[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
TRADE IN THE AMERICAS: PROGRESS, CHALLENGES, AND PROSPECTS
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HEARING
BEFORE THE
SUBCOMMITTEE ON
INTERNATIONAL ECONOMIC POLICY AND TRADE
OF THE
COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 22, 1999
__________
Serial No. 106-80
__________
Printed for the use of the Committee on International Relations
U.S. GOVERNMENT PRINTING OFFICE
63-475CC WASHINGTON : 2000
COMMITTEE ON INTERNATIONAL RELATIONS
BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa TOM LANTOS, California
HENRY J. HYDE, Illinois HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey ENI F.H. FALEOMAVAEGA, American
DAN BURTON, Indiana Samoa
ELTON GALLEGLY, California MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California ALCEE L. HASTINGS, Florida
PETER T. KING, New York PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South BRAD SHERMAN, California
Carolina ROBERT WEXLER, Florida
MATT SALMON, Arizona STEVEN R. ROTHMAN, New Jersey
AMO HOUGHTON, New York JIM DAVIS, Florida
TOM CAMPBELL, California EARL POMEROY, North Dakota
JOHN M. McHUGH, New York WILLIAM D. DELAHUNT, Massachusetts
KEVIN BRADY, Texas GREGORY W. MEEKS, New York
RICHARD BURR, North Carolina BARBARA LEE, California
PAUL E. GILLMOR, Ohio JOSEPH CROWLEY, New York
GEORGE RADAVANOVICH, Califorina JOSEPH M. HOEFFEL, Pennsylvania
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
Richard J. Garon, Chief of Staff
Michael H. Van Dusen, Democratic Chief of Staff
John P. Mackey, Republican Investigative Counsel
Parker Brent, Staff Associate
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Subcommittee on International Economic Policy and Trade
ILEANA ROS-LEHTINEN, Florida, Chairman
DONALD A. MANZULLO, Illinois ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio PAT DANNER, Missouri
KEVIN BRADY, Texas EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California BRAD SHERMAN, California
JOHN COOKSEY, Louisiana STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California JOSEPH CROWLEY, New York
TOM CAMPBELL, California JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
Mauricio Tamargo, Subcommittee Staff Director
Jodi Christiansen, Democratic Professional Staff Member
Yleem Poblete, Professional Staff Member
Camilla Ruiz, Staff Associate
C O N T E N T S
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WITNESSES
Page
Mr. Walter Bastian, Director, Office of Latin America and the
Caribbean, International Trade Administration, U.S. Department
of Commerce.................................................... 5
Mr. Douglas Browning, Assistant Commissioner, International
Affairs, U.S. Customs Service.................................. 7
Dr. Jerry Haar, Director, Inter-American Business and Labor
Program, Dante B. Fascell North-South Canter, University of
Miami.......................................................... 17
Mr. Philip Stephen Lande, President, Manchester Trade........... 19
Mr. Louis Marrero, President, Spectra Colors Corporation........ 22
TRADE IN THE AMERICAS: PROGRESS, CHALLENGES, AND PROSPECTS
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Wednesday, September 22, 1999
House of Representatives,
Committee on International Relations,
Subcommittee on International
Economic Policy and Trade,
Washington, D.C.
The Subcommittee met, pursuant to call, at 11:04 a.m. in
room 2200, Rayburn House Office Building, The Honorable Ileana
Ros-Lehtinen (Chairman of the Subcommittee) presiding.
Present: Representatives Ros-Lehtinen, Chabot, Brady,
Menendez, and Delahunt.
Ms. Ros-Lehtinen. The Subcommittee will come to order.
Thank you so much for being with us today.
As warfare and political turmoil have become echoes of a
grim past, replaced by the sounds of democracy, trade has
flourished among the countries in the Western Hemisphere.
The days of mercantilism are over, as most governments in
the region realize that economic development, growth, and
prosperity are best achieved through free trade and open
markets, where the entrepreneurial spirit can blossom.
State-owned and operated enterprises are being privatized
and deregulation introduced. Structural reforms in both the
public and private sector have begun toward the creation of an
environment characterized by transparency, efficiency, and
stability.
The 1982 debt crisis in Latin America forced many countries
to adopt an agenda which included a further opening of their
economies to international trade. Average import tariffs in
these countries fell from 45 percent in 1985 to 11 percent in
1997.
These reforms, however, have not been embraced with the
same commitment and enthusiasm in all the countries of the
region. As a result, trade openness, market access, and
competition continue to be pivotal issues in U.S.-Latin America
commercial relations.
Some would argue that they provide the impetus for the Free
Trade Area of the Americas, but there are other realities
driving the negotiations for an FTAA.
As a region, the countries in the Western Hemisphere
constitute the fastest-growing market for U.S. exports and the
second largest regional market for U.S. foreign direct
investment.
In turn, the United States is the fastest-growing market
for their products. Yet, U.S. firms are facing the possibility
of losing this market to European competitors.
In June of this year, leaders from 48 European, Latin-
America, and Caribbean nations signed a declaration to promote
and develop a strategic bi-regional partnership.
If the negotiations are successful, the ensuing agreement
will create a unified market of about 575 million consumers and
would further boost European Union trade in the region.
Within this context, progress and concrete results in
negotiations toward an FTAA are a matter of great urgency.
In July of this year, the trade negotiations committee,
which has oversight responsibility for the entire FTAA process,
agreed to non-Customs-related business facilitation measures to
be in place by January. It will also recommend that a deadline
be set by the trade ministers at the upcoming November meeting
to complete an FTAA draft agreement within the next 18 months.
Nevertheless, by all accounts, the negotiations are
proceeding at a snail's pace, only to be delayed further by the
upcoming WTO rounds.
In the interim, our U.S. companies are battling to overcome
tariff and nontrade barriers, our trade deficit with these
countries is ballooning, and violations of intellectual
property rights continue. Legal trade is being used for illegal
purposes.
Conversely, Central American countries are struggling to
recover from the damage caused by Hurricane Mitch.
The countries of the broader Caribbean Basin Initiative are
looking for preferential trade status equal to U.S. NAFTA
partners, MERCOSUR countries are working to minimize spill-over
effects of the Brazilian currency crisis, and these are just
focusing on a few of the problems.
How do these realities affect the FTAA process? Is the lack
of fast track authority responsible for the delay in the
negotiations? Is the creation of a multi-country, multisectoral
trade agreement the best course of action?
Can large industrialized economies, emerging markets, and
small economies integrate with all parties benefiting equally?
Some would argue that the negative impact of NAFTA and the
disparities in the WTO structure regarding the implementation
of the rules and requirements are vivid examples of how this
approach is doomed to fail. What is the alternative, if any?
These are some of the issues which we will be addressing
during the course of today's hearing, and we thank the
panelists, as well as the audience, for being with us.
[The prepared statement of the Hon. Ileana Ros-Lehtinen
appears in the appendix.]
Ms. Ros-Lehtinen. I now would like to turn to our Ranking
Rember, Mr. Bob Menendez of New Jersey.
Mr. Menendez. Thank you, Madam Chairlady.
Let me thank you for having us have this hearing, which I
think is incredibly timely, as we have the visits of the
president of Colombia here, and at the same time as we are on
the verge of having a visit by Central American presidents
here, speaking about Caribbean Basin Initiative or enhancement.
In December 1994, when I addressed the Summit of the
Americas, the atmosphere was filled with hope as the 34 leaders
stretching from throughout the hemisphere, from Canada to
Chile, agreed to pursue a free trade agreement by 2005, a
market of 750 million people and $9 trillion in gross domestic
products, and that progress since that time has been slow.
Trade relations within the hemisphere nonetheless have been
expanding rapidly. Countries in the region are moving forward
with regional trade pacts in advance or perhaps in lieu of the
FTAA.
There are now five regional trade pacts, including the
MERCOSUR common market, which encompasses South America's
economic power house, Argentina, Brazil, as well as Paraguay
and Uruguay.
