Copyright 2001 eMediaMillWorks, Inc.
(f/k/a Federal Document Clearing House, Inc.)  
FDCH Political Transcripts
June 21, 2001, Thursday
TYPE: COMMITTEE HEARING

LENGTH: 24260 words

COMMITTEE: SENATE FINANCE COMMITTEE

HEADLINE: U.S. SENATOR MAX BAUCUS (D-MT) HOLDS HEARING ON TRADE PROMOTION AUTHORITY

SPEAKER:
U.S. SENATOR MAX BAUCUS (D-MT), CHAIRMAN

LOCATION: WASHINGTON, D.C.

WITNESSES:

U.S. REPRESENTATIVE PHILIP CRANE (R-IL)
U.S. REPRESENTATIVE JIM KOLBE (R-AZ)
U.S. SENATOR CHARLES HAGEL (R-NE)
U.S. SENATOR PAT ROBERTS (R-KS)
DONALD EVANS, SECRETARY OF COMMERCE, U.S. DEPARTMENT OF COMMERCE
ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE

BODY:

 
U.S. SENATE COMMITTEE ON FINANCE HOLDS HEARING ON TRADE PROMOTION
AUTHORITY
 
JUNE 21, 2001
 
SPEAKERS: U.S. SENATOR MAX BAUCUS (D-MT), CHAIRMAN
U.S. SENATOR JOHN D. ROCKEFELLER IV (D-WV)
U.S. SENATOR TOM DASCHLE (D-SD)
U.S. SENATOR JOHN B. BREAUX (D-LA)
U.S. SENATOR KENT CONRAD (D-ND)
U.S. SENATOR BOB GRAHAM (D-FL)
U.S. SENATOR JEFF BINGAMAN (D-NM)
U.S. SENATOR JOHN R. KERRY (D-MA)
U.S. SENATOR ROBERT G. TORRICELLI (D-NJ)
U.S. SENATOR BLANCHE L. LINCOLN (D-AR)
 
U.S. SENATOR CHARLES E. GRASSLEY (R-IA), RANKING
MEMBER
U.S. SENATOR ORIN HATCH (R-UT)
U.S. SENATOR FRANK H. MURKOWSKI (R-AK)
U.S. SENATOR DON NICKLES (R-OK)
U.S. SENATOR PHIL GRAMM (R-TX)
U.S. SENATOR TRENT LOTT (R-MS)
U.S. SENATOR JAMES M. JEFFORDS (I-VT)
U.S. SENATOR FRED THOMPSON (R-TN)
U.S. SENATOR OLYMPIA J. SNOWE (R-ME)
U.S. SENATOR JON KYL (R-AZ)
 


*


BAUCUS: The hearing will come to order. Since there's a vote that's just begun, we're going to adapt the situation. I'm going to give my statement, and Senator Grassley, who is on his way over to vote, will return by the time I get over there. So we hope to have a seamless hearing here.

Secretary Evans, Ambassador Zoellick, I thank you very much for joining us today.

Yesterday, I spoke about the changing range of issues for trade negotiations. As the range of issues evolves to cover increasingly complex and sensitive issues, that is, intellectual property, labor rights, and health and safety standards, the political consensus on trade becomes increasingly difficult to hold together.

Establishing a consensus on cutting tariffs or eliminating quotas was relatively easy. Internationally, there is at least a grudging consensus that these steps are desirable. At home, presidents and Congress have generally seen eye to eye on these issues.

But it is substantially harder to define and enforce standards for protection of drug patents or computer software. Internationally, these intellectual property standards have been enormously controversial. Even domestically, as we have seen in the recent debate over availability of AIDS drugs and importation of pharmaceuticals from Canada, there are still points of substantial controversy. Yet, we managed to establish a consensus and forge trade agreements on this difficult topic.

On labor and environment issues, consensus is also difficult to achieve. But just because a problem is hard does not mean it can be ignored. Just because we will likely struggle for some time with the appropriate role for labor rights and environmental issues does not mean they can be left off the trade agenda.

I suspect we all know that Congress simply will not approve fast track, or TPA, until labor rights and environmental standards are meaningfully addressed. In that spirit, I plan today to put forward some specific ideas for addressing those problems.

On environmental issues, several approaches are promising. In new agreements, following on the model of the U.S.-Jordan agreement and NAFTA, we must discourage countries from lowering environmental standards to distort trade or investment.

In the WTO, we must ensure that the world trading system does not become a barrier to enforcing vital multilateral environmental agreements. We must also strive to construct a dispute settlement system in current and future agreements that does not inhibit legitimate environmental measures, while allowing action against true protectionism.

On the labor front, the five core principles of the ILO are already generally accepted around the world. These principles, along with assurance that labor standards will not be weakened to distort trade, can guide us in future trade negotiations.

In its tool box, the administration suggested a number of steps that can be taken outside of trade agreements on these issues. That's a fine start. However, labor and environment must also be at the core of trade negotiations if we are truly going to level the playing field.

Many have questioned the administration's credibility here. A true commitment to improve international labor standards cannot begin with a decision to cut in half U.S. spending on the ILO and international labor activities.

In order to establish credibility needed to pass fast track, I urge the president to immediately restore this funding and begin taking substantive steps to address labor and environmental issues in other forums. Indeed, the simple reality is that international trade negotiations are only possible if there is political support.

Opinion polls indicate that the public harbors deep reservations about trade. In addition to indicating broad support for addressing labor and environmental issues, those polls underline that the public will only support free trade if they also perceive it as fair trade.

Thus, U.S. trade remedy laws are critical to retaining public support for trade. Recent international agreements have already unduly restricted these laws. Any further restrictions threaten to compromise the very core of these statutes.

There are also strong public policy reasons for these laws. But let me make this point clear: There is no political support for weakening U.S. trade laws. Any agreement that compromises these laws will not pass Congress. This is a point that our trading partners and trade negotiators would do well to bear in mind.

In addition to the substance of negotiating authority, we must take a hard look at the process itself. As my good friend, former Senator John Danforth noted many times, the Constitution assigns Congress -- not the president, but the Congress -- primary authority over international trade matters.

Through fast track, TPA, and other devices, the Congress has ceded a breathtaking amount of its authority to the president. It is time to rebalance this relationship.

First, in the Senate, I believe fast tracked agreements should be subject to normal debate time limits. On highly controversial agreements, this would require cloture to be invoked to pass the agreement. This would give Congress more control over the direction of negotiations without unduly raising the bar. I note that all recent agreements have passed the Senate with more than 60 votes.

Second, the president should not be able to decide unilaterally if an agreement meets negotiating objectives and is thus qualified for fast track consideration. Perhaps a specially constituted joint committee of Congress should be required to concur with this judgment for a proposed agreement to earn fast track consideration.

Finally, I am working with Senator Byrd on a proposal for a Congressional Trade Office, which was also endorsed by the Trade Deficit Review Commission. I believe this is necessary to give the Congress the information it needs to function as a true partner in trade agreement negotiations.

Let me conclude with a challenge. I know this administration wants to move quickly on TPA. But moving quickly means finding consensus. Refusing to address key issues sets the stage for deadlock.

I will continue to do my part. I hope to move swiftly to pass the Vietnam and Jordan agreements. Both agreements were on the administration's trade agenda. In the spirit of moving forward in a bipartisan fashion, I want to call upon Secretary Evans and Ambassador Zoellick today to endorse the swift passage of these agreements without amendments.

BAUCUS: I also urge the administration to come forward with ideas. It is not enough to just sit back and hope that Congress works this out. I offered a number of constructive proposals that I believe will help us meet in the middle. Today, I hope the administration to do the same.

Would everybody on the panel please come forward, and we can start.

It's a great honor to have you here, Congressman Crane. I know that you introduced fast track over in the House and have a speedy time table in mind. We're honored that you took the time to come over here, and why don't you begin.

CRANE: Very good. Thank you very much, Mr. Chairman. It's a pleasure to be here to discuss what I believe is urgent legislation to empower the president with authority to negotiate trade agreements in the economic and national security interests of the American people.

My message is one that most of us in this room should appreciate. The United States is losing out. As each month passes, our economic potential is compromised further.

After decades where Americans set the pace, other countries are writing the new rules for international trade, as our president stands by essentially crippled in his ability to participate. The sheer number of free trade agreements in force around the world, 134 of them, is as startling as it is disturbing.

The United States is party to just two of those free trade agreements covering about 11 percent of world trade. Europe, for its part, participates in free trade agreements with 27 countries and is now moving into our hemisphere, most recently concluding an agreement with Mexico, and seeking expanded trade ties with markets and nations right in our back yard.

The activity of our two closest trading partners, Canada and Mexico, is instructive. Since implementation of the historic NAFTA agreement in 1994, Canada has gone on to negotiate FTAs with Chile and Costa Rica. Currently, Canada is conducting talks with Japan, Singapore, and the four countries in Central America. Likewise, Likewise, Mexico has concluded trade agreements with 31 countries and is now in talks with Japan, Korea, and others.

It's obvious to anyone paying attention that our exporters are being squeezed by their international competitors. Our competitors are enjoying the benefit of their government's aggressive pursuit of FTAs.

As trade barriers continue to fall for our competitors, America's exporters and workers face higher tariff differentials and more and more discriminatory rules, unfamiliar product standards, and unnecessary threats to their investments. I hope that your series of hearings spells clearly the direct connection that exists between increasing international trade and creating jobs and economic activity at home.

Fully one-third of the economic growth that has occurred in the United States since 1994 is directly attributable to expanding imports and exports. It's essential that this key engine of economic growth keep on running. Because future trade agreements will offer vital opportunities to expand and ensure the success of U.S. businesses and workers in the marketplace of the 21st Century, we must do all we can to remedy the current situation and reach prompt agreement on the specifics of trade promotion authority, namely TPA legislation.

Last week, the House Republican leadership and 57 co-sponsors joined me in introducing H.R. 2149, The Trade Promotion Authority Act of 2001, which is attracting five or six more co-sponsors daily, and we're now up to 80. Our effort is broadly supported among House Republicans who are largely united in their view that TPA is an exception to normal legislative procedures that must be well defined and not open ended in what the president is permitted to negotiate. Only those matters that are directly related to trade should be included in an implementing bill qualifying for TPA procedures.

My legislation gives the administration the authority and flexibility to negotiate and bring back to Congress the best deal possible, addressing goods, services, agriculture, intellectual property, investment, and e-commerce. It allows use of TPA for issues not included in the negotiating objectives of the bill as long as the negotiating priority, number one, is directly related to trade; number two, is consistent with U.S. sovereignty; number three, is trade expanding and not protectionist; and, number four, does not affect the country's ability to make changes to its laws that are consistent with sound macro-economic development.

This legislation leaves the president free to use his executive authorities to negotiate issues that don't meet these tests. However, the president should use his regular legislative procedures to implement any needed changes in U.S. labor and environmental laws.

Much of the trade debate is focused on whether trade agreements should be used to force countries to change social policies. While improving standards on environment and labor is a high priority, I believe using trade as a hammer to force these changes is counter productive, because it injects so much uncertainty into the trade and investment climate. Instead, we should focus on the fact that trade itself improves labor and environmental conditions.

As a country's standard of living improves, the income level of the workers within those countries increases, giving people the resources to care for the environment and the ability to improve their working conditions. Increasing trade with the rest of the world and countries like ours is the best way for a country to improve its standard of living.

Finally, my bill would ensure that the TPA procedure provide extensive opportunities for meaningful consultations with Congress before, during, and after the negotiations. Indeed, I want to remind colleagues that a vote for trade promotion authority is vote on the procedural rules for considering implementing agreements. A member is still free to vote against an agreement in the future if he or she does not support the agreement.

Because expanding exports is key to creating new, high paying jobs, our future will not be secure if the president does not have the tools he needs to open foreign markets and to shape trade agreements in our favor. Put simply, H.R. 2149 is about strengthening our position in the world. Success must not be measured in partisan terms.

I stand ready to discuss with any of you any specific suggestions you have on my bill. We now have legislative language before us, so we should make this discussion quite focused, and I look forward to working with you.

Thank you.

GRASSLEY: Thank you, Congressman Crane. Now, I'll go to Congressman Kolbe.

KOLBE: Thank you, Mr. Chairman, Senator Grassley.

GRASSLEY: Mr. Former Chairman.

(LAUGHTER)

KOLBE: Thank you for the opportunity to testify here today, and I asked for this opportunity because I think trade promotion authority is critical to the future of the United States, not incidentally, to the entire free world. I've testified before this committee in the past, and even though the jurisdiction of the Finance Committee is very broad, my testimony has always been on trade policy.

I've been a proponent of more open trade policies for years. It's important to my district. It's critical to my state. In fact, the Department of Commerce released data just this week that suggested that Arizona has been the fastest growing state in the Union for the last decade, with an annual growth rate of 7.3 percent. Trade, in general -- NAFTA, specifically -- has been an enormous contributor to that record pace of economic growth for my state.

But I come here today for reasons that stem far beyond the Fifth District of Arizona and beyond the state of Arizona. I come here today in my current role as chairman of the Subcommittee on Foreign Operations of the House Appropriations Committee. As chair of that subcommittee, I'm charged with providing leadership in the conduct of U.S. foreign policy, and I will do that to the best of my abilities on behalf of the entire House of Representatives. And I say the entire House, not just the Republican side, not the Democratic side, but both sides.

Over the last decade, it's grown increasingly difficult for Congress to operate in a bipartisan mode. Indeed, on trade policy, since NAFTA, that way of legislating has been largely lost except on a very few selected trade issues.

