[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
INTERNATIONAL TRADE AND THE ENVIRONMENT
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HEARING
BEFORE THE
SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
JUNE 21, 2000
__________
Serial No. 106-170
__________
Printed for the use of the Committee on International Relations
Available via the World Wide Web: http://www.house.gov/international--relations
______
U.S. GOVERNMENT PRINTING OFFICE
68-287 CC WASHINGTON : 2000
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE RADAVANOVICH, Califorina JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Kathleen Bertelsen Moazed, Democratic Chief of Staff
John P. Mackey, Republican Investigative Counsel
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Subcommittee on International Economic Policy and Trade
ILEANA ROS-LEHTINEN, Florida, Chairman
DONALD A. MANZULLO, Illinois ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio PAT DANNER, Missouri
KEVIN BRADY, Texas EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California BRAD SHERMAN, California
JOHN COOKSEY, Louisiana STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California JOSEPH CROWLEY, New York
TOM CAMPBELL, California JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
Mauricio Tamargo, Subcommittee Staff Director
Jodi Christiansen, Democratic Professional Staff Member
Yleem Poblete, Professional Staff Member
Victor Maldonado, Staff Associate
C O N T E N T S
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WITNESSES
Page
Mildred Callear, Vice President and Treasurer, Overseas Private
Investment Corporation......................................... 8
Barbara Bradford, Deputy Director, U.S. Trade and Development
Agency......................................................... 10
Dan Renberg, Member of the Board, Export-Import Bank of the
United States.................................................. 13
Paul Joffe, Associate Director for Advocacy, National Wildlife
Administration................................................. 23
Myron Ebell, Director, Global Warming and International
Environmental Policy, Competitive Enterprise Institute......... 25
APPENDIX
Prepared statements:
Mildred Callear.................................................. 32
Barbara Bradford................................................. 39
Dan Renberg...................................................... 49
Paul Joffe....................................................... 57
Myron Ebell...................................................... 61
INTERNATIONAL TRADE AND THE ENVIRONMENT
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WEDNESDAY, JUNE 21, 2000
House of Representatives,
Subcommittee on International Economic
Policy and Trade,
Committee on International Relations,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:05 p.m. In
Room 2255, Rayburn House Office Building, Hon. Ileana Ros-
Lehtinen [Chairwoman of the Subcommittee] presiding.
Ms. Ros-Lehtinen. The Subcommittee will come to order.
Thank you so much for being here today.
It has been said that we do not inherit the Earth from our
parents but rather bequeath it to our children. Today we are
just beginning to understand the real and long-term effects
which our existence has upon the natural world around us and
how we can as Americans can affect environmental change for the
better.
One area in which it has become quite clear that we can
export our concern over the environment to other nations is in
international trade and development. By supporting initiatives
which not only account for environmental concerns but indeed
promote conservation, the United States can provide leadership
in a world where concerns over the environment are becoming
ever more prominent.
In an age when international commerce and the cause of
conservation are often described as locked in the proverbial
battle between an immovable object and an unstoppable force, it
is incumbent upon us to pause and realize that trade and the
environment are not issues which are mutually exclusive. The
twin goals of trade and the protection of the environment can
provide each other with opportunities to pursue sustainable
development as well as conservation.
Following the World Trade Organization Seattle ministerial
in 1999, the world took notice of the issue of environmental
conservation and its relation to the international trade
community. As protesters from an eclectic collection of causes
pour into the streets of Seattle we were all forced to revisit
the way in which multi-national trade organizations had dealt
with the issue of protection of the environment. Among the most
serious charges leveled at the WTO was the perceived lack of
priority given to national and international environmental
laws. For example, while most member nations have committed
themselves to certain core environmental standards, protesters
felt that the WTO was not taking steps to implement regulations
to reward countries adhering to and exceeding such standards.
In response to these attacks, WTO members stated that as an
organization it is entirely dependent upon the desires and
actions of its member states and that many were unenthusiastic
about instituting reforms which they felt would overly burden
developing nations.
So for those Americans who believe that environmental
conservation is an important and needed reform within the WTO,
we must look far closer to home in order to ensure that care
for the environment is afforded the same respect as other
international trade issues. This goal can be accomplished by
addressing the procedures and regulations employed by the U.S.
Government agencies which fund and support American trade and
investment abroad such as the Overseas Private Investment
Corporation, OPIC, the United States Trade and Development
Agency, USTDA, and the Export-Import Bank of the United States.
By promoting projects and endeavors which account for
environmental conservation as well as assisting in creating
sustainable development within the local communities and
economies, the United States can provide the leadership which
the WTO has failed to exhibit and perhaps provide other nations
with an example of just how trade and environmental concerns
can work together.
One possible example of this fusion of trade concerns and
environmental awareness which has been proposed by analysts is
to take advantage of the vast experience which the United
States has developed in the field of environmental
conservation. For many years, the United States has been in the
forefront of nations studying the environmental impact of
industry and developing more environmentally friendly modes of
production.
These innovations can be put to use, for example, when a
state finally develops the necessary resources to maintain a
stable economic infrastructure and decides to allocate some of
its surplus resources toward protecting the environment. With
the proper guidance and support from U.S. agencies, American
firms with the necessary experience and technology may find a
fertile business opportunity.
Another example lies in less developed nations, where the
drive to actively conserve the environment may not be as
prevalent as it is within our country. American firms with the
foresight to understand the inherent value of the environment
can create new opportunities, such as eco-tourism, to not only
conserve the local environment but to strengthen the local
economy.
Finally, there is the vast divide between the
environmentally friendly technologies developed here at home
and those available in many other nations of the world. These
technology firms, which create products such as industrial
scrubbers and other bio-friendly commodities, represent yet
another opportunity for Americans to increase our share of the
growing international market while at the same time benefiting
the protection of the environment.
With the passion and assistance of the men and women
assembled before us today we can come up with just a few
examples of how it is that international trade and the
protection of the environment can work, and together we may be
able to help provide our children and our grandchildren with a
world full of blue seas and green forests as well as to provide
them with the prosperity and good fortune to appreciate the
beauty of nature.
I am proud to yield now to the Ranking Member of the
Subcommittee, Mr. Menendez.
Mr. Menendez. Thank you. I appreciate the opportunity you
have provided us for talking about this globally important
question of the relationship between trade and the environment.
Clearly, the subject is topical, as we have seen over the past
6 months in the news, and it is, more importantly, of long-
range importance as decisions made now on this issue will have
an impact for years, even, I believe, centuries to come.
The protests at the WTO meetings last December in Seattle,
and in Washington at the World Bank IMF meetings, serve to
remind us that there are still plenty of skeptics and some with
good cause. There are legitimate concerns on both sides of the
question, considering for a moment trade and the environment
separately. Most people in the United States agree, though
that, the development of trade and protection of the
environment are both desirable. More significantly, I would say
there is growing consensus in this country that they should no
longer be considered mutually exclusive. I believe most of our
witnesses today will make that point rather ably.
Certainly the vote that we expect today, which I think will
be somewhat lopsided, in calling for the United States to leave
the WTO, the vote against that is an indication of wide support
for continued U.S. participation and leadership in global trade
mechanisms and discussions. But that vote, when it takes place,
does not, of course, mean citizens in the United States and
elsewhere are complacent with the WTO. The Seattle protest
should not be disregarded, for they reflect a real
disenchantment for the way the WTO operates.
Principally, these problems include the world trade body's
failure to pay sufficient attention to environmental concerns,
as well as its continued penchant for operating in a secretive
manner.
These concerns, along with important labor considerations,
are part of the reasons certainly that talks on future
multilateral trade agreements remain stalled. In fact, since
1994 when NAFTA was agreed to, and the Uruguay round of GATT
negotiations culminated in the establishment of the WTO, not
much more has happened. So I believe that the United States,
through continued leadership on these issues, can help lead us
back on track to sustainable, responsible growth through
environmentally friendly trade.
In the past few years, the United States, with help from
NGO's such as the National Wildlife Federation from which we
will hear today, has done admirably in asserting the necessity
of pursuing the twin goals of liberalized trade and
environmental protection and to argue that these not need be in
conflict.
Prior to the start of the Seattle WTO ministerial meeting,
the U.S. Government, with backing from NGO's, made clear to its
negotiators a set of guidelines intended to, ``ensure the trade
rules continue to be supportive of environmental protections at
home and abroad.''
In a public White House declaration, President Clinton
outlined a series of principles. They included: increased
accounting of environmental implications, greater transparency
in the WTO and trading system, strengthened cooperation between
the WTO and international organizations with respect to
environmental matters, assurance that trade rules do not
undermine U.S. ability to maintain and enforce fully U.S.
environmental laws, support for ecolabeling, and full
participation of environmental, health and safety officials in
trade negotiations.
