[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
UNITED STATES NEGOTIATING OBJECTIVES FOR THE WTO SEATTLE MINISTERIAL
MEETING
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
AUGUST 5, 1999
__________
Serial 106-52
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
65-092 CC WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida CHARLES B. RANGEL, New York
AMO HOUGHTON, New York RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa
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.
C O N T E N T S
__________
Page
Advisory of July 8, 1999, announcing the hearing................. 2
WITNESSES
Office of the United States Trade Representative, Hon. Susan
Esserman, Deputy United States Trade Representative............ 24
______
Ambrose, Kathleen A., Chemical Manufacturers Association......... 143
American Council of Life Insurance, Charles Lake................. 159
American Family Life Assurance Company Japan, Charles Lake....... 159
American Farm Bureau Federation, Dean Kleckner................... 94
American Federation of Labor and Congress of Industrial
Organizations, David Smith..................................... 154
American Forest & Paper Association, John Dillon................. 99
Arizona Department of Agriculture, Sheldon R. Jones.............. 174
American Insurance Association, Charles Lake..................... 159
Becerra, Hon. Xavier, a Representative in Congress from the State
of California.................................................. 10
Cargill, Incorporated, Ernest S. Micek........................... 60
Chemical Manufacturers Association, Kathleen A. Ambrose.......... 143
Chiquita Brands International, Inc., Steven G. Warshaw........... 134
Chubb Corporation, Dean R. O'Hare................................ 68
Coalition of Service Industries, Dean R. O'Hare.................. 68
Dawson, Rhett, Information Technology Industry Council........... 169
Dillon, John, International Paper, and the American Forest &
Paper Association.............................................. 99
Emergency Committee for American Trade, Ernest S. Micek.......... 60
Health Insurance Association of America, Charles Lake............ 159
Information Technology Industry Council, Rhett Dawson............ 169
International Insurance Council, Charles Lake.................... 159
International Paper, John Dillon................................. 99
Jones, Sheldon R., Arizona Department of Agriculture............. 174
Kleckner, Dean, American Farm Bureau Federation.................. 94
Lake, Charles, American Family Life Assurance Company Japan, the
American Council of Life Insurance, America Insurance
Association, Health Insurance Association of America,
International Insurance Council, and Reinsurance Association of
America........................................................ 159
Lambert, Charles D., National Cattlemen's Beef Association....... 138
Micek, Ernest S., Cargill, Incorporated and the Emergency
Committee for American Trade................................... 60
Miller, Hon. Dan, a Representative in Congress from the State of
Florida........................................................ 15
National Association of Manufacturers, William Weiller........... 129
National Cattlemen's Beef Association, Charles D. Lambert........ 138
National Wildlife Federation, Mark Van Putten.................... 104
O'Hare, Dean R., Chubb Corporation, and Coalition of Service
Industries..................................................... 68
President's Advisory Committee on Trade Policy and Negotiations,
John E. Pepper................................................. 55
Procter & Gamble Company, John E. Pepper......................... 55
Purafil, Inc., William Weiller................................... 129
Regula, Hon. Ralph, a Representative in Congress from the State
of Ohio........................................................ 13
Reinsurance Association of America, Charles Lake................. 159
Sandler, Gilbert Lee, Sandler Travis & Rosenberg, P.A., and the
Washington International Insurance Company..................... 164
Smith, David, American Federation of Labor and Congress of
Industrial Organizations....................................... 154
Van Putten, Mark, National Wildlife Federation................... 104
Warshaw, Steven G., Chiquita Brands International, Inc........... 134
Washington International Insurance Company, Gilbert Lee Sandler.. 164
Weiller, William, Purafil, Inc., and the National Association of
Manufacturers.................................................. 129
Weller, Hon. Jerry, a Representative in Congress from the State
of Illinois.................................................... 7
Submissions for the Record
Ad Hoc WTO Round Processed Food Coalition: Bestfoods, Campbell
Soup, ConAgra, General Mills, Herbalife International, J.R.
Simplot Co., Lamb-Weston, National Food Processors Association,
National Potato Council, Nestle USA, Oregon Potato Commission,
Pepperidge Farm, PepsiCo, Pet Food Institute, Procter & Gamble,
Ralston Purina, Tricon Global Restaurants, Welch's, Wm. Wrigley
Jr. Company, John F. McDermid, joint letter.................... 184
Aluminum Association, Inc., statement and attachment............. 187
American Crop Protection Association; American Forest and Paper
Association; American Plastics Council; Biotechnology Industry
Organization; Chemical Manufacturers Association; Chemical
Specialties Manufacturers Association; Coalition for Truth in
Environmental Marketing Information; National Association of
Manufacturers; National Fisheries Institute; National Foreign
Trade Council; Soap and Detergent Association, New York, NY;
and U.S. Council for International Business, New York, NY;
joint statement and attachments................................ 189
American Free Trade Association, Miami, FL, statement............ 195
American Iron and Steel Institute, statement..................... 199
American Lands Alliance, Antonia Juhasz and Faith Campbell,
statement and attachments...................................... 204
American Sugar Alliance, James Wm. Johnson, Jr., joint statement. 213
American Textile Manufacturers Institute, statement and
attachments.................................................... 219
Association of International Automobile Manufacturers, Inc.,
Arlington, VA, statement and attachment........................ 221
Black, Edward J., Computer & Communications Industry Association,
and Pro Trade Group, joint statement........................... 264
Boyd, Robert T., Torrington Company, Torrington, CT, statement... 353
Brown, Larry R., Timken Company, Canton, OH, letter.............. 349
Bunden, Kenichi, Floral Trade Council, Haslett, MI, statement.... 284
Business Roundtable, statement................................... 228
Business Software Alliance, Robert W. Holleymann II, statement... 245
Campbell, Faith, American Lands Alliance, statement and
attachments.................................................... 204
Center for International Environmental Law, David R. Downes;
National Wildlife Federation, Jake Caldwell; Sierra Club, San
Francisco, CA, Dan Seligman; World Wildlife Fund, David Schorr;
Friends of the Earth, Andrea Durbin; Natural Resources Defense
Council, Justin Ward; Greenpeace USA, Scott Paul; Defenders of
Wildlife, and Community Nutrition Institute, Rina Rodriguez;
American Lands Alliance, Antonia Juhasz; Consumer's Choice
Council, Cameron Griffith; Earthjustice Legal Defense Fund, San
Francisco, CA, Martin Wagner; Institute for Agriculture and
Trade Policy, Minneapolis, MN, Kristin Dawkins; and Pacific
Environment and Resources Center, Oakland, CA, Doug Norlen;
joint letter and attachment.................................... 248
Center for Science in the Public Interest, Benjamin Cohen,
statement...................................................... 257
Chocolate Manufacturers Association, McLean, VA, Stephen G.
Lodge, joint statement......................................... 259
Cohen, Benjamin, Center for Science in the Public Interest,
statement...................................................... 257
Computer & Communications Industry Association, Edward J. Black,
joint statement................................................ 264
Consumer Federation of America, Arthur S. Jaeger, statement...... 267
Crawford, Bob, Florida Department of Agriculture & Consumer
Services, Tallahassee, FL, statement and attachments........... 287
DaimlerChrysler Corporation, statement........................... 268
Defenders of Wildlife, statement................................. 270
Distilled Spirits Council of the United States, Inc., statement.. 272
Dresser-Rand Company, The Woodlands, TX, statement............... 275
Federal Express Corporation, Memphis, TN, M. Rush O'Keefe, Jr.,
statement...................................................... 279
Floral Trade Council, Haslett, MI, Kenichi Bunden, statement..... 284
Florida Department of Agriculture & Consumer Services,
Tallahassee, FL, Bob Crawford, statement and attachments....... 287
Grocery Manufacturers of America, Mary Sophos, statement......... 291
Harvey, Pharis J., International Labor Rights Fund, statement.... 298
Hatano, Daryl, Semiconductor Industry Association, statement..... 343
Holleymann, Robert W., II, Business Software Alliance, statement. 245
Intellectual Property Committee, statement....................... 293
IBC, Inc., John F. McDermid, joint letter........................ 184
International Labor Rights Fund, Pharis J. Harvey, statement..... 298
International Mass Retail Association, Arlington, VA, statement.. 300
ITT Industries, White Plains, NY, Wingate Lloyd, joint statement. 303
J.C. Penney Company, Inc., and National Retail Federation, joint
statement...................................................... 306
Jaeger, Arthur S., Consumer Federation of America, statement..... 267
Johnson, James Wm., Jr., United States Beet Sugar Association,
and American Sugar Alliance, joint statement................... 213
Judge, Steve, Securities Industry Association, statement and
attachments.................................................... 338
Juhasz, Antonia, American Lands Alliance, joint statement and
attachments.................................................... 204
Labor/Industry Coalition for International Trade, statement...... 308
Libbey Inc., Toledo, OH, Arthur H. Smith, statement.............. 311
Lloyd, Wingate, U.S. Chamber of Commerce, and ITT Industries,
White Plains, NY, joint statement.............................. 303
Lodge, Stephen G., National Confectioners Association, and
Chocolate Manufacturers Association, McLean, VA, joint
statement...................................................... 259
McDermid, John F., IBC, Inc., and Ad Hoc WTO Round Processed Food
Coalition: Bestfoods, Campbell Soup, ConAgra, General Mills,
Herbalife International, J.R. Simplot Co., Lamb-Weston,
National Food Processors Association, National Potato Council,
Nestle USA, Oregon Potato Commission, Pepperidge Farm, PepsiCo,
Pet Food Institute, Procter & Gamble, Ralston Purina, Tricon
Global Restaurants, Welch's, and Wm. Wrigley Jr. Company, joint
letter......................................................... 184
Micron Technology, Inc., Boise, ID, statement.................... 314
National Confectioners Association, McLean, VA, Stephen G. Lodge,
joint statement................................................ 259
National Retail Federation, and J.C. Penney Company, Inc., joint
statement...................................................... 306
North Dakota Durum Wheat Farmers: Jerome Anderson, Ross, ND;
Marshall Craft, Stanley, ND; Louis Kuster, Stanley, ND; and
Curt Trulson, Ross, ND, statement.............................. 316
O'Keefe, M. Rush, Jr., Federal Express Corporation, Memphis, TN,
statement...................................................... 279
Pharmaceutical Research and Manufacturers of America, statement.. 317
PPG Industries, Inc., Pittsburgh, PA, statement.................. 323
Pro Trade Group, Edward J. Black, joint statement................ 264
Quinn, Hon. Jack, a Representative in Congress from the State of
New York, statement............................................ 328
Ranchers-Cattlemen Action Legal Fund (R-CALF), Columbus, MT:
Midland Bull Test, Columbus, MT, Leo R. McDonnell, Jr.;
Sullivan Kelley Farm, Meeker, CO, Kathleen S. Kelley; R-CALF,
Columbus, MT, John Lockie; R-CALF, Miles City, MT, Jack
McNamee; Herried Livestock Market, Inc., Herreid, SD, Herman
Schumacher; Open Spear Ranch, Melville, MT, Dennis McDonald; R-
CALF, Melville, MT, Bill Donald; R-CALF, Big Timber, MT, Chuck
Rein; and R-CALF, Columbus, MT, John Patterson; joint statement 328
Rubber and Plastic Footwear Manufacturers Association, statement
and attachment................................................. 334
Safe Alternatives for our Forest Environment, Hayfork, CA, Bill
Welsch, letter................................................. 336
Securities Industry Association, Steve Judge, statement and
attachments.................................................... 338
Semiconductor Industry Association, Daryl Hatano, statement...... 343
Smith, Arthur H., Libbey Inc., Toledo, OH, statement............. 311
Sophos, Mary, Grocery Manufacturers of America, statement........ 291
Timken Company, Canton, OH, Larry R. Brown, letter............... 349
Torrington Company, Torrington, CT, Robert T. Boyd, statement.... 353
U.S. Chamber of Commerce, Wingate Lloyd, joint statement......... 303
U.S. Integrated Carbon Steel Producers: Bethlehem Steel Corp.,
U.S. Steel Group, LTV Steel Co., Ispat Inland Inc., and
National Steel Corp., joint statement.......................... 355
United States Beet Sugar Association, James Wm. Johnson, Jr.,
joint statement................................................ 213
U.S. Virgin Islands, Government of:
Statement.................................................... 357
Belair Watch Corporation, Hampden Watch Company, Inc.,
Progress Watch Co., Unitime Industries, Inc., and Tropex,
Inc., Joint statement...................................... 363
Welsch, Bill, Safe Alternatives for our Forest Environment,
Hayfork, CA, letter............................................ 336
UNITED STATES NEGOTIATING OBJECTIVES FOR THE WTO SEATTLE MINISTERIAL
MEETING
----------
THURSDAY, AUGUST 5, 1999
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:20 a.m., in
room 1100, Longworth House Office Building, Hon. Philip M.
Crane (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON TRADE
Contact: (202) 225-1721
FOR IMMEDIATE RELEASE
July 8, 1999
No. TR-13
Crane Announces Hearing on United States Negotiating Objectives for the
WTO Seattle Ministerial Meeting
Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on
Trade of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on United States negotiating
objectives for the upcoming World Trade Organization (WTO) Ministerial.
The hearing will take place on Thursday, August 5, 1999, in the main
Committee hearing room, 1100 Longworth House Office Building, beginning
at 10:00 a.m.
Oral testimony at the hearing will be from both invited and public
witnesses. Invited witnesses will include Ambassador Susan Esserman,
Deputy United States Trade Representative. Also, any individual or
organization not scheduled for an oral appearance may submit a written
statement for consideration by the Committee and for inclusion in the
printed record of the hearing.
BACKGROUND:
The Uruguay Round was the eighth round or series of multilateral
trade negotiations under the General Agreement on Tariffs and Trade
(GATT). The agreements reached at the end of 1994 during the Uruguay
Round were noteworthy in that they greatly expanded coverage of GATT
rules beyond manufactured goods trade to include agricultural trade,
services trade, trade-related investment measures, intellectual
property rights, and textiles.
One of the most visible accomplishments of this multilateral round
was to establish the WTO to administer the GATT agreements and to
settle disputes among WTO members. The Uruguay Round agreement also
calls for the resumption of negotiations by the year 2000 to further
liberalize trade in agriculture and services, as well as examine
government procurement practices and enforcement of intellectual
property rights. The negotiations will begin formally at the WTO
Ministerial conference to be hosted by the United States in Seattle,
Washington, from November 30 through December 4, 1999. It will be the
largest trade event ever held in the United States and will bring
together representatives of the 133 member countries of the WTO. The
members will consider the procedures and substance of the so-called
``built-in'' WTO agenda, as well as other issues such as transparency
and possible reforms to the dispute settlement system.
In announcing the hearing, Chairman Crane said: ``The Seattle
Ministerial meeting represents a much needed opportunity for U.S.
workers and businesses. It holds the promise of renewing momentum to
reduce the continuing barriers facing U.S. agricultural, goods, and
services exports. It is important that Congress monitor the development
of United States negotiating objectives for the Seattle Ministerial, as
well as the adequacy of logistical and other preparations for this
historic event.''
FOCUS OF THE HEARING:
The focus of the hearing will be to examine United States
preparations for the Seattle Ministerial Meeting. Testimony will be
received on specific objectives for the negotiations, the outlook for a
successful meeting, and the anticipated impact of launching a new round
of WTO negotiations on jobs, wages, economic opportunity, and the
future competitiveness of U.S. manufacturers and service providers.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Pete Davila at (202) 225-1721 no later than the close
of business, Monday, July 26, 1999. The telephone request should be
followed by a formal written request to A.L. Singleton, Chief of Staff,
Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515. The staff of
the Subcommittee on Trade will notify by telephone those scheduled to
appear as soon as possible after the filing deadline. Any questions
concerning a scheduled appearance should be directed to the
Subcommittee on Trade staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Subcommittee are required to submit 200 copies, along with
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their
prepared statement for review by Members prior to the hearing.
Testimony should arrive at the Subcommittee on Trade office, room 1104
Longworth House Office Building, no later than Tuesday, August 3, 1999.
Failure to do so may result in the witness being denied the opportunity
to testify in person.
WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect 5.1 format, with their name, address, and
hearing date noted on a label, by the close of business, Thursday,
August 19, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways
and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Trade office, room 1104 Longworth House
Office Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1
format, typed in single space and may not exceed a total of 10 pages
including attachments. Witnesses are advised that the Committee will
rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at ``HTTP://WWW.HOUSE.GOV/WAYS__MEANS/''.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Crane. We are going to have a series of
interruptions today with a heavy legislative schedule, and so I
think it is essential that we commence. Our first panel
consists of our colleagues, Jerry Weller, Xavier Becerra, Ralph
Regula, Dan Miller and Jack Quinn.
But before you fellows testify, I want to welcome everyone
here this morning. The Trade Subcommittee meeting today is to
consider the U.S. negotiating objectives for the WTO, World
Trade Organization, ministerial meeting that will be held in
Seattle, Washington, from November 30 until December 3 of this
year, and the Trade Subcommittee intends to be out there for
part of that ministerial meeting before heading to the Far
East.
Today, we intend to have an open give-and-take regarding
what U.S. priorities should be for this important meeting, the
first of its kind to be held in the United States. As my
colleagues know, I am a strong supporter of the WTO. I think I
can speak for most of my colleagues here when I say that we are
fully supportive of achieving a successful launch of a new
round of world trade negotiations in Seattle.
A consensus seems to have emerged among our trading
partners that the new round should be concluded within 3 years,
by the end of 2002. While comfortable with the shorter
timeframe, I recognize that these will be tough negotiations
given the intractable problems that the U.S. and other
countries have with Europe and Japan in the agriculture and
other sectors.
Since its establishment in 1995, the WTO has functioned
effectively, aiding our efforts to ensure that job-creating
U.S. exports are receiving fair access to 134 nations around
the world. As the world's greatest exporter, the best engine
for our impressive economic growth has been expanding
international trade under the oversight of the WTO.
Almost 12 million U.S. jobs are supported by exports. When
we increase exports in particular, we are increasing the number
of high-wage, high-tech jobs in cities and towns across
America.
The U.S. wins with fair rules that are promoted by an
institution that has the moral authority to ensure that they
are followed. Americans instinctively understand principles of
fair play, and I believe overall support for the WTO will build
as understanding grows about how this institution promotes
economic growth worldwide. The high visibility of the meeting
in Seattle creates a great opportunity to expand appreciation
of this important institution.
The dispute settlement mechanisms of the WTO have in
general worked in our favor. Of the cases brought by the U.S.,
we have won or favorably settled 22 and lost only two. We must
assure, however, that our trading partners, particularly the
European Union, come into compliance quickly when the WTO rules
against them. Despite our tremendous record in the WTO, I am
very concerned about the recent decision against the U.S.
foreign sales corporation provision. We will hold a hearing in
the Ways and Means Committee in the fall to discuss this issue.
With that, I want to recognize the Ranking Member of the
Subcommittee and thank him for helping us assemble such a
distinguished set of witnesses for our discussion today.
Mr. Levin.
Mr. Levin. Thank you, Mr. Chairman. And before I start with
my opening statement, I would like to apologize on behalf of I
would think all the Members and surely those on the Democratic
side. This hearing as it turns out is being held at the same
time as the floor action on the tax bill, and so some of us
will be ducking in and out, and I will be leaving after this to
participate in the debate and come back as soon as I can.
And, again, many of the Members will be in and out and we
are sorry that this hearing is being punctuated. There is also,
for Democrats, a third event going on at this very same time
and as I look around, it is only Xavier and I who are not
there.
Mr. Chairman, thank you for calling today's hearing, on the
important subject of the upcoming WTO ministerial meeting to be
held in Seattle later this year. It promises to be a historic
situation marking the launch of the next round of world trade
negotiations. It will be the largest trade event ever held in
and hosted by the United States.
In any major undertaking, the first steps are often
critical ones. They define the shape of the endeavor. They give
direction to the task at hand. This will be especially so in
Seattle as the 134 countries initiate a new effort to develop
rules that will govern the course of trade in the next
millennium. As host of the ministerial, the United States will
have an opportunity, indeed a responsibility, to place its mark
on the new round of trade negotiations. It is of the utmost
importance, therefore, that the administration, in consultation
with Congress, clearly identify its goals for the new round and
state those goals definitively in Seattle.
I know our witnesses today will describe a range of issues
that they consider to be priorities for the ministerial meeting
and I look forward to hearing those views. In the interest of
helping to get the discussion going, let me suggest three areas
that should be high on our negotiators ``to do'' list at the
ministerial and throughout the next round.
First, the administration should use the ministerial and
other meetings to emphasize the importance of full compliance
by Members with their WTO obligations. The mechanism for
pursuit of that goal should continue to include the WTO's trade
policy review mechanism, TPRM. It should be bolstered by
requiring governments to set target dates for coming into
compliance with particular commitments and make nonconfidential
versions of information collected during the TPRM process
available to members in dispute settlement proceedings.
Second, the United States should have as a principal goal
in the next round the development of rules concerning
transparency in policies and practices affecting foreign
producers ability to get goods and services to customers. This
should include rules and the publication of laws, regulations,
rules and administrative and judicial decisions. Further, the
United States should seek rules requiring defendant governments
in dispute settlement proceedings to cooperate in the
disclosure of evidence of government actions except where there
is a clear threat to national security.
Third, the ministerial and the next round of negotiations
should be the occasion for recognizing--and many of you have
heard me say this before--that trade policy is more than just
about lowering tariffs and eliminating traditional nontariff
barriers, as important as that is. As the world economy has
become more integrated, and indeed it has, issues once
considered to be beyond the scope of trade policy are now very
much a part of trade dynamics. Those issues include the ways in
which countries regulate or fail to regulate their labor
markets.
Accordingly, the United States should, among other things,
support negotiating objectives that include the development of
rules that ensure adherence to trade and labor standards.
Next, support the establishment of a working group in the
WTO on the impact of labor market standards on trade.
And fourth, support development of ongoing institutional
linkages between the WTO and ILO on trade labor market issues.
I would welcome comment on these suggestions during today's
hearings, and I look forward to hearing the proposals
specifically coming from our witnesses. Thank you.
Mr. Chairman, if you would excuse me for a few minutes. If
they will call me in turn on the floor, I will be right back.
[The opening statement of Mr. Ramstad follows:]
Statement of Hon. Jim Ramstad, a Representative in Congress from the
State of Minnesota
Mr. Chairman, thank you for calling this important hearing
today to discuss our negotiating objectives at the upcoming
Seattle Ministerial Meeting.
It is critical that we prepare an aggressive, strategic
plan for achieving our objectives at the upcoming Ministerial.
Seattle will host the largest trade event ever held in the
U.S., and we must ensure that it is also the most successful
for achieving greater trade liberalization for American
workers, consumers, manufacturers, farmers and service
providers.
I want to pay special attention to market access for U.S.
agriculture commodities and value-added foods. We all know the
current problems that face farmers, but the truth is that
American farmers have been disproportionately hit by foreign
trade barriers for many years--despite being the largest single
positive contributor to the US trade balance!
Agriculture is a difficult sector to address, but it is
part of the ``build-in'' agenda and deserves significant
attention. We must make sure not only that these discussions
begin. We must also ensure they are substantive, aggressive and
fruitful. American farmers deserve our best effort.
We will never accomplish our goals if nations are allowed
to cling to old, market-distorting, protection-driven programs
and practices. Countries with the most blatant and arduous
trade barriers for U.S. agriculture exports, such as the
European Union, will fight any and all efforts to make real
progress in knocking down these unfair, anti-trade practices.
They will try to protect them and keep them in the ``blue
box.'' This cannot be tolerated!
We must also structure our approach at these meetings to
set ourselves up for the greatest gains for agriculture as
possible. I believe we should adhere to the Uruguay Round
framework, which provides for a comprehensive, formula-based
negotiation without exceptions. We should pursue conclusion
with a single undertaking encompassing all sectors.
Mr. Chairman, thanks again for calling this hearing. I look
forward to hearing from our witnesses today about the necessary
elements for launching a comprehensive, successful round of
multilateral trade negotiations in Seattle.
Chairman Crane. All right. Thank you, we will proceed in
the order I presented you.
Mr. Weller.
STATEMENT OF HON. JERRY WELLER, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS
Mr. Weller. Thank you, Mr. Chairman. Thank you for the
opportunity to testify today. I would like to reintroduce to
the Trade Subcommittee an issue that I brought before the Full
Committee during the markup of the Financial Freedom Act of
1999. This issue involves the loss of 20,000 American film
industry jobs from runaway film production. I want to raise
this issue to urge that our domestic film industry be given a
seat at the table at the WTO talks in Seattle to address the
cultural content issue and its relationship to runaway film
production.
The problem with runaway film production is a growing
national issue which directly impacts thousands of American
workers from New York to Florida, Washington to California, and
Illinois to Texas. During the Committee discussion on the
Financial Freedom Act, I offered an amendment which I later
withdrew to introduce a wage-based tax credit and creative
financing tax incentives to counter loss of film production
jobs to Canada.
Remember the film ``Coming to America''? Unfortunately, it
seems that filmmaking jobs are now running from America. In
fact, a one-time Presidential candidate once referred to that
``giant sucking sound'' of jobs heading south. Well, that giant
sucking sound is really the sound of 20,000 film industry jobs
heading north to Canada.
A recent study commissioned by the Directors Guild of
America and the Screen Actors Guild shows that in 1993 over $10
billion in economic activity was lost to runaway economic film
and television production. This is more than five-fold since
the beginning of this decade. In the last 4 years alone, Texas
has shown a 31 percent decrease in direct production revenues,
while my State of Illinois is down nearly 20 percent.
Nationally, this has resulted in a loss of 20,000 jobs.
In looking at the small businesses and jobs lost by this
phenomenon, we are not just talking about directors and actors;
rather, we are talking about the small businesses that support
the film industry and make America great. These include
caterers, hotel and motel operators, restaurants and bars,
rental equipment businesses, electricians, set construction
workers and many others involved in this vitally important and
culturally indigenous economic activity. Over the years this
industry has been a leading exporter and driver of small
business job creation.
Mr. Chairman, this is a constituent issue which we should
take seriously. This is also a constituent issue for you and
other Members of the Subcommittee. I come from a district which
includes Joliet, Elwood and Calumet City, the home of Joliet
Jake and Elwood Blues, which I often refer as the ``Blues
Brothers'' district. Last year, my constituents and I were
stunned when they decided to make the film ``Blues Brothers
2000,'' they chose to film it in Toronto rather than Chicago.
Even more embarrassing was the fact that the Canadian
filmmakers were calling the Chicago Film Commission to ask them
how to best portray Chicago.
With my statement I have included the Directors Guild and
Screen Actors Guild study explaining the reasons why the film
industry is moving out of the country, and they have concluded
that one of the many reasons is the tax incentives offered in
other countries like Canada, Australia and the United Kingdom,
which we do not have here in the United States. Canada alone
offers Federal and provincial tax credits between 22 and 46
percent of labor costs. These incentives are enough to make any
business consider relocating, particularly when savings from
filming in Canada can mean a dollar savings overall.
The United States shouldn't be put in a competitive
disadvantage by tax incentives offered abroad. Rather we need
to level the playingfield for the small businesses impacted by
the runaway production and create jobs in America, for
Americans.
Related to this is an issue of Canadian cultural content
policy. The Canadian government has given certain ``cultural
industries'' special treatment. This policy has been
implemented in large part by Canadian legislation as well as
some foreign trade issues such as tariffs, taxes, foreign
investment restrictions and content requirements that
discriminate against U.S. cultural industries. Canada has
consistently protected its cultural industries.
This has been discussed and negotiated in the past. I
believe that it must be addressed in Seattle with the backdrop
of the issue of runaway film production. We have a situation in
which thousands of U.S. jobs are being lured to Canada and
other countries through favorable tax treatment, while at the
same time cultural policies established by the Canadians and
others discriminate against U.S. interests thereby creating a
double hit to industries like our domestic film production.
Mr. Chairman, even if the problem of runaway production had
not become so great, the Canadian insistence on maintaining
cultural content rules and regulations ought to be put on the
table at the Seattle WTO talks. However, simple fairness
requires response by the United States to the increasing
efforts by Canada to attract production away from the United
States. So long as these efforts continue, the U.S. must
address the Canadian cultural content rules. Canada cannot
unilaterally decide to invite in our productions jobs, but
close the door on American domestic productions.
Mr. Chairman, with the problem of runaway film production
in mind, I ask that the issue of cultural content be placed on
the table and addressed at the WTO talks in Seattle. Let's be
honest about this issue of runaway production. It is all about
jobs. The average film industry worker earns $26,000 a year.
This Congress has given great attention, and the right kind of
attention, to the loss of 10,000 steel industry jobs over the
past year. The film industry has lost over 20,000 jobs in the
past year, and most of those jobs have emigrated north. It is
time to address this problem and save U.S. jobs.
Mr. Chairman, thank you for the opportunity to testify. I
look forward to addressing any questions you may have.
[The prepared statement follows:]
Statement of the Hon. Jerry Weller, a Representative in Congress from
the State of Illinois
Mr. Chairman,
Thank you for this opportunity to testify here today. I
want to reintroduce to the Subcommittee an issue that I brought
before the full Committee during the markup of the Financial
Freedom Act of 1999. The issue is the loss of 20,000 American
film industry jobs from runaway film production. I want to
raise this issue to urge that our domestic film industry be
given a seat at the table at the WTO talks in Seattle to
address the cultural content issue and its relationship to
runaway film production.
The problem with runaway film production is a growing
National issue which directly impacts thousands of working
Americans from New York to Florida; Washington to California,
Illinois to Texas. During the committee discussion on the
Financial Freedom Act, I offered an amendment to introduce a
wage based tax credit and creative financing tax incentives to
counter the loss of film production jobs to Canada.
Remember the film ``Coming to America?'' Unfortunately, its
seems that film making jobs are now running from America. In
fact, a one time Presidential candidate once referred to that
giant sucking sound of jobs heading south--well that giant
sucking sound is really the sound of 20,000 film jobs heading
north to Canada.
A recent study commissioned by the Director's Guild of
America and the Screen Actors Guild shows that in 1998 over $10
billion was lost to runaway economic film and television
production. This is more than fivefold since the beginning of
the decade. In the last four years, Texas has shown a 31%
decrease in direct production revenues, while my state Illinois
is down nearly 20%. This has resulted in a loss of 20,000 jobs
nationally.
In looking at the small businesses and jobs lost by this
phenomena, we are not just talking about directors and actors,
rather we are talking about the small businesses that support
the film industry and make America great. This includes:
caterers, hotel and motel operators, restaurants and bars,
rental equipment businesses, electricians, set construction
workers and many others involved in this vitally important and
culturally indigenous economic activity. Over the years, this
industry has been a leading exporter and driver of small
business job creation.
Mr. Chairman this is a constituent issue which we should
take seriously. This is a constituent issue for you too. I come
from a district which includes Joliet, Elwood and Calumet City,
the home of Joliet Jake and Elwood Blues, which I often refer
to as the ``Blues Brothers'' district. Last year, my
constituents and I were stunned when they decided to make the
film ``Blues Brothers 2000,'' they choose to film it in Toronto
rather than Chicago. Embarrassing was the fact that the
Canadian filmmakers were calling the Chicago film commission to
ask them how to best portray Chicago.
With my statement, I have included the Directors Guild and
Screen Actors Guild study explaining the reasons why the film
industry is moving out of the country, and they have concluded
that one of the main reasons is the tax incentives offered in
other countries like Canada, Australia and the U.K. which we do
not have in the United States. Canada alone offers federal and
provincial tax credits of between 22% and 46% of labor costs.
Those incentives are enough to make any business relocate.
Particularly when savings from filming in Canada can mean a
dollar savings overall.
The United States should not be put at a competitive
disadvantage by tax incentives offered abroad. Rather we need
to level the playing field for the small businesses impacted by
runaway production and create jobs in America, for Americans.
Related to this there is an issue of Canadian cultural
content policy. The Canadian Government has given certain
``cultural industries'' special treatment. This policy has been
implemented in large part through Canadian legislation, as well
as some foreign trade through tariffs, taxes, foreign
investment restrictions and content requirements that
discriminate against U.S. cultural industries. Canada has
consistently protected its cultural industries.
This has been discussed and negotiated in the past. I
believe that it must be addressed in Seattle with the backdrop
of the issue of runaway film production. We have a situation in
which thousands of U.S. jobs are being lured to Canada and
other countries through favorable tax treatment. While at the
same time, cultural policies established by the Canadians and
others discriminate against U.S. interests thereby creating a
double hit to industries like domestic film production.
Mr. Chairman, with the problem of runaway film production
in mind, I ask that the issue of cultural content be placed on
the table and addressed at the WTO talks in Seattle. Lets be
honest about this issue of runaway production--its all about
jobs. The average film industry worker earns $26,000 a year.
This Congress has given great attention to the loss of 10,000
steel industry jobs over the past year. The film industry has
lost 20,000 jobs and most of those jobs have emigrated north.
It is time to address the problem and save U.S. jobs.
Thank you Mr. Chairman.
Chairman Crane. Thank you.
Mr. Becerra. Wait. One thing before you start, Xavier. Try
and keep your oral testimony to 5 minutes or less and all
written statements will be made a part of the permanent record.
STATEMENT OF HON. XAVIER BECERRA, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Mr. Becerra. Thank you, Mr. Chairman, and thank you to the
Members of the Subcommittee, my fellow Subcommittee Members.
Let me also begin by thanking my colleague, Mr. Weller, for
having raised this issue of runaway productions as we start to
develop and negotiate objectives for the upcoming World Trade
Organization ministerial in Seattle.
This issue may not have quite the direct connection that
you might think in terms of the ministerial that we are about
to embark upon in Seattle, but it certainly does relate to
trade. Jobs are leaving communities across the Nation and
production companies are choosing more and more to film outside
not just of California, but outside of this country. Whether it
is New York, North Carolina, Illinois, Washington State, Texas,
Oregon, Maryland, Michigan, Wisconsin, all of these States
along with California and others have been able to attract
substantial production in the past. But unfortunately we are
seeing more and more that these sites are being abandoned for
places abroad.
Mr. Weller mentioned that already we can talk about the
20,000 jobs that have been lost, some $10.3 billion in economic
loss to the United States in 1998 alone as a result of these
fleeing productions.
Now, we are not talking about the movie stars who make the
million dollar salaries. We are talking about the ordinary
working people who build sets, provide lighting, cater food,
operate hotels, and work in other capacities directly or
indirectly in support of production of movies and television
programs. The average film industry worker makes about $26,000
a year.
Although a number of factors have caused productions to
leave the United States, it is clear that government tax
credits by other countries do have an impact. In Canada, since
1996, we have seen that nation offer to those production
companies that come into their country 11 percent tax credits
for labor costs and production costs. When you add up what the
provincial governments also provide you have somewhere between
22 percent to 46 percent savings of their labor expenditures
for production companies going into Canada. There are other
things they do as well. They provide duty free import of stage
props, special effects equipment, other things that give these
production companies a rather large break.
Now, I raise this issue today because, as Mr. Weller has
said, there is a disconnect, perhaps a little, between what the
U.S. is accepting in terms of Canadian insistence upon its
cultural content laws while at the same time it is aggressively
targeting U.S. jobs. For instance, only 40 percent of films
aired on Canadian television can be produced in other
countries. The Disney Channel and HBO are not allowed to have
their own channels in Canada due to laws designed to protect
Canadian competitors.
At the same time, it is not uncommon for Canadian
government officials to fly to Los Angeles, New York, and other
U.S. production centers to attend events and to meet directly
with film and television producers to advertise their incentive
structure. For example, representatives of Revenue Canada--that
is the Canadian IRS--attended a recent ``Location 99'' show in
Los Angeles in order to promote Canadian incentives.
I know the Office of U.S. Trade Representative will be
testifying today and we are looking forward to addressing this
issue with her a little further and we encourage Ambassador
Barshefsky to try to limit this content exception. We know that
she has tried in the past to try to eliminate it and we
appreciate that.
In 1996, the motion picture and television industry made
$27.5 billion in contributions simply to the State of
California's economy. If you add up the rest of the other 49
States you will find that the impact of this industry is
tremendous. Canada is now the second largest exporter of
television programming, following the United States. In 1998,
Toronto became the third busiest production center in the world
after Los Angeles and New York. And Vancouver now ranks fourth.
If we do not engage on this issue, we will find that we
have irreversibly and irretrievably lost jobs in this country
because we have failed to act in a timely manner. We certainly
don't want to have to constantly go to the floor of the House
to do what we did yesterday to try to support the steel
industry.
I would hope that we would move quickly. While we may not
be dealing directly with this issue through the ministerial in
Seattle, it is a good time to talk about cultural content and
other factors that do in the end cost U.S. jobs.
Mr. Chairman, I thank you and the Members of this
Subcommittee for the attention.
[The prepared statement follows:]
Statement of the Hon. Xavier Becerra, a Representative in Congress from
the State of California
Let me begin by thanking Chairman Crane, Ranking Democrat
Levin, and my fellow Subcommittee Members for affording me the
opportunity to testify here this morning. I want to also
commend my colleague Mr. Weller, for raising the issue of
runaway productions as we start to develop our negotiating
objectives for the upcoming World Trade Organization
Ministerial in Seattle.
Jobs are leaving communities across the nation as
production companies choose to film abroad rather than filming
in California, New York, North Carolina, Illinois, Washington
state, Texas, Oregon, Maryland, Michigan, or Wisconsin, as they
had in the past. In 1998, the U.S. suffered a $10.3 billion
economic loss because of productions moving to other countries.
Last year runaway productions accounted for the loss of 20,000
U.S. jobs.
It is important to note that job loss resulting from
runaway productions affects ordinary working people who build
sets, provide lighting, cater food, operate hotels, wait tables
in restaurants and bars, and work in other capacities that
directly and indirectly support the production of movies and
television programs. The average film industry worker makes
about $26,000 a year.
Although a number of factors have caused productions to
leave, it is clear that government tax credits in other
countries have played an integral role in the exodus of U.S.
production companies. Countries like Canada recognize the
benefits that U.S. movie and television production companies
can bring to local economies. Since 1996 Canada has offered
federal rebates that equal 11% of spending for all Canadian
labor involved in a production. Many provincial governments
supplement these incentives, creating a total savings of 22% to
46% on Canadian labor expenditures. Moreover, as of January
1998, wardrobe, stage props, special effects equipment, and
photographic equipment, of U.S. origin, used in the production
of feature films, t.v. movies, or t.v. series are imported
duty-free.
I raise this issue today because there is a disconnect
between the U.S. accepting Canada's insistence upon its
cultural content laws while at the same time it aggressively
targets U.S. jobs. For instance, only 40% of films aired on
Canadian television can be produced in other countries. The
Disney Channel and HBO are not allowed to have their own
channels in Canada due to laws designed to protect Canadian
competitors. At the same time, it is not uncommon for Canadian
government officials and film commission representatives to fly
to Los Angeles, New York City, or other U.S. production centers
to attend events or meet directly with film and television
producers to advertise their incentive structure. For example,
representatives of Revenue Canada (the Canadian IRS) attended a
recent ``Location 99'' show in Los Angeles in order to promote
Canadian incentives.
The Office of the U.S. Trade Representative will be
testifying in the next panel and I look forward to further
developing the discussion on cultural content laws at that
time. Three years ago the Trade Representative attempted to
persuade Canada to drop cultural content restrictions, but
unfortunately did not succeed. I encourage Ms. Barshefsky to
redouble her efforts in this endeavor. In the past, the issue
of cultural exemptions was more narrowly focused on whether a
clear violation of free trade should be granted an exception. I
think that the answer was ``NO'' then, and I think it is ``NO''
today.
However, the unfairness of the exception is even more
dramatic today. The recent study commissioned by the Directors
Guild of America and Screen Actors Guild demonstrates how the
runaway productions problem has escalated since the last round
of trade talks. Consequently, the U.S. must fight harder than
ever to eliminate the cultural content restriction and open up
the Canadian markets to all productions.
In 1996, the motion picture and television industry made a
$27.5 billion contribution to California's economy--$14.2
billion in economic activity was generated in Los Angeles
alone. The industry is integral to sustaining our economic
prosperity not only due to jobs created by the entertainment
industry but also because it spurs growth in related sectors
such as the fashion and apparel industry, furniture
manufacturing, multi-media industry, and tourism.
Canada is now the second-largest exporter of television
programming, following the U.S. In 1998, Toronto became the
third busiest production center in the world, after Los Angeles
and New York, with Vancouver ranking fourth. If we do not
engage on this issue, we will find that we have irretrievably
lost U.S. jobs because we failed to act in a timely manner.
Chairman Crane. Thank you. Mr. Regula.
STATEMENT OF HON. RALPH REGULA, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF OHIO
Mr. Regula. Thank you, Mr. Chairman. And I will summarize
my remarks. I think there is a lot of synergy between what is
happening on the floor today and this hearing, because we will
hear a lot of speeches during the debate that we have a
surplus, the economy is strong, and therefore we should give
some of the money back to the taxpayers. That strong economy is
predicated on both free and fair trade. And I think you might
call this a quality of life hearing as much as a trade hearing,
because if we are to have a strong economy prospectively and
generate all of those surpluses we are hearing about out in the
future, it is going to have to depend on a strong economy with
jobs, with an opportunity to trade. And obviously a free flow
of trade internationally is a very strong bulwark against the
reduction in the economy.
I just noticed in the paper today that South America
generally has had some diminution in their economy overall, and
that will affect us, as we found out with Asia when the Asian
economy got sick and we got the flu in a backhanded way.
So I commend you for what you are doing. But let me say
also that we put a lot of effort into the Uruguay round. I was
involved as cochairman of the Steel Caucus in getting
protection of our antidumping laws, and the antidumping laws go
to the question of fairness as well as the freedom in our trade
relationships.
I am concerned that there is a group in the WTO that wants
to reopen the question of antidumping rules and thereby weaken
the U.S. trade laws. I commend Ambassador Barshefsky for
ensuring that the WTO working group on the Interaction between
Trade and Competition Policy focuses its attention on
significant, well-defined international competition policy and
not include trade remedy instruments.
I would just have one simple message as they look at the
WTO rules: leave the dumping rules alone. If anything,
strengthen them, but do not tamper with them and do not respond
to some countries that want greater access to our country. We
had a debate last night on the steel issue and obviously we
heard that over and over again that there have been predatory
practices that tend to circumvent our antidumping laws.
We do have an enormously open marketplace, and I think we
are a model for the rest of the world, but as part of this we
need protection against unfair trade practices. I certainly
advocate WTO consistent reforms to the trade laws, including
reforming the injury standard for section 201 cases to the
injury standard provided in WTO's safeguards agreement. The
U.S. currently has a higher injury standard than is required by
WTO rules. This change would allow industry and labor to use
section 201 more effectively.
We constantly hear the statement that the industry and
labor should use the laws that we have rather than seek
additional protection that perhaps goes in excess of our
current law. I have to smile, I see President William
McKinley's picture up here, who was a former Chairman of Ways
and Means, and he built his first run as a Member of this body
on the protective tariff and that was the keystone of his first
campaign. And yet if you read the speech in Buffalo after he
had been inaugurated for a second term and he said we are in a
world trade situation and we have to open markets and we have
to trade with the world. So he really did a substantial
reversal on the issue of trade.
Those statements he made in Buffalo are certainly very
relevant today and I think you have an enormous challenge as a
Subcommittee to give recommendations to our negotiators in
Seattle to ensure that our industry and our Nation is in a free
trade environment, but also a fair trade environment. And I
thank you for the opportunity to be here.
[The prepared statement of Mr. Regula follows:]
Statement of the Hon. Ralph Regula, a Representative in Congress from
the State of Ohio
Mr. Chairman and Members of the Trade Subcommittee, thank
you for the opportunity to present testimony regarding the U.S.
negotiating objectives for the WTO Seattle Ministerial Meeting.
As you are well aware, the Seattle Ministerial will convene
this November in order to launch and set the negotiating
parameters for a new ``round'' of multilateral trade
negotiations.
U.S. Trade Representative Charlene Barshefsky testified
earlier this year before the Commerce, Justice, State
Appropriations Subcommittee that the agenda for these meetings
should include such issues as broad reductions in tariffs, the
elimination of export subsidies and further reductions in
trade-distorting domestic supports linked to production. I
further understand that these trade talks will focus more
directly on reshaping WTO rules on agriculture, services and
intellectual property. The question remains, what other issues
will be added to the list of items subject to negotiation.
While I support market opening efforts, I would like to
stress that maintaining free trade depends on maintaining fair
trade. In this regard, I believe that it is imperative that the
United States hold firm against reopening the WTO's antidumping
rules.
As a veteran of the Uruguay Round negotiations, I remind
everyone that the current WTO antidumping rules were agreed to
only with great difficulty. I personally participated in many
meetings and worked closely with industry, labor and
administration officials to ensure that U.S. trade laws were
not adversely impacted or significantly weakened during the
Uruguay Round.
I am concerned that there continues to be a group of
countries that seek to reopen the WTO antidumping rules and
call for a weakening of the U.S. trade laws. Most recently,
there were efforts in the WTO Working Group on the Interaction
between Trade and Competition Policy to weaken our trade laws.
I commend the U.S. Trade Representative for ensuring that this
working group focuses its attention on significant, well-define
international competition policy issues that do not include
trade remedy instruments.
Effective antidumping rules are a cornerstone of an open
market policy. The United States now has one of the most open
markets in the global marketplace. But, there must be some
protection against unfair trading practices if we are going to
make our markets available to all our trading partners. We
still face many trading partners that have not reciprocated by
fully opening their markets. So it is only fair that our
domestic industries have some protection against dumped and
subsidized imports.
A case in point is the recent steel import surge that
occurred in 1998, with imports still continuing at higher than
average rates in 1999. The U.S. industry and labor have sought
redress through our unfair trade laws and as these cases move
through the process, we are now seeing some relief provided to
slow the rate of dumped and subsidized steel imports. But, even
under expedited procedures, the process has been long and
costly for domestic steel manufacturers and American steel
workers. For this reason alone, it is imperative that our U.S.
trade laws are not weakened.
I would further advocate several WTO-consistent reforms to
the U.S. trade laws, including conforming the injury standard
for Section 201 cases to the injury standard provided in the
WTO Safeguards Agreement. The U.S. currently has a higher
injury standard. This would allow industry and labor to use
Section 201 more effectively to counter import surges. I also
support the provisions of H.R. 1505 introduced by Rep. Phil
English which would strengthen our trade laws in a manner
consistent with our international obligations.
I would like to close by saying that there have been no
major problems with WTO Members' implementation of the
antidumping agreement, and certainly non that justify reopening
the agreement itself. While continued monitoring of how the
Uruguay Round rules are being implemented makes sense, that is
very different from re-negotiating those rules. The United
States should be very clear about this distinction, and should
be careful not to agree to anything under the
``implementation'' rubric that will in practice lead to
reopening the antidumping agreements.
Thank you again for the opportunity to testify before the
Subcommittee regarding the importance of maintaining strong and
effective U.S. trade laws as a way to ensure that there is
truly a ``level playing field'' as we work to open more markets
throughout the world.
Chairman Crane. We thank you, and harking back to the
McKinley example, McKinley pushed through the most
protectionist tariff measure in the history of this country in
1890 and that brought on what was called the ``Panic of '93,''
Grover Cleveland took the blame for that and he was not
responsible for that stupid piece of legislation and he began
immediately dismantling it and made the observation at the time
that when you put those walls around the country, you are
inflicting the greatest injury on that man who earns his daily
bread with the sweat of his brow.
Now, our good friends on the other side of the aisle are
ones who have that great free-trade tradition throughout their
history until post World War II. We hope they will start coming
back to the fold. And Republicans learned the hard way as
McKinley did. But we are lifting the blinders too.
Mr. Neal. Mr. Chairman, I would hope that you would point
out what party Mr. McKinley belonged to.
Chairman Crane. Republican. And Cleveland was a good free-
trade Democrat.
My colleague Dan Miller is our next witness.
STATEMENT OF HON. DAN MILLER, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF FLORIDA
Mr. Miller. Thank you, Mr. Chairman. One of our major goals
as we approach the negotiations in Seattle is to open up
markets and bring down barriers to our products, especially for
our farmers around the world. But when we approach this, we
need to have clean hands. If we are asking other countries to
open their products, we cannot be protective of our products
and we have one that stands out like a sore thumb and that is
the sugar program, because that is a very heavily protected
program in this country.
It is designed where the Federal Government forces the
price of sugar to be about four times the world price. The
price of sugar in the United States is about 23 cents a pound.
The world price according to the paper this morning is about 6
cents a pound. This is very much an anti-free-market program
that is due to expire in 2002, so we need to make sure that it
is not allowed to continue certainly past that date.
Let me briefly describe the program. The program is
designed, since we cannot grow enough sugar in the United
States we must import some sugar, that we control the total
supply and force the price up. And what the Federal Government
does is through a nonrecourse loan program, and the loan
program is in the 18- to 22-cent range, depending on the type
of sugar, and we cannot lose any money on this nonrecourse
loan, they have to maintain a price above 22 cents. That is the
reason the price stays at 23 cents a pound approximately. And
we have a quota system with countries--this is a very strange
program--so we have 40 countries in the world that are allowed
to sell sugar to the United States. Now, 10 of these countries
cannot each grow enough sugar for their own consumption. And it
is amazing, big countries that grow a large amount of sugar
such as Australia, they sell it to everybody in the world for 6
cents a pound but not to the United States. They sell it to us
for 23 cents a pound. It makes no economic sense.
And then we have 10 countries that cannot even grow enough
for their own consumption and they are buying it from countries
like Australia and then selling it to us and making this
profit. It is a strange program and does not belong in our free
enterprise system in this country. It is very much
anticonsumer. The GAO study shows the cost of this program as
at least $1 billion a year. It kills jobs in this country. Let
me describe some of the jobs that are hurt.
First of all, refineries. Sugar refineries cannot get
enough sugar and they have been closing for the past decade
because of this program. We have lost over 10 sugar refineries.
These are good high paying union jobs, by the way. But we have
the users of sugar. One is Bob's Candies down in Georgia. It is
a candy cane company where sugar is a major cost of its
production. It has to pay the 23 cents for its sugar, but its
competitors in Canada only pay 6 cents for sugar. It cannot
compete. It is having to shift its jobs overseas to be able to
be competitive in the sugar cane business. This is a company
that has been around for three generations.
In yesterday's Hill Magazine, there was a case in Michigan,
Congressman Dingell's district, of a company that is a $35
million a year company with 60 employees and it was importing
some type of sugar syrup from Canada and the trade people say
you are importing that because all you want is the sugar out of
it. Well, all they are going to do is shut down that company
and move those jobs from Detroit.
This is very much an antijob program and anti-free-market
program. It is an embarrassment really to us I think because we
have had articles in Time Magazine and Reader's Digest and the
``Fleecing of America'' on television explaining how we allow
this to continue. And if we are going to be people that believe
in the free market system, we need to make sure that we say,
hey, we are willing to allow all of our products to compete in
the world market, and if we are going to expect Canada and
Japan and China and other ones to come to the table and to
negotiate in the same way with clean hands.
So I say we need to have clean hands when we negotiate and
we need to make sure that as this program expires in 2002 we
don't allow it to be reauthorized, because it is going to be
difficult for our negotiators to be in there seeking a fair
deal. And I would like to submit my official statement for the
record and also a recent GAO report that was just released this
week analyzing the entire sugar program, and I thank you, Mr.
Chairman.
[The prepared statement of Mr. Miller follows:]
Statement of the Hon. Dan Miller, a Representative in Congress from the
State of Florida
Chairman Crane, Ranking Member Levin, Distinguished
Colleagues:
Thank you for allowing me to testify about the important
WTO ministerial meeting that will take place in Seattle later
this year. I feel this is ``fish or cut bait'' time for the
United States in seeking free and fair trade and to truly help
our farmers and industry. I applaud this committee for holding
this important hearing.