Somewhere we've lost the bipartisan trade consensus. Where did it go? How did we let it slip away? Well, somehow, we did it, because we allowed ourselves to be seduced, I think, by more narrow, partisan economic or issue driven interests.

So I come before you this morning to plead that we commit ourselves to regain that bipartisan approach to trade. Trade promotion authority is not only in our national self economic interest. Certainly, we'd benefit tremendously from it.

But trade promotion authority for this president or any president -- and I favored it for the previous president -- is in our broad foreign policy interest. We shouldn't ignore the invisible benefits that trade promotion authority can bring us that may be harder to quantify but that are equally, if not more, valuable. It will be a key tool in this country's toolbox for encouraging successful economic growth abroad, and for this reason, we so ardently pursue a strong global economy as a plant of our foreign policy. The reason we do so is because successful economic growth abroad helps us achieve our humanitarian and national security foreign policy objectives as well.

Trade promotion authority will help us shape a world where democratic states can grow stronger, a world where nations in transition can stabilize, a world where developing countries can realize their potential through a promise of meaningful participation in the global economy. Without it, our ability to sustain a global economy and its rules-based trading system will diminished. This will lead to greater U.S. national security risks and probably create new unforeseen foreign policy challenges that will take us decades to overcome.

What do I mean by this? Since assuming my new position, I've learned of the nexus between political, social, and economic variables that have to combine in the right context for successful nation-state development.

I'm not here this morning to deliver a treatise on democracy, but I think it's of more than academic interest that a comprehensive of nation-state failure performed by the recent State Failure Task Force led by the CIA underscores the relationship between economic disruptions and state failure. The task force identified 113 cases of state failure in the last 50 years, and they identified three variables that were the most significant: infant mortality, openness of the economy, and whether or not the state was a democracy.

Let me draw your attention to the second one of those, openness of the economy. It's this variable that confirms why it's so important to provide the president with trade promotion authority. It's a tool that enables the U.S. to encourage countries to participate in the global economy, creating linkages that reduce the chance of state failure.

Mr. Chairman, we must reach a consensus to provide the president with TPA. We must find the political resolve to support it and be willing to make the compromises we need to make to get that bipartisan consensus.

U.S. foreign policy objectives cannot be achieved alone through U.S. foreign aid. Trade, not foreign aid, is much more critical. Knowing how critical trade promotion authority is to U.S. foreign policy, it begs the question: How do we get it back? How do we move beyond the prolonged stall in trade liberalization through which we have suffered these last seven or eight years? If I had a simple answer, I would have opened my testimony and saved us all the trouble of continuing to meet on this subject.

But instead of articulating an arcane trade answer, let me suggest something more basic, a set of three principles to guide how we engage one another to find a solution. And let me also for just a moment digress to share a story with you.

Senator Mitchell came over and briefed our subcommittee on the Middle East proposal that he and Senator Rudman have been chairing. It was a very productive briefing. At one point, Senator Mitchell shared his experiences on helping the parties in the Northern Ireland peace process.

He related to us that shortly after his arrival in Belfast, he figured out a solution in a matter of days. It was a very interesting statement. For decades, there's a conflict of rage without a solution, but he figured it out in a matter of days. Of course, his admission of calculating a solution so quickly was followed by a long explanation of what was so challenging about realizing the plan for peace.

Without going into the details, the solution was a well thought out chain of events by all the parties that were involved. Each party played a part in an elaborate sequence of events, and it involved confidence building among parties.

All of this, I think, suggests that we face the same challenges trying to move our trade policy forward today. The bipartisan coalition that lasted 50 years has lost the capacity for trust. We lost confidence in one another's ability to manage our separate, albeit more narrow, interests in a way that does not lose sight of our national interests.

So let me just suggest three principles that I think we need to follow here in the months ahead as we consider this. First is strong communication. We need to strive to achieve that at the staff level, the member level, between the House and the Senate, and between both ends of Pennsylvania Avenue.

Second is a commitment to operate in good faith. It is sometimes the case that incentives in the democratic process can work against a balanced national interest base strategy. If we are to achieve trade promotion authority, our process must resist the temptation to play this issue as a tactic in a long-term power struggle for political control. We will never achieve success unless we operate in good faith.

And the last principle is leadership anchored in U.S. national interests. As elected officials, all of us have interests, some constituent based, some personal and philosophical, some partisan, and they pull us in different directions every day. We have to find a way to meld those together to work together.

This isn't just a statement for a press release or a college textbook. Those more narrow interests of our constituencies and personal agendas require that we do this if we are to achieve success on the national level. As we achieve individual success, we guarantee success for the larger interest of expanded trade opportunities.

Mr. Chairman, these are my thoughts on this issue. It's important that we move forward.

KOLBE: As a member of the House, I hope to engage you and your colleagues during the course of the months ahead in trying to achieve a compromisable lead to a favorable outcome for trade promotion authority.

Thank you, Mr. Chairman.

GRASSLEY: Let me thank Congressman Crane and Congressman Kolbe for coming over here to discuss with us these important issues, because, obviously, over your entire tenure in the United States House of Representatives, you've both been leaders in that area, and we thank you for that leadership, and that leadership is going to be very important for us to meet the goals that we have to on this bill this year. Maybe I should give you folks, if you feel you have to go, permission to go. Otherwise, if you stay, then you'll probably put yourself up to some questions.

Senator Hagel?

HAGEL: Thank you, Mr. Former Chairman. Over 50 years ago, the United States found itself as the only economic and military superpower on Earth, faced with the uncertainties of a new world order. Much depended on the U.S. for stability, peace, trade, and prosperity. America had to readjust its thinking, recalibrate and change policies, trade policies, refocus priorities, and lead, yes, lead. All of that included trade.

There is one common denominator between the world that exists today and the world that confronted Harry Truman -- American leadership. Trade is one of the most vital and fundamental elements that establishes America's role and dictates our future in this new globally connected world. It connects us to all peoples of the world in positive and productive ways.

U.S. businesses are getting out-gunned in the international marketplace. Other nations are out-maneuvering the United States in world trade through their own bilateral trade agreements or through creative loopholes of the global trading rules that need to be addressed in the new WTO round of negotiations. This is happening because we have not made trade a top priority and have not provided strong political leadership for this effort.

Also contributing to the erosion of America's trade position has been inconsistent, contradictory regulations, sanctions, and policies of our government that have inhibited, frustrated, limited, and worked against our national interests and competitive position in world markets. To undo this folly, Congress and the president must lead and not continue to defer the tough decisions on trade.

To lead in world trade, the U.S. must show its trade partners that it supports open markets and is willing to send its trade negotiators forward to engage and break down trade barriers. In order for the president to lead, it requires his being given the authority to negotiate and finalize trade agreements on behalf of our nation. This means trade promotion authority, TPA.

TPA allows America's negotiators to negotiate the best possible agreements with our foreign partners. TPA allows the president the ability to protect and expand America's trade interests and our vital interests around the world.

This authority that every American president has had since 1974 has been the so-called fast track authority. However, since 1994, the president has been without this critical authority. This has hurt America's trade interests and our competitive position around the globe. Congress needs to grant the president TPA this year.

Sure, we can start trade negotiations without TPA, but that only continues to waste precious time and resources and perpetuates the continual loss of American market share and American standards development in potential world markets. Is that in the best interest of American business and workers? I don't believe so. We need to stay focused on the big picture, and the big picture is America's competitive position in the world.

Included in this trade debate are labor and environmental standards. It is important to encourage other countries to improve their labor and environmental standards. Yes, we agree on that. But unilateral trade sanctions or other punitive measures imposed by the United States on countries over labor and environmental standards help no one. They help no one.

Labor and environmental standards should be addressed. Of course they should. But not by tying labor and environmental enforcement standards to trade agreements. That's dangerous, short sighted, unproductive, and self-defeating.

Let us not forget our fundamental responsibilities here, to enhance America's future competitive position in the world, not erode or not diminish it. That should be our focus. That is not mutually exclusive with other responsibilities that come with trade, including trade and environmental responsibilities.

We have a significant challenge before us, but I believe that Congress is up to the challenge. I look forward to working with members of this committee to support the swift passage of a trade promotion authority that supports our negotiators, our businesses, our farmers, and our workers. I look forward to that trade promotion authority passing this year.

But we must be wise enough not to overburden our world trade infrastructure, structure, regimes, where we, in fact, could see the collapse of world trade regimes if we are not careful. If we fail, we will squander future opportunities for our next generations, and history will surely judge us harshly.

But this is not America's heritage nor our destiny. We're better than that. We will do better than that.

Mr. Chairman, I appreciate very much the opportunity to share my views. Thank you.

BAUCUS: Thank you very much, Senator. We are now joined also by the senator from Kansas.

Senator Roberts, please proceed.

ROBERTS: I want to thank you, Mr. Chairman, and thank you also, Mr. Chairman Emeritus, for the opportunity to come before you. It's a privilege to be here with my former colleagues from the House. Both Congressman Kolbe and Congressman Crane have been tireless leaders on behalf of trade and the betterment of jobs and progress, not only in this country but around the world, and I thank them for their efforts. I associate myself with the remarks by the distinguished senator from Nebraska, my good friend, Senator Hagel.

Mr. Chairman, trade is a necessary and very vital economic component for American agriculture's wellbeing. I have some items I'd like to list.

Ninety-six percent of the world's population lives beyond our borders. Any future recovery and potential growth for the agriculture sector -- and we're in pretty tough shape in farm country and have been for the better part of three years. Any recovery is going to rely in part on our ability to trade and access to foreign markets, simply put.

World demand is growing for agriculture products. So is the competition between suppliers. Our nation's failure to secure a part of the global economy has cost our agriculture producers dearly.

Annually, as of today, we export 52 percent of our wheat -- that's over half the Kansas wheat crop, half the Montana wheat crop, if, in fact, you have a wheat crop. I understand that's pretty tough out there -- 48 percent of cotton, 41 percent of our rice, 33 percent of our soybeans, 21 percent of our corn that is produced nationally. That's one out of five acres in Senator Grassley's home state.

In Kansas, this translates into one-fourth to one-third of farm income being generated by trade each year, and I would guess that that percentage is almost the same for Florida and for North Dakota and for Louisiana -- don't know about West Virginia -- certainly in regards to Montana, Iowa, maybe not Utah, but certainly in Texas.

My state's reliance on trade certainly extends beyond agriculture. We have aircraft, we have chemicals, we have petroleum, we have metals, and many other products. Twenty thousand people in Wichita certainly work for the aircraft industry -- probably more than that. I just counted the Boeing employees. So these folks also rely on exports as an important portion of their sales.

Between agriculture and manufacturing, one in four jobs in my state of Kansas depends on trade. Last year, we generated 66,000 jobs.

Now, through the last several decades, American agriculture has undergone leaps and bounds in the arenas of production technologies. It's been unbelievable. The explosion of precision agriculture and the productivity and the resulting yields have been able to feed this country in a troubled and hungry world. It's been a modern miracle, with the development of new varieties that resist disease and drought and cropping practices that certainly benefit the environment.

It's a paradox of enormous irony that while we have all this progress, all this innovation, and the modern miracle of agriculture, during the same period our share of the world's agriculture market has slipped from 23 percent to 17 percent, and it's headed downward. We're losing. We're not being competitive.

We have called the mechanism that would allow our president the ability to realistically negotiate free and fair trade agreements a variety of names. I just had a meeting yesterday with Secretary Veneman, and we've had meetings with Secretary Zoellick.

Trade promotion authority -- I don't like that much, because it reflects on promotion. This is far more serious than promotion. Trade negotiating authority -- perhaps that's a little better. I don't think that -- let's see, the acronym is TNA. I don't know what that's going to do to -- you know, the DNA on TNA doesn't work out very well.

Trade enhancement authority -- enhancement? We need a stronger word. Fast track -- I don't like fast track. That sort of indicates that we're trying to go around the Congress in some fashion.

I'm going to use the title used by my predecessor in the House of Representatives, The Honorable Keith Sebelius, who worked hard for farmers and ranchers for 12 years. I was his administrative assistant. He said, "Pat, you've got to export the product. You either sell it or smell it." And I don't know what that adds up to with an acronym, but that's about where we are.

So whatever we call it, I prefer that we grant the president the ability to competitively negotiate the market access for the products that our hard working farmers and ranchers certainly produce.

There are 133 trade agreements in place around the world and only two involve the United States. The president said that. Probably my preceding have said that.

If we're going to compete successfully for the export opportunities of the 21st Century, we need fair trade and fair access to the growing global markets. Without the trade promotion authority, or the "sell it, don't smell it" authority, we'll continue to fall short.

Now, I read in the "Sparks (ph) Commodity News" -- and I don't mean that to be a plug for the outfit, but it's a pretty good outfit, if you want to read about agriculture -- and it pretty well said this, and I'm just, you know, simply quoting here. I don't want to perjure anybody's intent or the fine work that the chairman and the chairman emeritus does or that this committee does.

But it says it, and I think it says it very well: "Senate Democrats insist on labor and environmental protections, and the Senate new Finance Committee chairman, Max Baucus, who is a dear friend and a colleague and a strong component of trade, is cool, is cool to any legislation that does not have labor and environmental protections." And I think that's a pretty accurate statement in regard to some of the feelings and in regard to my colleagues across the aisle.

"Senator Chuck Grassley, ranking member, chairman emeritus on the Finance Committee, said, 'Republican leaders would seek ways to address the environmental and labor issues so they don't become protectionism.'" And I certainly agree with that.