These policy guidelines for the multilateral WTO are
extensions of what the United States has called for and
implemented in its own government institutions charged with
trade development. In 1985, Congress added environmental
provisions to OPIC's statute. In 1992, Congress revised the
charter of the Export-Import Bank, requiring environmental
review procedures; and we look forward to hearing from these
U.S. trade agencies, including the Trade and Development
Agency, about how they have redoubled their focus on
environmental questions in recent years.
Finally, one of the most interesting proposals prior to
Seattle was to identify and pursue win-win opportunities in
which reducing or eliminating subsidies and opening markets can
yield direct environmental benefits, such as recent moves to
reduce subsidies to fishing industries and thereby reduce
overfishing. This kind of initiative is where the future of
sustainable, environmentally responsible and publicly supported
trade lies.
One outcome of the protests at Seattle is that a variety of
issues once considered anathema to trade discussions, including
environmental impacts of trade, have become more visible and
harder to ignore in subsequent trade negotiations.
Environmental concerns will from now on be a constant ware on
any trade negotiation table.
In this reality, there are challenges and opportunities for
the United States. The challenges include the need for
industrialized countries, with the United States in the lead,
to convince developing nations that environmental protection is
in their interest, too. So, too, the United States and other
WTO members are challenged to persuade the world trade body to
be more transparent in its actions and inclined toward
protecting the environment.
At the same time, the mounting international pressure for
sustainable, environmentally responsible growth in developing
countries provides significant opportunities for U.S. firms.
U.S. exports in environmental technology have nearly doubled
since 1996. U.S. companies must overcome extremely difficult
competition from foreign companies subsidized by their
governments, but there should be plenty of room in what is
estimated to grow to a more than $500 billion industry in the
next few years. Opportunities exist, too, in the growing areas
of biodiversity and ecotourism.
So I look forward to hearing from the panelists today about
some of these issues. I look forward to hearing about those
projects that support a healthier global environment by helping
to build the capacity of developing countries to meet
environmental needs and about opportunities for U.S. firms and
organizations to play a larger role in the export of
environmental technology and expertise.
I am reminded that we travel on a small spaceship called
Mother Earth and that we are dependent upon its natural but
limited resources. And that as we seek to raise the tides for
all people in terms of the economic opportunity that trade can
provide, we need to remember that the sustainability of all of
those possibilities exists with the type of environmental
decisions that make us good stewards of the land for this
generation and generations to come.
That is our challenge. It is also a tremendous opportunity.
And I personally want to thank those who have raised and
continue to raise the issue of the environment. I don't always
agree on how they raise the issue, but I do believe that the
raising of the issues has made it possible for this to be part
of the agenda and the debate in the days ahead of the trade
issues that we will face.
Ms. Ros-Lehtinen. Thank you so much, Mr. Menendez.
Mr. Cooksey, thank you for joining us.
Mr. Rohrabacher for some opening statements.
Mr. Rohrabacher. Every time I hear about this issue being
discussed there just seems to be something that is left--the
equation just totally left out. I am listening today, and it
just seems it is being left out. There is a void there.
I sort of looked at the map. I was trying to think what
that void is. It is very clear what that void is now, so that
nobody is talking about where democracy and freedom come into
play in this issue. It is just like not part of the question. I
mean, it is all about the environmentally good things that
need--the policies that need to be followed and, you know, what
sort of trade policies we will have. But there is a
relationship here, a very strong relationship between how we
trade and what policies we have as--based on what type of
government is on the other end of the trading relationship.
And people--let me assert this--people in developing
countries have just as much right to democratic government and
making their own decisions and controlling their own destinies
including their environmental policies as we do. And anybody
who comes from a rich, developed country like the United States
and thinks it is going to impose on a democracy environmental
laws is talking about tyranny. Even though it is the best of
motives, cost benevolent motives saving the environment, the
best of motives. But this is totally--then we are talking about
a dictatorship. When you are talking about how you relate and
what laws should be restricting trade with dictatorships, that
is totally different.
The WTO--and this is one of my biggest problems with the
WTO and a lot of the other trade--you know, globalist trade
policies that we have been hearing about on Capitol Hill--is
that these policies almost always insist that our trade
policies and our policies in the government should be exactly
the same toward a dictatorship as it is toward a democratic
government. That makes no sense to me.
I happen to believe that if you have a democratic
government they can set their own environmental restrictions,
as I said earlier. They have a right, and businesses--and we
try to control the trade policy--businesses have a
responsibility when they go to those countries to obey the laws
of those countries because the laws are, by definition, the
laws that have been put in place by the people there through
the ballot box.
But now, with dictatorships, that is a whole different
issue, isn't it? And we have had a lot of dictatorships. We had
a lot of trade with nations when they had a lot less than a
free government. Now they are struggling to have a democratic
government. I will bet you that the open environment policies
that we noticed in the old Indonesian government are going to
be changed.
In Burma, we had the rape of a rain forest in order to
what? In order to put money in the pockets of a militarist
elite and to also to help give them the weapons they needed to
repress their own people. So we had dramatic degradation in
non-free countries. This has to be an important part of the
debate.
Because part of the struggle to staff the resources around
the world and have good environmental laws is, No. 1, giving
the people of those countries the right to control their
heritage, their rain forests, their land, their skies, their
oceans. And I think it is wrong to think that we are going to
have a WTO, you know, just--the argument is, well, the WTO has
to do--have more regulations that are going to protect the
environment in the Third World.
I don't agree with that at all. I think the WTO should--you
know, people in their own countries--we should be struggling
for democracy and let the people in their own countries start
protecting their rights of their people when it comes to their
natural resources.
Again, I say we should be trading, trade-wise, with Costa
Rica different than Burma. And if we do and if we promote
democracy I think in the end it will promote environmentally
good decisions at the same time. Because with honest and
democratic governments you don't have the wholesale corrupt
destruction of these natural resources.
We need a code of conduct for American business in dealing
with dictatorships. The code of conduct in dealing with
democratic societies should be the laws of those societies as
those people see fit.
If Burma wanted to destroy its rain forest, if the people
of Burma wanted to do that in order to have an education system
to sell their trees, they have a right to do so. If the people
of Burma did that--not the little dictatorship, but if the
people of--if they wanted to do it because they wanted to use
that money for education, what might be a tradeoff, that would
be their right to make that tradeoff. What isn't good is having
dictators down in Indonesia or Burma or anywhere else raping
the environment in order to make a quick profit and put it in
Swiss bank accounts.
So I think that when we are talking about trade policy, we
should distinguish, as the WTO does, not between free and
unfree countries. And if we ourselves in the United States try
to establish our own standards maybe, as I say, rather than
putting all of our authority and power in the hands of the WTO,
set up our own standards like a code of conduct for American
companies in dealing with dictatorships. That would have my
support.
And, with that, I am very interested in hearing what the
witnesses have to say. I do know one thing. The Export-Import
Bank and American financially supported international financial
institutions have subsidized a lot of really bad environmental
decisions and economic activity going on in dictatorships. I
mean, we have actually financed with our tax dollars the
destruction of the environment in countries that were not free,
where their own people couldn't vote out the clique that was in
power.
That should stop immediately. We should have a restriction
on all subsidies that come from the U.S. taxpayers on economic
activity that would be deemed not acceptable by American law
because of environmental reasons in the United States. But,
again, when we are dealing with a democracy let's have those
people have control of their own lives and let's not just
ignore their rights as well.
So thank you very much, Madam Chairman.
Ms. Ros-Lehtinen. Mr. Cooksey.
Mr. Cooksey. Thank you, Madam Chairman.
I would certainly agree with the comments of my colleagues,
but I will defer my time to hearing from the witnesses. We have
some impressive witnesses. I have glanced over your statements.
I am anxious to hear what you say. Thank you.
Ms. Ros-Lehtinen. Thank you.
I would like to now introduce the three administration
witnesses who will share their views on the current state of
relations between international trade and environmental
communities this afternoon. So let me begin with--and I am
terrible with names. I have got a name that everyone
slaughters, so I hope I get more or less these right:
Mildred Callear, Vice President and Treasurer of the
Department of Financial Management and Statutory Review for the
Overseas Private Investment Corporation, OPIC. OPIC's former
Senior Counsel for Administrative Affairs, Ms. Callear is the
currently the corporation's chief financial officer and
responsible for administering OPIC's financial and political
risk insurance portfolios. Thank you so much for joining us.
She will be followed by Ms. Barbara Bradford, the Deputy
Director of the United States Trade and Development Agency. A
graduate of Georgetown University, Ms. Bradford joined TDA in
1986 after a series of successful ventures in the private
sector, including having founded a prosperous export trading
firm. While at TDA she has focused on managing the agency's
small business outreach programs and its trust funds with the
World Bank and other financial institutions.
We are also fortunate to have Mr. Dan Renberg, member of
the board of the Export-Import Bank of the United States, the
Eximbank. Sworn in as a board member in November 1999, Mr.
