the next few months. I believe we should extend trade promotion authority, and beyond a mere extension only for DOHA. Exports to our FTA partners–our 13 FTA partners, account for an amazing 42 percent of our total annual exports even though these countries only make up 7.3 percent of world Gross Domestic Product (GDP).
TPA is important for future bilateral trade agreements, but also because we know that other countries are aggressively pursuing expanded trade, such as the European Unioin (EU) and China. If we allow TPA to expire, we would be foregoing a competitive edge as these countries expand their trade relationships and leave U.S. producers and consumers behind.
As we continue to discuss the WTO with respect to agriculture, I think the central issue will continue to be market access. We have to insure that the concessions we made to reduce our trade-distorting domestic subsidies are reciprocated through meaningful new market access in places like Europe, Japan and Brazil by eliminating tariff and non-tariff barriers.
Beef and rice offer a good example. The EU market has been closed to U.S. beef because of a non-science-based ban which the WTO has deemed illegal. We also have a push for renewed beef exports to countries like Japan, China and Korea, which restrict our access in violation of international standards.
The EU also restricts our rice exports, blocking shipments through import restrictions and other non-tariff measures due to unfounded fears.
In other countries like Japan our access is severely restricted. The U.S. product that makes it into the country sits unused in warehouses, never present in the consumer market or people’s dinner tables. These are just a few concerns that I think must be addressed through our continued negotiations at the multilateral and bilateral trade level.
Overall, I’ve been extremely pleased with the bilateral trade opportunities we’ve created since TPA was granted in 2002. I think we need to continue our aggressive stance to conclude successful agreements with South Korea and Malaysia and see that American producers and consumers alike would benefit.
I believe this is a mission that we can accomplish on the very tight time frame we have, and I assure you, you have my full support as you continue to promote U.S. interests in these negotiations.
I would like to conclude with a couple of thoughts. First, we must make sure that our trading partners live up to their already negotiated obligations. Accordingly, I applaud the Administration’s recent announcement that it is bringing a case against China on export subsidies.
Second, as Congress looks for a way forward on TPA, an application of our trade remedy laws, we need to keep in mind a balance that recognizes the interest of all elements of our diverse economy.
Thank you, Mr. Chairman.
Chairman RANGEL. Thank you. Madame Ambassador, welcome to the Committee, and we really look forward to working with you in a bipartisan way, and we’re anxious to hear your testimony.
Ambassador SCHWAB. Thank you, Mr. Chairman. I’m delighted to be here today. In keeping with the spirit of the day, I will say I will be your new best friend if you’ll be my valentine.
I’m going to move through my written testimony fairly quickly, efficiently, and make sure that we have plenty of time for questions and answers. The first two slides that I’m going to go through really lay out the context for President Bush’s trade agenda for 2007.
The economy is very strong. The economy grew last year at 3.4 percent. We’ve averaged over three percent for the last several years. Two million jobs were created in the last 12 months, 7.4 million since August of 2003. Real compensation is up. Real manufacturing output is up.
That said, we recognize that there are real concerns about trade and those concerns are in spite of the very compelling evidence, statistics and data to the contrary. That has to do with the changing nature of the workforce and adjustment, structural adjustment that takes place in the economy.
Now we all recognize that productivity increases, technological change, and global competition have an impact on this. We must be understanding, and we must seek solutions to address and help the narrow but very real group of individuals, of companies, of communities that have been negatively impacted by trade. We need to do so in a way that does not jeopardize the benefits of trade that accrue to the vast majority of Americans, American workers, American producers, ranchers, service providers and so on.
Yesterday the 2006 trade statistics came out, and they offer a very interesting and in many ways upbeat insight into the trade picture. Export driven growth last year was tremendous, nominal U.S. goods and services exports grew by double digits, nearly 13 percent. Imports also grew 10.5 percent, but if you look at the composition of the increase in our trade deficit last year, it turns out 90 percent of that was from increased oil prices.
On an inflation adjusted basis, you see different statistics, but what is compelling when you look behind the statistics, exports accounted for over a quarter of real GDP growth in the United States last year. In the fourth quarter, U.S. trade accounted for almost half of our GDP growth.
Actually, if you look on a trade-adjusted basis, the U.S. trade imbalance was largely unchanged last year. In fact, it was down slightly, one-and-a-half billion dollars, and that is mainly because of strong export growth.
We note here the impact that exports had, trade had, in helping to offset the impact on the economy of the housing downturn. I would note, again, that export pay–export-related jobs pay an estimated 13 to 18 percent more than jobs nationwide. As we know, the vast majority of Americans benefit from trade, recognizing that not all Americans benefit from trade.
So, it’s in this context that I want to talk about our trade agenda today and to talk about the DOHA Round of multilateral trade negotiations, trade promotion authority, trade agreements, including our FTAs and enforcement, compliance and dispute resolution.
First, the benefits of the DOHA Round deal, a potential DOHA Round deal: This is an opportunity for the United States to improve our access to exports to the 95 percent of consumers in this world who do not live within our borders. The DOHA Round also has incredible potential, very important development potential in terms of alleviating poverty in the poorest countries of the world. By one estimate by the World Bank, elimination of global trade barriers could lift 66 million of the world’s poor out of poverty.
If Africa, for example, Africa’s share of world trade could increase from two percent to three percent, that would be the equivalent of over $70 billion a year in income for Africa, well in excess of foreign aid that goes to Africa, but ultimately, we will need trade promotion authority to implement any DOHA Round agreement.
On page six, I have a quick summary of where we are in the DOHA Round negotiations. We have talked about, and I suspect we’ll talk about more the element of trust in trade promotion authority, the nature of the contract between the executive and legislative branches that is represented by trade promotion authority.
A reflection of that trust included our ability, my ability, to walk away last July from a bad deal, knowing that that would mean that the current allocation of trade promotion authority would expire before we had a DOHA Round agreement.
What we’re doing to try to save the DOHA Round is to drill down below the headline numbers, the finger pointing, and look really specifically at our priority exports, our redline sensitivities, those priorities and sensitivities of our trading partners, and then to backward integrate, reverse engineer, into top-line numbers.
The key, at the end of the day, is going to be market access, whether it’s in agriculture, whether it is in manufacturing or whether it is in services.
On page seven, we’ve got information about why the DOHA Round is important. I’m not going to dwell on this. I’ll be happy to answer any questions about it, but again, the key, market access. If you want a single solitary contribution that the DOHA Round can make to U.S. economic growth and to global economic growth, development and the alleviation of policy, it is the elimination or the reduction of trade barriers, tariff and non-tariff barriers that generate meaningful new trade flows, particularly in agriculture.
There, the real problem has to do with the exceptions or sensitivities or loopholes that countries are looking to shield their barriers. Export subsidies here is one very bright picture to date in terms of the DOHA Round negotiations. There is already a commitment if the DOHA Round is ultimately implemented for the elimination of export subsidies in agriculture.
Then of course there is the issue of U.S. trade distorting agricultural domestic support where we are obviously under significant pressure to reduce and discipline that.
When it comes to manufacturing, again tariff and non-tariff barriers are critical, and we’re also looking to have enhanced access in certain key sectors, chemicals, electronics, electrical products, healthcare products, environmental products and forest products.
In the case of services that account for eight in ten U.S. jobs where we have a trade surplus, again, we are focusing on critical sectors, financial services, telecommunications, computers, express delivery, energy distribution and environmental services. Then there are other important issues under negotiation, including rules, environmental related issues having to do with fishing, trade facilitation and development.
Trade promotion authority, as I said, is going to be a prerequisite to getting a DOHA Round agreement enacted into law. All presidents since 1974 have used trade promotion authority to open markets and create opportunities for American workers, farmers, ranchers, service providers.
Very few countries are willing to negotiate seriously with the United States without knowing that trade promotion authority will enable the United States to deliver on a trade agreement without it being picked apart during the implementing process. The Administration has used trade promotion authority to increase our exports, and if we do not have trade promotion authority, whether it is for the DOHA Round or regional agreements or bilateral agreements or plurilateral agreements, that is the equivalent of walking off the field. If you’re not moving forward in this business, you’re probably moving backwards.
If you look at recent free trade agreements that we’ve negotiated in the 10 agreements that have been negotiated in the last several years, I would note that U.S. exports to those countries have grown twice as fast as U.S. exports to the world. Countries with which the Administration has concluded or is negotiating free trade agreements account for $157 billion in U.S. export markets, the equivalent of the second largest market in the world for U.S. exports.
Even though the 13 FTA countries with which we currently have agreements in force account for only 7.2 percent of global GDP. Excluding the United States, they account for 42 percent of U.S. exports to the world. Those numbers are broken down in the subsequent slide.
As you mentioned, Mr. Chairman, we are negotiating free trade agreements, currently under active negotiation with Korea. That negotiation is going on this week with Malaysia. We recognize that under the current allocation of trade promotion authority, any agreements must be signed by June 30th and we need to notify Congress of our intent to sign before the first of April.
Again, content over calendar. Content will take precedent over calendar, the substance of the negotiations, but ultimately access to trade promotion authority is critical.
We have in front of the Congress two free trade agreements, Peru and Colombia. Those are extremely good examples of how we use trade promotion authority to level the playing field.
One of my predecessors, Carla Hills, was quoted in the last two weeks about the Colombia and Peru FTAs as saying, “”Well, they get unilateral, one-way, free market access to the United States through a preference program. Under the FTAs, they have agreed to open their markets entirely to U.S. exports. If that isn’t leveling the playing field, nothing is.” She called it a no-brainer to see Peru and Colombia enacted into law.
We have a free trade agreement that we are very close to closing with Panama, as you know.
Enforcement, last but certainly not least. The last two slides–I’m going to talk very briefly about the record of success that we have had in enforcement. This is a very results oriented approach that we take with results to show for it. The Administration has been willing, has shown it is capable of using all the tools in our arsenal from jawboning at one end to retaliation at the other to get results when there are cases of countries that are not living up to their commitments in terms of our bilateral or global agreements.
Litigation is, in some ways, almost a last resort because if you want to settle a deal, if you want to work out a deal and get results, you’d just assume do it now if you can than go to litigation. That said, we have gone into litigation, for example, with the EU over the Airbus case, the largest case ever filed, and more recently with China over auto parts, and just last week with China over prohibited subsidies.
We have won, I’m happy to say, 88 percent of the WTO cases that had been brought since 1995 when the WTO was created, and we’ve won over half, 55 percent of all cases, offensive and defensive.
My last slide, Mr. Chairman, just offers some illustrative examples of where we have accomplished compliance enforcement objectives using bilateral consultations, using negotiations, market liberalizing negotiations through free trade area agreements, the WTO, by threatening or actually bringing WTO cases, and by reaching conclusion in WTO cases that have been successfully prosecuted.
Let me stop there and let me invite you to ask questions. I can into detail on any of these and other details that you care to discuss.
[The prepared statement of Ambassador Schwab follows:]
Chairman RANGEL. Thank you, Madame Ambassador.
If Ambassador Carla Hill believes that Peru is a no-brainer, why doesn’t she come down and share with us why we haven’t got it on the floor and voting on it?
Ambassador SCHWAB. Mr. Chairman, I can’t speak for Ambassador Hills, but I suspect–
Chairman RANGEL, but you already have.
Ambassador SCHWAB. Well, I was quoting her. I suspect she’d be very happy to come down here and work with this Committee.
Chairman RANGEL. Well, please tell her we welcome her input. Having said that, as you know, Mr. McCrery and I are working very hard to remove any partisan impediments to any agreement, and you do a heck of a job for negotiating what is best for the United States.
Do you believe since the Congress created your office, that there’s any room for the executive and legislative branch to agree on basic standards how we treat–how countries that we work with treat child labor and discrimination issues?
Ambassador SCHWAB. Mr. Chairman, I believe that the record–the United States’ record both in this Administration and the previous Administrations on free trade agreements, as affects child labor, worst forms of child labor, forced labor and so on, I think that record is very good. I think it’s very clear that in every case in every one of these free trade agreements, after the free trade agreement has gone into effect, the situation on the ground for workers in those countries is vastly improved over what it would have been if we hadn’t had the FTA. So, these are obviously important standards–
Chairman RANGEL, but as relates to getting votes for these bills and approval from the Congress, can you share with us what you think has been the biggest impediment to getting bipartisan support on these agreements based on your experience?
Ambassador SCHWAB. Mr. Chairman, you are asking the $64,000 question. These agreements, by almost any measure, are of dramatic net benefit to the United States economy, to workers, to ranchers, to small business, medium businesses, large businesses.
Chairman RANGEL. I agree with you, but I’m asking what would you think based on your experience in bringing these agreements to the Congress has been the one greatest impediment to bipartisanship. We all know you’re doing a great job. I said that. You all know that most everyone in the House and this Committee believes that it’s necessary for us to participate because globalization is a state of fact.