Much of the financial hardship being experienced by our
nation's farmers is due to contraction of overseas markets for
U.S. agricultural exports. What I want to stress to you today
is the importance of having the United States Trade
Representative enter into the Seattle Round with ``clean
hands'' in order to change that troublesome trend. Ostensibly,
Seattle is an opportunity to knock down barriers to trades and
allow American industry a greater opportunity to export into
other countries. This would result in greater incomes for U.S.
farmers and businesses. The sugar program undermines our trade
objectives and is colliding with efforts to help small farmers.
The Seattle meeting is the best opportunity to be pro-U.S.
farmer if we have the courage to knock down barriers. If every
country is allowed to exempt politically well connected
commodities from trade negotiations by taking them off the
table before they enter the room, then there can be no progress
on free trade. For example, if the United States continues to
knock out foreign sugar, then Canada can justify kicking out
United States dairy and Europe can knock out US oilseed crops,
and so on. Seattle must not allow this protectionist and
wasteful cycle to continue. Quite simply, our negotiators must
decide whether it is more important to preserve an outdated
sugar program than to open markets for competitive American
farm products. Remember the US sugar program hurts more people
than it helps.
I would like to concentrate my remarks on how the domestic
sugar program hurts our economy and hampers the competitiveness
of many important American industries. As you know, I have been
very active in reforming the sugar program and I have
introduced H.R. 1850 to phase out this program.
Through price supports, the sugar program keeps the price
of sugar in the United States artificially high. By tightly
limiting the amount of sugar that may be imported into the
United States, and subsidizing the operations of sugar
producers through federal loans, the sugar program forces the
price of domestic sugar to be at least twice as high as the
price of sugar on the world market.
While this is a sweet deal for sugar producers, it leaves a
sour taste in the mouths of taxpayers, consumers, American
workers, and the environment. The GAO estimates that the sugar
program costs consumers more than $1 billion every year in
higher prices for food and table sugar. Jobs for American
workers have been eliminated because of sugar refineries that
have been forced to shut down and because of companies
relocating overseas where sugar is cheaper. A more recent GAO
study shows that domestic users incur a cost of $200 million
annually for each penny in excess of the estimated price needed
to avoid forfeitures. This does not even address the higher
costs forced on users by the inflated prices of the program.
The environment is damaged by sugar production in Florida.
The subsidized production of sugar in Florida results in
phosphorous-laden run-off flowing into the Everglades, which
contributes to the destruction of this fragile ecosystem.
Amazingly, the federal government continues to subsidize sugar
producers, even as Congress participates in a multi-billion
dollar project to repair the damage done to the Everglades.
Recently, the Army Corps of Engineers announced a long-awaited
and ambitious plan to save the Everglades.
For the past several Congresses I have introduced
amendments to the Agriculture Appropriations Bill as well as
stand alone legislation to reform the federal sugar program.
This year I introduced H.R. 1850 with Congressman George Miller
(D-CA). H.R. 1850 has the support of national taxpayer,
consumer, and environmental advocacy groups. It has also been
co-sponsored by Trade subcommittee Chairman Crane and
subcommittee members Clay Shaw and Jim Ramstad.
As my time is limited let me concentrate on several
troublesome aspects of this program. Specifically, how the
sugar program costs consumers over $1 billion dollars a year
and benefits a select few sugar producers. Moreover, I will
discuss how the sugar program kills U.S. sugar refinery and
manufacturing jobs.
Costs to Taxpayers
In 1993, the GAO has estimated that the present sugar
program costs over $1 billion per year in higher prices for
table sugar and food. This cost has been confirmed by Public
Voice for Food and Health Policy. I believe this cost is
probably higher today due to the disparity of world sugar
prices and the US sugar program price. Not only do higher costs
affect the prices paid at the cash register, they affect the
taxpayer in the costs of government. Higher food costs mean
higher entitlement spending under Food Stamps or other
government programs such as school lunches and Meals on Wheels.
It is a regressive form of corporate welfare benefitting a
select few producers while making every consumer pay more at
the cash register to justify this program.
The U.S. Department of Commerce has noted that the ``effect
of the sugar program is similar to a regressive sales tax,
which hits lower-income families harder than upper income
families.'' If you support regressive taxation, then I guess
you have no problem with the U.S. sugar program. If you do not
favor taxing the poor more heavily, however, you should favor
changes in our sugar policies.
Finally, the flight of businesses out of the country due to
the high domestic cost of sugar results in lost revenue at the
local, state and federal levels. Although no calculation of
this lost revenue is currently available, it is significant in
light of the many thousands of displaced workers.
Benefit to a Select Few
The GAO reported that 42% of the sugar programs benefits
went to just 1 % of the sugar producers in 1991 and 33 big
sugar barons each received more than $1 million in extra
revenues under the program. One producer even received $65
million in one year.
Time Magazine did a story last November on the Fanjul
family that outlined how the U.S. sugar subsidy has helped
propel this family into the ranks of the multi-millionaires. I
commend it to your reading as it fairly captures how the sugar
program helps a few well connected folks while sacrificing the
good of the rest of the country.
I must emphasize this because you will hear; ``Don't kick
farmers when they are down'' or ``the family farm needs
support, not a kick in the teeth.'' Great sound bites, but
totally inappropriate with the sugar program. Sugar plantations
are not family farms in the normal sense of that phrase. In
1995, the USDA compared the non-cash economic benefits that
accrue to farmers of various commodities thanks to government
action. Wheat gets $23 per acre in government benefits, cotton
farmers $87 per acre. Sugar gets $472 per acre. Moreover this
artificially high price per acre of sugar acreage complicates
efforts to restore the Everglades by creating an economic
incentive to utilize more Everglades for sugar farming. And all
this benefit goes to a select few sugar barons.
So when our trade representatives defend the US sugar
program in global trade talks, they are defending the Fanjuls,
the politically well connected, the select few, but definitely
not the average family farmer hurt by the contraction of
overseas markets. The USTR must not protect a few folks who are
profiting from an overpriced subsidy program at the expense of
cattlemen, corn growers and other important American
commodities. Nor must the USTR protect the select few sugar
barons at the expense of the many important domestic users of
sugar such as candy makers and refineries which are important
US industries.
Jobs Lost
The two main American industries adversely affected by our
sugar program are sugar refineries and manufacturers of
products that utilize sugar.
Often, sugar refineries are unable to find a consistent and
adequate supply of sugar to operate year round. The variations
create economic inefficiencies and waste which result in these
facilities being unable to stay in business. Moreover,
refineries process sugar and require sugar cane and beet to
operate. Needless to say, buying this raw material in the
United States is overly expensive when compared to the world
price. Why would a company buy large quantities of sugar cane
at $ .22 per pound when they can buy at $.045 per pound in a
foreign nation and take advantage of other favorable economic
factors such as labor costs and government regulation?
Defending the status quo will only send more jobs overseas.
Accordingly, it is not hard to see why our sugar system is
sending refinery jobs overseas. As recently as 1981 there were
23 sugar refineries in the United States. Today, there are only
11 refineries. Over 3,500 jobs have been lost by closures at
the refineries due to a sugar program that only benefits a
select few.
Similarly, manufacturers of products that rely on sugar are
greatly affected by the present sugar subsidy. Ask any
businessman would they rather buy sugar at 22 cents per pound
or at 4.5 cents per pound and they would all agree they would
like the cheaper sugar. Even with a duty that raises the cost
to over 19 cents per pound when sugar is brought into America,
businessmen know that 19 cents is cheaper than 22 cents. And
businessmen know that they need to pack up and leave the United
States if they want to get that cheaper sugar. Also, the
incentive remains to move operations overseas if the company is
pursuing an aggressive export strategy.
I think the best example of the present sugar program
driving jobs out of America is the story of Bob's Candies.
Bob's Candies was the largest producer of candy canes in
America. Candy canes are a very cyclical industry and are made
to be a low cost candy. However, the U.S. sugar program throws
large roadblocks in the way of domestic candy makers.
Accordingly, Bob's Candies moved to Jamaica where sugar is much
cheaper. The president of Bob's Candies recently told Reader's
Digest that the company would save more than $2 million a year
in raw materials if the sugar program was scrapped. This
savings would enable the company to keep jobs in America and
lower retail prices. Unfortunately, it just makes good business
sense to go overseas to get cheaper sugar to make candy. How
many Bob's Candy Canes will this Committee tolerate?
Also, the Committee should note that the cost of our sugar
program was a main reason why Coke and other soda companies do
not use sugar in soft drinks. Sugar got too expensive. The
program priced sugar out of the lucrative soft drink industry.
Instead, soft drinks now use high fructose corn syrup (HFCS)
which does not have the high costs and economic inefficiencies
of the sugar program.
Finally, I ask this committee to keep in mind the fact the
sugar industry is not large in comparison to other aspects of
the economy. According to USDA data there are between 40,000
and 70,000 jobs directly related to the sugar program. This is
a small number compared to the 520,000 jobs in the food
processing industry or the thousands of lost Everglades related
tourist jobs. Congress and our trade representatives must not
blindly protect a small special interest sugar program at the
expense of the greater good.
The U.S. sugar protection program and its implementation
causes odd distortions in the world wide import and export of
sugar that are utterly inconsistent with free trade and free
markets. According to the GAO study on the sugar program
released just this week, the United States allocates import
levels to some 40 trading partner countries in a manner that
bears little relationship to the realities of supply and
demand.
For example, Brazil and the Philippines are both
``allowed'' by the USTR to import approximately the same
tonnage of sugar under this bizarre quota system despite the
fact that Brazil produces 21 times more sugar (5,215,000 tons)
than the Philippines (249,000 tons). Furthermore, 10 of the 40
countries who are given sugar quota allocations by the United
States to import sugar here are actually net importers of sugar
themselves. 11 of the 40 countries who receive an allocation
have average worldwide export levels that are less than their
U.S. allocation level.
Can such a system really be consistent with our free trade
message? How would the United States react if one of our
trading partners gave American corn farmers a quota level that
was the same as that of Honduras? Would we take seriously
another country's admonitions about free trade if that country
allocated imports of American beef at the same low level as
those of Liberia? These are the questions that naturally flow
from examination of our sugar program and I hope that our trade
representatives at Seattle do not feel compelled to expend
valuable credibility defending such an archaic and economically
inefficient system that does not advance the overall interests
of the United States.
Put another way, the Seattle meeting must be the forum for
the United States to effectuate the greater good. Many more
American jobs and consumers need cheaper sugar and many more
non-sugar farmers need our trade policy to be freed from the
millstone of our domestic sugar subsidy. If the Seattle
Ministerial is successful, the USTR can save American jobs in
refining and manufacturing of anything that uses sugar. Also,
the USTR will save the taxpayers billions of dollars.
Again, I thank you Mr. Chairman for not only allowing me to
testify but for your continued leadership on the efforts to end
the sugar subsidy. It is in America's best interests to get rid
of foreign and domestic subsidies like our sugar program and I
am appreciate all the efforts this subcommittee will undertake
to accomplish this goal.
Chairman Crane. And without objection, so ordered with
regard to your request.
Mr. Houghton.
Mr. Houghton. Thank you, Mr. Chairman. I appreciate the
testimony. It is enlightening. I just have two or three
questions I would like to ask Mr. Weller. The Canadians are
obviously concerned about their cultural heritage and feel
sometimes overwhelmed about their proximity to the United
States, so just to try to sort of depersonalize this thing and
get into the guts I would like to ask you two or three
questions.
First of all, what is really the practical impact here of
the Canadian cultural content rules? And second, does the
United States prohibit broadcast distribution or sale of
Canadian-produced programming? And third, really do the
Canadian cultural context rules have a real impact on
employment of actors and directors and things like that? You
might want to turn to those questions.
Mr. Weller. Sure, Mr. Houghton, and thank you for your
questions and I also want to thank you on behalf of all of us
interested in the question of runaway production for your
commitment to work with us and later this year conduct a
hearing on the issue of runaway production with the Oversight
Subcommittee. I thank you for your commitment to do that.
When it comes to the impact of the Canadian cultural
content rules, it could have a profound impact on U.S.
producers of television and motion pictures. There is a recent
Law Review article by publishers of Syracuse University Law
Review. They noted that certain cable channels like the Disney
Channel are prohibited as a result of cultural content rules
enforced by the Canadian government. And the irony of this is
that similar prohibitions have caused and forced many Canadian
citizens who are interested in obtaining these channels to buy
U.S. satellite dishes on the black market.
And, moreover, Canada mandates that private stations must
have a 60-percent Canadian content measured over the broadcast
day and 50 percent over the evening hours, while the Canadian
government-owned CBC must have 60-percent Canadian content at
all times. It does have a very big impact on American film
production as well as American television production.
You had also asked whether or not the United States
prohibits broadcast distribution or sale of Canadian-produced
programs. Not at all. The United States of course has a free
market for Canadian products. And not only do we permit their
programming, but many Canadian television shows and television
stars have been very successful. Let me list some of those.
SCTV, Due South, and Road to Avalon, and performers like Rick
Moranis, Dan Ackroyd, Jim Carrey, and Michael J. Fox have all
been very successful in the United States precisely because we
give our consumers the freedom and the right to choose the type
of program that they want to watch and not have that enforced
by the government.
You had also asked if the Canadian cultural content rules
have an impact on the employment of U.S. actors, directors and
technical crews and others, and they do have an impact. Canada
has adopted a point system that must be satisfied if a
production is to achieve the cultural content designation.
Under the point system six of 10 creative production positions
must be performed by Canadians. In addition 75 percent of all
expenditures have to be made to Canadians. Thus U.S. citizens
are cut out of the action. They are cut out of the broad number
of jobs in Canadian cultural content production. And of course
Canada has those opportunities for the promises of wage rebates
and tax incentives as well.
That is really one of the key reasons why it is so
important that the issue of runaway production as well as
cultural content be addressed at the Seattle talks because it
is having a real impact on an industry which is so important to
the United States. Domestic film production is indigenous to
our Nation. We have lost 20,000 jobs. Most of those have
emigrated north as a result of not only the Canadian content
rules but the vast array of incentives, particularly tax
incentives, that the Canadians are offering to American film
producers to relocate and go north.
So thank you for those questions. They are important and
basic questions.
Mr. Houghton. Thank you. Mr. Chairman, do I have just a
minute more? I would like to ask Mr. Regula a question on 301.
We are very concerned about 301 and also section 201. Clearly
there are people that want to change that. Do you really hear
the drums beating pretty loudly on that focusing on the
ministerial in Seattle?
Mr. Regula. Well, I think this Subcommittee should address
those issues. I believe Mr. English has a bill that tries to
reflect the experience we have had and proposes some trade law
changes. To summarize what I think will be the situation in
Seattle is an effort by countries to change WTO rules to make
it easier to dump into our markets. I think in anticipation of
that, we want to hold firm because our laws are working. If
anything, strengthen them and streamline them to make it easier
for demostic companies to bring actions.
Chairman Crane. Mr. Neal.
Mr. Neal. Mr. Weller, is it your belief that what the
Canadians are doing is legal under existing trade law?
Mr. Weller. We certainly believe there is some legitimate
questions that should be raised. We believe that they are using
their cultural content rules to put the United States at a
great disadvantage, particularly when it comes to film
production. When you think about it, the average film
production has about $25 million in economic impact. The
average film industry worker makes $26,000 a year. We have lost
20,000 jobs, most of which have gone north because of Canadian
tax incentives as well as the Canadian content rules. And when
cable channels that you and I have the opportunity just through
freedom of choice if we have cable at home, Disney, HBO, are
prohibited as a result of cultural content, something is wrong
and we should raise that issue and it should be put on the
table.
Mr. Neal. The U.S. film industry still remain a net
exporter. Is it your understanding that they would be reluctant
to bring a case?
Mr. Weller. I can't speak specifically for the U.S. film
industry. I will let them speak for themselves. But our belief
is that there are abuses that do need to be raised. We have
seen a growth in film production, but if you see how those jobs
have grown, more and more of them are shifting to Canada. And
we have seen in my city of Chicago, and I imagine if you look
at the economic impact in the Boston area you have probably
seen an impact as well, in Chicago we have seen a 20-percent
reduction in the amount of production activity as a result of
runaway production. In Texas, which has been extremely hard
hit, almost a third of their film production has been lost and
runaway production has clearly been identified.
And I would urge you to take a look at the monitor study
that was done by the Directors Guild and the Screen Actors
Guild, which we would be happy to provide you a copy of, which
numbers the impacts in the communities such as Boston and
Chicago. It is not just a Hollywood issue.
Mr. Neal. Thank you, Mr. Weller. Thank you, Mr. Chairman.
Chairman Crane. Next, Mr. Foley.
Mr. Foley. Thank you, Mr. Chairman. Mr. Chairman, I want to
thank Congressman Weller and Congressman Becerra for focusing
on the runaway production issue. In the House Entertainment
Task Force we are going to be doing, we hope, extensive study
and have extensive dialog on the issue and I think you raise
some very, very important points and I would like to ask you
both, if you can in the brief time, to comment on some of the
incentives that Canada provides as a tax motivation to bring
films to Canada. First Mr. Weller and then Mr. Becerra.
Mr. Weller. Sure. And Mr. Foley, of course I want to thank
you for your leadership and involvement on this issue. Folks a
lot of times when they think of the film industry and movies
and television production they always think of Hollywood and
this is not just a Hollywood issue. This is a constituent issue
for me in Illinois and I know it is for you in Florida and for
Mr. Becerra in California, but it impacts dozens of urban
areas, rural areas as well as many, many States have found
domestic film production to be a job generator and a job
creator.
In fact, in Illinois we had 55 productions that were either
fully or partially filmed in Illinois. So we are one of those
States that recognizes the importance of the film industry.
However, we have a challenge, and the Canadian government,
both the Federal and provincial governments, have been very,
very aggressive in offering financial incentives to television
as well as film production. And these include wage credits, as
well as other forms of tax subsidies which could reimburse in
some provinces up to 40 percent of the cost of the production.
Now from the standpoint of any businessperson if they could
find a way to reduce costs by 40 percent, they are going to
consider that other area to do business.
So my belief is that we really need to work in a bipartisan
way to find ways of reducing the cost of production in the
United States and keep these jobs here. As I noted in my
testimony in this Congress in the last 9 years, and I represent
an area with significant amount of steel production so it is an
issue I am very concerned about, but we have lost 10,000 steel
jobs in the past year and this Congress has given a tremendous
amount of attention to that issue. But unfortunately the
administration nor Congress have paid little attention to the
issue that needs to be on the radar screen and that is the
issue of runaway production. When you have lost 20,000 jobs,
that is serious. That is twice as many jobs as have been lost
in the steel industry alone.
So clearly the tax incentives as well as the weaker
Canadian dollar have contributed to the loss of jobs that have
headed north.
Mr. Becerra. Good question, and thank you again for the
role you are playing in this as well. Certainly Florida should
be very concerned because it is one of the States that does
have major production facilities and sites. More specifically,
because I think Mr. Weller did a very good job of answering the
questions, if the government in Canada provides an 11 percent
rebate--they don't call it a tax credit, they call it a
rebate--on all production costs that are related to labor. So
someone who works there, you pay that person a salary, you get
to reduce that in your costs by 11 percent. The Federal
Government in Canada will give you back 11 percent. On top of
that the provincial governments provide a number of incentives,
rebates, tax credits. So you can get anywhere from 22 up to 46
percent of a rebate, tax credit, whatever you would like to
call it, an incentive to do business.
On top of that, Canada is now offering to production
companies from abroad from other countries like the United
States duty-free import of its stage facilities, of its
production equipment, its photographic equipment, special
effects equipment. All of this now gets to come in without any
charge for importation. So they are saving quite a bit of money
when they go to a place like Canada.
We need to do something to make sure we have a level
playingfield.
Mr. Foley. Thank you very much and I thank you both for
your hard work on this and hopefully, and I know Mr. Weller has
asked Mr. Houghton to potentially have some hearings in depth
in a variety of locations and I look forward to working with
both of you. If I may, Mr. Miller, I cannot escape without a
conversation on sugar. I didn't expect one today, but I might
as well jump in.
The price of sugar has remained stable without question in
the last 9 years. There has been no increase in the wholesale
price of sugar. Why then can you explain the price of the
finished product going up so dramatically? There doesn't seem
to be a nexus between the cost of sugar and the end retail
price.
Mr. Miller. Basic economics 101 said that--you are talking
about if we went to the world market 6 cents a pound you would
not see a price change in products. But that is only one
component of the price and I think you would see price changes
in things that have high content of sugar. There is no
justification for us to be paying 23 cents a pound for sugar in
the United States and 6 cents a pound in Canada. How can we
compete? It is the same way we can't compete when they have
incentives for products like that.
But the most important thing is to have the ability to have
clean hands. We are protecting one product and when we go there
and try to open up markets for dairy products and what have
you, it is not a fair field.
Mr. Foley. My time has expired, but I would love to
continue the dialog. I am sure we will have a chance on the
floor.
Chairman Crane. Gentlemen, we appreciate your participation
today, and that concludes this panel.
We now welcome our next panel, our witness, Hon. Susan G.
Esserman, Deputy U.S. Trade Representative and you may proceed
when ready. And we would also ask you to try and keep oral
testimony in the neighborhood of 5 minutes and all written
testimony will be made a part of the permanent record. Proceed
when ready.
STATEMENT OF HON. SUSAN ESSERMAN, DEPUTY UNITED STATES TRADE
REPRESENTATIVE
Ms. Esserman. Thank you, Mr. Chairman, Members of the
Subcommittee. I very much appreciate this opportunity to
testify on the important issue of the U.S. agenda at the World
Trade Organization.
In 4 months, Ambassador Barshefsky will open the WTO's
third ministerial conference in Seattle. This will be the
largest trade event ever held in America, bringing trade
ministers, business executives and citizen groups to Seattle
from all over the world. It will highlight to the world our
economic achievements and focus public attention as never
before on the role that trade plays in the longest peacetime
expansion in American history.
We also expect at the ministerial to launch a new round of
international trade negotiations. This round builds upon 50
years of bipartisan American commitment to a fair, open, and
free international economy capped by the conclusion of the
Uruguay round, which created the WTO in 1994. In the 5 years
since, the WTO has fully proven its value to the United States
and the world. For example, Americans have taken greater
advantage of a more open world economy by increasing exports by
over $200 billion, contributing to the economic growth we have
enjoyed and helping us gain high-skill, high-wage jobs.
The WTO's strong dispute mechanism has strengthened our
ability to ensure compliance with trade agreements and has
resulted in tangible gains for American companies and workers
and the WTO has been vital to our ability to address the
financial crisis as its rules-based system has helped to
prevent the outbreak of a cycle of protection and retaliation
which would have hurt the United States as the world's largest
exporter as much as any other country in the world.
As we look to a new round, we see immense promise to go
further and as President Clinton has stated, to create a world
trading system attuned to both the pace and scope of the new
world economy and to the enduring values which give direction
and meaning to our lives.
We are now consulting with this Subcommittee, Members of
Congress, interested Americans in business, agriculture, NGOs
and others, about the objectives for the round.
I am going to very briefly outline our core objectives. Our
view is that the core of the negotiating agenda should address
market access concerns, including tariffs, nontariff measures,
subsidies and other measures, with benchmarks to ensure that
the negotiations stay on schedule. These broad-based markets
access negotiations would lead to immense new business and job
opportunities for our workers, companies and farmers.
The agenda and its results must unquestionably be broad
enough to create a political consensus by addressing the market
access priorities of all members. It also must be manageable
enough to be completed within 3 years and avoid raising major
compliance problems afterward.
This market access agenda would have four substantial
components: Of course, at the core of the negotiating agenda is
agriculture and here we seek elimination of export subsidies,
reduction of trade-reducing supports, lower tariffs and better
administration of tariff rates, quotas, disciplines on state
trading enterprises, improved market access for least developed
countries, and ensuring that trade in agricultural
biotechnology products is based on transparent, predictable and
timely processes.
The second core element is service. Our objective here
would include liberalizing a broad range of services, ensuring
that the WTO rules anticipate the development of new
technologies, and developing disciplines to ensure transparency
and good governance on regulation of services.
Third, industrial goods where broad market access
negotiation would buildupon the accelerated tariff
liberalization initiative. Here we seek to reduce existing
tariff disparities, use applied rates as the basis of
negotiation, address nontariff and other measures affecting
market access and, as in agriculture, improved market access
for the least developed WTO members.
Fourth, we will pursue trade facilitation negotiations
which would remove customs impediments so that exports
expeditiously reach customers in foreign markets. We intend to
expand on this base by pursuing work in several areas. For
example, a special priority will be creating a trade
environment that promotes the unimpeded development of
electronic commerce.
Second, we will seek to ensure that trade liberalization
promotes and supports sustainable development. This will
include identifying and pursuing areas such as the elimination
of tariffs on environmental technologies and the elimination of
fishery subsidies that both distort trade and harm the
environment.
We will use the WTO's Trade and Environment Committee to
examine the environmental implications of negotiations as they
proceed. We will seek institutional reforms to open up the WTO
and we have made a commitment to conduct an environmental
review of the round.
Third, the relationship between trade and labor will be a
high priority. As President Clinton has said, we must put a
human face on the global economy, giving working people
everywhere a stake in its success, equipping them all to reap
its rewards, and provide for their families the basic
conditions of a just society.
The WTO has a role to play in this area, including ensuring
respect for core labor standards. Our goal here is to ensure
that the WTO reaps the broadest benefits for the largest
possible number of working people in all nations. To this end,
and consistent with the Uruguay round Agreements Act, we have
called for the establishment of a work program to address trade
issues relating to labor standards.
Finally, the past 5 years revealed areas in which
institutional reforms would further strengthen the WTO and its
base of public support. A special focus here will be ensuring
that the WTO more fully reflects the basic values of
transparency, accessibility and responsiveness to citizens.
Before ending my remarks, Mr. Chairman, let me very briefly
review the areas we are seeking to conclude by Seattle which we
will help to build momentum for a successful round. We expect
the accession to the WTO of a number of countries. We are
especially pleased by the progress we have made with the
transition economies as their integration into the world
economy will help their reform and democratization policies
succeed.
We expect to conclude the ongoing review of the WTO's
dispute settlement mechanism with a focus here on ensuring
timely compliance with panel decisions and greater
transparency. We will seek to extend the current standstill on
application of tariffs to electronic transmissions. We will
also seek to conclude a multilateral agreement on transparency
in government procurement promoting new opportunities around
the world and reducing the potential for bribery and
corruption. And finally we will be working toward consensus on
the accelerated tariff liberalization initiative and on an
expansion of the information technology agreement.
Mr. Chairman, these are ambitious goals in the short term
for the round but they are goals fully in the tradition of the
50 years of bipartisan commitment to American leadership in
world trade. The task before us now is to bring this work
forward into the next century.
Thank you very much.
[The prepared statement follows:]
Statement of the Hon. Susan Esserman, Deputy United States Trade
Representative
American Goals in the Trading System
Mr. Chairman, Congressman Levin, Members of the
Subcommittee:
Thank you very much for inviting me to testify today on the
U.S. agenda at the World Trade Organization.
This November 30th, the United States will host the World
Trade Organization's Ministerial Conference in Seattle. The
Ministerial will be the largest trade event ever held in the
United States, bringing heads of government, trade ministers,
business leaders and non-governmental associations from around
the world and focusing public attention as never before on the
role trade plays in American prosperity. Ambassador Barshefsky
will have the honor of chairing this meeting.
At the Ministerial, we also expect to launch a new Round of
international trade negotiations, which President Clinton
called for in his State of the Union Address. This has the
potential to create significant new opportunities for American
workers, businesses, and farm and ranch families. We also seek
to improve the WTO itself, to make the organization more
transparent, responsive, and accessible to citizens. And we can
ensure that its work supports and complements efforts to
protect the environment, improve the lives of workers, reduce
hunger and improve health.
We are now building the necessary consensus internationally
for an agenda with broad support in the U.S. and worldwide. And
with the Ministerial just four months away, the Trade
Subcommittee has chosen an ideal time to review the United
States' stake in the trading system and our goals for its
future. As we prepare for the Ministerial and the Round, we
look forward to continuing to work closely with the
Subcommittee and with other Members of Congress to develop the
strategy and objectives that will yield the best results for
our country and for the world. Today I would like to review for
you our stake in the world trading system; the consultations we
have undertaken in preparation for the Ministerial; and the
results we hope to achieve at Seattle and in the Round.
U.S. Stake in the Trading System
The United States is now the world's largest exporter and
importer, carrying on over $2 trillion worth of goods and
services trade each year. The jobs of millions of American
workers, the incomes of farm families, and the prospects for
many of America's businesses depend on open and stable markets
worldwide.
This is the foundation of the leading role we have taken in
the development of the trading system for over fifty years,
since the creation of the General Agreement on Tariffs and
Trade in 1948. Throughout these decades, Republican and
Democratic Administrations, working in partnership with
Congress, have concluded eight negotiating Rounds. Each
successive Round, culminating in the Uruguay Round which
created the WTO, has opened markets for Americans, and helped
to advance basic principles of rule of law, transparency and
fair play in the world economy.
Since the Uruguay Round's conclusion in 1994, Americans
have taken full advantage of these benefits.
With the opening of world markets, American
exports have risen by well over $200 billion, contributing to
the rapid economic growth we have enjoyed, and the continuation
of the longest peacetime expansion in America's history. This
has also helped us to gain high-skill, high-wage jobs, reverse
a 20-year period of decline in wages, and in fact increase
wages by 6% in real terms.
The strong dispute settlement system created by
the Uruguay Round has allowed us to improve significantly our
enforcement of the trading rules. Since the creation of the
WTO, we have filed more cases than any other member, and have a
very strong record of favorable settling or prevailing in the
cases we have filed.
And the trading system has been vital to our
ability to address the financial crisis. The commitments WTO
members have made have helped to ensure that, with 40% of the
world in recession, and six major economies contracting by 6%
or more, we at least so far have seen no broad reversion to
protectionism. This is a tribute to the strength of the trading
system we have helped to build. It has prevented enormous
economic damage to our national economy, our farmers and our
working people; ensured that affected countries have the
markets essential to recovery; and helped avert the political
tensions that can arise when economic crisis leads to trade
conflicts.
The Work Ahead
Despite these achievements, however, much work remains
ahead. The trading system can be made more effective in
removing trade barriers, more transparent and accessible in its
own workings, and broadened to include nations now outside.
With the Ministerial and Round, we will address issues such as
the following:
World trade barriers remain high in many areas,
including in several crucially important sectors in which U.S.
producers are the world leaders. Agriculture and services are
crucially important examples; in industrial goods, we often
face significant trade barriers, subsidies and other practices
overseas which a new Round can address.
Our leadership in the scientific and
technological revolution creates new challenges and
opportunities for the trading system to address. Electronic
commerce and the growth of the Internet as a medium for trade
is an especially important example.
Membership in the WTO can make a major
contribution to reform in the transition economies--that is,
the nations in Europe and Asia moving away from communist
systems. As successful reformers and WTO members such as
Poland, the Czech Republic and Hungary have observed, WTO
membership on commercially meaningful grounds helps to
integrate transition economies into world trade and make the
reforms necessary to create market-based economies, thus
promoting long-term growth and liberalization.
The results of future WTO agreements can
contribute to the world's efforts to reduce hunger, protect the
environment, improve the lives of workers, promote health and
nutrition, support financial stability, fight bribery and
corruption, and promote transparency and good governance
worldwide.
The balance of my testimony today will review our WTO
agenda in four areas: ensuring implementation of the Members'
present commitments; developing the agenda for a successful
Ministerial and a new Round; encouraging the accession, on
commercially meaningful grounds, of new members; and the
specific steps that can advance the broader vision and yield
immediate results for the U.S. and world economies.
I. Compliance With Agreements
First of all, we are working to ensure full compliance with
existing agreements. We have met our commitments on time and in
full, and we expect our trading partners to do the same.
No matter what the new agenda will be, a fundamental
component of our trade policy will remain the effective
implementation of existing agreements. We have made this point
clear to our partners in Geneva, and in this regard, 1999 is an
especially important year. By January 1, 2000, WTO Members must
meet Uruguay Round commitments under the Agreements on
Intellectual Property, TRIMs, Subsidies, and Customs Valuation.
In succeeding years, final liberalization commitments under the
Agreement on Clothing and Textiles as well as certain aspects
of the TRIPS and Subsidies Agreement will phase in. Likewise,
Uruguay Round tariff commitments will soon be realized in full.
These commitments represent the balance of concessions
which allowed completion of the Uruguay Round and have helped
realize its benefits since then. The credibility of any future
negotiations depends on their implementation. To ensure
implementation, we use all methods available. This includes use
of dispute settlement and U.S. trade laws when necessary, but
also a commitment to the technical assistance programs that
allow some of the developing countries to gain the capacity to
meet complex demands in areas such as services, agriculture and
intellectual property. In our recent submissions to the WTO
General Council, therefore, we have proposed methods to address
legitimate problems with compliance now and in the context of
new negotiations, and ways to make technical assistance
programs more effective in promoting full integration into the
world economy.
We also are encouraging those WTO Members which have not
ratified the Basic Telecommunications and Financial Services
Agreements to do so as soon as possible. This will not only
open markets to U.S. Providers, but ensure that all Members can
benefit from their commitments and that they can win the
benefits of competition, transparency and technological
progress these Agreements offer.
II. Developing an Agenda for the New Round
As we address compliance issues, we are also developing the
agenda for the new negotiating Round President Clinton called
for in the State of the Union Address, to be launched at the
Ministerial in Seattle.
Our work in this regard has its foundation in a series of
domestic consultations with a wide range of interested groups
and individuals: Congress, business groups, agriculture, labor
organizations, academics, environmental groups, state and local
government, and others. This has included many individual
meetings; Trade Policy Staff Committee hearings in Atlanta,
Detroit, Los Angeles, Chicago, as well as Washington DC, to
gather ideas on priorities and objectives; and a series of
Listening Sessions jointly with the Department of Agriculture
on the agricultural agenda, traveling to Indiana, Florida,
Minnesota, Tennessee, Texas, California, Washington, Nebraska,
Delaware, Vermont, Iowa and Montana to hear directly from
farmers, ranchers and others. We have also, of course, met
frequently with our trading partners at the WTO in Geneva, and
in meetings such as the US-Africa Ministerial, FTAA
conferences, the US-EU Summit, the Quad meeting in Tokyo and
others to review their priorities, exchange views and develop
consensus.
Given our consultations and conversations to date, we
believe the agenda should take the following shape:
The core of the agenda should address market
access concerns including agriculture, services and industrial
goods, with benchmarks to ensure that the negotiations remain
on schedule for completion within three years.
The agenda should also pay special attention to
areas in which trade policy can encourage technological
progress, notably in electronic commerce.
This agenda should support and complement efforts
to improve worldwide environmental protection, and ensure that
trade policy yields the maximum benefit for the broadest range
of workers.
This negotiating agenda should be complemented
and balanced by a work-program to address areas in which
consensus does not yet exist for negotiations; and by a series
of measures to reform the WTO, with a special focus on
transparency and citizen access.
We can decide on the precise structure for negotiations
once consensus on the agenda is achieved. It is clear, however,
that the agenda and final result must unquestionably be broad
enough to create a political consensus by addressing the market
access priorities of all Members. At the same time, we should
ensure that it is manageable enough to complete within three
years and avoid raising major compliance problems afterwards.
Specifically, our ideas would include the following:
1. Market Access
Market access negotiations, as the core of the
negotiations, should cover the built-in agenda of agriculture
and services, and also address non-agricultural goods.
In agriculture, in liberalizing trade we have the potential
to create broader opportunities for American farm and ranch
families, fight hunger and promote nutrition worldwide through
ensuring the broadest possible supplies of food at market
prices, and help to protect the land and water by guaranteeing
the right to use modern science and reduce trade-distorting
measures which increase pressure on land, water and habitat. To
secure this opportunity, we would set the following objectives:
Completely eliminate, and prohibit for the
future, all remaining export subsidies as defined in the
Agreement on Agriculture.
Substantially reduce trade-distorting supports
and strengthen rules that ensure all production-related support
is subject to discipline, while preserving criteria-based
``green box'' policies that support agriculture while
minimizing distortion to trade;
Lower tariff rates and bind them, including but
not limited to zero/zero initiatives;
Improve administration of tariff-rate-quotas;
Strengthen disciplines on the operation of state
trading enterprises;
Improve market access through a variety of means
to the benefit of least-developed Members by all other WTO
Members; and
Address disciplines to ensure trade in
agricultural biotechnology products is based on transparent,
predictable and timely processes.
In services, American industries are the most competitive
in the world, as demonstrated by our $258 billion in services
exports last year. The Uruguay Round has created an important
set of rules, but in many cases, actual sector-by-sector
market-opening commitments simply preserved the status quo.
Effective market access and removal of restrictions will allow
U.S. providers to export more efficiently, and help address
many broader issues worldwide. Examples include improving the
efficiency of infrastructure sectors including communications,
power, transport and distribution; improving environmental
protection services; easing commerce in goods, thus creating
new opportunities for manufacturers and agricultural producers;
and helping to foster financial stability through competition
and transparency in financial sectors. To realize these
opportunities, objectives would include:
Liberalize restrictions in a broad range of
services sectors;
Ensure that GATS rules anticipate the development
of new technologies;
Prevent discrimination against particular modes
of delivering services, such as electronic commerce or rights
of establishment; and
Develop disciplines to ensure transparency and
good governance in regulations of services.
In industrial goods, further market-opening will help
Americans promote high-wage, high-skill jobs and create
economies of scale that allow U.S. firms to invest more in
research and development and become more competitive. Here,
broad market access negotiations in the next Round would build
upon the Accelerated Tariff Liberalization initiative, which
calls for the early liberalization of eight specific sectors
and which we hope to complete by the time of the Ministerial,
through objectives including:
Reduce existing tariff disparities;
Provide recognition to Members for bound tariff
reductions made as part of recent autonomous liberalization
measures, and for WTO measures.
Use of applied rates as the basis for
negotiation, and incorporation of procedures to address non-
tariff and other measures affecting market access; and
Improve market access for least developed WTO
Members by all other Members, through a variety of means.
2. Additional Issues
Most delegations agree that negotiations should be
completed within three years. Given this reality, and in order
to find an appropriate balance of interests and a convergence
of views, certain issues might be appropriate for a forward
work-program that would help Members, including ourselves, more
fully understand the implications of newer topics and build
consensus for the future. In addition, several broader issues
will inform our work on the core market access issues. Issues
to address would include:
a. Electronic Commerce
For example, one of the most exciting commercial
developments of recent years has been the adaptation of new
information and communications technologies, notably the
Internet, to trade. This has very important implications for
reducing the cost of goods to consumers, improving the
efficiency of companies, and for speeding growth in developing
regions, as Internet access greatly reduces the obstacles
entrepreneurs, artisans and small businesses face in finding
customers and managing paperwork.
It is critical that the WTO act now to ensure that
artificial barriers do not delay or block the benefits of this
new method of conducting trade. We have therefore promoted a
broad electronic commerce agenda at the WTO and elsewhere,
including a work-program to ensure technological neutrality in
the development of WTO rules, and capacity-building efforts to
ensure that developing countries have access to the Internet.
We are encouraged that most WTO members agree that all e-
commerce activities are covered by the traditional WTO
disciplines of transparency, non-discrimination and no
unnecessary obstacles to trade. As I will note later, our top
immediate priority is to ensure that cyber-space remains duty-
free--that is, that countries do not apply tariffs to
electronic transmissions.
b. Sustainable Development and Committee on Trade and
Environment
In all these areas, we intend to take special care to
ensure that trade liberalization promotes and supports
sustainable development. In particular, we will pursue trade
liberalization in a manner that is fully consistent with and
supportive of this Administration's strong commitment to
protection of the environment. This means a number of things.
First, it means that we must consider the environmental
implications of the negotiations from start to finish. In this
connection, President Clinton has committed to an environmental
review of the likely consequences of the Round and we have
called on other countries to do likewise. In the same vein, we
have proposed using the WTO's Trade and Environment Committee
to discuss the environmental implications of negotiations as
they proceed.
Second, it underscores the importance of institutional
reforms to ensure that the public can see the WTO and its
processes, notably dispute settlement, in action and contribute
to its work. Stakeholders have an important role to play in
helping to assess the environmental implications of the new
round.
Third, it means pursuing trade liberalization in a way that
is supportive of high environmental standards. This means,
among other things, that the WTO must continue to recognize the
right of Members to take science based measures to achieve
those levels of health, safety and environmental protection
that they deem appropriate--even when such levels of protection
are higher than those provided by international standards.
Fourth, it means that we have a responsibility for
identifying and pursuing ``win-win'' opportunities where
opening markets and reducing or eliminating subsidies hold
promise for yielding direct environmental benefits. Examples we
have identified thus far include elimination of tariffs on
environmental goods through the Accelerated Tariff
Liberalization initiative; liberalization of trade in
environmental services; elimination of fishery subsidies that
contribute to overcapacity; and continued liberalization in the
agriculture sector.
Fifth, it means that we will promote strengthened
cooperation between the WTO and other international
organizations dealing with environmental matters. In this
connection, we are pleased that discussions are going on right
now between the WTO and the United Nations Environment Program
on increasing cooperation.
We have tabled a number of proposals to advance these
objectives. Also, we are carefully examining the proposals put
forward by other countries on trade and environment. In
addition, as we look at other proposals from other countries
that are not trade and environment proposals per se, we will be
considering how they relate to the environment. In all of this
work, we welcome the input of this Committee and all
stakeholders.
c. Trade and Labor
Likewise, the relationship between trade and labor is an
especially important priority. As President Clinton said to the
ILO Conference in June:
``We must put a human face on the global economy, giving
working people everywhere a stake in its success, equipping
them all to reap its rewards, providing for their families the
basic conditions of a just society.''
Trade policy has a role to play in the realization of this
vision, and development of the trading system must come
together with efforts to ensure respect for core labor
standards, and our goal is to ensure that the WTO brings the
broadest benefits for the largest possible number of working
people in all nations.
In the Declaration issued at the WTO's First Ministerial
Conference in Singapore, WTO members renewed their commitment
to the observance of core labor standards. This was the first
time such a group of Trade Ministers had formally addressed
labor standards. While this was an important first step, we
believe that more attention to the intersection of trade and
core labor standards is warranted as governments and industries
wrestle with the complex issues of globalization and
adjustment, and that the WTO has a role to play in the process.
We are continuing to consult with Congress and the labor
community in the U.S., as well as with WTO members who share
our interest, on contributions the WTO can make to the goal.
In January, we submitted a proposal for the establishment
of a work-program in the WTO to address trade issues relating
to labor standards, and areas in which Members of the WTO would
benefit from further information and analysis on this
relationship and developments in the ILO. In addition, we will
seek enhance institutional links between the ILO and the WTO
through mutual observer status, to help facilitate
collaboration on issues of concern to both organizations. We
will consult with the Subcommittee on these matters in the
months ahead.
Work at the WTO on these issues is, of course, part of a
broader effort centered on the International Labor
Organization, which with the President's leadership recently
concluded a landmark Convention on the Elimination of the Worst
Forms of Child Labor. This builds on a June 1998 Declaration on
Fundamental Principles and Rights covering core labor standards
as well as a follow-up mechanism. In support of this work, the
President announced in his 1999 State of the Union address a
Core Labor Standards and Social Safety Net Initiative,
including a budget request for $25 million for multilateral
assistance to be provided through the ILO, to help countries
provide basic labor protections and improve working conditions.
We also, of course, make use of the labor policy tools in our
trade statutes, notably the labor conditionality under the
Generalized System of Preferences, to promote respect for core
labor standards.
3. Institutional Reform
The past five years of experience with the WTO have also
revealed areas in which the institution can be further
strengthened. We thus seek to ensure that the WTO more fully
reflects the basic values of transparency, accessibility and
responsiveness to citizens; ensure that its work and that of
international organizations in related fields are mutually
supportive and promotes as much as possible the larger vision
of a more prosperous, sustainable and just world economy; and
strengthen public support for the WTO. Our proposals here
include:
Institutional Reforms that can strengthen transparency, and
build public support for the WTO by:
Improving means for stakeholder contacts with
delegations and the WTO; and
Enhancing transparency in procedures to the
maximum extent possible.
Capacity-building, to ensure that the WTO's less advanced
members can implement commitments, use dispute settlement
effectively and take maximum advantage of market access
opportunities. This plan is based on our close consultation
with our partners in Geneva to ensure that technical assistance
and capacity-building programs meet their actual needs and
practical experience. This is to our advantage, as it will help
these countries grow and become better markets for U.S. goods
and services. Specific areas here would include:
Improve cooperation, coordination and
effectiveness among international organizations in identifying
and delivering technical assistance;
Build upon and expand the ``Integrated
Framework'' concept adopted to help least developed countries
implement commitments;
Ensure the most effective use of resources on
technical assistance programs;
Strengthen capacity-building in regulatory and
other infrastructure needs; and
Explore a development partner program for the
least-developed nations.
Trade Facilitation, which will ensure that U.S. small and
medium-sized businesses as well as less developed economies can
take full advantage of the market-opening commitments created
by the Round. Here, objectives would include:
Clarifying and strengthening the transparency
requirements of WTO Agreements; and
Helping to improve customs procedures, so as to
increase transparency and facilitate more rapid release of
goods, ensuring that our exports reach foreign markets more
rapidly.
III. Toward the Ministerial
In the months ahead, we will be working with our trading
partners to develop consensus on the negotiating agenda
(including issues of timing, and benchmarks to ensure that the
negotiations begin and end promptly), preparing logistically
for a successful meeting in Seattle, and continue to consult
with the Subcommittee and Congress as a whole on specific
negotiating objectives in each area. At the same time, we also
hope to reach consensus on several initiatives which would both
help build the foundation of a successful Round, and take
advantage of existing opportunities to open markets and reform
the WTO. They would include:
1. Accessions
First, the accession of new WTO Members, on commercially
meaningful grounds, is a major endeavor and critical for the
creation of a fair, open and prosperous world economy.
Since 1995, seven new Members have joined: Bulgaria,
Ecuador, Kyrgyzstan, Latvia, Mongolia, Panama and Slovenia,
with Estonia soon to follow. With 31 more accession applicants,
we look forward to further accessions on a similar basis in the
months ahead. Georgia just completed its working party process
and a number of others may soon follow, in advance of the
Seattle meeting. Already this year, we have completed bilateral
negotiations with Taiwan and made significant progress on the
accessions of Albania, Armenia, China, Croatia, Jordan,
Lithuania, Moldova and Oman. We have also held important and
fruitful meetings with Russia, Saudi Arabia and Ukraine.
Our hope is that a number of these applicants will have
completed their accessions by November. Clearly, however, not
all of the applicants will complete their accession processes
by the Ministerial and the opening of the new Round. In these
cases, as was the case in the Uruguay Round, we would work with
Congress and our trading partners to develop an acceptable
formula under which these economies could be involved in the
new negotiations while moving ahead with accession.
2. Dispute Settlement Review
Second, to promote American rights and interests, and to
ensure the credibility of the WTO as an institution, a dispute
settlement system that helps to ensure compliance with WTO
agreements, provides clarity in areas of dispute, and is open
to public observers is of great importance.
Our experience thus far with dispute settlement has been
generally positive: we have used the system more than any other
WTO member, with many successful results. The European Union's
failure to implement panel results in two cases, however, has
been very troubling, and we hope to ensure that in the future,
losing parties comply or face penalties in a more timely
fashion. Likewise, we believe the system can be more responsive
to citizen concerns in a number of ways.
Thus, in the ongoing Dispute Settlement Review at the WTO,
we are seeking greater transparency and ensuring timely
implementation of panel findings. We are particularly
interested in providing for earlier circulation of information
on panel reports, making parties' submissions to panels public,
allowing for submission of amicus briefs and opening the
hearings to observers from the public. Our hope is to conclude
this work by the Ministerial.
3. Electronic Commerce
As I noted earlier, we have begun a long-term work program
in the WTO to ensure the unimpeded development of electronic
commerce. In the immediate future, our priority is to avoid the
imposition of tariffs on electronic commerce. No WTO member now
considers electronic transmissions as imports subject to
customs duties--a policy affirmed when we led in securing in
last May's ``standstill'' on e-commerce tariffs. We are working
to secure consensus on extending this policy by the
Ministerial, which would help us prevent the imposition of an
enormous new burden on this new method of trade.
4. Accelerated Tariff Liberalization and Information Technology
Agreement II
Fourth, we hope to achieve agreements which expand market
access opportunities in areas of interest to U.S. producers and
to our trading partners by the time of the Ministerial. The two
areas of special concentration include:
Accelerated Tariff Liberalization--Eliminating or
harmonizing tariffs in chemicals; energy equipment;
environmental goods; fish and fishery products; gems and
jewelry; medical equipment and scientific instruments; toys;
and forest products; and
ITA II--An ``Information Technology Agreement
II'' adding new products (e.g. radar equipment, computer
accessories, consumer electronics and printed circuit boards)
to the sectors already covered by the first ITA.
5. Collaboration with Other International Organizations
Fifth, we are working toward making the WTO more able to
collaborate with international institutions to support economic
stability and stability through mutual observer status, joint
research programs when appropriate, and other specific
initiatives. Such organizations would include the World Bank,
the International Monetary Fund, the International Labor
Organization, the UN Environmental Program, the UN Development
Program, the OECD, UNCTAD, and others.
6. Transparency
Sixth, specific measures to improve transparency, both as
an institutional matter within the WTO, and in governance
worldwide. The two priorities for the months ahead include:
WTO--The WTO should ensure maximum understanding
and access to meetings and procedures, consistent with the
government-to-government character of the institution. As I
noted earlier, dispute settlement is a special focus for this
work. Essential goals include such additional measures as more
rapid publication of panel reports, and more rapid de-
restriction of documents.
Transparency in Government Procurement--The WTO
can also help to promote transparency and good governance
worldwide. In this regard, an agreement on transparency in
procurement would create more predictable and competitive
bidding, which would reduce opportunities for bribery and
corruption, and help ensure more effective allocation of
resources.
7. Recognizing Stakeholder Interests
Seventh and finally, it is clear that the interest in the
WTO and its work of civil society organizations (including
businesses, labor organizations, agricultural producers,
women's organizations, environmental groups, academic
associations and others) is growing. Likewise, delegations and
WTO staff will benefit from hearing a broad range of opinions
and views on the development of trade policy. We are thus
working toward consensus on methods for such stakeholder
organizations to observe meetings as appropriate, and share
views as delegations develop policy.
Conclusion
In summary, Mr. Chairman, the United States in the months
ahead has a remarkable opportunity.
Our predecessors in ten Administrations and twenty-five
Congresses have left us a legacy of bipartisan commitment and
achievement in creating a fair and open world trading system.
As a result of their work, American workers are more
productive, American companies more competitive and American
families more prosperous than ever before.
In the years ahead, we can do the same for the next
generation, if we work together to ensure that the WTO is
adapted to address new areas of commere, persistent trade
barriers, and the concerns of our citizens. As host and Chair
of the Seattle Ministerial Conference, we have a keen
responsibility to help create and bring to completion the
agenda that will realize this vision. We look forward to
working in partnership with the Members of this Committee to do
so.
Thank you very much.
Chairman Crane. Thank you, Ms. Esserman. How does the
administration foresee the issue of labor being addressed in
the upcoming WTO ministerial?
Ms. Esserman. Mr. Chairman, we are working on this issue in
a number of ways, and we have been consulting broadly on the
issue with the labor community, with your Subcommittee, and
other Members of Congress. Let me outline how we see it to
date, but I will tell you that we are still in the process of
formulating our ideas here.
First, as I said, we think it is very important that the
WTO ensure the maximum benefits for the largest number of
people, working people in the world. And there are a number of
things that we are thinking about to support that goal. First,
we think it is important that the WTO have a better labor
perspective and to that end we support International Labor
Organization observership.
Also, the United States on a routine basis raises, in all
the reviews of individual countries--the reviews of their trade
regimes--we raise to the attention of the WTO these countries'
compliance with core labor standards.
Third, we have been working and trying to expand the base
of countries that share our perspective on the importance of
respect for core labor standards.
And fourth, we have indicated to the WTO that we intend to
pursue a work program on the relationship between trade and
labor as called for in the Uruguay Round Agreements Act.
