[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
IMPLEMENTATION OF THE UNITED STATES-MOROCCO FREE TRADE AGREEMENT
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JULY 7, 2004
__________
Serial No. 108-47
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
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
PHIL ENGLISH, Pennsylvania LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona EARL POMEROY, North Dakota
JERRY WELLER, Illinois MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
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C O N T E N T S
__________
Page
Advisory announcing the hearing.................................. 2
WITNESSES
Office of the U.S. Trade Representative, Hon. Peter F. Allgeier,
Deputy U.S. Trade Representative............................... 11
______
CMS Energy Corporation, Jackson, Michigan, David Mengebier....... 31
Yasmine Enterprises, Inc., Denver, Colorado, Jamal Belcaid....... 35
National U.S.-Arab Chamber of Commerce, David Hamod.............. 38
Intel Corporation, Santa Clara, California, Melika Carroll....... 42
Wheat Export Trade Education Committee, the National Association
of Wheat Growers, and the U.S. Wheat Associates, David
Taliaferro..................................................... 48
SUBMISSION FOR THE RECORD
National Corn Growers Association, Dee Vaughn, statement......... 53
IMPLEMENTATION OF THE UNITED STATES-MOROCCO FREE TRADE AGREEMENT
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WEDNESDAY, JULY 7, 2004
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:06 a.m., in
room 1100, Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Committee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
June 25, 2004
FC-20
Thomas Announces Hearing on
Implementation of the United States-Morocco
Free Trade Agreement
Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways
and Means, today announced that the Committee will hold a hearing on
Implementation of the United States-Morocco Free Trade Agreement (FTA).
The hearing will take place on Wednesday, July 7, 2004 in the main
Committee hearing room, 1100 Longworth House Office Building, beginning
at 10:00 a.m.
Oral testimony at this hearing will be from both invited and public
witnesses. Invited witnesses will include Ambassador Peter F. Allgeier,
Deputy United States Trade Representative. However, 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:
Morocco and the United States had two-way trade of approximately
$860 million, and a U.S. trade surplus of $66.5 million in 2003. On
October 1, 2002, the President formally notified Congress that he would
pursue an FTA with Morocco. Negotiations for the United States-Morocco
FTA were concluded on March 2, 2004, and the agreement was signed on
June 15, 2004, by Ambassador Robert Zoellick and Moroccan Minister-
Delegate of Foreign Affairs and Cooperation Taib Fassi-Fihri.
The agreement provides significant benefits for U.S. businesses and
their employees as well as U.S. consumers. The agreement will
immediately eliminate tariffs on 95 percent of bilateral trade in
consumer and industrial products, with all remaining tariffs to be
eliminated within 9 years. The agreement includes a negative list for
services with very few reservations. All agricultural products are
covered by the agreement. The agreement also contains strong
protections for U.S. investors.
In announcing the hearing, Chairman Thomas stated, ``Morocco is an
important U.S. ally, and this agreement will enhance the economic
component of that relationship and support Moroccan economic reforms.
This strong and comprehensive agreement will expand trade opportunities
for U.S. goods and services immediately, and I expect it to receive
quick and favorable congressional consideration.''
FOCUS OF THE HEARING:
The hearing will focus on congressional consideration of the United
States-Morocco FTA and the benefits that the agreement will bring to
American businesses, farmers, workers, consumers, and the U.S. economy.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
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Those persons and organizations not scheduled for an oral appearance
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Chairman THOMAS. Good morning. This hearing will focus on
the recently completed U.S.-Morocco Free Trade Agreement (FTA)
(P.L. 108-302) and the benefits this agreement will bring to
American workers, consumers, farmers, businesses, and the U.S.
economy. It is remarkable that the United States and Morocco
have had such a long and strong relationship. Morocco was the
first country to recognize the newly sovereign United States in
1777, and the Treaty of Peace and Friendship between the United
States and Morocco is the longest unbroken treaty relationship
in U.S. history. Yet the economic relationship between the
United States and Morocco has lagged significantly behind the
strong friendship and mutual recognition. The European Union
(EU)--and it is of no surprise with less than 10 miles
separating Europe from Morocco--has played a dominant role in
much of northern Africa, including Morocco. Indeed, the two-way
trade between Morocco and the EU is over 50 percent higher than
the two-way trade between Morocco and the United States.
Hopefully, this agreement will provide an opportunity to expand
our economic relationship and change that percentage.
The agreement will also support economic reform efforts in
Morocco, a process that we hope to see replicated throughout
the region. Since we began negotiations with Morocco on a FTA,
we have seen a wave of other countries in the region express
interest. Recently, the U.S. Trade Representative's (USTR)
office has added Kuwait, Yemen, Qatar, and United Arab Emirates
to the group of countries with which we have trade and
investment framework agreements (TIFA), which also includes
Saudi Arabia, Egypt, Tunisia, and Algeria. We have recently
concluded a FTA with Bahrain. I hope these steps will promote
greater U.S. economic ties and integration within the region.
Many of the features of the Morocco Free Trade Area provide a
positive example, particularly the fact that the agreement is
comprehensive, i.e., all products are covered under the
agreement. Further, the agreement includes strong protections
for investment dispute settlements, including investment
agreements. This is clearly a strong step forward to U.S.-
Moroccan relationship improvement. I hope Congress affords it
the quick bipartisan support that it deserves.
Prior to recognizing the Ranking Member on the Subcommittee
on Trade, I will recognize the gentleman from New York, the
Ranking Member of the Committee on Ways and Means, for any
remarks he may wish to make.
[The statement of Chairman Thomas follows:]
Opening Statement of The Honorable Bill Thomas, Chairman, and a
Representative in Congress from the State of California
This hearing will focus on the recently completed U.S.-Morocco free
trade agreement and the benefits this agreement will bring to American
workers, consumers, farmers, businesses, and the U.S. economy.
The United States and Morocco share a strong and longstanding
relationship. Morocco was the first country to recognize the newly
sovereign United States in 1777, and the Treaty of Peace and Friendship
between the United States and Morocco is the longest unbroken treaty
relationship in U.S. history. Yet the economic relationship between the
United States and Morocco has lagged behind. The European Union has
traditionally played a dominant economic role in many African
countries, including Morocco. Two-way trade between Morocco and the EU
is over 50 percent higher than two-way trade between Morocco and the
United States. This agreement will provide an opportunity to expand our
economic relationship with Morocco and to enhance U.S. competitiveness
by providing Morocco with trade opportunities other than through the
EU.
The agreement will also support economic reform efforts in Morocco,
a process that we hope to see replicated throughout the region. Since
we began negotiations with Morocco on a free trade agreement, we have
seen a wave of other countries in the region expressing interest.
Recently USTR has added Kuwait, Yemen, Qatar, and the United Arab
Emirates to the group of countries with which we have Trade and
Investment Framework Agreements, which also includes Saudi Arabia,
Egypt, Tunisia, and Algeria. We have recently concluded a free trade
agreement with Bahrain. I hope that these steps will promote greater
U.S. economic ties and integration within the region. The potential of
an FTA has provided a major impetus to comprehensive labor reform in
Morocco.
Many features of the Morocco FTA provide a positive example,
particularly the fact that the agreement is comprehensive--meaning all
products are covered under the agreement. Further, the agreement
includes strong protections for investment dispute settlements,
including investment agreements.
This agreement is a strong step forward in the U.S.-Moroccan
relationship, and I expect it to be approved quickly by the Congress
with strong bipartisan support.
I now recognize the Chairman of the Trade Subcommittee, Mr. Crane,
for any comments he may have.
Mr. RANGEL. Thank you, Mr. Chairman, and I want to thank
USTR for the work that you have done in improving the trade
relationship between our great country and other countries. I
do not understand why constantly we do not find from your
office a stronger attempt to bring Democrats and Republicans
together on this issue. I am a firm believer in foreign policy,
that it is very, very important to us as Americans to work
together and to resolve our differences in our country and our
legislative and executive branches and to look like one strong
Nation whenever we are dealing with any foreign nation.
What has basically been the differences in these trade
agreements? It has been that most of us on our side have
believed that there should be some minimum standards as it
relates to labor, and these standards should be standards that
foreigners and the United States should be proud of as a
starting point in making certain that we are not saying that
the private sector is going to be in charge of determining the
rights of workers. We use as an example the great improvement
in workers' benefits in the United States, not for starters but
as a goal to say one day we hope that you will be able to be
productive enough to reach these standards. We do not want to
dictate to the countries as to what to do and that we know
better for their workers than what they do. We do believe that
when we are talking about child labor, the right to organize,
the right to vote, we know we have never, never, never would
have reached a point that we are today if we had to depend on
management. We know it is a good working relationship that
worked for us and should work for other people.
The resistance of putting these things into agreement when
many times the ambassadors and representatives of these
countries have said they had no problem with it, it is our side
that really did not want that language in the agreement, well,
that is--you diplomats can talk in language that even
politicians do not understand. The truth of the matter is that
you have a wonderful opportunity to bring many, many more
Democrats on board for bipartisan agreements if you try to work
out these differences in getting basic International Labor
Organization (ILO) language in these agreements.
Fortunately, when we have countries that have workable
laws, that enforce those laws, and you use the language that
you do to enforce your own laws, it is hard to resist it when
we have checked out that they are doing a pretty good job. To
think that we are just going to buy this type of boiler-room
language with every trade agreement means that you expect to
have a partisan fight on every trade agreement. You do not want
it; I do not want it. We talk about it. We respect each other.
If you think we are wrong, I hope you can bring a fresh view to
this this morning and explain why you do not want ILO language
in these trade agreements. It would help me not as a Democrat
but as a Member of Congress and as an American. So, let me
thank you for the hard work you have done.
Chairman THOMAS. It is now my pleasure to recognize the
gentleman from Illinois, the Chairman of the Subcommittee on
Trade, Mr. Crane.
Mr. CRANE. Thank you, Mr. Chairman. I am quite pleased that
the United States and Morocco have finally reached an agreement
on a bilateral free trade issue. Morocco has long been a key
ally in the Middle East. While perhaps less dramatic in scope
than some of the other FTAs Congress has and will soon
consider, two-way trade between the United States and Morocco
is significant, at about $1 billion per year. Furthermore, the
International Trade Commission (ITC) estimates that trade
between our countries should double once this agreement is
implemented.
This is a strong agreement. Under its terms, over 95
percent of U.S. exports of industrial goods to Morocco will
become duty-free immediately. This follows the high standards
set by our recently passed agreements with Singapore and Chile,
as well as that of the Australia FTA, which I expect will pass
through the House this month. This is important for U.S.
manufacturers, whether they produce heavy equipment, high-tech
products, chemicals, or any of a number of other products. This
is also a strong agreement for the services sector of our
economy, whether it be telecommunications, e-commerce for
digital products, or new opportunities for U.S. financial
institutions.
Importantly, unlike some other agreements, the Morocco FTA
is comprehensive as regards to agricultural goods. This is a
significant step forward, and I am grateful to USTR for its
efforts in this regard. I understand that difficult balances
must be struck in any FTA, but I hope and trust that inclusion
of all agricultural products will become part of standard
operating procedure as the Administration completes future
agreements.
I would like to emphasize my strong support for this
agreement and my appreciation to the Administration for its
efforts in completing it. I applaud their efforts in
negotiating an agreement that opens markets for U.S. exports
while eliminating tariffs, reducing nontariff barriers, opening
services markets, and strengthening intellectual property
protections. In addition, this agreement provides for important
investor protections for our companies. Taken together, this
will provide a significant benefit to the U.S. economy.
I would also like to welcome Ambassador Allgeier, as well
as our second panel of invited guests here today, and I look
forward to working with Chairman Thomas and our colleagues, Mr.
Rangel and Mr. Levin, as well as all other interested parties,
to ensure swift passage of this agreement. Thank you, Mr.
Chairman.
Chairman THOMAS. Thank you. Now the Chair will recognize
the gentleman from Michigan, the Ranking Member on the
Subcommittee on Trade, Mr. Levin.
Mr. LEVIN. Thank you, Mr. Thomas. As you mentioned, there
has been a long history of cordial relationships between the
United States and Morocco. When I was told that Morocco was the
first country to recognize the United States in 1777, I decided
maybe what I learned in high school and college was much too
oriented toward other places than Africa or Asia. Indeed, there
has been this long history of relationship, and I think we need
to keep that in mind, especially when we acknowledge that the
relationship between our two countries is probably more
important today than it ever has been.
I think it is important to remember at the same time that
trade agreements need to address the realities of each
situation. Trade agreements that become simply kind of
automatic models can miss the potential impact of those
agreements both on other countries and the United States. Each
situation is different. One size does not fit all, unless you
believe that expanded trade is always mutually advantageous, no
matter how it is shaped. I do not believe that for a moment. We
have to take into account the realities on the ground when we
put these trade agreements together and not automatically try
to use one as a model for another. If so, the results can be
the opposite in one place from another place. In that regard, I
want to talk just for a few minutes about the provisions on
medicines. The language here is essentially the same, for
example, as it is in Australia. The provision regarding
generics and test data, the 5-year provision, is the same as it
is in Australia. The situation is very different in Morocco
than it is in Australia. So, Ambassador, I would like you to
address this issue, whether Morocco now provides 5 years of
protection in terms of use of test data under its own law, and
if Morocco wanted to do otherwise, whether this agreement would
bind them.
The same relates to the so-called parallel importation law.
It did not matter perhaps in other agreements, but here it
might, and I would like you to tell us whether this agreement
would bind Morocco in terms of so-called parallel imports, how
they could handle exhaustion of patent rights, if there were a
public emergency, a health emergency in Morocco. Likewise--and
Mr. Rangel has eloquently covered this--the provisions relating
to core labor standards, and once again, this Administration is
using ``Enforce your own law.'' In Australia, there is going to
be zero impact really in terms of our economic relationship,
our competition, because the Australian laws essentially
incorporate the basic ILO standards. The same was true in terms
of Chile and Singapore.
With Morocco, it is not quite the same. They started major
reforms of their labor laws just, I think, a year ago. When we
had the meeting, Mr. Chairman, of the Congressional Oversight
Group (COG), we asked USTR if they had an English translation
of the labor reforms, and the answer was they did not at that
time. It was somewhat startling to me that we would not have an
English translation of reforms of labor laws if one felt it
mattered. If you use the standard ``Enforce your own laws,'' I
guess it does not really matter what the laws say if that is
your idea of the basis for expanded trade.
Anyway, we now have received an English translation of the
reforms, and there just needs to be more attention to the
contents of trade agreements. We did not get the actual text
until after notification in this case. So, let me just finish
by saying that, as I understand it, Morocco is now continuing
its process of reform of its labor laws, and there is now
before the government and their governmental apparatus some
proposed additional changes relating to the freedom of workers,
especially the right to strike under certain circumstances. I
would appreciate if the Ambassador could address us as to
exactly what the status of the latest reforms are, their
nature, and our government's expectations. Thank you, Mr.
Chairman.
Chairman THOMAS. Thank you. Now it is the Committee's
pleasure to hear from the Honorable Peter Allgeier, Deputy
United States Trade Representative----
Mr. ENGLISH. Mr. Chairman?
Chairman THOMAS. The gentleman from Pennsylvania.
Mr. ENGLISH. Just briefly, I was wondering if I might
insert a statement at this point for the record.
Chairman THOMAS. The Chair appreciates the gentleman's
concern. Any Member who has a written statement certainly can
place it in the record at this point. I thank the gentleman and
recognize his long interest and support, both structurally and
personally, in this U.S.-Morocco relationship.
Mr. ENGLISH. Thank you, Mr. Chairman.
[The statement of Mr. English follows:]
Opening Statement of The Honorable Phil English, a Representative in
Congress from the State of Pennsylvania
Mr. Chairman, before the Committee today is a historic agreement
that is a win for the United States and a win for Morocco.
Morocco is an emerging market of more than 30 million people at the
crossroads of Europe, Africa and the Middle East. As such, this
agreement represents an excellent export destination for U.S. goods and
services. In addition, the agreement levels the playing field with
Europe in terms of access to the Moroccan market where European
companies have for far too long enjoyed a competitive advantage because
of the Moroccan-EU trade agreement.
The United States-Morocco FTA strengthens relations with a moderate
Muslim ally in the volatile Middle Eastern and North African region.
Most recently, the United States further recognized our nation's
strategic partnership with Morocco by designating it as a ``major non-
NATO ally.'' This move elevates the military ties between the U.S. and
Morocco, and is a testament to Morocco's status as a close and vital
ally of the United States in the War on Terror.
More than 95 percent of bilateral trade in consumer and industrial
products will become duty free immediately upon entry into force of the
agreement. The FTA also provides immediate bilateral tariff elimination
on many agricultural products. Simply put Mr. Chairman, this agreement
represents the best market access package for domestic employers of any
U.S. free trade agreement with a developing country. The ITC determined
that trade liberalization as proposed by this agreement is likely to
increase the competitiveness of U.S. manufacturers and farmers in the
Moroccan market not only relative to Moroccan producers, but also
relative to other foreign suppliers such as the European Union--with
which Morocco already has an FTA.
In 2003, U.S. domestic merchandise exports to Morocco were valued
at $462 million, while U.S. imports for consumption from Morocco were
$396 million. The United States recorded a $66 million surplus with
Morocco in 2003, as Morocco ranked as the 69th largest market for U.S.
exports and the 82nd largest supplier of imports. In fact, the U.S.
consistently enjoys a trade surplus with Morocco; the surplus has
totaled over $1.5 billion from 1992-2003.
The ITC also determined that U.S. exports to Morocco are likely to
increase by $740 million, and U.S. imports from Morocco are likely to
increase by $198.6 million after full implementation of the FTA. This
agreement clearly is a win-win agreement for the U.S. economy.
The agreement is also an important component of the plan to create
a U.S.-Middle East Free Trade Area (MEFTA) by 2013. More than any other
region (other than sub-Saharan Africa), the Middle East has declined
economically over the past few decades. This occurred despite the rise
and dissemination of new technologies and the spread of international
trade. The economic decline of the region cannot be allowed to continue
unchecked without the political consequences we are seeing today.
The conclusion of the U.S.-Morocco FTA sends a powerful message to
countries throughout the Middle East and the rest of the world. The
message is clear: The United States seeks partners in the region
committed to economic and political reform, and is willing to extend
help to countries that are politically committed to undertake the
necessary--and sometimes difficult--reforms.
And Morocco has completed difficult reforms, in large part because
of the negotiation of this agreement. Due to Morocco's strong desire to
negotiate a FTA with the United States, a domestic consensus developed
for enacting sweeping labor law reforms; reforms that had been stalled
for 20 years. These reforms were unanimously approved by the Moroccan
Parliament. The new labor law went into effect on June 8, 2004 and
under the terms of the agreement all aspects of the new law are fully
enforceable.
Some key provisions of the new Labor Code include:
Collective bargaining: The rights of workers to union
representation and confirming workers' rights to be consulted over
management decisions that affect staff. Modernizes dispute resolution
mechanism and establishes a legal framework that embraces the right to
strike (provided for by the Moroccan Constitution).
