BODY: SEN. MAX BAUCUS: The hearing will come to order.
Good morning, everyone, and welcome to Ambassador Zoellick. I note that
Senator Rockefeller is not here. With a little tongue in cheek, I ask you, where
is Peter Davidson?
(Laughter.)
I know that he is here. Senator Grassley notified me that he will here
quite shortly, too.
As I look back on nearly three
decades of working on international trade issues, I must say I've always been
impressed, and I think Ambassador Zoellick you will agree, with the extent to
which there's been bipartisan cooperation and we work closely in that area. It's
often said -- I remember Senator Howard Baker saying this frequently a few years
ago -- that politics should stop at the water's edge.
That's true not only in national security but I think it should also be
true in trade and it by and large has been true in trade. In fact, when some of
my esteemed former colleagues like Senator Jack Danforth, Bill Bradley and John
Hines served on this committee, it was literally impossible to tell Democrats
from Republicans. We had to have a scorecard to know.
However, unfortunately, as the recent House vote on fast-track
negotiating authority underscored, the international trade debate has become a
bit more difficult and I might say, sadly, a bit more partisan.
That is something we cannot sustain. The only way to work our way
through difficult issues we face every year is to maintain strong lines of
communication, to work hard, work together towards centrist solutions. I will
try to do that. I will try to continue to reach out to find and help forge these
solutions. And I hope that the president and the administration and others in
Congress can do the same thing.
First, with regard to
the recently launched round of WTO negotiations, I want to publicly outline my
strong concerns. I appreciate that launching negotiation required a lot of
effort on the part of you, Mr. Ambassador, and I appreciate that -- as well as
the effort of many other members of the administration. I also believe that
there are very important potential agreements to be reached in many areas.
However, the negotiations as launched have one serious
apparent flaw -- the inclusion of trade remedy laws. These laws are not barriers
to free trade, they promote free trade. How? By attacking unfair practices like
dumping and subsidies. These laws also provide a critical political safety valve
to reassure Americans that free trade will also be fair trade and that options
are available to address serious import problems like those we now see in lumber
and in steel.
Trade laws have become a political third
rail, much like social security has become in another context. That is why 62
senators joined me in writing to the Administration last year urging that no
trade agreement be struck that would weaken or undermine these laws. Still, the
Administration agreed to place these laws on the agenda for WTO talks.
I understand that this is a very preliminary stage in
negotiations and that no agreement is immediately forthcoming. I understand
that, but these laws should not be on the agenda at all. I do not accept the
position that it was impossible to launch a round without negotiating on trade
laws. And I believe that there is nothing realistically achievable in other
areas that would be worth weakening US trade laws.
Given my strong views on this issue, some of my colleagues will
doubtlessly question the wisdom of even granting fast-track authority to this
Administration. Indeed I weighed this concern carefully in deciding to work with
Senator Grassley and others to develop fast- track legislation. I went forward
only because I am confident that there are ample opportunities to block a poor
deal on US trade laws.
I want to be clear on this
point. I will use every point of leverage available to prevent an agreement that
would weaken US trade laws, and I believe a strong majority in both Houses of
Congress would support such an effort.
Another of the
most hotly debated issues in recent years has been the appropriate role of labor
rights and environmental issues in international trade negotiations. After a
long and difficult struggle, these issues are now generally recognized as an
appropriate part of international trade discussions.
A
chain of trade agreements including NAFTA, the US-Cambodia Textile
Agreement and, most importantly, the US-Jordan Agreement all demonstrate this
point.
In developing the fast-track legislation pending
before Congress, the Jordan Agreement's treatment of environment and labor has
been fully enshrined in negotiating objectives. As I said before, Jordan is not
a rigid model to be fitted precisely into all potential situations. I am open to
considering alternate approaches such as incentives to make progress in these
areas.
That said, Jordan constitutes a practical floor
for future agreements. It is simply not possible to do less and gain broad
support for a trade agreement.
For that reason, as the
Congress moves toward action on fast- track legislation it is critical that the
Administration works to ensure that similar meaningful labor and environmental
provisions be included in agreements being negotiated with Chile and with
Singapore. I've been troubled by rumblings that the Bush Administration
negotiators were less than enthusiastic in their efforts to complete
negotiations on those critical provisions. I'm particularly concerned because
the Clinton Administration trade negotiators have assured me that both countries
agreed that the Jordan Agreement served as the basis for negotiations on labor
and the environment.
In order to gain the trust of
Congress, which is critical to achieve goals like their passage or fast track,
and ultimately that of our trading partners, the U.S. trade negotiating strategy
must be seen as a consensus strategy. Moving away from the Jordan-based
provisions on labor and the environment, to please critics whose views are not
in the mainstream, would be a severe blow to that confidence and invite a new
round of bitter partisan feuding.
Let me turn to an
issue now where I believe you, Mr. Ambassador, and I share very similar views.
While we sometimes disagree, although less often than not, there are issues
where I strongly support the endeavors of you, Mr. Ambassador, and your staff,
and I was particularly impressed by an important and far reaching report that
you helped to author before you entered the administration. The report was
drafted by the Trade Deficit Review Commission, which included Defense Secretary
Rumsfeld, former USTR Carla Hills, as well as Ambassador Zoellick. The
Commission was unable to reach consensus on many issues, but there was unanimous
agreement on one critical and timely topic, Trade Adjustment Assistant.
Mr. Ambassador, you and your colleagues made many
thoughtful and far reaching recommendations on TAA, including extending TAA to
secondary workers, extending the time period for TAA benefits, expanding efforts
aimed at retaining workers, and providing health insurance to displaced workers.
I was truly impressed by this section of the report, and these recommendations
formed a basis of the bipartisan TAA legislation that was passed by this
committee. In the coming weeks I hope to join it with other bills extending fast
track, in addressing other trade matters and win Senate passage of the combined
legislation.
In addition to providing the committee
with an overview of the current trade negotiations, Mr. Ambassador, I hope you
can spend a few minutes describing your work on that commission, and as it
relates to TAA and the committee's efforts to fast track. I look forward to your
testimony.
And I now turn to our good friend from the
far northwest, Senator Murkowski.
SEN. FRANK H.
MURKOWSKI (R-AK): Thank you, Mr. Chairman. We're a little further north than the
northwest.
In any event, I do want to congratulate
Ambassador Zoellick for the masterful job of negotiation on the dollar. I think
that at one time, at least in my opinion, there was very little chance for
agreement, and given how far apart WTO members are on some basic issues, I think
your accomplishment is noteworthy. I think also that any consensus reached is a
tribute to you and your colleagues on your negotiating team. Now, the language
on anti-dumping may seem dramatic in the sense of concessions to some members of
the committee.
Me thinks they do complain too much,
because in reality it's my interpretation that the language on anti-dumping
agreed to by USTR was fairly mind and can even be said to have achieved
recognition of the legitimacy of anti-dumping rules, yet opening the door to
potential market opening concessions by other WTO members. That's how I read it.
Not only is the language mild, it also does not predetermine any outcome.
Agreeing to discuss something does not mean an agreement to any particular
outcome. I think some have reached another conclusion.
The language also affirmatively establishes the legitimacy of
anti-dumping and countervailing duties as legitimate tools to counter unfair
trade practices. I guess we could all ask as a consequence of this effort, "Is
the glass half empty or is the glass half full?" Well, it's more than the eyes
of the beholder, but it seems to me that it's more full than empty. Ultimately,
the apparent concession on anti-dumping has paved the way for marketing opening
concessions from other countries which will benefit American farmers and
agricultural producers, manufacturers and certainly other exporters.
Agreeing to discuss an issue of importance to other WTO
members in exchange for discussions on issues of important to us I think is the
right thing to do. That may not be the way we operate in the United States
Senate necessarily, but we are not a consensus-based organization. Yet, the WTO
is, and you've fostered that consensus and I agree with you. I'm just going to
leave one bottom line. I know there's some unhappiness with the U.S. steel
industry. I'd suggest they spend a little more of their energies and initiatives
in recognizing the opportunities here in the United States. If this gas line is
built, and it will be built, it will use about 3000 miles of steel. It will
either be built in the United States because U.S. steel can be competitive, or
it will be imported in from Japan, Korea, Italy and other nations.
That order, Mr. Ambassador, is worth in excess of $5
billion. Now, it would seem to me that the United States steel industry should
make a determination of whether it wants that business, whether it can gear up
for that business, whether it can be competitive for that business and support,
obviously, the development of domestic energy resources in this country, as we
recognize the legitimacy of supporting, if you will, domestic industry here at
home, particularly when the development takes place here at home. So, for those
in the U.S. steel industry that are a little unhappy with your efforts, I
suggest they spend their energies and efforts establishing whether or not U.S.
steel can be competitive for an order of about $5 billion, or thereabouts. Thank
you, Mr. Chairman.
SEN. BAUCUS: Thank you, Senator.
bassador --
SEN. MURKOWSKI: Notice I didn't ask any
questions.
SEN. BAUCUS: I noticed, I'm very impressed.
bassador, welcome, look forward to your views.
MR.
ZOELLICK: Thank you very much, Chairman and Senator Murkowski, for both your
welcome and your encouragement and, Chairman, your commitment to work together
on these issues, and I think we've done that pretty well last year, and we got
more ahead of us. If I could just ask my full statement be submitted to the
record. I really want to start by thanking you, Chairman, and the full
committee, for the very strong vote of support for the Trade Promotion Authority
Bill. I know it came over here late in the session and it took a lot of
leadership on your part and others for that strong vote. I also, in Senator
Grassley's absence, want to thank him because he's been a fantastic support in
the effort that Senator Murkowski made with Senator Bob Graham, all during the
course of the year to push the bipartisan approach that you talked about,
Chairman.
