[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
OUTCOME OF THE WORLD TRADE ORGANIZATION MINISTERIAL IN SEATTLE
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
FEBRUARY 8, 2000
__________
Serial 106-50
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
66-204 CC WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida CHARLES B. RANGEL, New York
AMO HOUGHTON, New York RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of January 14, 2000, announcing the hearing............. 2
WITNESSES
Office of United States Trade Representative, Hon. Charlene
Barshefsky, United States Trade Representative................. 22
U.S. General Accounting Office, Susan Westin, Associate Director,
International Relations and Trade Issues, National Security and
International Affairs Division; accompanied by Beth Sirois,
Assistant Director, and Nina Pfeiffer, Senior Evaluator........ 60
______
Agriculture Advisory Committee, Dale E. Hathaway................. 76
American Farm Bureau Federation, Bob Stallman.................... 110
American Federation of Labor and Congress of Industrial
Organizations, John J. Sweeney, as presented by Richard Trumka. 81
Coalition of Service Industries, Robert Vastine.................. 127
Dawson, Rhett, Information Technology Industry Council........... 122
Electronic Industries Alliance, Hon. Dave McCurdy................ 135
Hathaway, Dale E., National Center for Food and Agricultural
Policy, and Agriculture Advisory Committee..................... 76
Hufbauer, Gary Clyde, Institute for International Economics...... 69
Information Technology Industry Council, Rhett Dawson............ 122
Kittridge, Frank D., National Foreign Trade Council, Inc......... 95
Lewis, Hon. John, a Representative in Congress from the State of
Georgia........................................................ 5
Marconi Commerce Systems, Steve Robertson........................ 131
McCurdy, Hon. Dave, Electronic Industries Alliance............... 135
National Association of Manufacturers, Steve Robertson........... 131
National Center for Food and Agricultural Policy, Dale E.
Hathaway....................................................... 76
National Foreign Trade Council, Inc., Frank D. Kittridge......... 95
National Wildlife Federation, Mark Van Putten.................... 115
Niles, Thomas M.T., United States Council for International
Business....................................................... 85
Public Citizen's Global Trade Watch, Lori Wallach................ 89
Robertson, Steve, Marconi Commerce Systems, and National
Association of Manufacturers................................... 131
Stallman, Bob, American Farm Bureau Federation................... 110
Sweeney, John J., American Federation of Labor and Congress of
Industrial Organizations, as presented by Richard Trumka....... 81
Trumka, Richard, American Federation of Labor and Congress of
Industrial Organizations, presenting statement of John J.
Sweeney........................................................ 81
United States Council for International Business, Thomas M.T.
Niles.......................................................... 85
Van Putten, Mark, National Wildlife Federation................... 115
Vastine, Robert, Coalition of Service Industries................. 127
Wallach, Lori, Public Citizen's Global Trade Watch............... 89
Waters, Hon. Maxine, a Representative in Congress from the State
of California.................................................. 10
Weller, Hon. Jerry, a Representative in Congress from the State
of Illinois.................................................... 7
SUBMISSIONS FOR THE RECORD
American Apparel Manufacturers Association, Arlington, VA,
statement...................................................... 147
American Fisheries Society, Bethesda, MD, Ghassan N. Rassam,
letter......................................................... 149
American Iron and Steel Institute, statement..................... 151
American Lands Alliance, Antonia Juhasz, statement............... 155
Blackwelder, Brent, Friends of the Earth, statement.............. 162
Dernbach, John C., Foreign Policy in Focus, and Widener
University Law School, Harrisburg, PA, statement............... 160
DiPeso, Jim, Rainier Audubon Society, Auburn, WA, statement...... 176
Foreign Policy in Focus, and Widener University Law School,
Harrisburg, PA, John C. Dernbach, statement.................... 160
Friends of the Earth, Brent Blackwelder, statement............... 162
Grocery Manufacturers of America, statement...................... 164
Head, David, Save Endangered Wilderness, Hatboro, PA, statement.. 186
Inouye, Lauren, Edina, MN, letter and attachment................. 166
Institute for Agriculture and Trade Policy, Minneapolis, MN,
Sophia Murphy, statement....................................... 168
JBC International, letter........................................ 171
Jones, Laura E., United States Association of Importers of
Textiles and Apparel, New York, NY, statement.................. 189
Juhasz, Antonia, American Lands Alliance, statement.............. 155
Labor/Industry Coalition for International Trade, statement...... 172
Murphy, Sophia, Institute for Agriculture and Trade Policy,
Minneapolis, MN, statement..................................... 168
National Electrical Manufacturers Association, Rosslyn, VA,
Malcolm O'Hagan, letter........................................ 175
Pjerrou, Mary, Redwood Coast Watersheds Alliance, and Save the
Redwoods/Boycott the Gap Campaign, Elk, CA, letter............. 177
Rainier Audubon Society, Auburn, WA, Jim DiPeso, statement....... 176
Ramstad, Hon. Jim, a Representative in Congress from the State of
Minnesota...................................................... 182
Rassam, Ghassan N., American Fisheries Society, Bethesda, MD,
letter......................................................... 149
Redwood Coast Watersheds Alliance, and Save the Redwoods/Boycott
the Gap Campaign, Elk, CA, Mary Pjerrou, letter................ 177
RONGEAD, Lyon Cedex, France, Hon. Tran Van Thinh, statement and
attachments.................................................... 182
Save Endangered Wilderness, Hatboro, PA, David Head, statement... 186
U.S. Integrated Carbon Steel Producers, statement................ 187
United States Association of Importers of Textiles and Apparel,
New York, NY, Laura E. Jones, statement........................ 189
Van Thinh, Hon. Tran, RONGEAD, Lyon Cedex, France, statement and
attachments.................................................... 182
Yeutter, Hon. Clayton, Hogan & Hartson, L.L.P., statement........ 191
OUTCOME OF THE WORLD TRADE ORGANIZATION MINISTERIAL IN SEATTLE
----------
TUESDAY, FEBRUARY 8, 2000
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to call, at 1 p.m., in room
1100, Longworth House Office Building, Hon. Philip M. Crane
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
Contact: (202) 225-1721
FOR IMMEDIATE RELEASE
January 14, 2000
No. TR-18
Crane Announces Hearing on the Outcome of the WTO Ministerial in
Seattle
Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade
of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on the outcome of the World Trade
Organization (WTO) Ministerial held in Seattle. The hearing will take
place on Tuesday, February 8, 2000, in the main Committee hearing room,
1100 Longworth House Office Building, beginning at 1:00 p.m.
Oral testimony at this hearing will be from both invited and public
witnesses. The invited witness will be Ambassador Charlene Barshefsky,
United States Trade Representative. Also, any individual or
organization not scheduled for an oral appearance may submit a written
statement for consideration by the Committee or for inclusion in the
printed record of the hearing. The Subcommittee intends to hold other
hearings on the WTO in the future.
BACKGROUND:
The Uruguay Round was the eighth round or series of multilateral
trade negotiations under the General Agreement on Tariffs and Trade
(GATT). The agreements reached at the end of 1994 during the Uruguay
Round were noteworthy in that they greatly expanded coverage of GATT
rules beyond manufactured goods trade to include agricultural trade,
services trade, trade-related investment measures, intellectual
property rights, and textiles. One of the most visible accomplishments
of the Uruguay Round was to establish the WTO to administer the GATT
agreements and to settle disputes among WTO members. The so-called
``built-in agenda'' of the Uruguay Round Agreements calls for the
resumption of negotiations by the year 2000 to further liberalize trade
in agriculture and services, as well as the examination of government
procurement practices and enforcement of intellectual property rights.
The WTO Ministerial conference that was hosted by the United States
in Seattle, Washington, from November 30 through December 4, 1999, was
to have formally launched these negotiations. At this meeting
representatives of the 135-member countries of the WTO considered the
procedures and substance of the ``built-in'' WTO agenda, as well as
other issues including transparency, possible reforms to the dispute
settlement system, treatment of electronic commerce, and the
accelerated Tariff Liberalization effort for industrial tariffs.
However, in a major setback on December 3, following four days of
meetings, Conference Chairperson Charlene Barshefsky announced a
suspension of negotiations, saying: ``Our collective judgement, shared
by the WTO Director General, the Working Group Chairs, and the
membership generally, was that it would be best to take a time out,
consult with one another, and find creative means to finish the job.''
Convening in Geneva on December 17, 1999, the WTO General Council
decided to postpone until early 2000 a decision on how to proceed with
the ``built-in agenda'' and other issues outstanding from the Seattle
Ministerial Conference. At this meeting, one of the proposals on the
table sought delays in the December 31, 1999, deadlines for applying
obligations and other provisions of existing WTO agreements -for
example, in intellectual property and trade related investment
measures.
In announcing the hearing, Chairman Crane said: ``The Seattle
Ministerial meeting represented a significant lost opportunity for U.S.
workers, businesses, and farmers. It is important that Congress
investigate the cause of the failed outcome, as well as the adequacy of
logistical and other preparations for this meeting of trading nations.
We must critically examine where we go from here in a manner that is
productive to our trade agenda and our goal of expanding markets abroad
for U.S. goods and services.''
FOCUS OF THE HEARING:
The focus of the hearing will be to examine preparations for the
Seattle Ministerial Meeting and the course of events leading to a
suspension of negotiations without agreement on a Ministerial
Declaration. Testimony will be received on: (1) causes of the impasse;
(2) the negotiating strategies pursued by the United States and its
trading partners; (3) the impact of the failure to launch a new round
of WTO negotiations on jobs, wages, economic opportunity, and the
future competitiveness of U.S. manufacturers and service providers; (4)
how the United States can achieve more forward movement on the ``built-
in agenda"; (5) prospects for future WTO negotiations, including
what issues are ripe for discussion in tandem with negotiations on the
``built-in,'' and the status of, provisions in the Uruguay Round
Agreements that may be time-sensitive.
DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to
Traci Altman or Pete Davila at (202) 225-1721 no later than the close
of business, Wednesday, January 25, 2000. The telephone request should
be followed by a formal written request to A.L. Singleton, Chief of
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102
Longworth House Office Building, Washington, D.C. 20515. The staff of
the Subcommittee on Trade will notify by telephone those scheduled to
appear as soon as possible after the filing deadline. Any questions
concerning a scheduled appearance should be directed to the
Subcommittee on Trade staff at (202) 225-6649.
In view of the limited time available to hear witnesses, the
Subcommittee may not be able to accommodate all requests to be heard.
Those persons and organizations not scheduled for an oral appearance
are encouraged to submit written statements for the record of the
hearing. All persons requesting to be heard, whether they are scheduled
for oral testimony or not, will be notified as soon as possible after
the filing deadline.
Witnesses scheduled to present oral testimony are required to
summarize briefly their written statements in no more than five
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full
written statement of each witness will be included in the printed
record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of
time available to question witnesses, all witnesses scheduled to appear
before the Subcommittee are required to submit
200 copies, along with an IBM compatible 3.5-inch diskette in
WordPerfect 5.1 format, of their prepared statement for review by
Members prior to the hearing. Testimony should arrive at the
Subcommittee on Trade office, room 1104 Longworth House Office
Building, no later than Friday, February 4, 2000. Failure to do so may
result in the witness being denied the opportunity to testify in
person.
WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect 5.1 format, with their name, address, and
hearing date noted on a label, by the close of business, Tuesday,
February 22, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways
and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Trade office, room 1104 Longworth House
Office Building, by close of business the day before the hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1
format, typed in single space and may not exceed a total of 10 pages
including attachments. Witnesses are advised that the Committee will
rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at ``http://waysandmeanshouse.gov''.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Crane. Good afternoon. This is a meeting of the
Ways and Means Trade Subcommittee to evaluate American trade
policy and our role in the world trading system after the
failed WTO ministerial meeting in Seattle.
Our focus here today is to steer a course for returning
America back to its historic position of strong influence and
leadership in the trading system. Clearly, the train has jumped
the track and must be repaired and redirected if we are to
preserve our prosperity and unbeatable success in international
markets.
The WTO system has borne huge benefits for U.S. firms,
workers, farmers, ranchers, and for all of us as consumers. The
breakdown in Seattle represents a direct threat to the WTO
system of trade rules. Constructed over 50 years by Presidents
from both parties, in close consultation with Congress, the WTO
system is fundamentally American-based ``rules of the road''
for commerce.
Because of the force of U.S. leadership, our trading
partners have been willing to accept this structure of fair
trade rules. There is absolutely no better strategy for
improving living standards than to pry away trade barriers and
grow foreign markets for U.S. products. To tear it down or
stand by as it is slashed and slandered is to put our
prosperity at risk. A compact among 135 governments can always
be improved. But to unravel the WTO rules of the road for world
trade, with no alternative system in mind, invites chaos,
commercial conflicts, and growing poverty in poor countries.
There are, of course, many causes of the problem we faced
in Seattle. These include: a lack of agreement on a declaration
prior to Seattle, recalcitrance on the part of the European
Union to agree to the elimination of agricultural subsidies,
Japanese foot-dragging on the ATL initiative, and the U.S.
inflexibility on antidumping, to name just a few.
With that, I would like to yield to the Ranking Member of
our Subcommittee for his opening remarks, Congressman Sandy
Levin.
Mr. Levin. Mr. Chairman, we were just discussing here that
we would give our full-length statement after these witnesses,
our colleagues, so that they could go on to other things. So I
will withhold my opening statement so that our three
distinguished colleagues can give their statements. I
understand that Ambassador Barshefsky will then be here and I
will present my opening statement before her testimony.
Chairman Crane. Very good.
With that then, we shall yield to our first witness panel.
Please try and keep your oral testimony to 5 minutes or less.
All written statements will be made a part of the permanent
record.
I now yield to Hon. John Lewis, our colleague from Georgia.
STATEMENT OF HON. JOHN LEWIS, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF GEORGIA
Mr. Lewis. Thank you, Chairman Crane, Ranking Member Levin,
and other Members of the Subcommittee for the opportunity to
address this Subcommittee this afternoon.
For a long time I have been saying that people have a right
to know. They have a right to know what is in the food they
eat, the air they breathe, and the water they drink. They also
have a right to know how their tax dollars are spent and what
issues come before this Subcommittee and the Congress. The
people have a right to know.
I think most of us would agree that as Members of Congress
we have a sacred duty to protect this right. We have a duty to
make sure that we are, in fact, a government of the people, by
the people, and for the people.
And that is what I am here to talk about today--government
in the sunshine, shining a little light on trade.
International trade is filled with complex and often
divisive issues. This is understandable. When jobs and the
economy are at stake, passion and partisanship can sometimes
overwhelm debate between reasonable people with honest
differences.
Mr. Chairman, we can bridge the divide on trade. But to do
so we must build trust, bring people together, and seek common
ground. Mr. Chairman, I believe that letting the sun shine in
on trade is the best way to begin.
I would like to share an example of how we can improve the
process. Under Chapter 11 of the North American Free Trade
Agreement, if a Canadian or a Mexican company believes that the
United States or a State or local government has unfairly
expropriated or taken its investment, that company is entitled
to request compensation for its loss from the State or Federal
Government.
If a dispute arises over compensation, the company can
submit its case to an arbitration panel. NAFTA requires that
before a case begins a company must file a notice of intent to
arbitrate a dispute. This notice gives the disputing country
basic information about the case including the basis for the
claim and the approximate damages sought by the company.
The issues that come before NAFTA for arbitration are
important. They are important to many people--both inside and
outside of government. Despite this fact, current law does not
require that the notice of intent to arbitrate or other basic
information on these cases be made public. The ideas that
things may be going on behind closed doors creates mistrust and
hurts the process. We should open those doors and give the
American people a view of what is going on the inside.
I propose to accomplish this goal by requiring the United
States government to publish in the Federal Register the
content of any notice of intent to arbitrate filed against the
United States. This will let interested people know that a case
may be forthcoming.
I also believe that it is important to give people an
opportunity to share their views on trade. We need a process,
Mr. Chairman, whereby people and organizations can submit their
comments on NAFTA arbitration cases to the government. At the
same time, we need an approach that includes people without
encroaching on NAFTA.
Finally, a credible process requires that those in power
have the trust of the people. We need common sense requirements
that guarantee that arbiters in NAFTA cases are fair and
impartial.
Again, my approach is a simple one. But in its simplicity
lies the seeds of progress. As I said at the beginning of my
statement, our democracy is built on the idea that regular
people can and should be part of the governing process. I
believe that we owe it to all Americans, indeed, we owe it to
all citizens of all nations, to demonstrate that democracy
works and that regular people can and should participate.
I thank you, Mr. Chairman and Members of the Subcommittee.
[The prepared statement follows:]
Statement of Hon. John Lewis, a Representative in Congress from the
State of Georgia
Thank you Mr. Chairman for the opportunity to address your
committee this afternoon.
For a long time I've been saying that people have a right
to know. They have a right to know what's in the food they eat,
the air they breathe and the water they drink. They also have a
right to know how their tax dollars are spent and what issues
come before this Committee and the Congress. The people have a
right to know.
I think most of us would agree that as Members of Congress,
we have a sacred duty to protect this right. We have a duty to
make sure that we are in fact a government of the people, by
the people and for the people.
And that is what I am hear to talk about today: government
in the sunshine, shining a little light on trade.
International trade is filled with complex and often
divisive issues. This is understandable. When jobs and the
economy are at stake, passion and partisanship can sometimes
overwhelm debate between reasonable people with honest
differences.
Mr. Chairman, we can bridge the divide on trade policy. But
to do so we must build trust, bring people together and seek
common ground. Mr. Chairman, I believe that letting the sun
shine in on trade is the best way to begin.
I'd like to share an example of how we can improve the
process. Under Chapter 11 of the North American Free Trade
Agreement, if a Canadian or Mexican company believes that the
United States or a state or local government has unfairly
expropriated or ``taken'' its investment, that company is
entitled to request compensation for its loss from the state or
federal government.
If a dispute arises over compensation, the company can
submit its case to an arbitration panel. NAFTA requires that
before a case begins, a company must file a notice of intent to
arbitrate a dispute. This notice gives the disputing country
basic information about the case including the basis for the
claim and the approximate damages sought by the company.
The issues that come before NAFTA for arbitration are
important. They are important to many people--both inside and
outside government. Despite this fact, current law does not
require that the notice of intent to arbitrate or other basic
information on these cases be made public. The idea that things
may be going on behind closed doors creates mistrust and hurts
the process. We should open those doors and give the American
people a view of what's going on.
I propose to accomplish this goal by requiring the United
States Government to publish in the Federal Register the
content of any notice of intent to arbitrate filed against the
United States. This would let interested people know that a
case may be forthcoming.
I also believe that it is important to give people an
opportunity to share their views on trade. We need a process
whereby people and organizations can submit their comments on
NAFTA arbitration cases to the Government. At the same time, we
need an approach that includes people without encroaching on
NAFTA.
Finally, Mr. Chairman, a credible process requires that
those in power have the trust of the people. We need common
sense requirements that guarantee that arbiters in NAFTA cases
are fair and impartial.
Again, my approach is a simple one. But in its simplicity
lie the seeds of progress. As I said at the beginning of my
statement--our democracy is built on the idea that regular
people can and should be part of the governing process. I
believe that we owe it to all Americans--indeed we owe it to
all citizens of all nations--to demonstrate that democracy
works and that regular people can and should participate. Thank
you.
Chairman Crane. Thank you, Congressman Lewis.
Our next witness, Hon. Jerry Weller from Illinois.
STATEMENT OF HON. JERRY WELLER, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF ILLINOIS
Mr. Weller. Thank you, Mr. Chairman and Members of the
Subcommittee. I thank you for the opportunity to testify today.
My purpose in being here today is to reintroduce to the Trade
Subcommittee an issue that we brought before the Subcommittee
and the Full Committee this past year. That is the issue of the
loss of 20,000 film and television industry jobs last year from
runaway film production. I want to raise this issue again to
urge that our domestic film and television industry be given a
seat at the table at any future WTO discussions to address the
cultural content issue and its relationship to runaway film
production.
Some might say that runaway film production is just a
Hollywood issue. But it is actually a growing national issue
which directly impacts thousands of working Americans from New
York to Florida, Washington to California, Illinois to Texas.
During last year's Committee discussion on the Financial
Freedom Act, we discussed an amendment that I offered to
essentially level the playingfield and of course counter the
loss of film and television production jobs to Canada.
Remember the film ``Coming to America''? Unfortunately, it
seems that film making jobs are now running from America. In
fact, a one-time presidential candidate once referred to that
giant sucking sound of jobs heading south. Well, today that
giant sucking sound is really the sound of 20,000 film industry
jobs which headed north this past year to Canada.
A recent study commissioned by the Directors Guild of
America and the Screen Actors Guild shows that in 1998 over $10
billion in economic activity was lost to runaway economic film
and television production. This is more than five-fold since
the beginning of this past decade. In the last 4 years, Texas
has seen a 31 percent decrease in direct production revenues,
while my home State of Illinois is down nearly 20 percent. This
has resulted in a loss of 20,000 jobs nationwide last year
alone.
In looking at the small businesses and jobs lost by runaway
production, we are not just talking about directors and actors.
Rather, we are talking about the small businesses that support
the film industry and make America great. Let's also remember
that the average film industry worker makes around $26,000 a
year. They include caterers, hotel and motel operators,
restaurants and bars, rental equipment businesses,
electricians, set construction workers, and many others
involved in this important activity. Over the years, film and
television production has been a leading exporter and a major
contributor to the American economy.
Mr. Chairman, this is a constituent issue which we should
take seriously. This is a significant issue for you as well as
other Members of the Subcommittee. I come from a district which
includes Joliet, Elwood, and Calumet City, the home of Joliet
Jake and Elwood Blues. I often refer to the district I have the
privilege of representing as the ``Blues Brothers'' district.
Last year my constituents and I were stunned when they decided
to make the film ``Blues Brothers 2000,'' they chose to film it
in Toronto rather than Chicago. And even more embarrassing was
the fact that the Canadian filmmakers were calling the Chicago
Film Commission to ask them for best advice on how to make
Toronto more Chicago-like.
With my statement, I have included a copy of the Directors
Guild and Screen Actors Guild study they completed last year
explaining many of the reasons why film and television
production is leaving the United States, and they have
concluded that one of the main reasons is the generous tax
incentives and subsidies offered in countries such as Canada,
Australia, and the United Kingdom which we do not have here in
the United States. Canada alone offers Federal and provincial
tax credits of between 22 and 46 percent of labor costs. These
incentives are enough to make any business consider relocating,
particularly when savings from filming in Canada can mean a 25
to 30 percent savings overall.
The United States should not be put at a competitive
disadvantage by tax incentives offered abroad. Rather, we need
to level the playingfield if we are going to keep this
important industry in America.
Related to this is the issue of Canadian cultural content.
The Canadian government has given certain ``cultural
industries'' special treatment. This policy has been
implemented in large part through legislation as well as from
trade barriers. These cultural content requirements
discriminate against our American film production. Canada uses
cultural content more as an industrial policy regarding jobs.
Under their definition of cultural content, the film ``Bad As I
Want To Be: The Dennis Rodman Story'' is defined as Canadian
culture, not because it is Canadian culture but because it was
filmed in Canada using Canadian workers. Clearly, this is
unfair.
As you know, toward the end of the WTO round in Seattle the
Canadians and Europeans raised the possibility of further
cultural exceptions to future trade agreements, including new
technologies. I believe that this would go against what many of
us are fighting for, which is to keep e-commerce barrier free.
Cultural content and cultural exceptions trade agreements
must be addressed in future WTO talks with the backdrop of the
issue of the runaway film production. We have a situation in
which thousands of U.S. jobs are being lured to Canada and
other countries through favorable tax treatment and subsidies.
While at the same time, cultural policies established by the
Canadians and others discriminate against United States film
interests thereby creating a double hit to industries such as
domestic film production.
It is an important issue that affects real Americans, Mr.
Chairman. I ask this Trade Subcommittee's interest as well as
we make this a priority in future trade negotiations. Thank
you, Mr. Chairman.
[The prepared statement follows:]
Statement of Hon. Jerry Weller, a Representative in Congress from the
Illinois
Mr. Chairman,
Thank you for this opportunity to testify here today. I
want to reintroduce to the Subcommittee an issue that I brought
before the Subcommittee and the full Committee last year. The
issue is the loss of 20,000 American film industry jobs from
runaway film production. I want to raise this issue again to
urge that our domestic film industry be given a seat at the
table at any future WTO talks to address the cultural content
issue and its relationship to runaway film production.
The problem with runaway film production is a growing
National issue which directly impacts thousands of working
Americans from New York to Florida; Washington to California,
Illinois to Texas. During the committee discussion on the
Financial Freedom Act, I offered an amendment to introduce a
wage based tax credit and creative financing tax incentives to
counter the loss of film production jobs to Canada.
Remember the film ``Coming to America?'' Unfortunately, its
seems that film making jobs are now running from America. In
fact, a one time Presidential candidate once referred to that
giant sucking sound of jobs heading south--well that giant
sucking sound is really the sound of 20,000 film jobs heading
north to Canada.
A recent study commissioned by the Director's Guild of
America and the Screen Actors Guild shows that in 1998 over $10
billion was lost to runaway economic film and television
production. This is more than fivefold since the beginning of
the decade. In the last four years, Texas has shown a 31%
decrease in direct production revenues, while my state Illinois
is down nearly 20%. This has resulted in a loss of 20,000 jobs
nationally.
In looking at the small businesses and jobs lost by this
phenomena, we are not just talking about directors and actors,
rather we are talking about the small businesses that support
the film industry and make America great. This includes:
caterers, hotel and motel operators, restaurants and bars,
rental equipment businesses, electricians, set construction
workers and many others involved in this vitally important and
culturally indigenous economic activity. Over the years, this
industry has been a leading exporter and driver of small
business job creation.
Mr. Chairman this is a constituent issue which we should
take seriously. This is a constituent issue for you too. I come
from a district which includes Joliet, Elwood and Calumet City,
the home of Joliet Jake and Elwood Blues, which I often refer
to as the ``Blues Brothers'' district. Last year, my
constituents and I were stunned when they decided to make the
film ``Blues Brothers 2000,'' they choose to film it in Toronto
rather than Chicago. Embarrassing was the fact that the
Canadian filmmakers were calling the Chicago film commission to
ask them how to best portray Chicago.
With my statement, I have included the Directors Guild and
Screen Actors Guild study explaining the reasons why the film
industry is moving out of the country, and they have concluded
that one of the main reasons is the tax incentives offered in
other countries like Canada, Australia and the U.K. which we do
not have in the United States. Canada alone offers federal and
provincial tax credits of between 22% and 46% of labor costs.
Those incentives are enough to make any business relocate.
Particularly when savings from filming in Canada can mean a
dollar savings overall.
The United States should not be put at a competitive
disadvantage by tax incentives offered abroad. Rather we need
to level the playing field for the small businesses impacted by
runaway production and create jobs in America, for Americans.
Related to this there is an issue of Canadian cultural
content policy. The Canadian Government has given certain
``cultural industries'' special treatment. This policy has been
implemented in large part through Canadian legislation, as well
as some foreign trade through tariffs, taxes, foreign
investment restrictions and content requirements that
discriminate against U.S. cultural industries. Canada has
consistently protected its cultural industries.
This has been discussed and negotiated in the past. In
fact, during the late hours of the Seattle talks in November,
the Canadians and Europeans raised cultural content concerns.
They were advocating the implementation of cultural content
barriers to new technologies. I believe that this goes against
what many of us are fighting for, keeping e-commerce barrier
free.
I believe that the cultural content issue must continue to
be addressed in future WTO talks with the backdrop of the issue
of runaway film production, as well as e-commerce. We have a
situation in which thousands of U.S. jobs are being lured to
Canada and other countries through favorable tax treatment.
While at the same time, cultural policies established by the
Canadians and others discriminate against U.S. interests
thereby creating a double hit to industries like domestic film
production.
Mr. Chairman, even if the problem of runaway production had
not become so great, the Canadian insistence on maintaining
their cultural content rules and regulations ought to be on the
table at future WTO talks. However, simple fairness requires a
response by the U.S. to the increasing efforts by Canada to
attract production away from the U.S. So long as these efforts
continue, the U.S. must address the Canadian cultural content
rules. Canada cannot unilaterally decide to invite in our
production jobs, but close the door on our productions.
Thank you Mr. Chairman for this opportunity to testify.
Chairman Crane. Thank you, Mr. Weller.
Our next witness, Hon. Maxine Waters from the State of
California.
STATEMENT OF HON. MAXINE WATERS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF CALIFORNIA
Ms. Waters. Thank you very much, Mr. Chairman. I attended
the WTO meeting in Seattle and I am really honored to have the
opportunity to come before you today and discuss the results of
this watershed event.
I was there really as the Ranking Member of the
Subcommittee on Domestic and International Monetary Policy of
the Banking and Financial Services Committee. I went there
focused on Jubilee 2000, the wonderful debt relief success
accomplished by a combination of our government working with
other governments and nongovernment organizations, especially
the faith-based communities. While it did not get a lot of
coverage in the press, we had wonderful ecumenical services all
around the idea that we could help developing countries and
poor nations get rid of their debt and be able to feed their
citizens.
As you know, thousands of people went to Seattle to protest
the WTO and its policies. These protesters were as diverse as
they were numerous. They included young people, labor union
members, environmentalists, church leaders, small farmers,
consumer advocates, and human rights activists. They came from
all over the United States and the world. They went to Seattle
to express their concerns about the WTO and the impact of its
decisions on the world's people.
It seems that the size of these protests and the intensity
of the backlash against the WTO took everyone by surprise. Mr.
Chairman, they did not take me by surprise at all.
For the last 4 years, I have been working on the problem
created when the United States took the case of the European
banana regime to the WTO. The European banana regime provides
access to the European market for bananas that are produced in
Europe's former colonies. This regime is essential to ensure
that small Caribbean family farmers have access to the European
market to export their bananas.
The countries of the Caribbean Community are predominantly
small island democracies, many of which are completely
dependent on banana production. In the Windward Islands, which
include St. Vincent, St. Lucia, Grenada, and Dominica, along
with Eastern Jamaica, the banana industry employs one third of
the labor force, provides over 80 percent of the total
agricultural exports, and contributes over 12 percent of the
Gross Domestic Product. Bananas are ideally suited for the
agricultural conditions of the Caribbean. Even after a
hurricane, the banana crops are replanted and grow back within
approximately 6 months.
Bananas are essential to the stability and prosperity of
these island democracies. Banana production in the Caribbean
takes place on small family owned farms. These family farmers
work hard to grow their bananas and support their families. The
people of these countries are very proud people. They do not
want foreign aid. They want to support themselves, and the
banana industry allows them to do so.
The banana case, interestingly enough, was the very first
case that the United States took before the WTO, despite the
fact that the United States does not grow or export bananas.
Only one company--Chiquita Brands--claimed to have been harmed
by the banana regime. It is obvious to me that Carl Lindner,
the chief executive officer of Chiquita and a major contributor
to both Republican and Democratic campaigns, used his political
influence and connections to convince the United States to
bring this case before the WTO. The February 7, 2000, issue of
Time magazine features an in-depth cover story on the influence
of large campaign contributions in this WTO case.
Unfortunately, the WTO ruled in favor of Chiquita and
against the Caribbean family farmers. Furthermore, WTO
authorized the United States to impose $191 million in
sanctions on a variety of European imports. The sanctions
imposed by the United States have also caused irreparable harm
to many small businesses in the United States, which import
European products affected by the sanctions.
It is ironic that these sanctions and the damage they cause
to Caribbean farmers, European producers, and American small
businesses alike are the direct result of a WTO decision. The
Chiquita banana case has proven that the WTO does not prevent
trade wars. It authorizes them.
As the Time magazine article said, ``When a fruit baron
wanted to conquer more of the European market, he got
Washington to launch a trade war for him. The victims of the
cross fire? A bunch of ordinary Americans who never saw it
coming.''
The Trade Related Intellectual Property Rights, known as
TRIPS, agreement provides another example of a WTO policy that
benefits wealthy and powerful special interests. The TRIPS
agreement gives patent rights over plants and medicines to
wealthy corporations. Corps use their patent rights to force
developing countries to pay for the use of the plants and
medicines. Now mind you, many of these plants and animals are
the indigenous plants and animals of these countries. Yet the
big corporations go in and get patent rights on them and then
force the people of those countries to pay for the products
that they develop from these plants and animals from their own
countries, and it is protected right in the WTO. As a result of
the TRIPS agreement, many people in developing countries have
been denied life-saving medicines because they cannot afford to
pay for them.
In 1997, the South African Government proposed new
legislation to require compulsory licensing of HIV/AIDS drugs
which would allow the drugs to be sold at a fraction of the
cost. Unfortunately, the U.S. pharmaceutical industry, with the
support of the United States government, is trying to prevent
this proposal from being implemented.
In closing, these are precisely the kinds of WTO policies
and decisions that outrage both developing countries and
nongovernmental organizations worldwide. It should not surprise
anyone that the WTO met such strong opposition in Seattle, both
inside and outside the meeting room. The WTO promotes market
access and investment opportunities for multinational
corporations without regard to the rights of workers and
farmers, the protection of the environment, or the health and
safety of people in the United States and throughout the world.
The WTO has developed into an invisible government that makes
its decisions in secret for the benefit of a small number of
extremely wealthy people.
It is time for the WTO to begin listening to the concerns
of developing countries, family farmers, union leaders, church
leaders, environmentalists, consumer advocates, and human
rights activists from around the world.
We do not need a new round of negotiations that will give
even more power to wealthy corporations like Chiquita. What we
need is a reevaluation of the existing WTO rules. I urge this
Subcommittee to critically examine the impact of the WTO and
its decisions on working families in America and throughout the
world.
Thank you, Mr. Chairman.
[Applause.]
[The prepared statement follows:]
Statement of Hon. Maxine Waters, a Representative in Congress from the
State of California
Thank you, Mr. Chairman. I attended the WTO meeting in
Seattle and I am honored to have the opportunity to come before
you today to discuss the results of this watershed event.
As you know, thousands of people went to Seattle to protest
the WTO and its policies. These protestors were as diverse as
they were numerous. They included young people, labor union
members, environmentalists, church leaders, small farmers,
consumer advocates and human rights activists. They came from
all over the United States and the world. They went to Seattle
to express their concerns about the WTO and the impact of its
decisions on the world's people.
It seems that the size of these protests and the intensity
of the backlash against the WTO took everyone by surprise. Mr.
Chairman, they did not take me by surprise.
For the last four years, I have been working on the problem
created when the United States took the case of the European
banana regime to the WTO. The European banana regime provides
access to the European market for bananas that are produced in
Europe's former colonies. This regime is essential to ensure
that small Caribbean family farmers have access to the European
market to export their bananas.
The countries of the Caribbean Community are predominantly
small island democracies, many of which are completely
dependent on banana production. In the Windward Islands, which
include St. Vincent, St. Lucia, Grenada and Dominica, the
banana industry employs one third of the labor force, provides
over 80% of total agricultural exports and contributes over 12%
of the Gross Domestic Product. Bananas are ideally suited for
the agricultural conditions of the Caribbean. Even after a
hurricane, the banana crops are replanted and grow back within
approximately six months.
Bananas are essential to the stability and prosperity of
these island democracies. Banana production in the Caribbean
takes place on small family-owned farms. These family farmers
work hard to grow their bananas and support their families. The
people of these countries are proud people. They do not want
foreign aid. They want to support themselves, and the banana
industry allows them to do so.
The banana case was the first case that the United States
brought before the WTO--despite the fact that the United States
does not export bananas. Only one company--Chiquita Brands--
claimed to have been harmed by the banana regime. It is obvious
to me that Carl Lindner, the CEO of Chiquita and a major
contributor to Republican and Democratic campaigns, used his
political influence and connections to convince the United
States to bring this case before the WTO. The February 7, 2000,
issue of Time magazine features a cover story on the influence
of large campaign contributions in this WTO case.
Unfortunately, the WTO ruled in favor of Chiquita and
against Caribbean family farmers. Furthermore, the WTO
authorized the United States to impose $191 million in
sanctions on a variety of European imports. The sanctions
imposed by the United States have also caused irreparable harm
to many small businesses in the United States, which import
European products affected by the sanctions.
It is ironic that these sanctions and the damage they cause
to Caribbean farmers, European producers and American small
businesses alike are the result of a WTO decision. The Chiquita
banana case has proven that the WTO does not prevent trade
wars. It authorizes them!
As the Time magazine article said, ``hen a fruit baron
wanted to conquer more of the European market, he got
Washington to launch a trade war for him. The victims of the
cross fire? A bunch of ordinary Americans who never saw it
coming.''
The Trade Related Intellectual Property Rights (TRIPS)
agreement provides another example of a WTO policy that
benefits wealthy and powerful special interests. The TRIPS
agreement gives patent rights over plants and medicines to
wealthy corporations. Corporations use their patent rights to
force developing countries to pay for the use of the plants and
medicines. As a result of the TRIPS agreement, many people in
developing countries have been denied life-saving medicines
because they cannot afford to pay for them.
In 1997, the South African government proposed new
legislation to require compulsory licensing of HIV/AIDS drugs,
which would allow the drugs to be sold at a fraction of the
cost. Unfortunately, the U.S. pharmaceutical industry, with
support of the U.S. government, is trying to prevent this
proposal from being implemented.
These are precisely the kinds of WTO policies and decisions
that outrage both developing countries and non-governmental
organizations worldwide. It should not surprise anyone that the
WTO met with such strong opposition in Seattle, both inside and
outside the meeting room. The WTO promotes market access and
investment opportunities for multinational corporations without
regard to the rights of workers and farmers, the protection of
the environment or the health and safety of people in the
United States and throughout the world. The WTO has developed
into an invisible government that makes its decisions in secret
for the benefit of a small number of extremely wealthy people.
It is time for the WTO to begin listening to the concerns
of developing countries, family farmers, labor union leaders,
church leaders, environmentalists, consumer advocates and human
rights activists from around the world.
We do not need a new round of negotiations that will give
even more power to wealthy corporations like Chiquita. What we
need is a reevaluation of the existing WTO rules. I urge this
Subcommittee to critically examine the impact of the WTO and
its decisions on working families in America and throughout the
world.
Thank you.
Chairman Crane. Thank you, Ms. Waters.
Order in the chamber.
[Applause continuing.]
Chairman Crane. The Committee will be in order, and this is
a warning.
Ms. Waters. Mr. Chairman, let me just say that while I
appreciate the enthusiasm, this was not orchestrated. I did not
know such enthusiasm was in the room. I do not want you to
think that I in some way orchestrated this. Thank you.
Chairman Crane. Ms. Waters, how come they are all from
California?
Ms. Waters. I do not know. I am proud of Californians
wherever they show up. And if they do happen to be from
California, that is a plus, but I did not orchestrate it.
Chairman Crane. Yes. We realize that.
Now I yield to our distinguished colleague from California,
Mr. Thomas.
Mr. Thomas. Ms. Waters, you described a situation in terms
of agriculture in general, and specifically the subject of
bananas, and painted what amounts to a conspiracy theory for
producing the current impasse. Are you aware that there was a
dispute resolution panel which decided against the EU and the
EU has refused to follow the dispute panel decision?
Ms. Waters. I am very much aware. I know it in detail, Mr.
Thomas.
Mr. Thomas. Do you believe there is also a conspiracy
associated with the beef hormone question and the failure of
the EU to move forward on that?
Ms. Waters. Just a moment, because you have concluded, Mr.
Thomas, that you believe it is a conspiracy. I do not believe
it is a conspiracy. I believe that Chiquita bought its way into
the WTO and used us to advance its cause.
Mr. Thomas. Do you believe the Cattlemen's Association and
the U.S. beef industry has bought themselves into the beef
hormone problem?
Ms. Waters. No, I do not. And I did not testify on that. I
testified on bananas because I know it so well.
Mr. Thomas. Do you believe that the canned fruit industry
is also in a conspiracy or they bought their way into the
dispute process? Because in that instance as well the European
Union had a dispute resolution panel rule against it and the
European Union has refused to follow that agreement and that
has produced a similar problem for the United States as
bananas.
Ms. Waters. Mr. Thomas, let me say again, it is you who
refers to what is happening as a conspiracy. I do not.
Mr. Thomas. No, you said he bought his way into it.
Ms. Waters. Yes, he did.
Mr. Thomas. So I am wondering if you believe the canned
fruit industry bought themselves into the same situation since
it was exactly the same decision that produced that result.
Ms. Waters. I cannot testify on anything else but bananas.
I have spent 4 years on this. And I agree with the Time
magazine article about Mr. Lindner and the fact that he bought
his way into the WTO and used the United States to start this
trade war. I believe that, Mr. Thomas.
Mr. Thomas. And I think you might spend some time with
other Californians who produce specialty agriculture crops--
peaches, pears, canned fruit--and meet with them in an
unplanned, unorganized meeting so that you can listen to their
concerns about the United States not backing up our people when
the World Trade Organization and formerly the General Agreement
on Tariffs and Trade has a dispute resolution panel rule
against the European Union and the European Union refuses to
follow the agreement. That is a group of Californians you
probably should spend a little bit of time with as well so that
you can fully appreciate the problems that have led us to, both
in bananas and in canned fruit.
Ms. Waters. I think it would have a lot more credibility,
Mr. Thomas, if the United States had led with a legitimate
case. They did not lead--the very first case that was taken to
the WTO was Mr. Carl Lindner's banana case, and we do not grow
bananas or export bananas in the United States. And as a result
of what has happened, now these little countries are reverting
to producing drugs, marijuana that will find their way into the
United States.
Mr. Thomas. And one of the last cases under the General
Agreements on Tariff and Trade was the canned fruit. There was
an attempt to move forward based upon exactly the same
arguments that you are presenting. If, in fact, you cannot be
first or you cannot be last, and the first and the last failure
are exactly the same, then in one sense I will join with you,
the WTO is not much progress than we had before. So in that
sense, maybe we can join together and decide that it really is
not a conspiracy nor is it an attempt to buy your way into the
structure, but it is the European Union that has an absolute
phalanx against changing and against having its world view
mitigated by everybody else.
If we can sit down and talk about that, I think you really
need to spend 4 years on the canned fruit controversy so that
you can fully appreciate that this one case does not stand out;
there are a series of cases and they all are based on the fact
that the European Union refuses to budge from any of its
current practices--any of its current practices--whether it be
bananas, whether it be beef hormone, or whether it be canned
fruit, or a host of other subsidies structures. This is not a
unique situation.
Ms. Waters. I appreciate that, Mr. Thomas. But you also
need to focus on the role that money and campaign contributions
play with the WTO and who the decisionmakers are, how they make
the decision, and who is influencing what.
Mr. Thomas. And take a look at the canned fruit industry in
terms of how small it is and how much it has been maltreated
and how the United States has failed to help the downtrodden.
Perhaps we can agree that it is not an influential individual
with a lot of money, but maybe it is the system that is at
fault. And if you look at canned fruit and the bananas, look at
canned fruit and the bananas, in fact, it would be an
interesting cocktail salad, you could really appreciate the
structural flaws which perhaps you have overlooked because you
are so enamored with the conspiracy theory.
Thank you, Mr. Chairman.
Ms. Waters. I have no conspiracy. This is fact.
Chairman Crane. Mr. Levin.
Mr. Levin. Welcome. I think I will refrain from asking
questions about the banana dispute. Ambassador Barshefsky is
going to be testifying in a few minutes and she may or may not
want to comment on it. As I understand it, there is now a
proposal pending before all the parties to resolve this issue
and to do so to the satisfaction of the countries in the
Caribbean plus the countries in other parts of Latin America
which have a stake in this. That is pending I think. So let's
see if the Ambassador wants to comment on that.
Let me just say a quick word about the reference to the
battle against AIDS. All of us have some deep feelings about
this and surely I do. We have talked with the administration,
as you know, about this matter. I am hopeful that the
administration is going to be able to take some important steps
to make certain that the drugs that are badly needed are made
available. It is not a very simple issue but it is a crucial
one. I think our challenge on this issue and a lot of other
issues is to realize that crucial issues can be somewhat
complex. If we do not recognize that, we do not resolve them.
And in this case, it seems to me in this instance, as well as
others, we must take steps to resolve the problem and to meet
the need.
I will not go on at length. But over the weekend two of my
distinguished Democratic colleagues and a number of others of
us in the Democratic ranks talked about this at length. And I
know there is concern across the aisle. I am very hopeful that
we can find an answer. My own judgement is that meeting the
issue head on will be more effective than a lot of finger-
pointing.
So, Representative Waters, you have been active, as your
colleague from Georgia and a lot of us, on this issue. I think
we are determined to persevere until there is an answer.
Ms. Waters. Thank you.
Chairman Crane. Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman. With respect to this
exchange, I want to just make a comment or two because I am
quite concerned. Let me say I hope that all my colleagues keep
an open mind because this is serious, serious business.
I am a believer in the WTO or in some similar organization.
Ms. Waters, we have got to have some organization in this
global world that we live in. It is built-in controversy. If
you stop and reflect on it and just think about it, it is built
in because you are trying to resolve differences; it is going
to be a tug of war and it is going to be gnashing of teeth.
But it cannot continue like it is. I have been a supporter
of WTO but I feel strongly that there has got to be some
changes and there needs to be some movement before that
approval resolution comes before Congress, which is up or down,
on our participation in the WTO.
My problem is I have been working on something for 10
years, and that is the beef hormone. They knew that by
declaring, say, a beef hormone they were not going to allow
U.S. beef to be imported into the European Union because 95
percent or more of our beef in the United States uses beef
hormone. Every steak that we eat. It is good quality, the
highest quality beef, regulated by FDA. The European Union does
not have an FDA or anything equivalent to it. But they are
sitting with a standard saying we are not going to allow you to
ship beef into Europe, and they are not even going to allow
non-hormone beef to go into Europe now.
It is an unfair trade barrier. I have been working on this
for 10 years. That is when they started saying we are not going
to allow United States of America beef into their Union. It is
totally wrong. They must change.
Now, over that 10 years, we finally, and I came here
pounding that witness table 3 years ago, they finally ruled in
our favor. Ms. Waters, in about 31 or so cases out of about 33
presented before the WTO the ruling was in our favor. There
have been a couple of things, as Mr. Portman knows, and yes,
bananas and beef are two of those first ones out there. We have
a situation though where finally the WTO ruled in our favor.
The U.S. Trade Representative came up with the fact that after
looking at everything our penalty was going to be, and we put
on the table, about $250 million. Let me assure you it is a lot
higher than that. But it started out looking at something like
$900 million and they have come down to $250 million. They
finally settled though for about $116 million.
I am beginning to feel a little concerned about our U.S.
Trade Representative and just where we are. Are we willing to
stand up and gut it out and fight it out for some of our
enterprises in this country? That we do not put beef and
bananas on the back of the shelf if we are right, and we are
right in beef, I know that factually.
I am concerned about this loop that has drawn out over all
these many years, as my friend Mr. Thomas from California said,
and he is correct, we have an endless loop--some of us are
talking about it as being a carousel, Mr. Portman and I very
much, and I am going to be pushing that with my colleague with
full force and we need your help and other people's help--a
carousel on those penalties. We cannot continue like we have
been or we are not going to have an effective trade policy in
this country.
I know full well we have got to have global trade. It is
part of our great economic expansion. Yes, information
technology, but we are opening up markets around the world. So
I ask you to join in a constructive way of trying to make sure
our U.S. Trade Representative puts some teeth in these things
and not back off, that we stand up for the beef cattle people,
for the banana people, and others if we are going to have an
effective respected trade policy for this country. I ask that
of all my colleagues.
Thank you, Mr. Chairman.
Ms. Waters. If I may just say, I am not opposed to global
trade and I believe in fair trade. You say you are concerned
about Ms. Barshefsky. I am too. I have been for a long time. I
believe that the decisions of the WTO----
Mr. Watkins. Excuse me, Ms. Waters. I did not use a name. I
said I am concerned about the U.S. Trade Representative Office.
Ms. Waters. Well, I am using a name, Charlene Barshefsky.
That is who I am concerned about now. And I was concerned about
my friend Mr. Mickey Kantor before her because of this issue
that I have spent so many hours on understanding how this issue
got to the WTO and how the decisions were made.
I think you and I are saying the same thing. If we are to
have trade mediated, negotiated, there must be a fair way of
doing it. We must know who the people are, how they operate,
and we must have a fair opportunity to be heard. As long as you
have organized labor and human rights activists and small
developing countries tearing away at these decisions, we are
not going to get anywhere. I think we are smart enough to
include the voices of many--who do not mind fair trade but will
not have trade at any cost--involved in ways that we can
resolve the disputes to the interests of this country and other
countries. I am committed to working with that. What I am not
committed to doing is supporting the WTO even if every decision
was in favor of the U.S.A. if, in fact, those decisions are
driven by money and power.
Mr. Watkins. Ms. Waters, we cannot have free trade unless
it is fair trade.
Ms. Waters. We must have fair trade.
Mr. Watkins. I yield back the balance of my time, Mr.
Chairman.
Chairman Crane. I thank the gentleman for yielding.
I thank our panelists for their presentations. I would
simply suggest, Ms. Waters, our next witness that I will call
to the dias is Hon. Charlene Barshefsky, our U.S. Trade
Representative, and if you want to hang in here, after she has
made her presentation you might have questions you want to ask.
So, feel free.
Ms. Waters. Yes. Thank you.
Chairman Crane. With that, let me welcome to the
Subcommittee Hon. Charlene Barshefsky, our outstanding U.S.
Trade Representative.
I delivered some opening remarks and some of this that I
may say is somewhat repetitive. But one of the concerns, Madam
Barshefsky, that we experienced coming out of the Seattle
ministerial meeting was the recognition that there was lack of
agreement on a declaration prior to Seattle, and also the EU's
failure to agree to the elimination of agriculture subsidies,
and the Japanese foot-dragging that I touched upon before, and
the U.S. inflexibility on antidumping, to name just a few.
I do, however, want to express my deep regret over the
President's comments linking labor standards to trade sanctions
imposed by the WTO. This statement was received like a torpedo
in the developing world and was taken as bad faith. It
undermined our chances of reaching an agreement. Whatever his
motivations, I believe the President's comments were off base
given the lack of consensus that exists in this country for
such an approach. This objective has no chance of becoming
American law, and the cost of injecting our domestic
controversies over trade policy into an international effort to
launch negotiations will be deep.
For many years the United States has possessed the
remarkable ability to design world trade rules. By exposing the
political divisions in this country on the international stage,
the President emboldened new constituencies in this country and
abroad who will now fight against our economic success in
trade. Don't think for a moment that our foreign competitors
won't use these divisions against us. And as we speak, progress
on the U.S. trade agenda in Geneva is in serious question.
The President's actions in Seattle as well as his legacy of
avoiding the consensus-forging debate needed to pass trade
negotiating authority have had serious consequences. If he
retreats into retirement, it is this Subcommittee and a new
President which must pick up the pieces and shoulder the burden
of the repair work. Fortunately, there are key steps that can
be taken this year to get us back on track, including early
passage of the CBI-Africa legislation with meaningful trade
benefits for these developing regions, and permanent normal
trade relations for China which will force unprecedented
reforms on that vast country. In addition, we should pursue
regional trade initiatives including Chile, the FTAA, and the
Pacific Region.
Before us also lies a path of dangerous and destabilizing
conflict with our largest trade and investment partner, the
European Union, including a confrontation over a threat to
fundamental elements of the U.S. tax system embodied in the
Foreign Sales Corp. This occurs against a background of
flagrant noncompliance by the Europeans on the panel reports
against them regarding bananas and beef and a push in Congress
to ramp up retaliation. As to FSC, I would like to schedule a
meeting with you, Madam Ambassador, to consult about the
administration's strategy.
Ambassador Barshefsky, we have had our work cut out for us
this year. By working to find a way to come together on trade
matters, I think that we can turn the picture of Seattle
around. I do not want to detract from your personal record of
hard work and service as you took us into Seattle. Yet, it is
important for us to recognize that our priorities and strategy
for the WTO need to be retooled.
Let me just conclude my remarks with a major salute to you
for all of the time and energy and work and professionalism you
have invested in our common national interest. You have done an
outstanding job as our U.S. Trade Representative.
With that, I yield to the Ranking Member of the
Subcommittee for his opening remarks.
Mr. Levin.
Mr. Levin. Thank you, Mr. Chairman.
I hope, Ambassador, you will use that professional talent
to set the record straight as to what the administration was
trying to accomplish at Seattle including on matters of labor
and the environment.
In retrospect, it seems clear there was inadequate
preparation and time to resolve the issues that loomed large at
the WTO meeting in Seattle. Drafting of an agenda for a new
round of trade negotiations was very rough going into the
ministerial with text on key issues still in brackets.
Ministers were confronted with the challenge of both moving
forward in traditional areas of trade negotiations such as
agriculture and developing approaches to newer areas such as
the relationship between trade and core labor standards, the
relationship between trade and the environment, and making WTO
institutions more open to public view and to public input.
WTO members faced an uphill battle on both the new and the
old. Not surprisingly, vocal resistance to particular agenda
items came from various corners. The imperative now is to learn
from Seattle and to move ahead.
The President undertook just that in his remarks at the
Davos World Economic Forum last month. In the first half of his
Davos remarks the President vividly described the important
role of trade in an era when globalization is on the march. He
described what I believe to be true and what I saw in my recent
intensive 10 days in China--globalization is here to stay. The
question is whether and how to shape it. In the second half of
his Davos remarks the President addressed that very question.
He stated that we must try to shape globalization including by
tackling the new issues. The President said: ``The consequences
of opening up a dialog and dealing honestly with these issues
will show that in the new economy we can have more growth and
more trade with better treatment for people in the workplace
and more sensible environmental policies.''
As I see it, and I am convinced that many, many of my
colleagues believe this, our challenge is how to piece together
the two halves of the President's Davos remarks. To focus on
just one or the other, to adopt either a just say yes or a just
say no approach to issues of expanded trade in the year 2000
does not meet the challenge. As the President put it at Davos,
``Those who heard a wake-up call on the streets of Seattle got
the right message. But those who say we should freeze or
disband the WTO are dead wrong.''
What is needed I believe is a plan of action for helping to
shape globalization. Today's hearing on the WTO after Seattle
and next week's full Ways and Means Committee hearing on
China's potential accession to the WTO are opportunities to
consider components of such a plan of action. Today I will
focus on six components of such a plan that apply generally to
reforming the WTO and moving it forward. I leave for next
week's hearing a discussion of components relating specifically
to China's potential accession to the WTO.
First, we should open up the WTO to public view and public
input. That has already been discussed here today. The U.S.
should press for reforms of the WTO, including: Prompt public
release of documents, public meetings of panels, acceptance of
amicus briefs, and more effective coordination with
nongovernmental organizations, labor, and business.
Second, we must continue efforts to bring labor market
issues into trade policymaking. Our goals must be to promote
greater understanding of the links between trade and labor
market issues and ensure the more consistent enforcement of
core labor standards as competition grows between evolving
economies and largely developed economies. These goals should
be pursued at both the multilateral level through the
establishment of a WTO working group on trade and labor and the
bilateral and regional levels through implementation of
adherence to core labor standards as a condition for receipt of
trade benefits. It should be made clear that our aim is not to
eliminate the comparative advantage of evolving economies but
rather to avoid distortions that result when workers are denied
core rights and thus denied the benefits of trade.
Third, we should move forward on environmental issues in
trade discussions. We should commit resources to the
performance of environmental impact assessments in advance of
agreement to trade liberalization measures and seek an enhanced
role for the WTO's Committee on Trade and the Environment.
Fourth, we should pursue the built-in agenda vigorously. I
understand, and this relates to agriculture and services, that
the WTO General Counsel reached agreement yesterday on a
framework for negotiations in those areas.
Fifth, we should apply a consistent policy of implementing
the other major Uruguay round Agreements and not renegotiate
them. They include TRIPS and TRIMS, and others, and the
antidumping agreement, and the subsidies agreement. They were
thoroughly negotiated during the Uruguay round. These
agreements provide vital safeguards and benefits in foreign
markets for the United States. Unlike agriculture and services,
none of these agreements provides for follow on negotiations
and the U.S. should continue to resist attempts to extend
deadlines across the board or otherwise weaken these agreements
through renegotiation.
Sixth, but importantly, we should work to make developing
countries our partners rather than opponents. As we work to
make the WTO more open and to bring new subjects within its
purview, we need to do so within a framework that fosters
greater understanding and partnership with developing
countries. This means including them in key agenda-setting and
negotiating processes rather than presenting them with done
deals. It also means recognizing that neither aid nor a policy
of trade not aid is an adequate means of helping developing
countries. We need to pursue a coherent policy of trade and aid
by relieving the least developed countries of overbearing debt,
as we began to do last session, and providing technical
assistance and other aid that will enable an increase in living
standards.
Some may ask, and I close with these thoughts, why the
trade agenda has become more complicated. The answer is over
the last fifteen years globalization has truly gone global. It
used to be in this Subcommittee just a decade ago when we
talked about trade policy we were referring mainly to relations
among the developed nations and to the reductions of tariffs
and the dismantling of the more glaring nontariff barriers.
That way of thinking plainly is outmoded today. There has been
a dramatic increase in trade and competition between our
country and evolving economies and the barriers to trade are
increasingly complex and decreasingly transparent. I make this
plea to all of us: These new trends demand new ways of
thinking.
Mr. Chairman, I do not expect for us to agree on
everything, as evidenced in our opening statements. But we must
face up to these issues and it is vital that we start now. As
the changing nature of the world economy brings new challenges,
we must be open to implementing new ideas so that we can move
beyond the stalemate of the last 5 years. I am ready, with I
think most of my colleagues, to work together to meet the
challenges before us. Thank you.
Chairman Crane. Thank you.
Now, we welcome you, Madam Ambassador. Any remarks beyond
your oral presentation will be made a part of the permanent
record. Proceed when ready, Charlene.
STATEMENT OF HON. CHARLENE BARSHEFSKY, OFFICE OF THE UNITED
STATES TRADE REPRESENTATIVE
Ambassador Barshefsky. Thank you very much, Mr. Chairman,
Congressman Levin, and Members of the Subcommittee. It is of
course a great pleasure to be here and I know I will see you
again next week on the China question. But today we are talking
about our agenda at the World Trade Organization for this year
and talking a bit about Seattle.
Let me begin with the most immediate point, and that is
that the global trading system is fundamentally sound and
participation in it is profoundly in America's interest. While
the ministerial conference in December in Seattle did not agree
on a new negotiating round, and while legitimate criticisms of
the trading system deserve a respectful hearing and repair, the
WTO is fulfilling its central mission and its central mission
is critical. That is, it is opening new markets and new
opportunities for Americans across the spectrum; it promotes
sustainable economic development, raising living standards, as
50 years of the global system has demonstrated, and
strengthening peace as countries realize they have a stake in
peace and stability beyond their own borders.
And our continuing leadership in the WTO is of critical
importance to Americans and to the world. This is clear in the
historic record. Over 5 decades, our development of the trading
system has helped to foster what amounts to a 50 year economic
boom. Since the fifties, the world economy has grown sixfold,
per capita income nearly tripled, and hundreds of millions of
families around the world have escaped from poverty.
The completion of the Uruguay round in 1994 took us
further, addressing for the first time agriculture as well as
services, protecting intellectual property rights, and
strengthening our ability to enforce agreements covered by the
WTO. And, of course, those negotiations enabled us further to
conclude more recent sectoral multilateral agreements on
information technology, basic telecommunications, and financial
services.
Worldwide, the WTO, and its forerunner the GATT system, has
strengthened the rule of law, opened markets, and during the
Asian financial crisis helped countries to avoid a cycle of
protection and retaliation similar to that which deepened the
Depression in the thirties and exacerbated tensions among the
major world powers.
At home, since 1992, the global trading system has helped
America's goods and services exports to expand 55 percent. This
export growth is particularly important because export-related
jobs in the U.S. typically pay between 12 and 15 percent above
the national average wage. Likewise, our own economy's growing
openness and receptivity to imports has helped to promote
competition, keep inflation low, and raise living standards
especially for our poorest families. And together with fiscal
discipline and increased investment in education, the trading
system has made a remarkable contribution to America's record
of growth, job creation, technological progress, and rising
living standards.
As the record indicates, development of the trading system
over 50 years has been a work of profound importance. And
because of that, it has always been difficult. Just as we saw
in Seattle, nations always have entrenched interests which
benefit from the status quo. And at each point along the road
governments over the last 50 years have had to make politically
difficult choices to serve the greater good.
So at times we meet deadlock. The founding of the GATT in
1948 was built on a failure to set up an international trade
organization in 1947. The creation of the WTO 5 years ago
followed a failed attempt to launch the Uruguay round in 1982,
a mid-term breakdown in 1988, a failure to conclude the round
in 1990, a failure to conclude the round in 1993. More recent
negotiations on financial services and telecom also broke down
in 1996 and 1997. And in all cases success followed.
The experience in Seattle was similar to many of these
deadlocks. While broadly supportive of a new round, a number of
WTO members were reluctant to commit themselves to a
negotiating agenda covering difficult issues. The reform of
agriculture trade poses a special challenge to the European
Union and Japan. Developing countries also have diverse
interests which a round must taken into account. And we in the
U.S. have sensitivities as well. All of us, every country must
be willing to look hard at our agendas and consider ways to
accommodate a number of the concerns of our trading partners if
we are to move forward.
Of course, the core elements of the negotiating agenda are
before us. Yesterday it was agreed in the WTO that negotiations
on agriculture and services, as required under the Uruguay
round Agreements, would commence. These are of tremendous
importance to American farmers, ranchers, and services
providers. I am pleased to report that through our efforts and
those of others these negotiations will proceed as confirmed.
The Council on Trade and Services will meet in special session
later this month to formally initiate the negotiating process,
and the Committee on Agriculture will do the same in March. We
are preparing a Federal Register Notice seeking public comment
on the full range of negotiating proposals in agriculture and
services and we will consult closely with the Subcommittee as
we move forward.
Beyond these mandated negotiations in agriculture and
services, we have additional pressing needs particularly in
relation to market access. Whether on industrial tariffs and
nontariff barriers, electronic commerce, or trade facilitation,
there are a number of market access areas that will need to be
addressed quite apart from the built-in agenda. And while there
are a variety of different options for proceeding with this, of
course at the same time, as the President said, we will
continue to work toward consensus for a new round. This will
not be simple but the outlines can be drawn if WTO members are
willing to rethink some of the positions they brought to
Seattle, focus more fully on the shared benefits of success,
and find a balance that allows us to move ahead. As the
President has said, we will keep working toward consensus but
success requires flexibility and shared responsibility from all
WTO members.
Apart from these negotiations, we have a broad and ongoing
agenda at the WTO this year. My written testimony lays these
out in detail, but let me just raise a few.
First, the implementation of a set of WTO Agreements
covering intellectual property, trade related investment,
customs valuation, and other issues. These come into force this
year when a number of transitions expire. It is crucial that
these agreements be implemented smoothly.
Second, we have action to address the problems and concerns
particularly of the least developed countries. This includes
both market access, on which we are prepared to proceed
unilaterally, as the President stressed in his State of the
Union, by securing passage this year of legislation to further
open U.S. markets to goods from Africa and the Caribbean, as
well as improved technical assistance and capacity-building to
ensure that the least developed countries can fully assert
their rights and interests at the WTO.
Third, the WTO is considering the accession of 31 new
economies, with a number of these negotiations well-advanced.
We expect Jordan and Georgia to enter in the very near future.
We have completed our bilateral negotiations with China,
Taiwan, Albania, and Croatia. We have made significant progress
with a number of other countries. As I mentioned earlier, I
will be before the Subcommittee next week on China's accession.
But let me say just one word on that. China's accession to the
WTO has the potential to support reform in China, create
opportunities for the United States and China's other trading
partners, and ultimately help to further stabilize peace in the
Pacific. As part of this process, as you know, the United
States must grant China permanent NTR or risk losing the full
benefits of the agreement we negotiated.
Finally, let me turn to the question of WTO reform. The
protests and criticisms of the WTO were not at the heart of the
negotiating impasse in Seattle. But they raise issues that
require a response. Only through openness and a willingness to
listen to its critics will the trading system retain the broad
support of the public and member governments over time.
This does not mean that all criticism is valid. Indeed,
part of the response must be a rejection of unsubstantiated and
more radical criticisms. The core vision of the trading system
is right. Opening markets in the past decades has sparked
growth, reduced poverty, and strengthened peace. To begin
reversing that work would be irresponsible and damaging in the
extreme, including lowering living standards, including putting
brakes on the hope of increasing labor and environmental
standards, and including broader prospects for political
stability.
But the WTO must also be willing to listen to and act upon
legitimate criticisms and the WTO must be willing to
incorporate new ideas. It can do more to promote environmental
protection. It can do more to advance internationally
recognized core labor standards. Let me stop on these two
issues just for a moment if I may.
I appreciate Congressman Levin's review of the President's
speech in Davos which was very well received I think by all
parties to the debate, by and large. I think the President's
fundamental point is this: That in an era of globalization, it
is not possible any longer to claim that areas of concern in
the trading regime should not also be integrated. If this is an
era of globalization in which trade impacts a series of issues
and a series of issues impacts trade, then let us at least take
a careful and close look at the full array of issues and
attempt to find means to spark dialog about them and to see if
we cannot make a series of competing interests mutually
compatible instead of mutually destructive. This will require a
step-by-step approach.
There is deep suspicion among many nations of the world, in
particular in developing countries, of developed country
motives in regard to environmental protection and the
observance of core labor standards. There are many reasons for
this distrust and for the suspicion that the developing
countries have on this, including perhaps 30 years of rhetoric
on the North-South divide that has in large part helped to
poison the atmosphere and as to which all parties are equally
responsible. The question is how do we piece together what some
view as competing interests of these issues and an open trading
regime, but which I believe need not be competing at all but
instead can be rather complimentary.
The first step, and what the U.S. is first trying to
initiate in the WTO, is discussion, discussion of these issues
and acknowledgement that many in the developed world--many in
the U.S., many in the European Union, in Canada, Norway, other
developed countries--feel quite strongly about these issues.
And while there might not be unanimity of view in our own
country or within Europe or elsewhere, nonetheless the trading
system should begin to listen to the concerns and to attempt to
see whether solutions can be provided and are appropriate in
the context of the WTO.
It is I think vitally important that we try and come
together on these issues. Divisiveness does not serve the
interests of the global trading regime nor does it serve the
interests of those who would wish to see the regime become
somewhat more modern and somewhat more in acknowledgement of
the reality of globalization and the fact that many of these
issues are now integrated one with another even if it is not
often easy to accept that challenge.
Let me also say the global system must address concerns
about transparency. These are valid and they can be easily
remedied. This is especially important in dispute settlement
where the current practice is, for example, to close arguments
to the public. If this remains unchanged, public confidence in
the system will erode.
As a first step, in our US-EU Summit in December, which
followed Seattle, we proposed that we and the EU, as the
largest users of dispute settlement, immediately agree to open
the arguments in our transatlantic disputes in the WTO. Thus
far, to our very deep regret and surprise, the EU has refused.
But it is quite clear that this issue of transparency, not only
with respect to open hearings but a number of other issues,
amicus briefs, for example, must be addressed sooner rather
than later.
Likewise, the WTO's internal processes can be improved and
updated given the growth and greater diversity of its
membership. Director General Moore has begun consultations with
WTO members toward this end. But as we address this issue, we
must be careful not to alter the principle of consensus for
decisionmaking in the WTO, and also ensure that such procedural
discussions do not distract us from taking immediate action on
core policy issues.
In summary, Mr. Chairman, the WTO faces a number of
challenges but also opportunities in the coming year, from its
newly inaugurated negotiations on agriculture and services, to
implementing prior agreements, bringing in new members,
integrating better the least developed countries, internal
reform, work toward a new round, and embark upon a serious
dialog with respect to a range of issues not traditionally
thought of as trade but which have direct impacts. None of
these tasks will be easy or simple; but generations before us
have shouldered equally difficult tasks in the past.
I believe that the record of the last 50 years should give
us a great deal of confidence. The promotion of the rule of
law, creating new opportunities worldwide for economic growth,
creating opportunities for Americans and for our trading
partners, it seems to me that this amply justifies the decision
Congress took 5 years ago to support creation of the WTO as a
successor to the GATT. And it should remind us of how
significant will be the rewards of success as we take up the
challenges of this new century.
Thank you very much.
[The prepared statement follows:]
Statement of Hon. Charlene Barshefsky, United States Trade
Representative
Chairman Crane, Congressman Levin, Members of the
Subcommittee:
Thank you very much for this opportunity to testify before
the Subcommittee on our agenda at the World Trade Organization
over the coming year. I appreciate this opportunity to review
our assessment of the WTO after five years, the events at last
year's Ministerial Conference, the negotiations and other work
we have under way in the year 2000.
Introduction
Our agenda for the year 2000 ranges from opening
negotiations on agriculture and services as mandated by the
Uruguay Round Agreement of 1994; to implementing and enforcing
existing agreements, including several now coming fully into
force; promoting the full integration of the least developed
countries into the trading system; institutional reform at the
WTO, with a focus on strengthening transparency; and the
accession of new members, in particular China, to the
organization. At the same time, we are working with other WTO
members for consensus on a new Round. To reach such a
consensus, as the President has said, all WTO members will have
to show flexibility and accept their share of the
responsibility for success.
My testimony will review each of these points, but will
open with a more basic review of the record of the WTO over the
past five years. And here the immediate point is clear. That
is, the trading system is fundamentally sound and our
participation in it is profoundly in America's interest. While
the Ministerial Conference in Seattle was unable to agree on an
agenda for a new negotiating Round, and the WTO has received
some criticism from its members and from outside as well, on
the whole the WTO is fulfilling its mission of opening new
opportunities, promoting sustainable development, raising
living standards and strengthening peace.
As the President recently said, there is no substitute for
the confidence and credibility the WTO offers the world as
trade grows. WTO membership opens world markets to our goods
and services, and helps us take advantage of our
competitiveness in agriculture, manufacturing and high-tech
industries. It advances the rule of law in commerce, and
promotes stability during economic crisis. And thus our
participation and leadership in the WTO is of critical
importance.
Criticisms, both from within the WTO and from outside,
deserve a respectful hearing and the WTO must respond to the
legitimate issues they raise. But these were not the
fundamental reason the Ministerial conference did not launch a
new Round. Rather, the WTO's 135 members reached an
unfortunate, but familiar, impasse on some of the major policy
issues. The impasse will not fix itself; but if WTO members
remember history and first principles, focus more intently on
the shared benefits we derive from the open markets and rule of
law represented by the WTO, and accept the shared
responsibilities of developing the trading system, we can break
the deadlock and move ahead.
The Context
Our first challenge is to place the Ministerial in its
proper context.
Today's WTO has its roots in the General Agreement on
Tariffs and Trade, or GATT, created under President Truman
after the Second World War. The leaders of the time acted in
the light of their personal experience: they had seen the
Smoot-Hawley Act in America and similar protectionist policies
overseas deepen the Depression and contribute to the political
upheavals of the 1930s. Fifteen years later, they believed that
by reopening world markets they could promote growth and raise
living standards; and that as open markets gave nations greater
stakes in stability and prosperity beyond their borders, a
fragile peace would strengthen.
The work they began has proceeded through five decades.
Over time, as we and others abandoned the closed markets of the
Depression era, we have strengthened peace by integrating first
Germany and Japan, then the post-colonial world, and now the
countries moving away from communist planning systems into a
modern economic world. And we have fostered what amounts to a
fifty-year economic boom during which the world economy grew
six-fold, per capita income nearly tripled, and hundreds of
millions of families escaped from poverty.
Most recently, with completion of the Uruguay Round and
Congress' passage of the Uruguay Round Agreements Act in 1994,
we made a fundamental advance: going well beyond the GATT
agreements in addressing agriculture and services; protecting
intellectual property rights; and strengthening our ability to
enforce all the agreements covered by the WTO. In the WTO
itself we created a small but efficient organization, with a
very small budget and professional staff, to serve as a venue
by which governments can agree by consensus on measures in the
general interest. This is evident in the substantial further
progress we have made since 1995, in conclusion of the landmark
multilateral agreements on Information Technology, Basic
Telecommunications and Financial Services.
Taken as a whole, these achievements have substantially
improved the world trade environment and its institutions, in
ways including:
Expansion of the Rule of Law: In just five years,
the 50 year-old trading system has been transformed from a
complex set of rules and disciplines that applied fully to a
relatively few members to a system where the rules apply to all
members (subject to transitions) eliminating the potential for
``free riders'' on the benefits of an open trading system.
Dispute Settlement: Today, WTO Members rely on a
set of procedures for the prompt settlement of disputes,
eliminating many of the shortcomings of the earlier GATT system
where the process could drag out indefinitely. While
improvements to the system are still warranted, the greater
certainty of the new system has led to a more prompt resolution
of disputes and greater predictability in the application of
rules.
Market Access in traditional and new areas of
commerce: Globally, the Uruguay Round is reducing manufacturing
tariffs by a third; American farmers and ranchers are finding
export opportunities, as a result of the first real commitments
to reduce barriers and limit the use of export subsidies; for
the first time in the history of the trading system services
providers have also recorded real export opportunities, from
accounting to telecommunications services providers. New
entrants into the global marketplace, particularly small and
medium-sized enterprises, are also benefitting from these new
market openings and innovations.
Intellectual Property Rights Protection: WTO
member governments have accepted a landmark set of rules for
protection of patents, copyrights, trademarks and other forms
of intellectual property. This both protects the research and
innovation of Americans in our most competitive industries, and
creates incentives for further investment and technological
progress worldwide.
Global Membership: The WTO has grown by 50%, from
the 90 members which joined to launch the Uruguay Round in 1986
to 135 in 1999, with another 30 members seeking to negotiate
entry. More stringent requirements for membership mean
acceptance of WTO rules helps to open markets to American
products and promote domestic economic reform. This is
especially important for countries emerging from communist
planning systems and seeking to establish market-based
economies. Thus, membership in the WTO is a key element in
newly emerging economies in Eastern Europe, in Asia, and in the
Middle East. African nations as well are participating more
fully in the WTO than in the past.
Creation of a dynamic forum for trade
liberalization: In establishing the WTO, we created a system
that is responsive to rapid changes in technology and the needs
of the 21st century. The WTO first set in motion and then
realized agreements in financial services, basic
telecommunications services and information technology, whose
outcomes are larger in scope than the totality of the results
of the Uruguay Round; and by setting a built-in agenda to
continue in agriculture and services this year.
High Technology: The dynamism of the WTO has kept
the trading system current with technological development,
providing real benefits to business and consumers -through its
work on the Information Technology Agreement, Basic
Telecommunications, Financial Services, electronic commerce and
other initiatives. Since the Basic Telecommunications Agreement
came into effect, for example, rates paid by U.S. consumers for
international service to most foreign destinations have
declined significantly. From 1996 to 1998, the average price of
an international long distance call declined from 74 cents per
minute to 55 cents per minute, a 25% decline. On highly
competitive routes, such as the U.S.-UK route, prices have
fallen even more dramatically, to as low as 10 cents per
minute. Although aggregate data for 1999 are not yet available,
indications are that the trend toward lower rates has continued
and that the current average price worldwide is well below 55
cents per minute.
