[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE U.S.-EU FREE-TRADE AGREEMENT: TIPPING
OVER THE REGULATORY BARRIERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 24, 2013
__________
Serial No. 113-75
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
____________
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Commerce, Manufacturing, and Trade
LEE TERRY, Nebraska
Chairman
JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey Ranking Member
Vice Chairman G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas JOHN D. DINGELL, Michigan
DAVE B. McKINLEY, West Virginia BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas JIM MATHESON, Utah
ADAM KINZINGER, Illinois JOHN BARROW, Georgia
GUS M. BILIRAKIS, Florida DONNA M. CHRISTENSEN, Virgin
BILL JOHNSON, Missouri Islands
BILLY LONG, Missouri HENRY A. WAXMAN, California, ex
JOE BARTON, Texas officio
FRED UPTON, Michigan, ex officio
C O N T E N T S
----------
Page
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 1
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Leonard Lance, a Representative in Congress from the State
of New Jersey, opening statement............................... 5
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, prepared statement.............................. 6
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 105
Witnesses
Matthew R. Blunt, President, American Automotive Policy Council.. 7
Prepared statement........................................... 11
Answers to submitted questions............................... 172
John J. Castellani, President and CEO, Pharmaceutical Research
and Manufacturers of America................................... 18
Prepared statement........................................... 20
Answers to submitted questions............................... 179
Calvin M. Dooley, President and CEO, American Chemistry Council.. 27
Prepared statement........................................... 29
Answers to submitted questions \1\........................... 184
Dean C. Garfield, President and CEO, Information Technology
Industry Council............................................... 37
Prepared statement........................................... 39
Answers to submitted questions \2\........................... 186
Jean M. Halloran, U.S. Liaison, Transatlantic Consumer Dialogue
Secretariat, Senior Advisor on International Affairs to the
President Of Consumer Reports, on behalf of the Consumers Union
and the Transatlantic Consumer Dialogue........................ 48
Prepared statement........................................... 50
Answers to submitted questions \3\........................... 188
Carroll Muffett, President and CEO, Center for International
Environmental Law.............................................. 58
Prepared statement........................................... 60
Answers to submitted questions............................... 191
Submitted material
Documents submitted by Mr. Terry
Statement of American Apparel & Footwear Association......... 107
Statement of the Alliance of Automobile Manufacturers........ 111
Statement of Global Automakers............................... 113
Statement of Handmade Toy Alliance........................... 119
Statement of Marketing Research Association.................. 133
Statement of the Society of Chemical Manufacturers and
Affiliates................................................. 135
Statement of TechAmerica..................................... 139
Statement of the Toy Industry Association Statement of
America.................................................... 143
Statement of the Biotechnology Industry Organization......... 153
Documents submitted by Ms. Schakowsky
Statement of the Coalition for Sensible Safeguards........... 161
Statement of the Transatlantic Consumer Dialogue............. 163
Statement of Hon. Sharon Treat, a Representive from the State
of Maine................................................... 166
----------
\1\ Mr. Dooley did not respond to submitted questions for the
record.
\2\ Mr. Garfield did not respond to submitted questions for the
record.
\3\ Ms. Halloran did not respond to submitted questions for the
record.
THE U.S.-EU FREE-TRADE AGREEMENT: TIPPING OVER THE REGULATORY BARRIERS
----------
WEDNESDAY, JULY 24, 2013
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:45 a.m., in
room 2123, Rayburn House Office Building, Hon. Lee Terry
(chairman of the subcommittee) presiding.
Present: Representatives Terry, Lance, Blackburn, Harper,
Guthrie, Olson, Kinzinger, Bilirakis, Johnson, Long,
Schakowsky, Sarbanes, McNerney, Dingell, Matheson, Barrow,
Christensen, and Waxman (ex officio).
Staff Present: Charlotte Baker, Press Secretary; Jerry
Couri, Senior Environmental Policy Advisor; Kirby Howard,
Legislative Clerk; Nick Magallanes, Policy Coordinator, CMT;
Gib Mullan, Chief Counsel, CMT; Andrew Powaleny, Deputy Press
Secretary; Shannon Weinberg Taylor, Counsel, CMT; Michelle Ash,
Minority Chief Counsel; and Will Wallace, Minority Professional
Staff Member.
OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Terry. All right. I think we are all set now. And it
looks like we will have a good morning, in the sense that the
votes will not occur until 1:30. I am pretty confident that we
are going to finish this panel before then.
So let's start the hearing. And I recognize myself for 5
minutes for the opening statement.
Good morning, and welcome to today's hearing, where we will
examine the regulatory issues that we expect will come up
during the negotiation of the Transatlantic Trade and
Investment Partnership, also known as TTIP.
A trade agreement with the European Union should, in many
ways, be a commonsense policy for the United States. Already,
the bilateral trade relationship between the U.S. and the EU is
the largest in the world, accounting for over $1 trillion in
trade, of which U.S. exports account for $463 billion.
According to the U.S. Trade Representative, this relationship
supports over 13 million jobs in the United States and Europe,
accounts for $3.7 trillion worth of direct investment in both
economies.
These are significant data points, and our subcommittee's
legislative record thus far supports many of those figures. Our
subcommittee's activity this Congress began by hosting an
entire hearing series that focused on learning from our
Nation's manufacturers. We heard time and time again from a
variety of industries about the well-paid, middle-class jobs it
could create if given the opportunity to expand their
operations and the positive effects this type of growth has on
various parts of our economy.
As the numbers suggest, foreign direct investment is a key
element of our trade relationship with the EU. We want this
piece of our trade portfolio to grow and strengthen, and not
just with the EU. So Ranking Member Schakowsky and I crafted
legislation aiming to lower barriers in the U.S. to inbound
foreign direct investment that the full committee unanimously
approved last week. And I am hearing solid rumors that it will
be on the floor next week. I believe that when foreign
companies want to initiate or expand their manufacturing
footprint in the U.S., it is good for our long-term economic
success.
Now we will turn our attention to TTIP, another potential
job-creating addition for our economy. This trade agreement is
unique for many reasons. Historically, tariffs on goods have
been the single biggest barrier to trade, but because of how
tariffs between the U.S. and the EU already exist, this isn't
the case with this negotiation. Consequently, addressing non-
tariff barriers is a substantial portion of the negotiation.
And, according to high-level working groups, as much as 80
percent of the so-called potential gains in the TTIP lie in
addressing these so-called behind-the-border issues. TTIP
represents a historic opportunity for both sides to create
greater openness, transparency, and convergence in regulatory
approaches and standards, while reducing unnecessary and
redundant requirements.
It would seem to make sense that if the European Medicines
Agency, EMA, just inspected a pharmaceutical manufacturer in
Berlin for compliance with good manufacturing practices, that
the U.S. FDA could rely on the findings of the European
inspector instead of duplicating the effort by conducting its
own inspection. But that is not the case.
It might also seem to make sense that, givenour respective
standards yield equivalent safety performance on vehicles, we
should be able to find a certain level of uniformity or at
least mutual recognition of the U.S. and European auto safety
regulations. Remarkably, or maybe unremarkably, as the case may
be, over the past 15 years only seven out of the hundreds of
safety regulations have been harmonized.
There are countless more examples of areas where U.S.
companies, workers, and consumers stand to gain from this type
of collaboration. And we should use every tool at our disposal
in an effort to maximize the potential benefits for Americans
when it comes to this agreement.
I would like to thank our witnesses for appearing before us
today. We have a broad cross-section of stakeholders before us
that each have a unique perspective on what the TTIP could
bring to their industries and, most importantly, into the
United States.
I look forward to hearing from each of you and now
recognize the ranking member, Jan Schakowsky from Illinois.
[The prepared statement of Mr. Terry follows:]
Prepared statement of Hon. Lee Terry
Good Morning, and welcome to today's hearing, where we will
examine the regulatory issues that we expect will come up
during the negotiation of the Transatlantic Trade and
Investment Partnership, also known as the U.S.-EU free-trade
agreement, or T-TIP.
A trade agreement with the European Union should in many
ways be a common sense policy for the United States. Already,
the bilateral trade relationship between the U.S. and the EU is
the largest in the world-accounting for over $1 trillion in
trade-of which U.S. exports account for $463 billion. According
to the U.S. Trade Representative, this relationship supports
over 13 million jobs in the United States and Europe and
accounts for $3.7 trillion worth of direct investment in both
economies.
These are significant data points, and our subcommittee's
legislative record thus far supports many of those figures. Our
subcommittee's activity this Congress began by hosting an
entire hearing series that focused on learning from our
nation's manufacturers. We heard time and time again from a
variety of industries about the well-paid middle class jobs
they could create if given the opportunity to expand their
operations and the positive effects this type of growth has on
various parts of the economy.
As the numbers suggest, foreign direct investment is key
element of our trade relationship with the EU. We want this
piece of our trade portfolio to grow and strengthen, and not
just with the EU, so Ranking Member Schakowsky and I crafted
legislation aiming to lower barriers in the U.S. to inbound
foreign direct investment that the full committee unanimously
voted to approve last week. I believe that when foreign
companies want initiate or expand their manufacturing footprint
in the U.S. it's good for our long term economic success.
Now, we will turn our full attention to T-TIP, another
potential job-creating addition to our economy. This trade
agreement is unique for many reasons. Historically, tariffs on
goods have been the single biggest barrier to trade. But
because of how low tariffs between the U.S. and the EU, this
isn't the case with T-TIP. Consequently, addressing non-tariff
barriers is a substantial portion of the negotiation and,
according to the High Level Working Group, as much as 80
percent of the overall potential gains in the T-TIP lie in
addressing these so-called ``behind the border'' issues.
T-TIP represents a historic opportunity for both sides to
create greater openness, transparency and convergence in
regulatory approaches and standards while reducing
unnecessarily redundant requirements.
It would seem to make sense that if the European Medicines
Agency (EMA) just inspected a pharmaceutical manufacturer in
Berlin for compliance with Good Manufacturing Practices, the
U.S. FDA could rely on the findings of the European inspector
instead of duplicating the effort by conducting its own
inspection. Unfortunately, this is not the case.
It might also seem to make sense that given our respective
standards yield equivalent safety performance of vehicles, we
should be able to find a certain level of uniformity--or at
least mutual recognition of--the U.S. and European auto safety
regulations. Remarkably, or unremarkably as the case may be,
over the past 15 years only seven out of the hundreds of safety
regulations have been harmonized through participation in a
United Nations working group.
There are countless more examples of areas where U.S.
companies, workers and consumers stand to gain from this type
of collaboration, and we should use every tool at our disposal
in an effort to maximize the potential benefits for Americans
when it comes to this agreement.
I would like to thank our witnesses for appearing before us
today. We have a broad cross-section of stakeholders that each
have a unique perspective on what the T-TIP could bring to the
U.S. I look forward to hearing from each one of them.
I now recognize the ranking member, Ms. Schakowsky.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman. I appreciate the
hearing that you are holding, that we are holding here today on
the Transatlantic Trade and Investment Partnership
negotiations.
I look forward to hearing from all of our witnesses about
this very important issue. I especially want to welcome Former
Congressman Cal Dooley.
It is good to see you, Cal. Glad you are here.
American trade with Europe is vitally important to our
economic outlook. One-fifth of all U.S. trade is conducted with
Europe, accounting for $1 trillion in trade of goods and
services just last year. Some economists maintain that an
agreement would increase trade by as much as 15 percent.
While I am committed to strengthening our economic ties to
our European allies, I do have serious concerns that an
agreement with inadequate safeguards could hurt American
consumers, workers, public health, and the environment.