Chairman Crane. There is strong support in the U.S.
agriculture community for treating the negotiations as a single
undertaking that encompasses all sectors and this group
suggests that a comprehensive set of concessions has to be on
the table in order to achieve the reforms we are seeking in
agriculture from our trading partners. Many U.S. industrial and
service sectors on the other hand want to negotiate, in effect,
``early harvests'' on some issues. How does USTR propose to
reconcile these two divergent approaches to the overall
structure of the negotiations and is there a way to assure both
groups that their interests will not be compromised?
Ms. Esserman. Mr. Chairman, I do believe there is a way to
ensure both groups that their interests will not be
compromised. Here is how we are approaching this issue.
First, we have said repeatedly, Ambassador Barshefsky has
said repeatedly, it is most important that as we shape the
structure of these negotiations, we first decide appropriate
subjects for negotiation. Once we decide the subjects for
negotiation, then we will determine how all of these subject
areas will be negotiated.
In other words--let me just say, basically we envision that
the core of the negotiations will be market access. And here
what we would envision is that at the end, we would have a
broad basis of areas for concessions so that there would be a
sufficiently attractive package for all of these groups. The
way in which we believe we can fit the interests of both groups
is that we are pursuing early results for the eight sectors
involved in the accelerated tariff liberalization initiative
and here we believe that the way to bridge the gap is that the
ultimate final implementation of the results with respect to
these eight sectors would be contingent on the completion of an
overall broad package at end of the round.
Chairman Crane. It has come to my attention that U.S.
businesses, particularly accounting firms, are being
handicapped by national laws and procedures which restrict
their ability to get the right people to the right place at the
right time. I was pleased to see mention a movement of natural
persons as an area ripe for negotiation in your recently tabled
services paper. Can you elaborate on our plans to proceed on
this important issue in the upcoming round of negotiations?
Ms. Esserman. At this point, let me just say that that is a
broad area for pursuit in the services negotiation. At this
point I don't have further details about it, but I would be
happy to follow up with you on this issue.
Chairman Crane. Thank you. And finally, if we are serious
about reducing trade barriers we will have to acknowledge that
it is a reciprocal proposition and we cannot start by taking
whole industries off the table. If we do, other countries will
do likewise. And our opportunities to open foreign markets will
be gone. Does the administration agree that our peak tariffs on
agricultural products are subject to negotiation in the Seattle
Round? And why isn't a formula approach to tariff cuts the
fairest way to proceed?
Ms. Esserman. Let me just say that we have not just
determined the best way to proceed. Obviously, we want to
achieve the maximum benefits for our exporting community, and
so we haven't determined, given the fact that overall our
tariffs are lower, substantially lower than other countries'
tariffs, whether or not a formula approach would be the best
way to proceed.
Chairman Crane. Thank you very much. Mr. Levin.
Mr. Levin. Thank you. Welcome. Your testimony did touch
this more comprehensively than you had a chance to recite here,
because of time, on issues of compliance and transparency. And
I just want to urge, as you know, that there be some
considerable emphasis on these issues. They are part of the
ongoing or not yet ongoing discussions with China and WTO. And
there are immense problems of transparency of compliance that
need to be resolved in that economy and operating in that
economy. And I do think that our WTO accession agreements have
to address these issues.
Also, though, there has to be a regimen within the WTO on
compliance and transparency that applies to everybody,
including new members and emerging economies where transparency
often is pretty opaque. So I welcome your emphasis on those
areas.
Mr. Crane raised the issue of the role of labor in Seattle.
So I just want to say a few words about that and you can
comment if you want. You said the issue of labor will be a high
priority, and I hope everyone hears that. It may be a bit
confusing when you say the core of the negotiations is market
access. It is not clear to me how you put those two together
plus your other high priorities, and maybe there needs to be
some attention, further attention to the language that is used.
But let me say just a word so we all understand what is
involved, you cited the President in his statement at the ILO
about people everywhere having a stake in the progress in
providing everywhere that families have the basic benefits of a
just society. The President has repeated elsewhere in his talk
about a leveling up, not a leveling down. I think everybody
should understand what is at stake in terms of U.S. policy is
indeed a concern about the workers everywhere but a primary
concern about people who work in this country, and the labor
market issue relates globally, but also primarily to the impact
of trade agreements on Americans.
So I hope you will continue your consultations. I hope you
will be direct. It is the only way we are going to have enough
discussion so we prepare for Seattle. It gets a little fuzzy
when you talk about a work program. I don't think anybody or
most people know what that means. I believe there needs to be a
hard fight to set up a working group that relates to the labor
market issues that are vital increasingly within the trade
equation. And we just all have to discuss it and prepare for
that and be prepared to make a hard fight at Seattle. As you
say, it is a high priority and when anybody says it is a high
priority, the test of it is how hard they fight for it.
I don't know if you want to respond. There are lots of
other parts of your testimony and we are eager to consult and,
more than consult, discuss these issues with you as well as
China-WTO if the negotiations recommence.
I want to end by just emphasizing there isn't much time for
a major round. We have only a few months now to fully get ready
and August isn't, except for some of you and maybe some of us,
the busiest work period. So I wish you good luck and I just
hope that you will be clear and direct. And if there is
controversy, let's try to have it energize us instead of
freezing us in place. End of question.
Chairman Crane. Mr. Houghton.
Do you want to respond?
Ms. Esserman. I would just say, Congressman Levin, I very
much appreciate your remarks and we certainly share your
concern and interest in this issue and we look forward to
working with you and other Members of the Subcommittee to make
sure the goals and the initiatives in this area are concrete.
Mr. Levin. Thank you.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Thank you very much. Well, Ms. Esserman, you
do a great job. It is wonderful to have you here. Thanks very
much for your testimony. I really have two basic questions. One
is in terms of 301. Is there any thought of the administration
reopening any of the antidumping and implementing provisions
that were negotiated in the Uruguay Round in Seattle? Then,
maybe could you take a crack at that. Then I got another
question.
Ms. Esserman. I can answer that very clearly. The United
States is firm that it is not appropriate to have antidumping
as a subject for negotiation in the next round.
Mr. Houghton. OK. Well, that is good. Now, the Secretary,
looking at your testimony, it seems to me that it is working up
toward the Seattle Ministerial Conference. There is really a
set of two categories: one is the housekeeping, the other is
the content. Housekeeping meaning accessions, dispute,
settlement review, collaboration, transparency, recognizing the
stakeholder interest, things like that.
Now, they may be most important but it would seem to me in
terms of the overall thrust of trying to generate business for
the United States, that the accelerated tariff liberalization
and electronic commerce are going to be really, really
critical. You talk about market access. You know, it seems to
me that we talk market access and many of the people that we
sell to or import from talk market access, but there is no sort
of monitoring. You obviously can see this in terms of our
current account deficit. So when we are talking about things
that produce more business, produce more jobs, produce more
opportunities, is there any way to monitor that market access
so that we really know where we are going?
Ms. Esserman. Actually now that the WTO is a full
institution there is a much greater ability to monitor
countries' compliance with commitments. Perhaps the most
visible way in which we enforce the commitments is by filing
dispute settlement cases. But there are also each--there are a
number of formal Committees in the WTO which serve as a forum
for raising concerns, about whether a member has complied with
their commitment, to try to foster compliance, to resolve an
issue before a dispute settlement needs to happen. And there is
also a way to monitor compliance with commitments, for example,
whether or not countries are reducing tariffs according to
their commitments, whether or not they are providing the true
commitments that they signed onto in the services agreement.
So there is a vehicle for doing that now that the WTO is a
full institution.
Mr. Houghton. Yeah, but there are nontariff barriers, such
as in the distribution systems, so that if you take a look at
the raw numbers in terms of products imported let's say from x
country and exported and it is going the wrong way for us and
it is going to be a long time until another ministerial and you
have all these Committees that you have got to go to, isn't
there a sort of simple index that we can use to say, hey, you
know, this isn't really quite what we had in mind?
Ms. Esserman. You mean a sort of formula for addressing
some of the things?
Mr. Houghton. Yeah.
Ms. Esserman. We are working on some of these issues. These
are the very things that we are focusing on in this next round.
A big area for the new round, as I mentioned, is services. And
here particularly in the distribution area there are a number
of barriers to our ability to effectively sell and have
effective distribution in foreign markets, and that is going to
be a high priority for us and we will think very carefully
about your question.
Mr. Houghton. Thanks very much. Thank you, Mr. Chairman.
Chairman Crane. Mr. Neal.
Mr. Neal. Thank you, Mr. Chairman. Will there be a direct
opportunity for labor and business to present their
recommendations to the ministers at the gathering?
Ms. Esserman. For labor? I am sorry.
Mr. Neal. Will there be a direct opportunity for labor and
business groups and other vital groups as well to present their
recommendations and perhaps policy suggestions to the
ministers?
Ms. Esserman. Yes. First of all, there is an extensive and
elaborate process here in the United States in which we consult
and receive advice both written and with extensive meetings
here on a ongoing basis. But we do think it is very important
for members of the civil society to have direct access to the
ministers, not only just to provide submissions but we had an
experiment in the WTO this year in doing just that. We had a
high-level meeting on trade and the environment in which
members of the civil society not only presented their
submissions but also had a chance to present their views
publicly to the 135 member governments. We are also
contemplating doing the very same thing on a range of issues
the day before the ministerial begins in Seattle.
Mr. Neal. I see. Now, is there considerable amount of
prepping that has to occur for the other member nations?
Ms. Esserman. Is there a considerable amount of?
Mr. Neal. Prepping. Do you have to prepare them for the
kinds of questions that they might get from labor and
environmental groups, for example?
Ms. Esserman. No, I think that there is a fair, there is a
fair amount of attention and interest to this issue, but I
guess the answer is no and yes. Yes, in the sense that, as you
may know, many governments around the world, countries around
the world do not share our interest in labor. So there is a
great deal of work that needs to be done. And we are going to
talk to other governments about the importance of including the
labor perspective more broadly into the WTO.
Mr. Neal. So you are suggesting, then, that this is going
to be a direct participation, this won't be filtered through?
Ms. Esserman. We are seeking to include mechanisms for
direct participation, for venues for direct participation by
labor groups, by environmental groups, so that they have a
chance to directly provide their views to the ministers in the
WTO. This is something that we have been urging on the other
countries in the WTO. They don't necessarily share our interest
in doing this, but we very, very strongly advocated doing it in
the environmental area. We think it was a successful meeting
and we are going to continue to advocate doing that in other
areas as well.
Mr. Neal. So this would be for labor, environmental and
business groups; they would all have that opportunity?
Ms. Esserman. Yes, business groups, consumer groups,
members of society and businesses.
Mr. Neal. Thank you.
Chairman Crane. Ms. Dunn.
Ms. Dunn. Thank you very much, Mr. Chairman. And welcome,
Ambassador Esserman. It is delightful to have you with us. We
think you are doing a fine job and appreciate it very much. And
I might add my invitation to others that Mr. McDermott and I
have extended to everybody to come to Seattle in the fall and
we are hopeful that this Subcommittee will be there in some
form. We look forward to being involved as closely as we can be
to make it successful.
I am concerned about the recent FSC, Foreign Sales
Corporation ruling. And I am very concerned about its impact on
American business in making us less competitive, which after
all was the reason for starting the FSC provisions in the first
place. I am wondering, I am interested in knowing what you
think will be the effect of the loss of FSC on industries that
are important to me, the high-tech industry, for example,
agriculture, that is an important industry to us in Washington
State. And I am wondering what you plan to do, whether you are
going to appeal, but I wonder first if you would give us some
sense of what you believe the impact would be.
Ms. Esserman. Well, I do think it is premature to determine
the impact of this. First, we did receive a report that was
unfavorable to us. It is not finalized yet. So this is the
first step in the process. We think the panel that made--that
wrote that report was plain wrong. So we are looking very
carefully at all of our options and including appeal, which we
are looking at quite seriously. Especially, given the
importance of the issue. But it is really premature to assess
the impact because there are many more steps still in the
process. Certainly we share your concern about the decision and
the importance of this.
Ms. Dunn. You mentioned earlier that you were working
toward the accession of several countries to the WTO. I have
not heard a discussion of that before because we are all so
focused on China I believe right now and the Republic of China
and the PRC and their accession. Could you give us some sense
of what is happening with other nations and what you expect to
see in terms of accession of other nations at the fall WTO?
Ms. Esserman. Yes. China does receive a huge amount of
attention here, but meanwhile we have been making a lot of
progress. A number of eastern--central European countries have
been making a lot of progress in their accessions and we may
see about 8 to 10 accessions by the time of the ministerial,
including Baltic countries, Albania, Georgia, Armenia, and
others so we view this as a very important development because
here this great number of countries are making the very
significant reforms that are necessary to transform their
economies into market economies.
Ms. Dunn. And that is so helpful because they will be
living under the rules from then on. It will be very useful to
us since we have been so forthright and open to other nations.
Let me ask you one other question. You had mentioned in
response to Congressman Crane's question that you were going to
continue negotiating on accelerated tariff reduction but any
results might take effect sometime later, I thought is what you
said. We are concerned on behalf of certain industries. I
represent the forest products industry, for example, who have
been working on this issue for years and really would like to
see it move along. I am wondering if you could clarify that for
me so that I could pass along to them the sense of the USTR.
Ms. Esserman. Absolutely. The accelerated tariff
liberalization initiative is a very important priority for us.
The President moved forward on this in 1997 in Vancouver and we
have been pursuing it since. And last year at the APEC leaders
meeting it was determined this issue would go into the WTO to
see conclusion in 1999 and we are continuing to work on that.
It is very important to seek early results in these areas.
As you know, there have been concerns that Chairman Crane
mentioned among the agricultural community and, working with
the agricultural community and those interested in these
sectors, we believe that we have come up with an approach that
addresses the interests of these sectors as well as the
agricultural community. And here there would be an
implementation of results, provisionally, for example a
lowering of tariffs early, but the final implementation would
be contingent and a part of the overall package at the end of
the round. And that is how we see fitting the two together.
Ms. Dunn. Good. Thank you very much. I might just say, Mr.
Chairman, when we were in New Zealand last December we had the
opportunity to sit down with Mike Moore, who will be the new
head of the WTO, and New Zealand was a very, very strong
partner with us at APEC and supported our position completely
on this. So I think that makes it more hopeful.
Thank you very much.
Ms. Esserman. Might I just add right there, if I could,
just to say, number one, New Zealand is very active in this
initiative that is so important to us, but also just to say how
delighted we are that we have Mike Moore as the Director
General of the WTO. I know that you had expressed your views on
the importance of having him here. He, I think, will be
terrific for the WTO, for the United States, because he
appreciates the importance of trade liberalization to our
future prosperity. He has a common touch. I think he will be a
very effective advocate of trade to our people and the world,
and I think he understands very much the importance of the
American market.
Chairman Crane. To which I will add amen.
Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. Ambassador Esserman,
thank you for being with us. In your testimony you make mention
that one of your goals is to reduce existing tariff disparities
in industrial goods. I don't think there is any sector, at
least in the American economy, that was required to make
greater concessions under the Uruguay round than the textile
and apparel industry.
And I know the President, I have some of his quotes here
that he has made with regard to that in November of 1993. The
President said, and I quote, ``I do recognize and appreciate
that the U.S. textile and apparel sector has been asked to make
substantial concessions under the Uruguay round.'' he went on
to say that the U.S. will, quote, ``insist that our willingness
to phase out textile quotas be linked directly to the
achievement of effective market access in individual countries
by removal of nontariff barriers and lowering tariffs.''
I understand that countries--Pakistan, for example, are
asking that we accelerate the removal of some of our barriers,
yet in some areas, Brazil, Argentina, Pakistan, India, we have
the most difficult time getting some of our products into those
countries. Given the concessions that this sector of our
economy has made, don't you--let me ask you, have you taken a
posture, any position with regard to textile and apparel
industry? Are you going to try to protect those industries from
further concessions being made in this ministerial and what are
you planning to do to try to open up those other markets that
are out there for our U.S. textile and apparel products?
Ms. Esserman. You are quite right, Congressman, that there
have been a number of these countries calling for us to
accelerate our liberalization of our expiration of the quotas
in textiles and we have made quite clear that that is simply
not in the cards. We will not be doing that. And at the same
time we have raised concerns about the lack of openness of
their market, for example, India in particular. And so, we have
very much been clear on this issue in Geneva.
Mr. Becerra. So I take that as a clear sign you will do
what you can to protect the industry as it is and also open up
those markets that agree they would participate in the free
trade of those products.
Ms. Esserman. We are going to be pursuing opening up these
markets and we have no interest in accelerating the expiration
of these quotas.
Mr. Becerra. Thank you for that. I don't know if you heard
all of the testimony by Members of Congress, but Congressman
Weller and I focused on the issue of cultural content rules.
Can you tell me if this is at all an issue that you are
planning to address at the ministerial in Seattle, the whole
issue of cultural content? I know it is a big issue with
Canada, obviously France, other countries as well. Give me the
Trade Representative's position at this stage on that issue.
Ms. Esserman. Let me just say generally that the issue of
culture is a big and important issue and we need to work
together to ensure that we are most effectively addressing the
issue. Of course all countries have a right to preserve their
cultural heritage, but what we are concerned about is when
those measures are just a disguised form of protectionism.
Mr. Becerra. Are you planning to raise that though in
Seattle?
Ms. Esserman. We are going to be raising and addressing
these issues and we want to work with you to make sure that we
are addressing your specific issue. Canada last week in Geneva
raised the issue of culture. It wasn't quite in the form of a
proposal, we are not sure what it is; but let me just say that
we are going to be applying the standard that I just indicated.
But we would like to work with you to make sure that we are
fully addressing your concerns.
Mr. Becerra. One last question, I know we need to run for a
vote, the TRIPs agreement, the trade-related aspects of
intellectual property rights agreement, I know that some
countries have asked to reopen that and I know that we have in
the year 2002 an opportunity to do just that. Are you planning
to reopen any type of negotiation on TRIPs before 2002?
Ms. Esserman. At this point we don't envision reopening the
TRIPs agreement. Our most important objective here is to ensure
that other countries comply with their obligations here. That
is very important to us. We have been working closely with
industry, with our trading partners around the world, not just
to wait till when their commitments come due but to work in
advance of that to ensure that we have the maximum of
opportunity for countries to be meeting their commitments in
this important area.
Mr. Becerra. Please be sure to let us know if you are at
all thinking of opening that up before 2002 because that would
concern a number of us who don't see enough progress. And a
final question, if I could ask, with regard to some of the
World Intellectual Property Organization, WIPO agreements that
were reached to try to provide protections for intellectual
property, I know a number of countries have not ratified some
of those various agreements. Are you going to try to push to
see if we can encourage countries to see if we can ratify those
quickly?
Ms. Esserman. Yes, we are very much doing that.
Mr. Becerra. Thank you very much.
Chairman Crane. Ms. Esserman, I apologize because we don't
control the procedure over there on the floor, but this is the
second bells and so the Subcommittee will stand in recess
subject to call of the Chair. I urge colleagues to run over
there, vote, and run right back. We will be right back.
[Recess.]
Chairman Crane. We apologize, Ms. Esserman, for the
interruption. I will now yield to our distinguished colleague
from Minnesota, Mr. Ramstad.
Mr. Ramstad. Thank you very much, Mr. Chairman, and thank
you, Madam Ambassador, for your testimony and for the good job
you are doing.
Earlier Mr. Levin stressed the need to have fighters for
America's interest at the WTO Round in Seattle. I can assure
you Minnesota will be well represented with fighters, our
delegation will be headed by our Governor, Governor Jesse
Ventura, and he is a fighter in every sense of the word. And
like our Governor, all Minnesotans are concerned that our
farmers get a fair break, which means significant
liberalization for the agricultural sector.
I am sure you are familiar with the recent study done by
the Dutch Agriculture Ministry in preparation for the Seattle
Ministerial meeting?
Ms. Esserman. I am not familiar with the specifics of that.
Mr. Ramstad. This study concluded that dairy compacts in
our country undermine our position for reduced trade barriers
for dairy products and that if the United States erects
barriers like the Northeast Interstate Dairy Compact within our
country, then we have no standing to negotiate reduction of
agriculture trade barriers elsewhere. The Northeast Interstate
Compact expires on September 30 of this year and unfortunately
there are some in Congress who want it to continue to the
detriment of efficient dairy farmers in our country by passing
a bill, H.R. 1402, This would be a death sentence for our dairy
farmers.
I would like to first of all, Mr. Chairman, submit this
letter for the record from Governors Ventura and Tommy Thompson
of Wisconsin opposing, strongly opposing, H.R. 1402.
Chairman Crane. Without objection so ordered.
[The information follows:]
[GRAPHIC] [TIFF OMITTED] T5092.001
[GRAPHIC] [TIFF OMITTED] T5092.009
[GRAPHIC] [TIFF OMITTED] T5092.010
Mr. Ramstad. Madam Ambassador, let me just ask you this:
You don't believe, do you, that it is in our best interest to
continue with this Northeast Compact?
The USDA has already testified in opposition to the
legislation in front of the Agriculture Committee. I think it
is a fair question. It just seems to me if we let it expire we
will be on solid footing going into the agriculture
negotiations.
Ms. Esserman. Well, I would of course never agree with our
agriculture--never disagree with our Agriculture Department.
Mr. Ramstad. You never disagree.
Ms. Esserman. Would not disagree with our Agriculture
Department. I understand that Secretary Glickman has, if I
understand it correctly, has opposed the market ordering aspect
of this particular package but not the support aspect of it.
And from that standpoint, we have looked at the support aspect
of it. By itself it does not violate international trade
obligations.
Mr. Ramstad. So you don't agree with the Dutch Ministry of
Agriculture, the Dutch study that really concluded our Federal
dairy policy violates the WTO rules? That is their bottom line.
Ms. Esserman. As I said, I have not even seen this study
and I would be loathe to disagree--loathe to agree with the
conclusion of a study that I have never seen.
Mr. Ramstad. I will be happy to share that with you as well
as with Members of the Subcommittee.
Thank you for your very candid, straightforward answer that
you share Senator Glickman's opposition to continuing this
compact.
For my remaining minutes, could you just elaborate about
how provisional implementation works and is it realistic?
Ms. Esserman. I do think it is realistic. I think this is a
good way to ensure that we are securing the goals of our
agriculture community and also ensuring that we serve the
interests of our industrial base. First, as I said at the
outset, it is critically important to succeed that we have a
broad package at the end of the day, at the conclusion of the
round to ensure that all of our interests are served and that
our agriculture community's interests are served.
The accelerated tariff liberalization initiative includes
initiatives that fully were pursued in the Uruguay round and in
fact in the Uruguay Round Agreements Act there is direction to
us to continue to pursue early liberalization in these areas.
So we are going to continue to pursue results, early results.
We believe the way to meld the interest is they would be
achieved on a provisional basis, on a provisional early basis,
and then made permanent at the end of the round, so that these
industries continue to have a stake in the negotiations until
the final day, which is very important to our agriculture
community.
Mr. Ramstad. Thank you, Madam Ambassador.
Thank you, Mr. Chairman.
Chairman Crane. Mr. Portman.
Mr. Portman. Thank you, Mr. Chairman, and, Ambassador
Esserman, thank you for your testimony today. I told you in
advance what my question was going to be but let me lead up to
it by saying as a free trader and someone who strongly supports
an effective WTO, I share the ambitious agenda you have for the
ministerial and for the new round and indeed hope to work with
you to make that possible. It includes improving the WTO as you
stated in your testimony.
You have also said that the first step is to ensure
compliance with existing agreements, and I think that is fine.
I would go one step before that and say we need to ensure
compliance with existing dispute resolutions, the settlements
that we have already entered into that are not yet being
implemented where we still don't have relief for U.S. industry.
Again as a free trader and someone who is very interested in
accession of China to the WTO and in the viability of the WTO
system, I am very concerned about the fact that we are not
ensuring just that those agreements that we have made since the
last round are being implemented, but that indeed the dispute
resolutions are being taken seriously. With the beef and banana
cases, taken together, with the Europeans we have about $300
million in retaliation now against the European Union, and many
on the Hill frankly think we have achieved a victory, and it is
off a lot of people's radar screens. That concerns me because
in fact we have absolutely no relief in sight for the U.S.
industries affected. In the banana case, as you know, there is
a possibility of that but the Europeans have continued to put
forward regimes that are even more illegal along the lines of
the WTO illegal regime that was already determined as such by
two GATT panels and WTO. In the beef case, heads of state are
going around saying we will never comply.
So I guess my focus would be to be sure that this system
works, the standard of success is going to be whether U.S.
industry receives the relief that is due them under
international trading rules, and as you and I have talked about
in the past and I have talked to your predecessors about this,
I feel strongly that in order for us to have the free trade
caucus here on the Hill prevail on a number of issues,
including WTO accession issues but also on fast track and other
issues, we have to show the current system works.
I would ask you today if that is your agency's standard of
success and, if so, what can we do to increase the likelihood
that with that standard of success measurable relief will
indeed be provided to U.S. companies in these and other cases.
Ms. Esserman. Congressman, well, I share your views about
the problems of compliance, compliance not only with agreements
but compliance with dispute panel rulings. I also share your
view that the ultimate test of success is getting results for
our industry. And to that end, we are deeply disappointed by
the European Union's behavior in both of these disputes. I
might say that they are alone in how they have responded to
dispute settlement panel rulings. Even Japan has complied with
dispute settlement panel rulings. So while we do believe we
need to amend the dispute settlement mechanism and we are
working intensely on it now because the banana episode
certainly showed that we needed to make some improvements, the
big problem is Europe and not more than the dispute settlement
system itself.
Let me just talk about bananas and beef and a little bit
about the reform. I do believe that the combined effect of the
retaliation in the two cases is starting to have effect. And by
effect, I mean that the private sector interests, that upon
which the retaliation is imposed, the 100 percent duties, are
now beginning to feel the pinch and they recognize that there
are consequences if their government does not comply with panel
rulings, and we have gotten a number of indications that that
is so. And that is the point of having retaliation, so that--
you cannot have retaliation, as we all know, because that does
not bring the benefits to the industry, but to put maximum
pressure on the government ultimately to comply, and that is
what our goal is here.
Mr. Portman. Again I would restate in a slightly different
way what I said earlier, which is if these cases cannot be
resolved fairly with our allies, admittedly the Europeans have
been the most flagrant violators, then it is hard for many of
my colleagues on the Hill to understand how we can ever expect
a country like China or other countries that we like to see
accede to the WTO comply with similar rulings. I would hope
that these cases they are precedent cases certainly for
agriculture, and I would argue for the WTO dispute settlement
system in general, continue to be a top focus of USTR.
I commend you for your success in the litigation but now it
is a question of implementation. I encourage you to turn up the
heat and be sure that these two cases are resolved and others
that are outstanding. As you said earlier, the Europeans are
one country that has most commonly been out of compliance with
these cases. It is important to note and get on the record that
the U.S. has indeed complied every time the United States has
been found in violation of a WTO ruling.
Ms. Esserman. Let me assure you that this remains a top
priority for us because retaliation is not the answer. In
addition, we are also working to reform the dispute settlement
mechanism itself because we do not want a country as Europe did
to seek to exploit ambiguities in the rulings. What we are now
seeking is to have a clarity about the procedure that should be
employed if a country is questioning whether or not another
country has truly taken effective compliance measures
consistent with the panel ruling. So here we are setting up
very clear procedures and we are also seeking to take time,
shorten the--take time out of the early phases of the dispute
settlement process. So we are working at bottom to secure more
effective compliance rules.
Mr. Portman. I know I am over my time, I apologize, but the
finality of the rulings is very important. I know we have
talked about the endless loop before. I was going to talk about
that with a later panel, but I know USTR has also focused on
that. If we are going to glue up the WTO we have to have
finality in these cases so countries cannot continue to
endlessly elongate the litigation.
Ms. Esserman. Right. Finality is what we are trying to
achieve here.
Chairman Crane. Mr. Weller.
Mr. Weller. Thank you, Mr. Chairman. Good afternoon,
Ambassador. Appreciate the opportunity to talk with you.
Earlier when I testified before this Subcommittee I raised the
issue of the loss of domestic film industry jobs and economic
impact of the issue of runaway production, a study done by the
Directors Guild and Screen Actors Guild which was recently
released, and you may not have seen that yet, but they
estimate, according to the study, that we have lost about
125,000 domestic film industry jobs over the last decade. The
problem is accelerating. We have lost 20,000 film production
jobs in the United States last year and if it continues to
escalate at the current trend we could see as many as 35,000,
36,000 jobs lost next year.
So representing the Chicago area and concerned about in
other communities around this country where film production is
an important part of our economy, I believe that the issue of
runaway production particularly, as well as the cultural
content issue, should be on the table at the upcoming Seattle
Round. And I guess what are you familiar--to begin with, let me
just ask, are you familiar with the cultural content issue?
Ms. Esserman. I am familiar to some degree with this issue.
Mr. Weller. Well, do you believe that the Canadian cultural
content rules, are they designed to solely protect Canadian
culture or do you believe that to some extent these rules are
more designed to protect Canadian jobs or actually create
additional jobs and attract them from the United States?
Ms. Esserman. Well, Congressman, we certainly understand a
country's right to take legitimate measures to promote their
culture, but we do have concerns about measures such as some of
these that are really economic protection in disguise. I don't
know all of the particulars in this area. But as I mentioned to
Congressman Becerra earlier, we would be pleased to work with
you to make sure we have this fully on the agenda in a way that
serves the interests of this sector.
I know there are a number of factors here that have
contributed to the runaway jobs, including the incentives, also
wage rates and exchange rates, which are a little bit more
difficult to address, as I know you must appreciate. But we
want to work with you to make sure we have a full appreciation
and we are most fully achieving what we can for this sector.
Mr. Weller. Ambassador, it appears when the television
stations in any of the networks that serve Canada are required
to have at least 60 percent of their programming be Canadian
cultural content, that it makes it very difficult for American-
produced television as well as films to be shown in Canada. At
the same time they turn right around and through some very
aggressive financial incentives are working to attract our
jobs.
Let me ask you: Is it your view that the cultural content
rules, that Canada is applying them fairly? Obviously I think
we all want to protect the culture of the individual countries.
And personally representing Chicago area, having Blues Brothers
2000 filmed in Canada had an impact on our culture because
Blues Brothers are part of our culture in Chicago. But do you
believe that the rules as the Canadian Government is currently
administering them, are they applied fairly and evenly across
the board?
Ms. Esserman. Congressman, I am not familiar with all the
particulars here, but we have a number of concerns about the
protective effect of these rules, culture rules in Canada.
Mr. Weller. Are you familiar with the point system that
they use to qualify for tax incentives?
Ms. Esserman. I am not familiar with the specific figures
of it, but I would be delighted to become familiar to make sure
we are fully looking at that issue.
Mr. Weller. I welcome the opportunity to sit down with you
relatively soon to discuss this issue. Clearly it is a major
economic issue not only in Chicago but nationally. We have
spent a lot of attention over the last 9 to 12 months talking
about the loss of the steel industry jobs. We have lost 10,000
steel industry jobs in the past year, we have lost twice as
many film industry jobs. It is clearly an issue that must be on
the table.
I look forward to working with you and look forward to
sitting down with you shortly. Thank you, Ambassador. Thank
you, Mr. Chairman.
Chairman Crane. Mr. English.
Mr. English. Thank you, Mr. Chairman. Ambassador Esserman,
welcome, and your comments as always are thoughtful and useful.
I wanted to pursue a line of questioning that Mr. Houghton had
opened up where I would welcome your elaboration. And I want to
start by reading a couple of lines from an article that was
published yesterday in Korea. ``Seoul will join forces with
Japan, India, Brazil and the Association of Southeast Asian
Nations to revise the antidumping agreement of the World Trade
Organization and thus eradicate the possibility of abuses by
the world's main trading nations, a foreign affairs trade
ministry industry official said yesterday. The antidumping
agreement is one of the hottest issues under discussion in the
process of launching the so-called new round negotiations.''
Now, given your comment to Mr. Houghton that the
administration would resist reopening the antidumping
agreement, may I ask, given the effort that is being made here
by some of those countries that certainly in the case of steel
have clearly been identified as being involved in dumping on
our domestic market, what is the administration's plan to
prevent the Seattle Round from resulting in a weakening of our
rules against unfair trade and given the commitment of these
countries to try to make this one of the focuses of the Seattle
Round? How committed is the administration and what is the
administration's strategy for heading off this result?
Ms. Esserman. Congressman English, let me assure you that
we are very committed to head this off. I am quite aware of the
determination of Japan and Korea and some of the ASEAN
countries. But what I would like to do is have--I think I do
have an opportunity to meet with you tomorrow. I would like to
use that occasion to go into our strategy, which is quite
detailed, but I would share it with you privately rather than
have our trading partners have a chance to hear that.
Mr. English. I will certainly take that opportunity and I
will take that as a very positive response on your part and I
look forward to that meeting.
On a separate issue, obviously we are in the process of a
negotiation with China that will eventually lead to the
resolution of their accession into the WTO. But separately, we
have had a negotiation with the government in place on Taiwan.
And it seems that Taiwan is in a more advanced place for being
considered as a candidate for WTO membership. On Taiwanese
accession, do you feel it is possible that the WTO could
consider Taiwan for membership without creating a sovereignty
issue with China?
And let me express in my view, Taiwan should be considered
separately from China. And if Taiwan is in a position for WTO
membership, my hope is that they will be considered. Can you
comment on Taiwanese accession in and the administration's view
of this issue.
Ms. Esserman. It is true that at this moment that the
Taiwan accession is more advanced than the China accession. And
we--there was a working party or meeting in Geneva last week I
believe or last Friday on the Taiwanese accession. Let me
simply say that we are going to continue to work with Taiwan on
its accession and you know we look to the successful accession
of both Taiwan and China.
Mr. English. Outstanding.
Mr. Chairman, that concludes my questioning. Again,
Ambassador, I thank you for the opportunity to pursue this
line.
There are many of us in Congress who are very concerned
that the Seattle Round may become a focus for an effort to
water down some of the basic protections that we are able to
provide under current WTO rules for domestic industries that
are the target specifically of unfair trade practices. Mr.
Cardin and I have legislation which we hope the administration
will favorably consider over time to strengthen our existing
laws in America to allow remedies to our domestic companies and
workers in some of these situations.
We welcome your examination of that legislation which is
WTO consistent, and I look forward to our dialog.
Ms. Esserman. Thank you.
Chairman Crane. Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman. And Ambassador,
always great to see you. You know, we know that free trade
depends upon fair trade. And I think we reflect, we study, we
realize we have got to have or need a WTO to make sure we have
fairness, and we assure compliance.
And I look forward to the Seattle round on November 30. I
think we have tremendous opportunities and I am a person who
wants to see those opportunities made available for the next
generation in the 21st century and there is no question our
maintaining and sustaining a strong economic growth depends on
our being in the trade arena. I got a couple questions and I
would like to ask you. Because I think the WTO's credibility is
at stake. I have--I don't apologize but I have become obnoxious
about the beef deal. I know I have. I pound the table, I have
shouted, I have jumped up and down and got out of character
because I think we have not fulfilled our commitment to that
particular industry. And I think we slighted that situation.
And let me say I am not a negotiator, I guess I could say
maybe I have been a horse trader to a certain extent, but 10
years ago we realized that the European Union on banning the
beef hormones on our beef coming into that country, they held
us at bay for 10 years. Then we go through all the appeals. And
then basically finally said, well, after that period of time,
looking through $900 million possible tariffs, we said there is
$205 million penalty, or $205 million that your shop, USTR
said, hey, we are going to finally come up with European Union,
the WTO. I will put it that way. The WTO finally said $116
million. That is nearly $90 million that we sent there. And I
didn't hear no screaming, no position being discussed about
that. That is an 84-percent reduction. That is a win in
anyone's position on someone else's part. I think we got to
have stronger teeth.
And this is where I want to go to your point. You stated
``European Union's failure to implement panel results in two
cases, however, has been troubling and we hope to ensure that
the future losing parties comply to face penalties in a more
timely fashion.''
Ambassador, ``we hope to ensure.'' What are we doing to put
some teeth in it? ``We hope'' is feeble. It is wimpish if I can
say that. What are we doing? I think we have to be strong if we
are--if we are going to put some backbone behind the WTO on
this stuff. I have high hopes of Mike Moore from New Zealand.
In fact, I am going to New Zealand during August and we will be
meeting some folks down there on trade. But what are we doing
there when you say ``we hope'' ?
Ms. Esserman. Well, Congressman, I regret that you said the
word ``hope.'' we are working with great resolve to try to
achieve results in two ways. First, as I mentioned to
Congressman Portman, to correct, to amend the dispute
settlement rules so there is clarity in dealing with the
situation like Europe where a country is not seeking to comply
but seeking to drag its feet. So we are trying to set up rules
where there will be a time certain where countries pay the
consequences for failure to implement panel rulings. So we are
changing the rules.
And second, on beef, we share your disappointment in that
retaliation is not the end that we are seeking for the beef
industry. However, the retaliation, as I mentioned to
Congressman Portman, is now starting to have its effect. There
are many, many producers in Europe who are now feeling the
effects of this retaliation, which is, after all, 100 percent
of the value of a product. We impose 100 percent retaliation.
These companies are feeling the effect of the retaliation.
And now the government is forced to see the consequences of its
failure to come in compliance. I am not saying that we are
there yet, but we--and we don't feel that we are there yet, not
at all, because there is no result here. We share your
frustration.
Mr. Watkins. Let me if I could, Mr. Chairman, could you
provide us instead of saying--instead of saying hoping, could
you provide us those steps that you are planning on taking and
recommending and also about the--you said ensuring timely
implementation? Also what we are going to be doing to try to
ensure timely implementations? Can you provide it for me and
also the Subcommittee?
Ms. Esserman. I would be pleased to do that.
Mr. Watkins. I wonder about us saying we are not going to
take up antidumping discussions at the Seattle WTO meeting
because it is an issue in the steel industry, it is an issue in
the oil industry, it is an issue now with Mexico, saying maybe
going to put 215-percent tariffs on some agriculture going into
Mexico. How can we say, stand idly by and say we are not going
to discuss that or have that on the agenda there. That is one
question. And who is handling the antidumping in your shop at
the USTR in the discussion so I can discuss some things with
them?
Ms. Esserman. I am, and I would be delighted to discuss
those issues with you. We believe that it is very important to
the United States' interests to have strong and effective
antidumping laws. And the purpose of Japan and Korea and the
ASEAN countries is to weaken those disciplines. I think we have
seen in the course of this steel crisis how incredibly
important it is to have strong and effective rulings against
unfair trade. It is the basis upon which we can move forward
boldly to open up our markets.
So that is the basis for the position. I would be pleased
to come and talk to you.
Mr. Watkins. I would welcome that. I say this in high hopes
also, for the future for the WTO, try and make sure that we
have free and fair trade around. I try to confront it in a
positive way, because I want it to work. I want us to make sure
we assure our industries across--whether it is bananas or beef,
the other aspects of it, make sure that we know that we are
making the fairness a major issue by making sure they follow
what we have agreed to.
So, again, I will say in a very positive way, I hope and I
know that we have got to be there. I want to, I am pushing
that. I want a 21st century globally competitive economy. Build
a trading center in Oklahoma.
I want to make sure that we are out in front leading
because our future if we are going to be an economic power has
to be out there in trade.
Thank you for the job you are doing.
Ms. Esserman. Thank you.
Chairman Crane. Let me thank you, Madam Ambassador. We
appreciate your patience. We apologize for the disruption
during your appearance today.
With that, we will excuse you and welcome our next panel.
[Questions submitted by Chairman Crane and Ambassador
Barshefsky's responses follow:]
Questions Submitted for the record By Congressman Philip M. Crane for
Ambassador Charlene Barshefsky
Question 1: As you know, I am concerned about using the WTO to deal
with labor issues that are not related to trade and for which there is
no national or international consensus. Please detail the
Administration's plan to handle labor issues at the Seattle
Ministerial.
Answer 1:
The implementing legislation for the Uruguay round requires the
President to seek the establishment of a WTO Working Party on trade and
labor standards. We sought to accomplish this at the Singapore
Ministerial meeting but were not successful. At Seattle we again will
attempt to obtain the establishment of a Working Group on Trade and
Labor. The purpose of this Group is to have a serious examination--
through discussion and analysis--of a number of trade related labor
topics. We believe that the International Labor Organization, the World
Bank, the International Monetary Fund, and the United Nations
Conference on Trade and Development should collaborate on this work. In
this regard, we also feel that the ILO should be given observer status
at the ILO. The Working Group would prepare a report for submission to
the next WTO Ministerial.
We recognize that ILO is the preeminent international labor
organization. It has energetic, new leadership, and it has negotiated
significant agreements in the past year involving core labor standards
and exploitative child labor. However, there are important issues
involving the relationship between trade and labor that require
consideration at the international level, and the ILO is not equipped
to undertake this review. On the other hand, the WTO, working with
other international institutions, can make a valuable contribution to
the understanding of these issues. Our WTO proposal outlines six trade
related labor issues; these are all issues that can benefit from the
WTO's comparative advantage as the international community attempts to
understand them better. We have proposed a constructive and supportive
role for the WTO in the labor area.
Question 2: During the August 5th Trade Subcommittee hearing, I
indicated that I was concerned that U.S. businesses were being
handicapped by national laws and procedures that restrict their ability
to get the right people to the right place at the right time. I was
pleased to see mention of ``movement of natural persons'' as an area
ripe for negotiations in your recently tabled services paper. I would
appreciate an explanation of your plans to proceed on this important
issue in the upcoming round of negotiations which will be launched in
Seattle.
Answer 2:
To maintain their competitiveness in foreign markets, U.S. services
companies often require the ability to bring along their top personnel
to manage operations and perform specialized tasks overseas. Some U.S.
companies also perform short-term consultancy or other work requiring
brief visits. The WTO General Agreement on Trade in Services (GATS)
recognizes this by creating a category for temporary entry of ``natural
persons'' as service suppliers. Further, there is work underway in the
GATS to promote greater transparency in government regulation, an area
that U.S. companies have identified as a particular problem with
respect to such temporary entry
in foreign countries.
We are working with U.S. companies to help ensure that in the next
services negotiations, our companies will have greater freedom to move
these top-level, specialized personnel as needs arise.
Question 3: At the hearing a representative of the International
Insurance Council discussed pro-competitive regulatory principles (copy
attached) that his group has suggested. I am interested whether you
view these principles as a possible basis for developing United States
negotiating objectives for this important industry. I am also
interested in your views on these principles and the extent to which
you intend to pursue them in the next round of services negotiations.
Answer 3:
The U.S. Trade Representative's Office already has been giving
close attention to these principles promoted by several representatives
of the U.S. insurance community and has drawn from them in formulating
U.S. objectives for the ``GATS 2000'' negotiations. The U.S.
negotiating proposal includes major issues identified by the U.S.
financial services industry, such as improving market access and
national treatment; promoting transparency and fairness of domestic
regulatory regimes, with appropriate regard for the prudential clause;
and review of whether existing definitions include all important
commercial activities. Like many in industry, the U.S. believes that
these issues have to be examined as a package to guarantee open and
meaningful market access for financial services providers. We intend to
pursue these issues vigorously and through the use of all possible
negotiating approaches in the upcoming round of services negotiations.
That is Mr. John Pepper, Chairman of Procter & Gamble in
Cincinnati and Chairman also of the President's Advisory
Committee on Trade Policy and Negotiations; Ernest Micek,
Chairman, Cargill, Inc., Minneapolis, on behalf of the
Emergency Committee for American Trade; Dean O'Hare, President
and chief executive officer, Chubb Corp. and Chairman of the
Coalition of Service Industries; Dean Kleckner, President of
the American Farm Bureau Federation; John Dillon, chairman of
the board and chief executive officer, International Paper Co.;
Mark Van Putten, President and chief executive officer,
National Wildlife Federation.
And let me apologize to all of you gentlemen for the kind
of chaotic day we are experiencing. As you sit down here, we
are in the midst of our tax bill on the floor, which is kind of
a hot topic, and that accounts for many of our Members being
tied up over there during the debate. But the other thing is I
realized as some of you have tight time constraints, and so for
everyone's benefit, if you are on a tight time constraint or
you have flights to catch, at any time, excuse yourself, and we
understand your situation, too.
And now I would like to yield to my distinguished
colleague, Mr. Portman, first, to welcome Mr. Pepper, his
constituent.
Mr. Portman. Thank you, Mr. Chairman. I will be brief just
to welcome John Pepper, who has been a voice of reason on free
trade, and has not only done this, Mr. Chairman, in terms of
policy over the years, being one of the leading advocates of
explaining the benefits of free trade and did it through
business practices, but also in the last 30 years deeply
involved in our community back home. He has a passion for youth
and helping them, as shown through his work in education and
antidrug efforts--he is on the board of the Coalition for a
Drug-Free Cincinnati with me--and his work on racial
cooperation and dialog. And I welcome him this morning--this
afternoon, now, and look forward to his testimony.
Chairman Crane. And next I would like to yield to our
distinguished colleague from Minneapolis, Mr. Ramstad, to
welcome his constituent Mr. Micek.
Mr. Ramstad. Thank you, Mr. Chairman. I will be brief. It
is a pleasure to extend a special welcome to my good friend
Ernie Micek, chairman of Cargill and also chairman of the
Emergency Committee for American Trade, ECAT.
I want to thank you again, Ernie, for appearing once again
before the Subcommittee, and for your important leadership in
helping us knock down tariff and nontariff barriers to USA
exports. Nobody has been a better corporate citizen than
Cargill, not only in Minnesota, but worldwide, and nobody has
been a more impressive, more committed chief executive officer
than you have. So thank you for all that you are doing and for
your leadership, and welcome again to the Subcommittee.
Chairman Crane. And I would just like to ask one question,
because I heard a rumor, Mr. Kleckner. I know you are from Park
Ridge. Is it true that Hillary Clinton used to babysit you when
you were a toddler?
Mr. Kleckner. I don't know, Mr. Chairman. She did go to
school in Park Ridge, and as I look out my office window, I
look down the street to where she was born and raised just two
blocks away.
Chairman Crane. John Wayne Gacy another two blocks. They
are both from Henry Hyde's district. That is why I raised the
question, because it is right next door to me.
Mr. Levin. I have nobody to introduce.
Chairman Crane. Now, gentlemen, if you will proceed in the
order that I introduced you on the schedule here.
Mr. Pepper.
STATEMENT OF JOHN E. PEPPER, CHAIRMAN, PROCTER & GAMBLE
COMPANY, CINCINNATI, OHIO, AND CHAIRMAN, PRESIDENT'S ADVISORY
COMMITTEE ON TRADE POLICY AND NEGOTIATIONS
Mr. Pepper. Thank you, Mr. Chairman. And thank you, Rob.
As the Chairman indicated, I appear here today as the
Chairman of the President's Advisory Committee on Trade Policy
and Negotiations, ACTPN as we call it. I accepted this role a
year ago because I feel very strongly that forging a consensus
and taking action to take greater advantage of trade
liberalization is critical to this country's future, is
critical to the growth of the economy and the growth of jobs.
We all know the importance of the WTO Ministerial that is
coming up in terms of furthering trade liberalization.
My convictions on this for years have rested on two simple
things: One, we have got far lower tariffs and lower barriers
than anybody else, and if we can get other people down to our
area, it is going to help us greatly, and if we don't, we are
going to suffer, as we are suffering right now, for example, as
Chile's 11 percent duty is being reduced for Mexico and Canada
and not for us; as we see an increasing amount of trade between
Brazil and Argentina that we are not taking part of because of
MERCOSUR.
And the other fundamental here, of course, is that the
overwhelming part of this world's population lies outside of
this country, and we need to ship more products to it, and we
can if we have a level playingfield.
As we went into ACTPN this year, and recognizing the WTO,
we decided we would focus 100 percent of our time on advising
Charlene Barshefsky and Sue Esserman on that agenda. We will
comment today on three of those aspects: Market access,
particularly agriculture; the new economy, particularly e-
commerce; and the role of trade and labor. You will hear from
Dean Kleckner and Dean O'Hare on two of those. I will be brief.
On market access, as 60 percent of the world trade will
soon be covered by regional free trade and customs union
agreements, ACTPN supports a bold initiative to bring those
efforts into the WTO. We also support a broad market access
package. Tariff and nontariff barriers in all industrials
should be dramatically reduced and export subsidies eliminated.
There is no more important element in the next WTO Round
then Agriculture. Dean will talk to that. I would just
highlight here the particular focus we have brought to the
issue of biotechnology. The USTR's goal is to ensure that
access to new agricultural technologies, specifically GMOs,
genetically modified organisms, are not restricted by
protectionism and unfounded fear. And this represents a huge
risk to U.S. agriculture, indeed to the world's populations.
While there is, I can tell you, general agreement among the
ACTPN members not to reopen the current sanitary and
phytosanitary standards, and we think that is very important.
There is a working group that has been charged with defining
the issues in SPS that present problems to some of our members
and determine how these problems could be addressed. Dean will
talk about that in a minute.
The ACTPN Services Working Group has urged USTR to adopt
broad liberalization and market access in a range of sectors,
including audiovisual services, telecommunications, travel,
tourism and others. We have recommended to the USTR that they
adopt a negative list schedule as the most effective
negotiating strategy. Dean O'Hare, CEO of the Chubb Corp. and a
member of ACTPN, will comment on this in a moment.
We spent a lot of time in the last 9 months on the subject
of the new economy, and particularly e-commerce. We have
concluded that especially since e-commerce is in its infancy,
governments must resist the urge to regulate or impose tariffs
or nontariff barriers. Clearly avoidance of harm should be the
guidance here, avoidance of mischief. We should allow
technology to follow market forces as it matures.
The evaluation of e-commerce in the last year has led our
members to recognize that e-commerce is only one element of an
incredibly fundamental change in the global economy, that of
IT, information technology. Internet usage is doubling every
100 days. Computers' power is doubling every 18 months. By
2006, one-half of the U.S. work force will be employed in
industries that are either major producers or users of IT
products. IT growth is already stretching existing trade
agreements, and it is going to raise many new unforeseen
issues.
Make no mistake, this is an area where the United States is
leading. IT as a percentage of gross domestic product is 5.3
percent in this country compared to 2.9 percent in Europe.
Fortunately, Lew Gerstner of IBM has agreed to chair an ACTPN
task force on IT which will deal with this rapidly changing
technology and make appropriate recommendations for policy not
just for the WTO, but on a continuing basis.
Charlene Barshefsky has asked that an IT task force
consider presenting an education forum for the trade ministers
on IT issues in Seattle. We think that is a good idea.
A priority without consensus right now in ACTPN is the
controversial role of labor and trade. In Procter & Gamble we
refer to controversial issues like this as ``mooses on the
table.'' They are issues that people are reluctant to deal with
head on, that they tend to talk past each other on and where
there are legitimate competing agendas.
ACTPN members John Sweeney and Tom Donahue of the Chamber
of Commerce have agreed to lead the examination of conflicts
that have often arisen between labor leadership and the
advocates of trade liberalization. They will be presenting
their conclusions at our September 28 ACTPN meeting. We are
hopeful that there will be common ground that we can find on
some issues such as the elimination of forced labor, exploitive
child labor, respect for ILO labor standards and the importance
of transparency in the resolution agreements.
Finally, I would simply note that there has been heavy
emphasis in the ACTPN on what has been stressed here by you
gentlemen today, the importance of assuring compliance and
accountability with agreements and with resolution rulings. If
the WTO is not delivering on what it has agreed, we have a
failed system. And I would assure you that in our discussions,
the energy we have seen around this from Sue Esserman and
Charlene Barshefsky has been intense.
In conclusion, let me just express my conviction here that
each one of us must take ownership of this if we are to be
successful in Seattle and take advantage of the enormous
opportunities that this country has through a successful round.
P&G along with 140 organizations have formed the U.S. Alliance
for Trade Expansion, a coalition to bring together a lot of
different efforts to promote the benefits of a rule-based
trading system for all Americans.
As Members of the Trade Subcommittee, I would respectfully
suggest that each of you has a vital role to play. Your
education of other Members as well as your constituents about
the importance of the ministerial and free trade certainly must
go alongside what we in industry do to tell our members about
its importance. I cannot imagine a higher stakes issue than
what we are talking about here or a higher stakes event than
the WTO Ministerial. Thank you very much.