"But he admitted if we went entirely the way that the labor leaders in America want to go" -- where John Sweeney wanted to go yesterday when he testified before the panel, maybe Charlie Rangel, maybe Sander Levin. I haven't read their testimony, but I certainly heard it when we went up to see the president at the White House before he went to Canada -- "...said that 'For every Democrat we would pick up, we'd lose a Republican.' However, Grassley said, 'The labor and environment provisions will be the key to crafting a bill that can gain the majority's support and I think it will have to be compromised.' As usual, Chuck Grassley certainly nailed it."

I don't know how we do this. You know, people talk about the third way. The third way in farm country is that for -- let me stop and think a minute -- for over 30 years, I have been making speeches in farm country, and that's why I'm here in the Congress, to do what I can on behalf of our farmers and ranchers. I've tried very hard to do that.

And there's a line in every speech, and I've written it for my predecessors and I will continue to give it: We need a consistent and aggressive export policy. Remember when Ed Zurenski (ph) wouldn't really go along with the budget, the situation with Reagan, and we started the Export Enhancement Program? That was a shotgun kind of a program. It sure made our competitors unhappy. We haven't used that for a long time.

Berkeley Bedell from Iowa and I went down to the first meeting, because it was sort of controlled by the State Department, and I made the same speech then. Why are you putting the farmers and ranchers out there subject to all these other considerations in regard to market interference?

And my question to everybody is: We exported about $61 billion three or four years ago in farm products. We're down to about $50 billion today. Subtract the difference and that's the subsidy the American taxpayers are paying to the farmer. It's not exactly a one to one cause, but it certainly is reflective of the problem that we have. We are not selling our product, and we need "sell it, don't smell it" authority.

Now, I don't know how long we're going to have to make those speeches. And I will tell you, in farm country, the farmer and rancher is damn tired of it, and they don't believe us anymore. The gild is off the lily in regard to a consistent and aggressive trade policy.

Now, the president has asked us in a call to action just yesterday and in repeated meetings, let's get the job done. And I'll be happy to do it any way I possibly can in some kind of a compromise, and I apologize to the chairman. There seems to be some kind of a compromise bill here with Mr. Murkowski and Mr. Graham, and I encourage you both to do that. My staff is working with you.

But can't we get this job done, Mr. Chairman? It's long, long overdue.

BAUCUS: Thank you very much, Senator. I think the answer to the question is yes, so long as all sides are going to negotiate and compromise and work together. Otherwise, we won't. If we give speeches -- and that was a great speech and a very helpful speech -- but not act, all of us -- and that means both houses, and it means the administration -- then we're going to be just giving speeches, not acting. It takes hard work, compromise, and working together to get this done, as you well know.

Do any senators have questions of our illustrious panel? First on my list is the chairman emeritus.

GRASSLEY: I do not have any questions of this panel, but sometime, maybe during my questioning of the next panel, I'd like to give a short opening statement.

BAUCUS: Senator Graham?

GRAHAM: I'd also like to give an opening statement.

BAUCUS: Can you, in the questions, make your statements, because we do have to get to the secretary of commerce and the ambassador, and I don't want to keep them waiting too long. So I'd ask senators to give very, very short statements. You can get your point across in about two minutes, so we can get to the secretary and to the ambassador.

And I know our panelists are busy, too, and they've got to go, so let's give our opening statements. But I do ask senators to keep them down to two minutes, and I'm going to enforce that, too.

Senator Graham?

GRAHAM: Mr. Chairman, almost a century ago, when the United States was taking an isolationist position with respect to our economic relations with Latin America, we suffered a grievous consequence with which we are still living. The Europeans moved into our natural trading area in the western hemisphere and established among other things a set of technical standards that ranged from electrical equipment to the newly emerging automotive vehicles.

The consequence of this is that for 100 years in the past and for an unknown period in the future, the United States has been handicapped in our ability to trade as effectively as we should within our own hemisphere. I fear that now, at the beginning of the 21st Century, we are about to make the same mistake. We see Europe again negotiating aggressively in Latin America. They have already established standards for things like emissions, brake standards, and telecommunications, which are not to the benefit of the United States' long-term ability to trade in the western hemisphere.

I make these points to indicate that time is not on our side. As we delay making a decision to grant trade promotion authority by whatever name it may be called, there is a real price to be paid. There is nothing likely to occur in the next 12 or 24 or 36 months which will make reaching a consensus on trade promotion more likely than it is today. In fact, I suggest just the opposite is true.

We all know that reaching political consensus is a highly charged issue, and as it relates to trade, it becomes more difficult the closer we get to an election. In this respect, there is no better time than the present to move forward with trade promotion legislation.

This is an issue that is well known to all of us. It is a mature question. We have had an opportunity to consider all of the ramifications. I would quote President Reagan when he asked the question, "If not now, when? If not us, who?"

As Senator Roberts suggested, with a group of new Democrats in the Senate and House and with several members of the Republican Party, we have developed a set of trade principles which I hope might be the basis around which we can reach consensus.

BAUCUS: Thank you, Senator, very much.

Senator Gramm?

GRAMM: Mr. Chairman, let me first say that we reached an extraordinary consensus on trade where we gave the president the ability to negotiate trade agreements that were unamendable and where we had limited debate, because they were fairly narrow. They were about external taxes, tariffs, and they were limited to areas where we so dominate the world, like copyright and patents, that they were pretty much like the British committing to the principle of freedom of the seas when the seas were owned by the British.

Now, there is this call to expand this authority into areas like labor and the environment and to other areas, and I understand the reason. But I'd like to raise two issues that I'd like to ask my colleagues as we go through this to really give some prayerful deliberation to.

Number one, do we really want to give this president or any president the ability to negotiate in trade agreements provisions that become domestic law in labor, the environment, or other areas where they cannot be amended, where they cannot be fully debated, and where we have no idea as to what they will be? So we need to look at not just our objective of getting our trading partners to try to promote our standards. We need to look at the issue of writing domestic law through these trade agreements in areas that have nothing to do with trade.

Secondly, we have the problem of international enforcement. Do we really want to write provisions in a trade law that are outside the narrow definition of trade, that would allow an international dispute resolution or an international tribunal, to find that the Congress, through its legislative and constitutional jurisdiction in making laws in areas that are not directly related to trade, is violating trade agreements, and, therefore, that the American consumer can be penalized, and the American farmer could be penalized with tariffs against our goods or fines imposed on the American taxpayer. I think if we come to grips with that, that we can work out an agreement here.

BAUCUS: Thank you, Senator.

Senator Conrad?

CONRAD: Thank you, Mr. Chairman. Thank you very much for holding this hearing and this series of hearings. I think they really are very important, and you're setting the stage.

First of all, I want to say I am committed to freer trade. I believe in it as a principle. But the devil is in the details, and too often we have seen the details of these agreements really fly under the flag of free trade, but didn't really represent free trade.

I think there are three things that have to be dealt with. One is true consultation. In fast track, senators give up their constitutional role, and there's an exchange, and the exchange is that we are going to be consulted fully on these trade agreements. Unfortunately, in the past, very often it's not happened. So the first thing is consultation has got to be real.

The second is a matter of currency. And maybe I can just put up a quick chart that shows what happened in NAFTA, where we had negotiated a 10 percent reduction in tariffs, and then the Mexicans promptly devalued by 50 percent. We wound up in a less favorable position than before we negotiated the agreement, and we moved from a trade surplus with Mexico to a $25 billion trade deficit with Mexico. If that's success, I don't want much more of it.

The final point is the question of corrections. We've got to have a means of correcting mistakes that have been made in past trade agreements. We saw that in the Canadian Free Trade Agreement. They've gone from zero percent of our market to over 20 percent, not because they're more competitive, not because they're more efficient, but because of deficiencies in the agreement.

This is what happened after the Canadian Free Trade Agreement. They went from zero percent of our market to over 20 percent of our market because of deficiencies in the agreement. There's got to be a way of fixing, of correcting things that are wrong.

So the three things I'd leave are the three C's, consultation -- it's got to be real; currency -- we've got to look at the currency of the country with whom we're negotiating to assure ourselves they're not going to devalue, completely undermining what we've accomplished at the negotiating table; and, third, a means of correcting mistakes.

BAUCUS: Thank you, Senator, very much.

Senator Breaux?

BREAUX: Just briefly, Mr. Chairman, I congratulate you for putting together these very important hearings. I think it is clear that the best way, I think, to improve environment and labor conditions around the world is to have contact and trade with countries around the world.

I think the administration is going to have to recognize that these issues are important to many members, and that they're going to have to be consulted with in order to get a trade agreement that expands trade. I think both sides are going to have to realize that we're not going to be able to do it my way or no way, because no way is going to end up winning. So there's going to have to be some negotiations between the administration and members in order to get the things that they want on trade.

I support the concept of free trade. I think, as I've said, that's the best way to address these issues. But if you're going to get something out of this Senate, it's going to have to be also in a negotiated fashion. Otherwise, it won't get done, and I think we can do that.

BAUCUS: Senator Rockefeller?

ROCKEFELLER: Thank you, Mr. Chairman.

This committee, I guess, last granted the president fast track in 1994, and since that time, we've negotiated with our trading partners without the benefit of fast track. So the president hasn't had that authority, and the question is has he needed that authority to do that. What has been the consequence of not having fast track?

I'm not declaring a position here. I'm just raising questions that I want to ask. Have there been adverse consequences for the United States by not having fast track? China -- tremendously controversial. I voted for that. It didn't have fast track. It had the merits to pass, at least in my judgment. So I just raise that question of why is the fast track so incredibly important, particularly when you need to have people consulted in the Congress.

And then I want to know what will the administration use fast track, if it gets it, to achieve? I, for one, am very concerned about -- there's been a lot of talk about the steel in Section 201, and there's been a lot of talk about, well, maybe we'll do this if you'll go along with fast track, or what is your position on fast track. And I just want to say that if we use our unfair trade laws as bait and leverage in trade negotiations, that is a very, very big mistake. Sixty senators signed letters saying we don't want that, so if that approach is taken, everybody can count on my opposition.

There are just things I want addressed during the course of the hearing.

Thank you, Mr. Chairman.

BAUCUS: Thank you, Senator.

Senator Hatch?

HATCH: Thank you, Mr. Chairman.

Let me start by commending the administration or trade representative or secretary for their recent decision to initiate a Section 201 action on steel. I think the president did the right thing, and I say that as a free trader.

If U.S. firms cannot compete in the global marketplace on even terms, then our government has no business to try and protect them or to protect inefficient businesses. But on the other hand, the United States cannot and should not look the other way if foreign manufacturers attempt to dump their products into our country at prices that do not fairly reflect the true cost of production.

Since 1994, the president of the United States -- the last time the president had trade promotion authority. I'd like my colleagues from the administration to kind of answer some of these questions, hopefully, in their remarks today. I'd like to know how many trade agreements have been signed without the participation of the United States, if you have that information. If you don't, I'd like to have you provide it.

What have been the economic consequences for the United States? Have you been told directly or indirectly by trade representatives from other nations that they will not come to the table with the United States if the president lacks this trade promotion authority? What trade agreements are currently under consideration that the United States would not participate in if the president lacks trade promotion authority?

Several of my constituents have expressed the concern that trade promotion authority removes Congress from their role in negotiating trade agreements. I would like you to respond to that concern as well.

You have tough jobs. I would like to help you in every way we possibly can. I think it's for the betterment of our country, and we do need to get back to assisting our president and both of you and others in doing this work.

I want to thank you for this time, Mr. Chairman.

BAUCUS: Thank you very much, Senator.

Senator Nickles?

NICKLES: Mr. Chairman, thank you very much, and I'm delighted that we have Trade Representative Zoellick and Commerce Secretary Evans with us, and I'm pleased to see that they're pushing trade promotion authority. I hope that Congress will likewise move aggressively to make this happen. I'm afraid if we don't, other countries around the world are moving ahead and taking our markets, and I think we're missing an opportunity that we in Congress have a chance to help fill that void.

So, Mr. Chairman, I hope that we'll move forward and pass a positive trade promotion authority. I would be cautious, though. I think there's some language that people would like to have added to this that could be very detrimental.

I want to pass a positive, good trade promotion authority to really promote trade, not to promote protectionism in one way or another.

NICKLES: And so, hopefully, we will move forward and be able to adopt this language in a bipartisan way through both houses of Congress this summer.

BAUCUS: Thank you.

Senator Lott?

LOTT: Mr. Chairman, I'd like to hear these witnesses testify, but I do just want to thank them for being here. I want to thank Ambassador Zoellick for the work that he's already been doing. We had this problem with the European Union on bananas and beef and other issues, and he moved in aggressively, and they were able to get an agreement on bananas. And when I was in Europe, the Europeans made it clear that it was the ambassador's focus on the issue and willingness to spend time that caused it to be resolved in only about a month. So, congratulations, and, Mr. Secretary, we look forward to hearing from you.

Like Senator Hatch, I, too, support what the administration did on the steel matter, and I know Senator Rockefeller knows that for quite some time, I've been saying that I thought something should be done in the steel area. And there's no connection between the two with me, but if people that expect us to step right out on steel wind up opposing trade promotion authority, which the president certainly should have, that would cause me a lot of concern.

So while there's no connection, I don't believe, between the two with the administration, it would be a factor in my thinking if we can't have fairness on both sides. So I'll just drop that hint in the process here.

I yield the floor.

BAUCUS: I think you dropped it pretty heavily. Thank you very much, Senator.

Let's have our two witnesses, Ambassador Zoellick and Secretary Evans. The committee thanks you both very much. I know how busy you are, and often, I'm sure you wonder why you have to go to the Hill to one more hearing one more time. We respect the time that you are taking, and we thank you very much for taking the time. We look forward to your views today. Your views are very important to the subject.