The High-Level Working Group on Jobs and Growth, in its
February report on this issue, identified three objectives for
a trade agreement with the EU. Among the three main objectives
identified is the goal, quote, ``to reduce unnecessary costs
and administrative delays stemming from regulation,'' unquote.
That objective, I have to tell you, raises many red flags
for me. While we all agree that actual unnecessary trade
barriers should be addressed, it is important to identify what
qualifies as unnecessary.
For example, I don't believe that the fuel economy
standards that President Obama negotiated with auto
manufacturers, which reduce greenhouse gas emissions by 6
billion metric tons over 8 years, saving the average U.S.
driver $8,000 over the life of her car, are unnecessary. I
don't believe that standards that keep the toys our children
and grandchildren play with and the food we eat safe are
unnecessary. I don't believe that price limits for public
programs like Medicare negotiation or Medicaid drug rebates are
unnecessary, and, in fact, they save consumers billions of
dollars and enable access to lifesaving medicine.
On the issue of drug pricing and accessibility, we are
going to hear from Mr. Castellani--and I appreciate our meeting
yesterday--about pharmaceutical issues and trade agreements. I
want to make very clear my view that access to essential
medicines should be debated out in the open, not in secret
trade discussions where the public and even Members of Congress
are excluded.
The pharmaceutical industry has put its significant weight
behind efforts to protect the profits and intellectual property
associated with its products. In many cases, those efforts fly
directly in the face of efforts to expand access to lifesaving
drugs for low-income individuals, both in the developing world
and here at home. I am much more concerned about saving
people's lives than adding to the already large profits of the
pharmaceutical companies.
We have made some progress to achieve more balance between
the priorities of the pharmaceutical industry and those of the
people in need of treatment through the Doha Declaration and
the May 10th Agreement, and I am deeply concerned about efforts
to undo those improvements. I have heard from healthcare
advocates and doctors from around the world and experts here at
home that proposed changes to our trade agreements would not
only raise the cost of drugs overseas but tie the hands of
those who want to make medications more affordable here at
home.
At the very least, I repeat, this issue should be
considered in open, public forums, not closed-door trade
negotiations.
Again, I support efforts to expand trade with Europe, but
not at the cost of undermining our own or our partners' efforts
to promote the growth of good jobs or protect the public health
and the environment.
I look forward to hearing from all of our witnesses on
these issues.
And, Mr. Chairman, I yield back.
Mr. Terry. Thank you.
And now we recognize the vice chairman of the subcommittee,
Mr. Lance, for 5 minutes.
OPENING STATEMENT OF HON. LEONARD LANCE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Lance. Thank you, Mr. Chairman.
And I welcome our invited witnesses and everyone in the
audience to this important hearing on the United States and
European Union's negotiation of the Transatlantic Trade and
Investment Partnership, also known as TTIP.
I am pleased that the United States and the European Union
have entered into negotiations over TTIP. The economic
relationship between the United States and the European Union
is the world's largest and most prosperous. These negotiations
have wide, bipartisan support because of the recognition that,
should this trade agreement be completed, it will have a
dynamic effect on the economies of all nations concerned.
In New Jersey's Seventh Congressional District, which I
represent, the pharmaceutical and telecommunications industries
stand to benefit from an agreement. On a broader scale, if
successful, this agreement has the potential to serve as a
template for which all future agreements between the United
States, the European Union, and third parties could be
negotiated.
From my perspective, I hope that the negotiations address
some of the regulatory barriers that stand in the way of an
agreement being reached, the so-called beyond-the-border
barriers of regulations.
While tariffs between the United States and the European
Union are lower compared to other standing trade agreements,
the differences between the regulatory structure of the United
States and the regulatory structure of the individual European
states are, for the most part, different. And we must reconcile
these differences in order to reach an agreement.
The other issue that I hope is addressed is that of
intellectual property rights. This subcommittee highlighted the
issues of intellectual property rights in trade agreements with
India in a previous hearing, and I hope that the United States
and the European Union can agree to robust intellectual
property-right protections in their trade agreement.
It is my ultimate hope that the United States and the
European Union, the two largest trading markets in the world,
will be able to come to a mutually beneficial agreement that
strengthens this already great trading relationship. I look
forward to the discussion among members of the committee and
stakeholders on how to achieve this objective.
And, Mr. Chairman, I yield back the balance of my time.
Mr. Terry. Is there anybody else on our side that wishes 2
\1/2\ minutes?
Seeing none, the time is yielded back.
The chair recognizes the full committee ranking member, the
gentleman from California.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman.
Today we are holding a hearing on an important subject with
major ramifications for U.S. policies, the U.S.-EU free-trade
agreement.
The United States and the European Union, which together
make up over 40 percent of global GDP, have entered into
negotiations on what would be the largest free-trade agreement
ever completed. Just for comparison, the EU market is more than
five times larger than the combined markets of Canada and
Mexico, our partners in NAFTA.
We have much in common. EU member states are democracies
with general high levels of economic development. And, despite
recent economic turmoil, they remain dedicated to policies
supporting an open international economy. We both have engaged
in austerity economic policies, which have failed there and are
failing here.
In 2012, more than $1.5 trillion in trade flowed between
the U.S. and member states of the EU, nearly double the value
of such trade 10 years earlier. The Transatlantic Trade and
Investment Partnership, or TTIP, proposes to further strengthen
our economic ties. I believe this is a worthy goal, and I
applaud the Obama administration for pursuing it.
While traditional trade barriers between the U.S. and EU
were already low, with average tariffs under 3 percent, they
are still significant, particularly to small and medium-sized
enterprises that want to become exporters. Lowering these
tariffs will save these companies millions of dollars. We can
also gain by cooperating on specific challenges, such as local
content rules, state-owned enterprises, and customs policies.
For most major industries, the major focus of negotiations
are behind-the-border barriers, which usually refers to
domestic regulatory measures. While we should always work to
avoid duplication, we must ensure that the push for regulatory
compatibility does not create a race to the bottom. I have
consistently believed that trade agreements negotiated by the
United States should not compromise sensible standards in the
United States or abroad. The U.S. and EU member states should
strengthen our competitiveness by raising the standards in our
countries, not by weakening them.
The pharmaceutical industry is a good example of the
complex issues this trade agreement raises. This agreement
should not be used as a vehicle to, one, drive up drug prices
in other countries or undermine efforts to reduce prices here;
or, two, delay or impede access to less expensive generic drugs
in developing countries, where too few can afford needed
medicines; or, three, disrupt the delicate balance of
innovation and access to medicines that we achieved in Waxman-
Hatch. Yet this could be the result of some proposals that have
been discussed.
International trade has the potential to raise the standard
of living and quality of life for people in the United States,
the European Union, and around the world. To uphold that
vision, we must ensure that our citizens continue to have
essential regulatory protections. Regulations keep automobiles,
children's toys, our food supply safe. They support public
health, privacy rights, and secure financial markets. And they
are crucial to the global effort to combat climate change.
When TTIP negotiators reconvene, I encourage them to
remember the importance of commonsense regulatory measures that
enhance consumer wellbeing. Trade liberalization should not be
just about reducing costs or enhancing efficiency. It is more
fundamentally about improving people's quality of life, whether
they live and work here in the United States or in the
countries with which we trade.
Unless any of my colleagues wish to have additional time,
what is left, I yield back the balance of my time.
Mr. Terry. Thank you, Mr. Waxman.
The gentleman yields back. And I am going to introduce
our----
Mr. Waxman. Oh, Mr. Chairman, before you do----
Mr. Terry. Yes?
Mr. Waxman [continuing]. May I apologize to the members
that are testifying. I know it is a very good group, an
important group of witnesses. But we have other subcommittees
meeting at the same time, so----
Mr. Terry. Almost all of them, by the way, all the
subcommittees at one time, it seems like.
Mr. Waxman. Right.
Mr. Terry. Thank you, Mr. Waxman.
I am now introducing our panel, and I will introduce the
whole panel, and then we will start with you, Mr. Blunt,
Governor Blunt, and move from my left to right.
So first on our panel, Governor Matt Blunt, president of
the American Automotive Policy Council; then John Castellani,
president and CEO of the Pharmaceutical Research and
Manufacturers of America; one of our own, been on both sides of
this table, honorable former Member Cal Dooley, president and
CEO of the American Chemistry Council.
Then we are honored to have Dean Garfield, president and
CEO of Information Technology Industry Council; and then Jean
Halloran, on behalf of the Consumers Union and the
Transatlantic Consumer Dialogue, U.S. liaison, Transatlantic
Consumer Dialogue Secretariat, Senior Advisor, International
Affairs, to the president of Consumer Reports; and then last,
Mr. Carroll Muffett, president and CEO of the Center for
International Environmental Law.
Thank you all for taking time to be here to help educate
us. As most of you know, you have 5 minutes for your
statements. There are lights there that will be green when you
start. When you start seeing the yellow, sum up, please.
So, at this time, I am honored to recognize Governor Blunt
for your 5 minutes.
STATEMENTS OF THE HON. MATTHEW R. BLUNT, PRESIDENT, AMERICAN
AUTOMOTIVE POLICY COUNCIL; JOHN J. CASTELLANI, PRESIDENT AND
CEO, PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA; THE
HON. CALVIN M. DOOLEY, PRESIDENT AND CEO, AMERICAN CHEMISTRY
COUNCIL; DEAN C. GARFIELD, PRESIDENT AND CEO, INFORMATION
TECHNOLOGY INDUSTRY COUNCIL; JEAN M. HALLORAN, U.S. LIAISON,
TRANSATLANTIC CONSUMER DIALOGUE SECRETARIAT, SENIOR ADVISOR ON
INTERNATIONAL AFFAIRS TO THE PRESIDENT OF CONSUMER REPORTS, ON
BEHALF OF THE CONSUMERS UNION AND THE TRANSATLANTIC CONSUMER
DIALOGUE; AND CARROLL MUFFETT, PRESIDENT AND CEO, CENTER FOR
INTERNATIONAL ENVIRONMENTAL LAW
STATEMENT OF THE HON. MATTHEW R. BLUNT
Mr. Blunt. Thank you, Chairman Terry and Ranking Member
Schakowsky and members of this committee.
Mr. Terry. Is the microphone on?
Mr. Blunt. It is now. And, again, thank you, Chairman.
I am Matt Blunt, president of the American Automotive
Policy Council, which represents the common public policy
interests of our member companies: Chrysler, Ford, and General
Motors.
On May 10th, AAPC and our European counterpart, ACEA,
jointly submitted a detailed auto regulatory convergence
proposal in response to the USTR Federal Register notice. This
statement is based on that submission, which would provide a
more thorough treatment of our proposal.
As the largest manufacturing and exporting sector in the
United States, the auto industry has a major stake in the
successful completion of a Transatlantic Trade and Investment
Partnership, or TTIP. TTIP will represent the largest share of
auto production and sales ever covered by a single free-trade
agreement. And we believe that a well-negotiated TTIP that
includes the elimination of tariffs and major non-tariff
barriers in the auto sector has great potential to grow the
transatlantic auto trade and investment relationship.
The global landscape for auto production and sales is
changing. Global auto sales are expected to increase more than
50 percent by the end of the decade, equating to roughly a
billion new automobiles on the road around the world. The
concentration of this growth will be in emerging markets, with
vehicle sales eventually surpassing the sales growth in mature
markets such as the United States and Western Europe. It is
essential to ensure that regulatory costs do not inhibit future
growth in auto sales and exports and the critical role they
play in economies on both sides of the Atlantic.
The negotiation of the TTIP presents an opportunity to
implement a regime that effectively breaks down regulatory
barriers in the auto sector, recognizes regional integration of
benefits both to the U.S. and the EU, reduces costs and
increases commercial predictability, while respecting U.S. and
EU sovereignty, and certainly without sacrificing vehicle
safety or environmental performance.
