Copyright 2001 Federal News Service, Inc.  
Federal News Service
March 7, 2001, Wednesday
SECTION: CAPITOL HILL HEARING

LENGTH: 18879 words

HEADLINE: HEARING OF THE HOUSE WAYS AND MEANS COMMITTEE
 
SUBJECT: PRESIDENT BUSH'S TRADE AGENDA
 
CHAIRED BY: REPRESENTATIVE BILL THOMAS (R-CA)
 
LOCATION: 1100 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: ROBERT ZOELLICK, UNITED STATES TRADE REPRESENTATIVE
 


BODY:
(Note: This event was fed in progress.)

REP. THOMAS: (In progress) -- on another essential component of the president's economic plan, and that is reclaiming United States leadership in world trade. As we know, the United States is the world's greatest exporter, but it's falling behind, frankly, in negotiating trade agreements and setting the agenda for rules for international commerce in the new century.

International competitiveness is not just, however, trade agreements and rules. The committee also recognizes that other areas of this committee's jurisdiction affect our ability to compete. Workers, business, and farmers run up against a long list of outdated and frankly damaging disincentives that are currently in the tax code that impede our success in foreign markets. Time is running out here as well to make changes.

So I want to welcome Ambassador Robert Zoellick in his first appearance in Congress since his unanimous confirmation last month by the United States Senate. Trade promotion authority will be crucial for this administration as you prepare to negotiate closer trading relationships, Mr. Ambassador, not just within this hemisphere, but globally.

I look forward to hearing your plans for following through on the Free Trade Agreement of the Americas, launching a new round of negotiations in the World Trade Organization, and bilateral trade agreement with Vietnam, among others. Together we need to also consider the Andean Trade Preference Act.

But I look forward also to hearing from my Democratic colleagues as to how they want to see trade promotion authority evolve. We've gotten to the point now where it just isn't sufficient to point with pride or view with alarm; we have to be specific about our concerns as to how we want to make changes to move ahead on a bipartisan basis. We've got a lot of work ahead of us to regain our historic position in the international marketplace. This is an area that historically this committee has worked very positively and successfully in a bipartisan fashion.

In view of the ambassador's time, in which he has about two hours in front of this committee, I would request that all members who wish to make opening statements could submit them in writing, save for the chairman and the ranking member, and the chairman of the Trade Committee and the ranking member of the Trade Committee.

So I, at this time, to conclude the chairman's opening statement, would yield to the chairman of the Trade Subcommittee, the gentleman from Illinois, Mr. Crane.

REP. PHILIP CRANE (R-IL): Thank you, Mr. Chairman. And I too want to welcome our new and impressive U.S. trade representative, Bob Zoellick, and we look forward to working with you.

I would rather get to questions rather than make an extended opening remark, except to say that I think we have a unique opportunity, historically. For the first time in all the years I've served in Congress, I think we can advance a free trade agenda that is in our national interest and the world's interest, too, and that you will play an instrumental role in that.

Let me ask you first, you mentioned in your confirmation --

REP. THOMAS: Phil, if I could allow the gentleman from Illinois (sic), and then I'll turn to you on questioning.

REP. CRANE: Oh -- oh, sure thing. Okay, I'm sorry. I'm sorry.

REP. THOMAS: All right.

REP. CRANE: Well, then let me yield to Charlie.

REP. THOMAS: The gentleman from New York, opening statement?

REP. CHARLES RANGEL (D-NY): Thank you, Mr. Chairman.bassador, let me join the chairman and others in welcoming you to the committee and congratulating you for the assignment, unanimous support, that you received in the Senate. You bring many great skills to this job, and this is one committee that appreciates the need for America to continue to find new markets and expand our trade if we're going to continue to enjoy the economic prosperity that we have today. And while not all Americans are able to enjoy it, we do know that we just have to increase the size of the pie in order for more people to be able to participate.

We know that there is no Democratic way and no Republican way for us to expand our markets, and so we want you to know that this is one committee that you should be able to enjoy bipartisan support. The president has gone out of his way to expound how important it is to him that the Congress act in a bipartisan way. Clearly, the Congress has struck out on the question of tax relief, but we do get another chance to come up at bat on the question of trade.

So I look forward to working with you, and I'd like to yield to my dear friend and the ranking member of the Trade Subcommittee that you'll be working closely with, Sandy Levin.

REP. SANDER LEVIN (D-MI): Thank you, Mr. Rangel and Mr. Chairman and Mr. Crane and colleagues on the committee. Let me just say a few words of a more general nature so we can focus on your testimony and Q and A. So Mr. Ambassador, welcome.

Your prepared testimony describes the benefit of trade in clear terms, and I agree that trade is an essential ingredient in American economic expansion. That said, I don't think the main challenge before us is just how to sell the benefits of economic globalization. A basic issue is whether we believe that economic globalization, which is indeed here to stay, needs to be shaped, or whether we just embrace it blindly on the presumption that it will work out on its own without any problems.

Put another way, the distinction is between those who view trade liberalization as an end in and of itself, and those who, like myself, view it as a key tool with the need to shape trade policies themselves so that they maximize the benefits and minimize the downsides of international trade.

Over the last 18 months, we took the latter approach, the approach of shaping globalization. As a result, we broke the deadlock of more than four years, and in that way, the nation did indeed show leadership on issues of world trade.

In CBI, for example, we found ways to enhance the competitiveness position of industries in the Western Hemisphere through complementarities of capital and labor, and enhanced the labor standards in CBI. In China, for example, we were concerned that the non-market structures in China's economy could well lead to overproduction that could cause agricultural and industrial products to surge into the U.S. market. So we crafted the toughest safeguard ever written into U.S. law.

Each of these solutions was a building block. Each addressed a specific problem and built some confidence that we could solve the next one.

This morning, and in the coming weeks, our challenge is whether we will continue on the path of innovatively shaping globalization and creating new building blocks. I believe there are real opportunities to move forward: to pass the Jordan Free Trade Agreement in time for the visit of King Abdullah next month; to address the labor dimensions of the Vietnam Trade Agreement and pass it this summer; and to come up with a meaningful response to the crisis in steel. With these building blocks in place, I believe we could then get to work on other issues, including how to address negotiating objectives, consultative procedures, and the approval mechanisms of fast track.

We will welcome today, and in the future, active discussion with you, and I hope work on specific topics. In this regard, you refer in your prepared statement to the importance of the congressional- executive partnership. As Mr. Rangel mentioned, that welcomed result will occur only if there is an early and genuine effort not to, as you phrased it, and I quote, "get mired down in partisan division."

Thank you.

REP. THOMAS: I thank the gentleman.

And now it's my pleasure to ask the ambassador that any written statement that he may have will be placed in the record, and you can address us in any fashion you see fit.

Mr. Zoellick, welcome to the Ways and Means Committee.B. ZOELLICK: (Off mike.)

REP. THOMAS: Mr. Ambassador, you're going to have to turn on the mike, and it is very unidirectional.B. ZOELLICK: How about this?

REP. THOMAS: Good. Thank you.B. ZOELLICK: Well, thank you, and Mr. Rangel and Chairman Crane, and Mr. Levin.

I appreciate the opportunity to be here.

What I would like to do, Mr. Chairman, is, if -- as you mentioned, if you put my full statement in the record, I will just summarize it.

Last week President Bush spoke before a joint session of Congress about how trade is part of his larger vision of expanding freedom. Trade policy is the bridge between the president's international and domestic agendas. As the former governor of a border state, President Bush has seen that the free exchange of goods and services sparks economic growth, opportunity, dynamism, fresh ideas and democratic values both at home and abroad.

In undertaking the president's charge, I know well that the Constitution vests the Congress with the authority to regulate commerce with foreign nations. Frequent substantive consultation with this committee is enormously important to me and I look forward to working closely with you.

The history books recount economic, political and indeed national dangers of a breakdown in America's trade policy. The disastrous experience of setting protectionist tariffs for over 20,000 individual items in the Smoot-Hawley Bill of 1930 led the Congress four years later to try a different approach, a bipartisan partnership with the executive to try to negotiate lower barriers to trade around the world.

This partnership between the Congress and the executive became a bipartisan cause and eventually produced prosperity and opportunity and even liberty beyond the greatest expectations of its supporters. Federal Reserve Chairman Alan Greenspan has put this success in historical perspective by pointing out that the growth in trade as a share of the world economy over the past 50 years has finally managed to reverse the losses from the calamities of the early 20th century and now approximates globalization around 1900.

So today, just like Americans at the turn of the last century, we face some critical decisions about the future course for our country, trade and the world.

Just as the World War II generation forged a bipartisan consensus that sustained successful trade expansion through the Cold War, we must build a new consensus to promote open markets and trade for decades to come. I know that new ideas are being advanced from many quarters, and I want to work with you with an open mind to try to mobilize broad support for freer trade.

I'm sure we'll have many opportunities, including, I expect, today, to discuss the important particulars of trade, but I'd like to step back just a moment to touch on the importance of global trade for the American people.

First, expanded trade -- imports as well as exports -- improves the well-being of Americans. It leads to better jobs with bigger paychecks and more competitive businesses, as well as to more choices of goods and inputs, with lower prices for hard-working families and hard-driving entrepreneurs.

I appreciate that votes for agreements like NAFTA and the Uruguay Round may not have been easy to cast, yet those agreements contributed to the longest period of economic growth in U.S. history, with levels of full employment and without inflationary pressures beyond the forecast of any economist. A new commitment to trade liberalization can help boost a vigorous long-term economic recovery from the present slowdown.

Expanding global trade and expanding economic growth in the United States are not coincidental. They are achieved in concert. One strengthens and reinforces the other. Moreover, restrictions on trade have victims -- farmers, school teachers, factory and office workers, small business people and many others who have to pay more for clothing or food or homes or equipment because of visible and invisible taxes on trade.

Second, as President Bush has stated, free trade is about freedom. Economic freedom creates habits of liberty, and habits of liberty create expectations of democracy. President Bush recently made a historic visit to Mexico, where he met President Fox, the first president elected from the opposition since that nation's revolution. And it is not an accident, in my view, that after Mexico embraced the openings of its economic system, as embodied in NAFTA, it was drawn to a democratic opening as well. So, trade can promote our values as well as our economic interests.

Third, expanded trade affects our nation's security. The crisises of the first 45 years of the last century were inextricably linked with hostile protectionism and national socialism. Or take an example from today. Colombia's waging a battle to defend the rule of law against murderers who finance their terror through complicity in drug trafficking. President Pastrana, when he visited Washington recently, has said that one way to counter this threat would be for Congress to renew the Andean Trade Preferences Act, which expires in December. With a renewed and robust Andean Trade Preferences Act, the emphasis of U.S.-Colombia relations can gradually shift from aid to trade.