World Economic Stability: The WTO has also
strengthened the world's ability to address economic crises.
During the financial crisis of 1997 and 1998, for example, the
respect WTO members, including ourselves, showed for open
market commitments helped to prevent a cycle of protection and
retaliation similar to that of the Depression era, ensuring
affected countries the access to markets they needed for
recovery, and minimizing damage to American farmers and
manufacturing exporters.
Greater Openness and Accountability: While, as I
will note later, we are not satisfied with the WTO's progress
toward full transparency, we also recognize that in five years,
the WTO has moved forward on these issues by making a majority
of its documents available to the public, reaching out via
symposia and other means to the NGO community and by creating a
Web page. All of the WTO Ministerial Meetings held thus far -in
Singapore, Geneva and Seattle -have enjoyed strong NGO
participation.
The WTO in America's Economic Boom
These policy achievements, in turn, have helped to
facilitate an expansion of American goods and services exports,
despite the effects of the Asian financial crisis, by 55% since
1992. This is especially important, as export-related jobs
typically pay 10-15% above the average U.S. wage. Together with
domestic policy measures such as the improvement of fiscal
discipline since 1993 and increased investment in education,
the trading system has thus made a remarkable contribution to
our prosperity in the past five years. By opening markets,
advancing the rule of law and promoting competition, the WTO
has contributed to a record of:
Growth: The U.S. economy has grown by $2.2 trillion, from
$7.0 trillion in 1992 to $9.2 trillion in 1999. To put this figure in
context, only two countries in the world apart from the United States
have a GDP totaling $2 trillion or greater.
Jobs: U.S. employment has grown by over 20 million, as
unemployment levels dropped from 7.3% to 4.0%. This is the lowest
unemployment rate since January of 1970.
Rising Living Standards: American living standards are
rising, as hourly wages for nonsupervisory workers are up by 6.8%. At
the same time, openness to imports has helped to keep inflation low,
broaden choice and improve consumer prices especially for basic
household necessities. This is especially important for the poorest
families.
Investment: Since creation of the WTO, U.S. non-
residential business investment has risen at 10.8% per year.
Shared Benefit: Americans have broadly benefitted from our
expansion, with poverty rates falling to the lowest level measured
since 1979, and unemployment at record lows for African-Americans and
Hispanics.
A final point to note is that in the past five years, the
U.S.' share of world foreign direct investment has sharply
increased, with foreign countries investing more than $400
billion in America. Many had expressed fears that a more open
world would promote investment in countries with weaker labor
and environmental standards. Investment decisions obviously
have many causes, but experience shows that our high standards
have not been any sort of a deterrent to investment in the
United States.
Reasons for Seattle Deadlock
Let me now turn to an analysis of the Ministerial, and then
to our next steps.
As the record--both of the past five years and of the past
fifty--indicates, developing the trading system has been work
of profound importance. It has therefore always been difficult:
nations always have entrenched interests which benefit from the
status quo, and at each point along the road, governments must
make politically difficult choices to serve the greater good.
It should therefore be no surprise that we at times have
encountered deadlocks. This happened at the creation of the
trading system, in which the founding of the GATT in 1948 built
upon a failure to set up an ``International Trade
Organization'' in 1947. The creation of the WTO five years ago
followed a failed attempt to launch a Round in 1982, a mid-term
breakdown in 1988, and failures to conclude the Round in 1990
and 1993. More recent negotiations on financial services and
telecommunications also broke down in 1996 and 1997, in all
cases to be followed by success.
The experience in Seattle was similar to many of these
previous negotiating deadlocks. While broadly supportive of a
Round, a number of major WTO members were reluctant to commit
themselves to a negotiating agenda covering issues that are
genuinely difficult.
Most important, any new Round must clearly have as a
central goal the rapid reform of agricultural trade. This is a
commitment the WTO made long ago, when in 1995 it adopted a
``built-in agenda'' requiring the opening of agricultural talks
this year. This poses a special challenge to the European Union
and Japan. However, developing countries also have diverse
interests and agendas, which a Round must take into account,
and we in the U.S. have sensitive areas as well. All of us must
be willing to look hard at our agendas and consider ways to
accommodate a number of the concerns of our trading partners to
move forward.
We knew well before the Ministerial, of course, that a new
Round would involve difficult issues. But an agenda that does
not take on the difficult issues is one of little real-world
consequence. Over the long run, WTO members have been able to
overcome their differences; on this occasion they did not. WTO
members began to harden their positions rather than coming to
consensus, and the negotiations proved unable to bridge the
gaps.
WTO Agenda for 2000
Since then, we have been consulting with our trading
partners and with Director-General Moore on ways to move ahead.
As we do so, we view it as of fundamental importance that the
WTO acts on the issues immediately before it: the
implementation of core agreements under the Uruguay Round, the
opportunity to promote development and integration for the
poorer countries, the decision by China and a number of other
countries to join the WTO and the commitment made in 1995 to
open negotiations on agriculture and services this year.
1. Implementation of Agreements
To begin with, a set of WTO agreements covering
intellectual property, trade-related investment measures,
customs valuation and other issues come fully into force this
year, when remaining transitions expire. It is crucial that
this proceed smoothly. We are meeting our own commitments, of
course, in areas such as textiles. And in case of outright
refusal to keep promises, we will not hesitate to use dispute
settlement to enforce compliance.
But we also recognize that these agreements are complex.
Some countries have genuine difficulty implementing them
despite making sincere efforts to do so. In such cases, our
preferred approach is to work through the problems on a
practical, constructive and pragmatic basis. That is the best
way to ensure that we address the fundamental concerns
countries have, and preserve the integrity of the balance of
rights and obligations all of us have taken up. Likewise, we
are willing to review concerns others may have about our own
implementation of agreements.
2. Least Developed Nations
WTO members must also act with greater generosity of spirit
toward the least developed countries.
Part of this is greater market access for the poorest
countries. We are prepared to do this unilaterally, as the
President stressed in his State of the Union Address, by
securing passage this year of legislation further opening U.S.
markets to goods from Africa and the Caribbean. This is of
fundamental importance to growth and sustainable development
for the people of these regions, and will also help them become
better markets for our own products.
Equally crucial, we must develop better means to help these
countries participate fully in the trading system. Many of them
come to the table with less experience in trade policy and at
times fewer resources to devote to it. They often rightly feel
they have difficulty in asserting their rights and interests in
the WTO. A proposal we introduced last year, together with
Bangladesh, Lesotho, Nigeria, Senegal and Zambia, to improve
the technical assistance and capacity-building programs
available from the WTO and other international institutions,
can serve as a starting point.
3. WTO Accession for China and Others
Likewise, the WTO is considering the accession of 31
economies. A number of these negotiations are well advanced: we
expect Jordan and Georgia to enter in the very near future; we
have also completed our bilateral negotiations with Albania,
China, Croatia, and Taiwan; and have had significant progress
with a number of other countries. Each case will mean
significant trade liberalization, bounded by the rule of law.
Let me say a few special words about the completion of
China's entry into the WTO. This is a critical goal for the WTO
this year. The economic liberalization and opening to the world
China will make as part of its WTO accession have the potential
to support reform in China, create opportunities for China's
trading partners, and ultimately help to stabilize peace in the
Pacific. And simply from the perspective of the trading system,
a status quo in which the world's third-largest economy does
not need to follow WTO rules is an enormous source of
distortion and uncertainty. The China accession is thus a
central task for the WTO, and must move ahead this year.
This will require expeditious action, first of all by those
WTO members which have yet to complete their own negotiations
with China, and second by the entirety of the WTO's membership
on rules issues. It is a complex task, but one which is
manageable for the WTO and should be completed soon. As part of
this process, the United States must grant China permanent NTR
or risk losing the full benefits of the agreement we
negotiated, including special import protections, and rights to
enforce China's commitments through WTO dispute settlement,
among other means. If Congress were to refuse to grant
permanent NTR, our Asian and European competitors will reap
these benefits of the agreement we negotiated with China, but
American farmers and businesses may well be left behind.
4. Built-In Agenda Negotiations and Work Toward New Round
Finally, with this work proceeding, we must look to the
future. The core elements of the negotiating agenda are before
us, in the opening of talks on agriculture and services, as
required under the ``built-in agenda'' WTO members agreed upon
in 1995. These are the sectors in which markets remain most
distorted and closed, and in which the opening of trade will
mean perhaps most to future prospects for rising living
standards, technological progress, and sustainable development.
I am pleased to report that WTO Members are moving forward
on this agenda. The WTO General Council yesterday set dates for
the initial meetings for the negotiations on services and
agriculture, and our expectation is that the important work for
those negotiations will proceed. That will include the
development of negotiating proposals this year, a matter on
which we will be consulting with Members, the private sector
and other interested Americans in the days ahead. The work has
just begun, and we will soon publish a notice in the Federal
Register seeking comments from all interested parties as we
begin the process of developing proposals for these
negotiations. But our view of the initial steps is as follows:
In agriculture, the WTO Agreement on Agriculture,
with binding commitments on market access, export subsidies and
domestic support, provides the basis on which to pursue further
agricultural reform. Useful preparatory work has already been
accomplished through the WTO Committee on Agriculture over the
last three years, where countries have identified key issues
and their interests.
We are now working with other countries to ensure
discussions in Geneva focus on substantive reform proposals.
Our work last year enabled us to identify general negotiating
objectives, such as eliminating export subsidies; reducing
tariffs; expanding market access opportunities for products
subject to tariff rate quotas, including better disciplines on
the administration of those TRQ's; reducing trade-distorting
domestic support levels; and ensuring that the operation of
agricultural state trading entities are more market-oriented.
We also want to ensure access for biotechnology products.
We are now developing specific proposals to implement these
objectives. While specific negotiating timelines have not been
established by the Uruguay Round, the expiration of the
agricultural ``peace clause'' in 2003, and continued domestic
farm reform efforts in the United States, Europe and other
countries, should help to move the negotiations forward.
In services, we are developing negotiating
proposals for a wide range of sectors where our companies have
strong commercial interests, including, energy services,
environmental services, audiovisual services, express delivery,
financial services, telecommunications, professional services,
education and training, private healthcare, travel and tourism,
and other sectors. Our companies are poised to be among the
primary beneficiaries from stronger services commitments in the
WTO.
Broadly speaking, our objectives are to remove restrictions
on services trade and ensure non-discriminatory treatment. We
also need to ensure that the commitments we obtain accurately
reflect our companies' range of commercial activities. For
example, the GATS definition of environmental services does not
include recycling services, an area where U.S. companies are
leaders. We want to fix this and similar deficiencies in the
GATS.
Our proposals must also reflect the many different means
U.S. service providers use to meet the needs of their foreign
customers. This includes U.S. companies that establish
operations overseas -for example, as a branch or subsidiary;
that deliver their services electronically -by phone, fax, or
the Internet; or that depend on individual personnel to
``export'' services -for example, Americans that perform short-
term consultancy services in a foreign country.
Beyond these mandated negotiations, we have pressing needs
to address market access concerns in non-agricultural products,
electronic commerce, issues related to trade and the
environment, trade facilitation, and perhaps other topics as
well. Thus, while there are a number of different options for
proceeding with trade liberalization beyond the agricultural
and services sectors, we working to build consensus for a new
Round.
To build a consensus for such a Round will not be a simple
task. However, the outlines can be drawn, if WTO members prove
willing to rethink some of their positions, focus more fully on
the shared benefits of success, and find the balance that
allows us to move ahead. As the President has said, we will
keep working toward consensus; we are willing to be flexible,
and expect our trading partners to do the same.
WTO Reform
Finally, let me turn to the criticisms the WTO has received
and the questions of institutional reform.
The protests and internal criticisms of the WTO were not at
the heart of the negotiating impasse in Seattle. However, they
raise issues that require a response. Only through openness and
willingness to listen to its critics will the trading system
retain the broad support of the public and its member
governments over time.
This does not mean that all criticisms are valid. Indeed,
part of the response must be a rejection of unsubstantiated and
more radical criticisms. The core vision of the trading system
is right: opening markets in the past decades has sparked
growth, reduced poverty and strengthened peace. The creation of
the WTO here in the United States has brought this still
further: by cutting tariffs, it has been the equivalent of a
$750 billion global tax cut, whose benefit goes largely to less
prosperous families which devote more of their income to food
and basic necessities. It has helped America's farmers, working
people and businesses find new markets overseas. And as our
import growth has shown, it has helped to raise living
standards, dampened inflationary pressures and broadened
consumer choice, while creating new opportunities for our
trading partners. Most recently, during the Asian financial
crisis the respect WTO members showed for open market
commitments helped to prevent a cycle of protection and
retaliation similar to that of the Depression area, ensuring
affected countries the access to markets they needed for
recovery, and minimizing damage to farmers and manufacturing
exporters worldwide.
To begin reversing the work we have done would be
irresponsible and damaging in the extreme. Workers in poorer
countries would lose jobs as industrial markets closed; living
standards of the poor in America and other industrialized
countries would fall as the price of food, clothing, shoes and
other essential goods rose. Hopes of rising labor and
environmental standards would be deferred, as countries which
suffer from grinding poverty have little time or resources for
clean air enforcement and factory inspection. And a crucial
support for peace would weaken, as the stake nations now have
in one another's prosperity and stability beyond their borders
diminished.
But the WTO must also be willing to listen to and act upon
legitimate criticisms and incorporate new ideas. Most
immediately, it must address concerns about transparency which
are valid and can be easily remedied. This is especially
important in dispute settlement, where the current practice is
to close arguments to the public. Historically, the practice
dates from an earlier era, in which dispute settlement largely
meant mediation and negotiation. But today, dispute settlement
is a more adjudicative process. In such a process, what once
was privacy becomes a harmful secrecy that reduces public
confidence in decisions.
If this remains unchanged, public confidence in the system
will erode. As a first step, at our US-EU Summit in December,
we proposed that we and the EU, as the largest users of WTO
dispute settlement, immediately agree to open the arguments in
our transatlantic disputes. Thus far, to our regret, the EU has
refused. But it is quite clear that this issue threatens to
erode public confidence in the WTO and its work, and must be
addressed sooner rather than later.
Likewise, the WTO's internal processes can be improved and
updated. Since 1986, when the Uruguay Round opened, the WTO has
grown by over 50%, from 90 to 135 members, with more to follow
this year. It is not only larger but more diverse, ranging from
the world's most developed to its poorest countries, and
covering each point of the spectrum in between. Each of these
members has different priorities and interests, adding to the
complexity of negotiations. Over time we should develop a more
effective means of ensuring both participation and efficient
consensus-building. Director-General Moore has begun
consultations with WTO members toward this end. However, as we
address the issue, we must be careful not to alter the
principle of consensus for decision-making in the WTO. And we
must also ensure that such procedural discussions do not
distract us from taking immediate action on core policy issues.
There are also clear areas in which the WTO can do more to
help environmental protection. These include elimination of
environmentally abusive subsidies, such as fishery subsidies
which contribute to over-fishing; elimination of barriers to
trade in environmental goods and services; and the disciplining
of agricultural subsidies, including the elimination of
agricultural export subsidies.
And we believe the WTO can contribute to the advance of
internationally recognized core labor standards. Its current
refusal to discuss the links between trade and labor cannot be
justified. It can also cooperate more actively with the
International Labor Organization on a number of issues.
We should also, however, draw lessons for the future from
our experience in Seattle in these areas. While our
environmental proposals won a substantial amount of support, we
received at times intense criticism for pressing to open a
discussion of trade and labor. If we are to move forward, I
believe we must address more effectively the reasons many
developing countries are suspicious of these discussions. Few
want to specialize in low-wage industries; almost all would
prefer highly skilled, healthy and prosperous work-forces. But
most also fear discrimination against their products that would
block development and perpetuate poverty. Clearly, our
proposals in this area have no such intention and would have no
such effect. But if the trading system is to play a role in
achieving the shared goal of improving labor standards--as it
should--we must find ways to allay these concerns.
USTR Budget
Finally, Mr. Chairman, in the context of our ability to
meet the totality of these challenges, let me raise one final
issue.
Yesterday, the president transmitted his budget to the
Congress. In it, he is recommending funding for USTR at $28.3
million and 190 staff. This represents an increase of $2.8
million and 12 full-time positions. In addition, the
President's initiative on enforcement includes additional
resources for our agency. Thus, this budget, like the previous
two the President has submitted, calls for funding increases,
to match the escalating workload our agency has at home and
worldwide.
As you know, USTR is certainly one of the leanest and I
believe most cost-effective agencies in the Federal government.
When we began, we were an agency designed to coordinate policy,
drawing on the resources of other agencies. Today, we have
tremendous statutory obligations, together with complicated and
demanding interactions with nearly 200 foreign trade partners
and a very wide spectrum of Americans. As the Appropriations
Committee begins considering this budget request, I ask your
support as our authorizers for the addition of these 12 new
positions to our team. To fulfill our mission most effectively,
we need additional support not only at the WTO, but with
respect to agriculture, Africa, China, Japan and several other
areas. I hope you will support this request.
Conclusion
In conclusion, then, the WTO faces a number of challenges
in the coming year, from proceeding on the built-in agenda for
agriculture and services, to implementing prior agreements,
bringing in new members, improving the ability of the least
developed countries to participate, reforming its institutions,
and working toward a new Round. To meet these challenges is a
responsibility that all WTO members share. None of these are
easy or simple; but others have shouldered equally difficult
tasks in the past.
And the record of the past fifty years should give us a
great deal of confidence. Taken as a whole, the multilateral
trading system has promoted the rule of law, created new
opportunities for worldwide economic growth, and created
opportunities for Americans. This amply justifies the decision
Congress took five years ago to support creation of the WTO as
a successor to the GATT. And it should remind us how
significant will be the rewards of success as we take up the
challenges of the new century.
Chairman Crane. Thank you, Madam Ambassador.
When that Seattle meeting became deadlocked, did you
consider offering a fallback position in the form of a
ministerial declaration that would have identified a few areas
of common ground and commitment to keep the talk going?
Ambassador Barshefsky. No. And the reason is severalfold.
Countries, and most countries did, that expressed flexibility
before Seattle became increasingly inflexible at Seattle and
were not willing to take the political leap necessary. This was
first apparent and most radically apparent actually in the
agriculture negotiations, where after 6\1/2\ hours of word-by-
word negotiations on a text, the European Union, Japan, and
Korea said at the end of that they could not accept the text
and would reserve their rights not to accept the text. This was
a startling development and ultimately there was no agriculture
text agreed upon.
As far as a smaller declaration went, that was really not
in the cards. I felt it most prudent at that point that rather
than countries feel they would need to yet further harden their
negotiating positions, that countries instead take a pause, a
time out, regroup, rethink where they were, what their
positions were in the hopes of coming back to the table at an
appropriate time. And we of course would hope that appropriate
time would be sooner rather than later, but it will require
further flexibility on the part of all countries.
An abbreviated declaration or a partial declaration was
never in the cards, would not have been accepted by the trading
partners, but I think would have had the effect of a further
hardening of positions, making it impossible to reach consensus
even after a pause. And we wanted to avoid that further
hardening of positions.
Chairman Crane. I gather that you do favor launching a new
round.
Ambassador Barshefsky. Yes, very much so.
Chairman Crane. When do you think it is likely to occur?
Ambassador Barshefsky. I think it depends very much on a
review by all countries of the positions taken in Seattle, that
will also require a review by the United States of positions
taken into Seattle, to see if each country could move a little
bit. And if each country could move a little bit, we may well
be able to get there.
There are a number of international remarks to the effect
that countries would like to see the launch of a round this
year. I think many countries see a substantial danger in
waiting, particularly in the run-up to French elections where
Europe's agricultural position will harden even further. But
the rhetoric has to be matched by reality. And if countries in
fact are not willing to move some, then there will be no round
whether this year or in the future. Countries, all countries,
will need to take careful evaluation and careful stock of their
positions and determine whether, in light of the Seattle
activities and negotiations and discussions that took place,
they can move forward.
Chairman Crane. What in your estimation are the prospects
for real progress especially given the EU's reluctance to
further liberalize agriculture without a comprehensive round?
Ambassador Barshefsky. I do think, certainly in the early
stages, moving forward now on agriculture and services
negotiations will be very productive. Because in any
negotiation, even in the context of a round there is quite a
bit of underbrush that needs to be cleared away before you get
to the array of political decisions that will have to be taken.
I do think, at a minimum, over the course of this year we will
be well positioned in the process in Geneva in agriculture and
services to begin to clear away a lot of that underbrush so
that at the point at which a round is launched a substantial
amount of work has already been done particularly at the
technical level.
Chairman Crane. One of the concerns I heard while we were
out in Seattle with you is the feeling on the part of many of
the less developed countries that they were being excluded from
the process. I know 135 countries cannot participate all at
once in negotiations, but is there a better way that we could
keep the member countries informed of key developments as they
are proceeding?
Ambassador Barshefsky. I think that the process used in
Seattle was actually much more inclusive than anything that had
been previously utilized. Four working groups were created, all
countries could participate in all groups, those groups were
each a series of negotiating sessions in which all countries
participated. Where I think the criticism comes into play is
the fact that in the last day and a half or so negotiations
were narrowed further to a smaller group of countries. And that
is the product of a realization that 135 countries cannot all
be in the room at once.
I think that there does have to be a better means for the
Director General of the WTO to inform the body as a whole of
developments as they proceed. But there is also a
responsibility on the part of countries that are regional and
subregional leaders to keep their neighbors informed of
progress. And there were many participants in these sessions
who claimed to be representatives of a group of nations but who
then did not report back to those nations as they should have
done with respect to progress.
So I think both the overall process needs to be looked at,
particularly as one gets to the endpoint of a negotiation, as
well as the role of countries that claim to be regional or
subregional representatives of a variety of countries and their
responsibilities to those countries to the extent report of
progress is appropriate. We have asked Mike Moore, the Director
General of the WTO, to look at this full range of issues on
internal reform. He will be doing that, hopefully to report
back to the body as a whole in the coming months.
Chairman Crane. If Congress approves a more generous CBI-
Africa trade bill, will this help build political support for
expanding the trade system among developing countries in your
estimation?
Ambassador Barshefsky. I think that the Africa and CBI
bills are absolutely critical. I think it will send a signal to
our trading partners that the United States intends to remain
fully engaged. I do believe, and many countries have said this
to me, that our completion of the bilateral agreement with
China was an extremely important marker for many countries with
respect to U.S. leadership and U.S. engagement.
But I think the CBI and Africa pieces of legislation ought
to be passed by the Congress in whatever form the House and
Senate can agree upon and we ought to get programs expanded for
these two critical regions of the world, which is what each of
the bills would do.
Chairman Crane. I could not agree with you more. As you are
well aware, the EU has gone forward in a free trade agreement
with Mexico.
Ambassador Barshefsky. Yes.
Chairman Crane. And are negotiating with Chile. We cannot
be caught in the wings.
With that, I yield to our distinguished Ranking Minority
Member, Mr. Levin.
Mr. Levin. Thank you, Mr. Crane.
I was going to ask you, Ambassador, as I said in my opening
statement, to put in perspective the President's comments at
Seattle. But I think you have already done that. And you did so
in part by referring to his speech at Davos. We were both
privileged to be there for his speech. I wasn't there before or
after except for the reception where there were some
interesting comments by ministers and people in the business
world and Mr. Sweeney about his speech. It essentially said
trade needed to be expanded and so did our perspectives on what
trade is. It seems to me that sums up the challenge. I think
especially your extemporaneous remarks about labor market
issues and environmental issues should give everybody here some
thought.
We have been stalemated for 5 years on trade legislation in
this institution, in good measure because of disagreement over
the role of labor market and environmental issues in the trade
equation. No one would say in the domestic economic equation
that labor market and environmental issues are irrelevant. We
fight over them all the time in part because they are relevant
to the economics of the whole country and of one section or
another. So I do not think it should surprise us that these
issues, as competition grows between different economic
structures, would become relevant and contentious.
I think all of us need to work on it. As I have said to the
administration, have everybody in the administration take the
talk of the President and talk that talk and try to walk the
walk and actually implement both parts of his speech.
Let me just say a word about transparency from my
experience at Seattle. Several of us met with the Mexican Trade
Minister and he was opposed to any opening up of the processes
within the WTO. We asked him whether within his country they
would tolerate the same processes used in a civil or criminal
trial that are utilized in the WTO, which isn't exactly the
same but it is a quasi- judicial process and you do not know
what documents are going in, which ones are the base of
decision, and what exactly comes out of it. And if there is
going to be finality, and I voted for it in the Uruguay round,
there has to be transparency.
And so I think it is a step forward to see you as
passionate about the new issues as the old issues. Because if
we do not resolve or confront both of them, I think we are
going to continue to be stalemated here. And as you know, I
urged the same in terms of issues like core labor standards in
the CBI Agreement.
So I guess I do not really have a question to ask you. I
just want to express my belief that your presentation here
gives some indication that the ball is moving forward. I think
you have answered the Chairman's comments about the President
in Seattle by referring to what the President said at Davos.
This is not mainly a politically motivated issue within this
country. It is an issue that has been coming to the surface now
for 5 years, these new issues. If we are not passionate in
pursuing them, we are going to have deep divisions abroad and
deep divisions here at home.
Ambassador Barshefsky. I know that was not a question, but
if I might just respond to a couple of points.
Mr. Levin. Please.
Ambassador Barshefsky. First of all on transparency, I
think a lot of countries' hesitations on opening up the dispute
settlement process really stem from an earlier era under the
old GATT system, where a dispute settlement was largely a forum
in which one might negotiate a settlement but was never
genuinely a litigation forum as it were.
Under the new system, this is very much a litigation forum.
You make formal submissions on the record, you have oral
argument before the panel, a record is maintained, there is an
appellate body to which you can appeal again based on a record,
based on formal submissions and oral argument as well as
additional submissions. This takes on the character of more
traditional administrative litigation as in the United States
and Europe and elsewhere. And just as those kinds of
proceedings are in most countries open at least to some degree,
and in the developed world virtually entirely open as to
submissions, the availability to sit in the back of the room
and watch an oral argument, the ability to know who the parties
are, what the record of the proceeding is, and so on, so too
these same steps and processes should be available now in
dispute settlement given its litigation oriented nature.
Hopefully, over time some attitudes will change. But it has
been somewhat surprising to us how entrenched the attitudes are
on the question of opening up dispute settlement, including by
Europe, for example, which does not want to see panel
proceedings open to the public. I find this shocking.
Mr. Levin. Inexcusable.
Ambassador Barshefsky. Second, with respect to the issue of
core labor standards, I would make only one observation. I
think we have paid too little attention to very genuine
sensitivities of the developing world on this issue. By that, I
mean I do not think that our rhetoric is perhaps calibrated in
the most effective way internationally. Many developing
countries take a U.S. or European focus on core labor standards
as harboring an implied rebuke to the way in which they have
conducted their economy or the way in which they treat their
workers. Many of these countries come to us and say, ``Do you
think we don't want to see living standards increased?'' ``Do
you think we don't want to see our workers moved to higher
value-added occupations?'' They look at remarks made by
developed countries as containing an implied rebuke of their
handling of the economy. And certainly the comments are not
intended in that way.
I think we have to think through carefully how better to
get across the point that these are issues in which both
developing and developed countries have a common stake, and
that these are issues that one needs to discuss, to work
through, to think through jointly so that we are sure the
benefits of a global trading regime can be more evenly shared
and can lead to the goals that both developing countries and
developed countries want to see for their own people. I feel
that we have never really gotten our own rhetoric quite right
in this area, which has helped to fuel the kind of suspicion
and a resistance, a very deep resistance on the part of many
countries to even discussing or embarking upon a discussion of
these issues.
I think as we proceed into this year we will want to work
with the Subcommittee because we do want to get the message out
in the most effective way possible. Because at the end of the
day, trade, labor issues, environmental issues should be
mutually supportive. One can easily see ways in which they
would be mutually supportive and mutually constructive in
increasing trade while you increase environmental protection,
as we have in this country, increasing trade while you increase
labor standards, as we have done in this country, and at the
same time, as the President points out, not in any way detract
from economic growth overall. So there are logically ways in
which these issues should be able to be fit together in a very
mutually supportive way.
But the first step, which may be the hardest, is persuading
countries to entertain a dialog on these issues in the WTO. And
in that regard, I feel that we, Europe, the other developed
countries need to work on a more effective means of
communicating the aims, the goals of these discussions lest the
developing countries especially believe this is simply a guise
for increased protectionism, that instead of using tariffs as
the basis, using labor/environment as the excuse. That is
surely not the intention.
Mr. Levin. It isn't. And when we talk about core labor
standards, and I will close, we are talking about core labor
standards that almost all of them have agreed to in ILO
documents and talking about embedding them within trade
agreements.
Ambassador Barshefsky. Right.
Mr. Levin. Thanks very much.
Ambassador Barshefsky. Thank you.
Chairman Crane. Thank you, Mr. Levin.
Mr. Thomas.
Mr. Thomas. Thank you very much, Mr. Chairman.
Thank you, Charlene. Nice to have you with us and I assume
we will have some repeat engagements.
In listening to your opening statement, I have been on the
Trade Subcommittee now for more than a decade, I was in
Seattle, but I will certainly defer to your more detailed
knowledge of world trade history when you indicated that
Seattle was similar to earlier breakdowns. Which of those
earlier breakdowns provided a video war of pitched battles that
produced a victory for antitrade forces?
Ambassador Barshefsky. Certainly, Seattle was characterized
by protests; no question about that. And certainly there was
substantial coverage of it. And certainly, as the President
said, there is something of a wakeup call at work here. But
that is not what led to a negotiating impasse.
If you look at earlier impasses, they typically were
followed----
Mr. Thomas. No. I have a question on that. But I just think
we have to realize that the context, where it occurred, how it
occurred, and the new format of visibility produced, I think, a
result that was far more disastrous than earlier breakdowns
which were in closed rooms and backroom restaurants in Geneva
and in other areas of the world. If you will concede that, we
can----
Ambassador Barshefsky. I do not think I would concede that
it was disastrous in the same way. I look at it actually rather
differently. That is to say, I reject much of the radical
criticism made of the global trading system. But I do accept
that there are ways in which the trading regime can and should
be updated. And to the extent the protests went to that point--
--
Mr. Thomas. Then let me ask a question a different way so I
can understand and focus it. Did the events in Seattle further
the Clinton administration's trade policies?
Ambassador Barshefsky. I think any breakdown of a round
does not. In other words, clearly, we would have preferred a
round to be launched. Clearly also, it was not going to be
launched without the key litmus test being passed, and that is
on agriculture. And that was not passed. So did it further the
trade regime or the trade record? Certainly not. That is
obvious.
Mr. Thomas. Then with hindsight, with the failure of the
governments to narrow their differences, with a total lack of
prior agreement on most elements of a text for the declaration,
especially agriculture, in your opinion would it have been
better to postpone the Seattle ministerial rather than take the
consequences that occurred?
Ambassador Barshefsky. Well, I think most countries felt
going into Seattle it might be possible to construct a round.
And most countries with whom we had dealt bilaterally, that is,
one-on-one, gave us certainly every indication that result
would be achievable at Seattle.
But what happened there happened in 1982, in 1989, 1990,
and 1993, and it is this. You never know for sure before you go
in the room whether the deal is going to be there or not. If I
had taken that approach on China, I never would have returned
to China.
Mr. Thomas. I have a very short period of time. And you
once again alluded to the similarity between the Seattle
breakdown and, for example, 1982, when in fact in 1982, because
it did not have that visual and dramatic and physical
disruption, we were actually able to come back and salvage it
fairly quickly. But we will discuss the similarity or
differences in the history of this particular event.
I happen to think that in hindsight, based upon our failure
to have a clear understanding of where we were going, we
probably damaged ourselves more significantly than we thought
we were going to. And that since we did not have a wedge that
we could deliver, that the downside outweighed any potential
upside. And then, of course, in my opinion, and I think of many
other observers, the fact that the President came in and made
the presentation that he did pretty well guaranteed, given your
description of the concern and fear and miscommunication of
various phrases, and I do think sanctions is one that can
create fear, that perhaps produced some miscommunication, but
which is a word that in the international trade community is
clearly understood.
So my question is this. What is the administration's
current position on labor issues? Are you still saying that you
would accept a study group to examine labor issues in the
context of expanded trade, or is there now some commitment to
sanctions?
Ambassador Barshefsky. No. The proposal we have made in the
WTO is very clear. This is a working group to review the
intersection between trade and labor policies. That is what it
is intended to do, with participation by the ILO, the Bank, the
fund, and so on.
Can I make one other point though since you have raised the
President in this, as did Mr. Crane. First off, the President
has talked about these issues since he began campaigning for
President in 1991. Second of all, I think his Davos speech
articulated really quite beautifully his own views on this
subject. That is to say that these issues have to be made to be
mutually supportive. Third, his statements in Seattle, which
were rather off-the-cuff, did not alter any country's position
on this issue. There is no country on the fence on these
issues. Those that believe that labor and environmental issues
should be considered in the context of the WTO believed it
before the President spoke and believed it after, and those
that believe they have no place in the WTO took that position
before he spoke and took that position after he spoke.
Mr. Thomas. Just let me tell you, ma'am, that very often
perception is reality. There were a number of forces, those who
stood up here, and unfortunately a number of them left prior to
engaging in what I consider to be an educational dialog, who
were here for a different reason than education.
Republicans offered policies on labor and the environment
in the Fast Track discussions, on paper, concrete. I think it
might be useful if we begin talking about what the Clinton
administration's positions are on labor and the environment, on
paper, concrete, so that as you are reaching out to try to
build a consensus across countries and across the equator that
we could work together since I think it is in our mutual
interest to come up with a policy that, as we do with Fast
Track, is in somewhat pre-approval condition.
Here is a quote from Director General Mike Moore: ``We need
to hear more of the `F' word--flexibility--before I can say
with any great confidence there has been enough movement from
all sides.'' Now, flexibility is important, but in response to
a question by the Chairman about the difficulty in launching a
new round, you brought up the argument that the Europeans will
harden fast because of the French elections. What time this
year are the French elections?
Ambassador Barshefsky. The French elections will be toward
the end of next year.
Mr. Thomas. Oh, so not even this year in 2000?
Ambassador Barshefsky No. But the French----
Mr. Thomas. They are in 2001?
Ambassador Barshefsky [continuing]. But the French view
prevailed among the member states in Seattle now.
Mr. Thomas. Do you think there is any possibility that
elections that are going to be occurring this year, not next
year, might be a reason for a reluctance to launch a new round;
i.e., the U.S. elections?
Ambassador Barshefsky. I do not think so. Because if you
look at the areas of U.S. sensitivity, and you all know what
they are--dumping and textiles, those are 30-year issues. Those
are issues on which most members have very distinct views.
Mr. Thomas. No. I think, ma'am, that what happened in
Seattle was the core arguments; those who were wearing the
circle with the stripe across the WTO are looking at labor and
the environment. And I would submit to you that the elections
that are going to occur this year are not a climate in which
this administration or candidates running for President want to
engage in a responsible discussion of labor and the environment
in the context of world trade.
Ambassador Barshefsky. I disagree with that conclusion.
Mr. Thomas. Last question. In the interest of getting a new
round launched, what is your reaction to the U.S. being a bit
more flexible on some of our issues? If we pull our sensitive
issues off the table and then require other folk to talk about
their sensitive issues, that might also heighten the concern
about motives. Where are we? And if you don't want to talk
about it, I understand that, I am going to give you a list of
written questions so I can have you respond to me. But can't we
maybe talk about investment, competition policy, antidumping
policy, even someone like me, accelerated phase-out of textile
quotas just to kind of show good faith and trust our people
such as you, and our negotiating capabilities, and not create a
front-loaded barrier to discussing issues that are sensitive to
others if we were to discuss issues that were sensitive to us
as well?
Ambassador Barshefsky. Right. I do not think that we
created front-loaded barriers. On investment and competition,
for example, we offered the EU a variety of approaches on those
issues which I believe the EU should have accepted. They did
not. But that showed flexibility on our part. We did that
because, to be frank, these two issues are very important to
the global trading system and in the longer run we are going to
need to also find ways of dealing with them.
With respect to the issue of textile quotas, there was very
little raised by developing countries on textile quotas. Think
about it from their point of view. They are phased out 4 years
from now in any event. Why would they pay in a negotiation to
get a phase out 6 months earlier by the time the next round
ended? There is very little discussion at all about textile
quotas.
And with respect to antidumping, as with our trade laws,
certainly I do not think Congress would want to see us weaken
our trade laws in a negotiation. On the other hand, we also
have to recognize other countries are using these laws more and
more in a rather abusive fashion. So there will need to be some
dialog on them, but certainly I think we must reject any dialog
that would lead to a weakening of our trade laws. And my guess
is that is probably the congressional view as well.
Mr. Thomas. And perhaps we ought to ask our trading
partners if they view your analysis of their position to be
their position. And that may be one of the problems that you
indicated in terms of our ability to listen and understand. I
think the integration of some of those issues is a real concern
and that perhaps we ought not to dismiss them out of hand by
placing ourselves in their conceptual framework and providing
the answer we believe they would have provided instead of
having them provide it in the first place.
Mr. Chairman, I would ask that I could submit these
questions. They are wide-ranging. Obviously, we did not spend
any time on agriculture, and I am very concerned about the
continued subsidies of agriculture in Europe, in fact, the
concentration of certain of them in areas that I think are very
detrimental to the United States.
Chairman Crane. Without objection.
Mr. Thomas. And I look forward once again to your very
thoughtful answers, Ambassador, as you have provided in the
past.
Mr. Chairman, thank you very much for the liberal use of
the 5 minute rule.
[Questions, and their respective answers, submitted by
Representative Thomas for Ambassador Barshefsky follow:]
Questions submitted for the record by Congressman Bill Thomas for
Ambassador Charlene Barshefsky
1. On what issues did the U.S. encounter the most resistence from
trading partners?
Answer 1:
At the May 1998 WTO Ministerial, WTO Members authorized a
process to prepare for the 3rd Ministerial Conference and the
possible launch of a broad-based multilateral trade
negotiation, recognizing that a new phase of negotiations was
already mandated to begin at the end of 1999/beginning of 2000
for the agriculture and services agreements concluded in the
Uruguay Round. In the course of this preparatory process, WTO
Members affirmed the need to proceed with these mandated
negotiations. Most also agreed that the time frame for
completing negotiations needed to be relatively short, and that
the scope of the negotiations should be broadened beyond the
``built-in agenda'' of agriculture and services. Members were
near consensus on the proper treatment of electronic commerce,
the agenda for negotiations on services, and several issues
relating to trade and the environment.
Major points of disagreement included:
1. Agriculture: The EU, Japan and Korea resisted a
commitment to thorough reform of agricultural trade. The built-
in agenda negotiations envisioned further reductions in export
subsidies, strengthened rules on domestic support, reductions
in tariffs and the expansion of market access opportunities for
products subject to tariff-rate quotas.
2. Implementation of Existing Agreements: A number of
developing countries, including some of the most advanced,
requested broad exemptions from previous commitments. Likewise,
certain of our trading partners sought to use the debate on
implementation to reopen agreements like textiles, confusing in
some cases the problems with implementation with a more basic
dissatisfaction over the results of the Uruguay Round.
Antidumping, in particular, was one agreement where many WTO
Members sought new negotiations, which the United States
resisted as being premature, at best.
3. Market Access: Questions here centered on the
comprehensiveness of the negotiations, whether they could be
supplemented with early provisional results as was suggested by
the APEC sectoral initiatives in the industrial sector, and to
what extent industrial market access would result in
improvements in current or existing market access.
4. Investment and Competition Policy: The EU and Japan in
particular argued for negotiation of broad and binding rules in
the areas of investment and competition policy, but found
relatively little support.
5. Labor: Extensive consultations were held at the
Ministerial on various ways to address the relationship between
trade and adherence to core labor standards in the WTO's work
program. In keeping with the mandate of the Uruguay Round
Agreements Act of 1994, the United States called for
establishment of a Working Group in the WTO, with ILO
involvement; others proposed a broader forum outside the WTO
context, having minimal if any WTO involvement.
6. Environment: Broad agreement emerged to confirm
sustainable development as a guiding principle for the
negotiations, to pursue trade liberalization and disciplines in
areas that hold particular promise for yielding both trade and
environmental benefits and to use the Committee on Trade and
Environment to identify and consider the environmental
implications of the negotiations. Differences emerged, however,
regarding the specifics of proposals to address subsidies that
contribute to over-fishing, and other proposals aimed at
modifying WTO rules.
2. What steps are being taken to advance the ``built in'' negotiations
on agriculture? When will talks start and how will you proceed without
a ministerial declaration framing the issues?
Answer 2:
We view the agriculture negotiations as an important tool
to expand markets for American farmers and ranchers and want to
take full advantage of the opportunity.
Domestically, we are continuing our internal work
identifying priorities and assessing different approaches for
eliminating export subsidies, reducing tariffs, expanding
market access opportunities for products subject to tariff rate
quotas, including better disciplines on the administration of
those TRQs; reducing trade-distorting domestic support levels
and ensuring greater transparency and fairness in the operation
of agricultural state trading entities. We also are reviewing
approaches for dealing with biotechnology in the WTO in
addition to our bilateral efforts in Europe and elsewhere.
At the WTO, we have set up a process for conducting
substantive negotiations on agricultural reform. At the first
negotiating session on 23-24 March countries agreed to a
meeting schedule and work program for the next twelve months
and set timeframes for submitting negotiating proposals.
Negotiations will be conducted under the terms of Article
20 of the Agreement on Agriculture, which calls for fundamental
reform. Under this mandate we have the scope to address all of
our negotiating objectives. We are also working with other
countries to establish the basis for a broader negotiating
Round.
3. What is the Administration's position on labor sanctions now? If
sanctions are not being proposed, how is the Administration going about
convincing developing nations that its interest in labor standards is
not a stalking horse for imposing rules on their economies?
Answer 3:
Our proposal for a Working Group on Trade and Labor is for
study and discussion on the important relationships between
trade and labor. This is not being done now by the
international community. Therefore, it is premature to propose
remedies to problems that have not been analyzed fully, nor is
it possible yet to define the appropriate role, if any, for the
WTO in addressing these problems. Of course, our trade
preference programs already provide statutory authority for the
suspension of duty free treatment if beneficiaries are not
taking steps to afford internationally recognized worker
rights.
4. Can the U.S. get agreement to launch a new round without being
willing to discuss our dumping laws or ``competition policy''?
Answer 4:
The United States is more than prepared to discuss both
topics; the only major issue has been whether it is appropriate
to initiate full negotiations in either area. On that, the
United States is not alone in its opposition.
As regards antidumping, we have taken the view that it is
premature to embark upon the negotiation of new rules given the
changes still being implemented as a result of the Uruguay
Round negotiations. The provisions of the Antidumping Agreement
are among the most complex of any WTO Agreement. Their
complexity is driven, in part, by the need to ensure that all
Members respect the transparency and due process requirements
that have for some time been features of our own law. Moreover,
to ensure impartiality and that the circumstances affecting a
fair comparison of prices are appropriately taken into account,
the methodologies are necessarily complicated. Insofar as a
negotiation would likely lead to even more complex rules which
would be difficult for many countries to apply in a WTO-
consistent fashion, we believe the first step must be to review
the existing rules and the adequacy of their implementation.
This would include looking in particular at the provisions
affecting developing countries, and considering how to improve
the coordination of technical assistance for new users of the
antidumping remedy so that the current rules are adequately
respected. This is critical to ensuring that U.S. exporters get
fair treatment in foreign markets, while also providing an
effective remedy against unfair trade in the U.S. market.
On the issue of competition policy, the United States has
been one of the most active participants in the working group
established at the 1996 WTO Ministerial to study this issue.
While the EU, Japan and some others have been anxious to move
on to the negotiation of a broad set of binding rules in the
WTO, many developing countries either oppose the basic
requirements of any such rules (e.g., the need to have an
antitrust law) or believe that the matter is not yet ripe for
negotiation. What's clear is that more work is needed to
encourage and guide other countries in the development of a
competition culture and the infrastructure necessary to
administer sound competition laws and policies. We also think
there needs to be further analysis leading to a better
understanding of and consensus about how to address anti-
competitive practices that affect international market access.
We are, therefore, working with our WTO partners to find the
best means for advancing work on competition issues.
5. European Union domestic subsidies of fruits and vegetables are
distorting the price of products like canned fruit and olives by as
much as $3 per case. How does the U.S. plan to deal with these trade-
distorting domestic subsidies in the ``built-in'' agricultural
negotiations?
Answer 5:
We have identified reductions in trade distorting domestic
support as a priority negotiating objective for the agriculture
negotiations. We are working closely with the fruit and
vegetable industry to identify the best approach to address
these EU subsidy programs as we develop our agriculture
negotiating proposal.
6. Are you preparing to pursue bilateral agreements as a means of
advancing the WTO discussions?
Answer 6:
The United States makes full use of its bilateral
relationships to advance work in the WTO. We have met on
numerous occasions over the past several months with a wide
variety of our trading partners in order to explore their
concerns or reservations on the launch of a new Round, and try
to find ways to narrow any differences. We have devoted
considerable time and energy to ``confidence-building'' steps,
ranging from ways to improve market access and technical
assistance for the least-developed countries to improvements in
the transparency and functioning of the WTO itself. We have
made clear our openness to working with those having difficulty
implementing their transitional WTO obligations on a timely
basis, to ensure both adherence to WTO commitments and the most
practical and expeditious means of securing compliance. We have
cooperated with our APEC partners to build support for early
market access results in the WTO, and have worked well with our
FTAA partners in the Western Hemisphere to advance shared
positions, such as the ultimate elimination of agricultural
export subsidies. The United States will not shrink from any
opportunity to use bilateral agreements and cooperation in
order to make progress on the multilateral agenda.
7. As you know, the European Union has not approved any agriculture
biotech products since the spring of 1998. This has led to U.S. corn
farmers losing $200 million for each of the last two years due to the
EU's unwillingness to address approvals of new agricultural biotech
products. More recently, the EU has threatened to limit imports of
other U.S. corn based products, such as corn gluten feed which total
$800 million a year, because they may contain genetically modified
organism varieties unapproved in Europe. Does the Administration have a
short term game plan to resolve this issue?
Answer 7:
Yes. The Administration is pursuing several approaches to
address this problem. We have made biotechnology a priority in
our dealings with the EU.
Presidents Clinton and Prodi agreed to form a high-level
dialogue to address the full range of problems facing agri-
biotechnology, including market access. Senior EU and U.S.
officials met last December to begin work under this dialogue.
They met again in February and March, with another possible
meeting in May. During each meeting, U.S. officials press for
EU action to resolve its regulatory process for agri-
biotechnology products.
We are also using the Transatlantic Economic Partnership
(TEP) Biotech Group to explore in detail some alternative ways
to resolve this issue. This group met in December shortly after
the meeting of senior officials and plan to meet again in May.
We also have been using U.S. Embassies in the EU to urge
Member State support for ending the moratorium on approvals of
new varieties, which would facilitate resolution of trade
problems. We are trying to find ways to address concerns Member
States might have, particularly for those varieties that have
already undergone scientific review in the EU.
8. How many products have been held up in the EU approval process for
political reasons? Would you say that there has been undue delay in
approving certain products developed in the U.S.?
Answer 8:
The main problem we have with the EU approval process is
that decisions appear to be driven by politics and not by
science. This political influence is best demonstrated by the
decision of some Member States to enforce a de facto moratorium
on approvals of new agri-biotech varieties, regardless of
whether there is a scientific basis. The EU has not approved
any new varieties since April 1998. We have received reports
that the EU's moratorium could remain in effect until the EU
finalizes new approval procedures, which not might be for
another two years. We are working with the EU see if there are
ways new approvals could proceed before completion of new EU
regulations.
9. What specific steps are being taken by the Administration to
encourage the EU to proceed with final clearance of outstanding
approvals? Has this been a topic of discussion in bilateral meetings
with Mr. Lamy and President Prodi and, if so, what has been our
position?
Answer 9:
As indicated above, we are also using the Transatlantic
Economic Partnership (TEP) Biotech Group to explore in detail
some alternative ways to resolve this issue. We also have been
using U.S. Embassies in the EU to urge Member State support for
ending the moratorium on approvals of new varieties, which
would facilitate resolution of trade problems. President
Clinton raised U.S. concerns about the adverse effect the EU's
regulatory system is having on U.S. exports and gained
President Prodi's consent to a high-level effort to try to
overcome these problems.
Question 10. What are the prospects of resolving disputes on corn and
soybean varieties prior to next fall's harvest? If the EU is not
willing to act on biotech products that have been submitted for
approval, how will the Administration respond?
Answer 10:
We would not want to speculate about what our next steps
might be. The U.S. goal is to work with the EU to get agri-
biotech products approved and entered into the EU, if possible
before next fall's harvest.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Thank you, Mr. Chairman.
Madam Ambassador, great to have you here. I always thought
your job was difficult. Now, after Seattle, I know it is
difficult. But I just wanted to say also that Representative
Maxine Waters is here and was part of another panel and she is
listening in on this whole procedure.
Look, I just have four basic questions. The first is about
antidumping. I really applaud you for standing up tall on this
thing. I remember being part of an industry that almost went on
its knees after 150 years in business because of the unfair
labor and unfair dumping laws that took place. I hope you are
going to stick with that.
Point number two is on the FSC. I go back so far I remember
the DSC. I thought that was all solved. I thought that everyone
thought that was a great idea. And now this thing rears its
ugly head and I just have a feeling that it could lead to some
really unfortunate consequences, maybe an international trade
war, which is wrong.
But I think that maybe the two most important things I
wanted to talk about are these. You mentioned transparency. But
if I understand correctly, in terms of the dispute settlement
panel which you are opening up, the Europeans do not want it.
Here, you are offering something, it obviously came out of
Seattle that we ought to have a more transparent situation, and
the very people who it would help are against it. I really
don't understand that.
And the last issue, and you may want to comment, is sort of
the issue of the green room, that obviously things can't be
solved by everybody in a huge open forum. But sometimes I think
in taking a look at the procedures we get involved in that
rather than in the substance and what is happening. And you may
want to make a comment on those.
Ambassador Barshefsky. Sure. I think with respect to
transparency and Europe, I have never understood the European
position on transparency in terms of opening up dispute
settlement panels to public observation, or the filing of
amicus briefs which the EU has also opposed. I do not
understand it. It is so contrary to an extraordinary legal
tradition in the EU, a tradition that we have adopted from
Europe over the course of 200 years. And so this has always
been something of a mystery.
Generally, when the EU speaks about the issue they raise a
concern about the government-to-government nature of
proceedings, and they are government-to-government, and the
fact that opening these processes up would detract from the
government-to-government character of the proceedings. But that
certainly is not the EU's position in, for example, the
International Court of Justice which are government-to-
government proceedings. So I have never quite understood the
argument that is raised.
I would hope that we could continue to work with Europe to
get progress on transparency. They have been quite forthcoming
in some areas, like the further derestriction of documents,
making many more documents presumptively open to the public
rather than the reverse presumption which pertains now, and in
some other key transparency areas where the EU has been
forthcoming. But in this area of dispute settlement they have
not been. And, of course, this hurts us with other countries
because if the EU with its legal tradition does not want to
move in this direction, other countries take note and decide
they don't have to move either. So we have something of a bit
of a vicious cycle there.
With respect to the green room and process, I think
ultimately there should be ways of better accommodating the
needs of all 135 members. We have a quite different situation
now than at the start of the Uruguay round. The WTO membership
now is 50 percent larger than it was at the start of the
Uruguay round. And even the start of the Uruguay round was
hampered in 1982 by countries claiming they were not involved,
they were not involved. And now you have a membership that is
50 percent greater in size.
There ought to be ways of reconciling how to deal with the
bigger group but how to also get the work done. One of the
things we have asked Mike Moore is to consult with a variety of
countries on this issue. The British have put in a suggestion
on convening an ``eminent persons'' group to look at the
internal issues with respect to the WTO and make
recommendations. We are looking at the British proposal now.
There may be many other ways of proceeding. But I think it is
critical that the WTO take a careful look at its internal
procedures to avoid the kinds of problems that have plagued us
in the past and at Seattle.
Mr. Houghton. Yes, but at the same time not getting in the
way of some of the substantive things you have to do.
Ambassador Barshefsky. Exactly.
Mr. Houghton. Because it is always easier talking about the
mechanics than it is looking at the gut issues.
Ambassador Barshefsky. Absolutely. We have made it very
clear in Geneva that we view the issue of internal reform as
one to be handled in parallel with, not sequentially, in
parallel with the ongoing work of the WTO, including moving on
the built-in agenda, as we are going to do.
Mr. Houghton. Thanks very much.
Chairman Crane. Mr. McDermott.
Mr. McDermott. Thank you, Mr. Chairman, for letting me ask
a question.
Chairman Crane. First, Mr. McDermott, if you will yield?
Mr. McDermott. Yes.
Chairman Crane. We want to thank you for all that gracious
hospitality in Seattle. [Laughter.]
Mr. McDermott. Well, it is about that that I wanted to
raise an issue with the Ambassador.
It seems to me after our experience in Seattle the Congress
has to rethink something, and I would like your comments on it.
When the United States government decided they wanted to have
this meeting in the United States, cities began to compete for
it--Denver, Detroit, San Diego, Seattle, Honolulu, and many
others were eliminated in the first round and wound up with
five, and Seattle won the prize. [Laughter.]
Mr. McDermott. I was in San Diego and saw a newspaper that
said thank God we didn't win. And I sat in from the very start
on the planning for this meeting on the Seattle Host
organization meetings and was there, Jennifer Dunn had
representatives, and our Senators did and so forth. We were
there a year almost in advance trying to put it together and so
forth.
It has become clear to me after seeing what happened that
the funding of these kinds of meetings needs to be rethought.
That saying that a city can go out and raise the money for a
meeting like this, and that somehow the Federal Government gets
the benefit of having the meeting in the United States in some
city without footing a very significant part of the bill is
going to be unacceptable to any city in these United States if
they anticipate anything close to what happened at the Seattle
meeting.
The biggest problem was that the business community went
out and started trying to solicit money from their conferrers
around the country, and of course when you offer the
opportunity to contribute people wonder what they are getting
for contributing. Some people saw the attendance at meetings
and other things as selling influence, and such an uproar
developed over that that they could not raise money. That was
one of the big problems--raising money.
The second thing that happened was we put in a specific
appropriation into the State Department for security and other
things, much of which has not yet been released to Seattle.
I would like to hear your comments about the likelihood of
having another meeting that comes to the United States in this
way. And I say that because I was in Germany in January and the
German bankers said to us if there was a meeting in Europe we
would have had the same thing that you had in Seattle, so don't
feel bad because we would have had 100,000 people there about
beef hormones, genetically modified, and so forth. And it was
just our chance to be in the sun. It turned out the sun was a
little hotter than we had anticipated.
But I would like to hear your thoughts about how you have a
meeting like this and have it successfully carried off.
Ambassador Barshefsky. Well, I think you raise an issue
that I would probably have to give quite a bit of thought to.
Certainly, the protocol, if you will, used for the Seattle
meeting was followed by the U.S. Government in meetings of this
sort over many, many years, where you have a host organization,
you have some funding by the Federal Government, some funding
by the State or city, and so on and so forth. And you may be
right that that whole model needs to be reviewed in light of
what happened in Seattle.
I know that the city is now in discussions with the State
Department on the question of certain funds. We are not a party
to those negotiations but I do know that they are going on at
the present time.
I think you certainly raise a critical issue and I think
that this is an issue in general the administration ought to
look at because it may be that the way in which these
conferences have been put together in the past simply will not
suffice for the future.
Mr. McDermott. The question really is, if you were to say
let's have another meeting of the World Trade Organization in
the United States in the next 2 years, what city would put
their name up there wanting it? And on what basis would they
want it?
Ambassador Barshefsky. Right.
Mr. McDermott. I think it is the old Machiavellian business
of hang somebody in the square and everybody walks by and says
``Thank God it isn't me.'' But the next time you have a meeting
you are going to run into, I think, some real serious problems
around this whole issue.
May I just ask one other question, and that is I understand
the President put $25 million additional money in his budget to
monitor and enforce trade agreements. Tell me how you
anticipate using that money.
Ambassador Barshefsky. Much of that money is contemplated
being divided among USDA, USTR, and some other agencies,
although I think our portion of that will be relatively small.
I think a good part of the funding will go out to Commerce
Department field office which can be extremely helpful on
enforcement issues but do not at this point have the capability
at the local levels at which they operate, do not have the
resources to be of as much help as they could be. These are
people who are on the ground whether in relevant cities or
overseas that can really help us on enforcement issues.
So, much of the funding is directed toward that, some
toward USDA enforcement, some toward USTR enforcement since we
do all of the litigation on WTO dispute settlement as well as
much of the monitoring of the trade agreements, as well as some
other agencies. I would be happy to get a dollar breakdown of
that if you would like, if that would be helpful to you.
Mr. McDermott. I ask that question really because it
strikes me that there was a good deal of I guess surprise
around here about what happened in steel. It is hard for me not
to think that we could have had the capability of knowing that
was happening long before the wave got to the level that it did
to require us to be out here passing resolutions on the floor.
Ambassador Barshefsky. I think steel was an issue that
also, to some extent, took the American producers by surprise.
That is, I think they did not anticipate this crushing wave of
imports from Japan, Russia, Korea, and elsewhere as came in so
rapidly, so very rapidly, and certainly the U.S. Government did
not anticipate it. I confess to that fully. I do not think
there was anyone who fully appreciated what was headed toward
the United States in such a concentrated period of time toward
the end of 1997 and through 1998.
I think if we had more folks on the ground, it may well be,
and you are right, it may well be that this would have been
known more in advance and perhaps there would have been some
preventative action or precautionary action that could have
been taken; at a minimum, being able to engage our trading
partners who were sending us this stuff at a much earlier point
in time than we actually did. And that would have been very
much to the U.S. advantage to have had those resources in place
at the time to be able to handle an issue before it became so
huge and so destructive of U.S. steel producers here that we
really had quite a job on our hands.
Mr. Levin. Would the gentleman yield for ten seconds?
Mr. McDermott. Surely.
Mr. Levin. I very much favor the added enforcement effort.
But in the steel case there actually were warnings quite a few
months before. I think we also need to take a look at section
201 because it has certain barriers to prompt action, even when
the data are very clear.
Mr. McDermott. Thank you, Mr. Chairman, for your
indulgence.
Chairman Crane. One thing in response to a question that
you raised about what city would want to serve as host next
time. I have heard that since you have gotten through your
practice game out there in Seattle that you are ready now for
the real affair, that you are number one.
Mr. McDermott. I heard Chicago had practice.
Chairman Crane. Chicago remembers 1968 still. We have got a
long memory.
Congressman Camp I think would like to ask a question.
Mr. Camp. Thank you, Mr. Chairman.
Ambassador Barshefsky, I just want to shift gears and make
a brief statement, and I realize this is not directly on WTO
and Seattle, regarding NAFTA and our trade policies with
Mexico, particularly with regard to the dry bean industry and
the problems we had last year with the permitting process, and
the lack of announcement by the Mexican Government for the 1999
auction period and the devastating effect that had on markets.
The uncertainty that the Mexican Government created caused our
markets to plunge. And second, the cost of the permits
themselves. Since the implementation of NAFTA the imports of
dry beans to Mexico have been subject to many changes in the
auction rate. I would just at some point like you to comment on
what the administration is doing to ensure that Mexico changes
that permit system. I realize that this is not something that
you are prepared to testify about today.
But regarding today's testimony, we are about 2 weeks away
from a ruling on WTO regarding the FSC issue. I wondered what
the administration's strategy was for dealing with the EU on
this issue should the findings of the appellate body go against
us, and particularly what steps the administration has taken to
ensure that the United States and our employers are not put at
a competitive disadvantage regarding the European competition
with regard to tax treatment of Foreign Source Income and
especially with regard to export transactions.
Ambassador Barshefsky. If I could respond in the case of
dry beans, we are working with the Mexican Government to fix
it. You are quite right, what they did on the permitting
process in terms of the auction period was very disruptive. The
cost of the permits is an additional problem. I am happy to
provide you with more detail on that.
Mr. Camp. Thank you.
Ambassador Barshefsky. On the question of FSC, as you know,
this case is in litigation. We did not prevail at the panel
stage. But the case is on appeal. Oral argument was held, I
guess, about 2 weeks ago or so. The appellate body should issue
a decision sometime. I would say at the end of this month or
early March. But because the appellate body is actively
considering the panel report, which we believe to be
substantively and factually incorrect and unsupportable, I do
not think it is appropriate for me to comment further on U.S.
plans. Our plan is to do everything we can to get the panel
report overturned.
Chairman Crane. And now our co-host to the exciting Seattle
ministerial, Ms. Jennifer Dunn.
Ms. Dunn. Oh, heck, I will give all the credit to Mr.
McDermott. [Laughter.]
It is good to see you, Ambassador, still in one piece. We
are sorry we didn't give you a better welcome in Seattle.
Ambassador Barshefsky. That is a great city.
Ms. Dunn. Yes, it is. I would like to see it glow once
again, not with the fires that we saw while we were there but
with the natural beauty that our lovely city does show off most
of the time.
I wanted to add my interest to that of Mr. Camp and Mr.
Houghton on the FSC situation. I think in the long run it is in
our best interest to be looking for a settlement with the
European Union. I am very concerned about what is going to
happen otherwise. I do not want to see trade wars breaking out
or anything like that. So I hope that you and the rest of the
folks on the negotiating team are proactively working with the
European Union on the FSC issue. That is just a statement not a
question.
I am concerned about some of the things I am beginning to
hear. We have always realized that on the NTR vote, the
permanent NTR vote with China that we would be able to move
into that as soon as the other bilaterals are completed. Now we
are beginning to hear some of the advocacy groups say that it
is not necessary for us to enjoy the relationship with China
under the WTO for us to have a vote on permanent NTR. You
mentioned this in your opening statement.
Ambassador Barshefsky. The view of the administration
obviously is that the benefits of the agreement we negotiated
will be put at risk if Congress does not pass permanent NTR for
China. That is to say there is a substantial risk that our
bilateral agreement will have opened up the Chinese economy to
the rest of the world but not for us, which would be a
remarkable irony, indeed. And that risk comes about to the
extent Congress does not pass permanent NTR.
So, as you know, the administration, the President are very
committed to achieving permanent NTR for China this year at
such point as the contours of the final package become known.
That is to say there are other countries that need to close out
bilaterally with China, most notably the European Union, but
there are others beyond the European Union. In addition, there
will be an additional rules negotiation in Geneva which will
also have to be completed or largely completed so that the
final contours of the entire WTO accession for China will be
fully known. And at that point, of course, the administration
would want to proceed to a very rapid vote.
Ms. Dunn. Do you have any sense now of the timing of all of
that?
Ambassador Barshefsky. It is a little hard to gage, but I
do think we are hopeful for a vote in spring.
Ms. Dunn. Good. And I was delighted to hear the President's
speech in Davos. I think it was a good speech and his effort to
put his shoulder to the wheel on that permanent NTR vote is
very welcome by those of us who have been working to make this
happen.
Ambassador Barshefsky. If I might say, I think that the
timing on NTR is a little bit uncertain because, of course, it
depends on how quickly our trading partners move. That is
obviously an area over which we have very little control. But I
think we do hope to see that process proceed apace. And if it
does, then a vote sometime in the spring or late spring should
be doable.
Ms. Dunn. Good. That is good. That is very hopeful.
Let me ask you a question on TRIPS. You mentioned that you
believe sticking to these agreements is crucial to upholding
the lines that we lay down under the Uruguay round. Could you
bring us up to date on what is happening with TRIPS. How are
the WTO countries doing on compliance? Are the least developed
countries still pressing for an extension of the deadline? Are
you planning to bring action against any country that does not
meet the deadline? What is happening on TRIPS?
Ambassador Barshefsky. Well, in December of last year I
ordered my staff to undertake a review of compliance by all of
the developing countries; that is, by any country whose
transition expires January 1, 2000. That review is underway now
so I do not want to talk about any one particular case.
But by and large, we see, generally speaking, either
compliance with the requirements or countries having put
themselves in a position to comply, or countries that are
desperately trying to comply but need some additional technical
assistance, and we are pleased to work with them on that, and
we have seen some, but relatively few, countries that simply
appear to have no intention whatever to comply. Those are
obviously the ones on which I think we need to focus first
because these are countries for whom issues of technical
assistance are not pertinent but who simply regret the
commitment they made in the Uruguay round and do not intend to
comply. That I think then merits a fairly strong response by
the United States.
For those countries that have tried to comply, that need a
little more technical assistance, a little more help, sometimes
able to be provided, frankly, by our industry, those countries
obviously we want to work with. The object is not litigation,
it is compliance. If we can work out a timely compliance plan,
which we do for many, many countries including developed
countries around the world, that probably brings us to where we
will want to be over the coming months.
And then, of course, for those countries that have
undertaken very substantial and successful efforts to ready
themselves for compliance, we see very good efforts having been
made and we feel fairly comfortable about that group that
compliance problems will not be a particular issue.
Ms. Dunn. Thank you very much, Madam Ambassador.
Mr. Chairman, I think it might be very useful to us, since
the report of the bilateral agreement between the United States
and China is classified, that we could have an executive
session with the Ambassador maybe even between now and our
hearing next week.
Chairman Crane. I agree with you. I think it would be very
valuable. We will try and work on it.
Ambassador Barshefsky. I would be delighted.
Chairman Crane. Mr. Nussle.
Mr. Nussle. Thank you, Mr. Chairman.
Madam Ambassador, can you tell us how many products have
been held up in the European Union approval process for
political reasons or, in other words, because products that
have passed scientific reviews have failed to gain approval
from the EU Council. Can you tell us about how many products
there are currently?
Ambassador Barshefsky. I cannot give you the number except
to say that the EU has not approved a GMO variety since April
1998.
Mr. Nussle. And this is after it has passed scientific
review?
Ambassador Barshefsky. Yes. In other words, the issue in
Europe has never been scientific review of those products for
which GMO approval has been requested, whether corn varieties,
or additional soybean varieties, some other more specialized
varieties that are on tap now. The issue has never been
scientific review because European scientists are generally in
accord with our scientists that these foods provide no health
risk. The issue has been a political issue in Europe.
Mr. Nussle. Could you give us a brief description on your
strategy, the administration strategy for dealing with this
approval problem before the coming planting season.
Ambassador Barshefsky. We have for a number of months now
engaged the Europeans on this. President Clinton and President
Proti have agreed to set up a high level group on the issue of
product approvals, that group having met once already, with the
hope that the EU can get its approval process back on track and
functioning so that we can have greater assurance for our
farmers that the EU process will in fact approve the varieties
that have passed scientific scrutiny.
Mr. Nussle. Will those assurances be ready before the
planting season?
Ambassador Barshefsky. We are pushing very, very hard at
this juncture. The EU is aware of the concern about the
planting season and the disruptive impact that their failed
approval process has had on U.S. farmers. We will continue to
push them very, very hard both in the context of this high
level group as well as in the context of an additional biotech
working group that we have.
We also have in the U.S. an interagency process that
involves all of our relevant agencies including the science-
based agencies, for example, FDA, as a means further to make
sure the U.S. Government approach and position is well
coordinated on these issues. So we are pushing very, very hard,
particularly on the varieties that are pending now for
clearance by the EU.
Mr. Nussle. If that cannot be accomplished in the next few
months, is a WTO case being contemplated?
Ambassador Barshefsky. We will look at all of our options.
The issue here is access on the basis of sound science and
approvals on the basis of sound science. We believe that test
has been met, European scientists believe that test has been
met. The U.K. just issued a report, as you may know, in the
case of beef hormones, for example, but also with respect to
GMOs. The science is not an issue here. This is political. And
so we will undertake a full review of all of our options and
hopefully choose that option that will be most effective to get
this process back on track.
Mr. Nussle. I will tell you, and I will let the farm
organizations speak for themselves because they obviously
represent a diverse number of farmers and producers across the
country, I will just speak for the folks that I have spoken to
in my district, if this cannot be resolved, this is big.
Ambassador Barshefsky. Yes, I understand that.
Mr. Nussle. No, I want you to understand even more than
what you may understand. And that is that this is going to
erode, totally and completely erode, in my very humble opinion
from one district in Iowa, the agricultural support that we
need in order to maintain the support in Congress and across
this country for fair trade and free trade in this world. I do
not know how I can say it any stronger than I have just said
it. And if a resolution on this matter cannot be achieved prior
to planting, we are in trouble. We were just talking about the
President on NTR with China. I mean, Katie bar the door when it
comes to trade legislation if in fact there is erosion on the
part of agriculture. And it won't just be the guys in the ties
that represent the organizations here in Washington. It is
going to be the guys on the combines that are going to be
making that decision. And right now their support is a mile
wide and an inch deep. It is not very strong.
Finally, I would just give you the opportunity to respond
to an accusation made here today by a very senior Democrat in
the House of Representatives basically accusing you and the
administration of pursuing the Chiquita banana case in the WTO
because of an exchange of campaign contributions. If it had
been made by a protester at the WTO, I would have maybe taken
it a little bit differently than I would if it were a senior
policymaker in this House of Representatives. The fact that it
is from the Party that the administration represents is even
more surprising. But it was a very direct and appeared to be
somewhat factual accusation. I would just give you the
opportunity to respond.
Ambassador Barshefsky. I do not know what the accusation
was, but I will tell you----
Mr. Nussle. Well, the accusation was we are pursuing the
Chiquita banana case because the administration took campaign
contributions, period.
Ambassador Barshefsky. The Chiquita banana case arises from
a 301 petition filed by Chiquita, supported by Dole and the
Hawaiian banana growers. We take 90 percent of the 301
petitions filed. That is to say we turn away very few and only
on the basis that the petitions did not meet the requirements
of the statute or of the regulations, or that the petition
itself was so ill-conceived it would surely lead to a loss at
the end of the day and we give people an opportunity to
withdraw their petitions when they realize that the petitions
are completely inadequate for whatever reason. But other than
that, USTR's history is we take about 90 percent, a little over
90 percent of all of the petitions filed.
Chiquita's petition was in good shape. It followed on two
refusals by Europe to comply with two previous panel rulings
which found their regime illegal under international standards.
Now if we are not taking that case, what case is it that we are
taking?
So this is a substantive issue, as the panel recognized in
the appellate body where we won again two more times. How many
times do we have to win this case again and again and again? As
the appellate body found, the European Union's policies were
discriminatory, they violated Europe's WTO obligations, they
violated international norms. And that is certainly proof
positive that this was a case fought on the basis of the
merits, and obviously the panels, now all four of them, decided
on the basis of the merits.
Mr. Nussle. Thank you. That was a very good response. I
appreciate that. I wanted to give you that opportunity because
I have heard you give that response before and I happen to
agree with it. I am not aware of what campaign contributions
she may be speaking of, but I will take that for whatever it is
worth.
Finally, I would just suggest that this may be indicative
of what we are up against. That the opponents of trade will use
both legitimate and illegitimate ways to try and forward their
case. But I will suggest that there are some legitimate
concerns, as you have outlined them today. And I only wanted to
make you aware of the concerns of my constituents in Iowa about
agriculture, in particular, the foods enhanced through
biotechnology, and I appreciate your response.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman.
Ambassador, it is a pleasure to have you here. Thank you
for being so patient in answering all the questions. Before I
ask any questions, I would like to just say that I appreciate
your response that was made to some of the comments made by my
colleague Mr. Levin earlier with regard to core labor standards
and the environmental issues that you confront. I, too, believe
that there is a way to try to resolve this if people talk, and
I think you made a very valid point about using the right
language. Sometimes we do send messages that hurt more than
help. And I think the developing countries in a sense do have
some claim for concern, but ultimately I think we all want to
do the right thing and they understand that as well, that we
are not trying to impose on them some type of condition that
makes it difficult for them to compete.
Let me ask you a little bit about FSC. I know you said the
case is pending, you expect to hear fairly soon what the
appellate body will rule, how it will rule. And to the degree
that you can comment, because I know you said you were
restricted in what you can say, give us a sense if the
appellate body of WTO does rule erroneously, as I believe you
are correct that it was an erroneous decision, if they uphold
that erroneous decision. If, in fact, that is the case, and if,
indeed, you are not able to resolve this through some type of
settlement with the EU anytime between now and then, what is in
the offing? Won't this lead to a general deterioration of our
trade relations with the EU, and won't this make Congress
somewhat suspicious of the WTO and how we proceed forward with
it? I have a difficult time seeing how something as big and as
important as FSC is to us can be allowed to just fester.
Ambassador Barshefsky. Let me say as a general matter that
because the appellate body is considering the case now, I am
very reluctant to suppose or assume, even hypothetically so,
that we might lose. We should win this case. That does not
necessarily mean we will or we won't, but we should win the
case on the basis that we believe firmly that the panel below
erred both substantively and with respect to the background and
facts of the case. So let me just start by saying that.
Certainly, we have engaged the European Union on this case,
we have from the beginning, because it is a large and important
case. We take the view that the U.S. must comply with panel
rulings. We have done so in all cases, even those that are
politically sensitive. But recognizing how large this case is,
we engaged the EU early on it by way of general discussion and
we have continued to do that really all through the pendency of
the action.
I think certainly Europe is waiting for the appellate body
ruling in the hopes that the panel will be affirmed. We are
waiting for the appellate body ruling in the hope that the
panel below will be reversed. And that is really the current
status right now.
Mr. Becerra. I see the temperature rising on bananas, on
beef----
Ambassador Barshefsky. Oh, this would dwarf that, there is
no question about it.
Mr. Becerra. Yes, it would. And for that reason, it would
put us at an even more disadvantage competitively to some of
our European counterparts in the corporate community. And if
something is not done quickly, (1) I think you are going to see
a deterioration of support for the WTO in Congress, and (2) I
think you are going to find that it is going to be very
difficult to deal in the future with the European Union.
Is there something that you can tell us that leads you to
believe that the Europeans are going to try to help us resolve
this, given that in fact they must have accepted it back when
in 1981-82 the changes were made that gave us FSC and it seemed
that for the longest time they were accepting of it. Now I
guess maybe because they lost in bananas and beef they are
saying we will give you one back.
Ambassador Barshefsky. Certainly I think Europe needs to be
cautious because, depending on the ruling and the range of the
ruling, many of Europe's own tax programs will be directly at
risk. I do not think Europe necessarily thought this throughout
as carefully as they should have before this action was
brought.
In addition, as you know, FSC arose from a settlement of
the DSC dispute, a settlement which existed for 15 years. And
so Europe having brought this action, we felt it was largely
not just unexpected but that one had to question the motives
and whether this was an attempt to try and balance the
litigation scorecard. I obviously have no way of knowing. And,
of course, there are many European companies that benefit
directly from the FSC as well.
Mr. Becerra. It almost seems an abrogation of the agreement
we had when we went from DSC to FSC because they were a party
to that.