As the progress toward an FTAA has slowed, countries in
regional trade pacts are beginning to pursue agreements outside
of the hemisphere, particularly with the European Union and
countries of Asia, and while American concerns about worker
rights and the environment are obviously going to continue to
be part, and justifiably so, as part of the debate, unless we
take the FTAA process seriously, the United States might very
well find itself having ceded what is a natural market to our
European and Asian competitors, and I particularly believe, not
only because of the long history of the United States within
the hemisphere and its geography within the hemisphere, but
also because of the incredible natural resources that America
has in Americans of Hispanic descent, who create a natural link
between the countries of Latin America and the United States,
who understand both language and the importance of language, as
Chevrolet found out when they tried to sell the Chevy Nova in
Latin America.
Nova, for those of you who do not speak Spanish, when
pronounced a certain way, means it does not move, it will not
go. I do not care what type of marketing program you have, but
if it does not move, it is not going to sell.
Language is important, but also business customs, as
Americans learned when they dealt in Japan, that you just do
not deal--sit down, offer your product and service, negotiate a
price, that there are business customs and culture that is
involved. That is also true in Latin America.
We have in our people one of the greatest opportunities to
develop those natural trade links, and many of them are,
notwithstanding the lack of an FTAA.
With those realities in mind, with understanding that trade
with Latin America is the fastest growing of all the
international regions, understanding the Central American
presidents who will be here saying that, for the most part, the
greatest opportunity for them not to have had a century
eradicated by the virtues of the hurricanes that took place and
affected them is to, in fact, have Caribbean Basin Initiative
enhancement, and understanding that, when we look at Latin
America, in which total merchandise trade between Latin America
and the United States for the last 8 years grew by 144 percent
compared with 70 for Asia and 61 for Western Europe, and
everybody was look at the Asian tiger prior to its flu, the
fact of the matter is we have an incredibly exploding export
market for which we are natural allies with and natural
opportunities to take place, and because that effort creates
jobs here at home.
We have a series of issues that, as we explore this, we
need to--and I hope to hear from some of our panelists today as
they talk about some of the issues.
Of course, we have worker rights and environmental
assurances, but also, what are the potential hazards that might
be addressed in a final agreement such as the trans-shipments
of goods from nontrade-agreement countries and the trafficking
in elicit substances or narcotics which might be facilitated,
as some might argue, by a free trade agreement.
We have a number of foreign policy tools we can use to
bolster the region socially and economically. We have spent a
lot of money in the region, particularly during the 1980's, to
promote democracy.
It is amazing to me that, when we have finally, to a large
degree, accomplished some of those goals, at least the
incipiency of democracies, that now we do not seem to be paying
the time and attention necessary to cement those democracies,
of which trade can be one of the great foundations of that
effort.
We want to hear from our witnesses and to learn from them
today and also to exchange in a dialogue to see how do we move
this process along.
Ms. Ros-Lehtinen. Thank you so much, Mr. Menendez.
Mr. Delahunt?
Mr. Delahunt. I do not have any opening statement. Thank
you.
Ms. Ros-Lehtinen. Thank you very much.
I would like to introduce our first panel.
Our first witness is Mr. Walter Bastian, the Director of
the Office of Latin America and the Caribbean for the U.S.
Department of Commerce.
He joined that office in 1974, and he is responsible for
developing programs, policies, and strategies designed to
strengthen the commercial position of the United States in
Latin America.
Mr. Bastian also serves as the Acting Director of the Latin
America-Caribbean Business Development Center, and before
joining the department, he worked in the corporate trust
department of a Washington bank and as an intelligence officer
in the U.S. Air Force, and we thank him very much for joining
us.
He will be followed by Douglas Browning, who is the
Assistant Commissioner for the Office of International Affairs,
where he is responsible for a staff of nearly 100 in the United
States and overseas.
Commissioner Browning has been a U.S. Customs Service
Employee for over 21 years, starting in 1977 as a staff
attorney in the Office of Regulations, where he has served as
an Assistant Regional Counsel in New Orleans and Baltimore and
as a Senior Counsel for International Enforcement in the Office
of Chief Counsel in Washington and District Director in
Baltimore.
Mr. Browning is the recipient of the Presidential Rank
Award for 1997 and was a member of the Customs Executive Team,
where he earned a Hammer Award from the Vice President under
the National Performance Review, and we thank you for being
here, and I would like to ask Mr. Brady if he has some opening
comments.
Mr. Brady. No, ma'am.
Ms. Ros-Lehtinen. Thank you. Thank you, Jody, for your help
today.
She is helping us in our Subcommittee on both sides.
So, we thank you for that.
Thank you, Mr. Menendez, for helping us.
Walter, thank you. We would love to hear from you.
STATEMENT OF MR. WALTER BASTIAN, DIRECTOR, OFFICE OF LATIN
AMERICA AND THE CARIBBEAN, INTERNATIONAL TRADE ADMINISTRATION,
U.S. DEPARTMENT OF COMMERCE
Mr. Bastian. Madam Chair, I am pleased to appear before the
Subcommittee today to discuss our commercial relationship with
Latin America. In many ways, it is a story of present
challenges standing the way of future opportunities.
We are less than 50 days away from the Free Trade Area of
the Americas Ministerial, a ministerial which will bring us
exactly halfway toward completion of this decade-long
undertaking, and it is the proximity to this event that makes
this a timely hearing, indeed.
Let me begin by putting the United States, Latin American,
and Caribbean--putting that trade into perspective.
Latin America is a major trade and investment partner for
the United States, tied closely to us by geography, history,
and culture.
Today, Latin America, including Mexico, accounts for one
out of every five dollars in U.S. merchandise exports, up
dramatically from under 14 percent at the beginning of the
decade.
In fact, Latin America has been responsible for almost half
of all U.S. export growth since 1995.
Further, excluding Mexico, Latin America is the only region
of the world where the United States has consistently run a
large and growing trade surplus in the 1990's, reaching a
record 13 billion in 1998.
I must note, however, that this trend is in jeopardy this
year.
Last year, American firms in 13 U.S. states exported more
than $1 billion each to the Latin American-Caribbean region.
Four states, California, Florida, New York, and Texas, each had
1998 exports in excess of $4 billion to the region.
Unfortunately, even before Brazil's devaluation, the global
financial crisis and lower commodity prices were having a
dampening effect of economic growth in Latin America and
Hurricanes George in the Caribbean and Mitch in Central America
had taken a toll.
While Latin America's economies collectively grew almost 5
percent in 1997, last year's growth was less than 2 percent.
This region-wide downturn, coupled with significant currency
devaluations in several markets, most notably an almost 40-
percent devaluation in the Brazilian rival against the U.S.
dollar, have both dampened the demand for U.S. exports while at
the same time increasing their cost in dollar terms relative to
domestically produced goods.
This slowdown is clearly visible in our trade performance.
Excluding Mexico, 1998 marked the first time since 1986 that
our total trade with Latin America declined, with our exports
to the region flat and imports falling.
Our trade balance, although still in surplus at almost $350
million through July of this year, has decreased dramatically
from the same period last year.
Fortunately, recent reports indicate that the Latin
American downturn may be short-lived, with growth returning to
many of the countries next year. But while growth is expected
to return to the region, followed by an expected recovery in
U.S. exports, let me note four areas of nagging concern, where
recent political and economic developments are continuing to
dampen U.S. commercial opportunities.
First, the current period of turmoil in the Andean
community bears close watch.
Uncertainty in Venezuela, Colombia, and Ecuador has
exacerbated the recent downward trend in U.S. exports to the
region, down by almost one-third during the first 6 months of
1999, and caused a major decline in new investments.
Second, the challenge in Central America rests on the
successful recovery of the region from last year's devastating
hurricane.
The economic impact of Hurricane Mitch on the Central
American countries was enormous, placing significant economic,
social, and political pressure on the region's governments.
Third, there is a significant increase in competition that
U.S. products face within what has heretofore been a
traditional U.S. market.
Latin America and Caribbean nations, strongly encouraged by
the United States, have moved beyond their traditional closed
markets to embrace greater market openness and increased
competition.
At last count, more than 30 regional and sub-regional trade
arrangements were active within the region without U.S.
participation.
Chile, for example, either has or is negotiating agreements
with every democratic nation in the Western Hemisphere except
the United States.
In addition, the European Union, traditionally our
strongest competitor in Latin America and especially in
MERCOSUR is refocusing its attention on the region.
Fourth, one of the administration's key commercial issues
focuses on the need for most Latin American countries to reform
their intellectual property rights legislation and enforcement.