Now we want this. All I’m asking, since we’re working on it, and I’m only trying to get it on the record, what do you think has been the greatest impediment so that Republicans and Democrats can hold hands and support these things?
Ambassador SCHWAB. I will answer your question. I think there are two significant impediments. One has been an increasing misperception within the United States among the electorate, your constituents, as to the real benefits of trade to the U.S. economy.
That has, in turn, telescoped into a dialogue in the Congress about worker rights and how the protection of worker rights should not fit into these trade agreements.
Chairman RANGEL. Do you believe that the executive branch and more specifically your office can make suggestions that can remove these impediments?
Ambassador SCHWAB. You have my commitment to make that effort.
Chairman RANGEL. Do you believe that the Congress should have any input as to what the President’s authority should be as relates to trade promotion authority?
Ambassador SCHWAB. I believe very strongly that trade promotion authority, whether you look at the original allocation of trade negotiating authority in 1934 or trade promotion authority starting in 1974, that is ultimately a contract between the Congress and the President, the legislative and executive branches of Government, some of which is written down, some of which has to be based on trust and a mutual understanding about how the authority can and should be used.
Chairman RANGEL. Well, I asked those things because, again, I want to thank you for you willingness to negotiate these things.
Jim McCrery is here, and I don’t think I’m talking out of school in sharing with the audience that he has been working with me and you and Secretary Paulson and the Secretary of Commerce. So, I’d just like to see how long we can have this atmosphere of cooperation working and to indicate publicly that you have done more than your share to get this started and on the right track.
While we have not reached any conclusions yet, I want to thank you for your efforts. Soon I hope to be able to bring your recommendations to the full Committee so that we can let the House know that we’re anxious to move forward and give it present authority and get these agreements agreed to.
I’d like to once again publicly thank Mr. McCrery for the cooperation that he’s given, not for Democrats and Republicans but for this Committee, the Congress and the country. I yield to Mr. McCrery.
Ambassador SCHWAB. Thank you, Mr. Chairman.
Mr. MCCRERY. Thank you, Mr. Chairman. I apologize for being late. For the first time in years, my four-wheel drive vehicle couldn’t get up my driveway this morning, so I had to make other arrangements to get here.
I want to add to what Chairman Rangel said in terms of our willingness to work together to find a way to move the trade agenda forward for the United States and for the world. Certainly Ambassador Schwab has been more than willing to meet with us and work with us, and her staff as well in searching for a way to create a robust trade coalition here in the Congress that would enable us to move forward with the trade agenda.
I don’t think there’s much question anymore as to the value of opening markets around the world. The value of breaking down barriers to American goods and services having access to the 95 percent of the world’s consumers who live outside of the United States. So, given that, I’m confident that we will find a way to forge ahead with opening markets and tearing down barriers to trade around the world.
Obviously, the best way to do that is with the leadership of the biggest market in the world, the United States. Obviously the United States cannot lead that effort if the executive branch of our Government is shackled with not being able to negotiate freely as every other country in the world is.
Given our unique form of government, it is necessary for the legislative branch to not delegate but make sure that the executive branch has the–in perimeter of the Government of the United States, and the authority of the Government of the United States not just the executive branch but the entire Government of the United States to negotiate, to knock down these barriers, to open markets, and to bring the value free or trade to people all over the world, not the least of whom would be our consumers here in this country.
So, I’m glad that we’re talking. I’m glad that we are seeking solutions and not just trying to obfuscate differences and block the progress of trade in the world. So, I commend the Chairman, Mr. Levin, Ambassador Schwab, and frankly my colleagues on the Republican side for working so hard to find a way to advance our trade agenda.
Mr. Chairman, I have a more complete statement that I would submit for the record with your permission.
Chairman RANGEL. Without objection. What we will do, fellow Members, is have the first round at three minutes and then we will go back around for those people who want a second round. Do you have questions, Mr. Levin, at this time?
Mr. LEVIN. Thank you, Mr. Chairman. Let me just–let’s talk about your presentation. Trade issues are so polarized, and Mr. Rangel mentioned that.
Mr. Rangel, you mentioned how polarized trade issues are. That makes it all the more important that we have balance in our presentations. I said the same thing to Mr. Portman.
Your presentation kind of shows half of the picture. It talks about exports, and they are vital. They don’t talk about imports and the impact of imports, and I guess I don’t have time. Chart one, if it’s quick, shows what our trade deficit is.
Okay. It’s not ready. It went up to $763 billion. Our deficit with China, $232 billion.
Imports matter. They have an impact, and that was–your pages aren’t numbered–trade spurring economic growth. There’s no references here except percentages as to imports; the base is so much larger.
Then skipping to the pages where you talk U.S. FTA’s expanded exports, I guess that’s page 10; they are numbered. So, much of that is with Mexico and Canada. You need to bring imports in there. We have huge deficits with Mexico and Canada. There’s also no reference to Japan.
We’ve had a discussion here about currency. We talked to the Secretary of the Treasury about not siding with the Japanese when he went over to the G7 meeting when Europe raised issues about the weak yen.
Again, it’s so imbalanced to not talk about imports and how they impact jobs in this country. You talk about the level of manufacturing. There’s no reference to the three million manufacturing jobs that have been lost in the United States. The import of cars in one year–from ’05 to ’06–these are the imports, went up by 30 percent.
So, again, I just urge, if we’re going to have a constructive discussion, and we must, and I want to be very much a part of it, we need to look at all sides of this. I want to pick up what Carla Hills said about no-brainer.
Look, when we debated issues in the Clinton Administration and they said that an issue, a trade agreement was a no-brainer, I said, “Never use that.” There are differences of opinion, so when you quote Carla Hills when we have some basic issues regarding the Peru and Colombia Agreement and say it’s a no-brainer, what are you transmitting, Ambassador?
Look, we want to work out these agreements. The record on this side is clear in the past and is clear about the future. We’ve got some serious issues. They aren’t no-brainer issues. I just urge, the next time you come and join our discussions, let’s talk about the imports. Let’s talk about the impact of the imports on places in the United States. Let’s talk about manufacturing. Let’s talk about currency issues that aren’t really in your domain. Let’s talk about breaking down barriers like Korea that don’t let any of our cars except a few hundred, a few thousand, come in when they ship 500,000 to 600,000 and we’ve said to you, “Let’s sit down seriously and talk about how we tear down the Korean economic walls.”
That’s the kind of balanced presentation that will be the predicate for the kind of full length, bipartisan and executive Congressional discussions about where we go here. I close–we’ve got only six weeks on Colombia, Peru and Panama, six weeks on Korea if you want the FTA under this present fast track.
We’ve got DOHA. My view is let’s get the policies straight and then talk seriously about the extension of fast track or its renewal. We’ve got some very different views on policies. Let’s work to straighten them out as well as our language.
Mr. Rangel is no isolationist; he’s no protectionist. I hope this Administration will stop using those terms about this Democratic congress. It’s not true.
Chairman RANGEL. The Chair accepts the Ambassador’s agreement to meet with the Committee in a less formal setting so that we can share with you some of the biased feelings that are created as relates to free trade, which we all agree with.
As soon as possible, since the clock is running out, we will be meeting in an informal way with you and the staffs and clear up some of the things that can be cleared up.
Recognize Mr. Herger.
Mr. HERGER. I thank the Chairman, and I think it’s a point well taken by the gentleman from Michigan. Somehow no-brainer doesn’t have a good sound to it, but the fact that we’re looking at in our country today a 4.6 unemployment rate, the greatest prosperity that we’ve ever had, we see exports that are up. We see with just the 13 countries that we do have trade agreements with, that some 43 percent of our total trade is going to those countries we can see. The fact that we’re living in a dynamic economy, worldwide economy, whether we like it or not, is very important.
So, no-brainer perhaps isn’t the right term, but the fact that how dynamic it is, how positive it is for Americans, also the fact that we can import and import goods that our consumers, the America can buy at a lower rate to be able to keep our inflation rate down. The fact that so many of our industries are dependent on these good quality, low rate products they import that they use themselves to put into their goods the export, I think, is incredibly positive.
Again, I agree. No-brainer isn’t the right term, but some positive term that describes what I’ve just said perhaps is.
Madame Ambassador, I am very concerned about the renewal of TPA and consider it to be vital to our economic policy. I’m pleased that we have an open dialogue on renewal of this important piece of legislation. Perhaps you can help us by describing the future use of trade promotion authority and its benefits from your advantage, and if TPA is renewed, how would you use it; which negotiations besides the DOHA Round and our already ongoing negotiation do you envision?
Ambassador SCHWAB. Thank you, Congressman. If I may respond to your question and also to Congressman Levin’s comments. We can set aside–let us coin our own phrase, which is, a ‘brainer’ as distinct from a no-brainer, and let’s proceed and talk about substance here.
The TPA renewal, is critical as I mentioned for a DOHA Round agreement. It is critical for any free trade agreements, regional, bilateral, that we care to negotiate. It is critical if we choose to negotiate plurilateral agreements, for example, sectoral agreements related to environmental goods and services if, for example, the DOHA Round does not succeed.
There are opportunities to negotiate on intellectual property rights and so on. While the United States–if we have a gap in trade promotion authority, don’t think that during that period of time, the world is going to stand still in terms of trade agreements and trade negotiations. There are hundreds of trade agreements, bilateral free trade agreements, regional trade agreements being negotiated by our trading partners with each other.
You can bet that if we have walked off the field those negotiations will continue, and they will continue and those agreements will be to the detriment of U.S. exporters and U.S. producers and U.S. farmers, and ranchers and workers. So, that is the kind of thing that we could use the next allocation of trade promotion authority to do.
I would look forward to working with this Committee, Mr. Chairman, with Members on both sides of the aisle, both sides of the Capitol, in identifying the negotiating objectives and the approach that we would take and the priorities that we would be looking at.
If I may, Mr. Chairman, respond briefly to some of the points that Congressman Levin made, he is absolutely right. You’re absolutely right, Congressman. Trade issues are much too polarized in the United States, and I’m happy to talk about imports.
Imports do matter. They matter significantly to consumers. They matter to people who went out and bought roses today for their sweethearts for Valentine’s Day where they were able to buy inexpensive flowers at Safeway or at Costco, where maybe a few years ago it would have been much more expensive to buy long stem roses.
That’s trade. That is comparative advantage. That is trade. That is open market.
Mr. PASCRELL. Chairman, a point of order.
Chairman RANGEL. For what purpose does the gentleman from New Jersey raise the point of order?
Mr. PASCRELL. Well, I would like to respond to what was just said on Valentine’s Day. Those very flowers come from countries that have child labor and forced labor, and that’s why the prices are cheaper. If we don’t concern ourselves about that, then we are not the Nation we pretend to be.
Ambassador SCHWAB. The principal sources of U.S. imports of such flowers include Colombia, include Ecuador, include Israel and a variety of other countries. I would say whether we’re talking about the ultimate consumer or when we’re talking about imports, intermediate users, manufacturers who are more globally competitive because the import parts, imports do matter.
Imports also matter in some cases to individuals, to firms and to communities when they are trade distorting and when they are trade damaging. I think that’s the point that you were making. I would note though that the way you address these issues has to be where the cure isn’t worse than the disease.
The last time we had a trade surplus was 1975. We were in a recession. There are ways of addressing trade imbalances. Increasing exports and tearing down foreign barriers to trade really is the way to go, and that is the way to go in terms of our workers, in terms of our constituencies.
Where individuals are hurt I would note that the President has specifically asked for the extension of trade adjustment assistance, and I would be happy in conjunction with the Department of Labor and others to work with you in terms of renewal of trade adjustment assistance.
Let me stop there, Mr. Chairman, for other questions.
Chairman RANGEL. All now to recognize Mr. McDermott for three minutes.
Mr. MCDERMOTT. Mr. Chairman, I’d like to focus on the DOHA Round. There is an assumption that because countries are poor that they are dumb or that they can’t count. There are more Less-Developed Countries (LDCs) in the world than there are developed countries, and you are not going to get a change in that round until you change some of the policies.
Now, in the 1970s, they accounted for 1.5 percent of the trade in the world. Today they are at .8 percent. That’s why we said this is going to be a development round.
When we sit down with them, we say things like, we’re going to stick with our agriculture. Agriculture is two percent of the employment in this country. Eighty percent is in manufacturing and services.
Now when you focus on opening up and forcing these countries to give up their agricultural exports by opening the markets, you are simply saying to them, we don’t care about you. They can count, and they say, we’re not going along. Then we have a Chairman in the last session who beat up on them by denying benefits to them under GSP and saying that India–and we’ve somehow, we’ve got to break them.
Now when you–let me just give you one specific question. When you talk at the DOHA Round about a duty free, quota free initiative, you say we’re going to open up our markets, duty free, quota free, to poor countries, except for three percent that we figure we have to hold on for flexibility.