Mr. Secretary, why don't you proceed?

EVANS: Thank you, Mr. Chairman. I'm delighted to be here. I've been looking forward to this. It's not an inconvenience to me at all. There's not anything more important to this country and this world today in my mind than what we're here to talk about today. So I'm thrilled to be here and look forward to this discussion this morning and further discussions through the summer and however long it takes to pass trade promotion authority.

The administration is committed to that and committed to working with you and this committee, and the committee working with Congress to pass trade promotion authority. So I'm delighted to be here.

Chairman Emeritus Grassley, nice to be with you. I like the ring of that. It sounds pretty good.

GRASSLEY: It sounds too much like retirement.

(LAUGHTER)

EVANS: It sounds very distinguished to me, which I think is appropriate.

Mr. Chairman, Senator Grassley, and members of this committee, thank you for inviting me here today to testify on trade promotion authority and on the imperative of maintaining America's leadership in a global marketplace. I'd like to make a brief opening statement and submit my written testimony for the record.

BAUCUS: It'll be put in.

EVANS: Thank you very much. Let me begin by emphasizing the economic case for continuing to open markets. America has always been a trading state, and in purely economic terms, it's in our nation's best interest to pursue free and open markets.

We remain the world's preeminent exporter of goods, services, and investment. We also benefit from the stimulus of foreign competition and the investments that others make in our country.

Trade liberalization has been a key factor in the longest period of sustained economic growth in history of this great country. It is important to recognize that U.S. exports accounted for nearly one- quarter of the economic growth we experienced during the past decade.

Despite the track record, the critics of open markets argue that further trade liberalization would destroy U.S. manufacturing, diminish the earning power of American workers, ignite a race to the bottom that would undermine our labor and environmental standards, and yield benefits only for larger, multinational corporations. Well, what has happened as trade increased around the world in the past 10 years? Let's look at the hard facts.

Since 1995, following the implementation of NAFTA and the Uruguay round, total U.S. private sector productivity has increased 3 percent a year. U.S. industrial production was 48 percent higher in 2000 than it was in 1990. More than 20 million new jobs have been created in the United States since the early 1990s. And our goods and services exports have grown even faster than the U.S. economy, increasing more than 7 percent a year since 1992.

We estimate that some 12 million U.S. jobs are now supported by exports. One in every five manufacturing jobs is supported by exports. And these jobs are good jobs, paying up to 18 percent higher than the average wage in this country.

Furthermore, there has been no race to the bottom. Our labor and environmental laws have been reinforced, not undercut, during this past decade.

And, finally, trade has extended its benefits throughout our economy, not just to large, multinational corporations. Most American workers are employed by small and medium sized businesses, and these businesses, which account for nearly 98 percent of the growth in export population, would be among the major beneficiaries of future negotiations that reduce foreign trade barriers.

America's farmers will also benefit greatly. One in three U.S. farm acres is planted for export, and 25 percent of gross farm income comes from exports. Trade is an engine of economic growth, job creation, national competitiveness, and innovation, and this results in a higher standard of living for all.

But trade is not just about economics. As President Bush has said, it's a moral imperative. Free and open trade is a foundation for democracy, social freedom, social responsibility, and political stability. It's about human freedom and a higher quality of life for all.

One key element in making progress toward that goal is rebuilding a consensus in support of opening markets. The vehicle to do that in Congress today is to grant trade promotion authority.

Let me emphasize that regardless of your perspective on what should go into a trade agreement, it serves no one's interest to prevent the president from taking the U.S. seat at the table and being on the sidelines. As the president recently observed, free trade agreements are being negotiated all over the world, and we're not a party to them. There are more than 130 preferential trade agreements in the world today. The United States is a party to two.

We have to get off the sidelines and back into the game. The president intends to press forward bilaterally, regionally, and multilaterally to expand trade and the accompanying economic opportunities that it creates for the American people.

It's often said that we don't need trade promotion authority until an agreement is concluded and Congress has to vote on its implementation. The reality is that negotiations in the WTO on services and agriculture began in 2000, and proposals are on the table. Trading partners now are asking when we will have trade promotion authority. Some will use the absence of TPA as an excuse to avoid new talks. We shouldn't give them that excuse.

For some of our Latin American and Caribbean trading partners, TPA is viewed as a litmus test of our commitment to a free trade of the Americas. They don't want to have negotiated twice, once with the administration and then once with Congress.

Yet there are still those who argue that numerous agreements have been negotiated since TPA expired in 1994 so there is no need to act now. The fact is that apart from the Jordan FTA, none have involved reciprocal market opening measures whereby we give and get access to overseas markets.

This administration is well aware of the fundamental role Congress plays in setting our trade policies under the Constitution. In fact, what trade promotion authority really provides is a vehicle to ensure that Congress and the president work together, cooperate, and have agreed on negotiating objectives.

Our intent is to work closely with Congress, not only for the passage of trade promotion authority, but to rebuild the political consensus necessary for our negotiators to engage with their counterparts at the bargaining table. Congress is an indispensable partner in this enterprise, and I'm here to assure you that we can work together in a partnership based on mutual trust, respect, and certainty.

Mr. Chairman, securing TPA is essential to successfully implementing the president's trade agenda, a bipartisan plan that will benefit all Americans. It includes, first, eliminating tariffs and other barriers that impede U.S. exports of goods, services, investments, and ideas.

Second, his agenda will bring a special focus to areas like agriculture. It has a profound benefit for American exporters and for global wellbeing.

Third, it will keep electronic commerce free from trade barriers. And, fourth, his agenda will preserve our ability to combat unfair trade practices that limit economic opportunity.

Finally, let me speak to the connection between trade and labor and the environment. The president and I believe that the most significant impact that trade can make on labor and the environment is through rising standards of living, greater freedom, and greater social responsibility for all citizens around the world. This will lead to demands for improved labor and environmental standards.

Clearly, free trade and the need to promote its advantage through passage of TPA are important to the American people and to all mankind. But our ability to promote economic growth and freedom through trade will depend on how well we communicate the benefits of trade in every home, on every factor floor, on every farm, and up and down Main Street of this great nation.

I'm looking forward to working with this committee and all members of Congress to build the type of bipartisan coalition on trade and trade promotion authority that also brought tax relief to the American people.

Thank you, Mr. Chairman.

BAUCUS: Thank you, Mr. Secretary.

The Honorable Robert Zoellick, United States Trade Representative.

ZOELLICK: Thank you, Mr. Chairman. I appreciate your thoughtful comments, Mr. Chairman, and those of your colleagues here, and I think the point that Secretary Evans and I know well to start is that the most important part of our job is to develop a common approach with the Congress.

So, frankly, we thank you for this opportunity to return back to this committee. I've certainly benefited from my discussions with each of you and appreciate the guidance and suggestions that you've offered. And, as it was this morning, sometimes it's just fun to watch the interchange among true professionals.

I'm pleased that one of your first steps, Chairman Baucus, was to convene this hearing on U.S. trade promotion authority. It's an encouraging sign of bipartisanship encored with the impressive tradition of this committee that you are considering sharing the priority that had been assigned to trade by your predecessor, Senator Grassley.

Your interest in U.S. trade promotion authority is especially timely. The administration has been gaining momentum for expanding trade with Europe, with Latin America, East Asia, Africa, and Australia. Yet we do need the Congress to act so we can keep moving ahead. This is a moment that we have to seize together.

As Pascal Lamy, the European Commissioner for Trade, has pointed out with realism, quote, "If trade promotion authority is denied by the Congress, it would be hard for the U.S. administration to establish itself as a credible trading partner." The failure seize this moment would hurt American farmers and ranchers, workers, businesses, and their families.

I just returned a few days ago from my second visit to Europe within a month. This time, led by the president, our aim has been to reenergize the launch of a new global round of trade negotiations in the WTO. And, frankly, to answer some of your questions, the preparations for the new global negotiations had been moving, at best, at a snail's pace. The repercussions of the failure in Seattle had left many dispirited.

But now, working closely with the European Union and others, including some key developing countries, we're now seriously discussing frameworks for negotiations. But we don't have much time left before the trade ministers meet in Doha to try to reverse the damaging economic and political legacy of two years ago in Seattle.

Two weeks ago, I was in Shanghai at an APEC meeting of trade ministers from across the Pacific. And while there, we were able to build on the work of Ambassador Barshefsky and Secretary Daley by negotiating a breakthrough on China's accession to the WTO.

After 15 years of negotiations, we are now well positioned to work with other WTO members to bring China and Taiwan into the WTO this year. Moreover, an important development from my perspective, the Chinese joined us in sending a clear signal to the nations of the Asia-Pacific that the train for the launch of the new WTO round is moving, and that spurred interest in getting aboard.

Two months ago, at the Quebec City Summit of the Americas, President Bush pressed forward for the negotiations for the free trade area of the Americas to a new and more defined stage. That train is moving, too, and it was very helpful that Chairman Baucus and Senator Grassley were with the president in Canada to make a united case for the United States. Others, including Senator Graham of Florida, have deepened our drive for trade liberalization within our own hemisphere by promoting the renewal of a more robust Andean Trade Preferences Act.

So stepping back, one can see that we're starting to move the key pieces of the president's trade strategy into position. We're advancing trade liberalization and America's interest globally, regionally, and bilaterally. We're creating a competition in liberalization with the United States at the center of a network of initiatives.

Yet the executive branch cannot successfully lead alone. We need a partnership with the Congress to pioneer new markets for America's farm products, goods, and services. We need a partnership with the Congress to break down barriers to the spread of American entrepreneurship. We need a partnership with the Congress to help us export individual freedom and the rule of law.

ZOELLICK: As a number of you have mentioned, the Congress enjoys the constitutional authority to regulate commerce with foreign nations, and, therefore, we need a partnership with the Congress to restore America's leadership on trade. As I have pledged to this committee previously, we will also enforce vigorously and with dispatch U.S. trade laws against unfair practices. We agree with you that this is fundamental to building public support at home for open trade.

The Bush administration is committed to the effective and creative use of statutory safeguards consistent with WTO rules to assist American producers under extraordinary stress from imports. Used properly, these safeguards -- for example, with our Section 201 investigation on steel -- could give U.S. producers a vital breathing space while they restructure and regain competitiveness.

It's a fact of life in this globalized economy that some industries and communities critically dependent on them cannot change at the pace of near instantaneous capital and information markets. Our response should be neither to hide these industries behind costly barriers nor to abandon businesses, workers, and communities. Instead, we need to try to use the safeguards in cases of serious injury as part of a comprehensive commitment to try to restructure and regain competitive strength.

In sum, the elements of the president's trade strategy -- global, regional, and bilateral negotiations; enforcement and dispute resolution; action against unfair trade practices; and safeguard and adjustment -- are mutually supportive. We're backing words with action. Now, after months of consultations with the Congress, Americans need action on the legislative front, too.

I'd like to correct a point that I understand may have been made yesterday. In 1986, when the United States and other nations launched the Uruguay round, the president did, indeed, have trade negotiating authority, the authority we are seeking, that had been granted by Congress in 1979.

Since the congressional grant of authority to negotiate trade agreements expired in '94, seven years ago, America has fallen behind. Today, the European Union has 27 free trade agreements or special custom agreements around the world, 20 of which were negotiated in the '90s, when we've been caught unable to act, and it's doing 15 more right now. We've got no one to blame but ourselves for this.

Consider this forecast: If we are unable to overcome the breakdown in Seattle by launching a new round of global trade negotiations, special trade agreements will proliferate even more quickly and, most often, without the United States. The president needs to have negotiating authority to help us achieve a successful global round and to preserve our trading interests. If not, American families, who are the backbone, the muscle, and genius of America, are going to pay the price.

Together, the two landmark trade agreements of the '90s, NAFTA and the Uruguay round, have boosted the annual income and lowered the cost of purchases for an average family of four in America by between $1,300 and $2,000. So the stakes are high for the United States.

In less than 20 weeks, ministers from around the globe will gather in Doha to endeavor to launch a new multilateral trade liberalization round. U.S. leadership is vital to its success, and we need a united front on trade.

I know from many consultations with you and other members of Congress that there's a substantial bipartisan majority that does support the trade negotiations we're advancing. So now is the time for Congress to act.

Prior congresses granted prior presidents, five of them, this authority to negotiate trade agreements. So I urge this committee, with its special tradition of cooperation on trade, to grant President Bush the same authority by the end of the year.

I know well that trade promotion authority must be based on a partnership between the executive and the Congress, founded on trust, close consultation, and mutual respect. This partnership needs to be structured carefully so that the executive can negotiate effectively and productively, and Congress can establish its objectives, ensure close consultation at various stages of the negotiations, review and revise on the work in progress, and make the ultimate judgment on trade agreements.

Mr. Chairman, the eyes of the world are now on Congress and on this committee. Wherever I go, whatever I do, I'm asked the same question: Will the Congress join the administration in supporting trade?

So I urge this committee to give me an answer of yes by enacting trade promotion authority we can use to reassert U.S. leadership on trade. It's within our grasp to build a post-Cold War world on the foundations of freedom and opportunity, democracy, security, free markets, and free trade. Together, we can seize this opportunity and set a course for peace, prosperity, and America's interest, not just for a year or two, but for decades.

Thank you, Mr. Chairman.

BAUCUS: Thank you very much, Ambassador and Mr. Secretary, and I particularly appreciate those words about cooperation and urgency, because I think that both are accurate.