They must do so in accordance with the WTO trade-related
aspects of intellectual property rights or TRIPS agreement
prior to January 1, 2000. Patent, trademark, trade secret, and
copyright enforcement regimes which fail to meet TRIPS
standards are areas of concern.
Despite the aforementioned concerns, Latin America remains
an area of significant opportunity. Let me briefly touch upon
the potential Free Trade Area of the Americas.
Much has changed since the heads of state from the region's
34 democratically elected governments met in Miami in December
1994 to announce agreement toward a Free Trade Area of the
Americas by 2005. But much also remains the same, including the
impetus behind that hemispheric consensus, that a comprehensive
Free Trade Area of the Americas, comprising the world's largest
free trade zone, would offer unparalleled opportunity to
businesses, farmers, and working families and strengthen the
hemispheric move toward open markets under the rule of law.
Today we stand at the halfway point in this effort, and
despite the gloomy economic forecast for 1999, we see little
evidence that the region is any less committed to completion of
the FTAA on schedule, as it was in 1994.
The next FTAA ministerial meeting will take place November
3rd and 4th in Toronto, Canada, and as I'm sure that Mr.
Browning is going to cover, given the mandate to achieve
concrete progress by the year 2000, vice ministers have agreed
to recommend a package of nine customs and transparency
business facilitation measures to be implemented by January 1.
The customs measures will result in more efficient customs
processing for express shipments, for low-value shipments, and
for business-related materials such as promotional materials
and equipment.
Ms. Ros-Lehtinen. If you could start to make your summary.
Mr. Bastian. This should provide the needed impetus to the
negotiations as we move toward their timely and successful
conclusion.
In closing, I want to thank the chair and other Members of
the Subcommittee for your appreciation of the critical work
that we are doing in the International Trade Administration,
and we in ITA are working together as a unit to ensure full
access to foreign markets for goods produced by American firms
and workers and to achieve full compliance by trading partners
with the trade agreements they have signed.
Thank you, Madam Chair.
[The prepared statement of Mr. Bastian appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much.
Mr. Browning?
STATEMENT OF MR. DOUGLAS BROWNING, ASSISTANT COMMISSIONER,
INTERNATIONAL AFFAIRS, U.S. CUSTOMS SERVICE
Mr. Browning. Thank you, Madam Chairman.
Madam Chairman and Members of the Subcommittee, I am
pleased to appear today to address the subcommittee on the U.S.
Customs Service's involvement in the trade programs in the
Western hemisphere, particularly the Free Trade Area of the
Americas initiative.
This initiative calls for the creation of a preferential
trade arrangement encompassing the 34 democracies of the
hemisphere, with negotiations scheduled to conclude by 2005.
The FTAA process promises to have a profound impact on
customs procedures in the region, since the efficient
processing of merchandise at ports of entry will be fundamental
to the agreement's success.
While much of the work in crafting a preferential trade
agreement consists of the political dynamic of exchanging
country positions, there is a technical and, indeed,
operational element that must be considered to ensure that the
trading community receives the full benefit of the preferential
regime.
At the same time, governments involved in the FTAA will
have to address how to ensure that administration of the trade
agreement does not adversely affect enforcement activities.
The key variable in these calculations is customs
procedures and a recognition that efficient and effective
customs practices are the principle mechanism for ensuring that
these goals are accomplished.
Based on this understanding, the United States Customs
Service has been involved in the FTAA process since its initial
stages, contributing to the efforts by the Office of the U.S.
Trade Representative to first explain the existing customs
practices and to assist them in the development of government
positions in the customs arena.
U.S. customs involvement in the FTAA can be traced to the
preparatory stage following the 1994 Summit of the Americas.
Formal negotiations of the FTAA were launched at the second
Summit of the Americas in 1988, and with this meeting came a
negotiating structure consisting of a number of negotiating
groups led by a trade negotiating committee.
Within the negotiating group of market access, customs
discussions have turned to the issue of what procedures may
potentially be incorporated into the FTAA chapter on customs.
Although no conclusions have been reached at this time and
substantive proposals will come in later stages of the process,
I can indicate to you that the U.S. Customs Service has been
very clear in its recognition of enforcement as an important
element for consideration in this process.
In the customs area, the Trade Negotiation Committee of the
FTAA has secured consensus as noted on nine customs-related
deliverables. Each of these is intended to ease the movement of
legitimate trade.
As is the case with other international initiatives in
which we are involved, our work within the FTAA has been
designed to balance the objective of facilitating legitimate
commerce with effective enforcement.
We at the U.S. Customs Service are acutely aware of the
potential challenges that can evolve in the implementation of
any free trade agreement.
Indeed, our experience with the North American Free Trade
Agreement, which overnight created a market of 360 million
consumers, has been instructive in this regard.
Clearly, free trade agreements between the United States
and other countries have the potential to provide positive
benefits to each country that is a party to that agreement.
Unfortunately, the potential also exists for importers to
unlawfully claim preferential treatment under a trade agreement
in order to avoid duty, quota, or other import restraints.
For instance, a trade agreement might allow goods imported
into the United States from a certain country to receive lower
duty rates. The importation or trans-shipment of products from
a country which is not party to that agreement through a
country which is a party to that agreement can result in goods
gaining unlawful access to the United States, as well as
nonpayment of lawful duties or evasion of quota restriction.
Trade agreements, while advantageous in promoting
international trade and investment, do provide opportunities
for unscrupulous importers to gain unfair business advantage.
While there is scant evidence to establish a direct link
between free trade agreements and increased trans-national
crime, this does not diminish the threat from international
criminal cartels.
We recognize that an increase in the volume of trade
provides additional opportunities for these criminal cartels to
secret their cargo in and among legitimate cargo.
At the U.S. Customs Service, we know the threat is real,
and it is not only growing in magnitude, it is also growing
more complex and more sophisticated every day.
Accompanying these general challenges are issues specific
to the region, particularly as they relate to the illicit
trafficking of narcotics and the laundering of proceeds from
trans-national crimes.
There are innumerable methods used by drug barons to
launder the proceeds of narcotics trafficking. One of the most
complex, far-reaching, and insidious is through the use of
legitimate international trade.
The black market peso exchange is an example of how trade
is used to launder drug money, and if I might, I would like to
give you just a brief illustration of how this process works.
We will use Colombia as our example.
In Colombia, a narcotics trafficker produces and ships
illicit drugs to the United States. The narcotic trafficker
uses the Colombia pesos to pay for these operations in
Colombia.
Upon selling the drugs in the United States, the narcotics
trafficker receives large amounts of U.S. currency, which the
narcotics trafficker then sells in bulk amounts to a specialist
in handling narcotics proceeds.
The specialist, often called a peso broker, undertakes to
transfer the proceeds back to Colombia to pay for the narcotics
trafficker for the money received in the United States minus
the broker's fee. Currently, this fee is approximately
somewhere between 25 percent. Once that is done, the
transaction starts again.
International trade is the Customs Service's core business,
and we are uniquely suited to address the issue. We are now
educating those businesses which are involved in international
trade and which are at risk of being victimized by drug money
launderers.
In the last 8 years, our undercover money laundering
operations targeting the peso brokering system have resulted in
the seizure of over $800 million in cash and monetary
instruments.
Ms. Ros-Lehtinen. Please summarize your statement now, Mr.
Browning.
Mr. Browning. As a final point, Madam Chairman, trade
relations with the Americas are an area in which the U.S.
Customs has focused a great deal of attention.
We are now engaged in supporting the free trade of the
Americas and are drawing upon our NAFTA experience and what we
know to be the challenges posed by trade in the Americas to
support the goals of trade liberalization and effective
enforcement.
Each year at our land, air, and sea borders, Customs
processes over 15 million containers, approximately 460 million
passengers, and a 125 million conveyances at our 301 ports of
entry.
Since the passage of NAFTA, we have seen trade with Canada
and Mexico increase substantially.
The FTAA, which will be comprised of the 31 remaining
countries in the hemisphere, promises to increase trade even
more dramatically.
Efficiency in customs procedures, defined in terms of
facilitation--facilitating the movement of legitimate commerce
and preserving effective enforcement, will be a key
consideration in the context of this anticipated growth.
Thank you, Madam Chairman.
[The prepared statement of Mr. Browning appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much, Mr. Browning.