The least developed countries immediately said, that’s the part that will kill us the most. Now I’d like to hear your answer to them about why you want to say to them, we’re going to give with one hand but take back with the other, to think that they can’t see through that, because cotton, for instance, is made–some of the best cotton in the world comes from Africa, and there should be duty free, quota free, right?
Ambassador SCHWAB. Congressman, thank you. You are absolutely right that the focus of the DOHA Round, which is formally named the DOHA development round agenda, as you know, is international economic development and the alleviation of poverty in developing countries. If you look at any study that is out there, World Bank study, Organisation for Economic Co-operation and Development study, International Monetary Fund (IMF) study, the single most important thing that we can do to enhance development in developing countries is barrier elimination, not just in developed countries, but also in developing countries.
It turns out, for example, that 70 percent of tariffs paid by developing countries are paid to other developing countries, not to the developed world. So, the DOHA Round, to be successful, needs to enhance North-South trade. It also needs to enhance South-South trade.
The Round framework is designed so the developing countries do less than developed countries in terms of opening their markets. The least developed countries, which are the ones you’re talking about, need to do nothing at all. Although I would argue in areas such as services, they would–one of the best development plans that developing countries could undertake is opening their markets to services, transportation, communications, computers services, express package delivery, build their own infrastructure for their own entrepreneurs to export and to gain access to the markets.
The United States, as you know, has been very generous in terms of preference programs that we offer to the developing countries through GSP, through African Growth and Opportunity Act (AGOA) (P.L. 106-200), through Andean preferences to the new Haitian preference program. When it comes to duty free, quota free, in the DOHA Round negotiation, the agreement–and by the way, this was an agreement among multiple countries not just the United States to have duty free, quota free applied at 97 percent of trade is significant because it turns out that there are some countries among the “”least developed” that in certain sectors, such as textiles and apparel, are powerhouse exporters that really don’t need duty free, quota free. If they have duty free, quota free, they will knock out the exports of all the other least developing countries and some other lesser developing countries.
So, there’s a balance to be struck. We have a Federal register notice that we just issued recently asking for comments on how we should allocate that three percent and if there are specifics that you or anyone else here on the Committee would like to offer and comment, we would welcome them.
Chairman RANGEL. Chair recognizes Mr. Camp for three minutes.
Mr. CAMP. Well, thank you, Mr. Chairman. Thank you, Ambassador.
There are clear benefits to trade as you outlined in your testimony. Our exports have increased and they’re growing faster than imports, and they’re growing faster with countries we have trade agreements with. Jobs related to export pay more than jobs that aren’t.
I’m also concerned about some of the adverse consequences as well. Our trading partners in some cases fail to stop counterfeiters. They impose non-tariff barriers.
I applaud your filing of the trade cases against China on auto parts. Korea, as has been pointed out, largely remains a closed market. We don’t have any agreement with Korea, but we’re working on that. It’s largely closed to our auto market. Do you think greater enforcement of our existing trade laws is as important as negotiating new trade agreements? Can you outline some of your enforcement efforts in this regard?
Ambassador SCHWAB. Congressman Camp, thank you very much. I think it’s a both-and answer, which is, in some cases active enforcement of existing agreements, whether they’re bilateral agreements, WTO accession agreements, WTO multilateral agreements on the one hand–in some cases enforcement–ensuring compliance is the best way to go. In other cases, the only way you’re going to get the trade barriers down is through new negotiations, whether it’s through a free trade agreement or whether it’s through a multilateral trade agreement like the DOHA Round.
It depends on the barrier. In some cases, there are barriers that are out there that are fully legit, legal under international trading rules, and the only way you get those down is to negotiate them.
In the case of–let me talk briefly about Korea and then about China. You mentioned Korean autos. In the case of Korean autos, Korea has, for example, an eight percent tariff on its automobiles. That is perfectly legal under the WTO. They only way we will ever level the playing field with Korea on autos is to get Korea to eliminate that eight percent tariff in contrast to a tariff we had that’s less than three percent and to get Korea to eliminate the non-tariff barriers that are very serious, a very, very serious market access problem having to do with regulatory standards, having to do with tax provisions, and so on.
That has to be done through a bilateral negotiation. That’s what we’re trying to do in the context of the FTA negotiations with Korea. You won’t be surprised to learn it’s hard slogging, but we haven’t given up yet.
In terms of China, there are a variety of tools and issues. Last year the U.S. trade representatives office issued a top to bottom review on what our policy vis-a-vis China should be, and that was a comprehensive blueprint that we have been following, and it includes discussion, negotiations through the Joint Committee on Commerce and Trade, for example, where we’ve addressed intellectual property rights issues.
It includes activities now through the strategic economic dialogue, Secretary Paulson’s initiative to address longer term strategic underlying issues, including macro-economic issues. As I note, in cases where we believe China is not in compliance with its WTO obligations, such as in auto parts, such as in Kraft Linerboard, where we almost filed a case last year and didn’t need to because when they heard we were filing a case they fixed the problem.
Most recently, these prohibited subsidies. Where we cannot get a resolution, cannot get the problem solved and trade moving on a fair basis through negotiation, we will opt for litigation through the WTO.
Mr. CAMP. All right. Thank you. Thank you, Mr. Chairman.
Chairman RANGEL. Chair recognizes Mr. Neal for three minutes.
Mr. NEAL. Thank you very much, Mr. Chairman. Madame Ambassador, this is a line of questioning that I’ve raised with the trade representative’s office in the past.
I’m aware of the postal privatization going on in Japan, and I’m hearing that there is a growing concern that the Japanese government will permit financial giants of Japan Post to begin selling insurance products of the private sector before the new entities have demonstrated they fully comply with all the rules and come under the same supervision that applies to private companies.
Wouldn’t that situation amount to a violation of Japan’s General Agreement on Trade in Services (GATS) commitment to provide national treatment? If the answer is yes, what is the United States doing to enforce GATS in this situation, and do we have a commitment from Japan that this concern is unfounded?
Ambassador SCHWAB. Thank you for that question, Congressman Neal. This is an issue that we are tracking very closely. It’s an issue we have a great deal of concern about. Privatization of their postal program is fine in theory unless it turns out that they are creating an unfair advantage, an un-level playing field when it comes to package delivery and some of the other issues that–some of the other commercial matters that the Japanese Postal Service has responsibility for.
We are monitoring it very closely as we are going through these changes. I have personally raised it with the last two trade ministers, Japanese trade ministers. We will continue to raise it and we will make sure that either they are ideally going to do it in such a way that they’re not creating new barriers to trade that would be in violation in contravention of their WTO commitments, their GATS commitments. Or we will, if necessary, seek litigation.
Mr. NEAL. Thank you. It’s very important to me, because I have been consistent in terms of raising this question with you in the past.
Lastly, DOHA. For somebody like me who follows the trade issues every day in daily publications, one of the things I’m struck by with DOHA is it’s almost like trying to determine what the score of a baseball game is. One day the game has been rain delayed. The next day the game has been canceled. The third day, there’s a double header. It’s really tough to follow.
I know some of you are counterparts from other positions they have held in governance during the past, but some clarification would be very helpful, not only to Members of this Committee but to the American people as well.
Ambassador SCHWAB. Oh my, the nine lives of the DOHA Round. The DOHA Round, as you know, was launched in 2001 in the wake of September 11, 2001, in an effort primarily to focus on global economic growth, particularly in developing countries.
It has sputtered and started and sputtered and started ever since then. There was a framework agreement. There was a declaration. Then last July we got down to the wire, and a group known as the G6–and that’s the United States, the EU, Brazil, Japan and Australia sat down in a room to see if we could come up with a proxy for what an outcome, what a breakthrough would look like.
Those talks failed. They failed largely over market access issues and market access issues in agriculture and manufacturing versus how much discipline should be put on trade distorting agricultural subsidies. We then walked away from what would have been a bad deal that we could not–that I could not in good conscience recommend to the President of the United States and that we could not in good conscience as an Administration have recommended to you even knowing that Fast Track was going to expire, the nature of trade promotion authority and the trust inherent in that.
Since then we have had to step back from the name calling, the finger pointing, all the numbers that you read about in the paper that you alluded to in your comments, and said, “”Let’s look at real trade flows. Let’s look at real trade flows and the potential for real trade flows rather than these sort of macroeconomic numbers” because it turned out where we broke down the framework has this really interesting, progressive, tariff-cutting formula both for agriculture and industry, meaning the highest tariffs that are out there get cut the most, which is really a benefit to the United States because we have much lower tariffs in agriculture and industry than anybody else in the world or virtually anyone else in the world, excepting a country like Singapore or a few others.
So, for us that tariff-cutting progressivity is very useful because other countries have shielded their most sensitive products using high tariffs. Well, it turned out that there were flexibilities built into this framework, loopholes that countries could use to avoid taking these dramatic tariff cuts. Not surprisingly, everybody assumed that they would have to cut their most sensitive tariffs a great deal and that the other country would be shielding your priority exports, our priority exports, using these flexibilities, using these loopholes.
So, what we’ve done since last July is sit down very quietly in terms of serial bilaterals, bilaterals going on with a number of countries, not just between the U.S. and other countries but between other countries and each other, saying “”what are your real sensitivities, your real red lines and what are your real priorities, and are there ways that we can ensure new trade flows in the priorities in spite of the sensitivities without throwing these top line numbers at each other that really didn’t make a whole lot of sense?”
That’s the approach we’re on now. I am cautiously optimistic that that ultimately will generate a breakthrough that is ambitious, that is robust, and that is a balanced outcome for the United States.
Chairman RANGEL. Chair recognizes Mr. English for three minutes.
Mr. ENGLISH. Thank you, Madame, Mr. Chairman. Ambassador Schwab, in my view, the United States Trade Representative (USTR) is very much to be applauded for finally bringing a WTO complaint against China, for providing what are clearly WTO, illegal, export and import substitution subsidies.
We recognize of course that these subsidies only account for a small fraction of the support that the Chinese government provides Chinese exporters. If you could, speak briefly to the prospects of this case. Could you also comment on whether U.S. TR intends to further pursue China’s other massive domestic subsidies such as loans at preferential rates from state-owned banks and the conversion of debt to equity by state-owned asset management companies.
Ambassador SCHWAB. Thank you, Congressman English, and thank you for your remarks about the subsidy case. We have, as you know, in the last week, requested formal consultations through the WTO with China.
We have identified nine subsidies. Six, we believe, are prohibited illegal export subsidies. Three of them are, we believe, prohibited import substitution subsidies. We know that these subsidies go to foreign invested enterprises, Chinese firms. The key there is that those subsidies can impact U.S. workers, manufacturers, particularly small and medium sized firms that haven’t invested in China and can affect U.S. economic interests that try to compete in the Chinese market, that compete with Chinese products here in the U.S. market and that try to compete with Chinese products in third country markets whether in Europe or Japan or developing countries.
So, that is the fundamental. We know that foreign invested enterprises account for 58 percent of China’s exports, so this could be a fairly significant case as it moves forward.
Our ideal in terms of this case is to resolve it, is to get the subsidies eliminated. If we need to litigate, we will litigate. That decision will be made within the next 60 days, and then we will work–the process would work its way through the WTO process.
In terms of other subsidies, we are always on the lookout for other subsidies and other potential cases. We work very closely with American companies that have an interest or that can identify such subsidies.
In some areas, such as intellectual property rights, we’re now going to the provincial level to look at IP issues. Some subsidies are at the provincial level. They’re hard to identify in many cases, but if there are specific subsidies that are identified, we’d be happy to hear about them.
Mr. ENGLISH. Thank you, Ambassador. In my view, the whole question of fair trade with China is what is going to dominate the public perception of the trade agenda for the next couple of years and is central to any efforts we may make to lower our trade deficit.
So, I ask you to focus on it, focus on it like a laser beam, and certainly work with your counterparts in Treasury on the overarching concerns that we have about China currency. I thank you, Mr. Chairman.
Chairman RANGEL. The Chair recognizes Mr. Tanner for three minutes.
Mr. TANNER. Mr. Chairman, thank you. Welcome, Ambassador.
I have always thought there are two Committees in the house that should be nonpartisan. One is Armed Services; we have only one defense. Ways and Means; we have only one economy.
We’ve had some rough times around here. We’ve had a take it or leave it attitude, and because I believe so strongly that engagement is better than nonengagement, a lot of times I was on the receiving end of a take it or leave it attitude.
I think this Congress has a unique opportunity, the 110th, to rediscover a true bipartisan consensus on trade. I think it’s going to be absolutely critical that we do so, because otherwise we’re going to have a very, very hard time explaining to the American people the non-harmful aspects of trade deficit that is reaching historic levels.
The perception is a lot of trade is going overseas, that trade is responsible for a lot of our jobs going overseas. True or false, it’s a perception. So, it’s my view that we’ve got to develop a new framework here in the 110th Congress, in this Committee, in order for us to move ahead in a manner that I think our country needs to.