Renberg is the former president of Renberg Strategies
consulting firm and a published author of a book on the House
of Representatives entitled, A House of Ill Repute. I
understand Mr. Rohrabacher has an entitled chapter in that
book?
Mr. Renberg. The Congressman wasn't one of the
contributors, but some of his colleagues were--Congressman
Gingrich, Congressman Walker. We could always do a reprint, I
guess.
Ms. Ros-Lehtinen. Ms. Callear, Let us begin with you.
Ms. Callear. Madam Chairwoman----
Ms. Ros-Lehtinen. We will be glad to put your entire
statements in the record. If could you briefly summarize them,
we would appreciate it.
STATEMENT OF MILDRED O. CALLEAR, VICE PRESIDENT AND TREASURER,
DEPARTMENT OF FINANCIAL MANAGEMENT AND STATUTORY REVIEW,
OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC)
Ms. Callear. On behalf of OPIC President and CEO George
Munoz, I appreciate this opportunity to testify on the
relationship between trade and the environment. And we also
appreciate your leadership and the bipartisan approach that you
and the other Members of the Committee are taking to this
important issue, because we really do think that it is good for
the environment, good for the developing countries and very
good for American companies.
Mr. Ros-Lehtinen. Tell George we all say hello.
Ms. Callear. I certainly will.
More than 15 years ago, this Congress had the foresight to
give OPIC an environmental mandate. We were charged with
conducting environmental assessments for all of the prospective
projects that come before us and to avoid doing any project
that would have the potential for serious harm to the
environment. Thanks to that vision, OPIC is one of the first
international agencies to have an environmental mandate, and
today we have a rich history of successful environmental
assessment and monitoring that I think showcases the
responsible approach that American companies have taken.
Now I would acknowledge that, at times, this has posed a
dilemma for OPIC because, as Americans, we recognize and value
the benefits of clean air and water and soil, and it is only
fair for us to take those values with us when we invest
overseas. But, unfortunately, not all of our OECD counterparts
have had the same approach. This has led to a very real concern
that American companies may be at a competitive disadvantage if
they are held to a higher standard.
But today I think there is more and more consensus among
environmental groups, U.S. business and us in the government
that common environmental standards for overseas investment
really do make sense. We should not allow foreign companies to
compete for business by cutting corners on environmental health
and safety. And I know that many Members of Congress have
worked diligently with your parliamentary counterparts overseas
to try to bring this point home, the importance of having a
common standard when companies are bidding on the same projects
in developing countries.
Since 1999 we do see that some of our counterparts have
begun to make some changes. I think that some of that is due to
the same pressures and discussions that we are seeing in our
own country as the environment is higher on the agenda and
there is more need for our OECD counterparts to look at these
issues. But there is much more that needs to be done. There is
much that has to occur before there is a real, substantive
standard that is applied and, I think, some of the transparency
and accountability issues are so important to having an open
discussion about the projects and their effects.
So we think that U.S. leadership is helping to level the
playing field, but there is much more work ahead.
Now, although having strong policies in the environmental
sector is important, our real commitment I think is shown by
the types of projects that we do, as you mentioned earlier.
There are many opportunities for American companies to really
take a leadership role. For example, just last week OPIC
approved a project that will greatly benefit the health of the
people in Bulgaria. We approved $200 million of political risk
insurance to rehabilitate a thermal power project in Bulgaria.
It is Entergy Power Group out of Louisiana--New Orleans--that
will be modernizing this plant.
As a direct result of their investments, some very
important U.S. technology is going to be put into place.
Atmospheric emissions will be reduced because there will be
modern new gas desulfurization technology, low NOX
burners and other state-of-the-art equipment. So this will have
significant health benefits for the people of Bulgaria, and it
will also improve the supply of electric power. The
rehabilitation of this plant will allow the Bulgarians to
phaseout their reliance upon a Soviet-era nuclear facility that
is clearly unsafe and technologically obsolete.
A couple of other noteworthy environmental initiatives. You
may be aware that OPIC has a series of investment funds, and
three of those funds are focused on environmental investments.
There is nearly $500 million of equity capital that is
available for investment. One of those funds has fully invested
its capital and two others are making investments in clean
water, clean energy and waste water treatment.
Because of President Munoz' dedication to small business,
we are also focusing on how we can work more closely with the
small business sector to do good things for the environment. We
recently announced, during World Environment Week, a $1 million
project to support small environmental projects in the
Philippines. We are working with the nonprofit NGO, Counterpart
International, and they have set up a for-profit subsidiary
that will take equity stakes in small energy-efficient
projects, ecotourism, water supply projects, etc., in the
Philippines that will help to improve the quality of life
there.
And, finally, one project that we approved last year I
think demonstrates how we can meet the environmental challenges
that are inevitable when we are financing and ensuring projects
overseas. The Cuiaba integrated power project involved the
construction of an underground natural gas pipeline from
southeastern Bolivia to fuel a power plant in Cuiaba, Brazil.
This project has provided us an unprecedented opportunity for
participation and dialogue as the project was assessed and
developed. It will benefit the environment because it will
provide clean natural gas as an alternative to diesel and
because currently many of the local citizens are harvesting
timber for fuel wood and that is resulting in a lot of
deforestation.
So we are very pleased to have the opportunity to work on a
project of this type, but it does present many challenges. It
required us to ask the sponsors to thoroughly assess all of the
impacts in advance and, in fact, to reroute part of the
pipeline to avoid an environmentally sensitive area, which they
were satisfied to do.
To ensure that the project meets the environmental
commitments that we are putting into the agreements, we have
really an unprecedented monitoring program, and we are trying
to do it by using advanced technology to measure and manage the
project impacts. We are using satellite imagery, satellite
telecommunications and the ability to send digital images,
including video images, directly from the field as the
monitoring is occurring back to our offices. Much of this we
are putting on our state-of-the-art website, and we have had
the results posted in both English and in Spanish so that the
local citizens in Bolivia can understand the impact of the
projects that are taking place in their country.
So through this process we have I think made great strides
in engaging the local citizens and the NGO community, and we
are having a proactive dialogue. We really have set out to make
this project a model; and we think that, because of the
cooperation of the sponsors, including the Enron Corporation,
we are well on our way to doing that.
As further evidence of their commitment, they put forward
$20 million of additional funding to support a regional forest
conservation program which is really separate and apart from
the project itself but I think shows their good will and their
desire to have a long-term relationship with the citizens of
that country.
So our experience in implementing projects shows that under
President Munoz' leadership we have really been able to strike
the right balance between protecting the environment on the one
hand and making sure that we are helping American companies
compete in a marketplace that is becoming increasingly
competitive for all of us.
As Congressman Menendez and you have described, I think the
opportunities are excellent for American companies and there is
a real chance for us to take our technology and our skills and
our infrastructure that we have developed here and really be a
model for the world at large and to truly sell our services and
our products in a way that is very good for our country as
well. Thank you very much.
[The prepared statement of Ms. Callear appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much.
Ms. Bradford.
STATEMENT OF BARBARA BRADFORD, DEPUTY DIRECTOR, U.S. TRADE AND
DEVELOPMENT AGENCY
Ms. Bradford. Thank you, Chairperson Ros-Lehtinen,
Congressman Menendez, and Members of the Subcommittee, for this
opportunity to testify today on the U.S. Trade and Development
Agency and the environment.
I would like to briefly summarize my remarks.
As our name suggests, TDA targets projects that promote
trade while assisting low- and middle-income countries with
their development and infrastructure priorities. With the
international political pressure mounting in recent years for
countries to become more environmentally responsible,
environmental projects have become an important mainstay of
TDA's programs. Despite the growth in this market, however,
U.S. companies face extremely tough foreign government
subsidized competition. As a result, the assistance TDA and our
sister export promotion agencies can provide our companies can
be critically important to their success overseas.
My testimony today will focus on how TDA has responded to
worldwide environmental trends presenting export opportunities
for U.S. companies, as well as a couple of examples of the
environmental projects in which we have invested.
Let me begin by discussing some of the trends we have
observed in trade and the environment around the world. From
hazardous waste to air pollution, the world community now
recognizes that environmental mismanagement in one country can
have negative global or regional consequences. Although the
initial investment in pollution mitigation and prevention
technologies can be costly, failure to make this investment can
result in environmental problems with much higher costs.
Recognizing this, many countries have significantly
strengthened their environmental policies.
One of the trends we have witnessed that we believe has
great promise for U.S. firms is the increase in the number of
privatization and private sector projects. When market-based
decisions prevail over political ones, U.S. companies
frequently benefit. We have witnessed this in Asia where, given
the somewhat limited resources of the public sector,
governments are encouraging the private sector to undertake
many environmental investments. Also, in Europe, there is
intense political pressure for the new EU accession countries
to adopt the strong environmental regimes of their Western
European counterparts. This has led to a multitude of private
sector environmental projects.