Chairman Crane. Thank you, Mr. Pepper.
[The prepared statement follows:]
Statement of John E. Pepper, Chairman, Procter & Gamble Company,
Cincinnati, Ohio, and Chairman, President's Advisory Committee on Trade
Policy and Negotiations
Mr. Chairman and distinguished members of the Trade
Subcommittee, I am John E. Pepper, Chairman of The Procter &
Gamble Company. I appear today as Chairman of the President's
Advisory Committee on Trade Policy and Negotiations (ACTPN).
This is an organization that was created by the Trade Act
of 1974. It consists of approximately 45 members who are
appointed by the President and represent business, labor,
industry, agriculture, services, retailers, environment and
consumer interests. The ACTPN is charged with advising the
President and USTR on trade matters.
Let me begin by saying that I accepted the role as Chairman
of ACTPN because I feel passionately that unless the U.S. sets
an example by forging a consensus on many of the controversial
issues related to trade policy, this country will jeopardize
its role as a global leader. While the views of our ACTPN
members on specific components of the negotiating objectives
for the WTO Ministerial are diverse, we are all in agreement
that the U.S. has a unique opportunity to provide leadership in
bringing together the 133 representatives of the WTO member
countries. Success will bring enormous benefits to the world
economy. Failure would be a blow to our common prosperity. We
must not let that happen.
As host of the WTO Ministerial, the U.S. plays a key role
in establishing the agenda for trade liberalization over the
next decade. Why is this important? Over one-third of U.S.
economic growth since 1992 has resulted from trade. Americans
by nature believe in playing by the rules. If we can bring
those rules to the rest of the world and establish a level
playing field, U.S. companies will be able to send our products
to other countries and make our strong economy even stronger.
If not, American firms and workers will be placed at a
competitive disadvantage. ACTPN members are concerned that our
trading partners are concluding preferential trade agreements
without us. Already, Chile's 11% tariff is being reduced
unilaterally for both Mexico and Canada, but not for the U.S.
MERCOSUR countries are progressively eliminating tariff rates
among member countries. Virtually all trade between Brazil and
Argentina now enjoys a duty-free status. With 95% of the
world's population living outside the U.S., the vast majority
of growth potential for American industry--growth that provides
American jobs--comes not from the U.S., but the rest of the
world.
To support our U.S. negotiators in the challenges
confronting them at Seattle, Ambassador Barshefsky has engaged
the ACTPN in three key areas--market access, the new economy,
and the role of trade and labor. I'd like to briefly comment on
our policy recommendations in these areas.
Market Access
As 60% of world trade will soon be covered by regional free
trade and customs union agreements, ACTPN supports a bold
initiative to bring these efforts into the WTO.
ACTPN also supports a broad market access package, such as
that negotiated in the Uruguay Round. To be specific, tariff
and non-tariff barriers in all industrial sectors should be
dramatically reduced, and export subsidies eliminated.
Obviously, we'll continue to battle our European friends over
their $60 billion in agriculture trade-distorting subsidies,
but like Vince Lombardi, I believe ``winning becomes a habit.''
Agriculture
U.S. farmers lead the world in productivity and efficiency,
sustaining our health and quality of life at home and aiding a
hungry world abroad. As agriculture is certain to be a key
element of the next WTO Round, the ACTPN has focused our energy
on agricultural products of modern biotechnology and the U.S.
Trade Agenda. USTR's goal is to insure that access to new
agricultural technologies is not restricted by protectionism
and fear. While there was general agreement among ACTPN members
not to reopen the current sanitary and phyto sanitary (SPS)
standards, a working group has been charged with defining the
issues in SPS that present problems to some of our members and
determine how these problems should be addressed. Dean
Kleckner, President of the American Farm Bureau Federation and
a long-time member of ACTPN, will elaborate more on this in his
testimony.
Services
In 1998 U.S. services exports were $260.3 billion, while
imports were $180.8 billion, producing a trade in services
surplus of $79.4 billion. Services comprise nearly 30% of U.S.
exports. Additionally, in 1998 U.S. service exports supported
about four million U.S. jobs--jobs both in services and
manufacturing sectors.
The ACTPN Services Working Group urged USTR to adopt broad
liberalization and market access in a range of sectors
including, but not limited to, audio visual services,
telecommunications, travel, tourism and others. The Working
Group also recommended to USTR that they adopt a negative list
schedule as the most effective negotiating strategy and one
which would speed market access. Dean O'Hare, CEO of Chubb
Corporation and a member of ACTPN, will comment in more detail
on the services agenda.
The New Economy
Since 1994, the ACTPN has produced five reports on the WTO.
This morning, I want to review the most recent report--on the
subject of e-commerce--and share with you the context of
ongoing ACTPN discussions on the ``new economy'' which is so
critical to America's future.
E-Commerce
At our June 10, 1999 meeting, ACTPN finalized a report led
by Hewlett-Packard's Lew Platt that dealt with a variety of
electronic commerce issues.
ACTPN opposes the classification of electronic commerce as
a good or service. While it still believes that substantive
regulation of electronic commerce should be left to the member
countries and other international organizations, it advocates
the adoption of WTO rules on transparency notification and
review of domestic regulation. Our key message is, e-commerce
is in its infancy and governments need to resist the urge to
regulate. We should allow technology to follow market forces as
it matures.
Information Technology
ACTPN's evaluation of e-commerce led our members to
recognize that e-commerce is only one element of a fundamental
change in the global economy--that of information technology
(IT).
Lew Gerstner of IBM reported to ACTPN members that
computing power has been doubling every eighteen months for the
past 30 years, with a parallel geometric decline in prices.
Internet usage doubles every 100 days. By 2006 almost half of
the U.S. work force will be employed by industries that are
either major producers or users of IT products and services.
IT's explosive growth is already stretching existing trade
agreements, and is certain to raise new, unforeseen issues. And
make no mistake--the U.S. is leading the creation of this new
economy. IT spending as a percentage of GDP in the U.S. in 1998
was 5.3%. By comparison, Europe was 2.9% and Japan was 3.5%,
which is where the U.S. was in 1990. Our trade policy must
reflect this rapidly growing global marketplace.
An ACTPN Task Force was established to make recommendations
to USTR on how to ensure we remain in a leadership position to
deal with this rapidly changing technology. I'm pleased to
report that Lew Gerstner has agreed to chair this important
effort.
Charlene Barshefsky has also requested that the IT Task
Force consider presenting educational forums for trade
ministers on IT issues at Seattle. I personally think this is a
terrific idea and a meaningful role for ACTPN to play at the
Ministerial.
Trade & Labor
A priority for which there is no consensus in ACTPN, but
one that must be addressed if we are to make progress in trade
policy, is the controversial role of labor and trade. In
Procter & Gamble, we refer to controversial issues as ``moose
on table.'' These are issues that no one wants to deal with
head on as there are always competing agendas. Unfortunately,
unless leadership focuses on the moose, these issues never get
resolved. ACTPN members, John Sweeney of the AFL-CIO and Tom
Donahue of the COC have assumed leadership for our group in
clarifying trade and labor issues and in establishing a
framework for resolving these concerns through U.S. trade
policy. Their goal is to present issues upon which there is and
is not agreement at our September 28, 1999, ACTPN Meeting. I
remain hopeful that there will be some areas of mutual
agreement and progress. Global growth can and should be
accompanied by safer workplaces, elimination of forced labor
and exploitive child labor and respect for core labor
standards. The WTO, in particular, can work in more
coordination with the International Labor Organization on some
of these issues. While developing countries are expected to
argue against inclusion of any work on trade and labor in the
WTO, our U.S. negotiators have a unique opportunity to deliver
results in this important area.
Conclusion
In conclusion, let me say that each of us here today must
assume ownership if the U.S. is to be successful in Seattle. My
Company, Procter & Gamble, along with the Coalition of Service
Industries, the American Farm Bureau Federation, and over 140
other organizations, have led the formation of the U.S.
Alliance for Trade Expansion. The mission of this coalition is
to promote the benefits of a rules-based trading system for all
Americans and support U.S. Leadership at the Seattle
Ministerial.
As Members of the Trade Subcommittee, each of you also has
a vital role to play at the WTO. Your education of other
Members of Congress and your own constituents about the
importance of the Ministerial and what it means to the future
of this great country is paramount. Congress as a whole must
build on their recent trade successes including passage of the
Africa Growth and Opportunity Act, CBI, China NTR and Vietnam
NTR. Bipartisan support for GSP renewal and permanent NTR for
China (if an agreement is reached) should follow. We must
support our U.S. negotiators. They will be working around the
clock to build a better future for you, me and for our
children.
Tom Friedman writes in his book, The Lexus and the Olive
Tree, that globalization is everything and its opposite. We are
a nation that is not afraid to go to the moon, but also still
loves to come home for Little League. We are a nation that
invented both cyberspace and the backyard barbecue. We can
never take this for granted. For globalization to be
sustainable, America must be at its best--today, tomorrow, all
the time. That is our challenge and our responsibility.
Thank you.
Chairman Crane. Mr. Micek.
STATEMENT OF ERNEST S. MICEK, CHAIRMAN, CARGILL, INCORPORATED,
MINNEAPOLIS, MINNESOTA, AND CHAIRMAN, THE EMERGENCY COMMITTEE
FOR AMERICAN TRADE
Mr. Micek. Thank you, Mr. Chairman. I am testifying today
before the Trade Subcommittee as Chairman of the Emergency
Committee for American Trade, which is comprised of the heads
of major American companies with global operations who
represent all principal sectors of the U.S. economy.
ECAT believes that in order to have a successful Seattle
WTO Ministerial, the focus of the meeting must be kept on the
launch of a new comprehensive round of trade negotiations.
These negotiations should enhance market access for the
industrial, agricultural and service sectors, and ensure that
WTO rules accomodate the development of new technologies key to
the U.S. economic growth in the 21st century.
While building a positive trade-expanding agenda for the
ministerial and a new round is critical, we will not be
successful with that agenda here at home unless we also build a
consensus in support of trade expansion among American workers
and their families. This means that we must demonstrate how
trade liberalization improves the lives of Americans and helps
all economies meet basic human needs.
ECAT believes that one way to increase trade's contribution
to human well-being is to make eliminating barriers to trade in
food a central negotiating objective in the agenda coming from
the Seattle Ministerial.
Toward this end, ECAT is launching a Food Chain Coalition.
The coalition will promote the reduction or elimination of
major barriers to trade at all levels of the food production
and distribution chain. Putting food prominently among
negotiating priorities will increase food security, accelerate
economic development, and promote a sustainable environment.
This new paradigm also can help to achieve the critical
consensus necessary to support open trade policies.
Before outlining our specific Food Chain Coalition
proposal, I will briefly discuss ECAT's overall recommendations
for the Seattle WTO Ministerial agenda and new WTO Round.
The United States must take the lead in crafting an agenda
for the WTO Ministerial and for a new round that is focused on
trade liberalization. The agenda must avoid globally divisive
issues such as nontrade-related labor or environmental matters
or competition policy on which there is not yet a broad-based
consensus within the WTO.
The United States needs to recognize the ways in which
trade liberalization contributes to resolving some of these
problems and to building consensus for cooperation. For
example, the elimination of barriers to food trade that ECAT is
proposing also yields environmental benefits by encouraging
agricultural practices that promote production in advantaged
areas while lessening demands on environmentally fragile lands.
In order to provide a positive foundation for continuing
liberalization in a WTO new round, ECAT believes that the
United States should urge that WTO members adopt a standstill
commitment on trade-restrictive measures at the ministerial.
The ministerial agenda also should include a renewed effort to
broaden WTO membership to include those emerging economies that
are not yet subject to WTO rules, particularly China.
In order to ensure that the new WTO Round negotiations
promote trade expansion, ECAT recommends that the formulation
of the agenda be guided by the following general principles:
One, the focus of the negotiations should be trade
liberalization. A new round agenda should be as comprehensive
as possible. All WTO members should be required to adhere to
new round agreements once they are finalized. A new round
should be completed expeditiously according to an agreed-on
timetable.
The United States should seek maximum liberalization
through improved market access with as few exceptions as
possible. New round negotiations should not weaken existing WTO
agreements or create opportunities for the imposition of new
trade restrictive measures. A new round should also promote
full implementation and compliance with existing WTO
agreements.
Trade liberalization objectives that address basic human
needs should be a focus of the WTO negotiations. ECAT believes
that these principles, which are set out in greater detail in
our written statement, can effectively guide the formulation of
U.S. objectives for a new round.
ECAT has formed a Food Chain Coalition to promote the
elimination of major barriers to food trade affecting the
agricultural, manufacturing, and service sectors within the
WTO. There are several reasons ECAT has chosen to take this
unusual step. First, ECAT has learned from its trade education
focus group research that supporters of global trade expansion
must demonstrate the importance of trade to the daily lives of
American workers and their families to enjoy their support for
liberalization. One of the most compelling ways that we can
emphasize the human dimension of global trade liberalization is
by eliminating barriers to food trade.
Second, the Food Trade Coalition can build on the momentum
within APEC for an open food system by extending its trade
liberalization objectives to the WTO.
Third, the Food Chain Coalition captures the growing
interest in agrifood trade liberalization. That interest
extends well beyond farmers to people who supply them with
seed, chemicals, fertilizer equipment and capital. It also
applies to those who handle, transport, process, finance, and
market food products. By using the elimination of barriers to
trade and investment at all levels of the food chain as an
organizing principle, the Food Chain Coalition seeks to create
cross-sectoral alliances in support of common negotiating
priorities. These priorities include eliminating export
subsidies, zeroing out tariffs and eliminating investment
restrictions.
Focusing on the shared interests in economic development
and liberalization enables businesses and governments to build
a new set of alliances and common interests. This will increase
the potential for success in new round negotiations. In terms
of the new WTO new round, the coalition urges the United States
to seek zero-for-zero tariff harmonization on agrifood products
wherever possible and on related industrial products such as
engines and engine systems.
In conclusion, ECAT, looks forward to continuing to work
with you, Mr. Chairman, and other Trade Subcommittee Members on
negotiating objectives for the new round, and in particular,
our Food Chain Coalition project. I appreciate the opportunity
to present our views. Thank you very much.
[The prepared statement follows:]
Statement of Ernest S. Micek, Chairman, Cargill, Incorporated,
Minneapolis, Minnesota, and Chairman, Emergency Committee for American
Trade
Introduction
I am Ernie Micek, Chairman of Cargill, Incorporated.
Cargill is a privately held agribusiness company founded over
130 years ago in Iowa. Today the company is headquartered in
Minneapolis, Minnesota, and our 80,000 employees are engaged in
marketing, processing, and distributing agricultural, food,
financial, and industrial commodities throughout the world.
I am testifying before the Trade Subcommittee today as
Chairman of the Emergency Committee for American Trade,
comprised of the heads of major American companies with global
operations who represent all principal sectors of the U.S.
economy. The annual sales of ECAT companies total over one
trillion dollars, and the companies employ approximately four
million men and women.
ECAT believes that in order to have a successful Seattle
WTO ministerial the focus of the meeting must be kept on trade
expansion through the launching of a new, comprehensive round
of trade negotiations. The ministerial should lay out an agenda
for the new round that enhances market access for traditional
industrial and agricultural products, while accommodating WTO
rules to the development of new technologies that will be key
to U.S. economic growth in the twenty-first century, such as
biotechnology and electronic or e-commerce. The agenda also
should strengthen the rules of the global trading system.
While building a positive, trade-expanding agenda for the
ministerial and the new round are critical, we will not be
successful with that agenda here at home unless we also
maintain our efforts to build a consensus in support of trade
expansion among American workers and their families. This means
that we must make the case that trade liberalization improves
the lives of American workers and their families and helps all
economies meet basic human needs.
ECAT believes that one way to increase trade's contribution
to human well-being is to make eliminating barriers to trade in
food a central negotiating objective in the agenda coming forth
from the Seattle ministerial. Toward this end, ECAT is
launching a ``Food Chain Coalition'' that will promote the
reduction or elimination of major barriers to trade at all
levels of the food production and distribution chain. Putting
food prominently among negotiating priorities will increase
food security, accelerate economic development, and promote a
sustainable environment. This new paradigm also can help to
achieve the critical consensus necessary to support open trade
policies.
The ECAT food chain concept builds on the idea of an open
food system that has gained support within the Asia Pacific
Economic Council (APEC) and extends it to the WTO. A study by
the U.S. Department of Agriculture has concluded that two-
thirds of the welfare gains from trade liberalization within
APEC comes from the agri-food sector alone. Given the many
global distortions to agri-food trade, there are similar
benefits to come from an ``open food'' initiative within the
WTO.
Before outlining our specific Food Chain Coalition
proposal, I will present ECAT's recommendations for the Seattle
WTO ministerial agenda and new WTO round.
Launching a New Trade Round at the Seattle WTO Ministerial Seattle WTO
Ministerial Objectives
As we approach the millennium, we must ensure that U.S.
trade and investment remain the powerful engines of economic
growth that have helped to produce the longest period of
peacetime economic expansion in American history and the lowest
unemployment rate in 30 years. With 96 percent of the world's
customers outside of the United States, the future growth of
the American economy depends on expanding world markets. Just
as ECAT member companies recognize that they must be global
firms to thrive, the United States must maintain its
preeminence as a global economy to continue to prosper into the
next century.
To accomplish this, the United States must take the lead in
crafting an agenda for the Seattle WTO ministerial and for a
new round that is focused on trade liberalization. That agenda
should avoid globally divisive issues, such as non-trade-
related labor or environment matters or competition policy, on
which there is not yet a broad-based consensus within the WTO.
That is not to say that these issues are unimportant. It is
merely to recognize that, if contentious issues dominate the
ministerial, confidence in the global trading system and U.S.
leadership will be undermined.
The United States needs to recognize and articulate the
ways in which trade liberalization contributes to resolving
some of these problems and to building consensus for
cooperation. For example, the elimination of trade-distorting
agricultural subsidies and the reduction of tariffs on
environmental goods and services reduce harm to the
environment, while speeding the spread of technologies that
enable countries to be efficient and to be environmental
stewards. The elimination of barriers to food trade that ECAT
is proposing also yields environmental benefits by encouraging
agricultural practices that promote production in advantaged
areas while lessening demands on environmentally fragile lands.
On labor issues, the United States is pursuing an appropriate
course in increasing its support for the ILO and focusing its
efforts to achieve a forum on global labor issues within that
organization.
ECAT also has some other specific recommendations for the
ministerial. The United States could help in maintaining an
open and transparent economy by urging that WTO members adopt a
standstill commitment on trade-restrictive measures. Such a
commitment would safeguard the liberalization achieved under
the Uruguay Round and subsequent sectoral negotiations while
preventing backsliding. It also would provide a positive
foundation for continuing liberalization in the context of a
new round. As the largest and most open economy in the world,
the United States is in the best position to call for such a
commitment. Indeed, the WTO Secretariat, in a recent highly
laudatory report on U.S. trade policies, noted the critical
role that the United States plays in serving as a positive role
model for other WTO member countries by maintaining open
markets. It also cited the key role of the United States in
helping to restore global economic stability in the wake of the
Asian financial crisis and the breakdown of the Russian
economy.
To be successful, the ministerial agenda also should
include a renewed effort to broaden WTO membership to include
those emerging economies that are not yet subject to WTO rules.
China, the largest emerging economy in the world, must be
brought into the multilateral trading system. Its admission to
the WTO on the basis of a commercially-acceptable protocol of
accession should be given top priority. The high degree of
financial instability in Asia and the slowdown in the global
economy make it more critical than ever that China become
subject to WTO rules and a participant in liberalization
initiatives.
Reaching an agreement on sectoral market-access
initiatives, such as the negotiations on the eight sectors
covered under the Accelerated Tariff Liberalization (ATL)
negotiations, at the time of the ministerial would help to make
it a success and would provide momentum for even broader
liberalization negotiations in a new round. ECAT particularly
supports efforts under the ATL initiative to eliminate tariffs
on chemicals, toys, medical equipment and scientific
instruments, and forestry products. Similarly, progress at the
ministerial in negotiations to remove non-tariff barriers in
the information technology sector is important and would also
promote a successful meeting.
U.S. business has a significant role to play in ensuring
the success of the ministerial by encouraging the adoption of a
positive agenda and making the case for the contributions of
the WTO in continuing trade liberalization. ECAT supports the
work of the Alliance for U.S. Trade, an ad hoc coalition of
U.S. business associations and companies that is coordinating
business support for ministerial activities, and similar
efforts by other groups.
A WTO ministerial that produces a trade-expanding agenda
backed by consensus will send a strong signal to global markets
about the strength and vitality of the open trading system. A
ministerial that endorses an expansion of the open trading
system will encourage emerging economies to stay the course on
trade liberalization. Success in advancing a trade-liberalizing
agenda at the Seattle meeting will help to reinforce U.S.
domestic support for the WTO by demonstrating that the WTO
continues to advance American interests in promoting greater
market access for U.S. goods, services, and agriculture. A
clearly articulated trade liberalizing agenda also will build
support for renewal of trade-negotiating authority.
The WTO New Round Agenda
In order to ensure that the new WTO round negotiations
promote trade expansion, ECAT recommends that the formulation
of the agenda be guided by the following principles:
The focus of the negotiations should be trade
liberalization. Progress on non-trade related labor and
environmental issues should be pursued in other appropriate
international fora.
A new round agenda should be as comprehensive as
possible in order to generate the greatest interest among WTO
member countries and to maximize the opportunity for
liberalization. A round should encompass the built-in agenda of
agriculture and services, as well as industrial tariffs,
customs facilitation, transparency in government procurement,
and other new areas. However, the agenda should not open areas
on which there is little consensus or likelihood of progress.
In keeping with the legal framework of the
multilateral WTO agreements, all WTO members should be required
to adhere to new round agreements once they are finalized.
A new round should be completed expeditiously
according to an agreed timetable. Consideration should be given
to allowing for provisional implementation of agreements
concluded in advance of the agreed deadline but with leverage
retained to ensure that progress is made across all areas,
including difficult ones.
The United States should seek maximum
liberalization in market-access negotiations with bound
reductions in tariff and non-tariff barriers to agricultural
and industrial products and in the services sector, with as few
exceptions as possible. The negotiations on industrial products
should cover as many sectors as possible.
New round negotiations should not weaken existing
WTO agreements or create opportunities for the imposition of
new trade-restrictive measures or discriminatory treatment,
particularly with respect to new areas such as biotechnology
and e-commerce.
A new round should promote full implementation of
and compliance with existing WTO agreements. WTO members should
consider the provision of additional technical assistance to
developing countries to promote this goal.
The United States should align U.S. negotiating
objectives with promoting higher U.S. and global living
standards. Trade liberalization objectives that address basic
human needs should be a focus of the WTO negotiations.
ECAT believes that these principles can effectively guide
the formulation of U.S. objectives for a new round and can help
maximize the benefits of the negotiations to the U.S.
agricultural, manufacturing, and services sectors. ECAT's views
on the major areas that should be included in a new round are
provided below.
Agriculture
The agriculture negotiations should aim to secure
substantial, progressive reductions in support and protection,
including deep cuts in bound tariff rates and the elimination
of export subsidies. Negotiations should reduce average tariff
bindings over six years by 50 percent from current levels.
Tariff peaks should be reduced to levels that will not prohibit
imports. Negotiations should clarify that tariff-rate quotas
are transitional measures and provide for their phase-out.
Sectoral zero-for-zero tariff agreements should also be
encouraged.
The agriculture negotiations should seek further reductions
in trade-distorting domestic supports, both by reducing support
levels and by shifting to less trade-distorting support
mechanisms. The United States also should seek to eliminate the
monopoly control of state-trading entities (STEs) and
strengthen WTO rules to ensure that agricultural trade is
conducted on commercial terms.
As outlined in greater detail in the section of our
testimony describing our Food Chain Coalition proposal, ECAT
believes that the Seattle ministerial declaration should build
on the initiative being developed within APEC and establish a
global ``open food system.'' To this end, the ministerial
declaration should include language establishing a ``WTO
Working Party on the Creation of an Open Food System.''
General Agreement on Trade in Services (GATS)
The United States should pursue new negotiations to
liberalize trade in services, particularly financial services,
as part of a new round. The negotiations should seek to broaden
and deepen the liberalization commitments under the GATS.
Further liberalization of services trade will enhance global
growth, assist developing countries in obtaining the necessary
infrastructure to sustain development, and help restore
investor confidence in global markets.
The services negotiations should also include a review of
regulatory regimes in order to promote the creation of
transparent, impartial, and pro-competitive regulatory regimes
in local markets. The creation of such regimes is essential to
make the GATS national treatment and market-access commitments
meaningful.
In seeking expanded liberalization commitments, the United
States should aim to limit reservations to the greatest degree
possible. In particular, it should seek commitments to ensure
national treatment and the right of establishment, eliminate
restrictions on cross-border transactions, promote pro-
competitive regulatory reform, and remove obstacles to the free
movement of business personnel.
Market-Access Negotiations
A new round should include market-access negotiations to
remove tariff and non-tariff barriers in a wide range of
industrial sectors. The tariff negotiations on industrial
products should include new zero-for-zero tariff initiatives on
small engines and other industrial products. The negotiations
should also seek the elimination of tariff peaks and so-called
``nuisance'' tariffs of five percent or less.
The market-access negotiations should include efforts to
achieve tariff reductions in the eight ATL sectors to the
extent such reductions have not been finalized by the time of
the ministerial. As was recently endorsed by the APEC
Ministers, the market-access negotiations should cover the six
additional sectors identified in APEC for further
liberalization, particularly food products.
Textile and apparel tariffs, which remain very high
relative to other industrial products, also should be included
in market-access negotiations, with the goal of seeking further
reductions before the termination of textile and apparel quotas
in 2005. Finally, the negotiations should encompass efforts to
broaden membership in the Chemical Tariff Harmonization
Agreement (CTHA), with the understanding that no further
reductions in chemical tariffs should be considered until all
major chemical-producing nations are fully committed to the
CTHA.
Trade Facilitation
ECAT strongly supports the inclusion of business-
facilitation issues on the ministerial agenda. The United
States should seek a WTO agreement on trade facilitation that
would encompass the adoption of a binding WTO agreement based
on the rules contained in the International Convention on the
Simplification and Harmonization of Customs Procedures (Kyoto
Convention), a work program on trade facilitation, and a
commitment to simplify rules of origin. The United States
should encourage the WTO to focus its trade-facilitation
efforts on customs procedures and advocate the establishment of
a WTO working group on the harmonization and simplification of
customs procedures. The United States also should support the
simplification and harmonization of non-preferential rules of
origin, so that they no longer create unnecessary trade
impediments.
TRIPs Agreement
The United States should ensure that the full
implementation of the TRIPs agreement remains a priority under
the WTO built-in agenda. It should resist any effort by
developing countries to extend the year 2000 deadline for their
implementation of the agreement and support the provision of
technical assistance to developing countries to facilitate
implementation. It also should oppose the extension of the
moratorium on the application of WTO dispute settlement to
intellectual property cases in which there is no direct
violation of the TRIPs agreement.
The United States should oppose efforts to expand Article
27.3 of the TRIPs agreement, which provides that WTO members
may deny the patentability of certain plants and animals. Under
the WTO built-in agenda, this provision is to be reviewed four
years after the date of entry into force of the WTO agreement.
The review was originally intended to provide the opportunity
to eliminate or narrow the exclusion. Some WTO members are now
advocating that the review be used as the occasion to broaden
the exception based on concerns about the increasing use of
biotechnology in agriculture and other areas. While the United
States may not now be able to succeed in eliminating the
exception, it should nonetheless continue to oppose any
expansion of the exclusion.
ECAT also believes that strict enforcement of the TRIPs
agreement should remain a priority, particularly in the areas
of piracy of computer software, music CDs, and violations of
the trademarks of U.S.-branded products such as apparel.
Government Procurement
ECAT supports U.S. efforts to bring more countries into the
WTO Procurement Agreement, to broaden its coverage, and to
negotiate an agreement on transparency in procurement. The
United States should seek to conclude an agreement on
transparency by the time of the ministerial. It should include
requirements regarding the transparency of procurement laws and
regulations, adequate notice of bidding opportunities, use of
objective criteria in preparing bid specifications and in
evaluating bids, adequate dispute settlement, and WTO
notification of preference levels.
The transparency provisions of the Government Procurement
Agreement should be harmonized with the text of a new
transparency agreement.
Sanitary and Phytosanitary Standards (SPS) Agreement
The Uruguay Round produced a strong agreement on sanitary
and phytosanitary standards that requires such standards be
based on sound science. This agreement should be rigorously
enforced and should not be reopened in the course of new round
negotiations. The WTO rules should continue to require that
governments base regulations on the best scientific information
available and not impose an unattainable ``zero-risk''
standard. The United States should oppose any effort to allow
SPS standards to be imposed on any basis other than the current
sound science requirement, as it would substantially weaken the
agreement and create the opportunity for WTO members to use
health and safety regulations to create new trade barriers.
Dispute Settlement
While the WTO dispute settlement process has overall been a
strong enforcement mechanism for WTO rules and market-access
commitments, the process can be strengthened. For example,
procedural reforms in the areas of expediting the timetable for
the dispute settlement panel process and implementation of
panel and appellate body reports should be considered.
E-Commerce
E-commerce is an increasingly important venue for
international trade throughout all sectors of the economy. It
is imperative that WTO rules address trade barriers and other
trade-related aspects of e-commerce. ECAT believes that a top
priority for the Seattle ministerial should be to make the
current standstill regarding tariffs on electronic
transmissions permanent.
ECAT's Food Chain Coalition
Objectives
ECAT has formed a Food Chain Coalition to promote the
elimination of major barriers to food trade affecting the
agricultural, manufacturing, and services sectors within the
WTO. The Coalition has three primary objectives: 1) providing a
framework for focusing on a key area in which trade
liberalization meets basic human needs; 2) extending the trade
liberalization component of the APEC Food System concept into
the WTO; and 3) creating greater leverage to pursue improved
market access and other goals in a new round by facilitating a
cross alliance of interests organized around barriers to food
production and distribution. There are several reasons ECAT has
chosen to take this unusual step.
First, ECAT has learned from its TradeWorks trade education
focus group research that supporters of global trade expansion
must demonstrate the importance of trade to the daily lives of
American workers and their families to enjoy their support for
liberalization. This theme is echoed in the Administration's
call for putting a ``human face'' on trade. One of the most
compelling ways that we can emphasize the human dimension of
global trade liberalization is by eliminating barriers to food
trade. This will make food supplies more secure, stabilize
prices in world markets, and improve access to needed
foodstuffs.
Second, the Food Chain Coalition can build on the momentum
within APEC for an open food system by extending its trade-
liberalization objectives to the WTO. The Information
Technology Agreement and the current Accelerated Tariff
Liberalization negotiations provide ample precedent for the
incorporation of APEC initiatives into the WTO system.
Third, the Food Chain Coalition expresses the broad
interest in agri-food trade liberalization. That interest
extends well beyond farmers to the people who supply them with
seeds, chemicals, fertilizer, equipment, and capital and to
those who handle, transport, process, finance, and market food
products. In using the elimination of barriers to trade and
investment at all levels of the food chain as an organizing
principle, the Food Chain Coalition seeks to create cross-
sectoral alliances in support of common negotiating priorities,
such as eliminating export subsidies, zeroing out tariffs, and
eliminating investment restrictions. The Food Chain Coalition
also enables business to express its shared stake in open
markets. People must be well and reliably fed before they can
become regular customers for other goods and services. Focusing
on the shared interests in economic development and
liberalization enables businesses and governments to build a
new set of alliances and common interests that will increase
the potential for success in new round negotiations.
The Coalition covers a broad spectrum of issues--ranging
from traditional agricultural tariff, quota, and, export
subsidy matters to the intellectual property, regulatory,
labeling, and import-restriction questions raised by a new
generation of biotechnology products. It covers agri-food
products themselves, as well as equipment, machinery, financial
services, and other inputs that go into a modern food system.
By reaching outside the traditional core of companies and
groups involved in agricultural trade issues to equipment,
chemical, pharmaceutical, apparel, financial, and other
industries that are increasingly affected by food issues, the
Coalition will garner broader domestic and international
support for its priority negotiating objectives. The Food Chain
Coalition also will focus attention on issues that directly
affect the welfare and health of hundreds of millions of people
now joining the global economy, thereby putting a ``human
face'' on trade.
Priorities for the WTO Ministerial
The 1999 WTO ministerial provides an historic opportunity
for the United States to shape the world trade agenda into the
next century and to lay the foundation in particular for global
liberalization of food trade. To that end, the Coalition
supports the inclusion of language in the ministerial
declaration establishing a WTO ``Working Party on the Creation
of an Open Food System.''
The Coalition would like to see the working party examine
not only traditional liberalization initiatives, but also other
issues, such as achieving food security through a principle of
non-discrimination, that are integral to meeting the challenge
of providing the world's growing population affordable,
abundant, nutritious, and environmentally sustainable food
supplies. Among the novel issues to be addressed should be
providing technical assistance to developing countries on rural
development strategies, sanitary and phytosanitary standards
issues, and the use of trade and financial risk tools to
enhance food security.
Priorities for the WTO New Round
The Coalition sees this broader, more integrated strategy
as critical to achieving its fundamental goal in this
historically sensitive area--more open markets for the products
and services involved in the production and distribution of
food. In particular, the Coalition urges the United States to
seek ``zero-for-zero'' tariff harmonization on agri-food
products wherever possible. The Coalition also supports the
initiation of ``zero-for-zero'' tariff negotiations on engines
and engine systems and the expansion of the existing ``zero-
for-zero'' tariff agreements for construction and agricultural
equipment to include a greater number of WTO member countries.
The Coalition also believes that the elimination of
agricultural export subsidies should be a priority in a new
round.
Conclusion
The Trade Subcommittee's hearing today is a vitally
important part of the overall effort that must be made by the
Administration, the Congress, and the U.S. business community
to work together to forge a trade-expanding agenda for the
Seattle WTO ministerial and a new WTO round. ECAT looks forward
to continuing to work with you, Mr. Chairman, and other Trade
Subcommittee members on negotiating objectives for the new
round and in particular on our Food Chain Coalition project.
I appreciate the opportunity to present ECAT's views and
would be happy to answer any questions subcommittee members may
have.
Chairman Crane. Thank you, Mr. Micek.
And next Mr. O'Hare.
STATEMENT OF DEAN R. O'HARE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, CHUBB CORPORATION, WARREN, NEW JERSEY, AND CHAIRMAN,
COALITION OF SERVICE INDUSTRIES
Mr. O'Hare. Mr. Chairman and Members of the Subcommittee, I
am Dean O'Hare, chairman and CEO of the Chubb Corp. It is my
pleasure to appear today in my capacity as chairman of the
Coalition of Service Industries.
We believe that the ability of the U.S. services economy to
generate new jobs and GDP depends on an aggressive trade policy
that opens new markets for our businesses. In my own company,
we could not maintain our U.S. employment base or survive long
term if we were not expanding abroad.
The U.S. nonlife-insurance market is mature, and its growth
rate is low. We now generate almost 25 percent of our premium
income from outside the United States, and I expect that figure
to rise substantially.
Our experience supports the point that you cannot sell
services to people unless you are in the local market. Our
firm's foreign operations do not cost U.S. jobs. They help to
maintain our employment base in the United States. There is no
question that U.S. service industries are among the most
competitive in the world. Nonetheless, we have formidable
foreign corporate rivals wanting to clean our clock. This is
why we need an aggressive U.S. trade policy strongly led by
both the administration and Congress, and equally strongly
supported by the business community. That policy should be
clearly focused on trade expansion through the WTO across a
broad range of service sectors.
It also means that we must pursue tax policies that promote
our competitiveness, such as the McCrery-Neal active financing
bill.
In the coming negotiations, the services sector wants free,
open, contestable, competitive markets for its products. These
conditions can be obtained by getting our trade partners to
commit to, first, ensure the right of U.S. companies to
establish operations in foreign markets and to wholly own them.
Second, ensure that U.S. companies receive national
treatment so that they have the same rights as domestic
companies.
Third, promote procompetitive regulatory reform focused on
appropriate and consistent rules as well as transparency and
impartiality of regulatory administration.
Fourth, remove barriers to greater cross-border trade.
And, finally, remove obstacles to the free movement of key
businesspersonnel and business information.
CSI, along with a number of other organizations, has
submitted more detailed objectives to the USTR, and I ask with
your permission, Mr. Chairman, that our submission be included
in the record. We, and our many associated industries, will
continue to work closely with our negotiators in defining
precise negotiating goals.
Most importantly, CSI is organizing the first World
Services Congress in Atlanta, November 1 through 3, to provide
strong support for the Services 2000 negotiations. We believe
that in order to complete the new round of negotiations by
2003, the content of the round must be manageable. We prefer a
negotiation focused on the core items of service, agriculture,
and industrial products.
With the possibility that early agreements could be reached
in one or more service sectors, we would like the flexibility
to put these into force so as not to lose the economic
advantages they would offer.
Specific goals for the service sector include, first,
extending the coverage of GATS commitments; second, exploring
alternative innovative negotiating techniques to speed up
services sector negotiations; third, pursuing procompetitive
regulatory reform principles; and fourth, creating an open
environment for the development of electronic commerce.
In short, Mr. Chairman, we have a very full plate of issues
pressing for resolution in the new round. To achieve them, we
believe the round must be kept short and that its content be
manageable and achievable within a 3-year timeframe.
Markets move too fast to give us the luxury of a decade-
long negotiation. We need greater market advice as soon as it
can be negotiated.
Thank you for the opportunity to express these views.
Chairman Crane. Thank you, Mr. O'Hare.
[The prepared statement and attachment follow:]
Statement of Dean O'Hare, Chairman and Chief Executive Officer, Chubb
Corporation, Warren, New Jersey, and Chairman, Coalition of Service
Industries
It is a pleasure to appear today to present the views of
the Coalition of Service Industries (CSI) on US preparations
for the World Trade Organization (WTO) Ministerial Meeting in
Seattle, specific objectives for the negotiations, and the
anticipated impact of a successful new round of WTO
negotiations on jobs, wages, economic opportunity, and the
future competitiveness of US service providers.
CSI was established in 1982 to create greater public
awareness of the major role services industries play in our
national economy; promote the expansion of business
opportunities abroad for US service companies; advocate an
increased focus on liberalization of trade in services in
international trade negotiations; and encourage US leadership
in obtaining a fair and competitive global marketplace.
CSI members include an array of US service industries
including the financial, telecommunications, professional,
travel, transportation and air cargo, information and
information technology sectors. Included in the broader
coalition of sectors with which we work are energy services,
advertising, entertainment, retail distribution, and education.
CSI has been active in multilateral trade negotiations
since before the Uruguay Round and has played an aggressive
advocacy role in writing the General Agreement on Trade in
Services and obtaining successful WTO negotiations in
telecommunications and financial services.
Today I would like to address (1) the critical importance
of services and services trade liberalization to the US trade
balance, jobs, innovation and competitiveness, (2) the WTO
``Services 2000'' negotiations as an exceptional opportunity
for US services firms to expand their operations abroad, and
(3) some recommendations for shaping the coming round in a way
that will produce the greatest benefit for all key sectors of
the US economy.
Importance of Services and Services Trade to the US Economy
Because US trade policy has in the past been dominated by
concerns about trade in goods, it is always useful to remind
policymakers about the key role services play now and will play
in the information-based global economy.
In overall terms, the US service sector comprised 77.2
percent of US GDP, and 78.8 percent of private sector.
[GRAPHIC] [TIFF OMITTED] T5092.002
In 1998, the US created 2.9 million net new jobs, all in
the service sector, only slightly fewer than the 3.2 million
service sector jobs created in 1997.
[GRAPHIC] [TIFF OMITTED] T5092.003
The US is the world's largest exporter and importer of
services. In 1998, US services exports were $260.3 billion,
while imports were $180.8 billion, producing a trade in
services surplus of $79.4 billion. Services comprise nearly 30
percent of US exports. The US recorded a services surplus of
$6.9 billion in May of this year, exporting $23.0 billion while
importing $16.1 billion.
US service industries are among the most competitive in the
world. Our competitive advantage is immeasurably strengthened
by the US ability to enrich our service products with the
latest information technologies. US services companies are
technology leaders whose expertise and innovation have
contributed to US productivity growth across a broad range of
sectors. Engagement in diverse foreign markets provides new
opportunities to develop innovative services products and new
technologies.
It is also important to remember that services are an
integral component of trade in agricultural and manufactured
products. It is up to the distribution sector to get goods from
the seller to the buyer, up to the consumer credit sector to
provide financing for the purchase of new goods, and up to the
insurance sector to provide coverage for plants that
manufacture everything from shoes to airplanes. These
relationships make services important to the international
competitiveness of many sectors of the US economy.
We are entering the ``Third Wave'' information-based
economy of the 21st Century as the world's strongest
competitor. This does not, however, mean that we do not have
formidable rivals. In insurance, banking, telecommunications,
transportation and many other fields there are strong foreign
companies aching to ``clean our clock.'' And, although the
ready availability of information and the rapid growth of new
technologies enhances the competitive position of our own
companies, it also readily empowers our competitors from around
the globe.
This is why we need an aggressive US trade policy strongly
led by both the Administration and Congress, and equally
strongly supported by the business community.
We need a trade policy clearly focussed on trade expansion,
which means using the WTO and the next round to obtain
meaningful liberalization. This means too, that we must pursue
domestic tax and regulatory policies that promote the
competitiveness of our companies so that they do not enter the
international arena ring carrying a competitive burden of our
own making.
I would also like to point out that while U.S. trade policy
has concentrated on opening world markets to U.S. companies,
our tax policy has not always moved in the same direction. U.S.
international tax laws are complex, cumbersome, and can stifle
the competitiveness of U.S. companies doing business overseas.
Because of this, international tax reform is a critical element
of an effective U.S. trade policy.
As trade policy moves into the 21 Century, it seems our
international tax policy still reflects the business
environment of the 1960's. That is why we are encouraged by the
recent language on tax deferral in the Financial Freedom Act
and its Democratic substitute--this is an important first step
in rationalizing our US international tax rules. CSI has
championed strongly the McCrery-Neal permanent active financing
bill and the provisions in H.R.2018, the International Tax
Simplification for American Competitiveness Act of 1999 that
provide an exception to subpart F for financial services active
business foreign earnings. CSI would like to thank Chairman
Archer, Congressmen Rangel, McCrery, Neal, Houghton, Levin and
other members of the committee who are helping to secure an
extension of deferral for America's financial services
industry; this extension will foster a more equitable and
competitive environment for US business in the international
marketplace.
A word about jobs--US jobs. Services companies have mainly
grown abroad by establishing operations in foreign markets (in
GATS parlance this is Mode 3 or ``commercial presence''). This
has been necessary because in most service sectors you can only
sell and deliver services locally. Foreign operations do not
cost jobs, in fact, they support thousands and thousands of new
US jobs that wouldn't exist otherwise.
In my own company, for example, we could not maintain our
US employment base or survive long-term, if we were not
expanding abroad. The US non-life insurance market is mature
and its growth rate is low. We now generate almost 25% of our
premium income from outside the United States, and I expect
that figure to rise substantially in the future. But, our
engagement abroad not only helps our business--it also serves
as a bridge for many of our customers to export from the US or
invest abroad.
Here are a few examples illustrating the stake of US
service industries in expanded global markets.
Travel and tourism contributed over $25 billion to
the services trade surplus in 1997. This is the largest
sectoral contribution to the overall services surplus. In
addition, travel and tourism are estimated to support over
seven million direct jobs and generate roughly $71 billion in
tax revenues for federal, state and local governments.
Business, professional and technical services is a
largely unrecognized powerhouse in American trade. In 1997, we
exported more than $21 billion in these services and we had a
$16 billion trade surplus. These data do not include the
earnings from foreign investments and foreign affiliates, which
are very substantial. Trade in business, professional and
technical services--such as accounting, legal, engineering,
architectural and consulting services--is especially important
because it frequently paves the way for trade and investment in
other service and manufacturing sectors.
Telecommunications services are an integral
component of operations of all businesses, and are essential in
promoting domestic and global growth. Telecommunications
services provide the necessary infrastructure for the
development and continued expansion of the information society
and electronic commerce. An estimated $725 billion in revenue
was generated in 1997, and projections for the next five years
indicate that traded telecommunications services will increase
at about 20 percent annually for outbound calls from the US to
foreign markets.
The information technology industry is also
dependent on trade and trade expansion. The WTO estimates that
over the next five years, sales over the Internet will double
each year.
The US asset management industry is the largest in
the world. It is estimated that by 2002, 51% of total asset
management revenue of $160 billion will come from abroad, not
the US. Today, US-domiciled investment managers manage 14% of
the total of non-US retirement plan assets and 5% of non-US
mutual fund assets.
US law firms, when billing foreign clients,
produce services exports. Overall US legal services exports
approach $1.0 billion.
Foreign students coming to American schools, net
after scholarship and local assistance, spent $8.3 billion in
the US, which is a US services export. We have a surplus in
trade in education services of $7.0 billion.
Although few doctors imagine themselves as US
exporters, medical services rendered in the US to foreign
citizens produced an export surplus of $0.5 billion.
Air cargo transport accounts for well over a third
of the value of the world trade in merchandise. However,
restrictions on market access (including cabotage), ownership
and control, the right of establishment, capacity, frequencies,
intermodal operations in connection with air services, wet
leasing, customs, groundhandling, the environment in particular
local airport access times, all limit the ability of cargo
carriers to plan their operations purely on the basis of
commercial and operational considerations. A WTO framework
could provide cargo carriers with clear rules addressing these
problems and resulting in enhanced delivery options to the
benefit of businesses, shippers and consumers worldwide.
Energy services have received little attention in
trade negotiations to date. But drastic changes in the
international and domestic business climate for this industry--
which in the US accounts for 1.4 million jobs and about 7% of
US GDP--have shown the need for global trading rules, which can
provide new, common understandings on such key matters as
monopoly power, anti-competitive practices and discrimination
against new market entrants, including of course US companies.
Thus the energy services industry looks to the coming round as
a critically important opportunity to map out a blueprint for
market access and free competition in energy services.
The challenges facing many services sectors underscore the
need for strong, united leadership as we enter the new round.
It also means we must structure this round to make sure it is a
success.
WTO ``Services 2000''--the Opportunity We've Been Waiting For
The services sector has been working toward the Services
2000 negotiations for 20 years. First came the effort to
convince governments that services--like goods--could be part
of a trade negotiation. CSI itself was founded on the
conviction that services firms needed a place in the
multilateral trading system, and our founding members worked
hard on behalf of the entire sector to ensure that services
were included in the Uruguay Round.
In the coming negotiations, services will, for the first
time, take a front seat in the negotiations as part of the
required agenda. Virtually all of the services sectors can be
subject to negotiation in this round. With 135 member
governments now participating in its rules-based system, and
with more accessions pending, the WTO and its mandated
``Services 2000'' negotiations gives the US services industry
an unprecedented opportunity to secure meaningful services
trade liberalization from our trading partners.
``Services 2000'': Goals for US Industry
While previous negotiations have produced important
liberalizations for service industries, all industries in the
service sector face uneven implementation of past commitments
and continued foreign impediments to open markets.
What the services sector wants is free, open, contestable,
competitive markets for its products. These conditions can be
obtained by getting our trading partners to commit to:
Ensure the right of US companies to establish
operations in foreign markets, including the right to wholly
own these investments;
Ensure that US companies get ``national
treatment,'' so that foreign investors have the same rights as
domestic companies in a given market;
Promote pro-competitive regulatory reform focused
on adequacy of appropriate and consistent rules as well as
transparency and impartiality of regulatory administration;
Remove barriers to greater cross-border trade; and
Remove obstacles to the free movement of people
and business information.
CSI, along with a number of other organizations has
submitted to the US Trade Representative more detailed
objectives for removing trade barriers. I ask that these
recommendations, covering 8 sectors, be included in the record
of this hearing. These will soon be updated to include
additional sections on air cargo and energy services.
We believe the coming negotiation should be completed by
January 1, 2003. In terms of trade negotiations, this is short.
In terms of the realities of the marketplace, it is a long time
for companies that are seeking to expand their business
operations abroad.
To make the most of the exceptional opportunity offered by
Services 2000 it is essential that the content of the broader
round be manageable so that there is a reasonable chance of
completing the round by 2003. This means a negotiation focussed
on the core built-in items, like services and agriculture, plus
industrial products. Other elements, on which there is no
broadly shared consensus among the WTO contracting parties,
like an overarching agreement on international investment and
competition policy, should not be attempted in this short
round. Resolving these issues in the long run may well be
important and useful, but they will require a different
negotiating framework.
There has been a good deal of comment about the concept of
the ``single undertaking'' and early harvests or early
agreements. On the possibly slim chance that an agreement could
be quickly reached in a given sector, we believe that agreement
should be allowed to come into force before 2003. It would be
unfair to require such an agreement be held up until the
completion of the entire round; this would simply deny the
companies in question and their workers the benefits of the new
business opportunities the agreement would create.
Extending the Coverage of GATS Commitments
The most telling criticism of the GATS is the lack of
commitments to liberalize. The new negotiations must secure
commitment to national treatment, market access, and cross
border services in as many sectors as possible. Current
exceptions are too broad, and must be honed so only the most
sensitive issues are excluded.
The need to improve commitments to open trade in cross
border services (mode one) and consumption abroad (mode two) is
even more important if electronic commerce is to achieve its
full development. Electronic commerce as a technology for the
supply of services cannot begin to reach its potential without
significant new market-opening commitments in virtually all
industry sectors. The ability to provide services across
borders is a necessary prerequisite of the robust development
of electronic commerce. If the cross border supply of services
is not enabled by commitments in modes one and two, electronic
commerce will be constrained to narrow national markets.
Innovative Negotiating Techniques
We strongly encourage the effort to speed up negotiations
in the service sector by finding alternatives to the
inefficient, ``request/offer'' method of negotiations that has
been used to date.
One of these would be to adopt ``horizontal'' agreements
that would apply to all sectors. For example, why not ask that
our trading partners commit, across the board, to allow foreign
companies to establish business operations freely, without
special license and to permit them to be majority owned?
Exceptions to this general rule would be allowed, but in
attempting the general rule we would be setting a high
benchmark that would take us a long way to a successful
negotiation, that could be completed by the 2003 deadline.
Regulatory Reform
Regulations are easily used to frustrate and nullify hard
won market access and national treatment commitments.
Regulatory reform that is ``pro-competitive'' should be a major
focus of the new negotiations. For example, attention needs to
be given to instances where incumbent producers have dominant
positions because of outdated restrictions on market entrance,
product innovation, and pricing flexibility.
CSI is intent on pursuing pro-competitive regulatory reform
in sectors where it makes sense, such as in insurance and
perhaps other financial services sectors. This will require WTO
members to make adjustments in their regulatory regimes. These
changes should create a transparent framework of rules that
will permit markets to operate as freely as possible while
providing necessary protections, such as ensuring the safety
and soundness of financial institution.
Creating an Open Environment for the Development of Electronic Commerce
International trade in virtually all services sectors,
particularly cross-border trade, will be conducted to an
increasing extent by electronic means. Electronic commerce and
the Internet are a new technology to facilitate trade,
particularly from business-to-business. Our goal should be to
preserve the free-est and most open applications of these
technologies to the enhancement of all forms of trade.
We believe that the cross-border supply of services by
electronic means is covered by existing GATS commitments.
Countries' commitments apply to transactions whether by
digital, or traditional, forms of communication.
We believe that at the Seattle Ministerial Meeting of the
WTO, Governments should:
Make permanent the moratorium on Customs Duties on
Electronic Transmissions;
Reaffirm that existing WTO disciplines and
commitments apply to electronic commerce;
Agree to refrain from enacting measures that would
impede electronic commerce; and
Agree to assess whether national measures
affecting electronic commerce are pro-competitive, and
eliminate regulations that impede it.
Conclusion
The coming negotiations are an important milestone. They
offer the opportunity to move considerably beyond the status
quo to make progress in opening up trade in all service
industry sectors. As an important step toward ``Services
2000,'' CSI is organizing the first World Services Congress in
Atlanta on November 1-3 of this year to provide strong support
for the negotiations. It is important that the 2000
negotiations not be hindered by the effort to negotiate issues
that are too contentious and would make the round unmanageable.