I think this new framework ought to continue to try to remove barriers from foreign markets to the extent we can. It should also–we should also have a very aggressive enforcement of the agreements that we already have. Third, and perhaps this is where we can work together sooner rather than later, a sensitivity of addressing the perception of the negative consequences of trade.
We have not done a very good job–nobody, but you have, and the Administration has, I think, a better microphone than perhaps we do.
This new framework, and I look forward to what the Chairman said earlier about us meeting again informally to talk about this, but I want to commend the Chairman and Mr. McCrery for–I think–I hope I put into works what they feel about it in terms of moving ahead on trade.
Could you just respond generally to that? I know I only have three minutes, but I really feel strongly about this.
Ambassador SCHWAB. Congressman Tanner, I feel equally strongly about the importance of bringing bipartisanship back to U.S. trade policy. I commend your leadership in this.
The Chairman has said that we should be looking for not a Republican trade policy or a Democratic trade policy; we should be looking for an American trade policy. I think that is absolutely right.
The President believes that as well. In my confirmation hearing last year, it was the top priority that I articulated in terms of why I was so grateful to have been asked to take on this task. I spent some time as a Senate staffer in the 1980s when trade was much more bipartisan and there was much less rancor.
It is–you have my commitment, and I have given my commitment to the Chairman, to Congressman McCrery to work with this Committee to see that trade does, in fact, return to more of a bipartisan basis.
Mr. TANNER. All right. I’m instructed to recognize Mr. Doggett next. Thank you.
Mr. DOGGETT. Let’s get this all in order.
Ambassador, I really believe that more than a few Americans will be surprised to hear that your reaction to the headlines in this morning’s paper, that the United States has a record trade deficit in 2006 for the fifth consecutive year, that your reaction to that is “”upbeat” and that as with so many other policies that I view as misguided of this Administration, that you believe we just need to stay the course.
Yesterday’s “”Financial Times” reported that you now agree that “international labor standards should be added to the pending trade deals.” Was that accurate?
Ambassador SCHWAB. Congressman, to respond to both of your points, one, in terms of the trade deficit, I think it is important to look behind the number, but–
Mr. DOGGETT. You had said that, and given my three minutes, let me just ask you if you agree that the Financial Times article was accurate or it’s inaccurate. I just want to know one way or the other.
Ambassador SCHWAB. Congressman, I have made a commitment to Chairman Rangel, to Congressman McCrery, to work with this Committee on a bipartisan basis to try to bridge the differences on labor rights in trade agreements, yes.
Mr. DOGGETT. Does that mean the story was accurate?
Ambassador SCHWAB. I’m afraid I didn’t read the story, so I think I–
Mr. DOGGETT. The story said that international labor standards should be added to the pending trade deals.
Ambassador SCHWAB. Congressman, the approach that I would take is let’s see if we can get a substantive agreement between the Administration and the Congress on what the nature of those labor rights commitments should be in trade agreements, and then let’s have a conversation subsequent to that about the form that it should take.
We don’t believe that it should be necessary to reopen existing trade agreements, but the first thing to do is see if we can bridge the substantive gap, and then we can talk about how it’s–
Mr. DOGGETT. So, you don’t favor reopening any of the pending trade agreements?
Ambassador SCHWAB. We don’t believe that that is necessary, but I think that before we have that conversation, I think it’s important to keep the conversation–
Mr. DOGGETT. One other area of concern. As you know, sometime after 9 o’clock last night some of the 11 Members of this Committee who wrote you a month ago about our desire for a bipartisan policy that addressed our concerns about the environment, received a fax response from your office.
I don’t believe it addressed any of our specifics. In the seconds that remain, let me just ask you if you agree or disagree with our observation in that letter that it is vital that our trade agreements require countries to fully implement and enforce obligations made through multilateral environmental agreements.
Ambassador SCHWAB. Congressman, I would be happy to visit with you separately when we have more time to talk specifically about the issue of multilateral environmental agreements. The key I think that we all agree upon is the importance.
Mr. DOGGETT. I appreciate that, and I’d be delighted to visit with you. I just want to know if you agree or disagree with the question that we raised to you a month ago that I don’t believe your letter last night responded to.
Ambassador SCHWAB. I believe our letter responded to the letter that we received.
Mr. DOGGETT. Do you agree or disagree that in our trade agreements we should require enforcement of multilateral environmental agreements to which the partners have agreed?
Ambassador SCHWAB. Congressman, I think the issue is, as with many trade issues, much more complicated than a yes or no answer. If the Chairman would allow me the time, I’m happy to answer in some detail. Otherwise, as I said, I’d be happy to visit with you separately and go through the issues.
There are some multilateral environmental agreements (MEAs)–there are many MEAs out there as you know. The U.S. is a signatory to some. Other companies are signatory to others. I think there is clearly a consensus that we need to use our free trade agreements to further environmental objectives. Sometimes we do that within FTAs, sometimes we do that separately.
For example, I just recently signed an MOU with Indonesia on illegal logging.
Chairman RANGEL. Maybe we can make arrangements for you to send your response in writing or you can get in touch with that office. I’m very anxious that everyone has an opportunity to inquire.
Mr. Weller, for three minutes.
Mr. WELLER. Thank you, Mr. Chairman, First let me commend you and Mr. McCrery for the commitment you have made to advance our trade agenda and to work in a bipartisan way. I consider that real progress and I want to support you in your leadership in this effort to move forward on our trade agenda.
Ambassador, it’s good to see you. Welcome. Time is limited so I’ll get right to the point.
My colleague from Texas raised an issue that I want to raise. First I want to congratulate you on the progress you’ve made on Peru and Colombia and soon to complete on Panama. Latin America is suffering from the unfortunate march of populist authoritarianism in different parts of Latin America and strengthening our relationship with our friends and allies, the democracies, particularly of Colombia, Peru and Panama, I believe is extremely important on all fronts.
The issue of labor of course is coming up. Since these agreements have been reached, I have friends that want to do more on labor. Looking back on the Dominican Republic Central American Free Trade Agreement (DR-CAFTA), I’m interested in knowing from you, as based on the DR-CAFTA model and the commitments that were made, have there been significant accomplishments from the standpoint of enforcing greater protections for workers, greater enforcement of existing laws and expanding opportunities for workers in the DR-CAFTA countries as a result of the DR-CAFTA agreement, the ratification by this Congress?
Ambassador SCHWAB. Thank you, Congressman Weller. Yes, as you know, we have DR-CAFTA entry into force with four of the six DR-CAFTA agreement signatories. Those have been during the last year–entry into force took place. In each one of those cases, we can articulate commitments and improvements that each of those countries made.
Mr. WELLER. Now the leadership of each of these countries issued the white paper, which is part of that commitment. Can you give some specific examples of what, from a bipartisan viewpoint, would be considered progress on enforcement as well as giving new rights to workers in these countries?
Ambassador SCHWAB. No, the white paper was very, very significant. In particular it set in motion a process involving the international labor organization and capacity building that we were able to provide so that on an individual basis, whether it is the right to organize, whether it is addressing child labor, whether it is addressing others of the internationally recognized standards, there have been tangible improvements in those countries.
I would be happy, if you would like a more specific assessment, happy to bring that back to you, but in each of the countries involved, each of the four countries where we’ve had entry into force, the white paper has been taken very, very seriously. Simply to engage on these issues in a way that they would not have engaged absent a free trade agreement, absent CAFTA DR I think is significant.
Mr. WELLER. Madame Ambassador, three minutes goes by very quickly, but if you could provide for the Committee a list of examples of what all of us would consider to be progress both in enforcement and in expanded rights for workers based on this white paper and other agreements as part of the DR-CAFTA process, I know I would appreciate it and I believe my colleagues would.
Ambassador SCHWAB. I would be happy to do that.
Mr. WELLER. Thank you, Mr. Chairman.
Chairman RANGEL. The Chair is pleased to recognize Ms. Tubbs Jones for three minutes.
Ms. TUBBS JONES. Thank you very much. Madame Ambassador, nice to see you again. How are you?
I’m particularly concerned when we have this whole discussion about unemployment rate of 4.6 percent and how great it is. In Ohio, the unemployment rate isn’t 4.6. In fact, in the city, my congressional district is 13.7 percent. We’ve lost a significant number of jobs in Ohio, and I keep repeating those numbers over and over again at these hearings.
I want to focus on trade adjustment assistance, which you talked about momentarily. What–even though it’s administered by the Department of Labor, it is through your work and your effort that we are able to bring workers–because in Ohio workers, fact or fiction, believe that their jobs are gone because of the trade policies of our Government and the failure of our Government to use all of the tools that they have to enforce trade relations.
Tell me what I can tell my people in Ohio that the Ambassador is going to do to ease the unemployment rate and their worry.
Ambassador SCHWAB. Congresswoman, thank you very much for that question. You’re absolutely right. There is a serious perception problem that trade somehow is the cause of significant unemployment in the United States, when in fact unemployment is at 4.6 percent, when we’re creating more than 2 million jobs a year more than we’re losing.
You mentioned trade adjustment assistance. Trade adjustment assistance is available for workers who have lost their jobs because of trade. I think a better answer to your question–and as I noted earlier, the President is fully committed to extending trade adjustment assistance to working with this Committee and with the Congress to do so, but I think the real answer to your question is opening more barriers, removing barriers abroad so that we can enhance our exports.
We know that U.S. jobs that are related to exports pay 13 to 18 percent more than average jobs in the United States.
Ms. TUBBS JONES. The dilemma I have with your response, and I’m almost out of time, is the fact is that the workers who are unemployed as a result of loss of manufacturing jobs are not getting jobs that they are capable of taking care of their families at a level. So, my position is that we collectively, in a bipartisan fashion have to fix it, and it’s not solely perception that trade has lost us jobs. It’s a reality that they’ve lost us jobs. It may not be as many as people believe, but there is a reality to the fact that people are not doing work in the United States as a result of work being done all over the country [sic.]
I guess my time is about up, so I’m just looking forward to the opportunity to fight for the workers of Ohio and not fight with you but fight for them to have jobs. Mr. Chairman, I thank you for the time.
Chairman RANGEL. Well, let me share with the gentlelady from Ohio that the trade representative–fully appreciate, as does the ranking Member that there are many people that are looking for jobs that are not included in the number of unemployed. We can’t give them numbers and say how good the economy is. We can’t talk about the historic 4.5.
Once we realize, statistics notwithstanding that we have to do something, it makes our job selling free trade a lot easier. I tell the gentlelady that we are working in a bipartisan way to make certain that we avoid the pain when we can, and if we cannot, we’ll make adjustments to help the people who unfortunately went away of progress.
Ms. TUBBS JONES. Thank you, Mr. Chairman.
Ambassador SCHWAB. Congresswoman, I look forward to working with you to see that that happens. Thank you.
Chairman RANGEL. The Chair recognizes Mr. Brady.
Mr. BRADY. Thank you, Chairman. I want to add my voice to those. Encouraged by the discussions, Ambassador, you’re having with our Ways and Means leadership, Chairman Rangel and others, to try to find some common ground. We really do need to speak with one voice around this world when we’re talking about a level playing field for our companies and our workers.
I’m convinced, after working on DR-CAFTA that the goal on improving workers rights and improving the environment are much more the same than people imagine. It’s how we get there that’s the debate. I think the discussions you’re having are very healthy.
I also think in this debate on trade we ought to be a little more intellectually honest about this trade deficit. It is not caused by our trade agreements, just the opposite. Eighty percent of our trade deficit comes from countries we don’t have trade agreements with. The trade agreements we do have are producing real sales and real jobs for American companies and the truth is America is a great country to invest in, which drives up our trade deficit.
We spend so much and save so little. We’re such a huge consuming country. The fact of the matter is we need to spend a little less, save a lot more, and we need, through your negotiations, to open up new markets and produce–turn countries into spending more themselves for our products.
Here is the question I have for you. Last week, in a very good hearing, Gene Spurling recommended to the Committee that we pursue a limited extension of trade promotion authority focused on the DOHA Round. My concern is that with our bilateral agreements producing so many more sales for American companies and the DOHA Round being very important, but as we all know–Uruguay Round took eight years, far less complex.
Today the issues are far more complex. We have more countries in WTO, making that much more difficult to reach a consensus. Yet, I’m convinced we stay at DOHA and use the rain dance approach, which is–the key to a successful rain dance is you keep dancing until it rains. The key to a successful DOHA Round is we stay engaged until it’s the right agreement for America in the global system.
What are your thoughts on a balanced TPA that gives us the bilateral negotiations and also keeps us at the table with DOHA?
Ambassador SCHWAB. Thank you very much.–You will notice that when the President of the United States called for a renewal of trade promotion authority, there were no specifics in terms of how broad and how long. That was not an accident, and it is not an accident the Administration has not submitted a specific proposal. The nature of trade promotion authority is one that is going to ultimately be worked out between the executive and legislative branches. Trade promotion authority is a contract between the two branches of Government.