Ambassador Barshefsky. Yes. Certainly part of the
argumentation before the panel in the appellate body is that
this was a settlement entered into and essentially brought into
the Uruguay round, and that as a settlement of a prior dispute
agreed to by the parties to that dispute FSC does not
constitute a subsidy that is prohibited under the rules or any
other action that would be proscribed by WTO rules. And that is
certainly one of the basic arguments that we made to the panel
and that we have reaffirmed with the appellate body.
And as I said, we will continue to talk to the Europeans on
this issue. As you may know, following a dispute settlement
case, the party that loses, which could be Europe in this case
or the U.S., does have time within which to think about it. In
the case of a losing party, one has a number of months in which
to consider options related to compliance or settlement or some
other means. And so this will not be a decision that comes into
effect immediately in any event. But as I said, we are very
focused on doing everything we can to see that the panel ruling
below is overturned, as we believe it should be.
Mr. Becerra. We urge a very vigorous defense and certainly
a vigorous----
Ambassador Barshefsky. Extremely vigorous defense, yes.
Mr. Becerra [continuing]. And a vigorous search for any
solution outside of that as well, because I think all of us are
concerned about where this may lead. Thank you, Ambassador.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
Mr. English.
Mr. English. Thank you, Mr. Chairman. And Mr. Chairman, I
want to thank you for the opportunity to participate in today's
hearing.
Welcome, Ambassador. I want to congratulate you as a
participant in Seattle on what the Chairman felicitously
referred to as the U.S. inflexibility on antidumping
negotiations. I believe that our delegation took the right
position. I believe that strong antidumping laws are essential
to police our market in a way that allows Americans to support
open trading laws. I believe this has been a settled issue
negotiated and with concessions in the past in the WTO, and I
want to congratulate you for resisting the drive by some of our
trading partners, particularly the Japanese, to use this
negotiation to weaken our trading laws.
I was privy to a recent meeting which included Commissioner
Lemee, and in that meeting the argument was advanced that
reopening the antidumping code was necessary as a concession to
the developing countries to get them to play in the WTO
negotiations. It has been my impression that the narrow
disciplined agenda that we put forward in Seattle included many
things that were attractive to the developing world. Would you
care to comment on whether reopening the antidumping code is
really necessary to get those countries to join us?
Ambassador Barshefsky. I think for most developing
countries the issue is not U.S. antidumping law, the issue is
agricultural market opening where many of these countries
believe they have or can achieve comparative advantage in
agricultural production but cannot possibly compete globally
with heavy EU export subsidies on the very products they wish
to grow or have grown but then cannot sell in world markets.
This is the issue for most developing countries and most rank
that as by far and away their top priority, absolutely their
top priority.
Certainly, on the question of dumping, we have some
concerns and we do need to find a means of dialog with the way
in which dumping laws are being handled in many other countries
which do not have the procedural requirements we have or due
process requirements. But the notion that we would in any way
undertake any action that could weaken our trade laws I think
is well understood around the world to be completely
impossible, particularly as one looks at the relative openness
of this market and the fact that, as the WTO concluded, we take
in about 22 percent of the world's goods. Europe, which is 15
countries, takes in about 19 or 20 percent. Japan takes in 6
percent.
The Japanese of course have focused on this issue and have
demanded in the past a very extensive negotiation on dumping,
largely we believe at the behest of their steel industry. I
would suggest to Japan that restructuring their steel industry
might be more in order than claiming that U.S. trade laws has
in any way created a real problem for their industrial base.
Mr. English. And my understanding is the implementation of
the WTO antidumping code still allows us to have discussions
with some of our trading partners that might lead to some
refinements. In other words, don't we still have some wiggle
room on that point?
Ambassador Barshefsky. Yes, certainly. And certainly we
want that kind of room. There are concerns on the part of some
countries with respect to our implementation. We have to be
willing to discuss that and address it. We have a range of
concerns with respect to other country implementation and we
would hope they would listen to our concerns and attempt to
address those concerns. So in that regard, certainly a give and
take can proceed, hopefully very productively so.
We have made clear to our trading partners that we would
not only be amendable to, but, indeed, would be very interested
in such a give and take because there are an array of
implementation problems we have faced. And in that spirit, we
need also to take a look at implementation problems called to
our attention.
Mr. English. Thank you, Ambassador.
Thank you, Mr. Chairman.
Chairman Crane. Thank you.
Mr. Watkins.
Mr. Watkins. Thank you, Mr. Chairman.
Madam Ambassador----
Ambassador Barshefsky. Let me first of all say----
[Brief sound system malfunction.]
Mr. Watkins. I appreciate that. I want to say that we need
to move rapidly, because I know this priority resolution is
going to be coming to the Floor.
Ambassador Barshefsky. Yes.
Mr. Watkins. And a lot of my people feel like that a lot of
foreign countries are being treated a lot better than they are,
especially a lot of my cattle people. And I want you to know
I'm, I want to invite you to come to Oklahoma one of these
days. I think you might make a favorable impression on some of
them that you are really working out there to try to do
something about this unfairness and this unfair trade barrier
there.
Mr. Chairman, I appreciate the time, and your allowing me
to be here and express this on behalf of all my constituents.
Chairman Crane. Well, thank you, Madam Ambassador. And one
quick question before you leave.
The Interagency Council, when do you anticipate it will
have completed its work?
Ambassador Barshefsky. I don't want to put a date on it.
I've just told my people that their instruction in this meeting
is to get this process moving quickly and to come back to me in
a rapid manner with specific recommendations.
Chairman Crane. All right. Well, we thank you always for
your participation and we look forward later in the week to
participating further with you.
Ambassador Barshefsky. Good. Thank you. Thanks so much, Mr.
Chairman.
[Questions, and their respective answers, submitted by
Representative Dunn for Ambassador Barshefsky follow:]
Questions Submitted for the record by Congresswoman Jennifer Dunn for
Ambassador Charlene Barshefsky
Background:
Since a separate WTO Working Party was formed in 1992 to
review Taiwan's accession, there has been an understanding that
Taiwan may accede to the WTO, but only after China's accession.
Taiwan believes that they should be judged on the merits of
their case for WTO membership, independent of other factors.
Taiwan is our seventh largest trading partner and purchases
twice as many goods from the U.S. than China right now.
Clearly, their accession will be good for the U.S. and the rest
of the world community.
Question for Barshefsky: I have used the term ``simultaneous
accession'' of China and Taiwan, which has drawn opposition from
China's Foreign Ministry. What I mean by that is the WTO General
Council should consider Taiwan's accession immediately following the
consideration of China's accession during the same day's business. Will
the Clinton Administration push for such a timetable ?
Answer:
We have worked intensively with both Taiwan and China to
achieve membership in the World Trade Organization (WTO) on
strong commercial terms. This objective has driven the timing
of our work in both accession negotiations. The United States
has completed all of its negotiations with Taiwan for it to
accede to the WTO. Other countries have also resolved their
substantive issues with Taiwan. Some technical issues need to
be resolved and final verification and approval of Taiwan's
accession package remain to be done. While China's accession
negotiations are not yet completed, China has recently reached
bilateral agreements with most members of the Working Party. We
are prepared to work intensively with China and other WTO
Members to conclude the accession negotiations as quickly as
possible. We anticipate that when the Working Parties on Taiwan
and China's accession reach a consensus on their respective
accession packages, the WTO General Council will approve both
accession packages and invite them to become WTO members at the
same meeting of the General Council. China has consistently
stated that it has no objection to Taiwan's membership in the
WTO and no intention to block its accession. Their primary
concern is that China be admitted first. This is not a problem
for Taiwan and can be accommodated by the procedure set forth
above. Our objective is to have both of these important trading
powers in the WTO and we do not believe that delaying either
accession advances that objective.
Background:
APEC has been pursuing a trade initiative known as Accelerated
Tariff Liberalization, or ATL. This initiative identifies eight sectors
for tariff liberalization and, since it involves wood and paper
products, is very important to the Pacific Northwest. Last year, APEC
was unable to reach a final conclusion on ATL since Japan was unwilling
to liberalize on another of the ATL's sectors: fish products. The final
solution was a joint statement by all APEC nations that the ATL
negotiations would be pursued in the next trade round.
Question for Barshefsky: Both the U.S. government and many U.S.
companies have invested significant time and resources in pursuing the
ATL initiative. Can you briefly describe the negotiations in Seattle
with respect to ATL? What is being done to ensure that these
negotiations continue to move forward?
Answer:
We are very appreciative of all the efforts made by U.S.
industry to push the ATL initiative, initially with our APEC
partners and in Europe last year. As a result of these efforts,
it is evident that EU industry is quite interested in the ATL
and recognizes the benefits of liberalization in these sectors.
In the WTO preparatory process last year and at Seattle, we
worked very closely with a number of our colleagues, including
colleagues from APEC, Canada, New Zealand, Australia, Singapore
and Hong Kong, to make early provisional implementation of the
ATL initiative a part of more general market access
negotiations on non-agricultural products as part of a new
Round. The European Commission held the view that sectoral
liberalization initiatives could only take place in the context
of broader WTO market access negotiations, and expressed
concerns (undefined) about the ATL coverage.
We are continuing to consult closely with our private
sector, and the ATL Coalition in particular, on next steps for
ATL products and launching broader market access negotiations
as part of a new Round. We have issued a Federal Register
notice to obtain private sector views on broader market access
negotiations in the WTO. Finally, we are continuing to press
forward with the APEC non-tariff work programs in the ATL
sectors as a way of maintaining APEC interest in the ATL
sectors. This non-tariff work in APEC will help us to prepare
for the broader non-tariff measures negotiations that will be
part of the WTO market access negotiations.
Chairman Crane. You're more than welcome.
And now I want to invite Susan Westin, the Associate
Director of the International Relations and Trade, U.S. General
Accounting Office, to come to the witness stand.
Welcome, Ms. Westin. Your printed remarks, if your oral
testimony exceeds roughly 5 minutes, will be made a part of the
permanent record. So you may proceed when ready.
STATEMENT OF SUSAN S. WESTIN, ASSOCIATE DIRECTOR, INTERNATIONAL
RELATIONS AND TRADE ISSUES, NATIONAL SECURITY AND INTERNATIONAL
AFFAIRS DIVISION, U.S. GENERAL ACCOUNTING OFFICE; ACCOMPANIED
BY BETH SIROIS, ASSISTANT DIRECTOR, AND NINA PFEIFFER, SENIOR
EVALUATOR
Ms. Westin. Mr. Chairman, Members of the Subcommittee, we
are pleased to be here this afternoon to provide some
observations about the WTO Ministerial Conference in Seattle.
In my remarks, I will summarize what happened, why it happened
and what lessons we can draw from the experience.
With me this afternoon are two of my colleagues, Beth
Sirois and Nina Pfeiffer. In addition to attending the
Ministerial, we have had discussions with U.S. and foreign
government officials and other WTO experts. The main message of
my testimony is that significant differences among WTO member
countries on several issues led to the failure of the
Ministerial to launch a new round of multilateral trade
negotiations. Notwithstanding the outcome, there are several
lessons to be learned from the Seattle experience.
Let me speak first to what happened. After 4 days of
intensive talks, the Ministerial was suspended without agreeing
on a round, and without issuing a ministerial declaration or
any other formal documentation of its deliberations. As a
result, the status of the Ministerial remains unclear.
Although negotiations to further liberalize trade in
agriculture and services are scheduled to begin this year, and
in fact, the announcement just came out that it looks more
positive they're going to start right away, progress may be
slow because the agenda lacks a deadline for completion.
As to why it happened, we concluded that there were two
major reasons. First, the difference on important issues, both
among the major trading countries and between developed and
developing nations, were too large to be resolved in Seattle.
For example, the United States wanted to pursue a narrow agenda
in the new round, focusing on market access issues, while the
European Union proposed including investment, competition
policy and other issues in a broad framework for negotiations.
In addition, there were differences on very sensitive issues,
such as agricultural export subsidies.
Developing countries also had concerns about the scope of
the negotiations and several sensitive issues. For example,
they sought more time to implement their Uruguay round
commitments. In addition, they feared that addressing labor
standards under the WTO was a veiled form of protectionism
aimed at undermining one of the few competitive advantages they
enjoy as low-wage producers. According to some officials from
developing countries, the U.S. insistence on resurfacing the
labor in Seattle and the President's remarks potentially
linking labor standards to trade sanctions were
counterproductive.
The second major reason leading to the failure to launch a
new round was the number of challenges faced by the
negotiators, both in Seattle and in preparations leading to
Seattle. In particular, efforts to balance efficiency with
allowing the maximum participation of all WTO members and
negotiations presented a challenge to reaching consensus. In an
effort to include all WTO members, the Ministerial co-chairs
set up five large working groups on the major issues. The
working groups were to provide draft text on their issues to be
brought together into a Ministerial declaration at the end of
the conference.
After 2 days of working group meetings, it was clear that
the process was not moving toward consensus, and the
traditional green room process began on Friday. By then, there
wasn't enough time to work sequentially through the unresolved
issues.
We identified several factors that contributed to the
challenges faced by the negotiators in Seattle. One major
factor was the inherent weakness of the draft text used as the
basis for negotiations. When WTO ministers arrived in Seattle,
the draft declaration officially on the table was 32 pages long
and contained nearly 400 bracketed items indicating
disagreement among members. As one WTO official noted to us,
negotiators had to build down, or remove text, to reach a
consensus document. This is more difficult to do than building
up, or negotiating to add desired language.
A number of officials with whom we spoke said that hosting
the Seattle Ministerial posed procedural challenges for the
United States, as it is difficult to serve as both host and key
participant. This job was made harder by the newness of the WTO
team. The WTO Director General took office in September, and
his principal deputies were named less than a month before the
Ministerial.
Finally, there are several lessons that could be learned
from the experience in Seattle. One, efforts to launch a new
round may have been premature. Many countries, due to political
or other reasons, may not have been ready to launch a new
round. Two, ministerial conferences are more likely to succeed
if they address only a handful of politically difficult
decisions, having reached consensus on most issues in advance.
Three, the WTO needs to find ways to address the institutional
challenges posed by increases in the number of and diversity of
its members. And four, holding high profile WTO meetings in
countries that are major trading partners, such as the United
States, or the EU, may present difficulties.
Mr. Chairman, this concludes my prepared remarks. We will
be happy to respond to any questions you may have or, given
time considerations, we are willing to respond to any written
questions from you or Members of the Subcommittee.
[The prepared statement follows:]
Statement of Susan S. Westin, Associate Director, International
Relations and Trade Issues, National Security and International Affairs
Division, U.S. General Accounting Office; accompanied by Beth Sirois,
Assistant Director, and Nina Pfeiffer, Senior Evaluator
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to provide some observations
about the World Trade Organization's ministerial conference in
Seattle that took place in December 1999. Specifically, my
testimony will address (1) the outcome of the ministerial
conference, (2) the factors contributing to the outcome, and
(3) the lessons learned from the meeting.
My observations are based on our past and ongoing work; our
review of World Trade Organization and executive branch
documents; related literature; discussions with experts on the
World Trade Organization and international trade; and U.S.
government, World Trade Organization, and foreign government
officials from 14 countries. In addition, I along with members
of my staff attended the Seattle ministerial conference.
The ministerial conference, composed of the trade ministers
of all the WTO member countries, is the highest decision making
body in the WTO and is required to meet at least every 2 years.
Ministerial conferences are intended to evaluate current trade
agreements and set the agenda for future work with a
ministerial declaration that identifies issues for negotiation
and specifies how negotiations should proceed.
The Seattle ministerial conference was to be particularly
significant because it was expected to launch a major new round
of negotiations and it was hosted and chaired by the United
States for the first time. The core of the new round was to be
negotiations on agriculture and services (such as
telecommunications); these negotiations, referred to as the
``built-in agenda,'' were already mandated to begin on January
1, 2000. Ministers intended to decide on what other trade
issues, if any, to include in the agenda for a new round. They
also expected to review the implementation of past agreements
and to address calls from nongovernmental organizations and
some WTO members to improve the WTO's openness. In addition,
they were to develop a plan to assist least developed countries
in several ways, such as providing technical assistance to help
them meet their trade obligations.
Summary
WTO member countries failed to meet their goal of launching
a new round of multilateral trade negotiations at their
biennial ministerial conference last December in Seattle. The
conference was suspended without initiating a new round or
issuing a ministerial declaration. No one factor, but a
combination of circumstances, led to the impasse. However, two
themes emerged. First, there was lack of agreement on many
issues both among major trading partners and between developed
and many developing countries on the eve of the ministerial
conference. Disagreement centered on the scope of the round and
stemmed from the sensitivity and complexity of the issues being
addressed. Second, the Seattle negotiation process had inherent
difficulties. For example, the document used as the basis for
negotiations was a poor starting point for reaching consensus.
It was a lengthy amalgamation of countries' divergent positions
rather than a text reflecting members' common objectives. In
addition, the negotiating process was hampered by the newness
of the WTO leadership team. Further, the process was made
difficult by the challenge of accommodating the needs and
interests of a large and increasingly diverse WTO membership.
Several lessons can be learned:
Efforts to a launch a new round may have been
premature.
Ministerial conferences are more likely to succeed
if they address only a handful of politically difficult
decisions, having reached consensus on most issues in advance.
The WTO needs to find ways to address the
institutional challenges posed by increases in the number and
diversity of its members.
Holding high profile WTO meetings in countries
that are major trading partners, such as the United States and
the EU, may present difficulties.
Background
The World Trade Organization (WTO) was established on
January 1, 1995, as a result of the Uruguay Round of
international trade negotiations. The WTO provides the
institutional framework for the multilateral trading system. It
administers rules for international trade, provides a mechanism
for settling disputes, and provides a forum for conducting
trade negotiations. The WTO succeeded the General Agreement on
Tariffs and Trade (GATT), which had provided the institutional
framework for world commerce since 1948. The 1994 Uruguay Round
agreements brought agriculture, services, intellectual property
rights, trade-related investment measures, and textiles and
apparel under the discipline of multilateral trade rules for
the first time and established a stronger dispute settlement
process. Two of these agreements also mandated a ``built-in
agenda'' for further negotiations on agriculture and services
to commence January 1, 2000.
Membership in the WTO has grown to 135 members, up from
about 90 GATT members in September 1986, at the start of the
Uruguay Round. Not only has there been an increase in
membership, but also increased diversity in WTO members.
Roughly 80 percent of the current members are developing
countries, although some are at more advanced stages of
development than others and thus they do not all have the same
needs. According to WTO, virtually all of the 30 countries
currently applying for membership are also developing nations
or economies in transition. Unlike many other international
organizations where decisions are based on a majority of member
votes, decision-making in the WTO is largely based on consensus
among member governments.
There have been three ministerial conferences since the
creation of the WTO: one in Singapore in December 1996, one in
Geneva in May 1998, and the third in Seattle in December 1999.
The WTO General Council makes major decisions in the periods
between ministerial conferences. The Director General, chosen
by members, heads the WTO Secretariat that supports the
membership and the institution.
The 1996 Singapore ministerial conference reviewed the
implementation of the Uruguay Round agreements and considered
proposals for trade issues to be addressed in the future. The
ministers in Singapore reaffirmed their commitment to complete
the built-in agenda and also addressed several trade issues
that were previously outside the scope of detailed trade
negotiations. Among other things, they authorized the creation
of working groups to study transparency in government
procurement, investment and competition, and agreed to continue
ongoing analysis of trade and environment issues. The ministers
in Singapore rejected attempts led by the United States to
establish a working group on trade and labor, stating that this
issue was best handled by the International Labor Organization.
The Geneva ministerial conference coincided with the 50th
anniversary of the GATT. Ministers agreed to begin preparing an
agenda for further trade liberalization. Ministers also
accepted President Clinton's offer that the United States host
the next ministerial conference. Seattle was selected as the
host city in January 1999.
Seattle Ministerial did not Achieve its Objectives
The ministerial conference failed to achieve its goal of initiating
a new round of multilateral trade negotiations with a ministerial
declaration. After 4 days of intensive talks, the conference was
suspended on December 3 without agreeing on a round, or issuing a
ministerial declaration or any other formal documentation of its
deliberations. As a result of the inconclusive nature of the meeting,
the status of the ministerial conference remains unclear. For example,
members have not decided if and when the conference might reconvene.
Even without a new round, negotiations to further liberalize trade in
agriculture and services are scheduled to begin in the year 2000 under
the Uruguay Round agreements' built-in agenda. Progress on these
negotiations, however, may be slow, partly because the agenda lacks a
deadline for completion. The negotiating impasse also left several
issues unresolved, such as addressing some developing countries'
concerns about expiration of certain Uruguay Round agreement deadlines.
In a brief statement at the end of the meeting, the Conference
Chair, U.S. Trade Representative (USTR) Charlene Barshefsky, noted that
the issues before WTO ministers were complex, and divergences too wide
to be bridged rapidly. Ambassador Barshefsky stated that it was the
collective judgement of those present that it would be best to, ``take
a time out, consult with one another, and find creative means to finish
the job.'' She then announced that the ministers had agreed to suspend
the work of the ministerial conference. In the interim, the Chair asked
WTO Director General Mike Moore to consult with delegations in an
effort to bridge differences, develop an improved decision-making
process, and prepare for a successful conclusion of the ministerial
conference.
The Chair and other delegations emphasized that the progress that
was made at Seattle would not be lost. But those assurances were
quickly dismissed by other participants, who refused to ``freeze''
their positions and said that any draft texts of a declaration on the
table at Seattle were no longer valid. Even if members were to agree in
principle to restart negotiations from where ministers left off at
Seattle, no text reflects the state of countries' positions at the end
of the day.
One outstanding issue due to the suspension of the Seattle meeting
concerns developing countries' efforts to delay their end-of-1999
deadlines for conforming to certain provisions in a number of Uruguay
Round agreements, such as those on intellectual property rights and
investment measures. The WTO General Council met on December 17 but
could not agree on whether to grant extensions for all developing
countries, or to consider them on a member-by-member basis. The General
Council postponed until early 2000 a decision on how to proceed. In the
meantime, WTO members were asked by the General Council Chairman to
exercise restraint and understanding in dealing with these deadlines.
USTR officials told us that the United States retains the right to
bring cases based on the deadlines, which have since passed.
No one Factor Contributed to Ministerial Outcome
No one factor, but a combination of circumstances, led to
the WTO's inability to launch a new round. Nonetheless,
seemingly unbridgeable gaps on major issues both among the
major trading partners and between developed and many
developing countries were at the root of the outcome of the
ministerial conference. First, disagreements centered on the
scope and direction of a new round. They also stemmed from the
increased sensitivity and complexity of the issues on the
table. Further, Seattle negotiators faced inherent difficulties
in their negotiation process both in Seattle and Geneva. These
included the challenge of accommodating the needs and interests
of a large and increasingly diverse WTO membership. In
addition, negotiators were working from an unwieldy draft text
symptomatic of the lack of agreement among countries in Geneva
on the eve of the ministerial meeting. Further, U.S. and
foreign officials noted that WTO members' selection of a new
Director General earlier in the year had been lengthy and
divisive. This experience left members without leadership
during a good part of their preparations for Seattle and
lingering hard feelings. Adding tension to a difficult
situation, protesters marching against the WTO in Seattle
during the week disrupted the proceedings.
No Agreement on the Scope of Negotiations
U.S. and foreign officials with whom we met said that
fundamental differences between the major trading countries
contributed greatly to the ministerial conference's ultimate
lack of consensus. The United States wanted to pursue a narrow
agenda in the new round, while the European Union (EU) and
Japan promoted a broad framework for negotiations to bring many
new areas under international disciplines. Officials we
interviewed generally felt that without agreement among these
major players in international trade, it would be impossible to
build consensus among the rest of the members.
The United States favored limiting negotiations primarily
to address market access concerns and to focus on the areas of
agriculture and services as called for under the Uruguay Round
agreements. With the backing of the other major agricultural
exporting countries, known as the ``Cairns Group,'' the United
States insisted that negotiations on agriculture address a
number of tough issues, including the elimination of export
subsidies and substantial reduction of trade-distorting farm
supports. Such far-reaching goals in agriculture were difficult
for the EU to accept. According to European officials, they
simply could not support language calling for the elimination
of agricultural export subsidies as the starting point of
negotiations. Instead, the EU viewed the new round as an
opportunity to establish international rules in other areas of
the global trading system. In addition to agriculture and
services, the EU proposed including investment, competition
policy, government procurement, and other issues in a broad
framework for negotiations.
Japan largely supported the EU's position on these issues.
Although U.S. negotiators indicated support for continued study
of investment and competition policy by WTO working groups, the
United States and many other WTO members were unwilling to
include these issues in the negotiating agenda.
In addition to differences among the major trading
countries, there was also a serious gap between developed and
many developing countries on the scope of a new round. Like the
United States, developing countries generally backed a narrower
scope for negotiations. Although developing countries'
positions differed on some issues, many of them called for a
reassessment of the commitments of the Uruguay Round
agreements. The United States did not want to reopen existing
agreements to new negotiations. Some developing countries felt
they had received few benefits from the Uruguay Round and had
found it difficult to meet their obligations under its
agreements. For example, certain developing countries insisted
they lacked the financial and technical resources to implement
the complex requirements called for under the intellectual
property agreement. Developing countries also wanted to re-
negotiate areas of the Uruguay Round, such as the agreement on
textiles that they argued had not given them the benefits they
had anticipated. U.S. negotiators indicated they would consider
ways of helping developing countries meet their Uruguay Round
commitments on a case-by-case basis, but they rejected any
attempt to reopen negotiations on the hard-fought agreements.
Finally, officials from some developing countries we
interviewed noted that 5 years did not provide enough time for
them to cope with the changes mandated under the Uruguay Round.
Given the difficulties they were having in implementing the
Uruguay Round agreements, many of these countries expressed
reservations about undertaking further trade liberalization.
One developing country official remarked that in comparison
with the situation in 1994 when the Uruguay Round was
concluded, starting a new round at this time would be
considerably more difficult. In 1994, the ideas of market
reforms and trade liberalization were still fresh and held
tremendous promise. It was also a time of economic growth in
many of the developing countries engaged in the negotiations.
The current situation is very different. Much of the developing
world is going through a difficult time economically, even
though many countries have already undertaken far-reaching
market reforms and trade liberalization.
Sensitivity and Complexity of Issues Impeded Progress
The most sensitive and complex area of negotiations between
the EU on the one hand and major agricultural exporters
including the United States on the other was on agriculture.
Although the EU has been reducing subsidies to agriculture
since the Uruguay Round, it remains by far the world's largest
user of agricultural export subsidies.\1\ In the WTO, the
United States and other major agricultural exporting nations,
such as Australia, Brazil, and Canada, have put increased
pressure on the EU to abandon its reliance on export subsidies.
Export subsidies, however, are a key mechanism in the EU's
Common Agricultural Policy. The Common Agricultural Policy is
intended to preserve farm incomes and rural economies by
supporting high domestic prices for a wide variety of
agricultural commodities and products. EU member states have
taken a very strong position on maintaining the Common
Agricultural Policy, which is a central element in the EU's
institutional system and is regarded as essential to its
cohesiveness.
---------------------------------------------------------------------------
\1\ See Commitments by the European Union and the United States to
Reduce Agricultural Export Subsidies (GAO/NSIAD-99-198R, June 18, 1999)
for more details.
---------------------------------------------------------------------------
Like the EU and its position on agricultural export
subsidies, the United States was virtually isolated on the
issue of antidumping regulations in the negotiations. Major
trading partners like Japan and Korea, as well as some
developing countries, called for reconsideration of the
agreement on anti-dumping reached under the Uruguay Round.
These countries felt that the current antidumping rules allow
countries to use trade remedies to unfairly protect certain
sectors. The United States argued that re-opening the complex
agreement was premature and risked weakening the strength of
the existing U.S. anti-dumping regime. U.S. negotiators said
they would consider holding discussions on how WTO members were
implementing the agreement's procedural requirements, but this
U.S. offer attracted limited support.
Developing countries were very concerned about U.S. and EU
initiatives to bring labor into the WTO. They feared that
addressing labor standards under the WTO was simply a veiled
form of protectionism aimed at undermining one of the few
competitive advantages they enjoy as lower-wage producers. At
the Singapore ministerial conference, it had been agreed that
labor standards were best addressed in the International Labor
Organization rather than in the WTO, and many developing
countries felt the issue had been put to rest. According to
some officials from developing countries, the U.S. insistence
on resurfacing the issue of labor in Seattle and the
President's remarks potentially linking labor standards to
trade sanctions were counterproductive.
Seattle Negotiation Process had Inherent Difficulties
The difficult task of accommodating the needs and interests
of a large and increasingly diverse WTO membership hampered
progress in Seattle. Efforts to balance efficiency with
allowing the maximum participation of all WTO members in
negotiations presented a challenge to reaching consensus.
In an effort to give all WTO members the opportunity to
take part in the negotiations, Chairperson Barshefsky and
Director General Moore set up five large working groups on the
major issues including agriculture, market access,
implementation, Singapore issues (such as investment), and
systemic issues (such as the structure of the WTO). The working
groups were open to all WTO member delegations and convened on
the second day of the conference. Working group chairs--trade
ministers selected in Seattle--were to facilitate consensus and
refine the Geneva draft text into a consensus document. Next,
working group consensus texts were to be brought together later
in the week to produce a complete ministerial declaration to be
issued at the end of the conference.
Ultimately however, the working groups were not able to
achieve the necessary consensus to avoid the more traditional
less inclusive ``green room'' process.\2\ Chairperson
Barshefsky had told ministers at a meeting on Wednesday that
she intended to proceed with the large working groups, but if
they were unsuccessful she would initiate a green room to
facilitate consensus. After 2 days of large working group
meetings, the green room process began Friday morning, the last
day of the conference.
---------------------------------------------------------------------------
\2\ Traditionally, negotiations have taken place among a smaller
number of key WTO members, which would work out privately some of the
more difficult compromises. This smaller group negotiation of 20-30
members is known as the ``green room'' process.
---------------------------------------------------------------------------
One difficulty in achieving consensus may have been that
the chairpersons of the working group meetings were not in
place until Tuesday during the ministerial conference. This may
have prevented parts of the leadership team from effectively
preparing for their roles--such as developing compromise texts
and meeting with key delegations before Seattle--as some have
claimed. Officials said that it had been difficult to find
chairpersons because trade ministers had to volunteer their
time to lead the sessions as opposed to their own country
delegations.
The green room had only 1 day to work out compromises
across the range of unresolved issues and then gather the
support of the rest of the delegation. Furthermore, the green
room worked sequentially--issue by issue. Negotiators began in
the morning with agriculture and spent until mid-afternoon on
this issue. Although many officials said that the green room
did make progress in agriculture, others argued that too much
time was spent on this issue to the exclusion of others.
However, officials expressed mixed views about whether
additional time would have resulted in consensus on a round.
Some said an additional day would have sufficed with the
progress made in agriculture, while others were more
pessimistic or said outright that no agreement could have been
reached.
Despite efforts to the contrary, some countries still
expressed frustration about being left out when the
negotiations shifted to the green room. In fact, a group of
Latin American and Caribbean countries and a group of African
countries stated publicly in Seattle that they would reject the
outcome of these smaller sessions. However, some officials
noted that a green room process involving a smaller number of
countries is necessary to efficiently handle the negotiations.
Some said the particular problem with the green room process in
Seattle was that countries were selected to participate in an
ad hoc, informal manner. They recommended a more formalized or
transparent process of determining the members invited to
participate in the green room.
A number of officials with whom we spoke said that hosting
the Seattle WTO ministerial meeting posed both substantive and
procedural challenges for the United States, given its large
stake in the world trading system. First, perceptions about the
U.S. role as chair may have affected the negotiating dynamic.
For example, it may have raised questions about U.S. neutrality
in brokering compromise, or raised WTO members' expectations
about U.S. willingness to make concessions to ensure the
ministerial conference's success. Second, the United States was
wearing two hats, that of host and key participant, a difficult
job that was made harder by the newness of the WTO team and the
number of issues to be resolved at Seattle. Overall, several
U.S. and foreign officials said that a major trading nation
hosting such meetings inevitably poses problems.
Another major factor affecting the outcome of the Seattle
negotiations was the inherent weakness of the draft text used
as the basis for negotiations. When WTO ministers arrived in
Seattle in late November, the draft declaration officially on
the table was some 32 pages long and contained nearly 400
bracketed items indicating disagreement among members. The
draft was, in fact, an amalgamation of all the proposals, or
position papers, members had submitted to the WTO General
Council during their 15-month, pre-Seattle preparatory process.
The problems with the draft conveyed the wide differences over
substance and philosophical approach that remained at the
conclusion of those preparations. Also, one WTO official noted
that because the text included many strongly held competing
proposals, negotiators had to ``build down,'' or remove text,
to reach a consensus document. In his view, this is more
difficult to do than ``building up,'' or negotiating to add
desired language. Thus, he believed, in Seattle, countries
automatically perceived agreeing to remove text as a loss.
Contributing to members' inability to reach consensus
before Seattle were the difficulties they had experienced in
selecting a new Director General. In Geneva in early 1999, WTO
members had had great difficulty reaching consensus on a new
Director General, whose 4-year term had expired. There were two
final candidates, Mike Moore from New Zealand and Supachai
Panitchpakdi from Thailand, from a developed and developing
country, respectively. Ultimately, members selected both
candidates to serve a split term, with Mike Moore serving
first. Many U.S. and foreign officials said that the
divisiveness of that experience had dampened the mood for
compromise in Seattle.
In addition, the lengthy and contentious selection process
left WTO members without leadership for 5 of the 11 months they
had available to prepare for Seattle. Mike Moore did not take
the helm at the WTO until September, when drafting of a
declaration started in earnest. His principal deputies were
named less than a month before the WTO ministerial conference.
While the WTO is largely a member-driven organization, the WTO
Director-General and his deputies can play an important role in
facilitating consensus and organizing work so as to ensure
maximum progress. The diversity of member interests and lack of
institutional leadership meant that fewer informal, consensus-
building meetings took place both in Geneva and Seattle.
During the ministerial conference, nongovernmental
organizations representing labor, the environment, and other
interests demonstrated and marched against the WTO in the
vicinity of the Seattle convention center. The protests
interfered with the convention by causing delays and dampening
the general mood among the delegates but were not a major cause
for their ultimate inability to launch a new trade round. The
most frequent comment we heard from foreign government
officials was that the protests cost them 1 to 2 days of work.
Some foreign officials attending the ministerial conference
said that limitations on moving safely about the city
interfered with delegates' normal ability to resolve
differences through informal social contacts. Another foreign
embassy official said that, while not a deciding factor, the
protests raised questions about the U.S. ability to conduct
trade negotiations without being unduly influenced by domestic
politics. Overall, however, delegates did not believe that the
protesters changed the outcome of the conference.
Lessons Learned
Several lessons can be learned from the experience in
Seattle:
Efforts to launch a new round may have been
premature. Countries, for various reasons, may not have been
ready to launch a new round. Due to current strong domestic
concerns, the EU and United States each found it politically
difficult to make concessions and exert leadership. Many
developing countries were resistant to calls for the WTO to
address new issues such as labor and skeptical about the
benefits of the last round.
Ministerial conferences are more likely to succeed
if they address only a handful of politically difficult
decisions, having reached consensus on most issues in advance.
WTO members had not reached agreement on most issues on the eve
of the conference. As a result, ministers in Seattle faced a
long list of unresolved items. This left ministers with an
overwhelming task to be accomplished within a short time frame.
Efforts to sort through and agree upon a manageable number of
issues should be made before a ministerial conference takes
place.
The WTO needs to find ways to address the
institutional challenges posed by increases in the number and
diversity of its members. The Seattle negotiations demonstrated
the importance of taking into account the different views of
the WTO's large and diverse membership on issues such as the
scope and nature of any further trade liberalization. Since the
ministerial conference, the WTO Director General has been
consulting with WTO member governments on ways to help
developing countries engage in world trade and has been
examining how the WTO can better gauge and act on its varied
members' interests.
Holding high profile WTO meetings in countries
that are major trading partners, such as the United States and
the EU, may present difficulties. It is not easy for major
trading countries to host ministerial conferences, given their
significant interests in international trade and possible
concerns about their influence on the negotiating agenda.
----------------------------
Mr. Chairman and members of the subcommittee, this
concludes my prepared remarks. I will be happy to respond to
any questions you may have.
Contacts and Acknowledgement
For future contacts regarding this testimony, please call
Susan Westin or Beth Sirois at (202) 512-4128. Individuals
making key contributions to this testimony included Nina
Pfeiffer, Howard Cott, Kim Frankena, Juan Gobel, Richard
Seldin, and Tim Wedding.
Chairman Crane. Thank you very much, Ms. Westin.
Let me put a quick question to you, and that is, how
isolated do you think the U.S. is in its insistence that
dumping with the exception of the agreement's procedural
requirements be off the negotiating table in the new round?
Ms. Westin. Well, from our experience in Seattle, and we
attended many of the working groups and some of the press
conferences where they talked about what was going on with the
negotiations, our experience was that the United States was
completely isolated. I think in one instance it was referred to
134 to 1 on this issue.
Chairman Crane. And on what basis did the USTR believe that
developing countries would be willing to launch a new round of
trade negotiations?
Ms. Westin. In the ministerial conference in Geneva in May,
1998, many countries, most countries had expressed their
willingness to launch a new round. But the developing countries
definitely wanted on the agenda a re-examination of their
implementation of the existing commitments under the Uruguay
round. And I think that in addition to some of the market
access issues, particularly on agriculture for them, as the
Ambassador referred to, I think there was some interest in
launching a round, but it was clear that that was one of the
things they wanted on the agenda.
Chairman Crane. Well, with regard to developing countries
and negotiations, the Uruguay round on textiles, they, as I
understand it, believe the United States has not given them the
benefits that they anticipated and how much liberalization has
taken place in that sector?
Ms. Sirois. I believe some liberalization has occurred. I
think more is, I think more textile quotas that the U.S. has
imposed are due to be eliminated in January 2002. However, most
U.S. quotas will not be eliminated until 2005.
Chairman Crane. Mr. Levin.
Mr. Levin. Well, I wasn't going to ask any questions. Our
other panelists have been waiting patiently.
I just want to say to you, though, I was at Seattle from
beginning to end. And I was there most of the hours. And I must
say, I think your perspective on the attitude of the countries
toward antidumping are not what I heard. If you ask the
countries to rank their priorities, and maybe you would agree
with this, I think all but a few would have ranked opening up
antidumping rather low.
The Japanese had it quite high, very high, maybe the
highest. But other than the Japanese and a few other countries,
I can't think of any other nation that would have ranked it
very high. Can you?
Mr. Westin. No, I don't disagree with you, Mr. Levin, in
terms of ranking it as a priority. But I understood Mr. Crane's
question to be where countries fell on the position. I think
that's a slightly different question.
But I agree, I didn't hear it as a particular priority
issue.
Mr. Levin. So to say we were isolated, I think, this is the
intensity level of other nations. They weren't, except for a
few. And my reaction to the Japanese on dumping, those who dump
don't like our antidumping laws. And they dumped steel, and I
say this as someone who did not vote for the quota bill,
because it violated our WTO obligations. But Lord, it's clear
they dumped. And we had to do something, and we finally did,
under antidumping laws, though it was quite late.
And a few other countries that dump don't like it. Some of
them aren't in the WTO. And that's why we had to have,
negotiate some major antidumping provisions, for example, with
China, which also dumped steel here in a dramatic sense. And in
terms of textiles, there's been a major change in that area,
and I don't think anyone should ignore the fact that we're
facing increased competition. And the question is what we do
about it and where it comes from.
But I think the worst way to handle problems is to ignore
that certain dynamics exist, and that the quotas are going off,
as we all know. So anyway, I'm glad for your response in terms
of antidumping. Because somehow the notion is that a country
that protects itself against an unfair trade practice of
another country is protectionist. The protectionist one is the
one that violates fair rules. And the WTO specifically permits
U.S. antidumping laws. In fact, we could strengthen 201 further
within WTO structures.
Thanks very much.
Chairman Crane. Thank you.
Mr. Becerra.
Well, you get off the hook easy then, Ms. Westin. But we're
sorry for the duration and the disappearance of some of our
colleagues here. It's been a longer day thus far than we
anticipated. But we thank you so much for your participation.
Ms. Westin. Thank you.
Chairman Crane. And with that, I next would like to call
our panel one, Gary Hufbauer, Reginald Jones Senior Fellow,
Institute for International Economics; Dale Hathaway, Executive
Director, National Center for Food and Agricultural Policy, and
Chairman of the Agriculture Policy Advisory Committee; Thomas
M.T. Niles, President, United States Council for International
Business; Lori Wallach, Director, Public Citizen's Global Trade
Watch; and Frank Kittredge, President, National Foreign Trade
Council.
We have someone also that is substituting for John Sweeney,
President of the AFL-CIO, who did not make it. Do we have your
name, sir?
Mr. Trumka. Richard Trumka, Secretary-Treasurer of the AFL-
CIO.
Chairman Crane. Rich Trumka. And do we have a--very good.
So we will proceed in the order that I presented you, and
please try and keep your oral testimony to 5 minutes or less,
and all written testimony will be made a part of the permanent
record. And with that, we yield to Mr. Hufbauer.
STATEMENT OF GARY CLYDE HUFBAUER, REGINALD JONES SENIOR FELLOW,
INSTITUTE FOR INTERNATIONAL ECONOMICS
Mr. Hufbauer. Thank you very much, Mr. Chairman.
The WTO is blocked, and the overriding reason is simple.
The Congress and the country are deeply divided on the way to
shape the competing force of globalization.
For the United States, the open economy ranks as one of our
three great engines of growth. The other two are the flexible
economy and information technology. These three engines have
brought us a remarkable period of low inflation, very low
unemployment and rising productivity, even after 8 years into
the boom.
But a prosperous and dynamic economy has losers as well as
winners. Moreover, our trading partners do not necessarily
embrace values that are deeply held in the United States
concerning environment and labor standards. These two issues,
more than any others, in my opinion divide the Congress and the
America people on WTO, on NAFTA, on China and on other trade
agreements.
Today, I'd like to spend my few minutes on urging solutions
to these two critical issues. Both solutions can be made in
America. They do not require fresh international negotiations.
They only require agreement by the Congress and the President.
The first solution, I commend to you, is degressive wage
insurance, namely, a make-up payment lasting 3 years for a
portion of FICA wages lost by all dislocated workers. The make-
up would start at 75 percent and gradually diminish to 25
percent in the third year. This wage insurance would be the
same whatever the reason for dislocation--technology,
restructuring, or trade.
Statistics indicate that dislocated workers today lose
under 5 percent of their income when they move to a new job.
That's much lower than it was 10 years ago, and the reason is
our very strong economy.
Let me turn now to environmental and labor standards. I
argue that we should move the central debate out of the WTO and
into a U.S. commission. The commission would be charged with
developing appropriate environmental and labor labels and the
underlying standards for their use. With appropriate labeling,
household consumers and industrial buyers could make an
informed choice between goods and services that were produced
anywhere in the world in full accordance with the standards, or
not in accordance with the standards.
This approach would represent a generalization of the
approach recently adopted in the biosafety protocol. A similar
approach has already been used for tuna, apparel, athletic
shoes, lumber products and others. It would not be designed to
afford protection against imports.
The commission I envisage would be an independent
commission with distinguished members. It would categorize
goods and services in a simple two-by-two matrix. One dimension
is whether the good or service requires a voluntary label or a
mandatory label. The other dimension is whether the label can
be provided by one or more of the private labeling services
which already exist--such as Underwriters Lab and many, many
others--or whether a new government label is required.
In creating labels and in specifying the underlying
standards, the commission would hold hearings open to all
interested parties. There would a very, very sharp differences,
very honest differences. The AFL-CIO might take a position on
labor standards that should be embodied in the label that
differed sharply from the position rendered by, for example, by
apparel importers.
But it would be a domestic debate. And I think this debate
can and should take place in a domestic forum. And it can be a
debate that is settled by a U.S. commission.
If we have a solution along these lines, I think the way
would be clear for us to go forward in the WTO and in other
trade agreements. Thank you very much.
[The prepared statement follows:]
Statement of Gary Clyde Hufbauer, Reginald Jones Senior Fellow,
Institute for International Economics
World Trade After Seattle: Implications for the United States
Seattle leaves a huge question mark over the U.S. role in
world trade policy. Faulty preparation and flawed tactics were
abundant--both in the street and between the delegations. The
Battle of Seattle may acquire the same instructive value for
future diplomats as Pearl Harbor has for military officers.
But this Policy Brief is not about preparation and tactics.
The Seattle outcome might have been far different--if the U.S.
Trade Representative had not swept concessions off the table
months before the ministerial conference. Or if the police had
cordoned downtown Seattle on Monday. Or if President Clinton
had left the phrase ``trade sanctions'' out of his Tuesday
interview. Or if France had agreed on Friday to the eventual
elimination of agricultural export subsidies. But this Policy
Brief is not about ``might have beens.''
Instead, this Policy Brief is an attempt to size up the
direction of world trade policy after Seattle. In particular,
it focuses on strategies that open market forces might adopt to
regain the initiative.
World Trade Game Score (since WTO 1994): Backlash 7, Open Market 3
By my score, the global Backlash forces, in the United States and
elsewhere, have enjoyed seven victories since the WTO agreement was
reached in Marrakesh in 1994. They defeated renewal of U.S. ``fast-
track'' negotiating authority twice (scored only once in my count). In
addition, the Backlash forces have stalled the Free Trade Agreement of
the Americas (FTAA) in the Western Hemisphere and have slowed European
Union enlargement. Kindred forces in Japan defeated the ``Early
Voluntary Sectoral Liberalization'' proposals in the Asia Pacific
Economic Cooperation forum (APEC) at the Kuala Lumpur meeting in
November 1998. Together with the French (concerned about U.S. cultural
imperialism), the nongovernmental organizations killed the Multilateral
Agreement on Investment (MAI) in December 1998. Meanwhile, the U.S.
Congress has stalled a twin vote on NAFTA parity for the Caribbean
Basin countries (Caribbean Basin Initiative [CBI] Parity) and the
Africa Growth and Opportunity Act (AGOA). From a media exposure
standpoint, their crowning glory was Seattle.
Against this count, the Open Market forces have achieved three
important victories since the WTO was established in 1994. They signed
off on the Information Technology Agreement at Singapore in December
1996. They crafted the Basic Telecommunications Agreement in February
1997. And they adopted the Financial Services Agreement in December
1997. These were all solid achievements--even if they were not media
spectaculars.
A Rest Stop Or a Turning Point?
Ten years from now, Seattle could be seen as only one more pause in
the long march toward open markets. The march that began in 1947 with
the establishment of the GATT has been interrupted many times. Europe
had a difficult time negotiating current account convertibility in the
1950s. Oil shocks in the 1970s threatened the world trading system.
Agriculture was particularly tough in the Uruguay Round. Yet on each
occasion, progress resumed.
On the other hand, ten years from now, Seattle could be seen as the
turning point--the event that marked the end of the policy-driven open
markets agenda for much of the world. If this is the outcome, many
countries could build new barriers, especially in areas not already
covered by international rules (such as financial services and e-
commerce). Three points are worth making in handicapping ``rest stop''
versus ``turning point.''
First, the Backlashers have not yet succeeded in rolling back
liberalization. NAFTA stands and prospers. Mercosur has so far survived
Brazil's currency devaluation. In the aftermath of the Asian crisis,
none of the ASEAN members nor Korea has reversed its trade commitments.
In the tax arena, more legislators are worried about ``runaway
headquarters'' (Chrysler/Daimler Benz) than ``runaway plants.'' The
Tobin tax and its kissing cousins remain academic toys.
But in the aftermath of Seattle, the Backlashers can claim three
achievements. They enlisted sympathizers who want the WTO to encompass
moral values, not just economic virtues. In the process, they turned
trade and investment talks into a political ``third rail'' (to borrow
Marc Noland's phrase). And they probably added years to the life
expectancy of stratospheric agricultural barriers, sky-high textile and
apparel tariffs, the U.S. antidumping laws, and other formidable
barriers.
Make no mistake: rollback is their goal. Hard-core labor
Backlashers (fortified by sympathy from Clinton) want wide latitude to
impose trade sanctions against offensive production processes. They
want to extend textile and clothing quotas well beyond the 2005 phase-
out date. They want tougher antidumping laws, and easier access to
normal safeguards. They welcome capital controls. In time, they will
resurrect the Burke-Hartke concept (dating from the early 1970s) of
imposing import quotas and heavier taxes on the foreign operations of
multinational firms. The ``new'' Backlashers want to put new trade
agreements in peril until social issues are addressed. Both Backlash
camps would dearly love to rewrite or even dissolve NAFTA.
Unless the Open Market forces regroup and adopt a winning strategy,
``turning point'' seems more plausible than a ``rest stop.''
Next Battle: China
China is the next battle and it could prove decisive. It is hard to
know how China and the WTO intersected in the minds of top
administration officials, but three scenarios are plausible.
First scenario: Clinton may have cut an implicit behind-
the-scenes deal with AFL-CIO leaders: I'll trash Seattle and you don't
trash China. A deal along these lines would give something dear to
business (better access to Chinese markets) and something dear to the
AFL-CIO (no new trade talks without labor sanctions). From what we know
about the sequence of events, this scenario seems far more plausible as
an after-the-fact rationale for hopeless fumbling in Seattle than a
Machiavellian before-the-fact game plan. It is not at all clear that
the AFL-CIO leaders will sign on to their part of the ``bargain,''
namely, stopping short of a ``take no prisoners'' battle against China.
Second scenario: In vintage Clinton style, the
``technical'' talks over the details of China's accession to the WTO
could be strung out and the normal trade relations (NTR) vote pushed
forward to 2001, when a new president is sitting in the White House.
This would deny Clinton an important legacy, but it might reduce the
``China factor'' in the U.S. presidential election and avoid
embarrassing demonstrations in Washington.
Third scenario: Clinton has simply lost control of trade
and investment policy. Evidence for this scenario is a string of events
since 1996: The loss of fast track in 1997. The MAI burial in 1998. The
China fiasco in April 1999. Haphazard preparations for Seattle.
Finally, Clinton's ``trade sanctions'' interview, which eliminated all
prospects of reaching an accord with developing countries on labor
issues. Under this scenario (favored by Marc Noland), China will be
Clinton's last trade debacle--a big effort, but not big enough to round
up the votes for permanent NTR. In the end, Congress votes the usual
one-year extension.
Can the Open Market Forces Regroup? Lots of Generals, Not Many
Soldiers
Missing from the ranks in the battle for open markets are business
firms and consumer groups. The most energetic soldiers are economists.
As Stalin famously remarked, ``How many divisions does the pope
command?'' That said, many strategic concepts have been offered for
regrouping the Open Market forces and sparking public enthusiasm for
globalization. Everyone wants business and government leaders to speak
out more forcefully in favor of free trade and investment. Beyond that
common theme, strategies differ. For brevity, I will summarize the
ideas of leading strategists in caricature.
Jagdish Bhagwati and Daniel Tarullo:
``Back to basics.'' Focus the WTO on border barriers. Reconsider
the TRIPs agreement (as T. N. Srinavasan has urged). Bhagwati goes
further: forget about regional groups--they're a nuisance at best, and
more likely harmful. In other words, get the WTO out of difficult
national sovereignty questions, and don't burden commerce with a
spaghetti of FTAA, APEC, Pacific-5, and other new regional
arrangements.
Problems: Where do you put the ``social issues"? Will
U.S. and European business firms push for new trade agreements that can
be easily nullified behind the border? As a practical matter, several
regional groups now seem healthier than the WTO--debilitated as it is
by the splits within the Quad and between the United States and
developing countries. In the regional arena the European Union is
rapidly moving ahead on new deals with Mexico, Mercosur, and the
Lomé Convention countries.
Robert Samuelson:
``Let the markets work.'' With dramatic cuts in transportation and
communications costs, the ascendancy of multinational corporations, the
rise of e-commerce, plenty of globalization will occur even if trade
ministers take a 10-year holiday. Moreover, thanks to the overwhelming
success of the U.S. economy, sensible countries will enthusiastically
sign on to the Washington consensus and Anglo-Saxon capitalism, without
another USTR or IMF mission abroad.
Problems: Mercantilism has dominated commercial policy for
350 years (today it's called ``reciprocity''). Who hears the death
rattle of this enduring ideology? What about growing underbrush that
threatens to choke e-commerce and other new realms? C. Fred Bergsten's
``bicycle theory'' worked well at explaining past swings between
liberalization and protection. Has this piece of political economy now
vanished?
Larry Summers:
``Go with the Living Ism.'' In 1991, before he became a senior U.S.
official, Larry Summers famously proclaimed his love for all the
``isms''--bilateralism, regionalism, multilateralism. Now that the WTO
has run into difficulties, this strategy would call for deepening NAFTA
(especially with Canada), the Pacific-5 (Australia, New Zealand,
Singapore, the United States, and Chile), working on bilateral issues,
and doing a few sectoral deals. Just be pragmatic.
Problems: The NGOs killed the MAI, and some see a threat
in the CBI and Africa. Will they pass up the next bilateral or regional
deal? Indeed, in the regional context, won't they insist on a heavier
loading of social issues? The same virus that hit Seattle could easily
spread.
I. M. Destler and Peter Balint:
``Bring in the social issues.'' These are the natural next step in
the long GATT/WTO journey from tariffs, to quotas, to services, to
intellectual property rights, to phytosanitary standards. Go with the
flow. Reasonable people can find reasonable solutions that both improve
production conditions worldwide and respect national sovereignty.
Problems: India, Brazil, and China have an automatic
response: ``Not on your life.'' Will the United States and Europe put
their own miserable treatment of illegal immigrants on the table? What
about state environmental standards and layoff laws? Finally, what
concessions will the United States and Europe make to get social
clauses? Will they accelerate the elimination of Multifiber Agreement
(MFA) quotas, slash textile and apparel tariffs, and reform their
antidumping laws? Will they liberalize stratospheric restrictions on
sugar, dairy, peanut, tobacco, and other specialty agriculture imports?
Dani Rodrik and Robert Litan:
``Buy off labor.'' This strategy sees the United States (not
Europe) as the main stumbling block to open markets, and identifies
organized labor as the key opponent. Hence the prescription. Enlarge
the U.S. social safety net across the board, as Rodrik advocates. Or,
in Litan's formulation, provide for a realistic, but degressive (e.g.,
lasting 2 to 3 years), make-up payment for a portion of the wages lost
(e.g., starting at 75 percent of the loss) by all dislocated workers
who find new jobs. Ensure that dislocated workers have health care and
moving allowances.
Problems: Who will spend the necessary money for a wide
social safety net? Gore is already attacking Bradley for wanting to
increase the health care budget. My estimate for degressive wage make-
up costs across the board is about $15 billion annually. Wage insurance
limited to trade-impacted workers would come cheap, about $500 million
annually. But labor has disdained all forms of Trade Adjustment
Assistance (TAA) for 15 years. Why would it love this wrinkle? Besides,
there is no meaningful distinction between workers displaced by
technology or restructuring and workers displaced by trade. If labor
alone is bought off, will other social causes be satisfied?
President Clinton:
``Y'all come.'' The central problem is process, not substance.
Invite responsible NGOs into the negotiations. Allow them to bring
disputes in the WTO. Broadcast the proceedings live on television and
the Internet. A more open party will be a better party.
Problem: No one believes this solution. Probably not even
Clinton.
Sizing Up the Problems
If the next U.S. president wants to restart the trade engine, he
will need to commit the same level of political resources as he might
devote to major tax, budget, or labor legislation. Gone are the days
when important policy-driven progress toward open markets can be
achieved without bitter political battles. There is no low-cost-lunch
strategy.
If the new ``third rail'' proves too hot for the next U.S.
president and his G-7 counterparts, then the open markets agenda will
depend on the two forces inherent in Robert Samuelson's analysis: the
technology revolution in transportation and communications, and the
winning appeal of Anglo-Saxon capitalism. In a pre-Seattle trip to
Asian capitals, Fred Bergsten found considerable enthusiasm for new
regional institutions ranging from trade to money. Asian leaders are
tired of dancing to Washington's economic tune. They want to write
their own songs. Seattle can only reinforce these sentiments. If
Washington and Brussels falter, the future trade agenda could be led by
an Asian renaissance.
If the ``third rail'' turns out to be a Washington problem--and not
so serious in Brussels, Tokyo, and Ottawa--the other G-7 powers might
well pursue their own regional initiatives. The European Union might
negotiate free trade arrangements with Mercosur and the Lomé
Convention nations, adding to its extensive free trade network with
Eastern Europe, North Africa, and Mexico. Japan could surprise everyone
by negotiating a free trade agreement with Korea. And Canada might join
the Northeast Asian party. A burst of regional energy along any of
these lines would disadvantage U.S. exporters.
The U.S. Trade Calendar in 2000
Multiple trade issues loom on the congressional calendar. In the
wake of Seattle, these issues present inviting targets for Backlash
demonstrations, attracting new financial support and more media
attention. Accordingly, a few thoughtful Open Market protagonists think
that the best strategy--in an election year--would ``cool down'' trade
and put off issues until 2001. Here is how ``third rail''
countertactics might play.
String out the technical talks on China's accession to the
WTO, and simply go for a one-year renewal of NTR in July 2000.
(Clinton's ``second scenario'' for dealing with China.)
Don't even mention ``fast track.'' At most, hold quiet
consultations with Ways and Means and Senate Finance Committee leaders
on possible new formulations and new labels.
Hold off on CBI Parity and AGOA.
Keep FTAA, APEC, and Pacific-5 talks at a strictly
technical level.
Avoid a media event of the House and Senate votes on
continued U.S. membership in the WTO. (Under the 1994 legislation that
ratified the Uruguay Round agreements, upon the request of a single
member, the House and the Senate each vote up or down on continued U.S.
membership in the WTO every five years.)
Downplay a possible adverse decision by the WTO appeals
panel in the Foreign Sales Corporation case. (In a case brought by the
European Union, a WTO panel found that this U.S. tax provision,
designed to promote exports, violates the Uruguay Round Code on
Subsidies and Countervailing Measures. The WTO appeals panel will issue
its decision by March 2000.)
``Firewall'' in 2000?
A different strategy for Open Market forces next year is to stand
and fight. In this strategy, an all-out battle would be waged to
welcome China in the WTO with permanent NTR legislation. Likewise, CBI
Parity and AGOA would be the next priority.
The argument for this strategy is simple. Unless the Open Market
forces build a firewall, the Backlash forces will gain momentum and
financial support. If trade policy is stalled in 2000, it will be that
much harder to restart the engine in 2001.
A New Strategy for 2001
Fact One. Steven Kull's polls show broad-based moral concern in the
United States about labor and environmental conditions abroad (even if
better conditions abroad translate into higher consumer costs at home).
His polls also show that the American public is worried about U.S. job
dislocation, even when workers can find new jobs at the same or better
pay, and even when a flexible economy means lower prices at the local
shopping mall.
Fact Two. Americans sharply disagree on the benefits of free trade,
polarizing by income level. According to a Wall Street Journal poll,
only about 32 percent of all U.S. adults think that the United States
has been hurt by free trade agreements. (By contrast, 35 percent think
the United States has been helped, and 24 percent think that trade
agreements haven't made much difference.) However, 54 percent of adults
with income under $20,000 think that the United States has been hurt by
free trade agreements, while naysayers drop to 25 percent among
households with income over $50,000.
Fact Three. Meanwhile, developing countries violently oppose a
working group on labor in the WTO, and they were enraged by Clinton's
mention of trade sanctions. Developing countries hold a well-grounded
fear that the concerns and worries of ordinary Americans will be
hijacked by the AFL-CIO and extreme Backlash groups--and turned into
formidable trade barriers.
Putting these three facts together, the time has come to address
labor and environmental concerns, but with a strategy that
would not entail new WTO rules;
would be accepted by the U.S. business community;
and would broaden the base of U.S. public support for
freer trade.
If this strategy can be crafted, then the way would be clearer for
Congress to grant the next president authority to conduct trade and
investment negotiations. No plausible strategy can avoid a political
battle. The right strategy could improve the chances of an Open Market
victory.
Six Linked Concepts of the New Strategy
First, create a permanent independent U.S. commission,
insulated from daily political life, to create and authorize labels
certifying that imported and domestic products and services are made in
ways that meet core labor and environmental standards. The labels would
be optional, not mandatory, both for importers and domestic producers.
For producers, the labels should become a ``badge of honor,'' enabling
concerned consumers (business or household) to purchase certified
products, at a premium price if necessary. The Global Reporting
Initiative (www.globalreporting.org) has already published its
suggestions for an appropriate framework.
Second, dedicate a portion of capital gains taxes to
creating a fund for degressive wage insurance (and health care and
moving allowances) for all dislocated workers, as Robert Litan has
urged. Individual capital gains taxes are running above $50 billion
annually; hence earmarking 30 percent for degressive wage insurance and
associated benefits should prove adequate. The basic rationale is that
globalization and technology are shifting part of national income to
capital; some of these gains are in turn captured by the capital gains
tax. It is only fair that a slice of the rewards generated by the new
economy be returned to those shaken up by its dislocations. Earmarking
would foster harmony between winners and losers. For earmarking to have
meaning, however, less money would be dedicated to the fund in years
when capital gains plunge and tax receipts drop.
Third, replace the antiquated and inefficient U.S. system
for taxing the worldwide income of U.S. multinationals (a system that
raises very little revenue) with a new system that allows a broad
exemption for income earned abroad. However, the broad exemption would
be conditioned on certification that the U.S. parent corporation, all
its foreign subsidiaries, and its principal suppliers exceed core labor
and environmental standards in their operations and appropriately
disclose their labor and environmental performance. Again, an
independent commission (not the IRS), drawing on the work of the Global
Reporting Initiative, would set certification and disclosure standards.
Fourth, in parallel with domestic initiatives on labor and
the environment, the administration should launch negotiations in the
International Labor Organization (ILO) to establish a worldwide system
for certifying observance of core labor standards, by both firms and
countries. Likewise, as Daniel Esty has proposed, the administration
should enlist international support for creating a Global Environmental
Organization (GEO). Among its tasks, the GEO would certify the
observance of recognized environmental standards. Both the ILO and the
GEO would issue periodic ``report cards'' on national performance, just
as the IMF and the WTO do on trade and macroeconomic policy.
Fifth, authorize the president to negotiate new trade and
investment agreements to reduce barriers. Congress would vote these up
or down on a ``no amendments'' basis, within the life of the Congress
(if submitted during its first session). In other words, new
authorizing legislation should call for enabling legislation on a
``slow track,'' not a ``fast track.''
Sixth, the authorizing legislation should give the
president authority to pursue trade and investment negotiations in
various forums--WTO, APEC, FTAA, Pacific-5--after giving advance
notice, plus a list of specific objectives, to Congress. (After
receiving notice, each house of Congress should have a 60-day window to
disapprove the launch of negotiations--a variant of the ``narrow
track'' idea floated by Representative Phil English.) The president
should be permitted, but not required, to seek agreement on
plurilateral or multilateral measures (in the ILO and the GEO as well
as in trade organizations) that would reinforce the labor and
environmental provisions already adopted by the United States (as
outlined above). Broad presidential authority would enhance America's
ability to achieve its goals--since the president would be tied neither
to a single forum nor to unattainable objectives.
The views expressed in this publication are those of the author.
This publication is part of the overall program of the Institute, as
endorsed by its Board of Directors, but does not necessarily reflect
the views of individual members of the Board or the Advisory Committee.
Mr. Houghton [presiding]. Thank you, Mr. Hufbauer.
Mr. Hathaway.
STATEMENT OF DALE E. HATHAWAY, PH.D., EXECUTIVE DIRECTOR,
NATIONAL CENTER FOR FOOD AND AGRICULTURAL POLICY, AND CHAIRMAN,
AGRICULTURE POLICY ADVISORY COMMITTEE
Mr. Hathaway. Thank you, Mr. Chairman.
I appreciate the opportunity to present my views on these
issues. I don't think that either the street theater or the
agricultural negotiations caused the breakdown in Seattle. I
believe the breakdown was inherent in things that preceded that
by quite some time.
Basically, I think it was a function of a lack of political
will on both the U.S. and the European sides. On the U.S. side,
it was clearly evident by the inability of the Congress and
administration to get trade negotiating authority for the
President. On the European side, it was equally apparent in
their inability to even make modest adjustments in their
agricultural policies. It appeared as part of the impasse over
the director general which in turn led to inadequate
preparations and an almost inevitable failure at the time.
This is behind us. It is now time for us to move ahead. And
it seems to me that the U.S. again can provide some leadership
and has begun to.
First, I am pleased to see that the general counsel, in
part at the prodding of the U.S., has agreed to move ahead in
the committee on agriculture to do, as Ambassador Barshefsky
calls it, clear the underbrush. After a Ministerial in 1982
failed to launch a new round, the committee on agriculture,
chaired by Aart de Zeeuw of the Netherlands, met from 1982 to
1986. That committee was very largely responsible for laying
out a framework that made the Uruguay round negotiation in
agriculture possible.
One final caveat in that regard. The agricultural community
is much concerned about a comprehensive undertaking in the
negotiation. The committee on agriculture will not provide
that. Therefore, it is important that the U.S. insist that any
activities that occur in the committee on agriculture be folded
back into a broader negotiation when it is possible to restart
those negotiations.
Finally, I think that, as everyone has suggested, we need
to pay substantially more attention to the concerns of the
developing countries. I think it became obvious when the
developing countries decided they no longer were willing to let
Europe and the U.S. decide who the next director general was
going to be that this is a different WTO and one in which we
need those countries on our side.
I think that is especially important in agriculture, where
those countries suffer as much as or more than anyone in terms
of the trade practices that we want to have removed. Therefore,
I think we should spend less time in agriculture negotiations
and in arm wrestling with the European Union, and more time in
gathering broad based allies that move to reduce the trade
distorting practices in agriculture.
Thank you very much, Mr. Chairman.
[The prepared statement follows:]
Statement of Dale E. Hathaway, Ph.D., Executive Director, National
Center for Food and Agriculture Policy, and Chairman, Agriculture
Policy Advisory Committee
Summary and Overview
A number of factors contributed to the failure of the World
Trade Organization (WTO) Ministerial in Seattle. These
included: insufficient political will and a lack of consensus
in Europe and the United States, inadequate preparation and
agreement on the agenda prior to the Seattle meeting, decision-
making procedures used before and during the Ministerial that
are inadequate to the much larger WTO, and a failure to
comprehend the depth and nature of the discontent among the
developing countries.
At this point it is counterproductive to lay blame and
point fingers as to who is responsible for the failure. We
should concentrate on how we can repair the damage, remove the
obstacles, and move ahead with the needed changes in both our
own positions and in the WTO as an organization.
I do not believe that the street theater of the rioters and
marchers was a significant factor in the failure. Nor do I
believe the difficulties in arriving at an agreed framework for
the agricultural negotiations was the crucial element that
caused the breakdown. If all other elements of the negotiations
had been in place, I believe that the difference on the
agricultural issues could have been bridged.
The first task should be to move ahead with the built-in
agenda in a way that will help overcome the difficulties
encountered in Seattle. In the case of agriculture this can
best be done by activating the Committee on Agriculture of the
WTO, finding a new dynamic chairman for that Committee and
charging the Committee to develop an agreed-upon approach for
carrying out the mandate to continue the agricultural reforms
started in the Uruguay Round.
Second, I believe we should broaden the base of our
interest in the agricultural negotiations and move off our
excessive focus on the European Union (EU). In Seattle, most of
the discussions on the agricultural text appeared to focus on
achieving language that would predetermine the outcome of the
negotiations. It appeared to be a contest between the EU and
its allies and the US and its Cairns Group allies. Rather than
adhering to this narrow focus, we must enlist the broad support
of developing countries in our efforts to reduce and remove
trade-distorting agricultural subsidies. This shift will
require a change in the attitude of many agricultural groups as
well as that of our officials and members of Congress.
Third, we also should do more to deal with the concerns of
developing countries that make up the majority membership of
the WTO. We and others promised technical assistance at the end
of the Uruguay Round to help countries implement their Uruguay
Round obligations, and that assistance has not been
forthcoming. Many countries lack the trained personnel to mount
a negotiation and lack the expertise to analyze the potential
benefits of different proposals. As a result they join blocs
led by countries claiming to know what is best for them or they
ask for special exemptions from new trade rules. They are
frustrated by feeling excluded from the key decision-making
groups and by the fact that their concerns are largely ignored.
It is in our long-run interest to help these countries become
better informed participants in the process.
In all likelihood it will be at least a year before the
Ministerial can be resumed. We have much to do in that time,
including the developing of a new political consensus to
support our trade policy. In the absence of such consensus the
US cannot resume its position as the world leader in
international economic policy.
Introduction
As chairman of Agricultural Policy Advisory Committee
(APAC) I was a part of the official US delegation to the
Seattle Ministerial of the World Trade Organization (WTO) held
November 30 to December 3, 1999. The APAC met with senior
administration officials in late October before the Seattle
meeting and had discussed the US positions on issues related to
agriculture at that meeting and at the two prior APAC meetings.
My observations are based on discussions and conversations
during and after those meetings, briefings provided during the
Seattle meetings for the Delegation and for the APAC; as well
as, my experience as the senior agricultural negotiator in the
Tokyo Round.
There were two events taking place simultaneously in
Seattle, one on the streets where protesters attempted to
disrupt the Ministerial meeting, and one in the Convention
Center where official representatives of governments were
dealing with the business of the Ministerial and attempting to
launch a new round of trade negotiations. The protesters
consisted of two groups, one dedicated to disrupting the
activities of the WTO and other international institutions, and
a group of labor representatives and environmental groups that
are skeptical about further trade liberalization and want it
accompanied by international rules regarding labor rights and
protection of the environment. A great deal of attention has
been paid to the activities in the street, and many persons,
including the President, have discussed the need to accommodate
the concerns of the labor and environmental groups in our trade
negotiations.
I believe that the protests outside the Convention Center
had little or nothing to do with the failure of the
Ministerial. The effect of the protesters was and will be
related to their ability to bring political pressure on some
WTO member governments to adopt the positions and issues they
espouse. As I shall point out later, the greater the success of
these protest groups, the more difficult it will be to move
toward more liberalized trade in the WTO of the 21st century.
Factors Contributing to Failure
In my view more attention needs to be paid to the
activities inside the Convention Center, and the reasons
underlying the failure of those negotiations to launch
successfully a new round of trade negotiations. One factor
leading to the failure of the Seattle Ministerial was the lack
of attention paid to developing countries' opposition to the
agenda. Finding a common ground with the developing country
members of the WTO should become a priority in subsequent
negotiations.
The danger signs of a possible failure in Seattle were
clear for all to see. They first appeared as an impasse over
the choice of a new Director-General of the WTO. Developing
countries, that now make up the majority of the WTO members,
were no longer content to have the Europeans and the US choose
another European Director-General as they have since the
founding of GATT in 1947. Developing countries put forth their
own well-qualified candidate and hung tough on the choice until
the US and Europe were willing to compromise on a split term
for the two leading candidates. This impasse resulted in a
Director-General who clearly was not the first choice of many
countries and, more importantly, came to the position late and
had inadequate time to lead the preparations for a successful
Ministerial.
Second, a successful trade negotiation requires significant
political leadership by the leaders of major trading countries,
most especially the United States and Europe. It is clear to
the world that there is no political consensus for an new trade
negotiation in the US. The Congress has refused to provide
trade negotiating authority to the President, and the attention
of the White House was diverted for most of 1998 and early 1999
by investigations and impeachment hearings. Many of the
strongest Administration supporters are strongly opposed to new
trade negotiations and have insisted on adding labor rights and
environmental issues to the agenda if any negotiations are to
take place. As a result the Administration did not provide
strong clear leadership, but proceeded cautiously by putting
forth proposals for a limited negotiation involving politically
popular new trade initiatives and sector negotiations.
The situation in Europe also shows lack of political will.
A new Commission of the European Union took over in mid-1999
after the old Commission resigned in disgrace as a result of
scandal and mismanagement. Moreover, the new government of
Germany, that normally is strongly supportive of trade
liberalization, has proven to have serious domestic political
difficulties. Political power is divided in France. The EU is
focused on the launch of the common currency, enlargement, and
the Balkans. A forecast of the limited European commitment to
further agricultural reform was evident in the refusal of the
EU heads of state to accept the rather modest reforms of the
Common Agricultural Policy (CAP) proposed by the Commission in
1998 to enable the EU to meet additional rollbacks in export
subsidies expected as a result of a new negotiation. The French
insistence that internal prices not be reduced as much as the
Commission proposed was a clear signal that the EU would not
accept a negotiating mandate to phase out export subsidies
completely. That, of course, was a major sticking point in
Seattle and brought intervention from the highest political
levels in France to veto any mention of eliminating export
subsidies in the proposed text on agriculture.
Thus, the two major trading powers that must provide
consensus and leadership for any trade negotiation to succeed
were both unable and unwilling to do so. The US proposed a
limited agenda that would have entailed minimum sacrifice and
immediate gains for the US from a short negotiation. It also
proposed adding labor rights and environment issues to the
negotiating agenda. The EU proposed a broad agenda of new
issues involving competition policy and investment policy
almost certain to entail years of negotiation. Moreover,
whereas the US was happy to settle for further negotiations to
liberalize agricultural trade using the Uruguay Round format,
the EU was pushing for a series of new agricultural issues
involving food safety, animal rights, and ways to protect the
multifunctionality of agriculture.
The developing countries had limited enthusiasm for a new
round, asserting that they needed additional time to adjust to
the Uruguay Round agreements. They also wanted some of their
issues on the agenda, including a reopening of the trade remedy
rules and the intellectual property rights agreement. Most
developing countries felt left out of the preparatory process,
and felt they were not included in the key consultative process
in Seattle.
Moreover, the developing countries were strongly opposed to
both the US and EU suggestions for new agenda items. Developing
countries viewed the move to include labor rights and
environmental issues as overt moves toward protectionism by the
developed countries. This view was reinforced by President
Clinton's quoted remark that we would use trade sanctions to
enforce labor rights in other countries. This, together with
the refusal of the US and others to give serious hearings to
the demands of developing countries regarding problems they
have had with the Uruguay Round agreements, led to the
developing countries' withdrawing from the process.
Normally, a Ministerial meeting begins its deliberations
with a text for the different sectors and the overall framework
upon which the major trading parties virtually agree. Some key
elements are always unresolved, and they are the primary focus
of the Ministerial negotiations. These nearly final texts are
the result of months of discussions and compromises brokered by
the WTO Secretariat.
No such texts existed for the Seattle Ministerial. Several
attempts to produce a text for agriculture had failed to
produce a common text with only a few remaining differences.
Instead the production of a draft text fell to the chairman
appointed to chair the agricultural negotiating group. That
text was still under negotiation when the Ministerial was
adjourned. Now the EU and others have said that text has no
standing and the process will go back to the beginning.
