Copyright 2002 FDCHeMedia, Inc. All Rights Reserved.  
FDCH Political Transcripts
February 7, 2002 Thursday
TYPE: COMMITTEE HEARING

LENGTH: 17929 words

COMMITTEE: HOUSE WAYS AND MEANS COMMITTEE

HEADLINE: U.S. REPRESENTATIVE WILLIAM THOMAS (R-CA) HOLDS HEARING ON THE PRESIDENT'S TRADE AGENDA

SPEAKER:
U.S. REPRESENTATIVE WILLIAM THOMAS (R-CA), CHAIRMAN

LOCATION: WASHINGTON, D.C.

WITNESSES:

ROBERT ZOELLICK, U.S. TRADE REPRESENTATIVE

BODY:

 
HOUSE COMMITTEE ON WAYS AND MEANS HOLDS HEARING ON TRADE
 
FEBRUARY 7, 2002
 
SPEAKERS:
U.S. REPRESENTATIVE WILLIAM M. THOMAS (R-CA)
CHAIRMAN
U.S. REPRESENTATIVE PHILIP M. CRANE (R-IL)
U.S. REPRESENTATIVE E. CLAY SHAW JR. (R-FL)
U.S. REPRESENTATIVE NANCY L. JOHNSON (R-CT)
U.S. REPRESENTATIVE AMO HOUGHTON (R-NY)
U.S. REPRESENTATIVE WALLY HERGER (R-CA)
U.S. REPRESENTATIVE JIM MCCRERY (R-LA)
U.S. REPRESENTATIVE DAVE CAMP (R-MI)
U.S. REPRESENTATIVE JIM RAMSTAD (R-MN)
U.S. REPRESENTATIVE JIM NUSSLE (R-IA)
U.S. REPRESENTATIVE SAM JOHNSON (R-TX)
U.S. REPRESENTATIVE JENNIFER DUNN (R-WA)
U.S. REPRESENTATIVE MAC COLLINS (R-GA)
U.S. REPRESENTATIVE ROB PORTMAN (R-OH)
U.S. REPRESENTATIVE PHIL ENGLISH (R-PA)
U.S. REPRESENTATIVE WES WATKINS (R-OK)
U.S. REPRESENTATIVE J.D. HAYWORTH (R-AZ)
U.S. REPRESENTATIVE JERRY WELLER (R-IL)
U.S. REPRESENTATIVE KENNY C. HULSHOF (R-MO)
U.S. REPRESENTATIVE SCOTT MCINNIS (R-CO)
U.S. REPRESENTATIVE RON LEWIS (R-KY)
U.S. REPRESENTATIVE MARK FOLEY (R-FL)
U.S. REPRESENTATIVE KEVIN BRADY (R-TX)
U.S. REPRESENTATIVE PAUL RYAN (R-WI)
 
U.S. REPRESENTATIVE CHARLES B. RANGEL (D-NY)
RANKING MEMBER
U.S. REPRESENTATIVE PETE STARK (D-CA)
U.S. REPRESENTATIVE ROBERT T. MATSUI (D-CA)
U.S. REPRESENTATIVE WILLIAM J. COYNE (D-PA)
U.S. REPRESENTATIVE SANDER M. LEVIN (D-MI)
U.S. REPRESENTATIVE BENJAMIN L. CARDIN (D-MD)
U.S. REPRESENTATIVE JIM MCDERMOTT (D-WA)
U.S. REPRESENTATIVE GERALD D. KLECZKA (D-WI)
U.S. REPRESENTATIVE JOHN LEWIS (D-GA)
U.S. REPRESENTATIVE RICHARD E. NEAL (D-MA)
U.S. REPRESENTATIVE MICHAEL R. MCNULTY (D-NY)
U.S. REPRESENTATIVE WILLIAM J. JEFFERSON (D-LA)
U.S. REPRESENTATIVE JOHN S. TANNER (D-TN)
U.S. REPRESENTATIVE XAVIER BECERRA (D-CA)
U.S. REPRESENTATIVE KAREN L. THURMAN (D-FL)
U.S. REPRESENTATIVE LLOYD DOGGETT (D-TX)
U.S. REPRESENTATIVE EARL POMEROY (D-ND)
 


*


THOMAS: If your guests could find seats please. Good morning to all of you.

Welcome, Ambassador Zoellick. Thank you for joining us today. This is the committee's fourth hearing this week on the president's budget and as I said, the president has stated three very clear goals in the context of this fiscal year 2003 budget plan: win the war, protect the homeland and revive the economy.

The events of September 11 have challenged us in many ways, and we're being tested militarily in our domestic economy, in our commitment to remain engaged on the world economic stage. As we work to revitalize the economy, nearly 8 million people remain unemployed. We believe free trade will fuel the engines of economic growth and create new jobs and new income here and abroad.

The United States is the world's largest exporter and for good reason. Our firms and workers are highly productive and committed to competing and winning in international commerce. Competition breeds innovation and innovation leads to new and better paying jobs. International trade agreements generate economic growth, spawn technological advances and help to advance American foreign policy objectives. One of every four dollars in the U.S. economy is linked to trade. Twelve million Americans owe their jobs to exports. Each trade agreement, excluding the United States, represents an opportunity lost for American business and the workers they employ.

Those who complain about unfair treatment we receive abroad or unfair advantages enjoyed by their international competitors should see the importance of moving forward with negotiations. Unless we aggressively negotiate in our own interests, we will face the same disadvantages in the future. We cannot negotiate, however, unless Congress gives the president the tools he needs. Senate passage of trade promotion authority passed by the House last year, would complete Congress' commitment that American business have a fair chance to compete and win in the international arena. We will actively encourage the Senate to deliver tools the president needs to ensure America stays competitive.

The Senate has also not yet passed the Andean Trade Promotion and the Drug Eradication Act, part of a comprehensive approach to fight the illegal drug trade that continues to plague that region indeed, our nation as well. This bill will offer the people of these nations, Colombia, Peru, Bolivia, Ecuador, the opportunity to develop legitimate businesses rather than engage in the production of illegal drugs.

In December the Foreign Sales Corporation Replacement, the Extra- Territorial Income Exclusion Act of 2000 was ruled an illegal export subsidy by the World Trade Organization. I intend to hold full committee hearings and a series of subcommittee hearings to examine the issue and the committee will undertake the necessary and appropriate legislative steps to meet our WTO obligations. We must preserve the international competitiveness of the U.S. interests. We have railed long and hard against those who do not comply to international agreed-upon rules. It is then in our own interest, when we have received the judgment against us, to make sure that we comply with those rules as well.

Mr. Ambassador, you succeeded in breaking through the WTO deadlock that had prevailed since Seattle. As a result we have an agreement on the need for a comprehensive three-year negotiation covering a range of trade barriers in agriculture especially, services, industrial tariffs and investment.

This committee will work closely with you to develop priorities for the new round of WTO negotiations, the free trade area for the Americas, the indicated Singapore and Chilean free trade agreements and hopefully additional negotiations that we can agree on, and you've been able to arrange for us so that we can continue creating new arrangements with our close trading partners and allies.

At this point I would recognize briefly the gentleman from Illinois, the chairman of the Trade Subcommittee.

CRANE: Thank you Mr. Chairman.

I want to join in warmly welcoming Ambassador Zoellick to the committee and to commend him on the impressive breakthrough he achieved at the World Trade Organization ministerial meeting in Doha. As you know, I led a delegation of 19 from this committee to Seattle in 1999 where we observed first hand the deadlock and suspicion among our trading partners in the WTO.

Mr. Ambassador, at Doha you cleared away a black cloud on the horizon of our international economic strength, and Americans are once again leading in the international -- at the international negotiating table.

The paychecks of hard-working folks in plants and on farms across this country will be more secure as the result of the markets the new Doha round can open. As they say at Cape Canaveral, we've got a launch. We also had a schedule and an outline of what can be achieved in terms of reducing unfair disparities in tariffs faced by Americans companies, discriminatory rules governing services unfamiliar and burdensome product standards and regulations and unnecessary threats to their investments.

Finally, you succeeded getting countries to commit to a deadline of 2005 and if I could do one thing today, it would be to urge you to stick to that date.

It's great to have you before us today knowing that the committee and the House have made the hard choices necessary to pass trade promotion authority and that we are only awaiting action in the other body.

The rapid 183 bipartisan approval of the Finance Committee or 18 to 3 bipartisan approval in the Finance Committee tells me that we struck the right balance in the House, even from where I sit at one end of the seesaw.

Last year at this time, when getting trade promotion authority out of the House was in question, our economic future as a country was also more in doubt. Now I believe Congress may be very close to giving you and the president the tools you need. Our trading partners have been very active in opening and expanding markets for their exports, and I'm optimistic we are positioning ourselves to do the same. I believe that this year 2002 will be a significant year for the United States trade policy.

We look forward to enhancing the Andean trade bill, concluding bilateral FTA's with Singapore and Chile which were initiated by President Clinton, initiating several other FTA negotiations, achieving key milestones in negotiations to establish a pre-trade area of the Americas and positive movement in many WTO matters including agriculture, services and industrial tariffs.

The year ahead in trade holds the promise of job creation, economic growth and making the world more secure by expanding commercial ties among countries that should be doing more to work together.

I look forward to working or hearing from you first and working with you on our trade priorities, along with President Bush.

And I thank you Mr. Chairman.

THOMAS: Prior to hearing from you Mr. Ambassador, I'll recognize the gentleman from New York, Mr. Rangel, for an opening statement.

RANGEL: Mr. Chairman, I intend to pass and to yield to Sandy Levin, but before I do, I want to join with you in congratulating our trade representatives on this international efforts on behalf of our country.

I also would want to point out that this committee in particular takes great pride in the unity that we have in the past shown in terms of trade policy as the Congress tries to, in terms of foreign policy. And I think that the trade bill with China as well as the Caribbean Basin Initiative and the opportunities that we've made and you continue to expand in Africa, throws away our party labels and makes us proud to provide the leadership that's expected of us by the House members.

Having said that, it's apparent that on many tax policies, especially as relates to (inaudible) and in certain areas, how we treat labor and environment and investments for U.S. firms, that you know, as I do, that there are basic policy differences between our parties politically.

I want to thank you for the time you spent with me and Democrats, and I also want to ask you publicly to consider whether or not you can attempt to use your good offices and that of the administration, to try to break down the political positions that both sides of the aisles of this committee find it so easy to lock ourselves into.