Our strategy, however, has been to focus on private sector
projects because private sector decisions tend to be less
distorted by political pressures than public sector projects.
On a level playing field, when the choice comes down to who has
the better product and expertise, U.S. firms do very well
against their tough competition, whether it is in Asia, Europe
or any other region.
TDA has recently hosted several conferences geared toward
the environmental sector. Conferences are particularly helpful
for small business, and many environmental firms fall in this
category, because their limited business development budgets
make it difficult for them to identify potential overseas
opportunities. Our conferences help with this problem because
we have essentially done the legwork for them.
Take as an example our U.S. Environmental and Process
Technologies Conference which we held in Hungary last fall,
where, for the price of an airline ticket and a nominal fee 56
U.S. companies were able to meet one on one with local project
sponsors regarding more than 30 major environmental projects.
Since that conference, we have already funded half a dozen
feasibility studies for projects that were profiled at that
event.
TDA conferences and the resulting feasibility studies are
examples of TDA capitalizing on win-win situations. Not only
are we able to assist regions in addressing their thorny
environmental problems, we also help U.S. companies establish a
foothold against their competition in this lucrative market.
Let me turn for a moment to a newly identified category
that falls within the environmental sector, emergency
management and preparedness. Obviously, not all environmental
calamities are man-made, so we must make efforts to deal with
natural disasters as they occur. Institutions such as the World
Bank, tired of watching decades of loans and advances in
development literally wash away in floods or crumble in
earthquakes, are seeking solutions. In the last 2 decades, the
World Bank has lent over $14 billion for disaster preparedness,
mitigation and response, with this trend expected to increase
rapidly.
With key sources of funding such as the World Bank already
identified, the potential for significant U.S. exports in this
area is pretty impressive; and U.S. firms are well-positioned
to take advantage of these opportunities. The United States
industry is a world leader in emergency management, information
technology systems, weather forecasting systems,
telecommunications and a wide variety of emergency response
equipment. To capitalize on this new sector, TDA has hosted
several events designed to showcase U.S. equipment and
expertise, including earthquake reconstruction symposia in
Turkey and our first major event, the Asia Regional Emergency
Management Conference.
This fall, TDA will sponsor a similar event targeted toward
Latin America.
TDA spends close to 20 percent of its budget each year on
environmental projects ranging from water and waste water to
air quality to industrial efficiency and clean energy. Last
year alone, we invested $10 million on over 50 feasibility
studies and other related activities that had a strong
environmental benefit. This year, in India alone, we will
probably invest in over a dozen environmental feasibility
studies. In addition, it is important to note that all of our
feasibility studies in every sector examine the environmental
implications of projects in which we invest to ensure that
where the environment is concerned we do no harm.
Madam Chairwoman, I would like to briefly discuss a couple
of examples of TDA's environmental projects.
The first is a great little success story of a small
business in California with new, high-tech proprietary
technology and its efforts to introduce this technology into
the marketplace. In Venezuela, the government is trying to
address environmental problems caused by the oil industry,
particularly in the area of thousands of oil pits. In response
to this effort, TDA funded a feasibility study for an oil pit
remediation project in 1993. As a result of the feasibility
study, a U.S. environmental company teamed up in a joint
venture with a Venezuelan firm and won the contract to clean up
one of the oil pits using their centrifuging and stabilization
technologies. This has generated approximately $5 million in
exports so far, and since it is viewed as a pilot project we
expect the exports to go much higher in the years to come. In a
couple of weeks, 12 Venezuelan delegates are coming to visit
the United States to look for again U.S. technology for this
clean-up of the oil pits.
At the other end of the spectrum is one of TDA's biggest
success stories. Almost $200 million in exports have been
associated with the feasibility study we funded for a Mexico
City air pollution project in the early 1990's. It is no secret
that Mexico City has faced a serious air pollution problem with
untold health and economic costs. In the early 90's the Mexican
government made a major commitment to begin addressing their
pollution problems. We provided a grant for the major
feasibility study coordinating Mexico City's pollution
mitigation effort. This project has been a huge success for
U.S. exporters while tackling one of the world's most infamous
environmental problems.
In conclusion, again I would like to say that TDA's
environmental projects are win-win situations. Not only do they
present U.S. firms with lucrative export opportunities, but
they help developing countries address their pressing
environmental problems. While U.S. firms are very competitive
in the environmental sector, we must not lose sight of the fact
that our companies are facing competition that is heavily
subsidized by foreign governments. To counter this competition,
TDA strategically responds to the trends driving environmental
decisions in the various regions of the world. In this way we
believe that we are making a significant contribution in
helping U.S. firms win some of these opportunities, while
helping countries take important steps on the road to
environmental progress.
Thank you very much for your time and attention.
[The prepared statement of Ms. Bradford appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much, Ms. Bradford.
Mr. Renberg.
STATEMENT OF DAN RENBERG, MEMBER OF THE BOARD, EXPORT-IMPORT
BANK OF THE UNITED STATES
Mr. Renberg. I assume that you will put the longer version
in the record----
Ms. Ros-Lehtinen. Absolutely.
Mr. Renberg [continuing]. For history and historians. I
worked on it last evening. I tried to abbreviate it. It was
down to 4 minutes and 40 seconds in my kitchen. Different air,
different temperature--I am not sure how it will come out.
I appreciate you having this hearing. I think it is great
for the people who visit Washington occasionally in the
summertime to descend on your offices and ask for the passes--
it is great for them to see an oversight hearing not just
targeted on legislation.
The comments you made in your opening statements I
certainly take to heart--I am sure my colleagues here at the
table do as well--and it is great to have a chance to think
about these issues, as opposed to just thinking about a piece
of legislation that is moving.
As a member of the board, I have just been there 7 months,
since I was sworn in, I have what we call the environmental
portfolio where I divvy up some responsibilities, jointly and
separately liable for all the activities of the bank, but I
asked for and have received this chance to work on
environmental matters.
To give you an idea of the scope of our involvement, just
15, 20 years ago an Eximbank board member giving testimony
wouldn't be able to say the following: We did $17 billion in
transactions last year, total export value, 2,200 or so
transactions, 86 percent of which were small businesses. So
right off the bat this is not the Eximbank of old. I just want
to draw that to the attention especially to people who aren't
as familiar with Eximbank as they might be OPIC and TDA.
Over the past 5\1/2\ years we financed transactions
including an estimated $2.7 billion in environmental export
value. This includes the small business sales of air and water
purification systems as well as multi-million-dollar fossil-
fuel-burning, natural-gas-burning power plants. That really
ranges--but a total of $2.7 billion over the past 5\1/2\ years.
A couple of the key points I wanted to leave you with today
because I think you have had a chance to read the written
testimony. We have an environmental exports program. We have
had it since 1994, and we provide enhanced levels of support
for environmentally beneficial exports, goods and services,
which is another thing to point out. We are able to maximize
repayment terms under the OECD guidelines. We can capitalize
interest during construction, and we can finance a percentage
of local costs. So we have tried to use market approaches, if
you will, to get people to think more about buying United
States environmental technologies.
I think that the Chair would be particularly pleased to
learn about our experience with Kimre Incorporated. I am not
sure if the Chair is familiar with that company. It is in
Miami, Florida, in your district. Funny how that works, that my
testimony would reflect that.
But a small business manufacturer of environmental control
filters that is using one of our short-term policies to export
around the world, they offer 60 days open account credit to
their customers. What this means is they--first of all, they
can do more exports. But, technically, what we can do is they
don't need to insist on letters of credit from the foreign
buyer. This makes it less expensive for the buyer, and they can
hopefully buy more. Second, domestic banks for Kimre and other
banks will allow them to get credit. As an assured foreign
receivable they can get credit and borrow against that. So they
can grow their business as a result of an export sale that
really we believe wouldn't happen but for our involvement.
Congressman Rohrabacher, your comments on democracies and
dictatorships made me pleased that I had included in my
prepared text a mention of the southeast Europe reconstruction
credit initiative that I am working on at the bank.
In early May, I visited both Prague and Budapest. We
identified Hungary in particular as a very useful gateway for
American goods and services, and once again particularly with
the environment. One thing that the Czech Republic and Hungary
have in common, they want to enter the EU, the European Union.
They have to bring themselves into compliance across the board
environmentally.
It is a wonderful market opportunity for the United States.
So what we decided was to--not only did we have the Czech
Republic and Hungary as potential markets, but all of southeast
Europe is a potential market. We joined in what is a unique
marketing relationship with our sister agency, the Hungarian
Export-Import Bank, where we will jointly identify projects in
Third World countries, in southeast Europe, Croatia, Romania,
Bulgaria, where, for instance, a Hungarian company could bid on
a waste water treatment plant, deciding to incorporate U.S.
technologies, U.S. goods, U.S. services. The Hungarian Eximbank
would finance the Hungarian portion of the contract if they
win, and we would finance the American portion.