In my view the agricultural issues were not the deciding
issues that caused the failure of the Ministerial. However
difficult agricultural issues can be, I doubt that the US, the
EU or the developing countries would have scuttled the
negotiations over a word or two in the agricultural text if all
the other elements of the negotiation had been in place.
The US was under siege on some issues that we wanted to
keep out of the negotiations and was making little or no
progress on gaining acceptance of some of the issues we wanted
included. The push for accelerated tariff liberation on
selected products in which we have a substantial advantage was
opposed by Europe and most developing countries. Thus, in
general, the immediate political fallout in the US appeared
significant and the gains distant. In this context, the
suspension of the Ministerial probably was not the worst
outcome from the Administration's point of view.
Moving Beyond Seattle
It appears that it will take some time to clear the decks
so that the full Ministerial can be resumed. While they are too
polite to say so openly, most countries have no interest in
negotiating with a lame-duck US administration. Thus, the full
negotiation can probably not be resumed until sometime in 2001,
after a new administration is in place and organized. Some
developing countries suggest it could be as much as two years
before they will be ready to return to completing the
Ministerial.
However, the Uruguay Round called for a renewed negotiation
on agriculture and services to begin in 2000. There seemed to
be some agreement in Seattle that the so called built-in agenda
should be honored, and thus, that negotiations on agriculture
and services should proceed. The question is how should they
proceed and what should the US strategy be. It is important
that the US take the initiative to move the so-called built-in
agenda forward so that when a full negotiation is again
inaugurated, the problems plaguing the Seattle Ministerial in
agriculture will be resolved.
It is also important that the administration insists that
any progress made on the built-in agenda be incorporated into a
broader agenda when one is finally authorized by a Ministerial
because the built-in agenda does not provide a broad
negotiating base. The agricultural community identified and
expressed its concerns about whether a single undertaking
negotiation involving only agriculture could produce
significant results during the preparations for the Seattle
Ministerial. This caused some tensions between the
Administration and the agricultural community over the proposed
Accelerated Tariff Liberalization.
It should be remembered that this is not the first failed
Ministerial. In 1982, a similar failure occurred, but it was
possible to make substantial progress in agriculture toward
laying the groundwork for the subsequent Uruguay Round. This
was done through the Committee on Agriculture of the GATT under
the skillful chairmanship of Aart de Zeeuw of the Netherlands.
That committee laid out the issues, discussed alternative ways
of addressing them, and moved the process toward agreement on a
text that was to become the mandate for the agricultural
negotiations in the Uruguay Round.
The Committee on Agriculture of the WTO should be charged
to play the same role again. The US should move immediately to
find and to urge the appointment of an able, forceful and
neutral chairman and work with that person to develop an agenda
to do the preparatory work that was not completed before
Seattle. When the Ministerial is resumed it should start with a
text on agriculture that has, at most, a few brackets left to
the highest level decision makers.
Second, the US needs to engage the developing countries
fully in discussions on all issues, including agriculture. The
USDA had efforts in this regard before Seattle, but a
government-wide coordinated effort is needed to bring the
developing countries more fully into the WTO decision making
process. Congress needs to recognize and take into account of
the interests of developing countries. For years we have said
we want trade not aid, but in reality we have not offered much
of either to developing countries. The EU offers both special
arrangements and much sympathy to developing countries while we
lecture them to deregulate, and it is not surprising the
developing countries generally line up with the EU on crucial
trade issues. This is especially ironic when you realize that
the developing countries are among those most hurt by the
trade-distorting policies of the CAP.
There are two areas in which I believe we should do more to
assist developing countries. One is to provide technical
assistance to help countries meet their obligations under the
Uruguay Round agreements. Such assistance was promised at the
end of the Uruguay Round and has not been delivered. The second
area is assistance in capacity building to enable developing
countries to participate fully in and benefit from trade
negotiations. In our work at the National Center with the
Caribbean Community (CARICOM) countries of the Carribean and
from discussions in Africa last year, I have been struck by how
limited the capacity of many countries is to understand and
cope with complex negotiations.
In addition, we should focus more attention on the issues
of Special and Differential treatment for developing countries
rather than dismissing such demands out of hand as we tend to
do. We should ask whether the requests are based on sound
justification, and if special and differential treatment is to
be a part of trade agreements, how it can be incorporated
without destroying the universality of the world trading rules.
Third, the US should broaden its focus in agricultural
negotiations, that appears to be largely on the EU. It is true
that the US wants to curb some of the trade-distorting
practices of the EU, namely export subsidies, and wants to
avoid some of the trade restrictive practices the EU is
proposing in the guise of food safety, animal welfare, and
multifunctionality. However, the reality is that market growth
for US agricultural exports is outside the EU in the developing
countries of Asia, Latin America, and Africa. Therefore, our
market access strategy should focus on those countries. I have
been observing and participating in trade negotiations for
nearly forty years, and in that time I have observed a near
obsession in the USDA regarding the CAP and efforts to change
or destroy it at the cost of almost every other issue.
It appears that too much effort is being put into achieving
a negotiating mandate that tries to predetermine the final
outcome of the negotiations. Some, including some of our
agricultural groups, view each word proposed by other countries
as having a hidden meaning and always attribute the worst
possible motives to that meaning. I believe that we should stop
trying to negotiate the final outcome in advance and
concentrate on getting discussions started on the modalities to
achieve the trade liberalization we desire. It is far more
important whether the final outcome contains a 25, 50 or 90
percent reduction in the volume of subsidized exports than
whether the negotiating mandate contained the magic word
eliminate. And it probably would not mark the end of all market
access negotiations if the word multifunctionality appears
somewhere in the mandate. We should focus on strategy to
achieve desired results not on strategy to produce a framework
with the desired buzzwords.
At the same time that we are pursuing a negotiating
framework in the WTO Committee on Agriculture and attempting to
gather allies from the developing countries, we should actively
pursue our rights under WTO rules. The so-called ``peace
clause'' expires at the end of 2003, and we should be ready and
willing to take WTO action as soon as it expires against those
practices and policies that appear to jeopardize our WTO
rights. Unless other countries indicate a willingness to
cooperate on moving ahead on the agricultural issues of
interest to us, we should not agree to extend the peace clause
beyond its current expiration date.
The WTO decision process clearly is not suited for a world
of instant communication and a membership of 135 countries or
more. The consensus approach to decision making appears no
longer to work, and a system to replace it is not immediately
obvious. In addition, the closed nature of the process has
raised suspicions among some member nations as well as
nongovernmental organizations. This issue also needs to be
addressed, with due regard to the vast difference between
countries on the role of private organizations.
There appears much work to be done before the WTO
Ministerial can be resumed with a good prospect of success.
Getting that work underway also will allow the next
administration to move to develop the consensus needed in the
US to allow us to become the world leaders again.
Mr. Houghton. Thank you, Mr. Hathaway.
Mr. Trumka.
STATEMENT OF JOHN J. SWEENEY, PRESIDENT, AMERICAN FEDERATION OF
LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS; AS PRESENTED BY
RICHARD TRUMKA, SECRETARY-TREASURER
Mr. Trumka. Thank you, Mr. Chairman.
I thank you for the opportunity to appear here today on
behalf of the AFL-CIO and our 13 million members. It's clearly
important that we understand, all of us understand and
appreciate what happened in Seattle, and that we learn the
right lessons from the breakdown in negotiations from the tens
of thousands of people in the streets and from the realities of
the current global economy.
We all have a tendency to view these events through our own
eyes. Many of those who have given testimony here today have
stressed the up side of the global economy, rapidly growing
trade, investment flows, a booming stock market, job creation
here in the United States.
But I speak to you today on behalf of working families here
in the United States and across the world, and working families
have experienced a different side of the global economy. From
our side of the bargaining table, it appears that the current
rules of the global economy have been used to tilt the odds in
favor of corporations at the expense of workers, family
farmers, the environment, and sometimes small businesses.
These rules have freed up corporations to move production
around the globe in search of the most vulnerable and
disenfranchised workers and the most lax regulation. These
rules have pressured governments to cut social spending, to
weaken labor laws and to export their way out of every corner.
We have not yet experienced the global economy described by
the so-called free traders, an economy that evenly spreads
wealth and opportunity and that brings prosperity which in turn
improves rights. We live in a global economy where inequality
is at an all-time high and growing, both between and within
countries. We live in a global economy ravaged by financial
crises and speculative booms and busts, where workers pay the
high price of adjustment and speculators are bailed out.
We live in an economy where the largest companies in the
world, headed by some of the richest people in the world, sell
over-priced goods to the relatively wealthy consumers and pay
their workers too little to buy a quart of milk or a pound of
beans for their family, put factories in countries where
organizing an independent labor union can be a death sentence
and spend millions of dollars a year fending off union
organizing drives.
But at the end of the day, we're all living in the same
global economy. Rosy predictions and corporate cheerleading
cannot change the reality of the global economy. That's our
job.
Yours as Members of Congress, mine as Secretary-Treasurer
of the AFL-CIO, to insist that governments craft rules for this
global economy that will deliver better outcomes to workers as
well as employers and to small poor countries as well as to big
rich ones. The lesson of Seattle that we must all learn is that
there is no going back. The American people and the U.S.
Congress have rejected new trade agreements that simply
replicate the old ones. The member countries of the WTO have
called for a time out on further trade talks until we have a
better common understanding of the impact of past trade and
financial liberalization on income and equality, on development
and on global financial markets.
Worse yet, many diverse voices in Seattle called for
institutional reforms to ensure that the WTO operate with more
democratic accountability and transparency. I want to take this
opportunity to associate myself and thank Mr. John Lewis for
his remarks this afternoon.
I am particularly, we are particularly frustrated, Mr.
Chairman, with the administration's prolonged inaction on steel
wire rod section 201 cases. A decision was due from the
administration on September 27, more than 4 months ago. In the
meantime, imports continue to grow and thousands of steel
workers' jobs have been put at risk. The steel workers played
by the rules. They waited patiently for a decision and their
patience is wearing thin. They deserve a timely decision and
appropriate action.
If we do not do better in the future, Mr. Chairman, if the
global system continues to generate growing inequality,
environmental destruction, and a race to the bottom for working
people, then I can assure you, it will generate broad
opposition that will pale Seattle. It's important for all of
you in Congress to recognize that these views are shared by a
broad and a growing majority, both in the United States where
voters overwhelmingly believe that workers' rights and
environmental protections should be enforced in the global
economy and across the world, by working people whose voices
too often go unheard.
None of these issues, Mr. Chairman, that I've raised here
today is addressed in the bilateral WTO ascension agreement the
United States government signed with China late last year. The
Chinese Government's abysmal record of violating its citizens'
fundamental human rights to freedom of speech and religion and
association will be harder, not easier to challenge, if
Congress grants permanent NTR.
The Chinese Government's woeful record of violating the
term of trade agreements it has signed will likely be worsened,
not improved, if the United States agrees to grant permanent
NTR. If Congress gives up the right to an annual review of
China's human rights record and trade compliance, the pressure
to reform will be off the Chinese Government. It's absolutely
essential that this Congress take a firm and principled
position against permanent NTR so that we can begin to build a
global economy that lives up to its potential and to our
expectations.
Mr. Chairman, let's all agree on one thing, that business
as usual cannot be the order of the day. This global economy
will either be reformed or face ever greater resistance. Thank
you, sir.
[The prepared statement follows:]
Statement of John J. Sweeney, President, American Federation of Labor
and Congress of Industrial Organizations; as presented by Richard
Trumka, Secretary-Treasurer
Mr. Chairman, members of the Subcommittee, I thank you for
the opportunity to appear here today on behalf of the AFL-CIO
and our thirteen million members.
It is crucially important that we all understand and
appreciate what happened in Seattle, and that we learn the
right lessons from the breakdown in negotiations, from the tens
of thousands of people in the streets, and from the realities
of the current global economy.
We all have a tendency to view these events through our own
lens. Many of those who have given testimony here today have
stressed the upside of the global economy--rapidly growing
trade and investment flows, a booming stock market, and job
creation here in the United States.
But I speak to you today on behalf of working families--
here in the United States and also across the world. And
working families have experienced a different side of the
global economy.
From our side of the bargaining table, it appears that the
current rules of the global economy have been used to tilt the
odds in favor of corporations at the expense of workers, family
farmers, the environment, and sometimes small businesses. These
rules have freed up corporations to move production around the
globe in search of the most vulnerable and disenfranchised
workers and the most lax regulation. These rules have pressured
governments to cut social spending, to weaken labor laws, and
to export their way out of every corner.
We don't experience the global economy described by the so-
called free traders--an economy that evenly spreads wealth and
opportunity, and that brings prosperity, which in turn improves
rights.
We live in a global economy where income inequality is at
an all-time high, and growing--both between and within
countries. We live in a global economy ravaged by financial
crises and speculative booms and busts, where workers pay the
high price of adjustment and speculators are bailed out. We
live in a global economy where the largest companies in the
world, headed by some of the richest people in the world, sell
over-priced goods to relatively wealthy consumers, pay their
workers too little to buy a quart of milk or a pound of beans
for their family, put factories in countries where organizing
an independent labor union can be a death sentence, and spend
millions of dollars a year fending off union organizing drives.
But at the end of the day, we are all living in the same
global economy. Rosy predictions and corporate cheerleading
cannot change this face of the global economy. That is our
job--yours as members of Congress, mine as president of the
AFL-CIO--to insist that governments craft rules for this global
economy that will deliver better outcomes--to workers, as well
as employers, and to small, poor countries, as well as to big,
rich ones.
The lesson of Seattle that we all must learn is that there
can be no going back. The American people and the U.S. Congress
have rejected new trade agreements that simply replicate the
old ones. The member countries of the WTO have called for a
time-out on further trade talks until we have a better common
understanding of the impact of past trade and financial
liberalization on income inequality, on development, and on
global financial markets. Many diverse voices in Seattle called
for institutional reforms to ensure that the WTO operate with
more democratic accountability and transparency.
I would like to take this opportunity to express my
appreciation for Mr. Lewis's remarks this afternoon on the need
to improve the transparency of our trade institutions in
general and NAFTA in particular.
The AFL-CIO believes that the WTO must carry out the
following reforms if it is to survive as a legitimate and
politically viable institution:
Incorporate enforceable rules on core workers'
rights (including the freedom of association, the right to
bargain collectively, and prohibitions on child labor, forced
labor and discrimination in employment).
Establish accession criteria requiring that new
WTO members are in compliance with core workers' rights.
Overhaul existing rules to strengthen national
safeguard protections in the case of import surges and ensure
that trade rules do not override legitimate domestic
regulations.
Develop stricter rules against the mandatory
transfer of technology, production, and production techniques.
Ensure that WTO rules do not create pressure on
governments to privatize public services.
Carry out institutional reforms, enhancing
transparency, accountability and access, so that citizens can
understand the basis for WTO decisions, as well as provide
meaningful input to this process.
Provide more technical and legal support to
developing countries so their participation in negotiations is
not hampered by lack of resources or technical expertise.
It is also essential that the U.S. government enforce its
existing trade laws effectively and consistently. I am
particularly frustrated with the Administration's prolonged
inaction on the steel wire rod Section 201 case. A decision was
due from the Administration on September 27--now more than four
months ago. In the meantime, imports are continuing to grow,
and thousands of steelworkers' jobs have been put at risk. The
steelworkers played by the rules, and they have waited
patiently for a decision, but their patience is wearing thin.
They deserve a timely decision and appropriate action.
If we do not do better in the future--if the global system
continues to generate growing inequality, environmental
destruction and a race to the bottom for working people--then I
can assure you, it will generate broad opposition that will
make Seattle look tame.
All of us need to think anew. Leaders of the global
institutions face a legitimacy crisis that cannot be solved by
better public relations and more educational campaigns. Their
institutions will become more accountable, or more irrelevant.
Developing nations face a growing inequality of income and
hope. They should not be forced into one economic strait-
jacket. For they will either find ways to empower workers and
protect the environment, or face growing popular resistance.
Heads of global corporations and banks must not be misled
by their own rhetoric. They will be held accountable for how
they do business--by consumers, by workers, by governments.
Leaders of the corporate community must join the effort to
establish enforceable laws that put limits on cut-throat
competition. It is in the interest of multinational
corporations and the governments that regulate them to have
rules that are agreed upon by all.
Labor leaders across the world also must change to meet the
new challenges. At the AFL-CIO, we know that we have to deepen
our own growing internationalism, and develop new
sophistication in bargaining and organizing across national
lines.
We also recognize that we must join our voices with those
in developing countries calling for high-road development
strategies. We must work to ensure that developing countries
are no longer crippled by crushing debt burdens, and that they
have the resources they need to engage in trade negotiations on
an equal footing, as well as the technical support to implement
and enforce labor and environmental standards.
Seattle marked a crossroads. Now, joined by millions of
others across the world, we pledge not to rest, but to continue
to press for core workers' rights that are the basis of
economic freedom and equitable development.
It is important for you in Congress to recognize that these
views are shared by a broad and growing majority--both in the
United States, where voters overwhelmingly believe that
workers' rights and environmental protections should be
enforced in the global economy, and across the world, by
working people whose voices too often go unheard.
None of the issues I have raised here today are addressed
in the bilateral accession agreement the U.S. government signed
with China late last year. The Chinese government's abysmal
record of violating its citizens' fundamental human rights to
freedom of speech, religion, and association will be harder,
not easier, to challenge if Congress grants permanent Normal
Trade Relations (NTR). The Chinese government's woeful record
of violating the terms of trade agreements it has signed will
likely be worsened, not improved, if the United States agrees
to grant permanent NTR. If Congress gives up its right to an
annual review of China's human rights record and trade
compliance, the pressure to reform will be off the Chinese
government. It is absolutely essential that Congress take a
firm and principled position against permanent NTR, so that we
can begin to build a global economy that lives up to its
potential and to our expectations.
Here, let us all agree on one thing: that business as usual
cannot be the order of the day. This global economy will either
be reformed or face ever greater resistance.
I thank you for your attention and I look forward to your
questions.
Mr. Houghton. Thank you very much, Mr. Trumka.
Mr. Niles.
STATEMENT OF THOMAS M.T. NILES, PRESIDENT, UNITED STATES
COUNCIL FOR INTERNATIONAL BUSINESS, NEW YORK, NEW YORK
Mr. Niles. Thank you very much, Mr. Chairman. I appreciate
the opportunity to appear before the Subcommittee today.
I'll use my time primarily to talk about the issue of trade
and labor, or to put it another way, how to deal with the issue
of labor rights in the globalizing economy. This is because the
organization I represent, the U.S. Council for International
Business, represents U.S. business in the International Labor
Organization. We have a particular interest in this issue.
Trade and labor was one of the points of controversy in
Seattle, but by no means the only issue. It was not, I don't
think, the principal rock on which the WTO Ministerial failed.
In my view, Seattle failed largely because of the long and
debilitating struggle over the succession to Renato Ruggiero as
WTO Director General. Traditionally, the DG has played the role
of conciliator and consensus builder in the WTO. However,
during most of the period leading up to the Seattle
Ministerial, there was no Director General, and the position
itself was a source of controversy.
Ministers, not surprisingly, in Seattle during 4 days were
not able to do what their senior officials were unable to do in
18 months in Geneva. Progress was made in Seattle and I hope
that that can be enshrined in some sort of a document and can
be used as the basis for further discussions in Geneva.
The demonstrations that we've discussed today were largely,
in my view, street theater and a media event, and did not cause
the failure of the Ministerial. The Ministerial would have
failed had there been no demonstrations in Seattle.
On the trade and labor issue, Mr. Chairman, there were two
proposals on the table. 1) the United States proposal for a
working group on trade and labor; 2) a proposal by the European
Union for a ``Joint WTO-ILO Standing Working Forum on Trade
Globalization and Labor Issues.'' The developing countries
rejected both of these proposals, arguing that the issue of
trade and labor had been settled once and for all in Singapore.
The statement that President Clinton made to the Seattle
newspaper changed no minds. It did tend to confirm what the
developing countries had believed all along, that the United
States was not after a study, but after sanctions.
My organization, the USCIB, fully shares and supports the
efforts and objectives of the United States government and
others, including the AFL-CIO, to raise labor standards around
the world. Where we part company is over tactics, or how best
to do it. Let me briefly explain why we don't believe it would
be productive to continue to try to introduce labor issues into
the WTO.
First, if we're interested in studies, Mr. Chairman, the
studies have been done, many of them, in the OECD and the ILO,
with generally the conclusion that differences in labor
standards do not in and of themselves determine trade flows and
investment flows. If we want to use trade to encourage higher
labor standards, there's a better way to do it. We could follow
the European Union's example and add to our GSP benefits for
developing countries that fully satisfy ILO basic core labor
standards. We can do this unilaterally.
The second reason for not putting labor issues into the WTO
is that developing countries are dead set against the proposal
and are not going to change their position. I saw no evidence
in Seattle that there was any flexibility on their part.
They're not prepared even to discuss it, which can be seen as
irrational, but that's their position.
Third and most importantly, Mr. Chairman, there is a better
way to do this, namely through the use of the June 1998 ILO
Declaration on Fundamental Principles and Rights at Work. This
declaration, which was developed largely through cooperation
between our Council and the ICFTU, takes the mandate that was
given to the ILO by the Singapore WTO Ministerial and creates a
means to raise core labor standards around the world, including
in countries that have not ratified ILO core conventions. And
that latter point is particularly important.
Implementation of the Declaration is now beginning with the
principle of freedom of association. We hope that the U.S.
Government and the AFL-CIO will join us in the ILO to ensure
the success of this project. Through the use of ILO cooperative
programs and its influence, coupled with the extraordinary
power of publicity in our networked world, this could be a very
effective process. Countries will not want to risk being left
out of international investment flows due to poor labor
practices. Nor will companies wish to run the risk of consumer
resistance due to problems in the labor area. We've seen many
examples of how this can work.
We do need, Mr. Chairman, better coordination between the
various organizations that are involved in parts of the
international economic development process, including the
international financial institutions, the ILO and the WTO, to
ensure that the social consequences of economic restructuring
can better be dealt with.
In sum, Mr. Chairman, our council believes there's a better
way through the ILO to deal with the issue of trade and labor.
Resurrecting the U.S. proposal for a WTO working group after
three rejections, Marrakesh, Singapore and Seattle, would not
only mean another rejection in the WTO. It would also
compromise our chances for major progress in the ILO, given the
developing countries' likely reaction.
We have a significant opportunity now to overcome this
setback of Seattle and move ahead on a broad front
internationally and domestically. On the latter, we hope that
this millennial year will be marked by Congressional approval
of PNTR for China, the Africa CBI initiative and WTO
reauthorization, demonstrating to our trading partners that
Seattle was an aberration and that the United States can play
its indispensable leadership role in creating a rules based
international trading system.
Thank you very much, Mr. Chairman.
[The prepared statement follows:]
Statement of Thomas M.T. Niles, President, United States Council for
International Business, New York, New York
I am Thomas Niles, President of the United States Council
for International Business (USCIB). The USCIB has approximately
300 members including multinational enterprises, law firms and
trade associations. It represents U.S. business in the
International Chamber of Commerce (ICC), in the Business and
Industry Advisory Committee (BIAC) to the OECD, and, most
importantly for the subject I wish to discuss today, in the
International Labor Organization (ILO) through the
International Organization of Employers (IOE).
I very much appreciate the opportunity to appear before the
Subcommittee today. I wish to use the time allocated to me to
discuss the issue of the relationship between trade and labor.
Because of the USCIB's participation in the ILO, this is an
issue on which we have been particularly active.
The issue of trade and labor, or to put it another way, how
to deal with the issue of labor rights and standards in a
globalizing economy, is not a new one, going back as it does at
least to the formation of the ILO in 1919. However, this issue
received more prominence during the run-up to the Seattle WTO
Ministerial and at the Ministerial itself than was the case in
previous multilateral trade rounds. While trade and labor was
one of the controversial issues at Seattle, it was not the
only, or even the principal rock, on which that enterprise
foundered.
In my view, the principal reason for the failure in Seattle
was the long and debilitating struggle in the WTO over the
replacement of Renato Ruggiero as WTO Director General.
Traditionally, the WTO, or GATT, Director General has played a
vital role as conciliator and problem solver. During much of
the run-up to Seattle, not only was there no Director General,
but the filling of that office itself was a major source of
contention. Not surprisingly, Ministers found it impossible to
solve in four days what had eluded senior officials for more
than 18 months. In addition, the developing countries came to
Seattle believing they had been denied the ``special and
differential treatment'' they had been promised in the Uruguay
Round. For these countries, numbering more than 100 of the
WTO's 134 members, the trade and labor issue was particularly
sensitive.
There were two proposals on the trade and labor issue on
the table at Seattle: one, put forward by the United States,
called for the establishment of a trade and labor working group
in the WTO; the second, advanced by the EU, provided for the
formation of a ``Joint ILO-WTO Standing Working Forum on Trade,
Globalization and Labor Issues.'' The developing countries
rejected both. Their position was, and remains, that this issue
was settled once and for all at the Singapore WTO Ministerial
in December 1996, which referred the issue to the ILO. This was
restated in a G-77 statement on Seattle issued in October 1999.
Although Administration representatives insisted that they
were only interested in ``studying'' the relationship between
trade and labor standards, this position was not taken
seriously by the developing countries. The latter assumed that
the United States had a hidden agenda of establishing a basis
for imposing trade sanctions over non-observance of core ILO
labor standards. President Clinton's December 1 interview with
the Seattle Post-Intelligencer confirmed their fears that the
United States had something more concrete in mind than a
``study.''
The USCIB strongly supports efforts to raise labor
standards around the world. In this respect, we fully share the
goals of the Administration and others, such as the AFL-CIO.
Where we part company is on how best to accomplish this goal.
Allow me briefly to outline why we oppose the introduction of
labor issues into the WTO:
If studies, and not sanctions, are indeed all that
is involved, the fact is that this issue has been extensively
studied by the ILO and the OECD. These organizations have
concluded that the extent to which countries adhere to ILO
labor standards does not have a discernable impact on trade
flows. For its part, the WTO, which has no particular
analytical capability, is unlikely to be able to add anything
to those studies. If the objective is to create a basis for
trade sanctions, we question how the imposition of barriers to
LDC exports will promote better compliance with ILO labor
standards. We believe, as many studies have shown, that the key
to better labor standards is economic development, which can be
achieved through increased trade and investment flows, not
sanctions. If the U.S. wishes to push this process forward, we
recommend the adoption of the EU program of giving a supplement
to GSP to countries that fulfill their obligations under ILO
conventions;
As I noted, the developing countries are dead set
against the U.S. proposal, which they see as the first step
toward a new protectionism. Realistically, there is no package
of concessions to which we could agree that could cause them to
abandon this position. Under the provisions of the WTO Charter,
a consensus would be required to introduce provisions
permitting us to impose sanctions in cases involving non-
observance of core labor standards. Should we argue that
developing country acceptance of a trade and labor working
party is a requirement for their agreement to a new trade
round, most of the developing countries would reply that the
idea of a new round was ours and that they are prepared to
forego the experience; and,
Finally, and most importantly, there is a better
way to deal with this issue, namely through the ILO, using the
June 1998 ILO Declaration on Fundamental Principles and Rights
at Work.
The ILO Declaration was developed in large part at the
initiative of the USCIB, particularly by my predecessor,
Ambassador Abraham Katz. It takes the mandate given to the ILO
by the Singapore WTO Ministerial and creates a basis on which
the ILO can use its influence to promote the implementation of
its core labor standards throughout the world, including in
countries that have not ratified the relevant ILO Conventions.
This process is now beginning, and in its first year the ILO
will consider the principle of freedom of association, one of
the fundamental requirements for raising labor standards.
It has been argued that this approach is flawed due to the
fact that the ILO ``has no teeth.'' However, the ILO has
significant influence, including in some of the countries most
in need of radical changes in the labor area. Moreover, the
publicity that will accompany ILO efforts to deal with these
problems, using the Declaration, will be a powerful incentive
for governments and private companies that do not adhere to
core labor standards to clean up their acts. Countries will not
wish to be in the spotlight for poor labor practices, given
what this can mean for flows of capital, and companies will not
wish to run the risk of consumer resistance to their products
due to problems in the labor area. We have seen examples of the
power of such publicity in a networked world.
One idea that has recently surfaced in the discussion of
this issue is the need to establish some mechanism to
coordinate the activities of the various international agencies
involved in one aspect or another of the development process.
For example, when the IMF develops a country program that
involves austerity measures by the country concerned, it is
crucially important to keep in mind that this program may have
significant social consequences. Does the country in question
have programs, a ``social safety net,'' to deal with those
consequences? This is where the ILO could, and should, be
called in, to work with the IMF to ensure that the negative
social consequences of the IMF program can be minimized. Some
sort of informal consultative structure involving the
International Financial Institutions, the ILO, the WTO, UNCTAD,
and other organizations, could prove quite useful.
In conclusion, Mr. Chairman, the USCIB believes strongly
that there is a better way to deal with the issue of trade and
labor than to persist in what will be a futile effort to force
this issue into the WTO. The ILO is the better alternative, and
the United States government, labor and business should work
together, as we did in the case of the 1998 ILO Declaration, to
ensure that the ILO moves ahead vigorously in implementing the
Declaration. Further alienating the developing countries by
pushing for a WTO working group on trade and labor could ensure
that we will fail in the ILO as well as in the WTO.
Chairman Crane [presiding]. Thank you.
Ms. Wallach.
STATEMENT OF LORI WALLACH, DIRECTOR, PUBLIC CITIZEN'S GLOBAL
TRADE WATCH
Ms. Wallach. Mr. Chairman and Members of the Subcommittee,
thank you for the opportunity to testify. I'm Lori Wallach with
Public Citizen's Global Trade Watch.
I'll summarize my written testimony by starting with number
one, Seattle was not a fluke or an accident caused by random
factors, either. And indeed, it's important to understand who
the protesters were and what they were about.
For instance, to rely on the goofiness of, say, Tom
Friedman, is at the peril of making the changes to move
forward. In fact, the protesters were informed. Ninety-nine
point nine percent of them were peaceful. They are diverse, and
I chance to say, some of them might have been your neighbors.
They came there, 50,000 of them, on their own time and
their own dime, because they were motivated by their personal
experience of 5 years of the WTO. The WTO's record was the
major organizer of the protest.
Not only should these folks not be dismissed as ignorant,
but at this point it's not possible to saddle with them with
more macroeconomic statistics or promises of benefits. Some of
them bought into the $1,700 a year in family income will
increase if the WTO passes line, and after 5 years, they don't
just realize that didn't happen, they were additionally peeved.
Meanwhile, many of the things they were concerned about did
occur. Every single environmental and consumer law that WTO
reviewed was ruled against, income inequality has increased.
For the folks who work in development issues, the share of
trade for the developed countries has decreased, and so forth.
These folks also don't buy the inevitability line. They
know the question is not whether there will be globalization or
not, but what will be the rules. And they know it took a long
time for the current rules to be designed and put in place. And
they find the current rules' outcomes unacceptable, and they're
committed to working for change. And they're blessed to live in
a democracy, where when the demand for change builds
sufficiently, change either happens in the policy or in the
policymakers.
Number two, the intensity and diversity of the protests
should not have come as a surprise, certainly not to the U.S.
Congress, as there is a long list of empirical evidence
demonstrating that the NAFTA-WTO paradigm of international
commerce is no longer viable. That evidence being two fast
tracks, two CBIs, an MAI, and so forth., that did not happen.
The consensus is gone because the circumstances changed and
the policy didn't keep up. And the folks who were in Seattle
would really prefer to work for it in a creative way to change
old policies. But it appears that those who support the status
quo seek one more piece of evidence about why we're not going
that way. And that would be the fight on permanent most-
favored-nation. Which by the way, after hearing the mantra from
the administration about losing all the benefits if we don't
permit most-favored-nation, no Subcommittee other than this one
knows more that we have a bilateral reciprocal MFN agreement
with China which continues. The question is the dispute
resolution. We don't lose the market access benefits.
And number three, continued inflexibility will be the
number one contributing factor to imploding the WTO. The
President says we should try a new paradigm, but then he pushes
permanent MFN with no labor, environment and human rights. USTR
Barshefsky calls for new a round, but actually a month ago said
her lesson was they needed to fix the WTO first. The groups who
brought you Seattle are arguing that to start with, pruning
back some of the places that the Uruguay round got into
domestic decisionmaking would be a first way to go forward.
And then finally, the cause of the breakdown of the
negotiations and the implications. To say there was no link
between the protesters is perhaps soothing in the short term,
but it's wrong. It wasn't the folks in the streets. It's been
years of organizing and educating in numerous countries. And in
fact, a year-long campaign leading toward Seattle, called the
new turnaround campaign.
What resulted was, number one, for the first time
negotiators were someone accountable to their own publics and
were being closely observed. And number two, the whole world
got to see that the U.S. public opinion did not necessarily
support the agenda the U.S. had pushed.
So as a conclusion, I would hope one thing we can agree is
that the Seattle experience should have been a wakeup call for
the groups who organized toward it. The resolution on the WTO
is not something we take seriously. We think the WTO should be
on a short leash to make some major changes, but to face fix it
or nix it, either the system will have to bend or it will
break. That would be unfortunate.
Thank you.
[The prepared statement follows:]
Statement of Lori Wallach, Director, Public Citizen's Global Trade
Watch
Mr. Chairman and members of the committee, on behalf of
Public Citizen and its members nationwide, thank you for the
opportunity to testify about the historic World Trade
Organization (WTO) Ministerial Summit in Seattle held in late
1999.
My name is Lori Wallach. I am the director of Public
Citizen's Global Trade Watch. Public Citizen is a consumer
advocacy group founded in 1971 by Ralph Nader. Global Trade
Watch is a division of Public Citizen founded in 1993 which
focuses on governmental and corporate accountability on
globalization, international commercial and trade issues.
Allow me to start my testimony with a summary of my
conclusions:
First--Seattle was not a fluke. The sentiment underlying
the WTO protests is based on the personal experience of people
affected by the WTO's rules and rulings. The critics of WTO are
energized by their knowledge of WTO's effects, not by
``ignorance,'' which some WTO-boosters dismissively argue can
be educated away. The majority of protestors were peaceful,
informed people who probably include some of your neighbors and
who intend to see the major flaws in the current model of
corporate economic globalization fixed. These folks realize
that what we have now is not ``free trade.'' And, they won't
tolerate the continued damage to many of their most important
values and interests of the ``corporate managed trade'' system
we now have. They know that there is nothing inevitable about
the current rules. They know it took years for those
benefitting from this version to develop it and put it into
place via mechanisms like the Uruguay Round Agreements and the
WTO.
Second--the diversity and intensity of the protests against
WTO in Seattle should not have been a surprise--certainly not
to the US Congress. The fact of the matter is that
international commercial policy in the United States has been
at a standstill for years because consensus on this vital
matter has broken down. American consumers rallied with labor
and environmental allies to stop the out-dated Fast Track
procedure, CBI NAFTA expansion, and the Multilateral Agreement
on Investment. The status quo trade policy--which now does set
environmental, human rights and labor standards in commercial
agreement, but in the form of constraining government action in
these areas--is no longer publically acceptable or politically
viable. We need to move forward towards a new policy. Yet
instead the same folks who stopped Fast Track, MAI et al are
facing the tedious prospect of having to stop yet another
backwards proposal--PMFN for China--instead of working on how
to move forward.
Third--continued stubbornness by the beneficiaries of the
international commercial policy status quo (against working
towards a new approach) will be the number one contributing
factor to further implosion of institutions such as WTO. WTO
either must bend significantly or it will break.
On Friday, December 3, 1999, labor, environmental,
consumer, human rights, religious, and other non-governmental
organizations (NGOs) from around the world let out a collective
``whoop'' in Seattle, when WTO Director General Michael Moore
and USTR Charlene Barshefsky announced a halt to WTO
negotiations intended to launch a Millennium Round of WTO
expansion.
Many of these groups had been working since the early
1990s. First we worked to shape the Uruguay Round texts. Then,
we tried to stop their adoption after having core public
interest concerns about safeguarding food safety and the
environment not only totally left out, but undermined by the
Uruguay Round package. Finally, over the past five years we
have monitored the Uruguay Round's outcomes and attempted to
limit the damage the Uruguay Round Agreements were doing to our
hard-won domestic public interest policies and democratic
decision-making systems.
However, as well in that room now also whooping to see the
WTO foiled from an expansion of ``more of the same'' where the
minority of NGOs which had supported the Uruguay Round and
establishment of the WTO. This shift is one that proponents of
the status quo dismiss at their peril.
For instance, the international consumer movement to which
Public Citizen relates was divided on the Uruguay Round. Some
consumer groups were concerned that the powerful enforcement of
the WTO combined with the anti-public interest provisions
tucked into the Uruguay Round's underlying substantive
agreements could undercut vital consumer interests and
safeguards. Other consumer groups were hopeful that increased
competition would lower prices and increase choice for
consumers around the world while promised economic benefits
would improve the standard of living for many poor consumers.
Back in 1993, no one could know what precisely would result.
But after carefully reviewing the WTO's real life five year
record, in the fall of 1999 Consumers International (the
international federation of consumer groups which had supported
the Uruguay Round) as well as many of its members
organizations, joined a global NGO command for no WTO expansion
until an array of problems were ``turned around''--namely
repairs, deletions and replacements of some WTO terms.
We are often asked how we were able to organize such
diverse WTO critics coming from all over the country at their
own expense to protest the expansion of the WTO. There actually
is a simple answer to that inquiry. It was not any NGO, but the
WTO, which provided the greatest organizing push: the WTO's
five year record of undercutting a diverse array of hard-won
public interest accomplishments around the world is what
brought out all of those people to Seattle.
WTO and US officials claim that the impasse in Seattle had
nothing to do with the opposition by citizens and the protests
in Seattle's streets, but was a result of the irreconcilable
differences between developed and developing countries.
On the contrary, the collapse of the Seattle WTO expansion
attempt was in no small part the result of years of work--based
on analysis of the WTO's operation to date and aimed at the
inherent and fundamental flaws of that organization.
Over the course of 1999, hundreds of NGOs working on the
``inside,'' including Public Citizen and thousands of NGOs
around the world, put forth to their governments rigorous
demands on topics now included in international commercial
negotiations as diverse as food safety and labeling,
genetically modified organisms, forest and animal protection,
investment rules, services, and agriculture. We also monitored
our country delegations closely.
Tens of thousands of protestors came to the streets when it
became clear that all of our calls for a review and repair of
WTO had been rejected in favor of more-of-the-same.
The protestors on the streets, 99.9% of whom were peaceful
and well-informed, can be credited with revealing to foreign
delegation and to the world public via the media the depth of
US public opposition to an international commercial agenda
sublimating all values to that of commerce. Given this agenda
is pushed by the US government, revealing the lack of broad
public support for it here is one of many successes from
Seattle. (See Annex below for more on the protests.)
The protests also shortened the time for negotiations to
launch WTO expansion. The shorter time made clearer how central
the controversial ``Green Room'' process was in making key
decisions.
As well, the Clinton Administration, just like governments
all over the world, found itself for the first time in
international commercial talks, with its public demanding some
level of accountability and watching VERY closely. This
scenario made it impossible to slip into the usual closed room
and trade away numerous countries public interest for narrow
special interests.
The events in Seattle rocked the corporate world. The
Financial Times editorial page bemoaned the ``Disaster in
Seattle,'' the New York Times the ``Shipwreck in Seattle,'' and
The Economist labeled the talks ``A Global Disaster.'' And,
from reports we have had from Davos, the CEOs collected there
either were stunned about Seattle and/or still do not
understand what happened or it means.
First--Seattle was not a fluke. The sentiment it
represented is based on the personal experience of people
affected by the WTO's rules and rulings. The critics of WTO are
energized by their knowledge of WTO's effects, not by
``ignorance'' as claimed by some WTO-boosters. Indeed, those
who follow Tom Friedman's ill-informed calls to ignore the
protest as a fluke and move on with business as usual are being
set up for a major fall. Seattle was no fluke; it is the new
reality.
The majority of protestors were peaceful, informed people
who probably include some of your neighbors and who intend to
see the major flaws in the current model of corporate economic
globalization fixed. These folks realize that what we have now
is not ``free trade.'' They are not willing to tolerate
continued damage to many of their most important values and
interests of the ``corporate managed trade'' system delivered
by mechanisms like the Uruguay Round Agreements and WTO.
There has been enormous interest in how Public Citizen
raised ``all of the money'' required to organize the assorted
NGO conferences in Seattle, open offices, and provide
transportation and housing to NGO participants from around the
world. The nature of that inquiry exactly pinpoints the depth
of mis-understanding about what the opposition was and is.
There is no interested source of Public Citizen's funding
because frankly, there was not much money that went into
Seattle organizing. The Seattle protestors were ``public
citizens'' meaning not our organization's membership, but
people with ``day jobs'' who gave up their free time to work on
Seattle activities because they are interested and involved in
their governance. With the exception of a few NGO
representatives from Africa and Latin America, everyone paid
their own way and the latter were assisted by several church
organization and other internationally-minded NGO in the U.S.
and Europe.
Unlike the corporate host committee for Seattle, almost all
of our work was done by volunteers and supplies and services
were donated bit-by-bit by people who care about what
globalization means for their lives.
We did find accommodations for almost 2500 people, but what
is often not noted is that one paid staffer and a team of
volunteers found local families to put up over 2000 of these
folks in homes. The rest paid for beds we set aside early on at
the local youth hostel and a few cheap hotels. We did arrange a
transportation system, but it was a pool of hundreds of
volunteers who signed up for certain times and days to
volunteer to drive around people and supplies in their car,
vans and trucks.
With volunteer help from local union carpenters, we built a
temporary office space in an empty building in downtown Seattle
that is slated for demolition. That office was given ancient
computers donated by a Seattle homeless advocacy group which
had gotten computer upgrades. The phones were an assortment of
old phones from Public Citizen and a local environmental group.
At the peak, there were five paid staff--who coordinated
literally over 1000 Seattle-area volunteers.
Second--the diversity and intensity of the protests against
WTO in Seattle should not have been a surprise--certainly not
to the US Congress. International commercial policy in the
United States has been at a standstill for years because
consensus on this vital matter has broken down. American
consumers rallied with labor and environmental allies to stop
the undemocratic Fast Track procedure, CBI NAFTA expansion, and
the Multilateral Agreement on Investment.
The status quo trade policy--which now does set
environmental, human rights and labor standards in commercial
agreement, but in the form of limiting government action on
these vital public interest safeguards--is no longer publically
acceptable or politically viable. We need to move forward
towards new policies.
Yet, instead the same folks who stopped Fast Track, MAI and
the Seattle WTO expansion launch are facing the tedious
prospect having to stop yet another backwards proposal--PMFN
for China--instead of working on how to move forward.
Third--continued stubbornness by the limited beneficiaries
of the status quo on international commercial policy (against
working towards new approachs) will be the major contributing
factor to further implosion of institutions such as WTO. WTO
either must bend significantly or it will break.
The message from US voters, NGOs and the international
consumer movement is one and the same. We must radically
restructure the way in which our governments undertake
international commercial policy--and we are not just talking
about transparency, but about substance.
While the specifics of such substantive changes are beyond
the scope of this testimony, the basic notion is that the WTO
must be pruned back. As regards a variety of issue areas, the
18 agreements the WTO was empowered to enforce after the
Uruguay Round simply go beyond what is appropriate to be
decided by ``international commercial'' regulations. The
Uruguay Round saw a transformation from a focus on tariffs and
quotas and objective principles of competition (eg national
treatment) into an array of rules setting regulatory and social
policy.
With the Uruguay Round, so-called ``trade'' rules moved
beyond the objective and into imposing value decisions about
the level of health or safety protection a country will be
permitted to provide its residents if it desires to remain
within trade rules (and avoid sanctions, etc.) Thus, the
European Union deciding to ban all meat with residues of
artificial growth hormones--taking a Precautionary Principle
approach to health regulation--was ruled to violate WTO rules
even though it treated domestic and foreign cattle the same.
That level of protection (zero risk) was not allowed.
Similarly, the notion of imposing 20 year monopoly patents
on seeds and all medicines is a value decision to subjugate
health and food security under commercial priorities. It is
these sorts of issues, in which WTO rules constrain today's
developing countries from using the same strategies for
development used by the US when it was a developing country
relative to much of Europe, that fuels opposition to WTO in the
developing world.
The over-reaching into such subjective policy decisions, as
implemented on millions of people over the past five years, is
what is at the root of growing WTO opposition worldwide.
Thus, ironically it has been in achieving the goal of the
Uruguay Round's designers--to quote its former head to create
``the constitution for a single global economy''--that the WTO
will be brought down absent major change.
Are we against trade? Do we oppose any and all
globalization? Obviously not. However, what we are for is for
is rules for a global economy in which consumers, farmers,
workers, environmentalist and other citizens who will live with
the results are able to shape the design to meet the public
interest.
Annex: Seattle Protestors--``Who are those guys...'' and what really
happened
Given the television network's obsession with replaying the
few violent scenes that transpired in Seattle and the short-
sighted strategy of WTO booster in trying to characterize the
Seattle protestors as loopy and violent, I wanted to use the
record of this hearing to set that record straight.
Thousands of NGO representatives attended conferences,
workshops and meetings at venues inside and outside the
official WTO meeting buildings. Each day of the Ministerial
also had an NGO theme and a full day of educational
programming. (Days included ``health and environment,'' ``labor
and livelihoods,'' etc.) Each day had a major protect or march
which was conducted with permits and on three of the four days
drew crowds of 15,000 (agriculture and food day at a harbor
side park) to 40,000 (the labor day rally at Arena Stadium.)
All of these activities were overshadowed in media coverage,
however, by what started as peaceful civil disobedience and
ended with police sousing crowds with tear gas and rubber
bullets.
Even though Public Citizen did not organize the civil
disobedience protests, I want to set the record straight as an
observer and then later having debriefed scores of those
involved:
What occurred on Tuesday November 30 was that before
sunrise, several west coast activist groups, who had trained
hundreds of people in non-violent, civil disobedience
techniques, organized protestors to sit in at the street
intersections leading to the Trade and Convention Center. The
Seattle Student/Worker Walkout Committee organized a mass
walkout of students and employees from local schools and
businesses who were part of the sit down protest. Activists
linked arm-in-arm and sometimes chained themselves together
with the announced goal of shutting down the start of the WTO
negotiations. From the perspective of these groups and
activists, the conferences, rallies and marches organized by
groups like Public Citizen and the AFL-CIO were only one aspect
of effective protest: these groups put their focus on peaceful
direct action, such as sit ins.
These actions, premised on the non-violent civil
disobedience techniques of Martin Luther King, Jr. and Ghandi,
had been planned over months. Indeed, the groups had used
publicly accessible webcites to describe their plans and invite
people to obtain non-violent civil disobedience training.
Whatsmore, the sit down protest organizers had met with the
Seattle police both to make clear their commitment to non-
violence and to prepare the police for the massive civil
disobedience arrests that would be necessary to clear the
streets on November 30. Indeed, through a series of meeting,
the police and the sit-down protest organizers made an
agreement that arrests would not begin until sunrise so the
process could be reported by the news media. Capping these
meetings, there was a joint news conference the week before the
Ministerial which included the Seattle mayor, representatives
of groups like Public Citizen and the AFL-CIO which held march
and protest permits, and representatives of the direct action
groups planning the sit in.
For reasons which remain unclear, the Seattle police never
began the agreed process of arresting the civil disobedience
protesters and bussing them away from Seattle's downtown. Most
of the sit down protestors were not prepared to remain at their
positions for much longer than Tuesday morning, thus the media
images of hungry, shivering young protestors.
Then, mid-morning Tuesday, several dozen young people
dressed in identical black garb and wearing face masks appeared
and started marching in formation down one of Seattle's main
streets, near the Convention Center. Despite their highly-
regimented paramilitary appearance, they identified themselves
as anarchists. They had popped up, disrupted a peaceful protest
and then melted into the crowd the day at a peaceful protest in
front of a McDonalds which had featured a French farmer handing
out French cheese hit with high tariffs under current WTO
retaliation on a dispute. Tuesday midmorning, once again, these
few appeared and began smashing the windows of downtown stores,
including Old Navy, Starbucks, Niketown, and FAO Schwarz.
The peaceful protesters conducting the sit-in shouted
``Shame!'' and ``Non-violent protest!'' at the youths. Some
grabbed the window-breakers, attempting to halt the property
damage. Hundreds of Seattle police officers dressed in full
riot gear stood by and watched, actively refusing to arrest the
masked window-smashers even when peaceful protesters asked for
assistance. Indeed, in one instance, a person restraining a
black-masked vandal armed with a brick and poised before a
store window was told by police to release the vandal or risk
arrest for assault. The police then stood by as the released
vandal smashed a row of store windows in front of them.
Meanwhile, at noon, tens of thousands of labor unionists,
family farm, consumer, religious, and environmental activists
rallied at Memorial Stadium to listen to AFL-CIO president John
Sweeney, Teamsters president James Hoffa, Jr., Steelworkers
president George Becker, and other U.S. and international
labor, environmental, and other NGO leaders speak on the WTO's
impacts on people around the globe. The massive labor rally,
sponsored by the national, state, and local AFL-CIO and many
international unions, then marched toward downtown Seattle. The
plan was for the march to proceed to the Convention Center and
then head back to the stadium, where hundreds of buses awaited
the labor participants.
By mid-afternoon, over 40,000 students, activists, and
labor representatives thronged into downtown Seattle as part of
the march from Memorial Stadium. The scene that greeted the
labor marchers was surreal. Riot police dressed in Robocop
costumes (even the police horses had plastic eyeguards against
the tear gas) had begun without warning to attack random
circles of sit down protesters with an array of weaponry
including tear gas, pepper spray, concussion grenades, and
rubber bullets.
Instead of asking the crowds to disperse, the police
randomly charged protesters, beating them with nightsticks,
shocking them with stun-guns, and continuously firing rounds of
tear gas and more lethal CS gas.
Meanwhile, police shot into the crowds at close range with
rubber bullets (not aimed at feet and legs as protocols
require) and set off concussion grenades, the goal of which is
to fell rioters by giving them concussions.
Given many protesters were literally chained or tied
together and had been given no notice to disperse, the impact
of this weaponry was vicious. Each sit-down group had a person
designated as a ``medic'' equipped with water and vinegar spray
for eyes in case tear gas was used. However, police targeted
those with medic IDs and also the protesters (many volunteer
lawyers and law students) identified with ``legal observer''
IDs for beatings and arrest. All this time the police allowed
the violent marauders to continue to spray-paint graffiti and
smash store and car windows.
As many of the labor marchers came onto these repeated
scenes of police violence, they intervened to protect the sit-
down protesters. The result was groups of beefy Teamsters and
Longshoremen trying to protect a diverse array of protesters--
including those in turtle costumes and others with a rainbow of
hair colors--at numerous intersections from platoons of police
marching in military formation and slapping their nightsticks
in rhythm on their metallic shin guards.
This ugliness could have been entirely avoided had the
police arrested the few vandals early-on and implemented their
agreed plan for civil disobedience arrests of the sit down
protestors. Instead skirmishes between protesters and the
police continued well into the night, with the police firing
tear gas indiscriminately into the crowds and pushing them into
Seattle's Capitol Hill residential section.
Ironically, by dousing a residential area with tear gas,
the police added many more Seattle residents to the following
days' protests. Local television played over and over an
interview of a man in his pajamas holding his small daughter
with both their faces red and tear-stained from being gassed in
their home.
The next day, the security zone was also turned into a no-
protest zone and anyone caught within it without WTO ID (only
available by applying months before to a WTO office in Geneva)
was arrested. This resulted in over 500 arrests within two
days. Indeed, numerous people with WTO credential were also
arrested, as were several bishops of a major Protestant
denomination, among others. In addition to the frequent beating
and other mistreatment of these arrested, the ACLU filed a
lawsuit in December 1999 which also challenges the police's
practice of holding arrestees for days without charging or
processing them.
Chairman Crane. Thank you, Ms. Wallach.
Mr. Kittredge.
STATEMENT OF FRANK D. KITTREDGE, PRESIDENT, NATIONAL FOREIGN
COUNCIL, INC.
Mr. Kittredge. Thank you, Mr. Chairman.
I'm Frank Kittredge, President of the National Foreign
Trade Council. My remarks today will focus on three issues: the
outcome of the Ministerial meeting, the United States and
Europe's fundamental interest in the multilateral trading
system, and the upcoming 5-year report on the WTO.
First, the Seattle Ministerial and the future outlook for
the WTO. The NFTC was, of course, disappointed that trade
ministers failed to launch a new WTO round last December. It
was particularly dismaying, considering the progress that was
achieved in the draft ministerial declaration. Progress was
made on key issues including services, agriculture, e-commerce
and developing country concerns such as capacity building.
We were also on the threshold of a step forward in
improving WTO transparency and eliminating environmentally
harmful practices, such as fishery subsidies. Everyone lost
when the talks were suspended.
There were many reasons for the failure to launch new trade
talks. They included ministers' intransigence on a few highly
charged issues, inadequate preparation, difficulties in
managing a ministerial process that included more active
players, and insufficient political leadership. As an aside,
the protest activity was not the reason for the lack of final
agreement, even though it allowed those who wanted to stop the
advancement of international trade to claim victory.
The NSTC views the way forward as a two-step process.
First, we should move ahead as quickly as possible on the
mandated, built-in agenda on services and agriculture, as well
as address the immediate issue of expiring provisions. On this
point, I'd like to note the NSTC's concern about the growing
list of developing country requests for extending
implementation deadlines, some by as much as 10 years, for key
agreements, such as customs valuation, trims and trips.
Second, there must be a willingness on everyone's part to
be less rigid. The U.S., for example, may have to recognize
that it cannot insist that issues of chief concern to a number
of countries, such as antidumping, are completely off the
table. Moreover, until developing countries are convinced that
a working party on trade and labor is not simply the developed
countries' excuse for new forms of trade protection, we are
unlikely to make much progress.
Likewise, Europe and Japan have to realize that substantial
agricultural trade liberalization must be dealt with. Launching
a negotiation requires realism and flexibility on all sides.
Second, U.S.-European relations. Perhaps the most important
step required to get the trade talks back on track is for the
U.S. and the EU to get back to their basic shared interest in
maintaining a vibrant, multilateral trading system. All past
trade rounds have been made possible by U.S.-EU agreement on
the fundamental need for trade liberalization. This has not
prevented the two from having trade disputes, surely, but their
mutual support for the broader trading system contained these
disputes within manageable limits.
As a case in point, and has been talked about quite a bit
here today, we're very concerned about the EU's current
challenge to the FSC. The EU's action breaks a 1981 agreement
that provides for equivalent treatment of exports under the
European territorial and the U.S. worldwide systems of
taxation. If unchecked, this case could lead to a cycle of
retaliation and counter-cases, and could ultimately undermine
basic U.S. support for the WTO. The NFTC urges the
administration and the EU to resolve this dispute expeditiously
in a manner that preserves the competitive balance created by
the FSC.
Third, the WTO and a 5-year report. The NFTC looks forward
to the administration's March 1 report on the WTO as a prime
opportunity to advance the WTO's positive record. On that
point, I'd like to request that the U.S. Alliance for Trade
Expansion's guide to whose trade organization be submitted for
the record. The Alliance released this guide to identify
specific misrepresentations by WTO opponents.
It is clear that the WTO and the GATT have accomplished a
remarkable record. Trade liberalization has helped lift 3
billion people out of poverty, fostered global economic
stability and prosperity, and spread democratic values, such as
the rule of law, peaceable dispute settlement, and
nondiscrimination. As far as our own economy is concerned,
we're experiencing the longest economic expansion in history.
America's openness to trade, as fostered by the WTO, is a
primary reason why we are so strong economically. Advancing
trade liberalization is essential to sustaining America's
leading edge, job-creating economy.
The NFTC recognizes that WTO is not perfect. We agree that
there should be greater transparency. However, we do not agree
that the WTO is not accountable. It is a government-to-
government organization, driven by consensus among nation
states, which are accountable to their citizens. Providing a
seat at the table to business and other special interest groups
would make the WTO less, not more accountable.
Finally, improving worker standards and the environment are
important objectives. And rule-based trade expansion under the
WTO has been a positive force for change in these areas. The
single most important way to improve environmental and labor
standards is to improve economic conditions, a main result of
trade expansion.
Moreover, while there is a need to better understand the
ways in which these issues interrelate, the WTO is not the sole
solution to every multilateral problem. It's time to devote
efforts to more effective approaches.
Mr. Chairman, I'll stop there. Thank you very much.
[The prepared statement follows:]
Statement of Frank D. Kittredge, President, National Foreign Trade
Council
Mr. Chairman and distinguished members of the Subcommittee,
I am Frank D. Kittredge, President of the National Foreign
Trade Council (NFTC). The NFTC is a broad-based organization of
more than 550 U.S. companies having substantial international
operations and interests.
I appreciate the opportunity to testify today on the
implications of the recent WTO ministerial meeting in Seattle.
The vital importance of the WTO to the U.S. national interest
and the upcoming five-year report on the WTO makes this a
timely and significant hearing. My remarks will focus on three
basic issues: 1) the ministerial meeting and outlook on future
WTO trade talks; 2) the United States and Europe's fundamental
shared interest in strengthening the multilateral trading
system; and 3) the Administration's upcoming five-year report
on the WTO.
The Seattle Ministerial and Outlook on Future WTO Trade
Talks
The NFTC and its member companies were very disappointed
that trade ministers failed to launch a new round of
multilateral trade negotiations at the WTO ministerial meeting
in Seattle last December. It is particularly dismaying when
examining the significant progress that was achieved in the
draft ministerial declaration. While we recognize the draft
declaration was a negotiating document and was not agreed upon
by WTO members, it nonetheless provides an indication of what
might have been achieved had the ministerial succeeded in
launching negotiations. The draft declaration shows that
progress was made on key issues, including services,
agriculture, e-commerce, government procurement transparency,
and developing country concerns, such as capacity building. The
NFTC believes we were also on the threshold of taking a step
forward on issues of concern to both the business and NGO
community, such as improving transparency of the WTO and
eliminating environmentally-harmful fishery subsidies. Everyone
lost when the talks were suspended.
There were many reasons for the failure to launch new trade
talks. They include ministers' intransigence on a few highly-
charged issues, inadequate preparation before the ministerial,
institutional difficulties in managing a ministerial process
that included more active players from developing countries,
and insufficient political leadership among major trading
partners. As an aside, the protest activity was not the reason
for the lack of final agreement, even though it allowed those
who want to stop the advancement of international trade at all
costs to claim victory.
The NFTC views the way forward as a two-step process.
First, we should move ahead as quickly as possible on the
mandated ``built-in'' agenda on services and agriculture, as
well as address the immediate issue of expiring provisions of
interest to both developed and developing countries. On this
point, I would like to note that many NFTC member companies are
alarmed about the growing list of developing country requests
for extending implementation deadlines--some by as much as ten
years--for key agreements, such as Customs Valuation, TRIMS and
TRIPS. Any extensions should be as short as possible to avoid
harming U.S. exports.
Agreement also should be reached on other ``confidence
building measures,'' along the lines of Director General
Moore's recent suggestions. For example, agreement on improved
integrated technical cooperation for developing countries would
be helpful to restoring positive momentum to the WTO
negotiating process. Finally, action on issues that were ripe
for agreement in Seattle, such as e-commerce, government
procurement transparency, and the transparency of WTO
procedures should be promptly addressed.
Second, we must work towards resolving the underlying
issues that prevented a successful launching of the trade
talks. This will require, among other factors, a willingness on
everyone's part to be less rigid in their positions. The United
States, for example, may have to recognize that it cannot
insist that issues of chief concern to a number of countries,
such as antidumping, are completely off the table. Moreover,
until developing countries are convinced that a working party
on trade and labor is not simply a developed country's excuse
for new forms of trade protection, we are unlikely to make any
progress on this issue. Likewise, Europe and Japan have to
realize that substantial agriculture trade liberalization must
be dealt with effectively. Launching a negotiation requires
realism and flexibility on all sides.
U.S.-European Relations
Perhaps the most important step required to get the trade
talks back on track is for the United States and the European
Union to get back to fundamental shared interests in
maintaining a vibrant multilateral trading system and in
raising living standards worldwide through trade expansion. In
that regard, the NFTC is disturbed by what appears to be an
increasing trend of trade-related political one-upmanship
between the United States and Europe for narrow domestic
reasons, at the expense of much more important global issues.
All past rounds of trade negotiations through the Uruguay
Round have been made possible by U.S.-EU agreement on the
fundamental need for trade liberalization. This has not
prevented the two from having heated trade disputes, but their
mutual support for the broader trading system contained these
disputes within manageable limits.
The NFTC is very concerned that the EU's recent use of the
WTO's dispute settlement system upsets this delicate balance,
particularly with respect to the EU's challenge to the Foreign
Sales Corporation (FSC) tax law. The EU's action breaks a 1981
agreement that provides for equivalent treatment of trade under
the European territorial and U.S. worldwide systems of
taxation. This is a matter of maintaining U.S. jobs and trade
and avoiding a deterioration in the trade balance. If
unchecked, this case could lead to a cycle of retaliation and
countercases, and could ultimately undermine basic U.S. support
for the WTO. The NFTC urges the Administration to resolve this
dispute expeditiously in a manner that preserves the
competitive balance created by the FSC.
WTO Benefits, Facts and Five-Year Report
The NFTC looks forward to the March 1 report by the
Administration on the WTO's five-year record. It is a critical
opportunity to explain the benefits and positive record of the
WTO. On that point, I would like to request that the U.S.
Alliance for Trade Expansion's guide to ``Whose Trade
Organization?'' be inserted for the record. The Alliance, which
is a coalition of American farmers, consumers, businesses, and
workers formed to increase public awareness of the benefits of
rules-based trade expansion, released this guide to identify
specific misstatements, misrepresentations and factual errors
that have been propagated by WTO opponents.
When the facts are known, it becomes clear that the WTO and
its predecessor the GATT have accomplished a remarkable record
of eliminating trade barriers, raising living standards
worldwide, establishing basic rules of fairness in the conduct
of trade, and preventing catastrophic trade wars. Trade
liberalization under the WTO and GATT has lifted three billion
people out of poverty, fostered global economic stability and
prosperity, and spread democratic values such as the rule of
law, peaceable dispute settlement, and non-discrimination.
Furthermore, it has helped improve the environment and workers
lives, and it fully protects the rights of nations to set
stringent standards on human health and food safety.
As President Clinton stated recently, ``open markets and
rules-based trade are the best engine we know of to lift living
standards, reduce environmental destruction and build shared
prosperity.'' Trade and the institutions that foster it have
nothing to be defensive about. As far as our own economy is
concerned, we are experiencing the longest economic expansion
in history. America's openness to trade and our nation's
ability to trade with other countries as fostered by the WTO is
a primary reason why we are so strong economically today.
Advancing multilateral trade liberalization through the WTO is
essential to sustaining America's leading-edge, job-creating
economy.
The NFTC recognizes that the WTO is not perfect. We agree
with other NGOs that there should be greater transparency of
the organization. However, we do not agree that the WTO is not
``accountable.'' It is a government-to-government organization
driven by consensus among democratically-elected nation states,
which are accountable to their citizens. Providing a ``seat at
the table'' to business and other special interest groups would
make the WTO less, not more, accountable.
We also agree with other NGOs that improving worker
standards and the environment are important objectives.
However, we believe that rules-based trade expansion under the
WTO has been a positive force of change in these areas, and we
should be focusing on these win-win solutions. The single most
important way to improve environmental and labor standards is
to improve economic conditions. Increased trade has proven to
be perhaps the single most important catalyst to economic
development around the world. Moreover, while there is a need
to better understand the ways in which these issues
interrelate, the WTO is not the sole solution to every
multilateral problem. The ILO, for example, is making greater
progress in addressing worker conditions and child labor. It is
time to devote efforts to more effective multilateral
approaches in addressing broader problems instead of simply
blaming the WTO for them.
The NFTC testified last year that it is prepared to sit
down with members of this Committee, the Administration, and
others to engage in a meaningful dialogue that will move the
process forward on these issues. We remain willing to engage in
such a dialogue.
Before closing, I would like to add one more top priority
WTO issue--China's accession to the WTO. The NFTC strongly
believes bringing China into the WTO is in our best national
economic interest and will lead to a more open Chinese economy
and society. We urge Congress to approve permanent normal trade
relations (PNTR) status for China this year so that the United
States will be able to benefit from the groundbreaking market-
opening commitments China has agreed to make as part of its
terms of accession.
Mr. Chairman, thank you for the opportunity to testify
today, and we look forward to working with you to achieve a
bipartisan consensus on a forward looking trade agenda.
[An attachment is being retained in the Committee files.]
Chairman Crane. Thank you very much, Mr. Kittredge.
Ms. Wallach, I read your testimony, and the agreement that
was negotiated between quiet, peaceful protesters and the
Seattle police force occurred how far in advance of the
beginnings of the WTO Ministerial meeting?
Ms. Wallach. I think that the actual sort of sign-off with
the sit-down protesters talked to the police about their not
being violent in exchange for the police not arresting anyone
until the sun came up and the cameras could roll was about 2
weeks out. And the news conference----
Chairman Crane. Wait, wait, 2 weeks before the conference?
Ms. Wallach. Two weeks before the Ministerial. And I
believe that the news conference announcing this, that the sit-
down strikers, and then the groups like ours or the AFL, who
weren't doing the direct action but had permits for rallies and
marches, all had together was the Wednesday before the Tuesday
of the Ministerial.
Chairman Crane. Mr. Trumka, is that your understanding,
too?
Mr. Trumka. I'm not familiar with the varied details of
that. I know that we had permits and things that we had talked
with, the people out there from the marches, AFL-CIO's point of
view, for literally weeks in advance. We had worked with the
county people, the town police, with ourselves for the march
and everything else. But I don't know about the other people.
Chairman Crane. But this was with the understanding that
the people protesting would be arrested and peacefully charges
would be filed and that would be settled at a later time. But
this was all resolved in advance on the part of the
overwhelming majority of the people who were protesting there?
Ms. Wallach. Yes, sir.
Chairman Crane. And it was the people who came in that you
never knew who had the masks and did the violence to the
buildings and the robberies and so forth?
Ms. Wallach. It certainly wouldn't have been in the
interest of those trying to have the focus beyond a critique of
the WTO, to shift the focus onto the bashing of windows. And to
that end, as I mentioned in my testimony, when some of our
marshals, our folks who were trying to keep order, tried to
stop the window breakers, like grabbing people's arms, they
were told by the Seattle police that if they did not let them
go, they would arrest them for assault.
Chairman Crane. Do you know if the administration knew
about this before the President's arrival?
Ms. Wallach. Which this?
Chairman Crane. About the agreement, the silent protesters,
sitting and violating the law and getting arrested by the
police after the sun came up when the media could cover it?
Ms. Wallach. I don't know.
Chairman Crane. Do you know whether the administration knew
about these sidebar agreements, Mr. Trumka?
Mr. Trumka. I don't know, Mr. Chairman.
Chairman Crane. Do any of the rest of you know anything
about this? Because this was my first understanding of this,
that these agreements had been reached.
Mr. Kittredge. Well, excuse me, I was there, Mr. Chairman,
but I wasn't aware of other preagreements. It was clear to see
the demonstraters and the denial of access that they produced
to a lot of the buildings. But there was--I don't know about
the agreement.
Chairman Crane. Well, I find it puzzling that when there is
a potential security question involved, and the President is
making a personal appearance, that the administration was not
involved in backing up the local police force. I mean at the
very outset, in anticipation of anything going wrong.
Well, we will try and explore that one. That's very
intriguing, though. I had no idea about any of this. Do you
have any further comment?
Ms. Wallach. I know there are news clips from the news
conference with the Seattle mayor, the sit-down folks and the
marchers. I'm not sure of the exact dates, but I would suspect
it was the Thursday before the week of.
Chairman Crane. And that was public information a week
before the Ministerial conference started? All right, very
interesting.
Mr. Hufbauer, did the President's comments increase or
decrease chances to get countries to proceed further on labor
issues?
Mr. Hufbauer. They decreased chances. They confirmed the
fears, in the minds of many developing countries, that it was
all a smoke screen for protection. And so it hardened
attitudes. But as Dale Hathaway and others have already said,
attitudes were already pretty hard by the time we got to that
point. However, President Zedillo's remarks in Davos just a few
days ago reflected exactly this hardening.
Chairman Crane. And Mr. Hathaway, do you believe the U.S.
private sector advisers were adequately consulted during the
Ministerial conference?
Mr. Hathaway. Yes, I think at least in agriculture, we were
kept informed as to what was going on, and asked for our
reaction to proposed changes. I can't complain about
consultation in terms of the agricultural negotiations.
Chairman Crane. And Mr. Niles, how do you know that the
keys to improving labor standards is economic development and
not trade sanctions?
Mr. Niles. Well, I think it's been demonstrated, Mr.
Chairman, that where you have economic development, labor
standards go up, as does environmental protection. And
sanctions, lowering the chance of economic development, won't
work to that end.
Chairman Crane. And now I yield to our distinguished
Minority Leader, Mr. Levin.
Mr. Levin. Well, it's kind of late to carry on this debate,
but let me say a few things. I was at Davos and heard reaction
to the President's speech where he laid it on the line, I
thought clearly. Some people wanted to listen only to the first
half of the speech, and others only wanted to listen to the
other half. But I was at a get-together after the speech, and
there were people there from developing economies as well as
from the American business sector.
And it was interesting, because I heard many of them say,
including some to me directly, that they liked the President's
speech. And I find it kind of mystifying that people want to
throw in the towel on tough issues so quickly. We didn't throw
the towel in on intellectual property, though it was fought
over for a long time, to get it into the trading system. We
just listened to the first people who said almost in unison,
no, we'd be nowhere with it today.
And Mr. Niles, Ambassador Niles, you and I have discussed
this subject. I know you're the representative to the ILO and I
respect it. But to indicate that the answer is just publicity,
the ILO has no enforcement powers. And just look at the record.
Look at the record in countries that have signed onto the ILO
which are not abiding by the principles they said they were
adhering to.
You and I have discussed this before. But I just don't
think it will fly to say just leave it alone. And Mr.
Kittredge----
Mr. Niles. Might I respond?
Mr. Levin. Yes, go ahead.
Mr. Niles. The point I made about publicity is not the only
thing that the ILO can do. The ILO does have programs designed
to assist member countries, and the ILO can take sanctions
against member countries, not trade sanctions.
But of course, the WTO can't take trade sanctions, either.
And anybody who thinks that we're going to be able to amend
Article 20 of the WTO treaty to include enforcement of core
labor standards is kidding himself. You've got to have an
absolute consensus of the WTO membership, now 135 strong, to do
that.
So when I hear, when I'm told that the ILO has no
enforcement capability and, therefore, we need to go elsewhere,
I ask, where do you find the enforcement capability? Certainly
not in the WTO. The ILO has a new Director General, the ILO is
an organization which has come into a higher degree of
prominence because of the focus on labor issues, greater
attention to this problem. I think we ought to give it a
chance.
As far as countries that don't fulfill ILO conventions, the
People's Republic of China is one that gets a lot of attention
in this respect. China has not signed the core labor
conventions, or have not ratified them. But they have agreed to
the 1998 Declaration. So it gives us a way to work with China
on these issues.
Mr. Levin. OK. You know in our bilateral agreements, in our
trade agreements, like GSP, we have a means of enforcing core
labor standards.
Mr. Niles. We do.
Mr. Levin. It isn't as if it's novel within the trade
agreement.
Mr. Niles. That's a unilateral U.S. act.
Mr. Levin. All right, OK, good. No one's talking about an
overnight transition. But also we're not talking about a
millennial tradition or a centuries tradition which it would I
think likely be true within the ILO. That's the history of it.
In the sense that the ILO was formed way back to enforce
core labor standards. That's a major reason it was founded
decades and decades ago. And let me just say, Mr. Kittredge, I
just urge that, as I've urged the business community to take
another look, because when you say, moreover, until developing
countries are convinced that a working party, a working group
on trade and labor is not simply a developed country's excuse
for new forms of trade protection, we are unlikely to make any
progress on this issue.
The business community can help convince developing
countries that that isn't what we're after. In a sense the
concept is very clear and kind of basic. And that is, if
countries are going to compete, and we are competing
increasingly with evolving economies, that we're not talking
about everybody being paid the same. What we're talking about
is that the workers within those countries have the ability to
gather together and fight for a fair part of the growth of that
country.
That's all we're talking about, or that's the main thing
we're talking about. And to the credit of a few businesspeople,
they signed onto the notion that there should be a working
group. This is not a veiled effort at protectionism.
Mr. Kittredge. Well, I think the point is that it may be
perceived as that. And I think what you're talking about is one
of the real issues with trade in many aspects, is trade
education. And it would seem to me, and I would readily admit
I'm not that close to the ILO, but it would seem to me that if
the ILO doesn't necessarily have the enforcement mechanisms, it
sure ought to be able to do a better job at educating
developing countries on what really are the aims and the goals.
Mr. Hufbauer. Mr. Congressman, you've been very generous in
allowing my colleagues to respond, and I would like a little
bit of time.
Chairman Crane. Go ahead.
Mr. Hufbauer. First of all, the President did a great deal
of repair work in Davos, President Clinton. The fact that
President Zedillo delivered his strong speech reflected what
happened in Seattle. If President Clinton had said in Seattle
what he said in Davos, I think the atmosphere would be much
better.
But I want to come right to the nub, because I think the
gist of your comments was that I was throwing in the towel. I'm
absolutely not throwing in the towel. I've tried to give a
constructive suggestion in a very short period of time. I was
given 5 minutes to try to give a constructive labeling
suggestion for dealing with the proper expression of values.
If I have a value that says I want Chinese goods to respect
core labor standards, I want a label that tells me that the
goods respected core labor standards, whether they were made in
China or West Virginia. And I've tried to outline that. Time is
limited, but I'm not throwing in the towel. I'm trying to take
it out of a place where it's run into a dead end, which is the
WTO. Thank you.
Mr. Levin. OK, I'm glad you had the time. I was just
worried about that red light. And we'll be talking further
about that. I didn't mean to say you were throwing in the
towel.
I just want to suggest dead ends. There have been dead ends
in the WTO before on a lot of issues, and we haven't given up.
That's been true for decades. And it seems to me that it's
unwise for us to consider this just a dead end and go on to
something else. We need to think of other ideas, but continue
working on this one.
Mr. Trumka, and then I'll be finished.
Mr. Trumka. I would like to comment on just two subjects
that have been broached here. One, I've heard comments made by
Mr. Niles that the developing countries do not support and will
not support core labor standards being inserted into trade
agreements. Well, I want to tell you something. We were outside
and we marched, there were workers from all of those different
countries. And they particularly did want labor rights and
labor standards raised on their behalf.
You very artfully, I think, capsulized what we're looking
for in those agreements and why they should be in trade
agreements. And the notion that we should use the ILO as a
substitute for trade agreements, I think the world would look
at us as just being slightly hypocritical.
If you want to be serious, if you want us to believe that
they're serious about using the ILO, the first step ought to be
for the United States to adopt all 178 resolutions of the ILO.