I would say this. Every president needs and should want trade promotion authority, and not just for a Doha round. Not just for a multilateral trade round. For multilateral trade agreements, for the bilateral free trade agreements, for regional agreements, whether it is Western Hemisphere or Middle East, for pluralateral agreements, for agreements that are sectoral in nature that cut across regions, for example, in intellectual property rights in areas where we have interest.
So, I would say the broader, the better, the longer term, the better. I look forward to working with you, with this Committee, Mr. Chairman, with Mr. McCrery and all Members of this Committee to try to forge that contract, forge that consensus.
Mr. BRADY. Thank you, Ambassador. Thank you, Mr. Chairman.
Chairman RANGEL. The Chair recognizes Mr. Thompson for three minutes.
Mr. THOMPSON. Thank you, Mr. Chairman. Ma’am, every time that we’ve had an opportunity to meet with someone from your shop, I have asked this or a similar question regarding what you are doing to deal with–it’s kind of an intellectual property issue, but in China, they make bad wine in China and they label it with the Napa Valley. It seems to me that that’s something that you guys ought to be able to have some leverage on. They call it Na Pa He Gu, which means Napa Valley. It’s clearly an infringement in regards to geographical designation, and it’s something that’s hurting a business in my district that’s important not only to California but to the country.
Could I get an answer as to what you guys are doing? It’s been three years I’ve been asking the question, and everybody’s, yes, we’ll look at it. What are you doing?
Ambassador SCHWAB. Congressman, thank you. This is an issue that we have raised with the Chinese. This is an issue that fits in with a broader set of intellectual property rights concerns and geographic indications concerns that we have.
In particular, when it comes to China, as you know, we’ve got a variety of intellectual property rights issues that we’re trying to address, whether it has to do with falsified labeling, whether it has to do with copyright protection, whether it has to do with–
Mr. THOMPSON. Could you–because my time is limited, could you send me a letter explaining what it is you’re doing and when we can expect some resolve on this?
Ambassador SCHWAB. Congressman, I’d be happy to do that.
Mr. THOMPSON. Can I expect a letter sometime soon? The three-year window is I think a little long.
Ambassador SCHWAB. Yes, sir.
Mr. THOMPSON. Thank you. The other issue–
Chairman RANGEL. We don’t have time. No, no. Go ahead.
Mr. THOMPSON. The other issue I want to talk to you about, and Mr. Doggett brought it up, and that’s the international labor standards. There are lot of us on this Committee who really wanted to vote for some of the past trade bills, but because of the environmental neglect and the labor neglect, we just–we couldn’t do it. Is it my understanding from your answer to Mr. Doggett that we can expect–and these are countries that said, yes, put the ILO standards in. We’re fine with that. Then I don’t know if it was the Committee or the majority on the Committee or the Administration that stopped that from happening.
Is there any harm that can come to anybody if we have strict labor standards and strict environmental standards?
Ambassador SCHWAB. Congressman, you have my commitment to work with this Committee, with the Chairman, with Congressman McCrery, with other Members of the Committee to bridge the gap if at all possible on the labor standards issue and on the environment issues.
Mr. THOMPSON. Do you see any harm that can come to anyone if we have strict labor and strict environmental standards in these trade bills?
Ambassador SCHWAB. I am committed to seeing that we bridge the gap that existed last year, and to see if we can do so in a way that contributes to rather than detracts from U.S. economic interests.
Mr. THOMPSON. Thank you.
Chairman RANGEL. The Chair would like to recognize Mr. Porter for three minutes.
Mr. PORTER. Thank you, Mr. Chairman, appreciate you being here today. I guess a global question, and it may have happened before I was here, because of a prior appointment, I couldn’t be here. As we look at Europe and kind of the trading roles between Europe and the U.S. and then compare that to the emerging markets in South America, it seems to me that that’s the next frontier as far as trade, economic development, and with this globalization.
China seems to have also the focus on South America and the expanding markets. Just kind of give me an overview on your perspective of where we need to be short term, long term in our trade South America, as it’s now the next frontier for economic development.
Ambassador SCHWAB. Congressman Porter, thank you. One of the advantages of a multilateral trade round is that you are able to negotiate with a wide swath of countries and regions, whether it is Europe, Japan, Asia. Bilateral trade agreements, regional trade agreements, such as the ones with the Western Hemisphere, though, enable us to be much more targeted in our approach, and this Administration has been utterly committed to enhancing economic growth through trade, democratization, through trade through greater commercial interaction in this hemisphere.
If we, whether you’re looking at the Peru Free Trade Agreement (FTA), which we hope will come before this Committee shortly, the Colombia FTA, which we hope will come before this Committee shortly, the Panama FTA that we’re just closing out, these are of fundamental importance. If you look at a map of the hemisphere, with enactment of those three free trade agreements into law, you will see a line of trade agreements going from the tippy top of Canada right down through the Horn.
Chile was one of our first FTA partners after Mexico, Canada, obviously, and that has been tremendously successful. We believe that these kinds of trade agreements are fundamental not just for commercial regions but also for geopolitical reasons. In the Andean region, also in terms of our anti-narcotics objectives.
Mr. PORTER. With the Central America piece, I think that from a–Homeland Security may have looked the other way for a few years, and now is that a major corridor? I appreciate your perspective.
Ambassador SCHWAB. The Central America piece, DR-CAFTA, is a fundamental part of that equation, yes, absolutely.
Mr. PORTER. Thank you.
Ambassador SCHWAB. Thank you.
Chairman RANGEL. Mr. Larson is recognized for three minutes.
Mr. LARSON. Thank you, Mr. Chairman. Thank you, Madam, for your testimony and service to the country. There was a story printed earlier today in the Post, I believe. At the end of the story, there was a quote from a Peter Schiff, who is the president of Euro-Pacific Capital, a brokerage firm in Darien, Connecticut. His comment was that instead of producing products, we are just printing money. How do you respond–and that we are–the country is in serious trouble. How do you respond to that?
The corollary question to that is one that you touched on in your remarks about the benefits of globalization, and that certainly Americans have benefitted. It’s been my experience in my district that while some Americans may be benefitting, not all Americans are benefitting from quote/unquote “”globalization.”
With respect to the comment that was made by Mr. Schiff with respect to that, do you think the United States takes full advantage of the global transactions that happen all over the world? Is our current tax code, the way we look at trade, antiquated in response of need for us to provide for those who may be left out of this economy the opportunity to be retrained, to be reeducated and foster other future economic development?
Ambassador SCHWAB. Congressman, I will not pretend to be a tax expert. I think the fundamental questions you are raising, though, are absolutely the right questions to be asking.
In the case of manufacturing, U.S. manufacturing output has gone up dramatically, has gone up in the last ten years over 38 percent. This is our manufacturing. Capacity utilization in manufacturing–
Mr. LARSON. I don’t mean to interrupt you, but I’m from a State where we’re losing over 40,000 manufacturing jobs on a regular basis, and we’re a high tech, aerospace, defense-oriented, pharmaceutical State, and yet we still continue to shed manufacturing jobs.
Ambassador SCHWAB. There, Congressman, you are talking about questions of causality. If in fact, as is the case, manufacturing output in the United States is up, and capacity utilization, is at a 33-year high, then the question is, where we are shedding manufacturing jobs to what we can–what can we attribute that to.
Labor productivity is part of that issue. Part of it has to do with when you look imbalance in our import/export composition, part of it has to do with different rates of economic growth, the fact that we save less than a lot of other countries. Other countries, developed countries are growing less fast than we are.
You alluded to questions about education. We’ve talked about trade adjustment assistance. Enabling individuals to be able to tackle today’s economy, the global economy. If look at the difference in earning power of someone with a college degree as opposed to someone without a college degree, that is a huge gap, and it has gone up dramatically. That gap has grown dramatically in the last several decades.
So, I think there are multiple causes here. We need to look for solutions that don’t jeopardize the successes that we do have in terms of manufacturing and exports.
Mr. LARSON. I’ll get back to you in writing on the printing of money as opposed to productivity, because it’s–
Chairman RANGEL. I’d like to share with the gentleman of Connecticut that the U.S. Trade Representative fully realizes that people who are working think better about trade whether they’re involved or not. Even though it’s not in her direct portfolio, she shares with me and the Ranking Member that her title is the U.S. Trade Representative.
So, therefore, the Administration has agreed to have other people perhaps sitting at the table to deal with the negative impact sometimes that progressive trade policy brings about. So, we are working very hard to find the language to make trade a popular thing.
The Chair recognizes the gentleman, Mr. Ryan, from Wisconsin.
Mr. RYAN. I thank the Chair for yielding. I’ve been enjoying this conversation, and I’ll just try and add my little contribution to it, and then just quickly follow up with a request more than a question.
It seems to me we have pretty good road map on how we can accomplish TPA moving forward by looking at some of the recent successes we had. Two agreements that I was very involved in, Bahrain and Oman, involved side agreements with respect to labor and core ILO standards. It was–it took a lot of time and effort and work to get these side agreements, probably more than was necessary, but nevertheless, they occurred.
We just got this letter from the finance minister dated 6 February, from the finance minister of Oman, stipulating that they basically implemented all those labor laws we asked them to implement. If I recall here, they implemented not only the core ILO labor standards, but also the United Nations (UN) protocols and some additional agreements.
So, in Oman we basically achieved what we all want to achieve, what we’re hearing here, we did it outside of it. So, now how do we come up with a model that put this within TPA so that we sort of standardize this process so it works a lot more efficiently and so that we can address these key critical issues?
That’s what we need to work together on. At the same time I want to put out just one little word of caution. As I understand it, there’s a possibility that a new labor regime, if not properly crafted, may possibly leave us subject to dispute settlement and possible trade sanctions because our superior labor laws are questioned. So, the devil’s in the details. That would be a bad situation that would undermine the reason we enter into these trade agreements in the first place, to help American workers and businesses.
In addition, I simply think we need to be mindful that we don’t want to adopt a model that would dissuade potential trade partners from negotiating with us in the first place. If we demand too much, we end up with nothing, not even the
improvements in labor like we have been using with the current standards, like we got with Oman and Bahrain. All these new labor laws in those countries would never had occurred if it were not for our trade negotiations.
So, I also worry that if we make it too difficult for partners to partner with us and get these agreements, then these other would-be trading partners will simply go to the EU, they’ll go to China, and they’ll cut easier, better deals with them and freeze us out.
So, we are in a competitive atmosphere here. So, we have to find that sweet spot. We have to find that right area where countries want trade agreements with us, where we do advance these very common sense labor causes. In my opinion these are common sense things. We’ve got to do it in such a way that we don’t set up our own laws for more litigation, for sanctions and dispute settlement. So, that’s where the devil in the details exists. If you could just kind of elaborate for me how to get that done. I know–I guess we’re on three minutes and my time’s kind of out–perhaps in writing. That would be very helpful.
I think we can do this. I think we should do this. If we don’t do this, all these other countries are going to trade and get better deals with our competitors, and we will lose because of that, and we will not advance this labor cause.
So, we’ve got to get this done. Thank you.
Chairman RANGEL. Mr. Ryan, no one understands that better than our trade representative, and we if she didn’t find it–if it wasn’t difficult, we would have done it a long time ago. So, I look forward for your input in helping us to reach that point where it’s in the best interests of the United States and we get broad-based support for the trade agreements. I thank you for the cooperation that you–and the input that you’ve had in the past, and hope that you continue to work with us. Thank you.
Mr. Blumenauer is recognized for three minutes.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I would state from the outset that I am one Member who is very interested in watching the development of the Administration’s agricultural policies and perhaps giving you greater latitude for the United States to be more forthcoming in the agriculture arena, particularly for poor and developing countries.
I would hope that maybe some of that same spirit about the special and differential treatment that we’re talking about maybe in Doha also finds its way into some of the FTAs with some of these countries themselves that are developing. I must say that I find a little of that wanting when we’re looking at the agreements with Peru and Colombia.
I am gratified by the leadership that is being exhibited by our Committee, by Chairman Rangel and Ranking Member McCrery.
It was in that sort of spirit of trying to move and reestablish the bipartisan trade consensus that we’re going to need that you did receive the letter from us dated January 17th. Some of us got faxed late last night a response. I want to add my voice as saying, with all due respect, that response I hope was just dashed off by some staff member who wanted to have something in our hands before this hearing, because it doesn’t go very far towards developing a sense of momentum dealing with these environmental issues as far as I’m concerned. In talking to my fellow signatories, they feel the same.
May I ask respectfully for maybe another shot at it? Let me offer just a few very brief comments, maybe get something back in writing to see if there’s somewhere in USTR we can do a better job. Has the United States ever brought a complaint pursuant to the provision of our trade agreements requiring domestic environmental laws be effectively enforced? Under what conditions would USTR consider bringing such a complaint?
An example. Where it’s document that there are illegal logging in the Rio Planto Bioreserve in Honduras, which is on the list of endangered world heritage sites, would that be an appropriate case to bring under the environmental chapter of DR-CAFTA? We’ve got the Singapore FTA where we’ve got massive transshipments of illegal log timber through the ports of Singapore.