Mr. Bastian, as we know, many--some have said that the
FTAA, along with other trade agreements, have the potential of
lowering the standard of living for U.S. workers, encouraging
U.S. businesses to relocate to take advantage of the lower
wages which are being offered in other countries, also the
environmental laws would not be enforced enough, the same
arguments that we had heard in NAFTA.
Do you hear that related to the FTAA, and what arguments
can you make to those who fear that this new trade agreement
would go in that direction, similar to NAFTA?
Mr. Bastian. Madam Chair, obviously we are familiar and
cognizant of the concerns, particularly as they were expressed
in the NAFTA debate. I think the situation changes a little bit
in the Free Trade Area of the Americas.
The concerns remain very real, but I think, if you are
focusing part of the answer to this on, let us say, the
assembly section, I think the further south you go, that
becomes less and less of an issue, because the business itself
becomes less and less viable.
I do think that the argument, also, that we have made in
the FTAA debate is that our interest in all of this and I am
sure that the interest of the foreign governments is in raising
those lower standards of living.
Their intent in market reform, market liberalization in the
trade agreements that they are signing is to raise their
standards, is to raise the wage scale, improve the whole social
situation for citizens of the hemisphere.
I think that is a driving force, in part, behind this, that
they realize that they cannot afford, as governments, to
continue to maintain the status quo with respect to social and
environmental programs that they have in place. The FAA is
viewed as an avenue to begin to address some of those issues.
Ms. Ros-Lehtinen. Thank you.
Mr. Browning, in your testimony, you talked about the
potential threats that I think are very real to us about money
laundering, counterfeit merchandise, black market trade.
How successful do you think that we will be in working with
our trading partners, our allies in making sure that we would
stop this traffic of contraband, and what about the fears that
folks have that we will be lowering our inspections and our
standards because of the FTAA?
Mr. Browning. Madam Chairman, as you are aware, we have a
relatively small work force of 20,000 very dedicated officers,
but one of the things that has been most helpful to us is we
have been developing strategies that we think will, first of
all, enhance our ability to do our job better, better targeting
mechanisms.
Congress has been extremely good to us in the area of
providing us with nonintrusive technology, x-ray facilities
that we can use to rapidly examine cargo coming into the United
States, and at the same time continue to move--facilitate the
movement.
We have also recognized that we cannot do this alone. We
have developed a number of industry partnership initiatives,
our Business Anti-Smuggling Coalition, our Carrier Initiatives
Program, our ACSI, America's Counter-Smuggling Initiative, all
of which are designed to elicit the assistance of people who
know that business best, and that is industry, and helping us
to identify areas of potential vulnerabilities.
On the international side, we have had great success in
developing lines of communication and information exchange with
our counterparts.
Indeed, we have in existence about 44 customs mutual
assistance agreements, and I would have said yesterday, 6 of
which are with countries in the Western Hemisphere, but as of
yesterday, we have now added Colombia to that battery of
agreements, and the Commissioner signed that agreement, with
his counterpart, in Miami yesterday.
A good bit of the groundwork--and I think a lot of that is
to be attributed to the very open approach that we have
received from the Pastrana Government and other governments in
that hemisphere, and if this is indicative of what we are able
to do, I think we will have some success in getting our
partners on the industry side and our partners in the other
government agencies working with us to try to address this
issue.
Ms. Ros-Lehtinen. Thank you so much.
Mr. Menendez?
Mr. Menendez. Thank you both for your testimony.
Let me ask you, what--Mr. Bastian, what are the situations
in Venezuela? President Chavez will be here tomorrow. President
Pastrana is here today. Those situations that you reference to
in your speech--how do they affect this whole process?
You talked about the current reality of its reduction with
some of those countries. How do they affect--have we noticed
any appreciable differences in the role that the ministers have
taken from those countries in terms of promoting the FTAA, and
how do they affect the process as we go through the second half
of the 5 years that is left?
Mr. Bastian. I think the short answer is--have we seen a
retrenchment or a withdrawal of the visibility of the ministers
from these countries in the FTAA process?--and the answer is
no. But I think the concern--looking at it from the perspective
of the Department of Commerce and the U.S. business community,
I think there we begin to see that there are some very real
concerns.
There is a concern with the direction that the Chavez
government is going, so much so, I think, that it in part
dictates the reason that he is up here, this week along with
his ministers meeting with government and private sector
officials. He has also representatives from his constitutional
assembly, the legislature, up here for the same purpose, to
clam investors nerves because the U.S. business community, in
Venezuela is wondering what direction this new constitution is
going to go and what it is going to mean particularly for U.S.
investment.
I think there is concern also--and this what really may
affect the FTAA process, as to what is happening in Colombia.
This is especially true with respect to its political problems,
which really are more the purview of the State Department or
the National Security Council than ours, but we look at it,
again, from a business perspective.
What has happened to U.S. investment down there? It is
slowing down. Trade is also dropping.
How do you keep people engaged? You have U.S. companies
there and also in Ecuador. What does this do for less
investment on the part of U.S. companies, less job creation.
The long-term spill-over effect, I think, from those
situations poses a hazard to what we are trying to accomplish
in the hemisphere through the FTAA.
Mr. Menendez. It has not lessened the zeal of the private
sector still to seek an FTAA.
Mr. Bastian. It has not, but I think you began to see -- in
this country, we believe very strongly in the public-private
sector partnership, and I know, in our department and in
others, we have all sorts of committees and councils, and we
get together with the private sector to hear what their
concerns are and help us develop our negotiating strategies.
That is an idea whose time has not quite come in Latin
America, and I think as the situations deteriorate in the
Andean region, I think what you get is less receptivity on the
parts of some of the governments to listen to their private
sectors, to get private sector input on the way negotiations
should go, and that concerns us equally.
Mr. Menendez. One other question. What is the effectiveness
of the South American sub-regional trade pacts on the FTAA and
the upcoming WTO new round of possible negotiations?
Are the Latin Americans saying, well, this is taking too
long and we have the Europeans out there pursuing us, we have
WTO maybe pursuing us, we have all of our own regional trade
pacts, maybe we really do not need this at the end of the day?
Mr. Bastian. I think there are probably a couple of points
in response to your question.
I think, first and foremost, that the United States is
still the market everybody wants to be able to deal with. We
have the largest market in the world, and the trade figures
yesterday, I guess, reflect that. I mean we are the market
everybody wants to sell into.
I also think maybe from the Latin American perspective --
and trying to read this from Washington could be difficult.
Mr. Menendez. A lot of us would like to marry Jennifer
Lopez, but we may never think it is possible. Not me, but the
question is do they believe that this whole process is
ultimately going to achieve that?
Mr. Bastian. I think that is the second part of the point I
am trying to get to. I think they do.
I think, in retrospect, the easy part of this whole
process, this whole Latin American reform process, was making
the decision to go forward with it. The difficult part comes in
implementing it, and it is not one of these things that is
implemented overnight, and we are beginning to see some of the
fallout from that.
That is natural.
I mean any academic exercise along these lines would show
it to you, that in reform processes, you cut down on bloated
bureaucracies and cut the Federal spending and so forth, you
are going to have unemployment and a number of issues that they
have to work through, and I think that possibly the timing
here, going from 1994 to 2005, to a degree, gives them a chance
to make some adjustments, also gets them a chance to engage
further in market expansion.
Maybe it is not possible to sell all of their product into
the United States, because--for a variety of reasons, we do not
want it, it is not competitive, whatever, developing
alternative markets is important to them, and I think MERCOSUR
goes a long way to--in that regard, and I would think also
there is the fact, particularly if you are Brazil, that you
might think that the MERCOSUR--strengthening MERCOSUR and
developing more trade agreements with other Latin American
countries outside of MERCOSUR, as they have done with the
Andean community, strengthens their hand as we get closer to
2005.
Mr. Menendez. One last question, Mr. Browning.
What does the Customs department view as or envision in
terms of placing safeguards on the questions of trans-
shipments? Is that part of the negotiations that are taking
place? Can you give us any preview as to how you are going to
safeguard in terms of trans-shipments?
Mr. Browning. Clearly, Congressman, one of the issues that
would arise would be the question of origin of goods under any
preferential arrangement, and there is within the nine items
that have been identified a clear regime of discussions to
address the question of origin.