I recognize, however, that the benefits of open trade can only be achieved if we achieve public support at home. To do so, the administration must enforce vigorously and with dispatch our trade laws against unfair practices. In a world of global economics, justice delayed can become justice denied. We need to do a better job of monitoring compliance with trade agreements and insisting on performance by our trading partners. And I assure you that I will not hesitate to use the full power of U.S. and international law to defend American businesses and workers against unfair trading practices.

Even if we do our jobs well, I appreciate that change, particularly rapid adjustments, from whatever cause, can be very difficult and frightening for hard-working people. So part of our larger program will have to be help people to adapt and adjust and benefit from change.

To strengthen and speed America's trade and economic policies, we're going to need to reestablish the bipartisan congressional- executive negotiating partnership. Last week, the president asked the Congress for quick action to give him, quote, "the strong hand of presidential trade promotion authority." This authority, as he pointed out, has been given to five previous presidents. Therefore, I will be following up with this committee and with the Senate Finance Committee to consider how to establish trade promotion authority for the president, based on the fast track precedent and the broadest possible support.

In the absence of this authority, other countries have been moving forward with trade agreements while America has stalled. Indeed, other countries are writing the rules of the international trading system as they negotiate without us. The European Union has free trade agreements with 27 countries. Twenty of these agreements have been signed since 1990. Japan is negotiating a free trade agreement with Singapore, and is exploring agreements with Mexico and Korea and Chile. There are approximately 130 free trade agreements in force in the world globally, but the United States is party to only two.

Our deadlock hurts American businesses, workers and farmers, and they're going to find themselves shut out of many preferential trade agreements and investment agreements negotiated by others. And just to cite one example, while U.S. exports to Chile face an 8 percent tariff, the Canada-Chile trade agreement will free Canadian imports of this duty. And that's why we are going to restart our negotiations with Chile on a free trade agreement this month. We cannot afford to stand still or be mired in partisan division while other nations seize the mantle of leadership from the United States. This would be a huge missed opportunity; indeed, in my view, an historic mistake.

In considering the grant of trade promotion authority, I urge you to give the president more leverage by broadening our options. I'd like to be able to tell my counterparts from around the world that we're willing to negotiate, if they're serious about eliminating barriers, yet also make clear that America will look elsewhere if they delay and that the United States will move forward, and it's up to them to decide to join us or be left behind. The fact that we are moving on multiple fronts increases our leverage.

On April 20th, President Bush will attend the Summit of the Americas meetings in Quebec City, where one of the major items will -- on the agenda will be the Free Trade Area of the Americas. And he has emphasized, to set a new course for this hemisphere, he needs to hold out the prospect in Quebec City that new trade promotion authority is on its way.

Now of course America's trade and economic interests extend far beyond this hemisphere. We want to launch a new round of global trade negotiations in the WTO, emphasizing a key role for agriculture. We will seek to negotiate regional and bilateral agreements to open markets around the world. There are opportunities in the Asia Pacific. We will start with a free trade agreement with Singapore and work with you to pass the basic trade agreement with Vietnam negotiated by the Clinton administration. We will urge Japan to deregulate, restructure, and open its economy, which is long, long overdue. And we want to complete China's accession to the WTO, once it meets its requirements.

Further reforms in the Middle East and Africa need our encouragement, and I compliment this committee for its important work with Africa and the Caribbean last year. We are committed to working with Congress to enact legislation for a free trade agreement with Jordan, to implement the Africa and Caribbean provisions, and to consider other ways that we can help both these regions.

As India reforms its economy and taps its great potential, we should explore ways to try to achieve mutual benefits. To help developing nations appreciate that globalization and open markets can assist in their own efforts to reform and grow, we'll need to extend the legislation authorizing the Generalized System of Preferences program.

Of vital importance, I will seek to work with the European Union and its candidate members in Central and Eastern Europe both to fulfill the promise of a transatlantic marketplace that's already being created by business investment and trade, as well as to reinvigorate, improve, and strengthen the WTO processes.

Now that there's a fragile peace in the Balkans, we must secure it by pointing people towards economic hope and regional integration. Therefore, we would like to work with the Congress to follow through on the prior administration's proposal to offer trade preferences to countries in Southeast Europe.

The Bush administration has an ambitious trade agenda, reflecting the importance that President Bush assigns to trade. This is an opportune moment to reassert America's leadership in setting trade policy and to build a post-Cold War world on the cornerstones of freedom, democratic values, open trade, and free markets, as well as security.

I appreciate the executive-congressional partnership on trade has a rich tradition which has produced very important results, and with your help, I look forward to working with you to build on that partnership as we move ahead. Thank you.

REP. THOMAS: Thank you very much, Mr. Ambassador. And I know you have limited time, and I hope members will appreciate that this will not be the only visit that we'll have with the ambassador, but it is the first.

Let me begin the questioning by telling you that a number of prominent people involved in trade, even someone as prominent as the former United States trade representative, has indicated that given the fact that we've been able to negotiate something like the China agreement, that perhaps what we used to call "fast track" -- now we call it "trade promotion authority" -- may not be not only as important as we thought, but not necessary to place in the hands of the president.

I'll do my best, as we have these discussions, to not drift off into jargon, and that those who are watching us can follow us, because we used to have something called "most favored nation," which made no sense, because in fact what it was was "normal permanent trade relations," and we've been able to conquer that terminology problem.

I do support the idea that instead of calling it fast track we call it trade promotion authority. But, frankly, rather than worry about what it's called, what do you think about whether we need it not, Mr. Ambassador?B. ZOELLICK: Well, thank you, Mr. Chairman. I have great respect for Ambassador Barshefsky, and I know she worked very closely and effectively with this committee.

REP. THOMAS: As do we all.B. ZOELLICK: I think at the forum that she spoke, she was the only one of about five or six former U.S. Trade Representatives that had that view. And I, personally, feel that what it might have overlooked is, is that the work that this committee and the Congress very effectively did were agreements that tended to be one-sided. Bringing China into the PNTR involved a series of concessions by China; we didn't make any trade adjustments. The Caribbean and African bills involved preferential arrangements, which I compliment the liberalization, but we didn't make any adjustments.

And I suspect that as we face the larger agreements on our agenda, particularly the Free Trade Area of the Americas or the WTO process, that this is going to involve some give as well as some take. And I think for a larger agreement it will be very important to be able to have this authority for those processes.

REP. THOMAS: I thank the gentleman. I also happen to believe that if we are going to try to reestablish trade promotion authority, that there has to be a way in which we can deal with the 21st century questions of trade, along with labor and the environment. But, frankly, it's going to require us to be a bit more creative than we've been in the past.

And my question to you would be, do you feel comfortable with the suggestions that have been offered already in terms of trade and the environment? Is there sufficient specificity, or rather than simply pointing with pride or viewing with alarm, do we need to get much more serious with those of us who are focusing on trade in trying to create an agreement with those who are also focusing on labor and the environment? How specific have the proposals been that you've seen in terms of trying to advance all of our interests with the new trade promotion authority?B. ZOELLICK: Well, first, Mr. Chairman, obviously both for you and many members of the committee, the trade and environment and labor issue is going to be a critical one going forward. So let me start with the guidance of President Bush on this. He has said that of course we want to try to improve environment and labor conditions; we just don't want to do so in any way that's protectionist.

As I said in my statement, I want to try to broaden the base of support for trade in a bipartisan fashion, and that will clearly include this issue.

Now, there have been a host of ideas out there. This committee, and the Congress as a whole, took one approach with the Africa, CBI bills, which involved at least the labor issue. I have been trying to consult with people in both the Senate and the House; some are interested in the increased role that the ILO can play, the International Labor Organization. Some have talked about financial arrangements, including with the multi-development banks.

I know that another issue would be the interconnection of environment agreements; for example, the CITES agreement with endangered species, with the WTO system. And I think that's a reasonable question to ask.

I've talked with Mr. Levin about the Cambodia provisions, which are ones that are designed to be incentives, as opposed to disincentives. And, obviously, other countries have explored other methods, like the monetary penalties that's in the Chilean and Canadian agreement.

At this point, I think there are a number of ideas on the table, but I certainly welcome more. Mr. Levin gave a speech yesterday where he put out some specific ideas on that. And as I mentioned to him, I thought while I didn't agree with all the speech, that I thought that it was a very thoughtful presentation on an important set of issues.

And so I believe that in terms of specificity, that from this committee, but also, frankly, from others -- I've talked with environmental groups, I met with John Sweeney -- that I would like to try to see a variety of ideas because I don't believe that "one size fits all." I think we're going to have to approach this differently in different circumstances. And what I would particularly appreciate is, is that as we try to figure out how to build the base of support in this country, we also look at how we do it abroad, because part of the challenge here is going to be bringing other countries to accept these ideas and, frankly, there's a lot of fear and anxiety out there.

So I think as long as we approach this in a spirit where our purpose is open markets, economic growth, helping countries to move to a win-win situation, whether with side agreements or other dimensions, we will be more successful in going where we all want to go, which is to try to increase economic growth, but also do so in a way that improve labor and environmental conditions.

REP. THOMAS: Thank you very much, Mr. Ambassador.

My friend, the ranking member from New York, wish to inquire?

REP. CHARLIE RANGEL (D-NY): Thank you, Mr. Chairman.

Once again, I really look forward to working with you. For so much of my life, trade has just meant Europe. And I feel so excited that I'm living in a time where America's concern goes beyond that; it goes to Mexico, Central, South America, the Caribbean and Africa. And to African-Americans, and to other people, this is such a healthy feeling because it means that we're the only country on the face of the earth that have color and cultural attachments to all countries. And so I hope the State Department and your office will make certain that we have the talent there to provide the best support and the best ambassadors, if you will, that we can get to take into consideration all that we have to offer.

And I do hope, as it relates to the Caribbean and to Africa, that we not just rely on formal treaty agreements, but you're able to put together a task force to see what some of us in Congress that sit on different committees can do with the Ex-Im Bank, that can do in finding capital to these countries, that can do in providing assistance as it relates to quality health care, because no one has done more than former Secretary of Commerce Ron Brown to make it clear that if you want good trading friends, you have to be a friend to assist people in getting the economy and having disposable income.

So you've made one great first impression with colleagues on both sides of the aisle, and I look forward and working with you and your task force to see what support we can give you to make this a greater and more prosperous country.

Thank you.

REP. THOMAS: Thank the gentleman.

The chairman of the Trade Subcommittee, the gentleman from Illinois, wish to inquire?

REP. PHILIP CRANE (R-IL): Yes, thank you, Mr. Chairman.

Mr. Ambassador, you mentioned in your confirmation testimony that you'd consider negotiating bilateral trade agreements as a means of advancing the WTO discussions. And I have supported for some time negotiations with Chile and with Singapore, Australia and New Zealand. And I'm wondering if you've had any discussions, or this administration, with Australia and New Zealand to lay the groundwork for free trade negotiations with those two close allies?B. ZOELLICK: Mr. Chairman, I've had some informal discussions with various Australians, who I've had the pleasure of knowing over the course of the past 15 years. I think there is a growing interest in a trade agreement with Australia.