Finally, if the round is to succeed, it must have the full
support of the Administration and the Congress.
Coalition of Service Industries
Response To
Federal Register Notice of August 19, 1998 [FR Doc. 98-
22279]
Solicitation of Public Comment Regarding U.S. Preparations
for the World Trade Organization's Ministerial Meeting, Fourth
Quarter 1999
Introduction
The Coalition of Service Industries, in coordination with
the Air Courier Conference of America, the Information
Technology Association of America, the International
Communications Association, and the United States Council for
International Business is pleased to submit our recommendations
to the United States Trade Representative (USTR) pursuant to
the Federal Register Notice of August 19, 1998: Solicitation of
Public Comment Regarding U.S. Preparations for the World Trade
Organization's Ministerial Meeting, Fourth Quarter 1999. We
appreciate the opportunity to provide these comments and look
forward to continuing to consult with the USTR and all involved
government agencies as we work toward launching and a
successful conclusion of the negotiations.
Organizations which assumed primary responsibility for the
initial drafting of specific portions of this submission are as
follows:
I. General Issues--Coalition of Service Industries
II. Distribution--National Retail Federation
III. Express Delivery--Air Courier Conference of America
IV. Financial Services--Coalition of Service Industries
V. Health Care--U.S. Council for International Business
VI. Information Technology--Information Technology
Association of America
VII. Professional and Business-Related Services--Coalition
of Service Industries
VIII. Telecommunications--International Communications
Association
IX. Travel and Tourism--Coalition of Service Industries
Other associations that have been involved in the process
of reviewing and commenting on this submission include the Air
Transportation Association of America, the American Hotel and
Motel Association, The Council of Insurance Agents and Brokers,
the American Bar Association, the American Consulting Engineers
Council, the American Institute of Architects, the American
Institute of Certified Public Accountants, the American
Insurance Association, the Consumer Bankers Association, the
Investment Company Institute, the American Council on Life
Insurance, the National Society for Professional Engineers, and
the Securities Industry Association.
I. General Issues
A. Importance of the Services 2000 Round
Multilateral trade negotiations in services are complex and
have had a short history. The global trading community is only
at the beginning of a process of removing complex barriers to
free trade in services through negotiation.
The Services 2000 Round is, therefore, a critical element
in maintaining and expanding world prosperity--the first in
which we can apply lessons learned about the structure of the
GATS and the difficult specialized services negotiating
process. In general, the overarching objective of the United
States Government in the negotiations should be to both broaden
and deepen the commitments made in the GATS. Contestable
markets in every sector and in every WTO member is the ultimate
goal.
Trade liberalization through Services 2000 offers the main
chance for a quantum leap in world prosperity. The new
industrial revolution--the information revolution or the
``Third Wave''--has made innovation and efficiency in the
production of services integral to economic growth. Services
inputs are now a central factor in competitive success in
manufacturing and agriculture. Telecommunications,
transportation, finance, insurance, distribution and
information services underpin all forms of international trade
and all aspects of global economic activity.
To maximize opportunities of Services 2000 it is essential
that the format for the broader negotiations permits sufficient
allocation of resources to the GATS negotiation and does not
hamper reaching substantive agreements on services in a short
time frame.
We believe that the following factors should come to bear
toward a successful new effort in services.
A sound basis for making substantial progress in
services in the 2000 negotiations exists. Progress made in
sectors such as telecommunications and financial services is
due to the realization by developing economies that services
are the basis for economic modernization.
The tumultuous financial and economic stresses of
the past year will lead not to retrenchment, but instead will
further progress toward liberalization.
Through several rounds of negotiations under the
WTO, countries learned to negotiate within the complex GATS
framework.
B. Structural and Negotiating Issues
Since its conclusion in 1994 the GATS has drawn
considerable criticism because of its complex structure which
facilitates obfuscation, not liberalization. In this paper, we
will not elaborate on the reasons for this. Instead, the
primary issue for negotiators is whether in these negotiations
the failings of the GATS architecture should be addressed.
We believe the answer must be derived from the twin
objectives of (1) obtaining maximum liberalization in (2) the
shortest time. If improvements in the GATS structure can be
made quickly and in a way that facilitates the liberalization
process, then it is a worthwhile effort. Otherwise, trade
liberalization should not be delayed by a concentration of
resources on structural GATS reform. In our view, GATS reform
is secondary to liberalization.
Classification and Dynamic Definition of Services
The existing classification of services used in the GATS is
outdated and inadequate. It omits certain services and
inappropriately categorizes others. It should be revised to
reflect accurately the real structure of services industries in
order to facilitate the removal of barriers to trade in those
services. We make specific recommendations with regard to
classification in the sectoral sections of this submission.
However, we feel that another useful exercise would be to
review the classification scheme across sectors so as to
rationalize the entire structure to reduce overlap and
redundancy where appropriate. This has not been undertaken as a
part of this submission.
Extending the Coverage of GATS Commitments
Apart from the issues of GATS architectural reform is the
need to broaden and deepen the substantive commitments to
liberalization made within the GATS. The GATS lacks, for the
most part, substantive commitments. The new negotiations must
secure broader commitments to national treatment and market
access in as many sectors as possible. Current scheduled
exceptions are too broad, and must be honed so only the most
sensitive issues are excluded.
Innovative Negotiating Strategies
We urge negotiators to explore options in developing
generic or formulaic approaches to negotiating the
liberalization of market access barriers, including negative
list schedules, sectoral commitments, horizontal commitments of
revised modes of supply, and other approaches which can move
beyond the traditional ``request-offer'' format and speed the
conclusion of agreements.
C. Regulatory Reform
In order to pursue meaningful services negotiations, WTO
members will have to consider making adjustments to their
regulatory regimes. ``Regulatory reform'' is a common set of
principles that should be used as a guide or a test to
regulations in individual sectors. Sometimes referred to as
``pro-competitive'' regulatory principles, they create a
transparent framework of rules that permit markets to operate
as freely as possible while providing necessary protections--
for example in the case of the banking sector, ensuring safety
and soundness.
The ``Reference Paper'' negotiated as part of the WTO
Agreement on Basic Telecommunications is a model that should
guide the development of a framework for dealing with
regulatory reforms in the Services 2000 Negotiations. The
regulatory principles embodied in this paper have already had
an important influence on reshaping national regulatory systems
towards a more market-oriented approach. The key is effective
implementation of those principles--in their common, pro-
competitive, open market interpretation and application. We
must learn from experience. The Reference Paper, we are
discovering, must be interpreted clearly and forcefully for
dispute settlement to be effective in most instances. Similar
initiatives in other sectors should attempt to include specific
and targeted language where possible.
Regulation should ensure that consumers (users) have access
to quality, reasonably-priced services that are available from
reliable producers. Government's role is to promote fair
competition, protecting buyers from misleading, collusive, and
other anti-competitive practices. Regulation should have four
central attributes:
Adequacy: it should be sufficient to rectify
serious market imperfections and thus protect the public.
Impartiality: governments should accord no one or
no group of competitors, foreign or domestic, a more favorable
position than accorded other competitors.
Least intrusive: governments should apply
regulation in ways that efficiently opens that market and that
least disrupt the smooth functioning of markets once opened.
Transparency: laws and regulations should be
easily available to the public, and the processes for arriving
at regulations should be open and accessible to the public for
comment.
There is a substantial basis of support in certain industry
sectors for efforts to achieve ``regulatory reform.''
Regulations are easily used to frustrate market access and
national treatment commitments. Regulatory conflicts are often
a major source of trade disputes. Countries should have an
interest in regulatory reform because it is a key to reviving
high growth rates. This area should be a major focus of the new
negotiations, especially where incumbent producers have
monopoly or residual market power as a result of their
incumbency or historic position.
D. Electronic Commerce
International trade in services, particularly cross-border
trade, is conducted to a large and increasing extent through
electronic means. Computer technology has made many services
tradable, which until recently were not. Electronic commerce
and the Internet have thus added a new technological means of
facilitating trade, adding digitized information flows to
physical flows, much as ships increased trade over merely land-
based movement of goods.
The supply of services by electronic means can take place
in any of the four modes set out in the GATS framework, just as
the supply of services by physical means can. Accordingly, the
supply of services by electronic technology is covered by the
GATS in the same way as all other means of delivery. Countries'
commitments in the GATS apply to transactions whether by
digital, or traditional, forms of communication.
We reject the idea that there is a class of services that
can be labeled electronic commerce and thus be negotiated
separately. There may be services products that result from
wholly new technological applications or inventions that might
be identified as electronic commerce, but these are more
appropriately labeled ``information technology services,'' or
services within specific sectors. Barriers to these new forms
of services can be negotiated by sector or in a separate
information technology services sector.
On the other hand, it is also necessary to recognize the
relationship between electronic commerce and specific industry
sectors. Electronic commerce as a means of delivery cannot
reach its full potential without significant commitments in
virtually every industry sector. The ability to provide
services across borders is a necessary prerequisite for the
robust development and growth of electronic commerce. If
service provision across borders is not permitted, then the
ability to deliver those services electronically will be
constrained and fragmented in national markets.
E. Government Procurement
Governments spend billions of dollars on procurement of
services. In many countries this procurement is conducted in
closed processes that work against foreign suppliers. A two-
pronged effort is now under way in the WTO. One prong of this
effort is to achieve agreement on transparency measures so that
all WTO members can commit themselves to transparent procedures
without yet making new commitments to market access and
national treatment. The other is to simplify the existing
Agreement on Government Procurement which has 27 signatories,
including the U.S., to increase its adoption by member
countries. The core of this document would remain a commitment
to permit foreign bidders to receive national treatment as they
compete for government awards. We understand that government
procurement is a sensitive subject and that commitments in this
area may need to be phased over a period of time. However, we
also feel it is an important area for progress to be made. The
impact of governments being able to obtain services globally is
quite substantial. The possibility is to dramatically improve
the services which governments provide to their citizens, and
to lower costs. This will have a beneficial effect on economies
and society worldwide.
We support the goal of the Quad to achieve a Transparency
Agreement in 1999. In addition, we feel that there are a set of
overall objectives for services which need to be achieved in
this area. Whether these objectives can best be met through
existing mechanisms or through the Services 2000 negotiations
is of less consequence to us than the fact that they are
actually achieved. Therefore, we believe that the objectives in
this area should be the following:
Insure transparency.
Insure access to an independent appeals and
dispute resolution process.
Insure full market access and national treatment.
F. Conclusion
The Services 2000 Negotiations, thus, are an important
milestone. They offer the opportunity to move considerably
beyond the status quo and to make progress in all service
industry sectors. It is important not to be sidetracked by
architectural and negotiating structure, rather all the effort
should focus on achieving further liberalization of services
and the inclusion of regulatory reform and government
procurement.
II. Distribution Services
A. Sector Status
The U.S. retail industry, represented by its trade
association, the National Retail Federation (NRF), strongly
supports negotiations at the World Trade Organization (WTO) to
further liberalize trade in distribution services. A growing
number of U.S. retailers recognize that there are many
attractive business opportunities outside the United States.
Many foreign countries have a growing middle class that
increasingly demands the quality of service and broad selection
of products that U.S. retailers can offer at competitive
prices. At the same time, many of these countries have
comparatively few retail outlets per capita.
Retail opportunities abound even in mature markets where
one increasingly sees the business signs of familiar U.S.
stores in many downtown and suburban shopping areas.
Notwithstanding the current global economic situation, many
U.S. department, specialty, discount, and mass merchandise
retail companies have opened stores abroad and are looking to
expand their foreign operations to meet this growing consumer
demand outside the United States.
In the Uruguay Round General Agreement on Trade and
Services (GATS), a number of countries agreed to include
commitments in their GATS schedules to bind at least some part
of trade in distribution services under the rules of the WTO.
These countries include our largest trading partners--Canada,
Mexico, the European Union, and Japan. Among the general
categories included under distribution services:
33 countries scheduled commitments on retail
services.
34 countries scheduled commitments on wholesale
services.
23 countries scheduled commitments on franchising.
21 countries scheduled commitments on commercial
agents.
2 countries scheduled under ``other'' distribution
services.
In many instances, these scheduled concessions were rather
modest and included broad exceptions.
B. Classification
The WTO Services Sectoral Classification List defines
``distribution services'' as encompassing retailing,
wholesaling, franchising, and commission agents. This
definition is, however, quite broad and somewhat vague.
Therefore, negotiations at the WTO in this sector must take
into consideration the entire network of activities that are
necessary to support retail and other distribution services
operations. For example, in the negotiations between the United
States and China on China's accession to the WTO, the area of
distribution services covers all activities that support retail
and other distribution services operation, from the port of
entry to the store, and ultimately to the customer--e.g.,
customs clearance, storage and warehousing services; road,
rail, water, and air transportation services; marketing; after-
sales services and customer support; control of distribution
networks and wholesale outlets; and protection of retail
trademarks. It is necessary to recognize that barriers in any
of these areas will disrupt the efficient operation of the
distribution chain and, in order to support successful retail
and other distribution services operations, barriers in all
areas supporting distribution services operations must be
addressed in some manner.
C. Barriers
In many countries, opportunities for U.S. retailers and
other providers of distribution services to establish and
maintain and commercial presence are limited by various laws,
regulations, and policies. Some countries have protected their
small stores from competition by limiting the size of retail
establishments and placing arbitrary and onerous restrictions
on where they may locate, price they may charge, and how they
may promote products. Restrictions imposed by countries to
protect so-called `` cultural industries'' have significantly
hindered the establishment of retail operations by large U.S.
booksellers. U.S. direct sellers and other retail companies
have been severely hampered in establishing and/or expanding
business operations in countries as a result of local sourcing
requirements, and tight limitations over ownership and control
of distribution systems. Restrictions on investment,
limitations on foreign ownership, restrictions on opening
hours, constraints on the typesducts that may be sold to
protect local monopolies, lack of adequate protection for
retail trademarks, and the non-transparent and arbitrary
application of commercial laws and regulations are further
examples of barriers facing U.S. retailers. In addition, some
countries have undermined the value of commitments they have
already scheduled at the WTO on distribution services by
including broad exceptions permitting restrictions to be
imposed under a vague ``economic needs test.''
The reduction of such barriers to trade in distribution
services warrants greater attention through specific sectoral
negotiations at the WTO for several reasons. Since trade in
distribution services includes wholesaling, retailing, and
franchising, this sector represents the last link in the trade
chain to the consumer and is, therefore, essential to a well-
functioning free and open trading regime. Larger retail
establishments are more likely to sell imported along with
domestically-made products. Moreover, market access is only
meaningful if goods can be effectively distributed at the
retail level.
D. Negotiating Objectives
The U.S. retail industry strongly urges U.S. negotiators to
seek the elimination of foreign restrictions to trade in
distribution services. Once negotiations are underway, the
United States should focus generally on:
Obtaining commitments from as many countries as
possible to bind the distribution services sector in their GATS
schedules.
Limiting as much as possible the number of
exceptions taken by countries in their schedule of commitments
on distribution services.
Persuading countries to refrain from general,
open-ended exceptions in their schedule of commitments on
distribution services.
Broadening and deepening the commitments from
countries that have already included distribution services in
their GATS schedules.
Obtaining commitments that allow for full market
access for distribution services under the principle of
national treatment, rather than merely enshrining the current
status quo.
E. Economic Impact
In order to achieve the goals listed above, U.S.
negotiators should emphasize the economic and employment
benefits that other countries would realize by opening up and
liberalizing their distribution services sector. For example,
the United States has no significant restrictions on the retail
services. Nearly one in five American workers is employed in
retail jobs that are well-paying and require a marketable set
of skills. Moreover, the U.S. retail industry registered sales
receipts in 1997 of more that $2.5 trillion and economic
activity in the sector has a significant multiplier effect
throughout the U.S. economy. Thus, the retail sector alone adds
substantially to U.S. Gross Domestic Product (GDP), economic
growth, higher employment, and lower inflation. In addition,
the ability of the U.S. retailers to provide American consumers
with a wide variety of reasonably-priced products is a
substantial contributor to a high standard of living in the
United States.
U.S. negotiators should impress on their foreign
counterparts that, as in the United States, an open and
thriving retail industry and distribution services sector
generally, will be an important factor in improving the
standard of living of their citizens, expanding economic
activity and growth, and developing a modern consumer society.
Those benefits should not be taken lightly. When U.S. retailers
establish commercial operations in a foreign country, those
operations:
Provide much needed local investment.
Create jobs for many local people, not only in the
retail establishment itself, but also in the warehouses, and
transportation and advertising services that support those
operations.
Allow local workers to develop business expertise
and a better understanding about proper business practices in
the services sector.
Provide local consumers with a better selection of
goods at lower prices that will help improve the quality of
their lives.
Make their country's retail sector and the economy
as a whole more efficient.
III. Express Delivery Services
A. Sector Status
Express delivery service, as provided by companies such as
DHL, Federal Express, TNT and United Parcel Service, is a
relatively new and rapidly expanding industry, having evolved
during the past two decades in response to the needs of global
international commerce. The express transportation industry
specializes in time-definite, reliable transportation services
for documents, packages and freight. Express delivery has grown
increasingly important to businesses needing to use time-
sensitive, ``just-in-time'' manufacturing techniques and
supply-chain logistics in order to remain internationally
competitive. The express industry has revolutionized the way
companies do business worldwide, enabling businesses to rely on
predictable, expeditious delivery of supplies. Producers using
supplies from overseas no longer need to maintain costly
inventories, nor do business persons need to wait extended
periods of time for important documents. In addition, consumers
now have the option of receiving international shipments on an
expedited basis.
Increased reliance on express shipments has propelled the
industry to average annual growth rates of 20 percent for the
past two decades. The industry's explosive growth is reflected
in the rapid expansion of air cargo shipments: the expedited
movement of cargo by air now accounts for 37 percent of the
value of world trade, a share which is expected to continue to
increase.
The express transportation industry is essential to the
future growth of world trade and commerce, as more and more
trade is centered on the type of high-value goods that are
carried by our industry, such as electronics, computers and
computer parts, software, optics, precision equipment,
medicine, medical supplies, pharmaceuticals, aircraft and auto
parts, avionics, fashions and high-value perishables. In
addition, the industry encourages small and medium-sized
businesses to grow by enabling them to participate in
international trade. The express transportation sector, with
its integrated services that provide door-to-door delivery,
frees small businesses from the burdensome and costly tasks of
arranging for the transportation of their goods through a
myriad of unrelated and often non-communicating parties.
Express delivery operators, represented through their trade
association, the Air Courier Conference of America (ACCA),
strongly support free and open trade and investment worldwide.
Express operators provide integrated, door-to-door delivery
service for documents and packages, and customers expect value-
added services like time guarantees, electronic information,
brokerage services and more. Express customers are not as
concerned with how their documents or parcels are moved--just
that they arrive on time. This could be by plane, train, truck,
van, automobile, motorcycle, or even gondola. Consequently, a
broad spectrum of issues affects the express industry, and
includes laws and regulations in the areas of intermodal
transportation, air auxiliary services, distribution,
warehousing, customs, postal, telecommunications, logistics,
brokerage, insurance, and freight forwarding. For this reason,
barriers to international trade in the express industry can
involve trade restrictions and trade distorting measures in any
of these pertinent service sectors.
B. Classification
Under the Uruguay Round's Services Sectoral Classification
List, express delivery services are currently classified as
``courier services''--a communications service (CPC 7512),
along with postal, telecommunications and audiovisual services.
This classification fails to reflect the true nature of express
delivery services, which provide for regular exchange of
physical items over a network of locations and, as described
above, incorporate transportation, communications and other
services.
Express delivery services should be reclassified to more
accurately reflect the nature of express operations which, at a
minimum:
Provide the business community and general public
with regular (usually every business day), expedited and
reliable collection, transport and delivery of physical objects
across a network of geographic areas.
have management and communication systems that
monitor and ensure end-to-end quality of service; and
Involve the operation of such offices, buildings,
telecommunications facilities, computers, sorting equipment,
automobiles, trucks, aircraft, and other vehicles as may be
necessary to accomplish the basic function of express delivery.
A reclassification of the industry would facilitate GATS
2000 negotiations that are meaningful to the industry.
C. Barriers
As described above, barriers in any of the numerous
operational areas encompassed by express operators can hinder
express delivery services. Among the most persistent problems
faced by the industry are inconsistent customs clearance
policies that add costs and delays to express services. These
barriers include:
Restrictions on the value and weight of express
shipments.
Delays, generally of at least one day and up to 96
hours, from lengthy customs clearance procedures.
Cargo handling restrictions that force express
carriers to use local handling companies--rather than our own
employees--to transport our express shipments from the baggage
collection area to warehouses where they can clear local
customs.
Arbitrary revaluation of declared value of
shipments by customs.
Imposition of a variety of charges and fees for
express shipments, including shipments that are transiting one
country on their way to their ultimate destination.
To eliminate these and other barriers, ACCA believes that
the WTO should require all members to adopt and implement the
express guidelines of the World Customs Organization.
Because express operators provide integrated, door-to-door
services, barriers to any element of transportation linked to
these services pose a problem for the industry. Unfortunately,
in markets worldwide ACCA members encounter a variety of
transportation restrictions that limit--and increase the cost
of--express service. For the express sector to achieve
meaningful trade liberalization under the WTO, it must be
accorded access to land, air and other transportation
infrastructures in all markets. For Example, arbitrary
operating restrictions on carriers to limit their market, such
as types of equipment and vehicles that can be used, and weight
or size of packages, must be prohibited.
Firms also face anti-competitive practices in many markets,
particularly with respect to postal operations. Because some of
the industry's operations are postal-related (e.g., the
delivery of documents and small packages), express operators
are frequently affected by postal policies in foreign
countries. In fact, throughout the world, countries exercise
varying degrees of authority over the delivery of printed
matter.
Many countries have vested the national postal service with
local monopolies over the pick-up and delivery of letters and
documents. This often imposes unfair or unreasonable
restrictions on international service, which limits the
operations of international express service companies. While we
are not advocating that U.S. policymakers seek the dissolution
of national monopolies for domestic postal services, we do
believe that the domestic monopoly claim should not be extended
unfairly and unreasonably to encompass cross-border services.
Unified, end-to-end administrative control makes rapid and
reliable international express service possible.
U.S. negotiators should seek WTO commitments that would:
Prohibit a foreign government from determining
unilaterally the basic conditions of express service to and
from the United States (market entry, price regulation,
operating restrictions, and extraordinary or discriminatory
taxation).
Ensure that a foreign postal monopoly does not
have an outright prohibition against the provision of
international service by U.S. express delivery providers.
Prohibit profits derived from services provided by
national postal authorities from subsidizing services that
compete with foreign companies.
Prohibit taxation of private sector companies from
subsidizing a national postal administration's services.
Ensure that national postal administration's
parcel and non-monopoly document services that compete directly
with foreign companies would be subject to effective and
impartial regulatory scrutiny to protect against illegitimate
cross-subsidy.
Ensure that a postal administration's competitive
services be subject to the same laws and regulations imposed on
private companies.
Prohibit a foreign country from unilaterally
selecting the U.S. express carriers that may service an
international market with restricted entry.
Prohibit a tax on bilateral services that exceeds
the net cost to a legitimate local monopoly carrier.
Prohibit discriminatory treatment of U.S.
carriers.
D. Negotiating Objectives
With respect to the WTO negotiating agenda, we urge that
express delivery services be a focus of the GATS 2000
Negotiations. Specifically, we advocate the negotiation of pro-
competitive regulatory principles for the express sector. These
principles should be legally binding on all WTO members, just
as is the case for the telecommunications pro-competitive
regulatory principles agreed to during the previous GATS
negotiations.
ACCA has detailed a proposed set of pro-competitive
regulatory principles in a separate submission to USTR. These
principles would encompass liberalized customs, postal, air
cargo and other policies. We look forward to working with USTR
throughout the GATS 2000 process to liberalize treatment of
express delivery services, thereby expediting the flow of goods
globally.
IV. Financial Services
A. Benefits
Increasing competition in financial services markets through
liberalization of restraints on foreign participation in financial
services activities will enhance economic growth for all countries.
Such liberalization will help provide developing countries with: (1)
essential information and infrastructure to speed their modernization;
(2) improved health, safety and retirement security for working people
and; (3) the broadest range of products and services at the lowest cost
for consumers. Additionally, it will help enhance investor confidence,
and attract and retain private long-term direct investment.
Liberalization promotes the development of modern, efficient, well-
regulated financial markets.
B. Sector Status
WTO financial services negotiations provide an excellent
opportunity to achieve meaningful liberalization on a global scale. By
securing binding commitments by a significant number of countries of
the right of foreign companies to establish and to own all or a
majority share of their direct investments, the 1997 negotiations made
important progress.
Even though the 1997 agreement didn't include comprehensive
agreements to reduce or eliminate investment barriers for foreign
financial service providers, the agreement made major progress in a
number of countries. Much remains to be done in the upcoming
negotiations and the 1997 Agreement serves as a strong foundation to
add truly liberalizing commitments.
C. Barriers
The financial services 2000 negotiations offer an extremely
important opportunity to build on this base in a number of ways:
Further the scope of commitments by reducing the number of
exceptions countries have written into their commitment schedules.
Expand rights of establishment and ownership. While
progress has been made in securing bindings of existing practice in
regard to establishment and full or majority ownership, these rights
should be expanded and secured from more countries that made no such
commitments.
Expand cross border trading rights. Little attention has
been given to securing rights to sell financial services across borders
in negotiations to date. WTO members should, where appropriate take
into account the views and legitimate objectives of the regulators.
Modernize and reform regulatory structures that frustrate
trade commitment and competition. Regulatory regimes can be used to
block gains made in trade negotiations by imposing unnecessary
restraints on foreign financial services suppliers, and thus favoring
local suppliers. Such practices prevent realization of the goal of
national treatment. They are inherently anti-competitive and
inefficient. These ``pro-competitive regulatory reforms'' should be
directed at establishing fair, competitive markets by focusing on
solvency and transparency to provide the most effective protection of
consumers and markets.
Achieve impartial administration of regulations. Article
VI of the GATS, applying to Domestic Regulation, requires that ``in
sectors where specific commitments are undertaken, each Member shall
ensure that all measures of general application affecting trade in
services are administered in a reasonable, objective, and impartial
manner.'' It further requires each member to set up tribunals or
procedures which provide prompt review and remedies for administrative
decisions affecting trade in services, and it establishes that members
must provide impartial review of these procedures. These requirements
for reasonable, objective and impartial administration of regulations
should be amplified by the establishment of principles against which
regulations should be tested.
Promote administrative and regulatory transparency. Clear
and reliable information about a country's financial services laws and
practices advances equitable trade and competition, reduces the
possibility of manipulation, and is an essential component of a
liberalizing agreement. Non-transparent regulations hamper foreign
firms' ability to do business. Transparency requirements make countries
more accountable for their actions and provide information needed to
evaluate compliance with the agreement.
Reduce and remove obstacles to the free movement of
people. The temporary posting of key business personnel should be
facilitated by creating a system of easily obtainable and renewable
visas, and by easing or removal of other restrictions.
D. Classification
Should include language necessary to provide for protection and
applicability for pensions, long-term care, disability income and life
insurance and reinsurance.
E. Negotiating Objectives
Foreign investors should have the right to establish
through a wholly owned presence or other form of business ownership,
and to operate competitively through established vehicles available to
national companies.
Foreign investors should have the same access to domestic
and international markets as domestic companies. They should be treated
to regulatory and other purposes on the same basis as domestic
companies.
Unnecessary restrictions on cross-border financial
services businesses and consumption of services abroad should be
removed, to encourage trade without requiring establishment.
Creating a system of easily obtained and renewable permits
should facilitate the temporary posting of key business personnel.
Existing investments should be grandfathered by Member
countries that did not commit to do so in the 1997 Agreement.
Countries wishing to accede to membership in the WTO
should do so on the basis of commitments to substantial financial
liberalization consistent with the 1997 Financial Services Agreement
and the goals set forth above, resulting in commercially meaningful
access. Countries should be permitted to participate in the
negotiations in a way which encourages them to make such commitments.
Financial regulation principles leading to the development
of sound, more competitive markets should be negotiated. Such
regulation will foster risk management standards, transparency, product
diversification and consumer choice important for public policy
purposes. It will also enhance financial security for citizens, nations
and the global financial system.
Transparent laws and regulations are necessary to
liberalize financial services. Clear and reliable information about a
country's financial services laws and practices promotes equitable
trade and competition, and reduce the possibility of manipulation.
A notification waiting period for all new national and
sub-national taxation of financial services should be established to
provide industry and governments with a minimum of one year to factor
changing taxation rates in technical, solvency and pricing decisions.
Nations should commit to lock in and improve pension
policies that encourage private savings for retirement, in recognition
of worldwide aging populations and related pressure on government
social security systems.
V. Health Care Services
A. Sector Status
There appears to be little coverage of healthcare services
in current agreements between countries; therefore, these
comments reflect preliminary thought process around GATS
negotiations for health care services. We intend to continue to
gather information and talk with businesses that are working
throughout the world in the health care services sector to
bring additional clarity to the submission.
There are several emerging global trends that could benefit
U.S. health care service suppliers in overseas markets
including the rapid growth in health care expenditures in a
large number of countries. Rapidly expanding health care
expenditures in many developed countries are due to an increase
in their aged populations, the demographic segment that uses
health care services most intensively. The entire spectrum of
geriatric services, both community and institutionalization,
for senior citizens should be explored. Increased health
expenditures in rapidly developing economies are occurring as
newly emerging middle classes demand the levels of health care
previously enjoyed only in more developed economies, such as
the U.S. and Western Europe.
We believe we can make much progress in the negotiations to
allow the opportunity for U.S. businesses to expand into
foreign health care markets. In the U.S. competition has
provided reductions in the cost of health care as well as
increased quality in the care that is being provided. Some
types of services are consulting and training for local
pharmacy management; consulting and training for health care
including treatment of abusive behaviors; telemedicine;
development of treatment protocols to enhance healthcare
quality; sharing expertise on appropriate treatment; and,
management of overseas health care institutions.
According to official statistics from the U.S. Department
of Commerce, in 1996 U.S. receipts of health care services
amounted to $872 million. This number was 2 percentage points
less than the average annual export growth rate of nearly 6
percent for health care services during 1991-1995. U.S. cross-
border imports of health care services amounted to an estimated
$550 million in 1996. U.S. receipts and payments for health
care services accounted for less than 1 percent of such cross-
border trade in all service industries in l996. The U.S. cross-
border trade surplus in health care services was $322 million
in 1996.
B. Classification
Below are the health care entries from the WTO's Services
Sectoral Classification List (W-120) with reference numbers to
the UN's Central Product Classification (CPC) numbers. In
current practice, many WTO members do not use the CPC
references in their scheduled commitments; practices may vary
per sector. While the W-120 and CPC classifications provide a
reasonable start toward definition of the health care services
that should be covered in this negotiation, we need
flexibility. We do not want to be locked into only these
specific existing classifications. For example, we need
flexibility to include some services which may not be captured
by these definitions. We also recognize that some of these
services may be included as parts of goods negotiations or in
the definitions of other service sectors. We will continue our
work to provide negotiators with the most detailed and
comprehensive description of the health care services we are
now providing or which we will want to provide.
WTO Services Sectoral Classification List (W-120)
Sectors and Sub-Sectors
1. Business Services
2. A. Professional Services
h. Medical and Dental Services 9312
i. Veterinary Services 932
j. Services provided by midwives, nurses, physiotherapists and
para-medical personnel 93191
8. Health Related and Social Services
A. Hospital Services 9311
B. Other Human Health Services 9319
C. Barriers
Historically, health care services in many foreign countries have
largely been the responsibility of the public sector. This public
ownership of health care has made it difficult for U.S. private-sector
health care providers to market in foreign countries. In addition,
there are substantive differences in emerging markets vs. OECD
countries. In most emerging markets there are few barriers to these
services but barriers can be erected in the future as laws and
regulations are enacted absent commitments in writing. Existing
regulations are by and large not a problem in emerging markets.
However, existing regulations do present serious barriers in OECD
countries, including:
Restricting licensing of health care professionals.
Excessive privacy and confidentiality regulations.
Lack of transparency in the OECD countries' regulations.
Difficulty processing permits for work and for facilities.
D. Negotiating Objectives
Three general objectives are to encourage more privatization, to
promote pro-competitive regulatory reform, and to obtain
liberalization. Specific objectives are:
Transparent licensing of health care professionals and
facilities, which do not place unnecessary or discriminatory burdens on
U.S. providers.
Obtain market access and national treatment commitments
allowing provisions of all health care services cross border.
Allow majority foreign ownership of health care
facilities.
Obtain a commitment for the cross-border provision and
transfer of health care information.
Seek inclusion of health care in WTO government
procurement disciplines.
Strengthen international co-operation to promote pro-
competitive regulatory reform across countries.
Negotiate Mutual Recognition Agreements (MRAs) for
licensing of professionals and cooperative agreements on regulation of
facilities.
Develop principles to guide regulators so as to minimize
unnecessary costs on trade and investment in the health care sector.
Simplify regulations and provide transparency for movement
of personnel, both professionals and patients.
VI. Information Technology Services
A. Sector Status
The information services industry has a vital interest in the
successful conclusion of the World Trade Organization (WTO) 2000
Services negotiations. Information technology, while a service industry
itself, is critical to the success of the other services industries,
which, in turn provide a substantial market for information services.
As the services sector thrives, so will the information services
sector.
While substantive commitments by many countries in the area of
value-added services (information services) are included in the General
Agreement on Trade in Services (GATS), some commitments are weak, while
others are non-existent. The 2000 negotiations provide an opportunity
to broaden and deepen the current commitments.
Recent international agreements affecting information technology
services have opened related sectors, such as basic and enhanced
telecommunications and offered protection and trade liberalization in
other sectors (Trade-related Intellectual Property--TRIPS, and the
Information Technology Agreement--ITA).
GATS Annex on Telecommunications and the WTO Agreement on Basic
Telecommunications Services
The Enhanced Telecommunications Annex provides substantial
commitments for information technology services and for access to
telecommunications networks for the provision of such services.
Examples of services covered under this Annex are electronic mail, on-
line information and database retrieval, code and protocol conversion,
data processing, and electronic data interchange. While a number of
countries listed significant limitations with regard to foreign
ownership and the required use of public networks, on the whole, the
provision of information technology services is relatively open and
burden-free.
The 1997 WTO Agreement on Basic Telecommunications Services (GBT)
and its reference paper on pro-competitive regulatory principles is an
integral element of providing a liberalized environment for trade in
information technology services. Under a very broad and essentially
open-ended definition employed for the negotiations, basic
telecommunications are considered any telecommunications transport
networks or services and the schedules of commitments cover a wide
variety of services fitting this definition. Some examples of basic
telecommunications include: voice telephone services, packet-switched
data transmission services; circuit-switched data transmission
services, telex, telegraph, facsimile and private leased circuit
services, analog/digital cellular/mobile telephone services, mobile
data service, paging, personal communications services, satellite-based
mobile services, fixed satellite services, VSAT services, gateway
earthstation services, teleconferencing, video transport and trunked
radio system services. Categories of service included: local, long
distance, international, wire-based, radio based, resale, facilities-
based, for public use, and for non-public use (closed user groups).
The agreement, which opened trade in the $600 billion global basic
telecommunications market, will promote competition in world
telecommunications markets, spur innovation and competition-based
pricing and speed the delivery of robust information products and
services to consumers everywhere. Ultimately, we believe the agreement
will expand the market not only for telecommunications, but for other
information service providers as well.
The GBT commitments are a key element in securing the
infrastructure for trade in information services. Together with the
agreement on enhanced telecommunications services, we believe many of
the basic elements to secure access to infrastructure over which
information technology services thrive, are subject to existing
liberalization commitments. It is our understanding that the GATS Annex
on Enhanced Telecommunications Services and the GBT cover the delivery
of services electronically. We urge the USTR to enforce these existing
commitments, expand commitments from those who made limited
commitments, and seek new commitments from those who have not signed on
to the GBT.
Information Technology Agreement (ITA)
Concluded in December 1996, the ITA provides for the elimination of
customs duties and other charges on information technology products
through equal annual tariff reductions and covers five main categories
of IT products: computers, telecommunications products, semiconductors,
semiconductor manufacturing equipment, software, and scientific
instruments. The tariff reductions, which are scheduled to begin on
July 1, 1997 and to conclude on January 1, 2000, are to be implemented
by signatories on a most-favored-nation (MFN) basis.
The ITA will open up global trade in a wide array of information
technology products, valued at over $500 billion, and spur growth of
the global information infrastructure. The USTR estimates that the ITA
will provide a competitive boost of 1.8 million jobs in the U.S.
The agreement will bring significant benefits to software and
telecommunications companies. The agreement includes a broad definition
of software products, which covers multimedia and interactive software
and ``Nuisance tariffs'' on software (tariffs below 3%) will be
eliminated as soon as July 1, 1997. The agreement also covers a wide
array of telecommunications equipment and products, including fiber
optic cable.
The ITA, while a goods-based (rather than services-based)
agreement, is essential to the liberalization of trade in information
technology services, as it provides the means to deliver IT services.
We urge the USTR to work with its trading partners in the WTO to expand
commitments made in the ITA.
Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS)
Adequate and effective protection and enforcement of intellectual
property rights is a critical element in fostering the growth of IT
globally. As electronic commerce continues to grow it will become
increasingly important that commitments to protect intellectual
property are enforced. In many countries, both developed and
developing, civil and administrative procedures do not meet the
enforcement standards set forth in Part III of the TRIPS agreement. As
more and more software is being sold over the Internet, adequate and
effective IPR enforcement becomes even more important.
We recommend the USTR press other WTO members to meet the
enforcement obligations outlined in Part III of the TRIPS Agreement.
B. Classification
Sector Classifications and Sub-Sectors (CPC Codes)
The emerging convergence between telecommunications services,
broadcasting, audiovisual services and information technology services
has made clear distinctions between sector classifications increasingly
difficult. For example, a barrier that restricts the number of foreign
produced films from being broadcast or foreign publications from being
distributed may affect both broadcasters who deliver films over the
Internet as well as the Internet Service Provider who runs the network
over which the films/publications are delivered.
We strongly encourage the USTR to review these classifications in a
dialogue with the various industry sectors involved. We also encourage
the USTR to begin informal discussions on this topic with their trading
partners.
Expanded Information Technology Services
Information technology has become so prevalent in the provision of
many services that the services themselves are being considered
information technology services. Call centers, for example, are so
dependent on the underlying information technology that they are
provided by many information technology providers as a routine service
offering. Customer loyalty programs, order fulfillment functions,
remote monitoring services, remote inventory services and remote
maintenance and repair services are examples of such services. Some
involve physical functions while others such as remote monitoring are
performed entirely electronically. Current computer and related
services section of the CPC (listed immediately below) is somewhat
limited given the rapid advances in this dynamic sector.
CPC Computer and Related Services:
Consultancy services related to the installation of
computer hardware (841)
Software implementation services (842)
Data processing services (843)
Data base services (844)
Other (845 + 849)
The USTR should expand the definition of information technology
services. We recommend a number of services be included and the
category be changed to information technology services. We recommend
the USTR consider the classification revised CPC scheme below.
Information Technology Services:
Consultancy services related to the installation of
computer hardware
Software implementation services
Data processing services
Data base services
Management consulting
Services related to management consulting
Customer services
Other
C. Barriers
The private sector has been the driving force behind the rapid
growth, innovation, and development of information technology services,
the Internet and electronic commerce. Despite this rapid growth, a few
barriers remain. Elimination of these barriers must be industry led and
market driven. Consistent with the U.S. Administration's Framework for
Global Electronic Commerce, we strongly recommend that the USTR
continue to recognize the course of industry leadership and self-
regulation
Barriers also remain with regard to the current commitments of some
countries. Restrictions on foreign ownership and requirements for local
partners of varying descriptions hamper the ability to provide
information technology services seamlessly. In addition, requirements
to use public networks and restrictions on the use of leased lines also
provide barriers to true global market access. Finally, national
treatment is not a reality in every country.
Practices in government procurement vary dramatically across the
globe and offer considerable barriers to the provision of information
technology services to governments. They range from many of the OECD
nations which have, both on paper and in practice, highly organized and
wholly transparent processes, to nations which conduct procurement
entirely behind closed doors. Likewise, a number of nations have very
open procurement markets while others are closed both to foreign firms
and to those firms not in favor, regardless of capability. Finally,
there is the same range of conduct regarding the ethics of procurement,
with many ``clean'' systems and just as many in which bribery and
corruption are the norm.
The greatest barrier to the continued development of the
information technology industry globally, however, is the lack of
market access and national treatment in the industry sectors which
information technology serves. If the financial services industry is
not permitted to sell mutual funds across borders, then the capability
of the information technology services industry to provide that service
electronically is moot. For the information technology services
industry to reach its full potential to deliver benefits to individuals
as well as entire economies, the markets in every other industry sector
must be opened and liberalized.
D. Negotiating Objectives
We urge the USTR to set the following negotiating objectives:
Expand the coverage of existing agreements in information
technology related and enabling areas such as the Enhanced
Telecommunications Annex, the Basic Telecommunications Services
Agreement, and the Information Technology Agreement.
Develop a consensual view of and acceptance of the modes
of supply as applied to information technology services in the section
above.
Expand the definition of information technology services.
Insure information technology services can be performed
and delivered without establishment.
Achieve full market access and national treatment for
information technology services and for services in a broad range of
other sectors.
Seek commitments in government information technology
services procurement for full market access, national treatment,
transparency, access to independent appeals, and dispute resolution
processes.
VII. Professional & Business-Related Services
A. Sector Status
Professional and business-related services are those
services for which the provider requires specialized, technical
knowledge--acquired through post-secondary education or
equivalent training or experience--which is adapted and applied
to the specific needs of business clients. Many of these
services are performed by licensed professionals for which the
right to practice is controlled by the government and/or
professional bodies. These licensed professions tend to be more
regulated than commercial services because the license holders
are authorized to practice restricted activities in return for
which they are expected to assume public interest
responsibilities. Examples include accountancy, architecture,
engineering and law. Other business-related services share
common characteristics with the professions, such as high
levels of human and intellectual capital input and close
interaction between the provider and the client, but generally
are not highly regulated or controlled by licenses granted by
government or professional bodies. Examples include management
and business, including computer-related, consulting services.
Thus, this discussion topic overlaps, with some extent, with
the section on information technology services. [Please note
that this section addresses the licensed professions most
closely associated with services provided to businesses and,
thus, does not cover medical doctors, dentists, nurses,
pharmacists, beauticians, etc. The medical professions are
covered in the ``Health Services'' section].
Statistics on trade in services are notoriously poor, so it
is difficult to know the volume of trade in professional and
business-related services worldwide. In the U.S. balance-of-
payments category of ``business, professional and technical
services,'' U.S. providers exported $17.6 billion in 1996 and
$21.3 billion in 1997. Imports were valued at approximately
one-quarter of these amounts. There is reason to believe,
however, that these numbers substantially understate the level
of international business in this sector, because they do not
include data on earnings from foreign investments and foreign
affiliates, especially with respect to ``accounting'' firms and
information technology companies. Nor do they include fees
generated by mobile service providers, such as lawyers,
architects, engineers and consultants, who serve temporarily in
foreign countries but are paid at home.
Professional and business-related services received
substantial coverage in the schedules of commitments under the
General Agreement in Trade in Services (GATS).
More than 60 WTO member governments have made
commitments in accountancy and related services, accounting for
approximately 90 percent of the world market measured by gross
revenues. Virtually all these commitments confirmed the status
quo with respect to market access and national treatment.
More than 40 WTO member governments made
commitments on architectural services, and just fewer than 30
made commitments on urban planning and landscape architectural
services.
More than 50 WTO member governments made
commitments on engineering services.
More than 40 WTO member governments have made
commitments in one or more aspects of legal services. The
commitments mostly cover advisory services on international and
home country law. The commitments are mostly in the nature of a
standstill and do not achieve the American bar's objectives on
Foreign Legal Consultants or rules for examinations in foreign
jurisdictions.
More than 60 WTO member governments also made
commitments in computer-related services an management
consultancy, also accounting for about 90 percent of the world
market measured by gross revenues. Again, the commitments
largely confirmed the status quo, which for the most part is
relatively free of trade restriction and discriminatory
regulation.
It should also be noted that the WTO and the GATS have
created an international legal umbrella over substantial work
initiated by the professions themselves in the areas of mutual
recognition and standards. Two examples follow:
The International Union of Architects (UIA)
Professional Practice Commission has produced the ``UIA Accord
on Recommended International Standards of Professionalism in
Architectural Practice.'' The American Institute of Architects
and the Architectural Society of China serve as the
Commissions' joint secretariat. The document was initially
adopted by the UIA's 91 national member sections in July 1996.
A revised and expanded edition, including recommended policy
guidelines, will be presented for adoption at the XXI UIA
Assembly in June 1999 in Beijing. A primary objective of this
document is to allow member sections to more easily negotiate
bilateral mutual recognition agreements (MRAs).
The American Institute of Certified Public
Accountants (AICPA) strongly supports the work of the
International Federation of Accountants and the International
Accounting Standards Committee in developing a body of widely-
accepted international accounting and auditing standards and
international guidelines on ethics. In addition, the AICPA has
joined with the National Association of State Boards of
Accountancy to complete MRAs with the Canadian Institute of
Chartered Accountants and the Institute of Chartered
Accountants in Australia. Additional discussions are continuing
with other professional bodies in Australia, England, Ireland,
Mexico and Scotland.
B. Classification
The professional and business-related services covered by
this paper are found in the following categories listed in the
World Trade Organization's (WTO) ``Services Sectoral
Classification List.''
Business Services
Professional Services
Legal services
Accounting, auditing and bookkeeping services
Taxation services
Architectural services
Engineering services
Integrated engineering services
Computer and Related Services
Consultancy services related to the installation of
computer hardware
Software implementation services
Other Business Services
Management consulting services
Services related to management consulting
CSI recommends that the U.S. Trade Representative seek the
inclusion of several additional classifications of professional
and business-related services in the specific commitments made
by member governments. These are:
Actuarial services.
Counseling in business transactions.
Participation in the governance of business
organizations.
Mediation, arbitration and similar non-judicial
dispute resolution services.
Public advocacy and lobbying.
In the area of computer-related services, the ``Information
Technology'' section of this paper makes a number of useful
recommendations.
C. Barriers
International trade in professional and business-related
services in conducted both by individuals who have met
specified professional qualification requirements or have
specialized business knowledge and by firms owned by and/or
employing these individuals. Professional and business-related
services are rendered in all four modes of delivery
contemplated by the GATS. They may be provided across borders
by professionals travelling to another country or communicating
electronically with clients there. More typically, the services
are provided by locally-established firms affiliated with
others abroad through ownership, contract or cooperative
agreement. And in some cases they are provided to foreign
consumers visiting the provider's home jurisdiction.
The impediments to trade in professional and business-
related services stem from regulations intended to protect
local providers from competition and, probably more
importantly, from domestic regulations intended to protect
defined national interests. Most professions are enveloped in
national and/or sub-national systems of regulation, which were
developed to respond to particular circumstances and political
demands. These distinct systems have persisted even as the
globalization of markets has accelerated and, thus, have given
rise to trade and investment barriers.
Impediments to Professional Firms
Restrictions on the movement of capital and
investment, such as foreign equity limits, screening of
investments and the application of economic needs tests, and
reserving ownership to locally-qualified professionals.
Restrictions on making current payments, such as
profit remittances and the payment of royalties and fees across
borders.
Restrictions on the types of business structures
permitted.
Numerical, geographic or other restrictions on the
establishment of branch offices.
Requirements to employ only local people and
professionals or the use of quotas to limit intra-firm
transfers.
Inadequate protection on intellectual property,
such as software, practice methodologies and training
materials, as well as restriction on the use of international
firm names.
Impediments on Individual Professionals
Onerous professional qualification requirements,
such as citizenship, permanent and/or prior residency, local
university degrees, and excessively long experience
requirements, and administering qualification examinations in
languages other than the WTO working languages.
The use of different technical standards or
standards of practice in each national and/or sub-national
jurisdiction.
Difficulties in obtaining visas and work permits.
Impediments Affecting both Firms and Individuals
The lack of transparency in the regulatory
process, including the failure to make laws and regulations
available, closed decision-making processes, the lack of
opportunity to comment before rules are adopted, and the
absence of appeal processes.
Local establishment requirements.
Rules either requiring or prohibiting relationship
between foreign and local professionals or professional firms.
Customs duties on professional documents, project
models, training materials, promotional publications, and
software.
Scope-of-practice limitations that may prohibit
the provision of selected or multiple services to clients.
The assignment of contract by government agencies,
the mandatory rotation of providers, and ``Buy National''
policies.
Prohibitions on advertising professional services.
Reciprocity laws or regulatory requirements.
D. Benefits of Liberalization
Professional and business-related services are part of the
intellectual capital infrastructure essential to the operation
of modern economies. For example:
Accounting and auditing services are critical to
management control of enterprises and provide the assurance
that underlies efficient capital markets.
Architectural and engineering services are
essential to the creation of modern business structures and
processes.
Legal services make possible effective relations
between buyers and sellers and among business partners, as well
as help to protect the investments and property of national of
one country transferred to another.
Consulting services provide valuable management
know-how, competitive insight, and advice on modernizing and
reengineering business enterprises.
Liberalization of trade and investment in this sector makes
available to business users state-of-the-art inputs to their
production processes. Moreover, the international operation of
professional and business-related service providers are
important conduits for transferring state-of-the-art technology
and training, which has ripple effects throughout the host
economies. And many professional services firms provide
international networks by which host country services can be
exported.
F. Negotiating Objectives
U.S. negotiators should press governments that
have not made specific commitments on professional services to
do so. The goal should be that all 132 WTO member governments
apply the GATS rules to professional and business-related
services. Some significant markets, such as India, Indonesia
and the Philippines, are now missing.
U.S. negotiators should press other governments to
remove as many of the ``exceptions'' in their scheduled
commitments as possible. The aim should be full application of
the market access and national treatment rules to professional
services.
U.S. negotiators should champion ``freedom of
association'' for U.S. and foreign professionals, seeking to
eliminate requirements or prohibitions of professional
associations in partnership or in other forms of ``corporate''
practice.
U.S. negotiators should work for an agreement on
business mobility (temporary entry of business people), which
would remove the visa requirements and red tape for qualified
professionals entering another WTO member country for specific,
temporary assignments.
U.S. negotiators should work for horizontal
disciplines on domestic regulation of professional and
business-related services under GATS Article VI that go beyond
the disciplines developed for the accountancy sector. In
particular, they should seek a meaningful ``necessity test''
under which onerous regulations could be challenged as ``more
burdensome than necessary, transparency rules that allow
interested parties to comment in advance on proposed
legislation, and pro-competitive regulatory structures.
U.S. negotiators should seek an extension of the
principles of the Agreement on Technical Barriers to Trade to
service industries and professions.
With respect specifically to legal services, U.S.
negotiators should focus on two objectives: (1) adoption of the
concept of ``foreign legal consultants'' whereby lawyers are
permitted to practice their home country law (as well as third
country and international law) in foreign jurisdictions; and
(2) ``model rules'' on bar examinations that assure the exams
are related the areas of law to be practices, follow
transparent procedures, are based on information readily
available (through training courses, etc.), and are
administered in one of the working languages of the WTO.
VIII. Telecommunications
A. Sector Status
As the new millennium fast approaches, it has become obvious that
telecommunications networks provide the underlying infrastructure and
services upon which most of the world's information and commerce
depend. It is safe to say that without a robust telecommunications
infrastructure, the global economy as we know it today would simply not
exist. Vice President Gore has recently recognized that not only is the
telecommunications-enabled Global Information Infrastructure a vital
underpinning of world trade, the GII has the capacity ``to extend
knowledge and prosperity to our most isolated inner cities, to the
barrios, the favelas, the colonias and our most remote rural villages;
to bring 21st Century learning and communication to places that don't
even have phone service today; to share specialized medical technology
where there are barely enough family doctors today; to strengthen
democracy and freedom by putting it on-line, where it is so much harder
for it to be suppressed or denied.''