As is the case with NAFTA where we have a very rigid origin
certification process, I would anticipate that would be the
same process involved in the FTAA. No doubt, with the number of
questions involved, it will be more complex for us to enforce
that, but there is a residual impact on countries that allow
themselves to be used for trans-shipment purposes, and that is
that legitimate merchandise manufactured in that country will
not receive the benefits of the particular preference, and that
impacts more directly the goods and services and economy of
that country.
I think that there will be both an incentive to try to
enforce this, as well a precedent and a mechanism for ensuring
that we can enforce the question on rules of origin and origin
of goods that are subject to preferential treatment.
Mr. Menendez. Thank you, Madam Chairman.
Ms. Ros-Lehtinen. Thank you so much.
Mr. Brady?
Mr. Brady. Thank you, Madam Chairman.
Thank you both for testifying today.
I had a very good question prepared but got distracted when
Jennifer Lopez got introduced into the discussion. Other than
my wife, I cannot think of anyone more distracting than her.
A question, Mr. Bastian. Your remarks reflect a frustration
that many of us have, which is short-term, year-to-year events
affect our long-term view on trade, slow down our negotiating,
and really put off what we know is the right thing to do long-
term, which is negotiate this free trade agreement.
My question is, in the end, do you have any idea in what
form the Free Trade Agreement for the America might take? Would
it follow a NAFTA-type format, a MERCOSUR-type concept, a
European Common Market approach? Just guessing, as you watch
things unfold, which direction is it headed, if any?
Mr. Bastian. I hope it is headed in a direction.
I think I would see this going more closely along the lines
of a NAFTA, as comprehensive as possible agreement with
significant safeguards for our industries, but without
sacrificing--as with NAFTA, without sacrificing the protections
and the mechanisms that are available for U.S. companies, but I
see it probably as broad and expansive as possible, which,
frankly, is complicated.
I mean the more countries you have, that makes it a more
difficult process.
Mr. Brady. What is the most important thing Congress can do
to keep these negotiations moving forward?
Mr. Bastian. I think, to send the message, would be fast-
track authority, no doubt about that. We have done a very good
job in the last 4 years of convincing--of convincing Latin
Americans that fast-track was absolutely key to the negotiating
process and we really needed fast-track, and they bought it.
We know that we can obviously continue to negotiate without
it, but I think, as a signal sent, I think that passing fast
track would be an extremely strong one.
Mr. Brady. Thank you very much. I agree, for whatever it is
worth.
Mr. Browning, some opponents of free trade, in effect, say
free trade means--increased trade means increased crime,
increased drugs, increased chaos, so therefore the answer is do
not increase trade or go the opposite way.
Isn't your approach much more common-sense, which is,
because increased trade, like any other changes in the world,
increases the opportunities, give us the resources and let us
continue to work smarter and better to address the new changes,
new approach.
Mr. Browning. Congressman Brady, I agree 100 percent with
you.
As I noted earlier in my comments, one of the things for us
as an organization that has been most encouraging has been the
support we have received from Congress in the nonintrusive
technology area.
We have a deployment plan over the next 5 years that will,
in fact, deploy $54 million worth of nonintrusive technology
along the southern tier, and I think we recognize that that is
a clear area of vulnerability.
With those tools, with additional targeting mechanisms,
with better educating our people on what we need to look at, I
think we should be able to continue to safeguard the borders of
this nation.
Mr. Brady. From your standpoint, obviously, trying to stop
31 smaller leaks at their source is more productive than trying
to stem a flood when it gets to our borders.
What kind of enforcement mechanism would be strong enough
in this agreement to provide the incentives to tackle this
issue, these issues at their origin, at the source? What kind
of enforcement mechanism really works?
Mr. Browning. Actually, I think one of the things--and some
of this we are pursuing already. I am not sure if you can build
into an international trade--free trade agreement a mechanism
that will necessarily achieve the result that you are talking
about, Congressman Brady, but I think, in getting the various
customs administrations and law enforcement agencies talking
together about the issue and about the potential impact in
providing technical assistance and training, and a very good
example of this is what is happening in the context of
Colombia.
Through both our treasury department, through our justice
department, through the utilization of fees, assets, a
substantial commitment is being made in training and the
infrastructure area to assist the Colombian government in
better policing and better addressing some of the concerns that
potentially impact us as a nation.
Your logic is flawless. We have, in the area, for example,
of weapons of mass destruction, made a substantial commitment
in western Europe--sorry--Eastern Europe, to trying to stem at
the source the movement of these kinds of commodities and are
starting to see some results.
I think that the issue here is to assist these nations in
understanding the potential impact, to provide them with
infrastructure, and to create cooperative bridges for training
and technical assistance and the resources to support that can
be made available to them.
Mr. Brady. Thank you very much.
Ms. Ros-Lehtinen. Thank you, Mr. Brady.
Mr. Delahunt?
Mr. Delahunt. Yes. Thank you.
This testimony is very informative, and I want to thank
you.
I think it was Mr. Bastian who talked about living
standards.
I am a member with has a concern about workers' rights. I
translate the concept of worker's rights into living standards,
and I see a relationship between living standards and the
uncertainty and turmoil we see in some Latin American nations;
You indicated that living standards have improved.
I think it is very, very important to provide Members of
Congress with that information in very clear and simple terms
so that at least I can understand it. Earlier, you referenced
Venezuela.
I recently returned from Venezuela and had an opportunity
to meet with President Chavez, who is going to be meeting with
Members of this Committee tomorrow, and the business community
expressed concerns, because it is uncertain as to what is
occurring.
There is a new constitution that is being formulated.
I think some of their concerns will be assuaged and will
disappear. But I think it is important to understand that, for
many of us, the prosperity that is brought about by free trade
be shared equally among all members, all citizens of these
various societies.
In the past 20 years in Venezuela, under dark democratic
government--I guess there are degrees of democratic
governments, but we now have a situation in Venezuela where you
have 80 percent of the population below the poverty line, and I
dare say much of the turmoil that exists in Colombia can be
accounted for because of disparity of income and wealth among
citizens.
The reality is, in Latin America, for years, we have had
economies where there are those few who have and those that do
not have, in large numbers.
I guess that is more of a statement than a question, but I
have got to run, because I am meeting with President Pastrana
at 12 o'clock.
Mr. Bastian. If I could just leave with one number--or a
couple of numbers, that distribution that you are talking about
concerns us greatly, and I think one thing that struck me even
more than the one I think you mentioned is a figure I saw last
year talking about Brazil. I think the figure was 70 million
people living on a dollar a day or less, and that cannot be
sustained.
Mr. Delahunt. My concern, Mr. Bastian, is that until that
issue is addressed, we are going to have nominal democracies.
We can have all kinds of elections, but we are not going to
have democratic societies where all citizens have the ability
to participate in the prosperity that is hopefully generated
through a market economy.
Mr. Bastian. I think we agree absolutely with that.
Mr. Delahunt. Thank you, Madam Chair.
Ms. Ros-Lehtinen. Thank you so much.
Thank you, both of you, for being here with us, and we
appreciate it. We will continue our dialogue as the FTAA gets
further going. Thank you so much.
Mr. Bastian. Thank you, Madam Chairman.
Mr. Browning. Thank you, Madam Chairman.
Ms. Ros-Lehtinen. I would like to introduce our second
panel.
Our first witness will be Dr. Jerry Haar, the Senior
Research Associate and Director of the Inter-American Business
and Labor Program at the Dante Fascell North-South Center at
the University of Miami, as well as a research affiliate at
Harvard University's David Rockefellar Center for Latin America
Studies.
He is a former Director of Washington Programs for the
Council of the Americas, and he has held several senior staff
positions in policy and management with the Federal Government
and has served as an adviser to numerous corporations.
Dr. Haar has written extensively on economic and political
issues pertaining to the Americas, but more important, he is a
constituent of my legislative district. Thank you.
Then we will also hear from Stephen Lande, who is the
President and founder of Manchester Trade. Currently, he is
advising several Latin American and Caribbean governments on
their participation in a Free Trade Area of the Americas.
Before entering the private sector, Mr. Lande served as the
First Assistant U.S. Trade Representative. He established a
trade consultation group and worked on the U.S. implementation
of the general systems of preferences.
In addition to his consulting work for foreign and domestic
clients, Mr. Lande has authored two books and has written
numerous articles about these issues.