Past efforts to harmonize have been ineffective and slow,
and we are proposing a new approach: mutual recognition for
existing automotive regulations and for future regulations that
are deemed necessary, the establishment of a joint regulatory
harmonization process that facilitates the development and
adoption of common future new regulations.
Our proposal is guided by the following principles: We must
have strong and sustained political support at the highest
levels of government and the relevant regulatory authorities.
There should be no net increase in U.S. or EU regulatory
requirements as a result of this convergence; no new third
regulations or additional certification requirements. And then,
as I stated, mutual recognition shall permit an automaker to
sell a vehicle built to either recognized standard in either
market.
Recognizing the significant advancements that the
regulations have provided in environmental and safety
technologies in both the U.S. and the EU, acceptance of an
existing regulation should be presumed unless the analysis of
the data conducted by the responsible regulatory agency
demonstrates that the regulation is deficient from either a
safety or environmental perspective.
We recommend that the process begin immediately, in close
cooperation with industry, in order to take advantage of the
current increased existing political will and interest in
regulatory convergence. Our May 10th submission provides a list
of U.S. and EU safety and environmental regulations for mutual
recognition consideration during the TTIP negotiations and a
proposed data-driven process for purposes of completing the
necessary assessment.
When a new regulation is needed, a joint U.S. and EU
regulatory harmonization process that takes into account the
differences and regulatory development and implementation
timelines needs to be developed that promotes and facilitates
the development and adoption of common future new regulations.
This process should also include a mechanism to foster the
development of common voluntary standards in the pre-regulatory
environment.
Key elements of a U.S. and EU harmonized standards process
must aim at strengthening the automotive industry in both
regions with lower costs through reductions in regulatory
complexity, reducing administrative burdens while maintaining
flexibility and increased predictability, have strong and
sustained political support at the highest levels of
government, and engage industry to work together to develop the
harmonized approach, and certainly should provide a timeline to
complete the development of this harmonization process.
TTIP presents an opportunity to break down tariffs and
regulatory barriers in the auto sector, promote regional
integration, reduce costs, and increase commercial
predictability, while respecting U.S. and EU sovereignty, and,
as I said earlier, without sacrificing vehicle safety and
environmental performance.
Again, thank you for the opportunity to present our views
on the TTIP, and we look forward to working with the
subcommittee on this important negotiation.
Mr. Terry. Thank you.
[The prepared statement of Mr. Blunt follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Mr. Castellani, you are now recognized for your
5 minutes.
STATEMENT OF JOHN J. CASTELLANI
Mr. Castellani. Thank you, Mr. Chairman, Ranking Member
Schakowsky, and members of the committee. It is a pleasure to
be here to talk about this very important proposed agreement.
To put the relationship of our industry between ourselves
and Europe in context, in 2011 about 80 percent of the
medicines and development around the world were being
researched and tested in the United States and in the European
Union. And this figure is a testament to the fact that the U.S.
and EU generally provide the strongest global support for
biopharmaceutical research and development.
Yet the continued strength of the innovative
biopharmaceutical industry in both regions is far from
guaranteed. The time and investment required to research and
develop new medicines continues to increase, and the global
ecosystem grows more hostile to that innovation.
And it is in this context that PhRMA and its member
companies strongly support a high-standard, trade-liberalizing
agreement between the EU and the U.S. and one that eliminates
unnecessary non-tariff barriers between these regions and
establishes a model for all future trade agreements.
PhRMA represents America's leading biopharmaceutical
companies. Our members pioneer new ways to save lives, cure
disease, and promote longer, healthier, and more productive
lives.
In 2012, our members invested more than $50 billion in
research and development. And in 2011, the last year we have
numbers, our sector employed more than 810,000 workers in the
United States and supported 3.4 million jobs, in addition,
across the country. That total activity contributed nearly $790
billion in economic output, considering the direct, indirect,
and induced effects of our industry.
PhRMA welcomes the expansion of the world's most dynamic
trading relationship that already contributes significantly to
creating jobs on both sides of the Atlantic. To be meaningful
and comprehensive, the U.S. and EU negotiations should address
not only regulatory compatibility initiatives but intellectual
property protections, market access provisions, and customs and
public pronouncement measures, as well.
Biopharmaceutical innovation does not happen in a vacuum.
It requires significant intellect, time, resources, and an
ecosystem that values and protects the resulting intellectual
property that is created.
For this reason, our industry is particularly concerned
about aspects of the current European environment.
First, shortsighted cost-containment measures, ostensibly
proposed in response to financial crisis but too often
implemented without predictable, transparent, and consultative
processes, have significantly impacted our members' business in
Europe. These measures raise serious concern regarding several
EU member states' commitment to adequately reward innovation.
Another issue of concern to the industry is the EMA's
current and proposed data disclosure policies. The
biopharmaceutical industry is firmly committed to enhancing the
public health through responsible reporting and publication of
clinical research and safety information. However, the
disclosure of non-public data submitted in clinical and
preclinical dossiers and patient-level data sets risks that
damage both public health and patient welfare.
PhRMA and its members urge the U.S. Government to engage
with the EU in every available avenue to ensure responsible
data-sharing.
We also recommend that the biopharmaceutical market access
commitments be included in the EU and the U.S. agreements, with
the Korean form of the basis for similar commitments included
in any EU-U.S. agreement.
Key principles should be built into potential
pharmaceutical chapters that we believe should include
recognizing the value of biopharmaceuticals and the value they
can play in reducing more costly medical interventions and
improving the life of patients; respecting the right of
physicians and other healthcare providers to prescribe
appropriate medicines for their patients based on clinical
need.
Further, both the EU and the U.S. recognize that IP is the
lifeblood of innovation, and providing IP rules within the
legal and regulatory regimes. Any agreement between the U.S.
and EU must not dilute those protections.
Finally, on the already high level of cooperation between
the FDA and EMA, PhRMA has proposed a number of regulatory
compatibility initiatives to reduce the regulatory burden for
both the sponsors and the agencies. These include reducing
redundant testing, seeking mutual recognition of our general
manufacturing principles and our good clinical principles,
inspections, and establishing a procedure for the development
of therapeutic area-specific regulatory guidelines.
In summary, PhRMA and its members strongly support the
proposed agreement and look forward to being an active
stakeholder throughout the negotiations.
Thank you very much.
Mr. Terry. Well done. Thank you very much.
[The prepared statement of Mr. Castellani follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. And, Mr. Dooley, thank you for being here once
again. And you are now recognized for 5 minutes.
STATEMENT OF THE HON. CALVIN M. DOOLEY
Mr. Dooley. Thank you, Mr. Chairman. I want to thank all
the members of the subcommittee for an opportunity to speak
today.
The American Chemistry Council represents the leading
companies engaged in the business of chemistry. And the
business of chemistry is a $770-billion enterprise which
provides about 788,000 high-paying jobs in this country. A lot
of folks don't also realize that the American chemistry
industry produces 15 percent of the world's chemicals, which
represent--and we also provide about 12 percent of all U.S.
exports.
ACC and its member companies are strong supporters of the
Transatlantic Trade and Investment Partnership. Two-way trade
in chemicals across the Atlantic totaled more than $51 billion
in 2012, and Europe remains one of the U.S. industry's largest
markets.
The reduction and elimination of transatlantic tariffs and
barriers to trade in chemicals would contribute to a
significant expansion of U.S. chemical manufacturing and
exports, allowing to us to capitalize on our enhanced
competitiveness of the U.S. chemical industry due to increased
supplies of natural gas, primarily from shale formations.
Since 96 percent of all manufactured goods rely on the
business of chemistry, this would provide a major boost to
overall economic growth and job creation, enhance U.S.
competitiveness, and expand consumer choice.
The purpose of pursuing closer regulatory cooperation
between the U.S. and EU should be to explore opportunities for
creating efficiencies within and between regulatory systems
while maintaining high levels of protection for human health
and the environment. The goal is not to undermine or weaken
existing regulatory mandates, but rather to ensure that those
mandates do not result in unnecessary barriers to trade.
The U.S. and the EU regulate chemicals in different ways.
That is not going to change because of TTIP. In fact, recent
congressional action affirms that the U.S. will continue to
embrace a more risk-based approach to chemicals management than
the more hazard-based approach embodied in the EU's REACH
regulation.
Where TTIP can add value is in ensuring that these
different regulatory systems operate as coherently as possible,
promoting efficient and effective regulatory approaches, and
exploring opportunities for cost reduction and burden-sharing.
Specific areas that might be addressed include efforts to
promote the better sharing of sound science. The goal should be
to minimize the potential for imposing additional regulatory
barriers when revising or developing new regulations and to
develop a common scientific basis for regulation. This could,
in turn, promote enhanced data- and information-sharing, which
would result in significant efficiencies for both government
and industry, reducing the need for duplicative testing.
Consistent with the comments of Congresswoman Schakowsky,
TTIP should also focus on ensuring greater transparency and
transatlantic cooperative activity between regulators.
Stakeholders on both sides of the Atlantic are aware that
regulator-to-regulator discussions are occurring, but
information on when cooperative activity is taking place and
what issues are being addressed is typically not made available
to stakeholders in advance of those discussions. Stakeholder
input and, where appropriate, participation in relevant
cooperative activities would facilitate expert input and help
enhance stakeholder confidence and support for the regulatory
cooperation.
ACC also calls on U.S. negotiators to explore opportunities
for promoting enhanced coherence in chemical prioritization and
assessment. The development of common principles for
prioritization and a process for comparing lists of chemicals
that are defined as priority could lead to greater
efficiencies, primarily by sharing the burden of review. Final
risk management decisions would remain sovereign, but a joint
approach in this area could promote greater certain in chemical
assessment process, significantly reduce costs for government
and industry by avoiding duplication and unnecessary testing,
and accelerate chemical reviews.
ACC strongly supports the negotiation of a comprehensive
and ambitious TTIP. In our view, the chemical industry is well-
placed to be a priority sector for enhanced regulatory
cooperation under TTIP. For the chemical industry and for the
broader U.S. economy, the TTIP has a potential to provide
significant boosts to growth and job creation, which in turn
would promote innovation and strengthen the international
competitiveness of U.S. exporters.
Thank you.
Mr. Terry. Thank you.
[The prepared statement of Mr. Dooley follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Now, Mr. Garfield, you are recognized for your 5
minutes.
STATEMENT OF DEAN C. GARFIELD
Mr. Garfield. Great.
Thank you, Chairman Terry, Ranking Member Schakowsky,
members of this committee. On behalf of the world's most
dynamic and innovative companies that make up the global tech
sector, we thank you for the opportunity to talk to you about
this issue today.
As well, we thank you for your work in general on trade.
The hearing you held last month on India has already had a
significant impact in pushing back on the preferred market
access regime that they tried to put in place there. In fact,
our hope for today's hearing is that it will have a similar
salutary impact as we move forward on TTIP.
As you have noted, this agreement has the potentially
precedent-setting impact, both economically and otherwise. And
given the eloquence of the other colleagues who have been on
this panel, rather than go through my entire written testimony,
I thought I would simply share our three objectives for the
potential partnership.
One, and foremost for you, I know, as well, is economic
growth and job creation. In order to ensure that this agreement
lives up to the forecast and that that forecast, in fact,
becomes fact, it is important that we include aspects of the
economy that are critical to economic growth.
The colleagues on the panel have highlighted a number of
areas. I would also like to point to electronic goods in
commerce. That e-commerce has the potential to be a significant
force multiplier for the entire economy, both businesses large
and small. So whether you are talking about AppleLink or an app
developer or the Apple vendor in each of your communities, the
potential impact is significant. And so we would suggest a
focus there.