Except for a few maritime resolutions, we've not adopted any of
the core labor standards ourself. How would we enforce
something in the world that we hadn't even endorsed.
So for that to even be considered, and I'm not saying that
it would be, but the initial step toward seriousness would be
for the United States to adopt all those. The dialog has to
take off. We have to approach and make this world globalization
work for everybody. The World Bank itself says income
inequality is growing. And if the workers in Colombia and China
and Poland and the United States, quite frankly, can't enjoy
the benefits of that globalization, there will be continued
resistance toward it in those countries as well as here.
The time is now, and I think Seattle was just the spark
that let everybody know that business as usual won't make it in
the future.
Mr. Levin. Thank you.
Chairman Crane. Mr. Becerra.
Mr. Becerra. Thank you, Mr. Chairman. And thank you to all
the witnesses for their indulgence and their patience. It's
been a long hearing. And I won't try to prolong it much longer,
either. Ambassador Niles, let me ask you, on the question of
economic development and how that can lead us toward better
working conditions, I don't think anyone disagrees that the
more opportunities for better jobs, the better our working
conditions become.
The question I would ask is how long do you wait for those
economies and the prosperity to trickle down to the point where
those who are making the lowest wages under the worst working
conditions finally see the fruits of that economic prosperity?
Mr. Niles. I don't think there's a schedule for that. How
long did it take in the United States? It took a while.
Mr. Becerra. It took decades.
Mr. Niles. Yes. And it could be that in some of the
developing countries, it would take equally long, if not longer
periods. But if you look at what has happened in some of the
economies where we've had particularly good economic
development in the last decade, despite the economic crisis of
1997-1998, some of the countries of Asia such as Taiwan and
Korea. Look at how poor Korea and Taiwan were, say, in 1960 and
how they are today, now, that's 30 years, 40 years later. The
change is absolutely extraordinary. Taiwan in 1960 was probably
about where China is today.
So under certain conditions, under the right conditions,
this kind of development can take place during a relatively
brief period.
Mr. Becerra. And I think everything is relative, relatively
brief meaning 30 years can be three decades for someone who's
suffering under some pretty bad working conditions. I am
reminded, as a Catholic, of the saying, the poor shall inherit
the Earth. I think they want to get it before they die.
And I think the difficulty a number of us have is that,
while no one contests that the better off we are in our
economies, and the more we're creating jobs, the better
everyone will ultimately be, the fact remains that we have too
many people, certainly in this country but throughout the
world, more importantly, who aren't benefiting from all that
prosperity. And to wait three decades won't help the guy who's
20 years old right now, working under the worst of conditions.
When he's 50, he probably won't be able to work any more.
There has to be something more we can say to workers,
whether they're outside of this country or inside this country,
that we're going to do, if we're going to use our implements,
our tools as a government, to open up markets, to accelerate
the movement by reducing tariffs and barriers, then we should
also be prepared to do some other things using government
implements to make the conditions better for those who work.
Mr. Niles. Could I make the point, in my remarks I refer to
a program which you could adopt in the Congress unilaterally
which would do just that, which is to take the GSP program and
add an additional GSD benefit for those countries where you
really do see progress on labor standards.
Mr. Becerra. And I think that's actually an interesting
approach, because it's the carrot versus the stick.
Mr. Niles. Well, exactly, yes. More likely to work than
imposing sanctions.
Mr. Becerra. And the only problem there is, I think you'd
have to help persuade a number of our colleagues that we should
be prepared to give dollars to help countries do what they
should otherwise be doing. And I think you're going to find a
number of Members of Congress saying, I'd rather it be spent
domestically than send it off on some foreign aid bill.
But I agree with you, that is one way other than using a
stick to try to get compliance with international labor
standards. And I would pose this question to anyone. Give me a
sense of how we get to the point. Because I think, Ambassador
Niles, I think you're right. I think it's going to be
difficult, at least under the current setting, to believe that
anyone in the WTO setting today would be prepared to see the
ILO core labor standards accepted within the WTO as a framework
for implementing labor rights.
How do we get some teeth into providing protections under
whatever our framework is, whether it's WTO or ILO, for labor
rights and environmental protections? Anything other than
allowing economics and prosperity take us there through trickle
down? Anything more?
And I know, Mr. Hufbauer, you've suggested the approach of
this labeling. I think that's a decent idea. Although if it's
just voluntary, I think it becomes more difficult, because it
becomes more problematic in getting people and countries and
companies to agree.
Mr. Hufbauer. But Congressman, I did give a matrix in my
remarks. I said voluntary, mandatory, private labels,
government labels. And that's where the fight should be.
Mr. Becerra. Is there anyone who sees a two or three step
process where we ultimately get there? Everything's
compromised, and at some point we should be able to get there.
But we've got the two divides. You can never enforce labor
standards or environmental protections, and if you don't do it,
we won't go anywhere with trade.
Mr. Niles. Could I make one point, Congressman? You really
need to distinguish between labor standards and environmental
standards in terms of the WTO. The WTO recognizes the right of
countries to enact trade measures in support of environmental
standards, environmental legislation. In the three cases
involving the United States environmental standards which have
come before the WTO, the WTO has upheld the environmental
standard in each case, but has not upheld the fact that in the
legislation or the regulation, it was implemented in a
discriminatory way. These were the tuna/dolphins, shrimp/turtle
and Venezuelan fuel oil cases. So we really do have to make
that distinction.
There is no problem, as far as I can see, with the way in
which the WTO has related to United States environmental
standards. Now, labor, I recognize, is a different story. And
we've run up against that wall several times, most recently in
Seattle. But there is, as I suggested, another way to do it.
Namely, the ILO. It's not perfect. There isn't a perfect
solution out there, by the way.
Mr. Becerra. Right.
Mr. Kittredge.
Mr. Kittredge. You made a little reference to trickle down
or trickle up economics. Not to take exception with that, but
let's not miss the point that the development of these
countries and the economic prosperity that comes with trade and
development is what's really going to raise labor standards and
environmental standards, when they have the money to do what
they need to do environmentally and when the workers increase.
So that's not an incidental reason or way to bring them up.
Mr. Becerra. And Mr. Kittredge, I don't disagree. I don't
think anyone would disagree that ultimately the tide lifts all
boats. The problem is, we could have said the same thing. If
you let this country proceed forward, it's going to become more
enlightened and not have slavery. We could have waited or we
could have enacted laws that actually abolish slavery.
Sooner or later, people would have come around to
understanding, whatever the color of your skin, you were equal
in the status of the Lord or anyone else, and therefore you
should not be enslaved. But we decided not to wait until the
natural course of intelligence led us to that conclusion. We
passed laws.
And the same thing can apply here, where we can wait,
certainly, until the economics help a lot of folks rise out of
poverty. But we're not waiting and letting the natural course
take place in the way countries deal with each other in trade.
We're talking about setting up a framework, a global framework
with the WTO, that mandates that we act in certain ways.
So why not then mandate that we act in certain ways
globally with respect to other issues, if we can do it with
capital, if we can do it with intellectual property, why--and
I'm not saying we're ultimately going to get anything, as Mr.
Niles said. There might be a solution out there. I'm just
trying to figure out if there's somewhere that someone can come
up with a little bit more of a compromise than saying you never
can do it, or you have to do it.
And Ms. Wallach, I know you wanted to say something, and
Mr. Chairman, you've been very gracious with the time.
Ms. Wallach. Well, an approach that is sort of a middle
approach, which goes to the suggestion I made, which is where
the NGOs from 30 countries who organized toward Seattle had
gone was to prune back, not to have an expansion round, but to
have pruning round, of limiting the places that the WTO at the
moment constrains governments from taking action on
environment, labor, human rights.
There's a fallacy that there is no room for or there are
not currently labor and environmental standards in the WTO.
They are there, but there are constraints on government action
in those areas, including for instance, the Article 20. I mean,
I've read the same cases. In fact, the WTO has ruled that none
of our environmental laws met the exception that's on paper,
but never gets applied.
So the alternative model would be what's called the
convention model, which is, for instance, how the multilateral
environmental agreements are enforced. They have international
standards internationally enforced, the WTO intellectual
property rules. Alternatively, you can have a convention. So
for instance, CITES, the endangered species treaty, all of the
parties agree to the standards, but then their commitment,
their international law obligation, is to enforce it at their
borders.
So you set the standards internationally, but a convention
is enforced so that basically it only affects goods in trade.
The country itself is not committing, with their sovereignty
protection, domestically to the same standard, but for
instance, in CITES, it's trade and endangered species. You
cannot let the list of things, and the rules are
internationally agreed, be broken as regards the goods access
into your market.
And that certainly is a halfway step. But given there's
either going to be some set of standards or there is going to
be an implosive autoarchy, that would be one that would be
something worth considering.
Mr. Becerra. Mr. Chairman, thank you. Ms. Wallach, I think
that last response, probably from the perspective of those who
don't think it works to have core labor standards in WTO, would
probably come close to being core labor standards in WTO, I
think they'd have real concerns with it. I understand what
you're saying. I think they'd have real concerns for that.
But I thank everyone for their comments. Thank you, Mr.
Chairman, for the time.
Chairman Crane. Mr. Houghton.
Mr. Houghton. Well, thank you, Mr. Chairman. Thank you very
much for being here, and I'm sorry I haven't been in the flow
of this conversation, I had to go out a couple of times.
I guess I just have one basic question. I mean, I've been
around this trade game for a long time. And there are always
obstacles to it, whether they're labor obstacles, Rich, you
know, that you were talking about, or whether they're
agricultural issues that Mr. Hathaway was talking about. There
is always something that isn't going to jive.
The question is, how do we put this thing together? We've
got to have world trade. Ninety-six percent of our customers
are outside of this country, we've got to reach for them. We've
got to do it in a fair way, not a free way, because there's
nothing free, it's got to be a fair way.
So aren't there goals we can work toward, rather than
hurdles that have got to be met? Can we sort of work toward
those things, recognizing that the environmental or the labor
or the human rights or some of the agricultural policies aren't
exactly as we would like? We're always getting mad at somebody.
I mean, the Europeans aren't particularly forthcoming in terms
of transparency rules. And the Japanese won't let us in their
market for television sets, or the Koreans are doing something,
or the Chinese.
There's always something there. Isn't there sort of a frame
of reference we can use toward working toward goals, rather
than having set lines in the sand that have got to be met
before we move forward?
Mr. Kittredge. Are you suggesting maybe we should get our
own house in order before we start talking to other people
overseas?
Mr. Houghton. I think that's probably true. Can you start
off with a suggestion?
Mr. Kittredge. And could we start trying to get some of the
people at this table and others to try to open communication
channels to talk the things through?
Mr. Houghton. Well, I think it's a good idea. I've had
several, from my sense, I have several groups coming into my
office all the time. I have business groups, I have labor
groups, I have environmental groups, I have religious groups, I
have everything. And I'm not sure really what we want.
There was a labor group in my office, UAW, just a minute
ago, talking about permanent NTR for China. And you know, to
me, I don't think it makes any difference, as far as I'm
concerned. We're going to have a relationship with China,
whether it's 1 year, 2 years, 3 years, 6 months, 10 years,
whatever it is. The question is, what do they want? You get so
hung up on sort of the national, the normal trading
relationship, that you don't ask yourself what's out there. The
fact is that we can't get in their market, and they get in
ours.
So what do we do sort of philosophically, so that we can
work together. And I think, Mr. Kittredge, you're absolutely
right, how do we develop some sort of a philosophic base?
Mr. Kittredge. We said in our testimony, I think it bears
repeating, this issue, as much as any other, requires a lot of
very strong political leadership. And that needs to be very
evident before we make much progress.
Mr. Houghton. Yes.
Mr. Trumka. I would suggest that we begin looking at the
issue, not just as a trade issue, but from the notion of
globalization, and bring in all the forces that are driving
globalization. You're talking about the World Bank, you're
talking about the International Monetary Fund, as well as the
WTO. Because that is what's influencing the lives of workers
around the world. They have to believe that they have a voice
in that process.
And in fact, I was just on a panel with Ambassador Clayton
Yeutter, and the subject was, how do we re-establish consensus.
And my comment to him was, it's not re-establishing consensus
on trade and globalization, it's establishing. Workers feel
that they've been shut out of the process, that the process has
been used to sort of weaken them. There's a distrust. Workers
on all sides of the border, Mexican workers don't feel any
different than American workers. Colombian workers don't feel
any different than American workers. Trade's being used to
ratchet them down, and to have them get less. They're not
enjoying the benefits. Income inequality goes up.
To start the dialog, look at it as globalization, and let
us all talk about how globalization, honestly, is affecting
each one of our lives, and be willing to own up to the facts
and say, yes, there's an income inequality and here's what's
driving it and how do we solve it. Then genuinely look at that
process.
Mr. Houghton. Well, I know, and Ambassador Niles, maybe
you'd have a comment on that, then I'll be done.
Mr. Niles. I don't disagree that we certainly need to
discuss this issue more productively among ourselves, not
necessarily just the groups that are represented here today.
But I also think it's very important that we get the facts
straight before we start this, and we know what indeed is
happening in the world economy, and it's not true that wages
are being driven down and that workers are suffering throughout
the world as a result of the process of globalization. There
are cases where that's happening, but there also are cases
where it's not happening. And we have to make that clear.
It's not true at all that there's a conflict between the
WTO as an organization and U.S. environmental standards. Simply
not correct. The only thing that the WTO has objected to in
terms of U.S. environmental standards is when we enforce them
in a discriminatory way, which we proposed to do on these three
cases that came up.
There's also no conflict between the WTO and observance of
human rights. There's another organization in the United
Nations, the United Nations High Commission for Human Rights,
that's responsible for that.
One of the things we ought to be mindful of not doing is
mixing all these organizations up. We ought to have some sense
of what organization is responsible for what job, and try to
get that organization cranked up to do it right. And if the ILO
doesn't do its job properly, let's see what we can do to make
the ILO work more effectively, and not just say, well, let's
take labor issues and put them into the WTO, which is going to
be extraordinarily difficult to accomplish.
Mr. Hufbauer. Mr. Chairman, in the correction of
misstatements division, I'd like to say a word on world income
inequality and then U.S. income inequality. I've done a paper
on the world dimension, I'd be happy to send it to you and
anybody else who's interested.
In terms of world income inequality, the countries which
are falling remarkably down and have every prospect of falling
further are the countries not participating in the world
economy. Those are countries in Africa, a number of countries
in central Asia, and elsewhere--countries that have any amount
of turmoil.
There has been a very big group of countries where the
inequality has actually decreased quite substantially. Those
are the east Asian countries. And they have every prospect of
further narrowing the gap. Those are facts.
In the United States, the inequality premium--measured by
the additional income which college graduates earn above high
school graduates--that premium stopped growing in the year
1994. These references you've heard are to data between 1973
and 1994. Nineteen ninety-four is 6 years ago. Income
inequality is not increasing in the United States today.
Thank you very much.
Mr. Houghton. Well, thanks very much, gentlemen and Ms.
Wallach, thank you.
Chairman Crane. Well, I want to thank all of our witnesses
very much. And Mr. Trumka, one of your concerns about income,
we hope to address possibly as early as Thursday with the
elimination of the marriage penalty tax. [Laughter.]
Thank you all for being here.
Our next panel will be Mark Van Putten, President and chief
executive officer of the National Wildlife Federation; Bob
Stallman, President of the American Farm Bureau, Rhett Dawson,
President of the Information Technology Industry Council; Bob
Vastine, President, Coalition of Service Industries; Steve
Robertson, Product Manager, Marconi Commerce Systems, and this
is on behalf of the National Association of Manufacturers; and
Hon. Dave McCurdy, President, Electronics Industries Alliance
here in Virginia, a former colleague.
And I would ask all the rest of you folks who are
participating in this panel if you would be so gracious as to
defer to Mr. Stallman to go first, so he can speak and run,
because he's on a tight constraint to catch a plane. And we'll
proceed with you first in order Mr. Stallman, and then Mr. Van
Putten.
STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION
Mr. Stallman. Thank you, Mr. Chairman. I do appreciate your
indulgence and the understanding of the rest of the panel. The
last plane ride out of town to get to point B is a valuable
commodity.
I am Bob Stallman, President of the American Farm Bureau,
and a rice producer.
Chairman Crane. Folks, those of you that are inside the
chamber, please hold your conversation until outside. All
right, Mr. Stallman.
Mr. Stallman. Thank you, Mr. Chairman. I am a rice producer
and a cattleman from Columbus, Texas, as well as President of
the American Farm Bureau. And I appreciate the opportunity to
testify before you today on the issue of negotiations on
agriculture in the WTO and the prospects for future
negotiations.
The Farm Bureau had a strong presence in Seattle during the
WTO Ministerial, and saw first-hand how difficult it will be to
overcome the resistance exhibited by key negotiating partners
such as the European Union, Japan and Korea, to further market
openings in agriculture. Every ounce of leverage and
negotiating muscle will be needed to continue the agricultural
trade reform started in the Uruguay round, and to make the
results from future trade talks commercially meaningful for
U.S. farmers and ranchers.
It is well known that there were many causes for the
failure of the trade ministers to launch a round in Seattle.
And while the reasons are numerous and the issues complex,
agriculture was not the cause for the breakdown of the trade
talks. In fact, when the talks ended in Seattle, green room
negotiations on agriculture had concluded and the agricultural
text was nearly complete.
Now, that's not to say the Farm Bureau endorsed the
language in the agricultural text. While we acknowledge that
significant ground was broken on key agricultural negotiating
objectives, much work remains to be done. Negotiations on
agriculture must be the highest priority for our negotiators as
they meet in Geneva in an attempt to restart the trade talks.
Not only is agriculture entitled to a new round of negotiations
as mandated by the built-in agenda, our sector is also rife
with unsurmountable trade barriers and trade distorting export
subsidies that are not present in other sectors.
In order for the WTO to claim that it has truly reformed
trade around the globe, it must first achieve market
liberalization in agriculture. Restarting the talks quickly and
linking the progress of all aspects of the talks together as a
single undertaking is crucial in order for U.S. agriculture to
maintain its foreign market share and to compete on fair and
equal terms with its export competitors.
What's at stake for agriculture if the WTO talks do not
resume? Well, our exports will continue to stagnate and our
competitors, especially those that benefit from export
subsidies or single-desk selling arrangements, will continue to
undercut us in foreign markets. U.S. producers are the most
efficient producers in the world. We can compete if allowed to
meet our competitors head-on, rather than with one arm tied
behind our backs, which is the case now as we compete against
foreign treasuries that subsidize our competitors.
There are many important objectives to be accomplished in
the WTO negotiations on agriculture once the trade talks resume
in Geneva. And I will briefly list those. First, the next round
of negotiations in progress on the built-in agenda items should
be pursued as a comprehensive single undertaking. Second, we
must call for the complete elimination of export subsidies by
all WTO member countries.
Third, all WTO member countries should reduce tariffs, both
bound and applied, in a manner that provides commercially
meaningful access on an accelerated basis. Fourth, our
producers compete openly in their own domestic market with
their foreign competitors, but are shut out of export markets,
due to prohibitively high tariffs. We must correct this
imbalance for our farmers and ranchers, and we must end the use
of all nontariff barriers to trade.
Fifth, we cannot allow our trading partners to exempt
certain products or policies from the negotiations. Everything
must be on the table for negotiation. Sixth, we believe that
countries should provide an increasing portion of total
domestic support for agriculture in a decoupled form, as the
United States has already done under the Fair Act.
In addition, we support elimination of trade distorting
domestic support programs, now classified under the blue box
criteria in the WTO. The U.S. does not use the blue box, but
the EU continues to increase its blue box spending.
And on domestic support, we oppose attempts to disguise
protectionist policies as an endorsement of the multifunctional
characteristics of agriculture. Domestic support for so-called
multi- functionality or government spending for the
multifaceted benefits of agriculture should be reasonable and
nontrade distorting.
Seventh, regarding sanitary and phytosanitary measures, we
believe that the provisions of the WTO SPS agreement are sound
and do not need to be reopened. Eighth, and very importantly,
we must ensure market access for biotechnology products
produced from genetically modified organisms. Significant
delays and a lack of transparency in the regulatory approval
process for GMOs in the EU have heightened the need for
science-based transparent provisions governing bioengineered
products.
Ninth, we must impose disciplines on State trading
enterprises that distort the flow of trade in world markets.
Tenth, the WTO dispute settlement process needs to be shortened
and measures must be instituted to ensure compliance. We have
seen in both the EU banana and EU beef cases that compliance is
not always assured. And I would like to note for the record
that nearly every country has complied with its WTO
commitments. However, in cases where WTO member countries do
not comply, a carousel retaliation approach should be adopted
to bring about compliance.
Finally, we believe that matters concerning the environment
and labor should only be addressed in a manner that facilitates
rather than restricts trade. In summary, America's farmers and
ranchers are counting on the WTO negotiations to achieve fair
access for their exports around the world.
We are the most efficient producers in the world. Access to
foreign markets should be based on efficiency and not on
protectionist policies. Given the dire economic conditions that
we are now experiencing in this country for our producers,
opening markets and leveling the playingfield is now more
important than ever.
We call upon the administration to resume a broad-based
negotiating round of the WTO and to link progress on the built-
in agenda items to an eventual round. Without such a
comprehensive approach, substantial progress on the
negotiations in agriculture will not be achieved.
Thank you, Mr. Chairman, and if there are written questions
later on, we'll be glad to respond for the record.
[The prepared statement follows:]
Statement of Bob Stallman, President, American Farm Bureau Federation
Mr. Chairman, members of the Committee, I am Bob Stallman,
president of the American Farm Bureau, and a rice producer and
cattleman from Columbus, Texas. I appreciate the opportunity to
testify before you today on the important issue of the
negotiations on agriculture in the World Trade Organization
(WTO) and the prospects for future negotiations.
Farm Bureau had a strong presence in Seattle during the WTO
Ministerial Conference and saw first-hand how difficult it will
be to overcome the resistance exhibited by key negotiating
partners such as the European Union (EU), Japan and Korea to
further market openings in agriculture. These countries have a
very strong desire to continue trade distorting domestic
support payments to their agricultural sectors. Given the
urgent need to further open foreign markets for U.S.
agriculture, and the intent of some countries to resist such
market openings, it will be very tough to continue the
agricultural trade reform started in the Uruguay Round. Every
ounce of leverage and negotiating muscle will be needed to make
the agricultural results from future trade talks commercially
meaningful for U.S. farmers and ranchers.
It is well known that there were many causes for the
failure of the trade ministers to launch a negotiating round in
Seattle. While the reasons are numerous and the issues complex,
agriculture was not the cause for the breakdown of the trade
talks. In fact, when the talks ended in Seattle, ``green room''
negotiations on agriculture had concluded and the agricultural
text was nearly complete. This is not to say that Farm Bureau
endorsed the language in the agricultural text. While we
acknowledge that significant ground was broken on key
agricultural negotiating objectives, much work remains to be
done.
Negotiations on agriculture must be the highest priority
for our negotiators as they meet in Geneva in an attempt to
restart the trade talks. Not only is agriculture entitled to a
new round of negotiations as mandated by the built-in agenda,
our sector is also rife with insurmountable trade barriers and
trade distorting export subsidies that are not present in other
sectors. In order for the WTO to claim that it has truly
reformed trade around the globe, it must first achieve market
liberalization in agriculture.
The WTO General Council meetings, which are taking place in
Geneva this week, must provide the basis for continuing the
agricultural negotiations as required under the built-in
agenda. Most importantly, the structure developed to restart
the talks on agriculture must be linked with the progress of
trade talks in other built-in agenda sectors as part of a
single package. Restarting the talks quickly, as part of an
eventual broad-based round, is crucial in order for U.S.
agriculture to maintain its foreign market share and to compete
on fair and equal terms with its export competitors.
You are aware that the U.S. agricultural sector is perhaps
the most open market in the world. According to the Agriculture
Department, the average tariff for imports of agricultural
goods into the United States is 8 percent or less, while our
exports face an average tariff of nearly 50 percent. We must
address this imbalance in the upcoming negotiations.
What's at stake for agriculture if the WTO talks do not
resume? We can expect that our exports will continue to
stagnate and that our competitors, especially those that
benefit from export subsidies or single desk selling
arrangements, will continue to undercut us in foreign markets.
U.S. producers are the most efficient producers in the world.
We can compete if allowed to meet our competitors head on
rather than with one arm tied behind our backs, which is the
case now as we compete against foreign treasuries that
subsidize our competitors.
There are many important objectives to be accomplished in
the WTO negotiations on agriculture and important improvements
that need to be made on the Seattle agricultural text once the
trade talks resume in Geneva.
Objectives for the Next Round
Structure and Framework
The American Farm Bureau Federation supports expediting action to
commence broad-based negotiations and trade talks on the built-in
agenda items, such as agriculture, in the WTO. We cannot sit by while
our competitors trade openly in our market but deny us access to their
markets on equal terms. We must begin negotiations on the built-in
agenda items and weave these negotiations into a comprehensive round as
early as possible to put U.S. agricultural producers on a level playing
field with the rest of the world.
First and foremost, the next round of negotiations and progress on
the built-in agenda items, should be pursued as a comprehensive, single
undertaking. By this we mean that all aspects of the negotiations
should be pursued in parallel and that talks should conclude
simultaneously for all sectors in order to get the best results.
Export Subsidies and Export Credits
We must call for the complete elimination of export subsidies by
all WTO member countries. Our producers cannot compete against the
mountain of spending by our primary competitors, such as the European
Union, which spends in excess of eight times the level of domestic and
export subsidies spent by the United States. The final version of the
agricultural text from the WTO Ministerial in Seattle did not go far
enough on export subsidies. We must not settle for anything less than
complete elimination of export subsidies. Moreover, the United States
should not allow other WTO member countries to link progress on
elimination of export subsidies to corresponding action by the United
States on export credits or other forms of export assistance.
Regarding export credits, we believe that the negotiations in the
Organization for Economic Cooperation and Development holds the best
potential to impose disciplines on export credits.
Market Access
U.S. negotiators must comprehensively address high tariffs, trade-
distorting subsidies and other restrictive trade practices in the
negotiations on agriculture.
The negotiations should result in tariff equalization and increased
market access by requiring U.S. trading partners to eliminate tariff
barriers within specified time frames. Our producers compete openly in
their own domestic market with their foreign competitors but are shut
out of export markets due to prohibitively high tariffs. We must
correct this imbalance for our farmers and ranchers. All WTO member
countries should reduce tariffs, both bound and applied, in a manner
that provides commercially meaningful access on an accelerated basis.
In addition, we must end the use of all non-tariff barriers to
trade. There are several practices that have been employed by our
trading partners to shut out competition in their domestic markets.
These practices include, but are not limited to, domestic absorption
requirements, discriminatory licensing procedures, price bands,
reference prices and the administration of tariff rate quotas that
prevent true competition. Provisions to address these and other
nontariff barriers should be written into the new agreement on
agriculture.
We support a trade round that enacts no product or policy
exceptions. Adopting a formula approach that addresses the disparity in
global tariffs is the best method for ensuring that all sectors are
included in the negotiations. As with the Uruguay Round framework, we
recognize the need to address import sensitive products. It is
imperative that the new negotiations address not only tariff
disparities but also peak tariffs and tariff escalation in a
commercially meaningful manner.
Domestic Support
We support transitioning countries to provide an increasing portion
of total domestic support for agriculture in a decoupled form as the
United States has already done under the FAIR Act of 1996.
In addition, we support elimination of trade distorting domestic
support programs now classified under the ``blue box'' criteria in the
WTO. Blue box payments are based on fixed area, yields and number of
livestock and are not subject to reduction. The United States does not
currently have any domestic support programs that qualify as blue box
spending. The European Union, on the other hand, has over $22 billion
in blue box spending and that is projected to increase as a result of
the recent CAP reform under Agenda 2000. We must put an end to blue box
spending.
SPS and Biotechnology
We believe that the new negotiations must include a recommitment to
binding agreements to resolve sanitary and phytosanitary issues based
on scientific principles in accordance with the WTO Agreement on
Sanitary and Phytosanitary Measures (SPS Agreement). The provisions of
the Uruguay Round SPS Agreement are sound and do not need to be
reopened. The United States has successfully litigated several SPS
cases that underscore the strength of this agreement. Cases have now
been tried that set precedents in each of the three areas of the SPS
Agreement. For example, the successful U.S. litigation of the EU beef
ban strengthens the provisions regarding human health, the Japan
varietal testing case underscores aspects regarding plant health, and
the Australia salmon case bolsters the animal health text of the SPS
Agreement. Any change to the SPS Agreement would expose the sound
scientific principles now embedded in its provisions--changes that the
EU would relish making to restrict, rather than facilitate, trade.
We must ensure market access for biotechnology products produced
from genetically modified organisms (GMOs). Significant delays and a
lack of transparency in the regulatory approval process for GMOs in the
EU have heightened the need for science based, transparent provisions
governing bioengineered products. We cannot continue to be held hostage
to the EU's nontransparent, discriminatory procedures that deny market
access for our GMO products. All WTO member countries should reaffirm
the principles of the WTO SPS Agreement, provisions which we believe
cover trade in GMOs.
Multifunctionality
We oppose attempts to disguise protectionist policies as an
endorsement of the multifunctional characteristics of agriculture.
While we agree that agricultural production holds multifaceted
benefits, we disagree that trade distorting subsidies should be allowed
to continue to sustain multifunctional endeavors. Government spending
for such pursuits should be reasonable and non-trade distorting.
State Trading Enterprises
We must impose disciplines on state trading enterprises (STEs) that
distort the flow of trade in world markets. Every effort should be made
to craft an agreement that sheds light on the pricing practices of STEs
and ends their discriminatory practices. Our producers have lost too
many sales in third country markets due to the noncompetitive,
nontransparent operations of STEs.
Dispute Settlement Process
Our negotiators must make changes to trading practices that would
facilitate and shorten dispute resolution procedures and processes. The
process for a WTO dispute settlement case typically runs three years,
if the WTO ruling is implemented. We have seen in both the EU banana
and EU beef cases that compliance is not always assured. In cases where
WTO member countries do not comply with WTO rulings, a carousel
retaliation approach should be adopted to bring about compliance.
Our trading partners cannot be allowed to unilaterally weaken the
very principles that we negotiated in the Uruguay Round Agreement. The
fundamental problem of a dispute settlement procedure that requires too
much time and prevents market access for several marketing seasons
before a resolution is reached must be corrected.
Environment and Labor
We believe that matters concerning the environment and labor should
only be addressed in a manner that facilitates rather than restricts
trade. We cannot allow the economic prosperity of our nation, and that
of our agricultural producers, to be used as a weapon.
In summary, America's farmers and ranchers are counting on the WTO
negotiations to achieve fair access for their exports around the globe.
We are the most efficient producers in the world. Access to foreign
markets should be based on efficiency, not on protectionist policies.
Given the dire economic conditions now being experienced by our
producers, opening markets and leveling the playing field is now more
important than ever.
We call upon the administration to resume a broad-based negotiating
round in the WTO and to link progress on the built-in agenda items to
an eventual round. Without such a comprehensive approach, substantial
progress on the negotiations in agriculture will not be achieved.
Chairman Crane. Thank you very much, Mr. Stallman. And you
are excused. Any questions we'll submit to you in writing.
And with that, Mr. Van Putten.
STATEMENT OF MARK VAN PUTTEN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL WILDLIFE FEDERATION
Mr. Van Putten. Thank you, Mr. Chairman and Members of the
Subcommittee. I'm Mark Van Putten, president of the National
Wildlife Federation.
The National Wildlife Federation is America's largest
conservation education and advocacy organization, with over 4
million members and supporters. In addition to those members
and supporters, we have State affiliates in 46 States, which
total an additional 1 million members. We were represented in
Seattle and in fact, we're headed back to Seattle next month
for our annual meeting where the delegates elected by our State
affiliates come together to set our policies on matters such as
trade and the environment.
I say that because our members represent America's
mainstream and main street conservation movement. They share a
commitment to United States leadership in building a global
economy that protects the environment while raising living
standards for all.
I was in Seattle for the WTO meeting leading the National
Wildlife Federation delegation. I appreciated the opportunity
to meet with you, Mr. Chairman, and Members of this
Subcommittee who were there, the opportunity to meet with
President Clinton, and the opportunity to chair the NGO session
sponsored by the World Trade Organization.
NWF has been intensely involved in the dialog with trade
officials, Members of this Subcommittee, the administration and
all of the participants. And I'd like to briefly outline for
you four lessons that we learned in Seattle.
The first lesson is, there's no turning back. The old,
exclusive and secretive deal-making process must give way to an
inclusive, transparent and domestic process. The negotiation
strategies pursued in the past by the United States and its
trading partners must be replaced by the new realities.
At the beginning of the 20th century, President Wilson
denounced secret deals, secretly arrived at. It is time to
follow through with the process that takes fully into account
the views of developing, as well as developed, countries and of
citizens and citizen groups as well as those of industry and
government officials. The era of international trade
negotiations, being insulated from public concerns such as
concern for the environment, is over.
The second lesson, which relates to the first, is that
trade liberalization and environmental protection must go hand
in hand. In Seattle, we used every constructive means available
to us to improve the WTO, not to disparage it. And we intend to
continue on that course.
Let me be clear. To the degree that a stereotype has been
created that the environmental community wants to shut down
international trade, that stereotype is false. The National
Wildlife Federation believes globalization is a fact, not a
policy choice. And we want the international trading system to
succeed.
But we want it to achieve its full potential. We want it to
deliver on the promise of improving the quality of life,
raising living standards, and respecting conservation values
throughout the world. To achieve this goal, in my written
testimony we outline the National Wildlife Federation's agenda
for environmentally responsible trade, which we presented in
Seattle. It includes first, the WTO should recognize and defer
to legitimate national and international environmental
standards. Second, new trade agreements should include
environmental assessments of their potential consequences.
Third, individuals and nations should be able to take into
account the environmental effects of how imports are produced.
And fourth, the WTO must adopt modern standards of openness.
The third lesson we draw from the Seattle experience is the
need to achieve global consensus. The WTO is a consensus driven
institution, and we must find ways to unite the interests of
the developed world with those of the developing world. We
recognize that liberalized trade abroad can help the less
developed nations implement policies for sustainable
development and environmental protection.
But these results are not a given. They will not happen
automatically. All of us, including Members of Congress,
administration officials and representatives of nongovernmental
groups, and the business community, must reach out to
developing countries with capacity building, technology
transfer and other efforts to achieve common ground to remove
and address some of the reservations about the reforms that we
have advanced.
The final lesson that we draw from Seattle is that it is in
the self-interest of American business and traditional trade
advocates who remain committed to old approaches to stop
resisting the inclusion of environmental concerns and
democratic values into the international trade system. Progress
requires finding common ground, not accentuating differences
and burying one's head in the sand.
International trade is suffering a crisis of eroding public
confidence. Those of us in Seattle witnessed this crisis first-
hand. Increasingly, average citizens, including my members,
simply do not believe that the current rules of international
trade respect their values, including their concern for the
environment. To create public confidence, the trade system must
respect these values, including the democratic values of
openness and respect for environmental concerns.
It's in the interest of everyone who wants trade to succeed
to establish public confidence in the institutions and policies
governing our global economy. We look to you, the Members of
Congress, to help provide the leadership in this effort.
The National Wildlife Federation is engaged and committed
to advancing the cause of conservation in the global economy.
We recognize about the international economy what we recognized
about our own economy at the beginning of the 20th century.
Trade is not an end in itself. It's a tool to achieve human
aspirations, to improve standards of living and to enhance the
quality of life. Our environment, our wild places, wildlife and
wild things are part of that quality of life.
Thank you very much.
[The prepared statement follows:]
Statement of Mark Van Putten, President and Chief Executive Officer,
National Wildlife Federation
I am Mark Van Putten, President and CEO of the National
Wildlife Federation, the United States' largest not-for-profit
conservation education and advocacy organization with over four
million members and supporters, ten field offices and forty-six
state and territorial affiliates.
For nearly ten years, we have been involved in the
development of United States trade policy. Our members are
America's mainstream and main street conservation activists who
share a commitment to United States leadership in building a
global economy that protects the environment while raising
living standards for all people throughout the world.
I was in Seattle with our National Wildlife Federation team
and our colleagues from the public interest community. We were
intensely involved in dialogue with trade officials, members of
this Committee, and all the participants. In response to the
Committee's stated focus of inquiry for this hearing, I would
like to outline for you the four key lessons that I believe
emerged from Seattle and the implications of those lessons for
future WTO negotiations.
I. No Turning Back
The first lesson is that the old, exclusive and secretive
deal making process of trade negotiations must give way to an
inclusive, transparent, and democratic process. The negotiating
strategies pursued by the United States and its trading
partners must reflect this new reality. At the beginning of the
twentieth century, President Wilson denounced secret deals,
secretly arrived at. It is past time to follow through with a
process that takes fully into account the views of developing
as well as developed countries and of citizens and citizen
groups as well as those of industry and government officials
from all countries.
In a speech before the World Economic Forum two weeks ago,
President Clinton noted: ``Trade can no longer be the private
province of politicians, CEOs, and trade experts. It is too
much a part of the fabric of global interdependence. . . .
[T]he consequence of running away from an open dialogue on a
profoundly important issue will be--it won't be more trade,
it'll be more protection[ism].''
The clock can never be turned back to a time when the
environmental and other goals of citizens from democracies
across the world could be excluded from trade policy. Seattle
put the impact of trade on the map of public consciousness. For
growing majorities of people there is an understanding of the
implications of trade for human values, for the way people live
and work, indeed for the quality of life. The increased
understanding has produced a determination to hold decision
makers accountable on these issues. Those who want trade to go
forward will have to make peace with environmental and other
goals that are necessary to achieving the public interest.
Trade policy must accommodate environmental values. We will
insist on it. The era of international trade negotiations being
insulated from public concerns, including respect for the
environment, is over.
As trade negotiations and trade institutions increasingly
establish the terms of market integration and their attendant
impacts on the environment, the need for meaningful public
participation opportunities correspondingly increases. Public
participation should be integral to any trade or investment
negotiations. Such a linkage confirms the relationship between
open markets and democratic principles, and provides citizens
with the information they need to make sound and informed
choices about policies that affect their future.
The United States has adopted a positive approach to
improving access to WTO decision makers in an attempt to ensure
that people are able to hold the WTO accountable for its
actions. The National Wildlife Federation urges the
Administration to redouble its efforts and Congress to provide
its support to infuse the WTO with the same democratic rules of
accountability enjoyed by American citizens at home.
Reform WTO Procedures Regarding Transparency and
Participation to Ensure the WTO System Is Held Accountable to
Democratic Principles: While the United States is to be
commended for its efforts over the past two years to increase
public participation and transparency in several trade
negotiating fora, including as part of the Administration's
Seattle Ministerial agenda, further progress is within reach.
For example, the United States must work diligently to increase
transparency in individual sectoral WTO negotiating groups in
which the United States actively participates. In the context
of the Seattle Ministerial agenda, the recently proposed
rebirth of the Committee on Trade and Environment (CTE),
ostensibly created as a forum to identify and discuss the
environmental implications of issues under negotiation in a new
round, must not simply become a ``mailbox'' repository of NGO
issues with no significant corresponding influence, nor impact
on the formal negotiating process. Clearly, the CTE's work
program must avoid repeating its previous mistakes of
conducting a one-sided and imbalanced review of the trade
implications of environmental policy without addressing
adequately the impact of trade policy on environmental
measures. In addition to any proposed new role for the CTE, the
WTO should establish, as a general matter, disclosure policies
to make information readily available and clear and responsive
mechanisms for receiving and responding to NGO participation
and comments.
Improved access and accountability are especially important
for people from developing countries, many of whose governments
do not have permanent missions located in Geneva. Given the
informal nature by which the WTO makes its decisions at
present, ensuring that the interests of all people are
represented at the WTO must be integral to the United States
objectives for trade liberalization. For most of the world's
population, the incredible acceleration of the global economy
has also brought accelerated loss of wildlife and wild places.
We urge the United States to devote its energy to ensuring that
all future WTO procedures are open and accessible to all
people.
Transparency at Home: Finally, a commitment to openness and
transparency must be present in the development of all aspects
of trade policy within the United States. For example, we note
our disappointment with the Administration's recent decision to
appeal a Federal court's ruling that requires the appointment
of environmental representatives to Commerce Department trade
advisory committees (ISACs) in the forest products sector. In
addition, the Administration needs to produce a more open and
transparent mechanism in the inter-agency decision-making
process prior to initiating a trade-based challenge of a
foreign country's environment, health, or safety law. Agencies
with environmental protection and conservation responsibilities
must play a major role in any such deliberations.
Open the Dispute Resolution Process: In all trade regime
dispute settlement fora, the United States should, at minimum,
fulfill President Clinton's commitment at the WTO to open
dispute settlement proceedings to public observation and pursue
consideration of amicus briefs from interested NGO parties.
II. Trade Liberalization and Environmental Protection Go Hand-in-Hand
In our preparation for the WTO Ministerial and in our
presence in Seattle, we worked through every constructive means
we had available to improve the WTO, not to disparage it. And
we will continue on that course.
We want the international trading system to succeed.
At the same time, we want trade to fulfil its true
potential. We want trade to deliver on its promise of improving
our quality of life. We want trade to raise living standards,
including respect for conservation values throughout the world.
How can we achieve this goal? NWF's trade and environment
work is informed by our desire to: achieve clarity and
predictability in WTO rules, raise environmental standards
globally through cooperative methods wherever possible, support
multilateral environmental solutions, and secure progress in
improving democracy, transparency and access to information in
all trade and environment policy arenas.
Specifically:
1. Improve WTO Deference to National Environmental Standards
and Multilateral Environmental Agreements (MEAs):
Trade rules must be crafted so they do not diminish the
environmental protections that nations have provided for their
citizens and resources. Each WTO member country must retain the
right to develop and enforce high conservation measures through
trade restrictions--even if they exceed the international
norm--without running afoul of WTO rules.
WTO rules should also provide for deference to MEAs in
instances of a conflict between trade rules and trade-related
provisions of MEAs. Furthermore, WTO rules should allow for
explicit deference to the independent institutions with
environmental expertise on questions of environment-related
trade matters. For example, the WTO should establish a formal
link to the United Nations Environment Program in WTO disputes
involving MEAs and WTO rules.
2. Allow Countries to Distinguish Between Products Based on the
Way They Are Produced:
Laws that address the environmental impact of how products
are made (such as the U.S. import ban on shrimp harvested by
trawl nets that kill endangered sea turtles), must be accepted
as a valid part of trade rules. For example, trade rules should
allow countries tolabel products or restrict the importation of
products that are produced or brought to marketin a way that
harms endangered species and/or the global commons.
3. Make Environmental Impact Assessments Integral to Trade
Negotiations:
Trade negotiators must look before they leap. The
environmental ramifications of any trade agreement must be
carefully evaluated before the agreement is concluded or put
into effect.
The goal of the environmental assessments and their open
public review-and-comment process should be to provide accurate
information on the environmental impact of the proposed trade
agreement and to suggest alternatives to mitigate the impact of
trade on the environment.
We welcome the President's signing of an Executive Order on
November 16, 1999, to perform environmental reviews of new
trade agreements. This is a significant step that formalizes a
process NWF has advocated for years. We look forward to an
immediate implementation and funding for this order and pledge
our constructive participation in such a process.
4. Reform WTO Procedures to Make Them More Open and Democratic:
Institutions that govern public conduct must be accountable
to the public. The WTO must adopt modern, democratic principles
of due process, including the right of the public to review and
comment on the written record of a trade dispute, access to
working documents and a permanent role for nongovernmental
organizations in WTO activities.
5. Eliminate Environmentally Perverse Subsidies and Promote
Trade in Environmental Technologies:
Renewed attention and energy must be devoted to delivering
eminently achievable ``win-win'' solutions relating to trade
and the environment. For example, the elimination of perverse
and environmentally damaging subsidies in natural resource
sectors such as fisheries and forest products may result in
positive gains for both the environment and trade. Nonetheless,
the timing and transition efforts must be carefully managed so
as to avoid short-term damage.
We commend the United States for its leadership in seeking
enforcement of current WTO notification requirements and rules
governing the elimination of subsidies in its 1999 WTO
Ministerial negotiating agenda. In addition, the United States
deserves credit for its efforts to place the facilitation of
trade in environmental technologies on the Seattle Ministerial
agenda. While the elimination of environmentally-damaging
subsidies and improved trade in environmental clean
technologies is not a panacea to the resolution of all trade
and environment conflicts, progress in these areas would
represent a positive step forward.
6. Environmentally Responsible Investment Agreements:
The United States should maintain its current position of
not seeking multilateral investment negotiations within the WTO
and should develop specific policy guidelines regarding the
relationship between investment negotiations and domestic
environmental regulation. Future investment negotiations
should, at minimum, pursue the following:
Seek mandatory, enforceable measures in the
agreement to prohibit the lowering of environmental standards
to attract investment and an active monitoring system to ensure
compliance.
Undertake a review of the traditional ``investor-
to-state'' principle found in numerous bilateral investment
agreements with an emphasis on ensuring its compatibility with
procedural openness, transparency and environmental protection
efforts. Recently, in the NAFTA context, several private
investors have attempted to use the investor-to-state
provisions to challenge domestic regulations with potentially
detrimental consequences for environmental laws.
Investment negotiations should include obligations
allowing legitimate measures designed to conserve the
environment, natural resources and the promotion of cooperative
environmental programs to be maintained and strengthened.
III. Global Consensus
Seattle's next lesson is that as a consensus-driven
institution, the WTO must find the common ground that unites
the interests of the developed world with those of the
developing world.
Policy regarding trade and the environment is a global
issue that requires global consensus. Seattle made clear that
further progress on both trade policy and international
environmental policy will require a consensus among all
citizens of all countries on how best to proceed.
We recognize the contribution trade liberalization is
making to our own economy and that liberalized trade abroad can
be vital in securing the means for less developed nations to
implement policies for sustainable development and
environmental protection. Nonetheless, while trade may help
deliver prosperity and improve prospects for the environment,
these results are not a given, nor will they occur
automatically. Billions of people and many nations are not
reaping the benefits of liberalization and continue to fall
further behind. This cannot be ignored.
We, as representatives of the non-governmental community
have a shared responsibility, together with members of
Congress, the Administration, and the business community in the
United States, to do our part to reach out to developing
countries through capacity-building efforts to achieve common
ground. We must encourage governments and industry to ensure
broader reach of the benefits of trade as well as improved
environmental protection. The challenge is to work with
developing countries, with understanding of their special needs
and different circumstances, while remaining true to our
commitment to environmental values. I believe deeply that
reconciliation is possible.
Specifically, what is needed is a structured formal process
to enable developing countries to be full participants in
global decision-making on trade and the environment. This
process would provide a framework for cooperation so that both
economic growth and environmental protection can improve
together. A formal process would develop needs assessments,
solicit input from both foreign and United States-based NGOs,
and enlist cooperative support from multilateral institutions,
all within specified timetables.
Promote Environmental Cooperation: As trade liberalization
leads to increased market integration, the opportunities to
foster a meaningful cooperative environmental agenda through
parallel environmental institutions multiply. Our own
experience working with government officials in Latin America
and elsewhere has helped us understand that it is not
improvements in environmental protection per se that
governments are reluctant to pursue. On the contrary, most
government officials are trying hard to develop and implement
effective national environmental regimes. What concerns them is
the possibility that regulation might be a disguised form of
protectionism or that their governments will lack the will or
the resources to implement regulatory requirements. We believe
both of these reservations can be and should be addressed. Our
goal is only to safeguard legitimate environmental standards
and as stated above, we advocate greatly enhancing capacity-
building efforts.
The National Wildlife Federation supports the notion that
trade and investment agreements can create unique opportunities
that should not be ignored to further environmental cooperation
among our trading partners. The conceptual framework and
cooperative mission of parallel environmental institutions
associated with trade liberalization merit strong political and
technical support in all of the United States' trade
initiatives.
In the NAFTA context, the Commission for Environmental
Cooperation (CEC) is the trinational environmental institution
created by the North American Agreement on Environmental
Cooperation (NAAEC) (NAFTA's ``Environmental Side Agreement'')
to address continental environmental issues in the United
States, Canada, and Mexico. The CEC facilitates cooperation and
public participation among the NAFTA parties by addressing
regional environmental concerns, helping to prevent potential
trade and environment conflicts, and promoting effective
environmental enforcement in each of the NAFTA countries. To
date, the CEC has been particularly effective in encouraging
improved working relationships between the environmental
ministers of the NAFTA parties, while at the same time,
providing a valuable forum to address transboundary issues of
shared environmental concern in North America.
The Border Environmental Cooperation Commission (BECC) is
the certifying entity responsible for developing and evaluating
water, wastewater, and municipal solid waste (MSW) projects in
the border region. BECC has comprehensive criteria to which
projects must adhere in order to be considered for BECC
certification. These include a project's economic viability and
its sustainable development components. The NADBank, now fully
funded with $450 million in equal contributions from the United
States and Mexico, is a binational financial institution that
may use its funds to leverage additional capital but only for
those projects certified by the BECC.
Although there remain areas that need improvement, the
BECC/NADBank have been particularly effective in facilitating
the development and adoption of sustainability criteria used to
evaluate potential environmental infrastructure projects;
transparent decision-making processes with public participation
from both nations; and capacity building and technical
assistance.
IV. American Business' Self-Interest
The fourth major lesson from Seattle is that it is in the
self-interest of American businesses and traditional trade
advocates who remain committed to old approaches to stop
resisting the inclusion of democratic values into the
international trade system. Progress requires finding common
ground, not accentuating differences.
Public confidence in the multilateral trading system is
eroding. In Seattle, we did not have to travel far to witness
the implications of this failure first-hand. Increasingly,
average citizens simply do not believe that the rules of
international trade respect their values, including their
concern for the environment.
As a result, the gravest threat to the multilateral trading
system and its potential to raise living standards throughout
the world is the lack of public confidence in its basic
functions.
The post-Seattle trade agenda presents us all with an
opportunity and a responsibility:
Seattle has raised the visibility of the
relationship of trade and the environment. This presents us
with the opportunity to gain public support for a new
consensus.
Our responsibility is to work together to build
that new consensus.
This does not mean that we should restructure the WTO into
the World Trade and Environment Organization. We are not
proposing or supporting measures that hide protectionism behind
a screen of environmental safeguards. We are seeking legitimate
reform, based on the merits of the issue.
The environmental community's reform agenda is not about
demanding the acceptance of one particular country's
environmental standards by another country. It is about
achieving clarity and predictability in WTO rules and raising
environmental standards globally through cooperative methods
wherever possible.
In the post-Seattle era, we should set to work on making
the multilateral trading system achieve its goals of
eradicating poverty, promoting sustainable development, and
truly raising living standards.
In this effort, the National Wildlife Federation is
committed to commonsense solutions to advance the environmental
cause in this new world we have entered. Perhaps I can
summarize by saying that we need to recognize for the new
international economy what we began to recognize about our own
national economy as the 20th century opened--that trade is not
an end in itself. It is a tool to achieve human aspirations, to
improve standards of living and to enhance the quality of life.
Our environment, our wild places and wild things are part of
humanity's quality of life.
Thank you.
Chairman Crane. Thank you, and our next witness, Rhett
Dawson.
STATEMENT OF RHETT DAWSON, PRESIDENT, INFORMATION TECHNOLOGY
INDUSTRY COUNCIL
Mr. Dawson. Thank you, Mr. Chairman, Congressman Houghton,
for inviting us to testify today. We're delighted to do so. We
were delighted also to see you in Seattle and see so many
Members of Congress you in large number participate in that
meeting. That was a very important lesson for all of us.
I am Rhett Dawson, president of the Information Technology
Industry Council. ITI is the leading IT association comprised
of the leading IT companies. Our members had worldwide revenues
of $460 billion in 1999, and employed more than a million and a
half people in the United States. As you know, our companies
are making a significant contribution, 35 percent, to the
growth of the economy. And we see innovation in the IT industry
as very helpful to the economy, not only for the United States,
but the world as a whole.
So we promote group policies to open markets, foster
innovation and give consumers choices, as well as stimulate the
development of electronic commerce. Over the past 5 years, ITI
has worked closely with our counterparts in Europe and Asia and
Latin America, in particular, to build global information
technology industry consensus to eliminate barriers to trade
and promote an e-commerce trade agenda.
Seattle, we believe, was a missed but not a lost
opportunity. We were heartened by the progress that was made on
electronic commerce. We believe that if the whole package could
have come together, an e-commerce agreement could have been
reached.
Our industry has significantly benefited from trade
liberalization on the product side, and now we also strongly
support liberalization on services, which WTO director-general
Mike Moore talked about yesterday. Liberalization must continue
and trade rules must be adapted to reflect changes in
technology and the new forms of business.
Countries all over the world have seen for themselves the
economic impact that information technology is having in the
U.S.: productivity increases, job creation, and job growth. And
they, too, want to achieve similar results. And this means
ensuring an open, competitive marketplace which rewards
innovation and entrepreneurship.
There is much work to be done to broaden understanding of
the digital world, especially to understand how electronic
commerce is changing global business, and examining how trade
rules apply, and really trying to figure out whether they need
to be adapted to provide a stronger underpinning for the global
information economy.
ITI has taken an active role in working with the WTO
delegates to help them understand how these changes are taking
place and how they can affect international trade. We've held
three seminars in Geneva over the past 18 months to begin this
educational effort. We're going to continue to press forward on
these educational efforts, as well as trying to press forward
with an e-commerce agenda. We're heavily invested in the WTO,
because we believe these things matter.
Now, I couldn't let this opportunity to testify before you
today go past without mentioning an issue that's really
critical to our industry, which is permanent normal trade
relations for China. I just want to tell you that bringing
China into the WTO is very much in America's national economic
interest and it is critical to continuing American
technological leadership and competitiveness in international
markets that this vote occur and occur this year. Granting
China PNTR is a critical process for us, and we hope that we
can count on you to support PNTR.
Thank you. We appreciate the opportunity and your patience.
[The prepared statement follows:]
Statement of Rhett Dawson, President, Information Technology Industry
Council
Thank you Mr. Chairman for inviting me to testify today on
the outcome of the World Trade Organization Ministerial Meeting
in Seattle and the trade priorities of the information
technology industry, particularly in the area of e-commerce. I
commend you and the Members of this Committee, for the
important step you took by participating in the meeting in
Seattle. There is no doubt trade is important to all of us.
I am Rhett Dawson, President of the Information Technology
Industry Council. ITI is the premier trade association
comprised of the leading IT companies. Our members had
worldwide revenues of $460 billion in 1999 and employ more than
1.5 million people in the United States. Our companies are
making a tremendous contribution to the growth and innovation
we see in the IT industry and to our economy as a whole.
International trade and electronic commerce are of critical
importance to ITI member companies. Nearly 60% of their total
revenues are derived from overseas sales in more than 125
countries. Consequently, a major focus of our work is to
promote policies that open markets, foster innovation, provide
consumers with choices, and stimulate the development of
electronic commerce.
I. Industry-to-Industry Collaboration on Trade Issues Essential
Over the past five years, ITI has worked closely with our
counterpart associations in 14 countries around the world in an
organization called the International Information Industry
Congress. Working on an industry-to-industry basis, we have
developed consensus views on critical trade issues and
advocated our positions to government. Our efforts helped pave
the way for the 1996 Information Technology Agreement to
eliminate customs duties on IT products. We are working through
the IIIC and APEC to identify and eliminate non-tariff barriers
to trade in IT products. In addition, our industry-to-industry
work is focused on the benefits of information technology and
the new issues brought about by electronic commerce.
At the behest of USTR, ITI organized three seminars over
the past eighteen months to familiarize WTO delegates in Geneva
with trade issues affecting the information technology
industry. We addressed the benefits of information technology
for economic growth and development, the application of
existing trade rules to new technologies, and proposed action
by Ministers to keep e-commerce barrier free.
Last winter, as we began preparing for the Seattle
Ministerial, ITI teamed with the Business Software Alliance
(BSA) to promote an e-commerce trade agenda for the 21st
Century. We focused on defining key issues in international
trade and e-commerce and on proposing action by industry and
governments to ensure that the benefits of the global
electronic marketplace are shared broadly among all countries,
both developed and developing. We initiated dialogues with our
industry counterparts in Europe and Asia and invested
considerable resources to acquaint WTO representatives in
Geneva with our technology and the potential trade policy
issues that the WTO may need to address. We were prompted to do
this in order to develop a common understanding of what e-
commerce is and means for the trading system.
We arrived in Seattle with high hopes for ministerial
action to keep e-commerce barrier-free. Our industry-to-
industry consultations revealed solid support for extending the
moratorium on applying customs duties to electronic
transmissions. We were encouraged by reports that consensus was
developing on other key points, including: reaffirmation that
current WTO rules apply to e-commerce; commitment to resist
imposing burdensome regulations that would inhibit the growth
of e-commerce and access to IT; and establishment of a WTO work
program on the inter-related issues inherent in e-commerce,
building on the WTO's efforts to date. Clearly, our industry-
to-industry consultations were successful in broadening
understanding of these issues among WTO delegates and
highlighting the need for on-going trade liberalization in this
sector.
II. Disappointed, but Optimistic . . . E-Commerce and the Internet are
Transforming International Trade
To be sure, we were disappointed that Ministers failed to
reach agreement and launch a New Round. But, we were heartened
by the substantial progress that was made on e-commerce. We
believe that an agreement on e-commerce could and would have
been reached--had the whole package come together. In spite of
criticism of the WTO, the Seattle Ministerial in particular,
and U.S trade policy that you may hear expressed today, the IT
industry is optimistic that trade negotiators will resume
discussion of e-commerce issues in the very near term.
Countries all over the world have observed the U.S
experience and recognize the very positive, quantifiable impact
IT is having on the US economy, as reflected in productivity
increases, job creation, and economic growth. They understand
that IT is not a specialized sector of the economy reserved for
the so-called ``Internet companies or ``dot-coms.'' To be
competitive in any business--whether public or private--
governments and companies must understand how to effectively
utilize information technology and the Internet.
A few data points might be helpful to illustrate this
point:
Between the first quarter of 1998 and the first
quarter of 1999, the Internet Economy (which includes such
things as online sales and investment in IT infrastructure)
grew 68 percent.
In the same time period, electronic commerce
increased by 127 percent and nearly 400,000 e-commerce jobs
were created. Some industry analysts estimate that e-commerce
will generate more than $3 trillion in sales by 2003.
Investment in computer and information
technologies in the 1990s by every sector of the U.S. economy--
from car makers to farmers--has cut production costs and
boosted output. The result has been to hold prices down and
increase American competitiveness internationally.
The future is even brighter:
A report released last year by the University of
Texas estimated that by the end of this year 56 percent of U.S.
companies will sell their products online.
In the next six years, almost half of the U.S.
workforce will be employed by industries that are either major
producers or intensive users of IT products and services.
Not only is the Internet driving the New Economy it is also
re-inventing our industrial base.
Late last year the world's two biggest automakers
announced plans to put their entire purchasing operation
online. The move will connect suppliers, business partners and
customers all around the world.
Even the United States Postal Service is looking
for ways to become more competitive in the Information Age--
focusing on how they can use technology to better serve their
customers.
The fact is IT is changing nearly every facet of our
lives--from how we teach our kids to how business is conducted.
While it is nearly impossible to predict what the future will
look like, we do know that the success and growth of our
industry has been--and will continue to be--fueled by
innovation and trade.
III. Our Trade Agenda for 2000
There is much work to be done to broaden understanding of
the digital world, especially to understand how electronic
commerce is changing global business, examine how current trade
rules apply, and assess whether new rules are necessary to
provide a strong underpinning for the global information
economy. We will focus our effort on the WTO.
A. WTO Services Negotiations (GATS 2000)
The WTO has a built-in agenda requiring negotiations on
Trade in Services. We believe there may be an appropriate way
to take up e-commerce issues in the context of these
negotiations, and we are exploring possibilities with our
industry and government colleagues both here and abroad. Some
have suggested that the Telecom Reference Paper, which is part
of the Services Agreement on Basic Telecommunications, may
offer a starting point for elaboration of rules governing
Internet access and e-commerce. We look forward to exploring
this suggestion, though we are somewhat concerned that it may
imply a greater government regulatory focus than the IT
industry believes is appropriate. The IT industry's fundamental
principle is to minimize government regulation of this sector
and promote open competition. We need trade rules in the area
of e-commerce that support the entrepreneurial innovation and
competition that characterize our industry.
B. Potential Action by Ministers
As WTO Director General Mike Moore reconvenes the delegates
in Geneva, there may well be a possibility for ministerial
action on the specific issue of e-commerce. We propose the
following action:
Ministers should make a public commitment to keep
electronic commerce barrier-free. Such a commitment would be a
``best efforts'' pledge that would set the tone and direction
for ongoing liberalization of policies affecting electronic
commerce, foster a transparent, predictable and technology-
neutral international trade environment, and spur global
economic growth and development.
To support this commitment, five additional actions by
Ministers are needed:
The first is to agree to continue the May 20, 1998
Moratorium on Customs Duties on Electronic Commerce and clarify
that the exemption from tariffs applies both to the
transmissions themselves and to their contents.
Second, we want the Ministers to reaffirm that
current WTO obligations, rules, disciplines and commitments
(namely the GATT, GATS and TRIPS agreements) are technology-
neutral and apply to e-commerce. We don't need to invent new
trade rules when using the existing rules may serve us better.
Third, we want Ministers to specifically commit to
resist imposing burdensome regulations that would inhibit the
growth of electronic commerce and access to IT and instead,
when measures must be taken, employ the ``least trade
restrictive'' measures possible. Such measures should be
subject to WTO principles (in particular, national treatment,
non-discrimination, transparency, notification, review and
consultation).
Fourth, we want Ministers to give the WTO General
Council responsibility to oversee a work program on the inter-
related issues inherent in electronic commerce, building on the
WTO's efforts to date. Our objectives in this work program are
to achieve: 1) expanded market access commitments in the
General Agreement on Services (GATS), the Agreement on Basic
Telecommunications and the Reference Paper; 2) expanded country
participation and product coverage in the Information
Technology Agreement, and 3) full implementation by all WTO
members of the World Intellectual Property Organization (WIPO)
copyright and phonograms treaties that impact e-commerce.
Fifth, we want to establish a substantive dialogue
on technical assistance for developing countries and continue a
regular dialogue between the WTO and IT industry
representatives.
C. Confidence-Building Measures are Needed
This Committee is in a unique position this year to take
early action on certain trade matters that will have the effect
of building confidence in our trading system. We commend you
for the leadership you have shown in forging consensus on the
Africa/CBI bill. While this legislation is not a priority
matter for the IT industry, we strongly support it because of
the important confidence-building messages it sends, namely
that trade liberalization enhances our economy and must
continue, and that the needs of developing countries must be
squarely addressed. Later this spring this Committee will also
consider the U.S. participation in the WTO, now five years
after its creation. Here, too, this Committee can play an
important role in restoring confidence among our trading
partners by reinforcing the commitment of the U.S. Congress to
the WTO.
D. Support for the On-going Process of Trade Liberalization
PNTR for China is Essential. Later this spring Congress
will consider extending Permanent Normal Trade Relations to
China in connection with China's accession to the World Trade
Organization (WTO). Bringing China into the WTO is in America's
national economic interest, and it is critical to continuing
American technological leadership and competitiveness in
international markets. Granting China PNTR is a critical part
of this process.
There can be no doubt that the bilateral agreement is a
solid ``win'' for our industry. High-technology products
(including semiconductors, semiconductor capital equipment and
materials, telecommunications, computer hardware and software,
electronics, and other related information technology products)
represent some of our country's most sought-after exports.
China, already our 4th largest trading partner, is one of the
world's fastest growing markets for high-tech exports. We
benefit from the market access provisions subscribed to by the
Chinese that substantially improve the trade and investment
opportunities for the high-tech industry. These include:
Elimination of tariffs on nearly all information
technology products;
The right to import and distribute goods without
mandated intervention of Chinese entities;
Increased foreign participation in China's
telecommunications services sector; and
Far-reaching reforms to bring China's economy into
compliance with international rules.
These market reforms will help bring about positive
economic and social changes that will benefit all the people of
China. The extension of permanent normal trade relations status
to China will enable the IT industry to expand trade and
investment with China. This, in turn, will lead the industry to
create more high-wage jobs, contribute to expanded domestic
economic growth, and advance American technological leadership
and competitiveness in international markets. We will also
benefit from having China abide by the international trading
rules.
We urge Congress to extend normal trade relations status to
China on a permanent basis so that U.S. industry will receive
the full benefits of China's WTO accession package.
Conclude ITA II Negotiations. We need on-going
liberalization to keep trade rules relevant to industry. The IT
industry strongly supports the seminal Information Technology
Agreement, which eliminated customs duties on a broad range of
IT products. The ITA is a voluntary agreement, subscribed to by
52 countries that represent over 95% of world trade in these
products. The problem is that the list of products covered by
the ITA is now two-to-three generations behind products being
produced and exported today. In just the past three years we
have seen the convergence of computing, telecommunications and
consumer electronics technologies, and the creation of a
fascinating range of new information appliances and
applications. In addition, the ITA does not yet address
specific technical or regulatory barriers to trade in this
sector, and useful work could be done in the near-term on these
matters.
Access to all IT products on a duty-free basis is a
critical element in bringing the benefits of Information Age to
all enterprises--both large and small--in developed and
developing countries. We must complete the ITA II negotiations
without delay and then update the ITA product list to keep it
relevant to the products that are being produced and exported.
Improve the Functioning of the WTO. And finally, we must,
as an urgent priority, continue to explain the benefits of
international trade and improve the functioning of the WTO.
This message must be broadly shared with small and medium-sized
companies, consumers, labor groups and the media. We need to
find a way to facilitate serious discussion among all
interested parties on how to reform the WTO. We in the business
community--particularly in the IT industry, which benefits so
much from international trade--must take responsibility in this
area.
The IT industry is hopeful and optimistic that governments
will heed our advice regarding trade and e-commerce issues.
Industry around the world has been hard at work to help define
issues and solutions in this critical area. In spite of the set
back of the Seattle Ministerial, we are confident that there is
a solid consensus that the WTO must address these issues.
I know we can count on this Committee for leadership and
policy direction for free and open trade. We stand ready and
willing to lend our expertise and assistance to the Committee,
the Administration, and our trading partners. It is in our
common interest to keep e-commerce barrier-free.
Thank you Mr. Chairman and I would be happy to answer any
questions you might have.
Chairman Crane. Thank you, Mr. Dawson.
Mr. Vastine.
STATEMENT OF ROBERT VASTINE, PRESIDENT, COALITION OF SERVICE
INDUSTRIES
Mr. Vastine. Thank you very much, Mr. Chairman and
Congressman Houghton. Good to see you both again.
Thank you for this opportunity to testify on behalf of the
Coalition of Service Industries. CSI and its partners and
friends here and around the world have been working since the
conclusion of the WTO telecommunications and financial services
negotiations in 1997 toward the Services 2000 round. Supporting
our skilled services negotiators in Washington and Geneva, we
have strived to develop a consensus globally that the Services
2000 negotiations must be used to expand significantly trade
across a wide range of services.
The failure of the Seattle Ministerial was very
disappointing, particularly because there was consensus on the
text of the declaration for services. Had the Ministerial
succeeded, this text would certainly have been adopted.
Nonetheless, the built-in agenda requires negotiations and
services to start at the beginning of this year.
The great question, until just yesterday, was whether the
failed ministerial had so jaundiced the atmosphere that WTO
members would refuse to proceed with the important work of the
built-in agenda.
CSI led a group of industry representatives for meetings of
the WTO in Geneva last week for talks with Mike Moore and a
number of key delegations in order to support the start of the
Services talks. The tone of these meetings was surprisingly
positive. It seemed to us very likely that a key meeting
scheduled for yesterday would decide to move ahead on the
built-in agenda.
The news indeed from yesterday's WTO General Council
meeting was very good. WTO members have decided that the global
trading system is too important and the WTO itself too valuable
not to get back to business. In Seattle, the members took a
good look at the abyss and decided to step back from it. This
means essentially that the services work will proceed much as
it would have even if Seattle had produced a ministerial
declaration.
We are now, in fact, where we would have been had the
declaration been adopted.
And I must say that director general Mike Moore has worked
very hard for this. We think he has done a very good job in
exceptionally difficult circumstances to get that organization
back on track. The General Council's decision yesterday means
that the Council on Trade and Services will meet on February
25th, later this month, to consider how to organize the
services negotiations. That work will fall into two categories.
First, work on rules and second, work on market access.
In the rules area, we will pay special attention to the
effort to reach agreement on rules permitting safeguards. There
has not been a safeguards rule for services, and we will want
to consider whether one is needed and what it might provide.
The market access area is of course the heart of the effort,
because here's where we can get expanded trade. We hope that
the Council on Trade and Services will initiate the market
access work in tandem with the rules work.
What do we want in the new Services round? We have a long
agenda. First, we want maximum liberalization in all the
sectors, services sectors, as soon as possible. We want to
include new sectors, like energy services and air express
services, and work on existing sectors like education and
health that have not gotten much attention heretofore.
We want to remove barriers to electronic commerce. There
has been a lot of focus in the last 2 years on the moratorium
on electronic transmissions. This is important work, but there
are other objectives perhaps of more immediate commercial
value. One would be to secure commitments for free trade in all
the services that make an e-commerce transaction possible, like
distribution and financial services, for example.
We want free movement of key business personnel for limited
assignments in other countries. This is an extremely sensitive
but very important area. U.S. business needs to send personnel
to service clients' needs all over the globe. And the U.S.
economy needs skilled personnel at a time of record
unemployment.
We also seek regulatory transparency. Regulations governing
the provision of services are often used to prevent U.S.
companies from doing business on equal terms with foreign
domestic providers, with whom they compete. To cure this, we
need to make regulatory processes transparent and accessible,
and we will be seeking this kind of regulatory reform sector by
sector in the coming negotiations.
Mr. Chairman, we believe the WTO is the best available
means to facilitate our trade expansion objectives. It has a
successful track record in services. That is why we continue to
help build its competence in services trade, and why we
continue to build a world-wide base of private sector support
for the services negotiations. We are very pleased by the
decisions of the General Council yesterday. We anticipate a
year of useful work in the WTO and are very positive about the
outlook for making real progress toward freer trade in
services.
Thank you.
[The prepared statement follows:]
Statement of Robert Vastine, President, Coalition of Service Industries
MAKING PROGRESS ON SERVICES TRADE LIBERALIZATION AFTER SEATTLE
Mr. Chairman, I am very grateful for the opportunity to
present the views of the Coalition of Service Industries (CSI)
on the post-Seattle trade agenda for services.
CSI and its partners and friends here and around the world
have been working since the conclusion of the WTO
telecommunications and financial services negotiations in 1997
toward the ``Services 2000'' round. Supporting our skilled
services negotiators in Washington and Geneva, we have strived
to develop a consensus that the ``Services 2000'' negotiations
must be used to expand significantly trade across a wide range
of services.
These efforts included conferences on services in
Washington; San Jose, Costa Rica; and Hong Kong. They
culminated at the World Services Congress in Atlanta a month
before the Ministerial, where more than 800 business, academic
and government experts from more than 50 countries met to
discuss and recommend policies on most of the important issues
affecting trade in services. I would be glad to supply these
recommendations for the record.
Participating in these efforts along with CSI have been the
Hong Kong Coalition of Service Industries, the American
Enterprise Institute, the Brookings Institution, Harvard's
Center for Business and Government, the Mark Twain Institute,
and hundreds of companies, businessmen and scholars. Many of
these organizations and individuals participate in the Global
Services Network, a loose, broad-based network whose members
support liberalization of trade in services. International
organizations like the Organization of American States and the
World Bank have also played an important role.
Thanks to all these efforts and with the leadership of our
negotiators, a strong consensus had developed by the time of
the Ministerial Conference on the goals for the sector. The
text relating to services contained in the final draft of the
Seattle Declaration would certainly have been agreed had the
Ministerial Conference concluded successfully. Nonetheless,
that text, which is attached, will likely form the basis for
the mandated Services 2000 negotiations, though it may not be
adopted formally.
Thus the services sector was left after Seattle in a
position to move ahead at the beginning of 2000 as required by
Article XIX of the General Agreement on Trade in Services.
Indeed, in her remarks closing the Ministerial, Ambassador
Barshefsky called for negotiations on services and agriculture
to take place as mandated by the ``built-in agenda'' of the
Uruguay Round.
The great question until just yesterday was whether the
unsuccessful Ministerial Conference had so jaundiced the
atmosphere that Members would refuse, in the absence of a
broader round, to proceed with the important work of the built-
in agenda.
Members of the Coalition of Service Industries and services
industry representatives from other countries met in Geneva
last week with Director General Moore; key members of the WTO
secretariat; the Ambassadors of the ``Quad"; the Chairman
of the GATS Council, Stuart Harbinson of Hong Kong; and
representatives of key WTO Members including Brazil, Pakistan,
Thailand, Malaysia, Egypt, Argentina, and Australia. The
purpose of our meetings was to express support for the WTO and
for the effort to liberalize trade in services, prior to the
General Council meeting scheduled to take place yesterday.
Decisions of the WTO General Council
The news from yesterday's General Council meeting is good.
WTO Members seem to have decided that the global trading system
is too important and the WTO itself too valuable, not to
proceed with the mandated agenda and get the organization back
on course. In Seattle the Members got a good look at the abyss,
and decided to step back from it.
The Director General should get the lion's share of the
credit. He has worked extremely hard since Seattle, using all
of his political and personal skills to forge a consensus on a
positive program among the highly diverse WTO membership.
Yesterday the WTO General Council instructed the Council on
Trade in Services (the ``GATS Council'') and the Committee on
Trade in Agriculture to carry out the negotiations.
This means the GATS Council will meet in special session on
February 25 to consider a timetable for the negotiating process
and other organizational matters. The Working Party on Domestic
Regulation and the Committee on Specific Commitments will meet
that week as well.
The services work program for 2000 will thus proceed much
as it would have even if Seattle had produced a Ministerial
Declaration. Specifically, work on services will progress on
two fronts: rules and market access.
The first front, rules, entails completing unfinished work
of the Uruguay Round, and improving on rules already adopted.
This work is organized through a number of committees reporting
to the GATS Council, including the Working Party on Domestic
Regulation, Committee on Specific Commitments, the Working
Party on GATS Rules (dealing with emergency safeguard measures,
subsidies, and procurement), and the Committee on Financial
Services.
Though technical, some of the issues considered by these
working groups are extremely important.
For example, the Working Party on Domestic Regulation is
looking at ways to strengthen the regulatory disciplines in
GATS Article VI in regard to licensing, qualification
requirements, and technical standards. The purpose is to insure
that regulations are transparent and not unnecessarily
burdensome or trade restrictive. I will discuss regulatory
issues further below.