I sat on the plane coming out from the Northwest this last week with a lumber executive that I’ve been having embarrassing comments with in the past. We’ve got a trade in illegally harvested timber that is posing a threat to his companies and others around the country, losses I’ve heard of a billion dollars a year in revenue because of these imports.
Now since it’s clearly, it would seem, a trade issue which impacts both conditions abroad and in the United States, could we have addressed this issue of illegal harvested timber in a more forthright fashion, negotiating the trade agreement with Peru?
I’d like–I don’t want to trap you, but I would like maybe a more detailed response in writing that speaks to what we’ve done, can we do it in the case of these illegal logging, the illegal transshipment, and putting teeth into these agreements that we have coming before us now that give some of us pause?
Chairman RANGEL. The Chair would like to recognize Mr. Nunes for three minutes.
Mr. NUNES. Thank you, Mr. Chairman. Ambassador, I want to be very quick with this. On the Korean FTA, it’s come to my attention that some of the agricultural products are not being zeroed out in terms of zero duty. Specifically, this troubles me for crops that are not even grown in Korea.
So, I hope we will send a very clear message to the Koreans that they won’t have my support if they’re going to try to put duties on products that they don’t even grow in their own country. So, that’s, of course, parochial to me, but of concern.
I want to get to a question in regards to perishable agricultural products. Given the short timeframe here, I will be very brief, but you know of the seriousness that we have with trying to get agricultural products into foreign markets, specifically dealing with the FIDO sanitary barriers to trade that they put up.
What I’d like to get from you is what do you think of an establishment of a perishable commodity export indemnification program perhaps operated by the USTR? Are there any indemnification programs for any U.S. exports today? In other words, getting more people on the ground to try to get this handled more quickly than it happens now.
Ambassador SCHWAB. Congressman, in terms of Korea, I think you just sent a very effective message. I would say–I would note that we have this round of the Korea-U.S. Trade Agreement negotiations going on this week here in Washington.
As far as the United States’ position, the United States’ position is very, very clear that these have to be comprehensive agreements that nothing is off the table, regardless. Nothing is off the table. That’s the position we take. That is the set of commitments that we’ve made in terms of market access, even though sometimes that’s difficult for us.
In terms of Sanitary and Phytosanitary Standards (SPS) issues, sanitary, FIDO sanitary issues, they are a constant source of problems in trade that we have, particularly in terms of our exports, but also other countries would argue that we have a system that is less efficient than it should be. Other countries would argue that.
I have worked with Secretary Johanns, and will continue to work with Secretary Johanns to see what kind of facilitative measures we can take. In terms of SPS barriers being used against U.S. exports, we are very active in terms of getting those eliminated, making sure that other countries also adhere to globally recognized standards.
Mr. NUNES. I think we have an opportunity with this farm bill coming up to try to help with some of these long outstanding issues. It seems like these never go away. I don’t know if it’s that the USTR is understaffed or if the staffing levels aren’t appropriate at the foreign level in the other countries, but anyway, we’re optimistic that we can try to get something done this year with this farm bill that would be beneficial for market access.
Ambassador SCHWAB. I will look forward to working with Secretary Johanns and with the agriculture Committees on this.
Mr. NUNES. Thank you, Ambassador. Thank you, Mr. Chairman.
Chairman RANGEL. Thank you. The Chair will now go back to those Members that were here when the gavel fell, which is Mr. Becerra, Mr. Kind, Mr. Pascrell, Ms. Berkley, Mr. Crowley, Mr. Meek, Ms. Schwartz, and then we’ll go to Mr. Pomeroy and Mr. Van Hollen.
The Chair recognizes Mr. Becerra for three minutes.
Mr. BECERRA. Thank you, Mr. Chairman. Ambassador, again, thank you very much for being here. I’m actually very delighted at some of the questions and conversation that’s taken place, because it seems like this year we’re seeing conversation about worker rights, worker protections occurring on both sides of the aisle in this discussion, and I think that’s great.
However difficult we have found it to promote our protections and our interests in things like our commodities, beef, crops, or our goods, heavy equipment, or even things you can’t touch like intellectual property, we’ve always done the best job we can to protect our interests, to promote them as well abroad.
So, when we have provisions in our trade agreements which say that if we find a country is violating our intellectual property rights on movies or CDs, not only can we enforce actions against that country’s crops or other products unrelated to CDs or movies, but we can actually require them to change their domestic laws to make sure that they are criminally sanctioning people who pirate our intellectual property. I think that is absolutely essential for us to be able to promote our interests abroad.
I’m wondering if you could tell me if you think it’s difficult for the United States to promote and protect our interests of our workers in America and workers, of course, in those countries, trading partner countries as well, as we go about fashioning a trade agreement that not only talks about worker protections but also includes it within the body of the agreement to be able to enforce protections and interests of American workers and interests of those–the worker interests in those trading partners as well.
Ambassador SCHWAB. Congressman, thank you for raising the question. As I have indicated and will reiterate, the Administration and I am fully committed to working with this Committee to see if it is possible to bridge the gap in terms of how we address worker rights. Congressman Blumenauer was talking about environment issues. We have–
Mr. BECERRA. My question was more focused on whether or not you as our ambassador believe that–I think it was Mr. Ryan who said it’s difficult–it can be difficult to get these trade agreements signed if we go too far on some of these rights for workers. I don’t think we spared any negotiating tool when it came to protecting our rights to our intellectual property, our rights to make sure our farmers can sell their crops for a decent price abroad, our rights to make sure that our heavy equipment that we send to other countries gets a fair price.
I’m just wondering if you could tell me if you believe that it’s too difficult to negotiate an agreement that includes protections that will make sure that, for example, in China where in their industrial heartland, that industrial worker will make about 64 cents an hour compared to in America where an industrial worker probably will on average make about $22 an hour, or in Mexico where the minimum wage is less than $5 in a day compared to our deplorable $5.15 an hour minimum wage.
How do we make sure that as we go about making these agreements that we’re protecting the interests of workers not just in our country but in those trading partner countries as well to make sure that, just as we protect product, intellectual property, commodities, we’ll protect workers as well?
Chairman RANGEL. You may respond.
Ambassador SCHWAB. Thank you. Let me echo Congressman Ryan’s comment that if this were easy, we would have done it a long time ago. We spend an inordinate amount of time and energy trying to make sure that we have solid and productive components, labor rights components, and environmental components, I might add, in our free trade agreements.
I believe that our free trade agreements are the single best vehicle that we have to improve the situation in terms of labor rights in other countries, and we have pursued that as actively and as avidly as we have pursued intellectual property rights and other services investment and so on.
We do need to–if it were easy, we would have done it some time ago. Let us recall that when we put together these free trade agreements, they’re very complicated. They have to be comprehensive, and there are tradeoffs for everything. I have made the commitment to work with this Committee to see if we can bridge the gap on the labor rights issues.
Mr. BECERRA. Thank you. Thank you, Mr. Chairman.
Chairman RANGEL. I want to be as positive as I can about what the gentleman referred to. It means that we would like to see that with the same enforcement as the other areas, as difficult as it may be, because we know it’s a question of trade policy, and we know that what you come up with is going to be in your opinion in the best interests of the United States of America. That doesn’t mean that the legislative branch may differ with the executive branch as to what’s in the best interest of the United States, especially when we’re giving that authority to the President of the United States.
So, to some extent–and we’ll have to have experts to support it–we may have a different opinion as to what’s in the best interests of the people of the United States of America. So, I know you say that you’ve tried hard, but I’m more confident that we’ll be trying harder to work together, because it makes the difference as to whether or not we’re going to have a bipartisan trade policy.
I know you believe that, but the gentleman from California was not privy to the many, many meetings we have had, and we hope to please you as well as the majority Members of this Committee.
Let’s see now.
Mr. BECERRA. Mr. Chairman, I’m hoping to be pleased as well.
Chairman RANGEL. Okay. Mr. Kind will be recognized for three minutes.
Mr. KIND. Thank you, Mr. Chairman. Thank you, Ambassador Schwab. This actually has been a very helpful discussion that we’ve been having throughout the morning. You’ve been very patient, and we appreciate it.
I’m going to eventually ask you about the Doha round, our ag bill coming up, but also the Canadian WTO challenge, ag challenge that’s recently been filed against us, but before I do, this is tough stuff. I think the comments you’ve heard her reinforces that. You’ve got one of the toughest jobs in Washington today in helping us try to form a new bipartisan consensus and how we can move forward on a trade policy that makes sense for our country. I think it’s worthwhile in doing, because I think trade is incredibly important for our country, for future growth prospects for our constituents. I believe it’s important to our national security, because I believe when goods and products cross borders, armies don’t. I believe it’s an important tool in our diplomatic arsenal and in how we engage the rest of the world, but especially the developing world at this crucial time.
I also believe it’s an opportunity of trying to elevate standards globally, both at home and abroad. To me, trade is all about the harmonization of rules and how we’re going to engage one another on an economic basis. The real question is, and what’s in the minds of our constituents back home, are we going to work hard to try to harmonize upwards, or are we going to encourage a race to the bottom, where we have no worker rights, no labor enforceable standards, no environmental protections, no level playing field for our constituents in which to compete, too? That’s really the great challenge that we’re trying to get at.
I, along with a few of my colleagues, spent a week in Geneva after Thanksgiving to get more insight on the Doha round, and there’s nothing more dangerous than Members of Congress going and spending a week on an issue and coming home and being experts, but it’s clear that all eyes are on us in regards to what we do with TPA, and especially on what we do with our egg bill coming up this year, but somehow we’ve managed to position ourselves as being the scapegoat or the bad actor in all this in Geneva right now. So, there’s a lot riding on this.
I was hoping to be more encouraged with the Administration’s farm bill that was sent up recently, especially with the Title I commodity program, so-called “”Amber Box” payments. I think we need to go further, and I know it’s just a starting point for negotiations with the egg bill, but obviously there was a round of criticism of both Europe and in the developing world on what the Administration was proposing under Title I. That’s a concern.
Now I hope you might have an egg expert on staff that can come up and brief me on where things like in Doha and what we need to accomplish with the egg bill. I would hope maybe it’s the same person that can give me an update on the Canadian challenge. We already had our hands handed to us with the cotton challenge, and we face a very serious challenge now with what the Canadians are arguing. Maybe if we can get something written from your office as well, that would be much appreciated.
If you could just comment on the importance of making sure we produce the right agriculture bill and what that means in the multilateral round.
Ambassador SCHWAB. Thank you, Congressman. We welcome Members of Congress going to Geneva, talking to WTO members and getting up to speed on a lot of these issues, because some of them are very arcane, they’re very complicated, and we very much appreciate it when you take the time to do that.
Just a couple of very quick observations. One, obviously, I would be happy to come up and see you, or our chief agricultural negotiator or a team to come up and talk about the relationship between the farm bill and what’s going on in Doha in agriculture.
Let me make one very emphatic comment, though, which is the farm bill, the Administration’s farm bill, is not our Doha round agriculture offer.
Mr. KIND. Right.
Ambassador SCHWAB. What the United States is prepared to do in terms of cutting our trade distorting domestic support, whether it’s Amber Box or Blue Box or other, or aggregate, has everything to do with how much agricultural market access, how much market access there is in this agreement. Those were–it was that tension that brought the talks down last July. So, we are pushing very hard to have a more ambitious market access outcome so that we can have a more ambitious conversation about trade distorting domestic support.
You mentioned the corn case. Mr. Chairman, this really bears some thought. In the absence of a successful Doha round negotiation, I think it’s very clear we’re going to see more litigation, and that includes more litigation like the corn case. We believe our programs are consistent with the WTO. We believe the new farm bill would be consistent with the WTO. Other countries don’t necessarily feel that way, and litigation is what happens when you aren’t able to resolve things through negotiation.
Mr. KIND. Thank you.
Chairman RANGEL. The gentleman from New Jersey, Mr. Pascrell, is recognized for three minutes.
Mr. PASCRELL. Thank you, Mr. Chairman. Thank you, Madam Ambassador. Madam Ambassador, I hope someday that trade will someday be a tool for economic security within our country and other countries as well, as well as national security, which I think it can serve a vital, vital part of that. There’s not enough time to get into that today. I want to take some exceptions to what you’ve said, if you’ll permit me to do that.
Your answer to the Chairman on his question about why do so many people believe that trade is really the bottom line, it’s not good for the rest of the–many workers in this country, and you said, you responded to him because of misconceptions.
That is why I–I hope I was not out of order, but that is why I responded to you before when you brought up the subject of Valentine’s Day for flowers. I know where those flowers come from. You know where those flowers come. Cocoa, which goes into chocolate, a lot of chocolate going out today to bevel off the edges with many relationships, chocolate does it, but many times that cocoa comes from places where you can’t organize, and they use child labor.