And it's going to take a little more than just the shuttle that you so effectively ride between Democrats and Republicans, but it really means, as the president has talked about bipartisanship, he should know that it stops when it gets to this committee. And so I hope you would consider that.

One of the examples of course is that some people believe that when you win by one vote and you have a half a dozen Democrats, it's bipartisan. It's OK with me because I can be just as political as everyone else, but it would seem to me that when you launch an agreement with the Caribbean countries and then find out that you got to renege on that agreement in order to pick up a vote, we should expect that the administration would resent this type of behavior no matter which party is the offending party.

It's my understanding that you've taken the position that this measure would have little commercial impact on the Caribbean countries. Well, this is not the position taken by the Caribbean countries, and I do hope that at some time in point, we might be able to view what the Congress has done, that does violence to what you are supposed to be doing representing all of us.

I'd like to yield to Mr. Levin to get involved with more substantive issues.

LEVIN: Well, I'm not sure I can be some substantive than you Mr. Rangel, but thank you for yielding and for your comments on truly the substance of trade. It was necessary to launch a new round at Doha, although there were some serious omissions and many vagueness. We welcome you here today, Ambassador.

Your role was clearly important in the launch of Doha, and I commend you for that. Doha followed several years of hard work and I would emphasize that in progress and I emphasize that also, on the trade front, Cambodia, CBI, Africa, Vietnam, China PNTR, U.S.-Jordan FTA.

It's important to note those efforts for two reasons. One and very importantly, there were developed on a broadly bipartisan manner and that is the only way we can move ahead productively on international trade. That is why I respectfully suggest that it's counterproductive to indicate, as you do in your testimony, that the thrust for trade liberalization had been lost before 2001 or that it was necessary to restore American leadership.

I don't believe that leadership had been lost. Indeed there had been new energy in 1999 and 2000 on important issues of trade. The negotiations of '99 and 2000, grappled with the integration among other issues of core labor and environmental standards as the trade agreements.

The list of successful initiatives is impressive. The textile and apparel agreement with Cambodia, which included positive incentives for the enforcement of labor standards and our staff was there and reported back that is working. The Africa-CBI (ph) legislation, which expanded trade with Africa and the Caribbean countries, while strengthening the labor provisions and building upon (inaudible) with the textile and apparel industry of our country.

The China PNTR legislation, which we worked on for a year and that was the key I think to moving the issue within the WTO which recognized the importance of the trade remedy laws and which created a commission to monitor the rule of law, human rights and labor rights in China. And the U.S.-Jordan agreement, which included provisions on core labor and environmental standards enforceable in the same way as any other provision and agreement.

As I see it, the fast track bill that passed the House was a serious step backwards from this progress, as was the exchange of letters relating to the Jordan agreement and also the failure to even raise the labor standards issue prior to Doha and at Doha through a working group on labor.

The regular (ph) substitute that garnered 161 votes would have sustained the momentum in these areas, as well as addressing and I emphasize this, other key issues. I expect that its equivalent will be introduced within the next week or so in the U.S. Senate and unlike the procedure that was adopted here that did not even allow us to introduce the bill on the floor, as a substitute for full debate, there will be ample debate, to debate then and other proposals in the Senate.

On Monday, this last Monday, Representatives Bentsen and Eshoo (ph), along with Mr. Rangel, Mr. Matsui, myself and others, introduced a bill to renew trade adjustment assistance and to improve it. We need those reforms, including a strong health provision.

However, improved TAA (ph) should not be used as a rationale to pass a flawed fast track bill. We need to get right, both trade policy and a safety net for those who are hurt by the impact of international trade. We need to shape trade policy to both maximize its benefits and there are many and minimize its detriments and there surely are some and not only hope those, help those who lose out.

There are some and I understand and respect their opinion, though I very much disagree with it, who do not believe we need to shape trade policy in this regard. In a sense that's the basic issue confronting this country on steel. One approach is to simply let the market run its course, no matter what the consequences and rely only on a safety net to catch all those who suffer the consequences. My own judgment is that such an approach would be bad for the nation, bad for our nation's economy and bad for the many adversely affected companies, workers and communities.

We have - I'm almost done Mr. Chairman - we have a much better alternative with a sensible balanced set of policies that broaden perspectives and open minds rather than narrow thinking. We can do better, in this case and in general in our approach to trade issues on a truly bipartisan basis.

I appreciate that you journeyed over here to talk to Mr. Rangel and to me over the recess. I encourage you to continue to work with us on the specifics of each of the issues as they emerge. I also urge the administration to exercise its leadership in the legislative process to build a truly bipartisan consensus on trade policy. It will by no means be easy, but I think that if we confront the tough issues head on, real progress can be made.

Thank you.

THOMAS: Thank you very much.

Mr. Ambassador, welcome. Through no pre-planning or collusion in any way, I understand this is the first anniversary of your swearing in as ambassador, so I'll take the opportunity to welcome you on your first anniversary.

Thank you for appearing before us once again. Any written statement you may have will be made a part of the record. You can address this in any way you see fit. And I think you need to turn that thing on.

ZOELLICK: Can you hear me now? Thank you Chairman and Mr. Rangel and Chairman Crane and Mr. Levin for both the informal and formal opportunities to be with you. This committee's work has been absolutely crucial in allowing us to regain momentum on trade, to open markets for America's farmers, ranchers, workers and families. And I want to thank the -- to start off -- Chairman, in particular, for your role with trade promotion authority and also the attention you're devoting to the FSC (ph) issue because it's been critical for us.

And again, I want to thank Mr. Rangel for, I know the FSC (ph) issue is a difficult one.

I appreciate your effort to try to be of assistance on this and also the role that you played in putting together the (inaudible) bill along with Mr. Levin and others, which I think has been a real foundation for our relations with Africa.

As you and I mentioned, I'm going to be going there next week and again, I know, appreciate your help with that.

I also want to thank Mr. Levin for making the trek to Doha with us. I know it wasn't easy, and it was very important to have you on the scene. I appreciated it. I'm pretty sure we had some chance to work together when we were there, and I'm also pleased that we were able to extend at the end of this year the Cambodia provisions that you referred to and which you contributed much to.

I'd also like to thank Mr. (inaudible) and Mr. Jefferson for their leadership on TPA (ph).

Together I think all of our comments sit (ph) on one point, and we've made some headway in the year 2001, but we've got some more work to do. There are a number of key components to our strategy. First, we are building momentum for liberalization and we're doing so on multiple fronts. We're trying to create a competition in liberalization with the United States as the center of a network, because frankly, it will help U.S. leadership and will give us more leverage to get more things done.

Globally, we have the launch at Doha, but I also think we all take some pride in finally getting China into the WTO after 15 years and Taiwan after nine years. I know this took a lot of work before I was on the scene with PNTR -- Mr. Levin, Mr. Matsui, Ms. Dunn -- in terms of trying to get that piece of legislation through. And I think now the good news is, the Doha agenda's off to a pretty quick start. In the past week, we've actually started in Geneva to get the negotiating framework in place.

Regionally, we have the free trade area of the Americas, and here is an incredible opportunity to create the largest free trade area in the world among 34 democracies. We will start this spring with the market access negotiations and later this year or after the Brazilian elections, the United States and Brazil through the biggest economic powers, will be the co-chairs to move this forward.

Bilaterally, a number of you referred to Jordan and Vietnam, and we were pleased we got those passed. Those weren't so easy along the way, and that was an accomplishment of last year. We're now obviously trying to complete the Chile and the Singapore free trade agreements started by President Clinton. And this is one, as I've mentioned to you, as we move in the final stage, it's particularly important for us to get the guidance of this committee on some of the sensitive provisions.

As I noted in the testimony, we're looking at the possibilities with you of new free trade agreements. The Caribbean Basin Trade Partnership Act passed by the Congress encouraged us to look at free trade with Central America and the president spoke about our interest in moving forward with them.

The AGOA bill talks about our interest in free trade with Africa, which would be a tremendous break through for that continent and our relations with it. And frankly we do have some catching up here to do. The European Union has 29 free trade and customs agreements, 22 of which they negotiated in the '90s, and they're negotiating 12 more while we have three.

Mexico has eight free trade agreements with 32 countries. The Japanese are moving ahead and even the Chinese just coming into the WTO are now pursing a free trade agreement with the ASEAN countries of Southeast Asia. So our movement is none too soon.

Second, we are enforcing agreements and managing disputes, because while we pursue new agreements, we recognize we have to actively defend our interest by pursuing and enforcing vigorously our trade laws. And here I want to be very clear in assuring each and every one of you, we will use all the tools at our disposal to fight unfair practices. We're also trying to manage disputes in ways that solve problems and achieve results. I know a lot of you have an interest in soft wood lumber. Mr. Collins has been the one who's talked with me a lot about that, and I think we're making some headway on that issue.

And then we have the critical challenge of the follow through on China and Taiwan's accession because, particularly in the case of China, we recognize this in the transformation of a country with 1.3 billion people, and it's not going to be easy and we need to work together on it.

Third, we're trying to broaden the circle of trade opportunity, and here in particular, there's an opportunity with developing nations. This is vital to build support for the global trading system, but it's also vital in these countries to support reform and rule of law and dealing with fundamental problems of poverty.

Developing nations became key to putting together the coalition that was successful at Doha and they will be key in anything else that we do in the WTO. Indeed, all you have to do is look at the newspapers and you read about the reach of terrorism these days, you have a sense of how, if this is going to be a long-term war, as President Bush has clearly made clear that that is going to be a challenge for this generation, then we're going to have to address some of the other components.

Zbigniew Brzezinski made a comment over the weekend that I thought was powerful. He said, "Look, it's quite clear that poverty is not the root cause of terrorism, but it does provide fertile fields and so in that way, economic development and growth is a key component."

The United States, I'm proud to say, has been leading the efforts to try to help poorer nations obtain the tools to participate in the global economy. Last year, the United States spent $555 million on capacity building because for a lot of these countries, take the African and Caribbean which I worked with Mr. Rangel, they don't have people that attend the negotiations, and they certainly don't have the ability to follow through. So this is an element that I hope we can work on together.

We also believe in renewing an expanding the preferential agreements. This committee took an important step in terms of the Andean trade preference act, but I think it's highly unfortunate that it did expire after 10 years and those four Andean countries are hurting right now at the same time they're trying to deal with the scourge of narcotics.

