SPEAKERS CONTENTS INSERTS
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48–003 CC
1998
NEW TRANSATLANTIC AGENDA
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
JULY 23, 1997
Serial 105–20
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Printed for the use of the Committee on Ways and Means
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
AMO HOUGHTON, New York
WALLY HERGER, California
JIM McCRERY, Louisiana
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JIM NUSSLE, Iowa
SAM JOHNSON, Texas
JENNIFER DUNN, Washington
MAC COLLINS, Georgia
ROB PORTMAN, Ohio
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
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WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
RICHARD E. NEAL, Massachusetts
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
JOHN S. TANNER, Tennessee
XAVIER BECERRA, California
KAREN L. THURMAN, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
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Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California
E. CLAY SHAW, Jr., Florida
AMO HOUGHTON, New York
DAVE CAMP, Michigan
JIM RAMSTAD, Minnesota
JENNIFER DUNN, Washington
WALLY HERGER, California
JIM NUSSLE, Iowa
ROBERT T. MATSUI, California
CHARLES B. RANGEL, New York
RICHARD E. NEAL, Massachusetts
JIM McDERMOTT, Washington
MICHAEL R. McNULTY, New York
WILLIAM J. JEFFERSON, Louisiana
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined. The electronic version of the hearing record does not include materials which were not submitted in an electronic format. These materials are kept on file in the official Committee records.
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C O N T E N T S
Advisories announcing the hearing
WITNESSES
Office of the U.S. Trade Representative, Hon. Jeffrey M. Lang, Deputy U.S. Trade Representative
U.S. Department of Commerce, Timothy J. Hauser, Acting Under Secretary, International Trade Administration
American Electronics Association, Patrick J. Yanahan, Jr
European-American Business Council, Willard M. Berry
Frost, Ellen L., Institute for International Economics
Insta Graphic Systems, Janet Wells
Stern Group, Inc., Hon. Paula Stern
Transatlantic Business Dialogue:
Lodewijk J.R. de Vink
Hon. Paula Stern
Janet Wells
USA Chicago, Inc., Patrick J. Yanahan, Jr
Warner-Lambert Co., Lodewijk J.R. de Vink
SUBMISSIONS FOR THE RECORD
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Health Industry Manufacturers Association, statement
International Trade Council, Alexandria, VA, letter
JBC International, James B. Clawson, letter
National Electrical Manufacturers Association, Rosslyn, VA, statement
Philips Electronics North America Corp., Thomas B. Patton, statement
U.S. Chamber of Commerce, Wolf Brueckmann, statement
NEW TRANSATLANTIC AGENDA
WEDNESDAY, JULY 23, 1997
House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:08 p.m., in room B–318, Rayburn House Office Building, Hon. Philip Crane (Chairman of the Subcommittee) presiding.
[The advisories announcing the hearing follow:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
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CONTACT: (202) 225–1721
FOR IMMEDIATE RELEASE
July 8, 1997
No. TR–13
Crane Announces Hearing on
New Transatlantic Agenda
Congressman Philip M. Crane (R–IL), Chairman, Subcommittee on Trade of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the New Transatlantic Agenda (NTA). The hearing will take place on Wednesday, July 23, 1997, in the main Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 p.m.
Oral testimony at this hearing will be from both invited and public witnesses. In addition, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee or for inclusion in the printed record of the hearing.
BACKGROUND:
In December 1995, the United States and the European Union (EU) launched the NTA to initiate specific joint U.S.–EU actions which would address global economic, political, and humanitarian challenges more effectively, fight international crime, terrorism, and drug trafficking, support peacemakers around the world, and bring down barriers to commerce. The trade action plan includes efforts to reduce barriers to trade, enhance trade opportunities, resolve trade disputes, and facilitate customs cooperation. As part of the Agenda, the United States and the EU recently concluded a package of Mutual Recognition Agreements (MRA), which aims to reduce regulatory burdens by recognizing in six industry sectors the results of product testing or certification requirements set by both governments, thereby eliminating the need for duplicative inspection, testing, or certification requirements.