This committee's support has been vital for
us in terms of regaining momentum on trade open markets for farmers and
ranchers, and for consumers and families. I just noticed today on coming up,
Chairman, it's the anniversary of the Senate vote on my confirmation, so I won't
ask again -- (laughter) -- but I will --
SEN. BAUCUS:
-- (inaudible) --
MR. ZOELLICK: But I do think we made
a lot of headway in 2001 together, we've got a lot of work to do, but I very
much appreciate it.
I just thought I would highlight a
few key components of our strategy heading forward. First, we're trying to build
momentum for liberalization on multiple fronts. At the heart of our strategy is
a competition of liberalization, with the United States as the center of a
network of initiatives that frankly enhances our leverage. On the global front
as you both mentioned, we were fortunate to be successful in Doha (ph) but also
I was very pleased we were able to finally complete the accession of China and
Taiwan of the WTO, Senator Murkowski has had a particular strong commitment to
the efforts of Taiwan, and so it's something that -- his efforts long pre-dated
mine, as well as my predecessors in both administrations, particularly Charlene
Barshefsky. And I'm please that at the start of this year, the WTO, in fact just
at the end of last week, has now set up the framework for the negotiations. So,
the process is moving forward.
On the regional front,
we now have the FTAA, the Free Trade Area of the Americas launched in a serious
way, which has the vision of a free trade agreement under 34 democracies in the
western hemisphere, and indeed this spring we'll be moving ahead with the market
access negotiations. And later in the year Brazil and the United States take
over the co-chairmanship, and that's important as the two economic powers in the
hemisphere to drive it forward. On the bilateral front, as you mentioned,
chairman, I'm pleased we got the Jordan free trade agreement, the bilateral
agreement with Vietnam that Senator Kerry had had a strong commitment to. We're
moving ahead with the Chile and Singapore negotiations. And I might just mention
briefly, Chairman, that the only holding up on environment and labor in those
negotiations is frankly waiting to get some guidance from the Congress on this
in terms of the TPA process.
We're committed to
addressing those issues, and indeed I talked about them with the Foreign
Minister and Trade Minister of Chile when she was just recently here.
And also the possibility that I've written to you and
Senator Grassley about exploring new FTAAs. I notice that the AGOLA (ph)
legislation for Africa and the Caribbean Basin and Trade Partnership Act both
encourage the administration to look at the possibilities of FTAs. You and
Senator Grassley have written me also about Australia, and one of the things
that I hope to is that however you think best we create some process here by
which we can discuss these, get the views of you and your colleagues and your
particular interest.
Always keep it in mind that we're
a little bit late in this game now. The European Union has 29 free trade and
customs agreements, 22 of which it negotiated in the past decade. It's got 12
more. And if you look in the Financial Times today even China just coming to the
WTO is now exploring a free trade agreement with the ASEAN countries.
Second, we are committed to enforcing and managing
disputes, a point that you've emphasized, Chairman, because as we pursue new
agreements we have to actively defend America's interests by vigorously
enforcing the commitments that are made. And I want to assure you and the
committee that we will use all tools at our disposal, as we've done last year
and will do going forward.
We try to manage disputes in
a way that leads us to solving problems and improving trade on both sides, and
here in particular I want to mention the soft wood lumber area where I know
you've had a particular interest, Chairman. We've talked about and we may talk
-- want to talk about more today. And in particular we're going to have the
challenge of the follow-through on China and Taiwan because now that they're in
we have to make sure we get the implementation right and that'll be no small
task.
Third, we're trying to broaden the circle of
trade opportunity. And here in particular I think the United States as a country
has an extraordinary possibility to open out and to open and reach out to
developing countries. They're going to be vital to our economic future and to
building support for the trading system. Part of this is building formal and
informal networks that can support reform and the rule of law addressing issues
of poverty, and all one has to do is look at the newspapers and recognize that
we are indeed in the midst of a war on terrorism to appreciate the fact that a
long-term struggle is going to require dealing with the economic problems of
some of these countries.
I saw that Zbig Brzezinski
said over the weekend, I think he said it right, is that, "I wouldn't say that
poverty by any means is a root cause of the terrorism but I do think it provides
a fertile field".
The United States, as you may know,
has actually been leading the efforts to support developing countries through
trade capacity building and we spend about $555 million a year because we have
to help these countries simply be able to take part in negotiations and
implement them, and frankly we need to do more with the development banks to try
to encourage their support as well.
Another part of
this strategy for developing countries is the preferential agreements which you
and others in the Congress have played a key role on. A very important one is
the AGOA (ph) for Africa, and indeed next week I'm leaving to Africa to try to
follow up on this activity.
Another one which I know
this Committee has worked on but I hope the Senate can give final action on is
the Andean Trade Preferences Act which was passed in '91 and expired last year
and is causing some real harm to the four Andean countries that we haven't moved
forward.
Similarly, the Generalized System of
Preferences which has been in existence for about 25-26 years covers about 123
developing countries. I know the schedule is crowded, Chairman, and I know
you've been committed to this, but anything we can do to get floor action on
these to complete it would be very important for our trade relations with the
developing world.
And then also we need to bridge the
gap with some of the new members, particularly the WTO, and I know you have a
particular interest, Chairman, in terms of Russia's accession particularly in
the area of agriculture with Senator Grassley. But we hope we can make progress
this year and over the course of the president's first term to try to get Russia
into the WTO under a good rules and basis.
Fourth,
we're trying to reach out to key stakeholders. This involves listening, it
involves building networks, educating and acting. Here in particular I want to
thank the help that Senator Grassley has provided in terms of reaching out to
America's farmers and ranchers, but it also involves seeking to help industries
and workers to be competitive and adjust to change. And both of you have
mentioned in different ways the importance of the steel industry. As I think
Chairman Baucus in particular knows, we worked with the wheat gluten and the
lamb industry on their safeguard issues to make sure that they had a chance to
go forward in compliance with the rules. And obviously, this administration did
something that didn't happen before which is to launch into a safeguards
investigation and now we're in the final stages of that determination.
Chairman, you mentioned trade adjustment assistance. I'd
be pleased to talk about this more, although obviously the Department of Labor
has the lead on this and I know they've been working with your staff quite
constructively, I hear. But I am in total agreement about the importance of
trade adjustment assistance, and I know it's something that you and the majority
leader and Senator Bingaman have played an important role on, and Senator Snowe
as well.
And obviously, there are going to be
differences about how to approach this but in terms of the thrust of doing it
and a need to get it reauthorize in an approved fashion I'll certainly do what I
can, Chairman, to work with you to get it done, because I've always said that if
we're going to have a free trade system then people will need to adjust it is
certainly appropriate to try to help them do so. We've also been meeting with
business and environmental leaders on a range of issues, and indeed given the
unusual security circumstances in Doha (ph) I was delighted that we were able to
do some of the first ever web briefings with the many people that advise us.
Another area that I know, Chairman, you've had a
particular interest in and I want you to know I've been focusing on is the NAFTA chapter 11 investor state issue. This is obviously a very
complex and difficult issue. I've been having a series of meetings with both the
business and the NGO community and trying to build on some of the points that
are in your TPA bill to see what we can do to try to bridge some of the gaps on
that issue. And as you know, it's going to take a lot of work, it's not an easy
one.
And then we've also as part of reaching out tried
to make the case for trading, correcting misinformation. A lot of people don't
know the benefits of NAFTA and the Uruguay Round which you and others
here pushed so hard to accomplish. And it's a meaningful number to me that the
statistics compiled by our predecessors and others revealed that for the average
family of four in America those two agreements produce added income and lower
taxes of about $1300-2000 a year for a family of four.
And for the new launch of the negotiations at Doha (ph) there's already
a University of Michigan study that just said, well, if you cut the tariffs on
industrial goods and agriculture, it doesn't even look at the services area, you
could produce an annual benefit of about $2500 a year for a family of four. So,
that's real money when people talk about tax cuts.
And
obviously, all throughout America you've got a lot of farmers and ranchers,
obviously in Montana, one in three acres in America is planted for export, 25
percent of gross cash farm receipts are from export.
And fifth and finally, Chairman, I think we have to always emphasize on
connecting trade to our values. Free trade is about freedom, it's about
spreading the rule of law and about openness and opportunity. But we also have
difficult issues to deal with such as the question of public health crises, so
one of the topics that we struggled with at Doha (ph) and I was pleased with our
result was coming to some reconciliation of how the intellectual property
regime, the TRIPS regime, could include and does include the flexibilities to
deal with developing countries struggling with pandemics like HIV- AIDS, malaria
and tuberculosis.
Or another one that I worked with
your House colleagues on and I think a number of you have an interest is this
question of conflict diamonds, where again I think we can work out something
that deals with that issue but also protects the paid (ph ?) system. So, we're
looking for a win-win on ideas and we certainly know that there are many sources
of those. I was pleased again at Doha (ph) that working with the World Wildlife
Foundation and others we were able to get a launch of negotiations of fish
subsidies because of their bad economics and their bad environmental policy.