I will tell you one point that I'm trying to be careful about with this. In 1992 I wrote a document for President Bush, number 41, about an economic plan that included a free trade agreement with Australia, and it got caught up in Australian politics at the time. And so I have said to my friends in both the Labor Party and the National/Liberal Coalition, since they're facing an election, that if we approach this, I want to make sure that it's done in a fashion that has bipartisan support in Australia. And I will be meeting the Australian trade minister in the next coming weeks. I hope that will be the case, because I certainly don't want to get caught up in the midst of their election campaign. But it's a subject I'd like to discuss further, also with this committee, because we will have some sensitive issues if we're going to go down that route.

As for the New Zealanders, I haven't yet had a conversation with that. Based on this exchange, I expect I will.

REP. CRANE: The upcoming April summit among 34 leaders of the Western Hemisphere marks an important opportunity to advance free trade in the region. And given the sizeable amount work that remains to be done to conclude an FTAA and seeming reluctance by some key partners, what will the United States do at the summit to rejuvenate FTAA negotiations?B. ZOELLICK: Well, first, Mr. Chairman, I would like to put this in a context that I think is important. I really do see this as a historic opportunity. Some of you that have a strong sense of the history of this institution probably know that Henry Clay and others had been promoting this notion of free trade throughout the Americas for well over 150 years, and we haven't been able to get it done. Senator Blaine, I think, also was an early proponent of this.

So this really is something that could be an incredible success story for the Congress and the executive going forward. It's, in my view, as I said, not only about economics, but it's about securing democracy. These countries have come a tremendous way since the time I dealt with them at the Treasury Department in '80s. But frankly, they're at a little point of reform fatigue now, and they need this incentive to try to keep moving.

As you probably know, we've committed -- completed nine bracketed texts to move the negotiation forward, and these deal with topics like market access and agriculture and services. And now we've got to begin the hard work of setting the timetable, and that is, I think, one of the purposes of the ministerial and the summit, to try to march forward for this.

The early statements by the countries of the Americas were to try to complete this by January 1, 2005. I'd be delighted if it could enter into force before that. We'll have to see how that works in terms of negotiating with our fellow countries.

And there's one other point on this I think is important, given this committee's broader range of interests. We know that there's some economic difficulties in the world at present, and these always reflect themselves in financial markets. What I've said to my Latin American colleagues is, what greater signal of confidence in the future of Latin America, which will be important for investors, than moving this agreement forward? So I hope that that's one of the effects we can have come out of the Summit of the Americas.

REP. CRANE: And finally, the five-year U.S.-Canada softwood lumber agreement imposes a tariff rate quota on all softwood lumber imported from Canada, is scheduled to expire on March 31 of this year -- of this -- March 31, this month.

Proponents of trade barriers have made allegations of Canadian softwood subsidies, but this has been disputed. Do you agree that the quotas penalize consumers and, in this instance, potential homebuyers in the United States, by increasing the price of lumber?B. ZOELLICK: Well, Mr. Chairman, as someone who actually spent a fair amount of his professional life in the affordable housing industry, I have a pretty good sense of that field. I have to honestly tell you, I think with lumber prices now, that's not their problem. I think that this is a field where I've certainly heard loud and clear from many members of the Congress about their larger concerns. I think there has been a past practice of subsidies in Canada, and it's one of the issues we'll need to deal with. Since the red light is on, I suspect I'll get this question to follow up on.

REP. CRANE: Thank you, Mr. Ambassador.

REP. THOMAS: Thank both of you for your cooperation. The ranking member of the Trade Subcommittee, the gentleman from Michigan, wish to inquire?

REP. LEVIN: Thank you. So I won't talk to you about softwood. I think your answer to Mr. Crane was interesting and revealing, because I think there's a real problem there.

Let me just say a word. In your testimony, you talk about reasserting America's leadership in trade, and I know every administration, new administration, has a tendency to kind of upgrade its devotion and somewhat diminish that of its predecessor. I just want to say, I do think, under the previous administration, surely in the last 18 months, there was very substantial progress and I think, in part, because it was willing to tackle some of the tough issues that have been often intractable. And you say in here, referring to what other countries are doing, that we may be losing ground, and I just would urge that we not overstate that. But in that regard, you talk about the small number of FTAs that the U.S. has entered into, so let me, if I might, be a bit specific.

We negotiated an agreement with Jordan. We completed it. Will it be submitted here before King Abdullah arrives, so we can act on it?B. ZOELLICK: Well, let me answer your first point. I certainly think the Clinton administration had a number of significant accomplishments, and I have supported them, frankly, in terms of the NAFTA and the Uruguay Round effort. I do think there was a problem after that, and I think it's important we face up to the fact that after 1994, the agenda slowed considerably. And I don't dismiss any of the work by the people in the offices, but I think that relied heavily on the fact that the president no longer had the negotiating authority that I think we need.

I certainly take your point that the work over the last 18 months was important work and, as I mentioned, that work was of a special type, in terms of preferential legislation and legislation to bring China into the WTO, that is different than some of the traditional trade negotiations. So I do continue to believe that if we are going to move forward and not fall behind -- and I just have to say, respectfully, Mr. Levin, when I talk to people in the business community and what I've seen economically, we do run that risk -- that we are going to have to address that issue.

Now, to Jordan. I obviously believe that this is a very important agreement, and I think it has a number of creative dimensions. Obviously, when the king comes, he is going to be pressing it forward. Just so you know, I have had communication, just through one other person, with Prime Minister Sharon to ensure his support of the agreement, and I have been told that he supports the agreement.

And I think its significance is, in part, not only due to the volatility in the Middle East, but the fact that you have a king that is trying to bring his country in the right economic direction, and we need to try to encourage that as a signal to others in terms of the reform process.

In terms of the timing, when I have spoken with you, I obviously know the priority you place on this one. When I have spoken to others, including, frankly, on the Democratic side, I hear a priority of Vietnam. I mentioned in my statement the importance of some of the other issues; for example, the Andean trade preferences, with President Pastrana coming and the fact that that expires. There's others related to the Balkans, given the sense, as I understand it, the prior administration proposed that legislation in 1999 and it was unable to move.

So one of the issues that I, frankly, am going to want to consult with this committee and others on is how we do all of these agreements, recognizing -- and you would know this better than I do -- that trade agreements aren't so easy for the Congress to take up one by one by one. And so one issue is, frankly, how do we handle the agenda that I've tried to lay out in my testimony here, and clearly, Jordan needs to be an important part of that.

REP. LEVIN: Let me just quickly say, I think the only controversy about Jordan is among a few -- I think, a few -- who have objected to the labor provisions and the environmental provisions that Jordan voluntarily entered into, and I would hope it would be sent up and it would not be used as vote-bait for other issues. I don't think that will work. It's a sound agreement in and of itself.

Secondly, quickly, on steel, a number of us have been doing some work on it, and I'm going to be sending a letter to the administration with a lot of the details about the surges, the imports, product-by- product, and urging a 201 action. Can you quickly tell us where you are on this?B. ZOELLICK: Yeah. Just on your first point, with respect, to say that it only has a labor and environment issue that some people disagree with is -- that's a big issue up here. (Chuckles.) And I've certainly got that sense from talking to people on both sides of the aisle, the recognition. So as you know, I'd like to work with you on that issue, and we can talk more about the specifics of the agreement. I think that it's a very creatively drafted agreement. I have some concerns about the sanction provisions, but I don't think I can just say, well, that -- to be honest with you -- we can just sort of move that one past. I think we're going to have to discuss this in the context of others, as a frank answer to you. But I assure you, Mr. Levin, I'd like to move all of these as quickly as we can. We just have to try to see how we can resolve those.

REP. LEVIN: We don't have to -- if we try to package everything, we'll do nothing. But in my --B. ZOELLICK: But that we can --

REP. LEVIN: Okay. Quickly, about steel, then. B. ZOELLICK: Yes. On steel, as you and I have discussed, I and my colleagues in the administration are looking very seriously at the 201 option because, frankly, there is a clear recognition about the problems that the industry faces, how it's never really fully recovered from the 1998, '97 period, and an important part of that, as you know, is the commitment by the industry and the unions to a restructuring so that at the end of that period we haven't just had protection, but we've had a more competitive industry.

And Secretary Evans, Secretary O'Neill and I have been in discussions with the industry and the labor unions about that.

I've certainly asked both to give us their suggestions on how that might work. We also, I think, need to look at this in the larger international context because, clearly, that is -- the industry is dealing with capacity issues, dealing globally. But we're seized and focused on the issue, and as we've discussed, I, frankly, think the 201 approach, if we can work out these pieces, could be more productive than others.

Thank you.

REP. THOMAS: Thank the gentleman.

The gentleman from Michigan wish to inquire?

REP. DAVE CAMP (R-MI): Yes, thank you, Mr. Chairman.

And welcome, Mr. Ambassador. My question goes to agriculture, particularly the area of dry beans. The Mexican government, for a number of years, has been putting requirements into the permitting process for us to export our dry beans to Mexico, which our producers would like to do. And recently, as late as February 27th, the Mexican government published details of their auction, to be held in March, and in that, said that only a quarter of the permits would be made available. And this is yet another effort where they've made these requirements. And auctioning only a quarter of the permits would put our growers at a distinct disadvantage.

Is there any comment you can make on that particular problem?B. ZOELLICK: Yes, Mr. Camp. I was aware of the issue and raised it with my Mexican counterpart, Secretary Gavez, in one of our first phone conversations. I then met him, either this week or last -- time is passing quickly -- and raised the fact that the regulations that you referred to were a disappointment not only for that reason, but some of the timing requirements -- I think they only allow 35 days -- and to be able to load this on railroad in Michigan and other places would be unduly prohibitive. And the only access to the licenses are for people that have had licenses before.

And so I told him how important I thought it was that we move on this. He needs to work with his Agricultural Ministry; he pledged to do so. And we have some other issues that are related to this that I hope will allow us to get a rapid resolution.

REP. CAMP: Thank you. And also, with the pending expiration of the U.S.-Canadian softwood lumber agreement, are you working with the secretary of Commerce to come up with a plan to prevent any injury to the industry between the end of the agreement and the possible imposition of preliminary countervailing duties and anti-dumping duties?B. ZOELLICK: Well, I'm glad you raised this because it's particularly important in an open forum we all have a sense of how we're trying to approach this issue.

I've tried to speak with a wide range of people in the industry about how they thought it was best to approach this. And at first, there was some thought about a continuation of the agreement. But I got a strong message from the industry that that was not their preference; that they preferred to have us basically get out of the way so they could file the anti-dumping and countervailing duty suits. And I told them that I would be supportive of that process.