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The NTA includes a commitment on the part of the United States and the EU to expand bilateral trade through an initiative called the New Transatlantic Marketplace. An important companion to the Marketplace Initiative is the Transatlantic Business Dialogue (TABD), a forum in which top American and European business leaders can meet to discuss ways to reduce barriers to U.S.–EU trade and investment. The major recommendations endorsed by the United States and European business communities since the inception of TABD include developing common standards, concluding MRA, eliminating tariffs in information technology products, adding to or accelerating some Uruguay Round tariff cuts, and implementing anti-bribery and corruption statutes in Europe.
In announcing the hearing, Chairman Crane stated: ''This hearing provides a good opportunity for us to study important developments in transatlantic commerce and prospects for further liberalization and facilitation of trade. The forum is unique because of the strong involvement of the business community as an official partner. The NTA has already been successful in removing barriers to trade between the United States and Europe through the Mutual Recognition Agreement.''
FOCUS OF THE HEARING:
The focus of the hearing is to examine the trade goals of the NTA, including the TABD. Witnesses should focus on the prospects for increased trade liberalization between the United States and the EU, including increased market access, reduced barriers to trade, the recently concluded package of Mutual Recognition Agreements, the impact of unilateral trade sanctions, and the role of Eastern Europe.
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DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:
Requests to be heard at the hearing must be made by telephone to Traci Altman or Bradley Schreiber at (202) 225–1721 no later than the close of business, Wednesday, July 16, 1997. The telephone request should be followed by a formal written request to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. The staff of the Subcommittee on Trade will notify by telephone those scheduled to appear as soon as possible after the filing deadline. Any questions concerning a scheduled appearance should be directed to the Subcommittee on Trade staff at (202) 225–6649.
In view of the limited time available to hear witnesses, the Subcommittee may not be able to accommodate all requests to be heard. Those persons and organizations not scheduled for an oral appearance are encouraged to submit written statements for the record of the hearing. All persons requesting to be heard, whether they are scheduled for oral testimony or not, will be notified as soon as possible after the filing deadline.
Witnesses scheduled to present oral testimony are required to summarize briefly their written statements in no more than five minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full written statement of each witness will be included in the printed record, in accordance with House Rules.
In order to assure the most productive use of the limited amount of time available to question witnesses, all witnesses scheduled to appear before the Subcommittee are required to submit 200 copies of their prepared statement and an IBM compatible 3.5-inch diskette in ASCII DOS Text format, for review by Members prior to the hearing. Testimony should arrive at the Subcommittee on Trade office, room 1104 Longworth House Office Building, no later than Monday, July 21, 1997. Failure to do so may result in the witness being denied the opportunity to testify in person.
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WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:
Any person or organization wishing to submit a written statement for the printed record of the hearing should submit at least six (6) single-space legal-size copies of their statement, along with an IBM compatible 3.5-inch diskette in ASCII DOS Text format only, with their name, address, and hearing date noted on a label, by the close of business, Wednesday, August 6, 1997, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may deliver 200 additional copies for this purpose to the Subcommittee on Trade office, room 1104 Longworth House Office Building, at least one hour before the hearing begins.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request for written comments must conform to the guidelines listed below. Any statement or exhibit not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee.
1. All statements and any accompanying exhibits for printing must be typed in single space on legal-size paper and may not exceed a total of 10 pages including attachments. At the same time written statements are submitted to the Committee, witnesses are now requested to submit their statements on an IBM compatible 3.5-inch diskette in ASCII DOS Text format.
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2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a statement for the record of a public hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list of all clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the name, full address, a telephone number where the witness or the designated representative may be reached and a topical outline or summary of the comments and recommendations in the full statement. This supplemental sheet will not be included in the printed record.
The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course of a public hearing may be submitted in other forms.
Note: All Committee advisories and news releases are available on the World Wide Web at 'HTTP://WWW.HOUSE.GOV/WAYS_MEANS/'.
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The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226–3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above.