Privatization and liberalization of the world's telecommunications
markets will provide the most efficient and effective means of insuring
the global telecommunications infrastructure's growth and enhancement.
As experience in a number of countries now amply demonstrates, a
liberalized market leads to significant increases in infrastructure
development, more and better services, and lower prices for consumers.
Moreover, a liberalized, modern telecommunications system should
increase capital investment, thereby strengthening and facilitating
growth of a nation's economy.
It now appears that much of the world's commerce in the future will
be transacted over the Internet's network of networks. A good deal of
the communications will be of the multimedia variety which will require
advanced, broadband telecommunications services. Without liberalized
open telecommunications markets, there will not be sufficient
incentives to upgrade what is rapidly becoming in many parts of the
world an inadequate, outdated telecommunications infrastructure.
WTO Agreement on Basic Telecommunications Services
The 1997 WTO Agreement on Basic Telecommunications Services (GBT),
with its accompanying Reference Paper, truly represents a watershed
event not only for the telecommunications industry, but also for the
entire world economy. Seventy countries participated and agreed to move
in varying degrees toward full, technology-neutral, liberalization of
their telecommunications sectors through market access, foreign
investment and adoption of pro-competitive regulatory principles.
The GBT was a landmark agreement in a number of ways. It was the
first successful sectoral negotiation--the agreement dealt only with
telecommunications. Changes in agriculture import quotas, for instance,
could not be traded for concessions in telecommunications, insuring
that all benefits of the agreement accrue to telecommunications alone.
In addition, a Reference Paper containing pro-competitive regulatory
principles was developed and was incorporated into a majority of the
countries' offers. This Reference Paper legally binds the countries
into ``how'' they will implement many parts of the agreement. Thus,
promulgation of regulations in accordance with the Reference Paper's
principles must be considered an integral part of a country's
implementation of the GBT.
Under a very broad and essentially open-ended definition employed
for the negotiations, basic telecommunications was considered any
telecommunications transport network or services and the schedules of
commitments cover a wide variety of services fitting this definition.
Some examples of basic telecommunications include: voice telephone
services, packet-switched data transmission services; circuit-switched
data transmission services, telex, telegraph, facsimile and private
leased circuit services, analog/digital cellular/mobile telephone
services, mobile data service, paging, personal communications
services, satellite-based mobile services, fixed satellite services,
VSAT services, gateway earth station services, teleconferencing, video
transport and trunked radio system services. Categories of service
included: local, long distance, international, wire-based, radio based,
resale, facilities-based, for public use, and for non-public use
(closed user groups). As discussed below, some rethinking of these
categories of facilities and services may be in order.
In sum, the GBT and accompanying Reference Paper represents a
tremendous first step toward the ultimate goal of a fully open,
competitive telecommunications market worldwide. A good deal of work
remains to be done, however. In addition, it is important that new
negotiations do not provide for countries to re-evaluate or back away
from existing commitments. New negotiations should build on existing
commitments.
B. Classification
Sector Classifications and Sub-Sectors (CPC Codes):
Clearly, telecommunications market developments of the past few
years warrant a reexamination of the applicability of the Standard
Classification System last revised in 1991. It may be appropriate for
countries to agree to a standardized set of services that are
independent of the particular technology used to provide those
services.
C. Barriers
Although a monopoly telecommunications environment provided a
fairly reliable, working telephone system which served the world well
for almost 100 years, most of the rapid technological developments of
the past two decades have resulted from the increasingly competitive
marketplace in a number of countries. Experience has shown that the
more open the market, in terms of free entry and exit and the number of
competitors present, the more robust the competition and the better the
result for consumers.
Unfortunately, even in the wake of the GBT, most of the world's
telecommunications markets still contain barriers that restrict access,
curtail the scope of the playing field, or tilt it in a variety of
ways. In accordance with their GBT commitments, many countries already
have privatized their national telecommunications carriers, and others
plan to do so in the near future. Privatization is an important step
toward introducing competition into markets, but privatization by
itself will not produce an open and fair competitive environment.
Whether the incumbent carrier is controlled by the government or is
privately held, new entrants cannot effectively compete in the market
without full liberalization. In order for competition to flourish, the
regulator must be completely independent of the dominant carrier and
must actively implement and enforce pro-competitive principles such as
those enumerated in the GBT Reference Paper.
Barriers remain even under the current commitments of some
countries. Restrictions on foreign ownership and requirements for local
partners of varying descriptions hamper the ability to provide
telecommunications services seamlessly in these countries or worldwide.
In addition, requirements to use public networks and restrictions on
the use of leased lines provide barriers to true global market access.
Nor is national treatment a reality in every country.
The licensing schemes of many countries pose another significant
barrier to the market and to full and fair competition. Restrictions on
the number of licenses awarded per geographic area, onerous
qualifications for licensees, exorbitant fees, and lack of transparency
in the bidding and award process must be eliminated. In many cases, the
totality of these requirements effectively limits participation to a
handful of large carriers and prevents smaller, perhaps more responsive
or innovative carriers from participating.
Variations on the same theme are regulations which favor
facilities-based providers over resellers. Many countries that have
otherwise committed to liberalize their telecommunications in the GBT
have adopted policies designed to encourage infrastructure investment.
For example, carriers may be required to implement a certain number of
switches before they are permitted to interconnect with the incumbent.
These sorts of requirements, while attempting to achieve an arguably
laudable goal, act as a barrier by depriving consumers in these markets
of a very valuable source of supply--resellers.
As experience has shown in this country, resellers continue to play
a vital role in the telecommunications marketplace. There are literally
hundreds of these entities, with their numbers increasing every month.
These companies are usually small by comparison with the giant
facilities-based carriers, but they are able to stay ahead of their
much larger competitors by constantly introducing new pricing
arrangements, new services, and innovations for consumers.
Another barrier to competition in many countries is the lack of
number portability. Number portability is essential in order for
competition to develop because it allows customers to keep their
telephone numbers when changing carriers. Where no number portability
exists, residential consumers in particular are much more reluctant to
shift their business away from the incumbent, even when they are
offered a significant price break.
Even in the business market, the lack of portability acts as a
major deterrent to competition. Businesses must incur significant
expenses to reprint stationery and business cards and to inform
customers, suppliers, and others that they have changed telephone
numbers. For example, before portability was implemented in the
domestic 800 service market, some competition did exist. However, soon
after the introduction of portability, overall demand rose and prices
dropped.
D. Negotiating Objectives
We urge the USTR to set the following negotiating objectives:
Update the 1991 Standard Classification System to
emphasize services rather than the technology employed to deliver the
services.
Expand and deepen the commitments of countries that agreed
to partial liberalization in the GBT to include full liberalization and
adoption of the Reference Paper, by a date certain in the near future.
Schedule commitments to full liberalization and adoption
of the Reference Paper, by a date certain in the near future, of
countries that are WTO Members but have not made commitments under the
GBT.
Seek commitments to full liberalization and adoption of
the Reference Paper by countries wishing to accede to the WTO.
IX. Travel and Tourism
A. Benefits of Liberalization
The travel and tourism industry is the word's largest industry,
employing over 230 million people worldwide, and is expected to grow to
almost 320 million by 2010. The travel and tourism industry is growing
faster than world GDP growth. Its share of gross domestic product is
expected to increase from about 11.6 percent in 1998 to 12.5 percent by
2010. The travel and tourism industry creates good jobs spanning the
spectrum from entry level to executives. It is clearly a driver of
economic growth in the world. Liberalization of the industry will lead
to faster industry growth, which will not only spur direct growth in
the industry, but growth in related industries such as manufacturing of
transportation equipment, and building and related critical
infrastructure development projects. Moreover, the travel and tourism
industry represents sustainable and ecologically friendly development.
B. Sector Status
In general, the tourism and travel related services sector tends
not to be heavily regulated and competition tends to be vigorous. There
are, however, some significant exceptions to this broad generalization.
C. Classification
This sector includes hospitality, restaurants, travel agencies,
tour operators, tourist guides services and other travel related
services. The industry has developed since these classifications were
drawn up, and the specific services covered under these broad
categories need to undergo a thorough review and analysis to ensure
that all services that should be covered are included. It should also
be clarified that this sector includes travel reservation services and
travel-related financial services, e.g. travelers checks and certain
foreign exchange services, which are distinct from those covered under
the banking, insurance and securities sector. (The tourism and travel
related services sector does not include air or other transportation
sectors, which are covered under the transport services sector.)
D. Barriers
Two of the most prevalent types of barriers fall under the rubrics
of competition and investment, which could be addressed either
horizontally or on a sectoral basis. (Needless to say, this industry,
like many others, has substantial investments in trademarks and
intellectual property, and has an interest in the outcomes on these and
other general business concerns.)
Competition
Many countries impose significant restrictions, often only against
foreign firms or enforce them in ways that favor domestic firms, on
marketing and promotional initiatives, including loyalty reward
programs.
Investment
One hundred percent foreign ownership is often prohibited, and the
form of doing business is commonly restricted or controlled. In
addition, when operating through a franchise network, repatriation of
profits, payment of royalties, and other similar issues frequently
become problematic.
Movement of Personnel
A third horizontal issue is of particular concern to the industry,
and that regards the freedom of movement for business personnel. The
ability of travelers to move freely around the world is the lifeblood
of the travel and tourism industry. The industry has an abiding
interest in liberalizing the restrictions, not only on tourists and the
industry's own management, but generally on businesses' ability to
locate the proper personnel in the locations where they are most
needed.
The other barriers are not covered in the general issues, though
some do affect other sectors, as follows:
Privacy
Many companies in the travel industry maintain records regarding
customers' travel preferences in order to serve particular needs
better. Many countries are proposing, or have already enacted, onerous
restrictions on the flow of this type of information. Many countries
also require the disclosure of overseas spending by customers, thereby
discouraging foreign travel by their citizens.
Tourist Financial Services
Many countries proscribe significant restrictions on the provision
of financial services for travelers. Sale of travelers checks are often
restricted to certain limited types of financial institutions, as are
foreign currency exchange services even though they pose no risk to a
country's financial system. Finally, access to local ATM networks is
occasionally prohibited.
Taxes on Overseas Spending
Some countries penalize their citizens when they travel abroad by
imposing taxes on overseas spending, often in ways that unfairly
discriminate among payment products. One large South American country,
for example, imposes a 2 percent transaction tax on credit and charge
card spending abroad, but imposes no special taxes on cash purchases.
As a large proportion of spending by international travelers is
transacted through credit card payment systems, this tax discourages
international travel and tourism.
E. Negotiating Objectives
The U.S. objective should be the removal of as many of these
barriers as possible. Unfortunately, it is too early in the process to
identify firm industry-wide priorities.
Chairman Crane. And next is Mr. Kleckner.
STATEMENT OF DEAN KLECKNER, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION, PARK RIDGE, ILLINOIS
Mr. Kleckner. Thank you, Mr. Chairman and Members of the
Subcommittee. I am Dean Kleckner, and while I office in Park
Ridge, Illinois, I am a north Iowa farmer, raising corn,
soybeans and hogs on that farm, and one of the four ACTPN
members sitting at the table today. Now there are three of us
left.
Agriculture is one of the few industries that consistently
runs a trade surplus. The United States along with agriculture
must be at the negotiating table in the next WTO Round with
trade negotiating authority to ensure that this trade surplus
continues.
U.S. agriculture is now reeling from low commodity prices.
Given an abundant global supply and a stable U.S. population
rate, the job of expanding existing markets and opening new
export markets for agriculture is more important than ever.
Agriculture's longstanding history of a trade surplus will not
continue if agriculture is relegated to the sidelines as new
negotiations commence.
Personally, I am concerned that agriculture will be left
behind if we do not structure the negotiations properly. The
next round of negotiations should encompass all sectors as a
comprehensive single undertaking. By this we mean all aspects
of the negotiations should be concluded simultaneously in order
to get the best results for all sectors. In other words, as was
said in the Uruguay round, agreeing it should be here, too,
nothing is agreed to until everything is agreed to.
I have submitted for the record a copy of the Seattle Round
Agriculture Committee's policy objectives for the next round.
The Farm Bureau chairs this coalition, which consists of 80
agriculture organizations representing producers as we are,
also processors and agribusinesses. U.S. agriculture is united
in its views for the next round through this coalition. The
very first principle of this coalition is that of a single
undertaking.
The United States will have the greatest success in the
next round of trade talks if negotiations are concluded as a
single undertaking without the possibility of an ``early
harvest'' or provisional implementation of early agreements. We
are very concerned--very concerned about concluding early
results for any sector, recognizing in doing so will require
devoting substantial resources and will likely sidetrack the
important structural issues that need to be addressed in order
for this round to be completed in 3 years.
Now, eight quick items. We have set a goal to complete the
agriculture negotiations by the end of 2002, 3 years. Our
producers need results in a timely manner. Two, we call for the
elimination of export subsidies by all WTO members by a date
certain and as soon as possible. Three, we believe that new
negotiations must include a recommitment to binding agreements
to resolve sanitary and phytosanitary issues based on
scientific principles in accordance with the WTO Agreement on
Sanitary and Phytosanitary Measures; that is, the SPS
agreement. The provisions of the Uruguay round agreement are
sound and do not need to be reopened, the SPS agreement.
Four, the next round should result in tariff equalization
and increased market access. By requiring our trading partners
to eliminate tariff barriers within specified timeframes, we
need to adopt a framework that was used in the Uruguay round
wherein there are no product or policy exceptions to such
tariff reductions. All WTO member countries should reduce
tariffs, both bound and applied, in a manner that provides
commercially meaningful access on an accelerated basis.
Five, quickly here, regarding state trading enterprises, or
STEs, we must impose disciplines on STEs that distort the flow
of trade in world markets.
Six, and very important, Mr. Pepper mentioned this, but we
must ensure market access for biotechnology products produced
from GMOs, genetically modified organisms. All WTO member
countries should reaffirm the principles of the WTO SPS
Agreement, provisions which we believe cover trade in GMOs. And
I might say six ``a'' here, the United States should not agree
to a Working Group on Bioengineered Products at the WTO. The
formation of such a group will derail the resolution of trade
issues concerning bioengineered product policy and not likely
result in a consensus approach.
Seven, we must end the use of all nontariff barriers to
trade.
And, last, eight, our negotiators must make changes to
trading practices that would facilitate and shorten its dispute
resolution procedures and processes.
In summary, Mr. Chairman, we support liberalization of
global agriculture markets that will result in the true reform
of the current trading regime and bring about fair trade for
our producers. This is our opportunity to address the trade
imbalances that hamper our domestic producers from both an
import and an export perspective. The U.S. must demonstrate
leadership in setting the agenda for this round of trade talks
and is submitting proposals for the structure of the
negotiations.
Mr. Chairman, I thank you.
Chairman Crane. Thank you.
[The prepared statement follows:]
Statement of Dean Kleckner, President, American Farm Bureau Federation,
Park Ridge, Illinois
Mr. Chairman, members of the Committee, I am Dean Kleckner,
president of the American Farm Bureau Federation and a hog,
corn and soybean farmer from Iowa. I appreciate the opportunity
to testify before you today regarding negotiating objectives
for agriculture in the next round of trade talks in the World
Trade Organization.
The American Farm Bureau is the nation's largest
organization of agricultural producers. Farm Bureau represents
over 4.8 million member families in the United States and
Puerto Rico. Our members produce every commodity grown in
America and depend on access to customers around the world for
the sale of over one-third of our production. Agriculture is
one of the few U.S. industries that consistently runs a trade
surplus, posting a positive balance of trade every year since
1960. The United States along with agriculture, must be at the
negotiating table in the next WTO round in a meaningful way,
with trade negotiating authority, to ensure that this trade
surplus continues.
The ability of U.S. agriculture to gain and maintain a
share of global markets depends on many factors, including
obtaining strong trade agreements that are properly enforced,
enhancing the administration's ability to negotiate increased
market access for U.S. agriculture and building in the
necessary changes to the WTO dispute settlement process to
ensure timely resolution of disputes.
When Congress passed the 1996 Freedom to Farm Act, it
phased out farm price supports, making U.S. agriculture more
dependent on the world market. American farmers and ranchers
produce an abundant supply of commodities far in excess of
domestic needs and their productivity continues to increase.
Exports are agriculture's source of future growth in sales and
income.
As you are well aware, U.S. agriculture is reeling from low
commodity prices. Given an abundant domestic supply and a
stable U.S. population rate, the job of expanding existing
market access and opening new export markets for agriculture is
more important than ever. Agriculture's longstanding history of
a balance of trade surplus will not continue if we are
relegated to the sidelines as new negotiations in agriculture
commence.
Moreover, global food demand is expanding rapidly and more
than 95 percent of the world's consumers live outside U.S.
borders. Despite significant progress in opening U.S. markets,
agriculture remains one of the most protected and subsidized
sectors of the world economy. In addition, U.S. agricultural
producers are placed at a competitive disadvantage due to the
growing number of regional trade agreements among our
competitors.
U.S. leadership of the global trade liberalization agenda
has paid off for American agriculture. If the United States now
leaves it to others to form new trade pacts and write future
rules for trade, U.S. producers, processors, and exporters will
be severely disadvantaged in the competitive marketplace of the
21st century. We are counting on this administration and
Congress to ensure that U.S. farmers and ranchers have a
significant place at the negotiating table, armed with the
tools they need, including trade negotiating authority.
WTO Ministerial
As you know, the Seattle Ministerial Conference will serve
as the kickoff for the new negotiations on agriculture and
other sectors in the WTO. As the host country for this
ministerial, the United States and its trade policies will be
in the spotlight. Given the economic turmoil and technical
barriers being experienced in many of our important export
markets, the launching of new negotiations to further open
markets has never been more important.
The United States has an unprecedented opportunity to lead
these negotiations to a successful outcome and should play a
central role in influencing the debate early regarding the
structure of the negotiations. Specifically, the administration
should take a stand now on a number of different issues,
including what sectors will be negotiated in this next round
and what approach will be used for the negotiations (formula
approach versus request-offer, or some combination thereof).
These negotiations are too important to agriculture, and other
sectors, to let other WTO member countries dictate the
negotiating agenda.
Objectives for the Next Round
Higher living standards throughout the world depend upon
mutually beneficial trade among nations. We urge that trade
policies be developed that promote the growth in world trade.
To this end, U.S. negotiators must comprehensively address
high tariffs, trade-distorting subsidies, and other restrictive
trade practices in the new round of negotiations on
agriculture.
The American Farm Bureau Federation supports expediting
action on the next round for agriculture in the WTO. Our market
is the most open in the world. We cannot sit idly by while our
competitors trade openly in our market, but deny us access to
their markets on equal terms. We must begin the negotiations
and conclude them as early as possible to put U.S. agricultural
producers on a level playing field with the rest of the world.
To this end, we have set a goal to complete the agricultural
negotiations by the end of 2002 to ensure that our producers
gain increased market access in a timely manner.
First and foremost, the next round of negotiations should
encompass all sectors as a comprehensive, single undertaking.
By this we mean that all aspects of the negotiation should be
concluded simultaneously in order to get the best results for
all sectors. The United States will make the greatest gain in
the next round of trade talks if negotiations are concluded as
a single undertaking without the possibility of an ``early
harvest'' or provisional implementation of early agreements. As
you are aware, this issue has attracted significant attention
in recent weeks given the administration's desire to achieve
early tariff reductions for the eight Asia Economic Pacific
Cooperation (APEC) sectors. We are very concerned about
concluding early results for any sector recognizing that doing
so will require a substantial devotion of resources to
accomplish and will likely sidetrack the important structural
issues that need to be addressed in order for this round to be
completed in three years.
Second, we must call for the elimination of export
subsidies by all WTO member countries. Our producers cannot
compete against the mountain of spending by our primary
competitors, like the European Union (EU). The EU spends in
excess of eight times the level of domestic and export
subsidies as the United States. Data from the U.S. Department
of Agriculture and the European Commission show that total EU
domestic and export subsidy expenditures for 1997 exceeded $46
billion compared to $5.3 billion spent by the United States.
This level of spending distorts world trade and undermines U.S.
producers' competitiveness in vital export markets.
Third, we believe that the new negotiations must include a
recommitment to binding agreements to resolve sanitary and
phytosanitary issues based on scientific principles in
accordance with the WTO Agreement on Sanitary and Phytosanitary
Measures (SPS Agreement). The provisions of the Uruguay Round
SPS Agreement are sound and do not need to be reopened. The
United States has successfully litigated several SPS cases that
underscore the strength of this agreement. Cases have now been
tried that set precedence in each of the three areas of the SPS
Agreement. For example, the successful U.S. litigation of the
EU beef ban strengthens the provisions regarding human health,
the Japan varietal testing case underscores aspects regarding
plant health, and the Australia salmon case bolsters the animal
health text of the SPS Agreement. Any change to the SPS
Agreement would expose the sound scientific principles now
embedded in its provisions--changes that the EU would relish
making to restrict rather than facilitate trade.
Fourth, the next round should result in tariff equalization
and increased market access by requiring U.S. trading partners
to eliminate tariff barriers within specified time frames. Our
producers compete openly in their own domestic market with
their foreign competitors, but are shut out of export markets
due to prohibitively high tariffs. We need to correct this
imbalance for our farmers and ranchers. All WTO member
countries should reduce tariffs, both bound and applied, in a
manner that provides commercially meaningful access on an
accelerated basis.
Fifth, we must impose disciplines on state trading
enterprises (STEs) that distort the flow of trade in world
markets. Every effort should be made to craft an agreement that
sheds light on the pricing practices of STEs and ends their
discriminatory practices. Our producers have lost too many
sales in third country markets due to the noncompetitive,
nontransparent operations of STEs.
Sixth, we must ensure market access for biotechnology
products produced from genetically modified organisms (GMOs).
Significant delays and a lack of transparency in the regulatory
approval process for GMOs in the EU have heightened the need
for science based, transparent provisions governing
bioengineered products. We cannot continue to be held hostage
to the EU's nontransparent, discriminatory procedures that deny
market access for our GMO products. All WTO member countries
should reaffirm the principles of the WTO SPS Agreement,
provisions which we believe cover trade in GMOs. Most
importantly, the United States should not agree to a working
group on bioengineered products in the WTO. The formation of
such a group will derail the resolution of trade issues
concerning bioengineered products and will not likely result in
a consensus approach.
Next, we must end the use of all nontariff barriers to
trade. There are several practices that have been employed by
our trading partners to shut out competition in their domestic
markets. These practices include, but are not limited to,
domestic absorption requirements, discriminatory licensing
procedures, price bands, and the administration of tariff rate
quotas that prevent true competition. Provisions to address
these and other nontariff barriers should be written into the
new agreement on agriculture.
Finally, our negotiators must make changes to trading
practices that would facilitate and shorten dispute resolution
procedures and processes. The process for a WTO dispute
settlement case typically runs three years, if the WTO ruling
is implemented. We have seen in both the EU banana and EU beef
cases that compliance is not always assured. Our trading
partners cannot be allowed to unilaterally weaken the very
principles that we negotiated in the Uruguay Round Agreement.
The expedited dispute settlement process for perishable
agricultural products outlined in the WTO Dispute Settlement
Understanding should be modified to allow the procedure to be
used if the aggrieved party requests it. Currently, the WTO
requires that both parties in a case agree to use this
procedure. As a result, it has never been used. This simple
change should be enacted promptly. Doing so would address the
fundamental problem of a dispute settlement procedure that
requires too much time and prevents market access for several
marketing seasons before a resolution is reached.
Concerning environment and labor issues in the upcoming
trade negotiations, we believe that such matters should only be
addressed in a manner that facilitates rather than restricts
trade. We cannot allow the economic prosperity of our nation,
and that of our agricultural producers, to be used as a weapon
for nations that disagree with our values.
In summary, we support liberalization in global
agricultural markets that will result in true reform of the
current trading regime and bring about fair trade for our
producers. The United States has a tremendous opportunity
before it to shape the agenda for the next round and should
seize this chance to demonstrate to the world that we are
committed to opening new markets for U.S. agriculture. This is
our opportunity to address the trade imbalances that hamper our
domestic producers, from both an import and export perspective.
Given the economic turmoil being experienced in many of our
important export markets, the launching of new negotiations to
further open markets has never been more important.
Seattle Round Agricultural Committee (SRAC) 1999 WTO Policy Statement
The U.S. agricultural and food sector supports the
launching of a comprehensive round of multilateral trade
negotiations that includes all goods and services, continues to
reform agricultural and food trade policy, promotes global food
security through open trade, and increases trade liberalization
in agriculture and food. Policy and process objectives should
include:
Conclusion with a single undertaking that
encompasses all sectors (i.e., no early harvest).
Adoption of the Uruguay Round framework for the
1999 agricultural negotiations to ensure that there are no
product or policy exceptions.
Establishment of a three-year goal for the
conclusion of the negotiations (by December 2002).
Elimination of export subsidies and tightening of
rules for circumvention of export subsidies.
Elimination of nontariff barriers to trade.
Transitioning countries to provide an increasing
portion of total domestic support for agriculture in a
decoupled form, as the United States has already done under the
FAIR Act.
Commercially meaningful reduction or elimination of
tariffs (bound and applied) and mutual elimination of
restrictive tariff barriers on an accelerated basis. In
addition, the administration of tariff-rate quotas (TRQs) must
be improved.
Elimination of State Trading Enterprises (STEs) or
the adoption of disciplines that ensure operational
transparency, the end of discriminatory pricing practices, and
competition for STEs.
Maintaining sound science and risk assessment as
the foundation of sanitary and phytosanitary measures.
Ensuring market access for products of
biotechnology, with the regulation of these products based
solely on sound science.
Accelerating resolution of trade disputes and
prompt enforcement of panel decisions.
Providing food security for importing nations by
avoiding sanctions on food exports combined with a WTO
commitment not to restrict or prohibit the export of
agricultural products.
Addressing labor and environment issues in a manner
that facilitates rather than restricts trade.
Establishing WTO rules for developing countries to
graduate to full WTO obligations using objective economic
criteria.
Ag Processing Inc. National Chicken Council
Agricultural Retailers Association National Confectioners Association
of the United States
American Cotton Shippers
Association National Corn Growers Association
American Crop Protection
Association National Council of Farmer
Cooperatives
American Farm Bureau Federation National Cotton Council of America
American Feed Industry Association National Food Processors
Association
American Potato Trade Alliance National Grain and Feed Association
American Soybean Association National Grain Sorghum Producers
Association
American Sugar Alliance National Grain Trade Council
American Vintners Association National Grange
Animal Health Institute National Milk Producers Federation
Archer Daniels Midland Company National Oilseed Processors
Association
Biotechnology Industry Organization National Pork Producers Council
Bryant Christie Inc. National Renderers Association
Bunge Corporation National Sunflower Association
CF Industries, Inc. National Turkey Federation
California Table Grape Commission North American Export Grain
Association
Cargill, Incorporated North American Millers' Association
Chicago Board of Trade Northwest Horticultural Council
Chocolate Manufacturers Association Pacific Northwest Grain and Feed
Coalition for a Competitive Food
and Pet Food Institute
Agricultural System Pioneer Hi-Bred International, Inc.
ConAgra, Inc. Ralston Purina Company
Continental Grain Company Snack Food Association
Corn Refiners Association Sunkist Growers
Distilled Spirits Council of the
United States Sweetener Users Association
Farmland Industries, Inc. The Fertilizer Institute
Florida Phosphate Council The IAMS Company
Food Distributors International
Association Transportation, Elevator, & Grain
Merchants Association
Gold Kist, Inc. USA Poultry & Egg Export Council
Grocery Manufacturers of America USA Rice Federation
Independent Community Bankers of
America U.S. Apple Association
International Dairy Foods
Association U.S. Canola Association
Kraft Foods U.S. Grains Council
Louis Dreyfus Corporation U.S. Dairy Export Council
Monsanto Company U.S. Meat Export Federation
National Association of Animal
Breeders U.S. Poultry & Egg Association
National Association of State U.S. Rice Producers Association
Departments of Agriculture U.S. Wheat Associates, Inc.
National Association of Wheat
Growers United Egg Association
National Barley Growers Association United Egg Producers
National Cattlemen's Beef
Association Washington State Potato Commission
World Perspectives Inc.
Chairman Crane. Mr. Dillon.
STATEMENT OF JOHN DILLON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
INTERNATIONAL PAPER, PURCHASE, NEW YORK, ON BEHALF OF THE
AMERICAN FOREST & PAPER ASSOCIATION
Mr. Dillon. Thank you, Mr. Chairman. I am John Dillon of
International Paper, and I am pleased to be here today
representing the American Forest and Paper Association.
U.S. forest products industry accounts for $230 billion in
annual sales and employs about 1.5 million Americans.
Basically, as you know, wood and paper products are essential
elements of our standard of living and are derived from a
renewable resource, which we are committed to managing on a
sustainable basis.
For our industry, the WTO Ministerial represents the last
opportunity to level the competitive playingfield for our
products. The U.S. market has an open door to foreign
competitors in forest products, while U.S. producers must scale
high tariff walls and other barriers to compete abroad.
Starting with the Uruguay round, we have sought to level the
playingfield through reciprocal trade elimination agreements.
That objective was only partially realized. Continued disparity
in market access combined with foreign capacity growth and weak
demand abroad have resulted in the actual deterioration in the
trade balance of our sector since the Uruguay round.
We are seeing explosive growth in forest products capacity
in emerging economies like Indonesia, China, Korea and Brazil.
They may claim to be developing economies, but the capacity
they are building is world class, and, in fact, is finding its
way in a major way into our markets.
For instance, in 1998, paper imports from Asia increased by
73 percent. In total, foreign imports of paper products
increased by more than $1 billion in 1998, while U.S. exports
declined by almost $350 million. This alarming trend of
increase in imports has been evident throughout the decade of
the nineties.
Turning to wood products, since 1994, U.S. exports of wood
products have dropped by 20 percent, while imports have
increased by 33 percent. In total, between 1994 and 1998, the
deficit in our sector has jumped from $3 billion to over $9
billion, in excess of a tripling. The significance of these
numbers is the effect on jobs. These jobs are some of the best
paying in our communities. For instance, papermill jobs pay
about $20 an hour, which is $7 an hour more than other
manufacturing jobs. In 1998, a year of record demand for our
products, paper industry employment declined by 18,000 jobs.
Our industry has made substantial capital investments to
modernize our operations and compete on a global scale. At the
same time our relative cost position has changed in part due to
public policy affecting fiber supply, environmental costs and
taxes. For example, the U.S. tax rate on corporate forestry is
55 percent compared to 22 percent in Finland and 7 percent in
Indonesia.
Clearly, the WTO will not change tax or environmental
policy, but it can finish the job we started with the Uruguay
round. The administration has proceeded on Congress'
authorization to accelerate and expand reciprocal tariff
elimination. Last November, and again last month, the APEC
ministers agreed to work toward an agreement accelerating
tariff reductions by the WTO Ministerial in November 1999. The
accelerated trade liberalization proposal would eliminate
tariffs on paper products between the years 2000 and 2002, and
on wood products between 2002 and 2004. An agreement on the ATL
package would boost global trade and benefit producers and
consumers around the world. However, that objective is
threatened by the Japanese Government's continued refusal to
agree to trade elimination on wood products and by European
resistance to conclude any agreement before launching a new
round of negotiations.
Immediate action in Seattle is essential. Delaying the
results will mean continued erosion of our competitive position
in world markets. With the APEC economies prepared to lead the
way in advancing the pace of tariff liberalization, an
agreement on the ATL at the outset of the new round would
provide important momentum for further opening global markets.
The WTO must demonstrate that it is capable of eliminating
barriers to trade on a continuing basis and can do so by
concluding the ATL agreement in Seattle.
We urge your support and thank you for listening to our
stories.
Chairman Crane. Thank you.
[The prepared statement follows:]
Statement of John Dillon, Chairman and Chief Executive Officer,
International Paper Purchase, New York, on behalf of the American
Forest & Paper Association
Mr. Chairman, Members of the Committee:
I am John Dillon, Chairman and CEO of International Paper,
and I am pleased to be here today representing the American
Forest and Paper Association. International Paper is the
largest forest products company in the world with $24 billion
in annual sales, operations in nearly 50 countries and close to
100,000 employees. In addition, International Paper owns and
manages nearly 7.5 million acres of forest land in the United
States.
The U. S. forest products industry, which accounts for $230
billion in annual sales and employs 1.5 million American
workers, comprises seven percent of manufacturing shipments. To
put this in perspective, the U.S. forest products industry
employs about as many people as the data processing and
computer services industry. While Internet-based advertising
totaled $1.9 billion in 1998, print-based advertising generated
$111 billion in revenues. Basically, wood and paper products
are essential elements of our standard of living--from paper
for daily information to textbooks to decorative products; from
packaging to keep products safe and prevent spoilage; and from
lumber and panel materials used in over 90 percent of American
homes to wood-based furniture and cabinetry. These products are
derived from a unique renewable resource which the U.S. forest
products industry is committed to managing on a sustainable
basis.
For our industry, the World Trade Organization (WTO)
Ministerial meeting in Seattle represents the most significant,
and possibly the last, opportunity to secure our ability to
participate in fast-growing global markets from a U.S.
manufacturing base. For too many years, the U.S. market has
provided an open door to our foreign competitors, while U.S.
producers have had to scale high tariff walls and other
barriers to compete in foreign markets. Our foreign competitors
have used those years and those barriers to create a
substantial global advantage by increasing their productive
capacity and exploiting our market while denying us equivalent
market opportunities.
For the last decade, beginning with the Uruguay Round, we
have sought to level the playing field by pursuing a global
free trade sector in forest products through reciprocal tariff
elimination agreements. That objective was only partially
realized in the Uruguay Round Agreement, as Japan blocked an
agreement in wood products, and Europe delayed the phase-out on
paper tariffs to ten years. These actions provided another
decade of protection to some of our strongest competitors in
global markets.
As a consequence, we have actually seen the global trade
balance in the forest products sector decline since the
conclusion of the Uruguay Round Agreement. In total, between
1994 and 1998 the trade deficit in our sector jumped from $3
billion to $9.4 billion, a tripling in this short time period.
On the solid wood side of the industry, global production
of lumber and panel products grew about 5 percent between 1994
and 1998, while U.S. production increased only about 3 percent.
Thus, the U.S. share of global lumber production has declined
by 1-2 percent since 1994. At the same time, U.S. exports of
wood products have dropped from $7.2 billion to $5.8 billion,
or a 20 percent decline; whereas imports of lumber and wood
products have grown from $10 billion to $13.3 billion, or a 33
percent increase.
On the paper side, global production of paper and
paperboard has increased about 12 percent since 1994, while
U.S. production has increased just 6 percent. The U.S. share of
world production of paper and paperboard has declined from 30.1
percent to 28.5 percent. On a tonnage basis, U.S. exports of
pulp, paper and paperboard grew 8.6 percent from 1994-1998, but
dropped 9.3 percent in 1997-98, while imports increased 12
percent.
Just as we saw strong growth in European capacity in the
early 1990s, we are now looking at explosive growth in forest
products capacity in emerging economies such as Indonesia,
China, Korea, and Brazil. And while these countries may claim
to be developing economies, the capacity they are building is
world-class--we are not talking about backyard paper and saw
mills, but some of the largest, state-of-the-art mills in the
world.
The situation has become more acute in the last two years
as a consequence of the Asian financial crisis. As Asian
economic growth collapsed, the rapid buildup in capacity that
was anticipated to serve the rapidly growing Asian economies
has resulted in increased shipments to the U.S. market. Imports
of paper from Indonesia, for example, increased by 1800 percent
during 1998. Imports from all Asian countries have increased 73
percent. At the same time, the reduction in demand in Asia, and
lack of strong growth in the rest of the world, has resulted in
diversions of products from other regions to the U.S. market--
European imports are up 12 percent; Canadian imports are up 5.3
percent. In total, U.S. imports of paper and paperboard have
increased by more than $1 billion in 1998, while U.S. exports
have declined by $335 million.
The result has been a significant erosion in prices and
profitability for U.S. producers, and consequently a reduction
in U.S. production. Since the beginning of 1998, the U.S.
forest products industry has indefinitely or permanently
shuttered 1.4 million metric tons of market pulp and 2.1
million metric tons of paper and paperboard capacity.
The real significance of these numbers is the effect on
U.S. jobs. In 1998, total paper and allied products industry
employment declined by 17,800 jobs, or 2.6%--the largest single
year decline since 1983. These are higher paying jobs than the
manufacturing average and are most often located in rural
communities that are heavily dependent on the forest products
industry. At an average wage of $20.41 per hour, paper mill
workers earn nearly $7.00 an hour more than all other private
sector production workers, whose average hourly wage is $13.14.
Future growth opportunities for our products are highest in
foreign markets where demand is expected to grow more rapidly
than in the more mature markets in the U.S. and Europe.
However, if we are unable to secure a market position in Asian
and Latin American countries in the near future because of
prohibitive market access barriers, those markets will be
locked up by emerging competitors and our natural competitive
advantage in this sector will have been sacrificed to unequal
terms of trade set by governments.
It is for this reason that we have been so insistent on
accelerating and expanding the reciprocal tariff elimination
agreement from the Uruguay Round and why we are so determined
to see a global agreement reached at the Seattle Ministerial.
Immediate action is essential to the future success and growth
of the U.S. forest products industry.
Six years ago, Fortune magazine evaluated U.S. industries
on their ability to compete globally and gave only two ``A''
ratings: pharmaceuticals and forest products. Today, that
competitive edge in the forest products sector is eroding as a
consequence of public policy impacts on our domestic industry
and because of the rapid expansion of foreign competitors,
often with the active support of their governments.
During the 1980s and early 1990s, our industry made
substantial capital investments to modernize and upgrade our
equipment and operations to ensure that we would be able to
compete on a global scale. In fact, in terms of net value of
plant and equipment per dollar of sales, the paper industry is
more than twice as capital intensive as the all-manufacturing
average.
However, also during that time, our relative cost position
changed, in part due to public policy actions. The 75 percent
reduction in timber from public lands has resulted in increased
fiber costs, which make up 30-70 percent of our production
costs. At the same time, our foreign competitors often enjoy
government-supplied timber concessions at below-market rates,
or benefit from export restrictions which artificially reduce
their cost of fiber.
Environmental compliance costs have increased
significantly, both for forest management and for manufacturing
processes. Last year, the Environmental Protection Agency (EPA)
imposed the most costly regulation ever on a single industry--
the Cluster rule--which will increase capital costs for the
industry by nearly $3 billion. Costs for International Paper
alone will exceed $500 million. Additional regulations which
EPA is now considering for our industry could add another $10
billion in capital costs over the next 10 years. AF&PA
estimates that environmental expenses accounted for 13 percent
of capital spending in the last decade, and will account for as
much as 28 percent of capital spending in the next five years.
Unfortunately, in many cases these expenditures produce little
or no significant environmental improvement and certainly do
not contribute to increased productivity or production. In
addition, these costs are not shared equally by many of our
foreign competitors, which face neither the scope of direct
regulatory costs, nor the strict enforcement regime that exists
in the U.S. We are proud of our environmental record, but there
must be a reasonable balance between environmental costs and
benefits, and we need to ensure that U.S. producers are not
left at a competitive disadvantage because of disparate
environmental requirements.
We also face a cost disadvantage as a consequence of tax
policy. A recent study of comparative tax rates revealed that
the U.S. forest products industry has the second highest
effective tax rate on corporate forestry and timber investment
when compared with any of our major foreign competitors: The
U.S. tax rate is 55 percent vs. Japan at 36 percent; Finland at
22 percent; and Indonesia at 7 percent. Similarly, the
effective tax rate on paper manufacturing in the U.S., at 62
percent, compares unfavorably to Japan at 57 percent; Finland
at 36 percent; and Indonesia at 33 percent. In both Finland and
Indonesia, almost all reforestation and silvicultural costs
currently may be deducted. In the U.S., most reforestation
costs must be capitalized until harvesting begins. The tax bill
that the House recently approved will help somewhat, but what
would really help level the competitive field for us would be a
significant reduction in the corporate capital gains rate
applied to timber and a permanent lifting of the cap on the
amortization of reforestation expenses.
Of immediate interest to this committee and this hearing is
the impact of trade policies on our industry and the
opportunity presented by the upcoming ministerial to improve
our competitive position. With our natural advantages in
abundant fiber supply, developed infrastructure, skilled
workforce, capital investments, and world-scale operations, we
should enjoy a comparative, competitive advantage in world
markets for our wood and paper products. However, while the
U.S. market has been open to the rest of the world, the
maintenance of foreign barriers to our products has
significantly eroded our competitive position and threatens the
future growth and success of this industry.
In previous trade negotiations, U.S. tariffs on wood and
paper products have been traded away for concessions in other
sectors leaving us with a big market open to foreign
competition and little leverage to gain equivalent access to
foreign markets.
During the Uruguay Round, we initiated and led the Zero-
for-Zero Tariff Initiative, designed to provide comparable
global market access opportunities in several globally
competitive sectors. As noted earlier, that initiative was not
fully achieved in our sector: Japan blocked agreement on
reciprocal tariff elimination in wood products and Europe
delayed achievement of zero tariffs on paper products for 10
years. Importantly, developing countries did not participate in
the Zero-for-Zero Initiative. These countries represent the
most rapidly growing markets for our products and have become
significant competitors in our industry.
The situation we faced then is now compounded. In short,
the distortions in market access around the world and
differences in government policies affecting forest products
industries are leading immediately and directly to the transfer
of U.S. production and jobs to other countries. If this
situation is not reversed in the near term, the opportunity for
our industry to export from the U.S. to growing economies in
Asia and Latin America will be lost for good as those markets
are claimed by low-cost, protected competitors.
The Congress has authorized the Administration to continue
to pursue acceleration and expansion of reciprocal tariff
elimination in the zero-for-zero sectors as a priority matter.
The Administration has worked with our trading partners in APEC
to advance an accelerated tariff liberalization package for 8
sectors--including forest products--first through the Asia
Pacific Economic Cooperation (APEC) forum and now through the
WTO. Last November, and again last month, APEC ministers agreed
to work toward an agreement by the time of the WTO Ministerial
in Seattle. The Accelerated Tariff Liberalization (ATL)
proposal for forest products would eliminate tariffs on paper
products between 2000 and 2002 and on wood products between
2002 and 2004, with limited flexibility on end dates and end
rates. In addition to forest products, the ATL package includes
fish, chemicals, medical equipment, energy, toys, gems and
jewelry, and environmental goods and services.
It is significant that the APEC economies agreed on the
importance of advancing liberalization in these sectors. It is
also important to note that China, in the WTO accession
negotiations, would significantly reduce tariffs on paper and
wood products and, on acceding to the WTO, would participate in
a WTO agreement on tariff elimination.
An agreement in Seattle on the ATL sectors could produce a
significant boost to global trade, benefiting producers and
consumers around the world. However, that objective is
threatened by the continued refusal of the Japanese government
to agree to tariff elimination on wood products, and by
European resistance to conclude any sectoral agreement in
advance of launching a new round of multilateral trade
negotiations.
Delaying results in our sector until the conclusion of a
new round, at best within three years and likely to be much
longer than that, will mean continued erosion of our
competitive position in world markets and continued transfer of
forest products jobs to other countries. This is an
unacceptable outcome. It is comparable to allowing a healthy
patient with a flesh wound to bleed to death because the
doctors cannot agree on whether to apply a tourniquet or suture
the wound.
We cannot allow the Japanese and Europeans to continue to
defer results in sectors like forest products, where there is
strong global competition. Both Europe and Japan have well
developed forest products industries and world-class production
is being built in emerging countries.
There will be some vocal opposition from groups in Seattle
about the impact of globalization and world trade on people's
lives. We cannot stop globalization of the world economy; we
have to recognize it and adapt to it to survive and prosper. We
can, however, work to ensure that the terms under which
globalization occurs are at least fair for American companies
and workers and that domestic and foreign barriers to
production, trade, and economic growth are eliminated.
Artificial barriers that distort trade and economic
development stifle not only competition, but also innovation
and economically-sustainable growth, and lead to reciprocal
barriers which further distort and stifle economic development
and growth.
Negotiations should be based on a recognition that
reciprocal open markets create economic growth and new market
and job opportunities for all participants. That is the
challenge and the opportunity facing the trade ministers in
Seattle.
The WTO must demonstrate that it is capable of continuous
progress in eliminating barriers to trade. The most tangible
demonstration of that capability would be to conclude an ATL
agreement at the Ministerial which would produce immediate
benefits for producers and consumers around the world in these
eight sectors. That would serve as a model and provide some
important momentum for the launch of a new round of trade
liberalization negotiations.
Conversely, failure to conclude the ATL agreement in
Seattle could lead to further loss of growth opportunities in
important sectors of the U.S. economy and further erosion in
public support for efforts to achieve a more open world trading
system.
I hope the trade ministers seize this opportunity to
demonstrate the vitality and value of the World Trade
Organization as a body which can and does produce meaningful
economic results through eliminating trade barriers, beginning
with an agreement in Seattle on the Accelerated Tariff
Liberalization package.
Chairman Crane. And our last witness, Mr. Van Putten.
STATEMENT OF MARK VAN PUTTEN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL WILDLIFE FEDERATION
Mr. Van Putten. Thank you, Mr. Chairman and Members of the
Subcommittee. I appreciate this opportunity to testify on
behalf of the National Wildlife Federation, America's largest
not-for-profit conservation advocacy and education organization
with over 4 million members and supporters in 46 States and
territorial affiliates.
For nearly 10 years, NWF has been intimately involved in
the development of U.S. trade policy. This makes sense to our
members, who are mainstream and main street conservation
activists. They understand the link between sustainable
economic development and environmental protection.
This hearing marks an important crossroads in America's
trade history. For too long, trade and investment agreements
have been treated as if they were independent from their impact
on the environment, wildlife and natural resources. There has
been an assumption that more trade is always better, leading to
greater wealth and an improvement in the quality of life for
all people.
But we have come to learn that liberalizing trade does not
come without costs to the environment. We now recognize through
firsthand experience that trade rules may restrict our ability
to protect sea turtles and other imperiled species, limit bulk
water exports from the Great Lakes, and provide information to
consumers about the environmental impact of the products they
buy.
This need not be so. The National Wildlife Federation
believes that trade liberalization could be a means by which
the goals of environmental protection and sustainable
development are advanced, but this will require a change in the
scope and direction of United States trade policy. Without this
change, public confidence in trade policy will continue to
erode.
As host of the WTO Ministerial meeting in November, the
United States has an unprecedented opportunity to demonstrate
leadership in reviewing and reforming the international trade
regime so it respects and promotes these core American values.
We stand ready to assist Congress and the administration in
developing a negotiating agenda which fully incorporates
environmental priorities with specific proposals for WTO rule
reform and clarification. At the same time, I must acknowledge
the National Wildlife Federation's willingness to oppose the
next round of WTO negotiations if protection of the environment
and democratic procedural reforms of the WTO do not emerge as
key components of the future trading system.
The National Wildlife Federation has an agenda for
harnessing trade liberalization in the service of advancing the
American values of environmental protection, natural resource
conservation, and process values such as openness and fairness
in decisionmaking. In my written testimony I describe this
agenda in detail, but I would just like to highlight a few of
those points.
First, we must improve the WTO's deference to national
standards and multilateral environmental agreements. Second, we
must address the WTO prohibition on distinctions in production
and process methods. Third, we must make environmental impact
assessments integral to trade negotiations. And fourth, we must
reform WTO procedures, especially the dispute resolution system
concerning transparency and public participation.
As I said, these and other points are fully addressed in my
written submission, and I welcome any questions you may have on
that.
We appreciate the administration's recent statements on its
agenda for integrating trade and the environment, and we urge
the United States to move forward and embrace the
recommendations we have made. Unless WTO nations embrace an
agenda for reform to address environmental concerns, they will
not earn the public support necessary for further trade
liberalization.
Mr. Chairman and Members of the Subcommittee, for our
members the question is not whether or not to trade, but how to
craft trade and investment rules that promote a healthier
environment. Trade is not an end in itself. It is a tool to
achieve human aspirations, to improve standards of living and
to enhance the quality of life. Trade rules are self-defeating
if they force us to trade away those things we value most
highly: Clean air, clean water, safe food, wildlife, and open
and living places that give meaning to our lives. Trade should
be an investment in a better way of life, not a license to
degrade those things on which healthy life depends. Thank you.
Chairman Crane. Thank you, Mr. Van Putten.
[The prepared statement and attachments follow:]
Statement of Mark Van Putten, President and Chief Executive Officer,
National Wildlife Federation
I am Mark Van Putten, President and CEO of the National
Wildlife Federation, the United States' largest not-for-profit
conservation education and advocacy organization with over four
million members and supporters, ten field offices and forty-six
state and territorial affiliates. For nearly ten years, our
staff has been involved in the development of United States
trade policy. Our members are America's mainstream and main
street conservation activists who understand the link between
sustainable economic development and environmental protection.
This hearing marks an important cross roads in American
history. For years we have negotiated international trade and
investment agreements as if they were independent from their
impact on the wildlife and natural resources on which they
often depend. We have assumed that ``increased trade is always
better,'' because we believed that more trade lead to greater
wealth and an improvement in the quality of life for all
people. To that end, United States trade policy has
traditionally been dedicated to securing greater market access
for United States' goods and services through the elimination
of national policies of our trading partners that stood in the
way of efforts to trade more and more products and services.
In many cases, increased trade is better, especially when
we are talking about the needs of developing countries.
Increased access to international markets allows developing
countries to sell their goods and services to a growing global
market. But as we better understand the impact living in a
global society has on our efforts to protect the environment in
a global society, we understand that liberalizing trade does
not come without costs to the environment. We now understand
that trade liberalization increases the pressure to turn wild
spaces into farmland and, in a recent tragic example, can
undermine efforts here at home to protect endangered sea
turtles all over the world.
The National Wildlife Federation believes that it is time
to change the scope and direction of United States trade
policy. We need a policy that will promote healthy economies
and cleaner environments. Acting as host to the World Trade
Organization's Third Ministerial in November, we believe that
the United States has an unprecedented opportunity to
demonstrate its leadership on this important matter, and show
the world that economically sound trade policy must respect the
environment and, the communities affected by the trend toward
globalization.
The WTO Ministerial represents a critical opportunity to
review and reform the international trade regime so that it
respects and promotes the core values of the American people.
We stand prepared to assist Congress and the Administration in
developing a negotiating agenda which fully incorporates
environmental priorities within specific proposals for WTO rule
reform and clarification. At the same time, we must
respectfully acknowledge our willingness to oppose the next
round of WTO negotiations if protection of the environment and
democratic procedural reform of the WTO do not emerge as
integral components of the future multilateral trading system.
We acknowledge and appreciate the progress made by the
United States in addressing environmental concerns at the WTO
High Level Symposium on Trade and Environment in March 1999 and
in the United States proposals for the Seattle Ministerial
agenda presented before the WTO General Council in July 1999.
We welcome the Administration's attempts to improve
transparency and participation of civil society at the WTO and,
to encourage the elimination of environmentally-damaging
subsidies in the fisheries sector. We are also moderately
encouraged that the WTO dispute settlement panel jurisprudence
and, in particular, the Appellate Body rulings, have recently
demonstrated an improved sensitivity to the merits of
environmental policy.
Despite the important United States proposals, we must
reiterate our view that the positions articulated by the
Administration as part of its Seattle Ministerial agenda are
positive first steps. Clearly, the choice between awaiting
improved jurisprudence and pursuing concrete rule reform is not
necessarily an ``either/or'' proposition. If the widespread
support of NWF members and the American people for further
trade liberalization is to be achieved, United States
leadership and more progress needs to be made in implementing
the proposed initiatives and in clarifying and modifying the
current trade rules to adequately reflect the integration of
environmental concerns.
I. The Relationship Between the International Trade Regime and
Environmental Policy
A. Background--The Principles of the GATT/WTO Regime
The core principles of the General Agreement on Tariffs and Trade
(GATT 1947) \1\ and its recent successor, the World Trade Organization
(WTO),\2\ have important implications for environmental protection.