As I mentioned -- or alluded to in my conversation with Chairman Crane, I also pointed out that when I last dealt with this issue at the Treasury Department, we actually were able to get an export tax in Canada because there were findings of subsidies. If the subsidies are found and the dumping duties are found, I still believe that may be a productive solution, but one has to reach that step.

And the last point, Mr. Camp, on this is that I made clear to Minister Pettigrew, who is certainly aware of this issue, that the concerns here are volatile to explosive, and I urged him to consider any other steps that they might take as the agreement ended so that we don't make the problem worse.

So I know the importance of the issue, and it's my understanding that this is the preferred approach of the softwood lumber industry.

REP. CAMP: And lastly I have one other topic. Being from Michigan, obviously U.S. automotive exports face considerable obstacles in other markets in contrast to our fairly open U.S. market. And obviously our access to these markets is just a simple matter of fairness as well as jobs here. Do you have any comment on that particular area as well?B. ZOELLICK: Well, let me start with this.

I think the U.S. auto industry under competition made tremendous advances in the 1980s. And I think that they're -- along with those advances, the fact that the U.S. auto industry now is a competitive export force around the world, which frankly at an earlier point I'm not sure that they were focusing on those markets. So I think it is particularly important that we try to follow through with them to try to help them open those markets.

The whole industry is changing globally, as you know. A large number of the Japanese auto companies are now either owned by or have significant investment portions of other countries. And that actually creates some possibilities because the key in a lot of these markets is to try to deregulate and add some transparency. This is true in Korea, as much or more as it is in Japan, to try to open opportunities for our auto industry as well as the auto parts industry.

And so I think those are important issues on the agenda. I am meeting the Korean president this week, and it's one of the ones that I plan to mention.

REP. CAMP: Thank you very much.

Thank you, Mr. Chairman.

REP. THOMAS: Does the gentleman from Oklahoma wish to inquire?

REP. WES WATKINS (R-OK): Thank you. Mr. Chairman, members of the committee and Mr. Ambassador, it's good to see you. I want to say thanks for returning my call -- I think it was on Saturday. I appreciate your --B. ZOELLICK: Pleased to do so.

REP. WATKINS: -- getting back to me on that.

I'd just like to say on your last statement, your statement there, it's very important and I want to talk about it: agriculture. My friend from Missouri, Kenny Hulshof, and I worked and pushed the last several years to try and get a(n) agriculture ambassador status to give us more, hopefully, prestige at the table for agriculture. Because I'm alarmed, very alarmed when I see what is eroding in our trade overall, and I want to bring that up a little bit. But your last comment was we'd be appealing, and people would come to us if we're accessible and resolute. Well, I want us to be resolute for the United States of America. And I want to point this out.

I think literally -- and I want my colleagues, my colleagues, I don't think we have had the right shake in agriculture, because a lot of people in agriculture have not -- they do not have an emotional commitment about agriculture. And I think our USTR back in '93 at the GATT talks, the Uruguay Rounds, sold us down the drain, to be very truly. And I want to put this out because our trade decisions affects (sic) this -- even my budget process right here. Our trade decisions affect the markets around the world, and our supply and demand factor depends on those markets. You made a statement earlier where the EU has signed 27 bilateral trade agreements, and we've only signed two. And many of those bilateral trade agreements give them a better positioning in agriculture.

Now, why they're able to do that is because of that 1993 Uruguay GATT talks where basically all the other things were agreed to by the USTR, by the United States, all of them, except agriculture.

And when we got down to agriculture, they finally said -- after negotiating and discussing, they finally said, "Well, let's have a peace clause."

Now here's what happened, fellow committee members, with that peace clause. It grandfathered in over $7 billion worth of agriculture subsidies for the European Union -- (inaudible) -- and only grandfathered in about $200 million for the United States, which we basically have not used -- (inaudible).

Now what has happened has caused us to lose a lot of markets. We cannot sell. It's because of supply and demand; we find that it drives our U.S. agricultural products down, and then we end up having to pay more, with our loan programs, out of our agriculture budgets here. And we get criticized a great deal here in the United States.

And I know my colleague from Maryland said something about the steel industry earlier today. But less than four decades ago we had 16 percent of our population in the production of agriculture. Today we only have 1.5 percent of our population in the production of agriculture. And we have to go back and say we can produce, we can produce, but we're not willing to sell.

The European Union says, "We'll pay whatever the price." And I'd like to know your plan. The facts -- I am concerned about the fact, Mr. Ambassador, we have not had people sitting at that table in your position that had a genuine concern about agriculture. And I know some people say, "Well, the -- you know, the FSC and other things are going to be affected if we push this or that." But what that tells me -- we're willing to sell our agriculture people down the drain. And I'd like to get your comment. And I got one follow-up I want to have.B. ZOELLICK: Okay. Well, I'll try to be brief, Mr. Watkins.

Well, this one starts with the president. And the president, whenever he talks about trade, talks about agriculture. And when he interviewed me for the job, it was the first topic he raised. So the commitment of the president on agriculture in trade is the start of the pyramid.

I agree with you about the importance of the agricultural ambassador. I think it's a very important appointment. I'm in the process of looking at a number of people. I think it's important that person have excellent ties with the agriculture community in the United States, but also be able to negotiate firmly abroad.

I won't -- I may give you partial satisfaction on this. I'm from Illinois, and I have farm -- family who still farm in Minnesota, so I have some sense of the farming business, a little bit.

And I also early in my tenure met with a large number of farm groups, because of the importance that I place on this issue. And I think that Secretary Veneman and I, who I have the greatest respect for in this, will be able to work well together.

As you know, even with the present limitations, these markets abroad are critical to U.S. farmers, because it's about one out of three acres that the farmer plants in America is exported, and about 20 to 30 percent of farm income, still with exports. So even with the limitations, it's critical to their role.

A lot of this comes down to the EU, as you mentioned. And we know this isn't going to be easy, given the subsidies that they've built into the system.

What's happening in the EU right now, however, is interesting and gives us some prospects --

REP. WATKINS: If you will you yield just a second --B. ZOELLICK: Yeah. You bet, sir.

REP. WATKINS: -- I'd like for my colleagues to know that out of the EU's budget, they spend over 50 percent -- nearly 60 percent of their budget to subsidize agriculture.

AMB. ZOELLICK: And that's exactly the point I was going to come to, is, is that given the problems that they are now having with the mad cow disease and the foot/mouth and other issues, plus the fact of European Union enlargement, they're going to even get more pressure on this issue. Now, there will certainly be many in the European Union that will resist change, but there is supposed to be a review in the year 2002 of the EU's policies. And frankly, one of the reasons I'd like to get trade promotion authority is I'd like to go to the EU and say, "We are now backed by our Congress to go ahead and negotiate; where is your reform in the CAP program in 2002 so we can move ahead the global round? Because I think the stars may be aligned to move this further in the EU.

REP. WATKINS: I'd just like to close with --

REP. THOMAS: The gentleman's time has expired.

REP. WATKINS: Can I refer to --

REP. THOMAS: The gentleman's time has expired. We have very limited time, and other members wish to ask questions as well. I apologize to the gentleman. Any member wishing to submit a written question to the ambassador will get a very full answer.

REP. WATKINS: Thank you, Mr. Chairman.

REP. THOMAS: Does the gentleman from Texas wish to inquire?

REP. LLOYD DOGGETT (D-TX): Thank you, Mr. Chairman.bassador, is it your personal opinion that prompt congressional approval of the Jordan agreement as written would be in the national interest?B. ZOELLICK: As written? I'm not sure, Mr. Doggett. I believe that there are some serious issues related to the final use of trade sanctions. I believe that in the Jordan agreement as a whole, there are some important principles there that we need to try to work on. And I've talked about these with Mr. Levin. I think the idea of having countries enforce their own laws is an important step. I think the step that is related to the fact that when we consider enforcement, we don't just look at one incident, but we look at the question of whether there's's a pattern is another important issue. I think the relationship to trade is an important issue. So there are a number of elements of that agreement that I think are very interesting for us to work on.

I think -- and it comes to the level of sanctions -- this is something that could still be very difficult for us. And so in terms of the larger context, I would like to move forward that agreement. I'd like to have further discussions about enforcement.

And just one other word on this, if I could. Having talked with both labor and environmentalists about this general topic, the sense that I've gotten is they are most interested in some sense of equal treatment of trade and labor and the environment. And maybe that's something that we can work on even within this framework. But I would like us to try to resolve those issues expeditiously so we can get this agreement done.

REP. DOGGETT: I know you're familiar with the executive order that President Clinton signed in 1999 requiring environmental reviews of trade agreements and of the guidelines to implement those environmental reviews that your predecessor, Ambassador Barshefsky, approved last fall. How do you plan to implement environmental reviews of our trade agreements so that we can have objective information about the consequences not only within this country but around the world. And perhaps the softwood lumber agreement that's already been mentioned would be a good example of your explaining to us your level of commitment to see that those environmental reviews are complete and meaningful.B. ZOELLICK: Let me just take the last one first. Since I don't think we're on track to have an agreement, I don't think we're likely to have an environmental review. I know that a number of the environmental NGOs actually share some of our same concerns about timber practices in Canada. So it's a good example of how we can work together even if not formally.

On your larger question, I believe these environmental reviews can play a very important role. And one of the things I, frankly, want to try to get a better sense of is how we do them formally and informally, and timing.

And let me give you an example.

In talking with some environmental groups over the past couple weeks some have suggested to me that as we start to frame our negotiating objectives there may be things that we could do in the market access area. I mean, for example, export subsidies in the European Union certainly raise questions among environmentalists. There's some in the marine fisheries area where we can have a win-win solution as we go forward. Then there's the question about how the trade and economic flows need to be complemented by other environmental issues or protections or other aspects.

And so I frankly am very open about how we try to approach this. And I know that back in the NAFTA and other processes that this was an important precedent that was set, but it also builds broader support. And that to me is part of the name of the game here.

REP. DOGGETT: Thank you. Another environmental concern has been the use of investment agreements that are certainly important to protect the -- our investment abroad and the investment of others, to challenge, particularly under NAFTA, existing environmental provisions. I know you're familiar with the suit of a Canadian company claiming over a billion dollars in damages because California expressed concern about (MPDEs ?) and the threat that they pose to the drinking water supply. How, given the likelihood that investment provisions would be part of a Singapore or Chile agreement, how can we ensure that we protect the rights of investors without seeing these agreements misused to undermine our environmental laws?B. ZOELLICK: Mr. Doggett, I'm looking at that question right now. I'm trying to get more detail about these cases to get a sense of whether they are real or whether they're cases that are just trying to use our -- a process. I -- as you mentioned, we obviously don't want to make changes on our side that end up hurting our American investors abroad. But there may be some aspects that, to ensure that our regulatory and safety and environmental provisions don't become a basis of trade action that we have to consider some adjustment, all I can tell you beyond that is, is that I've had this discussion with both my Canadian and Mexican counterpart related to Chapter 11, which is the NAFTA one. And the prior Mexican administration was unwilling to consider any adjustment in this one. This one is willing to look at the issue to try to deal with it. So I'd be pleased to work with you as we develop our thinking about how to get this fine balance.