We will also hear from Louis Marrero, President of the
Spectra Colors Corporation, and because he is a constituent of
our distinguished Ranking Member, Mr. Bob Menendez, I would
like to have Mr. Menendez introduce Mr. Marrero to us.
Thank you.
Mr. Menendez. Thank you, Madam Chairlady.
We appreciate Mr. Marrero coming from New Jersey on
relatively short notice, because we had a previous witness, but
when the hurricane knocked us out last week, Mr. Marrero was
very good to come, and I think that he has--I mentioned earlier
that, in trade with Latin America, we have some natural links
in terms of that trade, and I think he, in his testimony as it
relates to his company, is going to be someone who, in fact, is
going to be able to be part of the living testimony to that
reality and why, in fact, the FTAA is a very good proposition.
We look forward to listening to him and thank him.
I am going to very briefly, Madam--because I have President
Pastrana with the democratic leadership, but I will be right
back. I want to pay my respects to him while he is here. I do
not want him to think I have slighted him as the only Hispanic
member of the leadership. It would be somewhat offensive, I
think. I will be right back.
Ms. Ros-Lehtinen. We are proud of you for your work in that
leadership post, Mr. Menendez, and he will be meeting with the
other side of the aisle following that, so I am going to try to
speed this along if we can in order to accommodate the
president.
We thank all of you for being here. We will enter your full
statements into the record, and I would ask you to please
summarize your statements, and I will be watching that clock.
Thank you, Dr. Haar.
STATEMENT OF DR. JERRY HAAR, DIRECTOR, INTER-AMERICAN BUSINESS
AND LABOR PROGRAM, DANTE B. FASCELL NORTH-SOUTH CANTER,
UNIVERSITY OF MIAMI
Dr. Haar. Thank you, Madam Chair--I am delighted to be a
constituent, by the way--and Members of the Subcommittee.
I appreciate the opportunity to testify on the Free Trade
Area of the Americas.
As a leading policy research institution on U.S. Western
Hemisphere relations, the North-South Center has focused on the
FTA since plans for hemisphere free trade were discussed nearly
5 years ago at the first Summit of the Americas in Miami.
I have been asked to address the progress to date briefly
on the FTAA and outlook for the year 2000 and slightly beyond
that.
Essentially, the progress to date on the FTAA can be
classified somewhere between unremarkable and disappointing.
The commonly held belief hemisphere-wide is that
negotiations have accomplished only the bare minimum and that
the FTAA is languishing, having lost any momentum it may have
had and that the negotiators are light-years away from meeting
the 2005 completion date, nevertheless there have been concrete
achievements, too, in spite of the lackluster performance.
One major achievement has to do with process, and the other
is one that deals with substance.
In the first instance, dealing with process, the FTAA,
remarkably, has brought together 34 countries toward a common
cause of trade liberalization.
Plans and agendas were formalized, working groups were
formed, a negotiations committee was established, and the
actual negotiation process was begun.
A second accomplishment, the real substantive one, was
achieved just 6 weeks ago in Bolivia, where an agreement was
reached to implement by 2000 nearly 20 business facilitation
measures, including nine customs measures aimed at improving
and facilitating customs clearance and transparency.
Hopefully, these measures will make trade transparent,
efficient, and really focus on the small exporter and importer,
who, more than anything else (despite the trade rhetoric that
has been hair-spliting by numerous attorneys and trade
bureaucrats) wants to see goods getting in, getting paid, and
getting the product out.
That commendable aspect of the FTAA is one that we need to
focus on and one that should be commended in spite of the slow
progress.
The outlook for the year 2000 with regard to the FTAA and
even beyond that, I would say, in spite of the lackluster
performance to date, is one of guarded optimism. Why? As I have
just mentioned, the implementation of business facilitation
measures.
This will create the tangible results that the business
community has been waiting for, and by business community, all
business communities, not just in the United States.
Second, there is the impact of the launch of the World
Trade Organization negotiations. It has set a conclusion date
for 2002 rather than 2004.
While my colleague and one of Washington's top trade
experts, Mr. Lande, sitting to my right, feels that the WTO
will, in fact, dissuade a lot of the negotiators in the FTAA
from making concessions early on, waiting to see how the WTO
does develop, I would argue that, because the WTO is going to
finish earlier, it could, within 18 months, push ahead and
accelerate the FTAA negotiations.
Another factor where I have guarded optimism is the U.S.
presidential elections. After November 2000, the President-
Elect will have the opportunity to craft a leadership role in
achieving an FTAA, making it an administration priority in
United States-Latin American relations.
Another factor, as has been mentioned earlier this morning,
is the growing European presence in the region. Corporate
giants such as Ericson, Banco Santander, Airbus Industries,
SmithKline Beechem, and Volkswagen are competing head-on with
U.S. firms.
Also mentioned this morning, 2\1/2\ months ago, the EU and
MERCOSUR agreed to begin discussions on a trade agreement.
Europe has got an aging population. It is a slow market in
terms of expansion. Therefore targets will be set on the
Western Hemisphere.
May I also add there will be a recovery in Asia. Whatever
goes down must come back up, and Asians will be focusing their
attention, as they have already in Mexico, of moving in,
jumping behind the MERCOSUR tariff, and other arrangements to
get at growing markets for consumer and industrial goods.
Another factor not mentioned this morning is unilateral
trade liberalization. Led by Chile, a number of other countries
want to compete within the region against other less-developed
countries for access to investment dollars, financing, and
markets.
One example is the beer industry, which I know all too
well. The Bahamas recently enacted an excise tax on locally
brewed beer and reduced the tariffs on imports. This was done
to make local producers more efficient and competitive.
Unilaterally, the Bahamas has decided to move ahead in the
area of trade liberalization, and similar developments are
brewing throughout the region.
It has already been mentioned that the Latin American
region is a very attractive place, the best for U.S. trade in
terms of its level of growth. Suffice to say our exports to
Latin America are expected to surpass Europe by 2000 and exceed
those to Europe and Japan combined by 2010.
In my testimony, I have provided examples not from the
Fortune 100 companies but from dynamic medium-sized firms like
Lexmark International in Kentucky, Timken Corporation in
Canton, Ohio, and Tech Data of Clearwater, Florida, taking
advantage of trade opportunities.
In conclusion, I would say that it seems highly unlikely
that the 2005 deadline will be met for achievement of an FTAA.
Most likely we will witness at the beginning of 2004 what I
consider a cramming for finals approach in order to come close
to meeting that 2005 deadline.
Be that as it may, I submit that it is in the national
interest of the United States to exert a leadership role in
FTAA. With average Latin American and Caribbean tariffs four
times higher than the average U.S. tariff, the FTAA can further
open markets, benefiting U.S. businesses and workers.
Thank you.
[The prepared statement of Mr. Haar appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much, Dr. Haar.
Mr. Lande?
STATEMENT MR. PHILIP STEPHEN LANDE, PRESIDENT, MANCHESTER TRADE
Mr. Lande. I appreciate the opportunity to appear before
the Subcommittee to give my views on progress and prospects for
trade in the Americas.
I would like to thank the amazing cooperation of the
committee staff, both sides of the aisle, for allowing this
hearing to take place despite hurricanes, Jewish holidays,
Presidential visits, etcetera.
Being from New York and when you are subject to a 4-minute-
and-45-second limitation, you desire to speak very fast, but no
one understands you.
Instead, I will try to highlight a few of the points that I
have made in this testimony, that I have made in my written
statement, and I hope the rest can be made part of the record.
The current figures which shows the United States playing a
leading role in Latin America mask some very significant
weaknesses in the position and also does not explain some of
the threats we face.
While it is true that we do dominate trade in the northern
part of the hemisphere, having 74 percent of the Mexican
market, 48 percent of the Central American market, and 40
percent of the Caribbean market, Carricom market, the figure
declines to 35 percent of the market of the Andean communities
and only 21 percent of the MERCOSUR market. In fact, in many
years, Japan and European Union exports to this region exceed
those from the United States.
The second is the threat, and as Walter Bastian pointed
out, there are 31 free trade agreements in the hemisphere
today, agreements where it is much better to be inside, meaning
that your exporters are able to ship paying lower duties, than
to be on the outside.
We are on the outside of 30 of these agreements. We are
only on the inside of one, certainly the most important one,
NAFTA, but the other 30, and the real threat is that Brazil,
who views itself and in many ways is the premier country of
South America and a competitor of the United States, is
expanding its agreement.