Generally speaking, WTO rights and obligations impose certain
disciplines on its signatory parties--or member nations. The following
principles represent GATT's core disciplines:
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\1\ General Agreement on Tariffs and Trade, Oct. 30 1947, 61 Stat.
A3, 55 U.N.T.S. 187 [hereinafter GATT 1947].
\2\ General Agreement on Tariffs and Trade--Multilateral Trade
Negotiations (The Uruguay Round): Final Act Embodying the Results of
the Uruguay Round of Trade Negotiations, Dec. 15, 1993, Multilateral
Trade Negotiations (The Uruguay Round) Doc. MTN/FA, 33 I.L.M. 1 (1994)
[hereinafter WTO Final Act].
---------------------------------------------------------------------------
Article I of the 1947 original GATT text establishes the Most-
Favored-Nation principle (MFN). MFN aims to ensure that each member
nation grant any privilege or advantage it provides to a product from
one member immediately and unconditionally to ``like products'' from,
or destined for, all WTO members. MFN effectively requires all member
nations to treat products from all other WTO members in the same
manner.
Article III establishes the National Treatment Principle, which
requires members to treat any imported ``like product'' in the same
manner as they would treat domestic ``like products''. GATT/WTO dispute
settlement panels have traditionally defined the term ``like product''
narrowly so as to prohibit distinctions in products based on the manner
in which they were produced, or process and production methods (PPM).
At its core, National Treatment is designed to prevent the
discrimination of imported products in favor of domestic products.
Article XI establishes a prohibition on quantitative restrictions
and seeks to prohibit such trade actions as quotas, embargoes, and
licensing schemes on imported or exported products. A WTO member
country challenged with violating any of the above obligations has
recourse to the GATT 1947 General Exceptions. Article XX(b) and (g) are
the exceptions most frequently cited in trade disputes that involve the
environment and natural resources.\3\ Article XX also allows exceptions
from the WTO general obligations to, inter alia, protect public morals,
distinguish products manufactured with prison labor, exclude commodity
agreements that meet certain criteria, and meet emergency shortages of
supplies.
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\3\ WTO Final Act, Article XX(b), Article XX(g)
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Thus, if the trade provisions of a WTO member's environmental
policy are challenged as a violation of its WTO obligations, the
defendant country may attempt to justify the measure as ``necessary to
protect human, animal or plant life or health'' (Article XX(b)) or,
``relating to the conservation of exhaustible natural resources if such
measures are made effective in conjunction with restrictions on
domestic production or consumption.'' (Article XX(g)).
In addition to Article XX, the nexus between trade and the
environment is frequently addressed within the context of the WTO
Agreements on Technical Barriers to Trade (TBT Agreement) and the
Sanitary and Phytosanitary Agreement (SPS Agreement)
The TBT Agreement seeks to ensure that the nondiscrimination and
national treatment provisions of the WTO as a whole are specifically
applied to the adoption of technical regulations by members.\4\ The TBT
Agreement emphasizes deference to international standards in the
creation of regulations governing, among others, product
characteristics, process and production methods, labeling, and
packaging.\5\
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\4\ Agreement on Technical Barriers to Trade, GATT/WTO (1994). A
technical regulation is defined as:
Document which lays down product characteristics or their related
processes and production methods, including the applicable
administrative provisions, with which compliance is not mandatory. It
may also include or deal exclusively with terminology, symbols,
packaging, marking or labelling requirements as they apply to a
product, process or production method.
\5\ TBT Agreement, Article 2.
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The WTO SPS Agreement attempts to prevent non-tariff barriers to
trade in the form of environment and health measures designed ``to
protect animal or plant life or health within the territory of the
Member'' through restrictions on invasive species, additives,
pesticides, and other contaminants. In similar fashion to the TBT
Agreement, the SPS Agreement places additional disciplines on WTO
members so as to ensure that measures are not to be ``maintained
without sufficient scientific evidence,'' nor be maintained ``if there
is another measure, reasonably available. . . that achieves the
appropriate level of protection and is significantly less restrictive
to trade.'' \6\
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\6\ SPS Agreement, Article 3:2 (para. 6).
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If a dispute arises, a complaining party may request the
appointment of a dispute panel to settle the disagreement. The panel
hearings are between governments and are generally closed to the public
and non-governmental organizations (NGOs). Panel reports are adopted
within sixty days of their issuance unless a member initiates an appeal
or it is the consensus of the other members not to adopt the report. If
a member chooses to ignore the recommendations of a panel, the
complaining member may seek compensation in the area of trade directly
related to the dispute or, if necessary may cross-retaliate in another
trade sector. As a result, a member country whose environmental
regulation is found by a WTO dispute settlement panel to be
inconsistent with WTO obligations is immediately susceptible to
significant pressure to either alter the environmental law in domestic
administrative processes or provide compensation to the complaining WTO
member.
B. Implications for National and International Environmental Policy
The GATT/WTO trade principles have direct implications for a host
of environmental laws. Any national or multilateral environmental
measures attempting to accomplish their environmental objective that
results in the application of trade restrictions with disproportionate
impacts on different WTO members runs the risk of being in violation of
the MFN principle. The trade provisions of a multilateral environmental
agreement (MEA), the Montreal Protocol on Substances the Deplete the
Ozone Layer, that promote different trade restrictions among WTO
members based on their status as parties or non-parties to the Protocol
may violate the MFN principle. Similarly, an environmental measure that
attempts to distinguish products based on the environmental
consequences of their production (e.g. tuna caught in a manner that
harms dolphins as opposed to tuna caught without producing dolphin
mortality) may violate the national treatment principle. Finally, if an
environmental regulation restricts the trade in a particular product
via a trade ban, the regulation in question may be declared
inconsistent with Article XI's prohibition on quantitative
restrictions. For example, the United States' trade restrictions on
shrimp products caught in a manner that harms sea turtles were recently
found to be in violation of Article XI by a WTO dispute settlement
panel.
In addition to the core principles, WTO members are increasingly
demonstrating a propensity to utilize the TBT and SPS Agreements to
impose additional disciplines on national and international
environmental policies. For example, WTO members continue to explore
measures designed to discipline voluntary environmental labeling and
certification programs by advocating not only adherence to the TBT
Agreement but, also a list of additional principles requiring
ecolabeling programs to be, inter alia, ``based on sound science'' and
``no more trade restrictive than necessary''.\7\ Ecolabeling proponents
remain concerned that the new disciplines inherent in the recent
proposals and the principles of the TBT Agreement go well-beyond the
requirements of MFN and national treatment obligations and may place
WTO dispute settlement panels in the position of interpreting the
substantive merits of individual and voluntary environmental labeling
programs.
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\7\ See, e.g., Trade and Environment Bulletin, Committee on Trade
and Environment (CTE), WTO, Press/TE 023, (May 14, 1998).
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Similarly, the SPS Agreement requires national environmental
measures to adhere to additional trade-based disciplines and allows
significant deference to international standards. As a result, many
national environmental and health authorities remain concerned that the
SPS Agreement will allow WTO dispute settlement panels to sit in
judgment of societal policy choices such as determinations relating to
appropriate levels of risk and/or may defer to occasionally weaker
international standards in the interest of promoting trade.
As noted earlier, when differences of opinion over national policy
and its relationship to trade rules arise, member nations seek a
resolution via the new dispute settlement system established in
conjunction with the WTO. Thanks in large part to United States
leadership in the post-WW II era, the use of tariffs to impede the flow
of goods around the world has diminished considerably. As a by-product
of this success in tariff reduction, the WTO dispute settlement system
has increasingly been called upon to confront the trade-distorting
effects of non-tariff barriers. Within the international trade regime,
domestic and international environmental regulation is often suspected,
rightly or wrongly, of rising to the level of an actionable non-tariff
barrier to trade.
The WTO Dispute Settlement Understanding encourages members to
enter into informal negotiations in an effort to reach a mutually
agreed solution.\8\ If a resolution of the matter is not forthcoming, a
challenging member invoking the dispute settlement procedures is
entitled to a prima facie assumption that the trade provisions of the
environmental measure being challenged are inconsistent with the WTO
rules. The burden of proof to rebut the charge is on the defendant
member seeking to implement the environmental regulation.
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\8\ Understanding on Rules and Procedures Governing the Settlement
of Disputes, WTO (1994).
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In response to the preceding trade and environment linkages and in
the interest of forging a new consensus on United States trade policy
as we work together to develop United States negotiating objectives for
Seattle, the National Wildlife Federation proffers the following
recommendations as potential objectives for future United States trade
initiatives.
II. Establish Appropriate and Reasonable Limits to the WTO's Influence
on Legitimate National and International Environmental Measures
A. Improve WTO Deference to National Standards and Multilateral
Environmental Agreements (MEAs)
Trade rules must be crafted so they do not diminish the
environmental protections that nations have provided for their
citizens and their natural resources. As trade negotiations and
trade institutions are increasingly faced with the challenge of
distinguishing national standards adopted for legitimate health
and environmental purposes from those regulatory standards
enacted with protectionist intent, the need to ensure
appropriate deference to national decisionmakers with
environmental expertise acting at the behest of their citizens
intensifies.
As the recent WTO dispute settlement panel opinion
regarding the United States' efforts to protect endangered sea
turtles and several other environmentally-related dispute
settlement decisions attest, the WTO's review of the trade-
related aspects of environmental policy tends to expand rapidly
into a substantive review, from a trade perspective, of the
overall effectiveness of a chosen environmental policy.\9\
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\9\ See United States--Import Prohibition of Certain Shrimp and
Shrimp Products, Final Report, WTO, WT/DS58/R, (April 6, 1998). See
also, United States--Restrictions on Imports of Tuna, GATT Doc. DS29/R
(June 1994) (unadopted); United States--Restrictions on Imports of
Tuna, GATT Doc. DS21/R (Sept. 3, 1991) (unadopted), 30 I.L.M. 1594
(1991); Canada--Measures Affecting Exports of Unprocessed Herring and
Salmon, GATT Doc. L/6268, GATT BISD 98 (35th Supp. 1988).
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In addition to endangered sea turtle regulations, the WTO
and GATT dispute settlement bodies have recently issued rulings
on domestic laws addressing appropriate levels of protection
for growth hormones in beef,\10\ air quality,\11\ and fuel
efficiency standards.\12\
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\10\ EC Measures Concerning Meat and Meat Products (Hormones),
Final Report, WTO, WT/DS48/AB/R, (January 16, 1998).
\11\ United States-Standards for Reformulated and Conventional
Gasoline (AB-1996-1), (March 4, 1996).
\12\ United States--Taxes on Automobiles, GATT Doc. DS 31/R, at 3-4
(Sept. 29, 1994) (unadopted)
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1. Sanitary and Phytosanitary Measures
WTO SPS negotiators are charged with the difficult
responsibility and challenge of balancing the right of domestic
regulatory authorities to determine their appropriate level of
risk and the obligation to maintain measures consistent with
their commitments under the WTO SPS Agreement. The next level
of SPS negotiations at Seattle and beyond represent a
significant opportunity for the United States and its fellow
WTO partners to absorb the lessons of existing SPS Agreements
in the NAFTA and Uruguay Round/WTO contexts and to create a
much-improved agreement that ensures high levels of environment
and health protection while facilitating trade.
A failure to seize this opportunity to establish a well-
functioning SPS Agreement will undoubtedly lead to increased
challenges to nondiscriminatory national environment and health
protection laws which will in turn result in increased tension
and instability in the international trading regime and an
erosion of popular support within WTO countries for the WTO
process. Accordingly, we recommend that the WTO negotiators
seek to achieve an SPS Agreement consistent with the following
principles:
Burden of Proof
The WTO SPS Agreement should explicitly place the burden of
proof in establishing a violation of the SPS Agreement on the
challenging party throughout the length of a dispute involving
a particular country's environment and health protection
measure;
International Standards as Minimum Levels of Protection and the
Precautionary Principle
The WTO SPS Agreement should explicitly confirm that
international standards are not to be considered maximum levels
of protection in situations where a WTO country seeks to
maintain a higher standard than an international standard.
As a result, SPS Agreement negotiators should insist that,
at minimum, an express statement acknowledging that
international standards may not be invoked to weaken higher
domestic standards should be inserted into the SPS text. If
modest deference to international standards is to be
maintained, deference to relevant international health and
environmental standards and appropriate multilateral
environmental agreements (MEAs) should be incorporated into the
SPS Agreement. Indeed, the SPS Agreement should expressly
acknowledge the right of WTO members to invoke the
Precautionary Principle (the right to take action against a
potential harm even if the scientific evidence linking an
activity to the harm in question is inconclusive or uncertain)
in determining their appropriate levels of risk.
Deference to National Regulatory Authorities
The WTO SPS Agreement must allow for deference to national
regulatory authorities in the assessment of risk and the
determination of the appropriate level of SPS protection. As an
appropriate starting point in considering modifications to the
SPS Agreement, the United States should seek explicit language
in the text of the WTO's Sanitary and Phytosanitary Agreement
similar to the language contained in the Uruguay Round
Statement of Administrative Action. The United States has
stated that the SPS Agreement's definition of appropriate level
of protection explicitly affirms the right of each government
to choose its levels of protection, including a ``zero risk''
level if it so chooses. A government may establish its level of
protection by any means available under its law, including by
referendum. In the end, the choice of the appropriate level of
protection is a societal value judgment. The Agreement imposes
no requirement to establish a scientific basis for the chosen
level of protection because the choice is not a scientific
judgment.\13\
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\13\ The Uruguay Round Agreements Act, Statement of Administrative
Action at 89.
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In addition, trade rules must explicitly ensure that
sovereign nations may continue to adopt and maintain
legitimate, nondiscriminatory protective standards for health,
safety, and the environment.\14\ President Clinton has stated
in an address marking the 50th Anniversary of the WTO
``Enhanced trade can and should enhance--not undercut--the
protection of the environment. [I]nternational trade rules must
permit sovereign nations to exercise their right to set
protective standards for health, safety and the environment and
biodiversity. Nations have a right to pursue those
protections--even when they are stronger than international
norms.''
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\14\ Address By President Clinton to the World Trade Organization,
Geneva, Switzerland, May 18, 1998.
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Accordingly, WTO negotiators should insist that an
interpretative statement be incorporated into the SPS Agreement
reflecting the above position so as to provide clear guidance
to WTO dispute panels that any potential SPS Agreement
requirement of scientific justification must not allow the
substitution of a panel's scientific judgment for that of
domestic regulatory authorities.
2. Allow Explicit Deference to Multilateral Environmental
Agreements (MEAs)
The potential conflict between existing WTO trade rules and
the use of trade measures in MEAs has to be addressed. MEAs use
trade measures to promote environmental cooperation and
enforcement through the use of a variety of positive and
negative incentives related directly to the environmental
problem at issue.\15\ For example, MEAs utilize trade
provisions to regulate the trade in a ``target'' product or
substance primarily responsible for the environmental
degradation--such as ozone depleting chemicals or trade in
animal parts derived from endangered species.
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\15\ See generally, General Agreement on Tariffs and Trade, Trade
and the Environment (Feb. 12, 1992), 30.
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Frequently, many of the trade provisions in MEAs require
MEA parties to restrict trade in an environmentally damaging
product with non-parties to the MEA. Under these circumstances,
a non-party to the MEA that is a WTO member may allege a
violation of their WTO MFN rights and obligations as a result
of the differential treatment. In addition, trade restrictions
in MEAs that encourage wholesale bans or embargoes of products
may also be deemed inconsistent with Article XI's prohibition
on quantitative restrictions.
The National Wildlife Federation strongly supports global
efforts to negotiate and implement MEAs. In general, MEAs
encourage transparency and nondiscrimination, and
simultaneously discourage alternative unilateral measures that
may lead to further trade tensions. Traditionally, well-
supported MEAs provide certainty for business and discourage
``free-riders'' from attaining competitive advantages over law
abiding competitors. Negative economic consequences for
products not related to the environmental harm at issue are
rare and the WTO Secretariat has acknowledged that ``none of
the existing MEAs contain provisions for discriminatory trade
measures to be taken against unrelated products in the case of
non-participation or defection.'' \16\
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\16\ Id.
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The United States needs to demonstrate leadership in
working with other WTO members, MEA parties, and the
international environmental NGO community to establish a
framework in which the laudable goals of trade liberalization
and multilateral environmental protection may co-exist. We
pledge to work with Congress and the Administration to:
Build on the NAFTA model
The United States' commitment to multilateral environmental
solutions to international environmental issues as reflected in
Article 104 of NAFTA made important strides towards increased
deference for MEAs addressing shared international
environmental issues such as the trade in endangered species,
transboundary hazardous waste, and ozone depleting
chemicals.\17\ We urge the United States to consider an
expansion of the list of MEAs eligible to be ``grandfathered''
into existing trade agreements and to provide explicit guidance
to WTO dispute settlement panels that trade rules should not
inhibit the environmental objectives of MEAs;
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\17\ North American Free Trade Agreement (NAFTA), Dec. 17, 992,
Can.-Mex.-U.S., 32 I.L.M. 296 and 32 I.L.M. 605.
---------------------------------------------------------------------------
Article 104: Relation to Environmental and Conservation Agreements
1. In the event of any inconsistency between this Agreement and the
specific trade obligations set out in:
a) the Convention on International Trade in Endangered Species of
Wild Fauna and Flora, done at Washington, March 3, 1973, as amended
June 22, 1979,
b) the Montreal Protocol on Substances that Deplete the Ozone
Layer, done at Montreal, September 16, 1987, as amended June 29, 1990,
c) the Basel Convention on the Control of Transboundary Movements
of Hazardous Wastes and Their Disposal, done at Basel, March 22, 1989,
on its entry into force for Canada, Mexico and the United States, or
d) the agreements set out in Annex 104.1,
such obligations shall prevail to the extent of the inconsistency,
provided that where a Party has a choice among equally effective and
reasonably available means of complying with such obligations, the
Party chooses the alternative that is the least inconsistent with the
other provisions of this Agreement.
2. The Parties may agree in writing to modify Annex 104.1 to
include any amendment to an agreement referred to in paragraph 1, and
any other environmental or conservation agreement.
Enhance WTO Deference to Legitimate MEAs
The United States should seek clarification of WTO rules to
allow explicit deference to the independent institutions of
established environmental expertise on questions of appropriate
environmental policy in the global commons. For example, the
WTO should establish a formal link to the United Nations
Environment Programme (UNEP) as an appropriate venue for
providing initial arbitration and expertise services to the WTO
in the face of a dispute involving an MEA and WTO rules.
III. Harnessing Competitive Energy to Work for the Environment
Manufacturers tend to operate using a simple but powerful
logic---produce the highest quality product while minimizing
costs and seeking to operate in a multilateral rules-based
system that provides as much certainty and clarity in its
applicable rules as possible. The vast majority of businesses
abide by the existing rules and, seek competitive environments
where they know their colleagues do the same. Regrettably, some
businesses try to exploit loopholes in international trade and
investment rules to cut costs and create competitive
advantages. Trade rules that do not acknowledge limited
distinctions in products based on the manner in which they are
produced (PPMs) or fail to aggressively curtail the use of
environmentally damaging subsidies perpetuate an uneven
competitive playing field. From the perspective of law-abiding
businesses, to ask producers, operating in compliance with
domestic environmental laws, to compete against foreign-based
companies that compete by polluting the environment or
destroying natural resources is inadequate trade policy and is
simply not fair.
Trade rules can be written in a way to encourage
environmentally responsible behavior, and to prohibit
businesses from exploiting the loop holes that exist in the
current international trade framework.
The National Wildlife Federation recommends the following:
A. Address the Process and Production Methods (PPMs) Dilemma:
To promote a competitive level playing field, Congress and
the Administration should work diligently to adopt appropriate
criteria to ensure that legitimate environmental policies
regulating production process methods are preserved from
challenge in a trade dispute. Initial criteria should allow WTO
members to distinguish products based on the manner in which
they are produced in limited and clearly defined
environmentally-related circumstances. For example,
distinctions in products made with environmentally adverse
consequences for the global commons (e.g. products produced
with ozone depleting substances) and in measures designed to
protect threatened or endangered species should be deemed
consistent with WTO rules.
B. Eliminate Environmentally Perverse Subsidies and Promote
Trade in Environmental Technologies:
Renewed attention and energy must be devoted to delivering
eminently achievable ``win-win'' solutions in the trade and
environment interface. For example, the elimination of perverse
and environmentally damaging subsidies in natural resource
sectors such as fisheries and forest products may result in
positive gains for both the environment and trade. We commend
the United States for its leadership in seeking enforcement of
current WTO notification requirements and rules governing the
elimination of subsidies in its 1999 WTO Ministerial
negotiating agenda. In addition, the United States deserves
credit for its efforts to place the facilitation of trade in
environmental technologies on the Seattle Ministerial agenda.
Admittedly, while the elimination of environmentally-damaging
subsidies and improved trade in environmental clean
technologies is not a panacea to the resolution of all trade
and environment conflicts, progress in these areas does
represent a positive step forward.
C. Conduct Environmental Assessments:
A commitment to sustainability and access to information
argue forcefully for the initiation of comprehensive
environmental assessments of natural resource sector
liberalizations in the early stages of the trade negotiating
process and upon completion of trade negotiations. The United
States should build on and strive to strengthen the positive
experiences associated with environmental reviews prepared for
NAFTA and the Uruguay Round Agreements establishing the WTO. In
addition, the United States and our OECD trading partners have
agreed that ``governments should examine or review trade and
environmental policies with potentially significant effects on
the other policy area early in their development to assess the
implications for the other policy area and to identify
alternative policy options for addressing concerns.'' \18\
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\18\ OECD Guidelines on Integrating Trade and Environment Policy,
OECD, OCDE/GD(93)99, para. A, B, (June 1993).
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The National Wildlife Federation stands committed to
working with members of the Committee and the Administration in
developing specific and practical environmental assessment
proposals. The goal of the assessment(s), and their open public
review and comment process, should be to provide accurate
information on the relative environmental impact of proposed
liberalization in a variety of sectors under negotiation. In
instances when a potential environmental harm is identified,
the assessment should suggest mitigative measures such as
staggered implementation schedules and/or technical assistance
to lessen the impact on the environment.
D. Negotiate Environmentally Responsible Investment Agreements:
Increased foreign investment built on a solid commitment to
sustainable development can potentially lead to transfers of
cleaner environmental technologies and improved capital
expenditures in environmental protection infrastructure. At the
same time, poorly crafted investment rules may exacerbate the
exploitation of natural resources, contribute to environmental
degradation and place downward pressure on national
environmental laws and regulations through closed dispute
settlement processes. As a result, NWF does not support the
negotiation of investment rules beyond the current Agreement on
Trade-Related Investment Measures (TRIMs) as part of the
Seattle WTO Ministerial Agenda. The United States should
maintain its current position of not seeking multilateral
investment negotiations within the WTO. In the alternative, WTO
investment negotiations should, at minimum, attempt to achieve
the following:
Seek mandatory, enforceable measures in the trade
agreement to prohibit the lowering of environmental standards
to attract investment and an active monitoring system to ensure
compliance;
Undertake a review of the traditional ``investor-
to-state'' principle found in numerous bilateral investment
agreements with an emphasis on its compatibility with
procedural openness, transparency and environmental protection
efforts. Recently, in the NAFTA context, several private
investors have attempted to use the investor-to-state
provisions to challenge domestic regulations with potentially
detrimental consequences for environmental laws. Indeed, we
understand the NAFTA parties are presently engaged in such a
review and we urge close coordination with WTO negotiators in
this process with increased attention devoted to ensuring
greater safeguards for environment and public participation in
a WTO investment framework;
WTO investment negotiations should include
obligations allowing legitimate measures designed to conserve
the environment, natural resources and the promotion of
cooperative environmental programs to be maintained.
E. Slow Down Negotiation of the Forest Products Accelerated
Tariff Liberalization (ATL) Initiative Pending the Conclusion
of a Comprehensive Environmental Assessment.
The United States has announced, as part of the Seattle
Ministerial Agenda, its intention to pursue accelerated tariff
liberalization (``zero for zero'' reciprocal tariff
elimination) in the, inter alia, forest products, fisheries'
products, environmental goods, and chemicals sectors. In the
forest products sector, the proposed joint USTR and CEQ
``written analysis'' of the forest products ATL presents a
significant opportunity for the United States to pause and
assess carefully and thoroughly the environmental impact of the
current ATL initiative on global forests. We urge the United
States to utilize this analysis to promote an open and frank
discussion of the ATL initiative's direct effects on such
factors as consumer demand and the efficient management of
worldwide forest resources. Accordingly, we recommend that USTR
and CEQ work diligently to ensure the ATL initiative properly
addresses potential environmental concerns before proceeding at
its current rate of negotiation and implementation.
An enhanced commitment to sustainable development will
require a comprehensive assessment of the potential impacts on
sustainability of the proposed forest sector liberalization. We
wish to emphasize that NWF has not drawn any premature
conclusions to the ensuing results of a thorough assessment.
Clearly, some tariff liberalization will be beneficial to the
environment while tariff liberalization in other areas may
produce negative consequences for the environment.
The goal of the assessment should be to identify those
liberalizations likely to be less-harmful and give them a
higher priority than areas of liberalization identified as
detrimental to the environment. In instances when an
environmental harm is a likely outcome, longer implementation
timetables, technical assistance, the establishment of
preventive and mitigative measures, and proffering reasonable
alternative actions may merit due consideration by
policymakers. An environmental assessment will also strengthen
public participation in trade negotiations by making the best
use of NGO and other civil society inputs and experiences
involving trade liberalization impacts in certain natural
resource sectors.
In addition to an assessment of the ``zero for zero''
reciprocal tariff elimination approach, a comprehensive
analysis of the forest products ATL should explore the
potential impact of experimenting with other aspects of the
traditional tariff system, including inter alia:
carefully amending the Harmonized Tariff System
(HTS) to better reflect the sustainable harvesting of natural
resource products. The HTS has the potential to act as an
incentive to encourage the production of natural resource
products in a sustainable fashion throughout the United States
and the entire world;
promote increased flexibility in the tariff system
to potentially allow for a zero-tariff model in certain
categories of forest products (e.g. finished wood products),
while maintaining capacity to continue moderate tariffs in
other categories (e.g. raw, unprocessed logs or wood chips) if
they were clearly shown to have adverse environmental and/or
economic consequences.
IV. Support Cooperation on Environmental Matters Among Trading Nations
As trade liberalization leads to increased market integration, the
opportunities to foster a meaningful cooperative environmental agenda
through parallel environmental institutions multiply. Our own
experience working with government officials in Latin America and
elsewhere has helped us understand that it is not improvements in
environmental protection per se that governments are reluctant to
pursue. On the contrary, most government officials are trying hard to
develop and implement effective national environmental regimes. What
concerns them are two factors:
In the past, some governments have regarded a number of
environmental laws and regulations as thinly guised protectionism. We
recognize improperly crafted environmental policies can lead to
unnecessary trade tensions;
The fear that, above and beyond trade agreement
commitments, they lack the political will and/or technical resources to
fully implement their own environmental laws and regulations.
A. Promote Environmental Cooperation:
The National Wildlife Federation supports the notion that trade and
investment agreements create unique opportunities to further
environmental cooperation among our trading partners that should not be
ignored. The conceptual framework and cooperative mission of parallel
environmental institutions associated with trade liberalization merits
strong political and technical support in all of the United States'
trade initiatives.
In the NAFTA context, the Commission for Environmental Cooperation
(CEC) is the trinational environmental institution created by the North
American Agreement on Environmental Cooperation (NAAEC) (NAFTA's
``Environmental Side Agreement'') to address continental environmental
issues in the United States, Canada, and Mexico. The CEC attempts to
facilitate cooperation and public participation among the NAFTA parties
by addressing regional environmental concerns, helping to prevent
potential trade and environmental conflicts, and promoting effective
environmental enforcement in each of the NAFTA countries. To date, the
CEC has been particularly effective in encouraging improved working
relationships between the environmental ministers of the NAFTA parties,
while at the same time, providing a valuable forum to address
transboundary issues of shared environmental concern in North America.
The Border Environmental Cooperation Commission (BECC) is the
certifying entity responsible for developing and evaluating border
water, wastewater, and municipal solid waste (MSW) projects. BECC has
comprehensive criteria to which projects must adhere in order to be
considered for BECC certification. These include a project's economic
viability and its sustainable development components. The NADBank, now
fully funded with $450 million in equal contributions from the United
States and Mexico, is a binational financial institution that may use
its funds to leverage additional capital but only for those projects
certified by the BECC.\19\
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\19\ Since its inception in 1994, the BECC has certified 26 water
and wastewater projects to date, with 14 projects in U.S. and 12
projects in Mexico. Of those projects, the NADBank has closed financing
packages on six projects and has made recommendations for financing on
another 8 projects. Total NADBank financial commitment is $408.4
million (U.S.). Although few in number, these projects represent an
exponential increase in water and wastewater system construction in the
border region, particularly on the Mexican side.
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The BECC/NADBank have been particularly effective in facilitating
the development and adoption of sustainability criteria used to
evaluate potential environmental infrastructure projects; transparent
decision-making processes with public participation from both nations;
and capacity building and technical assistance. Despite this progress,
several issues which are beyond the scope of this hearing remain a
concern for some border communities seeking environmental
infrastructure funding, including: interest rates on loans are too high
for some communities, particularly in Mexico; without a fee-based
utility system, Mexican municipalities must pioneer rate structures and
fee collection; border population growth rates have increased rapidly
as project development has lagged behind.
V. Trade Negotiations and Trade Institutions Must Become More Open and
Transparent
As trade negotiations and trade institutions increasingly establish
the terms of market integration and their attendant impacts on the
environment, the need for meaningful public participation opportunities
correspondingly increases. Public participation should be integral to
any trade or investment negotiations. Such a linkage confirms the
relationship between open markets and democratic principles, and
provides citizens with the information they need to make sound and
informed choices about policies that affect their future.
The United States has adopted a very positive approach to improving
access to WTO decision makers and, ensuring that people are able to
hold the WTO accountable for its actions. The National Wildlife
Federation urges Congress to support this effort to infuse the WTO with
the same democratic rules of accountability enjoyed by American
citizens.
The National Wildlife Federation recommends:
A. Reform WTO Procedures Regarding Transparency and Participation to
Ensure the WTO System Is Held Accountable to Democratic Principles:
While the United States is to be commended for its efforts over the
past two years to increase public participation and transparency in
several trade negotiating fora, including as part of the
Administration's Seattle Ministerial agenda, further progress is within
reach. For example, the United States must work diligently to increase
transparency in individual sectoral WTO negotiating groups in which the
United States actively participates. In the context of the Seattle
Ministerial agenda, the recently proposed rebirth of the Committee on
Trade and Environment (CTE), ostensibly created as a forum to identify
and discuss the environmental implications of issues under negotiation
in a new round, must not simply become a ``mailbox'' repository of NGO
issues with no significant corresponding influence, nor impact on the
negotiating process. Clearly, the CTE's work program must avoid
repeating its previous mistakes of conducting a one-sided and
imbalanced review of the trade implications of environmental policy
without addressing adequately the impact of trade policy on
environmental measures. In addition to any proposed new role for the
CTE, the WTO should establish, as a general matter, information
disclosure policies and clear mechanisms for receiving and responding
to NGO participation and comments.
Improved access and accountability are especially important for
people from developing countries, many of whose governments do not have
permanent missions located in Geneva. Given the informal nature by
which the WTO makes its decisions at present, ensuring that the
interests of all people are represented at the WTO must be integral to
the United States objectives for trade liberalization. For most of the
world's population, the incredible acceleration of the global economy
has also brought accelerated loss of wildlife and wild places. We urge
the United States to devote its energy to ensuring that all future WTO
procedures are open and accessible to all people.
Finally, in the interests of promoting a more open and equitable
procedure for establishing and negotiating trade and investment
agreements, the National Wildlife Federation has co-authored a White
Paper which proposes a new form of trade negotiating authority.\20\ We
believe that the ideas represented in this White Paper will stimulate a
public debate on how best to empower the United States government to
bring home trade agreements that promote healthy economies and cleaner
environments.
---------------------------------------------------------------------------
\20\ Sierra Club and the National Wildlife Federation, White Paper
on Alternative Trade Negotiating Authority.
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B. Open the Dispute Resolution Process:
In all trade regime dispute settlement fora, the United States
should, at minimum, fulfill President Clinton's commitment at the WTO
to open dispute settlement proceedings to public observation and pursue
mandatory consideration of amicus briefs from interested NGO parties.
Conclusion
Thank you again for the opportunity to present these views.
Let me conclude by saying that, for the members of the National
Wildlife Federation, the question is not whether to trade, but
under what rules do trade and investment serve to promote a
healthier environment. Trade is a tool to achieve human
aspirations, to improve standards of living, to enhance the
quality of life. Our environment, our wild places and wild
things are part of humanity's quality of life. Diminish them
and you diminish the human standard of living. Trade rules are
self-defeating if they force us to trade away those things we
value most highly--the clean air, the clean water, the open and
living places that give quality to life. Trade should be an
investment in a better way of life, not a license to degrade
those things on which a healthy life depends. Unless WTO member
nations embrace the agenda for WTO reform proposed by
environmental organizations throughout the world, we believe
that they will not earn the support they need to negotiate
agreements that help to convince people that trade
liberalization works for them.
Center for International Environmental Law, National Wildlife
Federation Sierra Club, World Wildlife Fund, Friends of the Earth
Natural Resources Defense Council, Greenpeace USA Defenders of
Wildlife, American Lands Alliance, Consumer's Choice Council
Earthjustice Legal Defense Fund, Pacific Environment and Resources
Center Community Nutrition Institute, Institute for Agriculture and
Trade Policy
Dear Ambassador Esserman and Mr. Robertson:
Our organizations are deeply concerned about the
Administration's development of positions for the Third
Ministerial Conference of the World Trade Organization
scheduled for Seattle this fall. WTO rules and procedures have
been used repeatedly to attack environmental laws that our
organizations have worked for decades to create, strengthen and
protect. Equally important, the continued pressure to expand
trade through broadened and intensified application of trade
policy, without an equal effort to ensure that the right
framework of environmental law and policy are in place,
threatens to impede the conservation of our natural resources
and the maintenance and improvement of a healthy environment.
Yet while the Administration has sometimes raised general
environmental concerns about trade and trade rules at the WTO--
most recently at the March 1999 high level symposium on trade
and environment in Geneva--it has failed to take the concrete
actions needed to address those concerns effectively.
As our groups have emphasized in past communications, the
Administration can fulfill President Clinton's pledge to put a
``human face'' on the global economy only if it combines its
commitment to liberalizing trade with an equally strong
commitment to environmental protection and sustainable
development. We appreciate the Administration's call to improve
public distribution of WTO documents, enhance public
participation in WTO dispute settlement proceedings, and
encourage reduction of fisheries subsidies that distort trade
and encourage overfishing. These efforts fall far short,
however, of the comprehensive reforms needed to ensure that the
world trading system does not hinder sustainable development
and environmental protection. For example, we have found
unacceptable the Administration's inflexible position in recent
months that no textual changes to the WTO Agreements are
needed, as it indicates a reluctance to deal seriously with
environmental concerns.
The WTO Ministerial Conference offers an historic
opportunity for the Administration to lead the review and
reform that the international trade regime needs so that it
will promote, rather than undermine, environmental protection
and other core values of United States citizens. We stand
prepared to help the Administration seize this opportunity by
developing an agenda that fully recognizes environmental
priorities. If, however, the Administration misses the chance
to put the WTO on a course toward sustainable development, this
will undermine support for subsequent negotiations at the WTO--
and for United States government authority to participate in
those negotiations--and invite united environmental opposition
to the results. To avoid this, the Administration must develop
an environmentally beneficial agenda for the Ministerial
Conference, and a comprehensive plan for environmental review
and reform of the WTO, that go well beyond the proposals
advanced to date.
We recognize that the trade and environment issues
confronting the WTO will not be resolved at a single
ministerial meeting. What we do expect, however, is that the
Administration formulate a plan for achieving solutions, and
that it demonstrate a commitment to that plan through
constructive, open engagement with the public, with Congress,
and relevant agencies. Despite the complexity of the details,
the outline of the plan we need to see has three simple themes,
described below. Although not every one of our organizations
endorses every detail in this letter or the accompanying
attachment, we are united in support of the overarching
principles expressed here. We will evaluate the outcome in
Seattle on this basis.
1. Stop WTO Expansion.
The Administration must avoid rushing into more
negotiations on liberalization that would place the environment
and environmental laws further at risk. In light of the
potential for significant environmental impacts, this is not
the time to embark on further expansion of the WTO's power or
the scope of its rules. Thus, we oppose the launch of
negotiations within the WTO on investment liberalization,
government procurement or ``early harvest'' of tariff
reductions.
We oppose accelerated tariff reduction and other
liberalization in selected sectors pending an open,
participatory and balanced assessment that includes formulation
of mitigating measures. Our concern is intensified with respect
to environmentally sensitive natural resource sectors, such as
forest and fish products. Forests and fisheries are in crisis
both nationally and globally. Prioritizing liberalization in
these sectors is reckless, when we know that regulations and
incentives for sustainable harvesting and commerce are grossly
inadequate around the world.
Multilateral investment rules beyond the current Agreement
on Trade-Related Investment Measures (TRIMs) should not be the
subject of negotiations at the WTO. We are concerned that the
United States government may be shifting its position to
support partial negotiations on investment under WTO auspices.
2. Reform WTO Rules and Procedures.
The WTO as it exists today urgently needs reform. The
Administration must secure commitment to the reforms needed to
ensure that existing WTO procedures and rules affirm, rather
than hinder, environmental protection.
In broad terms, the WTO's limits of jurisdiction need to be
defined more clearly, so that the WTO stays within its
recognized realm of trade policy, and does not stray into the
field of environmental regulation. Equally important, the WTO's
decision-making must be transparent and must involve public
scrutiny and input. Achieving these goals will require major
changes in both the rules and the procedures for formulating,
interpreting, applying and enforcing those rules. These changes
must also be reflected in any negotiations that are launched in
Seattle.
Substantively, both existing and future WTO rules must be
written and interpreted so that they accord proper deference to
national and international standards that serve legitimate
environmental objectives. Procedurally, the terms of reference
of each WTO working group or institutionalized body must
provide for consideration of significant impacts on environment
and sustainable development, and there must be mechanisms to
ensure compliance.
3. Assess Impacts.
The Administration must provide for an assessment of the
environmental impacts of proposed multilateral trade and trade
policy. The fundamental question is whether the framework of
laws, policies and institutions is in place to ensure that
additional multilateral steps to liberalize trade will lead to
environmentally and socially beneficial outcomes. If not, then
the assessment must formulate needed institutional, legal and
policy changes before moving forward with further talks on
liberalization.
This assessment process must begin immediately. It must be
open and transparent, global in scope, and conducted through a
balanced, impartial process. It should be carried out in
cooperation with our trading partners. A forward-looking review
must be complemented by a retrospective review of past and
current impacts of existing policy. The reference point for the
assessment must be the procedures and criteria developed under
the National Environmental Policy Act.
The statement attached to this letter provides further
details on our organizations' bases for our positions and our
suggestions for addressing these areas of concern. We
appreciate recent overtures from the Administration that
indicate openness to a more substantive dialogue, and look
forward to the chance to discuss our positions further with you
and your staff.
Sincerely yours,
David R. Downes
Center for International
Environmental Law
On behalf of:
Jake Caldwell, National Wildlife Federation
Dan Seligman, Sierra Club
David Schorr, World Wildlife Fund
Andrea Durbin, Friends of the Earth
Justin Ward, Natural Resources Defense Council
Scott Paul, Greenpeace USA
Rina Rodriguez, Defenders of Wildlife and Community Nutrition Institute
Antonia Juhasz, American Lands Alliance
Cameron Griffith, Consumer's Choice Council
Martin Wagner, Earthjustice Legal Defense Fund
Kristin Dawkins, Institute for Agriculture and Trade Policy
Doug Norlen, Pacific Environment and Resources Center
cc: Ambassador Stuart Eizenstat, Under Secretary for Economic and
Business Affairs,Department of State
Frank E. Loy, Under Secretary for Global Affairs, Department of State
George T. Frampton, Jr., Acting Chair, Council for Environmental
Quality Frederick Montgomery, Assistant US Trade Representative
for Policy Coordination, Chairman of Interagency Trade Policy
Staff Committee
Attachment
Center for International Environmental Law, National Wildlife
Federation Sierra Club, World Wildlife Fund, Friends of the Earth,
Natural Resources Defense Council, Greenpeace USA, Defenders of
Wildlife, American Lands Alliance, Consumer's Choice Council,
Earthjustice Legal Defense Fund, Pacific Environment and Resources
Center, Community Nutrition Institute Institute for Agriculture and
Trade Policy
The World Trade Organization and Environment Technical Statement by
United States Environmental Organizations
This statement provides further detail on the concerns and
recommendations regarding environmental issues outlined in the
July 16 letter from several United States environmental
groups.\1\ Part I details our opposition to further expansion
of the World Trade Organization (WTO) at this time. Part II
identifies specific reforms needed to WTO rules and procedures.
Part III outlines procedural and substantive elements of the
environmental assessment of existing and proposed multilateral
trade agreements.
---------------------------------------------------------------------------
\1\ Several of our groups have elaborated our concerns in detail in
a October 16, 1998 response to the USTR's Federal Register request for
input regarding US preparations for the Seattle ministerial, as well as
in the Transatlantic Environmental Dialogue statement delivered to
governments at the recent G-8 summit. The comments in this document are
intended to summarize and complement these earlier statements and
express the collective views of our respective organizations; however,
not every signatory necessarily subscribes to the details of each
formulation.
---------------------------------------------------------------------------
I. No WTO Expansion
The Administration must avoid rushing into more
negotiations on liberalization that would place the environment
and environmental laws further at risk. In light of the
potential for significant environmental impacts, this is not
the time to embark on further expansion of the WTO's power or
the scope of its rules. Thus, we oppose the launch of
negotiations within the WTO on investment liberalization,
government procurement or accelerated sectoral liberalization,
including ``early harvest'' of tariff reductions.
We oppose the Administration's effort to accelerate
liberalization, especially in environmentally sensitive sectors
such as forest products, in the absence of a careful and public
assessment of the potential environmental impacts (see Part
III.3 below). Aiming to reach agreement on further
liberalization at the Seattle meeting itself--as the
Administration proposes to do with reduction of tariffs on
forest products--flies directly in the face of the
Administration's commitment to review the environmental impacts
of liberalization, because the schedule is too short to do a
thorough assessment of effects and policy alternatives.
As we have repeatedly stated, multilateral investment rules
beyond the current Agreement on Trade-Related Investment
Measures (TRIMs) should not be the subject of negotiations at
the WTO. Our objections to an investment agreement in the WTO
go beyond the issues of establishing rights to sue for lost
profits and investor-to-state dispute resolution. We are also
concerned that enforceable rights to national treatment and
most favored nation status could pry open environmentally
sensitive sectors in markets where regulatory frameworks are
inadequate to manage the increased environmental pressures that
would result. If unaccompanied by strong frameworks of
environmental and labor rights, application of the principles
of national treatment and most favoured nation could also
increase ``industrial flight'' by companies seeking to avoid
costs of compliance with labor and environmental requirements.
In light of these objections, we are concerned that the
Administration seems to be considering support for partial
negotiations under WTO auspices. Prior to the negotiation of
any investment rules in any forum, an over-arching
international framework is needed to ensure that international
investments promote sustainable development consistent with the
needs of host countries and to guarantee that the environment
is protected. The development of such a framework and any
subsequent investment agreement should take place within the
United Nations system. Any such agreement must include investor
obligations with respect to environmental and community
protection.
II. Reform WTO Rules and Procedures
In its Communiqué from Cologne in June, the G-8
stated that ``environmental consideration should be taken fully
into account in the upcoming round of WTO negotiations.'' We
are pleased to hear the United States join other industrialized
countries in this ambitious commitment. Unfortunately, the
United States' proposals to date have been entirely inadequate
to the task. To make significant progress, the Administration
will need to make positive proposals on both substantive and
procedural rules, including existing rules of the WTO as well
as the terms of reference for any further negotiations launched
at Seattle. The Administration will need to make a clear
political statement that affirms environmental values and
define a clear process involving the right mix of agencies and
other partners for achieving progress on a range of issues.
Substantively, the Administration will need to take action
to ensure that the scope of WTO rules is limited to trade
policy and does not intrude into matters that come under
environmental law and policy. WTO rules must provide for
deference to international and national environmental standards
(Part II.1), and protect the consumer's right to know (Part
II.2). At the same time, WTO rules can and should be applied so
that they encourage the elimination of environmentally damaging
subsidies that also distort trade (Part II.3). Procedurally,
the Administration must take steps to ensure that all WTO
forums take environmental implications of their work into
account (II.4), and that their operations become transparent
and accountable (II.5).
1. WTO Deference To International And National Environmental
Standards And Institutions
WTO rules need to be reformed so that they stay within the
bounds of trade policy and do not intrude into areas within the
jurisdiction of environmental institutions and regulations. We
are pleased to learn that the Administration now seems to agree
that ad hoc dispute settlement decisions alone are not a
solution to the impact that WTO rules as currently interpreted
may have on measures to protect the environment. United States
leadership of a multilateral approach to a number of issues is
needed to ensure that WTO forums--including the Dispute
Settlement Body--and WTO rules consistently defer to
regulations and other measures adopted by international and
national institutions, including measures based on the
precautionary principle.
In the absence of such consistency, there is a serious risk
that these institutions will be impeded from pursuing
legitimate environmental objectives through negative
interpretations advanced by trade policy-makers, ad hoc
challenges, and the threat of adverse decisions in WTO dispute
settlement. Of particular concern are the GATT, the TBT
Agreement and the SPS Agreement; also relevant are the TRIPS
Agreement as well as agreements on subsidies and agriculture.
Seattle is a critical opportunity for the United States to send a
clear signal that trade policy must be developed and applied
consistently with environmental principles, and to define a process and
terms of reference for achieving agreement on how to ensure that WTO
rules do not interfere with environmental measures. That process should
aim at the following specific outcomes.
a. Burden and Standard of Proof. Ensuring that the complaining
party in a WTO dispute settlement proceeding has the burden to show the
lack of an adequate basis for challenged local or national
environmental and health regulations, and that WTO decision-makers
employ a deferential standard of review, perhaps along the lines of
Article 17.6 of the Anti-Dumping Agreement.
b. SPS. Ensuring that the provisions of the SPS Agreement:
i. Do not interfere with the right of national governments to develop
and enforce high environment and health standards at the level
they deem appropriate;
ii. Fully recognize the precautionary principle;
iii. Acknowledge clearly that international standards establish
minimum, not maximum standards for the levels of environmental
and health protection set by WTO Members.
c. Acknowledge Multilateral Environmental Agreements (MEAs) in WTO
Rules. Consistent with the recent G-8 Cologne Communique, there must be
an affirmation that trade-related environmental measures (TREMs)
authorized or required under multilateral environmental agreements or
internationally recognized environmental principles are consistent with
WTO rules, including Article XX of the GATT, the TBT Agreement and the
SPS Agreement. Criteria should be defined indicating to the WTO how to
recognize the types of agreements or principles that fit within the MEA
category. Contrary to USTR's suggestion in the July 2 briefing, the
concept is not to establish criteria for evaluating whether an MEA
measure is legitimate. Rather, such measures will be deemed legitimate
by virtue of their adoption under an MEA.
d. Build Effectiveness of MEAs including Trade-Related Measures.
The Administration needs to make it a positive priority to build
effectiveness of MEAs. Where trade-related measures are appropriate
means for addressing the environmental problem, the Administration
should support their use. A WTO decision to defer to MEAs will do
little good if MEAs are written to include ``carve-outs'' that ensure
that WTO rules prevail over MEA obligations. Disputes over the
implementation of MEAs should be resolved by MEAs, not by the WTO.
Thus, we are also seeking a commitment from the Administration not to
advocate the inclusion of ``savings clauses'' in future MEAs. The
Administration should also work with other countries through
appropriate environmental institutions such as the United Nations
Environment Programme (UNEP) to develop principles of trade policy to
which negotiators of MEAs can refer during negotiations.
e. Production or Processing Methods (PPMs). Ensuring that
distinctions between products based upon PPMs related to environment,
human rights and internationally recognized labor standards are
recognized as legitimate measures for promoting sustainable commerce
that are consistent with WTO rules.
f. Procurement. A clarification or amendment to the Agreement on
Government Procurement ensuring that it recognizes the right of
governments to use social and environmental criteria in making
purchasing decisions. Several of our organizations provided further
suggestions on this topic in comments submitted to USTR by the Consumer
Choice Coalition in January.
g. UNEP and other Environmental Institutions. Adoption of
cooperative agreements between WTO and international environmental
institutions, including UNEP, by which the WTO defers to the role of
appropriate institutions in addressing environmental aspects of
international decision-making. Specifically, institutions such as UNEP
and the secretariats of relevant MEAs should have a role in the
settlement of environment-related disputes under the Dispute Settlement
Understanding (DSU) as well as the definition of key international
environmental principles such as the precautionary principle. Deference
to such outside expertise is necessary in light of the specialized
nature of WTO as a trade policy institution with trade expertise.
We will be happy to discuss the precise legal form that these steps
might take at the appropriate time. For instance, a clarification could
involve language in a statement adopted by a WTO Ministerial Conference
or the WTO General Council, an agreed-upon interpretation formally
adopted by the General Council, or an amendment to the text of the
relevant agreement.
As a general matter, we would like to emphasize that the use of
trade measures that affect developing countries to accomplish
environmental goals should be accompanied by assistance to those
countries to help them achieve those goals. This is consistent with the
Rio bargain that developed countries would assist developing countries
in raising environmental standards and combating environmental
problems, so that all could share in sustainable development and an
improved global environment. The merit of this approach was recognized
in the Appellate Body's Shrimp/Turtle decision. Unfortunately,
developed countries have failed to carry out their end of the bargain,
with foreign assistance budgets declining, and debt relief proposals
still inadequate. A renewed political commitment from the United States
and other industrialized countries would contribute significantly to
multilateral agreement on the program outlined here, and would offer
long term payoffs for the United States economy and environment.
2. Protection of the Consumer's Right To Know
Markets can allocate resources properly only if consumers have the
necessary information to make informed decisions. Unfortunately, some
WTO Members--including the United States government itself--have
advanced interpretations of WTO rules that threaten to restrict the
power of governments and private organizations to provide consumers
with information they want about the environmental and health aspects
of products and their production. We urge the United States to work
with other WTO Members to launch a process at Seattle that leads toward
the following outcomes:
a. Ensuring that the WTO Agreement on Technical Barriers to Trade
(TBT) preserves the ability of governments and private organizations to
protect the consumer's right-to-know and to promote sustainable
consumption through open and transparent labeling programs, including
genetically modified food;
b. Ensuring that the TBT Agreement recognizes the legitimacy of
regulations and standards that distinguish between products based on
the environmental consequences of their manufacture, use and disposal;
and
c. Ensuring that the TBT rules do not conflict with speech
protected under the U.S. Constitution, including third-party certified
private labeling programs.
As with the proposals in Part II.1 above, we are open to further
discussion about the precise legal form that these assurances should
take. Generally, however, the principle is that the WTO must recognize
that the TBT Agreement effectively includes an exception along the
lines of Article XX, to the extent it applies to ecolabeling.
3. Eliminate Environmentally Damaging Subsidies
We welcome and support the Administration's willingness to push for
the elimination of fishery subsidies that have contributed to the
current global fisheries crisis. The Seattle ministerial should
unambiguously place the fishery subsidies issue on the negotiating
agenda, and should do so in the context of an open interdisciplinary
and inter-organizational procedure that includes other institutions
with relevant and needed expertise alongside the WTO. We urge the
United States to push for a similar review of other environmentally
damaging subsidies, such as those for forestry, fossil fuels and
nuclear energy. At the same time, WTO Members must ensure that WTO
rules allow governments to craft measures that reward the social and
environmental values conferred by certain activities, such as adoption
of environmentally responsible technologies, artisanal fishing and
development of renewable sources of energy. The ability of the WTO to
play a constructive role on subsidies will be a significant test of the
organization's ability to produce the oft-promised ``win-win'' outcomes
for trade and the environment.