REP. DOGGETT: Thank you very much.

Thank you, Mr. Chairman.

REP. THOMAS: I thank the gentleman.

Does the gentleman from Ohio wish to inquire?

REP. ROB PORTMAN (R-OH): Thank you, Mr. Chairman. And first welcome, Mr. Ambassador. We appreciate your hands-on approach, your keen recognition of the needed partnership between the legislative and executive branch. And from what I've heard this morning, your contacts around the world, I think it would be very helpful. I also appreciate your taking a fresh look at the steel issue through the 201 lens. I know the administration's committed to doing that, and I think that's more productive than where we've been on that issue.

With regard to trade promotion authority, it expired in 1994, as you well know. And during those seven years I believe there has been a lot of pent-up interest in free trade agreements and expanding markets for American products. And I'm going to be very interested in supporting -- providing trade promotion authority for all the reasons you talked about this morning. I do think that, as you said earlier, we need to broaden the support for trade, and I do not think we can do that unless the WTO, the World Trade Organization, works.

And the heart of the WTO, of course, is the dispute settlement procedure. And as I look at the cases that have come up where the United States wins, we don't always get compliance. Where we lose, we always comply. And I'd bring your attention, one, that you've noted in some other hearings -- it's in some of your testimony -- which is the beef and banana case. There we win. Constantly, time and time again the Europeans simply thumb their noses at the United States, and therefore at the WTO. And I would just say that if we are going to have this broadening consensus and support for trade here on the Hill, we've got to have a system that works.

When those of us who promoted the WTO did so, we did so because we were convinced that we could have some resolution to our cases. And, frankly, the ag community was very critical to getting WTO approved and moving it forward. These two cases are about a lot more than those two products; they're about the credibility of the WTO.

And in your testimony you said that you were interested in working with the EU -- and I think I'm quoting you here accurately -- "to improve and strengthen the WTO process." I wonder what you mean specifically by that, and what actions you plan to take to ensure that we have a WTO that we can rely on and, therefore, promote more free trade up here on the Hill?B. ZOELLICK: Well, Mr. Portman, I am in full agreement with you, as you know, on this. And I have always tried to emphasize to Europeans, even before I was in this job, the fact -- the key point that you made, that these are more than these individual issues; they're a sense of confidence in the WTO system.

And this was best made at a meeting I was at in London by your colleague, Cal Dooley, from California, who said he didn't have a particular interest in the products at issue, but for him to stand up in the well of the House and say he supported a dispute resolution system where we win and we win, and we win in the appeal and there's not an effective resolution undermines support. So I agree with that foursquare.

On the particulars of the bananas issue -- since that one is front and center at present -- I've had a chance to talk with the two primary companies involved. As you know, they have a slightly different approach to this issue. I have also tried to assure that the approach the United States is taking has basic support throughout the Caribbean -- I know that Mr. Rangel is very interested in that -- as well as Latin American countries, and I think all but one basically support the approach we're taking.

We have a near-term issue here that I will be discussing with my European colleague, which is, is that I would like to at least have some time to be able to try to negotiate with him to see whether we can resolve that issue, working closely with the companies involved. The European Union is about ready, in March, to take a position in a lower-level committee that would preclude the follow-through of negotiations that occurred in the past because it'd be creating a new system. And I've said quite clearly that if they do that, you know, I see no recourse other than to start to use the carousel provisions. Now, if we do that, the European position is that they will follow up with the foreign sales corporations. And so it's, again, important that everybody be aware that -- what we're heading off into here.

But I feel as strongly about this as you do, and I think that if we -- at a minimum, we need some time to try to see if we can close that gap. And so I've urged our European colleagues to give us that time period to try to do that.

REP. PORTMAN: Thank you, Mr. Ambassador.

I thank the chairman.

REP. THOMAS: Thank the gentleman.

The gentleman from Wisconsin wish to inquire?

REP. GERALD KLECZKA (D-WI): Thank you for being here today, Ambassador Zoellick. And I'm excited about your testimony, especially with regard to agriculture.

I represent Southern Wisconsin, and we like to call ourselves "America's Dairyland." I know some Californians who may disagree with that. But in our part of Wisconsin, we produce basically Class 3 and Class 4 milk, which is butter, cheese and dry, powdered milk.

I wanted to bring an issue to your attention. The milk protein concentrate issue is something that has come about since the Uruguay Round. It is becoming a growing problem in the dairy industry with respect to its content in cheeses. And a lot of folks in the dairy industry are encouraging you to exercise Section 201, 301. There's a lot of, you know, angst out in dairy land. And just to kind of give it to you in a paraphrasing way, when you bring more milk protein concentrates abroad into the content of cheeses, you're displacing that -- the dairy products we produce right here in America.

So there's a lot of concern out there.

(Audio break.)

REP. KLECZKA: (Audio break) -- you said, second, as President Bush has stated, trade is about freedom. Quote, "Economic freedom creates -- (audio break) -- of liberty and having liberty creates expectations of democracy." What's wrong with Cuba?B. ZOELLICK: Well, Cuba isn't a democracy, that's for certain.

REP. KLECZKA: China -- (audio break).B. ZOELLICK: Well, you're talking about the terms of the trading relationship?

REP. KLECZKA: Yeah. China, Vietnam.B. ZOELLICK: Right. Well, I think that Cuba -- (audio break) -- and I honestly see them as quite different, for the following reasons. We have seen no evidence of Castro being willing to implement any change, and that hope always springs eternal, but instead, what we see is him shooting down unarmed planes, we see him getting defectors and trying to rope them back into his country.

And so, just again to be slightly more factual about this, I first visited China in 1980, and I last visited China a year or two ago. There has been enormous changes in China. Depending on how you count, about 30 to 50 percent of the economy is in the private sector in China. Right now, the problem in Cuba is that any economic opening just ends up supporting his dictatorship. Now, if one can try to figure out a way to change that, as it has been changed in others, well then it could provide the basis of opening.

But right now that's not the Castro we've seen. And I have to say, based on a 51-year record, I don't see him changing his spots.

REP. KLECZKA (?): There are many of us who believe that Castro's demise will be hastened by opening up trade between the two countries and really ending many of the problems that have existed over the past four decades. But my sense here is that this is an example where we sometimes miss the point here --

I mean, we're really talking about Florida and the electoral count. And we have to get past that in this debate as it relates to Castro. My sense is that Mr. Crane has been more than fair here as chairman of the subcommittee on Trade, and there are many Republican members here, incidentally, who have been very open-minded about this. They've been terrific. I sense that in the House that we could come very close to a resolution or another mechanism of reversing this policy. There's growing support here for opening up trade with Cuba. And we cannot continue to say that the world's largest nation, which time and again is on the front pages of major newspapers across the country about all the things that they do, and then take this great leap of faith that we did here by ending annual MFN votes and proceeding with a free trade agreement with China, and then in the next breath say that this small nation 90 miles off the American shore, which is not terribly important to America's interest every day any longer -- and there's a real chance down there, I think now, for you folks at the White House in this instance to reverse this policy. And our side --

Let me tell you, Mr. Ambassador, we were as guilty of many of these things as I suspect you are, even in the argument that you gave me. There's room here for honest disagreement. But at the same time I hope that you use the private moments with the president to urge him to take a new look at this. There are Republican members here, as I said earlier, they're willing to take a new look at it. On the Democratic side, I think that we're willing to take a good look at it. And I hope that you might offer a new perspective when you're back to see us in the near future.B. ZOELLICK: Well, I take your point. I understand what you're saying.

REP. KLECZKA (?): Thank you, Mr. Ambassador.

REP. NANCY L. JOHNSON (R-CT): Welcome, Mr. Ambassador. And since the next person to question is Mr. Shaw and after him was myself, I'm going to just go ahead with my question while he returns from voting.

First of all, let me say how very important it is that I think you deal directly with the issue of trade promotion authority. There's no question but that we were compromised in the last few years in the international arena by not having proper negotiating authority resting solidly in our U.S. Trade Representative. And I look forward to working with you on that.

But I also want to mention that Egypt is one of America's most important allies in the Middle East. And a U.S.-Egyptian free trade agreement when combined with free trade agreements with Israel and Jordan and the Palestinians would form the basis of a Middle East free trade region with our central peace partners. I would like to work with you, as my colleague Howard Berman and I worked with the preceding USTR, on promoting this kind of agreement because we -- I think it not only would be important to ensuring the integration, the economic integration of our friends in the region, but also our competitiveness in the face of an increasing number of association agreements between the EU and not only countries in that region, but also in North Africa. And I think those association agreements are very compromising of the competitiveness of American businessmen and American products in those countries and bode ill for the future. Any comments on that position?B. ZOELLICK: Well, I certainly share your objective, and I certainly share the importance that you place on Egypt, which I think is about 90 percent of the population of the Arab world. And I believe President Mubarak may be coming to visit before long, so it's a subject I suspect that he will also raise.

I've discussed with my staff what are the practical steps we could start to take on this. As you may know, we have a trade and investment facilitation agreement. And I think we have to build in an important discipline in this process -- and I know you would agree -- is that people sometimes like the idea of free trade until they actually have to do the work to make it happen. Right now the Egyptians have been not as cooperative as I wish they would be in the WTO negotiations. So maybe there's one way that we can have some common ground there as well, in terms of their intellectual property and their tariff issues. We've got a ways to go there. But my own view on this would be to try to set a path and some building blocks to see whether we can make some progress and work towards the long-range goal, because we don't do either them or ourselves any good by just saying, "Oh, well, we're going to have this agreement," but without recognizing that there has to be some serious, serious reforms in Egypt to accomplish this.

As you know, we -- our aid program is about $2 billion a year to Egypt. So it certainly makes sense that we try to facilitate trade. But unfortunately, I've sometimes seen in the past that that aid has precluded the reforms that they need to make.

REP. N. JOHNSON: I certainly appreciate the importance of the comments you just made. It is also true that it's very difficult for countries to make some of the progress they need to make in some of these areas, both reforming their own laws, intellectual property issues and so on and so forth, without in a sense some clear opportunity for the country at the end of that road. So I think that is the tension that we're confronted with in Egypt. We have used American aid dollars exceptionally well to promote some analysis of Egyptian law and American law and so on and so forth and made progress in the discussions in these areas, but I think it is important to begin looking at what is the broader goal and how do we enable other countries -- as well as ourselves, sometimes -- to make the tough steps that are necessary.