As well, we would suggest focusing on the policy issues
that would impact e-commerce. A number of people on this panel
have already spoken about the importance of cross-border data
flow and the rules that need to be put in place to ensure that
that occurs, and we think that should be a priority.
Our second objective for this agreement is to make sure
that it is, in fact, a model for the rest of the world. A
number of economies, in an effort to drive innovation and
economic growth, have put in place forced localization
requirements like those that we saw in India or have tried to
fix things that are not broken--for example, creating new
governance models for the Internet.
Both the European Union and the United States have acted as
a bulwark against those sorts of pernicious policies. And TTIP
has the potential to align us in a more significant way in
pushing back against those sorts of problematic policies on a
global basis.
Our third and final priority for this agreement, potential
agreement, is something that the other folks on this panel have
spoken of already, which is greater regulatory alignment where
possible.
The reason we have almost as many mobile phones as people
in the world and the reason we have almost 3 billion people
accessing the Internet is because it is an open, interoperable
platform that is built on global consensus-based standards.
That is a model that we think is apt for purposes of these
discussions, as well.
We recognize that we are not going to be able to align and
harmonize all regulation, but where we can, we should. It will
reduce costs and will continue to improve lives, as we have
seen with the Internet generally and the availability of mobile
technologies.
Related to that, we think it is important, where it isn't
possible to have alignment, that we have an alarm system so
that there is greater transparency and certainty around where
those disagreements are and the reasons for the disagreements.
And so we look forward, as the tech sector, in working with
this committee and with Congress generally in making sure that
TTIP is not only completed but it is completed in a way that
advances both U.S., European, and world economic interests.
Thank you.
Mr. Terry. Very well done. Thank you very much.
[The prepared statement of Mr. Garfield follows:]
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Mr. Terry. Now, Ms. O'Halloran--I am sorry, Halloran. I
have a good friend, O'Halloran, so I apologize. You are not
Terry. But you are now recognized for 5 minutes. Thank you.
STATEMENT OF JEAN M. HALLORAN
Ms. Halloran. Thank you.
Thank you for inviting me to testify today, and I am
pleased to be able to give you the consumer viewpoints on the
trade negotiations.
I represent Consumers Union, the policy arm of Consumer
Reports, which has 8 million subscribers to its print and Web
editions. And I am also representing the views of the
Transatlantic Consumer Dialogue, which includes all the major
consumer organizations, some 60 groups, on both sides of the
Atlantic.
Trade between the EU and U.S. already has many obvious
benefits for consumers, increasing choices in products and
services ranging from automobiles to banking to wines. However,
consumer groups are extremely concerned about the avowed focus
of this negotiation, which is regulatory and non-tariff
barriers. We are concerned this may erode safety, threaten
privacy, and even increase prices by extending patent
protections and other means.
In citing the need for regulatory convergence and
harmonization and mutual recognition, we think there are many
hazards.
The EU and U.S. are both advanced, highly civilized
societies which have high standards of consumer protections for
its citizens, so what could be wrong with this? The answer is,
unfortunately, a lot. Theoretically, harmonization, if it is to
the highest standard of consumer protection, could bring great
benefits. However, that is not the history of trade agreements,
and it doesn't appear to be the goal of the U.S. negotiators
nor of a number of my colleagues here.
Meanwhile, the scope of topics being tackled in this
negotiation is breathtaking, including, potentially, auto
safety, chemical safety, biotechnology, nanotechnology,
pharmaceutical safety, patent protections, privacy on the
Internet, banking regulations, food safety, medical device
safety, and toy and consumer product safety. We find the
potential for erosion of standards in these areas alarming.
Let's look at a few examples of why consumer groups are
extremely concerned.
The concept of regulatory convergence implies some sort of
movement to the middle where standards differ. In the area of
toy safety, this committee and the U.S. Congress, with
bipartisan support, addressed a sudden influx of hazardous
toys, in most cases made in China, bypassing the CPSIA.
A key provision of that law requires toy companies to
obtain independent third-party certification from an accredited
laboratory that says that U.S. standards for the lead in the
paint on the toys and other safety standards are being met.
Europe does not require third-party certification for toys. How
do we converge that?
The idea of mutual recognition is equally concerning here.
Some might propose that we simply recognize that the self-
certification behind the CE mark in Europe is comparable to our
provision. We feel, however, that this could potentially open
the door for toys made in China by European companies,
exclusively designed for sale in the United States, which could
be less safe than toys made by U.S. companies and, therefore,
subject to CPSIA. Consumers could be put at risk, and U.S. toy
companies could be put at a disadvantage.
Let's take another example, in the food area. When mad cow
disease was discovered in the U.K. A number of years ago, the
U.K. And other European regulators continued to allow European
beef products to be sold and shipped across borders. The U.S.,
prudently, did not. We shut our doors to European beef quickly.
We think the U.S. action was entirely correct and
appropriate. The U.S. had a plentiful supply of beef here and
did not need to take any risks with the European beef. But what
if the EU and U.S. had a mutual recognition scheme in place at
the time? The U.S. could have been forced to keep taking
European beef for as long as Europeans deemed it safe enough to
sell to Europeans.
I would like to quickly bring up a couple of other topics.
Investor-state dispute resolutions concern us greatly. They
were originally developed in trade agreements to provide a
means for U.S. corporations who invested in countries who had
poor legal systems to obtain compensation if a government acted
to, say, nationalize their oil wells. Such mechanisms are
completely unnecessary, however, in the EU-U.S. context, where
we both have well-developed court systems to deal with these
kinds of difficulties.
Finally, a few words about secrecy in this discussion. A
critical area of concern is the secrecy with which the Obama
administration's appointed negotiators will be conducting this.
We certainly understand, as do Members of Congress, that not
every conversation needs to be conducted or can be conducted in
public. But Congress makes pending legislation public at
numerous stages. By contrast, drafts and texts in this
negotiation are being classified as Top Secret, unavailable to
public and stakeholders at this table as well as to Members of
Congress. This has not always been the case, and we urge you to
demand that USTR periodically make public the texts that they
are drafting.
Thank you.
Mr. Terry. Thank you.
[The prepared statement of Ms. Halloran follows:]
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Mr. Terry. And, Mr. Muffett, you are now recognized for
your 5 minutes.
STATEMENT OF CARROLL MUFFETT
Mr. Muffett. Thank you, Chairman Terry, Ranking Member
Schakowsky, and members of the subcommittee, for the
opportunity to appear before you today on a matter of profound
importance for the people of the United States, Europe, and the
world.
I am Carroll Muffett, president of the Center for
International----
Mr. Terry. Mr. Muffett, would you pull your microphone a
little bit closer to you?
Mr. Muffett. I am Carroll Muffett, president of the Center
for International Environmental Law, a nonprofit organization
that uses the power of the law to protect the environment,
promote human rights, and ensure that--ah, is that better?
Mr. Terry. We will leave it to the IT guy.
Mr. Garfield. If you have a problem back there, I can help
you.
Mr. Terry. Thank you for being here, Mr. Garfield.
Mr. Muffett. For over 20 years, CIEL has worked with
partners around the world to support a positive trade agenda,
where increased market access does not undermine environmental
protections or human rights.
I offer this testimony on behalf of CIEL, Friends of the
Earth, and the Sierra Club. I have submitted a full statement
for the record and would like to briefly summarize my testimony
here.
The current system for regulation of chemicals in the
United States is wholly inadequate to meet the challenge posed
by the modern chemicals economy. The rate of cancer and other
adverse effects continues to increase among Americans. The
amounts of synthetic chemicals in our bodies have also
increased and are among the highest in the world. Absent
greater regulatory action, they will continue to increase.
This is an international public health problem that remains
unsolved. Public health is one of the core responsibilities of
a government to its citizens, and this responsibility is not
being met with regard to chemicals.
The limited information on TTIP, particularly from the
United States, makes assessments of its eventual impact
inherently speculative. While TTIP could offer an opportunity
to increase protections in the U.S. and the EU, experience with
other trade agreements, industry submissions on TTIP, and the
parties' express goal of reducing perceived regulatory barriers
to trade make it far more likely that TTIP will hinder progress
on chemical safety and potentially move us backward.
Of particular concern is the risk that TTIP will be used to
weaken the stronger chemical standards that already exist in
the EU and in some U.S. States, rather than to raise U.S.
standards to achieve higher levels of protection.
To reduce this risk, TTIP must respect and protect the
right of citizens in the United States and Europe, through
their governments, to choose their own levels of environmental
protection and to set the standards needed to achieve those
levels.
TTIP must avoid measures likely to delay or dilute the
creation of new rules for the protection of human health or the
environment, including stronger chemicals laws. TTIP should not
include provisions for mutual recognition for the chemical
sector and other sensitive sectors that reduce domestic
regulatory control in crucial public health and safety matters.
TTIP must not elevate the narrow interests of private
corporations above the public good through provisions for
investor-state dispute resolution. TTIP should not preempt or
impede the rights of State and local governments or of
governments outside the United States and EU to adopt new
initiatives on toxic chemicals and other threats, including
their rights to choose higher levels of protections for their
citizens and to innovate new and better approaches to achieving
that protection when the Federal Government is unwilling or
unable to do so.
TTIP should not impede regulatory efforts to address
emerging threats such as nanotechnologies, endocrine-disrupting
chemicals, or hydraulic fracturing, which have profound
implications for our health and our environment.
Finally, TTIP must be negotiated in an open, transparent,
and participatory matter that safeguards the universal and
fundamental public interest in the outcome of the negotiations.
In recent years, the United States has conducted trade
negotiations with a secrecy and a lack of transparency wholly
inconsistent with basic principles of good governance in a
constitutional democracy and inconsistent with the public's
right to informed, meaningful participation in a public policy
dialogue of profound national consequence on both sides of the
Atlantic. Both parties should commit to broad public access to
negotiating documents and positions to facilitate informed
public debate regarding the negotiations and any resulting
agreement.
To protect the environment, health, and safety of
consumers, workers, and children around the world, what is
needed is not free-trade agreements but better trade
agreements--agreements that see public protection not as a
competing goal but the highest goal and leverage the power of
markets to serve the global good; agreements that enhance trade
by strengthening and advancing environmental health and safety
standards, rather than viewing them as irritants to be reduced
and eliminated. We look forward to an open, transparent, and
inclusive dialogue on whether and how such an agreement can be
achieved.
Thank you again for the opportunity to testify.
Mr. Terry. Thank you, Mr. Muffett.
[The prepared statement of Mr. Muffett follows:]
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Mr. Terry. Now, at this time, we will all ask the
questions. So my first question--I recognize myself for 5
minutes of questions.
Mr. Blunt, Mr. Castellani, Dooley, and Garfield, I will ask
you this question. You set out your goals for each one of your
industries. Now, it seems like the easiest approach here would
simply be, who has the most restrictive, and we will harmonize
to that level. Is that an appropriate strategy for the USTR?
Mr. Blunt, you can start.
Mr. Blunt. We would argue that, since both economies have
very sophisticated regulatory regimes today with very similar
environmental and safety outcomes, that the real goal should be
mutual recognition of vehicles built to either economy's
standards, so that vehicles built to the EU standard would be
acceptable for sale in the U.S. and vice versa.
Mr. Terry. So you would disagree with just harmonize to the
most restrictive standards?
Mr. Blunt. We think you should look at the results of the
standards that exist today and that the results would
demonstrate that you have very high levels of environmental and
safety performance in both economies and that you should just
recognize that you are achieving the same thing through the two
regulatory processes.
Mr. Terry. All right.
Mr. Castellani?