So to sum up, I think we have a very full trade agenda
ahead. I obviously would urge the senate and the full congress to try to pass
trade promotional authority as soon as possible so we can move ahead on all
fronts to break down barriers, globally, regionally, bilaterally. From my
experience, Chairman, the eyes of the world are on the senate right now because
the United States' leader role is a question about whether they'll follow
through on your good work and Senator Grassley's good work on this committee.
And then obviously we have a very important set of
sensitive issues including the foreign sales corporation, steel, soft wood
lumber, high fructose corn syrup, and coming back I think to the heart of
efforts that you and Senator Grassley and I all want to push is that I've been
very clear to our negotiators in Geneva that now that we've got the Doha (ph)
agenda launched that we want to try to aim for a home run for America's farmers
and ranchers.
So, I want to thank you both very much
and I'm pleased to take any of your questions.
SEN.
BAUCUS: I'd like to explore a little bit of the concern I have with the Trade
Remedy Laws and it is true that we're in the preliminary stages but that gives
us an opportunity to not let something bad from happening. If the United States
were about to agree to the changes proposed by developing countries, isn't it
fair to say that those proposals would make our Trade Remedy Laws with respect
to developing countries somewhat useless.
MR. ZOELLICK:
Well, chairman, the developing world is now getting split on this and this is
one of the issues that actually informed our efforts in that a number of them,
with the help of American lawyers, are now putting in their own Trade Remedy
Laws and they are increasingly using them against the United States and I'll
forecast that if we're here five years from now -- I will not be -- but this
will be an issue that will be increasingly important for people as we move
forward so what I start with, and I think it's a similar point that both of you
have, which is that effective trade remedy laws are critical for this
country.
I know you believe they're important, we
believe they're important, we use them, we've supported their use, you know
that, in terms of softwood, lumbar and other areas. We may have some other areas
I want to talk with you about where I think we might use them creatively and as
you both properly pointed out we didn't negotiate any changes in these laws. Let
me explain what the heart of our logic was. First, we felt it was important to
be on an offensive agenda because, as I mentioned, there are now over 60 orders
in effect against US companies and a lot of these actually go against the steel,
the chemicals and increasingly the agriculture companies.
When Senator Blanche Lincoln was here we talked last time about a South
African decision used against the poultry area. So, part of what we have to try
to do is make sure that any discussion that goes forward gets their use and
application of these laws up to our level in terms of transparency and due
process. Second, and you've made this point too, chairman, we need to correct
some of the misinterpretations of the WTO panels. Just to take one prominent
one, we feel the WTO panels have not given the appropriate deference in a
standard of review, like an American court would, to our decision making process
and that's an important issue that we'd like to try to get cleared up in
this.
In terms of what we fought very hard for, as
Senator Murkowski mentioned, is that, you know, we've one language that says
whatever is done has to preserve the concepts, the principles, the effectiveness
of these Trade Remedy Laws, and indeed I went back personally and talked to
Chileans, the Japanese, the Koreans, the South Africa chair, to emphasize we
couldn't go along unless they also covered our instruments in this process.
SEN. BAUCUS: Could I just explore with you how we address
one of the questions you just raised, namely other countries, say a panels
interpretation of our laws. We're losing some cases, a good number of cases
we've already lost, and Americans like to think, and I think it's true, that
we're fair, we deal squarely, we're not trying to, you know, gain an advantage.
We just don't want people to take advantage of us. Yet there's a growing
perception that these panels are being a bit unfair. Now, in your judgment is it
because of ignorance of US law?
Is it because of
cultural bias that panelists might have that's different from American? Cultural
interpretation of matters or third, is it partly because, well, they're thinking
the United States because they're big, you know. They can suffer the loss here
and it's the worst, most cynical case and it's going to gang up on the US a
little bit, or it could be a fourth interpretation that we, compared to other
countries, operate a little bit more according to the rule of law, maybe a
little less administratively compared with other countries.
So, what's going on here and how do we address it, honestly, directly?
Because if we don't this trend continues and it's perceived as being unfair and
I'm trying to be totally objective about this. I think it is bordering on being
unfair and if the trend continues it will be unfair. It's going to lose a lot of
American support for trade and there could be a backlash develop in America in
the next few years against WTO, against some of these countries et cetera. So,
how do we -- your thoughts on that, please.
MR.
ZOELLICK: Well, I very much agree and I think you're being very objective and
that's besides the point because I think you're going to see Dr. Supachai (ph),
the incoming head of the WTO and I told him yesterday -- I said, "Look, you have
to understand these anti-dumping contravening duty laws like our safeguard
laws," or exactly what you said, chairman. We're pretty open economy and that is
the last defense and concern when there are unfair practices and if we can't
protect those, we can't hold trade in this country.
Now, on the question of the panels, I don't think there is any target
or ill will and, you know, we win a lot of these cases too. Not surprisingly we
hear more about the ones we lose than the ones we win but I think this actually
goes to what I hope we can do in the Doha (ph) Rhan (ph) more effectively. For
example, a lot of the judges of these panels don't have the full background in
this area and I think we ought to try to push for having a better sense of
background. The points I made about deference, just as in the American judicial
system, there is a greater deference to the finders of fact on different
things.
There are some rulings too that I think that in
the past have been done in a way where frankly we think they over-stretched
beyond where they should. Now, you and I probably also could look at the
American court system and find that we don't always agree with how judges come
out but in a way part of the role of the WTO is just like the role of the
congress when a court oversteps its bounds in terms of an interpretation of a
statute.
So, I think the strategy and objective you
mention is exactly right. It has got to be a key part of our strategy going
forward and I would be pleased also to discuss at greater length, if you'd like,
some of the areas where we would try to push the WTO in terms of interpretations
that we think have gone too far.
SEN. BAUCUS: It is
difficult -- we do not have time now to explore this although I think its
probably one of the key issues facing our country in respect to national trade.
I have some concern with the statement that you just made that in some sense WTO
reviews -- we had a system in the United States where, you know, if the court
makes a mistake that is reviewed say, at a higher level, presumably by the
Supreme Court and you made that analogy to the WTO, that is WTO reviews a bad
decision.
The difference there is that the review here
by a court is by a court whereas the review by WTO should not, in any sense, be
a legislative review because that intrudes upon our sovereignty.
Now, we do want a fair system but we don't want a system that's unfair
towards the United States and I think we're starting to move towards a system
that is unfair towards the United States, again trying to be totally objective
about this and I just urge you and the administration to give extra thought to
that because if we're going to develop a consensus and confidence in trade we're
going to have to, I think, address this. Thank you.
Senator Murkowski?
SEN. FRANK H. MURKOWSKI,
AK: Thank you, Senator Baucus. I just have one question. I wonder, Mr. Zoellick,
if you could elaborate a little bit on your experience at Doha (ph) and
elsewhere on the issue of how critical TPA is to achieving our trade priorities.
Is TPA absolutely necessary to say, regain our leadership in trade?
MR. ZOELLICK: Well, senator, I wish I had a dollar for
every time the topic came up with foreigners and I am always a little careful
about this because I feel that we have our own constitutional system and we'll
take care of it and so I don't really feel it's, on the one hand, their role to
tell us how to do anything but the reality is it will be critical to going
forward. One of the reasons I started out the way I did, senator, is, you know,
working with the Congress. I think we've regained a lot of momentum.
We've got the global round going, we've got the free trade
area of the Americas going, we've got China and Taiwan in, we've got bilateral
agreements going. But now the question is, can we keep up the momentum and that
is absolutely critical because these negotiations are moving forward. You know,
the process while people see a deadline of 2005 there's a lot of work to be done
along the way and my colleague, Commissioner Lamy (sp) of the EU noted, without
trying to put any pressure on, he said, "If the United States doesn't have this
authority people are just going to start to slow down and they're going to start
to question the overall commitment."
So, we have an
opportunity here to make a tremendous difference in the world and again I
compliment this committee with an 18 to 3 vote, but we now need to finish the
work.
SEN. BAUCUS: Well, thank you, Mr. Ambassador.
Senator Hatch.
SEN. ORRIN HATCH
(R-UT): Thank you, Mr. Chairman. I am sorry my duties on the Judiciary Committee
today make it impossible for me to attend the entire trade hearing today but I
first want to commend you, Mr. Chairman for being good to your word and calling
up the Trade Promotion Authority legislation right after the house act in
December and I look forward to working with my colleagues to attempt to continue
to force a bipartisan consensus on trade issues. In his State of the Union
speech President Bush called upon the congress to get the job done on TPA. The
president is correct. It is in the interests of the American people for congress
to pass fast-track legislation so that new markets can be opened for the
products made and services provided by American workers. I want to again commend
my colleagues across the aisle on this committee for contributing to the wide 18
to 3 vote in favor of TPA. I call upon the chairman and Senator Daschle to
schedule debate on a vote on TPA before the Easter recess, and I am certain
Senators Lott, Nickles and Grassley will work with you on that matter.
I also favor trade adjustment assistance legislation so
that workers displaced by the inevitable aftermath of competition and trade can
receive temporary assistance and valuable retraining. That is not to say that I
favor a 12 billion dollar TAA bill with inclusion of comfort benefits and
expanse of coverage for so-called secondary workers. But I'm absolutely
confident that the senate house and administration can reach broad bipartisan
agreement on TAA.
Let's not get bogged down on what
comes first, TAA or TPA. Let's get the vote done, tied together, on moving
separately in any order. The reality is that both of these pieces of legislation
will likely pass or both will likely fail. If we fail in my opinion the American
public will be the losers. I'm glad to see that Ambassador Zoellick is with us
today. Some of my colleagues did miss you in December. You may have heard that
my friend from West Virginia was particularly saddened by your absence.