The committee also had some efforts to try to strengthen a goal which we support that I hope we can further, over the course of coming months.

I also don't want to lose sight of the generalized system of preferences, something that the Congress put in place about 26 years ago and which also expired last year and that deals with 123 developing countries in 19 territories. That expired September 30, and so those countries now do not have the benefits. There's also the possibility of bringing in new members. One of the ones that's most exciting is Russia. Our enemy during the Cold War now is going through the process of actually joining the WTO, adhering to the rules. And I hope to make progress on this this year.

Fourth, we're reaching out to key stakeholders. This in part involves a lot of listening, building networks, educating and acting. We're pushing on all fronts for America's farmers and ranchers, working with this committee, but also obviously with the Ag Committee.

We're seeking to help industries and workers become competitive and adjust to change. This is an area that I know is close to the heart of a number of you in the steel industry. Mr. English and Mr. Hub (ph) and Mr. Cardinal I've talked to about this. This is an administration to launch the 201 (ph) and we're now in the final stages of that process.

But I also want to point out, we've used these safeguards in other areas like wheat gluten (ph) and land, working out solutions that I think are important.

Textiles is obviously a very sensitive area. This is another one where we are committed to the phase out of the apparel and textile agreement that will end quotas in 2005, but it's not been easy on this industry and I've worked with Mr. Collins and others in terms of that adjustment.

A number of you mentioned trade adjustment assistance, and Mr. Levin stressed this. I know the importance of this to many of your members and I just want to make clear, I'm in full and emphatic agreement about the need to have good trade adjustment assistance programs if we're going to have a successful trade policy.

And as my statement points to, and I hope my colleagues in the Department of Labor and the White House have also emphasized, I think there's a lot of common ground here that we can move forward on. I have talked about this, I think in the Senate yesterday, and I hope we will be able to have a product before long that we can all be proud of.

But also part of reaching out is meeting with different groups, business, environment, labor leaders on a range of these issues. I was pleased, given the unusual security circumstances at Doha, that we were able to set up Web casts for the first time so we're able to draw in a lot of our advisers who couldn't make it to the scene. I know a number of you, Mr. Doggett and others, have emphasized that after Chapter 11, the investor state, this issue obviously came up in the course of all the trade promotion authority bills, and I just want you to know I'm in the process of meeting with all sides on this, the business community, the NGOs and others, to try to understand and sort through what we know is a tough issue.

But reaching out also involves building the case for trade and correcting some misinformation and here I think the American public suffered, because they don't know what the benefits of cutting tariffs do. For example, (inaudible) work of our predecessors in the Clinton administration, we pointed out the very simple fact that the benefits of NAFTA in the Uruguay Round amount to about $1,300 to $2,000 a year for the average family of four in America. That's a hefty tax cut and it comes from growth in cutting tariffs.

The University of Michigan has done a study, a preliminary look at cutting just the tariffs on industrial goods and agriculture as part of the Doha agenda. In their estimate, admittedly a rough cut, it's $2,500 a year for a family of four in America. Or if you look at particular sectors -- Mr. Brady has an agriculture sector. One in three acres in America is planted for export, 25 percent of gross cash farm receipts are from export. So America's farmers depend on a healthy trading system.

If and finally, Mr. Chairman, as you know, we have tried to work hard to connect our trade system to our values. Free trade is about freedom and it's about opportunity and rule of law and openness. But we also have issues that we need to deal with, for example, the crisis in public health in parts of the world.

And I was very pleased and proud, working with a number of you, that in the Doya meeting, we were able to come up with a statement that I felt went a long way towards reconciling that there are flexibilities (ph) in international property that we need to use to deal with problems like HIV- AIDS and malaria and tuberculosis in the countries of Africa and elsewhere, because if these countries are plagued by epidemics, there will be no economic growth, and free trade won't be sufficient for them.

At the same time, we have to preserve intellectual property because the advances in this field are enormous in terms of their opportunity, including as I've talked with some CEOs recently, the prospect of a vaccine for AIDS and what an extraordinary development that will be. But it won't happen unless intellectual property is protected.

There are other win-win ideas. I was pleased that the World Wildlife Fund and some other environmental groups worked with us to focus on fish subsidies at Doha. We were also trying to work with the small business community much better in our country and others and draw them into the trade system.

So to sum up, we have a very full trade agenda ahead. We're looking forward to complete trade promotion authority as soon as possible, so we can move forward on all fronts to tear down barriers, open markets globally, regionally and very importantly for me, to have a framework of guidance from the Congress of your objectives and to have the procedures.

We're moving ahead on many crucial and I know sensitive issues, the foreign sales corporation, steel, soft wood lumber, high fructose corn syrup. And in Geneva, among our other goals, we're going to push for a home run on agriculture, which is key to our agenda for trade.

Thank you Mr. Chairman.

THOMAS: Thank you Mr. Ambassador.

As I indicated, the foreign sales corporation issue will occupy some time before this committee, hearings in both full committee, subcommittee, examining legislative options. What we will be requesting from the administration will be relatively close communications on what strategies the administration is going to be pursuing. And I don't want any lengthy discussion now, but clearly at the ambassador's choice, he can either offer us some brief comments -- and I certainly expect shortly some written indication of the direction of the administration's strategy -- so that we can coordinate the very real need to respond to this decision.

I might ask in that context you have had communications with appropriate officials since the decision has been rendered. They're still in the process of determining the dollar amounts. What's the climate post- decision?

ZOELLICK: Well, let me, Mr. Chairman, try to address the first one. We are very pleased with the prospect of working with the Congress. However, all of you determined we can't (ph). Obviously this will involve heavily the Treasury Department and the Office of Tax Policy and the senior people there. But we as an administration are trying to come up with inter-agency proposals on this, and we'd be delighted to work with you and we appreciate your leadership on it.

In terms of the climate, Chairman, the frank answer is it's uncertain. As I think we've had a chance to talk among ourselves, this is an issue that has been around for a while. The United States had some of its legislation challenged and we lost. And we lost on appeal, and there was another round. And so frankly, my read on the situation is that the European Union, while not eager to retaliate, needs a sense that the United States is going to take the steps to come into compliance. They recognize this is a extraordinarily difficult issue, and it won't be done easily and that's why I think steps like hearings or other actions, things we can do from the administration, will show a good faith in taking on the topic.

The problem is, we do have some near-term deadlines. By the end of April, the WTO will have an arbitration panel that will decide the amount that the EU can retaliate. The EU has pushed for about $4 billion based on some revenue estimates dealing with the FSC. We are obviously going to push very hard for a lesser number based on various arguments we make, partly related to the trade effects. But by that time period, there will be amount that European Union can retaliate and then we face a question, can we hold off that process by showing that we're taking this on?

I believe there's a chance to do so from my conversations with Commissioner (inaudible). I know others here have. But I think we can only do so if we show there's a serious and good faith effort, Mr. Chairman.

THOMAS: Well, I don't think anyone believes that the approach ought to be just simply ignore the decision. But at the same time, as we investigate ways in which we change our tax code, somebody has to take into consideration the season.

I know oftentimes when I sit down the Europeans, or even with others in discussing our abilities to move forward, if it isn't in the first or the second or the third sentence, the fourth sentence includes a phrase something like, "The elections in France or the elections in Germany," and that we have to be sensitive during this period, because they're having presidential or legislative elections in a particular European country.

None of us are going to use the fact that this is in fact an election year, and a fairly important one in this country, as an excuse for not going forward because we are going to go forward with hearings. But somebody has to put it in the context that we are addressing this, and we will address it in a fundamental way, in a very difficult climate. And that I'm hopeful as you continue to discuss this issue with others, that the context in which the House is attempting to move forward and resolve the problem, not patch it over, not come up with another gimmick, but fundamentally resolve it, understand that this is not a three week or even a six month pursuit.

Secondly, I'm pleased that the president -- and all of us are pleased with the president's push for permanent normal trade relations with Russia. My concern is, and I've introduced legislation to that effect, during the long and arduous as you described process with China, I thought that the PNTR vote was a useful one to frequently check and require people to make sure that the process of negotiating with China was a truly rigorous one and did not slide to a politically convenient structure but because you were able to do so because you didn't have the PNTR votes taking place. And I do want to put in context the fact that with Russia, we want to make sure that there are no foreign policy pressures or other departmental pressures in making agreements, that it has to be as firm and as sound as it was with China in dealing with Russia.

And lastly, the president going to China, you had indicated the importance of agriculture. Here we have an opportunity to stress what someone who is and will be a major competitor in the agricultural area, if there's sanitary and (inaudible), sanitary requirements that are biotech regulations all need a careful scrutiny, if we're going to continue this growing and I believe mutually beneficial relationship, and I know you will be in there scrapping. But we want the president to know that these are issues that ought to be on the front burner with the Chinese because these agreements need to be closed quickly.

With that, I'll turn to the gentleman from New York.

RANGEL: I think I've said most all the nice things about you that I can this morning, so we might as well get to the other issues and that is that, when you're negotiating with the -- for the United States with the WTO on this problem, are you not going to be heard to say that the president's not in charge of taxes or the Treasury's not in charge of taxes or the Congress or the Ways or Means Committee, you're carrying out (inaudible) and as it relates to overseas, in order to avoid an appearance of disunity here. It appears to me Mr. Ambassador, that you're going to have to bring a team to work with this committee.

When I (inaudible) Republicans and Democrats because if it appears as though the majority has a permanent solution to this problem that the minority disagrees with, that's got to be just as public as you, as it should be as it relates to our committee work. So I would strongly suggest that you might want to put together a team from the executive branch to meet with us informally as a committee, to share with us your concerns so that we can as nearly as possible read from the same page, because there are all types of potential solutions to this problem, but it doesn't mean at the end of the day that we can all read from the same page.

And so I know what you've been up against and you've done a tremendous job in trying to work between the chairman and me, but that's OK for domestic stuff. But as it relates to a deal with the European Union, I hope we can find -- at least an attempt to try to find -- a way that we can work more closely together. And I discussed this with you privately and I just want to thank you for your agreeing to try to do that.