It has gone beyond MERCOSUR, where its agreements now cover
all--with all principle countries in South America, and the new
threat is the European Union, and next month, the European
Union will sit down with MERCOSUR and could begin negotiating a
free trade agreement, which will have a negative effect on the
United States
The three points I would like to make here--or the three
points--the thing I should like to address is first the
question of fast-track, and as pointed out in response to
Congressman Brady's question, this is a very serious problem,
the absence of fast-track.
Second, despite Mr. Haar's characterization of my position,
I would like to explain my position on the FTAA and the
relationship to the Uruguay Round, and third, I would like to
emphasize the importance of preferential programs, particularly
the expansion of the Caribbean Basin Initiative and, starting
next year, the importance of addressing--starting in the next
Congress--the importance of expanding the Andean Pact
Preferences Act, and so on.
There are significant differences on fast-track, and we are
not going to solve them through debate. Republicans strongly
believe--I will not characterize Republicans.
I will simply say that one view views the issue of the
linkage between trade and labor and environment in one way --
i.e., that trade perhaps is the best way to have economic
growth and through economic growth you perhaps solve some of
these problems, and the other side believes that there is a
linkage where you really have to have economic sanctions and
use trade as your major instrument as a way to convince
countries to have acceptable labor rights and environmental
rights.
As so often happens in a democracy, when you have such
strong positions, you have to develop a compromise, and I just
would like to put one idea on the table for the consideration
of the committee for a compromise in the labor area.
One development over the last 2 years has been the increase
in the prestige and the effectiveness of the International
Labor Organization, particularly its ability to carry out
investigations and make decisions as to whether countries'
labor rights are consistent or not consistent, labor practices
are consistent or not consistent with the requirements of labor
conventions.
Let this group be the investigating body. Let this group
make the decision. Take the United States out of the role of
being the unilateral decisionmaker. We are not God. We are a
significant country, but it is better to have these decisions
made in a equitable and a generally recognized version.
If, however, there is a violation found, then it is
important that the United States does take a step. Violations
of labor rights are very similar to violations of human rights.
I am not sure that trade sanctions are the most effective,
because they really harm the very workers you are trying to
help, because you create unemployment. They do not have
economic opportunities.
There are a whole group of other sanctions which have been
applied effectively in the past and which should be considered
perhaps to be used in this area.
Travel restrictions on country leaders allow--clearly send
a message. For example, the inability to travel to Florida,
which is particularly important to Latin American leaders, not
only deprives them of access to one of the leading shopping
meccas of the world but perhaps more significantly prevents
them from obtaining first class medical care and limits access
to a very efficient financial center.
In addition, sanctions can be applied through limitations
on military cooperation, limitations on cultural and sports
exchange, etcetera.
The idea, of course, if you can come up with some way to
deal with fast-track with this question of linkage, then you
have a chance to pass fast-track.
A second challenge is how do we keep the FTAA moving while
the World Trade Organization is taking place? The danger is
that, if the WTO lasts for 3 years--and looking at the Uruguay
Round, which was supposed to end at the end four but went on
for eight, I am not sure the WTO is going to make that deadline
for the multi-literal negotiations--what can you do in the FTAA
agreement?
Being a professor of trade, it would take me many minutes
to describe how you do this. What I really would suggest, look
at the testimony I have presented, but just remember that you
can form agreements within the FTAA which not only will move
that process forward, but by not allowing the participation of
other countries, meaning the participants in the Uruguay Round
or nonhemispheric countries, you kind of say, hey, I do not
want to be left out.
If you make an agreement on government procurement that
allows countries to participate in the U.S. market for
government goods, the Koreans and the Chaebols and the Keretsus
are going to want to participate. They are going to say, hey,
we better do the same thing here.
You can make a very tough agreement on agricultural
subsidies, where you basically outlaw them in the hemisphere.
You cannot enforce that agreement until you get the
European Union in place, but if you do that agreement, it gets
the interest of all agricultural exporters into moving the WTO.
There are areas the WTO is not covering. Investment--there
is no international agreement. We have a short deadline.
What I would simply say is--and this could be a role for
Congress, as well--is to continue the pressure on the
administration to use the FTAA, not to let it wilt on the vine,
but to use it during the multi-lateral trade negotiations and
to make progress within that particular area.
My last comments concern the significant improvement of
enacting the CBI and the Andean Pact Preference programs.
Perhaps nothing shows how important it is than the fact
that you point out that you are going to meet the presidents of
Central America, I believe, tomorrow or the next day and you
are meeting the president of Colombia today.
One of the presidents of Central America, I understand,
will not be able to make it because of the continuation of the
natural calamities.
The best way to deal with natural calamities is by dealing
with the apparel and textile industry which is the one industry
that is still able to thrive in Central America.
What should be remembered is that a program like the
Caribbean Basin Initiative, particularly its extension to
textiles and apparel, benefits U.S. workers and U.S. producers
more than they benefit Central American and Caribbean workers,
because it is only through Co-production where you are able to
take advantage of U.S. competitive advantages in a number of
areas that you are able to then produce.
Nothing is more important than the next Congress address
the question of the Andean Pact Preferences, particularly with
Colombia. This is a program that has worked. We are all able to
get flowers all throughout the whole year. Miami's port has a
record employment because of this flower exportation. I hope
very much you address those issues, as well.
Thank you very much.
[The prepared statement of Mr. Lande appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you, Mr. Lande.
Mr. Marrero.
STATEMENT OF MR. LOUIS MARRERO, PRESIDENT, SPECTRA COLORS
CORPORATION
Mr. Marrero. Thank you very much for having me here today,
Madam Chairperson.
Speaking from personal experience of a minority-owned and
small business, South American companies prefer to buy from the
U.S. Perception and reality is that we have quality and
assurance, consistency in supply, price stability, and quick
delivery.
On the perception of consistency, in many cases it's true,
many companies do not provide the service needed. As a small
business, we find that we enhance our sales by providing the
quality of sales and services larger companies do not offer and
those countries do not have.
We, the United States, are more attractive because of our
economic stability. The reliability of our stable currency will
assure prospective clients a similar course within the business
cycle.
In order to further expand sales exchanges with these
economies, we must avail easy liquidity to stimulate commerce
or we must have affordable, accessible credit insurance
programs for small businesses.
Foreign investment by the U.S. companies is restricted
because of the uncertainty of the economies. Small companies
have to take risk in selling on open and un-secure terms.
FTAA can be the salvation of many of the weaker economies
in the region by means of buying and selling commodities
without paying duties.
With the U.S. leading the effort in the export market, the
regional economies will benefit directly by making the cost
relatively level with product coming from the Far East.
In fact, FTAA should be an expansion of the MERCOSUR and
other agreements in which all participating companies freely
trade without paying duties for goods bought and sold within
the group.
The United States has a leg up on the rest of the world as
long as we are competitive. Our close ties with the Americas is
a decisive force in decisionmaking in our favor.
Europe has not gained on the United States because of the
distance and lack of competition. Our costs seem to be lower
than Europe, therefore we can sell better prices. The quality
is good.
Asia is our main competition. China and India's lower-
priced products are available throughout the world. While they
lack some of the communication skills needed in South America
and other places, they are gaining very fast.
Spectra Colors Corporation products are very desirable
throughout the world because of our technology, quality
consistency, and sometimes competitive pricing.
Obstacles in soliciting export business, the high expense
of traveling international versus domestic travel in the United
States, we lack economic, political, and knowledge of foreign
customs and ways outside the United States We have an unsafe
feeling brought on by the news reports which show violence and
confrontations to the American people. Currency differences and
instability, of course, are a problem. Lack of pre-
qualification of potential accounts is difficult or
nonexistent.
My belief in how to promote U.S. business abroad--make more
businesses aware of U.S. offices abroad. They have a low-cost
program in qualifying new potential businesses and contacts,
therefore make a trip abroad more productive by pre-qualifying
each contact.
Local representation is another key to selling in other
countries. Web-sites promote American businesses throughout the
world. World trade missions open doors easier than traveling
alone. U.S. credit issuers will sell with lower risk and peace
of mind.
That is all I have. Thank you.
[The prepared statement of Mr. Marrero appears in the
appendix.]