(Laughter.)
While I will not ask
you whether you are wearing a flak jacket today, I will say that I share many of
Senator Rockefeller's concerns about the plight of the steel industry. In our
hearing yesterday I asked Secretary O'Neill to comment on the importance of our
domestic steel industry to our national security and to tell us of his
contributions on addressing the underlying issue of global -- (inaudible)--
capacity of steel. We do need your personal leadership on steel. I know that's a
headache but we do need it.
I have a lot of faith in
our USTR and the administration's international trade team. Leaders like
Secretary Evans and Grant Aldonis (ph) are moving the ball forward as well, and
I think that in Ambassador Zoellick's testimony he does a very good job of
cataloguing our successes of last year and he has laid out the challenges that
we face in the future. Launching a new round of trade negotiations is a
worthwhile endeavor. The chances of American success for the new round will be
enhanced if our trading partners can see that the American people, Congress and
the president are fundamentally together on these issues.
Now, nothing can send this signal stronger than enactment of TPA
legislation. So, just one question, Ambassador Zoellick, what is the
administration's view on the chicken and the egg question of what comes first,
TPA or TAA?
MR. ZOELLICK: Well, Senator, as I mentioned
to Chairman Baucus, I share your view and his view about the importance of trade
adjustment assistance and the administration it does as a whole. In terms of the
procedural issues and procedural link, that's something obviously we defer to
congress. Like you we want to get both done. In December, actually chief of
staff, Secretary Card actually wrote a letter on the house side, but I'm sure
that you've also seen it, talking about a lot of the areas where there are sort
of common ground to be worked through here. And I know that my colleagues in the
Department of Labor have had some good discussions on a number of these
items.
And frankly having looked through some of this
agenda myself I do think that not only are there points where, as at least I
understand it we've already reached agreement, but there are many others where
there's a room here that has got to be worked out. Now, there are some other
topics that have gotten hooked up with larger entitlements or stimulus issues
and other issues that are not within my bailiwick, but anything I can do to help
get this done I'd be pleased to do so.
There's one
other point that I think all three of you have mentioned that I just want to
underscore why TPA is important. We benefit from the structure and guidance of
the congress. We can't go very far on this unless we really have your objectives
and your procedures. Frankly, it's been very helpful to look at the house pass
bill and senate finance committee bill as we're trying to move forward and
finish the Chile and Singapore because at least I have a pretty sense of the
targets.
But there are also a series of procedures that
will be in this bill that we think are appropriate and useful to put forward.
So, in a sense one of the other parts - or the problem is that if we don't get
TPA done we don't have that structure to engage in a way that I think this
committee most of all historically has engaged.
So, we
want to try to get it done as soon as we can and I was very pleased, as I'm sure
all of you were, to see the majority leader talk about trying to get this up
soon, and TAA is the key item again I'm happy to work with my colleagues in the
administration. If there's any particular difficult issues let's try to get it
done.
SEN. HATCH: Thank you. I attended the World
Economic Forum last weekend, as you know, and many attendees including Secretary
O'Neill and my fellow composer, Bono, his CDs sell millions, mine sell, you
know, hundreds and -- actually thousands, but --
(Laughter.
MR. ZOELLICK : We'll put a real
focus on intellectual property.
SEN. HATCH: I would
like to see you do more to enhance the sale of inspirational patriotic love
songs in the country.
(Laughter.)
SEN. HATCH: CDs by erstwhile members of congress, you know. But we
raised concerns -- they raised concerns or concerns were raised about the AIDS
epidemic that rages across sub-Saharan Africa and is spreading at alarming rates
in other portions of the developing world. As you know, it's a serious thing.
Mr. Chairman, if I could finish this I would appreciate it.
I've been very interested from the beginning when Bono first came to me
and asked for help and I gave it. And I think other members of this committee
such as Senator Kerry are very interested in this, and I think all members are.
As you know, the epidemics of AIDS, malaria and TB raise many complicated
challenges that literally swamp the available local resources in many
nations.
And one problem is access to drugs. The harsh
fact is that even if we set the price of the cost of production those
medications would still be beyond the one dollar a day GDP of many of these
countries. And frankly it's hard to see how we can overturn -- ever turn around
the corner unless we get vaccines.
If you think the
anthrax attacks have exposed the fundamental weaknesses in the public health
infrastructure of our country imagine what the public health capacity is like in
the poorest nations of this world.
And it is just not
public health capacity or drug prices. As in our country complicated social
attitudes towards sexual behavior also plays a role. Unfortunately so does plain
ignorance. In this respect I would note that the government of South Africa has
an absolutely dismal record on AIDS information, and its policies on drugs like
novaropine (ph). And while I understand the motivations behind the drafting of
the Clinton administration executive order in Doha (ph) the language on AIDS
drugs, I am leery that these policies play out in the real world and that they
may have unanticipated consequences in the long run.
Now, I agree with your testimony that, quote, "It would be a tragedy
and health setback if the promotion of the flexibilities within the trips accord
degraded into an assault on intellectual property."
I
agree with that. So, I'm all for flexibility when it comes to AIDS, malaria and
TB in the developing world. I'm just afraid that sometimes one man's flexibility
might be perceived as taking of another's property.
Now, I just hope that all this flexibility in the short run does not
have the practical effect of disinvestment in the vital research that could
delay the development of vaccines and more efficacious treatments in the long
run. And as you know, we had some criticism by especially the EU as we usually
do at the World Economic Forum and others, and certainly from the lesser
developed countries, that we don't do enough, and I remember one time I read
about us having less than one percent foreign aid.
Well, I think of the hundreds of billions of dollars this country is
spending on keeping the world safe from weapons of mass destruction, of keeping
us peaceful in many areas of the world. The millions and millions of dollars
that we put in to the UN and its affiliated agencies. The billions and billions
of dollars in that. The billions of dollars in pharmaceutical research and other
technical and scientific research that has benefited the world. And it's a lot
more than just a little less than one percent. You can go on and on about what
the United States does and the burdens that we carry, and I want to help solve
these problems in sub-Saharan African and elsewhere on this globe where we need
to solve them in the interests of the whole world, not just those people in that
area.
I guess my question to you is, how will we know
we are reaching the point when this flexibility might reach the point of
degradation?
MR. ZOELLICK: Well, Senator, I know you've
had a long-standing interest in this because I remember we've had a chance to
talk about this on other occasions. And I agree with you, it's absolutely
critical to try to get it right for both the trade system and for the health
system, because as -- a point I noted in my testimony is that it is absolutely
vital that our trade system and trade policy be in line with our value system.
And if it's not, trade will lose. And the issue that this presents itself is in
part something we tried to deal with from the start of the administration which
is, can we take the flexibilities that are already in the intellectual property
regime and help deal with these extraordinary situations of pandemics and health
crises and others. And my view, to be honest, senator, is that if we didn't, the
intellectual property regime would get overrun.
So what
I talked about actually with, I think, some of the leaders in the industry,
people like Rio Gilmardon (ph) of Merck (?) and the people from Pharmacea is,
how do we use these flexibilities like the compulsory licensing provisions in
the context of crises, to make sure that if you're an African country, that
you'll abide by intellectual property rules but you have this escape valve in
these extraordinary circumstances.
And that's what the
political declaration at Doha (ph) was all about doing. As you mentioned and I
think this is vital, if this slips to a general assault on intellectual
property, everybody will be the loser because when I've talked with some of
those CEOs, I'm struck by the potential to even develop a vaccine for AIDS. And
yet, if we don't protect intellectual property people won't put the money in
investment to try to do that. And this is also an area of biotechnology which a
number of you with agriculture interests find, obviously, is very, very
critical.
The last point about this, senator, is that
while the cost of the drugs is obviously a piece of the problem, I think the
pharmaceutical companies, while they might have started a little slow, have done
a very good job of trying to get out of the curve in terms of providing these
drugs at low cost or no cost or for free. Because the key part is, it is not
just the cost of drugs. In developing countries, it is also the delivery system,
the prevention system, whole aspects of how you provide these medicines and how
you avoid having the problem start in the first place.
And if we don't get a hold of this problem in a continent like Africa,
it will have huge social and economic consequences. It does today but it will in
the future because in some of these countries, 25 to 30 percent of the public is
already infected and if we can't deal, for example, with the mothers that are
having babies and passing along this, it is going to be a cataclysm for 750, 800
million people. So we do need to get this balance and I think what we tried to
do at Doha (ph), senator, was to recognize the intellectual property rules we
all agreed to, have the flexibilities. Let's use those flexibilities while
preserving the recognition we have to protect intellectual property if we're
going to get the benefits in the future.
SEN. HATCH: I
couldn't agree more. I think you've done a terrific job under the circumstances.
I just want to compliment you personally and I know what a tough job you have
and I don't think we could be better represented in this country than by you and
I just -- you understand the balances that have to be made and the incentives
that have to be there to find these life preserving drugs. But yet, we've got to
do more and I'm certainly going to push to do more in this country to help some
of these very, very poverty stricken nations that are just being -- like you
say, 30, 40 percent are now infected with AIDS and we've got to do something to
help them. But thank you and I appreciate the hard work you've done.
SEN. BAUCUS: Thank you, senator.
And also thank you, Mr. Ambassador, for your work in this area too.