ZOELLICK: Mr. Rangel, just to add to, you and I have discussed this, I want the whole committee to know that what I explained to Commissioner Leme (ph) is that we as an administration will be putting together a task force, whatever one calls it. It is an inter- administration group. Obviously the tax policy is the heart of it, but there are Commerce and USTR and others who are deeply involved. And one of the things that I told him was is that we would also be in consultation with tax policy experts, the business community, reaching out -- and we know this is a difficult problem -- and then to try to come up with our series of ideas or proposals within some limited period of time which we haven't yet defined. I also told them that we would, through that group or another group, also want to have a similar discussion with Europeans and here not only the commission, but the member states, where the tax authority arises. Because I know a number of you from both sides of the aisle, have a sensitivity to making sure there's a level playing field here for tax systems and so if we're going to be able to put something together, we need to try to do it so that the Europeans understand that this is finally over, we get it done.

And so the third part obviously is, however, the committee and others want to try to work with us, we'd be delighted to try to do so. And what I want to emphasize here, I don't mean to suggest this is by any means an easy problem. And what I hope to do with the two of you and others on the committee is frankly take our good faith action at tackling it and I think the Europeans understand this is a big, big problem.

As I said to them, what would happen if the WTO said France had to change its tax law. How quickly would you be able to turn that around going to the chairman's point.

And so I think we can win some time here, and I won't hazard a speculation exactly how long if we work on it together. And that's what I've tried to get launched here, and I'll do my best to work with you on it.

THOMAS: Thank you. The chair notes that we're beyond second bells on a 15-minute vote. It will be followed by a five minute vote and so we will publicly not be able to sustain the committee by having members go over and come back. So Mr. Ambassador, if you'll allow us, the committee will stand in recess until as soon as we can get back, hopefully shortly before noon.

(RECESS)

CRANE (?): Will everybody please take a seat and discontinue conversation, and we'll resume.

Our chairman cannot get back here right now, but we will continue and as I understand it, I'm next in line since Charlie already got his five minutes. Is that correct?

RANGEL: You're the chairman and whatever you have to say, I will bend over backwards to make (inaudible). I yield to the chair.

CRANE (?): Well, I thank you so much for that. I'm meeting with Yugoslavian President Kostunica this afternoon, and one of the questions or the most important question from his perspective of course is reinstating NTR for Serbia and Montenegro. The administration already has the authority to reinstate NTR, but I'm told that we need to pass legislation. What is your position on this issue?

ZOELLICK: Mr. Chairman, we support the effort to try to restore the NTR for Yugoslavia and we've been working with the Department of State in terms of trying to address the concerns that were reflected in the '92 legislation to try to do so.

CRANE (?): Second question deals with your expressed interest in pursing free trade agreements with especially our Latin American countries, but also I've heard of potential FTAs with Australia, New Zealand and South Africa and Morocco. What criteria are you using to identify potential candidates for bilateral FTAs?

ZOELLICK: Well, Mr. Chairman, I'm particularly pleased you asked this because this is a topic that I wrote to you, as know you, and Chairman Thomas and Mr. Rangel and Mr. Levin, that I hope we could get a good dialogue going forward. The starting point is that Congress has passed legislation in the Caribbean Basin Trade Partnership Act that urged us to focus on the possible free trade agreement with Central America. And the president spoke about our interest in pursuing that with the five central American countries.

In addition, (inaudible) also encouraged us to look at possible free trade agreements with African countries, and the South African trade ministers expressed an interest with me in exploring this, perhaps in the context of the South African Customs Union, and that's one of the items I hope to address on my trip to Africa to explore it further.

But beyond that Chairman, there are a number of benefits for this I think. One is whether we can create some models to success, whether we can for example, advance some of the trade agenda in a particular area, for example in the high tech area, intellectual property rights area, whether we can catch up in market access. For example, right now Chile has an 8 percent tariff that doesn't apply to Canada, but does apply to us, so we're losing vegetable oil and wheat and potatoes and other things.

We also can use this to build support on other issues, for example, on biotech that a number of members are interested in or the sanitary and phyto-sanitary issues. Another one is to support economic reform and what I think it would be my suggestion, Mr. Chairman, is that we try to have a array of developing and developed countries in different parts of the world so that we can create a network and show that the United States is willing to look for free trade in Latin America, in Africa, in southeast Asia and in other quarters.

Obviously there's a dimension of this that could also help our foreign relations. For example, Jordan was a free trade agreement, our first with an Arab country in the Muslim world. It's important to do that at this time, and Morocco would offer another possibility. So those are some of the criteria that we are looking at, but it's an area where I very much want to have a good consultation, dialogue with Congress.

CRANE (?): And a massive effort will be required for China to comply with all its commitments and part of its WTO accession. And for the United States to monitor and seek compliance with these commitments, China must create or revise and enforce scores of laws and regulations. What is the administration doing to establish a system for promoting compliance?

ZOELLICK: With the help of the Congress, which at the time that it passed PNPR, put in, gave some additional resources, not only to USTR but the commerce and others. We're trying to do this at a number of levels. One is we have an interagency group that has taken each of China's commitments and assigned it to an agency, and we have monthly meetings where we track the follow up on that. But in addition, we're trying to reach out to the private sector because in a country of 1.3 billion people, a lot of the information will be gathered by American businesses in China and we're trying to link into that network so we can identify the problems at an earlier point and try to resolve them.

Third, we're trying to work on other countries. The WTO itself has a special process related to China's follow through, but with Europe and with other countries we have a common interest in this delivery.

Let me just emphasize this point most of all, Mr. Chairman, because it's one that Chairman Thomas raised. This is going to be a very long road. This is a country that is going through a huge transformation and in many cases what Beijing decides is not necessarily what the provinces will do. So we are going to have to work on these and while we are certainly willing to take the dispute resolution process as necessary, I do hope we can try to pursue this in a problem-solving mode.

In the area of soybeans and biotech, which Chairman Thomas mentioned, I just want to reassure you the interest starts at the top when President Bush was in China for the Shanghai APEC meeting, he emphasized the importance of this issue, and we got some headway on that one as an interim measure. But we're now focusing very heavily on the Chinese implementation of their biotechnology relations.

CRANE (?): Thank you very much Mr. Ambassador.

Mr. Stark?

STARK: Thank you Mr. Chairman.

Mr. Ambassador, I'd like to just touch on a topic for the moment I have questions about FSC, but another problem that seems to have invaded Capitol Hill has been corporate ethics and some of the problems that many people have had recently with 401(k)s and accounting and so forth. And I wonder if it's your intention to voluntarily come to Congress and testify about your employment with the Enron Corporation and disclose all that you know both formally and informally to help us figure out what to do to see that that kind of thing doesn't happen again.

ZOELLICK: Well, Mr. Stark, I'm pleased to disclose all that I know and as a starting point, I served on an advisory council and I recused myself from all matters dealing with Enron. And indeed, before I left for India, I was asked by the Indian press whether I would push the issue and I told them I couldn't because I was recused. In addition, I was a stockholder and all this was disclosed at the time of my confirmation, and I sold my stock at a loss.

STARK: It's my concern is that you're probably aware of things that went on in the company when you were there. I'm not suggesting that there was anything improper about your present position in your former position of Enron, but I'm sure that you have some, a lot of helpful information that would be useful to us and we try and resolve this issue in the future.

ZOELLICK: Perhaps, but again, I know this is an important and sensitive topic and I know it's one that there are hearings on right now. I served on an advisory committee that met twice a year, that's involved people like Paul Kudman (ph) of the New York Times and so on. I'm happy to try to cooperate in any way we can and try to deal with this issue. When you said, you used the words that of my participation or some such words...

STARK: As I say, I knew you were on some kind of a board or under some...

ZOELLICK: ... advisory council.

STARK: You know more than the average person about what perhaps went on or have some ideas that would be very helpful.

On the FSC (ph) issue, generally, there's, I'm going to say 20 or 30 major corporations in this country that get most of the $4 billion benefit from FSC (ph) and however you're able to negotiate that, these same companies by the way probably get 80 percent of the Ex-Im Bank guarantees and they probably get the majority of the ATM, AMT give- back of 25. So they're quite comfortably compensated by our tax code.

If, as many of us feel, we're going to at best negotiate, what can you suggest to us or how can you assure us that if in fact there is $4 billion of retaliation, let's say, whatever it is, that that money will be paid by the corporations who have enjoyed the benefit and not by all of the average people in America that you're saying maybe saved $1,000 bucks because of NAFTA.

It seems to me whatever we come up with, that the people who got the tax benefit ought to end up somehow paying for whatever retaliatory penalties we have to pay. Does that sound fair to you?

ZOELLICK: The problem with it, Mr. Stark, is that's not the way that the trade retaliation works. In other words, the trade retaliation would not be a payment. This would be to use right to raise tariffs on products.

STARK: Right, on products so we're talking farmers and...

ZOELLICK: It wouldn't be payments and one of the reasons why...

STARK: Exactly Mr. Ambassador what I'm getting at, that the people who got the benefit, who have the $4 billion in their pocket, these large American corporations wouldn't be the ones who would be retaliated against. It would be the...

ZOELLICK: We don't know that; that's the problem, Mr. Stark. Unless we work out something with the Europeans it's their choice, and they may choose those companies and they may choose others.

STARK: But there certainly is a way we could compensate. Let's assume that all of the tariff retaliation comes against agricultural products. Wouldn't it be fair then to raise the taxes on the corporations that got the $4 billion and distribute it through the tax code to the small farmers for instance who might suffer. All I'm saying is don't you think it would be worth our effort to make a good effort to see that we don't further hurt the average American who's already paying for the $4 billion that these big corporations are getting.

ZOELLICK: A lot of those average Americans work for those companies, and they get their paychecks from them. So all I can say -- and I'm not an expert on tax policy -- is I think we need to resolve this problem or else we're going to get retaliation against us and that's what...

STARK: As well we should. I mean we were cheating and we got caught. We had an illegal...

CRANE (?): The time of the gentleman has expired.

Mrs. Johnson?

JOHNSON: Thank you. And welcome Mr. Ambassador.

I wanted you to enlarge a little bit on how you see the negotiations going forward in regard to trade remedies and the great importance that we put on our laws that allow us to protect ourselves against what we refer to as unfair trade barriers. And this will be a big issues I would think in the upcoming round and I'd like to hear how you think that could go.

ZOELLICK: Well, first we believe that effective trade remedy laws are absolutely critical and we've not only supported them but we've supported their use and indeed whether it be soft wood lumber or steel or other categories, indeed, I made some suggestions yesterday about possibilities of doing this against the Canadian wheat board.

So we think it's a key part of our overall trade policy. There's been some question about this, but at Doha, we did not agree to change our trade remedy laws and we of course didn't change the laws.