So it is a chance for us to--almost a Trojan horse, if you
will, but I don't mean in a war-like situation. But we can come
in using the good offices of Hungarian Eximbank, the Czech
Export-Import Bank, where we are hoping to do a comparable
agreement with them. This is an effort to recognize that these
fledgling democracies certainly need our help to stay--for
their economies but also for the environment, and I am hoping
that we can help them grow so they won't go back to the ways of
old.
With respect to our environmental guidelines and
procedures, we place a real importance--our charter places a
real importance on balancing our mission both to promote
exports with the need to protect the environment; and we do
this through our environmental procedures and guidelines. I am
sure you are all familiar with them. If a project doesn't fall
within our guidelines, our first response is not to say, hey,
we are not going to do this. Our first response so to try to
work with the exporters and the project sponsors to see how we
can ameliorate the project. What could we do with them so that
they can avail themselves of the U.S. exports?
Of course, one potential outcome is that we still consider
the transaction, declining. But certainly since I have been
there that hasn't happened. Really, in recent memory what we
have been able to do is to lift up the boat, so to speak.
One example, in Venezuela, they don't have--they did not at
the time--I can't tell you when this was--they did not have
guidelines on NOX emissions nitrogen oxides. As a
result, a foreign buyer, a power plant, wasn't forced to
content with that issue. They could retrofit their power plant.
What we did is we came in, as I understand, and said, look,
we have an environmental exports enhancement program. If you
decide to put in special low NOX burners, even
though you don't have to under host country law, we can finance
that. It meant that, ultimately, when Venezuela does get around
to adopting NOX regulations, they would already be
in a position to comply. So it was I think a real win-win not
only for the people of Venezuela but for the American exporter.
That wouldn't have happened if our engineering division didn't
take the time to work with the project sponsor on it.
My last point I would make is that the OECD is actually
meeting--the exports credit group of the OECD is meeting this
week in Paris. It is a very timely hearing with respect to what
other ECAs, export credit agencies, are doing with respect to
their own environmental procedures. Most of them don't have
guidelines such as ours. We are seen--I think the NGO community
would say we are seen as being in the forefront on this fight.
What I can report is we are making incremental progress at
getting the G-7, ECAs and the other OECD ECAs to move forward.
Right now, we have information exchange, but that is the first
step. We are not in a position to dictate what these other
country sovereign nations will do. What we are trying to do is
lead by example and show that you can help your exporters get
the job done and get more sales without necessarily having to
hurt the environment.
With that, I would be more than happy to answer your
questions.
[The prepared statement of Mr. Renberg appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you, Mr. Renberg.
Following up on what you had said in your statement about
the policy you have about declining certain projects, that
says--your environmental policy description states, Eximbank
will decline to finance an export transaction if the board of
directors determine that it is appropriate in light of the
project's serious adverse environmental effects. And you had
given us some examples, but what is considered serious enough
to prompt the denial and what adverse environmental effects are
deemed acceptable by your policy?
Mr. Renberg. I will tell you, Madam Chair, I would be more
than happy to supply the Subcommittee for the record with a
copy of our environmental procedures and guidelines. We are
really out there with respect to our ability. We can quantify
NOX, SO2. We can really--I could give you
that, but I don't have it off the top of my head.
Ms. Ros-Lehtinen. So you have sound science to back up.
Mr. Renberg. We have sound science, quantifiable guidelines
with respect to specific emissions, for instance. We also have
a more of a broad--we take into account sociocultural effects.
For instance, if a population is going to have to be
shifted--you know, they are going to have to be forcibly moved
by an environment, we take that that account. What efforts are
there going to be to mitigate through compensation and other
means? I think we are leading the league, so to speak, on
having quantifiable emissions guidelines.
I would be more than happy to provide them for the record.
Ms. Ros-Lehtinen. How do your board and your agency
complement the work of the other agencies that are involved in
helping U.S. businesses abroad? Especially U.S. environmental
exporters.
Mr. Renberg. Sure. Well, one thing I didn't mention on your
first question, Madam Chair, would be that since I have been
there we have not declined anything for environmental reasons.
In fact, just last week we approved a transaction that I would
say had some environmental issues. So there is not much in
recent memory where we said no to something. So the board of
directors doesn't often have to do it. We try to work with the
project sponsors, as I said.
With respect to how we work with the other groups, we like
to say we are the agency with the checkbook for American
businesses that want to export. We have--thanks to Congress's
appropriation, we have the ability to underwrite insurance and
to direct loans but preferably loan guarantees. As you know, we
don't compete with the private sector. We price things
accordingly. I would say that sometimes there are projects
where we work with OPIC jointly financing some power plants,
clean natural gas in Turkey I think earlier this year.
With respect to TDA, one of my colleagues, Craig O'Connor,
attended that Hungary environmental conference and came back
with loads of leads. So, from my perspective, we work
harmoniously with them.
Ms. Ros-Lehtinen. Thank you. Would you care to add anything
about the agency's coordinated efforts?
Ms. Callear. Sure. I think the way that we look at it at
OPIC is that the first stop is TDA, because they are involved
in the feasibility study end of things when a company is just
beginning to think about a prospect; and the next stop is
Eximbank, because you are going to generally export before you
are ready to invest and the first step is to have a product and
try to test it out in the marketplace by continuing to be here
in the United States and to export abroad.
Finally, if you are successful enough, your investment may
be such that you need to expand your presence and you need a
presence in the market that you are going to serve, and we are
involved in helping finance that long-term investment overseas.
As was stated, because Eximbank's focus is on exports and
our focus is on investments, sometimes we can be side by side
in the same project. We are financing it from the investment
standpoint, and Eximbank is financing it because perhaps there
are some GE turbines that are going into that power plant, and
hopefully TDA did the feasibility study to start with.
Ms. Ros-Lehtinen. Great.
Ms. Bradford.
Ms. Bradford. We are trying to open up the opportunities in
the largest projects in developing countries for U.S. firms. At
that very early stage in the project development, the
feasibility, prefeasibility study stage, nobody knows where the
financing for the project itself is going to come from. If U.S.
investors and U.S. manufacturers get involved in building the
project, likely, OPIC and Eximbank financing will be there. But
many of the projects are financed by the World Bank, the host
governments themselves and private financing, and we want to
make sure that those projects go forward with financing and
that it isn't tied to some other nationalities and so that the
U.S. exporters have a chance to sell into them.
Ms. Ros-Lehtinen. Thank you.
Mr. Menendez.
Mr. Menendez. I want to make a comment to my colleague from
California. I share some of his concerns on the question of the
democracy aspects of our trade and the engagement with
nondemocratic countries. I know that the Chairlady's focus
today was the environment, and so I think many of us are
focused that way.
I would love to see a session on--a hearing on trade and
democracy issues as well. We look forward to that opportunity.
Let me just--one of our panelists later will say that any
linkages with our trade issues and environment are possibly
doomed, that the World Trade Organization creates some serious
issues for us. You have all spoken about what you have done
positively in this regard. Have we put you at a competitive
disadvantage--since you are all there to promote U.S. interests
abroad in terms of export promotion and assisting U.S.
companies being able to export their products and services
abroad, and ultimately that creates opportunities here at home,
have we put you at a competitive disadvantage by the
congressional mandates that we have provided in legislation to
have you consider environmental issues in the process?
Ms. Callear. I would say that was the fear of some American
companies initially, but the reality is that today the
environment is so much a part of the business that is done here
in the United States that, when it is taken overseas, it is
really not as great a leap as one might think. The concern,
however, is that their competitors may not have the same rules
that have to be followed if they are going to the equivalent of
their Eximbank or OPIC for financing; and that is the danger
and why it is important for us to continue to work on this
concept of trying to level the playing field for the standards.
This is what we have tried to do with our political risk
insurance counterparts and others who are in the development
financing business, as opposed to just the export side.
It is not what Congress has done, I think it is what our
counterparts have not done in living up to the responsibility
that we all acknowledge we have to be sure that what we are
doing in these developing countries is something that we can be
proud of and that it is going to be beneficial and
developmental, as opposed to harmful.
Mr. Menendez. Doesn't that speak to creating the greater
linkages that we would like to see in order to level that
playing field and ensure that American interests abroad are
competitive in the context of others meeting some of the same
standards? As long as that doesn't happen, we will consistently
have a set of problems in this regard?
Ms. Callear. I think that is an issue that is there and has
to be addressed. I think the problem that will develop is that,
ultimately, if the playing field is not level, American
companies are creative and they will find other ways to
continue to do business, but it might be at the expense of U.S.
exports. And that is the real fear--that we all learn how to
work around the system if we have to, although it is not our
preference. Certainly any company here in the United States
would prefer to be using U.S. suppliers, but they do want that
level playing field.