It's of vital importance. I've a couple of questions. One is soft wood lumber
and the other is wheat and they deal with lots of areas of our country. It's
certainly helped my state, Montana, but I'm amazed at how much these issues are
nationwide as well.
First, with respect to soft wood
lumber, it's my concern frankly that the United States government has not been
quite as forceful or as involved or as aggressive as it should be and let me say
why. Don't forget, many, many years ago, this committee, when Russell Long was
chairman, I remember him saying something to the effect that, we just need a
much larger USTR, much more staff and -- because all these other countries are
so involved in trade and care so much about trade, they have large staffs and
hire all these bright people and they out- negotiate us. They're just such --
they're so tough. And we don't care as much about trade.
Well, that's been changing over the years but it is true that to some
degree, when we changed administrations, we changed negotiators, we changed
personnel at some level.
I think more so compared with
other countries and I know the Canadians have a lot of people who spend their
lives figuring out how to take care of Canadians. Now, my concern is that on the
soft wood lumber negotiations that we as a country are not fully appreciating
and understanding and trying to figure out how to deal with all of the multitude
of complexities in the Canadian system with respect to soft wood lumber.
My sense, so far, in talking to the industry and
negotiators is we're a little too focused maybe on one component and not on all
the components because it's a zero sum game and if you don't get it all right,
there's going to be a big loophole. The discussion this far has been pretty much
on competitive pricing, that is the degree to which and over what period of time
Canada agrees to competitive pricing systems and pricing its stumpage. That's
well and good. Certainly a necessary part of all this.
However, I don't sense that our negotiators are focusing enough on some
other components. One is the tender system and as you well know, Canadian
Provincial governments give contracts to companies who get tenure. It's like a
professor, it's like a teacher. Not like senators but like in some other
professions. And they have a lock. And as you also know, there's not much of an
anti-trust body of law in Canada compared with the United States. And so these
companies can collude, and do.
Third, there's the
mandated sales provisions in Canada. A number of board feet have to be harvested
and sold which gets in the way. In addition to that there are some other
practices that have to be dealt with. One is the Canadian de jure and defacto
provisions which in effect make it impossible -- bit difficult if not impossible
to shut down. That is you've got to stay producing. And in all of the
circumvention issues that we face with Canadians, like drilling holes in studs
for example and things like that. I'm just urging the USTR and the
administration generally and those who are in discussions with Canada, to be
much more cognizant of the complexities of the Canadian system and much more
aware of and knowledgeable of the degree to which the Canadians will go to try
to find a way to -- and run this thing.
Now, it is my
hope that we could once and for all finally put this issue behind us. That is
the subsidies and the unfair trade practices of Canada with respect to soft wood
lumber. I cannot tell you the number of people around the country who are just
-- devastated is a bit strong but they are very, very concerned about this, in
just see what the Canadians are doing. We are next to Canada, we like Canada but
we don't like this practice. And I just urge you to follow up on that.
The other is the Canadian Wheat Board. We've commenced a
3.01(ph). But it's just unfair, it is market distorting for that Wheat Board to
set prices and I just urge administration to be more aggressive in pursuing that
one too. Because I've dealt with Canadians a long time and a lot of other
countries a long, long time and I can tell you, no country altruistically, out
of the goodness of its heart is going to give up a trade barrier, unless they're
forced to, unless there's leverage. It's not going to happen. Sweet words don't
do it. You've got to have leverage.
And one leverage we
have is the actions that we've commenced in both these cases. And the law is on
our side, the facts are on our side, fairness is on our side and I just urge you
to be a little more aggressive.
MR. ZOELLICK: Well,
Chairman, one of the good things about electing President Bush was that since I
worked on this issue in the '80s with Canada, it allowed the United States to
bring in that experience, as you talked about, that the Canadians have. But I
think, in general on soft wood lumber, you and I are actually in very close
agreement in that, as you know, we backed the cases that were filed by the
coalition, including -- I personally, while it was a commerce decision,
suggested the critical circumstances finding which was important along the way,
was the one that was appropriate. And so we now do have the preliminary
countervailing duty and anti-dumping duties.
Like you,
I think what distinguishes this period as this is the first time in 20 years we
have a chance to go at the underlying practices. For example, in the '80s we put
down an export tax that lasted for a while. And I couldn't agree with you more.
I think the whole key, as we approach this, is the interlocking and interrelated
nature. And I won't list them but I had written down pretty much the same set
that you talked about, is that I think that we can't just look at the option, we
have to look at the mandated requirements and the minimum pricing and the whole
pieces and how they fit together, because our clear objective -- and, you know,
I'm not sure we can do this, and if we can't get a good deal, we won't do it --
is to try to have an open and competitive market with Canada in this area. And
that's what the coalition, our own coalition has backed. We can work with the
environmental groups and I know you've had an interest in that because they
believe that the poor economic practices undercut this, so that's what we're
trying to do.
What we face in this area, Chairman, is
that, as you know, as of March, later in March, the Congress Department will
make its final determination for these duties, and that's a little bit of
uncertainty here because sometimes they change, and we also face a WTO
challenge, I'm sure, from the Canadians, on this. So, we have a period of time
to work on this issue, but one of the issues that we have to work with together
on this is to try to see what arrangement you can come to because you do run
certain risks if you go forward without having done that deal.
But what I want you to have a hundred percent assurance on is that I'm
not pursuing this for the sake of a deal, and if we can't get these types of
terms, then I don't think we should try to do it, but the industry will then
have to decide some of the risks that it runs. In the case of the Wheat Board, I
think we're having a chance to meet a little later this week, I actually have
some ideas that I'd like to try to suggest to you and your colleagues where we
might be able to try to pursue on this, as sort of additional steps, and so,
like you, I feel we pursued this 301 investigation. It's gotten us certain
information that's been useful, but this is a monopoly. It's not fair.
Now, there are certain rules that we have that we can be
able to use, whether WTO or our own unfair trade practices laws, while we're
also trying to negotiate these changes in the Doha (ph) agenda, but I frankly,
personally favor moving on multiple fronts and using multiple barrels of the
gun, so we can talk about it.
SEN. BAUCUS: Yes, perhaps
with WTO.
MR. ZOELLICK: Well, that's definitely one,
but I frankly also want to talk with the industry about a possible anti-dumping
countervailing duty suit, and talk to the people of North Dakota, because
sometimes the other States has actually helped. When you've had a group like
farmers that have a little bit of a harder time financing this. In the case of,
I think, Louisiana and Florida, they actually helped do some of the financing
for the group, and we learned some things through this 301 investigation that
might give a basis for some anti-dumping and countervailing duty actions.
So, frankly, Chairman, we can talk about this more. I'm
actually trying to think, number one, pursue this as we are in the new
negotiations. A possible WTO action, but the rules in this area are a little
uncertain and so, you know, we have to face that, but I think we could it in a
way that also helps the negotiations, but also possibly the anti-dumping
countervailing duty. So, I don't think we should restrict it to one.
SEN. BAUCUS: I appreciate that and before I turn over to
your good friend, Senator Rockefeller, I'd like to run forward a number of
question. We've been talking about this issue two or three times during
debate.
MR. ZOELLICK: And that's taking the fiscal with
WTO, the fiscal solution. There are a couple of approaches obviously to
resolving the fiscal matter. Some suggest reforming our tax law. Others suggest,
particularly myself, that we go to the Europeans and say, "Hey, let's find a
WTO, kind of more broader solution, to this solution to avoid a battle between
the United States and Europe and because of tax solution." It isn't going to
happen. The United States is not going to change its tax laws broadly to address
the question of rebates and, you know, what's permissible and what's not, in
terms of export stimulus and subsidies. Your thoughts?
SEN. BAUCUS: Well, I certainly understood you made this point to
Ambassador Lamy very strongly, which suggests --
MR.
ZOELLICK: Yes. The problem we're going to face on this, Chairman, is one of
timing in that we now, I think, have an extra month's reprieve for some
technical reasons, but by the end of April there will be an arbitration panel in
the WTO that will determine a retaliation amount that the EU can use. We're
fighting to lower that amount.
They've used a number
that is drawn off the estimates of the tax revenues from the Congress of about
$4 billion. So, as of April, at the end of April, they'll be in a position to
retaliate.
I don't think the EU is eager to retaliate
and they know, and I've tried to make the point, that this could start off a
series of actions that could be destructive to the larger economic relationship.
The problem is that if they get a sense that the United States is just thumbing
their nose on the decision and just sort of ignoring it, then there will be
pressure to retaliate, not necessarily full, but definitely in part.
So, what I was trying to do with Lamy in our last meeting
was to try to say, "Look, as an administration, we'll take this seriously and
one thing we can try to do is create the type of internal task force --
obviously, this involves heavily the Treasury and tax policy -- to come up with
some recommendations within a certain definite period of time." Secondly we can
also try to have a U.S./European tax policy dialogue on this with some of the
experts, so that if we resolve this this time, it's resolved for good and, if
necessary, get it - try to agree or try to do it in a Doha (ph) agenda, sort of
to try to finalize it.
But, third, there's going to be
the congressional dimension, and this is where, as you and your colleagues
decide what if, at all, you've got to consider on this in terms of hearings and
others. It's important that we try to use this with the Europeans to show
there's a serious consideration of the topic, because otherwise I think the
reality is, Chairman, we're going to face retaliation and, in my trade role,
what I've been trying to do is to show our good faith response, but also make
clear this is a huge problem.