What we set out first was an offensive agenda, because a number of countries are putting laws like this in place without the due process, without the procedures and they're increasingly being used against American companies. In fact there are about 60 orders in place right now against American companies and they tend to focus most on chemicals, steel, other metals firms but also being used against agriculture, for example our poultry industry is very concerned about this. So our firs step is to try to make sure that whatever is done in this area, it gets others to have a better performance and up to the standards that we have.

Second, Congresswoman, there have been a number of decisions in the WTO which frankly we -- and I think most of the members of this committee -- disagree with. For example, they have not given in our view the due deference that should be given to the ITC or the government in terms of a standard of review and frankly we'd like to get those and some of those changed. But we also agreed in Doha was very important from our point of view, was that there is, that we will not undermine the concepts, the effectiveness and principles that underlie these laws and indeed we went and fought back, fought again and said and also the instruments by which they are applied. We also said if there's any discussion of these laws, you can't look at the remedy without looking at the disease. We have to go with the underlying problems of subsidies and dumping.

So that's the framework for which the future Doha agenda will go forward, and again our emphasis is primarily on the offensive agenda because one of the issues that this committee and all of us will be dealing with in the future is more and more countries are using these laws and they're going to be using them against American exporters. And you're going to hear about it and I'm going to hear about it.

JOHNSON: Thank you very much.

CRANE (?): Mr. Houghton?

HOUGHTON: Thank you Mr. Chairman.

Mr. Ambassador, good to have you here. I'd like to talk about two points -- one about the general trade laws and secondly about 201. I was not at the Senate hearing that you were at. But I think in questioning, Senator Rockefeller asked you about some of our trade laws, particularly in anti-dumping. And I think that you said, well, you know, there are certain things that we've got to negotiate. Therefore, we are prepared to put certain things on the table. You may want to comment on that because I was not there. But I would hope that you wouldn't put the anti-dumping laws on the table or really change our trade laws.

Those are so important and some of us who have been on the other side of this thing, being in business, have found ourselves really in very difficult straits. I'm not going to mention any names but having been in business and being sort of thrown to the winds by our trade representatives in other times, it's good as (inaudible) negotiation forum (ph).

We'll give you this. We'll get that but the people who were given, it's very, very difficult and that involves a lot of jobs. So I just want to put in a plea for you to be very careful in terms of that. You may want to comment on that.

But the second thing is in terms of 201. I'm not a great historian, but I do remember that in 1934 and yes, I was alive in 1934, that Franklin Roosevelt and Cordell Hull organized the whole concept of relief for various industries. In other words, if an industry -- the reason Congress gave the president that authority to be able to negotiate and be able to give relief -- that he would give relief if an industry was in trouble. And I know there are an awful lot of suggestions about steel and you know the statistics as well as I do, 39 or 40 companies are now in bankruptcy.

But one of the things that I worry about is that when the president makes a decision, whatever that decision is, that he would do it in a meaningful way and not just have it sort of a cosmetic approach. In other words, there's been suggestions now that with steel imports coming in at the usual number, in the usual amounts, that you would let those come in and then you would give a 25 percent tariff for everything that's surged over that.

That would be wrong I think because what it does, as everybody is lining up and creating a tremendous surge, which should be unfortunate in a particular case. So you may want to comment on both those issues.

ZOELLICK: Well, let me touch on the steel one first, Mr. Houghton. As you know, President Bush in this administration, initiated this 201 because we believe that safeguards have an important role. Members of this committee were pushing for this for the prior eight years and could never get the initiation. And just to further underscore that, we worked last year to try to work out some of the safeguard issues related to the slam (ph) and wheat gluten industries, and this is based on the same strategic principle that you mentioned, which is there are times in which markets move more quickly than industries and the communities that live off them can adjust. And so I'm a firm believer that we need to have safeguard laws but in a way that helps the adjustment process. The favored one that's pointed to in the 201 industry is the Harley Davidson industry, how it turned around.

But we also have to be careful because it could just become a form of protectionism, and that doesn't help anybody adjust. But if we have a restructuring plan and then we include a time for an industry to catch its breath, I think that's the important part of the adjustment process. In steel, after we received the ITC's recommendations and you know, they varied somewhat by commissioner, we've had very good discussions with all branches of the industry. The mini-mill looked at it a little different than the integrated people do. The ports looks at it a little differently than and some of the other users obviously have concerns. But what I can assure you is this is something that is now at the capital level of discussions.

(Inaudible) very thoroughly about the effects on the economy and on this industry. So it is getting a very serious examination and I know the president has a personal interest in it from discussing it with him, and we are on track to try to get the decisions in early March as we would under the 201.

HOUGHTON: But before you leave that, Mr. Ambassador, I guess my point is that if you do have relief, it ought to be real relief and it shouldn't be cobbled out with different proportions and surges and things like that. I mean this is an industry -- and I never was in the steel industry, but I identified with them total --, that is not fat and happy. They really have done almost a resurrection of what they've been about in the years in the past and frankly they do need some help here, some real help.

CRANE (?): The time of the gentleman has expired.

HOUGHTON: Wait a minute, can I ask...

ZOELLICK: I'll speak briefly because I think part of my answer to Mrs. Johnson was I think on a similar point about the trade remedy laws. And what I was emphasizing is we know how important they are. I would not take your characterization of my exchange with Senator Rockefeller as an accurate description of reality but here's the other situation that we face. And then we will fight to protect these and I believe they need to be protected. As I mentioned there are two other things.

One is at Doha, there are 141 countries that wanted us to at least discuss this topic. And so yes, we had to make a decision. Should we crate it around and that's what it would have been about or should we try to craft what I think is a darn good agenda in terms of our offensive points without giving anything up defensively? And the other point I'll just put on the table here is I think we'll hear about it more and more is that we're going to need to figure out a way to get other people to improve their laws, while protecting ours because there is now a gap.

American lawyers, God bless them, have been going all around the world, helping other countries to put these in place and they have nowhere near the standards, transparency, due process that we have, and we're going to hear about it to an increasing degree. So that's what we will target at the negotiations.

CRANE (?): Thank you Mr. Ambassador. And it's hard for any of us to believe Amo, that you were running a business back in 1934.

Mr. Levin?

HOUGHTON: I didn't say that, but I wasn't -- sure.

LEVIN: Well, I'm tempted to take up Mr. Houghton's question. Let me just say that I'm not sure how people will read your answer, but I think the feeling is clear, as I stated in my opening statement, that just providing a safety net isn't enough. And I guess the Europeans have now suggested something that is essentially a way to finance a safety net.

Let me also, on the countervailing duties -- anti-dumping -- just indicate that I hope very much that we will be emphatic, that we will not agree to negotiate, to renegotiate what we negotiated in great deal, at great length during the Uruguay Round. And the problem is that the language within the Doha agreement, I think is read by many people as essentially saying everything's on the table.

And it may well be that the judgment was that we had to agree to that or else the round wasn't going to proceed, but that's the way it's been interpreted and it's quite different the way it was worded in article 28 from the provisions for example on competition and we notice you negotiated it, where a decision to proceed had to occur by explicit consensus and essentially there's no such language in the anti-dumping provisions but provisions on rules. But I don't want to make it more difficult for you, so let me just go on and just say a couple other things quickly.

On Chapter 11, we've talked about this, and you and I have talked about other areas of disagreement and I won't go into them -- the labor and environment provisions, etc. An investment in our bill that we brought up, we had some very specific provisions, and what I'd like you to do if you would is to send to us your analysis of those provisions. We talked about them, but we've never had any written communication as to any objections you have as to how we laid out what should be the negotiating objectives on Chapter 11.

If you would do that, it will help the dialogue and in that regard, getting to Chile, if you -- and we talked a bit about this -- but if you could give us a somewhat more specific timetable as to when you think the investment provisions will be taken up. You said you were going to be talking about market access I think next month. But if you could tell us the timetable and investment and also on the labor and the environment provisions, just a timetable. We have our differences but let's see if we can possibly move ahead.

So let me just talk for one minute about agriculture. Could you tell us.

ZOELLICK: Mr. Levin, I'm sorry I didn't hear.

CRANE (?): About agriculture.

LEVIN: Could you tell us how you think the present discussions or work on the farm bill could affect the negotiations on one of the two or three key sensitive issues and some people think maybe the most sensitive? I think there are others in the next year or two.

ZOELLICK: Certainly, Mr. Levin. Just since you mentioned that (inaudible) proposal, I don't want you to misstate it because I'm not sure you would like it if you really look into it. It's the idea of taxing the steel industry for a fund. That's what the Europeans did, and I'm not sure our steel industry would be very excited about having a new tax imposed on it.

LEVIN: I can understand that. And the tax would essentially go to pay legacy costs and so that only addresses the safety net. I'm not saying it's a good idea. It only addresses the safety net issue and the basic issues of whether we want a steel industry, how it's structured, et cetera. That was...

ZOELLICK: And Mr. Levin, I'll be pleased (ph) on the written points on Chapter 11, but I would urge, however, we also do is we talk about it more because I've looked at a number of those points and I think they're focusing a lot of the same issues that we're focusing on. I may feel for example that a required appellate level for an agreement that's not likely to have many appeals might be something that is not a workable approach but we need to address that issue in some other way. So we'll try to follow that up.

On your farm (inaudible) question, obviously the Department of Agriculture is in the lead in terms of trying to deal with that. And we support forward-looking farm legislation as the president has made clear that helps both the prosperity of our farmers but also meets our WTO commitments. There is language in the (inaudible) farm bill that authorizes the Secretary of Agriculture to make necessary adjustments if our spending exceeds WTO limits. And right now, the USDA staff is working with the committee to get a sense of how that would be administered, how it would work in the process.

So it has been -- our emphasis has been administration that we need to have a farm program that allows us to meet the needs of farmers but also meets our international obligations and has us to continue to move forward in terms of eliminating export subsidies, reducing production support and opening markets around the world. And I've talked with members on both sides of the aisle on that and the ag committee about trying to do this.

CRANE: The time of the gentleman has expired.

Mr. Ramstad?

RAMSTAD: Thank you, Mr. Chairman.

Mr. Ambassador, congratulations on your one year anniversary, and thank you for your outstanding leadership as our country's trade representative. Certainly the president has the best and brightest on his trade team, and I certainly applaud the work that you're doing.