The Working Party on GATS Rules is considering the adoption
of a rule on safeguards, which must be completed by the end of
the year. This work must be very carefully followed. While the
principle of safeguards is well accepted for trade in goods, it
has never been applied to trade in services. Whether safeguards
have a place in the service sector and what that place may be
is an important issue.
The Committee on Specific Commitments is working on
classification, in order to create accurate descriptions for
important, newer, industries like air express services, and
energy services, for example. The purpose is to ensure that
when a country makes commitments to liberalize trade in a given
sector, the commitments capture accurately the actual range of
commercial activities performed in the sector, and are legally
secure.
There seems to be a solid consensus among WTO Members that
this work should proceed immediately. Indeed, progress on these
issues will encourage many emerging market delegations to move
soon on market access talks.
The second front, market access, is paramount for CSI,
because this is the work that we expect will result in greater
access to markets across the broad range of sectors and all
four of GATS' ``modes of supply".
Hopefully at its February 25 meeting the GATS Council will
agree that preparations for market access negotiations should
begin immediately, in tandem with the work on rules mentioned
above. This means that governments will begin to prepare their
request and offer lists, which they will likely exchange in the
fall.
While yesterday's General Council meeting established no
formal link between the negotiations on services and the
negotiations on agriculture, our discussions in Geneva left
little doubt that many countries will make such a linkage. Our
position is that liberalization of trade in services promotes
economic growth, development of critical infrastructure, and
technology transfer. It provides significant benefits for
consumers in both advanced and developing markets. Limiting the
gains from expanded trade in services by insistence on linkages
would be self-defeating.
Goals for the Next Services Negotiations
The US services sector has several priorities for the
coming negotiations.
The first is to achieve maximum liberalization in all modes
of supply across the widest possible range of services, as soon
as possible. The WTO is the best available means to facilitate
this objective among all the world's significant trading
nations. It has a track record of successful negotiations in
telecommunications and financial services. That is why we
continue to focus on building the WTO's competence in services
trade, and why we continue to help build a worldwide base of
private sector support for multilateral services negotiations.
We are committed to working with developing economies to help
them identify both their own interests in trade liberalization
in services, and the benefits they can derive from such
liberalization.
The second, related objective is to fully embrace important
new sectors in the liberalization effort. These new sectors
reflect the continued growth of the knowledge-based services,
and certainly include all the services required to support
electronic commerce. They also include important, new sectors
like energy and environment, and existing ones that have not
received sufficient attention, like education and health.
The third objective is to focus on the real barriers
impeding the full realization of the promise of electronic
commerce and the Internet. This may require a fresh look at the
WTO work program on electronic commerce, which has been
dominated by the objective of obtaining a permanent moratorium
on duties on electronic transmissions. While this is a useful
goal, there are other objectives of more immediate commercial
value. One would be to secure commitments to ensure free trade
in the services that make e-commerce possible, like
distribution and financial services, for example, and the
services that can be traded through electronic commerce.
This objective could be pursued through the services
negotiations. Efforts to obtain the extension of the moratorium
on duties on electronic transactions and other elements of the
electronic commerce agenda that were discussed intensively, but
not finally agreed at Seattle, should be pursued on a separate
track when the WTO Council considers how to re-launch this
work.
The fourth objective is to increase commitments to
liberalization of cross border trade, providing, however, that
governments may take necessary prudential, health, safety and
consumer protection measures as already provided in GATS
Article XIV. Currently there are relatively few commitments to
cross-border trade in services. Such cross-border trade will
create an incentive for service providers to operate from
competitive home markets geared to product quality, transaction
security and customer responsiveness.
The fifth objective is to obtain commitments to the freer
movement of key business personnel. This is an area of
increasing concern to US business, which is daily hampered by
shortages of critical skills in an economy blessed by
remarkably low rates of unemployment. Immigration rules should
be revisited to permit easy access to visas and work permits
for short-term entry of foreign experts to complete limited
assignments and return home. We should of course ask the same
of other countries, because US businesses need to be able to
transfer skilled people to service their own and their
customers' needs, whether in Buenos Aires or in Bangkok. For
sound reasons, some emerging market countries have made this a
major goal in the WTO talks because of the opportunity it
provides to upgrade the skills and opportunities of their own
people; it would help reduce the incentive for skilled,
talented people simply to emigrate in search of better work.
The sixth objective is to strengthen GATS regulatory and
transparency provisions. Services industries are in general the
most highly regulated. In many instances, rules and regulations
governing the provision of services are used in a manner to
impede the ability of US firms to engage in doing domestic
business on a level playing field with local businesses. Only
by making regulations and regulatory processes transparent and
accessible and treating foreign and domestic market
participants equitably will firms be able to compete fairly on
a global basis.
Conclusion
Mr. Chairman, CSI is dedicated to supporting our
government's efforts to develop fully, this year, the complex
range of services work that is outlined above, including the
launch of market access negotiations. Given its strong
commitment to open markets, CSI was actively involved in
private sector preparations both for the Seattle Ministerial,
and the Services 2000 negotiations. The inability of Trade
Ministers to leave Seattle with a blueprint for global trade
negotiations is a warning to all that obtaining further trade
liberalization will not be easy.
For our part, we will redouble our efforts to work with
businessmen and trade negotiators around the world to help
achieve the consensus and political will that are the critical
components of successful negotiations. We also look forward to
working with the Administration and Congress to help develop
the leadership necessary to bring trade negotiators together so
that services negotiations, as part of the built-in agenda, can
move forward. We look forward to a year of very useful work to
move the services negotiations forward, and are very positive
about the outlook for making real progress.
[Attachments are being retained in the Committee files.]
Chairman Crane. Thank you.
Mr. Robertson.
STATEMENT OF STEVE ROBERTSON, PRODUCT MANAGER, MARCONI COMMERCE
SYSTEMS, GREENSBORO, NORTH CAROLINA, ON BEHALF OF NATIONAL
ASSOCIATION OF MANUFACTURERS
Mr. Robertson. Good afternoon. I'm Steve Robertson, Product
Manager at Marconi Commerce Systems. On behalf of Marconi, and
also the National Association of Manufacturers, NAM, of which
we are a member, I am pleased to have this opportunity to
testify.
I commend the Ways and Means Trade Subcommittee, and you,
Chairman Crane, for holding these hearings on determining the
direction of trade negotiations after Seattle. This subject is
critical to both Marconi and the NAM. Marconi is headquartered
in Greensboro. We produce and ship gasoline dispensers and
related equipment, from pump controllers to total site
management systems for convenience stores and service stations.
The pamphlet you'll be getting in a moment here will show you
the most tangible, familiar example of what we produce, a gas
pump.
We have two factories in the United States, both in North
Carolina. We moved to Greensboro from Springfield,
Massachusetts in 1966 and opened with fewer than 900 employees.
We have grown as our international trade and domestic
opportunities have expanded, to 2,500 people today in total,
with 1,500 of them in Greensboro.
The Greensboro plant produces gasoline dispensers for the
world. In 1989, we were only shipping products to a handful of
countries. Today, about 20 percent of our U.S. production is
shipped to 85 different countries. Furthermore, Marconi has a
worldwide presence, which includes manufacturing facilities in
Australia, England, Germany and the People's Republic of China.
Revenue directly related to international trade at the
Greensboro plant has increased 585 percent in the past 10
years. Our production and sales here in the United States would
stagnate if our consumers were limited to the domestic market.
I'd like to describe for you today one particular area of
great concern to Marconi. For several years, our company has
through hard work and good fortune been the leading supplier of
gasoline dispensing equipment in Latin America. We sell to all
countries in the region. Fully one half of our exports end up
in Latin America.
In response to our success, competitors have established
manufacturing facilities in the MERCOSUR region of South
America. Since we must pay duties ranging from 17 to 30 percent
on the products we ship into these countries, we find ourselves
at a serious price disadvantage. To deal with this problem, our
short-term position is to cut costs as best we can and to
sacrifice profits to maintain our number one market position.
That is clearly not a tenable long-term approach.
In the future, we will overcome the situation by
elimination of tariffs through successful negotiation of the
free trade area of the Americas and further WTO negotiations,
or we will be forced to build a factory in Brazil. If we are
forced to go, foreign workers will permanently replace up to 10
percent of our highly skilled, highly paid U.S. production
workers in Greensboro.
But that's not all. Currently about 80 percent of the parts
and components in our products come from U.S. suppliers. The
pamphlet I have given you today lists some of these suppliers.
These companies throughout the country will also suffer the
loss of business as components for South American-produced
product is sourced in South America.
This example clearly illustrates how important it is for
U.S. companies and U.S. workers to have better access to world
markets. Marconi urges the U.S. Government to be a strong
leader and an aggressive negotiator for the speedy elimination
of trade barriers. These negotiations must proceed quickly. It
is our serious hope that they last not more than 3 years. Three
years is an eternity in terms of profitability and
competitiveness for a manufacturing company.
Marconi Commerce Systems, like most other U.S.
manufacturers, looks forward to competing on a level
playingfield with other worldwide manufacturers, because we
believe that our workers are the most productive in the world,
and the products they make are of the highest quality in the
world. That is why Marconi is working hard on its own through
the NAM and through the recently formed U.S. Alliance for Trade
Expansion to support increased trade liberalization and to
spread the message about the benefits of free trade.
Thank you.
[The prepared statement follows:]
Statement of Steve Robertson, Product Manager, Marconi Commerce
Systems, Greensboro, North Carolina, on behalf of National Association
of Manufacturers
Good morning. I am Steve Robertson, product manager at
Marconi Commerce Systems. On behalf of Marconi, and also of the
National Association of Manufacturers (NAM), of which we are a
member, I am pleased to have this opportunity to testify. I
commend the House Ways and Means Trade Subcommittee and
Chairman Crane for holding these hearings on determining the
direction of trade negotiations after Seattle. This is a
subject of critical importance to both Marconi and the NAM, so
we are pleased to offer you our views.
The NAM spearheaded the U.S. Alliance for Trade Expansion
(US Trade), a coalition of American agriculture, consumer,
manufacturing, retailing and service organizations, to promote
the benefits of expanded international trade. I was in Seattle
to promote our belief that trade expansion, and the rules-based
trading system in particular, is beneficial to all Americans.
Admittedly, the relatively sober pro-trade message we delivered
had difficulty competing with the chaos that prevailed on the
streets. Good theater doesn't necessarily mean good policy,
however.
While few Americans have the time, interest or patience to
follow the political wranglings in Washington over a new round
or permanent normal trade relations (PNTR) status for China, it
is important to take a step back and consider what the failure
to expand trade opportunities will mean to the bottom line of a
small manufacturer in North Carolina.
Marconi is headquartered in Greensboro. We produce and ship
gasoline dispensers and related equipment, from pump
controllers to total site management systems for convenience
stores and service stations. Marconi also provides customers
with several payment-at-the-pump and merchandising options,
such as built-in card readers, cash acceptors and transmitter/
receiver in dispenser technologies.
The pamphlet in front of you shows the most familiar
tangible example of what we produce--a gas pump. We have two
factories in the United States, both in North Carolina. We
believe that our Greensboro factory is the largest of its kind
anywhere in the world. We moved to Greensboro from Springfield,
Massachusetts, in 1966, and opened with fewer than 900
employees. We have grown, as our international trade and
domestic opportunities have expanded, to 2,500 people total,
with 1,500 of them in Greensboro today.
The Greensboro plant produces gasoline dispensers for the
world. About 20 percent of our U.S. production is shipped to 85
different countries. We have high hopes and targeted plans for
expanding sales to the African countries. In the past, our
African sales have been limited to Egypt and South Africa. We
recently have signed new distribution agreements in East and
West Africa. Furthermore, Marconi has a worldwide presence,
which includes manufacturing facilities in Australia, England,
Germany and the People's Republic of China. For that reason, a
sound, multilateral, rules-based commercial trading system is
of paramount importance to Marconi. Without such a system, it
would be much, much harder and costlier to operate
internationally. Our production and sales here in the United
States would stagnate if our consumers were limited to the
domestic market.
Certainly the Uruguay Round of negotiations and the
resultant creation of the World Trade Organization were a
groundbreaking exercise in global trade expansion. Marconi has
capitalized upon these developments, as evidenced by the fact
that revenue directly related to international trade at the
Greensboro plant has increased 585 percent in the past 10
years. In 1989, we were only shipping products to a handful of
countries; today, as mentioned above, 85 countries receive our
products.
Several different explanations have been offered for the
failure to agree on the agenda for a new round. First, the
``Doomed To Failure''
theory: Apart from agriculture and services--both of which
were part of the so-called ``built-in'' agenda for which
negotiations would be automatically launched on January 1,
2000--there was never any broad consensus on the need for a
comprehensive round, which was a European Union (EU) idea to
begin with, to create as much possible compensation for much-
needed agricultural reforms within Europe. Moreover, countries
needed more time to digest the Uruguay Round, major aspects of
which (TRIPs and TRIMs) have not been implemented in many
developing countries.
Second, the ``Protesters Derailed It'' theory: The
sometimes violent protests in Seattle undoubtedly had some
chilling affect on the negotiations; they certainly gave the
United States a black eye as the host for this international
meeting. But did the protest derail the talks? I don't think
so.
Third, the ``Angry Developing Countries'' theory: Expecting
a shot in the arm from the President's appearance in Seattle,
the talks were thrown into crisis when the President explicitly
called for sanctions to enforce ``core'' labor standards,
despite assurances given by senior Administration officials
that only an analytical working group was contemplated. Unlike
previous rounds, the developing countries were not going to be
excluded from the high-level, ``Green Room'' political
discussions geared to cutting a final deal.
Finally, the ``Miscalculation of the Dynamics of the
Talks'' theory: The logistics of negotiating a consensus within
a now unwieldy 135-member organization was unrealistic to begin
with, given the politically charged atmosphere, and the
complexity and scope of the issues. Moreover, negotiators did
not enjoy the high-level support back home to cut politically
sensitive deals.
For my part, having witnessed the event, I concur with
aspects of all four theories. Whatever the cause, we highly
support further trade liberalization and urge you to ensure
that these negotiations are launched in the year 2000. Time is
of the essence: negotiations should not be put off.
These negotiations should provide for the reduction of
tariff and non-tariff barriers to facilitate the expansion of
market access for companies such as Marconi. With reduced
barriers, our potential is endless, and there is still much
room to grow and further facilitate the operations of the
international marketplace. By way of illustration, let me
describe for you one particular area of great concern to
Marconi. For several years our company has, through hard work
and good fortune, been the leading supplier of gasoline-
dispensing equipment in Latin America. We sell to all countries
in the region--fully one-half of all Marconi exports end up in
Latin America.
In response to our success, competitors have established
manufacturing facilities in the Mercosur region of South
America. Since we must pay duties, ranging from 17 percent to
30 percent, on the products we ship into these countries, we
find ourselves at a serious price disadvantage. To deal with
this problem, our short-term position is to cut costs as best
we can and to sacrifice profits to maintain our number-one
market position. This is clearly not a tenable longer-term
approach. In the future, we will overcome this situation by
elimination of tariffs through successful negotiation of the
Free Trade Area of the Americas (FTAA) and further WTO
negotiations, or we will build a factory in Brazil.
If we are forced to go, foreign workers will permanently
replace up to 10 percent of our highly skilled, highly paid
U.S. production workers in Greensboro. But that's not all.
Currently, about 80 percent of the parts and components in our
products come from U.S. suppliers.
The pamphlet I have given you today lists some of these
suppliers. These companies throughout the country will also
suffer the loss of business, as components for South American-
built gas pumps are sourced in South America. This example
clearly illustrates how important it is for U.S. companies and
U.S. workers to have better access to world markets.
For this reason, Marconi urges the U.S. government to be a
strong leader and an aggressive negotiator for the speedy
elimination of trade barriers. These negotiations must proceed
apace, and it is our serious hope that they last not more than
three years. Three years is an eternity in terms of
profitability and competitiveness for a company. The early
phase-in of reduced tariffs on capital goods, like our gasoline
pumps, should face little opposition from our South American
trading partners.
I mentioned earlier in my testimony that Marconi has
operations in China. Not surprisingly, China will soon be the
largest market for petroleum-dispensing equipment. I want to
reiterate here the importance of China's accession to the WTO.
The deal that closed in November is a welcome and healthy
development. A deal should be closed as soon as possible with
other trading partners so that China can be assimilated into
the WTO, and therefore be a participant in future multilateral
negotiations.
To give you an idea of just what kind of a deal we got, I
would like to submit for the record a one-page document titled
``Why American Manufacturers Support China's Entry into the
World Trade Organization.'' In May, 1998, the NAM issued a
report that set forth key commitments that China should make in
order for American manufacturers to support China's accession
to the World Trade Organization (WTO). The scorecard indicates
just how much was achieved. The deal provides genuine market
access to all sectors. It includes not only the right to export
goods, services and agricultural products to China, but the
right to market, sell and distribute them as well.
In considering whether to support PNTR for China, it is
important to keep the following facts in perspective:
China makes the concessions. The U.S. gets the benefits.
China must take on the challenge of opening its market. The
United States makes no concessions. Our market is already open
to Chinese imports. This agreement levels the playing field.
China's market-access commitments are enforceable. The
strong multilateral dispute-settlement mechanism of the WTO
will help ensure that China adheres to its commitments.
Violations would subject China to authorized trade sanctions
under these same WTO dispute-settlement procedures.
China's commitments to these disciplines will translate
into jobs, profitable business ventures, increased productivity
and competitiveness for U.S. workers and manufacturers.
For Marconi specifically, only the southwestern tier of
China, near Hong Kong, is open. The rest of China has recently
been divided between two state-owned oil companies. To the
extent that China's accession means a commitment by the Chinese
to transition from state-run commerce to a market-driven
economy, and multinational companies are permitted to enter the
Chinese market, Marconi stands to benefit dramatically as our
customers build retail fueling facilities in China.
Additionally, tariff-reduction commitments would, we hope,
reduce the up to 30-percent import duties we now face when
sending parts to our operation in China. Obviously, China's
accession to the WTO is of importance to Marconi.
As a final note, our company and the NAM continue to urge
Congress to extend the currently expired trade-negotiating
authority procedures. The extension of fast-track trading
authority is critical to enabling U.S. trade representatives to
negotiate ``final'' trade agreements; authority they must have
in order to be taken seriously. The current situation puts
American companies' products and workers at a disadvantage. I
don't have to tell you that while our trade negotiating
authority has lapsed, competitor countries are concluding trade
agreements without us. We are falling behind our competitors.
Marconi, like most other U.S. manufacturers, looks forward
to competing on a level playing field with other worldwide
manufacturers because we believe that our workers are the most
productive in the world and the products they make are of the
highest quality in the world. That is why Marconi Commerce
Systems is working hard, on its own, through the NAM, and
through the recently formed U.S. Alliance for Trade Expansion,
to support increased trade liberalization and to spread the
message about the benefits of free trade. Thank you.
Chairman Crane. Thank you, Mr. Robertson.
Mr. McCurdy, our distinguished colleague from Oklahoma.
It's good to see you back in town again. You're now located
right across the river, right?
Mr. McCurdy. Just across the river. And it's a long way
between.
STATEMENT OF HON. DAVE MCCURDY, PRESIDENT, ELECTRONIC
INDUSTRIES ALLIANCE, ARLINGTON, VIRGINIA; AND FORMER MEMBER OF
CONGRESS
Mr. McCurdy. Mr. Chairman, having chaired a Committee, I
appreciate your leadership and your willingness to chair a
hearing and go through a day like today.
In order to be brief, and I know those lights well, I do
represent the Electronic Industries Alliance, a partnership of
electronic and high-tech associations and companies committed
to shared knowledge and shared influence. With over 2,000
member companies, accounting for 80 percent of the $550 billion
electronics industry, we're proud to represent the most dynamic
and competitive industry in the world economy today.
The companies we represent operate globally. They think and
we think and plan in global terms, and they face intense
international competition. The fact is, the days when U.S.
companies dominated the global high technology industry are
over. Similarly, the days when domestic U.S. market could
sustain the industry are also over. It has become almost
cliche, but the global economy is a fact of doing business for
us, and it is a critically important concept to keep in mind as
we formulate public policy in this area.
For the past 50 years, the United States has led the world
toward economic integration and opening of global markets. From
World War II to the conclusion of the Uruguay round in 1994,
the U.S. Government, in a bipartisan approach, was committed to
a multilateral trading system. Although the message was often
confused, the benefits of trade: competition, specialization,
economic integration in the world economy, and rising standards
of living, all were clear.
Consumers in open markets saw the equivalent of tax cuts,
especially because of the increased purchasing power due to the
availability of cheaper, often better quality products. This is
especially true in the realm of electronics.
The message is simple: trade is a win-win undertaking, and
is a net benefit for all. With the defeat of communism, the
world has embraced the concepts of market economics and
reducing barriers to trade. While the opponents of trade often
accuse us of engaging in a zero-sum game that is shifting
wealth from developing to the developed world, the evidence in
the last decade is unequivocal.
Countries like Poland, Chile and Taiwan, which institute
market reforms, adopt democratic, transparent institutions and
open their economies to international trade and competition,
see reduced poverty and rising living standards. Countries
which remain closed or only institute partial or haphazard
reforms experience stagnation or recession.
While global tariff rates are low, and decreasing every
year, the goal of trade policymakers is to now remove the
remaining barriers to trade through deeper integration of
economies, through broad-based negotiations and internationally
agreed-upon rules. The Seattle Ministerial meeting, however,
confused the picture for continuation of the economic
fundamentals. What we saw in the name of opposition to
globalization were fringe groups who want to stop trade, not
expand it.
The fact, however, is that globalization is a reality, and
the best approach is to stick to the basics and press for
multilateral, rules-based trade agreements. EIA believes it is
crucial that expansion of high technology trade be a priority
goal of U.S. trade policy. Key elements of a technology trade
strategy should include securing a broadened information
technology agreement and trade rules that are conducive to
growth and e-commerce.
The ITA is a prime example of an initiative that has the
potential to promote the growth of the U.S. economy and that of
other nations through improvements in efficiency and
immigration. Considering the speed of change in our industry
and the rapid development of so-called convergence products, we
cannot afford to wait several years for the conclusion of a new
round for necessary trade liberalization. Indeed, just the
start of a new round may take too long.
Members of the U.S. high technology industry are concerned
that trade negotiating success in the technology sector not be
held hostage to achievement of other trade policy goals. In
this regard, it is important that U.S. decisionmakers take a
creative and flexible approach to the built-in agenda that
emerged from the Uruguay round negotiations.
In any event, advancement of high technology trade
expansion must be a foremost goal of America's post-Seattle
approach to trade negotiations and cannot be sacrificed due to
a perceived lack of success in other areas. Our written
testimony provides more details regarding the ITA and e-
commerce. However, I'd like to discuss one of the most
important WTO-related issues facing our industry today, and
that is bringing China into the rules-based, multilateral
trading systems.
China is the single most promising emerging market in the
world today. And this fact is especially true for the U.S.
electronics industry. As China enters the information age and
builds its information infrastructure, it will purchase more
high-tech equipment from the world's leading supplier, the
United States. Bringing China into a multilateral system of
rules and procedures which the WTO oversees will go a long way
toward making China a more attractive and easier place to do
business.
EIA member companies have an inherent interest to see China
become a member of the World Trade Organization. The
electronics industry has much to gain from China's accession in
the area of tariff and nontariff barriers, distribution rights,
trading rights, transparency, state-owned enterprises, and
national treatment.
Mr. Chairman, the issue and principle before us is very
simple, and that is, to vote for continuing the momentum for
trade liberalization and reform. The verdict of history is
clear: democracy and market economics have won out over
communism and state-controlled economies, which only produced
human misery, economic deprivation, and environmental
devastation.
I would urge leaders in Congress to not delay nor try to
make political and partisan hay from this vote. This vote
should occur before the summer and not be dragged out.
The best opportunity to continue the economic and social
progress of the past decade lies in voting early this year,
before the campaign season really begins, to further U.S.
participation in WTO, support China's accession to WTO by
granting permanent NTR status, and support for the principle of
economic freedom and reform.
Mr. Chairman, I would hope that this vote would be
bipartisan, resounding and soon.
[The prepared statement follows:]
Statement of Hon. Dave McCurdy, President, Electronic Industries
Alliance, Arlington, Virginia; and former Member of Congress
Thank you, Mr. Chairman, for the opportunity to testify
today on the post-Seattle U.S. trade agenda. I represent the
Electronic Industries Alliance (EIA), a partnership of
electronic and high-tech associations and companies committed
to shared knowledge and shared influence. EIA includes the
Consumer Electronics Association (CEA); Electronic Components,
Assemblies, Equipment and Supplies Association (ECA);
Electronic Industries Foundation (EIF); Government Information
Technology Association (GEIA); JEDEC--Solid State Technology
Association; and Telecommunications Industry Association (TIA).
Simply put, we connect the industries that define the Digital
Age.
I am also a former Member of Congress from Oklahoma. During
my 14-year tenure in the House, I served as the Chairman of the
Select Intelligence Committee, as well as subcommittee chairman
on the Armed Services Committee and the Science Committee. This
experience gave me valuable insight into the national security,
foreign policy and technology policy issues of importance to
the high technology industries.
Realities of the High-Tech Industry
With over 2000 member companies, accounting for 80 percent
of the $550 billion electronics industry, we are proud to
represent the most dynamic and competitive industry in the
world economy today. The companies we represent operate
globally, they think and plan in global terms, and they face
intense international competition. The fact is, the days when
U.S. companies dominated the global high-technology industry
are over. Similarly, the days when the domestic U.S. market
could sustain the industry are also over. It has become almost
cliche, but the global economy is a fact of doing business for
us, and is a critically important concept to keep in mind as we
formulate public policy in this area.
As any successful CEO will tell you, competing--indeed,
surviving--in the global economy means exporting. The
phenomenal success of the U.S. technology industry comes from
its entreprenurialism, its aggressiveness, its willingness to
compete--all those free market forces that drive innovation. In
this kind of business environment, tapping new markets before
the competition does is the key to success. In 1999, more than
one-third of what the U.S. electronics industry produced was
exported overseas, over $150 billion in goods. That means more
than a third of the 1.8 million employees who work for U.S.
electronics companies depend on exports for their jobs, and the
percentage goes up every year.
We must also recognize that our high-tech companies are the
engine of technological innovation and economic growth in the
world today. The U.S. economy is the most competitive in the
world due in no small part to the amazing advancements our
companies have achieved. Technologies which, not long ago, had
only military or limited civilian applications are now
pervasive in our society, and the greater economic efficiency
stemming from this diffusion of technology has been the driving
force for the remarkable prosperity so many Americans are
experiencing. Not incidentally, salaries for high-tech jobs
average around $58,000 per year, whereas the U.S. average
salary is $28,000 per year.
Leadership or Stagnation?
With the successful passage into the year 2000 without
major Y2K or terrorist events, Americans are as optimistic
about the future as never before. The reason for the positive
feeling is that the fundamentals are good. The economy
continues to grow, with low unemployment, low inflation,
increased productivity and a booming technology sector. The
U.S. budget is balanced, thanks to the incredible economic
performance. The social indicators such as crime and homicide
rates are down. We are on course for continued unprecedented
economic growth and prosperity at home and abroad.
Because of these factors, voters are happy and policy
makers should be ebullient. Now is the time for politicians to
lead. The opportunity to continue this growth depends on
keeping faith with economic fundamentals, especially support
for free and open trade. For the past 50 years, the United
States has led the world toward economic integration and
opening of global markets. Accordingly, as President Clinton
stated, ``the world has experienced the most rapid, sustained
period of economic growth ever recorded.'' From WWII to the
conclusion of the Uruguay Round in 1994, the U.S. government,
in a bipartisan approach, was committed to the multilateral
trading system. Although the message was often confused, the
benefits of trade: competition, specialization, economic
integration of the world economy and rising standards of
living, all were clear. Consumers in open markets saw the
equivalent of tax cuts, because of the increased purchasing
power due to the availability of cheaper, often better quality
products. This is especially true in the realm of electronics.
The message is simple; trade is a win/win undertaking and
is a net benefit for all. With the defeat of communism, the
world has embraced the concepts of market economics and
reducing barriers to trade. While the opponents of trade often
accuse us of engaging in a zero-sum game--shifting wealth from
the developing to the developed world--the evidence of the last
decade is unequivocal. Countries like Poland, Chile, and Taiwan
which institute market reforms; adopt democratic, transparent
institutions; and open their economies to international trade
and competition; see reduced poverty and rising living
standards. Countries which remain closed or only institute
partial or haphazard reforms, experience stagnation or
recession.
While global tariff rates are low and decreasing every
year, now the goal of trade policy-makers is to remove the
remaining barriers to trade through deeper integration of
economies through broad-based negotiations and internationally
agreed upon rules. A good example of this is the lifting of
government restrictions on competition in industries such as
telecommunications.
The Seattle Ministerial Meeting, however, confused the
picture for continuation of the economic fundamentals. What we
saw, in the name of opposition to ``globalization,'' were
fringe groups, who want to stop trade, not expand it. Under the
guise of nationalism or environmentalism, the Seattle
opposition was intent on destroying, not promoting multilateral
economic cooperation. Playing to fears of rapid change,
superbly organized groups are trying to reverse globalization,
rather than influence or shape it. The fact, however, is that
globalization is a reality and the best approach is to stick to
the basics and press for multilateral, rules-based trade
agreements.
The Seattle Ministerial
The WTO was created in 1994 as a means to more formally
bring together the world trading community under a binding
system of rules that provide, among other things, the
opportunity for countries to challenge each other on trading
matters. In the past, negotiations were conducted between a
relatively small group of countries, where informal agreements
were hashed out and then presented to the larger group of
countries for consensus. This process focused heavily on the
interests and strength of the developed world and left many
countries in the developing world unable to participate in some
discussions, a complaint which resurfaced during the Seattle
negotiations. Further complicating the Seattle talks was the
basic fact that many of the ``easier'' trade issues were
addressed in previous rounds, leaving the most contentious and
difficult issues for the Ministerial.
EIA participated at the Ministerial and conducted numerous
meetings with representatives of other country delegations.
From our meetings, it was apparent that many of the items for
discussion at the Ministerial would be highly contentious. Many
developing country representatives had a number of common
interests to be addressed during the talks, including demands
for additional time to implement Uruguay Round commitments.
Adding to the confusion and disagreement was U.S. isolation
in some of its negotiating positions. This was especially true
in the case of the U.S. Government's support for inclusion of
labor and environmental standards in the WTO Agreement as
sanctionable trading violations. This pronouncement hit a
strong chord with many developing country representatives, who
felt that these standards would be used against them in trade
disputes. In the end, these differences made it impossible for
the WTO members to agree on a set of negotiating principles to
lead the round for the next several years.
Future Agenda
Trade in the high technology sector is a major and growing
part of U.S. exports and world trade in general. Moreover,
maintaining a vibrant U.S. high technology industry is now
critical to U.S. economic prosperity and, in turn, depends on
continued trade expansion.
Accordingly, it is crucial that expansion of high
technology trade be a priority goal of U.S. trade policy. Key
elements of a technology trade strategy should include securing
a broadened Information Technology Agreement and trade rules
that are conducive to growth in E-Commerce. The ITA is a prime
example of an initiative that has the potential to promote the
growth of the U.S. economy and that of other nations through
improvements in efficiency and integration. Considering the
speed of change in our industry, and the rapid development of
so-called ``convergence'' products, we can not afford to wait
several years for the conclusion of a new round for necessary
trade liberalization. Indeed, just the start of a new round may
be too late.
Members of the U.S. high technology industry are concerned
that trade-negotiating success in the technology sector not be
held hostage to achievement of other trade policy goals. In
this regard, it is important that U.S. decision-makers take a
creative and flexible approach to the ``built-in'' agenda that
emerged from the Uruguay Round negotiations. In any event,
advancement of high technology trade expansion must be a
foremost goal of America's post-Seattle approach to trade
negotiations and cannot be sacrificed due to a perceived lack
of success in other areas.
Information Technology Agreement
The Information Technology Agreement (ITA) was implemented
on July 1, 1997. The agreement called for the elimination of
import tariffs for information technology products by the year
2000. Those products covered by the agreement include
semiconductors, computer hardware, software and
telecommunications equipment among others. The second round of
negotiations, dubbed the ITA II, is underway to expand product
coverage, eliminate non-tariff measures (NTMs) facing the high
technology industry, and accelerate tariff reduction on
products already included in ITA I.
EIA is a strong supporter of the ITA process because the
ITA calls for reductions in tariff rates on many of the
products that our industry produces. These reductions allow our
industry to penetrate markets from Europe to parts of Asia.
Importantly, EIA endorses an expansion of the ITA to additional
countries and additional products. We believe that while the
first round of ITA negotiations produced important changes to
world-wide tariff rates on information technology products,
there needs to be a further examination of how convergence has
expanded the scope of information technology. Specifically, EIA
endorses an approach that broadens the types of products that
should be included in the ITA in the future. Our definition of
an information technology product includes:
1) A product or device that uses digital means to process
information; or
2) A product or device that is critical to the functioning
of an information technology product; or
3) A product or device or components, parts, inputs of a
device which enables or facilitates the transmittal of
information; or
4) A product, component, or input that is critical to the
manufacture of an information technology product and is
primarily or extensively used in such manufacturing.
E-Commerce
EIA is pleased by the broad consensus among developed and
developing countries alike that electronic commerce should
remain duty free. The Administration should be applauded for
its initiative in 1998 to reach multilateral agreement to keep
Internet commerce tariff-free. Although several countries
remain somewhat wary of making the moratorium permanent, the
Administration has made considerable progress in explaining the
benefits of e-commerce, as well as the stunting effect of ``e-
tariffs.'' Like the ITA II, extending the tariff moratorium on
e-commerce is an area in which a conclusion is well within
reach. Regardless of other issues, negotiations to permanently
extend the moratorium on e-commerce tariffs should continue
and, hopefully, conclude quickly.
Similarly, the broader agenda of the WTO in examining the
trade-related implications of electronic commerce must move
forward as well. The emergence of the World Wide Web as a means
of commerce raises a variety of questions which require careful
consideration, questions such as: how to prevent the creation
of technical trade barriers in this area, how to ensure
nondiscriminatory access for network and service providers, how
to treat electronic transmissions, and how can e-commerce
expedite and simplify implementation of WTO commitments. The
WTO has proven to be a useful forum for airing differing views
on these types of questions, and for building multilateral
consensus for moving forward.
China's WTO Accession
Perhaps the most important WTO-related issue facing our
industry is bringing China into the rules-based multilateral
trading system. China is the single most promising emerging
market in the world today, and this fact is especially true for
the U.S. electronics industry. As China enters the Information
Age and builds its information infrastructure, it will purchase
more high-tech equipment from the world's leading supplier--the
United States. Consider the following trends:
Total U.S. electronics exports to China more than
doubled between 1994 and 1999, from $1.3 billion to nearly $3
billion.
By December 1999, China was expected to have 39.7
million mobile phone subscribers, with an annual growth rate of
58.8 percent.
China adds 15.1 million fixed telephone lines
annually.
The number of Internet users more than doubled
between June and December 1999, from approximately 4 million to
8.9 million.
The number of websites also increased dramatically
in that six month period, from 9,906 to 15,153.
Nevertheless, our companies face considerable obstacles to
penetrating the Chinese market, and this is reflected in the
lopsided bilateral trade deficit. Even in the electronics
sector, where in most cases U.S. manufactured products are
superior in terms of both quality and price competitiveness,
the trade deficit in 1998 totaled over $12 billion. This is
due, in part, to the high tariffs China imposes on our
products. In 1998, those tariffs averaged 18 percent, and in
some sectors like consumer products, tariffs are in the 40 to
60 percent range. But of even greater significance to our trade
deficit with China are the costly and burdensome non-tariff
barriers which confront our companies. As you can imagine,
these barriers take many forms, from a distribution system
which discriminates against our companies, to the
discriminatory buying practices of state-owned enterprises, to
the arbitrary customs procedures we face at the ports-of-entry.
For the electronics industry in particular, China is an
important export and import market for EIA's most competitive
companies. On the export side, our industry looks to China as a
market for its products. China is a market of one billion
people that is growing in sophistication and buying power every
year. On the import side, our industry utilizes China as a
source for components that are then incorporated into larger
products. The availability of these components, which often are
not produced domestically, are essential to the competitiveness
of our industry. Without access to the inputs produced in
China, these firms would not be able to be competitive
domestically or internationally.
Bringing China into the multilateral system of rules and
procedures, which the WTO oversees, will go a long way towards
making China a more attractive, and easier, place to do
business. EIA member companies have an inherent interest to see
China become a member of the World Trade Organization (WTO).
The electronics industry has much to gain from China's
accession in the areas of tariff and non-tariff barriers,
distribution rights, trading rights, transparency, state-owned
enterprises and national treatment.
As part of the agreement reached on November 15, 1999,
China agreed to:
Implement the Information Technology Agreement by
2005, which will eliminate tariffs on a wide range of high-tech
products.
Provide U.S. firms significant market access
rights that include the ability to import, export and
distribute their goods throughout China. State-owned
enterprises would be prohibited from discriminating against
U.S. firms in their buying decisions.
Enforce laws protecting intellectual property, and
preventing local content requirements and forced technology
transfers.
Open the telecommunications market to foreign
competition and investment:
-China has agreed to implement the pro-competitive regulatory
principles embodied in the Basic Telecommunications Agreement
(including cost-based pricing, interconnection rights and
independent regulatory authority), and agreed that foreign
suppliers can use any technology they choose to provide telecom
services.
-China will allow 49% foreign investment in all services
immediately upon accession, and will allow 50% foreign
ownership for value added in 2 years and paging services in 3
years. This is a change from the April 8 deal, in that China
had indicated it would allow 35% foreign ownership for value-
added and paging services two years after accession and 51%
four years after accession.
-China will phase out all geographic restrictions for paging in
3 years, value added, and closed user groups in 3 years,
mobile/cellular in 5 years and domestic wireline services in 6
years. China's key telecommunications services corridor in
Beijing, Shanghai and Guangzhou, which represents approximately
75% of all domestic traffic, will open immediately on accession
in all telecommunications services.
-Internet services will be liberalized at the same rate as the
other key telecommunications services, and China will permit
provision of telecom services via satellite.
Regarding antidumping, the U.S. will continue to
treat China as a non-market economy. Moreover, in applying
countervailing duty law, the U.S. will be able to take the
special characteristics of China's economy into account when we
identify and measure any subsidy benefit that may exist. This
provision will remain in force for 15 years after China's
accession to the WTO.
Should China fail to abide by these commitments,
China is subject to the WTO's Dispute Settlement Mechanism,
including the possibility of multilateral trade sanctions.
Whereas China has committed to overhaul its economic
structures, all the United States must do is make permanent
China's ``Normal Trade Relations'' (NTR) status under U.S. law.
Unless Congress votes to make China's NTR status permanent,
China will not grant, and is not required to grant, U.S.
companies the benefits which have been agreed to. Ironically,
our overseas competitors would receive the benefits of the
November 15 agreement, while U.S. companies are shut out. EIA
is proud to be a member of the U.S. High-Tech Industry
Coalition on China, as well as the Business Coalition for U.S.-
China Trade, working to ensure that Congress permanent NTR.
In addition to the substantial economic opportunities the
accession agreement creates, China's membership in the WTO also
advances our broader foreign policy goals by promoting economic
and political reform. The practical effect of adhering to WTO
principles and commitments makes China's economic reforms of
the last two decades irreversible, and sets China on a course
for further free-market reforms. It commits China to abide by
the same multilateral trading rules--like national treatment,
Most-Favored-Nation, and impartial dispute resolution--that we
and our other major trading partners already abide by. WTO
membership will require greater transparency from China's legal
system and bureaucracies, creating unprecedented accountability
for the country's decision makers. Furthermore, it creates the
foundation for China's prosperity and improving the quality of
life for a billion people. Finally, it promotes the free flow
of ideas and information through enabling greater Internet
penetration, music and movies, financial information and other
news, and increased exposure to U.S. companies and citizens.
Thirty-three emerging market countries have applied for
membership in the 135-member World Trade Organization (WTO).
Most of these countries are transitioning to market-based
systems and represent 1.6 billion people, or nearly one-sixth
of the world's Gross Domestic Product. The United States has
seized the opportunity of potential WTO membership, to
negotiate bilateral agreements with countries, such as China,
to press them to open and modernize their economies and
markets. China, not the U.S., had to make significant
concessions to achieve membership in the WTO. China must reduce
tariffs, open markets for competition and investment from U.S.
firms and abide by international rules of commercial behavior
and monitoring of its compliance. As a result, US
telecommunication and high tech companies have a tremendous
opportunity to gain from China's accession to the WTO and
concurrent implementation of the WTO deal. As the Chinese
Ambassador to the U.S. told me, the deal is ``good for China,
good for the U.S. and good for trade. China will continue the
process of opening up and modernization.'' It is a commercially
viable agreement that is a huge win for the US and
international trade.
Conclusion
I served in the U.S. House of Representatives from 1981-
1995. During that time, there were only a handful of votes that
were considered momentous, where Congress debated the issue
fairly and rose above partisanship to send a clear signal of
national direction. The one vote that stands out was the debate
over commitment of force in Iraq. It was clear that sanctions
were not going to work, despite the hand-wringing and fear of
losing thousands of Americans in combat, Congress voted to send
a clear message of our commitment to democracy and
multinational coalitions to oppose aggression. Democrats in
Congress, were in an uncomfortable position, but enough of us
voted to authorize force based on our belief in core values and
faith in America's ability to succeed.
Congress is in the similar position today. The principle is
simple, vote for continuing the momentum for trade
liberalization and reform. The verdict of history is clear;
democracy and market economics have won out over the legacy of
Lenin, Hitler, Stalin and Mao, i.e. state-controlled economies,
human misery, economic depravation, and environmental
devastation. Leaders in Congress should not delay nor try to
make political or partisan hay from the vote. It should occur
in the Spring and not be dragged out. The best opportunity to
continue the economic and social progress of the past decade
lies in voting early this year, before the campaign season, to
further U.S. participation in WTO, support China's accession to
WTO by granting permanent NTR status and support for the
principle of economic freedom and reform. It should be
bipartisan, resounding and soon.
Chairman Crane. Thank you very much.
Thank you all for your testimony. Dave, one quick question,
and that is, I get the impression from your testimony that you
are concerned that the high-tech sector not be held hostage to
a lack of progress in other areas. Is that correct?
Mr. McCurdy. That is correct. Mr. Chairman, the ITA and the
ITA2 are important steps that need to be taken. In this
business, as Mr. Houghton knows very well, the time to market
is very quick. The demands and the competition are great. And
the potential for opening these markets is critical. We would
urge the trade negotiators and their policymakers in Congress
to support maximum flexibility to move on other agreements to
see this progress achieved.
Chairman Crane. Very good. And Steve Robertson, I have a
question for you with this pamphlet that you distributed.
Mr. Robertson. Yes, sir.
Chairman Crane. You've got the list of the people who are
the providers of various component parts. And it's an
impressive list of employees. Do all of those employees have
copies of this?
Mr. Robertson. All of those companies that we list as
suppliers of ours in that pamphlet have multiple copies of
that, yes, Mr. Chairman.
Chairman Crane. But I hope they realize the importance of
distribution of this to all of the employees. And I say that
because in my district, my district is probably the biggest
export district in the State of Illinois. We're the fifth
largest export State in the union. And when I talk about the
importance of trade issues at a town meeting, people start
falling asleep.
It is our employers--I've got corporate giants like the
headquarters of Motorola, Sears, AmeriTech, United Airlines,
Kemper Insurance, Baxter and Abbott are right on my border. And
we had a trade hearing out there, and I knew that we had these
big giants. But the thing that was interesting about the trade
hearing is we found out that better than 90 percent of our
exports out of Illinois came from companies employing 500 or
less.
And that message is not being gotten out to the employees,
about the essentiality of trade to the preservation of the
business. And that in turn translates to the preservation of
their jobs.
I was particularly struck in your testimony here about the
duties that you're having to pay to penetrate the MERCASR
market. And that if you don't get some relief, that it means
leaving town.
Mr. Robertson. Yes, sir.
Chairman Crane. And going down there and replacing folks'
jobs up here with jobs down there. And that's totally
understandable, it's survival. But it's that kind of message
that we need to get distributed to more folks so that they can
in turn communicate with us. Because we have a number of
Members here still that I don't think fully appreciate the
importance of guaranteeing that we provide those windows of
opportunity for expanded markets to our own businesses here.
And with that, I'd like to yield to Mr. Levin.
Mr. Levin. Thank you. And my apology, I'm sorry, I had no
choice but to miss part of this hearing, which went longer than
we expected, and I think much longer than you expected.
I always say, if you're on the last panel, beware. But
thanks for your patience, and I assure you, I will read your
testimony carefully. In some cases, I already had a chance to
review it. And if the others don't mind, if I might say a
special hello to--it says Hon., how true--Dave McCurdy. It's
nice to have you back and looking in such trim battle form.
Mr. McCurdy. A little grayer, but doing well.
Mr. Levin. I don't object to that. [Laughter.]
But thanks very much, and you can be assured, your
testimony will receive more attention than the late hour might
indicate. Thank you.
Chairman Crane. And Mr. Houghton.
Mr. Houghton. Thank you very much, Mr. Chairman and Mr.
Levin.
Well, gentlemen, it's wonderful to be here. I'm not going
to take long, because we've got to go for a vote, and you've
been very patient here. But the question is, how does it all
get done? I don't think there's really any disagreement of the
fact that we've got to have normal trade relations with China,
we've got to be part of the WTO, we've got to make sure that
the foreign sales corporation exists, that we product our
antidumping laws.
How does it get done? Because you know, I don't think
there's really any disagreement here. And Dave, you know this.
And I mean, I have organization after organization come into my
office and they have their own particular ideas. But you know,
we're not really looking at a long term as citizens of the
country, we look at it in terms of our own individual
interests. And there are waves that come in, and if you don't
get them, then I think you're really in trouble for years to
come.
So politically, how do we drive these things through? I
have been fighting, as I guess most of us have around here,
certainly in this room, for the fast track authority. I don't
think it's complicated. I don't think it gives up anything as
far as environment or labor or human rights and everything. But
boy, I tell you, it is tough.
And I guess maybe the one suggestion I might have is that
you gentlemen represent the power sources in this country. I
don't really think labor and business work together to explain
to employees how important the international operations are. I
mean, the three critical companies in my district all are
totally dependent upon international sales, period. But you
won't hear that when you go to the town meetings. There is
something we need to do to explain, explain, explain and to
work closer together.
And absent that, I think these are going to be tough votes.
Maybe you could have some ideas.
Mr. McCurdy. Well, Congressman, if I could just take 1
minute. Let me say this for the benefit of my former colleagues
as well, a little quick commercial. Mr. Houghton was a member
of EIA long before I was. As a matter of fact, he made a
comment to me at one of our recent programs that he was a
member of EIA before I was born.
Mr. Houghton. Now, that hurts. [Laughter.]
Mr. McCurdy. It hurt me, actually. But this year, it
actually, I don't think that there's been appropriate mention
on both sides, whether you're Members of Congress, and those of
us who have now been on both sides of this podium. One is, I
don't think there's been the long-term leadership needed, and
the long-term vision.
And I'll give you an example of where it can work, for
those who are not aware. Congressman Houghton was the only
chief executive officer of a Fortune 500 company to serve in
the U.S. Congress. And Amo Houghton, during his leadership,
took his company through some very difficult times to develop
fiber optics.
And we see today the benefits of telecommunications on a
global basis because of the leadership of that person right
there. So EIA this year is presenting him with a medal of honor
for his leadership as an industry leader.
Now, I use that as an example, because it took long-term
vision to do that. It wasn't short-term sales, it wasn't the
quarterly profit sheet, it wasn't the quarterly NASDAQ report
or the DOW. You were looking long-term at something and you
took a risk.
I don't believe that there's been sufficient leadership
either from the administration or quite frankly from the
Congress and certainly not from industry on this issue. It is
an educational requirement for all of us. We don't explain the
benefits, the long-term benefits of this. And that's why in my
testimony today, I cited a little bit of the history. Because
we forget that.
It hasn't been that long ago, we were fighting communism.
We were in a gridlock. And when I was chairman of the
Intelligence Committee and a Member of the Armed Services
Committee, I was in a position to start looking at some of the
other issues. When we were in a hot or cold war, we weren't
worried about environmental concerns in Eastern Europe. But
after we won, we realized the economic and environmental
devastation that occurred under those command economies. And
this is where I think we fail is in the basic education
throughout the country.
And Chairman Crane was right in talking about Marconi and
distributing to the employees. The employees don't know where
the benefits actually are derived from those international
sales. And let me just make one last point. This vote on China
PNTR is different than fast track. Fast track is a process
question. China PNTR is an agreement. We conditioned our
support for an agreement we did not see until we got a final
agreement. When we examined it, it was not only a commercially
viable agreement, it was a good agreement. And that agreement
is to the benefit of the United States. The Chinese made the
concessions, we didn't, the United States didn't. All we have
to do is change the Jackson-Vanik requirement, and make
permanent their membership in WTO and NTR, we used to call it
MFN.
But that word's not getting out. We're focused on the
short-term, sometimes political debate and argument and
forgetting the real true economic prosperity and increased
standard of living. And quite frankly, in our industry, we
can't say it for every industry, but in our industry, we
actually are very involved in designing products that are not
only good for consumers, but also environmentally sustainable,
better for the environment overall. Issues like recycling and
end of life, the types of materials, we have one of the most
active areas in our association, just in the environmental
issue.
That's something that we can do proactively. But industry
doesn't talk about the positive things they do. So I think it's
a question of long-term leadership from the administration. I
was pleased the President came up and said that they're going
to commit it without any equivocation, no hesitancy, they're
supporting this agreement and they're going to push for it. I
think it's good that the leadership in the Congress is coming
forward on this.
And I would just urge my colleagues, and especially
Democratic Members, this is not fast track. This is different
than even NAFTA. This is an agreement that is very clear,
whether you're in agriculture, whether you're in technology,
across the board, this is an agreement that's good, certainly
for the United States. And in the long-term, it's going to be
better for the Chinese, people in China, that's why the Chinese
liberals support it. Those that are seeking reform, political
reform, support it. Those who are seeking environmental reform
in China support it.
And that's why I would urge my colleagues and former
colleagues to support this. This is the number one priority for
our organization. We've already produced letters to over 174
Members of Congress, 82 Senators. And that's just the
beginning. We're going to have lobby day, we're making this a
top priority issue. And I think my colleagues here at this
table will concur that it is at the top of their list as well.
Mr. Van Putten. Congressman Houghton, may I respond? I
certainly agree that visionary proactive leadership is what is
required. What is required is to demonstrate concretely the
ways in which liberalized trade can enhance values like
environmental protection. What is required is an aggressive
agenda in areas such as the perverse subsidies in fisheries to
demonstrate ways in which the conservation of the world's
fisheries can be enhanced.
What is required is a carefully articulated strategy toward
trade liberalization in the energy sector focused on ways to
reduce global climate change causing greenhouse gases. What is
required of those businesses who want to make the case for
environmentally responsible behavior in China is don't supplant
the governmental funding we've all worked so hard on the
environmental community to prevent the Three Gorges Dam from
going ahead.
If we see private financial actors in the United States
moving in, where the World Bank and the Japanese Development
Bank have fled, and directly and indirectly fund that kind of
environmentally destructive activity in China, it's a little
hard to take the argument that it will inevitably be good.
There are real concrete visionary opportunities to demonstrate
how trade can work to vindicate values such as protection of
the environment. And we need a policy that articulates that
proactive benefit and then delivers.
Mr. Houghton. Right. And Mr. Chairman, if I could just say
this one thing, and I was picking up on that, I think what Mr.
Dawson said, that the World Trade Operation, the meeting in
Seattle, was not a lost opportunity, it was a missed
opportunity. And I get sort of an ashes and sackcloth feeling
around here, everybody thinks, oh, my gosh, this will never be
brought together. It will be brought together. We've got to
drive this thing.
So thank you very much.
Chairman Crane. Well, and let me add just one comment to
Dave's remarks earlier. And I've argued this for years, that
trade is not a Democrat or a Republican issue, it's an American
issue, and I know it's not easy for some of our colleagues on
the Republican side to take an objective view of trade. And
simultaneously, I know a lot of Democrats are under pressures,
especially in the post World War II era.
But we have had a remarkably high level of bipartisanship
on the e-trade issues. And I want to pay tribute to our
Democratic friends as well as Republicans, keep working. But
the big part of that problem is getting that message out,
explaining to the folks back home the importance of it, and
getting them to recognize that trade is almost one-third of our
national economy now. And it's been the fastest growing over
the past decade, the fastest growing component.
And when we're less than 5 percent of the world's
population, where's the market? It's out there beyond our
shores. And we're the biggest export country on the face of
this Earth. And no one has been able to match us in that
competitive world.
But we want to make sure that Steve isn't put out of
business here, and down there competing with us in Brazil.
Folks, I want to thank you for your participation, and
please stay in touch with all of us. With that, our Trade
Subcommittee hearing stands adjourned.
[Whereupon, at 6:08 p.m., the hearing was adjourned, to
reconvene at the call of the Chair.]
[Submissions for the record follow:]
Statement of American Apparel Manufacturers, Association, Arlington,
Virginia
Thank you for providing the American Apparel Manufacturers
Association (AAMA) an opportunity to submit testimony in
connection with the Subcommittee's investigation of
international trade issues in the aftermath of the failed
Seattle Ministerial round in December 1999.
AAMA is the central trade association for US companies that
produce clothing. Our members are responsible for about 85
percent of the $100 billion worth of garments sold at wholesale
in this country every year. Our industry employs about 700,000
Americans.
While most of the large apparel manufacturers in the United
States are our members, many of our members are relatively
small companies. Two-thirds have sales under $20 million a
year. Our members are predominantly domestic manufacturers, but
most also manufacture in, and import from, other sources.
AAMA has been a strong advocate of liberalized trade
initiatives and was an ardent backer of both the North American
Free Trade Area (NAFTA) and the Uruguay Round of the GATT. Our
association is at the forefront of efforts to expand trade with
the Caribbean Basin and has endorsed regional programs to
expand trade through the Free Trade Area of the Americas (FTAA)
and the Asia Pacific Economic Council (APEC) processes.
AAMA was sorely disappointed when the Seattle Ministerial
failed to launch negotiations for a new multilateral trade
round. Simply put, we believe the United States, indeed the
entire world, missed an important opportunity to lock in
additional commitments for trade and tariff liberalization.
Increasingly, our members rely upon unimpeded flow of
commerce between countries to satisfy the needs of their
customers and to stay competitive. The globalization of our
industry, and the increased competition it has brought,
requires our members to engage in flexible sourcing strategies
if they are to survive. This means they have to be prepared to
supplement their US production base with sourcing arrangements
from a variety of countries.
Although our members are most heavily concentrated in this
hemisphere, they have increasingly found themselves in
virtually every part of the globe. To produce the most
competitive garments, our members are often required to import
from and export to a variety of countries. Any barriers--be
they traditional quotas and tariffs or non-traditional fees,
investment restrictions, customs procedures, bureaucracy, or
corruption--hinder their operations and drive up their costs.
If their costs go up or if they are unable to deliver garments
on time--because of trade distorting barriers--they often lose
the business to their competitors.
Accordingly, we believe it is of paramount importance that
the United States find a way to put and keep the WTO trade
liberalization process back on track. Recognizing that this is
an effort partly directed at confidence building--both in the
United States and among our trading partners--and partly
directed at setting a concrete and meaningful agenda, we would
like to make the following recommendations:
First, Congress should declare its unequivocal support for
an aggressive and pro-active trade agenda. The best way to do
this is to complete action quickly on the pending CBI/Africa
legislation, reaffirm US membership in the World Trade
Organization following the Section 125 report, and, finally,
extend permanent normal trade relations with China.
Reauthorization of trade negotiating authority for the
President, and its accompanying ``fast track'' procedures,
should also be completed at the earliest possible date.
Decisive action by Congress is important because many of
the protests in Seattle have their genesis in the perception
that the United States has abandoned its orientation toward
trade liberalization. Protestors during the week of November
29, 1999--ironically the fifth anniversary of congressional
passage of the Uruguay Round of the GATT--were no doubt buoyed
by some of the ``anti-trade'' votes taken by the House earlier
in the year and in previous sessions. It is time the Congress
swiftly and clearly rejects this perception and reasserts a
positive agenda on trade.
Second, we should be careful not to misunderstand the
``message'' delivered by the Seattle protestors. In fact, there
was probably no single message. Several of our staff and
members who were in Seattle during the protests witnessed
peaceful teach-ins just a few doors down from where a Starbucks
store was being looted. Protestors demanding greater labor and
environmental enforcement powers for the WTO stood shoulder-to-
shoulder with those hoping to strip the WTO of its existing
responsibilities. A sign complaining that ``global trade was
bad'' was partly obscured by a sign urging the end of the US
trade blockade with Cuba.
If anything, the Seattle protests showed us that few people
understand the importance of trade liberalization--to their own
well-being, to their own community, and to the world at large.
While the WTO is an important arbiter of international trade
laws, it is nothing more than a traffic cop. When the American
people begin to perceive that the WTO possesses the kind of
power that threatens national sovereignty, that is a clear
signal that there is something fundamentally wrong with the
public understanding of international trade.
Third, we should collectively do a better job explaining
the importance of trade liberalization. Policy makers have long
argued that not enough ``trade education'' is done among
workers and employees of companies that benefit from trade.
This is true and the corporate community should do a better job
in the future. But policy makers themselves must also play a
key role--educating not just the workers at their jobs but also
the workers' families in their communities and schools.
We should begin by discarding the incorrect notion that
imports are intrinsically bad. Traditionally, exports are seen
as the ``good'' side of the trade equation while imports are
measured only through the dislocation and disruption they may
cause. Yet, this only tells half the story. Millions of
American workers are employed because they handle or process
imports. Hundreds of millions of American consumers benefit
from lower prices or greater selections because of the
availability of imports. If the American public can begin to
perceive that imports are not a threat, the natural flows of
international trade should cause them less anxiety.
One way to do this is through the Trade Adjustment
Assistance program, which provides retraining assistance for US
workers whose jobs are adversely affected by trade. This is an
important program that should be sustained. But as we do so, we
should recognize that one of its by-products is that the US
Government is steadily certifying that hundreds of thousands of
US workers are losing their jobs because of international
trade. Yet, at the same time, there is no equivalent program in
which the Federal Government actually certifies that US
workers, or consumers, are gaining ground because of
international trade. If the Federal Government insists upon
only telling half the story, who can blame the American public
if they remain misinformed?
Fourth, we must encourage the WTO to make its operations
and activities more transparent and accountable. Veterans of
the 1997 funding battle over the International Monetary Fund
(IMF) will recall the complaint that the IMF conducted all its
business behind closed doors. Congress eventually cleared
funding for the IMF, but only after the IMF agreed to necessary
reforms to bring about greater transparency. Similar steps are
needed with the WTO. All parties affected by WTO decisions--be
they non-governmental organizations, interest groups, or
business entities--should be able to present the WTO with their
perspectives and witness its decision making and rule-setting
activities. This is especially important if we wish to provide
least developed countries the opportunity to participate fully
in the international trading system.
Fifth, the United States should encourage the WTO to
complete its unfinished agenda--namely the reciprocal
elimination of tariffs. Our industry faces some of the highest
levels of protection around the world. But while US tariff
rates on imported apparel are high, they often pale in
comparison to those imposed by other countries. The next round
of tariff liberalization should begin by requiring other
countries to bind their textile and apparel tariffs at US rates
and then use that binding as a basis for further negotiation.
A recent case with India clearly dramatizes why this is so
important. In recent weeks, the US Government successfully
persuaded the Indian Government to abandon a number of quotas
and other quantitative restrictions on imports of textile and
apparel products. However, some of the gains of this concession
may be undermined due to Indian Government plans to raise
tariffs on those same products. Because the tariff action will
not exceed the Indian Government binding, the action may be
permissible under the WTO. We need to convince the Indian
Government to lower these bindings to, at the very least, US
levels.
Finally, we need to remain aggressive in ensuring that
foreign countries live up to the bargains they strike in
international trade deals. Confidence in the entire system
falters when US workers, and their elected representatives,
perceive that other countries do not have to play by the rules.
We should insist that our trading partners live up to their
commitments and have ``zero tolerance'' for those that fail to
do so. Similarly, we should lead by example, and refuse to
tolerate demands that we abandon our own commitments to satisfy
vocal political constituencies.
In the past month, the United States posted a record for
the largest sustained economic expansion. This success occurred
in no small part because we benefit from an open and liberal
trading regime. US firms are able to produce goods and services
for export markets while companies and individuals are able to
purchase imports for inputs or final consumption. The more we
can enhance this system--through multilateral trade
negotiations and through unilateral action--the better chance
we have of sustaining this economic growth in the years to
come.
American Fisheries Society
Bethesda, MD 20814-2199
November 23, 1999
William J. Clinton
President
The White House
1600 Pennsylvania Ave
Washington, DC 20500
Dear President Clinton:
The American Fisheries Society (AFS) is a professional organization
with 9000 members from academic, agency, tribal, and private
institutions. We are concerned with the possible consequences of the
World Trade Organization (WTO) ministerial meeting scheduled for 30
November -3 December in Seattle, WA. We understand that the WTO
objective is to foster international trade by:
1. Eliminating or reducing tariffs on products, thereby reducing
export costs while opening additional markets to producers.
2. Requiring countries to treat foreign nations and corporations at
least as well as domestic entities. That is, a government cannot
subsidize or prefer domestic fishers who meet domestic regulations.
3. Requiring that all foreign countries and companies be treated
identically. For example, local or national governments could not ban
fish products obtained in an unethical or ecologically unsound manner.
4. Prohibiting quantitative import or export restrictions. In other
words, fish produced from well-managed aquaculture facilities must be
treated in the same way as fish obtained by mining pristine systems or
endangered populations.
It appears that the WTO seeks to facilitate international commerce
without regard for fisheries consequences.
International laws increase the potential of impacting fish and
aquatic resources. The following seven examples demonstrate our
concerns for the management and protection of our valuable fisheries
resources.
1. U.S. law requires that shrimp fishers use nets with turtle
exclusion devices to protect sea turtles. Several Asian nations not
using these devices could not market their product in the U.S. and
sued, claiming that the import ban was an attempt to influence fishing
behavior outside the U.S. The WTO agreed and the U.S. suspended the
law.
2. The U.S. Marine Mammal Protection Act embargoed tuna caught with
porpoise-killing methods. Mexico declared that this law was an attempt
to close U.S. markets to foreign competitors and sued. The law was
declared an illegal tariff and the U.S. held the law in abeyance.
3. National and global deforestation and forest degradation have
increased since the Rio Earth Summit. If trends continue, the world's
remaining unlogged forests will be lost in this coming century. Many of
our most sensitive fish families and species maintain their greatest
diversity and abundance in forested regions. Once the forests are
removed, the diversity and abundance of sensitive fishes decline.
4. The U. S. Federal Advisory Committee Act requires (and Judge
Barbara Rothstein ordered recently) that advisory committees be
composed of members representing a wide variety of perspectives.
Nonetheless, the two U.S. trade committees contain only industry
representatives, as have the past U.S. trade negotiation teams.
Although Canadian Minister Pierre Pettigrew recently met with NGO,
labor, and other interest groups, this has not occurred in the U.S.
When fishery and aquatic environmental interests are not represented,
they do not become part of trade agreements.
5. The United States has adopted some elements of the precautionary
approach to fisheries management which has been recommended by UNCED,
UNEP, and many participants in the FAO. Giving priority to trade over
protection of sustainability of fish populations will undercut the
precautionary approach and re-establish the burden of proof for
conservation on the managers rather than those who engage in
overfishing or methods damaging to resources.
6. U.S. law prohibits the import of some species of fish below
specific minimum lengths. Swordfish below the approved minimum length
may have to be allowed for import if the U.S. continued to import any
swordfish at all.
7. U.S. law required a 76% U.S. citizen ownership of fishing
companies that are allowed the rights to harvest fish in the waters of
the United States. WTO trade provisions may invalidate those laws and
allow majority ownership and control by foreign interests that are not
limited by U.S. conservation ethic and management.
Therefore the AFS requests the following of the Canadian and U.S.
governments:
1. Ensure that strong environmental concerns are represented on
U.S. and Canadian Advisory panels and negotiating teams.
2. Certify that pre-established negotiating objectives (e.g.,
environmental protection, human rights) are met before Parliament and
Congress grant a ``no amendments'' or ``fast track'' vote.
3. Recognize that support of sustainable fisheries policies are in
the interest of long-term social and economic stability.
4. Develop rules permitting governments to protect biodiversity,
and the environment--even if they secondarily impede trade.
5. Adopt environmental standards even though they might interfere
with free trade.
6. Regulate imports of products at the expense of sustainable
fisheries, or if a product is produced in an unsustainable, unsafe, or
degrading manner, particularly if fishing communities are likely to be
negatively affected by the production of that product.
7. Allow national and sub-national governments to elect, adopt and
enforce their own levels of protection.
8. Allow trade measures that will enforce multilateral
environmental agreements.
9. Discourage challenge of government regulations that have
incidental effects on investors' returns.
10. Eliminate subsidies that harm the environment.
11. Ensure that transnational corporations and their subsidiaries
protect the environment, with the possible penalty of losing their
charters.
12. Submit an environmental impact statement prepared jointly by
Environment Canada, the Ministry of Fisheries & Oceans, the Council on
Environmental Quality, the Fish & Wildlife Service, the National Marine
Fisheries Service, the Environmental Protection Agency, and the
Canadian and U.S. trade representatives, sufficiently in advance of the
proposed adoption of any specific trade measures related to fish or
fishery products to allow those agencies to comment on and consult with
the WTO with regard to any problems or objections that such agencies
may present to the WTO.
13. The WTO should favor industries that minimize direct and
indirect environmental impacts because these practices promote long-
term ecosystem productivity and economic development.
14. Recognize the validity and utility of the precautionary
approach to fishery management as a recognized exception to the
priority of trade in international commerce.
15. Specifically allow the protection of fish habitat as a basis
for exception to the priority of trade in international commerce.
If you would like to discuss these issues further, please do not
hesitate to contact me.
Sincerely,
Ghassan N. Rassam
Executive Director
GNR:jpg
Statement of American Iron and Steel Institute
The following statement on the outcome of the Seattle World
Trade Organization (WTO) Ministerial Conference is submitted on
behalf of U.S. member companies of the American Iron and Steel
Institute (AISI), who together account for approximately two-
thirds of the raw steel produced annually in the United States.
Rules-Based Trade:
AISI and U.S. Government Position in Seattle
In going to Seattle, AISI representatives stressed that:
trade liberalization without effective fair trade
rules cannot work in the interests of America;
there can be no further trade liberalization
unless trade will be fair; and
the best way to do this is through strong trade
laws, strictly enforced.
The AISI message going to Seattle can be summed up in three
words: RULES-BASED TRADE. After Seattle, this message has
become even more important.
AISI went to Seattle to support the long-held, bipartisan
position of the U.S. government in favor of continued
multilateral trade liberalization, based on no further
weakening of the WTO's antidumping and anti-subsidy rules. The
U.S. government and AISI took this position because, had these
agreements been opened up, it would have led to certain
weakening of the WTO's fair trade rules.
In the months leading up to the WTO Ministerial, the
Administration stated repeatedly that, in the national interest
of the United States--and in the ultimate interest of trade
liberalization and the global trading system--it would not
allow the WTO's antidumping and anti-subsidy rules to be the
subject of negotiations. The Administration deserves credit for
holding firm in Seattle against strong foreign government
pressures to reopen the WTO's dumping and subsidy agreements.
The Congress also deserves credit for making its views
known. There is overwhelming bipartisan support for preserving
effective international disciplines against unfair trade. In
the months leading up to the Ministerial and then again in
Seattle, Steel Caucus Members and other Members of Congress
communicated an unswerving message of support on this issue.
Last year, more than half of the U.S. House of Representatives
called on the President not to enter into any international
negotiation that includes U.S. trade laws. In 1997, in its
markup of ``fast track'' legislation, the Ways and Means
Committee approved without dissent a provision instructing U.S.
negotiators to reject any agreement that would weaken existing
disciplines against dumping and subsidies. Today, the
bipartisan consensus in Congress on this point is even
stronger. It is that fast-track procedures should never again
be used to amend U.S. trade laws.
AISI's position is that there is a role in the U.S. market
for fairly traded imports, but there is no role for unfair
trade. In President Clinton's August 1999 Steel Action Plan,
the Administration said it agreed with us. It announced that it
is committed to a policy of ``zero tolerance of unfair trade.''
The devastation suffered by the U.S. steel industry and its
workers over the past 18 months due to record levels of unfair
trade has served as a warning. It has reinforced the need of
competitive U.S. industries for strong, effective, vigorously
enforced trade laws. The events in Seattle in the first week of
December 1999 have also served as a warning. They have
reinforced the point that effective disciplines against unfair
trade are critical if we are to maintain an open market policy
in the U.S., enable further trade liberalization and promote
market opening and much needed adjustment abroad.
Seattle in Perspective:
Reasons for Outcome
There are many reasons why the Seattle Ministerial may not
have succeeded in launching a new round of international trade
negotiations. The simplest explanation is that there were many
complex, divisive issues; there was too little time; there were
135 members (60 more than at the time of the Uruguay Round);
and there was a lack of consensus and political will among the
key players for going forward.
Key points on which there was no consensus included (1)
agriculture, (2) the basic relationship of developing countries
to the WTO and (3) the new issues, such as the nexus between
trade and labor and trade and the environment. Perhaps most
important, both the European Union (EU) and Japan, unwilling to
take the needed steps on agriculture, pushed a very broad
negotiating agenda in large part as a diversionary tactic.
While posing as a friend of the developing world, the EU
subordinated everything else to the core goal of defending its
closed and heavily subsidized agricultural regime, which is so
injurious to developing countries. In the process--and urged on
by Japan--the EU indicated an openness to undermining the WTO's
antidumping rules. In much the same way, Japan--the number one
dumper in the U.S. market--pursued a reopening of the WTO's
antidumping rules on behalf of its own manufacturers, all the
while claiming it was taking this position on behalf of the
developing world.
The antidumping issue was one of several divisive issues,
because other countries thought the U.S. would change its
position, and we did not. However, the Seattle Ministerial did
not fail because of the U.S. position on antidumping. The U.S.
position on trade laws was sound and no surprise. It was a
long-held bipartisan position, articulated clearly, often and
early in the process.
As to where we go from here: AISI remains committed in
support of trade liberalization--provided there is no further
weakening of existing fair trade rules.
Ongoing Foreign Government Goal:
Erode and Weaken U.S. Trade Laws
What modest decline occurred last year in overall U.S.
steel imports took place because of the successful use of trade
laws by America's steel companies and unions. As the steel
crisis has shown, the antidumping and countervailing duty laws
are America's last line of defense against surging unfair
trade. Foreign unfair traders view the trade laws as the only
remaining major obstacle to their unfettered abuse of the open
U.S. market. To attack this obstacle head on, foreign
governments and producers are employing three main ways to
achieve their goals.
International Negotiations. In Seattle, foreign governments
sought to weaken U.S. trade laws through multilateral
negotiations. Thanks to the steadfast position maintained by
the Administration and the Congress, the forces of trade law
weakening did not achieve their goal. However, these forces
will not stand still. They will continue their efforts to try
to weaken U.S. trade laws through multilateral negotiations,
whether in the WTO, the FTAA negotiations or the APEC process.
Therefore, Congress needs to remain vigilant.
WTO Dispute Settlement. Having failed to achieve trade law
weakening at Seattle, Japan, Korea and other countries whose
producers have engaged in unfair trading are now trying to
achieve through the WTO dispute settlement system what they
could not achieve through multilateral negotiations. Thus,
Japan--the same Japan that still refuses to import steel, and
continues to underperform dramatically as an importer of
manufactured goods in general--has recently filed a complaint
with the WTO regarding U.S. antidumping measures on hot rolled
steel, and both Japan and Korea have threatened to file other
WTO appeals relating to steel trade cases decided under WTO-
consistent U.S. laws. The U.S. government needs to defend
aggressively the trade laws enacted by Congress from this
effort by unfair traders to use the WTO dispute settlement
process to undermine America's fair trade rules.
Trade Law Changes. In addition to using multilateral
negotiations and WTO appeals of U.S. trade laws and trade law
application, counsel for foreign governments and producers are
now drafting trade law weakening legislative proposals. On
this, both the Congress and the Administration need to send a
very clear signal. Instead of trade law weakening, Congress
should ensure that U.S. trade laws are as strong as what the
WTO allows. In this regard, AISI urges prompt enactment of the
Fair Trade Law Enhancement Act (H.R. 1505/S. 1741), the
Continued Dumping and Subsidy Offset Act (H.R. 842/S. 61) and
other proposals to strengthen U.S. trade laws consistent with
WTO rules. This should include amendments targeting the problem
of diversion of steel and other manufactured goods to the U.S.
market as a result of foreign anticompetitive practices.
Steel's Example:
Need for Strong Remedies Against Unfair Trade
Over the past 30 years, the U.S. steel industry has faced a
world of pervasive trade and market-distorting practices,
including:
widespread foreign government ``targeting'' and
subsidizing of steel;
foreign government barriers to imports of steel
and steel-containing products; and
foreign government toleration of private cartels
and corruption in the steel sector.
These trade-distorting conditions have enabled less
efficient foreign steel companies to produce at levels not
supported by market forces, to maintain artificially high steel
prices in their home markets and to dump large quantities of
steel in the United States.
The revitalized U.S. steel industry is very familiar with
the challenge of having to compete against pervasive unfair
trade practices. However, what occurred in 1998 was like
nothing seen before. With Asia and Latin America in recession
and with Russia in collapse, the United States experienced the
single largest surge of dumped and subsidized steel imports in
its history. This was a transplanted crisis caused by major
structural economic failures elsewhere. The result was an
unprecedented surge of imports, which turned the U.S. into the
World's Steel Dumping Ground.
The past 18 months should have been the best of times for
an American steel industry restored to world class status,
which in recent years has added over 20 million tons of new,
state-of-the-art steelmaking capacity. Instead, the U.S. saw
record steel imports in 1998, the second highest import total
in history last year and continued unfair trade by less
efficient foreign steel producers throughout this period.
Against the background of record U.S. steel demand--and due to
one reason alone--unfair imports:
five U.S. steel companies are now in Chapter 11
bankruptcy;
virtually all U.S. steel companies have seen
profits plunge or losses mount; and
thousands of U.S. steelworkers have experienced
layoffs, shorter work weeks or reduced benefits.
This is not the way that market-based trade is supposed to
work. Between 1980 and the onset of the steel crisis, the U.S.
steel industry succeeded in reinventing itself. By 1998, we had
become a new industry producing new steels, using new equipment
and employing new processes. Thanks to nearly $60 billion in
modernization investments since 1980 and a costly and painful
restructuring of all aspects of steel operations, a new U.S.
steel industry had by 1998 emerged as a highly competitive,
technologically advanced, low cost, environmentally responsible
and customer-focused industry.