It's not going to be
solved anywhere near overnight, but if we engage as administration, if the
Congress engages on it, that should be reason for the Europeans to hold off
retaliation. For how long, I can't say. I don't know. But I think this is where,
if we can, Chairman, we're going to have to work really closely with the tax
policy experts and the Congress on this, because otherwise it's retaliation.
Although one other option is compensation, Chairman, I'm
sorry, which would require, again, congressional action.
SEN. BAUCUS: Sorry, I'm sorry. Sorry, I got distracted. I hear you, but
I tell you, listening to the music as well as the words, I sense a little, from
my perspective, too much emphasis on a tax solution. I think that's more
difficult to attain than some might think, in this Congress, that is, the number
of years it's going to take, for what some people are talking about.
And I hear you say it's a question of timing with
Ambassador Lamy and so forth, and WTO, but I urge you to look for alternatives.
Don't put too much emphasis on a mere term, or a moderate term, you know, tax
solution, because I don't think that's going to happen. So that we do avoid a
collision, why don't they brouhaha with Europe over this matter.
MR. ZOELLICK: Chairman, just on this, and I apologize for following it
up, but I just -- I want to make sure, as we go forth, this is going to be a
tough issue that there's not any question of ever misleading on this. I'm going
to try to do everything we can to hold this off, but the real problem is that
we're now in a world where they either retaliate, we do compensation, which
would require lowering tariffs, or we change the law, and I can't change
that.
Now, what I can do, and what I will try to do, is
that I have certainly made the point, as you have, about how complex and
extraordinary this is in terms of tax policy and how it would take a lot of
time, and no one can say for sure the result. Well, all I'm suggesting is if
Congress takes this issue on and starts to examine it, however this branch
decides to do it, please work with me so I can use that to try to make the case
for deferral of retaliation because otherwise I just can't move the pieces on
the board any other way. And so --
SEN. BAUCUS: I hear
what you're saying, but I also ask you to go try to find another approach, as
well, because I think that other approach is probably going to be more
fruitful.
MR.: ZOELLICK: But I'm certainly, with you
and your staff, open to any --
SEN. BAUCUS: Thank you
(laughs.)
Senator Rockefeller.
SEN. JOHN D. ROCKEFELLER IV (D-WV): Thank you, Mr. Chairman, and I
apologize I was a little bit late.
Mr. Ambassador, I
think you know by now my interests in steel is not either to embarrass you, the
Bush administration, the Clinton administration, but it's profound because it
involves tens of thousands, hundreds of thousands, when you include families and
retirees, et cetera, lives. You've been discussing with the Chairman
agricultural matters. I always vote for agricultural bills in which, in one way
or another, we sort of manage to pay farmers not to grow crops with federal
money.
And it's interesting to me that if we decline to
do anything from the federal government's point of view to help what is sort of
a pillar industry in this country, and with that little opening, I want to ask
you -- and I'm going to read the question because I want it to be done
correctly. And it's just an honest question, because you know, I respect you,
you're a lawyer, you sit at these tables and tell us things, and you know Doha
(ph) practices and all the rest of it trade along very well. And in our parts of
the country where we do steel we have to depend entirely upon people like
yourself and the president and our own efforts to try to allow people to keep
putting food on the table. And in some cases, to put it rather dramatically
because it's happened in the past, to avoid committing suicide because of loss
of jobs. When you're dealing with three or four generations of family within the
same steel plant it's unlike anything else in this country really except I
suppose for farming and coal mining.
In any event, when
this committee last met to discuss trade in December I remarked how very
disappointed I was that you had sat in my office and you wrote me a very strong
letter in opposition to what I'm about to say, and told me that you would not do
anything to weaken US trade laws. And that was very important because really --
it's really the only question I wanted to ask you. It's the only question I
cared about. I didn't have any question about your intelligence, your knowledge,
your integrity and all the rest of it. I did have a question about this because
I had gone through the same experience with the previous administration which
with whom I've basically cut off relations because of steel, because steel is
that important to West Virginia and to me and in my judgment to a lot of our
country.
And then you went on to say that you went off
to the Doha (ph) ministerial and you agreed to put US anti-dumping and
countervailing duty laws back on the table. Now, I have a little prcis of the
previous conversation you had with Mr. Baucus and what you said and that was the
case. I understand that but I am proceeding with my question because it's laid
out I think effectively.
You were not at that finance
committee mark-up and you worked on that in your letter to me, and I understand
that. You sent me a letter protesting you would follow through on your
commitment to me and that you had not agreed to any weakening in US trade laws.
Now, I think this committee would benefit from some straight talk on what was
agreed to at Doha (ph), not the lawyer's language but the logical
implications.
The U.S. has been arguing for years that
our existing trade laws should not be on the agenda of the new WTO round. It has
a history. Then you went to Doha (ph) and suddenly we agreed that,
"Improvements," to our trade laws would be part of the package, and it's a
benign word but perhaps not.
Technically we have not
agreed to anything that will change our trade laws yet, so you're right about
that. And I guess the lawyers can keep saying that until we sign the final
agreement in three years time. But we have agreed that such changes will be part
of the final package of the new round.
We've agreed to
that.
So, realistically, that means that we're not
going to get what we want in agriculture or services or market access unless
we're prepared to pay with concessions on our trade laws. None of these
countries want us to strengthen our trade laws. They never have. So, it seems
self-evident that the only way that we're going to reach agreement on,
"Clarifications and improvements," is by weakening those trade laws.
And since this is the major U.S. concession in the new
round that means that the countries that don't want to open up their agriculture
or services markets in Europe, Japan, Korea and the like, India, have every
incentive to ramp up their demands on US anti-dumping laws to ensure that we pay
a maximum price for any trade concessions that we might get from them, that you
might seek from them.
So, you can tell us that there
will only be cosmetic changes, but the other WTO countries whose agreement will
be necessary to complete the WTO round that you're devoted to have every
incentive to insist on much more than fundamental changes. Our trading partners
characterize this as a major victory for them. Why would they do that? The
media, those that support the Doha (ph) agreement as well as those who oppose
the Doha (ph) agreement, have characterized this as a major US concession. Why
would they do that?
So, I'd like to ask you two things,
and please bear in mind that you have in front of you -- well, no senators at
all except for myself --
(Laughter.)
-- who want to believe and want to be helpful and want to see all of
this work, and who do understand what globalization means, and who have taken it
on in their states.
I'd like to ask you, did you make
agreements in Doha (ph) that will likely lead to weakening US trade law? Number
one. And number two, are you prepared to walk away from the new WTO negotiations
if other WTO members insist on changes that would weaken the integrity of our
anti-dumping laws?
MR. ZOELLICK: Okay. Well, let me
start again, senator, as you and I have discussed and as I mentioned to the
chairman, is that I think effective trade remedy laws are creatable, and we've
used them and we've used them in the area of steel where others did not use
them, as you know. And as you and I have discussed, I was a key participant in
moving on that after. So, I think the bona fides have been established here.
SEN. ROCKEFELLER: Are you referring to 201?
MR. ZOELLICK: Yes.
SEN.
ROCKEFELLER: No, but you see that's like -- we can all talk about that and we
can all say who did what and who talked to who and how that came about, that's
not the question I'm talking about.
MR. ZOELLICK :
Well, it's part of the answer I'm giving, senator, because it is part of the
laws that we use to try to safeguard our industries as part -- and this is an
area particularly, as you emphasize, steel being the heart of your concerns and
this 201 goes to steel.
SEN. ROCKEFELLER: Well, then I
need to -- excuse me, but I need to interrupt and say that it's going to be too
late to do any of this unless the president does come up with a remedy. And I
think you're --
MR. ZOELLICK: And we're working on
trying to come up with a remedy.
SEN. ROCKEFELLER: I
know, everybody is always working on this, but nothing ever works for the steel
industry.
MR. ZOELLICK: And in addition as I mentioned
to the chairman, there are a number of other areas where we've supported the use
of these laws including soft wood lumber, and as I just suggested here, the
possibility of dealing with Canadian wheat. So, we are comfortable and believe
these laws are important to be used, and need to be used, and we will use
them.
Second, as you properly identified, we did not
negotiate any changes to these laws. And much less agree to any changes in these
laws. You have the text. I'm sure your staff has the text of what we did agree
to. And here is where I honestly think your analysis of the international
situation may be a little off, senator.
A number of
these other countries are now developing similar laws, and we are finding them
being used increasingly against American exporters, and I touched on some of
that in our letter. I do believe it is possible to develop coalitions with a
number of these other countries in terms of the importance of these laws and to
try to support and protect them and stop any adjustment of them that we don't
like. There are some areas where we would like some adjustment, and I talked
about some of those in the letter, not the least of which are some of the use of
developing countries of these laws against us.
Senator
Lincoln and I talked about the misuse of these when she was last here about
poultry, and I'm trying to work to fix that problem with South Africa. I
mentioned to Chairman Baucus a number of decisions that we think were poorly
done by WTO panels, and the key issue is deference to our decision-makers, the
ITC and the commerce which we don't think WTO panels have accorded enough of.
So, there are areas of clarification and improvement that we believe will help
US exporters without undermining our use and ability to use these laws in a
protective fashion which I've agreed and I support their use. And as I said to
the chairman before you came in, I think -- I imagine like you do -- that if we
don't have effective trade remedy laws we're not going to be able to maintain
support for trade in this country, so it's a key component of the package of
what we have going forward.