I want to raise an issue that's critically important to America's medical technology industry. A very important segment of our economy, as you know, and as you also know on April or December 12th, the Japanese ministry of health and welfare adopted foreign reference pricing, commonly known as FRP which is a new pricing policy. It's going into effect April 1 that allows the ministry to cut reimbursements for medical devices based on the overseas prices. Our country has long opposed FRP schemes. They discriminate against the United States medical device community. They fail to recognize the high cost of doing business in Japan.

Now the way in which it was quickly adopted also violates U.S. Japan freight agreements according to all neutral observers. Congress, in a bipartisan way, has expressed its strong opposition to FRP. Letters have been sent from Senate and House leaders, Republicans and Democrats alike. Speaker Hastert and Representatives Dunn and Blunt raised their concerns during the trip, their trip to -- January -- last month. Secretary O'Neill has raised his concern as has your Deputy Huntsman.

Despite all of the efforts by Congress and the administration, the Japanese do not appear willing to alter their proposal which would be a huge, a huge setback to the progress that's been made over the last 15 years in opening up Japan's protective marketplace.

Since the Moss (ph) trade agreements in 1986, aggressive U.S. trade policy has turned a $100 million device trade deficit into a $1.3 billion trade surplus today. And we need that strong United States leadership to continue.

I know, we all know, the president will be visiting Japan on February 17th and my question to you Mr. Ambassador, I believe is a very, very critical one. If this policy is not removed by then, that is the time of the president's visit to Japan on February 17, will the president raise our serious concerns and our strong opposition to FRP during his visit?

ZOELLICK: Well, first Mr. Ramstad, thank you for your kind words. I obviously can't say what the president will or won't do. I work for him, not vice versa. But he...

RAMSTAD: Will you encourage him to raise this?

ZOELLICK: Yes and indeed he, he has helped and pressed on a number of trade issues as I mentioned on his visits. He's always, frankly -- it's a big help to me, more than willing to try to push these, I will say that we've been working closely with the industry, as you know, and others in addition, Secretary Evans and Ambassador Baker, Ambassador, Senator Baker, have been pushing it very vigorously, and I think there have been some discussions this week, Mr. Ramstad, that are making some headway with the industry there. I don't want to be premature in this.

But we know the importance and it's a critical industry for the United States and also it's an unfair pricing system. So we will work with the industry with it and I'll certainly also talk to the White House and the president as they go forward.

RAMSTAD: The fact that you're encouraging the president to raise this is very encouraging to us certainly and so and he is aware of the terrible consequences of such a policy, is that correct?

ZOELLICK: Yes, I'm sure.

RAMSTAD: And I just met as I think you did or your Deputy Huntsman with a number of CEOs from Medtronic, from Minnesota's medical alley, from Silicon Valley, from Representative Thurman's district, who are here and this truly, this FRP scheme, truly has devastating consequences. I can't speak in strong enough terms as to how devastating to this critical industry, to our country and to our economy.

So I'm certainly glad we're on the same page. Appreciate the fact that you're going to encourage the president himself to raise this when he's visiting Japan on February 17, because this is such, so important to a big part of our economy and to the medical device community.

So thank you very much, Mr. Ambassador.

ZOELLICK: Thank you.

CRANE: Mr. Tanner?

TANNER: Thank you, Mr. Chairman

And Mr. Ambassador, thank you for being here. And I've got three items I'd like to mention, the enforceability issues and I know we all agree that whether we are for or against a particular bill, the enforceability of what we have is important to both the supporters and the non-supporters of what we're trying to do here. So let me just mention these if I could and then you can respond.

As you know, the House has passed -- the Senate's considering the -- to renew the extension of trade benefits to Andean countries. We have a telecommunications company that is involved with, in a dispute with Colombia. I've talked to you about it before and we have talked about it. We get a lot of promises and assurances and so forth from the Colombians, but nothing changes. Deadlines have passed without resolution. I understand that their own laws are not being followed with respect to the enforcement or execution of the judgment and my question is, even though we have APPA concessions, there is some conditionality in that regime where benefits could be suspended or lifted for a particular country. And I hope that we can give the attention it deserves to this situation because it is one of really shocking non-compliance, if one could use those terms.

Second, Korea has some new biotech regulations with respect to corn and soy items that many feel are regulations that are a barrier to trade and are done to stifle competition. It has to do with documentation and certification and so forth. I understand someone in your office has recently met with the Koreans and if so, if you could give us the status of that and involving corn chips and so on.

And then finally the EU has had a moratorium on biotech products from our agricultural sector. I understand they, the EU, has recently suggested that they would start their approval process later this year, having to do with such issues as traceability, labeling requirements and so forth. And if you could give us the status on that and where we are with that, it relates to the Korean situation as well. Thank you.

ZOELLICK: Sure. Well, first on the Colombian matter, as I know you've been pushing this issue and we've been working with you on it. I've written President Pastrana and I've written the Colombian trade Minister Ramirez and indeed she responded in a way that she thought they were moving it forward and in fact I saw her just this past weekend and raised it with her. She's going to be moving on to another post, so I'll have to follow up with somebody else in the process, but I thought the next step is actually we will meet with Nortel and get their side about why they don't think it's moving in the process, and then we'll work with the Colombians further as we go forward.

The ATPA right now, since it's not been passed, if we can't use it in that way, but we can use it in terms of trying to get it passed which is what I have been doing. And the Colombians have been responsive in some other areas like acrylic fibers. I will just point out, on point and this is an issue of perhaps interest to Mr. Levin and Mr. Doggett as well. This is one of the reasons why these investor provisions are a double edged sword. This is the company that employs people in your district that want to have investor provisions and wants to have them enforced. Some other people are then a little wary about how those work. So this gives you a little sense of kind of the balance we need to strike here.

On the Korea biotech, I know generally about the work we've been trying to do with the Korean biotech. I don't know particularly about the corn one, so I'll have to follow up with you on that one. But you are right, it is definitely related to the larger problem out of the EU and this is an important and I'm glad you raised it because I want to put a real focus on this this year because biotech is so critical not only for our industry and our employment. But it's critical for the development of agriculture around the world, including in a lot of developing countries.

And frankly the EU's sort of stymieing of this is totally unacceptable, economically and I think morally, because in many developing countries around the world, this will be what leads to increased yields, less use of fertilizer, you know, the development of nutrigens or nutrients in a lot of these products.

And so I was in Europe in December pressing this. I talked to four or five commissioners on this and frankly, Mr. Tanner, my view is they're not going to move. And one of the things that I'm doing is very strongly considering bringing a WTO action against the fact that they are not approving products. And I'm working right now to talk with other countries around the world to see whether we might do so.

That's separate from the traceability and labor, which is another element. Right now they're not approving a darn thing. But on top of that would be the traceability and labor rules and frankly we think they're unworkable and so we're also trying to work with industry to see how we could fix those.

CRANE: The time of the gentleman has expired.

Mr. Cardin?

CARDIN: Thank you, Mr. Chairman.

Ambassador Zoellick, let me thank you for the way that you have had an open door policy with members on both sides of the aisle and the way you've consulted with us. We very much appreciate that and the way that you're conducting your office.

Let me just mention two issues that we talked about before so that I can just advance these issues. First on steel, we talked about that frequently, and I want to thank the administration for its actions that it's taken. The key decision of course will be made next month, or by next month, on what remedy to seek in regards to the damages that were caused on our companies.

I would just urge you to take advantage of -- or at least recommending to the president -- a significant enough tariff that it will deal with the true cost of steel. And I would urge you to look in the range around 40 percent. I would also urge that you look at that revenues being used to help deal with the legacy cost.

As you know the European countries do not have to incur the costs of our trading partners, incur the costs of, the social cost in our country and it makes it difficult for U.S. steel to be competitive with the high legacy costs.

And lastly, you have been probably the leader in encouraging the restructuring of the steel industry in the United States, and we've had some different views on that over time. But I would urge you to take a look at the antitrust laws to see whether there is a concern there in what we're trying to work out on the restructuring and whether we need to look at some recommendations in that regard so that the restructuring can move forward in an orderly way.

And then on the second issue that we had talked about, and that is the permanent normal trade relations with the former republics of the Soviet Union. I look forward to working with you as we advance that legislation. I would just caution that when we look at PNTR for China, it was with a strong WTO accession agreement and that made it a lot easier for some of us to move forward in that area.

I also would point out that each of these republics are different, and it would at least be helpful for us if we considered them independently. And with China, we put in a strong monitoring commitment on human rights which is important in some of the former Soviet Union. So I would just urge, as this process unfolds, look for a way that we could bring a broad consensus to the legislation that the administration seeks.

And again, I thank you for your help.

ZOELLICK: Would you like me to...

CARDIN: Sure.

ZOELLICK: Let me take the last one first because we haven't really discussed it today, and I think it's very important. And I appreciate your help, and I take your counsel about looking at these individually. In the case of Russia, in particular, one thing you see in how the administration looks at this is that this is an important step in recognizing the Cold War is over. I mean it's been 10 years and so as you know, the history of the (inaudible) with Russia and China were always different. I mean in terms of Russia, it focused on immigration and human rights issues. And Russia's been in compliance since 1994.

So the focus that we've had -- and I look forward to working with you on this is with human rights and religious groups to make sure we try to get the assurance that we need to be able to go forward. I would distinguish that and some have said, Look, we like to keep this as a club over Russia as it gets into the WTO." And I want to try to explain why I think that would actually be a mistaken idea.

President Putin and the other Russians have said, "Look, we want to fight (ph) by the same rules that everybody else does. And so we will agree, whether it's agriculture or other topics, but please don't use something that distinguishes us from the Cold War as Jackson-Vanik would. We're in the midst of 28 other applications, and this I honestly think would be counterproductive if we used it in that way and particularly, we don't need it, because the WTO accession requires a consensus, not only us, other countries.

We have the ability to say no unless they take the steps, and so I've had a number of meetings with the Russians in the nitty gritty detail of this. They are making the efforts with their (inaudible) to comply. We want to bring them into the system.

We won't do it unless we have the right market access. The agriculture community is particularly concerned about this and deal with the subsidy and other issues. But I think it would be wisest to focus the Jackson Vanik issue on its origins with Russia, the immigration, the human rights, the freedom aspects and I know that's one that you worked on.

I'll be pleased to work with you in the future and my colleagues obviously at State and others.

CARDIN: I understand that and I think that makes good sense. I look forward to working with you.