It's also important, I think, for all of us to keep in mind -- and you've referred to it -- that it's an extraordinary grant of power for the Congress to delegate fast track trade promotion authority to the president to negotiate an agreement that Congress cannot amend. That is an extraordinary grant of authority, and in return for that grant of authority, clearly, there has to be cooperation and understanding and delegation under terms that the Congress thinks is appropriate in this day and in these times.

Because the Congress cannot be the negotiator in trade agreements, and because only the president, the executive branch, you, Mr. Zoellick, you, Mr. Evans, are really doing the negotiating, we have to be careful that when we delegate and give the instructions under the constitution to the president, it'll be done in a way that the people of our country want us to. After all, we are representing our constituents, the people of the country.

Now, I think it is true that the eyes of the world and many eyes of this country are looking to see what the Congress is going to do. I don't know if it's entirely an accurate statement to imply that it's only the Congress. Mr. Zoellick said the eyes of the world are on the Congress.

The truth of the matter is the eyes of the world are really on both the Congress and the president. It depends on what statements the president makes in this regard. And I might say it's a bit ambiguous, it's a bit unclear as to where the president is with respect to this issue.

I say that because the president's statement on his declaration of principles included the language, open trade, matched -- and I'm quoting the declaration of principles -- "a strong commitment to protecting the environment and improving labor standards," end quote. And then the recent statements by the president that all those environmentalists are just a bunch of isolationists, that -- you know, it's -- I've forgotten the exact words, but it was just yesterday, quote, "that the protectionists and the isolationists" -- he wasn't referring to all environmentalists. He said some, but still, he did not mention that some are not isolationists. He did not mention that some are not protectionists, that some are -- in fact, most are trying to do something that's right here. And so it's unclear.

Mr. Zoellick, you made some very good general statements, but they were pretty general. And in the White House, the president has made some statements that undermine, that seem to contradict the general statements. So for us to proceed, it's very important for us to hear where the president is and for us to know that the president is, in fact, in a position and wants to negotiate and wants to compromise with the Congress so that the Congress can pass this extraordinary delegation in a way that reflects the views of American people.

One other signal that we get that's a little bit unclear is the Crane bill. I don't know whether the administration supports the Crane bill or does not support the Crane bill. It would be helpful to this committee to know. And in that bill, there's not one word that refers to labor issues and environmental issues. There's not one word.

That's a bill which failed to pass the Congress by 45 votes a few years ago, and it just seems that it's important for this committee to know where the administration is on that bill. I very much hope that it does not support the Crane bill. I very much hope that it sends a signal that it wants to deal, and I'd like the response of Secretary Evans on that point.

Where is the president? His public words are a little bit contrary to your words. They're contrary to the statement of principles. They're contrary to statements by Ambassador Zoellick, and it'd be very important for this committee to know where the president is. And I very hope the president's position is that he wants to sit down at the table and work out a compromise on these issues.

EVANS: Thank you, Mr. Chairman. I made reference in my remarks to the importance of cooperation and consultation and working with the Congress on this very important issue.

I understand the process and how it works, and that bills get introduced, and then they go to subcommittee for markup, then they go to full committee for markup, then they go to the full floor, and then I'm assuming there'll be a bill introduced on the Senate side and will go through committee. And as I've seen through the years, all through those steps, there's consultation and there's discussion and there are changes that are made to try and bring together a consensus that everybody's comfortable with that will lead to ultimate passage of trade promotion authority, in this case.

The president's been very consistent in terms of his desire for trade promotion authority and free and open trade, because he understands the power of it around the world. He understands the power of what free trade can mean for a better environment for the world and for improving labor standards around the world.

So the president's been very consistent when it comes to the goals that he has with respect to the economy, but then, specifically, the environment and labor. Maybe his approach is a little different in how we get there, because he sees the power of what free and open trade can mean to economic growth around the world, which means more jobs, which means a higher standard of living, which means bringing people the social freedoms and human freedoms that will demand improved labor and environmental conditions for a long lasting period of time, as opposed to maybe dictating it to people.

So I think the end goals are all the same. We all are protecting the environment. We're all for improving labor standards around the world.

BAUCUS: I appreciate it. My main point is that, because it is urgent, passing TPA, we're going to pass it much more quickly the sooner the president indicates that he wants to deal on these issues and speaks well of legitimate issues, to not discourage them. When he speaks well of them, believe me, this committee is going to operate much more quickly than it otherwise might.

Senator Grassley?

GRASSLEY: I'm going to give my opening statement, because I was voting when the time for opening statements of the chairman and ranking member took place.

I'm glad that we're having this second day of hearings. The very fact that we're having two days of hearings on trade promotion authority makes a very important point. That point is that there's a bipartisan continuity of interests regarding the United States' trade policy. Republicans and Democrats both know that we have to work together so that America can only win when we are negotiating down barriers to trade.

I strongly believe that we can develop bipartisan legislation to renew the president's trade promotion authority and do it this year. In fact, we must do it this year.

This legislation will be aimed at maintaining America's constructive leadership in the international trading regime. There is simply no question that America's vital leadership role in trade will be just as important in this century as it was in the last century.

If we fail this challenge, if we lose the opportunity to grant the president trade negotiating authority this year, I believe that the process of opening global markets through global negotiations -- and this is a process that we have championed for over 50 years -- may be set back for years. And I already believe that there's some setting back, because the president previous, as well as this one, haven't had this authority for now the last six years.

If this all happens, this setback, the future prosperity of millions of Americans and the future prosperity of many of this nation's most competitive businesses, as well as farmers, will be put in doubt. That is why 78 agricultural groups representing diverse agricultural interests, such as corn growers and wheat growers and tens of thousands of farmers, recently sent a letter that you can see here to President Bush endorsing his effort to renew trade promotion authority.

As you can see, this is a very extensive and comprehensive list of organizations that want the president to have this authority for the demonstrated good that it has done over the last decades that the president has exercised it.

Finally, I want to say a word to both Ambassador Zoellick and Secretary Evans.

GRASSLEY: I want to publicly acknowledge President Bush's outstanding success in resolving two long-standing disputes that are critically important trade issues. I also want to publicly commend both of you for carrying out so successfully President Bush's most significant trade initiatives to date. As you know, just a few days ago, Ambassador Zoellick and his team resolved, in Shanghai, a major outstanding bilateral trade issue that were holding up China's accession to the World Trade Organization.

The satisfactory resolution of the outstanding agricultural issues relating to China's WTO accession was extremely important to America's farmers, and to me personally, as ranking member of this committee. Ambassador Zoellick, you and President Bush really came through for America's farmers, and I want them all to know that. This success came on the heels of your successful resolution of the WTO banana dispute. We should have resolved this dispute a long, time ago.

These lingering trade disputes are bad for everyone. They undermine confidence in the World Trade Organization and complicate our efforts to pursue new multi-lateral trade initiatives. Your ingenuity, persistence and ability to work cooperatively with Pascal Lamy, trade commissioner, has paid off. These are very important accomplishments for a new administration that has not even been in office 200 days. They are also causes for hope, and the greatest reason for hope is that I believe we have a president who is willing to expend the political capital to get these jobs done, including trade promotion authority.

If the United States can successfully resolve complex and politically sensitive trade issues with both China and the European Union in the first half of this year, then surely Republicans and Democrats can come together for the good of our country in the second half of this year. My first question is for Secretary Evans. Many of us in the Senate believe that the International Labor Organization is the proper form in which to address labor issues, not the WTO. I believe the International Labor Organization is a proper form to address these issues and strongly support the mission of the ILO.

This morning, we have heard assertions about the United States support the International Labor Organization. The assertion was that the United States has cut in half spending on the ILO and the international labor activities. If you could, Secretary Evans, would you state if that is the case?

EVANS: Well, first of all, Senator, what I do know about -- first I agree with you on being supportive of their mission and their effort. And they ought to be one of the leaders -- the leader in the world in dealing with labor issues around the world. I wish Secretary Chao was here to give me the exact numbers. But it's my understanding that what has happened is from the years 2000 to 2001, there was a substantial increase in dollar commitment to the International Labor Organization. And what we proposed to do was take it back down to the same level of commitment that we had in this country in the year 2000. And you know, I don't know the exact number.

Ambassador, do you know the numbers?

ZOELLICK?: As Secretary Evans said, and I'm very glad you raised this point, because it's been used, and I think somewhat unfairly. In FY '98, the spending was $12.1 million. By FY 2000, it was $70 million. In FY 2001, it was $147.9 million. And our FY 2002 request was $71.6 million. So that puts it at the FY 2000 level. I'll add that some of that reduction was the end of a special two-year effort with AID dealing with some basic education with child labor.

I'll also add two other points. One is I know that some members of the business community, including the Chamber of Commerce and the Committee on International Trade have emphasized their willingness to work on this issue. And I'll just put a little bit of this into perspective. That $71.6 million that we're giving to the ILO is over twice my budget.

GRASSLEY: Thank you.

Senator Gramm?

GRAMM: Thank you, Mr. Chairman. One of the parts of building this relationship between the Congress and the administration is acts, which develop a sense of a common purpose. I was pleased during the administration of President Clinton and now under President Bush that the Department of Commerce has been asked to play a role in coordinating the activities of the executive branch in terms of implementing various trade agreements, specifically today the Caribbean Basin initiative, which was passed in 2000.

Secretary Evans, I wonder if you could review what your department is doing to see that that legislation achieves its intended purposes, particularly the purpose of preparing the partnership with U.S. Textile and Caribbean Assembly to meet the challenge which will occur in the year 2005 when the multi-fiber (ph) agreement expires.

EVANS: Senator, I have not been breached on that. And I apologize for that, but I will get back to you on the specifics that we're involved in to fully implement that. I'm sorry. I just haven't done that yet. Sorry.

GRAMM: Ambassador Zoellick, you talked about the relationship between the Congress and the administration. Looking at the last fast track bill, which was the one that expired in 1994, what changes in that legislation would you recommend for a fast track or TBA bill of 2001 in the specific area of congressional consultation?

ZOELLICK: Well, in general Senator, I'd be pretty pleased with that bill. I'd be pretty pleased with the bill that the Senate passed in '97. I had some opportunity to look at the drafts that you and Senator Murkowski have been developing. They also strike me as very constructive. And frankly, as I tried to make the point in my written statement, I think the core here is we need the authority to go ahead and negotiate, globally, regionally and bilaterally.

And in terms of the processes, I do accord a high degree of respect, as a number of you have mentioned, about what Congress needs. And I'm very open to discussion about particular ways in which that can be conducted, whether the procedures as developed in the past needed to be executed better, or whether we need additional procedures. My only concern, Senator, is that now and then I see some ideas that are floated that look like they're giving you authority. But with one hand they're giving you authority and the other hand they're taking it back.

And as we go through some of those specific points, that I think I would have a caution on. But you know, as a number of your colleagues have mentioned, I started out with a fundamental respect for the Constitution, and the Constitution authority belongs with the Congress. So I do believe that while the Constitution also gives the president authority in foreign affairs, that we have to try to be responsive to your needs and interests in terms of the structure that works for you.

GRAMM: On the issue of labor in the environment, I share the opinion that's been expressed that the International Labor Organization should be the primary international entity to help develop standards for labor. Within a trade agreement, does the possibility exist of incorporating by reference those standards that had been established by the ILO, and also determining what is the appropriate means of enforcing those standards?

I understand that in some recent trade agreements between Canada and Chile, they are using a form of fines as a means of enforcement of labor and environmental standards. I wonder if you could comment, Ambassador Zoellick, on the relationship of trade negotiations and international organizations such as the ILO and the use of trade agreements as a method of achieving enforcement of those standards.

ZOELLICK: I am pleased to. And in a way, is a follow up to the point that I think Chairman Baucus made. I think the starting point for us is to recognize that the best opportunity to improve environmental labor conditions around the world is by improving growth and openness. We always have to keep that in mind, because if you look historically or look at countries, that's what's been the key transforming force.

Frankly the president said during the course of the campaign, he was open to other ideas on this as long as they're not protections. And Chairman, I was at his remarks where he made those points, it was quite clear, and the use of the word some makes the point, there are some out there. And you know it because you fought them, that tried to use these to try to stop arrangements. I think all of us are aware, there is strong anxiety abroad on these issues. We've seen it in developing countries the president often cites in the conversation that the president of El Salvador has been doing some pretty impressive things, and his worry about whether this will be a new form of restraint.

So frankly Senator, what we have tried to urge is a broader base of discussion on approaching these issues. I think the frustrating thing is to see that as soon as environment and labor came up, they got connected with sanctions. And so you automatically had disincentives. And frankly, we're trying to widen that universe a little bit, talk about possibilities of incentives, talk about possibilities of aid. I have had a number of meetings with the people from the ILO about how to try and strengthen its role. And frankly, we also try to hope we can build some credibility on results here. People talk about concerns of labor movement. Well, we've done some things, frankly, using the preferential trade agreements, like GST and others to make sure that there are protection of core labor rights. But in talk about American labor, there were members of this committee that were pressing eight years to do what the president decided to do for America's steel workers. And I hope that counts somewhat in terms of not just talking about processes, but talking about doing things for laboring people in this country or abroad.

In terms of processes, we've initiated a review process for environmental reviews of all our trade agreements, and we've started them to practically draw in ideas from the environmental community about what we negotiate. There's some win-win possibilities here. For example, on agricultural subsidies in the E.U., which are not good for the environment, there's some fishing subsidies around the world. So in a number of our conversations with environmentalists, we've looked at that as a joint possibility.

So I frankly think, Senator, there's a rich range here. And the real danger would be if we just let this focus on the negative aspects or how we block trade. You mentioned the approach of fines. In the case of the Canadian-Chilean agreement, that was a separate agreement, just as we have a side agreement with NAFTA that has fines in some aspects of sanctions. But having dealt with international affairs for some 20 years now, I'll tell you the key message I take on this, if we're really concerned about improving environment and labor standards in these countries, it can't be seen as imposed by the wealthy countries on them.