In contrast, the steel industries of other countries,
including Asia, the former Soviet Union and South America, did
not make the adjustments that the U.S. industry made in the
1980s and 1990s. They maintained substantial excess capacity,
and this excess found a destination in 1998-99 in the large and
open U.S. steel market. As a result, over the past 18 months,
the United States has experienced an unprecedented level of
unfair steel imports sold at cut-throat prices in violation of
U.S. laws and WTO rules.
Internationally competitive U.S. steel companies and their
highly productive employees have learned important lessons from
the 1998-99 steel crisis. They are that:
a surge of unfair and disruptive imports causes
lasting damage;
the damage can extend to all segments of the U.S.
steel community, and affects even the most competitive
producers;
the current trade laws are inadequate and are not
designed to address the kind of major shifts in trade flows
that result from structural economic failures abroad; and
yet, these laws at the present time are the only
effective WTO-consistent defense that exists to counter surging
unfair and disruptive imports.
Therefore, steel producers in the United States, now more
than ever, support:
prompt and strict enforcement of U.S. trade laws;
modernization of these laws in a WTO-consistent
manner; and
preservation of effective international
disciplines against unfair trade.
Today, significant unfair trade and serious import injury
are continuing in the U.S. steel market. The import injury is
confirmed by the International Trade Commission's recent
affirmative findings with respect to hot rolled steel, cut-to-
length plate, wire rod and welded line pipe. The unfair trade
is confirmed by the very high margins of dumping or
subsidization found recently by the Commerce Department on hot
rolled, cold rolled, plate and other products. An important
point, often overlooked, is that this injury is long term
damage for which the competitive U.S. steel industry will never
be compensated.
The injury caused to U.S. steel companies and employees by
unfair trade should also be a cause of long term concern to
steel's U.S. customers. It is vital that U.S. steel companies
continue to generate internally the capital needed for
modernization so that they can continue to reduce costs,
improve quality, compete against other materials and serve
customers. It is not in the long term interest of customers to
see competitive U.S. suppliers undermined by unfair trade from
less efficient foreign competitors.
Global Trading System:
Effective Fair Trade Rules are Essential
In a July 1998 submission to the WTO Working Group on the
Interaction between Trade and Competition Policy, the U.S.
government said that antidumping law remains:
``necessary to the maintenance of the multilateral trading
system. Without this and other remedial safeguards, there could
have been no agreement on broader GATT and later WTO packages
of market-opening agreements, especially given the
imperfections which remain in the multilateral trading system.
... [T]he antidumping rules represent an effort to maintain a
``level playing field'' between producers in different
countries ... [and] are a critical factor in obtaining and
sustaining necessary public support for the shared multilateral
goal of trade liberalization.''"'' STYLE="font-size: 10pt">
It is no surprise that the countries that repeatedly engage
in unfair and disruptive trade are the most vocal critics of
U.S. trade laws. Japan and other governments, whose domestic
markets remain largely closed, went to Seattle to open up--in
order to weaken--the WTO's fair trade rules. Other governments
would like to take away the only effective tools the United
States has to counter unfair trade. It is no accident that
countries with closed markets and cartels want to weaken the
WTO's antidumping rules and that countries that subsidize their
inefficient industries want to weaken the WTO's anti-subsidy
rules.
However, this effort to weaken disciplines against unfair
trade is a direct threat not just to steel and other
competitive U.S. industries. It is also a direct threat to
further progress on global trade liberalization. Effective
rules against dumping and trade-distorting subsidies are an
essential element of the multilateral trading system. These
rules are what enables the public here and elsewhere to support
open trade.
It is the failure to counter injurious dumping and other
unfair trade practices that undermines public confidence in
free trade and public support for further multilateral trade
liberalization. For more than 50 years, multilateral trade
rules have allowed the U.S. and other countries to counter
injurious dumping. The reason: a clear recognition that, over
time, there can be no free trade unless it is rule-based and
fair.
When the public believes that existing trade rules are
ineffective or are not being enforced, support for open trade
begins to erode--and support for more restrictive, sometimes
less transparent, solutions starts to grow. This is what has
occurred in the United States in recent years, and the only way
to reverse this trend is to improve and enforce U.S. laws
against unfair trade.
Only a few years ago, the Uruguay Round of trade
negotiations led to weaker international disciplines--and
national laws--against dumped and subsidized imports. The U.S.
Administration, to its credit, went to Seattle determined to
maintain the effectiveness of current international disciplines
against unfair trade. Japan and other governments went to
Seattle determined to discipline not the underlying trade-
distorting practices, but the WTO-consistent laws used in
response to those practices.
America's support for the WTO is not unconditional. It will
not withstand another assault on the system's basic fair trade
rules. The real problem in international trade is not the
antidumping remedy. It is dumping, closed markets and other
trade-distorting practices. If the public is again to support
further trade liberalization, we need to build a new trade
consensus in the United States around effective trade rules,
effectively enforced. By contrast, if Japan and other
governments get their way and U.S. trade laws are further
weakened, public support for open trade will continue to
decline.
It took nearly eight years in the Uruguay Round to re-
negotiate the current international regime of antidumping and
anti-subsidy rules. These rules have yet to be tested and have
not proven defective. What the global trading system needs is
proper compliance with current rules--not new negotiations,
with new and confusing rule changes that could threaten all WTO
members' exports.
Seattle's Message:
Importance of U.S. Trade Policy Objectives and Requirements
This spring, Congress will review whether the United States
should continue to participate in the WTO. In light of the
devastation suffered by the U.S. steel industry in 1998-99 due
to record levels of unfair trade--and given the ongoing foreign
government attacks against U.S. trade laws and WTO rules--AISI
is looking at this issue through the prism of key trade
objectives and requirements. In any debate over the value of
the WTO, Congress should consider the need to ensure that:
1. the global trading system remains rules-based;
2. the WTO is truly effective;
3. the WTO achieves real structural reform (e.g., dispute
settlement reform, more participation by the private sector and
greater transparency), which is especially necessary after
Seattle;
4. U.S. trade laws are strengthened to the full extent
allowed by WTO rules;
5. there is absolutely no weakening of the WTO's existing
fair trade rules or of current U.S. trade laws; and
6. there is a review process for WTO panel decisions
established under U.S. law, similar to the one sponsored in the
last Congress by Representatives Benjamin Cardin (D-MD), Ralph
Regula (R-OH) and others in the House and Senate. This will
help ensure that, in future WTO appeals, WTO panels do not
exceed or abuse their authority.
In addition, Congress should consider convening a special
inquiry into Japan's role in the international trading system--
including its continued closure to imports of manufactured
products and its continued regulation of trade.
Conclusions
Laws against unfair trade, especially the antidumping and
countervailing duty laws, are necessary to offset foreign
unfair trade and market-distorting behavior, level the playing
field and restore public confidence in free trade. Such laws
help ensure that more efficient domestic producers are not
weakened or destroyed by less efficient foreign firms. Because
these laws serve the interest of customers, consumers and the
entire economy, successive U.S. Administrations and Congresses
have taken the position that it is essential to preserve
effective U.S. laws against unfair trade and effective
international fair trade rules. This was the position that the
U.S. government and AISI both took to Seattle.
With respect to the Seattle WTO Ministerial, both the
Administration and the Congress deserve significant credit for
taking a strong stand against foreign government pressures to
reopen the WTO's antidumping and anti-subsidy rules.
The events that occurred in the streets of Seattle indicate
what could occur in the global trading system without fair
trade rules. Indeed, the global trading system as we now know
it would not exist, and could not survive, without such rules.
The key message coming out of Seattle is that it is essential
to build a new trade consensus in the United States around the
concept of RULES-BASED TRADE. The best way to begin doing this
is for Congress and the Administration to:
work together to strengthen U.S. trade laws in a
WTO-consistent manner; and
continue to resist foreign government efforts to
weaken further the existing U.S. and WTO fair trade rules--
whether through international negotiations, WTO dispute
settlement or trade law changes.
Statement of Antonia Juhasz, Director, International Trade and Forest
Programs, American Lands Alliance
``Defend Our Forests, Clearcut the WTO''--read a banner
prominently featured on the front page of the New York Times
the day after the start of the Seattle Ministerial, November
30, 1999. Held beneath the banner were signs with slogans such
as ``WTO Hurts Forests,'' ``Free Trade=Global Clearcuts,'' and
``No to the WTO, No to the Global Free Logging Agreement.'' The
banner and the signs were carried by forest activists from
around the nation and the world who gathered in Seattle to
ensure that their voices were heard in opposition to deals
being negotiated by their governments that threatened to
increase global forest destruction.
Forest activists came to Seattle after sending hundreds of
letters, making thousands of phone calls, visiting their local
and national elected officials, submitting testimony and
speaking before Congressional and Administration hearings on
the WTO in Washington, DC and across the country, and visiting
Washington, DC to meet with Clinton Administration officials.
These traditional democratic activities did not reap the
desired end, so activists went to Seattle to let their elected
officials and the world know that they would not accept
business as usual.
Forest activists came to Seattle to voice their opposition
to a deal to liberalize trade in forest products without
providing protections for forests--dubbed the ``Global Free
Logging Agreement'' due to concern that the elimination of
tariffs and discussions of the removal of non-tariff trade
barriers would give timber corporations a free hand at forest
destruction around the globe.
Forest activists also came to Seattle to express their
concern over WTO agreements such as the Agreement on Sanitary
and Phytosanitary Standards (SPS) which threatens forests by
making it more difficult for countries to impose necessary
protections against invasive species and the Technical Barriers
to Trade (TBT) Agreement which, together with Production
Process Method (PPM) restrictions, opens the door to attacks on
forest protection measures such as forest certification
programs and green procurement laws.
Forest activists felt the need to join with labor,
consumer, human and women's rights advocates to air their
concerns through protests on the streets of Seattle because
their concerns had heretofore fallen on virtually deaf ears by
many governments. To many, the most important government to
reach was the United States--the country most forcefully
pushing the GFLA and the host of the Ministerial.
The Outcome of the Seattle WTO Ministerial
The Seattle WTO Ministerial failed from the perspective of
the WTO and the governments that wanted to launch a new round
of trade negotiations in Seattle. The Ministerial was a success
for forest activists who hoped to stop the GFLA and other
harmful trade deals; for activists, developing countries and
others who sought to halt a new round of negotiations; and for
all those who hoped to send a message that the WTO could no
longer be used as a multinational corporate bastion free from
democracy.
The Ministerial's failure is most often blamed on the
particularly rigid stance taken by governments such that normal
negotiations were made impossible. After offering this
explanation, few attempt to explain why governments were less
amenable to negotiation in the build-up to Seattle and in
Seattle than in the past. An obvious answer is increased public
awareness about trade policy. This awareness created a public
that holds its elected officials accountable for their trade
positions. The Seattle protestors who were willing to withstand
pepper spray, rubber bullets, beatings and the removal of their
constitutional rights, were a constant reminder that the public
was watching and that free trade would forevermore have to
survive in the sun-light and under the scrutiny of civil
society.
In his speech at the World Economic Forum in Davos,
President Clinton made clear that he had heard the concerns
expressed in Seattle less than one month prior when he
explained that the demonstrators ``felt that they had no
voice'' and therefore were in the streets. Unfortunately, the
President made few substantive and no meaningful
recommendations to address this problem in this speech nor in
the State of the Union. On the contrary, while making several
meaningful insights into the reasons for the protests, the
President continually reaffirmed existing global trade rules
and suggested that what is needed is a better understanding by
the public of the benefits of free trade, rather than a re-
working of the rules themselves. These speeches, and the
actions of the Administration taken post-Seattle, indicate that
the Clinton Administration has not fully learned the lessons
from Seattle.
Clinton Administration Rejects Forest Activists Concerns
In a speech just weeks after the Seattle Ministerial, a
State Department representative announced that the Clinton
Administration continued to support the Advanced Tariff
Liberalization Initiative (ATL) (otherwise known as the Global
Free Logging Agreement). The Administration maintains this
support in spite of letters from sixteen of the nations leading
environmental organizations, over 500 forest activists from
across the U.S. and the world, 48 bi-partisan Members of
Congress, seven Senators, 22 Washington State Senators and
Representatives and nine Seattle City Council members rejecting
the GFLA and demanding protections for forests from
international trade and investment policies.
The Administration also rejected requests from forest
activists and other environmental groups to reform WTO rules
that threaten forests through the SPS and TBT agreements, the
PPM requirements, and the dispute resolution process that have
favored free markets over environmental and health concerns.
Forest activists have asked, and the Administration has
rejected, requests to pay particular attention to reform of the
SPS Agreement. The SPS Agreement unwisely restricts steps that
the U.S. Department of Agriculture and its counterparts in
other nations can take to prevent introductions of potentially
harmful exotic species.
The SPS Agreement requires federal regulators to predict
which foreign species will become invasive if introduced into
the U.S. Scientists understand too little about both the
Earth's estimated thirty million species and our own country's
many and varied ecosystems to make such predictions. Scientists
recommend, instead, that regulations be based on the premise
that all species are ``guilty until proven innocent.'' Forest
activists have asked the Administration to advocate revision of
the SPS Agreement so that it expressly acknowledges the right
of governments to invoke the Precautionary Principle (the right
to take action against a potential harm even if the scientific
evidence linking an activity to the harm in question is
inconclusive or uncertain) in determining their appropriate
levels of risk.
Forest Activists Excluded from U.S. Trade Policy
Forest activists had hoped that one outcome of the Seattle
Ministerial would be a recognition from the Clinton
Administration that the democratic process leading up to
Seattle had failed. An example of the failed democratic process
was the exclusion of forest activists form the policy-making
process of the United States Trade Representative (USTR).
Forest protection groups won a federal district court ruling
under the Federal Advisory Committee Act, requiring USTR to
appoint forest protection representatives to relevant advisory
committees which are currently composed only of industry
representatives. Yet rather than reach out to the forest
protection groups to discuss how to open up and balance the
process, USTR chose to maintain an exclusively adversarial
relationship and appeal the court ruling. In this context,
forest activists are not encouraged by USTR's simultaneous
announcement of an initiative to ``enhance opportunities'' for
environmental groups to advise on trade issues.
USTR's shortcomings in the environmental arena, even when
partnering with the Council on Environmental Quality (CEQ),
were made evident in the USTR/CEQ study of the ATL. While this
study was welcomed by the forest community, particularly due to
the inclusion of CEQ and the Forest Service, the process for
completing the study and the policy-decisions made based on the
study results were extremely disappointing and hopefully not
precedent setting.
The many methodological shortcomings which plague the study
led forest activists to conclude that the potential threat of
the forest negotiations at the WTO to forests and biodiversity
were considerably worse than even those identified in the study
itself.
The study's methodological short-comings include: (1) a
limited time-frame that made it impossible to provide a
thorough analysis of the problem; (2) investigation of the
acceleration of tariff elimination rather than the overall
impact of the elimination of tariffs on forests; (3) absence of
analysis of the impact on forests of the negotiations of non-
tariff barriers to trade that threaten vital forest protection
laws; and (4) failure to develop an environmentally justifiable
alternative to the ATL. Even if one ignores the methodological
problems, the study findings confirmed some of the forest
communities worst predictions regarding the ATL:
1. The study found that the ATL alone will increase global
logging, trade in forest products and production and
consumption of forest products;
2. The study found that the increased logging will take
place in some of the world's most sensitive and biologically
rich forests: the primary forests of Indonesia and Malaysia,
among other endangered forests in additional countries; and
3. The policy recommendations based on the study were in
favor of continued support of the ATL, recommending only that
``bilateral, regional and multilateral cooperation, including
continued technical assistance to help countries develop
environmentally sound national forest management policies and
practices'' should be pursued. While such policies are welcome
and desirable, alone they are not adequate to address the
problems that arise from the ATL.
In this context, we welcomed the President's announcement
last week that he will request nearly double the current
federal spending on programs to protect the world's tropical
rain forests in his FY 2000 budget. This budget request
demonstrates a concern for rainforest protection shared by
forest activists everywhere. As mentioned above, while such
policies are extremely welcome and we applaud the
Administration for this program, alone such programs are not
adequate to address the GFLA and other international trade
agreements that threaten forests and forest protection efforts.
The Administration must include forest protection as a criteria
within trade and investment agreements and reject the inclusion
of trade liberalization in non-trade agreements such as the
United Nations Intergovernmental Forum on Forests.
It is American Lands' hope that studies conducted in the
future under the President's Executive Order on environmental
reviews of trade agreements, will be administered by the
Environmental Protection Agency (EPA), CEQ and when relevant,
the Forest Service, as the lead agencies. Only by giving
agencies with expertise in and a commitment to the environment
control over such studies will forest concerns receive the
necessary and proper attention.
Policy Recommendations
``This is what democracy looks like!''--was a chant
repeated often in the streets of Seattle. The Administration
can show us another version of democracy by moving forward on
these and other recommendations from forest activists.
Remove USTR From Environmental Aspects of U.S. Trade
Policy.
We join with other leading national environmental
organizations in demanding that USTR be removed from
environmental trade policy. The lead-up to Seattle confirmed
environmental organizations' opinion that one of the main
problems with U.S. trade and environment policies is USTR
itself. USTR is not an environmental regulatory agency and
lacks sufficient environmental expertise. Moreover, USTR is
perceived as being ``captured'' by business interests and not
as receptive to broader public concerns over the environmental
implications of trade agreements. Nevertheless, USTR plays the
lead role in devising U.S. policies on trade and the
environment. In 1999, USTR used this role to block the
environmental community's calls for WTO reforms that would have
reduced threats to environmental law. The solution to this
problem is to give environmental agencies like CEQ and the EPA
the lead role in setting the environmental aspects of U.S.
trade policy. USTR could focus on doing what it does best:
negotiating to achieve these policies at the multilateral
level.
Remove the ``Global Free Logging Agreement'' (GFLA) From
U.S. Trade Agenda
The GFLA (also known as the ATL) would increase trade in
wood products through the elimination of tariffs and the
elimination of non-tariff trade barriers (NTBs). NTBs are
forest and species protections that interfere with free trade.
Tariff elimination will increase consumption of wood products,
while the elimination of NTBs threatens existing and future
forest protections. The Administration should drop its push for
the GFLA at the WTO, the Asia-Pacific Economic Cooperation, the
Free Trade Area of the Americas and other trade agreements or
bodies.
Constrain Environmental Destructive Subsidies.
Reducing harmful subsidies should take priority over
cutting tariffs. Such subsidies distort trade and contribute to
deforestation. Governments have recently advocated cutting
environmentally destructive subsidies in the fisheries sector
at the WTO. The Clinton Administration should use international
trade agreements to reduce destructive forest subsidies as well
as committing to eliminate these subsidies at home prior to the
conclusion of such agreements. For example, the U.S. Government
should stop wasting hundreds of millions of dollars each year
on timber roads and below cost timber sales to logging
companies.
Reform the SPS Agreement to Protect Forests from Invasive
Species.
American Lands hopes that the review of current statutes
governing invasive exotic species that is now under way by the
Invasive Species Council will highlight the conflict between
the SPS Agreement and scientifically sound ``pest exclusion''
programs. We hope further that the Administration will then
pursue needed amendments to that agreement, as well as other
strategies to ensure that the harmful environmental impacts of
trade are minimized. The SPS Agreement must be revised, among
other changes, to expressly acknowledge the right of
governments to invoke the Precautionary Principle (the right to
take action against a potential harm even if the scientific
evidence linking an activity to the harm in question is
inconclusive or uncertain) in determining their appropriate
levels of risk.
Support a Global Convention on the Trade in Old Growth (CTOG).
Taking the example of the Convention on International Trade
in Endangered Species (CITES), the Administration should
examine the feasibility of a ban in the trade of forest
products from old growth forests. Initially, the ban could be
imposed on the trade in primary forests. Logging of primary
forests for export is the most environmentally problematic
aspect of the forest products trade. The U.S. Government is
already committed to not funding timber operations in primary
tropical forests through World Bank and OPIC policies. If the
appropriate package of aid, debt relief and technical
assistance can be created, this proposal could be expanded to
tropical forests as well. Such assistance is consistent with
the Rio bargain that developed countries would assist
developing countries in raising environmental standards and
combating environmental problems, so that all could share in
sustainable development and an improved global environment.
Pursuit of such an agreement would also have to be accompanied
by MEA recognition at the WTO and elsewhere.
Protect Non-Tariff Trade Barriers Used for Environmental
Protection.
The Administration much explicitly state that it will not
support, but will rather fight, attempts to label forest
protection measures as illegal ``non tariff trade barriers''
under WTO or other trade agreement of trade body rules.
Protect Independent Forest Product Certification Measures and
Green Procurement Laws.
Forest product certification programs such as the Forest
Stewardship Council are threatened by WTO. We ask the
Administration to ensure that distinctions between products
based upon PPMs related to environment, human rights and
internationally recognized labor standards are recognized as
legitimate measures for promoting sustainable commerce. We also
ask the Administration to explicitly state that independent,
voluntary and mandatory forest product certification measures
and green procurement laws are in no way contradictory to the
TBT Agreement.
Grant Preferential Treatment to Independently Certified
Imported Wood Products.
The U.S. government should consider adopting tariffs and
non-tariff measures that encourage sustainable forestry and
discourage unsustainable forestry practices. For instance, the
Clinton Administration should consider only lowering tariffs
for forest products that have been independently certified to
have been produced in an environmentally and socially
responsible manner. Governments could raise tariffs and
consider additional controls on forest products that have not
been certified in order to create incentives for
environmentally protective forestry.
Negotiate Binding Code of Conduct Setting Minimum Standards for
Forestry Industry.
Concerns over trade and investment liberalization in forest
products-such as ``cut and run'' operations, increased
investment in countries without adequate laws--would be
assuaged by the negotiation of binding minimum standards for
corporations involved in international investment and trade in
the forest sector. Such a code could draw upon existing
principles and best practices, such as those of the World Bank,
and voluntary codes. However, the rules should be binding and
enforceable by citizens. The United Nations Development Program
has called for such binding standards in their latest Human
Development Report. According to UNDP, ``multinationals are too
important for their conduct to be left to voluntary and self-
generated standards.''
Impose Small Tax On Cross-Border Trade in Forest Products, With
Revenues Dedicated to Forest Protection.
The total value of trade in forest products worldwide
exceeds $150 billion annually. A small surcharge on all forest
products imports, even just one percent, would raise
significant sums that could be dedicated to forest protection,
particularly in developing countries and critical forest ``hot
spots.'' The Clinton Administration should examine the
feasibility of this policy at the hemispheric level, as well as
possible mechanisms or organizations that could channel the
funds for forest protection, capacity building in forest
regulation, and the promotion of sustainable forestry practices
among the private sector.
Conclusion
American Lands' wishes to thank the Committee on Trade for
the opportunity to present these views to the Congress. We look
forward to working with Congress and the Administration on a
new set of trade and investment rules that will make the global
economy respond to the needs of the world's forests, the
environment and it's citizens.
Statement of John C. Dernbach, Widener University Law School,
Harrisburg, Pennsylvania, and Foreign Policy In Focus Associate
WTO and Sustainable Development:
Why the Seattle Ministerial Failed and the Path for Future Directions
WTO and Sustainable Development
The WTO should be judged against its explicit
objective--sustainable development, a term that includes
economic and social development and environmental protection.
The U.S. has no commitment to sustainable
development and uses international trade laws primarily for its
own economic development.
The U.S. needs to play a leadership role in the
WTO to make trade, environmental protection, and social
development mutually supportive.
The World Trade Organization (WTO) Ministerial Conference
in Seattle could have been a defining moment for the world's
commitment to sustainable development. It could also have been
a defining moment for U.S. leadership on sustainable
development. As the WTO and the U.S. pick up the pieces from
Seattle, they may see that the ideas underlying sustainable
development provided a unifying theme for many of the
protesters.
The WTO is the international entity responsible for
overseeing implementation of the Global Agreement on Tariffs
and Trade. The WTO agreement explicitly states that trade
should be conducted ``in accordance with the objective of
sustainable development.'' As the agreement recognizes, trade
is a means of achieving sustainable development; it is not an
end in itself. It is time to hold the WTO and its member states
to that objective.
Sustainable development is not a buzzword or another way of
talking about environmental protection. It is a framework for
reconciling key international goals, and it applies to national
actions as well.
Understanding sustainable development requires an
understanding of development, a misused term that has a
specific meaning in the international community. Development is
intended to improve the quality of human life and generate
opportunity by fostering peace and security, human rights (or
social development), and economic development. But this cannot
occur without a fourth component--supportive national
governance. An international consensus about these goals grew
out of World War II and the Great Depression. This
understanding of development is taken directly from a variety
of international agreements, U.N. General Assembly Resolutions,
and reports of the U.N. Development Program.
Since World War II, development has accomplished much good.
People are living longer, more people are enjoying a higher
standard of living, and we have not experienced a third world
war. This is due in part to the 1947 Global Agreement on
Tariffs and Trade.
But the post-World War II development model has two
failings, according to Our Common Future, the 1987 report of
the World Commission on Environment and Development. The number
of people living in poverty is now greater than ever, and
widespread environmental degradation is occurring in every
region of the world.
The Commission found that each of the four basic components
of development--peace and security, social development,
economic development, and supportive national governance--
required protection, and even restoration, of the environment.
Continued development is compromised and even prevented by
inattention to the environment. People have fought over water
and scarce resources. Environmental contamination and disease
kill people or prevent them from living decent lives. People
cannot earn a living from fishing when there are few fish to
catch. Governments that do not protect their environment thus
undermine their own development goals.
At the United Nations Conference on Environment and
Development (or Earth Summit) in 1992, the nations of the world
endorsed sustainable development as a response to these
problems. Sustainable development adds another component to the
traditional development model--environmental protection and
restoration. More fundamentally, it redefines progress. Instead
of seeing progress in terms of traditional development--and
tolerating environmental degradation--sustainable development
means that we must also simultaneously seek progress in overall
environmental quality. The nations of the world adopted a
statement of principles (the Rio Declaration) and a plan of
action (Agenda 21) to realize sustainable development.
Concerning trade, the Rio Declaration urges states to
``promote a supportive and international economic system that
would lead to economic growth and sustainable development in
all countries, to better address the problems of environmental
degradation.'' Similarly, Agenda 21 states that the
``international community should provide a supportive
international climate for achieving environment and development
goals'' by, among other things, ``[m]aking trade and
environment mutually supportive.'' In 1994, when GATT was
amended and the WTO created, sustainable development was
incorporated into the WTO's goals.
At century's end, however, the world generally is moving
away from sustainable development rather than toward it. Trade
is not the only reason, but it is a major reason. Global GDP
has risen by five times since 1950 and could be four or five
times its present size by 2050. The world's natural systems,
however, are being undermined by unsustainable use and
exploitation as well as grave imbalances between those who
benefit from that exploitation and those who are burdened by
it. A recent U.N. Environmental Programme report concludes that
environmental protection is ``lagging behind economic and
social development.''
Toward a New Foreign Policy
The U.S. should exercise leadership to move the
international trading system toward sustainable development.
The WTO, with the support and leadership of the
United States, should abolish subsidies that contribute to
unsustainable development and integrate sustainable development
into new and existing trade agreements.
U.S. actions concerning trade should be part of a
broader U.S. vision and strategy for sustainable development
that is also applied in other forums.
The U.S. should articulate a positive and compelling vision
of what sustainable development would mean for the world's
nations and integrate that vision into its domestic and foreign
policy, including its trade policy. The United States should
exercise that leadership in the WTO and other forums.
U.S. Leadership in the WTO
The WTO needs to be part of the effort to achieve
sustainable development, not part of the problem. The United
States should exercise leadership in the WTO to achieve the
following outcomes. Although many of the examples relate to
environment, these recommendations also apply to labor, health,
and other aspects of sustainable development.
Elimination of Subsidies That Contribute to Unsustainable
Development. WTO parties should phase out subsidies for
environmentally unsustainable activities, including subsidies
that contribute to fisheries overcapacity. The elimination of
such fishing subsidies has been proposed by New Zealand,
Iceland, and the United States.
The parties should find other ways to apply the WTO's legal
authority concerning subsidies to support sustainable
development. For example, it is widely recognized that the use
of fossil fuels is subsidized by governments in ways that often
increase their use and that the use of fossil fuels contributes
to global warming. The Kyoto Protocol specifically identifies
elimination of national subsidies as one means of achieving
greenhouse gas reductions. Subsidies for fossil fuels distort
the prices charged for those fuels and create substantial
economic distortions in the debate over the cost of Kyoto
Protocol compliance.
Consideration of Sustainable Development in New Trade
Agreements. No trade-related agreement should be negotiated or
allowed to go into effect unless a sustainable development
impact assessment is first prepared and subjected to public
review. The assessment should describe the impact of the
proposed agreement on the environment, on social development
and human rights (including labor), on peace and security, and
on national governance that is supportive of those goals. The
assessment should also describe alternatives to the proposed
agreement, including alternatives relating to the special
situation of developing countries, and particularly the least
developed countries.
Integration of Sustainable Development Goals into New Trade
Agreements. No trade-related agreement should be allowed to go
into effect unless the parties are satisfied, after public
review, that the agreement would actually further not just
economic development but also environmental protection, social
development and human rights, peace and security, and
supportive national governance. It is not enough to consider
the effects on these goals. Trade agreements should actually
further these goals, or at least not interfere with them.
Procedural reforms to WTO's Committee on Trade and Environment
will not achieve this result.
The parties should also find additional ways to make GATT
and multilateral environmental agreements mutually supportive.
When negotiations relating to a particular economic sector
begin, for example, and there is no multilateral environmental
agreement in place concerning that sector, there should be
preliminary discussion on whether it would be appropriate to
have multilateral environmental standards and procedures
applicable to that sector. (These standards would include
process and production methods.) Environmental ministries
should participate directly in such discussions. If so, then
those standards could be negotiated at the same time as, or
perhaps even as part of, the trade discussions for that sector.
Such negotiations should also include appropriate standards and
financial or technical assistance for developing countries.
The standards should include air pollution, water
pollution, sanitation, and drinking water--environmental
problems that developing countries experience more severely and
immediately than most other environmental problems. These
problems generally are also not directly covered by
multilateral environmental agreements. The quid pro quo for
increased trade, in short, should be progress in addressing
such problems and assistance by developed countries in doing
so.
Integration of Sustainable Development Goals into Existing
Trade Agreements. Where trade agreements already exist (e.g.,
for products), the parties should facilitate the negotiation of
international agreements concerning process and production
agreements relating to products. These agreements should
include, but not necessarily be limited to, extended producer
responsibility, ecolabeling, and the greening of public
purchasing. These agreements also should apply to air
pollution, water pollution, and similar problems experienced
severely by developing countries, and should include
appropriate assistance. The WTO agreements should also be
amended, or interpreted by the parties, to provide a more
balanced test for the availability of the Article XX(b) and
XX(g) exemptions for measures to protect ``human, animal or
plant life or health'' or conserve ``exhaustible natural
resources.'' In addition, the WTO agreements should expressly
protect domestic actions taken pursuant to multilateral
agreements and allow unilateral actions where necessary to
protect the national interest.
U.S. Leadership in Other Forums
Many of the changes required to make trade supportive of
environmental and social goals cannot be achieved by WTO alone.
Unless the United States exercises leadership for sustainable
development in all relevant international and domestic forums,
it will continue to miss many opportunities to improve the
environmental and social effects of trade.
Greater Assistance to Developing Countries for Sustainable
Development. The Earth Summit bargain between developed and
developing countries was that developed countries would provide
financial and technical assistance to developing countries to
help developing countries achieve environmental and social
goals. The developed countries have not kept that bargain.
Developed countries (including the U.S.) need to increase
official development assistance, to assist technical and
governmental capacity building, and to provide access to
environmental technology and know-how on preferential terms.
Creative means of financing this assistance should also be
seriously considered (e.g., debt for environmental and health
protection swaps, or a small tax on global trade and capital
flows).
Creation of International Institution for Sustainable
Development Comparable to WTO. There is no organization equal
in influence to the World Trade Organization concerning the
environmental aspects of sustainable development. Such an
institution should thus be created, probably by combining
existing organizations (e.g., Commission on Sustainable
Development, U.N. Environment Programme, secretariats of
various multilateral environmental agreements). The
consolidation of environmental organizations would be in
addition to the integration of environment into existing WTO
operations.
Domestic Efforts to Achieve Sustainable Development. The
U.S. and other developed countries must demonstrate by their
own domestic actions, including actions concerning trade, that
sustainable development provides better quality of life for
their citizens and for succeeding generations.
Statement of Brent Blackwelder, President, Friends of the Earth
The 1999 Seattle Ministerial Meeting of the World Trade
Organization (WTO) put trade issues under an intense spotlight
of public scrutiny. The old way of conducting global trade
talks--rules and agreements negotiated in a secretive manner
that excludes the public and harms the environment--proved
unacceptable to ordinary people and even to many governments.
In Seattle and later at the World Economic Forum in Davos,
President Clinton acknowledged the need to democratize trade
policy and to make the WTO more transparent and accountable.
The coming months provide an opportunity for US government
leaders to act on these promises, and to demonstrate that they
have truly learned the lessons of Seattle.
I. Democracy Starts at Home
President Clinton and members of Congress have noted the
need to open up the WTO, but democracy starts at home. The
Clinton-Gore Administration and Congress must give the public a
greater voice in the domestic trade policymaking process, which
is currently dominated by corporate interests. This will lead
to greener trade policy that inspires more public confidence in
international trade. Friends of the Earth recommends that
environmental agencies be charged with setting trade and
environment policy, that the trade advisory system be opened to
environmental organizations, and that public notice be given
when the US uses the WTO to threaten other countries'
environmental laws.
A decade of advocacy on trade and environment issues leads
environmentalists to the inescapable conclusion that the main
trade threat to the environment is the United States Trade
Representatives Office (USTR) itself. Though USTR lacks
environmental expertise and is perceived as being beholden to
business interests, it plays the lead role in setting US
policies on trade and the environment. In the lead up to
Seattle, USTR blocked the environmental community's calls for
WTO reforms that would have reduced threats to environmental
laws. The solution to this problem is to give environmental
agencies like the Environmental Protection Agency (EPA) and the
Council on Environmental Quality (CEQ) the lead role in setting
the environmental aspects of US trade policy. USTR could then
focus on doing what it does best: negotiating to achieve these
policies at the multilateral level.
Approximately 700 business representatives sit on 30
industry sector advisory committees that get special access to
information and advise USTR. There are no public interest
members on these committees. For example, there are two
committees advising USTR on the forest product trade. None of
the members of the committees are environmentalists, so it is
not surprising that USTR has aggressively pursued trade
policies that threaten forests worldwide. These committees need
to be opened to diverse public interests or abolished.
Friends of the Earth is not concerned just with the WTO's
effects on US environmental laws; we are equally outraged when
the US government uses the organization to challenge other
countries' regulations or block environmental progress. For
example, the US electronics industry recently sent USTR
detailed arguments that a proposed European directive on
recycling waste violated WTO rules. USTR sent the arguments to
US embassy staff in European countries, with instructions to
register complaints over the directive. They did this without
informing, much less with input from, the American public or
environmental agencies like EPA.
It is unacceptable for USTR to act as private mercenaries
for corporate interests. The US Government should give public
notice and seek comments before trying to undermine other
countries' environmental or health laws.
II. What To Do About The WTO
Friends of the Earth is not interested in transforming the
WTO into an environmental organization. We don't want the WTO
to use sanctions to enforce environmental standards. And we
have no interest in or intent to prevent market access for
developing countries. We believe the WTO should take a ``hands
off'' approach to environmental and health laws, allowing
governments to make environmental progress at the national and
international level. We also believe the US and other
governments must strengthen the Multilateral Environmental
Agreements so economic liberalization doesn't rush ahead
without an adequate framework of environmental protection.
We believe environmental assessment must be part of all
trade agreements. Governments have been leaping before they
look on trade. Members of the WTO should commit to assessment
of past and planned trade agreements. The breakdown in Seattle
provides the opportunity to assess the five-year record of the
WTO before starting new negotiations. Assessment should focus
on trade agreements' impacts of ecosystems and environmental
standards, but also address broader sustainability issues,
including development and labor impacts. The assessments should
happen at the national level and governments should also
cooperate on a joint review, perhaps at the United Nations
Environment Program. The Clinton-Gore Administration recently
announced a policy of assessing the environmental impacts of
some trade agreements. This is a good start, but should be
followed through and strengthened to cover investment
agreements, insure leadership from environmental agencies, and
closely follow our tested and effective laws for domestic
environmental assessment (NEPA). Ongoing negotiations for a
Free Trade Area of the Americas (FTAA) provide an immediate
opportunity for the US to put its assessment policy to work.
Friends of the Earth also believes the WTO's dispute
resolution rules and some substantive rules must be changed to
grant greater deference to environmental and health laws. The
WTO's rules are biased against environmental regulations, so
reforming them would assure environmental organizations that
they will not continue their perfect record of ruling against
environmental laws. deference should also apply to Multilateral
Environmental Agreements (MEAs) which use trade measures or
impact trade.
Friends of the Earth also believes the WTO should be
downsized when it comes to environmentally sensitive sectors.
Governments should follow the example of hazardous waste (which
is regulated by the Basel Convention), and trade in endangered
species (which is regulated by CITES) and negotiate MEAs while
taking certain products out of the WTO. The recent completion
of a Biosafety Protocol on trade in genetically modified
products is an important step in the right direction. Bulk
fresh water is another sensitive issue that should not be
commodified and treated like other products. Governments should
consider restricting trade in logs and products from old growth
forests, both temperate and tropical.
Conclusion
Friends of the Earth is a national environmental advocacy
organization with affiliates in 63 countries. We were active in
Seattle, conducting advocacy and public education as part of a
team of nearly 40 representatives of FoE from 20 countries. I
came away impressed by the depth of commitment and awareness
shown by the vast majority of the protestors, marchers, and
other members of the public in Seattle to express their
concerns about the WTO. The people have spoken. We hope our
government will act, and show the rest of the world that
democracy works.
For More Information on Friends of the Earth's Position on
the WTO:
View our website at http://www.foe.org/
international/wto
Contact Mark Vallianatos at 202-783-7400 x. 231
Statement of Grocery Manufacturers of America
GMA welcomes this opportunity to present our views on the
prospects for the mandated negotiations on agriculture in the
World Trade Organization. GMA is the world's largest
association of food, beverage and consumer product companies.
With US sales of more than $450 billion, GMA members employ
more than 2.5 million workers in all 50 states. Led by a board
of 42 Chief Executive Officers, GMA speaks for food and
consumer product manufacturers at the state, federal and
international levels on legislative and regulatory issues. GMA
also leads efforts to increase productivity and efficiency in
the food industry.
GMA regrets that the recent WTO Ministerial meeting failed
to launch a comprehensive new round of trade negotiations.
Agriculture negotiations, however, will proceed as mandated
under Article 20 of the WTO Agreement on Agriculture. GMA
believes it is crucial that governments worldwide enter
immediately into good-faith negotiations to build on the
achievements of the Uruguay Round and continue to expand market
access, reduce tariffs and dismantle barriers to food and
agriculture products. United States leadership will be key to
ensuring that negotiations begin in a timely fashion and
proceed expeditiously.
GMA respectfully offers its views on the structure and
goals of the mandated negotiations on agriculture.
Structure of the Negotiations
As noted above, GMA believes it is imperative that
negotiations on the so-called ``built-in'' agenda begin in the
WTO at the earliest possible date, in conjunction with
necessary institutional and decision-making reforms. We
recommend that negotiations begin under the auspices of the
Committee on Agriculture with the eventual goal of a separate
negotiating group on agriculture. Negotiations should follow
the overall framework of the Uruguay Round, focusing on market
access, export competition and domestic support. The United
States should also exercise the necessary leadership to launch
a more comprehensive round of trade negotiations, in order to
secure maximum leverage for liberalization for food and
agriculture products. However, GMA does not wish the lack of a
broader package of negotiations to be used as an excuse to
delay negotiations on agriculture.
GMA Goals for the Mandated Agenda
GMA's goals for the agriculture negotiations remain
consistent with our earlier testimony on the WTO Ministerial.
First, we believe it is essential to improve market access for
processed food products and primary agricultural commodities
through reduced tariffs, elimination or further liberalization
of TRQs and other mechanisms. Second, GMA believes that export
subsidies on food and agricultural products must be eliminated.
Finally, GMA recommends that discussions on non-trade concerns
relating to agriculture be carefully circumscribed throughout
the negotiations.
Expanding Market Access for Processed Food and Primary
Agricultural Products
GMA recommends that the Administration place particular
emphasis on liberalization in the processed food sector in the
agriculture negotiations. U.S. trading patterns for food and
agricultural products have undergone a profound change in
recent years. Consumer products now account for 39% of U.S.
exports in the agricultural sector, more than the percentage
accounted for by raw agricultural products. Consumer and
intermediate products, those that have undergone some
processing, together comprise nearly two-thirds of total
agricultural exports. Globally, trade in processed food is
growing at more than twice the rate of trade in primary
agricultural products. By 2000, trade in processed or value-
added products is predicted to account for 75% of global
agrifood trade as compared with about 50% in 1985.
Yet, despite this impressive growth, barriers to processed
foods and beverages remain significantly higher than those for
many other products. The Uruguay Round negotiations delivered
some benefits by lowering barriers and reducing subsidies to
producers and exporters. However, the reductions in tariffs for
processed foods and beverages were mostly at the lower end of
the allowable range. Because the rules allowed countries to
average their tariff cuts, countries naturally chose to make
high percentage reductions on already low tariffs and lower
percentage reductions on higher tariffs. As a result, the
average tariff on processed food products globally remains, on
average, eight times the U.S. rate.
To address these barriers, GMA strongly advocates an
approach to tariff reductions that will address the particular
problems of the processed food sector and will place these
products on par with their industrial counterparts. We support
an approach that will eliminate tariff peaks (asymmetrically
high tariffs that far exceed a country's average tariff rate)
and address the problem of tariff escalation, where tariffs
increase with the level of processing. This approach should, in
essence, reduce the higher tariffs faster than the lower ones
to create meaningful market access for exports. We also
recommend that governments worldwide work toward zero-for-zero
tariff agreements on a number of products including, but not
limited to, pet foods, dry cereals, soft drinks, soups,
biscuits and cocoa and cocoa containing products.
GMA also recommends that the U.S. seek a significant
expansion of the minimum market access commitment for processed
food and primary agricultural products achieved during the
Uruguay Round. Quotas also represent a major barrier and, as a
result, the U.S. should pursue substantial increases in
applicable quotas, significant decreases in out of quota tariff
rates and elimination of in-quota duties.
Lastly, if our commitment to expanding market access abroad
for U.S. products is to be taken seriously by our trading
partners, domestically favored industries and products must not
be excluded from the upcoming negotiations. Tariffs and quotas
on sugar, peanuts and dairy products must be liberalized. The
U.S. must not shy away from helping lead the way in that
liberalization. Simply put, our negotiators will have a much
stronger position in world trade talks once they are able to
demonstrate serious resolve to open markets by further opening
of the American market for sugar, peanuts and dairy products.
We strongly recommend that sugar, peanuts and dairy products be
kept on the table in the negotiations.
Elimination of Export Subsidies
If we are to ensure a level playing field for agricultural
commodities and processed food products, the massive export
subsidies provided by many of the U.S.' most important trading
partners must be eliminated. Our goal is to see export products
compete on their quality, merit and consumer interest, not the
degree to which they have been subsidized. Therefore, GMA
recommends that export subsidies on all primary agricultural
commodities and processed food products be eliminated within
five years of the conclusion of the negotiations.
While we are also concerned about achieving a reduction in
domestic support for agricultural commodities and processed
food products, we believe the most effective means to ensure a
lessening of this support is to focus on increasing market
access and eliminating export subsidies. Working together,
these two tools provide the needed discipline in the
marketplace and will inevitably result in the desired reduction
of domestic support.
Non-Trade Concerns
GMA recognizes that Article 20 (c) of the Agreement on
Agriculture directs countries to consider ``non-trade''
concerns in future agricultural negotiations. We are concerned,
however, at the expansive approach that some countries took to
this concept in the lead up to, and during the WTO Ministerial
meeting. In particular, GMA was troubled that language
pertaining to food safety was included in the last draft ``Text
on Agriculture.'' Issues pertaining to food safety are already
clearly covered by the existing Uruguay Round Agreement of the
Application of Sanitary and Phytosanitary Measures (SPS), which
should not be renegotiated or re-opened in any manner. GMA
firmly believes that any reopening of the SPS Agreement could
lead to a weakening of its provisions, a result which GMA
strongly opposes and which would represent a significant step
backwards in eliminating unwarranted restrictions on trade.
Conclusion
Thank you for this opportunity to share our views on the
mandated negotiations on agriculture. GMA firmly believes that
it is of critical importance to farmers and producers alike to
continue to expand market access, reduce tariffs and dismantle
barriers to food and agricultural products. Achieving the
objectives discussed above will benefit consumers around the
world with a more reliable, diverse, safe and affordable food
supply. We look forward to working with you and the
Administration to achieve these goals.
Stanford University, Class of 2002
International Relations and Economics
February 12, 2000
A.L. Singleton
Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington D.C. 20515
Dear Mr. Singleton;
The following outlines my testimony for the House hearing on the
World Trade Organization.
I think that this is an issue of tremendou importance. Today, 60 of
the world's largest economies are corporations, rather than nations.
Corporate citizenship will have to expand beyond donating a couple
thousand to art museums and global trade will have to be balanced by
concern for human rights and the environment. Realistically, I feel the
only way to enforce laws protecting such fundamental human rights is
through multilateral government agreements on trade with the same
enforcement as other WTO agreements. Trade will dominate the future,
and if we want the new millennium to bring true global prosperity, the
WTO must be willing to listen to the protesters and make some
fundamental changes as an institution to fulfill its responsibilities
to the world's people.
I appreciate your consideration.
Sincerely,
Lauren Inouye
Edina, MN
** The WTO prioritizes trade and commercial considerations over
other values. WTO rules generally require domestic laws, rules and
regulations designed to further worker, consumer, environmental,
health, safety, human rights, animal protection or other non-commercial
interests to be undertaken in the ``least trade restrictive'' fashion
possible--almost never is trade subordinated to these noncommercial
concerns. I agree that regulations should be taken in a manner that is
the least-restrictive to trade-but only if the regulations remain
effective.
** If the promotion of free trade is being ``justified'' on the
basis that it improves everyone's lives, I think we should focus more
on improving people's lives, and free trade only as a means to that
end. The WTO is argues that development will lead to a better standard
of living for all-that the rising tide will lift all boats. But the
Wall Street Journal recently reported (10/29/99) that the per capita
income gap between the wealthiest and poorest nation has grown from 3
to 1 in 1820 to 35 to 1 in 1950 to 72 to 1 in 1992. Even if the
increase in the gap was due entirely to the US getting richer (which it
is not) I'm concerned. Basically, I don't think all growth helps
people. Growth and GDP do not always accurately represent quality of
life. GDP was never meant to be an indicator of people's wellbeing. It
is a measurement of the size of the economy, simply that. I think any
growth initiative should be carefully evaluated not simply on whether
it will make $$$, but on how it will effect people's lives. The WTO
(and, many would argue, the other Bretton Woods institutions, like the
IMF and World Bank) promote growth without these considerations.
Basically, people before profits.
** The WTO is not democratic. We did not elect our representative,
Charlene Barshefsky, and have little opportunity to influence her
policy. She has advisory panels to represent different segments of
American industry, and the panels, except in one or two cases, are
entirely composed of businessmen. NGO's and public citizens do not have
an opportunity to share their concerns about labor, the environment,
and human rights.
** The WTO operates in secrecy. Its tribunals rule on the
``legality'' of nations' laws, but carry out their work behind closed
doors. Neither the press or the public is allowed in their meetings.
** The Dispute Resolution Panels, which arbitrate trade arguments,
often have a bias in favor of corporate interests, and their rulings
cannot be overturned unless there is a unanimous decision to overturn
them. ``Under WTO rules, once a commitment has been made to liberalize
a sector of trade, it is difficult to reverse,'' the WTO says in a
paper on the benefits of the organization which is published on its web
site. ``Quite often, governments use the WTO as a welcome external
constraint on their policies: 'we can't do this because it would
violate the WTO agreements.'''
** The WTO does not just regulate, it actively promotes, global
trade. Its rules facilitate global commerce and multinational
development and do not equally promote local economic development and
policies that move developing countries towards greater self-reliance.
Although the leaders of many developing nations have clearly stated
their desire to join the WTO, there is reason to believe that while the
political elite want more international development, the people of the
nation prefer smaller ``microenterprise'' and more control over their
economy. Also, I feel the focus on international development agencies
should be sustainable development, and that it is far wiser to aid
developing countries with technology and other environmental aid now
then to deal with the consequences 40 years from now.
** The WTO does not abide by the Precautionary Principle. The
Precautionary Principle is an accepted norm in international law, and
basically states that if there is reason to believe that a product
poses a risk to human health or the environment, that it needs to be
proven safe before being produced. (this is the principle that the FDA
works on) WTO rules (the Sanitary and Phytosanitary Standards)
generally block countries from banning exports of products which they
cannot conclusively prove to be harmful-which is basically everything.
(Think about how long tobacco companies denied that Cigarettes caused
cancer). The most famous case here is that of the European Union and
bovine growth hormone-treated beef.
** The WTO establishes international ceilings, rather than floors
on import environmental standards through a process of
``harmonization.'' It is argued that environmental standards which are
too high make it difficult for LDCs to produce, and are therefore a
barrier to trade. My feeling is that is that we should try as much as
we can to keep standards high, and just put more money into tech.
transfer programs to help them develop sustainably now. In the long-
run, clean-up and repair is often more expensive then investing in new
technology-but business often looks at short-run profits rather than
the long-term, and without an incentive to do so, are more likely to
look for a way to make a quick buck. Programs to facilitate technology
transfer through the Global Environmental Facility (managed through the
UNDP and the World Bank) have already been established to help LDC's
develop sustainably. Some say we should just have ``eco-labelling,''
putting the choice directly in the hands of the consumer. I agree in
some instances, (this is the solution with tuna-look at the dolphin-
safe mark on the can) but we have national environmental standards and
government enforcement of them, for a reason. The American people
reached a general consensus that we wanted Clean Air and Water, and
protection of Endangered Species. I don't think something as important
as species survival should depend on consumer choice. By the time
people realize that its really important to stop buying a certain
product, the species may already be extinct or the land degraded.
** The WTO limits governments' ability to use their purchasing
dollar for human rights, environmental, worker rights, and other non-
commercial purposes. In general, WTO rules state that governments can
make purchases based only on quality and cost considerations. For
example, Canada complained that US laws encouraging the federal
government to buy recycled paper have hurt their logging industry by
decreasing demand, and the US had to pay them reparations. Also the
Massachusetts state government had selective purchasing laws preventing
government purchase of items made in Burma/Myanmar, as Burma is
currently run by a military dictatorship with documented instances of
slave labor, and has their democratically-elected leader under house
arrest. That law is currently under Supreme Court appeal-if they win,
the WTO will overturn it, and the US will be forced to pay the
determined fee. The WTO can't actually force national governments to
change their laws-it just makes them pay fines for them. In these
cases, I can understand why the laws are considered discriminatory-but
I think that human rights are more important than free trade.
Governments should have the right to say they don't want to purchase
certain kinds of goods for certain reasons.
** The WTO does not allow bans or restrictions based on production.
According to the WTO, Tuna is Tuna is Tuna. A nation cannot
discriminate on how an item was made-for example, whether or not turtle
excluder devices were used on shrimp nets, or whether precautions were
taken to prevent dolphins from being killed catching tuna, or whether
or not shoes were made with child labor. The developing county reps
have expressed concern over labor standards that this would only end up
hurting them, because. US industry wouldn't use their labor anymore at
all, but I feel that many US companies could up labor standards without
upsetting thier bottom line.
** Issues in bioethics. The WTO promotes intellectual property
rights for DNA sequences and other ``life patents,'' and many feel that
its wrong. Other intellectual property rights issues include
controversy over whether Africa should get to produce generic versions
of AIDS drugs without paying intellectual property rights because the
drugs could potentially improve/save many lives. Also, many biotech
companies have been accused of ``biopiracy'' for patenting indigenous
people's traditional remedies, developing drugs, and then not
compensating the people who developed the medicine as a public good.
Statement of Sophia Murphy, Institute for Agriculture and Trade Policy
Agriculture, Trade and Developing Countries:3
Where to after Seattle?
The collapse of talks in Seattle last November, at the
third Ministerial Conference of the World Trade Organization
(WTO) has left a lot of confusion about what direction
multilateral trade talks can take next. It is widely accepted
that progress on new negotiations will be slow, and that the
widely anticipated ``Millennium Round'' will not start this
year. However, agriculture, together with services and the
Trade-Related Intellectual Property Rights Agreement (TRIPs),
have review clauses built into them. Negotiations are mandated
to begin in 2000 in these areas regardless of whether or not
other issues get taken up. In the Uruguay Round Agreement on
Agriculture, Article 20 requires WTO member governments to
undertake these new negotiations in the light of the experience
of implementing the agreement.
This written submission analyzes the agriculture
negotiations in Seattle where the governments seemed to come
very close to agreement on a draft text on agriculture. Also
included is a review of what this draft text included and
suggestions for ways in which the next text for negotiation
could be strengthened to better reflect U.S. goals of
supporting developing countries.
There are different opinions on whether it was agriculture
that broke the talks in Seattle. Even those closest to the
negotiations, including government delegates, are not of one
mind. Some say yes. The European Council of Agriculture
Ministers did not accept the draft text on agriculture they
were sent on the last day of the conference, saying they would
need to see the whole deal before signing off on it. Coming as
it did at the last stage of the meeting, with no time left to
negotiate, this was the equivalent of refusing the deal. Others
say that if Clinton had not insisted on linking trade sanctions
to labor standards as part of the Seattle negotiations, then
there would have been an agreed package that Europe would have
found hard to reject over agriculture alone.
There is no question that the frustration of many
developing country delegates, particularly from Africa and the
Caribbean, contributed to the failure of the negotiations. Many
delegates were poorly informed about when and where meetings
were taking place and how the working groups were supposed to
function. Developing countries worked hard to develop common
positions before Seattle and yet felt that they were still not
being taken seriously in the negotiating process. The
traditional practice of closed sessions among a small number of
delegates to broker deals was continued in Seattle, despite
assurances from the WTO's Director-General that smaller
countries would not be excluded from the process. The protests
going on in the streets throughout the week contributed to the
sense of disorganization inside. The press statements made by
the Organization for African Unity and then CARICOM (the
economic community of Caribbean states) on the lack of
transparency in the process created a dynamic that will make
lasting changes to the way in which the WTO does its work. As a
leader in the WTO the U.S. should work to address these
concerns to make the WTO process more successful in the future.
Despite all the problems in Seattle, the total collapse of
the talks took many governments by surprise. For those
observing the negotiations, it really did appear that
governments were resolving their disagreements on agriculture.
The European Union (EU), Japan and others stopped insisting
that the review of the Agreement on Agriculture take into
account ``multifunctionality,'' for example. Multifunctional
agriculture is a term used by several developed country
governments, particularly the EU, Japan, Norway and
Switzerland, as well as Mauritius. The term refers to a concept
of agriculture that extends beyond its purely productive
function, to include its role in protecting culturally,
ecologically or economically fragile regions. Most governments,
particularly the United States and the Cairns Group of large
agricultural exporters, object to the term, arguing that it is
simply a justification for continued use of export subsidies
and high levels of domestic spending on agriculture. In
Seattle, the advocates of multifunctional agriculture accepted
the use of the term ``non-trade concerns'' in the draft text
instead, which is a term used in the Uruguay Round Agreement on
Agriculture. Similarly, the Cairns Group and U.S. dropped their
insistence on a call for the total elimination of export
subsidies to accept a more gradual approach.
One view maintains that it was the time it took to get
these advances on agriculture that made progress in other areas
of negotiation impossible. Certainly, for many governments,
especially the Cairns Group members, but also many developing
countries, a deal on agriculture was essential to reaching
agreement on any other issue. For the EU, a reluctant
negotiator on agriculture, agreeing a deal in Seattle was in
turn dependent on the EU getting concessions in other areas,
such as investment policy. Many agree that the Seattle agenda
was too broad to hope that the wide differences among
delegations that were evident in the preparatory negotiations
could be bridged in the four days of the Ministerial
Conference.
Whether or not it was agriculture that broke the talks in
Seattle, it is important to understand and evaluate the
proposals that were put forward there. The U.S. asserts that
the agreements reached in Seattle still stand as the basis for
further negotiations. But almost no one else involved in the
negotiations agrees that this is possible. The EU has clearly
said that the deal was all or nothing. The likelihood is that
governments will go back to Article 20 and start again.
Nonetheless, it is widely accepted that the text reflects what
an agreement could look like and it is important to look hard
at what nearly came to be the basis for new negotiations on
agriculture.
The draft Seattle text on agriculture did not do justice to
the agenda put forward by developing countries, although it had
their widespread support. Paragraph 28 addressed many important
developing country concerns, including the need for special and
differential treatment to be reflected in the specific
commitments on tariff reduction, domestic support levels and
export subsidies. Yet it was paragraph 29 that dealt explicitly
with operational commitments, and there special and
differential treatment hardly made an appearance.
On market access, some developing countries and many NGOs
argue that developing countries should not have to increase
access to their domestic markets until there is much more
substantial access for agricultural products in developed
countries. Yet the Seattle draft text speaks only of ensuring
the ``broadest possible liberalization.'' Nor did the draft
text mention the widely acknowledged problem of tariff peaks
and tariff escalation on processed commodities. In other areas
of the negotiations, for instance on market access on non-
agricultural products, this issue of tariff discrimination was
specifically addressed. The Special Safeguard--a measure
specific to the agriculture agreement that allows governments
that requested the right to use it to impose temporary, very
high tariffs to protect their domestic producers from import
surges--was also not mentioned. This is a tool primarily
available to developed countries although it is developing
countries that are more vulnerable to economic shocks.
On export subsidies, the Seattle draft text called for
reductions that are ``in the direction of progressive
elimination of all forms of export subsidization.'' This
carefully crafted language avoids holding developed countries
(by far the most significant users of export subsidies) to a
hard commitment to end subsidies, despite their evidently
trade-distorting impact. It was nonetheless a sign that the EU
will continue to reduce, if not yet eliminate, its use of
export subsidies (and therefore to reform its dependence on
support prices for domestic producers, as these generate
surpluses that the EU can only dispose of through subsidized
export). Some developing countries, particularly in Africa,
have legitimate concerns about ending export subsidies, as they
are dependent on cheap imported food. Yet the dumping that
results from subsidies has been shown to damage domestic
production in food importing countries, as well as to distort
trade. An end to export subsidies should be supported, as well
as to the other forms of support given to developed country
traders, such as export credits and tax relief.
Although Egypt and others developed specific proposals to
ensure the Marrakech Ministerial Decision (formally called the
Ministerial Decision on Measures Concerning the Possible
Negative Effects of the Reform Programme on Least-Developed and
Net-Food Importing Developing Countries) could be made
operational, the Seattle draft texts made little mention of it.
The decision provides measures to help developing countries
that face problems paying for food imports when prices surge.
Yet WTO members were unwilling to meet their obligations and
the decision proved too weak to be useful. In future
negotiations, it will be important for net food importing
countries to get clearer commitments of assistance from the
international system.
Finally, the Seattle draft text on domestic support
programs was also disappointing. The simple proposal was for
``progressive reductions'' in levels of domestic support. No
mention was made of the gross inequalities that persist in
levels of domestic support among countries. As the African
Group's position reflects, many African countries need to
increase their spending on agriculture, in some cases
significantly. In some cases, this may require lifting the
ceiling they face on domestic expenditures on agriculture. The
current agreement reflects special and differential treatment
for rich countries by allowing enormous expenditures on
agriculture to be exempt from reduction commitments. The review
of the Agreement on Agriculture needs to eliminate these
anomalies, while ensuring that the commitment to food security
and rural development made in the language of the text can be
translated into concrete measures.
The question of state-trading enterprises (STEs) was raised
by some countries in the preparations for Seattle (notably the
U.S.) but was not reflected in the draft text negotiated there.
Many developing countries abolished their marketing boards (a
typical form of STE) under structural adjustment programs.
There were widely acknowledged problems with the way many of
these boards work. Nonetheless, UNCTAD and others have shown
that the privatization of the boards has often resulted, in the
medium-term, in diminished competition and the dominance of a
given export sector by one or two foreign companies. As a
result, less of the economic benefit from the trade stays in
the producer country. It is likely that properly managed STEs
offer a useful second-best solution to the many imperfections
in agricultural commodity markets. At a minimum, developing
countries could request a review of the possible role of STEs.
The proposal to make STEs illegal under WTO rules should be
rejected. Linked to this question of market distortions, better
documentation of the activities of the transnational companies
that dominate many commodity markets is needed. This is also
some thing that could be requested of WTO members, just as they
are required to document the activities of their STEs.
The failure to launch a new round of negotiations in
Seattle is a welcome respite for many. There is no question
that some U.S. interests were also served, as there is little
domestic support for the legislation that the government needs
to negotiate something as complex as a multilateral trade
round. All along, the U.S. pushed for a limited agenda of
talks. Yet it is certainly not fair to claim, as the WTO
Director General Mike Moore has done, that developing countries
lost in Seattle. While the multilateral system is preferable
for small countries to bilateral negotiations with power blocs
such as the U.S. and EU, the system needs to take far more
account of developing country interests to be truly helpful.
Now there is time for the U.S. to elaborate more clearly
what kinds of special and differential treatment will promote
equity in the multilateral trade system. However new approaches
are necessary. Many NGOs have been advocating for some time the
need for assessment reviews of the impact of the Uruguay Round
Agreements. UN agencies such as the Food and Agriculture
Organization and the UN Conference on Trade and Development
have been doing some of this work. The results of these studies
should inform future negotiations on agriculture. Both the U.S.
and EU insist that we should look forward rather than at
implementation experience for these impact studies but this
ignores their obligations under Article 20 of the Agreement on
Agriculture. They should not be allowed to persist in this
policy.
The U.S. must push for developing countries to be active
participants in the negotiations on agriculture. The sector
remains of primary importance for them and many of their
people. While the developed countries may spend a lot more, and
derive a lot more wealth from their production, the sector is
marginal in the numbers of people it affects. Agriculture truly
is multifunctional, and its cultural, environmental, social and
economic importance is much greater in most of the developing
world than in those countries advocating the term at the WTO.
Trade rules should reflect this and ensure that developed
countries do not promote practices that damage the development
potential of developing countries. The failure of Seattle
created breathing room for those who argue the Uruguay Round
Agreement on Agriculture needs serious reform.
JBC International
Washington, DC 20006
Mr. A.L. Singleton
Chief of Staff
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, DC 20515
Dear Mr. Singleton:
JBC International is pleased to submit comments on the outcome of
the World Trade Organization (WTO) Ministerial held in Seattle. JBC
International is an international trade and government affairs
consulting firm based in Washington D.C. JBC International serves as
Secretariat to the Joint Industry Group, a customs and trade coalition,
and its CEO, James B. Clawson, serves as Chairman to the Industry
Functional Advisory Committee on Customs matters (IFAC1).
While overall we are disappointed that a new round of multilateral
trade negotiations was not launched in Seattle, we would like to
highlight the progress made in the area of trade facilitation and urge
the Committee to ensure that trade facilitation continues to be a high
priority for the U.S.
Seattle represented the first time in the history of the
multilateral trading system, that customs and trade facilitation issues
were on the agenda to be considered as rules-based, enforceable
measures. In anticipation of the Seattle Ministerial, several
governments, including the U.S., submitted detailed work plans for an
agreement on trade facilitation measures to be launched within the WTO.
At the same time however, several other WTO members submitted positions
aimed at delaying the implementation of key customs-related commitments
made during their accession negotiations. As negotiations were breaking
down on all other fronts, the WTO's Trade Facilitation Committee -
bolstered by strong U.S. leadership -was successful in moving the trade
facilitation efforts forward while addressing the concerns of certain
members. Most importantly, the requests to delay implementation of the
WTO Valuation Agreement and other commitments, were met with concrete
work plans to manage the adoption process while ensuring timely
implementation.
Although trade in goods serves as the foundation for international
commerce and the primary focus of the WTO, customs procedures and trade
facilitation measures need to be elevated to an equal footing in order
for U.S. companies to take full advantage of the gains from trade. The
successive multilateral trade negotiations, culminating in the Uruguay
Round that gave birth to the World Trade Organization (WTO), have
brought tariffs down to their lowest levels this century, but this
unprecedented liberalization has drawn attention to other obstacles to
the free flow of goods across borders. Indeed, many of the hard-fought
gains from the Uruguay Round go unrealized in the face of the customs
barriers to trade. What many traders have resigned themselves to accept
as ``necessary costs'' of doing business are actually gross distortions
of price and delivery, which ultimately serve as barriers for U.S.
producers. These ``costs'' take many shapes: goods waiting to be
unloaded, containers stuck at customs, mountains of paperwork, non-
transparent rules, unpredictable tariff rates, uplifted values, etc.
The WTO, for the first time, provides us the opportunity to address
these issues. In Seattle, the U.S. articulated its very ambitious
proposal for the establishment of a WTO undertaking to create a rules-
based system. A rules-based system adopted by the WTO would set a
minimum standard in all these areas and provide the political
commitment needed to ensure that the proper measures are introduced
where they are needed most.
Although Seattle was a disappointment on many fronts, the work of
the WTO on trade facilitation measures must continue. U.S. companies
can ill afford to allow this monumental opportunity to pass. The U.S.
must stand firm and insist on the establishment of rules that overhaul
the international trade machinery so that the very agreements we
negotiate can be supported. We therefore urge the Committee to see that
the U.S. remains committed to a WTO Agreement on trade facilitation and
that Congress and the Administration work together to ensure that this
important work receives the high priority it deserves.
Statement of Labor/Industry Coalition for International Trade
LICIT appreciates this opportunity to testify on the
outcome of the WTO Seattle Ministerial and some of the
important issues that require attention in future negotiations.
Celebrating its 20th anniversary this year, LICIT brings
companies and unions together in support of increased and
equitable international trade. Among the companies and labor
unions currently or recently participating in LICIT are:
American Flint Glass Workers; AMT--The Association for
Manufacturing Technology; Bethlehem Steel Corp.; Communications
Workers of America; Corning Inc.; Daimler Chrysler;
International Brotherhood of Electrical Workers; Milacron Inc.;
Paper, Allied-Industrial, Chemical & Energy Workers
International Union (PACE); Union of Needletrades, Industrial
and Textile Employees (UNITE); and United Steelworkers of
America/United Rubber Workers Conference.\1\
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\1\ Members do not necessarily associate themselves with every
LICIT report or recommendation.
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I. Introduction
The goal of the Seattle Ministerial was to launch and set
parameters for a new round of multilateral trade negotiations focused
on agriculture, services and intellectual property--a ``built-in
agenda'' that was established during the Uruguay Round. Unfortunately,
no progress was made in these areas, and the Ministerial Conference
ended in failure. Some critics have sought to blame this failure on the
U.S. Government or on the demonstrators who occupied the streets of
Seattle, but the reality is that the Ministerial cratered because the
world's two other major trading powers--Japan and the EU--were
unwilling to engage in serious discussions on agricultural
liberalization.
The U.S. Government expended a very substantial effort to achieve a
launch of a new round of trade negotiations. This effort was led by the
President and most of his Cabinet. Japan in particular, which benefits
so much from the multilateral trading system, failed to take a
leadership role. Instead, besides defending agricultural protectionism,
denying its trading partners access to its market for these goods, it
sought to undermine the international rules governing fair trade--in
particular by seeking to re-open the recently negotiated antidumping
rules. The U.S. Government held firm, supported broadly by Congress,
business and labor. It did not agree to compromise fundamental elements
of the WTO rulebook such as the rules on injurious dumping and
subsidies. For this, it deserves to be commended.
II. The Antidumping Issue In Seattle
The WTO Members which sought to circumvent the agreed list of
negotiating topics and reopen debate over antidumping and anti-subsidy
measures touched off a senseless and distracting confrontation with
other Members, including the United States, that were focused on moving
forward per the built-in agenda rather than on ripping up the Uruguay
Round texts and re-fighting that Round's divisive battles. The tactic
of reopening the antidumping rules was embraced by several developing
countries whose broader Seattle agenda involved unraveling the Uruguay
Round agreements rather than moving ahead with additional
liberalization. The idea that side discussions on antidumping were in
any way responsible for the failure to launch new talks on agriculture
and services is untenable and belied by all of the evidence, anecdotal
and otherwise.
The assault on antidumping came from two categories of WTO Members:
(1) those looking for a pretext to avoid movement in other areas (the
EU on agriculture; the LDCs on meeting their Uruguay Round
obligations); and (2) those whose exporters most frequently engage in
dumping practices (Japan, Korea, and Hong Kong on behalf of China). It
was particularly disappointing that the EU, seeking to shift attention
away from its market-distorting agricultural policies, encouraged
developing countries to press unfounded claims with respect to
antidumping, and to seek unwarranted exemptions from the existing
disciplines on trade-distorting subsidies.
LICIT commends the Administration for firmly rejecting these
efforts to reopen the WTO's basic fair trade rules. The Administration
rightly recognized that the existing fair trade rules must be kept off
the negotiating table if new WTO talks are to enhance the welfare of
America's working men and women. Effective antidumping and anti-subsidy
rules are a pillar of the United States' open-market policy and of the
multilateral trading system. From its inception half a century ago, the
GATT has provided that injurious dumping ``is to be condemned'' and has
authorized remedies to offset and deter dumping and trade-distorting
subsidies. These rules are designed to ensure a basic level of fairness
in international trade and to prevent abuse. Without such rules, past
successes in trade liberalization could not have been achieved and
future progress on the core WTO agenda would become impossible.
Allowing the fair trade rules to be weakened would inevitably lead to
abuse of the world's open markets--particularly that of the United
States, the world's most open market--and would rapidly undermine
confidence in the WTO itself.
Regrettably, in the job of defending the trade laws, Seattle was
not an end-point but simply a milestone. Much work remains to be done.
First, of course, continued vigilance is essential during any further
discussions about launching a new Round. The same factors described
above will spur continued efforts by certain WTO Members to reopen the
antidumping rules, with a view to weakening them. Second, a pattern has
emerged of trading partners seeking to accomplish through WTO dispute
settlement cases what they could not gain in negotiations: the
effective repeal of the U.S. trade laws. We discuss this further below.
III. Issues the New WTO Talks Should Address
The ``built-in agenda'' is already a broad and important one, more
than enough by itself to occupy the next few years of trade
negotiators' attention. The only topics that the U.S. Government should
even consider adding to that built-in agenda are those that can be
independently justified in terms of (1) likelihood that meaningful
progress can be made and (2) where manufacturing is affected, favorable
impact on America's manufacturing sector if progress is made. The U.S.
proposals regarding industrial market access appear to meet that test.
LICIT submits that the same is true of two other issues: reforming the
WTO dispute settlement system, and disciplining anticompetitive private
practices that impair market access.
DSU Reform: There is an urgent need for reforms to the WTO Dispute
Settlement Understanding (DSU). In several important respects, the
United States has been badly served by the DSU during its first five
years. In cases brought against U.S. measures, particularly challenging
the application U.S. trade laws, panels have exceeded their mandate and
invented obligations never accepted by the United States at the
negotiating table. Meanwhile, cases brought by the United States have
frequently failed to generate actual commercial results.
The former category is particularly worrisome, as the willingness
of panels to overreach seems to have tempted trading partners into a
broad-based attack against America's trade laws. WTO statistics show
somewhere between 15 and 20 distinct challenges, involving the U.S.
antidumping and CVD laws, our safeguard law, section 301, and now
apparently another case against section 337. This flood of cases has as
its premise that the United States signed on to a package of agreements
in 1994 which it was, and is, comprehensively violating--a premise that
is not remotely tenable. These are not legitimate challenges but a
brazen effort by other nations to achieve through dispute settlement
concessions the United States was and remains, for very good reason,
unwilling to make in negotiations.
When panels participate in such an effort by making up rules and
obligations, they undermine the legitimacy of the dispute settlement
system and of the WTO itself. The United States should place a high
priority on these ``defensive'' concerns in the next phase and all
future phases of WTO activity.
The U.S. Government should also seek increased transparency, via
DSU amendments that: (1) require Members to submit, promptly after each
submission to a panel, a public version sufficient to permit a full
understanding of the arguments; (2) require panel and Appellate Body
meetings to be opened to all WTO Members and to the public; and (3)
allow affected private parties to participate meaningfully in panel
proceedings. These changes would enhance the credibility and
performance of the system by allowing panels and governments to benefit
fully from the expertise of affected private parties who are normally
the ``real parties in interest'' in WTO cases.
Finally, the DSU should also be revised to set clear limits on the
WTO Secretariat's role in dispute settlement proceedings. It is
inappropriate for Secretariat officials who do not accept or agree with
the resulting substantive rules that panels are supposed to enforce to
be substantively involved with panel deliberations. The Secretariat
does not exist to espouse positions attacking individual articles of
the GATT, or to side with particular Members who want to rewrite the
Uruguay Round results in particular subject areas. The United States
should insist on appropriate firewalls and should be prepared, if
necessary, to use its funding of the Secretariat as a lever in that
regard.
Private Restraints of Market Access: Private and joint-public-
private restraints that impair market access have not received adequate
attention at the WTO. This issue has long been an Achilles heel of the
GATT/WTO system. The exchange of ``market access'' commitments by two
countries presupposes that a functioning ``market'' exists within the
territory of each--something that turns out not to be universally true
in the case of WTO Members.
The WTO agreements themselves do not directly guarantee access, but
rather only discipline discrete categories of government actions that
could otherwise limit access. The result is a package of agreements and
commitments largely ineffectual in dealing with complex trade problems
such as the closure of foreign markets by governments working with
private monopolies and cartels. Private actors can close a market just
as effectively as government agencies, and in both cases, from the U.S.
perspective, the result is the same: bargained-for sales opportunities
do not materialize. To make matters worse, since the entry into force
of the WTO agreements, the U.S. Government has been unable to confront
these barriers directly (outside the WTO system) out of fear that any
measures undertaken to open the markets would be met with WTO-
sanctioned retaliation.
Moreover, the WTO's government-focused approach uniquely
disadvantages industries located in the United States, a country that
vastly outstrips other WTO Members in the rigor of its antitrust
enforcement and in general openness to imports.
The current situation, in which market access is regularly promised
but frequently not delivered, is corrosive on several levels and
requires correction. Political support for multilateral trade
liberalization, in the United States and abroad, depends on the degree
to which trading partners are seen to have effectively opened their
markets and extended meaningful, reciprocal trade benefits. By
tolerating or encouraging anticompetitive practices, governments can
avoid the adjustments that freer trade would otherwise require. As a
result, markets never become truly contestable, and trade patterns do
not improve. The WTO system cannot thrive if its putative benefits are
undermined in this manner. The most viable long-term solution would be
to attach to all WTO market access commitments a ``warranty'' that
sales opportunities will not be undermined by the anticompetitive
practices of local monopolies or cartels.