Mr. Renberg. I don't think that Congress has disadvantaged
American businesses with our current mandate as I have seen it
in the 7 months I have been at Eximbank. I have seen
environmental benefits occurring, mitigation of adverse impacts
as we saw in a number of board transactions. We are up for
reauthorization next year. After I have more time, I would be
glad to chat with you on that issue.
The real issue is, can we get other members of the G-7 to
stay with the program? The Cologne summit, they have spoken a
good game about common--moving forward to their common
environmental guidelines. Getting them to act has been tougher
and slower going.
I can't wait to see what happens in Paris this week with
respect to the OECD negotiations. There is a Congressman
Menendez in France or Germany, and I would hope----
Mr. Menendez. Probably in Spain.
Mr. Renberg. Quite possibly--I would hope that your
counterpart over there would care. To the extent that you can
raise the issue with your counterparts, it would be so helpful.
Mr. Menendez. With reference to your discussion about that
pipeline development in Brazil and Bolivia and the public
participation, how does that actually come about? How does that
take place?
Ms. Callear. Well, it takes place person by person, step by
step. It is a very labor-intensive process. Enron Corporation
estimated earlier in this implementation phase that they had
upwards of 200 meetings individually with indigenous groups,
members of communities, various NGO's, government officials on
the ground in the various communities that are affected along
the pipeline. The work is at the grassroots level.
At the more macro level, what we do is make sure that we
post on our Internet site when we are about to do a particular
project, make the environmental impact assessment available to
anyone in the public who requests it, and provide an
opportunity for comments. In fact, before every board meeting
we have a public hearing so anyone who wants to come and talk
to us about the project and give us their ideas or suggestions
can do so. It becomes a very iterative process, and I think a
dialogue has gone on in this particular case because it is a
large pipeline, and a lot of people are affected.
Mr. Menendez. But for the requirement for that
consultation, we would have less of an empowerment and less of
a democratization for those individuals, would we not?
Ms. Callear. You have hit the nail on the head. As
Congressman Rohrabacher was talking before, having that kind of
public debate and accountability is the first step to
democratization. It empowers people, and they have a tool to
make the changes needed in the country. Environmental standards
are good, but having accountability and transparency is really
key.
Mr. Menendez. Thank you.
Ms. Ros-Lehtinen. Thank you.
Mr. Cooksey.
Mr. Cooksey. Thank you, Madam Chair.
Ms. Callear, tell me if an American company went to
Venezuela and started a business, took some of their technology
there and they did not go through OPIC, what would be the
ramifications of it on environmental issues, bad loan, on the
political risk insurance?
Ms. Callear. Clearly we believe we are adding value to the
transaction, because chances are that, at this point in time,
the standards that might apply in Venezuela--and I think we
just heard an example from Eximbank about a similar case--might
not be at the level that we require. We tend to follow the
World Bank guidelines and supplement them when necessary.
This project has better environmental impacts because we
have been engaged and working with the company to apply those
standards. Certainly from a political risk standpoint, without
OPIC that company has less protection if there are changes in
the government's viewpoint on the particular project, if there
is some difficulty on down the road, some contract that has to
get renegotiated, some concerns that are raised.
Mr. Cooksey. So if they did not go through you, they would
not have any opportunity to take advantage of the political
risk insurance?
Ms. Callear. Certainly they would not have the U.S.
Government behind them.
Mr. Cooksey. Our largest source of oil for gasoline is
Venezuela and Mexico, not the United States. It is not the
Middle East. The largest retailer of gasoline products in this
country is CITGO, and CITGO's major stockholder is the
Venezuela government. Chavez is the man that led an overthrow
of the government a few years ago, and then he was elected
through a democratic process. That directly relates to what you
are talking to.
I couldn't help but notice that Brazil in your testimony is
replacing diesel fuel with natural gas, and that is the right
and proper decision, and that has not been done in this
country. In the energy crisis in this country, the Department
of Energy or some of these politicians--and you know how I rail
against politicians--they have dictated that we would do
certain things in this country.
For example, in my State, they mandated a coal-burning
power plant and energy plant, and we have these trainloads of
coal coming in, while the plant is located on one of the
largest reserves of natural gas in the United States. When all
of you Northeasterners get cold in the winter and are
complaining about your high heating oil, you should be buying
natural gas because it is better burning fuel, it is
environmentally the best. But that decision was made by a bunch
of politicians 20 years ago. Of course, none of us would make
bad decisions like that.
The other thing that I am glad to see is that our
technology is being exported over there with energy. They are a
good company in Bulgaria. And, again, I would emphasize
something that Mr. Rohrabacher emphasized, that Bulgaria was
running their government on a flawed political policy and that
flawed political policy, which had no democracy, led them to
make a lot of bad decisions from an environmental standpoint
and from an energy standpoint, and they are paying the price
right now. I think some of the worst environmental abuses
occurred in these countries.
Ms. Bradford, I was glad to hear you say that you are aware
when market-based decisions prevail over political decision the
outcomes are better. I think that is true. You said that
private sector decisions are usually better, and I think that
is certainly the case--not that politicians don't always have
this clairvoyant ability that we think that we have. Anyway, it
is reassuring.
Mr. Renberg, sometimes I have some question about the
Export-Import Bank and the approach that is used on some of
those loans in countries, but you were reassuring, and I am
sure that you are making economic statements and not political
statements--and good banking decisions, too.
Thank you very much. Your testimony was good. There seems
to be a game plan. I think that will be good for us and good
for the rest of the world and the environment.
Ms. Ros-Lehtinen. Thank you, Mr. Cooksey.
Mr. Rohrabacher.
Mr. Rohrabacher. There is one thing worse than a politician
and that is them who holds power without having been elected
through a political process.
Dan, did you say that there have been no requests for loans
turned down for environmental reasons by the Export-Import
Bank?
Mr. Renberg. Not since I have been there. Historically
there have, but not since I have been there.
Mr. Rohrabacher. Historically there have. You mean the
Three Gorges Dam project in China?
Mr. Renberg. Yes.
Mr. Rohrabacher. Do you know of any other contracts with
your organizations that have been turned down for environmental
reasons?
Ms. Callear. On a regular basis, people come to us with
large dam projects, and we are not able to do those because of
the environmental impacts.
Mr. Rohrabacher. Yes, those dam projects.
Ms. Callear. If someone proposes a power plant that can't
meet our emissions standards, unless they are willing to apply
the appropriate technology, we are not able to do them.
Mr. Rohrabacher. Do you have some examples of people who
have been turned down for environmental reasons?
Ms. Bradford. We turn down a lot of projects for a lot of
reasons, and if there is an environmental problem that is so
big, it wouldn't even come up from the staff as a
recommendation.
Mr. Rohrabacher. Early on we mentioned that we should not
be financing with any tax subsidy any project that
environmentally would not be permitted in the United States. Do
you have that standard? Or is that something that has not been
codified by your operations?
Ms. Bradford. Would we finance a feasibility study for a
project that would not meet the environmental standards of the
United States, is that the question?
Mr. Rohrabacher. Correct. In other words, if a project is
not possible in the United States because of our environmental
quality, our laws, etc., and regulations, are any of your
organizations involved or can you legally be involved in
providing funds and support and subsidies for that very same
project overseas?
Ms. Bradford. I don't know on an exact par, sir, how that
would work. At the TDA level, when we are talking about the
prefeasibility and the feasibility study stage of a project on
the drawing boards, every step when deciding whether we provide
financing for the feasibility study, we are trying to frame up
the environmental issues. You are starting to frame up those
issues and not apply the standards. So I----
Mr. Rohrabacher. That is still a no.
What about you two guys?
Ms. Callear. Our standards basically are the World Bank
standards, and so what I would call them are international
standards. Many of them have been based over the years by
reviewing the best standards that exist in the world, which
usually are the U.S. standards. But in terms of the actual
substantive levels in every category, because U.S. laws were
written for the U.S. environment and the conditions that
prevail here, which may or may not be the same in the
developing countries, but they are the highest standards.
Mr. Rohrabacher. In my opening statement I made it clear
that people in democratic countries can set their own
standards, but that is different. We are talking about setting
standards for the use of our tax dollars. American people have
a right to set a standard for the use of their tax dollars in
subsidizing projects, at least that they are consistent with
our values or consistent with our standards of environment or
other types of standards. But that might be a good piece of
legislation to consider perhaps.
Mr. Renberg. If I could respond along those lines,
Congressman, our guidelines I believe were done first in 1992--
obviously, 1988 or 1992. They were recently updated in 1998. As
part of that process, there was significant public
participation, exporters, NGO's, dissemination very wide, and
we--the good part, they sunset. We did not get a permanent
guideline in place. They sunset at some point in the next year;
and as a member of the board with this portfolio, I intend to
work closely----
Mr. Rohrabacher. Let me be more specific then. Are we
financing in any way--have we financed in the last 10 years the
construction of nuclear power plants overseas? No nuclear power
plants? Nothing from your institutions on that?