Because they'll resist it, and you'll really plant the seed that will never grow. It's better to build on the openness. When I was in Chile, I met with labor groups and environmental groups to try to encourage them and see what their interests are. If we can open these societies, get growth, figure out ways to do projects together, that's the long-range way in which we're really going to be successful.

And frankly, that is some of our concern, Chairman, is that there are some who we know who honestly have that view. We're willing to work with them. But there's some that just want to stop. They've come up with various reasons. You saw them in Seattle. And that is a group we have to stand firm against, because they do not stand for trade and growth and openness.

BAUCUS: Senator Breaux?

BREAUX: I don't want to belabor the point, because I think you've made a fairly clear statement about this environment and labor issues being associated with fast track authority. I mean, is the position of the administration that you can address to some degree, labor and environment in the fast track authority, or that you cannot deal with it at all?

ZOELLICK: Well, Senator, if you go back and look at some of these bills, there were various trade and labor objectives in '88 and frankly, the '97 bill. There are ways -- what gets in to complications is some of the points that Senator Gramm was mentioning in terms of if you bring back agreements, you know, in what form and how is it related. When the president sent up his overall trade package on May 10th, he noted a toolbox of things that could be related to trade agreements and outside trade agreements. So I think there is a wide range, you know, that we'd be willing to work with the Congress on, but the key point is to not to do anything that actually sets us back in terms of trade and protection.

BREAUX: Well, I'm glad to hear you say that. I mean, again, I want to get something that we can get adopted. And that means that both sides are going to have to give a little, because if both sides just take the position that we have to have it this way or no way, we're going to end up with nothing. And I don't think anybody wants to do that. So I think in the concept of a toolbox, where there's fines or sanctions or what have you, somehow being a part of the things that you can utilize, don't have to, but can. That would be very important to get some type of agreement.

Let me ask a couple of parochial things that I think would hit the big picture on trade very well.

BREAUX: Senator Lincoln and I, I think, both have raised with you the situation with South Africa, the action that they took about seven months ago on chicken parts, which they say are being dumped over there. It's really interesting. They say it's chicken parts are being sold in South Africa cheaper than the price of the whole chicken, and therefore, that's a dumping activity. That sounds almost comical, but the implications in trade are enormous around the world. Can you comment on whether we plan to take action against that?

ZOELLICK: Well, again, I appreciate the opportunity to have discussed this in the past, because, you know, you're kind to say it's (inaudible). Obviously given the effect on the chicken industry beyond South Africa, I think it is a bigger issue than that. And frankly, we share your concern. We've discussed the possibility that WTO is OK (ph) with the poultry industry, also with the industry lawyers, Department of Commerce and some of the ITC as well. This, as you suggest, relates to issue of cost methodology they used. And frankly, I'm very sympathetic to the points that you've made.

Here are going to be the difficult parts that we can talk about, I think, at greater length. The ITC will have interests in these cost methodologies related to the United States as well. And in a sense, what you're now seeing here is the circle come back. And it's one of the reasons why we're going to have to be very careful on how we deal with anti-dumping laws, which I think we all share the importance. Because now other countries are starting to use them against us, and the case you cite is a good one.

And you prompted me to just check on this, is that in '95-'96, there were 383 anti-dumping cases around the world. Now in '99-2000, 638. It's been near doubled. And if you look at the countries that are now using these, there are a lot of the developing countries that don't have the procedure and rules and transparency we have. So the fine line that we're going to have to walk here is to make sure we don't do anything that undermines our ability to use these laws, but also make sure that as others use them, they don't hurt our exporters. And that's an issue that's related somewhat to this case at a technical level.

BREAUX: I think the industry correctly is concerned that if we continue to do nothing or to express concern in some fashion, that other countries will be following suit on this, and it could have a real global implication.

ZOELLICK: Personally, Senator, I'm disposed to try to take an action. I think the thing is is that we have to talk with the ITC and the Commerce lawyers about the overall context of our anti-dumping laws, and that's something we may want to talk about a little bit more, too.

BREAUX: OK. Since I have a couple more minutes, let me ask another, sort of parochial thing on the molasses problem, which you are very familiar with with sugar, and what the Canadians are doing by importing sugar from Brazil and other countries and putting it into a molasses form and exporting it into this country. I know Senator Conrad feels very strongly about this and others. You are very familiar with it. Can you tell me if the administration supports the position of the previous administration and USDA with regard to that being something that is in contravention of our existing trade laws?

ZOELLICK: We share your view on the issue. I've made the point to the Canadians. As you probably know, there was a changed customs classification, and obviously we support that classification. That is challenged in court, and my understanding is there is still a ruling left in the federal circuit about whether the change classification that would accomplish what we want to accomplish will be upheld. It was not upheld at the lower level, to my recollection.

BREAUX: Have you decided whether you all would support what we tried to do legislatively ...

(CROSS TALK)

ZOELLICK: On that, what we need to talk with you about, Senator, is is that if we go that route, and the case goes against us, that's a key point here, then we will be required to offer compensation. And we have to talk with you about making sure that legislation has that possibility. Frankly, before I give something up, I'd rather see if we can win it in court and see if we can get additional progress with the Canadians. If we can't, we need to talk about your routes, but we need to get the compensation.

BREAUX: OK. I appreciate it. Thank you very much.

(CROSS TALK)

(UNKNOWN): Thank you, Mr. Secretary, too. I've been hitting all my questions at him ...

(CROSS TALK)

BAUCUS: I apologize I overlooked you last (ph).

BREAUX: Well, I was going to point out if you did it again, Mr. Chairman, but I appreciate it. I knew you were vigilant.

(UNKNOWN): Mr. Chairman, first of all, let me say with all due respect, I've got to disagree with you on two things. First of all, if anybody in the world has ever been clear on anything, George Bush has been clear on trade, free trade, and trade promotion. I think the president's position is totally clear. I also think if anybody has been flexible, that the administration has been flexible, especially in terms of being willing to consider the extraordinary expansion of normal trade relations procedures to environmental and labor provisions within limits.

Secondly, let me also say that your proposal and your opening statement about making so-called fast track agreements subject to normal debate requiring closure (ph), that's not fast track, that's derailing.

Finally, I can't imagine that this committee would ever give up its trade authority to some newly created congressional trade office. So let me say where I think a compromise can be found. It comes as a surprise to nobody that I don't believe that we ought to have extraneous matters in the bills related to trade. I think they ought to be very narrowly defined. I understand the political necessity of some of our colleagues to have something related to the environment and something related to labor, even though I support trade because it promotes both those things. But I think where we have got to set limits is that we cannot set up a procedure where a president in trade negotiations is writing domestic law. Clearly no one ever contemplated that, and there has to have some procedure.

And perhaps something that could accommodate part of what you're saying is if the trade agreement does write domestic law and non-trade areas, maybe that part of it shouldn't be subject to fast track. Secondly, if we're going to write labor and environmental provisions into trade law, we've got to understand they apply to us as well as to our potential trading partner. Not only is that an impediment to getting trade agreements as everyone knows, but then are we going to empower an international dispute resolution mechanism to decide whether Congress, through its constitutional legislative action, is not abiding by a trade agreement.

Are we going to subject American taxpayers or American consumers to penalties imposed by some international tribunal or dispute resolution mechanism based on their interpretation of what we are doing in terms of our labor environmental or any other legislative activity that is not narrowly defined as trade? I would simply submit that I don't believe America is ready to turn over enforcement of domestic law in non-trade areas to international dispute resolution mechanisms or international tribunals. I don't believe that that will float. And I think that that's something that we should be able to find common ground on.

Secondly, as much confidence as I have in this president -- though I would have to say in listening to Mr. Zoellick talk about the importation of molasses, it made me long for the Clinton administration; at least they were willing to stand up against raw, rotten protectionism -- but having said that and feeling better about it, let me say that I'm not willing to give any president the ability to write domestic law in non-trade areas in a trade agreement that is not debatable and not amendable.

So we deal with it in two ways. One, if we want labor and environmental standards in the bills that are domestic law, I think they ought to be treated differently. And maybe your proposal might be a way to do it. Secondly, I don't think we want agreements where we're letting some world body make a decision that overrides the United States Congress on non-trade areas. And I think there would be consensus on it. So we could either write the agreement so we preserve our sovereignty, so that enforcement is something that the nation does, not some international dispute resolution.

And where we've got some special mechanism on a border or like a Byrd rule on a reconciliation, where we've got something so that if domestic law is being written in a non-trade area, it's got some different set of rules. Or finally, just write into fast track some principles that we're for on labor in the environment that don't write domestic law and that don't have international enforcement. And I think we might agree to that. But I think you go much outside those areas, you're going to have a very hard time.

BAUCUS: Thank you, Senator.

Senator Rockefeller?

ROCKEFELLER: Thank you, Mr. Chairman. I just want to go back to what I originally said in my opening statement, because I didn't feel that I got an answer, and I don't want you to draw any conclusions from these questions, but I do want to get answers to them. And that's about the need, just the compelling absolute need for fast track. I mean, the WTO round can certainly be launched without it. Jordan has done without it, will pass without it. Chile will pass without it. Bob Graham and I are discussing an Andean thing, which is more GSP than fast track, but you know, the bill's written. It will pass without it. Singapore will pass, I think, without it. And then you have FTAA. I think that's ready to go. And whether it passes or not still won't be a matter of fast track.

And so I just simply, I'd like to get, and you referenced it briefly, Mr. Secretary, in one sense, which I couldn't quite digest properly to give me an answer, the need, the compelling need for fast track when so much is being done without it. I understand the business about our standing in the world, and you made reference to two of a hundred and something, et cetera. But make the case again why it seems to be so important.

EVANS: Senator, I think in a large part it's about jobs. I think it's about our economy. And I have businesses from all over America come and talk to me about their future and their growth and where their markets are and the importance of opening up those markets. I listen, and it gets my attention when I listen to those business leaders tell me you look at the technology industry, a third of our growth in the last five years has come from technology; when those leaders come and talk to me and say that our future growth is outside the borders of the United States.

Certainly there's some here in the U.S. But they look to markets outside the U.S. to continue the growth that they've experienced over the last five to 10 years. And what those leaders need to know, and what these financial markets need to know, and what our economy needs to know: Is America is going to lead this issue? We're going to lead when it comes to free trade. The whole world needs to know that. And our financial markets in both here in America as well as world financial markets need to know that, because markets need to have a certainty as to this imperative that we're going to open up trade around the world, and America is going to lead.

The way decisions are made is markets are forward looking. They're forward thinking. And if we send the signal to markets that yes, we're going to lead on opening up trade around the world, then our financial markets are going to open up, and our economy will make decisions to get ready for that. If we continue to send mixed signals -- we may lead, we might not lead, we might follow, we are kind of going to be at the table, but we won't have real negotiating authority -- there's not a lot of certainty in that. But there's one thing that this economy needs and industries need, is certainty.

And the one other thing that I talked about is leadership. I agree with Senator Gramm when he said earlier, Time is not on our side. We see what's going on in the world, and markets or other countries are entering into trade agreements. If you look at the surplus we had in just our technology industry ten years ago and look at it today, it's shrinking. And one of the reasons it's shrinking is because we're allowing other countries and other parts of the world to grab our market share.

EVANS: So you know, to me, the imperative for it is America needs to lead on this issue. Our economy needs the certainty that we're going to lead on this issue so that our industries can get prepared for that, continue to think about that. And to me what that means is more jobs for Americans and higher paying jobs.

So to me, at the end of the day what it gets back to is continuing economic growth in this country, continuing to increase the number of jobs in this country, increasing our standard of living in this country and increasing the quality of life for everybody.

I don't think I can put enough emphasis on the fact that our markets and our businesses are really watching. Are we going to lead on this issue? And to me, the only way we can really show we're going to lead on it is giving the president the authority that he needs to negotiate trade agreements.

ROCKEFELLER: A quick, one-line response, if you wouldn't mind.

EVANS: Sure.

ROCKEFELLER: What have we lost over the past seven years by not having it?

EVANS: Well, I'm going to defer to Ambassador Zoellick, but I am going to say that, you know, in the last number of years, there are 130 other preferential trade agreements out there in the world that we're not a party to.

I'll give you one example. Selling a tractor to Chile. If we manufacture that tractor here in America, the tariff is $25,000. If we manufacture the tractor in Brazil, with one of our American plants, the tariff is $15,000. If Canada manufactures the tractor, the tariff is zero. And the reason it's zero is because Canada has entered into a trade agreement with Chile. So would it have moved quicker? I don't know.

That's one example. I'm sure, Ambassador Zoellick would like to ...

ZOELLICK: If I could just ask the chair's indulgence as a negotiator to give you a sense of this, is that first, Senator, I think it's important to distinguish different things that Congress has done in the trade area. So, for example, the preference agreements, like the Andean trade preference, the GSP, the Caribbean, the afferent (ph), all very useful, are one way. We grant preferences. We're not negotiating this because they are developing countries. And so, the Congress by statute has said you can do this if countries meet various standards. But it's not a two-way negotiation.

The China NTR was, again, China agreeing to a whole set of steps to open up, and in return, the action of the United States was to agree they come into the WTO and take action on the annual NTR review. So we didn't change our markets in anything. And that's the key part here, is once we start to get into two-way agreements, where we give and they give, then you get into the problems you would run into in negotiation if you don't have a united front.