And now I'd like to both yield the chair and the right to question to my colleague, Mr. Shaw from Florida.

REP. E. SHAW (R-FL): Thank you.

And I join my colleagues and welcome you before the hearing. My district is in south Florida. I've been told that much of the questioning has become somewhat parochial, but that's the way we do business around here on many things. But I wanted to ask you about two issues that I think are important to the entire country. One is that, as you probably are aware, there will be a permanent home for the Secretariat of Americas, and south Florida is in there as a strong contender. I think that from a language standpoint, an ethnic standpoint, as well as, certainly, an economic standpoint, that we should prevail in that. And I would hope that we would have your support in making Miami Dade County the permanent seat of the secretariat.

But I also want to talk to you just a moment about Haiti and what is going on there. We have, I think, probably a tremendously failed policy in Haiti, and the country is suffering terribly because of the failed policy that we have had, partly because of it and partly because it hasn't gone in the right direction. I think one thing that we have learned in Haiti is that you can't have a democracy without an economy. People have to have something to hold onto. And it's hard to tell somebody how important democracy is when their children are suffering and hungry, going to bed hungry. People are living in cardboard shacks down there, with open ditches for sanitation waste. It's just -- it's a nightmare.

I don't know whether the administration has had time to really try to formulate some type of a Marshall Plan or some way to return economy to that island nation. But I think it really speaks very poorly of our country that we have one of the poorest countries in the world right there at our doorstep.

What do you see as what you might be able to do, as the trade representative of the United States, in order to bring that economy up to something that would certainly be much better than what it is today?B. ZOELLICK: If I could, Mr. Shaw, let me just address your first point for a moment, and that is I think it would be an excellent idea to have Miami be the location of that for the Free Trade Area of the Americas. And I have to say I think that the commitment by people in Florida in general, and Miami, to try to support the overall concept is a testament to why it would be a good location.

And just as a small area of trying to both support that, but also demonstrate it, we agreed to have the next round of our talks with Chile later this month in Miami. And in the process, I must say one of the reasons that helped us do it is, is that some of the civic institutions in Miami were particularly cooperative in helping us be able to put that forward. So they have a record of demonstrating some support for the trade issue in a practical sense as well as in a sense of a policy commitment. So I think that would be a wonderful result.

On Haiti, like you, it's a tragic and sad story in that, you know, we occupied this country for about 17, 18 years earlier in this century. We occupied it again; we put billions of dollars, as I understand, into it, and yet it is sinking back.

I think, as Mr. Rangel would probably point out more generally in the Caribbean, the best way that we can help in the trade area is to try to provide the openings so that if some businesses start to develop, and small businesses develop, they're going to do so in sectors that are sometimes somewhat sensitive here. And one of the things that this committee managed to reach some agreement, and in doing so talked to some of the industries that were most concerned about that, is to how we could create special trade preferences. And I think that's the best way we can approach is that, as you know, you can't do this for another country, they have to be willing to build the small business sector, the rule of law, deal with the violence issues. But if they do, then we really do have to be ready to buy their goods so that those people have jobs and so they have some sense of improving their livelihood.

REP. SHAW: Also, of course, following on to what you're saying, it will also promote a great deal of investment, which is tremendously important.

Mr. Hulshof?

REP. KENNY HULSHOF (R-MO): I appreciate that, Mr. Chairman.

Welcome, Mr. Ambassador.

And, Mr. Chairman, mindful of your suggestion to us that we may be speaking to a broader audience, I want to seize on something that you said in your written testimony, and that is helping make the case to the American people.

I appreciate the fact that you've acknowledged that in addition to your primary role of sitting at the table and negotiating with other nations, that the case has to continue to be made to our own domestic citizens. Out on the hustings, Mr. Ambassador, NAFTA, to some, is a four-letter word. The battle in Seattle was a cause celebre for those who -- opponents of globalization.

Even now, protectionists look at this unprecedented trade deficit and they say, "There is a disaster waiting to happen."

And to the displaced worker, for instance, who sees simply the disparity in labor costs in this country and, say, with other nations, and they see a plant closing in our country, relocating to that other nation, often to that displaced worker it's simply a matter of, you know, cheaper labor when, in fact, as we know from this committee, it could be the international tax laws that we have that put our businesses at a competitive disadvantage; it could be, for instance, as we have been interrupted by these votes with this upcoming rule on ergonomics that is going to impose additional cost to American business, that Congress, I think, bears some responsibility that we often create an unfriendly business climate. And that's part of the discussion, although that's probably not -- that's probably a little bit more than you wish to take on as far as, you know, helping make the case.

But I do want to talk about a specific, and Mr. Watkins very passionately talked about agriculture, as Mr. Ryan did. I want to focus just a little bit on biotechnology; the European reluctance to accept the importation of GMOs and, again, that's terminology, Genetically Modified Organisms, although I prefer to call it "genetically enhanced foodstuffs."

GMOs have been a source of tension, as you know, in United States-European Union relations. It's been our position that GMOs are safe for human consumption, that we are in compliance with not only sanitary but phytosanitary measures. The EU contends that GMOs have not been proven safe for human consumption. What I would say to them, anecdotally, is that after visiting my parents this past summer on our Missouri family farm, that part of our fare was BT corn on the cob. And I'm none the worse for wear, but I know that's probably not something that we can go to the European Union with.

I do want to, seriously, get to this point. The University of Missouri, which is in my hometown of Columbia, is becoming really a national leader in biotech research, and whether you're talking with those who make their living in agriculture -- you mentioned your own experience of having family connections to agriculture -- or whether you're talking to the dedicated researchers like the University of Missouri, I think the sentiment is shared that biotech does offer some really innovative ways for farmers to be more productive and to continue to meet the world's ever-expanding need for food.

So my concern is with the EU's hostility to biotech. They're our third-largest export market for agriculture goods, but the restrictions on GMOs are really hurting our ability to sell commodities abroad. My question, generally, to you then is, if you want to comment on anything that I've mentioned to date, but what assurances can you give to those researchers, to those producers in our own country, that this administration will continue to pursue this issue to ensure that our farmers and ranchers are not put at a competitive disadvantage?

You know, I do -- let me just say, I do recognize the political sensitivity of this issue in the European Union. How are you planning to work with the EU member states on this issue?B. ZOELLICK: Let me just answer your first comment briefly and then go to the core of it, because I think your first comment does bear a moment, and that is, it is going to be vital that all of this -- and this is going to be something I'm going to try to do with the limited resources of USTR -- try to communicate more broadly. And as you could tell even today, I'm trying to say this is not simply a matter of economics and business, as important as that is; it also relates to freedom and security.

And I think, in the whole globalization debate, we're going to have to be sensitive to the values and anxieties that are developed, and there's different ways we can do that. One that I've mentioned in some contexts was, given the high sensitivity to HIV-AIDS, I was trying to be very quick in making sure people recognized we were not changing the policy and wanted to work with people to try to address that problem, because it's going to be core to building support.

But on your core issue here, I am in 100 percent agreement with you. This gives me extraordinary frustration -- and, like you, I call them "GEMs" as opposed to GMOs -- because this is, to me, a classic situation of where science is developing something with enormous potential, and people are acting as if they're in the Dark Ages or in the Luddite era, in terms of refusing to understand the safety that is associated with science and bioengineering.

They're willing to consider how a map of DNA can help their health, but they're unwilling to use the same processes in what they eat.

The -- you know, and this is -- it's even -- in my view, to try to address it, we need to try to draw the support of others -- the developing countries, for example. Many of the developing countries, including China, are much more supportive of this, because they see the importance of how this might help with Vitamin A and rice, and deal with blindness and disease, might help with health, might help with dealing with hunger in parts of the world. And so in part, as in many areas, we're going to have to build a coalition to get better support.

Second, we're going to have to deal with the fears, which -- as you announced, in terms of food safety. In the case of Europe, much of this is not based on us; it's based on the fact they don't trust their own health systems, because of the problems with blood and the various meat issues and others. And if you're going to deal with the real problem, you have to deal with that real issue. And this, in part, I think, will require the Europeans to clean up their own act in terms of safety.

I think it is vital that in our work on this, that we keep emphasizing the importance of having decisions based on sound science. When I talked with some agricultural groups, they emphasized to me the importance of the Codex process and how we needed to work with the Agricultural Department -- and Ann Veneman and I already doing that -- to try to emphasize that process. And then we're also going to have to do a better job of educating people to understand this.

And the last point I'd mention is the fight is often in the trenches. Tolerance is -- in the end of the day, the way this is going, it might end up being that there will be different lines drawn, and then it'll be a critical question of what degree of tolerance do you allow. When I was actually in Kansas in the course of the last year, people were pointing out tome the danger of pollen that might spread from one crop to another, or the trucks that these products are hauled in.

So I'm 100 percent agreeing with you on the issue.

The last point I'll say is, as my overall theme, this is going to be on the key issues we're going to have to try to get done in another WTO round. I can't do that unless you give me trade promotion authority.

REP. THOMAS: I thank the gentleman. It is an important area, and it clearly needs additional discussion and approaches. But the gentleman's time has expired.

The gentleman from North Dakota.

REP. EARL POMEROY (D-ND): I thank the chairman.

Mr. Ambassador, I congratulate you to your new position and think you're background's really exciting in terms of the broad experience you bring to bear on our collective behalf.

As the administration looks for fast track authority, I think it'll be very important for us, particularly those in the other party, to have a sense of how this administration views trade deals. I tend to be, representing an agriculture production area, strongly in favor of market expansion. On the other hand, we've seen good trade deals, and we've seen bad trade deals, trade deals that have insufficiently protected our interests.

That is why there's a bipartisan group of us in the House and Senate that have formed the Farmers and Ranchers for Trade Caucus, to make certain that even while we promote trade deals, we don't end up with the kind of differential that works to our disadvantage, as was pointed out so well by my colleague from Oklahoma.

I think, in terms of getting initial credibility on trade, Mr. Ambassador, the Jordan deal is very, very important.

Some describe the turmoil in the Middle East now as really more about forces of modernization versus anti-modernization. I think the Jordanian leadership, in advancing this trade deal, clearly comes down on behalf of the forces of modernization. Prompt recognition of that through prompt action on this trade, I think, gives us a wonderful foreign policy opportunity and trade opportunity at the same time. It's also an excellent opportunity for the administration to, I think, gain some credibility from those of us that will be watching carefully.

That was my observation. Now to my question.

Durum wheat, and specifically, the conduct of the Canadian Wheat Board. State trading enterprises is one of those areas where I don't think we have sufficiently protected our interests versus the operation of a monopoly marketing system that controls completely through the vertical flow of product in other areas. And we've certainly seen that -- grain farmers trying to compete against the Canadian Wheat Board have absolutely seen that.