Mr. Castellani. Mr. Chairman, in our industry, as you know,
both the EU and the U.S. have very strict and very important
regulatory regimes. What we are suggesting in this agreement is
we take the best of the both but give the opportunity, from the
patient perspective, to have harmonization that makes it more
efficient for, for example, our FDA and the EMA.
In our industry, we have very high standards on both sides
of the Atlantic, obviously, for our manufacturing practices and
for our clinical trial practices. We think if we could
harmonize to that high standard, we could free up FDA resources
and EMA resources to focus on countries that present more of a
risk and manufacturing practices that present more of a risk
for patients.
So it is a not a simple ``yes'' or ``no.'' It is taking the
best, from a patient perspective, and applying it equally on
both sides of the Atlantic.
Mr. Terry. OK.
Mr. Dooley? And you may want to add some context for Mr.
Muffett's comment.
Mr. Dooley. Yes, I would say that, no, we have no interest
in a harmonization to the most restrictive standard.
And, you know, our companies, whether they are
manufacturing and introducing chemicals and products in the
United States or the EU or anyplace in the world, their first
commitment is that they are safe for their intended use.
But I would also just give a couple examples. You know, you
can look at what we would assess as a non-science-based
approach in the EU to the evaluation of the safety of GMO
products in agriculture. It is not just an accident that BASF
and Syngenta, both European-based companies, have moved all of
their bio-ag research and development to North Carolina, and it
is a direct response to the regulatory impact.
On the issue of REACH, BASF, one of the largest chemical
companies in the world, are now assessing that the regulatory
costs to their company to comply with REACH is going to amount
to about $650 million or $700 million. You know, we don't think
that that is contributing to safer outcomes and safer products,
because they are marketing the same products in the EU as they
are in the U.S. But they are facing an additional cost of
operation, which is siphoning dollars away from innovation.
What we are suggesting, though, that a lot of that research
and assessment and data that is being developed by BASF, what
they are spending some of that $650 million on, is that there
are opportunities for the sharing of that data between the U.S.
and the EU that can achieve greater efficiencies for industry
as well as for government.
Mr. Terry. Mr. Garfield?
Mr. Garfield. The answer is also ``no'' for us, but nor are
we advocating for the adoption of the least restrictive either.
I think that dichotomy is a false one.
What we are encouraging is that we use greater, more
objective standards that are science-based and, as well, that
we look at the impact and also avoid redundancy. So oftentimes
we, in fact, do have very similar standards, where you couldn't
point to any great distinction, but we have redundancies
anyway.
Mr. Terry. All right. Very good.
I will yield back my 15 seconds and recognize the
gentlelady from Illinois, Jan Schakowsky.
Ms. Schakowsky. Thank you very much, Mr. Chairman.
Mr. Castellani, in your testimony, you talked about, quote,
``issues of considerable concern to the industry,'' unquote,
and among them you mentioned, quote, ``shortsighted cost-
containment measures,'' talking about the European environment.
And, to me, it is a little ironic. You also said something
about ``too often implemented without predictable, transparent,
and consultative processes,'' which we are talking about, too,
as a shortcoming, I think, of these trade negotiations, that it
is not very transparent.
But I wanted you to tell me, yes or no, is PhRMA opposed to
the following cost-containment measures:
One, Medicaid drug rebates, the current Medicaid drug
rebates. Yes or no?
Mr. Castellani. We are opposed.
Ms. Schakowsky. You are opposed.
The 340B program, which would allow reduced costs for
certain safety net providers?
Mr. Castellani. We favor the 340B program.
Ms. Schakowsky. Favor.
A ban on pay-for-delay that would prohibit drug companies
from paying to keep generics off the market?
Mr. Castellani. We oppose that.
Ms. Schakowsky. State law limits on pharmaceutical company
payments to doctors?
Mr. Castellani. We oppose that.
Ms. Schakowsky. Medicare negotiation for prescription
drugs?
Mr. Castellani. We already have Medicare negotiations.
Ms. Schakowsky. OK, but allowing Medicare to fully
negotiate, as the VA does, for lower drug prices?
Mr. Castellani. Oh, the negotiations that occur now occur
through the insurance companies that provide the drug benefit.
Ms. Schakowsky. Right. But Medicare, itself, negotiating?
Mr. Castellani. No. We think the current system works fine.
Ms. Schakowsky. VA negotiations currently?
Mr. Castellani. The current system is fine.
Ms. Schakowsky. Negotiating authority for Federal Employees
Health Benefits Program?
Mr. Castellani. Well, again, the insurers do have that
authority.
Ms. Schakowsky. OK. And you wouldn't oppose that or want to
change that in any way?
Mr. Castellani. That is how prices are determined by
insurance companies.
Ms. Schakowsky. OK. And formularies?
Mr. Castellani. That is how formularies are determined by
insurance companies.
Ms. Schakowsky. OK.
The elimination of existing cost-containment measures and
the restriction on possible future ones that we see could be
coming up increases cost to States, taxpayers, and consumers.
And, at the very least, I think all of these cost-containment
changes that could possibly be in this agreement should be
discussed publicly rather than just behind closed doors.
Turning to another issue, auto safety. And, Ms. Halloran, I
wanted to ask you and Governor Blunt if you wanted to comment.
In meetings regarding this hearing, companies pointed to
the auto industry as one space where they believe there can be
substantial progress made toward their goal of regulatory
harmonization.
So, in your testimony, you mentioned child occupant
protection standards. I have long supported efforts to
strengthen U.S. requirements for car seats and boosters. It is
only recently that the U.S. has added a child-sized crash dummy
to its testing, which is the size of the typical 10-year-old,
as well as a standard crash test for rear occupants.
Can you describe the difference between the U.S. and EU
standard for car seats and why you think the EU standard is
safer?
Ms. Halloran. I think it might be best if I get back to you
on that.
The EU does have a number of standards which are better
than ours, we think, and ones which we would advocate for NHTSA
to adopt. And this is a clear area where it would be good to
harmonize up.
But I think I should get back to you on the specifics after
I talk to my colleagues.
Ms. Schakowsky. OK.
And let me ask you, Governor Blunt. I mean, there are many
efforts right now where consumer groups are looking at those
ways in which European standards are higher.
My understanding of what you are saying is neither one
should have to change and that each should be accepted in each
country. Is that--that is your goal?
Mr. Blunt. That is our goal, though if a new need emerged,
we are not stating that we are opposed to new regulations in
either economy if there is a new safety need that needs to be
addressed. But our goal would be to recognize that today you
achieve essentially the same environmental and safety outcomes
and have mutual recognition of those standards.
Ms. Schakowsky. OK.
And with just a few seconds, I would love to meet with you
about the regulation that would require rear visibility through
cameras, which has been held up at the National Highway
Transportation Safety Board. That would prevent two children,
on average, a week being killed by back-overs. And if we could
at some point meet about that, I would appreciate it.
Mr. Blunt. Look forward to it.
Ms. Schakowsky. Thank you.
I yield back.
Mr. Terry. Thank you.
And I now recognize Mr. Lance for 5 minutes.
Mr. Lance. Thank you, Mr. Chairman.
To Mr. Castellani, the rapid deterioration of Indian
intellectual property protections are direct evidence that
India's industrial policies are designed to take American and
European innovation for its own domestic industries, the
industries affected by India's actions cover a broad range of
innovative industries here and in Europe, including high tech,
telecom, green technology, and your industry as well.
In light of this threat, how can we use this trade
agreement to set global standards that value strong IP
protections?
Mr. Castellani. Thank you, Mr. Lance.
As I said in my testimony, we view and I think across
industry we all had agreed that we view this as an opportunity
to set a standard that should be applied around the world. In
our industry, the ability to reward and protect innovation is
key to the ability to meet patient needs, and particularly to
develop medicines where none exist right now. We think the high
standards that the Europeans have and the high standards the
United States have present an opportunity to demonstrate to the
rest of the world that you can have both the innovation that is
necessary to serve patients and the affordability of medicines
at the same time. And you can't have one without the other.
I would quote what the vice president said in India this
morning, where he said a young Indian physician who is a
researcher is motivated by his or her ability to discover and
to continue that discovery process because they can be rewarded
and encouraged because of the protection of what they develop.
And we think that should be the standard around the world.
Mr. Lance. Thank you. Isn't it true that many of the
innovations that occur in your industry occur based upon
research and development here in the United States?
Mr. Castellani. About 65 percent of all of the research
that is done in biopharmaceuticals is done in the United
States. It, as I said, represents--the National Science
Foundation has told us that we do 20 percent of all the
industry-funded research and development in the United States.
It is also about 20 percent of our revenues, which I think is
the highest of any sector in the economy. So it is absolutely
vital to the United States and the United States as a leader.
Mr. Lance. We will be having a major discussion on tax
policy in this country out of Ways and Means, not E&C, but of
course, we want as much research and development as possible.
And I think the 20-percent figure is extraordinary in
relationship to what it is across other sectors.
Now, as I understand it, the cost of generic drugs is
higher in developing parts of the world than perhaps many
realize; is that accurate?
Mr. Castellani. Generics are higher in price across the
board in Europe than they are in the United States, yes.
Mr. Lance. Thank you. Would others on the panel like to
comment on intellectual property matters as they relate to your
fine industries?
Congressman Dooley, it is a pleasure to meet you, sir.
Mr. Dooley. I would just say we are very much aligned and
consistent with the policy that Mr. Castellani said. We are one
of the leading innovation manufacturing sectors in the United
States; about 20 percent of all patents are issued to our
industry. So protection of that intellectual property is a high
priority.
Mr. Lance. And do you see challenges in that regard in
other parts of the world for your industry?
Mr. Dooley. There are challenges, you know, throughout the
world. I would say with the EU, that is not where we are facing
the greatest challenges.
Mr. Lance. I am not suggesting the EU.
Mr. Dooley. Significant concerns----
Mr. Lance. This is a model for other parts of the world.
Mr. Garfield.
Mr. Garfield. Yes. I would add two things. One is, we do
see challenges in other parts of the world, particularly around
tech transfers as a part of a requirement for participating in
a market. That was one of the challenges that we faced in that
India that we are now seeing a bit of a reprieve on, but there
is still a lot of work to be done there.
The second is as we think about IP, I would ask that we
also think about trade secrets, which there is a great
opportunity for greater harmonization between here and Europe
and for it be to a model for the rest of the world.
Mr. Lance. Thank you.
Ms. Halloran.
Mr. Halloran. I think everyone needs to just think for a
moment, though, about the recent Supreme Court decision in the
Myriad case, where they decided that a breast cancer gene could
not be patented. This is an example of how patenting may be
going too far in a number of cases and getting in the way of
actual innovation and unnecessarily raising healthcare costs
for consumers.
Mr. Lance. Thank you. My time has expired.
Thank you, Mr. Chairman.
Mr. Terry. At this time, I recognize the emeritus of the
entire Congress, Mr. Dingell.
Mr. Dingell. Thank you, Mr. Chairman. I thank you for your
courtesy, and I commend you for holding this important hearing.
I am delighted to see the subcommittee is exercising its long
neglected jurisdiction over matters related to international
trade.
At the April 10 hearing of this subcommittee about domestic
automobile manufacturing sectors, I tried to establish that
some form of regulatory harmonization or mutual recognition of
standards with the European Union would allow U.S. automakers
and others to be more globally competitive. While it is
arguable that regulatory harmonization or mutual recognition of
standards would be helpful to industry, I also want to make
sure that the health and safety of American consumers does not
result from either.
Now, to Messrs. Blunt, Castellani, Dooley, and Garfield,
all of you posit in your written testimony that a U.S.-EU free-
trade agreement should include some form of regulatory
harmonization or mutual recognitions of standards. I am asking
that you and the other panelists submit to us a brief
definition of these terms and how this would benefit the United
States.