So as you can see, what we
tried to do with that language, and you are right, we were in this case, in the
framing of it, there were 141 countries that wanted something included on that
and we were the one that was the (outlayer ?). So we fought -- and as I think I
explained to you in the letter, I personally fought and went to a number of
countries -- the chairman of the group in South Africa and the Koreans and the
Japanese and the Chileans, to insist that we not only include the language that
protected the effectiveness of the concepts and the agreements, but also the
instruments that we use. The core instruments and objectives that we include,
and that language would not have been put in, Senator, if I hadn't gone and
pressed personally and insisted that this had to be part of the component of
what we have going forward.
So these are laws that
we're going to see, and interestingly enough they're increasingly being used not
only against our agriculture producers but most of the 60 odd orders against the
United States are against some of our metal producers and some of our chemical
producers and some of our basic industry producers. So as you say, senator,
we're part of an international system. We need to try to make sure that these
are not used unfairly against us and that we protect our fair use, and that's
what I'm committed to try to do.
SEN. ROCKEFELLER:
That's your answer?
MR. ZOELLICK: That is an answer.
Yes, that's my answer.
SEN. ROCKEFELLER: Okay. The --
if you put on the table, and you're the only one of 141 or 142 countries that so
do, clarifications, simplifications of -- clarifications improvements of
anti-dumping laws, and then you say you go to the Chileans, the Koreans, others,
and you say -- you know, you've talked very strongly to them, but there's
nothing in writing, there's no agreement. But the language is now on the agenda,
clarifications and improvements. So where is your leverage other than your
voice? I mean, it's you versus all these other countries that don't want to, you
know, open up their access or to diminish their exports and you give them
something which they want. You give them leverage, and I don't see where you
have extracted any leverage at all from them except some conversations that you
had.
MR. ZOELLICK: Senator, perhaps I wasn't -- didn't
state it explicitly. Some of the language that is in that statement which
creates the context for our further work is the written language that I insisted
on, including the use of the word instruments plus much of the other language
came from us in terms of the offensive agenda and preserving the concepts and
the effectiveness of the agreements.
So, first, it is
written down.
The second is that there are countries
who will increasingly support the use of anti-dumping and countervailing duty
laws with us. So in that sense -- and this is where the economic and
international system is always changing -- one of the questions that we will
face as a country -- but this one of the reasons why the letters I get represent
a diversity of views from you and your colleagues on this, is that we can form
alliances with countries that don't want any change whatsoever in these laws.
Any change. The price might very well be that many American exporters, and some
of the people on this committee on both sides of the aisle will be extremely
frustrated.
And that's one of the things that we will
have to consult with you as how we proceed and how try to form the coalitions.
It is my goal, Senator, to try to pursue a negotiation that promotes the
interests of American exporters, because I think many of the developing
countries are not using these laws in that way that we use them and I think they
need to move up to a level playing field with us, and to preserve and protect
the effectiveness and the use of our laws.
Now, there
are other aspects of this, even related to us -- as I alluded to, there are
decisions that frankly, some of them involving other countries, made by the WTO
that will hurt the United States. For example, how they calculate a net value.
In other words, whether they take as they calculate the dumping, whether they
put a positive as well as the negatives to have some net numbers. We believe
that was read into the rules inappropriately. It wasn't in a case that involved
the United States, but it will hurt the United States as we try to use those
laws. So that's the type of issue that we'd like to try to get changed.
SEN. ROCKEFELLER: That's all well and good. I will come
back to my question, that if anti-dumping is weakened in this negotiation, will
you pull us out of it?
MR. ZOELLICK: And, Senator, you
certainly can understand that weakened in which way? If it's weakened in a way
that helps American exporters but doesn't hurt American importers --
SEN. ROCKEFELLER: But that's the classic argument that
people always come back with. I mean, you're being the senior senator from
Texas, as you answer that.
MR. ZOELLICK: I'm not sure
he would be pleased with that attribution though --
(Laughter.)
SEN. ROCKEFELLER: Ronald Reagan
did this with the Japanese and semi-conductors. Sure it was a different context
and we were swamped. I mean, you say well, other people will be displeased
because, as Senator Graham would say, the prices will go up or somebody else
will say well, our exports will be threatened, they will retaliate. Retaliation
is constantly used as an argument. I heard it from Charlene Barshefsky, I hear
it from you. I'm trying to protect steel. And like it or not -- preserve steel.
I don't want to use the word protect so that you can't use that against me, but
the word preserve. Like it or not, that's what I'm focused on and I'm not
focused on other things, and I have a right not to be focused on other things
because that's where our state rises or falls. So that if you allow anti-dumping
-- I'll be finished, Mr. Chairman, just one second -- if you allow anti-dumping
laws to be on the table and changed, and it affects steel, why should I not --
why should I trust you when you came to me and said that you would not
anti-dumping laws to be weakened, when you now say that in the context of lots
of processes -- exports, services and other kinds of things, that sometimes you
have to make adjustments of these sorts.
MR. ZOELLICK:
Senator, you can disagree with me, but I have done absolutely nothing -- and I
repeat that -- absolutely nothing to lead to a point of distrust. And in
particular, as you've said, your prime interest in steel, and I have done more
than any USTR to try to help the steel industry and am continuing to do so. And
as we talk about negotiations that have been launched and have very general
language as we proceed and have a deadline of 2005, I have been working very
ardently, and I know you have as well, on the near term problems of the steel
industry, because that will ensure -- and I'll be happy to say preserve and
protect because we are trying to preserve and protect the steel industry. That's
what safeguards are about.
And so you may disagree with
me, Senator, and you may vote accordingly and that's certainly your prerogative.
I know that the letters that I have received and the resolutions that I have
received from the House and the Senate are ones that I carefully followed and
that I held to. And so in terms of trust, that is my answer.
SEN. BAUCUS: I'm going to have to go on --
SEN. ROCKEFELLER: Well, I'm not satisfied with that answer, Mr.
Chairman. I want that on the record.
SEN. BAUCUS: Well,
you have a next round if you wish to speak.
Senator
Lincoln.
SEN. BLANCHE L. LINCOLN (D-AR): Thank you, Mr.
Chairman, and certainly thank you for your leadership and holding this very
important hearing.
We would like to thank Ambassador
Zoellick for being here and to all of the others that will testify, for taking
the time to help us prepare for the upcoming negotiations in the WTO and for
some of the ongoing negotiations in other important areas such as U.S. and Chile
free trade agreement.
I don't want to take up too much
time. I'd like to just reiterate a couple of things maybe that have been spoken
about, particularly TPA and TAA. We've all noticed that the vote in the House on
the TPA was quite close. I think it was close in large part because there are
large parts of our economy that have in some ways lost faith in our nation's
negotiations on their behalf in many places, and I take full responsibility for
my share of that as well -- (laughs) -- because I do know that often times that
results in their concern for both not only your department, but also for the
U.S. Congress and what we're doing.
So I encourage us
as we go forward with TPA, and I believe it was indicated to me that you stated
earlier that you also felt like TAA was something that we could move with TPA. I
think doing so and moving a trade adjustment assistance package would also do a
great deal in rebuilding some of that faith that we need from the American
public as well as the American economy. So I hope that we can do that and I hope
that we can work with you in making that happen.
The
other segment of the economy which I have devoted a great deal of attention is
agriculture. You're well aware of that in my correspondence with you and on the
issues that we've worked on. Our rural economy has been suffering and a lot of
it has been because farmers have been squeezed between low prices at home and
very few open markets abroad and we want to correct that. I hope that we can
work through the concerns, as I mentioned earlier, in terms of the trust that
both rural America and other parts of our economy have and our ability to make
sure or there general criticism maybe perhaps that TPA has received from the
heartland and from those groups in our economy and recognize that U.S.
agriculture needs to see dramatic improvement in the commitment of our trading
partners. And I hope we can press for that. I hope we can work together to see
that happen. I think it will certainly benefit not only the rural economy and
our constituency in rural America but I think it will benefit the overall
economy of our nation.
I'd also like to comment on
Phil, just a bit, and that is to simply say that as you look at -- as you look
at the issue of steel and you have the opportunity to address the serious
problems from which the steel industry is suffering, we hope and think it is
very important that full and adequate section 201 relief is granted to the steel
industry. And we also -- I also particularly want to clean out from our
perspective in Arkansas the pipe and tube industry often sees imports that
otherwise might come in the form of flat rolled imports. So it's very important
that the duties that are attached to these two sectors are linked, that there is
a connection. So that the importers of the flat rolled steel do not simply
switch to an increase in pipe and tube imports to take advantage of a
disproportionately low duty in that sector.
So I hope
that we can keep that in mind as we go forward in terms of the steel talks
because as you know from my perspective in the State of Arkansas, we are all
mini mills but we have an awful lot of offshoot industries in the steel industry
that are very important to us as well.
And again I hope
that as we -- just in closing in terms of TAA, as it relates really to the
observations I've mentioned earlier in terms of trust, I hope that they will be
linked and I hope you will help us encourage that in terms of bringing up TAA
and TPA because I do think it not only helps us move TPA but I also think it
will help us to build that trust out there with the economies that we're -- the
individuals in the economy we're working with as well as our individual
constituents.
So, I appreciate that and thank you for
being here. I know that we've got to vote shortly, Mr. Chairman, and I will
submit any further statement that I have for the record.
SEN. BAUCUS: Thank you, Senator, very much.
SEN. LINCOLN: Thank you.
SEN. BAUCUS: I think
we appreciate that very much.
Senator Snowe, any
questions?
SEN. OLYMPIA J. SNOWE: Yes, I do, thank you,
Mr. Chairman.