4. Recognizing Environmental Aspects of WTO Decision-Making
Another key question is how to reform the procedures and
institutions of the WTO so that decision-making takes into account its
environmental implications. The United States proposes to use the
Committee on Trade and Environment (CTE) on a ``rolling basis'' and in
an advisory capacity to address the environmental aspects of WTO
decisions. But compartmentalizing environment in the CTE has not worked
in the past and will not work in the future. The Administration has
offered no concrete steps that would effectively link the CTE to the
real decision-making forums at the WTO.
In our view, much more is needed to ensure that the WTO takes
environment into account in its decision-making. As a general matter,
all relevant WTO bodies--including councils, committees, and working
groups--must include reference to environmental protection and
sustainable development among their objectives or terms of reference,
consistent with the preamble of the WTO Agreement itself.
The WTO will also have to adopt procedures that ensure that these
forums take these objectives seriously. For instance, each forum could
periodically consult with international environmental institutions with
relevant expertise, report on the environmental implications of their
work, and make recommendations on how to address environmental impacts
of the trade policies with which they are concerned. The CTE might have
a role through review and comment on that report. Another option is for
the WTO's Director General to present a review of the WTO's record on
environment and sustainable development in a section of the annual
report. The United States itself could do a better job of integrating
environment by including representatives from relevant agencies such as
the EPA on delegations when forums such as the SPS or TBT Committees
discuss environment-related issues.
5. Improved Transparency, Public Participation And Accountability At
The WTO
We very much appreciate the efforts made by the Administration to
advance democratic reform of the WTO. We ask that the Administration
continue to include increased transparency, participation and
accountability as a priority on its negotiating agenda in Seattle.
However, effective achievement in this area will require more actions
in addition to broader and faster access to working documents and
consideration of NGO submissions in dispute settlement. It will also
require, at a minimum:
a. opening of dispute settlement and appellate body proceedings to
public observation;
b. NGO participation in discussions of environment-related issues
by other WTO decision-making forums, such as the SPS Committee, the TBT
Committee, the TRIPS Council, the Agriculture Committee, the CTE, and
relevant negotiating groups; and
c. the development of a consultative process between the WTO, NGOs,
member governments and businesses.
We recognize the validity of concerns raised by developing
countries that they may have fewer resources than do some NGOs. The
United States and other developed countries should support fuller
participation by poorer WTO Members, for instance through financial and
technical assistance.
A first step towards improved transparency of the WTO and trade
policy must begin at home. We have indicated our willingness to work
with the Administration to provide input into the negotiating agenda,
yet little information and no documents have been shared with the NGO
community as the Administration prepares its position for the WTO
Ministerial. Only at the July 2 briefing did we hear any degree of
detail about the Administration's proposed positions. We urge the
Administration to be more transparent, to share information and
documents, to engage the NGO community in a constructive dialogue, and
to ensure balanced representation on advisory committees dealing with
trade issues that have environmental implications consistent with the
Federal Advisory Committee Act. Furthermore, we reiterate our request
that the United States include NGOs on its delegation to the WTO
Ministerial meeting, especially since other governments, such as
Denmark, have already done so.
III. Environmental Assessments of Current and Proposed Trade Policies
We are pleased that President Clinton has committed the federal
government to conducting an environmental review of the next round of
talks at the WTO. However, the Administration needs to make significant
progress in this area. We are concerned about the adequacy of the
process and criteria for such an assessment. We believe that the
assessment should include a review of both past and current impacts of
existing trade policies on the environment and on environmental law and
policy, a similar review of foreseeable impacts of proposals for
negotiations, and consideration of policy alternatives. We remain very
concerned about the conduct of assessments of proposed tariff
reductions in environmentally sensitive sectors. Finally, we have
concerns about certain process issues, including the roles of relevant
agencies and cooperation with other governments.
1. Procedures and Criteria for Assessment
We are concerned that the Administration has yet to suggest any
procedures or criteria for the assessment, with Seattle less than six
months away. In our view, there are some clear principles with which
this assessment must comply. Many of these principles are found in the
National Environmental Policy Act (NEPA). The starting point for this
assessment must be NEPA's mandated procedures and methodologies, as
elaborated through regulations of the Council on Environmental Quality,
and enriched through decades of federal agency experience with
implementation.
At a minimum, the assessment must be comprehensive in scope,
covering all Administration proposals for modifying or adding to
existing trade policies embodied in the WTO Agreements. The assessment
should be framed in terms of two basic questions. Is the framework of
laws, policies and institutions in place to ensure that additional
multilateral steps to liberalize trade will lead to environmentally and
socially beneficial outcomes? If it is not, then what institutional,
legal and policy changes must we make before we move forward with
further liberalization?
The assessment must involve the full participation of civil
society. In light of the short time remaining before Seattle, the
assessment procedure must begin immediately. It must consider
reasonably foreseeable impacts on a global scale. It must continue
until the conclusion of any new negotiating round, taking into account
new knowledge as it accumulates, as well as evolving trade policy
positions. It must identify areas in which existing WTO agreements and
new negotiations have (or will have) significant environmental effects,
and evaluate policy alternatives and mitigation measures, including
reforms of existing agreements and modifications of proposed ones
including the no-action alternative. And it must integrate social and
development concerns.
To ensure that the results are balanced and objective, the process
should be overseen by the CEQ and conducted with the full and equal
participation of affected federal agencies, state and local
governments, and interested members of the public. Finally, we urge the
Administration to take the lead in facilitating an assessment at the
multilateral level by a balanced panel of experts drawn from the WTO
Secretariat, international institutions with environmental and other
relevant expertise, the scientific community, and the public.
2. Assessments of Existing Trade Policies
A forward-looking assessment must be complemented by consideration
of lessons learned. To date, unfortunately, governmental consideration
of environmental impacts of trade policy have been inadequate. As a
result, we urgently need to gain a better understanding of the impacts
of past trade policies. Thus, the Administration should also conduct an
assessment of the environmental impacts of the WTO Agreements adopted
in the Uruguay Round, carried out consistent with the principles we
have outlined for conducting an assessment.
This review should cover all relevant WTO Agreements, such as the
General Agreement on Tariffs and Trade (GATT), the Agreement on the
Application of Sanitary and Phytosanitary Measures (SPS), the Agreement
on Technical Barriers to Trade, the Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS), and agreements on subsidies
and agriculture. In relation to the TRIPS Agreement, we are concerned
that the expanded scope and enforcement of intellectual property rights
required under the WTO TRIPS Agreement may affect the transfer of
technology required under multilateral environmental agreements (MEAs),
the rights of farmers and indigenous peoples, and the equitable
distribution of benefits required under the Biodiversity Convention.
3. Assessment of Proposals for Accelerated Sectoral Liberalization
Beginning in the context of Asia-Pacific Economic Cooperation
(APEC), and more recently in the WTO, the Administration has proposed
accelerated reduction of tariffs, accompanied by examination of non-
tariff measures, of a number of sectors, including environmentally
sensitive sectors such as energy, chemicals, fish and forest products.
In light of the potential environmental impacts, we urge the
Administration to assess carefully the environmental effects of
accelerated liberalization in all sectors, and to define and implement
policy measures to maximize environmental benefits and mitigate harmful
impacts. The United States should not push for accelerated
liberalization until full environmental assessments have been
conducted--of the proposals for both tariff and non-tariff measures--
along the lines discussed in this letter. In light of the severe
threats confronting forests and fisheries, and the demonstrably
inadequate national and international frameworks for conserving them,
this approach is particularly important with respect to the fish and
forest product sectors.
We appreciate the step in the right direction represented by the
joint analysis of the economic and environmental effects of the forest
product initiative to be conducted by CEQ and USTR. We are skeptical,
however, whether the review as defined in the June 25, 1999 Federal
Register notice will be an adequate basis for sound policy making. Even
if it is, we are equally concerned that the review's results will not
be taken into account in the ultimate decision. Thus, we call on the
Administration to explain on the record the environmental basis for
whatever policy decision it takes. As currently proposed, the review
does not reflect key principles of NEPA. For instance, the Federal
Register notice allows only 30 days for the public to provide input,
and it is unclear whether there will be any other opportunities for
public participation.
4. Assessment of the Built-In Agenda
Services. We have concerns that negotiations on services could have
some of the same far-reaching implications for domestic environmental
and health regulation as would investment liberalization. Services,
like investment, involve activities within a country's territory that
relate to a host of regulatory functions performed by federal, state
and local authorities. When it comes to trade liberalization, services,
like investment, raise a host of concerns about community values,
regulation and sovereignty that are not so directly posed by goods. We
urge the Administration to assess environmental and social implications
as it develops its positions.
Agriculture. The United States has called on WTO members to carry
forward with agricultural negotiations with the objectives of gaining
``further deep reductions in support and protection, while encouraging
non-trade distorting approaches for supporting farmers and the rural
sector.'' We share the Administration's desire to reform policies and
programs that encourage environmentally damaging expansion and
intensification of production. At the same time, government
agricultural policy can and must reflect the multiple environmental and
social functions that agriculture plays. Support for environmentally
responsible agriculture can help level the playing field for farmers
who take responsibility for the impacts that production has on the
environment of their neighbors, and at the same time have to compete
with producers that externalize environmental costs onto society.
Government policy also should take into account the social values that
independent farmers provide to communities.
We urge the Administration to make an effort to ensure that the
United States approach to agriculture at the WTO strikes a better
balance among these policy objectives than in the past. The United
States continues to maintain direct and indirect subsidies and
protections that distort agricultural markets and threaten our
environment, such as below-market pricing for water from government-
funded projects and for grazing on public lands. The Administration
should carry out a thorough review and restructuring of these policies
and programs.
The agricultural negotiations on the built-in agenda will offer
governments a chance to develop a multilateral understanding of which
policies and programs should be reduced, and which should be permitted,
on environmental and social grounds. The assessment we are calling for
will provide an opportunity for this. Governments should also explore
how to help developing countries implement such support, whether
through multilateral financial and technical assistance or through some
system of preferences. We urge the Administration to provide leadership
on the issue of food security in these talks. Governments must consider
the impacts that dumping of food exports have on the productive
capacity of countries whose populations suffer from chronic hunger, and
take this into account in defining relevant trade policies.
* * * * *
Submitted by:
David R. Downes
Stephen Porter
Center for International
Environmental Law
On behalf of:
Jake Caldwell
National Wildlife Federation
Dan Seligman
Sierra Club
David Schorr
World Wildlife Fund
Andrea Durbin
Friends of the Earth
Justin Ward
Natural Resources Defense
Council
Scott Paul
Greenpeace USA
Rina Rodriguez
Defenders of Wildlife and
Community Nutrition
Institute
Antonia Juhasz
American Lands Alliance
Cameron Griffith
Consumer's Choice Council
Martin Wagner
Earthjustice Legal Defense
Fund
Kristin Dawkins
Institute for Agriculture
and Trade Policy
Doug Norlen
Pacific Environment and
Resources Center
Chairman Crane. Mr. Kleckner, is there room for a
compromise between industry and service interests who advocate
early harvests of trade liberalization measures and agriculture
groups like the Farm Bureau who insist on the need for a single
undertaking?
Mr. Kleckner. Good question, Mr. Chairman. We need to keep
talking about it. I talked to Sue Esserman during the break
today when you went back to vote, and I talked to Charlene
Barshefsky yesterday by telephone, and, John, you and I visited
briefly early. We have to keep talking about that to see if
there can be a meeting of the minds.
I just believe that strongly, though, that if we solve some
of the problems and leave the tough ones like agriculture to
last, it is going to be very, very tough to get it done there.
And that is not a new position for me or for us in the Farm
Bureau. In Belgium, Mr. Chairman, in Brussels in 1990, when
this Uruguay round was supposed to end, I chaired the American
delegation of all segments that were there. When it looked as
though agriculture was going to be able to get theirs done
first, and I said to my cohorts--they were not there in person,
but their companies were--that I did not favor that because I
didn't think that they would get what they wanted at the end of
the day if we got agriculture solved first.
In the end it did not work that way, but we are all in it
together, or we are not in it at all, it seems to me. I am
willingly to talk to John and to the other ones, including
Charlene and Sue Esserman, to see if there is somewhere that we
could work it out, though.
Chairman Crane. Have you got anything to add to that, Mr.
Dillon?
Mr. Dillon. I agree with Dean. Someplace there needs to be
a coming together. I would only point out that part of the
difference here is the issue on forestry and paper is old
business that is carried over from the Uruguay round, and there
were agreements on the part--or direction on the part of the
Congress to the administration to move forward on those
agreements in the zero-for-zero sectors from the Uruguay round
and to do so, before the next round.
On the other hand, these are tough issues, and if we are
not together on them, the Japanese and the Europeans are going
to look for any crack that they can find. And so I think, as
Susan has said and as Dean said, there has got to be a way here
that we can meet everybody's objectives and come out of this
not with a split in our ranks, but a position that we can go
forward on.
Chairman Crane. Mr. Micek, I am intrigued by the broad
coalition that you have put together in support of the food
chain proposal which spans manufacturing and services in
addition to agricultural interests. Is the proposal apt to
appeal to lesser developed countries?
Mr. Micek. Well, as a matter of fact, the proposal that we
are advocating really is an extension of the open food system
that is being advocated in APEC member countries. The open food
system really is about bringing more and better food to more
people at affordable prices. To do this, one of the key things
we need to do is to deal with the issue of food security. If we
can do that, we can deal with some of the issues that have been
talked about, about some of the environmental concerns.
For example, there is land in China that is being farmed
agriculturally that should not be farmed, but one of the key
reasons it is farmed today is because the Chinese are on a
policy of 100 percent self-sufficiency. And if we can deal with
some of these difficult issues, I think we can also find a way
to deal with some of the environmental problems we have.
Chairman Crane. Thank you.
Mr. Van Putten, what types of improvements in the WTO's
institutional operations are needed to ensure more transparency
and accountability?
Mr. Van Putten. Well, Mr. Chairman, we think the types of
improvements include access to the decisionmaking panels,
inclusion of friends of the court briefs, if you will,
publication of panel decisions. Those types, sort of
transparency values that we take for granted here in the United
States are critical, we think, to the WTO taking into account
values like the environment, but also gaining public confidence
in the decisionmaking processes.
Chairman Crane. Thank you.
Mr. Levin.
Mr. Levin. Thank you.
Mr. Van Putten, I will start with you. Thank you. I think
your testimony is constructive, and I think there is a spirit
of willingness to look at issues together, and I hope everybody
picks that up.
Mr. Kleckner, I, for one, lean in your direction. I hope we
can resolve in terms of this early harvest. Maybe--the Farm
Bureau, you are not in favor of early harvest usually. It is
not ripe. But, seriously, I trust we will work hard to work
this out. It seems to me if you say in advance you will accept
separation, you are likely to have people try to cherry-pick
issues, while if you say you want to wait until it is all
resolved before anything, there is a pressure to resolve
everything. You can later modify that if you need to. That is
the way I lean.
First, service products. I remember when I was over for the
Uruguay round talking to some Europeans, Mr. Dillon, but in
those days--it was not that long ago--some of the countries
have 14-percent tariffs, and we had much, much lower, as I
remember it, and that struck me as unfair. And I think you are
right to call for beginning to more level the playingfield,
including the emerging economies.
And I would just suggest to you that you look at the
playingfield and that you take into account issues including
environmental differentials, and we are not talking about
having identical structures, but differentials as well as in
the labor market. I mean, that is part of the difference in
scales.
In that regard I want to just say a word about the labor
issues, because, Mr. Kleckner, you said we cannot allow
economic prosperity of our Nation and that of our agricultural
producers to be used as a weapon for nations that disagree with
our values.
I don't think that is, if I might say so, quite a fair way
to say it, because in a sense our struggle on trade has been to
convince people to abide by or incorporate our values in terms
of free markets into their systems. And I think to separate out
labor issues that way, labor market issues kind of misses the
point. And the same with environmental issues.
In that regard--and I am sorry that Mr. Pepper is not here,
because I was struck by his testimony. I happened to be at an
advisory Committee meeting where there was discussion and very
open discussion. And I hope all of us will encourage ACTPN to
continue these, and I wish Mr. Sweeney and Mr. Donahue good
luck because we need to try to find common ground. If we do not
find it, I think we are likely to have continued stalemate in
straight issues here and possibly a blowup in Seattle, and that
is not what we want.
I finish, Mr. Micek, with your testimony because I am
trying to persuade you, and I am hoping Mr. Pepper can persuade
you, to discuss these issues. You say in your testimony that
the agenda should avoid globally divisive issues such as
nontrade-related labor or competition policies on which there
is not yet a broad consensus within the WTO. That is not to say
these issues are unimportant. It is merely to recognize that if
contentious issues dominate the ministerial, confidence in the
global trading system and U.S. leadership will be undermined.
You know, I have not been a USTR negotiator, but I have
been at a number of sessions, and they are nothing if not
contentious. I mean, we cannot eliminate issues from the
ministerial and the next round because they are contentious.
Agriculture is sure--contentious, my lord, that understates it.
And then you say on labor issues the U.S. is pursuing an
appropriate course in increasing its support for the ILO and
focusing its efforts to achieve a forum on global labor issues
within that organization.
I respect the ILO up to a point. It has been evolving some
core labor standards, but its function is limited. It has no
enforcement. There is nothing there except discussion and then
unanimous agreement to accomplish something. And the question
is how we take what they have evolved, and where they are part
of the trade equation, how we work it out so they are
meaningful. So it will not work to just say leave it to the
ILO. And I think Mr. Pepper acknowledges that. And that is the
basis for the discussions with Mr. Sweeney, how we are going to
go try to find some common ground beyond that. And I just urge
everybody in the business community, I urge everybody in the
environmental community as well as the labor community these
next weeks and months to work hard, because otherwise who knows
what is going to happen?
Thank you, Mr. Chairman.
Chairman Crane. Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman, and let me say I
appreciate this panel very, very much, and I would like to
preface some things. My colleagues know I was here in Congress,
and I left and I went back to Oklahoma, and then I came back. I
was on that side of the aisle, and now I am back on this side
of the aisle. So let me say I came back for two reasons: One,
to balance the budget. I felt like I had not done justice by
the future generation of our children and grandchildren, and I
am very proud of the fact we have balanced the budget in this
Congress and all.
Second, I came back because I wanted to help shape a 21st
century global competitive economy for this country. I hope--
you may say what is a 21st century global competitive economy?
Let me say that I see it as one that we have got to have less
taxation. Some of you have mentioned some countries do not have
capital gains, but we do have a situation in this tax bill that
we are going to vote right now on. We have got some great
provisions that is going to allow us to be more competitive
around the world, so we need you to go out and sell that to the
American people, if we believe what we are talking about.
The second thing we have got to have is less regulation if
we are going to be competitive. About 7 percent overburden we
have on our trade products because of regulations. We have got
to try to continue to ratchet that downward.
And third, we have got to have less litigation. I don't
know about you, but in business I guarantee you I spend more
money--or I did when I was in business--let me say, there is no
one any more sincere in this Congress than I am about trying to
have free and fair trade. I want us to succeed. I could
probably not have come back to Congress. I could have probably
shoved back and said this is not going to affect Wes Watkins,
but my children and grandchildren have no way to go. They
cannot. They have got to participate.
What we do has got to lay that kind of foundation in this
world in this global economy, and we are not going back, and we
all know that. I was born and raised on a farm. I love
agriculture. I lost everything to a drought, but I went on to
Oklahoma State University and acquired two degrees in
agriculture because I love it and know it is very important.
I want to mention to Mr. Micek, could I ask you or maybe
one of your individuals to come by the office. I would like to
discuss the Emergency Committee on American Trade. And before
Mr. Kleckner leaves right fast, Dean, if I could, before you
take off, many of my farmers feel like that we are being traded
down or we are traded out in agriculture because when we
negotiate it away. I detect you have a concern, and we have got
to have a package, but not trade us out; is that correct?
Mr. Kleckner. Yes, sir, Mr. Watkins. You know, I talk to
the same people you do, whether they are in Oklahoma, and the
feeling is kind of general among farmers that we have not
negotiated as well as we could have, or if we did, we have not
enforced the agreements as well as we should have. And in the
Farm Bureau, and your State president, Jack, in your State, and
other people I talk to all around the country tell me
consistently we have got to either do a better job of
negotiating, be a little firmer or tougher. Our tariffs are so
low, for example, that the average 50 percent we pay around the
world, other countries send agriculture products in here at 5.
What is fair about that? Bring them down a ways before we do
anything else or very much of anything else.
Mr. Watkins. In your testimony you say we are reeling out
there in agriculture, and I know we are. And we are under a
freedom to farm policy, but freedom to farm will not work
unless we have freedom to the markets of the world, and we have
to get rid of a lot of these sanctions out there. Literally, we
are killing ourselves.
Mr. Kleckner. Mr. Watkins, you recall when freedom to farm
passed in 1996, we supported it. I still think it is a good
bill, but there were certain things promised to us in return,
including opening markets around the world, less regulation,
reformed taxes, all of those things, so it went one way, it
didn't come the other way.
Mr. Watkins. That is correct. Thank you very much, and I
look forward to having a follow-up. I meet with a lot of your
people.
And, chairman Micek, I appreciate what you are doing in
those areas. I would like to follow up with you or your people
about the emergency, and I will not belabor the Subcommittee by
further questioning.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
And I want to thank all of the members of the panel, and
again, we apologize to you for this chaotic day, but it is
going to get worse, not better. And with that, we are going to
stand in recess subject to the call of the Chair.
[Recess.]
Chairman Crane. Folks, the place has cleared out as I
indicated before. It is going to remain kind of chaotic this
afternoon. But we will get under way here. Our next panel
includes William Weiller, chairman and chief executive officer
of Purafil Inc., in Atlanta, and he is here on behalf of the
National Association of Manufacturers; Steven Warshaw,
president and chief operating officer, Chiquita Brands Corp.,
Cincinnati; Charles Lambert, chief economist, National
Cattlemen's Beef Association; Kathleen Ambrose, vice president,
international affairs and co-leader of market access team,
Chemical Manufacturers Association; and finally David Smith,
director, Public Policy Department, American Federation of
Labor and Congress of Industrial Organizations.
If you folks will please proceed in the order in which I
presented you, and try and keep your oral testimony as close to
about 5 minutes as possible and then any printed statements
will be made a part of the permanent record.
And we will start out with you, Mr. Weiller.
STATEMENT OF WILLIAM WEILLER, CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER, PURAFIL, INC., ATLANTA, GEORGIA, ON BEHALF
OF THE NATIONAL ASSOCIATION OF MANUFACTURERS
Mr. Weiller. Thank you, Mr. Chairman. My name is Bill
Weiller. I am the owner and president of Purafil, a leading
manufacturer of air purification systems based in Atlanta,
Georgia. I would like to thank you for the opportunity to
testify before the House Ways and Means Committee on the
upcoming World Trade Organization Ministerial and the impact of
the WTO on small businesses like Purafil. I am here on behalf
of the National Association of Manufacturers and obviously also
Purafil.
Many might be surprised that Purafil, a small American
business, about 70 employees, is even remotely interested in
the World Trade Organization and its objectives. In fact, we
often encounter the notion that global free trade is good for
big companies and bad for the little guy. Small--and medium-
sized businesses do not attract the headlines the
multinationals do and often our success in a global economy go
without notice. I am here to let you know that open trade is
not only good for Purafil, it is the backbone of our business.
In fact, Purafil is representative of many small
businesses. I have attached a chart to my testimony which you
may find interesting. In 1989 nearly half of the NAM's small--
and medium-member companies said they did not export. Today
only 1 in 5 fall into that category.
In other words, in the last 10 years the share of NAM's
small--and medium-member companies that export has gone from
half to more than three-quarters and it is a 50-percent
increase. Let me just hammer the point home. In 1989 less than
10 percent of NAM's small--and medium-member companies derived
11 percent or more of their revenue from exporting. Today that
share has grown, doubled to more than 20 percent. That is an
important change that has taken place over the past decade and
Purafil has been part of it.
So let me tell you about Purafil. We manufacturer air
quality systems that remove odorous, corrosive, and toxic gases
from the air. In short, we sell clean air. Our customers
include petrochemical companies like Saudi Aramco, Exxon, paper
companies like International Paper, Stora, Weyerhaeuser,
museums and archives such as the Sistine Chapel, the Holocaust
Museum, da Vinci's Last Supper, or the U.S. National Archives.
Despite our small size, Purafil is an industry leader in a
niche market. Sixty percent of our sales are made outside of
the United States. Exporting is vitally important to Purafil.
It is the cornerstone of our coporpate strategy.
We have recognized that in order to survive and grow we
have to export and become experts in doing international
business. The problems that we solve are the same worldwide. A
refinery in Baton Rouge experiences the same hazardous
emissions from manufacturing processes as does a refinery in
Saudi Arabia. If Purafil were not present to solve these
problems, the increased demand for a solution would result in
someone else from our foreign competitors gaining the business.
Right now Purafil is the best in the world at solving air
purification problems. We have few viable U.S. competitors that
serve all the applications in markets that we do. That someone
else could likely be a company from outside the U.S.
The trade barriers we come across when trying to export to
some countries are beyond the ability of any individual
business to change. For example, Mr. Chairman, the tariff for
our equipment to South Africa is 19 percent. In response to
this, we signed a licensing agreement with a local
representative so they would build portions of our equipment in
their country and remain competitive. That representative
utilized the Purafil name and proceeded to dissolve the
relationship and become a low-cost, Purafil-educated
competitor, leaving us with little recourse.
We are facing similar high tariff situations in India,
Brazil, China, Russia and others. Purafil will continue to do
everything in its power to remain competitive. I am here today
to ask you to do your part. Level the playingfield so our
people, our technology, our products can compete in a global
market. Don't force us to compete with the lack of
transparency, the lack of access, irregular rule of law and
some of the trade barriers and tariffs currently in place.
That is why we support the NAM's leadership role in
organizing a coalition to support the upcoming WTO Ministerial
in Seattle. The Alliance for U.S. Trade Expansion, commonly
referred to as U.S. Trade, encompasses an impressive broad-
based group of agriculture, consumer, manufacturing, retailing
and service organizations, representing $2 trillion in annual
trade and over 150 million Americans.
The coalition seeks to promote the benefits of economic
growth, job expansion and higher living standards in the United
States as a result of free trade and specifically U.S.
participation in the WTO.
And while Purafil is a small piece of the overall coalition
we are participating because we will continue to be successful
only if we maintain our international customer base. In order
to do that, we will depend on the reduction of tariffs and
other trade barriers. A multilateral rules-based approach to
trade, negotiated through the WTO, is strongly supported by
Purafil. The United States should take a leadership role in the
pursuit of free and fair trade through the WTO in order to
support American business.
Thank you.
[The prepared statement follows:]
Statement of William Weiller, Chairman of the Board and Chief Executive
Officer, Purafil, Inc., Atlanta, Georgia, on behalf of the National
Association of Manufacturers
Good morning, Mr. Chairman. My name is Bill Weiller, I am
the Chairman of the Board and CEO of Purafil, a leading
manufacturer of air purification systems based in Atlanta,
Georgia. I would like to thank you for the opportunity to
testify before the House Ways and Means Committee on the
upcoming World Trade Organization Ministerial and the impact of
the WTO on small businesses such as Purafil. I am here on
behalf of the National Association of Manufacturers (NAM), and
obviously also for Purafil.
Many might be surprised that Purafil, a small American
business with about 70 employees, is even remotely interested
in the World Trade Organization and its objectives. In fact, we
often encounter the notion that global free trade is good for
big companies and bad for ``the little guy.'' Small and medium-
sized businesses do not attract the headlines the
multinationals do, and often our successes in the global
economy go without notice. I am here to let you know that open
trade is not only good for Purafil, it is the backbone of our
business.
In fact, Purafil is representative of many small
businesses. I have attached a chart to my testimony, which you
may find interesting. In 1989, nearly half of the National
Association of Manufacturers' small and medium-sized member
companies said they did not export. Today, only one in five
fall into that category. In 1989, only 4 percent of those
members earned more than 25 percent of their revenue from
exporting and another 4 percent earned between 11 percent and
25 percent. Today, those percentages have more than doubled to
9 percent and 11 percent respectively. Let me just hammer that
point home. Today, in NAM's surveys we're finding that
exporting generates over 11 percent of the earnings for 1 out
of every 5 exporters and over 25 percent for 1 out of every 10
of these smaller manufacturers. That is an important sea-change
that has taken place over the past decade and Purafil has been
a part of it.
I'd like to tell you a little bit about my company. Purafil
manufacturers air quality systems that remove odorous,
corrosive and toxic gases. In short, we sell clean air. Our
customers include paper mills in Argentina, Oklahoma and North
Carolina. We protect valuable artifacts in the Netherlands, the
Sistine Chapel, and in Washington, DC. We service petrochemical
refineries in Texas, Brazil, and Saudi Arabia. Despite our
small size, Purafil is an industry leader in this niche market.
Sixty percent of our sales are made outside of the United
States. Exporting is vitally important to Purafil: it is the
cornerstone of our corporate strategy. We are not a company
that got into international sales by accident or solely as a
reaction to market demand. We have recognized that in order to
survive, to continue to provide jobs to our employees, and to
continue to fund the R & D efforts necessary to our success, we
have to export and become experts in doing international
business.
The problems that Purafil can solve are the same worldwide.
A refinery in Baton Rouge experiences the same hazardous
emissions from manufacturing processes as does a refinery in
Saudi Arabia. The Sistine Chapel protects its artwork from
environmental degradation, as does the U.S. National Archives
in Washington. Our intellectual property, considering our size,
is significant. We have worked hard to take a technology that
was developed in the U.S. about 30 years ago and have
constantly refined and improved it.
If Purafil were not present to solve these problems, the
increased demand for a solution would result in foreign
competitors gaining the business. Right now, Purafil is the
best in the world at solving air purification problems. We have
a technology that cannot be matched. Purafil has worked hard to
stay on top of our industry, and I fear that without exporting,
someone else will take the lead. We have few viable U.S.
competitors that serve all the applications and markets that we
do. That ``someone else'' could likely be a company from
outside the U.S.
The trade barriers we come across when trying to export to
some countries are beyond the ability of any individual
business to change. For example, Mr. Chairman, the tariff for
our equipment in South Africa is 19%. In response to this, we
signed a licensing agreement with our local representative so
they could build portions of our equipment in country and
remain competitive. That representative utilized the Purafil
name and proceeded to dissolve the relationship and become a
low cost, Purafil-educated competitor, leaving us with little
recourse. We are facing similar high tariff situations in
India, Brazil, China and others. One solution is to form
licensing agreements in these countries, but in doing so, we
dilute our profit margins and make it easy for partners to
eventually become competitors.
Purafil will continue to do everything in its power to
remain competitive. I am here today to ask you to do your
part--level the playing field so our people, our technology and
our products can compete in the global market. Don't force us
to compete with the trade barriers and tariffs currently in
place.
I don't need statistics, studies or business experts to
tell me that exporting creates jobs and is good for the
economy. As a small business owner, I see it every day I go to
the plant. I'm constantly reminded when I look at the shipments
on our dock and see their final destinations.
That is why we support NAM's leadership role in organizing
a coalition to support the upcoming WTO Ministerial in Seattle.
The U.S. Alliance for Trade Expansion, commonly referred to as
``US Trade,'' encompasses an impressive broad-based group of
agriculture, consumer, manufacturing, retailing and services
organizations representing $2 trillion in annual trade and over
150 million Americans. The coalition seeks to promote the
benefits of economic growth, job expansion and higher living
standards in the United States as a result of free trade and
specifically U.S. participation in the WTO.
While Purafil is a small piece of the overall coalition
mentioned above, we are participating because we will continue
to be successful only if we maintain our international customer
base. In order to do that, we will depend on the reduction of
tariffs and other trade barriers. A multilateral, rules-based
approach to trade, negotiated through the WTO, is strongly
supported by Purafil. The United States should take a
leadership role in the pursuit of free and fair trade through
the WTO, in order to support American business.
Thank you.
[GRAPHIC] [TIFF OMITTED] T5092.004
Chairman Crane. Our next witness, Mr. Warshaw.
STATEMENT OF STEVEN G. WARSHAW, PRESIDENT AND CHIEF OPERATING
OFFICER, CHIQUITA BRANDS INTERNATIONAL, INC., CINCINNATI, OHIO
Mr. Warshaw. Mr. Chairman, my name is Steve Warshaw. I am
president and chief operating officer of Chiquita Brands
International. Chiquita Brands brings a unique perspective to
these issues, being one of a very small group of American
companies to have experienced every step of the WTO process
from beginning to an end that never occurs.
In 1994, as Congress debated U.S. accession to the WTO,
Undersecretary of Commerce Jeffrey Garten made the following
statement: ``The new WTO dispute settlement process will be
much more effective than that of the old GATT system. Whereas
in the past, parties could interminably delay the resolution of
disputes, dispute settlement procedures will now be subject to
strict deadlines and the adoption of panel findings will be
binding and all but automatic.''
Clearly the banana and recent beef cases are proof that the
dispute settlement process has not lived up to that promise.
Injured parties can litigate for years, win their cases and
still not be compensated for damages.
The EU has lost two GATT rulings and four WTO rulings in
the banana case, but its illegal banana trade practices remain
in effect today. Chiquita Brands and Latin American economies
continue to be harmed. The WTO calculated that Europe's illegal
actions have cost U.S. interests alone $191.4 million annually,
almost all of which has been borne by Chiquita Brands.
When any company suffers annual losses of this magnitude,
timely relief becomes essential. The WTO procedures alone took
3\1/2\ years just to get to the point of retaliation and there
is still no relief. After the U.S. won a favorable ruling in
the banana case, Europe was entitled to continue its illegal
practices for another 15 months. This 15-month grace period
alone caused $270 million of additional injury to our
interests. At the end of that period, the EU was able to claim
that it was in compliance, even though it was not, as a way of
further prolonging the procedures.
Such a system provides absolutely no incentive for prompt
compliance. In reality it rewards delays, obstruction and
noncompliance. And so, Europe has delayed, blocked, evaded,
argued, appealed, vetoed and repeatedly sought ways to avoid
its obligations under international trade rules.
The only tool for reversing noncompliance under the WTO is
retaliation. In order to accomplish its objective of inducing
compliance, it needs to be effectively applied. To date, the
banana and beef retaliatory actions against Europe have been
unsuccessful by any standard or measure. Five months after
retaliation took effect in the banana case Europe is still
proposing WTO inconsistent banana arrangements. In the beef
case Europe is promising never to lift its ban.
Their continuing obstruction has persuaded several U.S.
farm groups that static retaliation is not sufficient leverage.
In order to increase internal pressure to comply, we recommend
that retaliation targets within Europe be rotated at regular
intervals. We believe this so-called ``carousel retaliation''
approach would be entirely consistent with WTO law and urge the
Trade Subcommittee to insist on its use to bring disputes to
their proper conclusion.
As this Subcommittee considers the critical issue of
dispute settlement in the months leading up to the Seattle
Ministerial, we urge you to examine the serious flaws that have
emerged as a result of the banana and beef disputes. The banana
case in particular offers several valuable lessons. This has
become the most litigated trade issue in the history of dispute
settlement. The United States and the Latin Americans have won
every major round. The rulings have been unambiguous, decisive
and precedent setting and still, despite more than 6 years of
successful decisions in the GATT and WTO, Europe's illegal
practices continue.
If the shortcomings raised in the banana and beef disputes
are resolved, the WTO can still live up to the promise that
former Undersecretary Garten described and that Congress
endorsed. But unless they are resolved and existing rulings and
agreements are enforced, new agreements should not be pursued.
Chiquita Brands is eager to assist the Trade Subcommittee in
addressing these critical issues in the coming months.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Steven G. Warshaw, President and Chief Operating Officer,
Chiquita Brands International, Inc., Cincinnati, Ohio
Mr. Chairman and Members of the Committee, my name is Steve
Warshaw. I am President and Chief Operating Officer of Chiquita
Brands International.
As this Committee knows, the Banana case--for reasons quite
apart from bananas--has become important for what it says about
the WTO system. The case makes clear the imperative for more
effective, streamlined procedures; for good faith compliance on
the part of all WTO members; for more effective application of
retaliation; and, above all, for a system that delivers
measurable relief to the injured U.S. commercial interests.
Chiquita Brands brings a unique perspective to these
issues, being one of a very small group of American companies
to have experienced every step of the WTO process from
beginning to an end that never seems to occur. It is my hope
that our company's experience can contribute constructively to
the national debate and congressional focus in the months
leading up to the Seattle WTO Ministerial.
The Need for More Effective, Streamlined Procedures
More than five years ago, as Congress debated U.S.
accession to the WTO, Under-secretary of Commerce Jeffrey E.
Garten made the following statement:
``The new World Trade Organization dispute settlement
process will be much more effective than that of the old GATT
system. Whereas in the past, parties could interminably delay
the resolution of disputes, dispute settlement procedures will
now be subject to strict deadlines and the adoption of panel
findings will be binding and all but automatic.''
Clearly, the Banana case is proof that the WTO system and
its dispute settlement process have not lived up to that
promise described by former Undersecretary Garten. In fact,
what this case--and the recent Beef case--show is that the WTO
has a dispute non-settlement procedure. Injured parties can
litigate for years, win their cases, and still not be
compensated for damages as the illegal trade practices continue
unimpeded.
Let me briefly review the history of the six-year Banana
case, which has taken away more than half of our 100-year-old
European business, and inflicted serious economic injury on
many of the poorer banana-producing nations of Latin America at
a time when these developing countries were being required to
open their markets and abide by new trade obligations.
In 1993, the EU instituted an illegal banana
policy that systematically and deliberately destroyed much of
Chiquita Brands market share in Europe.
In late 1993, the GATT ruled that the EU banana
policy violated trade agreements. In response, the EU blocked
the GATT ruling and maintained its illegal practices.
In 1994, the GATT again ruled that the EU banana
policy was illegal. In response, the EU again blocked this
second GATT ruling and maintained its illegal practices.
In May 1997, using new trade rules, the WTO found
that the EU banana policy violated the WTO. In response, the EU
appealed the ruling and continued its illegal practices.
In September 1997, a WTO appeals panel reiterated
the ruling that the EU banana policy contained more
illegalities than virtually any other policy ever reviewed in
dispute settlement. Having exhausted its appeal process, the EU
finally changed its banana policy--by making it more illegal
and more damaging to U.S. interests.
In March 1999, at the request of the United
States, the WTO determined that the EU's ``new'' banana policy
also violated WTO rules. In response, the EU ignored the WTO
and maintained its illegal practices.
In April 1999, when the United States imposed
punitive tariffs against Europe in retaliation, the EU ignored
the action.
To this day, Europe's illegal banana trade practices remain
in effect. Chiquita Brands and Latin American economies
continue to be harmed. The adverse impact to our business has
been substantial.
The WTO calculated that Europe's illegal actions have cost
U.S. interests $191.4 million annually--almost all of which has
been borne by Chiquita Brands. The U.S. government and our
company believe that number, which was determined by an
arbitration panel, is far below actual U.S. and Latin loses.
When any company suffers annual losses of this magnitude,
timely relief becomes essential. The WTO procedures alone took
three and a half years just to get to the point of retaliation,
and there is still not resolution or relief. This timetable is
entirely too long when significant injury is compounded year
after year. By authorizing prolonged delays, the WTO
effectively legitimizes evasion, obstruction, and runaway
injury to the prevailing party. How many American companies,
farmers or industries could sustain that amount of injury for
that amount of time?
The delays are all the more frustrating because they arise
for inequitable and illogical reasons. In the Banana case, for
example, consistent with standard WTO procedures, even after
the United States received a favorable ruling, Europe was
entitled to continue its illegal, harmful practices for another
15 months. To make matters worse, WTO rules prohibited the
United States from scrutinizing Europe's so-called compliance
or plans for a ``new'' banana policy during those 15 months. As
a result, at the end of that period, the EU was able to claim
that it was in compliance, even though it was not, as a way of
further prolonging the procedures and its illegal trade
practices.
Using the WTO's own injury calculations, the aggregate harm
done to our interests during the multi-year period from when
the WTO procedures first began to the date retaliation took
effect was $670 million. The EU's 15-month grace period--that
is, the period after the favorable ruling--alone caused $270
million of additional injury to our interests.
Under present WTO rules, Chiquita Brands can never recover
the damages incurred during those periods. Relief, if provided,
will be strictly prospective, with no retroactive penalty
imposed on Europe for the damage it has caused in the meantime.
Such a system provides no incentive at all for prompt
compliance and every incentive for protectionist member
countries to gain a lasting commercial edge over U.S. interests
without fear of penalty or economic consequence. In reality,
the WTO procedures reward delays, obstruction and non-
compliance: European banana interests continue to earn
illegally conceived profits. There is no mystery in why the EU
continues to procrastinate and evade compliance with GATT and
WTO rulings.
The Need for Good Faith Compliance
Another major concern arising from the Banana case is one
that Ambassador Barshefsky has described as Europe's ``30-year
pattern of refusing to accept panel decisions.'' Nowhere is
that pattern more apparent than in the Banana case.
Under the old GATT, the EU blocked two banana panel
rulings. New WTO rules were supposed to prevent such tactics.
However, even under the WTO, the EU has continued to do
everything possible to avoid compliance.
For decades, the EU has demonstrated this pattern of
protectionism and prevarication. In case after case, Europe has
delayed, blocked, evaded, argued, appealed, vetoed and
repeatedly sought ways to avoid obligations under international
trade rules. It has happened on citrus, pasta, canned fruit,
soybeans, beef, and bananas. The list goes on, and so do
Europe's unlawful trade practices.
For Chiquita, the problem of chronic non-compliance
threatens our business. For the WTO system, the stakes are
equally high. If Europe, the largest WTO member, continues its
pattern of non-compliance, legitimate questions will be raised
about the real value of the WTO.
The Need for More Effective Retaliation
The only tool for reversing non-compliance under the WTO is
retaliation. When WTO-sanctioned retaliation is imposed, it
must be applied in a way that induces compliance as quickly as
possible. If retaliation is the end-result, the injured
petitioning interest gets no relief and the entire multi-year
litigation process becomes futile.
To date, the Banana and Beef retaliatory actions against
Europe have been unsuccessful by any standard. Five months
after retaliation took effect in the Banana case, Europe is
still proposing WTO-inconsistent banana arrangements. In the
Beef case, Europe is promising never to lift its ban.
Europe's response to these retaliations has persuaded the
American Farm Bureau, the National Cattlemen Beef Association,
the American Meat Institute, the U.S. Meat Export Federation,
the Hawaii Banana Industry Association and Chiquita Brands that
static retaliation is not sufficient leverage. In order to
increase internal pressure to comply, we recommend that
retaliation targets within Europe be rotated at regular
intervals. Because the overall level of retaliation against
Europe would not change, we believe this so-called ``carousel
retaliation'' approach would be entirely consistent with WTO
law. We urge the Trade Subcommittee to insist on the use of
carousel retaliation in order to bring these cases--and future
disputes--to their proper conclusion.
The Need for Measurable Relief to the Injured U.S. Industry
Ultimately, the proper and equitable conclusion of dispute
settlement must be full WTO compliance and the delivery of
quantifiable relief to the petitioning U.S. industry. Chiquita,
like other U.S. companies and farmers, has availed itself of
dispute settlement with that singular objective in mind. U.S.
interests, particularly agricultural interests, have often made
the point that if prominent cases like Bananas and Beef are not
resolved in a way that produces a fair outcome and tangible
relief, WTO dispute settlement will inevitably lose its appeal.
This overriding imperative has not yet been grasped by the
European Commission, which continues to propose certain new
banana arrangements that would in fact increase injury to
Chiquita Brands. Congress and the Administration need to
reinforce in the clearest way possible the message to Europe
that dispute settlement is intended to accord commercial relief
from illegal practices and that outcomes that fall short of
that objective will be unwelcome and of no help in lifting U.S.
retaliation.
Conclusion
America's agricultural sector is the most productive and
competitive in the world. Despite this fact, some of our
nation's most important export markets are being stolen away by
illegal trade practices. We don't permit America's intellectual
property, patents, or high technology industries to be
subjected to such treatment, and we shouldn't allow it in
agriculture.
As this Subcommittee considers the critical issue of
dispute settlement in the months leading up to the Seattle
Ministerial, we urge you to examine the serious flaws that have
emerged as a result of the Banana and Beef disputes. These
cases provide concrete examples of the obstacles that any U.S.
interest could encounter when taking on unfair practices by the
EU.
Unless solutions to these inadequacies can be found prior
to the WTO Ministerial Meeting, many will question the value of
new agreements, given that existing ones cannot be enforced. On
the other hand, with proper attention to the concerns raised in
the Banana and Beef disputes, the WTO can still live up to the
promise that former Undersecretary Garten described and that
Congress endorsed. Chiquita Brands is eager to assist the Trade
Subcommittee in addressing these critical issues in the coming
months.
Chairman Crane. Thank you.
Our next witness, Mr. Lambert.
STATEMENT OF CHARLES D. ``CHUCK'' LAMBERT, PH.D., AND CHIEF
ECONOMIST, NATIONAL CATTLEMEN'S BEEF ASSOCIATION
Mr. Lambert. Thank you, Mr. Chairman and Members of the
Subcommittee, for holding hearings on issues that are vitally
important to American agriculture. I am Chuck Lambert, chief
economist of the National Cattlemen's Beef Association. Exports
of meat and grains are imperative for the United States. We
have only 4 percent of the world's population but a large share
of the world's production agriculture.
One of the underlying premises of the 1996 Freedom to Farm
bill was that aggressive pursuit of growing export markets
would replace the safety net of traditional farm programs.
There must be followthrough by Congress and the administration
on this obligation.
The Seattle Round of trade talks will be a defining moment
for world agriculture trade. Success of the Seattle Round
dictates that the U.S. take the high road to expanded exports
and freer trade with less dependence on government assistance.
The near agreement with China last April was a good one.
Hopefully it will be completed and set the benchmark for tariff
reduction and market access for WTO members to follow in
November.
NCBA supports three process objectives for the negotiations
as follows. Set the 3-year time line for concluding the
negotiations, no product or policy exemptions, and three,
conclude with a single agreement that encompasses all sectors.
There is a perception among many in agriculture that past
negotiations often traded agricultural interests for other
priorities. NCBA and other agricultural organizations strongly
object to the finalization of agreements in any other sector
until agreements in agriculture are concluded. From the
parochial view of the beef industry, the overall objective of
U.S. trade policy is to maintain and increase access to
existing markets for U.S. beef and to gain access in emerging
markets.
NCBA supports addressing the specific points regarding the
upcoming WTO negotiations. Prevent the EU from rolling back
progress made during previous agreements. Ensure that science
remains the only basis for resolving the SPS agreements.
Protect science-based technologies and establish transparent
science-based rules. Eliminate state trading entities.
Negotiate reduction and eventually elimination of production-
distorting price supports, and I will add here including those
that are currently insulated in the blue box, and eliminate
export subsidy programs. Establish a target date for reducing
all tariffs to zero, and until that elimination can take place,
continue tariff reduction and expands tariff rate quotas to
permit continued growth in exports.
U.S. beef entering many Asian markets still faces close to
a 40-percent tariff. In Europe, we face a 20-percent tariff and
that is within a very small quota of 11,500 metric tons, even
if we had all of our other issues resolved. Prices still drives
the effective demand for our product, and tariffs increase
price. Continued tariff reduction is critical.
I am clearly aware of the administration and other sector
positions regarding dumping. But the fact is the current
definition of dumping does not make sense for many agricultural
commodities. Cyclical commodities, including beef, have periods
of low prices. Often those prices are below the cost of
production for most of the industry. That is why our industry
is cyclical. By WTO definition the beef industry may be
considered to be dumping during periods of low prices, even in
the absence of evidence of predatory behavior, intention to
monopolize or other efforts to drive competitors out of
business.
Under the current definition, U.S. dumping suits were filed
in 1998 against cattle from Canada and Mexico. In return
Mexican feeders and processors filed a dumping case against
beef and cattle from the United States. Mexico announced
tariffs as high as 215 percent just last Monday for some
exporters of some U.S. products.
Among the strengths of the current WTO system is a well
defined process for initiating a case for determining the final
ruling. The current--the strict, science-based rules
established for resolving these issues is another major
strength. The primary weakness of the current system is the
absence of an enforcement mechanism to assure compliance once
the ruling is issued. Canada and the United States
painstakingly followed the WTO dispute settlement process for
changing regulations to come into compliance with the WTO
ruling.
No one wins in trade wars, and our preference is for
access. All we ask is for Europe to give their consumers a
choice. Our negotiators with our advice and consent have
offered labeling beef as a product of the U.S. to the EU with
no success.
If Europe continues to thumb its nose at this science-based
process, the WTO is in jeopardy of losing its credibility.
Thank you for the opportunity to present this information.
[The prepared statement follows:]
Statement of Charles D. ``Chuck'' Lambert, Ph.D., and Chief Economist,
National Cattlemen's Beef Association
Thank you Chairman Crane and the Subcommittee for holding
hearings regarding issues to be addressed in the 1999 Seattle
Ministerial meeting. NCBA commends your continuing efforts to
improve the export outlook for U.S. agricultural products. I am
Chuck Lambert, Chief Economist for the National Cattlemen's
Beef Association,
Importance of Trade:
Beef and pork producers have always avoided the traditional
supply management and price support programs, and therefore,
had the ``freedom to farm'' as well as ``freedom to fail.''
Livestock producers add value to grain produced by our
neighbors by feeding it through our livestock.
Livestock producers are becoming increasingly dependant on
the rest of the world to buy our products. Exports of meat and
grains make sense for the US, a country that has only 4 percent
of the world's population, but a large share of the world's
production agriculture. Exports of beef have helped to take up
the slack of declining demand for beef at home. We, as an
industry, have worked hard to promote beef exports which now
account for over 12 percent of the value of wholesale beef
sales. On a tonnage basis, we export 8-9 percent of what we
produce.
The 1998 calendar year--a year of recession in most Asian
markets--was the first time that more than one million metric
tons of US beef and beef variety meats have been exported.
Compared to 1997, exports of beef and beef variety meats during
1998 increased of 4.75 percent on a volume basis but declined
5.44 percent on a value basis as U.S. beef prices declined and
international customers shifted to a lower-price mix. As an
industry, we have expanded exports of beef and beef variety
meats from about one-half billion dollars twenty years ago, to
approximately $3 billion today. During the first five months of
1999, beef exports increased 6.43 percent on a volume basis and
6.56 on a value basis compared to the same time in 1998.
The Seattle Round of world trade talks will be the defining
moment for world agricultural trade. The US beef industry has
worked hard to expand sales of our product in the younger, fast
growing, overseas markets. In spite of record US meat exports
and efforts of most commodity organizations to expand exports,
prices for nearly all US agricultural products remain very low.
There is a perception among many in agriculture that past
GATT and WTO rounds often traded agricultural priorities for
other priorities and left US crop and livestock producers
facing high tariffs and a host of non-tariff trade barriers in
overseas markets while opening US markets to imports. One of
the underlying premises of the 1996 ``Freedom to Farm Bill''
was that aggressive pursuit of growing export markets would be
a critical strategy to replace the safety net of traditional
farm programs. The pursuit of export markets includes
eliminating trade barriers and this must be a successful part
of the next round.
Success of the Seattle Round means that the US must take
the high road to expanded exports and free trade, with less
dependence on government assistance. Failure to follow this
course will take us down the road to protectionism--if not
isolationism--trade wars and a return to costly government
supply management and price support farm programs. The near-
agreement with China last April, if finalized, would set a good
example for other countries for reducing trade barriers. If the
agreement with China--which would be contingent upon approval
of permanent Normal Trading Relations--can be finalized it will
set the pace for all of the WTO countries to follow in
November. The proposed China agreement would allow for:
a bilateral Sanitary/Phytosanitary agreement for
China to accept all USDA approved processing plants as eligible
to ship to China. This bilateral agreement has been finalized,
but its impacts will depend on finalization of the overall
trade package with China. The proposed overall package would
allow for the following with respect to the beef industry:
duties on certain beef items to decline from 45
percent to 12 percent over a five-year period