Mr. Renberg. Since I have been there, we did the safety
upgrade in Lithuania.
Mr. Rohrabacher. I have this feeling that some money that
went into North Korea came from us or some of these Japanese
clients.
Again, I personally am not necessarily against nuclear
power, but I do know that you can't build nuclear power plants
in the United States. And if that is the case because of our
standards we should not be subsidizing that to other countries.
I have another question here about--what relationship do
you guys have with the World Bank in terms of--you are totally
separate? You do join in joint projects? Your organization does
feasibility sometimes with the World Bank, doesn't it?
Ms. Bradford. Yes. But the World Bank is a multilateral
development institution, and the United States is a member. TDA
does have grant funding at the bank in a trust fund that is
available to be used in the exact same way that the TDA core
budget is to be used.
Mr. Rohrabacher. Are there companies--to your knowledge, do
you know of companies that actually leave the United States and
set up factories in places like China in order to escape
environmental regulations here?
Ms. Callear. If there were companies doing that we would
not be able to assist them, because we have a provision that
states that we cannot support a runaway project. We are not
active in China now anyway.
Mr. Rohrabacher. My question is whether or not there are
companies that close up shop here and set up in China, and that
is not the discussion of today. If there are companies like
that, they do get support from the World Bank, do they not,
maybe if they go to China or Vietnam?
Ms. Bradford. Those that TDA funding goes into, bank
projects, we look at that runaway shop issue at each stage of
the vetting; and we would not put any TDA funding into a
project that had that element.
Mr. Rohrabacher. Your testimony today has been basically
talking, and I would say justifiably, tooting your own horn
about the proactive way that you have been to the environment;
and that is very good. They say here in Washington if you don't
toot your own horn somebody is going to come along and turn it
into a spittoon.
I am very concerned about maybe some of the things that are
not proactive but instead policies that are permitting things
that go ahead and happen, you want to happen, but are just
going through the system, people using your systems to do
projects overseas that they couldn't do here. Of course,
philosophically, I oppose the idea that we should be
subsidizing people doing business overseas--but it makes it
worse when they do things that we don't permit in our own
country.
Thank you.
Ms. Ros-Lehtinen. Thank you very much for your testimony
today. We thank you for your participation.
To complement the expertise of our first panel, I would
like to introduce two gentlemen who have been in the field and
understand the problems and prospects of relations between the
environmental movement and the international trade community.
First, I would like to introduce Mr. Paul Joffe, the
Associate Director for Advocacy at the National Wildlife
Federation's Office of Federal and International Affairs. A
former Acting General Counsel of the Department of Commerce and
Deputy Assistant Secretary of Commerce for Import
Administration, Mr. Joffe is a former recipient of the Navy
Achievement Medal for his years of service at the U.S. Navy JAG
Corps. We thank you for being here today.
He will be followed by Mr. Myron Ebell, the Director of
Global Warming and International Environmental Policy with the
Competitive Enterprise Institute. In addition, Mr. Ebell
currently chairs the Cooler Heads Coalition, a subgroup of the
National Consumers Coalition that focuses on the issues of
climate change. A former policy director at Frontiers of
Freedom, Mr. Ebell is an accomplished essayist whose writings
have appeared in a number of nationally respected publications.
I thank you gentlemen for your testimony. We look forward
to hearing your insights, and your full statement will be
entered into the record, so if you would feel free to summarize
your remarks. Thank you.
Ms. Ros-Lehtinen. Mr. Joffe, let us begin with you.
STATEMENT OF PAUL JOFFE, ASSOCIATE DIRECTOR FOR ADVOCACY,
NATIONAL WILDLIFE FEDERATION
Mr. Joffe. Thank you very much, Madam Chair. And I want to
commend the Chair and the Ranking Minority Member for their
very constructive statements and in fact support for
environmental legislation such as the conservation funding
legislation, and I would like to salute the Ranking Member for
being from my home State of New Jersey.
Ms. Ros-Lehtinen. There is another Mr. Menendez in Spain,
you know.
Mr. Joffe. Without a healthy global environment, any one
nation's prosperity is in jeopardy.
The evidence of the need to ensure that trade and
environment policy are mutually supportive continues to
increase. At the same time, public confidence in trade rules
and in multilateral institutions has been shaken. We believe
this is because of a growing sense that these institutions
don't reflect the public interest regarding the environment,
but we are optimistic that that can be remedied because we
believe that there are ways to do that, some of which have
already been explored today.
I would like to suggest three components of U.S. trade
policy we believe can advance both trade and the environment
simultaneously so that they are mutually reinforcing. I am just
going to touch on and summarize some items in the prepared
statement for the record.
The first of the three is improved openness and
accountability both in our own trade institutions and in those
multilateral trade institutions. For example, prior to any
action initiated by the United States against a foreign
environmental measure, we believe that other agencies of the
U.S. Government and the Congress and the public should be
consulted. That is not something that has been fully done in
the past, and we think that would be an improvement, and that
is an example of a process improvement that we mention in the
statement.
The second category of recommendations we have deal with
ensuring that trade liberalization and environmental protection
go hand in hand, and we reference a number of improvements here
such as the need for recognizing legitimate national and
international environmental standards. Contrary to what some
have suggested, this is not some novel innovation. The charter
of the GATT going back to 1948 contains a provision which
allows for that type of consideration, and there has been some
debate over whether it is being applied properly, but there is
a long-standing principle, not a terribly novel innovation. In
fact, it is something that happens within the United States.
There is a leading Supreme Court case in which the
environmental rules of the State of Maine were sustained
against claims that they somehow violated free trade within the
United States. So that balancing goes on under free trade
regimes classically.
The third area in which we make recommendations is for
improving global consensus. A major lesson of the Seattle
ministerial was, as a consensus-driven institution, the WTO
needs to find common ground that unites the interests of the
industrial world with those of the developing world. We
recognize that liberalized trade abroad can be vital to
securing the means for less developed nations to implement
policies for sustainable development and environmental
protection. But these results are not a given. They do not
occur automatically.
And glancing at the statement of Mr. Ebell, who is going to
follow me, we would not agree with the idea that one somehow
has to go first; and perhaps we can discuss that in the
question period. We believe that they go together. They are
mutually reinforcing. And indeed the sustainability aspect is
an important aspect of development, that you really are not
going to have successful development unless it is sustainable.
So we have proposed in recent months to both the administration
and Congress that there be a systematic approach to reaching
out to developing countries and to working with them to improve
the capacity of those countries to help themselves; and we have
proposed that that include evaluation of their needs,
significant incentives and financial assistance to those
countries, milestones and reporting and evaluation of results.
In conclusion, international trade is suffering a crisis of
eroding public confidence. It is in the interest of everyone
who wants trade to succeed to establish public confidence in
the institutions and policies governing trade.
We are optimistic that this is possible because we believe
that the agenda we have set forth is a straightforward, common-
sense agenda that can provide the basis for consensus, not one
that is terribly difficult if all concerned will work together.
Thank you.
[The prepared statement of Mr. Joffe appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you, Mr. Joffe.
Mr. Ebell.
STATEMENT OF MYRON EBELL, DIRECTOR, GLOBAL WARMING AND
INTERNATIONAL ENVIRONMENTAL POLICY, COMPETITIVE ENTERPRISE
INSTITUTE
Mr. Ebell. Thank you, Madam Chair; and thank you for
inviting me to testify today. My name is Myron Ebell. I will
just try to highlight a couple of aspects of my written
testimony.
It seems to me that there is always a temptation to try to
make trade into some--to try to moralize it, moralize it for
whatever goal particular a group has. Now, some religious
communities over the centuries have tried to do this within
their own community, and that is their right. But to
memorialize trade and make it compulsory for all of us is
problematic, and that is what is at stake with the World Trade
Organization and the attempt to link the environmental and
labor issues into them. Because, of course, each one of those
interests, the environmental interests and the labor interests,
are an attempt to moralize trade on the basis of some interest
of that group.
I think this was best put some time ago by Professor Deepak
Wol, one of the world's largest development authorities. He
teaches at UCLA but is a native of India. He was debating Ralph
Nader on television, and he turned to him and said, so, Ralph,
when you go to the butcher do you inquire as to the background
of the butcher who is providing your meat? And Ralph Nader was
apparently nonplused. And Deepak explained, what you are
offering for the international trading system should be applied
in your own life. That is, do you inquire as to whether this is
a good family that is providing this meat and look at the farm
that it has come from and if you agree with them politically
and religiously and everything.
But that is not the purpose of trade, of course. The
purpose of trade is to provide consumers with the cheapest and
best goods possible. And there are many, many protectionist
interests in the world that would like to do down consumers,
make goods less affordable and of less quality by protecting
their own special interests; and that is the battle that the
WTO has all the time. And so, therefore, I would like to
suggest that importing two groups of protectionists into the
WTO is a recipe for disaster, labor protectionist and
environmental protectionist, because each one of these groups,
their recipe for everything is to restrict trade in some way.