Welcome, Ambassador Zoellick, and I'm
sorry I wasn't able to be here earlier, but constant conflicts around here.
Several questions. One of course, I know that you have
addressed the issues concerning trade remedy laws and what was decided for at
the Doha (ph) ministerial. But I certainly want to reemphasize the fact that our
anti-dumping and countervailing duty laws are critically important, particularly
as we begin to address the Trade Promotion Authority. I hope there's no notion
that somehow these are going to be placed on the table they're going to be
renegotiated or undercut or minimized in any way. So I see that as the essence
of being able to bring valid complaints with respect to unfair competition from
abroad to our domestic industries. And that is the way, I think, of leveling the
playing fields and those trade remedy laws have been very effective and
essential in that regard.
Do you have any comments on
that in terms of what you expect as a result of having these being placed on the
agenda?
MR. ZOELLICK: Well, I think that the use of the
trade remedy laws is effective -- trade remedy laws is critical. This
administration has used them and we talked earlier about some of the examples,
obviously in the area of softwood lumber which are a particular interest to you.
There are some other areas that we discussed today about their use. We did not
negotiate any changes in those laws nor did we agree to. We fought very hard for
a text that allows us to pursue some of the areas where these laws are being
used against the United States in increasing numbers, interestingly enough
against steel, chemicals, agriculture, a whole series of industries by countries
that don't have the same standards and procedures that we do.
We also have the ability to go after some of the underlying problems
that are the heart of why you have the trade remedy laws in the first place, in
terms of subsidies and anti-dumping because it strikes me as totally
inappropriate to have a discussion about the remedies unless you go after the
nature of the disease. And we also believe we should attack the decisions of the
WTO that have hurt our ability to use these laws. The text otherwise talks about
the importance of the need to preserve the effectiveness of the concepts and
principles and indeed the instruments that we have ourselves.
So, we certainly recognize the importance of these laws, the need to
use them and the need to protect them.
SEN. SNOWE: So
you see it as more of an effort to focus on these laws of other countries --
MR. ZOELLICK: In the --
SEN.
SNOWE: -- in negotiating of making sure that these laws are non negotiable
because I would hope that we could dispel that notion that somehow there's this
perception that that maybe true. That these will be negotiated.
MR. ZOELLICK: I do believe that they should be -- that we need to
clarify the misuse of other countries. I also think sometimes there's been some
decisions of the WTO that have hurt our ability to use ours.
SEN. SNOWE: All right, okay. On the softwood lumber issue, as you know,
Governor Roscoe was the special representative on this issue in working with
Canada to hopefully try to expedite a consideration here. What will happen now?
I know there was a meeting that was cancelled in December. Has anything evolved
from those face to face meetings and having Governor Roscoe in that position?
What's going to happen now? I know he's obviously got a new position with the
R&C (?) so whether or not they're going to change that position at all, or
has anything resulted from those meetings?
MR.
ZOELLICK: The process, Senator, will continue. In other words Governor Roscoe is
working with my staff and the Commerce Department staff and so there's no
fundamental change in the approach. Where we are, today, is we have the
anti-dumping and countervailing duty remedies in place which we supported an
unfair trade law practice about 31 per cent. Those are preliminary. And so the
Commerce Department will make a final decision on those in late March.
What we have been trying to do, and I talked about this a
little bit with the chairman is, the Canadians for the first time in 20 years
have shown a willingness to go at some of the underlying practices that have
created a lack of a market in Canada. And so what Governor Roscoe was doing and
now my staff and the Commerce people are doing, is to probe the provinces and
the central (inaudible) in Ottawa, working with our lumber coalition and other
groups like environmental groups, to see if we could have a series of
interlocking changes to create a market and I'd be happy to go through the
details of those. But, we'll see if that is possible. I don't know whether it
is.
SEN. SNOWE: Well, hopefully we can resolve it in a
permanent way. I mean, obviously this is a very vital issue to my state and to
my industries and obviously if we can work through a permanent resolution
obviously that would be the best approach. But no matter what, it clearly is,
you know, an unlevel playing field that has to be resolved.
Mr. Ambassador, one final question on fishing subsidies. As I
understand it, what was agreed to is there's going to be fishing subsidies would
be discussed. But there was no distinction made between conservation measures
and excess fishing capacity. And our position was, at least in Seattle in '99,
that we would discuss fishing subsidies with respect to those that contribute to
excess fishing capacity.
Has our position changed?
MR. ZOELLICK: No, and in fact, you'll be pleased to know
that I worked with the World Wildlife Fund on promoting this and indeed they and
another environmental group put out some very complimentary releases because
this is the heart of an example of where bad economic policies, bad
environmental policies. So the real problem here was getting the European Union
and to a certain degree, Japan, to finally budge on this issue. And, it's an
interesting example working with some of the NGOs. We've got some of the member
states in the European Union to also adjust, so this is one that we're
particularly pleased we were able to get accomplished.
SEN. SNOWE: Okay, thank you.
Thank you, Mr.
Chairman.
SEN. BAUCUS: Thank you very much, Senator.
Senator Hatch think has a question.
SEN. HATCH: Senator Grassley asked me to ask you a question. Mr.
Ambassador, as you know I have been very concerned about the status of Mexico's
new tax on U.S. supplies of high fructose corn syrup.
Senator Grassley has seen press reports from last week stating that
Mexico is considering modifying its tax to apply only to producers using
imported or U.S. supplies of high fructose corn syrup. Are you aware of those
reports and if so what's your reaction?
MR. ZOELLICK: I
am, senator, and to the best of my knowledge they're inaccurate but since this
is an issue that I know a number of farm seat senators have a strong interest
in, let me just explain for a moment what we've done. We believe that the
Mexican action is illegal, it's protectionist, it's discriminatory and I've had
three meetings with my Mexican counterpart and another with the Mexican Foreign
Minister to try to get this resolved.
My Mexican
counterpart, Minister Darbez (ph), frankly was decent enough to come up to the
United States and meet with a lot of our corn people and high fructose corn
people to explain that the Fox administration opposes this and wants to get it
reversed. And I talked with him as recently as this past weekend and he gave me
a sense that they would be trying to do so in the near future. That report goes
to the idea of how they would try to resolve it and whether they'd do it in a
way that helps the producers of high fructose corn syrup in Mexico but not the
people who would be able to send it from the United States and the approach that
the Fox administration has taken is non-discriminatory which is what we've urged
them --
SEN. BAUCUS: Thank you, senator. Before we turn
to our next panel, Mr. Ambassador, I would just like to firm up a couple of
points here. The commission that you're a member of, that I referred to in my
earlier statement, recommended that TAA be extended to secondary workers and the
commission which was the -- and the vote on this was unanimous, you and
Secretary Rumsfeld, Carla Hills and others also recommended providing health
care to TAA recipients. I assume that's your current view?
MR. ZOELLICK: Senator, I've gone back and looked at -- since these --
some of these relevant -- references the report have been raised to me and I
often find, not surprisingly, there's various types of qualifying language on
these issues. But I think here's the key point. I think there are various ideas
and I'm not an expert and the Department of Labor is, about possible ways to
deal with the secondary worker problem, where they're using the Workforce
Investment Act or other things and I think the administration is interested in
doing that and I believe that Secretary Card's letter of December actually
mentions this in some fashion.
On the health insurance
issue the administration has had a series of proposals dealing with refundable
tax credits. There's another approach that's been used using the COBRA payments.
Again, I don't presume to be an expert on this but not surprisingly the talking
points that I've seen is that the COBRA payments actually covers a large number
of other workers, people that would be voluntarily.
It
also has the problem that it requires various changes in terms of business or
state laws so it's not as immediately put in effect and ends up being more
costly. And so I think, in terms of the thrust, there's an interest in trying to
work on this issue. At least as I understand it, there's a different approach in
how to do so. But what I want to emphasize to you, chairman, and this is the
point that Senator Lincoln mentioned as well, I personally, even more
significantly the administration, believe that you need to have very good and
improved trade adjustment assistance programs.
There
are obviously going to be debates about how to try to do that but I believe,
long before I took this job and I believe now, that if you're going to have a
transformational process in the economy, you've got to help people change and
frankly, it starts in the education system.
SEN.
BAUCUS: Right. But I'm not getting into the mechanics of the procedures and so
forth and of course the devil is in the details. Still, I take it that you do
think that that TAA assistance also means covering secondary workers and health
benefits, regardless of -- not getting into how it's done.
MR. ZOELLICK: The only point I'm hesitant, because, as you could
imagine, I'm not the Secretary of Labor, when you say TAA assistance, I think
there's ideas of whether you do this with a workforce and the secondary --
SEN. BAUCUS: That's what I'm talking about, helping the
secondary workers. I'm talking about helping the secondary workers.
MR. ZOELLICK: And I believe there's an administration
position through the secretary -- through the Chiefs of Staff's letter saying,
willing to try to work to try to cover this.
SEN.
BAUCUS: Right. To get it fast tracked we need significant meaningful trade
adjustment assistance, it's that simple.
MR. ZOELLICK:
And, chairman, again, this is not my directory but since I agree with you, if I
can help, if it's ever stuck in the process, give me a call and I'll try to do
what I can.
SEN. BAUCUS: You got it. Okay. Well, thank
you very much, Mr. Ambassador, you've been very helpful. We'll have many more
hearings like this but I think this has been a good, solid, constructive hearing
and it very much helps all concerned.
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