Now, again, to Messrs. Blunt, Castellani, Dooley, and
Garfield, this is a yes or no question. Do each of you believe
that the regulatory harmonization or mutual recognition of
standards will not result in any diminution of the health or
safety of American consumers? Yes or no.
Mr. Blunt. Yes.
Mr. Castellani. Yes.
Mr. Dooley. Yes.
Mr. Garfield. Our experience is yes.
Mr. Dingell. All right. Now, to Ms. Halloran and Mr.
Muffett, do you agree with your fellow witnesses responses? Yes
or no.
Mr. Halloran. Absolutely not.
Mr. Dingell. Sir?
Mr. Muffett. No.
Mr. Dingell. Now, I would like to hear what our witnesses
have to say about regulatory transparency as it relates to
transatlantic regulatory harmonization or mutual recognition in
standards. As we all know, the Administrative Procedure Act
provides for substantial stakeholder input in the U.S.
regulatory process. And essentially, that is a manifestation of
the requirements of the constitution.
Now, to all witnesses, yes or no: Do you believe that the
regulatory harmonization or mutual recognition of standards
between the U.S. and the European Union would afford Americans
the same level of stakeholder input in the regulatory process
as they currently enjoy under the Administrative Procedure Act?
Yes or no?
Mr. Blunt. No.
Mr. Dingell. Mr. Castellani?
Mr. Castellani. I am not sure I can answer for both sides
of the Atlantic.
Mr. Dingell. Well, if you want to submit the answer later,
that would be acceptable.
Mr. Castellani. I would be happy to do that, but I think
generally, yes, it should be the objective.
Mr. Dooley. I will submit a written answer.
Mr. Dingell. Next witness.
Mr. Garfield. I hate to fall prey to peer pressure, but I
will submit as well. I would say that it is something that we
should insist upon in view of it about very important.
Mr. Dingell. I am down to a minute, 38 seconds.
Ma'am, if you please.
Mr. Halloran. No.
Mr. Muffett. Most emphatically no.
Mr. Dingell. Now, to all witnesses, do you believe that
regulatory harmonization or mutual recognition of standards
would make it more difficult in general for the United States
and the European Union to promulgate new regulations in the
future? Yes or no. Starting on your--at this end of the table.
Mr. Blunt. No.
Mr. Castellani. No.
Mr. Dooley. No.
Mr. Garfield. No, as well.
Mr. Halloran. Definitely yes.
Mr. Muffett. Yes.
Mr. Dingell. Now, to all witnesses, similar, do you believe
that regulatory harmonization or mutual recognition of
standards would constrain the ability of the United States and
the European Union to promulgate regulations it deems uniquely
appropriate for the specific threats to the health and safety
of their respective citizens? In other words, do you believe
that regulatory harmonization or mutual recognition of
standards would diminish the regulatory sovereignty, so to
speak, of the United States and the European Union? Yes or no.
Mr. Blunt. No.
Mr. Castellani. No, sir.
Mr. Dooley. No.
Mr. Garfield. No.
Mr. Halloran. Yes.
Mr. Muffett. Yes.
Mr. Dingell. OK. Now, again to all witnesses, I would like
that you would submit additional comments on these matters for
the record.
Now I would like to indicate my displeasure with the manner
in which the TransPacific Partnership has been negotiated.
Congress and the public have had far too little access to
details in the draft agreement. I believe that a lot of
sunshine is warranted.
Now, to all witnesses, would you support legislation that
improves the transparency in trade agreement negotiations,
particularly by granting improved access by all stakeholders to
negotiating texts on future trade agreements? Yes or no.
Mr. Blunt. Yes.
Mr. Castellani. With all due respect, Mr. Chairman, I think
you have to ask the negotiators; that is really the
government's business.
Mr. Dingell. Mr. Dooley.
Mr. Dooley. I concur with Mr. Castellani.
Mr. Garfield. I do as well. I think the negotiators should
be the ones who determines it.
Mr. Dingell. Ma'am.
Mr. Garfield. And it will be different in each instance.
Mr. Dingell. Ma'am.
Mr. Halloran. I concur with auto representative, yes.
Mr. Dingell. And.
Mr. Muffett. I will support it and march through the
streets for it.
Mr. Dingell. Now, one question--I know that I am exceeding
my time, and I thank you for your courtesy to me, Mr. Chairman.
On a more parochial matter, do you, each of you, support or
oppose the inclusion of currency manipulation disciplines in
future U.S. trade agreements? Yes or no, with starting this end
of the table.
Mr. Blunt. Yes. Absolutely.
Mr. Castellani. It is not an issue on which we have taken a
position.
Mr. Dooley. It would vary with respective countries.
Mr. Dingell. Sir.
Mr. Garfield. We don't have a position on that issue.
Mr. Dingell. Ma'am.
Ms. Halloran. No position.
Mr. Muffett. No position.
Mr. Dingell. Mr. Chairman, you have been extraordinarily
courteous to me. I thank you and yield back the balance of my
time.
Mr. Terry. Thank you.
At this time, recognize the gentleman from the great state
of Texas, Mr. Olson.
Mr. Olson. I thank the chair. And want to thank our
witnesses for coming here this morning. This is a very timely
hearing. Given that just down the road the first round of
negotiations of the Transatlantic Trade and Investment
Partnership, or TTIP, were completed. Now, trade relationship
with the EU is very significant, accounting for 40 percent of
global output and nearly $1 trillion in trade.
Of course, foreign trade gives me a chance to brag about my
home State of Texas. The largest petrochemical complex in the
world lines the 50-mile-long Port of Houston. The Port of
Houston is the largest foreign tonnage port in America. Last
week, the Department of Commerce's International Trade
Administration announced that the greater Houston area is the
top market for exports, with $110.3 billion in merchandise
exports in 2012, $110.3 billion. And TTIP gives Houston a
chance to get even bigger. Only one of the top five countries
that Houston exports to are in the EU. That is The Netherlands.
Recent study by the Paramount Group found that Texas could add
$17 billion if tariffs on the barriers with the EU were
eliminated. More foreign trade means more American jobs and a
more safe and secure world.
My former boss, United States Senator Phil Gramm, summed it
up best when he said that American democracy and American free
enterprise have given more hope and more freedom to more people
than all the wars in history combined.
Against that backdrop, my first question is for you, Mr.
Dooley. Your testimony and in public, you stated that the
American Chemical Industry is poised to capitalize on enhanced
competitiveness due to increased supply from shale formations
all across our country. As you know, most of the shale gas is
being produced in Texas. The Barnett Shale played the first up
there by Dallas-Fort Worth, Eagle Ford Shale played south of
San Antonio, towards Laredo. Happening all over our country.
Could you please go into detail about how the FTA and TTIP in
particular could positively affect the petrochemical industry?
Because, again, as I have told you in the past, sir, in the
last 4 years, I have noticed a difference. Before chemical guys
were talking about going to overseas. Now they are talking
about coming back to America, keeping those jobs here. A lot of
it is because of cheap energy. Details about that for
petrochemicals.
Mr. Dooley. There has been a dramatic shift in the
international competitiveness of the U.S. chemical industry in
just the last 5 years. We have gone from in that period of time
from one of the highest cost producers of chemicals globally to
now the lowest cost producer of chemicals globally. There is
one reason for that, and that is the increased supplies of
natural gas, which for the chemical industry, we use natural
gas, not only as an energy source but as also a feedstock. It
is like flour is to bakery, natural gas is to the chemical
industry. So when we see this dramatic increase in supplies
which is resulting in more competitively priced natural gas,
that gives us a significant competitive advantage
internationally.
We keep a running total of new investments. We have now,
looking by the year 2020, we will have 72 billion in new
capital investments and chemical manufacturing in the United
States. And important to note is over 50 percent of that is
from direct foreign investment, companies located outside the
U.S. We are in-shoring investment into the United States, which
is a dramatic shift from over 10 years ago. And there has
probably never been a point in time when you are seeing a
dramatic--such a divergence in energy policies between the EU
and the United States. In the United States, we are seeing the
prospects of having domestic energy security, we see a
commitment to develop our fossil fuel sources, primarily
natural gas.
And if you look at the EU, they are putting policies in
place that are banning fracking, that are moving away from
nuclear energy. Their energy costs and feedstock costs are
projected to go up significantly over the next decade, ours are
going to stay flat. So when we also capitalize on the
opportunity to reduce tariff barriers and regulatory barriers,
that gives us the opportunity to further capitalize on this
competitive advantage, and that's why the U.S. chemical has a
vested interest in seeing progress on a TTIP being finalized.
Mr. Olson. I told you I have seen a dramatic shift in the
chemical industry in the last 5 years. They were talking about
not growing business here in America, not building new chemical
plants, moving overseas. Now that has changed. Coming back home
or staying here. That is a great problem to have or solution to
have.
One final question, in your testimony, you talked about the
greater regulatory transparency. What are you concerned about?
Is the process breaking down, and should we be concerned going
forward with TTIP?
Mr. Dooley. Well, what we are referring to here is there is
an opportunity--and we're not--contrary to what was implied by
an earlier question, we are not for regulatory harmonization or
standardization between the U.S. and the EU. But we do think
that there are opportunities for cooperation where we can
through the U.S. and EU through TTIP identify, you know,
scientific assessment protocols. You know, we ought to be
developing the best way to identify what are the scientific
studies and the way that you are preparing data that can
provide information on a risk of a particular chemical. You
might have different standards of risks that EU would take
versus the U.S. And that should--we should respect that. But
you are going to have industry as well as government investing
significant dollars to develop this data. And we ought to be
providing ways to share that. And there ought to be
transparency in terms of how those studies are being identified
and developed that would help inform the--you know, whether the
U.S. or in the EU.
So that is where we think that there is a lot of savings in
terms of this regulatory cooperation as well as transparency to
build a trust in confidence in the respective approaches to the
safety of chemicals in coppers.
Mr. Olson. Thank you, sir.
I've got all my time. I want to take this interpretation,
the chairman loves Texas.
But thank you, sir. Appreciate it.
Mr. Terry. Chair recognizes the gentleman from California,
Mr. McNerney, for 5 minutes.
Mr. McNerney. I thank the chairman for holding this
important hearing.
My first question goes to Mr. Muffett. You indicated that,
in your opinion, U.S. chemical regulatory regime was not
adequate in its current form. And I was wondering if you could,
and a yes or no answer: Could our chemical regulatory regime
benefit from harmonization with the EU? Could we benefit in our
form? Yes or no.
Mr. Muffett. No.
Mr. McNerney. No?
Mr. Muffett. It doesn't admit of a yes or no answer. If we
were to harmonize up to the EU standard, yes, we could benefit.
Mr. McNerney. So there is a potential for benefit. But my
followup question is this: How could secrecy in the TTIP
negotiations influence the outcome of the harmonized chemical
regulatory regime and the need for sound science in general?
Mr. Muffett. Your preceding question is a case in point of
the risk. The U.S. system for addressing chemical risks is far
weaker than the European system. In efforts to harmonize, in
efforts to find some places for regulatory convergence, the
tendency will be to push toward the middle. And without the
public there to participate, to engage, to defend the public's
interest in strongest possible regulations, that movement
towards the middle is the biggest risk.
Mr. McNerney. Ms. Halloran, I do appreciate your concerns
with regards to the trade negotiations. As harmonization and
regulatory convergence are discussed, how can we ensure the
maintenance of U.S. consumer protections?