Worker Safety: Modernizes workplace inspections,
including health inspections. Reduces the number of weekly working
hours from 48 to 44 for the private sector, with no more than ten hours
worked in a single day.
Compensation and benefits: Raises the minimum wage in the
private sector by 10 percent in two steps and implements the minimum
wage in the public sector. Extends maternity leave from 12 to 14 weeks;
and for women experiencing difficult pregnancies, additional leave up
to 22 weeks is granted. Provides for premium pay for overtime and paid
public and annual holidays.
Child labor protections: Raises the minimum age of
employment from 12 to 15 years to comply with ILO convention 138.
Gender discrimination: Gender discrimination is
prohibited--equal pay for equal work is required.
Layoff protections: Total or partial shut-downs of firms
are allowed for technical, structural or economic reasons, but should
first have the government's agreement. The courts have the authority to
reinstate workers dismissed arbitrarily and can compel employers to pay
damages and backpay. Affected employees are entitled to compensation up
to 6 weeks' salary for each year of work. The compensations are exempt
from taxes and Social Security contributions.
Mr. Chairman, Morocco has also made difficult reforms in the area
of women's rights. In October, King Mohamed VI announced a series of
proposed reforms to the Personal Status Code aimed at improving women's
rights. These included raising the legal age for women to marry from 15
to 18, imposing severe restrictions on polygamy, and giving husband and
wife equal and joint responsibility over the family.
Aside from encouraging historic opportunities for Moroccan workers
and women through negotiating this agreement, the U.S.-Morocco FTA sets
a high standard in many areas of 21st century global trade. The
intellectual property rights provisions alone are the best yet in any
U.S. FTA with a developed or developing country and will serve as an
important model going forward.
The agreement establishes a secure, predictable legal framework for
U.S. investors operating in Morocco. All forms of investment will be
protected under the agreement and U.S. investors will enjoy in almost
all circumstances the right to make investments in Morocco on equal
footing with Moroccan investors. Additionally, the agreement makes
certain that trademarks are protected by embodying the principle that
the first person to acquire a right to a trademark is the person who
has the right to use it.
More than simply requiring high standards on paper, Mr. Chairman,
this agreement includes strong circumvention provisions, protecting
intellectual property and penalizing piracy. The agreement requires
each government to criminalize end-user piracy, providing strong
deterrence against piracy and counterfeiting. The agreement mandates
both statutory and actual damages under Moroccan law for violations of
intellectual property. Under these provisions, monetary damages can be
awarded even if actual economic harm cannot be determined.
All core obligations of the agreement, including labor and
environmental provisions, are subject to the dispute settlement
provisions of the agreement. The agreement includes strong enforcement
mechanisms, including the ability to suspend trade concessions or
establish monetary assessments.
Finally, Mr. Chairman, the FTA is an historic milestone in the
U.S.-Morocco bilateral relationship, which began well over 200 years
ago when Morocco was the first country to recognize the newly
independent United States. Morocco today remains one of the United
States' closest political allies in the war against terror and a
steadfast friend in advancing peace in the Middle East.
[The statement of Mr. Tanner follows:]
Opening Statement of The Honorable John S. Tanner, a Representative in
Congress from the State of Tennessee
Mr. Chairman, thank you for having this hearing today. I would also
like to acknowledge my colleague and co-chair of the Morocco Caucus--
Mr. English and thank him for all his work on moving this agreement
forward.
I also want to congratulate Ambassadors Zoellick and Allgeier, and
all of the hard working members of our negotiating teams at USTR and
other agencies for their achievements. The agreement that they have
reached, along with their Moroccan counterparts, is a comprehensive,
well-balanced agreement that will benefit both nations. Additionally, I
believe that this is a bipartisan agreement that follows the procedures
established under the Trade Promotion Authority Act.
As many of you know, Morocco is the signatory to the oldest
unbroken treaty in the history of U.S. foreign relations and they have
proved their commitment to the United States many times during the past
two centuries. The U.S.-Moroccan friendship began with its recognition
of the American Republic on December 20, 1777 and is continuing strong
today. While many Muslim countries want nothing to do with the United
States, Morocco is seeking closer ties with us.
Morocco is one of our strongest allies in the war on terrorism and
a moderate voice in the Muslim world. Moroccan officials continue to
aid our efforts to stop terrorism and are proving to be vital helping
track down and arrest suspected terrorists.
The Kingdom of Morocco suffered the horror of a terrorist attack on
May 16, 2003, in Casablanca. 42 people died as a result of the
terrorist attacks and more than 100 people were injured. Therefore, it
is important that the United States continue to stand together with
Morocco in the international fight against terrorism.
With this agreement, Morocco could be a link between the United
States, the Middle East, Africa and the Arab world. If we delay this
agreement and fail to cooperate with a traditional friend like Morocco,
which has always been a moderate and stable country, it sends a strong
negative message to the rest of the world.
In addition to the global security benefits that will be achieved
through this deal, the agreement will increase U.S. agriculture exports
to Morocco and will give U.S. farmers significant tariff advantages
over the EU and other U.S. competitor suppliers. Commodities that will
benefit from this FTA include U.S. soybeans and wheat.
In short, this is a good agreement and I hope it is approved by the
House before the August recess.
Chairman THOMAS. Now the Honorable Peter Allgeier, if you
have a written statement, it will be made part of the record,
without objection, and you can address us in any way you see
fit. If you wish to respond to questions as part of your
opening statement, feel free to do so. Otherwise, we will call
on Members to repeat those questions so that you can understand
them in the context in which they were delivered. Mr. Allgeier?
STATEMENT OF HONORABLE PETER F. ALLGEIER, DEPUTY U.S. TRADE
REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE
Mr. ALLGEIER. Thank you very much, Mr. Chairman. I would
like to thank you and Congressman Rangel and the others on the
Committee who work so closely with us on our FTAs. I certainly
appreciate the opportunity today to discuss the U.S.-Morocco
FTA with you, and I know that all of you share our interest in
expanding our trade relationship with North Africa and the
Middle East. I am also very grateful to Congressman English and
Congressman Tanner for their support as co-Chairmen of the
Morocco Congressional Caucus.
I would like to make a point about the broad context of
this agreement before getting into some of the commercial
aspects, and that is that this agreement is an important
element of U.S. policy in the Middle East and North Africa. We
believe it will help to build the economic, political, and
social stability in Morocco, and it signals to other reforming
countries in the region the benefits of pursuing market
liberalization policies and a closer economic relationship with
the United States. We think this is very important.
Our trade strategy toward the region is predicated on the
idea that sustained economic growth can best be brought to the
region through internally generated reforms and market-based,
trade-liberalizing policies which are embodied in this
agreement.
Working in close partnership with Congress has been
critical to our success. The Trade Act of 2002 has put in place
procedures that make it possible for us to negotiate agreements
that: one, address the pressing need for engagement with such
regions; two, bring real benefits to U.S. workers and farmers
and to our economy overall; and, three, bolster the economic
and social reform in our partner countries.
This is clear in the case of Morocco. Under the leadership
of King Mohammed VI, Morocco has made legally binding
commitments to liberalize its trade with the United States, and
with this agreement, it signals its serious intention to pursue
and to lock into place profound economic reform.
Now, this agreement will bring significant benefits to U.S.
exporters, workers, investors, farmers, and ranchers. There are
two important dimensions in which it will help to level the
playing field.
First of all is with respect to competition with Morocco
itself in Morocco. Currently, U.S. products entering Morocco
face an average tariff of more than 20 percent; whereas,
Moroccan products coming into the United States have average
duties of only 4 percent. Under this agreement, more than 95
percent of our two-way trade in consumer and industrial
products will become duty-free upon entry into force.
The second way in which this agreement levels the playing
field is vis-a-vis other competitors into the Moroccan market,
particularly the EU, and this agreement will level the playing
field and even give us preferential access vis-a-vis those
competitors.
Just to give you some examples, in the agricultural area,
which is so important, here we had to strike a balance between
their development needs and our free trade objectives. Our beef
and poultry producers will get new access to a market that
formerly was closed to them. Tariff rate quotas (TRQs) for
wheat, durum and common wheat, could lead to a five-fold
increase in our exports of wheat. Other agricultural products,
fruits and vegetables, nuts, corn, and corn products, also will
benefit from the improved access in this agreement.
We have also achieved significant market access
improvements in services, important services for us--financial
services, audiovisual, are very important, banking and finance,
telecommunications, and computer-related services.
The agreement also provides a high level of intellectual
property protection, including state-of-the-art protection for
digital products, for trademarks, and for patents. The
government procurement and customs chapters promote
transparency and efficiency and improved market access for us.
We have rules of origin provisions which will allow for the
possibility of counting the value of inputs from other free
trade partners in the region in determining whether goods will
receive preferential access in our market. This will facilitate
weaving together our bilateral agreements as we move forward
toward a more integrated, region-wide agreement as envisioned
by President Bush in the Middle East Free Trade Area
Initiative. This also can encourage more trade among the
countries within the region, and that is an important missing
ingredient in their own development.
The labor and environment provisions meet the objectives
set out by Congress by the Trade Act of 2002. Each chapter's
obligations are parts of the core text of the agreement. Each
party commits to enforcing its own law. This is enforceable
through the dispute settlement mechanism. Each government
commits to promote high levels of environmental protection, to
strive to ensure that its labor laws provide for labor
standards consistent with internationally recognized standards,
and that they will not weaken or reduce labor and environmental
laws to attract trade or investment. What I would particularly
like to emphasize in this regard is that this process has
spurred significant labor law reform in Morocco, which entered
into force a month ago and prior to this process had been
stymied for several years.
Further important elements of this agreement are its
transparency, public notification, and anti-bribery provisions.
This agreement also establishes investment protections that
will improve conditions for investment by U.S. companies, and
these provisions are fully consistent with trade promotion
authority (TPA).
In conclusion, the U.S.-Morocco FTA is a comprehensive,
well-structured agreement that will provide concrete benefits
for both Americans and Moroccans, and it will bolster our
broader policies toward the Middle East and North Africa. With
your guidance and support, we will continue to pursue the
Middle East Free Trade Area Initiative. Working together, we
feel confident that we can build a trading and investment
community with the Middle East and North Africa that will
stimulate growth, that will generate prosperity, and that will
promote democracy. Thank you very much, Mr. Chairman. I would
be happy to respond to your questions and your comments and
those of your colleagues.
[The statement of Mr. Allgeier follows:]
Statement of The Honorable Peter F. Allgeier, Deputy United States
Trade Representative
Mr. Chairman, Congressman Rangel, and Members of the Committee:
I would like to thank Chairman Thomas, Congressman Rangel, and
others on the Committee who work in such close partnership with us on
our free trade agreements. I am also grateful to Congressmen English
and Tanner, who have been extremely supportive of this agreement as co-
chairmen of the Morocco Congressional Caucus. I appreciate the
opportunity to discuss the U.S.-Morocco Free Trade Agreement (FTA) with
you now. I know that you share in our interest in expanding our trading
relationships with countries in North Africa and the Middle East.
The FTA with Morocco is an important element of U.S. policy in the
Middle East and North Africa. The FTA will help build economic,
political and social stability in Morocco, and signals to other
reforming countries in the region the benefits of pursuing market
liberalizing policies.
The Administration's trade agenda is a fundamental part of the
President's broader efforts to advance reform in North Africa and the
Middle East. In May 2003, President Bush announced our goal of creating
a U.S.-Middle East Free Trade Area by 2013. This trade agenda is one
element of a comprehensive approach to address the economic, social,
and political challenges facing the region and U.S. interests in the
area. In particular, our trade strategy is predicated on the idea that
sustained economic growth can best be brought to the region through
internally generated reforms and market-based, trade liberalizing
policies.
Our strategy toward developing countries--to engage them at their
levels of development, to provide them access to the U.S. market based
on reciprocity, and to require that they adopt high standards for trade
and investment--is working. In addition to our FTA with Morocco, we
completed an FTA with Jordan in 2000, concluded FTA negotiations with
Bahrain in May, and signed five additional Trade and Investment
Framework Agreements with countries in the region in the last year.
Important to our progress has been the strong desire among countries in
the region to conclude FTAs with the United States to benefit from more
certain market access for goods and services, and the high standards
for intellectual property, transparency, and anti-corruption that only
such agreements can provide.
Working in close partnership with Congress has been critical to our
successes to date. The Trade Act of 2002 has put in place procedures
that make it possible to negotiate the types of agreements that not
only address the pressing need for engagement with such regions as the
Middle East and North Africa, but also bring real benefits to American
workers and the U.S. economy and bolster economic and social reform in
our partner countries.
The FTA with Morocco is illustrative of these positive developments
in our trade agenda in the region. As Ambassador Zoellick has noted,
``our agreement with Morocco is not just a single announcement, but a
vital step in creating a mosaic of U.S. free trade agreements across
the Middle East and North Africa.'' Under the courageous leadership of
King Mohammed VI, Morocco has made legally binding commitments to
liberalize trade with the United States. With this Agreement, Morocco
has signaled its serious intention to pursue and, lock in place
profound economic reform.
THE AGREEMENT
This Agreement will result in significant benefits for U.S.
exporters, workers, investors, farmers and ranchers. Morocco is an
emerging market at the crossroads of Europe, Africa and the Middle
East. It imports $11.6 billion in products each year. Currently,
however, U.S. products entering Morocco face average tariffs of more
than 20 percent, while Moroccan products are subject to average duties
of only 4 percent in the United States. Under this Agreement, more than
95 percent of two-way trade in consumer and industrial products will
become duty-free immediately upon the Agreement's entry into force,
with all remaining tariffs on currently traded products to be
eliminated within nine years, making this the best market access
package of any U.S. free trade agreement signed with a developing
country. This Agreement will also serve to level the playing field for
U.S. companies vis-a-vis their EU competitors.
Negotiating market access for agricultural goods was a significant
challenge. Ultimately, negotiators from both sides were able to craft
an agreement that balances Morocco's development needs and our free
trade principles. U.S. access to the Moroccan market has been enhanced,
while complementing Morocco's agriculture reform efforts, and taking
into consideration the importance of economic and social stability in a
sector of the economy that employs an estimated 44 percent of the
population. Our beef and poultry producers will get new access to a
market that was formerly closed to them. Tariff rate quotas for durum
and common wheat could lead to five-fold increases in U.S. exports over
recent levels.
We also achieved significant market access in services sectors.
This will allow U.S. services providers to compete on a level playing
field with Moroccan companies. Under the Agreement, Morocco has made
broad commitments to create a wide array of new opportunities in its
services sector including banking, insurance, audio-visual,
telecommunications and computer-related services.
The Agreement provides for a high level of intellectual property
protection, consistent with the standards set in U.S. law. This
includes state-of-the-art protections for trademarks and digital
copyrights, expanded protection for patents and product approval
information and tough penalties for piracy and counterfeiting. Overall,
Morocco has committed to substantially enhance protection and
enforcement of intellectual property rights.
The government procurement and customs chapters of this agreement
will promote transparency and efficiency and improved access. The
Agreement establishes important obligations between the two countries,
such as prohibiting discrimination by government purchasers between
U.S. and Moroccan suppliers when making covered government purchases in
excess of agreed monetary thresholds.
The rules of origin provisions allow for the possibility of
counting the value of inputs from FTA partners in the region in
determining whether goods receive preferential tariff treatment. This
feature will facilitate the weaving together of our bilateral
agreements as we move to a more integrated, region-wide agreement. It
will also encourage trade among countries in the region, an important
but missing ingredient for the region's development.
The labor and environment provisions also meet the objectives set
out by Congress in the Trade Act of 2002. Each chapter's obligations
are parts of the core text of the Agreement. In both cases, each Party
commits to enforcing their own laws. This obligation is enforceable
through the Agreement's dispute settlement procedures. Moreover, each
government commits to promote high levels of environmental protection,
to strive to ensure that its labor laws provide for labor standards
consistent with internationally recognized labor principles, and to not
weaken or reduce labor and environmental laws to attract trade and
investment. Also notable are provisions calling for panel expertise in
the event of labor or environmental disputes, as well as an innovative
mechanism that allows for monetary assessments to induce a country to
address its labor or environmental problems. The Agreement also
establishes processes for further cooperation on labor and
environmental issues, building on already extensive cooperation in
these two areas.
Further important elements of this Agreement are its transparency,
public notification, and anti-bribery provisions. These provisions will
help to improve the business and investment environment in Morocco by
providing more certainty and predictability for firms and individuals
operating and investing there. In turn, by increasing the
attractiveness of doing business in Morocco, such provisions will allow
the Moroccan economy to realize the full potential for growth and
development that an FTA provides. The agreement also establishes
investment protections that will improve the conditions for investment
by U.S. companies and are fully consistent with TPA objectives.
The trade advisory committees have shown widespread support for
this Agreement. The most senior committee, the Advisory Committee for
Trade Policy and Negotiations, found the agreement ``to be strongly in
the U.S. interest and to be an incentive for additional bilateral and
regional agreements.'' Advisory committees on services, goods and
intellectual property also expressed broad support. These committees
highlighted the comprehensive nature of the Agreement and its rapid
elimination of tariffs on U.S. exports. Several committees identified
in particular the Agreements strong protection of intellectual property
rights, with the advisory committee on Intellectual Property Rights
saying that the Morocco FTA contains ``the most advanced IP chapter in
any FTA negotiated so far.'' Agricultural advisory committees voiced
broad support for the agreement as well. We recognize that the Labor
Advisory Committee has concerns about all FTAs that relate to the
Committee's assessment of this Agreement. The U.S.-Morocco FTA,
however, fully meets the guidance that the Congress gave us in the
Trade Act of 2002.
CONCLUSION
The U.S.-Morocco FTA is a comprehensive, well-structured agreement
that will provide concrete benefits for both Americans and Moroccans.
The Agreement is an essential building block not only for Morocco's
economic and structural reform effort, but also for the
Administration's goal of building a more market-oriented, liberalized
economic regime in the Middle East and North Africa. In addition,
progress made bilaterally and regionally will support our global trade
agenda and complement our efforts in the Doha round of negotiations.
This Agreement sets a benchmark of high quality for other potential
FTAs in the region. It demonstrates that it is possible to tackle
successfully some of the most contentious issues facing trade with
developing countries, such as agriculture, and that agreements
benefiting both sides can be reached. To ensure that this Agreement
meets the high expectations we have for it, the Administration has
refocused its assistance program with Morocco to help ensure the
Agreement generates the benefits both sides expect. U.S. assistance
will focus on helping the Moroccans to meet their FTA obligations,
stimulate business development, and promote economic reform.
With your guidance and support, we will continue to pursue the
Middle East Free Trade Area initiative. Working together, we feel
confident that we can build a trading and investment community with the
Middle East and North Africa that will stimulate growth, generate
prosperity, and promote democracy.
Chairman THOMAS. Thank you very much, Mr. Allgeier.
Although there were questions in the initial statement, I will
be recognizing Members, and they can restate their questions at
that time. First I will recognize the gentleman from Illinois,
Mr. Crane.