The WTO Working Group on the Interaction between Trade and
Competition Policy has been created to explore more modest or immediate
solutions, but the dialogue held to date in that Working Group provides
little reason for optimism. The primary problem has been too much focus
on laws, and not enough on facts. The core concern of the WTO is market
access. To achieve improved market access, the focus should be on the
naming and removal of particular barriers--one country and sector at a
time, if necessary--rather than a study of national legal tools
available to promote competition.
IV. Conclusion
Although many have viewed the Seattle Ministerial as a failure, it
is important to realize that (1) the agenda at Seattle was mainly a
procedural one and (2) the results were much less disastrous than they
could have been. For the United States, Seattle proved the truth of the
adage that sometimes, no agreement is better than a bad agreement.
Talks on agriculture and services are set to go forward based on prior
agreement, so that the core U.S. interest in moving forward with
liberalization in these sectors was not fatally compromised by the
failure to launch a ``Round.'' Meanwhile, the United States
distinguished itself as the only major trading country that came to the
Ministerial ready to move forward on trade liberalization--ready to
talk about subjecting the world's vast agriculture and services trade
to the WTO rulebook, rather than about re-writing the rulebook with a
view to making it more difficult to counter unfair trading practices.
Negotiators interested in providing the structure of a ``Round''
will eventually pick up where they left off in Seattle, and when they
do, the United States must continue to stand firm in its commitment to
block reopening of the WTO's basic fair trade rules. At the same time,
the U.S. negotiators should redouble their efforts to achieve DSU
reforms. At home, legislation should be enacted to discipline privately
imposed import barriers so that market access commitments can become
something other than hollow promises.
LICIT looks forward to working with the Committee on Ways & Means
to ensure that developments in the WTO, including any new multilateral
negotiations, yield the maximum possible benefit for the American
economy and its industrial sector.
National Electrical Manufacturers Association
Rosslyn, VA 22209
February 10, 2000
The Honorable Philip M. Crane, Chairman
Trade Subcommittee
House Committee on Ways and Means
1104 Longworth House Office Building
Washington, DC 20215-6354
Dear Mr. Chairman:
The National Electrical Manufacturers Association (NEMA) seeks
multilateral tariff elimination for electrical products, be it via the
energy sector of the WTO Accelerated Tariff Liberalization (ATL)
initiative, or via regional groups and/or other opportunities as they
arise. NEMA reaffirms this position despite the failure of the Seattle
WTO trade ministers meeting to launch a new WTO negotiating round. Our
position is explained more fully in the remainder of this letter, which
I request that you add to the record of your February 8 hearing on the
Seattle ministerial.
NEMA is the largest trade association representing the interests of
U.S. electrical industry manufacturers. Founded in 1926 and
headquartered in Rosslyn, Virginia, its more than 500 member companies
manufacture products used in the generation, transmission,
distribution, control, and use of electricity. These products, by and
large unregulated, are used in utility, industrial, commercial,
institutional and residential installations. Through the years,
electrical products built to standards that both have and continue to
achieve international acceptance have effectively served the U.S.
electrical infrastructure and maintained domestic electrical safety.
Annual shipments total over $100 billion in value.
Our perspective may be summarized in the following points:
The US electrical products industry is extremely
disappointed in the failure of the Seattle WTO meeting to reach
agreement on the basis for a new round of global trade negotiations.
NEMA's members are particularly disappointed in the
failure to reach any agreement on improvement of industrial market
access through a multisectoral accelerated tariff liberalization
process (ATL) as proposed by the United States and other APEC members.
As noted in a Commerce Department document prepared before the Seattle
negotiations, the value of US exports in our sector alone that could
have been positively affected by such an agreement is $40 billion
annually.
NEMA urges the US government to expeditiously work with
the other APEC ATL sponsors to eliminate tariffs on the products listed
in the 1998 APEC Energy Sector Initiative (ESI). Such an agreement
should include all products that are used in the generation,
transmission and distribution of electricity as defined in ATL's Energy
Sector.
Such agreements could be part of a larger multisectoral
package as originally envisioned, or they could be contained in a
single, sectoral agreement, such as the recent Information Technology
Agreement.
While NEMA does not propose to limit the geographical
coverage of such agreements, in view of the present uncertainty
regarding the launching of the new WTO round we would urge that
alternative regional agreements again be explored. This would include
revival of the APEC ESI and sectoral liberalization within FTAA
negotiations. In pursuing such regional arrangements, we would urge
that they be expanded to include the European Union. Indeed, any such
arrangements should be open-ended, so that additional countries or
regional groups could also join.
Thank you for your consideration of these remarks. NEMA has greatly
appreciated your leadership on trade matters, and we look forward to
continued collaboration on tariff-related initiatives.
Sincerely,
Malcolm O'Hagan
Statement of Jim DiPeso, Forests Chair, Rainier Audubon Society,
Auburn, Washington
This statement is written testimony submitted by the
Rainier Audubon Society for the Ways and Means Committee's
hearing on the Seattle WTO Ministerial. The Rainier Audubon
Society has approximately 1,000 members in south King County,
Washington.
Forest conservation is one of many environmental and social
issues that concerned the thousands of peaceful activists who
were in Seattle for the Ministerial. The Accelerated Tariff
Liberalization agreement, or ``global free logging agreement''
as it was dubbed informally, raises serious issues concerning
forest conservation. The immediate issue is that accelerated
tariff phaseout would lead to increased consumption of wood
products and increased depletion of forests that already are
under stress worldwide.
There is another cluster of concerns that relate to the
WTO's disturbing policies regarding public health and
environmental protection standards judged to be ``non-tariff
barriers to trade.'' We are extremely concerned that the
authority of national, state and even local governments to set
standards and adopt policies to protect our forest resources
could be undermined by the WTO's uninformed determination to
remove ``non-tariff barriers to trade.'' We are concerned that
in time a number of important forest conservation standards
could be challenged and overturned, unless the WTO's rules are
reformed. Examples of standards vulnerable to a challenge
include:
Safeguards against importation of invasive
species, which wreak havoc on native plants and ecosystems.
Restrictions on raw log exports, designed to
protect old-growth forests.
Government procurement standards that give
purchasing preference to products from sustainably managed
forests, products made with recycled content, or products
manufactured in environmentally preferred processes, such as
chlorine-free pulp production.
Labeling and certification programs which give
consumers meaningful choices by providing the information they
need to identify sustainably produced forest products. In this
vein, it is absolutely unacceptable for the rules of an
unelected, supra-national institution to pre-empt the free
speech guarantees in the Bill of Rights.
Before further trade agreements are negotiated, WTO rules
must be reformed to ensure that health and environmental
standards will not be undermined in settlement of trade-related
disputes. Examples of needed reforms include the following:
Explicitly state that national and sub-national
levels of government have the authority to develop and enforce
public health and environmental standards.
Shift the burden of proof in trade-related
disputes to parties challenging health and environmental
standards as ``non-tariff barriers to trade.''
Explicitly state that health and conservation
standards based on production methods are legitimate measures
governments may take to protect their citizens and natural
resources.
Explicitly recognize the authority of national and
sub-national governments to use social and conservation
criteria in making purchasing decisions.
Give a substantive role to international
institutions with environmental expertise in settlement of
trade disputes, including explicit recognition that governments
may employ the precautionary principle in developing and
enforcing health and environmental standards.
Explicitly recognize the prerogative of
governments and private organizations to provide accurate,
objective consumer information through labeling and
certification programs. Explicitly state that private U.S.
labeling programs are protected by the free speech guarantees
in the Bill of Rights.
Thank you for your attention to our concerns.
Redwood Coast Watersheds Alliance and
Save the Redwoods/Boycott the Gap Campaign
February 20, 2000
Honorable Phillip M. Crane and Members
Subcommittee on Trade
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
Dear Congressman Crane and Members of the Subcommittee on Trade:
Many people have testified and written to you about the World Trade
Organization (WTO) protests in Seattle in November 1999. I want to
contribute to that record by telling you why I was in Seattle
protesting the WTO, and what I personally witnessed in the streets of
Seattle that week.
There are two points that I want to stress:
1. I witnessed unprovoked and brutal attacks by the police against
peaceful protestors starting at 10:30 am Tuesday morning, November 30,
and continuing through the morning, long before any vandalism occurred
in downtown Seattle. This fact has been mostly lost or suppressed in
mainstream news media reports, and it is vital to a proper evaluation
of these events. I and the 50,000 other people who protested the WTO,
including the 10,000 people who peacefully shut down the WTO meeting,
conducted ourselves entirely peacefully and we are tired of the slander
that we did not. We kept the peace even while we were beaten, hosed
with pepper spray and shot with tear gas canisters and plastic bullets.
2. We were demonstrating against an illegal meeting. The WTO is a
group of unelected trade ministers who have the illegitimate power to
eliminate our environmental, labor, health and human rights laws,
without our consent and without our participation. The citizens of the
United States have a right-and indeed a duty--to protest this violation
of the United States Constitution.
Why I was in Seattle
First of all, I went to Seattle to protest the illegal
meeting of the WTO. The WTO has no legitimacy in my eyes to
make decisions that overrule our national and local laws that
protect workers, consumers, farmers, the environment and human
rights. Yet the WTO is so powerful that I could think of no way
to influence its exclusive and secret proceedings except by
massive peaceful protest.
If you had held a session of the U.S. Congress in secret to
decide the future of United States, what would you expect to
happen? Wouldn't you deserve massive protests? Wouldn't the
citizens of this country have a right and a duty to stop that
meeting? And if you made such a mistake of democratic
procedure, wouldn't the right thing, the lawful thing, be to
reverse that mistake, and open up your proceedings? That is all
we asked of the WTO-lawful, democratic process.
The Founders of this Republic believed that violent protest
was legitimate to overthrow oppressive government-and they
engaged in violent protest and in war, to secure me the rights
that are established in the United States Constitution. We have
had examples of peaceful resistance since that time-Mahatma
Ghandi and Martin Luther King chief among them-who have shown
that respect for human life is the highest value that we can
hold, that such respect must be maintained even under extreme
provocation, and that it produces a better form of change, a
change in the human heart.
That is the spirit in which I and 50,000 other people went
to Seattle. Our purpose was to make clear to the WTO that it
cannot continue to meet in secret, to overrule our laws and to
remake our world on a global scale without our consent.
The issues that brought us to Seattle are critically
important to the future of our society and our world. These
issues include the right to live, the right to work, the right
to a healthy, productive environment, and the right to help
determine political and economic policy in a democratic system.
My group has a particular concern about the WTO ``Free
Logging Agreement,'' which would eliminate tariffs on imported
wood, no matter how that wood is logged. While our California
Forest Practice Act has failed in its stated purpose of
sustainability, the citizens of California have the right to
reform that Act, and to institute new and better policies for
the protection of our forests. As citizens of the United
States, we also have the right to exclude from this market any
wood product that results from the destruction of forests
elsewhere in the world, or that threatens the health of our
forests in any way, including by pestilence and unfair and
unsustainable competition.
Our planet's biosphere is being destroyed by
thoughtlessness and greed. Our national and local environmental
laws, and trade restrictions, are the only potential protection
we have against destruction of the planet that we all depend
upon for life. As with other WTO issues, this is a life and
death issue, and a justifiable cause for civil disobedience.
What I Personally Witnessed During the Seattle Protests
I was part of the group that was peacefully protesting the
WTO meeting at the Sheraton Hotel intersection at 10:30 am, on
Tuesday morning, November 30. I was a support person and an
observer-there to help insure everyone's peacefulness and
safety. As a support person, the first thing that I tried to do
was to clarify the situation with the police. There were
several dozen Seattle police in riot squad gear, several
mounted police and a gray armored tank that we soon found out
contained pepper spray and tear gas equipment. The police were
lined up across the intersection and up on the sidewalk, with
billy clubs drawn. There were about 200 people in the
intersection blocking traffic to the Convention Center. My
group, the Save the Redwoods/Boycott the Gap affinity group,
was standing face to face with the police line, in the
intersection, in close proximity to the billy clubs. We had
agreed to represent the environment at the WTO meeting. We
carried the sign, ``Delegation for the Environment.''
I spoke to one person whom the other police identified to
me as the ``commander'' of the police line that was immediately
in front of me on the sidewalk. I asked this commander three
questions: Had an order to disperse been given in the
intersection? Had an order to disperse been given where I was
standing on the sidewalk? And was tear gas going to be used?
To the first two questions, he answered no-no orders to
disperse had been given. To the tear gas question, he answered
that no order had come down to use tear gas and that three
commanders in the hierarchy had to agree to such use.
Shortly after my conversation with this commander, the
police attacked the people in the intersection using pepper
spray guns, tear gas guns and plastic bullets. This attack
occurred without warning and without provocation. In fact, the
Delegation for the Environment, which had been standing in a
line directly in front of the police, had deliberately removed
itself from that position in order not to be provocative to the
police.
Just before the attack, the police had been getting nervous
and more aggressive. Several of our group were poked and hit
with billy clubs before they withdrew. The Delegation for the
Environment stepped aside, and gave up our intention of
entering the Convention Center, in the interests of civility
and peace-and by mutual agreement with the other protestors.
The people in the intersection nearest to the police then sat
down on the ground. In other words, we, and everyone there,
went out of our way not to be provocative.
Many of the intersection protestors were sitting on the
ground, huddled together for protection. The police hosed them
with pepper spray directly on their heads and faces, and then
began shooting at their backs and heads with tear gas canisters
and plastic bullets. They continued the attack even against
people who were lying on the ground, totally disabled and
extremely sick. This was the most violent and uncalled for
attack against human beings that I have ever personally
witnessed, and I shall never forget it. It was as if the police
were exterminating insects.
I also saw the police club several people during this
police attack. These people had no weapons and were merely
reacting emotionally to the chemical attack, and were yelling
at the police to stop.
A young man who was standing near me began to yell at the
police during the attack. I put my hand on his shoulder and
told him to remember Ghandi. He calmed down. I was also
involved in helping an elderly Asian couple who said they were
WTO delegates escape this scene. They, like I and everyone else
who was near that intersection, got tear gassed. As the clouds
of tear gas filled the streets, we helped these delegates over
a wall to another street.
I feared for my life that day in Seattle, though I was
breaking no law myself, and though the people who were attacked
in the intersection were breaking only a minor law, blocking an
intersection. I witnessed similar attacks by the police against
peaceful protestors at other locations in downtown Seattle on
Tuesday morning and into the early afternoon. Downtown became
so filled with tear gas that there was nowhere to go-nowhere to
escape to. People who were attempting to leave downtown could
not do so.
Once again, I want to stress that these events occurred
long before any windows were broken or other vandalism was
committed downtown.
The Sequence of Events--the Irresponsible TV Coverage
That night the TV news showed these events in reverse order. They
showed footage of windows being broken first, then the police ``getting
tough'' and using tear gas-exactly the opposite of what happened. This
very irresponsible journalism led many people to believe that the
police violence was justified, and prevented an immediate stoppage of
the police violence by public outcry. The police then went on a
rampage, invaded the Capitol Hill neighborhood, and tear gassed and
brutalized people sitting in cafes, in their homes, or out on their
sidewalks.
In the next couple of days, the police arrested hundreds of people
for protesting the police state in downtown Seattle in which a person
could be stopped on the sidewalk, ordered from the area, or arrested,
merely for wearing an anti-WTO button. I saw that on television-a lone
woman being ordered off the streets merely for wearing a button. She
asked the police: ``What if this had been a pro-WTO button?'' The
police did not reply to that.
It seems to me that the police actions of the morning of November
30 were intended to provoke a violent reaction. I'm thinking of the
young man whom I calmed down during the first attack. How much of this
sort of horror could he take without reacting and fighting back and
trying to protect people? It is also evident to me that this police
provocation largely failed. The 50,000 protestors in Seattle that day
did not retaliate in kind. Almost all violence against people was
perpetrated by the police themselves, starting at 10:30 in the morning
on Tuesday.
I've since learned that a few picket sticks and tear gas canisters
were thrown at police in the midst of the police attacks. I find that
reaction understandable, in view of what I saw the police doing--
although it does not follow the non-violence code. The police were well
armored and wore gas masks. The workers in downtown stores where
windows were broken likely felt fear and even terror, and I consider
that to be violence against people. That violence, and the property
damage, was the work of a small group of people who were acting in
violation of the non-violence code, and also in direct conflict with
the wishes of the 50,000 other protestors in Seattle, many of whom
suffered serious police brutality without provocation and without
retaliating in any way. I also think it's fair to say that the police
themselves may have indirectly caused the later vandalism by creating
tension and anger with their early and brutal attacks against people.
This police brutality, and the subsequent mistreatment of peaceful
protestors who were imprisoned, raise serious questions that need to be
answered by the city of Seattle, by the state of Washington and by the
federal government:
1. Why did the police use massive brutal force against peaceful
protestors on Tuesday morning, November 30, long before any vandalism
occurred? Who gave those orders?
2. Why didn't the police-who were everywhere downtown on late
Tuesday afternoon-stop the vandalism? Why, instead of stopping the
vandalism, did the police create a no-civil-rights zone, consisting of
the entire downtown area, and start arresting and brutalizing everyone
in their path? Once this police violence began, why wasn't it stopped?
Who is responsible for failure to stop the police from rampaging
through neighborhoods and escalating their violence and their massive
violations of civil rights?
3. Who is responsible for the false TV news stories on Tuesday
evening, November 30? The TV reports were clearly wrong about the
sequence of events-the police were not responding to any violence or
vandalism on Tuesday morning, but rather were engaged in a deliberate
and brutal attempt to curtail free speech. Did public officials have
anything to do with these false TV stories?
4. What role did federal officials play in these decisions?
5. What role did federal officials play in the cruel and illegal
treatment of peaceful protestors who were imprisoned?
It seems that the police reserved their brutality and their arrest
procedures for peaceful protestors who were breaking minor laws as an
act of conscience and courage--or who were breaking no law at all--
while they allowed the few people who were doing property damage to go
free. It also appears that the police brutality was a deliberate
attempt to curtail the WTO protests, which in themselves were entirely
peaceful. This was a political decision. Who made this decision?
An Example of Democracy
On Friday night, I supported the young people who did a
``sleep in'' on the Westin Hotel steps. The purpose of this
spontaneous protest was to gain the release of the 600 peaceful
protestors who had been kept in jail for several days without
arraignment and without counsel. Many people in Seattle brought
us blankets and food, and members of the Teamsters Union
brought us coffee and cookies at 3:00 in the morning. I am very
proud of these young people who showed such courage and
persistence. They taught us all a lesson in democracy.
Around 4:00 in the morning, the riot squad, which had been
surrounding us at the Westin Hotel, was withdrawn-which I very
much appreciated-and was replaced by the Seattle police in
normal uniform who stated that these young people must move
away from the Westin Hotel steps or be arrested.
The patience of the Seattle police in this instance allowed
for a lengthy, democratic discussion among us protestors about
moving to another location, and resulted in a decision to move
from the Westin Hotel and join the protestors in front of the
Seattle jail.
I think that, instead of threatening these young people
with arrest and forcing them to move, the Seattle police should
have immediately released the people in jail, and begun a
dialogue and listened to our concerns. These young people, in
my opinion, represent the best that democracy has to offer. In
the middle of the night-amidst fear, tension and extreme
fatigue-these young people conducted a lengthy and orderly
discussion, in which all points of view were heard, and came to
a decision about what to do. That is devotion to democracy! The
WTO could have learned something from these young people, if
only they had been willing to listen to them.
We kept the peace at the Westin Hotel. We had a good time.
We had good music--some heroic drummers who played for many
hours, keeping peoples' spirits up. We meticulously cleaned up
after ourselves, removing all garbage and sweeping the steps of
the Hotel.
What Could Have Happened in Seattle
Now I want to turn to what could have happened in Seattle.
On November 30, about 10,000 people placed themselves in
intersections in the downtown streets of Seattle, in a peaceful
effort to prevent the WTO meeting from occurring without our
participation. We did not want this extremely powerful group of
trade ministers to meet in secret and decide our future.
Because they were in fact deciding our future, we had a
right to stop that meeting and insist that we be heard. We met
for weeks in advance-and some protest leaders had been planning
for months and years-to accomplish this purpose peacefully.
What if Seattle had welcomed us? What if Seattle had said,
``All right, 10,000 people is a whole lot of objection. Add in
the 50,000 who marched and held rallies-and that's an
overwhelming amount of objection. Maybe this WTO meeting
shouldn't be taking place.''
What if that had happened in Seattle? What if the governor
and the mayor and the city council and the President of the
United States had told the WTO, ``50,000 people is too many to
ignore. You have to listen to them, you have to include them.''
What if our political leaders had stood up for the U.S.
Constitution and the labor unions and the environment? What if
they had told the WTO, ``This is what democracy looks like-get
used to it''?
Circumstances changed in Seattle when 50,000 peaceful
protestors showed up. Our political leaders should have been
more flexible in reacting to these changed circumstances. On
Tuesday, when the WTO meeting was shut down, our political
leaders should have taken a breath and said, ``Okay, this WTO
meeting is no longer possible as planned. These protestors have
a point.
How can we address the undemocratic and unconstitutional
nature of the WTO?''
The United States and the city of Seattle could have been
the arbiter of a profound change in global economic policy.
Seattle would then have become synonymous with democracy,
instead of with repression.
What we got instead were platitudes, from President Clinton
on down-insincere statements about the importance of the
environment and workers' rights. Statements that no one
believed. Statements that should have been made long ago
accompanied by strong action. In fact, President Clinton, like
his predecessor President Bush, and local officials--Washington
Governor Gary Locke and Seattle Mayor Paul Schell--all approved
of, and welcomed the WTO-having long ago sold this democracy
down the river.
Conclusion
November 30, 1999, is an historic date that will influence events
for centuries to come. On that date, U.S. Citizens, in massive numbers,
rebelled against corporate rule right here in the home of ``free
trade''--sparking a widespread awakening of the American public. This
was the beginning of a New American Revolution. What unfolded that day
and in the subsequent days was the courage, intelligence and great good
will of the revolutionaries. We accomplished this rebellion peacefully
-despite the false news reports. In Seattle, it was the police who were
violent and we, the people, who peacefully shut down the WTO.
On the morning of November 30, as the riot squad was getting out
the pepper spray hoses and the tear gas guns, at the Sheraton Hotel, I
heard the following exchange between a protester and a riot squad
policemen: Protestor: ``This is just like Tienamen Square.'' Riot squad
police: ``No, it's not. We're not going to kill you.''
We can laugh at this now--it has a sort of black humor to it. But
it wasn't very funny when we were getting tear gassed. We need to know
who told the police that they could use anything short of lethal force
to stop these peaceful protests. In any case, sub-lethal force can be-
and was-life threatening. It can be-and was-utilized to suppress free
speech and freedom of assembly, and our right to petition our
government.
There is more at issue here than a mistaken and illegal use of
force by the police, but there is a common theme-abuse of power. The
police were given too much power and they created mayhem in downtown
Seattle, brutalizing many people who were not even involved in the
protests. Our federal government made the same mistake with the WTO-
they gave it too much power. Indeed, they gave away whole sections of
our Constitution. The abuses of ``free trade"-loss of jobs here,
workers living in slavery in other countries, the assault on our
environmental laws-are the inevitable result of that giveaway. Instead
of our labor laws, and our environmental laws and our democratic ideas
spreading across the world, we have abuse and piracy spreading across
the world. This has to stop. We, the people, will stop it. I think we
made that clear in Seattle.
You, the members of the Congressional Subcommittee on Trade, and
other members of Congress, should be asking yourselves the questions
that we are asking: Do you want the WTO, an unelected group of trade
ministers, to dictate the laws and the future of this country? Do you
want a world in which there is no protection for the environment, for
workers, and for your health and well-being? Do you believe in
democracy?
We urge the following actions by the House Subcommittee on Trade,
in response to the events in Seattle during the week of November 30,
1999:
1. An investigation of the role played by federal officials in
massive violations of the civil rights of citizens of the United States
during the Seattle protests. Investigation of all such illegal activity
by the police. Determination of who made the decisions. Recommendations
toward the prevention of civil rights abuses in such situations in the
future.
2. A recommendation to Seattle officials of complete amnesty for
all protestors who were arrested during the Seattle police riots.
During the week of November 30, hundreds of people were unlawfully
arrested by police forces who were themselves engaged in massive
violations of the law. These protestors were held in prison for days
without counsel or arraignment. They suffered fear and mistreatment in
jail. They gave up their comfort and risked their lives for democracy.
Although many charges against protestors have been dropped, Seattle
prosecutors are continuing some legal actions. In all fairness, and to
clear the air, all such prosecutions must cease.
3. Endorsement of the letter of Congressmen George Miller (D-CA)
and Henry Waxman (D-CA), now in circulation in Congress, which asks for
specific reforms to current U.S. trade policy such that forest and
environmental issues will receive greater representation. Recently, a
federal court ruled that environmental representatives must be included
on U.S. trade advisory committees that deal with forest products. This
ruling, in a case brought by U.S. environmental groups, was appealed by
the U.S. Trade Representative just after the Seattle Ministerial
meeting in December-an example of our government's hypocrisy on these
issues. The Miller/Waxman letter explicitly asks the Administration to
withdraw that appeal.
Thank you for your consideration of these matters.
Yours sincerely,
Mary Pjerrou
cc: Congressman Mike Thompson; Senator Diane Feinstein; Senator
Barbara Boxer
Statement of Hon. Jim Ramstad, a Representative in Congress from the
State of Minnesota
Mr. Chairman, thank you for calling this important hearing
today to investigate the significant ``lost opportunity'' we
witnessed at the 1999 Seattle Ministerial.
Last August, we held a hearing on our negotiating
objectives at the upcoming Seattle Ministerial. Today, it is
clear that 'Team USA' did not lay out an aggressive, strategic
plan for Seattle.
I am particularly interested in asking whether the coach of
'Team USA,' President Clinton, used a play that wasn't in our
play-book. A December 13th article in Newsweek states:
``In Seattle, faced with a challenge to one of his major
accomplishments, the WTO, President Clinton bizarrely sided
with the demonstrators -and presumable against his own
officials who were the targets of the protests. In statements
reminiscent of his famous squiggle on the Gulf War -'I guess I
would have voted with the majority if it was a close vote. But
I agree with the arguments the minority made' -the president
explained that he supported the protesters bud didn't want to
hobble free trade.''
I was greatly disappointed when I left Seattle last
December and returned home empty-handed to Minnesota.
Throughout this recent recess, Minnesota business leaders,
entrepreneurs, farmers and workers asked me what went wrong. I
hope to have answers for them soon.
We must regroup and make progress soon on the ``built-in
agenda,'' and jump-start further liberalization trade in
agriculture and services, as well as examine government
procurement practices and the enforcement of intellectual
property rights.
Mr. Chairman, thanks again for calling this hearing. I look
forward to hearing from our witnesses today about the causes of
the impasse in Seattle and the impact of this failure on future
WTO negotiations.
[By permission of the Chairman.]
Statement of Hon. Tran Van Thinh, RONGEAD, Lyon Cedex, France; and
former Ambassador of the European Union
Seattle: more than a High Mass for trade, it must take up the challenge
of economic globalization
Why Seattle?
The objective announced for the new round of multilateral
trade negotiations at Seattle is to boost development of trade
in goods and services in order to sustain economic growth.
As usual, the enthusiasm among members stirred by a new
round remains somewhat damped due to differences of approach,
loaded with ulterior motives. Arguments over taking into
account the interactions between trade and other areas are on
the increase.
Negotiating rules and specific concessions giving greater
access to individual markets, in order to secure the global
growth of trade, inevitably touch highly sensitive areas, such
as the environment and investment, related to trade. Opposition
to the negotiated and contractual inclusion of links between
these areas and trade, and their effects on it, is pointless.
On the other hand, using the pretext of these links and effects
for the purposes of fighting skirmishes, and recourse to
unilateral and protectionist actions, is derisory. Where trade
is concerned, these two attitudes amount to perpetuating
incoherencies at a time when a rational, global and integrated
approach is needed to grasp the phenomenon of globalization,
with all its implications. Henceforth, the globalization of
economies is irreversible, affecting every one of their
characteristics and components. The real scope of globalization
remains barely evident and poorly identified regarding its
ramifications that concern every aspect of daily life, even
that considered private. It not only involves the visible part
of the iceberg, such as the circulation of goods, services,
capital, technology and ideas, but also the submerged part,
that of human beings, not forgetting diseases, vices, scourges,
discontent, fraud, criminality and the forces of evil. The
seeds of tension, violence, and conflicts, these incoherencies
only fuel the chaos that reigns already over the
interconnections generated by economic globalization. What is
more, they magnify its negative effects and undermine its
positive ones.
Sustainable development
Benefit can be gained from awareness of the
interconnectedness of life's realities, whether they be
palpable or virtual, and the ability to take them into account
and go beyond traditional and sterile incoherencies. They were
understandable at a time of economic fragmentation and conflict
between different and antagonistic economic and social systems.
However, that era ended with the fall of the Berlin Wall. Now,
the whole world is under the reign of the market economy and
conclusions need to be drawn that match the scale and scope of
this phenomenon. Whatever the case, the aim of expanding trade
cannot be limited to simple economic growth, it must also
contribute toward sustainable development.
Sustainable development has been a byword since the Rio
summit, which shed stark light on the harmful contradictions of
the States that govern us and paralyze its effective
implementation. Now, at Seattle, determination is required to
get everyone, from governments to consumers, economic operators
and civil societies, to accept sustainable development as the
absolute priority. Its one and true objective must be punched
home: it is to ensure balanced development between every
country in the world and between every stratum of its
populations. Indeed, equilibrium is the backbone of sustainable
development. It erases the antiquated and artificial borders
between the North and South, since almost every country now has
its mega-rich and its cortege of very poor.
Although globalization should lead to growth capable of
making the poor dream, it in fact makes the rich richer and
impoverishes the poor still further. What is more, urban
violence, conflicts between governments, and economic crises
will result in the erosion of our economies, in search of a
costly and probably illusory new distribution of cards and
rules at the price of new suffering mainly for the poor. The
fact is that the days of impregnable fortresses of abundance
and well-being are over. The attraction and envy they instill,
thanks to information and communication technologies, condemns
their existence through time. The West can diffuse its dreams,
but it must eventually pay the price for the attraction of
these same dreams on the poor, in terms of crime, clandestine
immigration, etc.
So, how should globalization be managed ? How can six
billion differences between the world's inhabitants be managed.
It is difficult enough today managing six billion differences
(no human being the same), but what of tomorrow when there will
be eight billion. . . ?
Common sense: the obvious remedy
Thinking, conceiving and acting globally in a world-wide economic
environment
The challenge of globalization is above all a psychological one for
our thinkers, politicians, citizens and economic players. True,
businesses already operate profitably in almost fully integrated,
dominant financial markets. However, other sectors of the economy,
especially trade in the traditional sense, remain in tow and tag along
as best they can. The lesson of recent crises has not sufficiently
highlighted the interconnections of capital transactions, in particular
short term ones, with domestic and foreign trade. Likewise for the
structure and management of the financial banking and monetary economy
regarding their inextricable interconnections with the commercial and
social economies, not forgetting environmental protection, labor, etc.
The only positive--and modest--conclusion that can be made is the need
to build a new international financial architecture. However, will this
goal take into account the interconnections and interactions of finance
with other sectors of the economy and other aspects of life or only, as
in the past, confirm its dominance over all the other sectors with, in
addition, dangerous tendencies toward a unipolar world based on single
track thinking?
The past habits of a fragmented and partitioned world are dying out
slowly, since they are deeply anchored in government establishments and
it will take a long time for the new customs of a border-less world
with interdependent, interactive and united components to become
accepted.
A great step forward could be made with the elimination, at
international level, made necessary by globalization, of the
incoherencies and incompatibilities stemming from the inadequacy or
even complete lack of coordination between international institutions
with that jealously guard their specific areas of responsibility. This
global non-coherence at all levels can be estimated, year in year out,
as amounting to one tenth of world GNP; this is the cost of non
coherent economic management on an international scale. Decisive
progress could be triggered by achieving convergence between the
different policies, actions and practices implemented by the various
international institutions. A very timid attempt has been made at the
level of the WTO, the IMF and the World Bank, i.e. the Ministerial
Declaration of Marrakech in April 1994 on the ``Contribution of the
World Trade Organization to Achieving Greater Coherence in Global
Economic Policymaking'' at international level. The practical effects
of this Declaration are modest and the good will and actions of the
heads of these institutions born from Bretton Woods remain tributary to
the degree of cooperation which the respective member states for whom
they act decide to give them. What political weight do trade or
environment ministers have in comparison with finance ministers in
economic development strategy ? The influence of mandators on the
actions carried out by international institutions, in particular
financial ones, is decisive though little known. This sheds light on
another element: although convergence at international level is
necessary, it is even more vital upstream at national level.
If this step forward toward convergence could be achieved under the
right conditions, it would lead to coherent economic and social
policies. This coherence implies the globalization of economic and
social policy tools. This logic is faultless, but account needs to be
taken of those with power and competencies who hold back or prevent
progress.
There are many pitfalls and the road is long but the convergence of
economic and social policies is inevitable if economic globalization is
to lead to sustainable development in our world, without disparities or
distortions.
The convergence and coherence of economic policies constitutes the
foundation of cohesion for each and every people of Planet Earth, so
that they can control economic globalization instead of being
controlled by it.
Convergence is a minimum, coherence is a must, and cohesion is a hope.
This is the revelation of common sense needed to deal with the
implacable logic of economic globalization. Recently, no lesser person
than Jim Wolfensohn proposed building a new international architecture
for developmentin parallel with ``a new international financial
architecture'' in order to give a voice to the poor. But how can
cohesion be possible when a supposedly universal organization such as
the WTO only represents three fifths of humanity, with thirty or so
countries waiting on the sidelines for accession under discretionary
conditions that appear arbitrary to say the least.
In short, sustainable development is the objective and the basis of
good governance.
My testimony is pertinent to this hearing, it is in complete support of
that of Mr Jose Bove whose remarks correspond with my reflections and
observations.
I was among the active participants in the establishment of
the World Trade Organization. I negotiated the Uruguay Round as
Ambassador of the European Union and I have devoted half a
century to the multilateral trading system, with participation
ranging from the United Conference on Trade and Employment in
Havana (1947-1948) until the Ministerial Conference of April
1994 in Marrakech.
Two preliminary statements:
Without a strong and fair multilateral trading system,
trade may create tension and conflict that threaten state
security. Even the strongest states, including the United
States of America, are potentially vulnerable.
In the aftermath of the Second World War, the USA was
governed by statesment with vision. Today the United States has
been rejuvenated and has achieved extraordinary economic and
technological advances.
However, the leadership necessary to channel economic
globalization of the economy towards a sustainable development
of the planet is lacking. Indeed the failure of Seattle sounds
a warning that a new leadership is needed to initiate and drive
the global governance of the planet.
Below, I present what your Subcommittee may wish to
consider as its broad goals starting with the Hearing of
February 8, 2000.
The Fundamental Realization:
The failure of Seattle was foreseeable. In this day and age
where everything is connected to the economy both inside and
outside of national borders, a viable solution to the problems
of international trade does not lie in trade policies alone. A
viable solution to the challenge of trade will be linked to
financial, monetary, social, environmental, sanitary and
wildlife protection policies on the national and international
levels. Clearly, the failure of Seattle is due to the absence
of an agreed global development strategy that considers the
necessary inter-relationships between trade policies and
policies related to the environment, investment protection,
labor etc. . . The absence of arbitration and of a more all-
encompassing trade policy freezes corporate competition and
plants the ``seed'' of failure. In addition to the urgent and
fundamental need to incorporate additional policies inter-
relationships into negotiations on trade, another essential gap
lies in the absence of transparency and of dialogue with civil
society. Finally, the concept of disparity between the rich
countries of the North and their poorer Southern neighbors must
be considered and remedied. Poverty is still present in the
North, just as wealth can also flourish in developing
countries. These disparities must be addressed. These elements
can be found in my first testimony.
Sincerely yours,
Tran Van Thinh
Statement of Jose Bove
Mr. Chairman, Thank you for this opportunity to provide
testimony for your hearing on the outcome of the WTO
Ministerial Meeting held last December in Seattle. I was
privileged to represent my farmer's organization there and to
have participated in many of the important events organized by
civil society during that week.
Of the many outcomes, I will focus on the way in which the
Seattle meeting has awakened ordinary people all over the world
to the need to become actively involved in global affairs. A
new appreciation of the complexity of international issues
exists among citizens, many of whom are offering positive
solutions to some of the problems facing the World Trade
Organization and world leaders. These creative ideas should be
carefully considered.
I am involved with a broad coalition of organizations from
civil society all over the world who are working together to
turn this new commitment into specific positive actions.
Together we have created the Global Citizen Initiative to bring
concerned individuals and organizations into the international
arena and to facilitate institutional changes that will
maximize the positive impact of this growing citizen interest.
While we will initially be focusing on issues concerning trade
policy, we are well aware of the need to broaden our work on
trade as part of a broader vision of global governance.
We have identified five critical themes and are developing
these with our growing global network of concerned
organizations (now consisting of over 2,000 civil society
organizations and representing nearly every country in the
world). We are targeting ideas that resonate on a global basis
and that can form the basis of a consensus within civil society
on key trade and global governance issues. This consensus will
give us the basis to move forward.
Our five major themes include:
1) Transparency and democratic procedures.
We need to learn from events such as Seattle and to forge
efficient and participatory approaches that involve civil
society.
2) Bridging the gap between the rich and the poor.
We are working on new approaches to help ensure that trade
rules do not make the gap between rich and poor countries and
rich and poor people even worse. Our goal is to find ways to
turn trade policy into a positive force that can help end
poverty.
3) Current and new issues in trade policy.
This includes the specific topics currently under
negotiation at the WTO, the so-called built-in agenda of
agriculture, patenting of life, and services. There are also
working groups on the more difficult trade issues such as
environment, labor standards and human rights.
4) Negative impacts on food security.
This includes a number of specific topics such as
agricultural dumping, tariff escalation and the ways in which
current trade policies are fueling the conversion of land from
human food production to non-food uses or to luxury cash-crops.
5) E-commerce.
The Internet is changing our entire business system,
potentially rendering many of our current trade policies
meaningless. At the same time, if it can remain free both
politically and financially, the Internet appears to be one of
the keys to making a truly democratic system of global citizen
action. We have organized a working group to put forward
proposals to maximize the positive political, social and
commercial impacts of the Internet while avoiding the negative
impacts that may come from a more restrictively controlled
technology.
As mentioned above, the goal of the Global Citizen
Initiative is to bring about changes in the international
framework through global consensus. The WTO Ministerial Meeting
created a new awareness around the world about the critical
role played international institutions and the importance of
creating a new vision of global governance. The new citizen
awareness that is manifest in our work, and in the concerns
voiced at Seattle, presents a unique opportunity to make long-
term, positive changes for all.
Mr. Chairman, thank you again for the opportunity to
present these ideas and for organizing this hearing aimed at
drawing lessons from Seattle. We believe that this event is an
important first step towards a fairer, open and democratic
system of global governance.
Yours faithfully,
Jose Bove
Member of Confederation Paysanne
France
Statement of David Head, on behalf of Save Endangered Wilderness,
Hatboro, Pennsylvania
Dear Members of Congress,
Congress has decided to take up the issue of ``What Went
Wrong in Seattle.'' The issue has nothing to do with when and
where trade makes good economic sense. The issue is democracy.
Behind the benign sounding term ``Free Trade,'' lurks a
juggernaut unprecedented in the history of mankind.
Functionally, the World Trade Organization is an
association of the world's most powerful transnational
corporations. This association is, by their own boastful
admission, ``writing the constitution for a global economy.''
Their goal is clear--that the ultimate governance of any and
all issues that involve international trade or finance be
removed from the hands of democratically elected governments,
and placed in the hands of the world's corporate elite. They
would further eliminate all public input, as well as public
scrutiny.
More than 500 corporate lobbyists sit on some 16 committees
that advise the US Trade Representative. These committees
aren't just closed to public interest groups, they are actually
shielded from public scrutiny by national security secrecy
laws. Citizen activists found it necessary to get a court
order, in order to force US Trade Representative, Charline
Barshefsky, to include any environmental advocates on the
committees that advises her on forest products issues. The
Clinton Administration is now appealing that court order.
The judicial system of the WTO consists of panels, each
comprised of three trade bureaucrats whose meetings are closed
to the public. It is so skewed in favor of corporate interests
that since it was created in 1995 the WTO has ruled that every
environmental, health, or safety policy that it has reviewed,
is an illegal trade barrier, that must be eliminated or
changed. The effect of this has been that many governments
faced with even the threat of a WTO challenge have backed down,
and governments are reluctant to enact legislation that might
be challenged.
We have sacrificed millions of lives and spent trillions of
dollars to defend our right to govern our own affairs. Our
government is signing away that right in secret negotiations,
behind closed doors.
Do not think that what went wrong in Seattle was a fluke.
What happened in Seattle is simply that the Titanic has just
brushed ever so gently against a very very large iceberg.
This is a far more powerful moment in history than most of
us realize. Perhaps Congress should be asking what King George
would say in retrospect, if he was asked ``what went wrong in
Boston.'' Lincoln had a simple suggestion-``you can't fool all
the people all the time.'' That's what went wrong in Seattle.
Though the American people have grown complacent, even as
they have grown cynically accustomed to political corruption,
the spirit of democracy is not dead. The corporate conspirators
who believe that their destined moment has arrived, are in
reality awakening a giant that has lain dormant since the civil
rights movement and Viet Nam.
The monster will be stopped. It may come through massive
demonstrations, riots or armed revolution. That will largely
depend on congress and the President. But the human spirit will
not surrender to a corporate world government.
The fifty some thousand Union workers, environmentalists,
human rights workers, and church representatives, who braved
the police in Seattle and around the world, to stand up to the
WTO and corporate tyranny, are in greater solidarity with the
people, and stand for a far nobler cause than did our
forefathers who dumped the King's tea in Boston Harbor. When
the Ministerial ended, the demonstrators, except for the
prisoners, went home, but do not think that it ended there.
Religious and other human rights workers will not give up on
human rights. Environmentalists will not relinquish to some
autonomous corporate body, their right to defend the planet.
And Union leaders know all too well that far from bringing
prosperity, corporations brought slave labor conditions and
sweat shops to America, wherein hundreds of thousands of
workers died. It was not corporations that brought prosperity
to America, it was strongly united workers.
The Clinton Administration has promised a few bandages to
patch up some specific areas of complaint. That will not solve
the problem, nor will it placate the American people.
Unless and until the WTO becomes a democratic institution,
whose operations are open to full public participation and
disclosure; until the WTO reverses past decisions and undoes
the damages already done to public health, worker,
environmental and human rights protection; until its judicial
system puts people above corporations; and until elected
governments are guaranteed the right to enact laws to protect
people and all the other inhabitants of the earth, the WTO will
remain an institution whose interests are opposed to the
interests of the people of this nation and of the world, and
the people will do whatever is necessary to stop it.
Instead of asking ``What went wrong in Seattle?,'' everyone
in Congress should be asking ``Which side will I be on--The
People's or the Corporation's?,'' for that is how history will
judge you.
Statement of U.S. Integrated Carbon Steel Producers
This statement sets out the views of the five major
integrated U.S. producers of carbon steel products--Bethlehem
Steel Corp., U.S. Steel Group, a unit of USX Corp., LTV Steel
Co., Ispat Inland Inc., and National Steel Corp.--on the need
for the Administration to strongly adhere to its position that
the WTO Antidumping Agreement will not be subject to future
bilateral or multilateral trade negotiations. As the recent
steel import crisis has demonstrated, strong, effective and
vigorously enforced trade laws are necessary to ensure that
American industries and workers are not left defenseless
against unfairly traded imports. Moreover, the unfair trade
laws are essential to maintaining an open market policy in the
U.S., and encouraging the same abroad.
In the months leading up to the WTO Ministerial conference,
the Administration's firm position was that the WTO Antidumping
Agreement would not be the subject of negotiations. For
instance, in its 1997 markup of fast track legislation, the
Committee on Ways and Means approved without dissent a
provision instructing U.S. negotiators to reject any agreement
that would weaken existing disciplines against dumping and
subsidies. Further, over 200 members of the House co-sponsored
a resolution last year stating that the Congress would not
consider legislation to implement a trade agreement that
required changes to our trade laws. The Administration's
actions in following through on its commitment to keep the
renegotiation of our trade laws off the table is recognized and
appreciated. At the same time, it remains vital that this
position be re-affirmed and it made clear to our trading
partners that the United States will not discuss changes to the
trade laws.
Reasons for the Outcome of the WTO Ministerial
The setbacks resulting from the WTO Ministerial conference
in Seattle were caused by many substantive and logistic
impediments which made the successful conclusion of
negotiations difficult. The positions of our major trading
partners, particularly the European Union and Japan, were
untenable and a consensus with developing countries on the
implementation of existing commitments was not reached. There
is a general consensus, however, that the negotiations did not
stall because of the American position on the antidumping and
anti-subsidy rules. The U.S. position was set forth clearly and
did not undermine efforts to begin a round on those issues ripe
for negotiation by the WTO.
Further Attempts to Erode American Trade Remedies
In the past few years, the U.S. integrated steel industry
has been seriously injured by unprecedented surges of unfairly
traded imports. In particular, countries which have recently
suffered severe economic consequences--Japan, Korea, and
Russia--have continued to target the U.S. market with dumped
and subsidized imports. Often, these countries also benefit
from protected home markets, thus exacerbating the effect of
their unfair trade practices. The American industry's last line
of defense against these illegal trade practices are the
antidumping and anti-subsidy trade laws. Foreign unfair traders
realize that the only significant obstacle to unfettered abuse
of the U.S. open market is the trade laws. Their goal is to
reopen the antidumping and anti-subsidy agreements in order to
weaken them. The U.S. government correctly withstood these
pressures.
In light of their failed attempts, other countries,
particularly Japan and Korea, are now trying to achieve through
the WTO dispute settlement system what they could not achieve
through multilateral negotiations. For instance, Japan has
recently filed a complaint with the WTO concerning American
antidumping measures on hot-rolled steel, and has threatened to
file further WTO complaints concerning additional trade law
cases duly resolved under the U.S. law consistent with our WTO
obligations. The long and arduous WTO dispute settlement
process has been initiated by the very same parties which have
engaged in the unfair trading of steel. Rather than accept the
orderly rule of law they seem determined to continue to
litigate in defense of their own wrongdoing.
Japan's objective in filing these complaints is to achieve
the weakening of U.S. trade laws that they were unable to
achieve in the recent WTO Ministerial. The U.S. government must
aggressively defend the trade laws enacted by Congress and
administered by the Executive Branch and courts against this
pernicious assault through the WTO dispute settlement process.
Allowing these laws to be weakened only favors those countries
that benefit from their closed markets; strong trade laws are
necessary to ensure open and fair trade worldwide. Further, re-
opening the WTO agreements after our position leading up to
Seattle was made clear, and after complicated negotiations were
concluded during the Uruguay Round, would only serve to
diminish the credibility of U.S. negotiators among our foreign
counterparts. The Congress too must re-affirm its position that
it will not accept agreements that require changes to the U.S.
antidumping laws.
American Steel Companies and Workers Need Strong Remedies
Against Unfair Trade
The American steel industry and steelworkers are seriously
injured by unfair trade. American steel companies have invested
over $50 billion to improve their plants and equipment.
American steelworkers suffered the loss of over 250,000 jobs as
the companies and labor worked together in the 1980's and early
1990's to restructure the industry and make it the most
efficient in the world. After having made the necessary
investments to modernize the industry, American steel companies
and workers are now being seriously injured once again. Since
the beginning of the current import crisis, over 10,000 good
U.S. steel jobs have been lost. The industry has suffered five
bankruptcies since the import crisis began. As confirmed by the
International Trade Commission's affirmative findings of injury
in the recently filed hot-rolled and cut-to-length plate cases,
and the high dumping margins and countervailing duty rates
found by the Commerce Department, dumped and subsidized foreign
steel are causing this damage.
As a result of the petitions filed by the domestic
industry, pursuant to the same antidumping and anti-subsidy
laws that our competitors seek to renegotiate, only now are we
beginning to see market adjustments as foreign imports must be
sold at fair prices. Without the full force and effect of these
laws, every indication is that massive foreign dumping and
subsidization would persist, and cause greater injury. In
short, further erosion of our trade laws would lead to further
injury to the domestic steel industry and its workers.
The Global Trading System Needs Strong Antidumping and Anti-
subsidy Laws
The antidumping rules are at the very foundation of the WTO
and an essential element of the multilateral trading system
because illegal trade practices distort the marketplace and do
not allow for the benefits of fair and equitable global
competition. The original GATT stated in Article VI that
``dumping a is to be condemned if it causes or threatens
material injury to an established industry in the territory of
a contracting party or materially retards the establishment of
a domestic industry.'' Strong antidumping and anti-subsidy
rules are essential if global and regional open market policy
objectives are to be achieved and maintained. Maintaining open
trade requires the enforcement of fair trade.
For these reasons, the current WTO unfair trade rules were
comprehensively negotiated and concluded only after spending
substantial effort and resources during the Uruguay Round.
These rules were designed to ensure a basic level of fairness
and to prevent abuse by countries with closed markets of other
countries' open market policies. But these rules have barely
been tested and certainly have not proven to be defective. Re-
opening negotiations on these laws would only undermine
confidence in the WTO system and future negotiations.
Conclusion
The United States has consistently made clear that the
WTO's antidumping rules would not be subject to negotiation.
Congress has also emphatically stated its position that the
trade laws shall not be undermined by international
negotiations. We commend this continued strong commitment to
maintain effective WTO disciplines against unfair trade.
American industries, and the global trading system as a whole,
will suffer irreparably if the terms of the antidumping rules
are renegotiated.
Statement of United States Association of Importers of Textiles and
Apparel, New York, New York
The U.S. Association of Importers of Textiles and Apparel,
USA-ITA, is pleased to have this opportunity to provide its
views on the outcome of the WTO Ministerial in Seattle and what
steps are necessary to achieve a more positive result in the
future. USA-ITA participated as a non-governmental organization
at the Ministerial meeting in Seattle and strongly supports the
launch of a new round of multilateral negotiations.
USA-ITA is an association founded in 1989 which now has
more than 200 members involved in the textile and apparel
business. USA-ITA members source textile and apparel products
both domestically and overseas. Members include manufacturers,
distributors, retailers, and related service providers, such as
shipping lines and customs brokers. USA-ITA member companies
account for over $60 billion in U.S. sales annually and employ
more than one million American workers.
It is the view of USA-ITA that multiple factors contributed
to the inability of the ministers to reach agreement in Seattle
on a declaration launching a new round. Textile issues were
among those factors. Of course differences between the European
Union and the United States, principally on agriculture,
probably had the most to do with the breakdown of the Seattle
Ministerial, but some of the ``credit'' also must go to:
1) the developing countries, who made it clear that an unwieldy
and outdated WTO decision-making process was unacceptable (with
a small number of countries secretly making the most important
decisions in exclusive ``Green Room'' sessions and then forcing
the excluded countries to concur);
2) the timing and location of the meeting: too close to the
next American election cycle and in the United States (which
therefore compelled the U.S. Government to serve as a host at
the same time it sought to implement a significant agenda);
3) the failure of Geneva representatives to reduce the number
of questions left to ministers before Seattle;
4) substantive differences between and among the developed and
developing countries on a variety of issues, including
textiles, where promised liberalization has yet to materialize;
and
5) the comment by President Clinton indicating support for the
ultimate use of sanctions to enforce labor standards.
USA-ITA rejects the attempts by labor and environment
protestors to take credit for the failure of the ministers to
reach agreement on launching a new round. While disruptive and
inconvenient, their presence was not what determined the
outcome of the meeting.
It is apparent to USA-ITA that textile issues played a key
role in the difficulties faced by the trade ministers in
Seattle. We spoke extensively with the trade ministers of many
of the developing countries that supply the U.S. market.
Through our discussions with these officials, we know that the
insistence by U.S. negotiators not to move on textiles led to
much frustration and consternation within the developing world.
Clearly, these members had little interest in initiating a new
round of trade talks unless it included concessions on
textiles, where the promises of liberalization provided by the
Uruguay Round Agreement have yet to yield tangible results.
The textile issues were framed well before the ministers
arrived in Seattle and reflected the developing world's strong
feeling of disappointment with the implementation of the
Agreement on Textiles and Clothing (ATC) by the United States,
in particular, and with the increased use of anti-dumping
measures by the European Union. The developing country
producers of textile and apparel products have plenty of
reasons to be disgruntled:
few textile and apparel products removed from the
quota system (integrated into ``normal GATT rules''),
annual increases in trade constrained by small
growth rates,
the introduction of numerous safeguard actions
(new quotas) creating new restrictions, and
the disruptive change in the U.S. rules of origin
for textile and apparel products after the ATC was implemented.
Several trade ministers specifically raised textiles during
their statements at the opening Plenary Session of the
Ministerial and, in the view of USA-ITA, their statements
accurately summarized the frustrations of the developing world
with respect to textiles trade. Thus, Hong Kong's Secretary for
Trade and Industry noted that ``The begrudging manner in which
the [ATC] is being implemented--including back-loading of
integration, minimum growth rates, unjustified safeguard
actions and harassment through anti-dumping--is probably more
responsible, more than almost any other single factor, for the
feeling that has emerged among developing countries that they
have so far been denied the anticipated benefits of the Uruguay
Round.''
Similarly, Pakistan's Minister of Commerce, Industry and
Promotion noted that ``developing countries have not gained any
meaningful increase in market access in the key areas where
they have a clear comparative advantage, especially textiles
and agriculture. For many developing countries, the [ATC] was
the centerpiece of the Uruguay Round Agreements. They were
persuaded to go along with the ``single-undertaking'' in the
expectation that progressive liberalization of textiles by the
developed countries within the ten-year phase-out period would
enable them to generate significant gains in exports and
incomes. . . Unfortunately, these hopes were dashed. The
integration programmes for the first two stages have not led to
any meaningful liberalization. . . .''
From the outset of the Ministerial meeting, however, U.S.
negotiators made clear their determination to avoid making
commitments on textiles, particularly if it involved quota
liberalization, and therein lies a significant problem. This
issue cannot be ignored if developing countries are to perceive
a benefit from participating in a round that will require them
to make further reforms in their trade policies.
USA-ITA is disappointed that U.S. officials repeatedly
insisted that those concerned about textile trade and assisting
the least developed countries should be satisfied with the
Administration's support for the Africa Growth & Opportunity
Act and the Caribbean Basin Enhancement Act, which are
currently being considered in the U.S. Congress. USA-ITA
strongly supports that legislation because it would provide
duty-free and quota-free entry into the U.S. for certain
products--mostly apparel--made in qualifying countries. Recent
comments by U.S. Government officials, including chief textile
negotiator C. Donald Johnson and Assistant U.S. Trade
Representative Rosa Whitaker, confirm that the Administration
endorses the House version of the Africa legislation. However,
the final content of the legislation remains to be seen. The
Senate version would not provide meaningful benefits to sub-
Saharan Africa. The Senate bill, for example, would limit the
benefits to apparel made from U.S. formed fabric from U.S.
formed yarns, thereby greatly reducing the value of program for
the participating countries. In any event, an LLDC initiative,
while useful and a moderate step forward from the current
situation, cannot replace the need for broader liberalization
in the textile sector.
The failure of the Ministerial Conference to produce a
Declaration to launch a new trade round does not immediately
threaten the life or health of the WTO as an institution. Nor
does it threaten the 2005 deadline for completion of the quota
phase-out process under the Agreement on Textiles and Clothing.
USA-ITA continues to be confident that, at least with respect
to WTO member countries, the termination of the ATC will be
honored. However, the fact that most of the liberalization is
delayed until January 1, 2005 creates the opportunity for new
demands to be put forward before that date. Given the fact that
most of the concessions made by developing countries during the
Uruguay Round have implementation deadlines well ahead of 2005,
the prospect that further concessions may be required before
the benefits of the Uruguay Round have been obtained greatly
limits the negotiating flexibility of these nations. Tangible
benefits before 2005 would likely change this dynamic.
So long as a new round is not initiated, USA-ITA and its
member companies will be unable to achieve their objectives as
well. These include additional access to new markets, the
implementation of trade facilitation measures that reduce
variations in procedures among different border authorities,
and access to improved distribution systems. Obviously, the
global expansion of other sectors of the U.S. economy,
including agriculture, manufacturing and services industries,
also is being impeded by the delayed start of a new round.
Unless the very real concerns of the developing world are
addressed, including their concerns vis-a-vis the highly
contentious issue of textiles, these countries have no reason
to agree to a new round where further concessions on their part
will be required. We all will pay the price for such short-
sightedness.
We look forward to the Ways & Means Committee continuing to
play a leadership role on this important issue.
Respectfully submitted by,
Laura E. Jones
Executive Director
Statement of Hon. Clayton Yeutter,\1\ Counsel, Hogan-Hartson L.L.P.;
and former United States Trade Representative
The WTO: Where do we go From Here?
Mr. Chairman and members of the Subcommittee, it is a
pleasure for me to submit this testimony to you. Doing so
brings back fond memories of many appearances before this
Subcommittee through the years.
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\1\ Clayton Yeutter served as U.S. Trade Representative from 1985-
1989 and as U.S. Secretary of Agriculture from 1989-1991. He was
heavily involved in the launch of the Uruguay Round in 1986. He is
currently of Counsel to Hogan & Hartson, L.L.P., a Washington, D.C. law
firm.
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It is easy to be a critic. It is especially easy to be one
with the benefit of hindsight. Beyond that, focusing on the
future is a much more fruitful exercise than bewailing the
past. Nevertheless, it might be useful to delineate some of the
mistakes of the recent Seattle Ministerial, if only to build a
better foundation for the future. What follows is my personal
opinion only, and the criticisms are aimed primarily at the
policy making process of the present White House, rather than
at Amb. Barshefsky, who is a fine U.S. Trade Representative.
In my view:
l. The l999 ministerial meeting should not have been held
in the U.S., an attractive locale for disruptive actions, as we
learned by sad experience.
2. The meeting should not have been chaired by the U.S. It
is difficult to be an effective advocate when one also has
chairmanship responsibilities.
3. The U.S. chief of state should not have been there,
other than to provide a formal welcome to the attendees. His
presence was a motivation for the demonstrators, and his
substantive presentation alienated the representatives of
lesser developed nations. Any chance of reaching agenda
consensus at Seattle disappeared at the conclusion of his
presentation.
4. The meeting should not have been held when policy
positions of major trading nations were so divergent. One
simply cannot bridge such huge differences at a three or four
day ministerial meeting.
5. The meeting should not have been held so soon after the
arrival of the WTO's new Director General, Mike Moore. The
Director General is an outstanding individual, with exceptional
knowledge and experience, but no one can be expected to get up
to speed on new round preparations in just a few weeks. It is
the DG who must personally work on narrowing major policy
differences, and Mr. Moore did not have time to do that.
6. The meeting should not have been held so soon after the
completion of U.S.-China negotiations on the latter's potential
entry to the WTO. That was a major distraction for Amb.
Barshefsky, and one that could have been avoided had the White
House recognized what an excellent job she had done in the
initial China negotiations several months earlier.
7. The U.S. should have spent less time worrying about what
the round would be called, and more time preparing for it. In
particular, our relentless argument in favor of a limited
agenda was not only counterproductive, but counter to our own
interest in expanding trade and opportunity.
8. The U.S. should not have taken antidumping off the
table. That is a priority issue for many nations, both
developed and developing, and our intransigence did not wear
well. When we insist that issues sensitive to us will not be
negotiated, it is not surprising that other nations respond in
like manner. That almost guarantees that consensus on a
negotiating agenda will not be reached.
Failure of the Seattle ministerial provided the groups who
were demonstrating an opportunity to claim credit for the
outcome, and they've done so with great relish. It has also
provided them with the momentum to try to disrupt WTO and other
international meetings in the future. So the Seattle
proceedings were a huge embarrassment for the U.S.
The Seattle meeting was a debacle of major proportions, for
it will delay WTO negotiations of consequence for at least a
year and a half. There will be concomitant delayed benefits of
more open trade, particularly for developing countries, but
also for the most internationally competitive nations--and the
U.S. is at the top of the latter list. It is ironic that we've
shot ourselves in the foot at a time when we have more to gain
from a new WTO round than any other nation in the world.
In tennis terms, we had way too many unforced errors in
Seattle, and we'd better figure out a way to avoid or eliminate
such errors in the future. U.S. leadership in international
trade is at a mighty low ebb, and that needs to change soon.
The Future
So where does this now leave us? Let's concentrate first on
the year 2000. In my opinion there is only a minimal chance of
launching a new trade round prior to the U.S. presidential
election.
Nevertheless, there is plenty to do this year. Director
General Moore can work hard on the major stumbling blocks that
emerged in Seattle, engaging in a bit of shuttle diplomacy
where that will be helpful. He'll not be able to resolve those
differences this year, but just narrowing them appreciably
would be a significant accomplishment.
The Director General needs also to encourage countries who
have not yet finalized their own negotiations with China on WTO
admission to do so, promptly. Later in the year the WTO needs
to bring this effort to its ultimate conclusion, with entry
afforded both to China and Taiwan (almost simultaneously). The
U.S. Congress needs to do its part, by approving the permanent
grant of normal trade relations for China, on a timetable
carefully coordinated with Director General Moore.
China's behavior, on human rights and other issues, is far
from exemplary. Its trade regime has its own shortcomings. The
real issue, however, is whether progress on all such issues is
more likely to occur if China is in the WTO, or outside, as it
is today. I'm persuaded that we'll have a much greater chance
to affect and influence that behavior once China is a WTO
member, and thereby subject to international rules, than if it
continues as an outsider, following its own rules. Absent WTO
disciplines our trade leverage in China is limited to potential
economic sanctions, and they typically hurt us more than they
do ``the other guy.'' With China on the inside we'll have the
much more comprehensive and powerful leverage of about l50 WTO
member nations.
The WTO should also proceed with preliminary skirmishes on
agriculture and services, the two major issues on which
``second tranche'' negotiations were agreed to in the Uruguay
Round. There is a lot of hard work ahead in both those areas,
for they are highly contentious and extremely sensitive
politically. So the sooner that work gets underway the better.
Otherwise they'll be a drag on the new round, just as they were
on the last one.
Turning to the post-U.S. election period, one of the
highest priorities for the incoming administration should be to
get a strong USTR team in place as quickly as possible. The
rest of the world will be waiting for this.
My own view is that the next administration should make
fewer political appointments at USTR. That number has increased
in recent years, and the result is an inevitable downgrading of
USTR's top career negotiators. The latter typically have far
more negotiating knowledge, experience and skills than the
incoming political appointees. We ought to let them do their
jobs--with broad political guidance, but not day to day
political handwringing--for they're the best in the world!
We also need to re-think our negotiating priorities for a
new round, particularly the argument for a narrowly based
agenda. We're certainly not going to accomplish anything
multilaterally on issues that are omitted from a finally agreed
agenda. Conceivably we could make progress bilaterally on such
subjects, but that's hard sledding, and a terribly inefficient
use of scarce negotiating talent. Therefore, let's be sure to
get a comprehensive new round agenda that addresses all the
trade issues that are likely to be globally important to the
U.S. over the next decade.
That means we need to get beyond agriculture, services, and
industrial tariffs, the key issues we've denominated so far.
Those are indeed significant, but I'd add:
1. Revisions of Existing WTO Agreements -wherever that
would be appropriate. That may open up issues in government
procurement, standards, antidumping, and perhaps even some of
the other agreements such as customs administration. But why
not? We should feel free to raise issues in those areas that
require additional negotiation, and so should any other WTO
member country. After all, we spent hundreds of hours
negotiating these Agreements in past rounds. We all should be
willing to consider potential improvements in those Agreements
where improvement is in order.
2. Administration of Existing WTO Agreements and Other
Provisions -In many cases where dissatisfaction exists with the
performance of the WTO, the proper response may well be to
foster the execution and administration of what was agreed to
earlier. If corrective action is taken in that arena, a re-
negotiation of specific Agreements and other WTO provisions may
not be necessary.
3. Dispute Settlement -WTO dispute settlement is working
much better than in the past, and far better than its critics
are willing to admit. But with several years of experience now
behind us, it is time to evaluate the mechanisms that were put
in place during the Uruguay Round. If we can improve them by
tweaking them somewhat or making them more transparent, we
clearly should do so. Though the process is much faster, more
decisive and more definitive than it was for decades, it is
still too slow for a rapidly changing world. In my view it has
also become too legalistic.
With countries beginning to use dispute settlement much
more than in the early years of the GATT, we also have a danger
of disputes overwhelming the system. If the WTO cannot handle
them in a satisfactory manner, the organization itself will
suffer a severe loss in credibility. That suggests attempting
to resolve more of these disputes through conciliation and
arbitration, rather than with a full blown panel procedure.
The WTO also experiences a credibility problem when nations
refuse to take corrective action after losing in a dispute
settlement proceeding. The aggrieved nation will have the
privilege of retaliating against the offender, but that does
not remove the grievance. And the sanction incongruously
reduces international commerce, an undesirable result indeed.
In this next WTO round we need to find creative ways to
encourage and stimulate compliance with WTO rulings, while
still respecting each nation's sovereignty. And sanctions ought
to be trade enhancing rather than trade reducing.
4. Investment -Over the past several years a major attempt
has been made to draft a multilateral investment agreement
under the aegis of the OECD. Regrettably, those efforts seem to
have failed. We ought to bring them back to life in the WTO,
where they should have been negotiated in the first place. A
beginning was made in the Uruguay Round, and the venue was then
shifted to the OECD. We ought to shift it back again.
We should not underestimate the importance of sound
investment rules. At a time when technology is drawing the
world economy ever closer together, investment and trade rules
go hand in hand. If one lags behind the other, this will
inevitably have an adverse effect on economic growth. That
means job creation will also lag, in developed and developing
countries alike. We all have a stake in undertaking this task
(which is why negotiations cannot be limited to the OECD
nations), and in getting it accomplished in a timely way. The
OECD proposals generated lots of criticism, much of it based on
fallacious reasoning. It is time for everyone to recognize that
the technological revolution is not going away, and that the
efficient movement of capital will be critical to narrowing
differences in economic well-being throughout the world. Too
many nations today deliberately distort investment patterns.
Some that are most in need of investment discourage foreign
investment rather than encourage it. It is high time for
rational thinking to prevail in this area, and that demands
negotiation of a sensible WTO investment agreement. The U.S. is
now seeking to meet this need via bilateral investment
agreements, but that is far too slow a process.
5. Open Markets for the LLDCs -The developed country
members of the WTO have flirted in recent years with the
concept of opening their markets fully to products and services
from the lesser of the less developed nations. Director General
Moore has been and is a strong advocate for this worthy cause.
There is still trepidation among some developed country
industries with respect to this proposal, but that trepidation
is unfounded. In a new round the WTO will, of course, have to
delineate specific parameters for determining which low income
nations qualify, and when such nations are to be graduated from
the benefits of this proposal. That should not be a formidable
task, and developed nations need have no fear that they'll be
inundated with imports from the LLDCs. This would be a splendid
gesture by the developed world, deeply appreciated by those
very poor countries, all of whom would prefer trade to aid. In
addition, placing this issue on the agenda of the new round
will instantaneously generate political support for the round
from a substantial number of countries.
6. New Controversies? -What is not on the negotiating
agenda may be just as important as what is on it. Issues that
are not ripe for negotiations should not be included. Forcing
them on the agenda becomes an exercise in frustration and
futility. The U.S. has been spinning its wheels on worker
rights and environmental issues for the past several years, and
neither of those issues is anywhere near ready for a new round
agenda. The European Union has been doing the same with
competition policy, and it is not yet ripe either.
All three of those issues do have some relevance to
international trade. In many instances the impact is nebulous,
and it is often indirect and peripheral. But in some situations
the impact is direct and meaningful. With the high level of
interest that prevails for each of these subjects, a
multilateral forum (or fora) should be available for people and
organizations to discuss them. The preferred forum may or may
not be the WTO, but it should be some international
organization. Otherwise those who have strongly held opinions
on these subjects will conclude that they are being stonewalled
by the international community. That in turn will lead to
conduct of the kind that was on display in Seattle.
Competition policy issues obviously need to be vetted with
Ministers of Justice from the WTO countries. Because of the
interrelationship of these issues with those of antidumping,
one could certainly justify a joint working group of justice
and trade ministers to determine whether global standards are
yet in order for competition policy--and, if so, where and how
such standards should be negotiated. But we'll certainly not be
ready for any such negotiations in the next WTO round.
The ``worker rights'' issue is a legitimate one, for the
world ought to be able to agree that some such rights are
fundamental -in any country, rich or poor. The International
Labor Organization (ILO) is the appropriate standards-making
body in this area, but the ILO does not now have a mandate for
implementing and enforcing ``fundamental'' worker rights. Such
a mandate will obviously be highly controversial, as to if,
when, how, and where implementation and enforcement are to take
place. All of this merits discussion, perhaps as a joint ILO-
WTO effort, but it is not yet ripe for negotiations in any
international fora.
Environmental issues have such great breadth that I see no
feasible way ever to negotiate meaningful WTO rules in this
area. International harmonization of environmental standards is
a laudable objective, but one that should be pursued in
appropriate standards-making bodies, not in the WTO. In many
instances, it may be far more sensible and practical to sort
out environmental differences issue by issue, and in defined
geographic areas, rather than battle through their complexities
on a worldwide basis. It seems to me that the WTO's proper role
at present is to be sensitive to environmental considerations
in its deliberations and decisions. That suggests prudence in
action and a willingness to listen, but it does not support a
negotiating agenda.
WTO Governance
The Uruguay Round dramatically broadened the spectrum of
issues to be dealt with at the WTO, and significantly added to
the complexity of its rules. Debate over the handling of
matters such as worker rights, the environmental impact of WTO
rules, and competition policy has the potential to broaden that
spectrum still more. To me this suggests that the Director
General needs to invite high level trade officials from the
capitals to Geneva on a regular basis.
This need not be (and should not be) l50 trade ministers,
for not much will be accomplished by a l50 member committee. It
should be a manageable group, representative of the WTO
membership. The risk in this is that those who are excluded
will be displeased, but that is a challenge that must be faced.
(That risk can be mitigated by rotating at least some of the
memberships on an agreed timetable.) Years ago this was done at
the GATT through what was then called the Consultative Group of
l8 (or the CG l8), and it worked quite well during its time.
Something of this nature needs now to be resurrected by
Director General Moore, to help him work through the delicate
issues that are bound to confront the WTO in the coming years.
The world just cannot wait for this to happen in a trade round
conducted once a decade. Issues and potential consequences
change much too quickly for that. The private sector is fast
moving these days, and the public sector (including
international organizations such as the WTO) must begin to
match it in pace and agility. Slow moving, cumbersome,
inflexible public entities will soon fade into oblivion.
Fast Track
What does all this mean for fast track here in the U.S.? It
means we ought to grant fast track authority to USTR and have
confidence in its ability to do this job and do it right. The
Congress will have ample opportunity to influence negotiations
as they unfold, and prior to finalization of any package that
will be brought back for Congressional approval. We're the only
nation in the world that has tied the hands of their
negotiators. And we've done so at a time when it is clearly in
our national self interest to be negotiating. The risk, to the
Congress and to the American public, of granting fast track
authority is minuscule, and we ought to provide it. That said,
I see no merit in granting such authority for matters--such as
those I've discussed above--which clearly are not now ripe for
negotiations, and are not likely to become ripe during the
tenure of a new WTO round. Should that situation change,
additional fast track authority can always be granted in the
future.
Conduct of a New Round
In light of what transpired in Seattle, how can the WTO
launch a new round? By getting its homework done this year, and
much of that burden will now fall on the shoulders of Director
General Moore and his staff. If he can begin to generate
consensus in support of an agenda such as the one I've outlined
here, and if the accession of China and Taiwan can be completed
later this year, I see no reason why a new round cannot be
launched in 200l.
Is another ministerial meeting necessary? Perhaps, but not
necessarily. All WTO member nations have delegations in Geneva,
and they ought to go to work with renewed vigor in the
aftermath of Seattle. They should be embarrassed too, by what
did and did not occur in the Seattle fiasco. If these
delegations do their jobs well, with the full support and
involvement of their trade ministries back home, it is
conceivable (perhaps even probable) that a new round could be
launched without another meeting of ministers, or with a pro
forma session that could be held in Geneva rather than off-
site.
The Seattle meeting's proposed timetable for a new round
was three years. Can a broad based agenda be packaged for final
approval in such a short timeframe? Probably not, so I'd rather
opt for a four year wrap-up, as was done in the Uruguay Round.
The latter took nearly twice that long, but the GATT had never
before dealt with such a comprehensive negotiating agenda. With
the experience of the Uruguay Round, and an agenda not quite so
broad, the WTO should have a reasonable chance of finishing in
four years this time around. If so, that would be a superb
achievement.
Conclusion
Neither the Congress, the Administration, or the American
public should be mislead or intimidated by what occurred in
Seattle. The demonstrators had little or no impact on the final
outcome of the meeting. Virtually every demonstrator in Seattle
will benefit from a more open trading system. Those of us who
understand the benefits of free trade obviously have not
delivered the open trade message in a persuasive manner to
those who were marching in Seattle's streets. That is a
challenge in itself, but it is beyond the purview of this
hearing. What we must not do is turn inward, altering U.S.
trade policy in a way that will come back to haunt all of us
(including the Seattle demonstrators) in the future. That's
what leadership is about, and it is imperative that we exercise
it, with courage and principle.
The success of the Uruguay Round, and its positive impact
on millions of people in the U.S. and elsewhere around the
world, provides a foundation on which to build. The trade
policy path to a better world is generally quite clear, and a
new trade round is on that path. We need now to help lead the
world in that direction.
We should, therefore:
1. Recognize the mistakes of Seattle, and learn from them;'
2. Focus this year on bringing China and Taiwan into the
WTO, and in the process approve normal trade relations for
China on a permanent basis;
3. In the coming months help WTO Director General Moore to
narrow agenda differences for a new round, and move forward
with preliminary negotiations in agriculture and services;
4. Early next year encourage the new Administration to get
strong USTR leadership in place as quickly as possible;
5. Then reach an agreed agenda broader than the one we
advocated in Seattle, but exclude issues that are not ripe for
negotiation;
6. Determine appropriate international fora for
deliberating issues such as worker rights, environmental
protection, competition policy, and others that either are
inappropriate for WTO negotiations are not yet ready for such;
7. Grant fast track authority to the new Administration,
under the conditions just described; and
8. Set a timetable for concluding the new round, and make
it our highest negotiating priority in international trade.
Thank you, Mr. Chairman, for granting me the privilege of
contributing these views for your consideration.
-