Ms. Halloran. The first step has obviously got to be to
have a more public process for this. The extent of the entire
thing is just enormous. And then they have to set goals, I
believe, that I think are in direct conflict, for example, with
those of the auto industry, which says there should be no
increases. I think the proper approach has to be to try to go
for the best level, the highest level of consumer protection,
which may be the EU standard in one case and maybe the U.S. in
another. And convergence towards the middle won't get us there.
Mr. McNerney. Thank you for that answer.
Mr. Dooley, thank you for coming here today. I understand
the potential benefits of the enhanced EU-U.S. cooperation when
it comes to regulations within the chemical industry clearly.
Can you suggest how to uphold the highest standards when
sharing scientific assessments and test results that may differ
between our two locations?
Mr. Dooley. I'm not sure I understood the question.
Mr. McNerney. Sure. Can you suggest how to uphold the
standards that will protect consumers when we are talking about
scientific assessments and test results that may differ between
our two regimes?
Mr. Dooley. I think that, it is clear that whether you are
producing a chemical in the United States or the EU, and our
companies are multinational, is that, the first commitment has
to be to the certainty of the safety of the product for its
intended use. We would contend that the REACH program has that
similar objective that is differing outcomes. But those
outcomes are not markedly different than what is being
determined and assessed through the U.S. EPA's review of the
safety of chemicals in commerce. I think it is also notable
that we see in the Senate today, or in the last few months, a
bipartisan bill was introduced that is supported by industry,
ACC, as well as the Environmental Defense Fund, that develops a
reform and modernization of TSCA that is taking a more risk-
based approach than what the EU under the REACH program. But
there is a collective understanding that that will result in
the EPA having authority to make a determination on the safety
of chemicals in commerce that will be every bit as accurate and
as effective as the REACH program, but at a far less cost. And
that is what we are looking for. How do you have the most
efficient and effective program of assessing the safety of
chemicals for industry as well as the regulators, whether it is
in the U.S. or the EU. And that is where we have differences
and where we don't want to harmonize to the EU's REACH program.
Mr. McNerney. Good answer there.
Mr. Castellani, simple question. You folks thought IP--and
I have IP myself, so I appreciate that. What location, do
members of your industry prefer IP to reside, in the United
States, in Europe, or in third countries?
Mr. Castellani. It needs to be--it needs to reside where it
is developed. And the nature of our industry is such that
because of the unique both existence of the scientific
ecosystem here in the United States, because of the strong
intellectual property protection that U.S. Provides, because of
the transparent and rigorous regulatory system that we have,
and because of our valuation system for medicines, the
preponderance of it lies here in the United States. It needs to
reside where it is developed, but it needs all four of those
elements to be able to be developed.
Mr. McNerney. All right. Thank you.
I yield back.
Mr. Terry. Thank you, Mr. McNerney.
Now the chair recognizes for 5 minutes the vice chairman of
the full committee, gentlelady from Tennessee.
Mrs. Blackburn. Thank you, Mr. Chairman. And I want to
thank each of you for taking your time to be here today.
Chairman Terry has done a great job in putting the focus on
how we bring jobs back to the U.S. And some of you, we have had
the opportunity to visit with previously, and I have tremendous
respect for the way each of you have looked at intellectual
property and the protection thereof.
Mr. Blunt, I know you have engineers who are seeking to
protect their IP that are very concerned with reverse
engineering. Mr. Dooley, I know the same thing happens with
some of your members. So I want to just stay with that for just
a minute, with the IP issues.
Mr. Garfield, we had someone from your organization at a
hearing recently here. We talked about India and the PMA. And
that is something that I understand now that India is going to
review that policy. And we are pleased with that. So we know
that it could be reinstated. So I want you to just discuss for
a moment, as you look at this, as you are learning lessons from
what has happened with India and the PMA, as we look at
protecting IP and looking at some of these transfer rights, if
you will, that are there through the Internet, and you spoke a
little about that global platform, talk to me about what we
could do here in Congress, from a policy point of view, that
would help us to forestall, if you will, things like the
situation in India with the PMA. And then what would be helpful
for the administration to do, for USTR to do, and kind of where
we stand. Take it from there.
Mr. Garfield. It is a great question. Thank you for it. I
will start, and I am sure some of my colleagues on the panel
will jump in.
I began the testimony by thanking the committee for its
vigilance and oversight as it relates to India. But India is--
and we are pleased that we are seeing some reprieve, at least
temporarily, on India. But India is not alone. In a number of
markets that are looking to engender innovation and economic
growth, I believe the way to do that is to have--is to take
other countries' intellectual property or other companies'
intellectual property or force the transfer of IP as a
requirement for being in that market.
The lesson learned from India, I think, is largely one of
having high standards, which we do in the United States,
certainly can be approved. But we do. Two, remaining vigilant
in oversight and our resistance to succumbing to countries who
suggest that we should compromise on those intellectual
property rights. And then the third that I would point to, and
it is still early days yet to fully assess, and we still have
work to do with India, but the alignment of the messaging and
consistency of the messaging between Congress and the
administration was such that it was clear and has been clear to
India that there was no space between the private sector,
Congress, and the administration, which I think served us
exceptionally well. This TTIP has the potential to do that on a
much broader basis. And it is something that we are strongly
supportive of.
Mrs. Blackburn. Mr. Dooley, I saw you----
Mr. Dooley. I am not familiar with the--the India, you
know, reference that you made there. But I would just put it in
the context of TTIP and make an argument for why we are not
for, in some instances, regulatory harmonization. In the United
States, we currently bring three times the number of new
chemicals and innovations to the marketplace as they do in the
EU. That is in large part because of the regulatory structure
that is in place and the cost of compliance and whether or not
you have an environment that is conducive to that. So that is
where we have some concerns about whether or not it is in our
interest to go down that path, which we concluded it is not.
But there is an opportunity to ensure that there is a sharing
of data and information that results in cost savings to
industry as well as to the regulators and the agencies and the
United States and the EU. And that is where we think that there
is significant benefit through a TTIP in terms of trying to
find ways in which we can share that information, which also
has to be done in a way that it protects intellectual property
rights. In the sharing of that information. And how do you
control that, which all has to be part of the negotiations that
are taking place.
Mrs. Blackburn. OK. Mr. Castellani, did you have anything
to add?
Mr. Castellani. Yes, ma'am. I think that one of the things
that you have to focus on is, I am not aware of any economy
that has been able to develop sustained economic growth over a
long period of time by stealing intellectual property. One of
the reasons why the United States is as strong economically as
it is in also the EU is that we have the infrastructure to
develop the intellectual property here. And that benefits not
only the customers for it, in our case, patients, but also
obviously the economy where it is developed. So the challenge
with India is that the actions that they have taken, at least
in our sector, just to usurp and therefore confiscate property
that was developed with substantial investment in other parts
of the world, in the United States and in Europe, has turned
out so that it doesn't help their economy in the long return
and it certainly doesn't help their patients because they are
precluding the Indian patient from the most innovative medicine
in the world. So thank you.
Mr. Terry. Chair would now recognize gentlelady from Virgin
Islands for 5 minutes.
Mrs. Christensen. Thank you, Mr. Chairman.
And welcome to the panel. A growing body of scientific
evidence demonstrates that many chronic illnesses on the rise
in the industrialized world are linked to exposure to toxic
chemicals, including many cancers, learning disabilities,
asthma, Alzheimer's, and Parkinson's disease, as well as
fertility problems. The most comprehensive review to date of
environmental factors that may increase the risk of breast
cancer found that 216 chemicals are associated with the
disease, including 73 that have been present in consumer
products or food.
I would like to ask Mr. Muffett a series of questions. And
so in light of the alarming health risks posed by some toxic
chemicals, I can assume that you prefer the EU hazard-based
approach to the U.S. risk-based approach?
Mr. Muffett. That is correct.
Mrs. Christensen. And do you find that TSCA limits the
ability to control some of those risks? Is TSCA not strong
enough?
Mr. Muffett. I think it is clear there is a broad, there is
a broad consensus or at least the overwhelming weight of
perspectives on TSCA is that it is not strong enough to respond
to those risks. It is important to recognize that TSCA was
adopted in 1976, just 4 years after the very first book on
toxicology, the very first textbook on toxicology was
published. And TSCA was based on that very early, early
understanding of toxicological risks and toxicological science.
Our understanding has changed dramatically, profoundly over the
ensuing 35 years, and TSCA hasn't changed with it. And this is
one of the fundamental differences between TSCA and REACH, is
that REACH is targeted to responding to the world as we
increasingly understand it, rather than the world as we
understood it in 1976.
Mrs. Christensen. And, you know, I have heard Congressman
Dooley's position and--which is on behalf of the council,
really not in favor of trying to harmonize any more towards the
REACH areas. But there are some chemical manufacturers and
downstream users of chemicals that have called for the
expansion of REACH-like systems around the world to help level
the global playing field. Can you share your point of view of
why some of the companies or the council might oppose the
REACH-like initiatives in the U.S., especially since some of
those companies are arguing for harmonization?
Mr. Dooley. Absolutely. Because we think there is a better
and more effective way to assess the safety of chemicals in
commerce. I agree with Mr. Muffett that we need to modernize
and reform TSCA, and that is exactly what has led to a
bipartisan introduction of a TSCA reform bill, the Chemical
Safety Improvement Act in the Senate. It is the first time
continues TSCA was introduced in 1976 that there has been broad
bipartisan support for the legislation to reform TSCA, which
takes a risk-based approach, which gives EPA more authority in
terms of requiring information and data from the industry. It
is legislation that has the support of unions and the
machinists, the ironworkers, sheet metal workers, as well as
the transportation union, as a support of Environmental Defense
Fund, a number of other NGOs, and has the broad support of the
industry, large members, small members, throughout the value
chain. And it is a risk-based approach that is viewed as being
equally effective in the assessment of safety and chemicals as
REACH but is done in a much more efficient and effective
manner.
Mrs. Christensen. Mr. Muffett, I was really directing the
question to you on that issue. With regard to the new
legislation that is being proposed, do you find that that would
satisfy your idea of where we ought to go with the regulation
of chemicals?
I can see I'm not going to get my next question in.
Mr. Muffett. Thank you for the question.
The Chemical Safety Improvement Act, in our view, is not
adequate without substantial amendments. And I think it is
important to recognize that the EU in its position papers on
chemical safety in the context of TTIP has acknowledged the
same thing. So the bipartisan bill that was referred to is not
sufficient, even from the EU's perspective, to bring the U.S.
to the same level of protection that the EU is achieving.
Mrs. Christensen. I think my time is up.
Thank you, Mr. Chairman.
Mr. Terry. Thank you.
Chair now recognizes Mr. Long for 5 minutes.
Mr. Long. Thank you, Mr. Chairman.
And thank you all for your testimony.
Here today--and, Mr. Castellani, I will start with you, if
you don't mind. As you noted in your testimony, the U.S. and
the EU already provide the strongest global support for
pharmaceutical research and development. Pharmaceutical tariffs
between the U.S. and the EU are zero under the WTO
pharmaceutical agreement. And you obviously support a high
standard, ambitious agreement. But what exactly do your
members' companies hope to gain from such an agreement?
Mr. Castellani. As I mentioned in my testimony, from a
regulatory standpoint, we are starting, as you said, from a
very, very hard standard. It is absolutely essential to our
industry. And we are not asking that those standards be
reduced. But, rather, there is in our process of discovery a
rather expensive part of the process; cost us about a billion
and a half dollars to develop one medicine, takes about 10
years. Half of that cost, for example, is in clinical trials.
It is very important that clinical trials adhere to the highest
standards to both protect the patients and ensure a valuable
outcome.