—————
NOTICE—CHANGE IN ROOM
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
CONTACT: (202) 225–1721
FOR IMMEDIATE RELEASE
July 15, 1997
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No. TR–13–Revised
Room Change for Subcommittee Hearing on
Wednesday, July 23, 1997,
on New Transatlantic Agenda
Congressman Philip M. Crane (R–IL), Chairman, Subcommittee on Trade, Committee on Ways and Means, today announced that the Subcommittee hearing on the New Transatlantic Agenda scheduled for Wednesday, July 23, 1997, at 2:00 p.m. in the main Committee hearing room, 1100 Longworth House Office Building, will be held instead in room B–318 Rayburn House Office Building.
All other details for the hearing remain the same. (See Subcommittee press release No. TR–13, dated July 8, 1997.)
—————
Chairman CRANE. The Subcommittee will come to order. I know we have more guests here trying to get accommodated, if they could just quietly get over to the other end of the room here and take seats.
Welcome to the Ways and Means Trade Subcommittee hearing on the 18-month-old New Transatlantic Agenda, or NTA, and the U.S.-Europe trade relations. The purpose of this hearing is to examine the trade goals of the NTA, including the Transatlantic Business Dialogue, or TABD.
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TABD is a forum in which top American and European business leaders can meet to discuss ways to reduce barriers to U.S.–EU trade and investment. Business operates as an official partner in the discussions. The NTA and TABD have already been very successful in removing barriers to trade between the United States and Europe, and through the Mutual Recognition Agreement, MRA, which aims to reduce regulatory burdens by recognizing for six industry sectors the results of product testing or certification requirements set by the United States when conducted in the European Union and vice versa, thereby eliminating the need for duplicative requirements.
The MRA is expected to substantially reduce barriers to trade and investment, covering over 50 billion dollars' worth of trade. This hearing provides a good opportunity for us to study important developments in transatlantic commerce and prospects for further liberalization and facilitation of trade, including increased market access, reduced barriers to trade, the recently concluded MRA, the impact of unilateral trade sanctions, and the role of Eastern Europe.
The United States and the European Union share the largest two-way trade and investment relationship in the world. Trade with Europe amounted to $256 billion in 1995. In my home State of Illinois, Europe is the second largest export market. In 1995, Europe bought 4 billion dollars' worth of Illinois goods, supporting nearing 50,000 jobs. In addition, it is estimated that approximately 3 million U.S. jobs have been created by EU investment in the United States. In Illinois, European investment supports nearly 135,000 jobs. Of these, 51 percent are high-paying manufacturing jobs.
[The opening statement follows:]
Opening Statement of Chairman Phil Crane
Good afternoon, and welcome to Ways and Means Trade Subcommittee hearing on the 18-month old New Transatlantic Agenda, or NTA, and U.S.-Europe trade relations. The purpose of this hearing is to examine the trade goals of the NTA, including the Transatlantic Business Dialogue, or TAB–D. TAB–D is a forum in which top American and European business leaders can meet to discuss ways to reduce barriers to U.S.–EU trade and investment—business operates as an official partner in the discussions. The NTA and TAB–D have already been very successful in removing barriers to trade between the United States and Europe through the Mutual Recognition Agreement, which aims to reduce regulatory burdens by recognizing for six industry sectors the results of product testing or certification requirements set by the United States when conducted in the EU, and vice versa, thereby eliminating the need for duplicative requirements. The MRA is expected to substantially reduce barriers to trade and investment, covering over 50 billion dollars' worth of trade.
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This hearing provides a good opportunity for us to study important developments in transatlantic commerce and prospects for further liberalization and facilitation of trade, including increased market access, reduced barriers to trade, the recently concluded MRA, the impact of unilateral trade sanctions, and the role of Eastern Europe.
The United States and the EU share the largest two-way trade and investment relationship in the world. Trade with Europe amounted to $256 billion in 1995. In my state of Illinois, Europe is the second largest export market. In 1995, Europe bought $4 billion worth of Illinois goods, supporting nearly 50,000 jobs.