Mr. CRANE. Thank you, Mr. Chairman. This agreement creates
a TRQ for textile and apparel products, the first time we have
used TRQs for anything except agricultural products. I
understand that the quotas are large enough to cover current
trade so they will not provide a limitation in this case, but I
am concerned about the precedent that could be set by this
provision. Can you describe the unique circumstances that made
the use of TRQs appropriate here and provide assurances that
this provision is unlikely to be used again?
Mr. ALLGEIER. Yes, we certainly do see it as a unique
situation here, which I will describe in a minute, and it is
not our intention to replicate this in future agreements. The
situation we faced is we wanted to liberalize trade in both
directions for textile and apparel as quickly as possible. The
Moroccans were concerned that because of commitments they have,
most-favored-nation commitments to the EU, if they opened up
immediately for us, it would result in a flood of imports from
the EU. So, we devised this system of these TRQs as a way of
opening up trade to a certain degree in various products
immediately, and then dealing with this Moroccan problem, and
then maintaining the TPA responsibilities of reciprocity. So,
that was the balance we tried to achieve, and we think it is a
unique situation here.
Mr. CRANE. While the Chile and Singapore agreements were
clearly used as models for this FTA, the agreement does contain
differences. Are there any new provisions in this FTA which are
not in the Chile and Singapore agreements that you believe are
beneficial and should be carried over into future FTAs?
Mr. ALLGEIER. We believe that the standards that we are
achieving in this agreement are comparable to those in
Singapore and Chile, which is very significant given the
different development levels. Obviously, we have had to
customize certain elements for the Moroccan situation,
particularly transitions, but basically we have achieved the
same sorts of objectives, and there are no radical new
innovations in this agreement that we would be carrying over to
other agreements.
Mr. CRANE. This agreement will provide immediate duty-free
access to 95 percent of current trade, making it the strongest
agreement we have signed to date with a developing country. Do
you believe expeditious action by the Congress will spark
interest by other countries in the region to reform their
economies as a step toward closer trade and economic relations
with the United States?
Mr. ALLGEIER. Absolutely. We believe that having a
permanent preferential comprehensive trade agreement with the
United States is a very powerful incentive for countries to
make the sorts of reforms that we are seeking. Several
countries in the region have already approached us. I think
that Chairman Thomas identified those about the possibility of
free trade agreements in the future. Obviously, they are
looking very closely to see if we can get this agreement
through our Congress expeditiously.
Mr. CRANE. Thank you, Mr. Allgeier.
Chairman THOMAS. Thank you. Does the gentleman from New
York wish to inquire?
Mr. RANGEL. Thank you, Mr. Chairman. Thank you again, Mr.
Ambassador. We all are proud of our friendship with Morocco,
and they certainly did not need us to improve the quality of
their labor standards. We all have to feel proud as to the
improvements that they have made as it relates to violation of
child labor laws and moving toward ILO. Could you tell me in
this short period of time why there is such a resistance from
your office in advocating the adoption of ILO standards in
these trade agreements?
Mr. ALLGEIER. Well, looking at this particular agreement,
we see that Moroccan law largely is consistent with ILO
standards and is moving in that direction. So----
Mr. RANGEL. Please, let me beg to--I hate doing this, but I
have got a Chairman that is so strict with the time, and I do
not want to get him annoyed. I know what you are saying is
true, and that is why there is no resistance. They are moving
hard toward it. My question was just simple. Why is there such
resistance to including in the agreement incentives that we
would help them to abide by the minimum ILO standards? Why do
you resist that when sometimes the countries do not resist it?
Mr. ALLGEIER. Well, certainly in the case of Morocco, I do
not think that either we or the Moroccans are resisting it. We
are working together to achieve a standard of treatment that
both of us seek, and the U.S. Department of Labor has programs
of cooperation with Morocco to help them, for example,
implement their new labor code.
Mr. RANGEL. I will have to find a better way to frame my
question. Maybe I will go to U.S. Department of State school
and learn how diplomats talk about these things. If you really
want bipartisan agreement, you would try desperately hard to
try to understand what we are trying to say to you in non-
diplomatic but very political language.
Chairman THOMAS. The Chair appreciates the gentleman from
New York not taking the full time. Does the gentleman from
Louisiana wish to inquire?
Mr. MCCRERY. Yes, thank you, Mr. Chairman. Just briefly. I
am just curious. You have stated that 95 percent of all
consumer and industrial products will be duty-free when this
agreement goes into effect. What percentage of products now are
duty-free? So, I can get some idea of the improvement in that
that this agreement will make.
Mr. ALLGEIER. Most of Morocco's products coming into the
United States are duty-free because they benefit under the
Generalized System of Preferences (GSP). We will have to get
you the exact number for the percentage of U.S. products that
are duty-free into Morocco at this time. As I mentioned, the
average tariff we face in Morocco is 20 percent, so it is quite
significant improvement of an access for us. We will get you
the precise number.
Mr. MCCRERY. Okay. Thank you. Thank you, Mr. Chairman.
Chairman THOMAS. Thank you. The gentleman from Michigan,
Mr. Levin.
Mr. LEVIN. Thank you, Mr. Ambassador. So, let's start with
medicines, and then I want to follow up on Mr. Rangel's
question. Maybe he would yield me an extra minute or two. There
was an article in the Wall Street Journal just yesterday, and
it starts off this way under the headline, ``In New Trade Pacts
U.S. Seeks to Limit Reach of Generic Drugs. As public health
groups urge wider use of generic drugs to lower the cost of
treating Advanced Immune Deficiency Syndrome (AIDS) and other
diseases in developing countries, U.S. trade negotiators,
prodded by the drug industry, are taking the opposite stance in
new trade pacts, seeking to strengthen protections for costlier
brand name drugs.'' So, I ask you, regarding the 5-year rule in
terms of the use of test data, if Morocco decided not to abide
by that--and I do not think it is in its law--does this
agreement in any way restrict Morocco in terms of how it
handles the sale of generic drugs in Morocco? If you can, as
much as you can, does it or does it not? Is there some
restriction?
Mr. ALLGEIER. Well, first of all, you are correct that
Moroccan law currently does not give the 5 years of data
protection that would be required under the Free Trade Area. In
all of these areas of intellectual property, we are trying to
bring countries to the practice and the standards that we have
in U.S. law, which, of course, is part of our TPA
responsibility. We feel, however, that certainly nothing in
this agreement restricts Morocco from dealing with genuine
health crises, as was envisioned in the Doha agreement and
subsequent agreements.
Mr. LEVIN. Tell me how that works. If the agreement has a
provision as to the use of data, doesn't that restrict Morocco?
Mr. ALLGEIER. Well, the restriction on data is that it does
restrict another company from relying on the originator's data.
Mr. LEVIN. Right. So, essentially this agreement would
restrict the flexibility of Morocco under its present law.
Mr. ALLGEIER. Well, I think it needs to be looked at in the
context of the other provisions in this agreement, including
the explicit recognition that nothing in this agreement
prevents Morocco from availing itself of the flexibilities that
we agreed on at Doha. So, for example, they could issue a
compulsory licensing to a producer if they needed a drug for a
health crisis.
Mr. LEVIN. Okay. Still, I think in terms of this provision,
the 5-year test data provision, this agreement does restrict
Morocco, does it not?
Mr. ALLGEIER. It does introduce a new obligation to Morocco
on not allowing countries to use someone else's test data for 5
years. That is literally correct.
Mr. LEVIN. Okay. I am not sure the compulsory license has
anything to do with this. It is important we speak plain
English to people. So, the answer is, forgetting--not
forgetting, but whatever the merits, it does restrict. I simply
suggest everybody read this Wall Street Journal article, which
is a rather lengthy one, in terms of what is our policy. It was
one thing to use it in Australia where it really was not going
to have any impact, or if it did, Australians could afford the
cost of other medicines. That is not necessarily true in
Morocco. The same is true, I think, in terms of parallel
importation. I do not have much time, so let me just say a word
about the labor provisions. Are you current as to where they
are in terms of reform of their laws?
Mr. ALLGEIER. Yes, sir.
Mr. LEVIN. Could you for the record give us your analysis
as to exactly where those reforms are and when they are likely
to be completed and the extent to which they will then comply
with basic ILO standards? If you could do that in the next few
days, because your answer to Mr. Rangel that you think the laws
are basically consistent, then his question becomes all the
more salient. Why don't you put the implementation of these
laws into trade agreements, enforceable, like everything else?
Here relating to intellectual property, we essentially are
requiring Morocco to abide by a provision that is not in their
law, to go beyond their present laws, while when it comes to
core labor standards we have a very different approach. We are
not even willing to put into agreements that they must carry
out basic ILO standards and name them. There is a basic
inconsistency here in terms of, I think, how we view economic
development mutually beneficial for all the people. My time is
up. If you will give us a current status of their labor reform
efforts, and if you can do that in a timely fashion, and then
we will engage in discussions informally, I hope on a
bipartisan basis, as to exactly where these reforms are. Okay?
Mr. ALLGEIER. Yes, we will provide that information,
Congressman.
Mr. LEVIN. Okay. Thank you.
Chairman THOMAS. Thank you. Does the gentlewoman from
Connecticut, Mrs. Johnson, wish to inquire?
Mrs. JOHNSON. Thank you. Mr. Allgeier, would you please
discuss in some detail the agreement between Europe and Morocco
since their trade is about 50 percent more than ours and the
preferential status--I assume that that is given Moroccan
products, a preferential status in the European market, and
vice versa--and how this trade agreement will or will not put
American products on an equal footing, a better footing, or a
less good footing?
Mr. ALLGEIER. Yes, the arrangement between Morocco and the
EU is a time-bound one that is renegotiated every 5 years. It
is not as comprehensive as our agreement either in product
coverage--it does not include all products, for example--and it
is not as comprehensive in terms of the other disciplines that
we have in our free trade area, including things like
intellectual property and those sorts of investments in those
sorts of disciplines. So, we are looking here at a much more
comprehensive agreement than the partial preferential
arrangements that the Europeans have.
Mrs. JOHNSON. Thank you. I have one other question, but
that is very important because since Europe has been so active
in the bilateral area and through it has actually been able to
sell a lot more to other countries, it is high time that we
develop these agreements to put our products on an equal
footing and to have the kind of comprehensive agreement that
isn't just about product trade but also about intellectual
property rights (IPR). Which product areas do you think will
enjoy the most dramatic and immediate benefit from this trade
agreement?
Mr. ALLGEIER. On the industrial side, we think that
information technology products, medical equipment, chemicals,
civil aircraft, construction equipment will be among those that
will benefit dramatically. In agriculture, I have already
mentioned beef and poultry, wheat, soybean products. We think
that fruits and vegetables, pistachios, almonds, apples, all
will be beneficiaries of this, and, of course, a number of our
services sectors, including audiovisual, financial, express
delivery. Then anybody who is bidding on government procurement
contracts in Morocco will benefit from this, to name a few.
Mrs. JOHNSON. Thank you. Thank you, Mr. Chairman.
Chairman THOMAS. Does the gentleman from New York wish to
inquire?
Mr. HOUGHTON. Thank you, Mr. Chairman. I don't know that I
want to inquire. I just want to congratulate you on this. I
think it is a great agreement. Here you have an economy that is
about 1 percent of what ours is and the population about 10
percent. We have got a trade surplus with them. We have got new
labor reform measures which would kick in really by the FTA,
having been stalled for 20 years. You have got enforcement of
domestic labor and environmental laws, and also we have got a
great dispute settlement procedure. What is wrong with this?
What is the weak part of it? I think it is a great agreement.
Mr. ALLGEIER. I think the weak part of it is that we do not
have more of them with other countries.
Mr. HOUGHTON. Do you want to break that down a little bit?
Mr. ALLGEIER. Well, I do not mean it really in the sense of
being weak. I think that this is actually a good example of how
we can strike a mutually beneficial agreement with a developing
country, one that also has great importance to us
strategically, and that this is recognized in the region. We
have already discussed the fact that we have an agreement with
Bahrain, and there are a number of other countries that are
knocking on our door that are interested. They look at this
kind of agreement, and so they know exactly what it is that we
expect from such an agreement. I think that is a very important
aspect of this agreement.
Mr. HOUGHTON. Is there any one issue that might loom in the
future as something that you would be concerned about?
Mr. ALLGEIER. With respect to this agreement?
Mr. HOUGHTON. Yes.
Mr. ALLGEIER. No, I think we feel quite good about the
understanding that the Moroccans have of what is in the
agreement and of their seriousness in implementing it.
Mr. HOUGHTON. So, there isn't.
Mr. ALLGEIER. Correct.
Mr. HOUGHTON. Good. Thank you.
Chairman THOMAS. Does the gentleman from New York wish to
yield to the gentleman from New York briefly?
Mr. RANGEL. I just want to join in with you in thanking
USTR--I don't know whether I did that--and while I have this
brief moment, to thank you for putting together the AGOA
agreement with the cooperation of the Chair. Without his
leadership we would not have been able to do it, especially to
pass it on the suspension calendar. I wanted to take this
opportunity to say that both to the Chair and to the USTR.
Mr. ALLGEIER. Well, we very, very much appreciate it. That
was an extremely important accomplishment for us and for the
country.
Chairman THOMAS. If the gentleman would continue to yield,
I would like to thank the U.S. Senate for taking the House work
product and passing it. If we can encourage more of that, we
can move forward expeditiously. The one other thing about this
agreement, I would tell the gentleman from New York, is that in
this part of the world, they are not familiar with FTAs. They
have these neomercantilist agreements with the EU, and this
allows them to examine a far broader, more fundamental FTA. We
hope there will be additional comparisons with the deal they
are getting from the EU versus the deal they are getting from
the United States and we can move forward with what we believe
is a far more fundamental free trade working relationship. I
thank the gentleman for yielding. Does the gentleman from
Pennsylvania wish to inquire?
Mr. ENGLISH. Thank you, Mr. Chairman. I do. Ambassador, in
your testimony, you cite a statement by the Advisory Committee
on IPR indicating that the Morocco FTA contains the most
advanced intellectual property chapter in any FTA negotiated so
far. Briefly, could you comment on the significance of that in
terms of our broader trade policy?
Mr. ALLGEIER. Yes, I would be happy to, Mr. English. This
agreement does, in fact, have an extremely high standard for
intellectual property protection across the range of our
intellectual property areas. In terms of copyrighted works,
they will join the various World Intellectual Property
Organization (WIPO) Internet treaties. There also will be
protection for copyrighted works for extended terms that will
make it consistent with international standards. The government
will use only legitimate computer software. This agreement
requires them to adhere to standards that are basically
equivalent to our Digital Millennium Copyright Act. This is a
very important example for other countries of what is good
intellectual property protection and what is achievable for a
country that is at the status of Morocco.
Mr. ENGLISH. Ambassador, I represent a manufacturing
district, and many of my manufacturers are reluctant to sell
their products in the developing world for fear that their
patented products will eventually lead to knock-offs and unfair
competition that they will have no control over. What does this
do to speak to their concern?
Mr. ALLGEIER. This agreement has very strong provisions on
enforcement, and in most countries, the types of problems that
your constituents are facing are a result of weak enforcement,
not so much poor laws. So, this streamlines the rules for
bringing copyright and trademark claims--trademark claims being
very important for manufacturers--and effective remedies are
also included in this agreement.
Mr. ENGLISH. Now, many workers in my district are very
concerned when we negotiate these FTAs that we are entering
into a trade relationship with countries that do not have
state-of-the-art labor laws. We have heard already that Morocco
last month put into effect what I consider for the region to be
revolutionary labor laws. Speaking to those, can you tell me,
are Moroccan workers now guaranteed the fundamental right to
associate, strike, and bargain collectively?
Mr. ALLGEIER. Yes, they are. In fact, I should note that
the Moroccan constitution guarantees the right to strike. So,
the new labor law actually enhances that with appropriate
procedures and affirming various rights. I think that this is
certainly recognized. Previous USTR Mickey Kantor actually has
been very complimentary of this and said that the Moroccans
``have codified new labor rights and protections based on key
ILO conventions. Congress can make an important contribution by
approving the agreement this year.'' That is a quote from
Ambassador----
Mr. ENGLISH. From the Clinton Administration. Thank you.
Didn't the new labor code also raise the minimum employment
age, improve safety in the workplace, reduce the basic work
week, and provide for premium pay for overtime hours?
Specifically, on the minimum employment age, does this not
bring them into conformity with international standards?
Mr. ALLGEIER. That is my understanding. The law did raise
the minimum employment age from 12 to 15. As you pointed out,
it reduced the work week. It calls for a periodic review of the
minimum wage, on top of a 10-percent increase in the minimum
wage.
Mr. ENGLISH. On that point, are there any plans to increase
the minimum wage for Moroccan workers?
Mr. ALLGEIER. Yes, there will be a periodic review, the law
requires a periodic review of the Moroccan minimum wage to
determine if it needs to be modified or to be increased.
Mr. ENGLISH. Would these dramatic improvements in Moroccan
trade law be enforceable under the FTA? If so, how?
Mr. ALLGEIER. The FTA does require, subject to dispute
settlement, a country to enforce its own laws, and it cannot--
if there is a pattern of failure to enforce the law in a manner
that affects trade, that is something that is subject to the
dispute settlement provisions of this agreement, as is any
other violation of this agreement.
Mr. ENGLISH. Will the United States continue to provide
support to the Moroccan Government to further develop the
environment for workers and tools for enforcement of those
recently enacted changes? If so, how?
Mr. ALLGEIER. Yes, the Department of Labor has a number of
programs that support Morocco in this regard, and I should say
that a number of these programs are actually implemented by the
ILO.
Mr. ENGLISH. Thank you very much, Mr. Chairman.
Chairman THOMAS. I thank the gentleman. Does the gentleman
from Florida wish to inquire?
Mr. SHAW. Yes, Mr. Chairman. I passed and indicated that I
did not have any questions when you first called on me a few
minutes ago. However, with the comments regarding AGOA made by
my friend from New York, I thought it would be quite proper for
me to report to the Committee that I just returned from
Tanzania and looked at a factory which will be exporting to
Wal-Mart--it is a cut-and-sew shop--and saw what was going on
there. Tanzania is an extremely poor country. It has a very low
minimum wage. I saw 900 workers that I was privileged to
address, along with another Member of Congress, and saw their
attitude and their eagerness and pride in a job. I just want to
report back to the Committee that the only way that we are
going to even take part in raising the standards of living in
countries such as Tanzania is through trade. The comments were
made over and over: ``We want trade, not aid.'' This is the way
to fight poverty on a global scale, and I just wanted to tell
the Members of the Committee who supported this most important
legislation, which was, incidentally, just extended before the
July 4th break, that it is working and it is having the exact
results that all of us had hoped for. I yield back, Mr.
Chairman.
Chairman THOMAS. I thank the gentleman. Does the gentleman
from Washington, Mr. McDermott, wish to inquire?
Mr. MCDERMOTT. Thank you, Mr. Chairman. Mr. Deputy, there
has been disputed territory between Morocco and some of their
neighbors. Does this agreement cover the territory that is
disputed?