We're convinced that there has been inappropriate, trade- violative activity of the Canadian Wheat Board, and that was why we supported strongly the petition advanced by growers in our region for a Section 301 investigation. Your predecessor approved the petition, and I understand now that your office has embarked upon the requisite investigation of whether or not there have been illegal and inappropriate activities of the Canadian Wheat Board.

Can you advise of us of the status of the investigation?B. ZOELLICK: Certainly. Let me just comment briefly on your first point. I definitely agree with you. And just to give you an example that probably hits home, I have pointed out to the Chinese that the bilateral agreement they made with us on agriculture -- I believe in '99 -- has been blocked in the area of wheat because of them stopping things at the border related to alleged phytosanitary standards. And that I notice they just did an agreement with Canada at the same time. And so when we talk about WTO accession, I have said if you are going to be able to be in a position to say you're going to keep one agreement, you've got to keep all your agreements. And I think this phytosanitary issue is going to be one that we're going to have to fight a lot harder on. Secretary Veneman and I just, I think, made some headway with Brazil on wheat on this issue as well. So I'm fullscore with you on that.

REP. POMEROY: Great.B. ZOELLICK: And on Jordan, I would be pleased to work with you. I'd like to get this done. I have some issues we're going to need to discuss, I think, and I hope to do that as quickly as possible.

On the 301, as I mentioned in the Senate, I support this investigation. I have had enough sense about how the Canadian Wheat Board works that I could see the problems that it causes for our people in terms of their ability to price accordingly. Obviously, this is not going to be an easy issue related to changing Canadian practices, but I am very sympathetic to what you're saying, and that's why I want to try to use the 301, in part, to get additional information and to be able to develop a stronger overall case.

And this is another one of the issues that is on our list of four or five that we're emphasizing in the global round, which is dealing with these state trading enterprises. And this is the one that, frankly, hits us the most. So I share your interest in it and am trying to get -- use that process to learn more about what we can do with it.

REP. POMEROY: That's excellent. I'm very pleased to hear that response.

I would just finally note that, even while we feel like we're at the receiving end of a deluge of subsidized or dumped Canadian grain, they have brought an anti-dumping action against our corn, basically under the guise that it's sold below the cost of production. Well, that's just the sad reality of commodity pricing right now. We're not recouping the cost of production in market prices, but that doesn't mean it's dumping. They may be taking steps to make their initial action permanent. Are you addressing that with the Canadians?

And this is my final question.B. ZOELLICK: I'll just mention briefly. I raised the issue with my Canadian counterpart. And as you know, it goes through their process like we have our process in terms of the International Trade Commission. And I pointed out the same points that you did. It will run through their process.

REP. THOMAS: Does the gentleman from Georgia wish to inquire?

REP. MICHAEL COLLINS (R-GA): Mr. Chairman, only to say welcome, Ambassador. I appreciate the earlier comments you've made. I was not here to hear them, but I heard about them, particularly in the area of the Canadian softwood lumber. We've had several discussions as to that subject. I hope you are able to work something out with that. I understand time's drawing down on us. But we look forward to working with you over the next few years.B. ZOELLICK: Thank you, Mr. Collins.

REP. COLLINS: Thank you, Mr. Chairman.

REP. THOMAS: Does the gentleman from Pennsylvania wish to inquire?

REP. PHIL ENGLISH (R-PA): Yes, Mr. Chairman.

Welcome, Mr. Ambassador. I want to start by saluting you for your commitment to pursuing a new round of negotiations within the WTO. I think this is of paramount importance. But as someone who attended Seattle and was aware of some of the issues that led to a breakdown of the process in Seattle, one of the most troubling for me was the insistence by the Japanese and some of our other trading partners that our anti-dumping laws be reopened. I'm concerned about that because I feel that our anti-dumping laws play a critical role in allowing us to police our own markets against unfair trading practices. And I think they are helpful to a wide range of domestic producers and are intended -- perhaps not always in practice, but certainly in intent -- they are to provide a level playing field and some fairness.

My question is, does the administration continue to support the position that our anti-dumping laws should not be on the chopping block in a new round of negotiations with the WTO? And second, is the administration open to the possibility of trade law reform consistent with the WTO guidelines, both in the areas of Section 201 and 301, to strengthen those laws and make them more accessible to American companies?B. ZOELLICK: Well first, on the general principle, I agree with you that the anti-dumping laws play an important role in dealing with unfair practices. As you know, there's always a debate about how they're applied and the methodologies. This gets very complicated. But I think they're vital to the overall trading system, and they're certainly vital to maintaining public support for open and free trade.

One of the issues we're going to have to look at here is that other countries are now starting to develop their legal regimes. And for all the criticism of ours, theirs are nowhere near as transparent or based on a set of rules and a regime that people -- exporters can get some appreciation that they're going to get fair treatment. And I know this is true in Brazil, in South Africa, and these are going to be growing and important markets for the United States.

And so frankly, congressman, as we look at that issue, sort of going into any round negotiation, that's another feature that we have to examine.

In terms of your question about whether I would be willing to discuss or consider changes in our laws as long as they're -- conform with the WTO, certainly. You know, I don't know the specifics, but I, as I mentioned in my answer to Congressman Levin on steel, I believe, I think 201 plays a vital role in the process. In fact, I think 201 could be much more useful than some of the other unfair trading practices if we put it in place quickly and we get serious restructuring. And similarly, the 301 process.

So I'm certainly willing to consider any set of ideas. I do believe we need to try to do them in a way that fits within the WTO system because fundamentally we're the most competitive major country in the world. We want to make sure the system is a set of rules that works for us in a way that's fair, but also allows us to export abroad.

REP. ENGLISH: Thank you, Mr. Ambassador. And let me urge you in addition in thinking about conventional trade promotion authority, which I understand the administration is committed to seeking, as someone who was skeptical of several of the fast track proposals that came before this committee in the past, I hope that the administration will keep an open mind when it comes to how to deal with issues like labor and the environment. It seems to me there may be a middle ground available here that would address the scruples of a wide variety of people concerned with this issue. And I hope the administration will keep an open mind about the possibility in structuring this authority to provide for pre-authorization of specific negotiations as one feature of that authority. That would give Congress greater control over the process, but also give you the authority that you need if we could work it out procedurally. You're welcome to comment on that if you like.B. ZOELLICK: Well, on the first one, I definitely agree with you. As my statement said, I have an open mind about this both because I think it's the right thing to do and I think it's the thing to try to build a basis of support. It goes to my larger point about trying to have a sense of how trade relates to our values and what we're trying to accomplish more broadly in the world. On the second one, I'm afraid I'm not familiar with the details of the pre- authorization. But I'd be pleased if you'd give me more information to give you a fuller response.

REP. ENGLISH: I will follow up. And thank you, Mr. Ambassador.

Thank you, Mr. Chairman.

REP. THOMAS: I thank the gentleman.

Does the gentle woman from Washington wish to inquire?

REP. JENNIFER DUNN (D-WA): Thank you very much, Mr. Chairman.

And welcome to our committee, Ambassador. It's good to see you. And I want to particularly thank you for making yourself available to sectors of our economy that are very interested in presenting their views to you, particularly the high tech sector. Very, very helpful to them. We appreciate that.

I have three probably brief questions to ask you. And I apologize if these questions have been asked while I was over taking the vote.

We have concluded an agreement with Vietnam, the first free trade agreement since the war in Vietnam. And I would like to have some sense of update on when this treaty will be delivered to the Congress.B. ZOELLICK: (Pause.) You want me to do each one, or do you want to do all three?

REP. DUNN: Well, I can do all three, if you like.B. ZOELLICK: Whichever.

REP. DUNN: Okay. The second question I have has to do with the TRIPS agreement. At the World Economic Summit I heard more talk than before about how developing nations are very concerned about meeting the TRIPS agreement, and yet this -- the lack of compliance with this agreement is costing us billions of dollars every single year in the loss and the piracy of software. I'd like you to -- your comment on that and let us know where that stands and how you believe that is affecting industry in the United States.

And lastly, I am interested in knowing about the FSC situation.

We've had a lot of discussion about that in the last year, re-wrote the FSC provision, and the EU has indicated thumbs-down on this. What happens next on FSC? I know that Pascal Lamy is going to be in town shortly and you two will be getting together. What is our position on FSC, and what do you see ahead on that issue?B. ZOELLICK: Well, first, Congresswoman, I'd like to thank you for your help with the high tech community. I know that this is a particular interest of yours, and you obviously have an extraordinary set of ties, and you've brought these people into the public policy process, so the thanks really goes to you. And I'd be delighted to work with you in the future on these issues, because I think it's important economically and it certainly is important, as many people have mentioned, in terms of broadening the base of support on trade.

On the Vietnam issue, as I mentioned to Mr. Levin, this is another issue that I've gotten a strong sense that there is eagerness to try to move forward promptly. As you probably know, it's actually an agreement that just brings Vietnam to a normal trading relationship, like China was, but it does, in the course of it, have some very important market-access and other arrangements.

There is an issue that's been brought to my attention related to textiles, in that the possibility of the textile imports that would come in and whether there's a need for a separate agreement and, if so, whether it would follow some of the provisions that Mr. Levin was interested in related to the Cambodia context. And so that's an issue that I think we're going to have to deal with here.

I understand that, regardless, that the administration has the authority if need be to set quotas for textiles, and so -- it's my understanding that the Vietnamese desire is to get the agreement going forward and deal with that later, but that's a topic I need to get more wisdom from you and others on.

In terms of the TRIPS provisions, I share your view that this is a critical area, not only because of the competitive advantage of the United States, but actually it's in the long-term interests of other countries, because if they're going to draw the investment that they're going to need to grow, often it's related to the intellectual property that is often associated with that investment. And so I believe that -- I know there is a concern about the implementation of those provisions.

My first preference, Congresswoman, would be to try to add their capacity to be able to implement them than to adjust them, but I am willing to listen to others as they try to figure out how we achieve this, because the goal is to make sure we get that protection.

On the Foreign Sales Corporation, this committee and your counterparts on the Senate side, I think, did an extraordinary job in trying to make a fix of what the WTO found to be a violation. As you probably know, the WTO will issue another ruling on that. The EU continues to challenge that. We will certainly do all that we can to defend that provision, and I have had some conversations with Stu Eizenstat, who I knew was very involved with that.

Under the WTO procedures, the EU is in a position to be able to retaliate if they so choose, and they've picked a number related to the revenue estimate of about, I think, $4 billion, which is a rather large sum. That doesn't mean that's the number that would be accepted by the WTO, but that's what they're using. And up to now, they've taken the position that they won't retaliate until the WTO makes a ruling. But this sends us back to the carousel issue, and bananas and beef.

I have met with a coalition of the companies involved with the Foreign Sales Corporation, just so I could get a better understanding of their interests and where they'd like to go on this. I've also alerted them to the reality that if we follow through on the points, as Mr. Portman was raising, in bananas, we have to be prepared for the counteraction. We can't have it both ways.