ZOELLICK: And then on steel, just obviously we're at a point where we are looking at the full range of remedies. As you know, the ITT commissioners, some suggested tariff rate quotas. Some of them suggested higher tariffs. We're looking at the full range and on the issues of legacy costs, there are different ways to try to address this and we're looking at the full range. As you know, U.S., Ex-Im proposed basically a $13.5 billion over 10 years to deal with six companies. One of the issues we have to look at is what about the other six companies where you have workers that are similarly situated.

And this has also led I think to a focus on, if wherever one goes, about the programs for the workers. For example, the administration's had a proposal about a refundable tax credit for health insurance. Pension funds as you know, by-in-large, for retirees are covered by the PBGC. The numbers we have is it should cover about 93 percent of the pensions.

But I think one of the issues we'll have to balance here is some fairness, not only on steel companies, but other companies and for what it's worth Congressman, my view on this is that try to focus the aid on the people who are going through the change.

CRANE: The time of the gentleman has expired.

Ms. Thurman?

THURMAN: Thank you, Mr. Chairman.

Mr. Ambassador, thank you for being here with us and staying for a rather long time, as well as we especially appreciate it down here on this row because a lot of the times our guests have to leave and we never get an opportunity to answer, ask...

ZOELLICK: I get good questions from that row, Congresswoman, so I appreciate it.

THURMAN: So we do appreciate you being here.

Ambassador, I just have a couple of issues that have been blocking me and as I can see from the line of questioning, other members of this committee have brought specific issues because of specific contacts they've had with people, and frankly I'm always amazed at just how big this country is and the kinds of things we do and the kind of trade that goes on. I mean there's so much going on.

But in saying that, as you know during the negotiations over TTA (ph) there was a lot of concern in Florida specifically dealing with our citrus industry and other agriculture industries. Evidently there are some questions dealing with some of the cartel practices that I guess the Senate has maybe brought up to you. One of the -- we just would like to know whether or not you plan to negotiate remedies to eliminate cartel practices and how do you plan to address them.

And then secondly, with the GPA (ph) while it gives you the tools to expand trade through U.S. and foreign tariff reductions, there are many unsubsidized U.S. agriculture commodities which have been forced to address what we believe have been unfair imports repeatedly. Will you commit to us to avoiding U.S. tariff reductions for those commodities which have been faced with (inaudible) import competition like citrus?

Thirdly, and I did get a memo and I actually was surprised, because I didn't remember hearing much about this during even GPA (ph) about on the tariff reduction, how many other countries actually use this. It was alarming to me that we weren't able to negotiate any of that when we were doing some of this, but on the idea why we would take a position that ties our hands on the issue and harms our import sensitive industries while our trading partners take the opposite course in their own self interest and this is on our tariffs and then in the FTAA are you prepared to sacrifice unsubsidized agriculture industries like citrus for the sake of a negotiating principle which only the U.S. follows.

And in the last comment that I need to make, it's come to my attention that in Florida, as you can imagine, we have a lot of people doing business in Peru and other areas and it came to my attention that there's a business over there that actually has been trying to work with the government to take care of an issue where they feel like they have been harmed, in the telecommunications, and I guess the Senate actually put some language in their committee report that is asking USTR to closely examine these matters in determining whether Peru should be designated as an ATPA (ph) beneficiary country because of these particular -- I guess there's about three or four different cases. One just happens to come from Florida. Some on telecommunication issue. You might be familiar with it, Telefonica, maybe not, but...

ZOELLICK: Well, let me try on some of these because I think they're interconnected. I think there's actually a general theme of the citrus which wouldn't surprise you.

THURMAN: I didn't think it would.

ZOELLICK: I think on at least the second on the fourth as I have them, there is language in the trade promotion authority bill that establishes a series of additional procedures to deal with sensitive products and citrus was kind of the lead in the train in this. And it would require that as we undertake any negotiations. And if we want to try to negotiate any reductions in tariffs, we have to go to the international trade commission and have various reports done and then explain the logic for moving forward and the of course it states clearly that any ultimate decision in change of tariffs belongs to the Congress and not us. And I'd be happy, again, to give you more information about those provisions.

On the cartel point, I'm not 100 percent sure I have this but it's our negotiating position that we want to try to address the problems of state trading monopolies and state trading enterprises. This is most actively in the news actually related to wheat and the Canadian wheat board. And I think the practices are wrong and I'm actually talking with the wheat industry again tomorrow about some options we might be able to take dealing with that, using our unfair trade laws and maybe also the WTO.

On the Peru and the telecommunications issue, I'm afraid I don't know the precise points. Mr. Tanner mentioned, I didn't know if it was with the Nortel and the Colombia case, so this may be a different one. But I'll be pleased to look into it with you. I would say again, and you can share this with your colleague, Mr. Doggett, this is one of the issues why we have a little difficulty on these investment issues is that we want to try to protect our investors abroad and make sure they get the protections foreigners get here. Sometimes that creates a little complexity in the legal regimes we have.

THURMAN: Mr. Ambassador, it's just in the language for your staff to note this that it was in the Senate language on page 31.

ZOELLICK: OK.

THURMAN: And that will give you an area...

CRANE: The time of the gentlewoman has expired.

Mr. English?

ENGLISH: Thank you Mr. Chairman. And Ambassador, it's a real privilege to have you here to comment upon, in the wake of the president's budget submission, our trade priorities. I want to congratulate you on the extraordinary job you've done in the last year. I thought your predecessor set a very high standard and I think that you have done a remarkable job of strengthening our trade policy within a very short time and without as much cooperation from Congress as we in this committee might have liked.

I have a couple of specific issues that I'd like to raise with you. One, I would like to once again congratulate the administration for launching its 201 action in steel. I realize this entailed a great deal of political capital on your part, that this was a controversial move in some areas of the business community and manufacturing. As someone who represents a district that both produces steel and also has steel consuming manufacturers, I appreciate the challenge that you faced in crafting that policy and that you have a final upcoming decision.

As chairman of the Steel Caucus, I would urge you to go to the president and urge him to pursue an aggressive solution to the 201 action, one that while I realize will create some animosities with some of our trading partners, one that I think is necessary for us to preserve on a level playing field our domestic steel manufacturers.

You're welcome to comment.

ZOELLICK: Well, I think the key point that you added, Mr. English -- and thank you for your kind words on this -- is that regardless of complaints from trading partners, safeguards provisions are acceptable under WTO rules and we've been going back to the ITC to make sure we try to do this as cleanly as we can to proceed in accordance with those rules and if we have the industry undertaking the restructuring, as they will need to become competitive, I think safeguards are appropriate. That's something that my cabinet colleagues and I will be discussing with the president in the nature and the form -- and as you probably point out, there is a balance here. You get different users and you have different steel industries, companies that now have developed slightly different business plans and how they're trying to approach this.

But I would really just thank you and your leadership with the steel caucus all year for working with us on this so we can try to deal with what we know has been a very difficult problem for many communities in America.

ENGLISH: One of the other issues that is frequently associated with steel and other heavy manufacturing, is the status of our anti- dumping laws. And I know that you've had some very difficult decisions to make on this as the Doha negotiation progressed. I wonder if you would care to comment on whether the administration would be open to some ideas being advanced, not only by myself, but by Mr. Levin and Mr. Cardin and Mr. Houghton.

Potentially within the WTO standards strengthen our anti-dumping laws, take out some of the, take out or replace some of the provisions that have proven to be antiquated or create problems. We have not had a major overhaul of our anti-dumping laws in quite a few years and I don't count in this the minor revisions that were made in 1994. I think a major overhaul of our anti-dumping laws has not been done since the '70s. Would the administration be open to entertaining this kind of an initiative?

ZOELLICK: Well, first, we would certainly be pleased to discuss this with you and others on the committee and just to give you a sense of the importance of this, the House passed a resolution before we went to Doha that we looked at and followed very closely in terms of our approach in dealing with these issues in the WTO context. On the domestic front, as you know, the Commerce Department applies these laws and so I have to defer a little bit here to my colleague, Secretary Evans. But we work very closely together and we'd certainly be pleased to get in a dialogue on these laws and how they could be improved and strengthened obviously in accordance with our WTO obligations.

ENGLISH: As the author of the House resolution, I'm grateful that you followed it religiously. And one last point I'd like to make, I noticed recently you visited Morocco. I was delighted to see that. My own view is that Morocco is potentially a good partner, that we could engage in a bilateral trade agreement along with some of the other MEGRB (ph) countries, Tunisia, potentially Egypt. Would you like to comment on the potential for a bilateral or multilateral initiative here?

ZOELLICK: Well also Mr. English, I don't know if you were on this trip, Mr. Gephardt just proceeded me and I know that he was interested in trying to express help in terms of strengthening U.S. ties to Morocco. So perhaps we can even get a broader base here. And I talked with Mac Collins about he had tried to promote some paper from Georgia in terms of sales. Morocco is a country that has pushed forward with economic reforms. It's actually pushed forward with political reforms as well. There will be parliamentary elections. And so at a time that there's turmoil in the MEGRB (ph) and the Middle East, I personally feel and I think all of us have a sense that it would be extremely good for the United States if we could strengthen their reform process in a way that also opens markets.

The Europeans have preferential access. We've lost out in various areas, so I think we can do good and do well at the same time through this negotiation. And I do believe that the MEGRB (ph) may, there may be a window if you're some of the other MEGRB (ph) countries.

You mentioned Egypt, and here we've had discussions. But I also will just share with you the need that we have to be realistic with Egypt in that right now Egypt has not implemented some of its WTO obligations in terms of intellectual property and customers in other areas. We want to support Egypt. We want to try to help Egypt, but going back to Chairman Crane's question about standards, one of the standards I look at is whether a partner is ready. And a good test of whether they're ready is whether they're willing to follow through on the reforms in their current obligations. Morocco has, Egypt has -- work ahead of it.

CRANE: The time of the gentleman has expired.

Mr. Doggett?

DOGGETT: Thank you Mr. Chairman.

And Ambassador as you know, the last year when you've come before this committee on two occasions, I've voiced my very strong concerns about the misuse of the investor state (ph) provisions by multinationals to challenge the governmental actions that were designed to protect the water we drink and the food that we eat. During that year, there have been few public signs that anything is being done about it (inaudible) pleased there were some cosmetic clarifications last July that were announced. And I believe that the concerns of every major environmental organization in the United States remain the same as when I raised this issue with you last year.