Mr. ALLGEIER. This agreement, like all trade agreements,
deals with the customs territory of the other country, and so
however that is defined that they exercise responsibility over,
that is the territory that would be covered by this agreement.
Mr. MCDERMOTT. So, if products come from the territory that
is disputed, as long as it is coming through the Moroccan
customs system, you do not make any distinction?
Mr. ALLGEIER. Well, this agreement does not change our
policy with respect to the Western Sahara.
Mr. MCDERMOTT. That is?
Mr. ALLGEIER. That is that that is not part of Morocco. It
is not part of the customs area of Morocco.
Mr. MCDERMOTT. So, you are on the side of Morocco--or on
the side of the Western Sahara in that dispute?
Mr. ALLGEIER. No. We are simply saying that the current
customs territory of Morocco, which does not include the
Western Sahara, is what is covered by this agreement, and
products would have to originate within that customs area,
within that customs territory.
Mr. MCDERMOTT. Does it say that in the agreement anywhere?
Mr. ALLGEIER. There is not a specific definition of the
territory within the Moroccan agreement and, therefore, it does
not change the current recognition that our Customs Service
gives to the territory of Morocco. So, the existing territory,
not the disputed territory, is what is current practice and
remains the practice within this agreement, as far as----
Mr. MCDERMOTT. You are saying that the definition is
grandfathered in from other agreements previously made.
Mr. ALLGEIER. From our current practice and our current
policy of recognition, yes.
Mr. MCDERMOTT. Okay. How specific is this agreement around
the issue of currency control? Can the Moroccan Government do
anything to prevent the outflow of currency?
Mr. ALLGEIER. There are not restrictions on transfers. This
is a carryover from our bilateral investment treaty with
Morocco. This is carried forward into the chapter on investment
in the Free Trade Area because the chapter on investment in the
Free Trade Area will supersede, with the proper transition, the
bilateral investment treaty. So, there are not provisions for
capital controls and restrictions on transfers.
Mr. MCDERMOTT. In this agreement?
Mr. ALLGEIER. Correct.
Mr. MCDERMOTT. Now, are there restrictions in other
agreements with them?
Mr. ALLGEIER. Not that I am aware. We will double-check
that, but I am not aware that there are other restrictions.
Mr. MCDERMOTT. Because it was an issue, it has been an
issue in a lot of these trade agreements recently, Singapore
and others, and I wondered how you dealt with that issue here.
Or do you have a general policy to try and remove restrictions
or allow the free flow of capital wherever it goes?
Mr. ALLGEIER. It has been a longstanding policy of ours in
the bilateral investment treaties that we negotiate that there
should be free transfers for U.S. investors. So, we seek both
in our bilateral investment treaties and in the investment
chapters of Free Trade Areas to maintain that policy as much as
possible, and I think we have a good track record for doing
that.
Mr. MCDERMOTT. Because it seems to me that one of the
things that we ought to be worried about, or at least I
consider, is the whole question of what happened in the East
Asia crisis, where you had the value of the rupiah in Indonesia
just went from where it was to nowhere and crushed that
economy, and it happened in Thailand and it happened in several
of those countries, in part because they had absolutely no
ability to stop the outflow. I wondered if that was something--
and you are saying it is something that we put into our
agreements that we do not want anything to stand in the way of
Americans to be able to pull their money out of these countries
if there is any kind of problem that develops.
Mr. ALLGEIER. Yes, we are trying to protect the investments
of U.S. citizens in these countries. Obviously, questions of
what macroeconomic policies these countries follow have a
greater impact on what the value of their currency is or what
their capital flow situation is than the transfer provisions of
our investment chapters. At least that is our feeling.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Chairman THOMAS. Does the gentleman from California, Mr.
Herger, wish to inquire?
Mr. HERGER. Yes, thank you very much, Mr. Chairman, and
thank you, Mr. Ambassador, for the work you have done on this
very important trade agreement. I represent a very rich
agricultural area with a number of specialty crops in Northern
California in the Sacramento Valley, and I want to thank you
for the strong rules of origin on Moroccan olives included in
this agreement. Early on, some California olive growers were
concerned about subsidized Spanish olives being packaged in
Morocco and resold in the United States duty-free. My
understanding is that the rules of origin in the agreement
require Moroccan olives covered under this agreement to be
grown in Morocco. So, I appreciate your commitment to fair
trade on this particular issue. I also appreciate the strong
IPR protection included in this agreement. They are very
important to the California high-tech economy, so I thank you
on both these fronts. A question I have is one that was alluded
to, I believe, just a little earlier, but does the fact that
our FTA with Morocco covers agricultural products while the
Moroccan Association Agreement with the EU does not give our
producers a competitive advantage in the Moroccan market?
Mr. ALLGEIER. Yes, first of all, let me confirm that you
accurately described the rule of origin that we are using for
olives and for a number of other agricultural products to
ensure that there is not transshipment of products from outside
of Morocco. In terms of where we have, we think, particular
benefits vis-a-vis European competition in Morocco--in the area
of beef and poultry, for example--they are restricted to
selling to the military market there, and we now have openings
to the domestic market for those products. Also soybeans is
another area where we have those sorts of advantages. So, there
would be a number of products where we have an advantage over
the Europeans in the agricultural area.
Mr. HERGER. Again, thank you very much, Mr. Ambassador.
Fair and free trade as we are experiencing in this agreement is
so crucially important. The fact that I believe we have such
overwhelming support, bipartisan support from the Congress
indicates what a great job the Administration has done in this
area. I want to encourage you to continue this work with other
countries that we need the same agreements with. Thank you very
much.
Mr. ALLGEIER. Thank you, Mr. Congressman.
Chairman THOMAS. Does the gentlewoman from Washington wish
to inquire?
Ms. DUNN. Thank you very much, Mr. Chairman. Thank you for
being with us today, Mr. Allgeier. I want to congratulate the
USTR for doing a great job on this agreement. It is one that we
are all excited about, and I have, along with Mr. English, been
a couple of times in Morocco, most recently a few weeks ago. I
think we are all eager to begin to do increasing business with
that nation. I am a particular advocate for compliance with
intellectual property rights, and I would like to ask you--and
excuse me if this question has been asked. I had to leave the
room in order to meet with some constituents. Can you please
expand for us on how the United States-Morocco FTA better
protects IPR, both in compliance but also in enforcement?
Mr. ALLGEIER. Yes, I would be happy to. Really, it is a
very comprehensive chapter on intellectual property in that it
covers patents, trademarks, copyright issues, and basically
brings the Moroccan practice and law up to the sort of
standards that we have here in the United States. You mentioned
enforcement. Here there are streamlined procedural rules for
people bringing copyright and trademark claims. There are
effective remedies, which include statutory damages, and
enforcement officials may act on their own authority in border
cases and criminal IPR cases. So, they do not even have to wait
for a particular petition to be brought to them. They do not
have to have a formal complaint. So, we believe that both at
the level of the law and at the level of enforcement, this
agreement moves Morocco forward on intellectual property and
obviously then protection for our intellectual property works,
which are so important for us. If there are particular parts of
intellectual property that you would like more details, we
would be happy to provide those to you.
Ms. DUNN. Thank you very much. I think in general, but
particularly in the area of software. Thanks, Mr. Chairman.
Chairman THOMAS. Thank you. Does the gentleman from
California, Mr. Becerra, wish to inquire?
Mr. BECERRA. Thank you, Mr. Chairman. Ambassador, thank you
for coming and good to see you again. Let me follow up on some
of the questions that were asked by my colleague from
Washington regarding intellectual property. Give me a sense of
what the laws are currently for Morocco and what we have done,
because my understanding is that this agreement is very similar
to the agreements that we have with Chile, Singapore, and now
hopefully in the future with Australia. Give me a sense of
where Morocco is today with regard to intellectual property in
terms of its laws, its norms, and how it differs from what the
trade agreement would provide.
Mr. ALLGEIER. Yes, I would be happy to. Well, there are a
number of areas in which Morocco has not acceded yet to
important intellectual property treaties, and they will do so
as a result of this agreement. For example, in the area of
copyrights, there are the WIPO Internet treaties. This
obviously is a very, very important area for our industry. This
will extend the term of protection for copyrighted works in
Morocco. On the trademark side, they will accede to the
trademark law treaty, and this agreement also ensures that they
will have an appropriate procedure for the settlement of domain
name disputes, again, dealing with the Internet. These elements
have been established in the uniform domain name dispute
resolution policy. On copyrights, the copyright owner will
maintain the rights to temporary copies of their works on
computers. This is an important area in dealing with piracy in
digital works. The terms of protection for copyrighted works
and for phonograms will be extended, and the government can use
only legitimate software. Also, there will be protection for
encrypted programs that are brought through satellite signals.
So, all of these new technologies are areas that have not been
protected to date and will be protected under this agreement.
Mr. BECERRA. Ambassador, do we have any sense of how they
are going to implement these changes? Are they providing
additional resources to their relevant agencies to try to now
enforce these heightened standards under intellectual property
norms?
Mr. ALLGEIER. Well, obviously they will have to allocate
additional resources, but also we are working with them----
Mr. BECERRA. Have they made a commitment to do so?
Mr. ALLGEIER. Yes, they have. Also, we are working with
them through technical assistance, because some of these things
are rather sophisticated----
Mr. BECERRA. Our Patent Office will be working, in fact,
has been working with them in the past.
Mr. ALLGEIER. Well, it would be patent and copyright, and
also we expect that the private sector will also be helping
them.
Mr. BECERRA. Now, let me turn to the labor area. I know
that Morocco has recently amended its laws, domestic laws, to
try to bring it closer to the ILO standards, the more
internationally accepted standards for acceptable labor
practices. They did not include all of the different ILO
standards. We pushed very hard--and I know this has been asked
by some of my colleagues previously, but we pushed very hard to
make sure that our intellectual property was protected, and
rightfully so. Morocco, as any other country, should abide by
the international standards through the treaties that we have
in place and so forth.
Why would we not also push Morocco--if it is already making
strides to try to improve its labor practices, why would we not
want to do what you said just a minute ago in reference to a
question posed by the gentlelady from Washington, Ms. Dunn,
where you mentioned that the agreement brings Morocco's
standards and laws to the standards that we have here in the
U.S. with regard to intellectual property. Why would we not
want to try to push Morocco, not perhaps to have our standards
when it comes to labor, because we have higher wages, a higher
standard of living and so forth, but at least push them to at
least meet the minimum standards that are recognized
internationally and not allow them to meet some but not others?
Mr. ALLGEIER. First of all, I think that we certainly did
use the influence of this FTA to encourage the passage of this
labor reform law in Morocco, which is a very significant----
Mr. BECERRA. It seems that we are able to succeed in
getting real significant changes in their domestic law to IPR,
which is important and good, but we did not really push them to
do what they could have done with regard to basic labor
standards, not our standards but basic labor standards.
Mr. ALLGEIER. Well, we think that actually the new labor
law does include the ILO standards. Substantively, it includes
those ILO standards.
Mr. BECERRA. The right to strike?
Mr. ALLGEIER. Yes. Well, they have had a right to strike
within their constitution. What they are working on now are
some of the extra, additional procedural elements in the right
to strike, but they do have the right of strike and they do
exercise it.
Mr. BECERRA. I appreciate your time. Thank you, Mr.
Chairman.
Mr. ALLGEIER. Thank you.
Chairman THOMAS. Thank you. Does the gentleman from
Illinois, Mr. Weller, wish to inquire?
Mr. WELLER. Thank you, Mr. Chairman. Good morning,
Ambassador. I appreciate you being before the Committee, and
like my colleagues, I want to congratulate you, President Bush,
Ambassador Zoellick, and all of you on the progress you are
making on expanding opportunities for expanded trade for
Illinois manufacturers and Illinois farmers with the agreements
you are moving forward. I look back when I served in the 1990s,
we sat on the sidelines when it came to expanding trade
opportunities, and in the last 4 years, under President Bush
and Ambassador Zoellick, we have been very aggressively working
to open up new opportunities. This Moroccan agreement, like the
Dominican and Central American agreement, the Australia
agreement, continue to break down barriers and open up markets
for Illinois farmers and Illinois manufacturers, and for that I
want to commend you and particularly Ambassador Zoellick for
the work that the Office of the USTR is doing.
Morocco is a good friend of ours. They have been a partner
and ally in so many areas, and right now we do about $475
million in exports to Morocco from the United States. There is
tremendous opportunity for more of this agreement. I believe
with your good work it is going to give us that opportunity.
I would note, because we are playing catch-up with our
European competition, that they do twice as much business with
Morocco as we do. My hope is this agreement will expand our
opportunities. From the standpoint of agriculture and the
standpoint particularly of small manufacturing, which are major
components of the economy that I represent, my district is
heavily dependent on export. I was wondering, can you just walk
us through the impact, particularly on corn, soybeans, and
beef, of this Moroccan trade agreement?
Mr. ALLGEIER. Yes, I would be happy to do that. On beef, as
I said previously, we really did not have access to that market
before. Now there will be basically two segments of the market
that we will have access to: first of all, high-quality beef,
and there is a TRQ that will expand, that will allow us to sell
this beef in restaurants and hotels and so forth; but then also
there is a similar provision for standard-quality beef. So,
this will open up that market there, and it is a growing TRQ,
and the tariff within the quota will be eliminated. You also
asked about, I believe, soybeans and on soybeans and soy
products, that also will be--it will eliminate immediately
their tariff on soybeans, and they will also be eliminating the
tariff, very high tariff--72 percent, 75 percent--on high-value
soybean meal used in human feed. So, the soybean area and other
oilseeds and products also will be opened up by this agreement.
Mr. WELLER. How about corn?
Mr. ALLGEIER. Corn, yes, corn also will be opened up, corn
and corn products. There is a high tariff on corn. Their tariff
on corn now is 35 percent, and its tariffs on corn products
such as flour, meal, and flakes, is as high as 60 percent. So,
these tariffs will be reduced by 50 percent in the first year,
and then they will be eliminated over the next 5 years in equal
annual reductions.
Mr. WELLER. So, it appears that if you are an Illinois corn
farmer or raise soybeans or beef, you are a big winner under
this agreement compared to the status quo.
Mr. ALLGEIER. We expect that. Yes, sir.
Mr. WELLER. You know, Illinois is, of course, a major
manufacturing State. We often think of heavy construction
equipment and other major manufacturers, but also there are a
lot of small manufacturers. When it comes to market access for
particularly our smaller manufacturers and smaller businesses,
what kind of opportunities do you see resulting from this
agreement for them?
Mr. ALLGEIER. Well, certainly there will be the elimination
of the tariffs, but I think particularly for smaller exporters,
what is very important are the customs procedures that the
country has, and whether these customs procedures are
transparent, whether they are simple, whether they are reliable
and that there is not any sort of under-the-table payments that
have to be made to get your products through, this is a very
difficult situation for small exporters. They cannot cope with
that if they do not have these sorts of protections, and that
is a very important element here in this agreement.
Mr. WELLER. Thank you, Ambassador. Again, congratulations.
I look forward to working with you toward ratification.
Mr. ALLGEIER. Thank you.
Mr. WELLER. Thank you.
Chairman THOMAS. Does the gentleman from Wisconsin, Mr.
Ryan, wish to inquire?
Mr. RYAN. I do. Thank you, Chairman. I just wanted to get
through a couple of things. First of all, since my home State
of Wisconsin is one of the leading exporters to Morocco, I
think this is a big win for Wisconsin, especially what the
gentleman from Illinois said, corn, soybeans, manufacturing
products. Those are the big exports that we have, and the fact
that these tariffs are coming down such a great level so
quickly is very good. There is an untold story here that I
worry is not getting told, and that is the labor reforms that
have occurred as a result of this trade agreement.
Now, is it not true that Morocco was dealing with trying to
pass labor reforms for about 20 years and just could not get
off the ground? Is that not the case?
Mr. ALLGEIER. That is accurate.
Mr. RYAN. So, when this trade agreement came about, did it
not bring forward a whole new labor reform law that, if I am
correct, dealt with combating child labor, reduced the work
week from 48 to 44 hours, with overtime rates payable for
additional hours? Did it not call for periodic reviews of the
minimum wage, which is increasing by 10 percent in July, just a
few days ago? Does it deal with worker safety and health laws,
gender equity in the workplace? Does it promote employment for
the disabled? Does it guarantee rights of association and
guarantee collective bargaining? Does it prohibit employers
from taking actions against workers because they are union
members? Does it also guarantee the right to strike?
Mr. ALLGEIER. Yes, all of those elements that you
identified are part of the labor code reform that is now in
effect.
Mr. RYAN. That is a new reform code that came largely
because of this new free trade agreement with Morocco?
Mr. ALLGEIER. Yes. They were stuck for nearly 20 years, and
they do this through a tripartite arrangement of government,
business, and labor, and they succeeded, frankly, we think,
with the help and incentive of this agreement to pass and put
into place the labor reform that you just described.
Chairman THOMAS. Would the gentleman yield briefly?
Mr. RYAN. Yes.
Chairman THOMAS. To make sure the record is completely
accurate, my understanding is that the recent codification does
not include the right to strike. That is a guarantee in the
constitution, but it is not included in the recent
codification. Is that correct or not?
Mr. ALLGEIER. It is correct that it is in the constitution,
but what the new labor code did was strengthen the right to
strike, for example, by prohibiting the hiring of substitute
workers, prohibiting other practices.
Chairman THOMAS. Excellent. Thank you.
Mr. RYAN. What I think is important to note here is that as
we go to fulfilling the vision of AMEFTA for North Africa and
for the Middle East, what we are accomplishing is bringing
these developing countries into the First World, bringing up
their labor and environmental standards, bringing up their
transparency, bringing up the protection of intellectual
property. This is not only good for America and for American
jobs and consumers and for our exporters, but this is good for
our relationships that are so important with this part of the
world. So, I just want to commend you for that, and I just hope
that this story of how this agreement was a catalyst to rising
labor standards, to improving trade, and opening up new markets
for our products is a story that does not go on untold. With
that, I just want to yield. Thank you.
Chairman THOMAS. Does the gentleman from North Dakota wish
to inquire or perhaps get a piece of the Moroccan market?
Mr. POMEROY. We are very interested in the Moroccan market,
Mr. Chairman, and I would have a quick question in that regard.
Although there are many commodities potentially affected by the
trade agreement, the one that I would specifically direct my
questions to Mr. Ambassador involve sugar, specifically the net
exporter provision relative to future sugar that might come to
our country under preferential status from Morocco. We have
worked very closely with the U.S. Trade Representative's office
in other agreements as well to make certain that we suddenly
just don't have a passthrough that they send all their sugar
out and pull in sugar at a global dump price. So, is the
language very clear that, to the extent that there is any
special treatment for sugar under this agreement, it is only to
the extent that Morocco achieves a net exporter status?
Mr. ALLGEIER. Yes, sir, that is a precondition that they
would have to achieve net exporter status before they could
increase any sugar shipments to the United States.
Mr. POMEROY. Is that part of the 18-year transition period
or is that permanent, that is just how it goes?
Mr. ALLGEIER. I believe that it is permanent, that that is
a permanent requirement, a permanent precondition. It is not
just a transitional element.