And you mentioned Jordan. Jordan is a foreign policy and national security agreement, and we all know it. The amount of trade we have with Jordan is minuscule. There's some good things there in terms of setting pattern for others in the region, but it's not going to fundamentally affect economic interest in this country.

ROCKEFELLER: Then why don't we just pass it?

ZOELLICK: I support it and so does the president.

ROCKEFELLER: Is there support as is?

ZOELLICK: And we have supported the overall agreement.

(CROSS TALK)

ROCKEFELLER: I know.

ZOELLICK: Well, if I can answer this question, then I'll come to yours, Chairman. I'd be pleased to. But I think this is an important one.

When it comes back time to negotiating leverage, once we strike a deal, it is absolutely critical if you're sitting across from someone at the table that they know it will be taken as a deal. That doesn't mean that the United States Congress will necessarily accept it. You have the up or down vote.

But you could understand, as a negotiator, if they're sitting on the other side, and they're being asked to deal with something that is very politically sensitive, something very difficult on their side, we're trying to get to that real core bottom line, and they think the whole process is open up to amendment and unraveling here, we're not going to get to that core bottom line. And you ask what effect it had? I do believe this also affected Seattle, and Seattle, in my view, is a debacle. And if we don't reverse it, this country and the international trading system is going to be in serious trouble.

You ask whether we need it (inaudible). I don't know for sure, but a lot of countries that I'm going to be pressing to say we have to go forward, are going to ask me, "Do you have your country behind you in going forward?" FTAA was launched by the president, Clinton, in 1994. It really wasn't going much of anywhere until we pushed it back again.

And frankly, on all these issues, the reason why I emphasize the time is now is that if we can't work this out together, and get a sense of the Congress and the executive working together, we're going to lose this momentum that we started to generate.

I'll give you one last example from a sector you know well, union negotiations. When union contracts are made, it comes back to the membership for an up or down vote. They don't allow an amendment on this pension plan or on this aspect of wages or (inaudible). It's seen as a unified package.

And the key part on it is when we're dealing with big agreements, it's a question of the national interest. We all know that there are various points of view that have to be represented. At the end of the day, the package has to represent the national interest.

So I do believe, and I know this topic comes up, and I'm really pleased that you asked the question, because as a negotiator on the front line, these are the questions that I get and I do worry if we don't have this authority.

ROCKEFELLER: Thank you.

BAUCUS: Thank you, gentlemen.

Senator Snowe?

SNOWE: Thank you, Mr. Chairman, and I want to welcome both of our witnesses here today, and obviously this is a complex and multifaceted issue that obviously we have to reconcile some of the differences as well as, I think, acknowledging some of the realities that now exist.

With respect to our trade agreements and even some of the barriers that continue to persist with other countries, countries that have refused to open up their markets, I know my state has been the victim of a significant loss of manufacturing industries and jobs in Maine because other countries refused to open up their market.

But we are where we are today. And the question is, you know, what kind of consensus can evolve so that we can perhaps proceed to grant the president the authorities that he needs to negotiate agreements. And obviously there is a strong feeling in this country about the standards of labor and environment. What can we do to bring about that cooperation with other countries?

Now, I know the president had made in his announcement a series of toolbox of actions. And I would be interested in hearing from both of you this morning as to how you think that could help in combination with trade negotiations that would bring change in the countries with whom we will try to seek trade agreements.

Because many of these actions, as I understand, are based on previous agreements of the generalized systems of preferences and four or five other agreements. Now, they lack enforcement mechanisms, obviously. So how do you think the president's suggested actions within this toolbox, given the previous agreements upon which he's predicating these actions, will be helpful?

ZOELLICK?: Well, Senator, I think you hit the nail right on the head. What we're trying to do with the toolbox is to take the controversial and sensitive topic of environment and labor, and say, "Let's look at an agenda of things that can be used." Some of them are in law now. Some of them we're suggesting there could be adaptations. For example, last year, the Congress added to these preferential trade agreements some child labor standards, which obviously are important.

We support and we -- in fact, I have already used these in a GSP review with countries to try to improve their use of the core labor standards. So part of its implementation, part of it is how those laws are used more generally. There's been the discussion of how we could strengthen the ILO. The ILO, at present, has a certain role in terms of developing these core labor standards, trying to get other countries to put them in their domestic legislation, as many members here have mentioned, in many cases they have done so. And now it's a question of enforcement.

So to give you an example, in the case of Cambodia and also in Guatemala, we work to have the ILO send a team to actually help them in terms of the implementation. Those go to the point that I was trying to make before about let's try to get some results on the ground in these areas. The environmental one is an interesting one because it actually cuts across some of the lines you heard here about sovereignty in that as Senator Gramm would point out, one of his strong concerns and our strong concern is protecting America's sovereignty in terms of its laws in environment and labor areas.

But interestingly enough, a number of environmental groups are also sensitive to the fact that they don't want the WTO interfering with their international environmental agreements. And we were just very pleased to win a case that dealt with this with domestic law dealing with sea turtles and the effect in (inaudible). And there's another one dealing with (inaudible) dolphin (ph). So there's a range of things that can include incentives. Our aid programs that can support this.

I talked to Jim Wolfensohn of the World Bank of ways in which they can include some of their financial support in these efforts for both core labor standards and the environment. And if we went through that whole list, our point was these are examples of ideas that may or not be formally with trade agreements, they may be associated with them at a similar time to try to deal with real problems. We mentioned in their (inaudible) nature swaps. Back in the 80s, Secretary Baker and I were able to put forth this innovation to be able to not only reduce debt in other countries, but get the money to go to the environment.

That's not part of anybody's trade agreement, but when I was down in Chile, I was struck with the progress that it had made. So we're partly trying to say let's broaden the discussion here. Congress can best decide how it wants to relate that to any grant of authority that is fit to give. But let's not rush to just the negative and how do we stop trade, because I think all of us in our heart realize that if you stop trade, it's not going to help the environment or labor.

SNOWE: I think what we need to know is where we've been effective in the past when we've granted fast track authority to a president on some of these issues, because I think the feeling is that progress hasn't been made, at least in a substantial way. And I agree that we can't totally impose and dictate on other countries, and you have to work with them. But on the other hand, at what point do you make a decision that clearly the status quo has not been working and hasn't been effective?

I mean, could there be the use of fines, for example? Other ways in which to bring about some of the changes so that it levels the playing field, you know, for our companies and for our workers here in America vis-a-vis other countries that obviously don't adopt the same high standards.

ZOELLICK: And just to further on that point, we do have some examples in our own experience with the NAFTA side agreements that did have fines. As others mentioned here, there is a Chilean-Canadian agreement with fines. But I would just hesitate to mention this is that, you know, people easily say, "Oh, well. Other things haven't worked." But actually, if you look at what's happened in terms of environmental and labor conditions around the world over the past 10 or 20 years with the opening up, there is significant improvement in countries.

Now, it's not up to our level yet, but I really think we shouldn't lose the sight that the combination of openness and growth and some of these tools has made a difference. I'm not saying that it necessarily is enough. But we also shouldn't ignore that some of these things, I think, have worked and we need to just keep using them as countries grow.

SNOWE: I think it would be helpful to have that documentation, frankly. It's a good example of where it has worked.

Thank you, Mr. Chairman.

BAUCUS: Thank you very much, Senator.

Senator Lincoln?

LINCOLN: Thank you, Mr. Chairman. And I would echo the words of Senator Snowe that it would be helpful to have documentation of those productive areas where we could reflect on.

Thank you, Secretary Evans and Ambassador Zoellick, for sharing your wisdom and experience with us here today. You've both made the point that the time to act is now lest we fall behind and lose our leadership role. I wholeheartedly agree.

I have had the pleasure and the good fortune to be working with my colleague, Senator Graham from Florida, and some other new Democratic colleagues outline a plan that I think encompasses the essential ingredient of a realistic and pragmatic approach.

We appreciate, Ambassador Zoellick, your involvement and wisdom and coaching on some of that in any way. We appreciate, at least, your input. But this is an approach that I think can garner bipartisan support and an approach by which we can give to you in the administration the trade promotion authority that you need.

I've supported this plan and continue to work with my colleagues on it in the extension of TPA because it's the right thing to do, not only for the farmers, for the industries as well as the workers in my state and, I think, across our nation.

LINCOLN: But for freer trade to serve the lofty goals that we have envisioned in these principles and that we talked about in this hearing, it must also be fair trade. And that's simple to say, oftentimes difficult to implement. And I think it's important for us to set those guidelines for ourselves.

Just two quick specific questions, if I may. One is the problem that, Ambassador Zoellick, I know you're aware of. We talked about it many times from the standpoint of my catfish farms in Arkansas, what they are dealing with. And it's the import of the mislabeled fish from Vietnam. You've been gracious in listening to my questions and comments. You've replied in many ways.

These fish are imported with misleading labels and in packaging that are designed to look like catfish farm raised and grown in the U.S. This is a problem that we really need to resolve. I understand to the extent that the Vietnam agreement has already gone to, but would really like to hear from you what you will do to help our catfish growers deal with this problem with Vietnam and what you'll do to ensure that we don't encounter these similar types of problems in the future. You know, not only to the effect of what we've done in the past, but we really intend to do in the future, say with trading partners in Latin America, perhaps.

And the second question Senator Breaux touched on, I didn't want to waste your time trying to call you about it. I knew you were going to be here today, so I would certainly bring up my concern that our farmers are facing with all kinds of trade barriers, but particularly our chicken exporters that are fighting in the anti-dumping action in South Africa. I'm so sorry that I was excused for a moment when Senator Breaux asked that question, and I would just certainly like to have your response.

In South Africa, the government, in our opinion, is abusing the WTO Article 6 to assess the unfair duties, and we're just anxious to hear your perspective on whether or not we'll see the U.S. institute a challenge before the WTO on behalf of our chicken industries and exporters.

ZOELLICK: Well, thank you, Senator, both for your words of support, which I appreciate, and your efforts. And I'm always delighted to work with you on issues big and small.

And on the catfish, let me mention that, again, I want to compliment your leading role on this. You're not the only person, obviously, but you have been, I think, the strongest in terms of bringing it to my attention. I've done a couple things. One is I raised this with Minister Hu Qua (ph) when I met him at the APEC meeting and said that this was a problem.

It was a problem with a number of people in the Congress. And I urged him to work with us to try to see how we could, sort of, best resolve it. I also asked our embassy to try to see what they could track.

As you may know, we've also worked with the FDA, and they have issued, at least I understand they've issued, an alert on the labeling issue to try to make sure that, as you properly pointed out, some of the fish that is coming in is not catfish. And therefore, the FDA has taken the step to make sure that there is proper labeling and we can work with them to make sure that's implemented and enforced.

I know we've also talked with the industry a little bit about safety standards, and the industry has done some of their own testing on that. We'll be pleased to work with them on that element.

And beyond that, you know, we've talked with the industry about other alternatives, depending on the progress. I've learned that this an industry that actually there's been some substantial growth in about 15 percent a year and came down a little bit last year. And so obviously, you know, it's a growing market. I think the Vietnamese share is now about 2 percent, but there's some sense it might have affected price.

So my suggestion is that we hone in particularly on the implementation of this labeling issue so that it's not affecting the U.S. catfish if it's a different product. And then I'm pleased to work with you and your colleagues, you know, as we go through this process. And as I mentioned, I did alert my Vietnamese counterpart about it.

On the issue of South African poultry, frankly, I share your concern. And I talked about it in the context of how I know the poultry industry is actually trying to disaggregate the product. And so a lot of the, sort of, the white meat of the breast here, and then it sells the other products out. And this goes to a question of the cost calculations done within the anti-dumping suit in South Africa.

I'm sympathetic to your judgment that this is not a proper ruling. In terms of taking it to the WTO, what I mentioned to Senator Breaux is we have to work closely with the people at Commerce and the ITC because some of these cost calculation methods are used more broadly, and there's defensive issues here with the United States on other matters.

So what I'd be pleased to talk with you about after working out with the various lawyers here is is that, you know, frankly I have a lean towards going forward on this, but I think we all need to know how we go forward has effects on other things.

LINCOLN: Absolutely. And I appreciate very much your willingness to work with us on both of these issues. And we'll just say to the last issue, one of our other big concerns in regard to that is the precedent that it sets with other nations. And those other nations that have indicated that if we don't take action, or at least don't stand up to some regard to what's happening in South Africa, that they intend to take the same action.

And we would certainly hate for it to get blown out of proportion, I think, with other nations in an industry that's very important to us. And to the aquaculture industry and agriculture, it is an unbelievable opportunity for this nation in terms of job creation and in export. So I appreciate your recognition of that. Thank you very much for your hard work.

Thank you, Mr. Chairman.

BAUCUS: Thank you very much, Senator.

Senator Murkowski?

MURKOWSKI: (inaudible) pretty much identified pretty much for the panel and many Americans who are watching the necessity of having the trade promotion authority at this time.

You know, there's a lot of folks that have said that there's no urgency. Some of that has been expressed here. Today, some say the trading system is working pretty well right now. I think your explanation, Secretary, on the tractor speaks for itself. There's numerous duplications of that, and unless we address this matter with trade legislation, that's going to continue and it's not in the best interest of the United States or United States jobs.

I think you've heard Phil Gramm pretty much the expression that I would join with him that Congress should obtain control over America's participation in the global trading system, certainly.

And you know, your comments relative to Seattle, I think, deserve some examination. Some suggest that that debate out there on trade has changed the mentalities. And we, perhaps, need to respond to that. On the other hand, if you look at what happened out there, it's hardly a debate. You don't debate with gas masks or -- what is it, molotov cocktails -- that was almost a riot.