We have clinical trial standards and inspection process in
the United States to make sure that occurs and they have them
in Europe. We believe those could be harmonized so that those
inspectors could be freed up to cover other areas of the world
where you perhaps don't have as high of standards. Same is true
in our manufacturing practices. Both very high. And it seems to
us that there is a better use of time and a better use of
resources than to have an AMA inspector come into one of our
facilities followed by a FDA inspector, both having the same
standards. So it is an opportunity to make our processes more
efficient and an opportunity for the government agencies to be
able to focus where there is higher risk.
Mr. Long. Did I understand earlier in your testimony that
80 percent of R&D, research and development, is done between
the U.S. and EU?
Mr. Castellani. Yes, that is correct.
Mr. Long. And then you had a figure in there later in your
questioning; I think it was 65 percent.
Mr. Castellani. Sixty-five percent----
Mr. Long. U.S. 65 of the overall----
Mr. Castellani. U.S. is 65 percent; Europe is about 15
percent.
Mr. Long. OK. That was my question.
I have another question for you. How do the European
Medicine Agency's current and proposed data disclosure policies
present potential problems regarding the protection of a
patient privacy and shielding confidential commercial
information?
Mr. Castellani. Thank you. The AMA has proposed some very
extensive transparency requirements on our conduct of clinical
trials that cause concern in one of the three areas,
potentially two of the three areas that are essential for the
trials to continue and the investment to continue.
Here is no disagreement that we must protect patient-
specific data. It absolutely has to be so that people who
participate in clinical trials do not run the risk of having
their participation and their medical records being released.
Secondly, we have to make sure that the clinical trial data
as it is released is consistent with the regulatory process so
that we are not creating two different standards, one at the
regulatory agency and one within academic discussion.
Third, where we have the biggest concern with the EMA's
proposal is EMA is proposing to release what is called
commercially confidential information, that is, the
intellectual property into the whole environment. And,
therefore, the companies who have invested the billions of
dollars to develop it will lose that exclusivity because it
will just go into the world and anybody can copy it.
So our concern is that we protect patients; we enhance the
transparency of the clinical trial process; we protect the
regulatory process; but we also protect the ability the
continue to invest.
Mr. Long. OK. Thank you.
And the next question goes to a gentleman that I would like
to thank, Governor Blunt, number one, for your service to our
country in the Navy, and your service in our area, my neck of
the woods, as a State rep and a Secretary of State and then
Governor. So thank you for all of the above.
And a question for you. If mutual recognition of a
regulation is achieved, is it your expectation that an
automaker could then sell a vehicle built in either recognized
standard or sell--to either recognized standard--would they be
able to sell that in either market then with no further?
Mr. Blunt. Yes. That is our aspirational goal.
Mr. Long. I feel like with Chairman Dingell with a yes or
no answer. You said yes.
Mr. Blunt. We believe that that would increase trade and
lower cost and create jobs and obviously improve the
international competitiveness of the industry in the United
States and Europe and also afford lots more choices for
consumers in both markets. They would see a more rapid option
of the newest and latest technology.
Mr. Long. Thank you.
And, for the record, I would note that in your 5-minute
opening, you had 5 seconds remaining, and I have 1, so I got
closer than you did.
Mr. Terry. At this time, recognize the gentleman from
Maryland for 5 minutes.
Mr. Sarbanes. Thank you, Mr. Chairman.
Ms. Halloran, do you think there is any chance that we can
achieve mutual recognition or harmonization between your side
of the table and this side of the table any time soon?
You don't have to answer.
I wanted to ask you about the--this whole transparency
issue in terms of the negotiations. How does it compare to
other negotiations? Is this one particularly opaque, would you
say, in comparison? Or is it about standard? And so forth.
Ms. Halloran. Negotiations like this with respect to always
so secret. The Doha round, the drafts were periodically
published. The Free Trade of the Americas agreement, draft
texts were periodically published. Bob Zoellick, the former
U.S. trade representative, just recently said in a speech that
he doesn't know quite why things have gotten so closed down.
And so it's--especially in a negotiation like this, which is on
regulation, which is of such broad interest and importance to
so many sectors, I think there has got to be a higher level of
openness.
Mr. Sarbanes. Do you have any theories, either you or Mr.
Muffett, about what is going on?
Mr. Halloran. Well, I think if you are a negotiator at
USTR, it is obviously a much easier job if you are just talking
to your European counterparts and you don't have to show
anything to anybody until 2 years from now and you can hand it
out on a take-it-or-leave-it basis. And I think they have
actually said that they really don't want to be burdened by the
public feedback. And you can sort of understand their position.
But it is something that in a democracy, I mean, you as
Congressmen are--deal with the burden of public feedback all
the time, and it is sort of how we should work, I think, in a
democracy.
Mr. Sarbanes. What is the perspective on this on the
European side, this issue of the transparency of it?
Mr. Halloran. They are also in favor of the--behind-closed-
doors approach. Ironically, because they have to share
everything with all of their member states, their control over
their positions and so forth is not very tight. So we have been
finding out the most about what is going on from European
League documents which seem to be leaked very regularly, and
they also don't have the stringent penalties we do under the
Espionage Act for disclosures. But, on the other hand, Europe
has much less of a history. They don't have an Administrative
Procedures Act, they have much less of a history of public
discussion and input than we do. So they are amenable to the
idea of doing it behind closed door, but I think they could
also be amenable to more disclosure.
Mr. Sarbanes. Arguably, we have got a higher standard to
meet based on our history in terms of this transparency, it
sounds like.
I wanted to ask you, all of the answers to Mr. Dingell's
questions were predictable, except there was one question where
I was surprised that the industry folks, at the answer there,
and that was this notion that if you had harmonization for
example or mutual recognition, it would not affect the ability
to establish new standards in response to things that might
happen, which to me seems--that is very hard for me to
understand why you would not acknowledge that that would tie
your hands certainly a little bit when you want to find new
standards. And I wonder, either Mr. Muffett or Ms. Halloran, if
you could speak to that issue.
Mr. Muffett. I think the clearest example of how a TTIP
agreement and these expectations of harmonization would affect
the ability to develop new standards lies with the ability of
the States to innovate and develop new standards. One of the
things that the EU has identified as a major objective for it
coming out of TTIP is harmonization to Federal levels, and that
includes sub-national standards coming up to a relatively
similar level so you don't have wide divergences between what
is going on at the Federal level in the United States and what
is going on at the State level.
Unfortunately, in the U.S., it is at the State level where
all the innovations in chemicals regulation and chemical policy
have been going on. If States are required to undertake
additional consultations and defend their decision-making
processes not only to U.S. industry and the U.S. public but to
the European industry and European public through these
processes, the additional burdens on regulators, particularly
local and State regulators, will be profound. And that itself
will I think impede the development of new protections.
Mr. Sarbanes. So if you are a good federalist, that might
cause you some concern.
I am going to yield back.
Mr. Terry. Thank you, Mr. Sarbanes.
At this time, recognize gentleman from Florida for 5
minutes.
Mr. Bilirakis. Thank you, Mr. Chairman.
I appreciate it and thank the panel for their testimony.
Most of my questions were already asked, but I do have a
question for Governor Blunt.
The United States and Europe differ quite a bit with
regards to safety and vehicle emissions requirements. Has your
association or members been in discussions with NTSA or the EPA
about these issues with regard to TTIP?
Mr. Blunt. Thus far, most of our discussions have been
through the U.S. Trade Representative's Office, but we have
presented our proposal to representatives of all of those--of
agencies.
Mr. Bilirakis. Have they been receptive to your industry?
Mr. Blunt. I think they understand if we are going to
maximize the benefits of TTIP, some convergence is necessary.
We understand that we have set a high goal, both industry and
the United States and Europe for the negotiations. But we are
certainly willing to work with them as we evaluate data and
methodologies that would allow us to come to what we think is
the natural conclusion that both sets of regulatory standards
achieve the same environmental and safety outcomes.
Mr. Bilirakis. Very good.
Thank you, Mr. Chairman. I yield back.
Mr. Terry. All right. Well, that concludes all of the
questions.
I have a little bit of business to do before we adjourn.
And I want to put nine statements into the record. Number
one, American Apparel and Footwear Association; the Alliance of
Automobile Manufacturers statement; Global Automakers
statement; Handmade Toy Alliance statement; Marketing Research
Association statement; Society of Chemical Manufacturers and
Affiliates statement; Tech America statement; Toy Industry
Association statement; and the Biotechnology Industry
Association statement. There all being nine. And these have all
been shared with the minority.
[The information appears at the conclusion of the hearing.]
Mr. Terry. Now without any objections, they will be in the
record.
Now yield for the same to Ms. Schakowsky.
Ms. Schakowsky. Thank you.
Let me just say that while I don't agree with a number of
those statements that are going in for the record, we did
approve them and agree to their submission.
In addition, we would like to add the statement of the
Coalition for Sensible Safeguards; the Transatlantic Consumer
Dialogue; and the Maine State Representative Sharon Anglin
Treat in a relevant testimony that she gave on a trade
agreement.
Mr. Terry. I am sure I have the same thoughts on those,
that we probably don't necessarily agree. But all statements
should be in the record. So, therefore, those are also in.
Hearing no objections.
[The information appears at the conclusion of the hearing.]
Mr. Terry. I want to thank all of you.
If there is one thing I think we can take away from this
hearing today is that TTIP is not going to be easy. All of your
statements have been good and insightful. And I thank you for
being here.
So, at this time, we are adjourned.
[Whereupon, at 11:37 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Fred Upton
Earlier this month, the United States and the European
Union held the first round of negotiations on what we all hope
is the first step toward achieving an historic trade agreement:
the Transatlantic Trade and Investment Partnership. This has
the potential to be the most comprehensive bilateral agreement
ever developed, addressing non-tariff impediments in ways never
previously attempted.
We have a long and valuable relationship with our European
allies. These ties have created great cooperation on many
fronts and led to a flourishing trade relationship. Together we
account for almost half of world GDP and world trade. And as
investment partners, there is no greater bilateral relationship
than between the U.S. and the EU: we are the largest single
recipient of EU foreign direct investment and we are the
largest source of foreign investment in the EU.
The benefits of this trade partnership cannot be
overstated: additional jobs, income, and economic growth on an
annual basis going forward--something both sides desperately
need. U.S. job creators like the Big Three automakers in
Michigan have the potential to make significant gains. And
Congress doesn't have to appropriate a penny to reap the
potential rewards.
We are all hopeful of achieving the most ambitious trade
agreement possible. The sheer size of our bilateral trade and
investment with the EU means that any significant progress to
cut regulatory costs and bureaucracy, reduce market access
barriers, and eliminate tariffs will translate into positive
economic growth for both sides of the agreement.
To achieve our shared goal, we need to work together. Both
sides agree we have different, but mature regulatory regimes,
which, in most cases, attain equivalent outcomes.
Unfortunately, the outright elimination of regulations is a lot
more difficult than eliminating tariffs; however, we can and
should reduce the costs of these dual regulations.
In our federalist system, different (even incompatible)
state regulations exist yet we do not allow them to impede
interstate commerce. For example, states can and do regulate
auto safety inspections for vehicles registered in their state
in different ways and under different timelines, but it would
be counterproductive if states were able to block residents of
other states from traveling across sate borders unless they
complied with the exact standards of the visiting state. We
wouldn't stand for it. So if we allow recognition of different
state standards, there is no reason we can't find a way to
similarly work with the EU to harmonize or recognize each
other's standards to avoid duplicative and costly regulations
designed to achieve the same goals.
We have a distinguished panel of witnesses today who can
elaborate on the real costs of trade barriers.
They also know how reducing those costs will benefit more
than just the individual companies and industries. It will
provide all of our citizens with a more prosperous future. It
is our job to ensure they are not denied that opportunity.
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