Mr. POMEROY. I believe it is, too. How certain can we be on
this point, which is an important one, permanent versus 18-
year?
Mr. ALLGEIER. It is permanent.
Mr. POMEROY. Permanent is good. I yield back, Mr. Chairman.
Chairman THOMAS. I thank the gentleman. Do any other
Members wish to inquire of the Ambassador? I believe the
gentleman from Michigan had a parting----
Mr. LEVIN. Just quickly. You raised a point regarding the
labor provisions, and before I talk about that briefly, on the
capital controls provision, we should all look at that. I think
you know there is some basic concern among a number of us about
this provision. It was modified in the Chile agreement at the
insistence of Chile. I think we should be very careful before
we believe that this is something that on a cookie-cutter basis
should be placed into other agreements. Mr. McDermott has
raised some legitimate questions about it.
Secondly, on the labor standard issue, you are going to
send us material about the new reforms that are being
discussed, and hopefully implemented, because in answer to Mr.
English and then to Mr. Ryan, you said the right to strike is
protected. It is in the U.S. Constitution. In reality, it has
faced a number of problems, I think not only from the point of
view of workers but from the point of view of management. So,
let's not suggest that there is not further work that is being
done and that should be done to make the right to strike a
reality and consistent with ILO standards. The more some of my
colleagues talk about how much progress Morocco has made, the
more it raises the question: Why not have a provision in the
agreement requiring that the parties abide by basic ILO
standards? In a sense, the more progress Morocco has made, the
more it contrasts with other places where we have negotiated
trade agreements.
I want to finish--Mr. Weller is not here anymore, but we
have tried to put trade or continue it on a bipartisan basis.
It does not help, in fact, it hurts to talk about the 1990s as
this government sitting on the sidelines. It just is not true.
In the 1990s, CBI, AGOA, China PNTR, Cambodia, Jordan, Chile,
and Singapore were started. The World Trade Office agreement
was finalized in this institution. I am sorry Mr. Weller is not
here, but to try to talk about the 1990s as a period of sitting
on the sidelines is factually erroneous, and I think it is
harmful to any efforts to once again have a bipartisan
coalition on trade issues. Thank you, Mr. Chairman.
Chairman THOMAS. I thank the gentleman. Mr. Ambassador, we
want to thank you on behalf not only of this Committee and the
Congress but the United States in continuing to move forward
under the new agreement that we have in place after many long
years of not having an agreement through the 1980s and the
early 1990s and are now being able to make agreements around
the world. It was very difficult for all of us watching rather
than moving forward. This is on the whole an excellent
agreement, and we thank you for your efforts. It is this
Chairman's intention and goal to move this to the floor and off
of the floor prior to the Democratic National Convention. With
that, and thanking you, the Chair will call the next panel.
Chairman THOMAS. If David Mengebier, Senior Vice President
at CMS Energy Corporation, Jackson, Michigan, would come
forward; Jamal Belcaid, President of Yasmine Enterprises,
Denver, Colorado; David Hamod, President and Chief Executive
Officer, National U.S.-Arab Chamber of Commerce; Melika
Carroll, Trade Policy Director, Intel Corporation, Santa Clara,
California; and David Taliaferro, a farmer from Laneview,
Virginia, on behalf of the Wheat Export Trade Education
Committee, the National Association of Wheat Growers, and the
U.S. Wheat Associates.
It is the Chair's understanding that Mr. Taliaferro has
been in the South long enough to prefer ``Talifer'' to the
apparent pronunciation. We are going to have Mr. ``Talifer'' in
front of us, I would tell the gentleman from Illinois. If you
will turn your name tags around, you have been able to
determine where you sit by virtue of seeing your names, and now
the Committee would prefer to see them. I would ask, Mr.
Mengebier, if you will simply begin to address the Committee.
All of you have written statements which will be made a part of
the record. You have 5 minutes. You have a button that you need
to light up, and the Committee will then, if there are any
questions, inquire after each of you, beginning with Mr.
Mengebier and then moving across the panel, make your
statements. With that, welcome to the Committee.
STATEMENT OF DAVID MENGEBIER, SENIOR VICE PRESIDENT, CMS ENERGY
CORPORATION, JACKSON, MICHIGAN
Mr. MENGEBIER. Thank you, Mr. Chairman and Members of the
Committee, for the opportunity to testify today in support of
the U.S.-Morocco FTA. CMS Energy is an integrated energy
company headquartered in Jackson, Michigan. In Morocco, we
operate and are a 50-percent owner of the Jorf Lasfar power
plant, located in the province of El Jadida on the Atlantic
Coast. This 1,356-megawatt, $1.3 billion facility supplies
approximately 60 percent of daily demand for electricity and
represents the largest American investment in Morocco.
CMS is proud to serve as the corporate co-chair of the
U.S.-Morocco FTA Business Coalition. This coalition of nearly
100 companies and associations believes the FTA is a
comprehensive, high-standard agreement, and we urge its
approval by the Congress this summer. With your permission, Mr.
Chairman, I would like to insert into the record a short
background paper prepared by the FTA Coalition, along with its
membership list.
Mr. CRANE. [Presiding.] Without objection.
Mr. MENGEBIER. Thank you.
[The information was not received at the time of printing.]
The CMS has had experience building and operating energy
facilities in more than 20 countries. Our experience has taught
us that to succeed, these investments must be based on
partnerships with the host country that entail collaboration,
trust, and common vision. By these standards, our experience in
Morocco has been outstanding. Our working relationship with the
government and the Moroccan national utility has been one of
openness, transparency, and cooperation.
We have tried to reciprocate by working with our Moroccan
partners to strengthen the Moroccan economy and society. While
Morocco is not among the largest economies, its strategic
location, its commitment to economic reform, and its longtime
friendship with the United States are all factors that argue in
favor of an enhanced economic partnership.
The U.S. International Trade Commission (USITC) reported
last week that U.S. exports to Morocco are likely to increase
by $750 million and imports from Morocco by nearly $200 million
through the implementation of the FTA. Other benefits will
emerge that are not as easily quantified. United States
companies will bring new technology, best practices, and
vigorous corporate citizenship programs to their work in
Morocco. These contributions will highlight to Morocco the
benefits of doing business with U.S. firms and over time will
enable the United States to compete better with Europe, which
historically has played a disproportionate role in Morocco's
economy.
On the labor front, we employ more than 500 Moroccan
citizens to operate our power plant. These jobs include
management-level positions, pay fair wages and benefits, and
involved rigorous training and education programs. Morocco
still has major remaining infrastructure requirements, and the
FTA will enhance opportunities for U.S. companies to respond.
As they do, we fully expect they will bring a similar approach
to labor practices.
The labor situation took a significant step forward with
the adoption last year of a new labor code--a development that
many of us believe was driven in part by the FTA negotiations
with the United States. Implementation of the new code promises
to improve labor conditions further still and will bring
greater predictability and stability for employers and
investors.
Because electricity must be produced in proximity to its
market, I emphasize that we did not export a single job when we
made this investment. Instead, we created and are now
sustaining jobs in Michigan to deal with technical, financial,
legal, and other requirements. On top of that, some of our
current suppliers and lenders include companies from New York,
Virginia, Tennessee, California, Connecticut, the State of
Washington, Washington, D.C., New Jersey, and elsewhere. This
multiplier effect will be repeated as other U.S. companies come
to Morocco under the FTA.
Our experience likewise shows that investment and economic
growth can be managed in a way that advances the cause of
environmental protection. CMS has worked closely with the
Moroccan authorities and others to establish world-class
standards on water quality and emissions and to deploy state-
of-the-art pollution control technology and practices.
The FTA will have a positive and immediate impact on the
importation of U.S. goods and services we use at the plant. Our
facility is already operating, so the FTA will not affect
prices on the big ticket items imported during construction. On
an ongoing basis, we import about $10 million in goods and
services annually to operate and maintain our facility. About
80 percent of that currently comes from Europe since U.S. goods
and services are subject to as much as a 42-percent customs
duty. Once the FTA comes into effect, however, we anticipate we
could nearly triple the amount of goods and services we procure
from the United States. This is especially true with regard to
services, as the FTA includes specific coverage of energy
services and Morocco's trade agreement with the EU does not.
In closing, both CMS Energy and the U.S.-Morocco FTA
Coalition recognize that it will be a challenge for the
Congress to approve this agreement prior to the August recess.
We, nonetheless, believe it can and should be done. It is an
outstanding agreement, it is good for the United States, it
will advance the cause of economic progress, and it will help
an important friend in a key part of the world. Thank you.
[The statement of Mr. Mengebier follows:]
Statement of David Mengebier, Senior Vice President, CMS Energy
Corporation, Jackson, Michigan
Mr. Chairman, Members of the Committee, I thank you for the
opportunity to testify regarding the United States-Morocco Free Trade
Agreement (FTA).
By way of background, CMS Energy is an integrated energy company
headquartered in Jackson, Michigan. Most of our assets and operations
are located in Michigan, but we also have investments elsewhere in the
United States and in international markets. In Morocco, we operate and
are a 50% owner of the Jorf Lasfar power plant, located in the province
of El Jadida on the Atlantic Coast. This 1,356-megawatt, $1.3 billion
facility is the largest independent power project on the continent of
Africa and supplies approximately 60% of Morocco's daily demand for
electricity.
CMS Energy is an active member and honored to serve as the
corporate co-chair of the U.S.-Morocco Free Trade Agreement Coalition.
The Coalition is comprised of nearly 100 companies and associations,
all of whom support Congressional approval of the FTA. The coalition's
leadership also includes the other corporate co-chair, Time Warner, and
two outstanding Washington-based associations, the National Foreign
Trade Council and the Business Council for International Understanding.
The U.S.-Morocco FTA Coalition strongly supports the FTA and urges
its timely passage by the Congress this summer. The FTA is a high-
standard, comprehensive agreement that will eliminate tariff and non-
tariff barriers to trade for our manufacturing and agricultural
sectors, boost bilateral trade for our services sector, help to finance
new investment flows, and stimulate economic growth and opportunity in
the United States and Morocco. It will serve as an important building
block in the proposed Middle East Free Trade Area. It will deepen U.S.
ties with a country that recently was designated a major non-NATO ally
and is a steadfast partner in the war against terror. The FTA is a new
milestone in America's historic relationship with Morocco--the first
country to recognize the newly independent United States and a partner
in the longest unbroken treaty relationship in U.S. history.
With your permission, Mr. Chairman, I would like to insert into the
record a short background paper prepared by the Morocco FTA Coalition
and its membership list.
CMS Energy in Morocco
Over time, CMS has had investments or operations in as many as 22
countries. To succeed, these investments must be based on partnerships
that entail collaboration, trust and common vision. By these standards,
our experience in Morocco--where we are the largest American investor--
has been outstanding. When changes have been required in the legal,
regulatory or policy regime that governs our project, the needed
adjustments have been developed in a cooperative and transparent
fashion.
We have tried to reciprocate by establishing ourselves as good
corporate citizens and partners in Morocco's growth and development. In
practical terms, we have gone beyond the requirements of our contracts
in order to help strengthen the Moroccan economy and society. We have
assisted in the planning of a nearby industrial park and support local
efforts to establish the area as a regional hub for manufacturing,
training and exports. We provide charitable contributions, support
educational, social and health related causes, including adopting and
refurbishing several local schools and undertaking a substantial multi-
year commitment to the Moroccan Fulbright program. As a Michigan based
company, we are working to establish and expand links between Morocco
and the United States in the automotive sector, which we think holds
particular promise under the FTA.
Impact of the FTA
While Morocco is not among the world's largest economies, its
strategic location at the crossroads of Europe, Africa and the Middle
East, its fundamental commitment to economic liberalization, and its
longtime friendship with the United States are all factors that argue
in favor of an enhanced economic partnership. The proposed Free Trade
Agreement will increase levels of trade and investment from the United
States and will create jobs, promote exports, and increase revenues for
U.S. firms. It similarly will stimulate economic growth and development
in Morocco.
As you no doubt are aware, the U.S. International Trade Commission
reported last week that U.S. exports to Morocco are likely to increase
by $740 million and imports from Morocco by nearly $200 million through
implementation of the FTA. Other benefits will emerge that are not as
easily quantified. For instance, as U.S. companies establish themselves
in Morocco under the FTA, they, like CMS Energy, will bring new
technology, best practices, and vigorous corporate citizenship efforts.
This will improve further the investment climate, strengthen business
practices and standards, and highlight the benefits of establishing
business relationships with U.S. firms. As a result, America in time
will be better able to compete with Europe, which historically has
played a disproportionate role in Morocco's trade and investment
picture. In sum, the FTA promises to strengthen the U.S. and Moroccan
economies, improve U.S. competitiveness, and cement the bonds between
our governments, private sectors and peoples.
CMS Views of the FTA
We employ more than 500 Moroccan citizens to operate our facility.
Because electricity must be produced in proximity to its market, let me
underscore that we did not ``export'' one job when we made this
investment. Instead, the project created and now helps to sustain a
variety of jobs in the United States in order to deal with ongoing
management, technical, financial, legal and other business issues. On
top of that, some of our current suppliers and lenders are based in the
United States, so there is a multiplier effect that brings jobs not
only to Michigan, but also places such as New York, Virginia,
Tennessee, California, Connecticut, the State of Washington,
Washington, D.C., New Jersey, and elsewhere. This is a phenomenon that
will be replicated as other U.S. companies establish trade ties or make
investments pursuant to the FTA.
We have taken steps to ensure that the types of jobs that we have
created in Morocco include management level positions, pay fair wages
and benefits, and involve rigorous training and education programs. We
are more than pleased with the quality and sustainability of the work
force we have established in Morocco. Morocco still has major remaining
infrastructure requirements, including in the energy sector, and the
FTA will accelerate opportunities for U.S. companies to meet those
requirements. As they do, we fully expect that they will bring a
similar approach to employment and labor practices.
The labor situation took a significant step forward with the
adoption of a new labor code last year--a development that many believe
was driven in part by the FTA negotiations with the United States.
Implementation of the new code will improve labor conditions further
still, creating stability and predictability for employers and union
employees alike.
Our experience likewise shows that investment and economic growth
can be managed in a way that advances the cause of environmental
protection. CMS has worked closely with Moroccan authorities and other
parties to establish world-class standards on water quality and
emissions and to deploy state-of-the-art pollution control technology
and practices. We have developed major recycling programs, including an
innovative effort to recycle 85% of fly ash from the plant for use in
concrete production--with the remaining 15% deposited in a state-of-
the-art storage facility to be recycled at a later date. In addition,
we collaborate with local officials to implement strict environmental
training, education, compliance, monitoring, and reporting programs.
Our facility has operated for several years, so the FTA will not
affect prices on the major components and equipment that were brought
in for construction. That said, we import about $8 million in goods and
services from Europe and about $2 million from the United States
annually to operate and maintain the plant. Since goods and services
purchased from the U.S. are subject to as much as a 42% customs duty,
we anticipate that many of these will be procured more cheaply from the
United States once the FTA comes into effect. This is especially true
with regard to services, as the FTA includes specific coverage of
energy services and Morocco's trade agreement with the EU does not--
which gives an important advantage to U.S. energy and technical
services companies.
To conclude, on behalf of both CMS Energy and the U.S.-Morocco FTA
Coalition, I would like to urge swift Congressional approval of this
important agreement. We recognize that it will be a challenge for the
Congress to approve this agreement prior to the August recess. We
nonetheless believe it can and should be done and urge you in the
strongest possible terms to try to meet that challenge. It is an
excellent agreement, it is good for the United States, it will advance
the cause of economic progress, and it will help an important friend
and ally in a key part of the world.
Thank you.
Mr. CRANE. Thank you. Mr. Belcaid?
STATEMENT OF JAMAL BELCAID, YASMINE ENTERPRISES, INC., DENVER,
COLORADO
Mr. BELCAID. Chairman Thomas, Members of the Committee,
thank you for allowing me to testify on behalf of the passage
of the U.S.-Morocco FTA.
I am a small businessman, based in Colorado. My company,
Yasmine Enterprises, has supported the concept of a FTA between
the United States and Morocco from the beginning. We are a
member of the U.S.-Morocco FTA Coalition and strongly support
prompt passage of the U.S.-Morocco FTA this summer. The FTA
will create greater trade and investment opportunities for
businesses in both countries. It will also provide greater
opportunity for American small businesses to participate in a
marketplace that has long been dominated by European companies,
as well as providing greater protection to investors.
The benefit of this FTA is illustrated by my current
project in Morocco, a food can manufacturing plant in Agadir.
The project will create 500 jobs in the United States and 200
jobs in Morocco. Indirectly, it will create 2,500 jobs in
Morocco, which is in great need of finding employment
opportunities for its population. The project is very strategic
in that it will enable Morocco to be more competitive on an
international level, particularly in the European marketplace,
while utilizing U.S. technology and raw materials.
By far, the largest sector of the Moroccan economy is
agriculture and fish, accounting for over 40 percent of the
jobs in the country and 20 percent of Morocco's national
income. Growth and prosperity for this sector have suffered
from a shortage of high-quality food containers that are
reasonably priced. Agribusiness is Morocco's largest and most
important industry. In order for Morocco to expand its rate of
economic growth and create jobs for low-skilled workers, it
needs to increase the local processing of fruit, vegetable, and
seafood products to expand its share of European and world
markets for canned food, rather than exporting these products
in raw form. The Moroccan processors of fish and vegetables
need access to higher-quality and lower-priced canning.
Currently, Morocco imports approximately 400 million tin
cans from Europe per year, the majority of which come from
Spain. The presence of these imports and the willingness of
local food processors to pay premium prices to obtain them
reflects the poor quality, limited product range, and
unresponsive and monopolistic nature of the existing can
producers in Morocco. Moroccan food processors have already
expressed a strong interest in the introduction of a new can
plant that will eliminate the expense and delays of importing
cans from Europe and create a domestic alternative to the
obsolete and non-competitive existing can producers in Morocco.
To succeed, the plant does not need to take sales away from
Morocco's existing domestic can producers. Instead, the plant
only needs to replace imported cans from Europe and become the
preferred source of high-quality cans. Local processing will
increase, not only because of the new EU agreements, but also
because the new can plant will make Moroccan food processors
more competitive in international markets and thereby increase
their demand for cans.
The project has very strong potential for steel exportation
from the United States. It will also help other developing
African countries and demonstrate the effectiveness of closer
economic and trade ties with the United States. These countries
have the potential to better exploit their own food production
to the degree that, with high-quality canning, they can
actually improve their exports and compete on the European
market. This project is a transnational project that directly
benefits a specific country. As you know, many multinationals
are headquartered and produce in Europe. Their intention is to
sell their products to developing countries. Our project will
develop production within a country, allowing it to grow and
develop its own strength to effectively compete with the world
market.
I would like to stress one thing. Beyond the short-term
benefits of the FTA, the long-term benefits will be extremely
important to both countries, because economic stability will
grow in Morocco, developing greater employment opportunities
and creating overall social stability.