I'm certainly wiling to do that, because I think it's important that we defend our rights. But people all need to be on notice that that's the path that we're on. I hasten to emphasize my preferred path is to try to get some time to negotiate with Commissioner Lamy, for whom I have the greatest respect, to see whether we at least can give ourselves a few months to try to see whether we can resolve this issue.

It's been kicking around for nine years. I don't see why the Europeans can't give me a few months to give a try.

REP. THOMAS: I thank the gentlewoman. It's pretty obvious that every sword in trade is a double-edged one, and what is useful for us can be useful for others. And we have to be very careful about how we not only empower you, but how it's exercised. And I appreciate the ambassador's comments.

The gentleman from Colorado wished to inquire.

REP. SCOTT MCINNIS (R-CO): Thank you, Mr. Chairman.

Mr. Ambassador, thank you for coming today. Before I begin my comments, I did hear your response in regards to Mr. Neal's inquiry on Cuba and China. I want to caution or at least add to those comments that I'm not sure China is the one to compare in talking about the good guy and the bad guy. I certainly agree that Cuba is a bad guy, but I would want to just note that China has a number -- while you mentioned that Cuba shoots down airplanes, China has extensive, extensive human right violations. China has made its intentions towards the United States very clear. I think China's very clear on where its nuclear missiles will be aimed. And furthermore, yesterday China just announced they're going to increase their military budget 17 percent.

So I would approach China with great caution, as what they show on the face is not necessarily what they have in the mind. They're kind of like a gigantic iceberg, in my opinion.

And that said, I'm concerned really primarily about two things. One, on the W2O (sic), that as you begin your tenure here, that we be very careful in these trade agreements that we preserve our voice or our vote to be somewhat in proportion to our budget. In W2O (sic), for example -- in WTO, our budget obligations are -- I think it's about 40 percent. You could correct me. But it's a significant amount of the total budget as compared to one vote out of what -- the total number of votes. And I think that we have to have some tough negotiations in regards to our budget contributions, so that they're relative or somewhat relative, and we're not taken advantage of, which I think, frankly, under the previous administration, that we were taken advantage of on the budget issues, because that wasn't their focus. And our focus here sometimes is so intent on the trade agreement and on the future of the trade agreement, we ignore the budget obligations that we sign on to.

And you, as the ambassador, know it took a great deal of negotiations and certainly the withholding of our dues to the United Nations to get our budgetary obligations dropped, I think, 1-1/2 percent, I think, from 26 percent to 24-1/2 percent. I'm not sure, but it's in that ballpark, right in there, those numbers. So I would ask that you watch those budgetary obligations with some care.

Finally -- and I'd like your concern about this -- of course, coming from Colorado -- we have a lot of ranch country and so on -- I'm deeply concerned about the hoof-and-mouth disease that has broken out. And in the United Kingdom, as you know, it's created a collapse. And as I understand it, once the -- once they determine that this disease is in existence on a farm, not only do they take out the animals -- and I understand that in the European Union countries they're paying for those animals -- but in order to cleanse of the disease, the farm then has to sit idle for six months thereafter. And I wonder what your thoughts are and what kind of provisions we will -- we have in these kind of trade agreements to, for example, immediately stop importation of a product that may threaten the well-being of our products or health over here. Could you -- I just don't know about that, and I was curious about that, if you could help me.B. ZOELLICK: It's an excellent question.

First, on China, I take your point. I used to deal with China in a different context. I know what they can be like.

I do believe that -- and obviously I -- this committee believes -- that there is an openness in China that we need to work with in terms of developing the rule of law. And I do believe there are opportunities there, but it doesn't take anything away from any of the security points that you mentioned, including espionage.

On the WTO budget, I will look into the percentage. I don't know for sure. It's a good point. I would just -- I'd like to put it in a little context. I do recall seeing the size of the overall WTO budget not long ago, and it's minuscule -- I don't remember the exact size; it's like $25 million or $35 million -- and remember, the dues that we were paying for all of the U.N., it was like a $900 million appropriation. And so while we look at the percentage, we also have to look at the amount, given what we get from it. But it's a fair point about the U.S. share.

On the hoof-and-mouth question, this goes to this issue of SPS, the sanitary and phytosanitary standards. It's not sort of directly, at least to my understanding, within the USTR area because the monitoring of this would be done by Agriculture and other services.

And I believe, but I will check for you, that there are a series of provisions that would allow us to take emergency action. For example, even recently, under the NAFTA accord, when the Canadians were concerned about even lack of data from Brazil dealing with mad cow -- there wasn't even any evidence of the BCE, it was just data -- that they stopped Brazilian beef, as you know. And under our NAFTA accord, we went along with that. Fortunately, we worked that out and no one had any sense of a problem with that. But, clearly, there is an ability to respond in emergency fashion.

The tricky thing about the SPS standards is how others can use them against us. And so it needs to be based on a reasonable scientific basis. We have a problem with Australia right now -- Chairman Crane was asking about it -- related to grapes. And so I think, again, what I answered, I think, to -- maybe it was Mr. Hulshof's question -- about the key role that we need to rely on the Codex and others to be able to act immediately, if necessary, but make sure this is done on a sound scientific basis, otherwise our agriculture is going to be the big loser.

REP. THOMAS: Thank the gentleman.

The gentleman from New York, Mr. Houghton, wish to inquire?

REP. AMO HOUGHTON (R-NY): Yes, thank you, Mr. Chairman.

Mr. Ambassador, great to have you here. Thanks so much for taking your time. I have not been here recently, therefore I may be redundant. If so, just skip over some of these questions. One statement and really one question.

The Washington Post this morning had an article called "Sabotage in the Senate." I don't know whether you read this thing. And it talks really about the steel industry. And it said, "Mr. Zoellick is due to appear before the House Ways and Means Committee today. It will be interesting to see whether there are saboteurs in that chamber also."

Classify me as a saboteur, because I really think that the Golden Rule should apply; that if people are going to sabotage our markets, which is the most precious thing we have, we've got to somehow have some sort of a mechanism to protect ourselves, whether it's 301 or 201 or whatever it is.

And it's very easy to create a statement like this. But when your job is on the line, and whether you're in Pittsburgh or wherever it is, it's a very, very serious issue. And I, as a Republican, as a free-trader, really strongly believe on this.

Let me just ask you a question. When a business is in trouble and it's going through economic difficulties, it tries to increase its sales because you can't shrink yourself rich, you've got to be able to increase your volume.

What are those things, those mechanisms under your control or under our control, we can try to go out and sell the other 95 percent of the world in some of our products to be able to keep our employment up?B. ZOELLICK: Well, first, I can once again thank the Washington Post for helping me -- (laughs) -- with an issue at a sensitive point in time. But I want to say a word on steel because, if you were not here, I wanted to emphasize that the way that Secretary O'Neill and Secretary Evans and I are all trying to look at this is in the context of a possible 201 investigation. The op-ed actually referred, or the opinion piece referred to anti-dumping and countervailing duty. Those have been used with varying degrees of success. And what we honestly believe might be the best course here is if we can get some significant restructuring of the industry, as you know from your own experience --

REP. : Could I ask my colleague to yield on that point? Could you just yield for a moment?

REP. HOUGHTON: Absolutely, if it's all right with you --

SEN. THOMAS: Go ahead.

REP. : I appreciate that. We've had a chance to talk, and I very much support your position on trying to look at at the 201s and enforcing our laws. You've mentioned over and over again the restructuring of the industry. And I just at least want to put on the record that the industry has gone through a significant restructuring already today. They've invested an awful lot of money. There's been a lot of downsizing as far as the number of steel workers. There's been a lot of consolidation and a lot of reduced capacity in this country already.

I just really want to put on the record that there's a already been a significant restructuring within the steel industry, and they're finding that, as a result of what happened in 1998, we have not recovered from the low prices of steel that's having the major impact. And I know that you're aware of this, and I just really want to put that on the record. And I thank my colleague for yielding.B. ZOELLICK: I appreciate it. It's a good point. I'm sorry I didn't include it myself.

And so what we're actually trying to do is to work with the industry and the unions and see whether we might be able to follow that course. And we've got a group together that's trying to gather some of the data and some of the industry analysis to do that. And as I also mentioned, it occurs in a global context. So that's how we are trying to deal with that one.

On your larger point about increased volumes, the first thought that comes to my mind, Mr. Houghton, but I will be pleased to give it additional thought, is, is that this goes to the basic issue about trying to reduce barriers around the world for our products. I believe in many industries around the globe, the United States can certainly at least hold its own. But whether we deal with traditional barriers, like tariffs, barriers related to investments, so you can have some of your operations there with the trade flowing with investment, whether it's related to various standards and regulations, this is what interrupts the trade flows.

And as my prepared testimony stated, it's been quite extraordinary what has happened with additional trade flows in terms of growth and income. That same op-ed, to give the Washington Post its due, noted that the increase in terms of income in the United States due to the increase of these 2-or 3- or 4-percent trade flows is quite enormous. And so I think that is, to me, the best way to try to approach the question of helping companies work through difficult times.

REP. HOUGHTON: Yeah, just one other thought. You know, there are long-term important measures to be taken, and you've just cited one, reducing the tariff barriers and making it easier for our products and services to go elsewhere. But there are also short-term emergency measures, and maybe you could think through that a little bit. And I'd be willing to talk to you because there are a variety of different examples here that could be used. Because in surges or in pullbacks, certain things are necessary in the short-term period that aren't in the long.

Thank you.

REP. THOMAS: Thank the gentleman.

Mr. Ambassador, we promised we would get you out by 1:00, and obviously our goal was to try to keep on a general focus in terms of the broad-based tools that we might need. But in any discussion in trade, it gets down to specific interests fairly quickly.

But I do want to conclude on a specific point, and that is this. The chairman and ranking member, the chairman of the Trade subcommittee and the ranking member of the subcommittee, and especially those who worked hard in addition to those individuals -- Mr. McDermott, Mr. Jefferson and others -- are somewhat concerned about the way in which the African CBI agreement has been interpreted by our own government, and we would very much like to engage very quickly the rationale that has led to what we believe to be a failure to properly follow the intent of the law in particular areas.

And so, moving from a general to a specific, we might as well roll up our sleeves and get to work. I want to thank you on behalf of the committee, especially in terms of your knowledgeable and frank answers to a number of very specific questions without knowing what was going to be thrown at you. It clearly shows that the president has made an excellent choice. It will be our pleasure to work with you to make sure that the international competitiveness of the United States is enhanced. Thank you very much.B. ZOELLICK: Thank you, Mr. Chairman.

REP. THOMAS: The hearing is adjourned. (Sounds gavel.)

END

LOAD-DATE: March 8, 2001