So, I want to ask you a question, if I may, about a subject that I didn’t bring it up, the gentleman from Wisconsin brought up, on Oman and Bahrain. I proudly voted against both of those trade agreements. In those agreements, it was promised–they promised, both of those countries, to strengthen their laws in order to secure passage of their respective FTAs.
Bahrain recently issued a decree banning strikes in numerous public and private sectors, and Oman has not adopted laws necessary to implement what they promised. It appears that it is enough for the USTR to obtain promises regardless of whether the promises are kept. I’d like to know in 15 or 30 seconds, what are you going to do that the promises are being kept? We can’t accept promises that are not being kept by most of the countries that we trade with. What are you going to do about it?
Ambassador SCHWAB. Let me begin by respectfully disagreeing with your underlying premise.
Mr. PASCRELL. Which is?
Ambassador SCHWAB. First that the agreements are not being kept. In the case of Oman, Oman has fully complied with the commitments that it made in terms of changing its trade laws, royal decrees, in terms of regulations. They are now in place. The trade agreement has not yet even entered into force, so.
Mr. PASCRELL.–know that.
Ambassador SCHWAB. Those are in place. In the case of Bahrain, Bahrain made significant commitments. Bahrain is, to my understanding, acting in a manner consistent with those commitments. I just heard of the claim that you described, and our office is looking into that to make sure that they are addressed.
Let me note the obvious, though, which is absent free trade agreements with Oman and Bahrain, there would be nothing whatsoever that the United States could have done to improve labor rights in either of those countries. None of those laws, none of those regulations would have gone through, and we would have no mechanism to enforce them.
So, I’m happy to say that we have those agreements in place and we have the dispute resolution mechanisms available to us.
One last point, Congressman. That is, in my written presentation, I specifically noted that of the long-term unemployed, there are approximately 3 percent of those whose jobs have been lost directly attributable to trade. We understand there is a problem. It is not–it is not a huge problem statistically. It’s a huge problem for those individuals in those communities.
Mr. PASCRELL. Yes. We’re talking about human beings. We’re not talking about–
Ambassador SCHWAB. That’s exactly right, and we’re committed to helping them.
Mr. PASCRELL. We’re not talking about widgets. The previous President did not have fast track, and yet he had very specific trade deals with the WTO, with the Permanent Normal Trade Relations (PNTR) in China. Why do we need to have fast track? Why do we need to be kept out of things in order to come to these agreements?
Chairman RANGEL. The Chair would like to recognize–
Mr. PASCRELL. Thank you, Mr. Chairman.
Chairman RANGEL.–Ms. Berkley for three minutes.
Ms. BERKLEY. Thank you, Mr. Chairman, and a belated welcome, Ambassador. I’m going to change topics a bit. I think we can agree that our participation in international trade through the framework of the WTO is advantageous for a number of reasons.
So, I’m wondering if you can help me. What happens when the United States finds itself in a situation where we’re judged by the international community to be in violation of WTO principles which we have agreed to follow? I’m specifically referring to the case that Antigua and Barbuda have brought before the WTO alleging that the United States is in violation due to our confusing and may I say hypocritical stance on Internet gaming. According to the Justice Department, any gaming conducted over the Internet is illegal.
This Congress in its infinite wisdom included a ban on Internet gaming in the port security bill that was passed right before we adjourned for the election. I have never been able to figure out how banning Internet gaming had any connection whatsoever with this Nation’s port security, but included in that ban was an exception for horse racing. So, I have to think poker bad, horse racing good.
As a result, our Government has prevented operators based in Antigua and elsewhere from offering online gaming within our Nation’s boundaries, citing our Nation’s moral objection to Internet gaming at the same time we are allowing online betting for horse racing.
The WTO of course has disagreed with our Justice Department’s position and will shortly issue a ruling that confirms we are in violation and that Antigua may and can retaliate. What are we going to do about this contradictory policy? What do you recommend that Congress does? Ought we not study the problem or the issue of Internet gaming before we ban it, in violation of WTO?
Ambassador SCHWAB. Congresswoman, you have been very patient waiting to ask this question.
Ms. BERKLEY. You have no idea.
Ambassador SCHWAB. This is quite a question. Let me offer the following. One, because this is a matter still under litigation in the WTO, I would just as soon not get into any specifics. What I would appreciate is if you have the time, if I can come in with some of our compliance attorneys who are working on this case. The United States takes the position we believe that our laws are consistent with our WTO obligations, but if you would permit, I’d like to be able to come in with some of our attorneys to get into more details and respond more fully to your question.
Ms. BERKLEY. I would appreciate that, but the idea that we’re going to spend a fortune litigating an issue that I think could be easily taken care of in Congress with a simple vote seems a waste of taxpayers’ money, but I would welcome sitting down with your attorneys and talking to them about this issue.
Ambassador SCHWAB. Thank you, Congresswoman.
Chairman RANGEL. The Chair will now recognize my colleague from New York, Chairman of the Queens County Democratic Organization for what international input he would like to place in this issue before us. Mr. Crowley.
Mr. CROWLEY. I need a moment, Mr. Chairman.
Mr. CROWLEY. Let me just–get back to where I’m at. Thank you, Mr. Chairman, as always. Ambassador, thank you for being here. It’s great to see you again.
I just want to follow up very quickly on the question Mr. McDermott asked earlier, and that is pertaining to the LDCs, Least Developed Countries. As you know, I have an interest in–primarily, in a number of those countries, in particular, Bangladesh, Sri Lanka, just to name a few of them, and an interest to see them advance in terms of their society and the need to have more free access to our markets.
During the Doha development agenda, WTO members would move to adopt the initiative which promotes duty free, quota free market access for the LDCs. By 2008, this initiative would be applicable to all products originating from LDCs, with the aim to move towards greater equity in international trading opportunities for those countries.
When Mr. McDermott asked you the question in regard to 100 percent duty free and quota free access, you raised the issue of the African nations’ objection to that. Recent economic studies, including the International Food Policy Institute, which is a conservative institute, show that 100 percent duty free, quota free access would not adversely affect apparel exports from Africa, and in fact–and moreover, the Africa countries have expressed support for 100 percent duty free, quota free access for all LDCs.
One, I’m going to ask you to respond to that. Before I ask you to respond to that, if you could, just another note, because time is of the essence here, I mentioned to you briefly in private the issue of Oracle and their difficulties in India, specifically, they face difficulty working through the Indian bureaucracy. India’s Securities and Exchange Commission and Fed leaked the sale within India that increased the stock price there. They changed the filing fee during the process from $1,058 to $6.6 million. It’s a software company dealing with banking software.
Oracle is in the process again of purchasing that within India. It would be the largest forward directed investment in the history of India, over $2 billion. They were told that they could have 100 percent ownership within India. They’ve only been able to secure 84 percent ownership. So, a lot of double dealing is the sense that Oracle has gotten in their dealings with India.
Can you comment on that and tell me what it is you are doing as Trade Representative and what our ambassador, Mulford, has been doing or saying to the Indians in India? Thank you.
Ambassador SCHWAB. On your second question, the issue of Oracle’s acquisition in India, this is one that we are following, very familiar with, and between Ambassador Mulford and our office, has been raised with Indian authorities. I will continue to raise that in context of the India-U.S. Trade Policy Forum, which was created last year, and that will be meeting again in the next several months.
In terms of duty free, quota free, the duty free, quota free decision–and this was an agreement reached in December–of the Doha–in the Doha agreement of the WTO members, was for 97 percent of product to be duty free, quota free. Countries that want to do more can do more.
Ninety-seven percent was a position that a lot of countries agreed on. We have currently a Federal Register notice out asking for input, asking for comments on what should or should not be included, because we do–we are fully committed to making the duty free, quota free provisions as useful to the least developed countries as possible.
There are preference erosion issues that need to be considered not just in terms of African countries, although I hear a lot of concerns from African countries, AGOA members in particular, but also other preference holders, other countries that already have extensive preferences in our market.
We will be using this request for information, request for input process, public input, to get a sense of where this would fall out. It is our expectation and our desire to make sure that the maximum possible benefits to developing countries are derived from this 97 percent.
Mr. CROWLEY. Well, I look forward to working with you on this in the future, Ambassador. Thank you very much.
Ambassador SCHWAB. Thank you, Congressman.
Mr. CROWLEY. Thank you, Mr. Chairman.
Chairman RANGEL. The Chair would like to recognize Mr. Meek of Florida for three minutes.
Mr. MEEK. Thank you, Mr. Chairman, Madam Secretary, thank you for coming before us. I know that many of the questions that many of us on the bottom row had for you have already been answered, but as you know, I’m from Miami, Florida, and I’m the only Member on this Committee that represents Florida, and trade is something that, like the pork industry says, we’re the new white meat as it relates to trade, because some of the issues or some of the issues that are facing Americans, loss of jobs, what have you, that’s being blamed on trade, did not affect Florida like it affected Ohio and some of the other States and South Carolina.
As you know, we had the Free Trade of Americas that we attempted to try to promote, and we know the status of that now. Also, CAFTA, DR-CAFTA, which I understand there’s still some discussions that still need to take place for that to be in full effect. Now we have the Hope legislation that was passed in the closing of the last Congress. I represent more Haitian Americans than any other Member of Congress, and we know the situation in Haiti, the poorest country in the Western Hemisphere. I know that the Administration has really been looking to do a lot, not only in South America, but in our own hemisphere to promote trade.
I also would like to hopefully give some questions to your staff for the record so that you can give me some feeling of where we’re headed as it relates to Haiti. A very difficult, very technical international community is there trying to do the best they can. I just want to make sure that we’re putting our best foot forward. I voted against DR-CAFTA for the main reason that we had the Hope legislation or Hero or what have you before us, and it wasn’t getting the attention that it deserved from the Administration. It did not come up for a vote, and when it was coming up for a vote, thanks to the Chairman, it was so watered down under the previous Chairman, it wasn’t even worth bringing it up, but I’m glad that our present Chairman and the previous Chairman worked to get the Hope legislation up.
I want to just ask you very quickly as it relates to Haiti, what kind of forward lean does your office have as it relates to getting the implementation of the Hope legislation moving fast? Faster than it’s doing now. I understand that we may be in a DR-CAFTA experience, and it’s just one country.
Ambassador SCHWAB. Congressman Meek, thank you for asking the question. We have committed our office, and we’re working with the Customs and Border Patrol for their side of it. We have committed to have expeditious implementation of the Hope legislation. That is within a timeframe ideally within 90 days of enactment. That takes us into March. We’re moving very quickly, and I am optimistic that we will be able to meet that timeline.
You are absolutely correct that Florida is an incredible beneficiary of an open trading system, particular Western Hemisphere trade, and the Hope preference program I hope will be of significant benefit. We believe very strongly that DR-CAFTA, when it’s fully implemented, again, has fundamentally important implications for Florida and the Peru and Colombia and Panama free trade agreements when those come before this Committee, when they are enacted will also be very, very significant in terms of Florida and other countries in the region, including Haiti, gaining the benefits that are possible from international trade.
Mr. MEEK. Thank you very much, and I look forward to following up with you and your staff on the issue. Thank you.
Ambassador SCHWAB. Yes. I forgot to mention, if you’ve got specific questions, we will be very happy to receive them and respond to them promptly. Thank you.
Chairman RANGEL. I’d like to make your job easier, because when we have these–the Ranking Member and I agree that when we have these informal meetings, some of the questions that people have of their own district other Members would be interested in getting these answers so that you’ll have a Committee that’s more in line with our full trade policy rather than just what hits our district.
We would be better informed, and I want to thank you again for your willingness to have these informal meetings.
Ms. Schwartz is recognized for three minutes.
Ms. SCHWARTZ. Thank you, Mr. Chairman, and thank you for your patience, too, in hearing all of our questions. I wanted to really ask about–more about the issue of enforcement. I mentioned it to you before the hearing, but one of the concerns, and the Chairman expressed it in the beginning, that there is skepticism about these trade agreements really being helpful to either American businesses or to the workers of course they employ. So, what that means is that we work hard to get language in legislation in these trade agreements, but then the issue of enforcement is clearly a major one.
So, specifically, Congress did insist in the China WTO accession agreement and the China PNTR that the legislation include the special anti-surge agreement that would allow the United States to act against unfairly traded Chinese imports. The anti-surge mechanism known as–you referred to it as the 421 provision–is a major reason that the China PNTR was passed.
Since the law went into effect, a number of U.S. industries have sought to use the anti-surge mechanism and to seek relief under this law. In four out of six of the cases, the independent U.S. International Trade Commission found that the U.S. firms did in fact need relief, but in every one of those cases, this Administration rejected those petitions, often reaching beyond the parameters of the Congress’s intention, and looked for justifications for the rejection.
I have a business in my district. I wrote to you about this. I’ll represent it’s a standard pipe manufacturer located in the city of Philadelphia, in the northeast section. I can tell you just–this is an example. The standard pipe imports from China increased from 10,000 tons in 2002 to 663,000 tons in 2006. That’s not a small increase. It’s a staggering figure. As a result, this particular company has had to cut back and has laid off workers’ hours.