In conclusion, Mr. Chairman, this agreement is very
beneficial to the United States, to the canning industry, to
the steel industry, and to the small business. Yasmine
Enterprises strongly supports and urges quick passage of the
Morocco FTA, and I would be pleased to respond to any questions
you or other Members of the Committee may have. Thanks.
[The statement of Mr. Belcaid follows:]
Statement of Jamal Belcaid, President, Yasmine Enterprises, Inc.,
Denver, Colorado
Chairman Thomas, Members of the Committee, thank you for allowing
me to testify on behalf of the passage of the U.S.-Morocco Free Trade
Agreement.
I am a small businessman, based in Denver, Colorado. My company,
Yasmine Enterprises, has supported the concept of a Free Trade
Agreement between the United States and Morocco from the beginning. We
are a member of the U.S.-Morocco FTA Coalition and strongly support
prompt passage of the U.S.-Morocco FTA this summer. The FTA will create
greater trade and investment opportunities for business in both
countries. It will also provide greater opportunity for American small
businesses to participate in a marketplace that has long been dominated
by European companies, as well as providing greater protection to
investors.
The benefit of this Free Trade Agreement is illustrated by my
current project in Morocco, a food can manufacturing plant in Agadir,
Morocco. The project will create 500 jobs in the U.S. and 200 jobs in
Morocco, directly. Indirectly, it will create 2,500 jobs in Morocco,
which is in great need of finding employment opportunities for its
population. The project is very strategic, in that it will enable
Morocco to be more competitive on an international level, particularly
in the European marketplace, while utilizing U.S. technology and raw
materials.
By far, the largest sector of the Moroccan economy is agriculture
and fish, accounting for over 40% of the jobs in the country and 20% of
Morocco's national income. Growth and prosperity of this sector have
suffered from a shortage of high quality food containers that are
reasonably priced. Agribusiness is Morocco's largest and most important
industry. In order for Morocco to expand its rate of economic growth
and create jobs for low-skilled workers, it needs to increase the local
processing of fruit, vegetable and seafood products to expand its share
of European and world markets for canned food, rather than exporting
these products in raw form. The Moroccan processors of fish and
vegetables need access to higher quality and lower priced canning.
Currently, Morocco imports approximately 400 million tin cans from
Europe per year, the majority of which come from Spain. The presence of
these imports and the willingness of local food processors to pay
premium prices to obtain them reflects the poor quality, limited
product range, and unresponsive and monopolistic nature of the existing
can producers in Morocco, many of whom are closely tied to European
companies and financing. Moroccan food processors have already
expressed a strong interest in the introduction of a new can-making
plant that will eliminate the expense and delays of importing cans from
Europe and create a domestic alternative to the obsolete and non-
competitive existing can producers in Morocco.
The plant in Agadir will supply some 600 million cans per year, at
peak production. Up to 50% of the output will go to the local off-
takers who sponsor the project and hold an equity stake, while the
remainder will be sold to other domestic food processors and exported
to other North African countries, the Middle East and European Union.
To succeed, the plant does not need to take sales away from
Morocco's existing domestic can producers. Instead, the plant only
needs to replace imported cans from Europe, and become the preferred
source of high quality cans. Local processing will increase, not only
because of the new EU agreements, but also because the new can plant
will make Moroccan food processors more competitive in international
markets and thereby increase their demand for cans.
The project has very strong potential for steel exportation from
the U.S. It will also help other developing African countries, and
demonstrate the effectiveness of closer economic and trade ties with
the U.S. These countries have the potential to better exploit their own
food production to the degree, that with high quality canning, they can
actually improve their exports and compete on the European market. This
project is a trans-national project that directly benefits a specific
country. As you know, many multinationals are headquartered and produce
in Europe. Their intention is to sell their products to developing
countries. Our project will develop production within a country,
allowing it to grow and develop its own strength to effectively compete
with the world market.
The plant will benefit from a U.S.-Morocco Free Trade Agreement
because it will encourage the participation of high quality and highly
competitive U.S. suppliers of equipment, raw materials, technology and
services, as well as potential equity participation by U.S. venture
capitalists. If the plant is constructed with U.S. involvement, total
export potential for U.S. suppliers of goods and services could exceed
$34 million to build and equip the plant. In addition, U.S. exports of
tin plate and other raw materials and intermediate and replacement
products consumed by the plant could easily exceed $25 million
annually, meaning cumulative exports of over $150 million over a five
year period, and $750 million over the useful life of the plant.
Goods and services coming into Morocco from the United States will
be more competitive because of reduced tariff rates under the FTA. The
agreement will also result in improved customs procedures and will
establish a secure, predictable legal framework for U.S. investors.
All forms of investment will be protected under the FTA, and U.S.
investors will enjoy in almost all cases the right to establish,
acquire and operate investments in Morocco on an equal footing with
Moroccan investors, and with investors of others countries. Basically,
it assures that U.S. investors in Morocco receive all of the rights and
protections that Moroccan or other foreign investors already receive in
the United States.
I would like to stress one thing. Beyond the short-term benefits of
the FTA, the long term benefits will be extremely important to both
countries, because economic stability will grow in Morocco, developing
greater employment opportunities and creating overall social stability.
Obviously, the benefit to the U.S. is the growth in U.S. exports in a
region that has not been engaged in active trade with the U.S. Arab
countries receive only 1.2% of the world's direct investment. The U.S.
should be aggressively involved to promote stability and prosperity in
these countries.
In conclusion, Mr. Chairman, this agreement is very beneficial to
the United States, the canning industry, the steel industry and small
business. Yasmine Enterprises strongly supports and urges quick passage
of the Morocco FTA. I would be pleased to respond to any questions you
or other Members of the Committee may have.
Mr. CRANE. Thank you. Mr. Hamod?
STATEMENT OF DAVID HAMOD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL U.S.-ARAB CHAMBER OF COMMERCE
Mr. HAMOD. Mr. Chairman and Members of this distinguished
Committee, thank you for the opportunity to testify this
morning. My name is David Hamod, and I serve as President and
CEO of the National U.S.-Arab Chamber of Commerce.
Since its inception more than 35 years ago, our chamber has
been the preeminent organization for fostering trade and
investment between the United States and the Arab world. Our
special relationship with American Chambers of Commerce and the
national chambers of commerce in the 22 Arab nations places us
in a unique position as a nexus between East and West. This
morning, I will outline why our chamber believes that the U.S.-
Morocco FTA is good for America and good for Morocco. I will
also look at this agreement in the broader context of what it
may mean for the Arab world as a whole.
First, creating jobs for Americans. From our perspective,
this FTA will help to create a level playing field for U.S.
businesses and workers that have traditionally been excluded
from markets in Morocco and the region by America's European
trade competitors.
Second, supporting reform in Morocco. Morocco is undergoing
major economic reform, and the FTA is the centerpiece of this
reform effort. For Moroccans, the FTA translates into
opportunities for job creation in a nation whose 30 million
citizens face double-digit unemployment, particularly among the
youth. If it is true that ``hope begins with a paycheck,'' then
the U.S.-Morocco FTA promises to provide a way out of the
hopelessness that can fuel extremism and breed terrorism.
Third, enhancing market access. In our view, the U.S.-
Morocco FTA agreement ``raises the bar'' for trade and
investment rules that enhance market access. This agreement is
the best FTA market access package on industrial goods
negotiated thus far with a developing nation.
Fourth, complying with labor laws. Morocco used the
negotiation of the FTA to bring about a comprehensive new labor
law that went into effect last month. Morocco's labor laws are
based on ILO conventions, and they are consistent with TPA
provisions on labor and the environment.
Mr. Chairman, I would like to use the balance of my time to
look at how Congressional action on this FTA may be perceived
elsewhere in the region. Simply put, if Congress supports the
FTA, this will send a very positive signal about economic
reform to the entire Arab world, thereby encouraging Arab
nations to take the tough steps necessary to integrate their
economies further into the global marketplace. If Congress
fails to support this FTA, in our opinion, this will send
precisely the opposite message, thereby emboldening those in
the Arab world who would seek to diminish economic ties with
the United States. At a time when America's political relations
with the Arab world are experiencing considerable turbulence,
U.S. economic relations with the Arab nations are enjoying
remarkably smooth sailing.
There are a lot of reasons for this. One of the most
important is that a new generation of business and government
leaders in the Arab world is helping to drive the TIFAs and the
FTAs forward using the FTA process as a catalyst to bring about
long overdue economic reforms in their own nations.
Many of these leaders received their college educations in
the United States. As a result of their early exposure to the
United States, these former students from the Arab world have
an affinity for our country, respect for American institutions,
and an appreciation for the way we do business here in the
United States. Today, through the FTA process, these very same
individuals--ministers, leading businessmen and businesswomen,
and advisors to heads of state--are now playing an instrumental
role in helping to open markets in the Arab world. This will
enhance bilateral investment with the United States, but at the
same time encourage regional trade and investment throughout
the Middle East.
United States policymakers question whether the ``stick''
or the ``carrot'' is the most effective way to bring about
reform in the Arab world. In our chamber's experience, the
``carrot'' of open markets, greater transparency, job creation,
and a higher quality of life is clearly winning the debate
hands down. With this in mind, Mr. Chairman, the National U.S.-
Arab Chamber of Commerce urges Congress to seize this historic
opportunity and to move this agreement forward as soon as
possible. Passage of this FTA is good for America, it is good
for Morocco, and it will send the right signal about America's
resolve to support economic reform throughout the Arab world.
Thank you.
[The statement of Mr. Hamod follows:]
Statement of David Hamod, President and CEO, National U.S.-Arab Chamber
of Commerce
Mr. Chairman and distinguished Members of the House Ways and Means
Committee, thank you for the opportunity to testify this morning. My
name is David Hamod, and I serve as President of the National U.S.-Arab
Chamber of Commerce. I am here to provide testimony on behalf of our
Chamber, a member of the U.S.-Morocco Free Trade Agreement Coalition.
Since its inception more than 35 years ago, the National U.S.-Arab
Chamber of Commerce (NUSACC) has been the preeminent organization for
fostering trade and investment between the USA and the Arab world. Most
of our members are small and medium-sized U.S. companies that are
exporting to the Middle East, and we have a special relationship with
the American Chambers of Commerce (AmChams) in the region for purposes
of promoting U.S. business interests.
At the same time, our Chamber serves as the U.S. point of contact
for the national chambers of commerce in the 22 Arab nations, providing
us with valuable insights into the opportunities and challenges facing
the Arab business community. This unique position, as a nexus between
East and West, enables our Chamber to closely monitor the pulse of
business between the United States and the Arab world like no one else.
This morning, I will outline why our Chamber believes that the
U.S.-Morocco Free Trade Agreement (FTA) is good for America and good
for Morocco. But I will also look at this agreement in the broader
context of what it may mean for the Arab world as a whole and why, in
our opinion, Congress should move this agreement forward as soon as
possible this summer.
Creating Jobs For Americans
From our perspective, the U.S.-Morocco FTA will help to create a
level playing field for U.S. businesses that have traditionally been
excluded from markets in Morocco and the region. For years, America's
trade competitors in Europe have been successful in erecting tariffs
and non-tariff barriers in North Africa that discriminate against U.S.
products and services, which currently account for only six percent of
Morocco's total imports.
With this Committee's support for the FTA, the United States can
beat back America's European competitors and the odds will no longer be
stacked against U.S. companies and American workers when doing business
with Morocco.
The recent report of the U.S. International Trade Commission (U.S.
ITC) put it this way: ``Trade liberalization is likely to increase the
competitiveness of U.S. manufacturers and farmers in the Moroccan
market not only relative to Moroccan producers, but also relative to
other foreign suppliers such as the European Union--with which Morocco
already has an FTA.''
U.S. exports to Morocco are likely to increase by $740 million
annually, according to the U.S. ITC, and tariff liberalization should
provide benefits to U.S. consumers in the range of $110.5 to $131.6
million per year. (``U.S.-Morocco Free Trade Agreement: Potential
Economywide and Selected Sectoral Effects,'' U.S. International Trade
Commission, June 2004).
Supporting Reform In Morocco
Morocco has undertaken a process of reform that has affected every
aspect of Moroccan life. The centerpiece of this reform effort is the
FTA.
For Moroccans, the FTA translates into opportunities for job
creation in a nation whose 30 million citizens face double digit
unemployment, particularly among the youth. If it is true that ``hope
begins with a paycheck,'' then the U.S.-Morocco FTA promises to provide
a way out of the hopelessness that can fuel extremism and breed
terrorism.
In the words of H.E. Taib Fassi Fihri, Morocco's Minister Delegate
for Foreign Affairs and Cooperation, ``With this agreement, Morocco
will gain a renewed incentive to complete the task of reform. The
process of economic reform is never easy, but Morocco knows where the
future is headed. Whatever the cost today, we know the longer-term
payoff will be worth it.''
Enhancing Market Access
In our view, the U.S.-Morocco FTA agreement ``raises the bar'' for
trade and investment rules that benefit business and enhance market
access. This agreement is the best FTA market access package on
industrial goods negotiated to date with a developing nation. Passage
of the FTA means that more than 95 percent of two-way trade in consumer
and industrial goods will become duty-free immediately.
According to the Office of the U.S. Trade Representative (USTR),
U.S. products entering Morocco face an average tariff of over 20
percent, while Moroccan products are subject to an average tariff of
only 4 percent as they enter the United States. This disparity will
change drastically with passage of the FTA.
With regard to market access, the U.S. ITC says that commitments
made through the FTA and the World Trade Organization (WTO) will
``commit the two parties to progressively eliminate duties on
originating goods and to implement a wide array of customs procedures
that would enhance trade. . . . The FTA would make the treatment of
U.S. exports clear and simple.''
Complying With Labor Laws
Important labor safeguards have been incorporated into this FTA.
Morocco used the negotiation of the FTA, for example, to bring about a
comprehensive new labor law that went into effect on June 8 of this
year. This law raises the minimum employment age, reduces hours in the
work week, increases the minimum wage by ten percent, guarantees rights
of association and collective bargaining, and prohibits employers from
taking actions against workers because they are union members.
Morocco's Constitution guarantees the right to strike, a right that
Moroccans do not hesitate to exercise when the need arises, and that
nation's labor laws are based on International Labor Organization (ILO)
conventions. In this regard, the U.S.-Morocco FTA picks up where the
U.S.-Jordan FTA leaves off, in the opinion of our Chamber, and Trade
Promotional Authority (TPA) provisions on labor and the environment are
an integral part of the U.S.-Morocco FTA.
Beyond Morocco: Implications For The Arab World
When it comes to free trade agreements with the United States, the
Kingdom of Jordan may have been the trendsetter, but the Kingdom of
Morocco is now the pacesetter. Nations throughout the Arab world are
watching closely to see how the United States treats this North African
ally and trading partner.
If Congress supports the FTA, as we believe it should, this will
send a very positive signal about economic reform to the entire Arab
world, thereby encouraging Arab nations to take the tough steps
necessary to integrate their economies further into the global
marketplace. If Congress fails to support the U.S.-Morocco FTA, in our
opinion, this will send precisely the opposite signal, thereby
emboldening those in the Arab world who seek to diminish economic ties
with the United States.
At a time when America's political relations with the Arab world
are experiencing considerable turbulence, U.S. economic relations with
the Arab nations are enjoying remarkably smooth sailing. Nowhere has
this been more obvious than in the case of negotiations over Trade and
Investment Framework Agreements (TIFAs) and Free Trade Agreements
(FTAs), and our Chamber wishes to recognize the outstanding work being
done by Ambassador Robert Zoellick, Assistant USTR Catherine Novelli,
and their team at the Office of the U.S. Trade Representative.
In the United States, the debate continues about whether the
``stick'' or the ``carrot'' is the most effective way to bring about
reform in the Arab world. In our Chamber's experience, as the FTA
process suggests, the ``carrot'' of open markets, greater transparency,
job creation and a higher quality of life is clearly winning the debate
hands down.
There are a lot of reasons why the FTA process has been so
successful. One of the most important reasons is that a new generation
of business and government leaders in the Arab world is helping to
drive these Free Trade Agreements forward, using the FTA process as a
catalyst to bring about long-overdue economic reforms in their own
nations.
Many of these leaders received their college educations in the
United States, so if U.S. policymakers ever wonder about why it is
important to have Arab students live in the USA and attend U.S.
universities, these policymakers should wonder no more. As a result of
their early exposure to the United States, these former students from
the Arab world have an affinity for the USA, respect for American
institutions, and an appreciation for the way we do business here in
the United States.
Today, through the FTA process, these very same individuals--
ministers, leading businessmen and businesswomen, and advisors to heads
of state--are now playing an instrumental role in helping to open
markets in the Arab world. This will enhance bilateral trade and
investment with the United States, to be sure, but over time, it will
also encourage regional trade and investment throughout the Middle
East.
* * *
Two hundred and seventeen years ago this month, in 1787, a young
United States ratified a Treaty of Peace and Friendship with Morocco--
now the oldest unbroken treaty in the history of America's foreign
relations. In signing this agreement, our fledgling democracy sought
``most favored Nation'' status with Morocco, a regional ``superpower''
of its day, so that the United States could pursue unfettered trade and
commercial opportunities.
Today, more than two centuries later, the United States has an
opportunity to sign another groundbreaking agreement with Morocco that
will enhance commercial relations between our two nations. The National
U.S.-Arab Chamber of Commerce urges Congress to seize this historic
opportunity and to move this agreement forward as soon as possible.
Passage of this FTA is good for America, it's good for Morocco, and it
will send the right signal about America's resolve to support economic
reform in the rest of the Arab world.
Mr. CRANE. Thank you, Mr. Hamod. Ms. Carroll?
STATEMENT OF MELIKA CARROLL, TRADE POLICY DIRECTOR, INTEL
CORPORATION, SANTA CLARA, CALIFORNIA
Ms. CARROLL. Thank you, Mr. Chairman, Members of the
Committee. My name is Melika Carroll, and I am Trade Policy
Director for Intel Corporation, headquartered in California. I
am very pleased to be here with you today on behalf of the U.S.
High-Tech Trade Coalition and the U.S.-Morocco Business
Coalition.
Intel is the world's largest manufacturer of
semiconductors. Our products serve as the electronic brains of
personal computers, servers, mobile phones, network equipment,
and many other products. Intel is an active member of the U.S.
High-Tech Trade Coalition, which is comprised of the major tech
industry associations and the thousands of companies they
represent. The industry as a whole is a strong supporter of
trade liberalization and is united in its support of the U.S.-
Morocco FTA.
On average, 60 percent of the U.S. high-tech industry's
revenues come from outside the U.S. market. Therefore, the
completion of multilateral, regional, and bilateral agreements
like the U.S.-Morocco FTA increases our access to foreign
markets which are critical to our growth. High-tech deployment
in Morocco is ahead of the curve compared to other countries in
North Africa. The U.S. tech sector has enjoyed an ongoing trade
surplus with Morocco over the last 3 years. In 2003, we
exported nearly $100 million worth of goods to Morocco, an
important market when compared to others in the region.