I know that within the last few days as you testified, you met with one part of the environmental community that offered some trial balloons about how to address this concern. But of course the (inaudible) case concerning the pollution of the water supply in California is still pending. The recent lindane (ph) case is pending now where there is a challenge to a Canadian regulation that follows a similar U.S. regulation by the American company that involves health and safety.

Last week, a Chilean official was reported in the trade press to have said that Chile doesn't like the wording of Chapter 11 either. Given the threat to our environment and safety, the Chileans stated concern in the year that you've had to act. Can you commit today that you will be personally urging that any trade agreement with Chile or any other agreement that you plan to negotiate to submit to Congress in the near future will have significant changes in the investor state (ph) relationship?

ZOELLICK: Well, I, one thing I really differ with I guess, Mr. Doggett in your statement is the notion we're just trying trial balloons. I'm in a very serious dialogue with people, based on the concerns that you've had, Sandy and others have raised and with both the business and environmental community. And let me tell you what I'm struggling with and I'm honestly struggling with it, is that we have a balance here, because on the one hand, we want to try to make sure as we've had some testimony today from your colleagues...

DOGGETT: The lightness (ph) and I'd be glad for you to supplement. I understand the need for the balance. That's what I asked about last year so there's no conflict between what I'm urging and the concern you raised with reference to Mr. Tanner where there was a contract breach. What I want to know is, is there going to be something you're urging to have happen on this in the Chilean agreement that you say you...

ZOELLICK: We haven't decided yet on our position because I'm honestly...

DOGGETT: After a year you've not decided which way to go on it?

ZOELLICK: Well, one of the things that happened during the course of the year, Mr. Doggett, was I was getting advice from this committee in turning the ATPA (ph) process which didn't -- I wish it would have happened earlier but it didn't happen until December. So working on that guidance, I am trying and I'm reaching out as best as I can, Mr. Doggett, to get ideas and I think it's best that I not decide until I do.

DOGGETT: Thank you, Mr. Ambassador. If you haven't decided, I can quite accept that as the answer, though I'm troubled by it. I know that you're aware of the PBS special that occurred just this week that Bill Moyers did called "Trading Democracy." The deputy chief negotiator of NAFTA there before of course you were in charge, was quoted on the program as saying, "If expropriation means anything that diminishes the value of your investment, then that's probably a big mistake because that's just too greedy."

And I wonder if you agree with that view or feel that NAFTA should require compensation any time governmental health and safety regulations diminish profits.

ZOELLICK: What I feel, Mr. Doggett, is we need to do two things. One is make sure that American investors abroad get the same protection as foreign investors get in the United States. And the second thing we need to do is to make that our ability to have health and safety and environmental regulation is not compromised in any way. And that is what we're trying to strike the balance.

DOGGETT: Does that first principle mean that you also subscribe to the view that foreign investors should have more rights with regard to property than American citizens do?

ZOELLICK: No. And that's one of the reasons that we're trying to work to see, given the framework of these agreements. And again, it is important. I know but this is a serious topic and I want to deal with it seriously, because you have and I believe we need to as well. But you know, we've had about 60 of these agreements and bilateral investment treaties. There are about 1600 of these around the world, and one of the things we have to be careful about is also not leaving the United States in a bad position compared to other investors.

DOGGETT: It certainly is. Since the yellow light's on -- and I welcome your supplementation -- am I correct that in the NAFTA arbitration panel, it's possible for a foreign corporation to deny this committee, the public and the press from reading legal briefs that are submitted even if you personally think that the foreign investors filing should be public?

ZOELLICK: I'd have to check on that because one of the things that we did in July was to try to make sure we opened up the documentation for the agreements so one of the things in July when you probably weren't acting, (ph) might have been able to address this. But also I would say that it's my view just so that you know, that all of these should be opened up and the hearings should be opened up as well.

DOGGETT: That's right and I hope you urge that in Chile and just finally, Mr. Chairman, some have suggested that you are involved in plans to settle the (inaudible) against the United States case as soon as the fast track vote is over with. Are there any negotiations under way on that subject...

ZOELLICK: Is this the one, is this the Mississippi case?

DOGGETT: This is the Mississippi Supreme Court case...

ZOELLICK: I didn't know I could part of any ability to settle it. I would certainly wish I could make it go...

DOGGETT: ... consulted about it in any way or involved in any way in it then.

ZOELLICK: I've monitored the case because I know that it's an important case but I don't think we're part of it.

CRANE: The time of the gentleman has expired.

Mr. Pomeroy?

POMEROY: I thank the chairman.

Mr. Ambassador, I think that the president chose well when he selected you to be the trade representative, and I think you're doing a very good job on behalf of the administration, on behalf of all of us. That isn't to say we'll always agree about the philosophical directions of you. (Inaudible) your responsibilities but by and large, I have found you personally and your staff, particularly Ambassador Johnson, to be very responsive to the issues that I've had relative to North Dakota agriculture. I want you to know I appreciate it.

ZOELLICK: Thank you.

POMEROY: Coming up next week is a determination that you'll be making on the 301 petition brought against the Canadian wheat board. We are waiting with baited breath about what might happen there and appreciate the fact that tomorrow you'll be meeting with a number of senators and some House members, although most of us unfortunately will be clearing out of town without (ph) votes on this question that you're further discussing prior to the ruling.

There was some responses that you made yesterday that I find a little troubling as you testified at the Senate Finance Committee in terms of your thoughts on this matter. We have visited in the past, Mr. Ambassador, about the range of options. What do you do when you have an entity, the Canadian wheat board, a state-subsidized monopoly in a situation where literally it's illegal to sell wheat other than through this monopoly if you're in western Canadian and this monopoly, we believe routinely exercises internal subsidies. We can't prove it because they absolutely, adamantly refuse access to their books and they have taken, in my opinion, extraordinary lengths to preserve the utter secrecy around internal pricing.

Finally, the ongoing frustration then resulting from a languishing market price for wheat and the demise of the durham wheat market in particular for U.S. farmers have really brought the situation to a very serious point that has caused very extensive evaluation of what our options might be. The section 301 wasn't picked in a vacuum. It was picked after very thorough deliberation in terms of the elements of establishing a case and then establishing a remedy under antidumping or a countervailing duty. It was exhaustively deliberated and determined that really the only shot was to go for the section 301.

You hold your responsibilities at a very important point of time because issues that have been out there, not really come - they're fully ripe and they've come to a point where they have to be resolved. Sometimes it seems to me that reality causing political forces is at a total different track than the regime of international trade laws. Somehow you've got to span those two. You've got to deal with real reality and the political consequences coming from it as well as apply your expertise as our trade negotiator.

I'm telling you that it is my sincere evaluation that the stakeholders in this question in North Dakota and through the northern tier of wheat production that anything less than finding under 301 the difficulty and establishing tariff rate quota to deal with it, is not going to be responsive to what they're hoping for. It's understood that that's going to be challenged, that that's going to involve a challenge that would even involve a risk of being overturned by WTO. That is where they are and that's the way they think this has to advance and I wanted to bring you that message in this final days before you must make your determination. I'd be interested in anything you'd care to say on the record.

ZOELLICK: Well, first Mr. Pomeroy, let's make sure that if we can, if you're not going to be able to be there tomorrow, that we have a chance to follow up by phone because I want to compliment you, because you've been a leader on this, and we've learned an awful lot from you and we very much appreciate the engagement as we've gone through.

Let me tell you how I, briefly, see it today as and I will discuss with your colleagues, is that the 301 just gets us the information and we work with you and others to try to really do a much more thorough job about trying to dig and get as much information, surveys and then to release that publicly. The other question is whether we do it. The problem with the tariff rate quote is there's really no doubt that under or NAFTA obligations and with a little bit more of an increase in the tariff under our WTO obligations, that we'd be in violation. And then that means automatically they retaliate against us, probably to add commodities, maybe some that hurts against North Dakota and it's not a durable solution. So then the question is, what can we do.

And what I was putting forth yesterday and this is what I just, I hope we can talk with the industry about a little bit more, is I know some of their initial look at the anti-dumping countervailing duty suit. We think there is some additional information gained through the 301 process that is worth a look, to see whether this might be a useful approach. And indeed we looked and I know because we're talking about farmers that don't necessarily have the ability to bring actions but we looked at other states sometimes that supported groups, citrus in Florida for one, to be able to bring action. So I just want to try share with them some of our thoughts about one offensive group.

The other offensive group that we've talked about with you is a WTO case, and I talked about this with Chairman Baucus yesterday is, this is a very uncertain area in WTO sort of rules. And so there's no sort of clear answer and we may or may not be successful but I think by pushing the issue in that route as well, we would be in a position to heighten it for the third element of the offensive, which is to do this in the context of the Doha agenda.

And this is where we're good to have the round going because look, I think these are monopolies and I think they're rotten. I think they allow various types of credit and subsidies. I think they ought to be changed and so we have a rules based system as it is and as you properly said, that's what we got to try to address. So actually just so you know Mr. Pomeroy, we can talk about this more, is that I'm not saying one or the other, frankly. I'm looking at all three, OK, and I think that they might even be able to help and interrelate with each other and I know the tariff rate quota looks facilely appealing but what I can't get over is, if it's a violation it won't last, then where does it leave the North Dakota wheat industry?

So that's kind of a summary of how I'm looking at it and we'd be pleased to work with you and others as we proceed because you know, I feel and felt for a long time that the state monopoly ought to be changed.

CRANE: The time of the gentle...

POMEROY: Appreciate (ph) your response. I will call you, and I appreciate that indication. Thank you, Mr...

CRANE: The time of the gentleman has expired. And with that, all time has expired and we want to commend you, Mr. Ambassador, for your endurance. And we look forward to working with you over the course of this year, and we are guardedly optimistic that we will be able to make positive accomplishments thanks to your efforts.

And with that the committee stands adjourned.

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:  WILLIAM M THOMAS (94%); PHILIP M CRANE (72%); NANCY L JOHNSON (57%); E CLAY SHAW (57%); JIM MCCRERY (56%); WALLY HERGER (56%); DAVE CAMP (55%); JIM RAMSTAD (55%); JIM NUSSLE (55%); MICHAEL (MAC) COLLINS (54%); JENNIFER DUNN (54%); SAM JOHNSON (54%); ROB PORTMAN (53%); WES WATKINS (53%); JERRY WELLER (52%); SCOTT MCINNIS (51%); KEVIN BRADY (50%); MARK A FOLEY (50%); PAUL RYAN (50%); 

LOAD-DATE: February 13, 2002