This is true for standard pipe companies across the Nation. While you might say, and I hope you do, that you would speak to the specific concerns I have about this company, I am really asking more as we go forward, I’m asking more the question as we go forward, as we seek to build in language that will in fact offer this kind of potential relief as we go through–sometimes it’s a transition, sometimes it’s actually really sort of an anti-dumping provisions as well–can we count on the Administration to find only reasons to reject the opportunity for relief for American industry and companies?
Or in fact will we see some enforcement from the Administration, from you and from the President? It’s an assurance I think that we need going forward to make sure that as we want to promote trade policies in this country that work for American business and American workers, we need to have that assurance going forward.
I would like to have you speak again to the specific or to the general notion of enforcement. Thank you.
Ambassador SCHWAB. Congresswoman, thank you. Let me speak both to the specific and to the general. General first. We are absolutely committed as an Administration, as the U.S. Trade Representative’s Office where we have jurisdiction, and the Commerce Department in anti-dumping countervailing duty areas where they have jurisdiction, we are absolutely committed to effective enforcement of trade agreements.
It is not a good use of anyone’s time for us to go out and negotiate trade agreements and discuss them here and debate them and enact them into law and put them into effect if we are not actively enforcing those agreements. If, for example, you look at the–you mentioned the case of China.
If you look at cases that we have brought related to auto parts, the most recent subsidies case, prohibited subsidies case, involving export subsidies, involving import substitution subsidies, some of the issues that we’re debating over intellectual property rights and so on, we are showing that we will be rigorous in our enforcement of trade agreements.
Ms. SCHWARTZ, but not in the anti-surge.
Ambassador SCHWAB. In terms of anti-dumping and countervailing duty, the anti-surge mechanism 421 that you reference, that is a provision of law that we respect, that we implement in good faith.
In the case of the Standard Pipe decision, that decision and the previous decisions, the President needs to make a determination, we make a determination as to whether it is in the national interest to impose these special safeguards.
In that particular case, we found that there were more than 40 other producers of this product, countries exporting that product to the United States, and that a safeguard put on one imports from China, would not have done any–provided any real benefit to U.S. producers. In fact, it would have harmed U.S. users.
You have our commitment, and Carlos Gutierrez, Secretary Gutierrez, I’m sure would say the same thing if he were here, that this is a provision of law that we will faithfully implement.
Chairman RANGEL. The Chair would like to recognize Mr. Pomeroy for three minutes.
Mr. POMEROY. Thank you, Mr. Chairman. Madam Ambassador, is sugar secure as a sensitive product in your negotiations with, among others, least developed countries?
Ambassador SCHWAB. Congressman, it would have been lovely if you had been able to ask that question about the same time that the two congressmen were here asking me why duty free, quota free–
Mr. POMEROY. You’re on my time. Question, please.
Ambassador SCHWAB. The answer is, we have committed that 97 percent of imports would come in duty free, quota free from the least developing countries in the world if there is a Doha round agreement. We have not made any commitments as to what would be contained in that 3 percent. We have a Federal Register notice that we have recently issued to get comments on that very subject. I am assuming that any–
Mr. POMEROY. Sugar is insecure relative to be in sensitive product exclusion at the present time. Is that right?
Ambassador SCHWAB. We have not made any determination as to what will be–
Mr. POMEROY. All right.
Ambassador SCHWAB.–within that allocation.
Mr. POMEROY. Watching the Doha round, it reminds me of a one-bidder auction with recalcitrance, intransigence by our trading partners, the United States just tossing more and more on the table. I believe that in light of restricted market access that is very different from the open market we allow, the extraordinary European subsidies, which are very different than what we have in our own farm programs, this approach is ill advised.
Not only have we been wimpy in negotiating, we are wimpy in trade enforcement, and this is where I would direct the rest of my time. Two issues. Transshipment of sugar through Canada under NAFTA–I’m sorry, through Mexico under NAFTA, as we have the NAFTA 2008 date arriving with unlimited amounts of sugar allowed in from Mexico, what resources are allowed–are you allocating to make sure there’s no transshipment, which is clearly prohibited under the terms of the signed agreement?
Second and very different issue, but I think it reflects upon the array of areas where trade enforcement has been lacking, is the privatization of Japan post exposing a $50 billion a year life insurance presence in Japan, what resources do you have dedicated to the privatization of Japan post? Have you had discussions with Japan relative to national treatment of Japan post as they’re in this transition toward privatization?
I thank you and yield–and look forward to your answer.
Ambassador SCHWAB. Congressman, you raised two questions and accused us–accused me of being a wimpy negotiator, and I must–
Mr. POMEROY. Our trade policy generally, Madam Ambassador.
Ambassador SCHWAB. Well, let me suggest, Congressman, that Exhibit One for our determination to make sure that any Doha round outcome is clearly in the national interest of the United States was walking away from the table in July. There was a bad deal on the table. It had insufficient market access in agriculture, in manufacturing, and in services. We walked away from the table even knowing that that was our last chance to use trade promotion authority. That is because we are determined when we negotiate free trade agreements, when we negotiate multilateral trade agreements like the Doha round, that there has to be market access. In terms of what we are or are not prepared to do, in terms of our trade distorting domestic support in agriculture, that has everything to do with how much market access is on the table.
So, first, foremost, most important. In terms of sugar, in terms of sugar and NAFTA, as you know, and as you implied in your answer, the market ultimately becomes fully open between the United States and Mexico next year in terms of sugar and a number of other products that are very sensitive to, for example, the Mexican government and sensitive to Mexico, sensitive to the United States. We will need to make sure that transshipments do not occur, because it is important that if there is going to be trade within this NAFTA agreement it is fair trade and it is trade that was anticipated by the agreement, not trade with third countries.
Finally, on Japan post, it is an issue that we are concerned about. We need to make sure that with this transition in Japan there is a level playing field at the end of the day and that U.S. rights under the WTO that Japan has allocated are not eroded by this change, we will continue to work with the Japanese to make sure that happens.
Mr. POMEROY. Thank you.
Chairman RANGEL. The Chair recognizes Mr. Davis for three minutes.
Mr. DAVIS. Thank you, Mr. Chairman, Ambassador Schwab. I apologize for getting here and delaying your departure. I had some weather issues today.
Let me go back to Ms. Schwartz’s questions about countervailing duties. As you’re probably aware, Mr. English and I have had a bill in the last Congress that we’ll be introducing soon, which unambiguously–which gives unambiguous authority to U.S. Commerce Department to apply countervailing duties in the event of subsidies by the Chinese. The reason it’s difficult to do that now, as I understand it, is because of the determination of the term “”nonmarket economy.”
Two questions. Is there any good economic reason or any good substantive reason why the United States should be reluctant to treat China as a country for whom these provisions are applicable? Is there a reason that the Administration has been resistant to interpreting the current law in such a way that allows countervailing duties to be applied? Is there a good reason why this legislation shouldn’t be implemented by the Congress? Give me a brief answer to that.
Ambassador SCHWAB. Congressman, thank you. On the issue of Chinese subsidies and countervailing duties, as you know, there is currently under review, under consideration, a specific case before the Commerce Department related to coated paper that I can’t comment on where the Commerce Department has decided to review whether or not and how applicable countervailing duty laws are and whether they should be applied in this case. That is obviously at a sensitive stage, and I won’t comment on that specific case.
In terms of addressing Chinese subsidies, this is an area where we have a great deal of concern, and where it is very clear that China has subsidies that are illegal or clearly inconsistent with their WTO obligations, we are acting. Most recently, we announced that we are seeking formal consultations under the WTO–
Mr. DAVIS. Let me stop you simply because my time is about to run out. The concern that some of us have, Ambassador, is I understand there’s a current case in controversy that you don’t want to wade into. It’s not your job to wade into that here today, but the concern that some of us have is this. There is a lingering concern in the American economy, on both the employer level and the labor side, that we have not been zealous in enforcing the trade provisions that currently exist with respect to China.
If we were to provide unambiguous authority to the Commerce Department to make this determination, some of us think that that would strengthen our hand with the Chinese. I hear the argument that’s advanced that, well, we don’t want to needlessly upset the apple cart with China. I certainly understand the arguments about the need for constructive engagement.
I would just end with this point. China has as much incentive as we do to constructively engage if we’re willing to show some sticks as well as carrots. I don’t think that we’re somehow going to push the Chinese off the international market if we get more aggressive with enforcement actions. Certainly if we add this tool that’s available for all kinds of economies around the world, if we add that to our arsenal of sticks, I don’t think it’s going to push the Chinese away. I think it will be a demonstration of seriousness on our part.
Finally, this has to go both ways if we’re looking to build the kind of political support that we need. As the Chairman has made clear to you, as other Members have made clear to you, we have to serve constituents who empower us every two years to come back, and they have to hear something from us more than the long-term benefits of trade or the 15-year benefits of trade. They have to hear some sense of current reciprocity, and they have to hear that we take seriously the laws we have in place. I’ll end on that observation.
Ambassador SCHWAB. Thank you, Congressman.
Chairman RANGEL. The Chair would like to recognize Mr. Ramstad for three minutes.
Mr. RAMSTAD. Thank you, Mr. Chairman. Ambassador Schwab, nice to see you again. I’ll be brief. I just want to commend you for the progress you’ve made with respect to the Doha round negotiations. I realize much work is left to achieve a breakthrough, but you have done a yeoperson’s job in leadership in terms of progress with respect to Doha.
I also want to commend you for your leadership on trade promotion authority, and I certainly hope that a majority of Congress understands how absolutely critical it is. We need trade promotion authority obviously to implement Doha, and to negotiate regional and bilateral agreements to open those new markets which are critical certainly to my State of Minnesota, a State that has a great high tech industry, a lot of agriculture as well as financial services and others. So, thank you for your work there as well.
Also I commend you for the progress that’s been made on the various trade agreements. I think you probably have the second or third toughest job in this town, but I appreciate the work that you’ve done, and there has been real progress on those pending enactment as well as ongoing negotiations.
Finally, I want to commend you for your impressive record of success with respect to enforcement and dispute resolution. So, I just wanted to say thank you and keep up the good work, Madam Ambassador.
Ambassador SCHWAB. Congressman Ramstad, thank you very much.
Chairman RANGEL. The Chair recognizes Mr. Herger.
Mr. HERGER. Thank you. Ambassador Schwab, I’m eager to see the U.S.-Korea free trade agreement because I believe that Korea would be an immense market for our goods and services.
I also want to make sure that any agreement meets our usual high standards by being comprehensive and aggressive. In addition, I believe the agreement should include a robust investor state dispute settlement mechanism, and I’m alarmed by reports that Korea wants to limit this mechanism severely. This mechanism is essential to preserving the rights of U.S. investors abroad.
Do I have your commitment to principles on investor state issues that we’ve used in our prior agreements?
Ambassador SCHWAB. Congressman, as you know, the eighth round of the Korea-U.S. free trade negotiations are going on this week. It is a tough negotiation. This is our seventh largest trading partner. We are trying to move this agreement in as fast a manner as we can in the hopes that if we can get a mutually acceptable deal, we can do it before this allocation of trade promotion authority runs out.
You do have my commitment that when it comes to investment issues, investor state issues, we will be as tough and seek the same degree of comprehensive inclusion when it comes to investment issues with Korea as we have in other FTAs, yes. Thank you.
Mr. HERGER. Thank you.
Chairman RANGEL. Thank you again, Madam Ambassador, and as much as I appreciate your willingness to meet with individual Members that need some answers, because of your generosity with your time, the Ranking Member and I are prepared to call the full Committee, at least those who want to participate, in the library or some other place so that it will save you time and we could be better informed. Is there anything that you could suggest that I and the Ranking Member do to improve our ability to support the trade policies of our country?
Ambassador SCHWAB. Mr. Chairman, thank you. Thank you for your offer to hold executive sessions where we can get into more specifics, and in some cases, I can be more candid than I can be in an open session. I think the most important thing you can do, you’re doing right now, which is to make sure that there is an active and bipartisan dialogue about U.S. trade policy, whether it is trade negotiations, whether it is enforcement and compliance, whether it is trade agreements. You have my commitment, this Administration’s commitment to work with you, to work with Congressman McCrery, Congressman Herger and whatever we need to do to be part of that partnership.
U.S. trade policymaking is a difficult and complicated exercise for governance, in governance in the United States, and anything that we can do to work with you, we’re prepared to do.
Chairman RANGEL. Thank you for your time. You can see that the participation of the full Committee shows the interest that this Committee has.
Thank you so much for your time.
Ambassador SCHWAB. Indeed, thank you.
[Whereupon, at 12:53 p.m., the hearing was adjourned.]
[Questions submitted by the Members to the witness follow:]
[Submissions for the Record follow:]