This FTA bolsters opportunities for U.S. technology in
Morocco as well as in the region as a whole. This is critical,
as the Middle East tech market is expected to be worth
approximately $14 billion by 2006. The U.S.-Morocco FTA sets
high-standard commitments in six policy areas that are
particularly important to the tech industry's continued
success.
First, Morocco joined the Information Technology Agreement
as part of these negotiations. Consequently, most tariffs on
U.S. high-tech goods were eliminated just this past April.
Second, it is essential that our trading partners establish
the level of intellectual property protection that meets the
challenges that are particular to a digital world. The U.S.-
Morocco FTA adheres to the high standards of protection and
enforcement of IPR set out in earlier multilateral and
bilateral agreements. These commitments will also support the
positive 10-year trend of decreasing piracy rates in Morocco.
Third, commitments on information technology services are
critical as a vast array of new e-commerce and information
services has been developed. This agreement has no reservations
in the area of computer-related services, thereby ensuring full
market access and national treatment for this important sector
of our industry. The negative list approach also adopted here
will ensure that rapidly evolving new computer services will be
covered by these commitments contained in this agreement.
Fourth, the e-commerce commitments are also important. As
software becomes increasingly distributed online, it is
essential that software delivered electronically receive the
same treatment under the trade laws as software traded on a
physical medium. The e-commerce chapter in the U.S.-Morocco FTA
maintains and clarifies the standard for trade in electronic
commerce established under previous agreements, which should
also help us continue to advance discussions on this issue in
the WTO in the long term.
Fifth, the telecommunications services commitments also
contain key provisions for our sector. In addition to the
negative list approach for telecommunications services, the
agreement also established the principle of technology
neutrality to help ensure that foreign governments do not
disadvantage American technologies to the benefits of others.
This last principle is really critical to our industry.
Finally, our industry is concerned that as tariffs are
eliminated, many countries may increase their use of technical
regulations for high-tech products to protect their market or
their industry. This FTA has built on the WTO's commitments on
technical barriers to trade and establishes new requirements
that can help ensure better justification for regulatory
decisions as a result of increased transparency, opportunity
for industry input, and accountability.
In conclusion, our industry believes that the positive role
that trade liberalization has played in the development of
markets for U.S. high-tech products should be maintained and
expanded. The U.S.-Morocco FTA is an important step in reaching
this objective. We commend the Administration and Congress for
achieving such a high-standard agreement and strongly support
congressional approval this summer. Thank you, Mr. Chairman.
[The statement of Ms. Carroll follows:]
Statement of Melika Carroll, Trade Policy Director, Intel Corporation,
Santa Clara, California
My name is Melika Carroll and I am Trade Policy Director for Intel
Corporation, headquartered in Santa Clara, California. I'm very pleased
to be here with you today on behalf of the U.S. High-Tech Trade
Coalition.
Intel is the world's largest manufacturer of semiconductors, with
sales in 2003 of $30 billion. We employ approximately 79,000 people
worldwide. About 60% of our employees are based in the United States,
while over 70% of our revenues are generated outside North America. Our
products serve as the electronic brains of personal computers, servers,
mobile phones, network equipment and many other products.
Intel is an active member of the U.S. High-Tech Trade Coalition
(HTTC), which is comprised of the major tech industry trade
associations, and the thousands of companies they represent. The
industry as a whole is a strong supporter of trade liberalization and
is united in its support of the U.S.-Morocco Free Trade Agreement
(FTA).
Members of the HTTC include: AeA, Association for Competitive
Technology, Business Software Alliance, Computer & Communications
Industry Association, Computer Systems Policy Project, Computing
Technology Industry Association, Electronic Industries Alliance,
Information Technology Association of America, Information Technology
Industry Council, National Electrical Manufacturers Association,
Semiconductor Industry Association Semiconductor Equipment & Materials
International, Software & Information Industry Association and
Telecommunications Industry Association.
Expanding High-Tech Trade and the U.S.-Morocco FTA
As one of the leading contributors to the U.S. balance of trade,
U.S. high-tech contributed a trade surplus of $24.3 billion in 2002. As
a leading engine of global economic growth, the industry contributed
more than a trillion dollars to the global economy in 2002, according
to a study conducted by IDC for the Business Software Alliance (BSA).
In fact, in the U.S. alone, the IT industry contributed 2.6 million
jobs and more than $400 billion to the U.S. economy, generating $342
billion in tax revenues in 2002.
On average, over 60% of the U.S. high-tech industry's revenues come
from outside the U.S. market. Our industry's success clearly relies
heavily on access to global and in particular emerging markets. The
completion of bi-lateral, regional and multilateral agreements to
increase our access to foreign markets is vital to our future.
To maintain the positive contributions of this industry to the U.S.
economy, it is critical that FTAs: establish the highest standards of
intellectual property protection; provide an open trading environment
that promotes tariff-free high-tech products; facilitate barrier-free
e-commerce and that promote the growth of computer and
telecommunications services.
Past trade liberalization in the information and communications
technology industries have benefited consumers and the U.S. economy
alike. The acceleration since 1995 in quality improvements and price
declines in many high-tech products coincides with three major WTO
Agreements of direct relevance to the high-tech industry: the 1995
Agreement on Trade-Related Aspects of Intellectual Property (TRIPS),
the 1997 Information Technology Agreement and the 1997 Basic
Telecommunications Agreement.
High-tech deployment in Morocco is ahead of the curve compared to
other countries in North Africa. After the deregulation of
telecommunication licenses we have seen significant improvements in
high-tech deployment. There are millions of mobile users and broadband
deployment is slowly improving. This growth in high-tech was also given
a boost from Maroc Telecom's home computing initiative; a program which
Intel has been part of, aimed at encouraging home PC adoption. Also,
the Ministry of Commerce and Industry is working with our industry to
develop programs to increase the deployment of technology in small and
medium businesses.
The U.S.-Morocco FTA bolsters these opportunities for U.S. high-
tech manufacturers and service providers. The U.S. high-tech sector has
enjoyed a trade surplus with Morocco in each of the last three years.
In 2003 the U.S. high-tech sector exported nearly $100 million in goods
to Morocco, an important market when compared to another country in the
region like Tunisia where U.S. technology exports reached $10 million
in 2003.
With a population of approximately 300 million, the Middle East
region is one of the fastest growing emerging markets and has become a
key focus area for Intel. According to IDC data, the high-tech market
is estimated to be worth approximately $14 billion by 2006.\1\
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\1\ http://www.idc.com/.
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As the importance of the Middle East market grows, the U.S.-Morocco
FTA sets strong precedents that will buttress our industries' growth.
We commend the Administration and Congress for this achievement and for
realizing the important objectives outlined in the Trade Promotion
Authority legislation. Without the leadership provided by Ambassador
Zoellick and his team and Congress' thoughtful guidance, these
achievements would not have been possible.
Tariff Measures in the U.S.-Morocco FTA
The Uruguay Round agreements on tariff reduction, and the
subsequent Information Technology Agreement (ITA) within the WTO, have
made significant contributions to the elimination of most tariffs in
our sector. However, tariffs on high-tech products are still very high
in countries that have not joined the ITA, creating a substantial
impediment to trade.
Fortunately, Morocco agreed to join the ITA as part of these
negotiations. Most tariffs on U.S. high-tech manufactured goods
included in the ITA were therefore eliminated in April 2004.\2\ Tariffs
on most computer components and products in Morocco previously ranged
between 2.5% and 10%, which can have a significant negative impact on
product sale costs. Due to the highly competitive nature of our
industry, combined with very short product life cycles, margins can be
severely impacted by any additional costs such as these duties. Also,
when duties are imposed on separate components, as they were in
Morocco, the multiplier effect of the duty on each component could have
had an even greater impact on the overall cost of the final product.
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\2\ Morocco has requested staging on 5 products; however those
tariffs will be eliminated by 2010.
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In order to foster a barrier free trade environment, it is critical
that our trading partners sign and implement the ITA or its equivalent.
Morocco's agreement to join the ITA improves our industry's access to
this growing market and sets an important example for emerging markets
that still have not joined this agreement.
Intellectual Property (IP) Provisions in the U.S.-Morocco FTA
For the high-tech industry, strong intellectual property protection
is essential to foster continued innovation and investment. This is
particularly important as copyright infringements and software piracy
cost the high-tech industry $13 billion in lost revenues in 2002.
Morocco had a 58% piracy rate in 2002 according to the Business
Software Alliance. We are encouraged by the reduction in this rate over
the last decade, with Morocco's piracy rate falling from 82% in 1994.
We also are encouraged by the significant progress made in the Middle
East/Africa region to reduce software piracy. This region's piracy rate
improved more than any other in the world, with the regional piracy
rate falling from 80% in 1994 to 49% in 2002. The intellectual property
protections afforded by this FTA will continue this positive trend of
decreasing piracy in Morocco, and they will serve as important
precedents to continue to cut piracy throughout the region.
To promote the development of a strong IT sector, it is essential
that our trading partners establish the level of copyright protection
that meets the challenges of a digital world. They must not merely
comply with the WTO Agreement on the Trade Related Aspects of
Intellectual Property Rights (TRIPS), but also comply with the World
Intellectual Property Organization (WIPO) Copyright Treaty (WCT).
Moreover, it is essential that our trading partners fully implement and
enforce these obligations.
The Administration has set the pattern for such levels of
protection in the U.S.-Singapore and U.S.-Australia FTAs, and the U.S.-
Morocco FTA follows in that pattern. The U.S.-Morocco FTA adheres to
the high standards of protection and enforcement for copyrights and
other intellectual property set out in those earlier agreements.
The agreement recognizes the importance of strong intellectual
property rights protections in a digital trade environment by building
on the obligations in the TRIPS Agreement, and ensures that works made
available in digital form receive commensurate protection by
incorporating the obligations set out in the WIPO Copyright Treaty.
Some of the highlights of the agreement include:
Provisions to promote strong intellectual property rights
protection and foster electronic commerce by maintaining the balance
reflected in the U.S. Digital Millennium Copyright Act. Copyright law
is clarified to permit the exploitation of works and effective
enforcement of rights in the online environment, while remedies against
Internet service providers are limited for infringements they do not
control, initiate or direct.
Requirements to establish prohibitions against the
circumvention of effective technological protection measures employed
by copyright owners to protect their works against unauthorized access
or use, coupled with the ability to fashion appropriate limitations on
such prohibitions, again consistent with those set out in the Digital
Millennium Copyright Act.
Provides for the application of the reproduction right of
a copyright owner to temporary as well as permanent copies.
Recognizes that robust substantive standards for the
protection of intellectual property must be coupled with obligations
providing for the effective enforcement of rights, in both civil and
criminal contexts in order to be meaningful. In this regard, key
provisions of the agreement provides for the establishment of statutory
damages at levels appropriate to deter further infringement, strong
criminal penalties against the most pervasive form of software piracy--
corporate and enterprise end user piracy; and strong border measures to
combat cross-border trade in infringing goods. The authority to
increase damages up to treble the amount of the injury assessed in a
patent infringement case is particularly useful given the greater
difficulty of proving infringement in these complicated cases and
potential significant negative impact on the patent owner's ability to
recuperate developmental costs.
Obliges governments to lead by example by using only
legitimate and licensed software.
Information Technology Services in the U.S.-Morocco FTA
During the past decade, a vast array of new e-commerce and
information technology services have been developed including data
storage and management, web hosting, and software implementation
services. Given the increasing trend for technology users to purchase
information technology solutions as a combination of goods and
services, full liberalization in this area is more important than ever.
In this agreement, both parties agreed to provide full market
access and national treatment on services. The agreement adopted a
negative list approach, which means that new services will be covered
under the agreement unless specific reservations were made in the
agreement. Specifically, this agreement has no reservations in the area
of computer and related services, thereby ensuring full market access
and national treatment for this important sector in the U.S. high-tech
industry. Between the services chapter and the investment chapter, the
agreement covers all modes of delivery, including electronic delivery,
such as via the Internet. The negative list approach also ensures that
rapidly evolving new computer services, driven by continual advances in
technology, will be covered by commitments contained in the agreement.
Without such an approach, computer and related services definitions and
commitments quickly could become obsolete as new services are
introduced.
We commend this approach and the fact that liberalization of high-
tech services was agreed to without any commercially significant
reservations. This will lead to the promotion of barrier free-trade in
services with Morocco.
E-Commerce in the U.S.-Morocco FTA
With millions of people using the Internet worldwide, the promotion
of barrier-free cross-border e-commerce is critical in encouraging
continued e-commerce growth and development. In fact, the trade
treatment of software delivered electronically is one of the most
important issues facing the software industry, and it is essential that
software delivered electronically receive the same treatment under the
trade laws as software traded on a physical medium.
We are quickly moving to a world where online distribution is the
predominant way software is acquired and used. According to a BSA CEO
study, by 2005, 66% of all software is expected to be distributed
online. This will create enormous efficiencies as the newest, most up-
to-date software is delivered across borders at a lower cost and more
quickly than when delivered in a physical form, to the benefiting of
both customers and software developers.
The e-commerce chapter in the U.S.-Morocco FTA maintains and
slightly expands the standards for trade in electronic commerce
established under previous agreements. As with previous agreements, the
U.S.-Morocco FTA includes the concept of ``digital products''; prevents
the application of customs duties on electronically delivered digital
products; assures the non-discriminatory treatment of digital products
delivered physically or electronically; addresses the valuation of
physically delivered digital products; and provides commitments to
cooperate on electronic commerce policy. The agreement includes broad
national treatment and most favored nation (MFN) provisions which are
further expanded in a footnote clarifying coverage in additional
instances. In short, the FTA contains important long-standing
electronic commerce principles identified by U.S. industry. There are
no reservations taken specifically in the area of e-commerce.
This sets important positive precedents for future negotiations on
e-commerce in the context of the Doha Development Agenda negotiations.
Through this and other recent agreements, the U.S. has developed a
method for addressing trade in digital products which should advance
discussions in the WTO in the long term.
Telecommunication Services in the U.S.-Morocco FTA
Chapter 13 of the agreement contains a number of provisions that
will benefit the telecommunications industry. The FTA ensures access to
and use of public telecommunications networks and services on a non-
discriminatory basis. The non-discriminatory treatment is important,
and it is a concept that we wholeheartedly support.
Also notable is the fact that the FTA uses a negative list approach
for telecommunications services. As with information technology
services, the principles of market access, transparency and non-
discrimination for telecom will be reinforced as a result of this
negative list approach.
The provisions ensuring that each party's telecommunications
regulatory body is separate from, not accountable to, and does not hold
a financial interest in or maintain a separate operating role in any
supplier of public telecommunications services are also very important.
We believe that the affirmation of this concept is absolutely critical
to ensuring fairness, impartiality and regulatory integrity in each
participating country's telecommunications sector, and we encourage the
Moroccan regulatory authority to eliminate all financial and/or other
ownership interests in its major supplier of public telecom services as
soon as possible.
Furthermore, we support the inclusion of a binding commitment in
the FTA establishing the principle of flexibility in the choice of
technologies in the communications sector. The goal of this provision
is to ensure that foreign governments do not disadvantage American
companies by mandating the use of certain technologies while excluding
others. However, the language regarding technical specifications and
national frequency tables is different from similar technology-choice
language in other already-negotiated FTAs and could create regulatory
uncertainty for our sector.
The principle of technology neutrality is critical in fostering
competition among technologies, which has become a standard negotiating
objective in all recent FTAs, and industry strongly supports this.
Industry believes the technology choice provision in the CAFTA is a
better formulation, and looks forward to working with USTR to improve
upon the CAFTA model in negotiating future FTAs, such as with Thailand
and the Andean countries.
Technical Barriers to Trade in the U.S.-Morocco FTA
Finally, the agreement contains important commitments in the areas
of technical barriers to trade and transparency.
Since the early-1990s, many foreign governments have increased
their use of technical regulations, including standards implemented
through regulations, which can significantly impact the cost and design
of high-tech products. Certain countries and/or regions have been
particularly aggressive in this respect, focusing on product regulation
in areas of environment, health, and safety (EHS). However, in some
cases, these product regulations also have also been expanded to a
variety of new areas (e.g.: privacy, security, and low-frequency
emissions requirements). Apart from general concerns about the
promulgation of these regulations, our major concern is that as tariff
barriers diminish, an increasing number of countries may replicate this
``regulatory'' approach to high-tech products to protect their markets
or industry. Such regulations have a significant impact on the high-
tech industry because (a) they are costly and limit innovation, and (b)
regulations generally are unable to keep the pace with the rapid
technology advances, which may hamper product time to market and (c)
most importantly, they may ultimately result in market access barriers.
The FTA has built on the existing World Trade Organization
Agreement on Technical Barriers to Trade commitments (WTO TBT
Agreement) that will help ensure greater transparency in the regulatory
process. In particular, new and more detailed provisions (such as a 60
day comment period for all interested parties) ensure meaningful public
participation in the development of standards, technical regulations
and conformity assessment procedures. There are also new requirements
for transparency that require government responses to significant
comments by interested parties be made available to the public, thereby
ensuring better justification for regulatory decisions as a result of
increased accountability.
Conclusion
In conclusion, the U.S.-Morocco FTA sets new benchmarks in progress
toward the promotion of strong intellectual property rights protection,
full liberalization of trade in information technology services and
barrier-free e-commerce as well as increased regulatory transparency
and tariff elimination among our trading partners. In this agreement,
new baselines have been set that should lead to significant market
opportunities for the U.S. high-tech industry in the years ahead. We
commend the achievements made in the agreement and we strongly support
Congressional approval of this agreement.
The positive role that trade liberalization has played in the
development and growth of markets for U.S. high-tech products should be
maintained and expanded and the FTA is an important step in achieving
this objective. We commend the achievements made in the agreement and
strongly support Congressional approval.
Thank you for the opportunity to appear before you today.
Mr. CRANE. Thank you, Ms. Carroll. Mr. Taliaferro?
STATEMENT OF DAVID TALIAFERRO, FARMER, LANEVIEW, VIRGINIA, ON
BEHALF OF THE WHEAT EXPORT TRADE EDUCATION COMMITTEE, THE
NATIONAL ASSOCIATION OF WHEAT GROWERS, AND THE U.S. WHEAT
ASSOCIATES
Mr. TALIAFERRO. Thank you, Mr. Chairman and Members of the
Committee. Thomas Jefferson once wrote, ``Those who labor in
the earth are the chosen people of God, if He ever had a chosen
people, whose breasts He has made his peculiar deposit for
substantial and genuine virtue.'' I stand before you today as
one of God's chosen people, humble yet full of virtue.
My name is David Taliaferro. My brothers and I farm in
eastern Virginia along the Rappahanock River. Our operation is
just 100 miles south of Washington. We raise corn, wheat,
soybeans, and barley on approximately 4,000 acres. We also
export food-grade soybeans to Japan and Korea.
I am speaking on behalf of the Wheat Farmers of America who
are ably represented in Washington by the Wheat Export Trade
Education Committee, the National Association of Wheat Growers,
and U.S. Wheat Associates. I am here to support the
implementation of the United States-Morocco FTA. Strong exports
of wheat and other grains are vital to our farm economy.