I think we'd all agree the reality is that the global system probably cannot handle another Seattle and we have to make sure that we have a definitive policy, and I think you gentlemen represent that. And the administration, obviously, is directed in that vain. But you know, we do have an assault on the global trading system. There's no question about that. And the surest way to ensure that it fails is for the United States to simply stay on the sidelines or have less than a leadership role.

And I think what we have here is a willingness and a commitment to exert that leadership. And you can't do it, as evidenced by your testimony, without trade promotion authority, because you simply can't take the leadership without it. So I think that is basically the justification for the Finance Committee to resolve this and other legitimate issues that we can debate and I hope which would clarify some of the concern over the issues that divide us on trade promotion authority.

I think we can all agree that trade promotes economic growth, promotes jobs. But I'd like to suggest that we can also agree on means to address the unintended consequences of that growth. As you've indicated, Ambassador Zoellick, Senator Graham and I have worked with a number of colleagues on both sides to reach a bipartisan TPA bill. And I want to commend Senator Graham for his contribution in that regard and our professional staffs that have worked together on this.

I think we believe that this approach will promote meaningful new trade agreements that are workable for you gentlemen, but will not allow trade to be used as an excuse to downgrade social standards in other countries. And certainly trade is not a partisan issue. Trade is an issue reflecting American leadership and opportunities and American values.

But to give you just an example of the other side of the coin, relative to some of the problems we could get into, as past chairman of the Energy and Natural Resource Committee, we have oversight on the trust territories. And the Virgin Islands fall into that category, and we had a situation in April where I met with the governor, Charles Turnbull, governor of the U.S. Virgin Islands. And he was very concerned about an action taken by the previous administration whereby executive order there were about 12,700 acres from the Virgin Islands National Park in the creation of a national monument, which expanded an area of Buck Island by about 18,000 acres. There was no consultation with the governor of the Virgin Islands or the delegate, Donna Christian-Christensen. It was just an executive action.

And in the process of creating and expanding this monument, the consequences were the elimination of the commercial fishing industry for the territory of the Virgin Islands. And the impact on that was one that the governor was faced with. You know, here we have a situation where, you know, American citizens really don't have a voice, and you know, it's difficult for me to understand what other nations must be thinking about when they hear the United States would insist upon placing labor or environmental policies and standards on a negotiating table in order to reach a trade agreement.

I don't know if either of you have any comments, but that's a factual reality. And here's a governor of a small territory faced with a dilemma that happened overnight without his participation or accord. That's the kind of exposures that we potentially could see if indeed we mandated environmental mandates in trade agreements, as an example. Any comments?

EVANS (?): Well, I think you're exactly right, Senator. And from talking with people around the world, the real anxiety out there is that a lot of countries are finally moving to market systems. They're moving in democracies. They're fragile. They need growth. They want to have access to the international system. We're finally getting them off aid. We're getting them into trade. And then they look at us and we say, "Well, now, if we trade, you have to have this, that or the other thing," that goes beyond.

And, you know, the truth is these countries want to have better environmental and labor conditions. You know, they want to make life better for their own people. And I sincerely worry that if we approach this in an adversarial context, where we're trying to force this down their throat, it will backfire. That goes back to my point to Senator Snowe, there are a whole set of opportunities that you and others are exploring here in terms of ways we can promote standards, living conditions, environmental conditions in a more cooperative fashion.

And I just think that's going to be much more successful. And I'll tell you with a lot of countries, particularly if we get to any bigger agreements, they'll just say no. And they'll go ahead with others that don't require this.

MURKOWSKI: In conclusion, let me remind you relative to catfish, we have an awful lot of salmon in Alaska. Our salmon are all wild. There's an awful lot of farm salmon taking place all over the world. We think there's a distinction between wild and farm raised. And we think it should be marketed as such. But we're having great difficulty because those countries that foster farmed salmon don't want us to try and distinguish between our wild salmon, which, of course, is fresh only seasonal. I just wanted to make sure you recognized that in your negotiations. Farmed salmon is not nearly as good as the wild salmon.

EVANS (?): Sometime, if I have a chance to go out and look at the wild salmon closely, I might have a better sense of the nature of that.

MURKOWSKI: When would you like to go?

EVANS (?): I'm already committed to Iowa in August...

MURKOWSKI: All right. Well, I don't know what Iowa is going to do for salmon, but they're pretty heavy on ethanol right now.

BAUCUS: Thank you very much, Senator.

Senator Torricelli?

TORICELLI: I have generally been supportive of international trade accords. I certainly have an open mind now on giving this authority.

TORRICELLI: But you can imagine if you represent a state with a major company that goes abroad and seeks fairness in merger and acquisition and to have trade laws for foreign (ph) (inaudible) to use for obvious political or competitive purposes does not give one confidence to continue with this regime. I'm speaking, of course, of Honeywell and General Electric. The opposition of the European Commission is irrational. It has no basis in fact or law. And it is going to have repercussions. Three principle customers that would be affected by a Honeywell and General Electric combination are Boeing, Airbus and probably the United States government.

Boeing and Airbus have already made clear they have no opposition to this combination. President Bush made very clear not only did he not have opposition, he's supportive of it for the U.S. government. This is a combination that makes sense. It saves money. It adds efficiency. I helps the research base. I have not seen any basis in law to resist this combination. Now, if indeed there are some ancillary matters where a combination of the company causes some divestiture, that's understandable. And indeed, the Canadian government and the U.S. government having looked at this, there are some recommendations.

And I would understand if the Europeans had some recommendations. But their position goes far beyond asking for some ancillary change of the relationship to enhance competition. They indeed would force Honeywell to divest itself, and General Electric, of major competitive components of the company and abandon major industries. It isn't fair and it isn't right. I was heartened by President Bush raising this issue when he was in Europe. But now the question is where do we go from here.

Particularly with Europeans, who are our important trading partners and allies to the United States, one does not mention retribution easily or lightly. That is not a path any of us want to travel. But if indeed these laws are going to be misused, and the bar is going to raise so high, then I will tell you clearly, if this is to happen to a company based in New Jersey, as Honeywell is with many of its operations, and General Electric in our neighbor of Connecticut, I will tell you we are lying in wait.

There will be a moment when European companies are going to arrive on this shore and ask for the same consideration. I believe in these fair trade laws. I believe in this expansion. But none of us can be idle. Major American industries are going to be abused in this fashion. This should take place.

Now, the question is, though, how do you come to the Senate and ask us to give authority for further trade liberalization if the interest of our companies cannot be defended under the current regime? That's the general question.

Here's the specific question. Now that President Bush has spoken, there is no apparent change in the Europeans. What are we going to do next?

ZOELLICK: Senator, let me start with GE-Honeywell being -- let me start from the position of that merger and the possibility of that merger and the impact it would have on trade around the world and the importance of a transaction like that to go forward.

I'm one that believes, as we continue to open up this world to trade, bringing efficiencies to corporations is very, very important in a global market. And certainly that would, that combination of GE- Honeywell, would provide some greater efficiencies with the combination of those two companies, which would deliver lower cost goods and services to people all over the world.

I also spoke supportive of it when I was in Europe this last week. I think it is the right thing. I think it would be important for that to go forward.

But in the overall context of trade, and you think about the impact that it's having on the world in terms of spreading democracy, and continuing to improve economic growth and quality of life all around the world, I think we have to be careful not to overreact. I think it sends a disturbing signal. It's something we're going to have to, if it does not go forward, we're going to have to just step back and understand why it didn't go forward, why the big disparity between -- I mean, we would have looked at it and said to divest yourself of $200 million worth of assets. They looked at it and said $5 billion worth of assets.

I have to agree with you. I mean, I don't see the relationship there at all. So it's very troubling that we would look at it, and quite frankly, other countries in the world would look at it, including Canada would look at it, and be comfortable with the U.S. position, and the European Commission was 25 times what we had said you should divest yourself. So that's very, very troubling, and something that I think we need to step back and take a look at.

But as I look at the total picture of trade that goes on around the world, and look at these disputes relative to the total trade that continued that we see in the world, I would just be one that would say, you know, we don't want to overreact to this and say because this agreement didn't make, that means we don't want to lead the world in trade, we don't want to push ahead with trade promotion authority.

I mean, as I see the benefits that we will enjoy in this world from continuing to expand trade and liberalizing trade far outweigh what I think is a very disturbing situation here. It needs to be addressed and we need to look at it. We need to sit down and talk. Why are we so far apart? Why would you say, "Honeywell, you need to divest yourself of $5 billion worth of assets," and we in America say $200 million.

So is it disturbing? Yes, it is. Do I think it should go forward? Absolutely I do. But do I think it rises to the level of saying that we should not move forward with trade liberalization around the world? No, I don't.

EVANS (?): Senator, if I could just follow, I haven't reached that conclusion either. I'm only telling you that it would be natural to look for suspicion upon further liberalization if we feel that our companies and our people are not treated fairly. And I have that suspicion, not a conclusion, not an opposition. Justice has created doubts. This is not an ancillary American industry.

In aerospace, power generation systems are essential to our industrial economy. This combination would add efficiencies of $3 billion to an important competitive American export industry. This is not a matter that can simply be forgotten and then move on to the next issue. I'm simply requesting the administration insist on its position and maintain presence (ph) in your own current views.

ZOELLICK: Senator, can I just add a thought on this, is that since this is an ongoing deal, and, you know, purchase (ph) a little sensitivity. And as you well know, there are different degrees of interest in the deal at this point. But I think one distinction I would wish to draw is that these deal with the competition laws as opposed to the trade laws. And as you know, our predecessors in the Clinton administration actually were able to work out some pretty good arrangements with the EU on a lot of these competition laws.

This is one where, frankly, as you pointed out, our antitrust authorities come to a very different conclusion. My own sense is that the European theologians on this are relying on some old concepts that most of the people in our economics profession have given up a long time ago. And it goes to this core issue of the competition versus the customers and how do you try to create an overall improvement in the marketplace. I think the bottom line answer for us at this point is how can we be most effective on this topic?

And it pushes me in the direction, frankly, of saying we're going to need more contact with their competition authorities, whether it be related to the trade system or others, to point out the risks and dangers of this, and also the effects, which we have pointed out to the Europeans the exact point that you've made in terms of, you know, whatever category it's in, it has that harmful effect.

But the last point I'd just say, that I think if you talk to the companies involved and you ask them the question about the overall trade authority, trade promotion authority, I think they'd still very much back us.

EVANS (?): I might add, though, this is I feared would be a growing problem. And I think it's important for the administration to begin to think about how to address it. Maybe that's on down the road a little bit, but still extremely important. Because U.S. competition policies say it's based on consumers, essentially, what's best for consumers. Whereas in the EU it's more what's best for the companies or the arrangement over there.

It's a whole different attitude, different approach. And the decision-makers over there are less representative in the sense that they're less elected than over here. It's a big problem. And it does affect trade, even though we talked about competition policies.

I urge the administration, and I just think altogether to jointly, and maybe it moves toward more harmonization competition policy, which is a big bunch to bite off. But I think it's coming, and I'd urge, I think, earlier rather than later.

TORRICELLI (?): Mr. Chairman, could I have 30 seconds?

BAUCUS: Sure.

TORRICELLI (?): I'd like to suggest an additional answer, Ambassador Zoellick, to the answer that you gave to Senator Snowe in her last question. It seems to me that it's so obvious what trade has done over the 50 years of the regime that we're using now to (inaudible) and now WTO. If you would remember the ministerial statement launching the Kennedy round (ph), Japan was listed as a developing nation.

So take Japan, South Korea, other places that were basket cases at the end of World War II, and see how they are so prosperous with a middle class now. It's obvious what trade does. And then, in addition, I mean this is what we want for the remaining developing nations. And they can have what Japan and Taiwan and South Korea, Thailand, a lot of other countries have now that they didn't have 50 years ago.

BAUCUS: OK. This has been a good start. Again, I just urge the administration to (inaudible) come forth with some compromise ideas so we can address the sense of urgency.

And second, I might ask Mr. Zoellick where the administration is on the Jordan FTA. Can you tell me, Ambassador Zoellick?

ZOELLICK: Yes, as I mentioned, you know, we, like you, are very interested in trying to get this done rapidly. As I've told you and I've told your colleagues, you know, we support the agreement as it is. As you know, there is a lot of sensitivity about some of the terms in that agreement, and we've also, as I've discussed with you, suggested that we're willing to try to work with people on other things that we can do separate from changing the agreement to be able to try to address those concerns.

And this goes, you know, fundamentally to the question of, at the end of the day, when the agreement talks about commensurate and appropriate action, if there's some disagreement on trade or labor and environment topics, how do you deal with that? You know, it's my view that this is never going to end up in sanctions, because the nature of the pattern in trade. And you have an agreement with Israel since 1985, I think had one case go to dispute resolution, and it didn't even go all the way through. But I think we share a common interest in terms of getting Jordan done ...

BAUCUS: That's true. (inaudible) questions (inaudible) other senators will too. But thank you both very much for taking the time.

END

NOTES:
???? - Indicates Speaker Unknown
    -- - Indicates could not make out what was being said. off mike - Indicates could not make out what was being said.

PERSON:  MAX BAUCUS (94%); KENT CONRAD (56%); JEFF BINGAMAN (56%); BOB GRAHAM (56%); ROBERT G TORRICELLI (55%); FRANK H MURKOWSKI (53%); PHIL GRAMM (53%); DON NICKLES (53%); FRED THOMPSON (52%); TRENT LOTT (52%); OLYMPIA J SNOWE (51%); JON L KYL (51%); 

LOAD-DATE: June 26, 2001