That is in the way that they like.
Now, they have some charges against the WTO, that it is
undemocratic, unaccountable and secretive and that it overturns
national environmental standards; and I would like to address
those.
The WTO is a club of sovereign nations that have joined up.
Each one of these sovereign nations has a role to play and can
negotiate there. Other groups that are not nations, such as the
environmental groups, or, in the case of my organization, free
market groups, we have every right to make ourselves heard
within our own deliberative processes in our countries. And we
do that.
Now, I should say that the environmental groups usually
win, and the free market groups usually lose, but that is the
way that the game is played. But what is it to import these
groups and to give them a seat at the table, at the WTO? Well,
it is to change the club into something very different,
something that is not accountable to anyone. Because
environmental groups, labor unions, even free market public
policy institutes are not accountable. They work in secret.
They are not democratically elected; and, therefore, they
should mind their own business and stay out of the WTO. Now,
they can make their views known, but they don't have a place.
They are not members of the club, and they should not become
members of the club.
Now, of course, some deliberations are secretive. All
international negotiations have periods that must be secret
because the nations that are doing deals are giving up some of
the interests of some of the people in their own country in
order to further what they feel is a larger national interest;
and, of course, they have to be able to do that without having
the world scrutinizing them. And I think opening up the
deliberative processes of international negotiations is the way
to spread strife and probably warfare, certainly civil warfare
in the world. The idea that WTO overturns national and
environmental standards, this is utterly false. The WTO in
every one of its dispute resolutions has upheld national and
forbidden extraterritoriality, and that is that we can export
our standards and force some other country to abide by them as
a condition of trading with us.
So it seems to me that all of the complaints about the WTO,
which is certainly not a perfect organization, are largely
baseless.
I would conclude with a couple of remarks with the
practical problems of the environmental linkage, and I would
like to quote from an editorial that appeared in the
International Herald Tribune right before the WTO met. It is by
Barry Akobundu, who is a colleague of mine at CEI who is an
agricultural economist by trade and a Nigerian by birth. This
is what she said from her perspective as someone from a poor
and developing nation:
Increases in wealth will first provide families with basic
necessities and only later with the disposal income to demand
improvements in the environmental quality. Consideration of
environmental issues in WTO trade talks threatens to restrain
trade and progress in the 48 sub-Saharan countries. Detractors
of free trade point to environmental degradation as a
consequence of trade and want this to be a priority issue in
trade negotiations. They would condition trade with countries
of the region on environmental policies. Such linkage would
make an acceptable set of environmental policies precede
increased access to the markets of developed countries. But in
a region in which the basic necessities of life are luxuries,
that is at best unrealistic and at worst inhumane.
I think that fairly summarizes the situation between our
environmental standards and those that are possible in the rest
of the world.
Finally, I would bring up something that has only very
marginally come up so far today and that is the claim that,
without the ability to export our environmental standards and
force them upon other countries, we will have a race to the
bottom. That is to say, industries will move to those areas of
the world that have the lowest environmental standards.
Well, first, there is absolutely no evidence of this, no
factual evidence; and I have searched quite a lot.
Second, the environmental groups that push for
environmental legislation in this country continually talk
about how it won't be costly. That is, it will not impact
industry in the way that industry claims that it is going to
raise our cost of production. They continually say no, no, no,
it will actually improve your performance by spending this
money on pollution controls.
So I think I would conclude by saying that the threat to
the world trading system is real. It is very serious. It is
called linkage, and thank God for the developing nations of the
world which almost unanimously and steadfastly oppose linkage
because they understand what is at stake.
[The prepared statement of Mr. Ebell appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you, Mr. Ebell and Mr. Joffe, for
both of your testimonies. As you heard, the bells have rung,
and we have a series of four votes, so that will keep us on the
floor for a substantial period of time.
I would like to recognize Mr. Menendez to ask a concluding
question, and I have a few questions, but I will give them to
you in writing and perhaps you can respond.
Mr. Menendez. Thank you. I also have more questions than I
could ask, so I will submit them for you to answer as well.
Let me get this straight. The purpose of trade--I was
trying to write your words down as you said them--is to obtain
the cheapest and best goods possible. Is that a fair
characterization of what you said?
Mr. Ebell. Yes.
Mr. Menendez. So it is also fair to say that that purpose
would be achieved regardless of how we seek to accomplish that
goal?
Mr. Ebell. Could you repeat that?
Mr. Menendez. The purpose of trade is the cheapest and best
goods possible. It is the cheapest and best good possible
however we can achieve that?
Mr. Ebell. As long as we pay for them, yes.
Mr. Menendez. That would be the only qualifier?
Mr. Ebell. There may be some slight other qualifications,
but yes, in a market economy, when you pay for a product, you
get it.
Mr. Menendez. So if the price of paying for that is our
only qualifier, and listening to your comments about moralizing
trade, I guess then it is OK to trade with those countries that
imprison their people and use their prisoners for slave labor.
I guess that it is OK to trade with those countries that
Chernobylize their citizens; and I guess it is OK to trade with
those countries that, in fact, would use children to create
products. Because those ultimately would be the cheapest
possible products that we would obtain and, of course, we would
pay for them, but that would be OK?
Mr. Ebell. Yes, it seems to me that we do all of those
things now that you have just listed. We do trade with
countries that do all of those things.
Our belief is, first of all, that it benefits consumers in
this country.
Second, that it is up to those countries to decide what
sort of political system they want to have and what sort of
laws governing production they want to have.
Third, it is the belief I believe of virtually every trade
economist in the world that trade with repressive regimes has
the effect of both helping the poorest people in those
countries and also has the effect of liberalizing those regimes
over time. This is not a hard-and-fast rule, but I think the
people who have looked most seriously believe trade does good.
Mr. Menendez. I have looked at it seriously, and I beg to
differ with you. I don't believe that Americans generally want
the cheapest price at any cost, including the sacrifice of a
child or the imprisonment of people in order to achieve a
benefit here in the United States. If they truly knew that was
the case, I would venture to say on that score, or having a
cleaner environment that they would mutually enjoy, that they
would pay somewhat more not to get the cheapest product to
their table or to wear a clothing article in that regard.
The suggestion that trade alone is going to lift all tides
for the people here in this hemisphere of which nearly 50
percent live below the poverty level--trade has broadened the
gulf between those who already have within those societies and
those that do not. If you do not match it with development
assistance in addition to trade, you do not lead to where you
need to be.
I am really concerned about the view that neither
environmental issues nor some of the issues in terms of labor--
that our view is that, at any cost, as long as we pay for it
and the cheapest price, if that is the standard of the United
States of America, that is in my mind an appalling standard and
one that does not sustain itself over time for our country for
a policy and ultimately for the sustainability. I am not among
those marching on the streets of Seattle who drowned you out,
but I do believe that you cannot say that the only equation is
the cheapest price. The cheapest price does not promote
democracy, it does not promote sustainability and----
Mr. Ebell. You have made several points.
Ms. Ros-Lehtinen. Mr. Ebell, I am afraid--if you can just
take 1 minute each. We have 5 minutes to vote.
Mr. Ebell. First, I just suggest that trade embargoes don't
have much impact. Are we hurting Saddam Hussein or the poorest
people in Iraq? We are hurting the poorest people in Iraq.
Second, I have no problem not to buy products that are
produced in countries which produce them in ways that I don't
agree with. I make many of those choices in my personal life.
But I don't want my country telling me what I can and cannot
buy. I want that choice.
One more point. There are many other international forums
for pursuing human rights, labor and environmental issues. We
have hundreds of treaties governing national environmental
issues. Don't mix up trade with environment.
Mr. Menendez. Thank you. Thank God you are not in a country
where you are sitting in jail.
Ms. Ros-Lehtinen. Mr. Joffe.
Mr. Joffe. It is not the law of the GATT or the charter of
the WTO that anything goes. There are provisions in the charter
that provide for exceptions, forced labor and for immoral
aspects of trade. The debate is somewhere else. The debate is
how those are being interpreted. And the only other point in
the shortness of time that I would say is that it is impossible
to avoid some discussion of this in the WTO because the
existing environmental rules are sometimes challenged under the
WTO charter, and it is at that point that a deliberative
process has to take place as to whether the exceptions apply.
So you can't extricate them, but if the countries of the world
can move in another forum and provide a rule that applies to
particular cases, we are all for that.
Ms. Ros-Lehtinen. Thank you, Mr. Joffe; and thank you, Mr.
Ebell.
The Subcommittee is now adjourned.
[Whereupon, at 3:50 p.m., the Subcommittee was adjourned.]
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A P P E N D I X
June 21, 2000
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