First, 96 percent of the world's consumers live beyond our
borders. Second, we export consistently nearly 50 percent of
our wheat production. All opportunities for expanding our
exports need to be vigorously pursued. This is why I am here
today. Bilateral agreements are important interim measures as
we pursue the objective of free and fair world trade of wheat
in the FTAA and the WTO negotiations.
Let me compliment the USTRs office and the United States
Department of Agriculture for keeping wheat on the negotiating
table. I understand that this was no easy task. We believe that
no commodity should be exempted, and this would make future
negotiations with other countries much more difficult. Our most
serious competitor in the Moroccan market is the EU. With
France's colonial ties, the EU's export subsidies, and the
Moroccan import duty structure, we are clearly disadvantaged.
Morocco has a GATT-bound tariff rate of well over 100 percent
for durum and other wheat classes which could be imposed at any
time. It is designed to favor the importation of higher-quality
wheat but is flawed by reference prices obscured by the lack of
pricing transparency.
The negotiated agreement addresses the increasingly
sophisticated and diverse wheat sector in Morocco, and we
understand the effect that a modified tariff rate structure
would have on the domestic wheat industry there, and we are
sensitive to the possible need for a fair and effective farmer
compensation program. Now, when this agreement is implemented,
the in-quota tariffs for durum will go to zero over 10 years.
Initially, the level is set at 250,000 metric tons, rising by
10,000 tons each year. Unfortunately, the out-of-quota tariff
will remain under most favored nation treatment and will not go
to zero.
We are disappointed that for other wheat classes the
tariffs will continue. There is a favorable provision for
eventual reduction which comes into play January 1st of the
first year of the signed agreement. The in-tariff quotas are
well within the current import levels. Growth in this volume is
dependent on Moroccan domestic production, and we do sense that
there is some potential for us here as well. The Moroccans have
insisted upon protecting their industry through a seasonal
provision that the negotiated quota would not apply during
their wheat harvest in June and July. I do not expect this to
be a problem.
Regarding the issue of state trading enterprises, Morocco
has agreed to work with the United States in the WTO
negotiations to eliminate restrictions on the right to export,
to eliminate the special financing granted to STEs that export
for sale a significant share of their agriculture products, and
to ensure greater transparency regarding the operation and
maintenance of export state trading enterprises. Hopefully the
Administration will secure these provisions in all future
agreements. Finally, a most important element of the agreement
is the clause guaranteeing preferential treatment. If Morocco
provides any other trading partner better treatment for a
product, then that same treatment shall be applied to the like
U.S. product. In this way, we can compete fairly with our
competitors.
I would like to restate the appreciation that our wheat
farmers have for the job done by our negotiators. I might add
as well that the United States needs to project a positive
image in that part of the world, and trade is the best way to
do it. I urge the Congress to implement this agreement as soon
as possible, and thank you for letting me come today.
[The statement of Mr. Taliaferro follows:]
Statement of David Taliaferro, Farmer, Laneview, Virginia, on behalf of
the Wheat Export Trade Education Committee, the National Association of
Wheat Growers, and the U.S. Wheat Associates
Good morning Chairman Thomas and Members of the Committee. My name
is David Taliaferro and I farm in eastern Virginia, approximately 100
miles south of Washington, D.C. I raise wheat, corn, soybeans and
barley. My brothers and I also export food quality soybeans to Japan.
I appreciate this opportunity to speak to you on behalf of the
Wheat Export Trade Education Committee, representing the wheat industry
on trade policy issues; the National Association of Wheat Growers, the
organization responsible for domestic policy and farm programs; and for
U.S. Wheat Associates, the industry's foreign market development and
promotion organization.
Let me begin by highlighting two points that wheat producers in the
United States take into account when looking at export trade
opportunities. First, 96 percent of the world's consumers live beyond
our border. The four percent within the United States do not consume
enough wheat to sustain a viable wheat industry.
Second, we consistently export nearly 50 percent of our total
production. As you can imagine, our success or failure hinges on the
ability of U.S. wheat to be exported around the world. Trade is a vital
component for ensuring the financial viability of U.S. wheat farmers.
All trade agreements, bilaterals such as the Moroccan Free Trade
Agreement (FTA), and negotiations for the Free Trade Area of the
Americas (FTAA) and in the World Trade Organization (WTO), must offer
unique potential for expanding market opportunities for American wheat
growers.
The U.S. wheat industry strongly supports moving forward
aggressively in Free Trade Agreements and in the World Trade
Organization and Free Trade Area of the Americas negotiations. The WTO
process is important for liberalizing world wheat trade, and the U.S.
wheat industry is clearly focused on achieving our goals in this round
of negotiations. However, the FTAA negotiations have the potential to
extend beyond the level of liberalization achieved in the WTO and the
U.S. must be prepared to take full advantage of this opportunity. As
these two negotiations have not moved forward as smoothly or as quickly
as we would have liked, the wheat industry views the Administration's
efforts to open markets bilaterally, through FTAs, as the logical
alternative. The FTAs should be seen as critical stepping-stones to
free and fair trade on a worldwide scale. As part of this process the
U.S. wheat industry strongly supports the U.S.-Morocco Free Trade
Agreement (FTA) and urges its prompt passage by Congress before the
summer recess.
Before going into the details of the agreement, let me highlight
the importance of the agreement achieved for wheat. First, without the
strong determination of our U.S. negotiators from both the U.S. Trade
Representative's Office and the Department of Agriculture, Morocco
would have taken wheat off of the negotiating table. We firmly believe
that no commodity should be exempted from any FTA negotiations. We all
know that once a commodity is allowed to be taken off the table other
countries will demand the same right for what they would define as
sensitive products. Not only was keeping wheat in the negotiations a
win for the U.S. negotiators, but I also believe that wheat posed the
most difficult set of hurdles to overcome in this negotiation. We
applaud the negotiators for the long hard battle they successfully
fought on behalf of the U.S. wheat industry. Keeping wheat on the table
and achieving a very positive outcome for our growers was not an easy
task.
In the Moroccan wheat market, the United States has been
handicapped by close proximity to and old colonial ties with Europe--
especially France. The European Union's export subsidies and the
Moroccan import duty structure also put U.S. wheat at a disadvantage
vis-a-vis other origins. Morocco has a GATT bound tariff rate of well
over 100 percent for durum and other wheat that they could impose at
any time.
The current import duty is designed to promote the importation of
the higher quality wheat necessary to meet Morocco's evolving industry
needs, but it is flawed because it is based on a series of reference
prices which are further handicapped by a worldwide lack of pricing
transparency.
The FTA addressed the need to reflect the demands of an
increasingly sophisticated and diverse wheat sector in Morocco. First
of all, we acknowledged that any modification of the current duty
structure could create major political, strategic and social problems.
We also acknowledged the overwhelming challenge to implement a fair and
effective farmer compensation program, particularly given the highly
fragmented nature of land tenure and use in Morocco.
Once the FTA is in place we will have very positive changes for
U.S. wheat. The in-quota tariffs on durum wheat will go to zero.
Unfortunately, these will take 10 years to phase out. U.S. durum does
not, as a rule, compete with Moroccan produced durum. However, it is
beneficial that the initial in-quota tariff for durum has been set at a
level (250,000 metric tons) that is compatible with current market
levels, and is set to grow by 10,000 metric tons a year thereafter.
Unfortunately, the out of quota tariff on durum will remain under Most
Favored Nation (MFN) treatment and is not scheduled to go to zero.
We are disappointed that for all wheat other than durum, tariffs
will continue under this agreement. However, there is a favorable
provision to lower the tariffs. If the prevailing MFN rate is equal to
the base rate, the reduction will be 62 percent of the base rate, and
the reduction of an additional .275 percent of the MFN rate for every
percentage point difference between the base and the MFN rate. These
reductions enter into force on January 1 of the first year of the
signed agreement.
In-tariff quotas for common (non durum) wheat under the agreement
are well within the current import levels. Growth in the in-quota
volume is contingent upon domestic Moroccan production. Thus, Moroccan
producers are protected at two levels, one at 3 million metric tons of
production and at domestic production being less than 2.1 million
metric tons. However, there is a generous growth potential for common
wheat regardless of domestic production.
The Moroccans also insisted on greater protections for their
industry through what are known as seasonality provisions. During the
months of June and July with the possibility to be extended through
August, the Moroccan harvest season, the negotiated quota would not
apply.
For durum wheat there is a clause that would suspend the quota
according to market conditions and the preference clause would apply.
The wheat agreement also involves a complicated auction system on
TRQs that is somewhat equivalent to the one Morocco structured with the
EU. In the fourth year of the agreement, the U.S. and Morocco will
review the auction system to decide whether to continue it or offer
wheat quota access on a first come, first served basis.
Tariff rate quotas (TRQs) were also established for all durum and
common wheat products. While the TRQs may serve as a protection for
Moroccan millers and bakers, they also serve to provide quantified
levels of imports for these products.
We are also extremely pleased that the negotiators secured a
commitment on State Trading Enterprises. Morocco has committed to work
with the U.S. in the WTO negotiations to:
1. Eliminate restrictions on the right to export;
2. Eliminate the special financing granted to state trading
enterprises that export for sale, directly or indirectly, a significant
share of their country's exports of an agricultural export; and
3. Ensure greater transparency regarding the operation and
maintenance of export state trading enterprises.
We have asked the Administration to secure this commitment in all
future FTAs, both those currently under negotiation and ones yet to be
initiated.
The final and maybe the most important element of the agreement,
especially since we will not go to zero tariffs on non-durum wheat, is
the clause guaranteeing preferential treatment. A preference provision
that is beneficial to U.S. suppliers for all products is included in
the agreement. It guarantees that if Morocco provides any other trading
partner better treatment for any product, Morocco must immediately
provide the same treatment to the like U.S. product. (Thus Canada can
not negotiate an agreement that would put our growers at a disadvantage
in this market.)
The U.S. wheat industry applauds our negotiators for their hard
work and tenacity to reach this agreement for wheat. We strongly
support the agreement and urge Congress to pass it before the summer
recess.
Thank you for the opportunity to present the views of the U.S.
wheat industry on this important agreement.
Mr. CRANE. Thank you, Mr. Taliaferro. Mr. Levin?
Mr. LEVIN. Thank you, Mr. Crane. I do not have any
questions, but if I might just say a special hello to David
Mengebier--we have known each other for some years--and to
thank you, Mr. Hamod, for your communication of last week, and
to thank all of you for your testimony. I think it is
interesting testimony that covers not all of the issues in this
FTA but a lot of them. So, thank you for coming, and we will
make sure that your testimony is well distributed. Thank you.
Mr. CRANE. Thank you. Mr. English?
Mr. ENGLISH. Thank you, Mr. Chairman.
Ms. Carroll, the U.S.-Morocco FTA clearly sets a high
standard in many areas of 21st century global trade. Some, for
example, have said that the intellectual property rights
provisions alone are the best that have ever been negotiated
for a U.S. FTA with a developed or developing country. Do you
agree with that assessment? Do you feel that the provisions in
this agreement have the potential to be a model for future FTAs
in the area of intellectual property?
Ms. CARROLL. Thank you. Yes, the tech industry does believe
that the intellectual property commitments in this FTA are very
good indeed, although we do think that this should be an
important model for future FTAs. There are particular entities
in every country that we negotiate with, or region, but, in
general, the provisions for this agreement from our industry's
perspective are excellent.
Mr. ENGLISH. Thank you. Mr. Hamod, in your testimony you
state that Moroccans do not hesitate to exercise their
constitutional right to strike. You have heard here some
questions raised about the extent of that right to strike. Can
you please give us an example of an occasion when Moroccans
have been able to strike?
Mr. HAMOD. Mr. English, I do not profess to be an expert on
ILO and the labor laws in Morocco, but I have had the pleasure
and the opportunity to hear from numerous delegations of
Moroccans in recent weeks who have come through Washington and
told us how important it is to them to have that opportunity to
strike when necessary. They feel that it is free and fair when
the opportunity presents itself and that this agreement will
support their efforts.
Mr. ENGLISH. How does this agreement embrace reforms that
have already been made in Morocco and further encourage
additional and ongoing reforms in the future?
Mr. HAMOD. My own sense is that this helps to consolidate
some of the reforms that have taken place to date, and the
United States is in a unique position to support Morocco in
such areas as transparency to promote better business
practices. Frankly, given a choice between learning those from
the United States and, say, learning corporate governance from
the French, I would rather that they learn it from us.
Mr. ENGLISH. That is well said. Mr. Belcaid, it is a
privilege to see you again, and as co-Chairman of the Morocco
Caucus and Chairman of the Congressional Steel Caucus, I have a
particular interest in your testimony. Aside from the
possibility of increasing steel exports from the United States
to Morocco and creating hundreds of new jobs in both countries,
your testimony illustrates the dynamic and complementary nature
of our two countries' economies. Given the preferential trade
agreement in place between Morocco and the EU, I wonder if you
could elaborate on why this agreement is critical to your
efforts to involve U.S. producers to make this initiative work.
Mr. BELCAID. I was in Morocco in April, and I met with the
industry, the canning industry, the people that buy cans and
process food. They import a lot of cans from Europe, and right
now with the euro high, they are struggling and they want the
project to go through and to have a plant near them to supply
them. I think with this FTA, we will provide greater benefit
for the project to this industry.
Mr. ENGLISH. Mr. Chairman, I would like to thank the
panelists. They have provided a very broad perspective on the
benefits of a Moroccan FTA, and with that, I yield back the
balance of my time.
Mr. CRANE. Thank you, Mr. English. I, too, want to express
appreciation to all of the panelists for your participation,
but ask you if you will be so kind as to stay in constant
communication with us. With that, the hearing stands adjourned.
[Whereupon, at 11:58 a.m., the hearing was adjourned.]
[Submission for the record follows:]
Statement of Dee Vaughan, National Corn Growers Association
Chairman Thomas, Ranking Member Rangel and Members of the
Committee. We would like to thank the Committee for giving us the
opportunity to submit a statement regarding the U.S.-Morocco and U.S.-
Australia Free Trade Agreements.
The National Corn Growers Association (NCGA) was founded in 1957
and represents more than 33,000 dues-paying corn growers from 48
states. The Association also represents the interests of more than
350,000 farmers who contribute to corn checkoff programs in 19 states.
NCGA's mission is to create and increase opportunities for corn
growers in a changing world and to enhance corn's profitability and
use. Trade is vital to the future of corn growers as we search for new
markets and provide grain that is more abundant and of better quality.
The National Corn Growers Association and sister organization, the
U.S. Grains Council, support the Morocco Free Trade Agreement (FTA).
Along with the Central America Free Trade Agreement (CAFTA), the
Morocco FTA will provide new opportunities and an expanding market for
U.S. feed grains. More so than any time in the past, corn producers
operate in a competitive international marketplace. For this reason,
free trade agreements have never been more essential to the future
success of our industry.
The feed grains industry has been active in building markets in
Morocco and the sector is already benefiting from strong economic ties
between the two countries. Morocco is primarily a bulk commodity market
with corn being the largest component of that trade.
In 2002, Morocco imported 1.1 million metric tons of corn, 63
percent originating from the United States. However in 2003, U.S.
market share declined to about ten percent due to increased competition
from Argentina, Brazil and Eastern Europe. This decline was only a
temporary phenomenon due to abundant world grain stocks in 2002. The
world grain situation in 2002 saw abnormally high feed wheat and corn
stocks being exported from Eastern Europe and ongoing economic turmoil
in Argentina.
Fortunately, U.S. market share is returning to normal in 2003 and
2004 as feed grain stocks have returned to their normal levels. In
2003, Morocco imported 330,819 metric tons of U.S. corn, making it the
17th largest market for U.S. corn exports. The U.S. Grains Council
projects this market will continue to grow over the next ten years,
with additional demand for feed grains of 1.2 million metric tons by
the year 2011.
Driving Morocco's feed grain demand is poultry production, the
fastest growing meat production sector in Morocco. In 2003, total
broiler production was 245,000 metric tons (plus 12,000 metric tons
from spent laying hens and breeders and 50,000 from backyard chicken
production) and total egg production was 2.35 billion (plus 800 million
eggs from backyard production). Per capita consumption of eggs is 105
per year and poultry meat is 10.2 kilograms. During 2003, the poultry
sector consumed approximately 825,000 metric tons of corn. There is
further room for growth in the poultry sector, as the cost of producing
chicken meat in Morocco is one of the highest when compared to other
middle-income countries. In addition, corn is no longer seen as a
viable crop for production in Morocco due to the large amounts of water
it consumes and the fact that domestically produced corn is extremely
expensive compared to international prices.
Morocco's beef sector has remained stagnant over the past twelve
years, with an annual production level of 150,000 metric tons of beef.
Production levels of red meat would have to increase to 512,000 metric
tons by the year 2020 to keep up with population growth, given the per
capita consumption of 4.3 kilos per year. This level of production can
only take place through intensive feeding of a larger number of animals
with access to low cost feed grains.
Although Morocco represents a valuable market to U.S. corn growers,
high tariffs remain a significant barrier to U.S. exports. The current
tariff system in place operates much like a variable levy--when the
world price goes up, the overall percentage charged on the value of the
corn shipment goes down; and when the world price goes down, the
percentage goes up. For example, if a shipment of U.S. corn is valued
at $150 CIF, the first $80 is assessed an ad valorem tariff of 35
percent, while the other $70 for the amount above $80 is assessed a
duty of 2.5 percent. This gives little incentive for importers to seek
the best world price or the most optimal combination of feed
ingredients.
The Morocco FTA cuts the tariff on U.S. corn initially in half (to
17.5 percent for lower value per ton shipments based on its reference
price system), and then proceeds to zero by year six based on linear
reductions. This provides a significant advantage to U.S. exporters and
could potentially allow them to capture near 100 percent of the
Moroccan market. The duty-free corn would save the Moroccan poultry and
livestock industries approximately $30 million per year based on
current imports and applied duties.
The reduction and elimination of tariffs on U.S. feed grains will
benefit corn growers upon implementation and in the future. The
reduction in tariffs will provide lower feed costs to the Moroccan
poultry and livestock industries which will allow further overall
expansion of the Moroccan market for feed grains. In addition, the
lower tariffs applied to U.S. feed grains versus the most favored
nation (MFN) rates that competitor countries will continue to face will
allow the United States to capture a larger portion of that important
growth market.
The future strength of the agricultural economy in the United
States will depend on expanding trade opportunities like those in
Morocco. At the same time we need to continue educating farmers across
the country on the benefits of trade. Sometimes it is hard to
articulate the importance when most farmers never see their grain again
once it leaves the elevator and is transported by barge or train. We
must do a better job communicating with our grassroots, but we need the
Congress and Administration to negotiate and enforce trade agreements
that allow farmers to participate on a level playing field in the
international marketplace.
The National Corn Growers Association remains committed to an
aggressive trade agenda and bilateral free trade negotiations. We urge
the Committee to approve the Morocco FTA as soon as possible and we
look forward working with you on this and other issues of importance.
Mr. Chairman, we appreciate the opportunity to comment and please do
not hesitate to contact us if we can be of assistance in any way.