Ms. Ros-Lehtinen. Thank you so much. We appreciate it.
Thank you so much for being with us.
I have a general question for the three of you, and you may
answer it in any way that you would like. Many of you have
addressed that in your testimony already.
To what do you attribute the growing U.S. trade deficit
with countries in the Hemisphere? Would you agree with the
argument raised by the Department of Commerce and USTR, who
attribute it to foreign economic weakness versus a strong U.S.
market, or do you see other factors, and how confident are you
that the FTAA will strengthen our position in this trade
imbalance?
Dr. Haar. I would say the manifestation of the trade
deficit in the United States is due to reasons far beyond the
trade deficit itself. Fundamentally, one could argue that
deficits are neither good nor bad; the question is the ability
to service deficits without causing economic calamity.
The Greenspan-led economic growth cycle continues led by
the expansion of credit in the United States at the consumer
level--I am a perfect example of that; I use my Visa card to
pay my Master Card bill. You have excessive levels of debt
incurred both in the public sector and in the private sector,
and I think that is attribution of a strong and growing
economy.
I do not necessarily believe that, with or without the
FTAA, that is necessarily going to get worse. I think the
question is these deficits are going to continue, and through a
pro-growth approach to economic policy and employment, I think
it is certainly going to be manageable unless there is an
economic downturn.
I do not see the notion of the United States being flooded
with cheap exports as a way of sopping up excess unemployment
in developing countries. I just do not buy that argument.
Ms. Ros-Lehtinen. Thank you.
Mr. Lande?
Mr. Lande. On a global basis, I do accept, certainly, the
position of the Department of Commerce. However, vis a vis
Latin America, where microvariables are perhaps just as
important, I definitely believe that the extension of
preferences, preferential agreements to which the United States
is not a party is part of our problem, and it will get worse.
Brazil's extension has just been recently put into effect.
Europe is knocking on the door in terms of its own agreements.
When Europe starts entering into preferential agreements--Chile
is negotiating with Korea a free trade agreement. Where are we?
They want to negotiate with us.
I would just emphasize the fact that Central America has
requested negotiating preferential agreements with the United
States
They will accept continuation of CBI, but they really want
to have a fully reciprocal agreement with the United States,
where you exchange benefits, but the United States is not in a
position to negotiate with them because of fast-track.
The Andean Pact certainly has indicated a desire to
negotiate free trade with the United States Argentina, before
they went to Brazil, wanted to negotiate free trade with the
United States. Certainly, Chile wanted to negotiate free trade
with the United States
When you put the thing together, it is my own view very
much that enactment of fast track by Congress is the best thing
you can do to deal with the threatening micro-level kinds of
trade deficits with Latin America.
Ms. Ros-Lehtinen. Thank you, Mr. Lande.
Mr. Marrero?
Mr. Marrero. Yes. In my experience, restrictions from the
U.S. Government have kept us from growing, importing or
exporting. Pricing, of course, is a big issue overseas. Lack of
manufacturing in the United Ststes--very little can be made in
the United States A company cannot go and start manufacturing
something without the red tape that would cost much more than
most small companies like ourselves can afford.
Restrictions on imports and exports--it has always been the
case with duties, in both directions, sent to those countries
and, of course, here.
From what I see, we--most of the time, we are a little too
late, with too little. We are being left behind by the other
countries. They are making their own agreements with anybody
that will listen. We are not listening, I guess, or we are not
listening in the right way.
Ms. Ros-Lehtinen. Mr. Brady.
Mr. Brady. Thank you for being here today.
The issue of failure of U.S. leadership was broached again
today regarding FTAA, and it gets embarrassing that a nation
founded on competition and the open marketplace would be at a
time where it is Lewis and Clark days around the world, where
every country staking their lucrative claims to good markets,
that we are handicapping ourselves, afraid to compete.
My question to you is, if you could deliver any message to
Congress and to our next President on the importance--on what
we need to do to retain--regain the leadership role in free
trade for the Americas, what message would you deliver?
Dr. Haar, do you want to start?
Dr. Haar. I would say, regardless of who is going to be
elected in November, initially there will be a honeymoon, and I
think, if the Congressional leadership and the incoming
administration can sit down and say let us show to the people
of the United States and the world, our trading partners in
Latin America, that truly we want to work together. Let us not
take a revisionist approach to fast track, because clearly
nothing has prevented the President from sending Congress a
fast track bill it can live with, that is one side of the
equation. The other is: Is Congress willing to give the
President an authority that, perhaps has been oversold by a
number of trade negotiators in the United States?
Ambassador Moss, Director of the North-South Center, with
Mr. Lande, wrote a brilliant paper arguing that you can have
movement and progress without fast track. Still, fast track,
symbolically, should be something that the incoming
administration and Congress should work out immediately in the
spirit of cooperation and bring some bipartisanship back to
foreign policy.
I think that would advance not only trade integration but
economic and political policy, as well, because there is
linkage.
You cannot isolate trade policy. I believe that economic
policy drives trade policy, not the other way around.
Cooperation with our partners in the areas of, environmental
surveillance, drug trafficking and peacekeeping, depend upon
bipartisanship--the Administration and Congress working
together.
Mr. Brady. Let us start fresh, because we have got a lot of
steps.
Dr. Haar. Yes.
Mr. Brady. Mr. Lande.
Mr. Lande. If I had my own choice, I would suggest that the
President, depending on which political party he is from,
appoint either Ros-Lehtinen or Congressman Menendez Secretary
of State, or at least listen to their advice in this particular
trade policy area.
Since I do not know whether you want to leave Congress or
not, I will not push that, but I will say that two things has
to be done, and I think first it might be Congress. I think
that it is extremely important that Congress focuses on this
fast-track issue.
There is enough ideas out there, there is enough people who
carry the view of the Unites States future in hand that they
should be able to work out some understanding on dealing with
this fast-track issue, whether it involves a special study
group to be established that will report back, whether it
involves just an informal meeting of various leaders of
important committees, I do not know, but it is something that
really should address.
If you are going to do something----
Mr. Brady. So, ignore the President and Congress.
Mr. Lande. I would say that it would make a lot of sense
for whoever the new President is and so on that there be some
Congressional consensus perhaps made on this particular issue.
I never suggest ignoring a President, for obvious reasons,
but it is a question--we have a new day, and I do not believe
there is going to be a fast-track push for the next year-and-a-
half by the current President, so I think the question is there
for the future.
As far as the issue goes, and if I was the President and I
had no consensus as to fast track, I would go down the non-fast
track route.
Chile has indicated a willingness to negotiate with the
United States now without fast track.
They have set up--I do not know if you are familiar, but a
bunch of--there is now--they have suggested to the United
States that a commission be established to look at issues that
are part of a free trade agreement without necessarily calling
it negotiation.
Central America has requested that, once CBI enhancement is
finished--and again, hopefully, it will be finished this
session of Congress--that perhaps a free trade agreement makes
sense with that particular of the world.
If I was the President, I would grab the bull by the horns
and I would say I am negotiating, that is my constitutional
right. I would bring back an agreement.
Fast track is not holier than thou, because as you know,
amendments--there are various procedures in the House now where
you can have a bill without allowing it open for unlimited
amendments, but in the Senate you need 60 votes anyway to pass
trade agreements, often, even with fast track because of the
budgetary requirements, the funding.
I would not sit there and start bemoaning the fact that I
do not have fast track.
In short, it would be really good if Congress could work
out their own understanding, which are really Congressional
issues you have got to deal with, labor and environment, and I
am not saying you do not protect them. I am saying you come up
with effective ways to deal with labor and environment and
trade, and then, if I was the new President, whether you did it
or not, I would take my honeymoon period and I would send out a
negotiator, maybe Jerry Haar, because he speaks so clearly and
so forceful, and I would move in that direction.
Thank you.
Mr. Brady. Thank you.
Mr. Marrero. Small businesses are the fastest-growing
entities in the United States A lot of us are exporting.
Include us and help us to be more competitive by making
agreements to facilitate our trade. Simple as that.
Mr. Brady. Thank you very much.
Ms. Ros-Lehtinen. Thank you.
Thank you so much. We thank the panelists for being with
us, and the Members and the audience, as well, and this
Subcommittee is now adjourned.
[Whereupon, at 12:27 p.m., the Subcommittee was adjourned.]