In addition, it is estimated that approximately 3 million U.S. jobs have been created by EU investment in the United States. In Illinois, European investment supports nearly 135,000 jobs. Of these, 51% are high paying manufacturing jobs.
I now recognize our distinguished Ranking Member, Mr. Matsui, for any statement he would like to make.
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Chairman CRANE. I now recognize our distinguished Ranking Member, Mr. Matsui, for any statements he would like to make.
Mr. MATSUI. Thank you very much, Mr. Chairman.
I want to commend you on holding these hearings today. Of course, yesterday you held hearings regarding the Western Hemisphere trade possibilities, and we appreciate very much your efforts in this area.
Despite the fact that the United States and the European Union have the world's largest two-way trade and investment relationship, we in Congress, too often in the past, have not devoted sufficient attention to our economic relations with the European Union. Indeed, I can't really recall a time, in my almost 18 years on the Ways and Means Committee, that the Trade Subcommittee has held a hearing solely devoted to U.S.–EU trade relations.
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It is my hope that today's hearing will help educate the Congress and the public in developing, with respect to the U.S.–EU relationship, many issues that are outstanding. In this regard, the United States has embarked upon an ambitious and potentially far-reaching course of action with the European Union that responds in a positive way to the questions of how the United States and the European Union should structure their relationship in the post-cold war era, including in the area of trade.
The overall goal of the New Transatlantic Agenda, agreed to in December 1995, is to widen and deepen the transatlantic relationship, given the new realities of a globalized economy, where nations must work together on a broad range of issues in a cooperative manner, more than ever before, in order to prosper.
One of the four key goals of this new agenda is to contribute to the expansion of world trade and closer economic ties across the Atlantic. We will be taking a closer look at what actions are being taken to achieve these goals, especially the Joint Trade Action Plan.
With regard to the Transatlantic Business Dialogue, this is a rather unique concept. As I understand it, rather than having government officials establish their own work agenda, the idea is to have business communities on both sides of the Atlantic work together, in the first instance to identify problems complicating trade and investment flows, and to suggest solutions to these problems with their respective governments. Governments would then follow up on these suggestions, as appropriate. I am interested in hearing from the private sector witnesses on how this process has worked to date.
Finally, while our current trade relationship with the European Union is, on balance, very positive, it should be noted that we do have a number of ongoing bilateral trade disputes with the European Union. We should use this hearing today as an opportunity to review some of the efforts to resolve these disputes in the World Trade Organization and elsewhere.
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In this regard, I am gratified by reports out of Brussels earlier today that, after successful last minute negotiations with the Boeing Co., the European Commission has given its blessing to Boeing in its planned merger with McDonnell-Douglas. This averts what could have been a major trade dispute.
[The opening statements follow:]
Opening Statement of Hon. Robert T. Matsui
Mr. Chairman, I congratulate you on holding this hearing today to discuss the trade aspects of the New Transatlantic Agenda, including the Transatlantic Business Dialogue (TADB).
Despite the fact that the United States and the European Union have the world's largest two-way trade and investment relationship, we in Congress too often in the past have not devoted sufficient attention to our economic relations with the European Union. Indeed, I cannot recall the last time that the Trade Subcommittee held a hearing devoted solely to U.S.–EU trade relations.
It is my hope that today's hearing will help to educate the Congress and the public on developments with respect to the U.S.–EU relationship. In this regard, the United States has embarked on an ambitious and potentially far-reaching course of action with the European Union that responds in a positive way to the question of how the United States and the European Union should structure their relationship in the post-Cold War era, including in the area of trade.
The overall goal of the New Transatlantic Agenda agreed to in December 1995 is to widen and deepen the transatlantic relationship given the new realities of a globalized economy, where nations must work together on a broad range of issues in a cooperative manner more than ever before in order to prosper.
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One of the four key goals for this new agenda is to contribute to the expansion of world trade and closer economic ties across the Atlantic. We will be taking a closer look today at what actions are being taken to achieve this goal, especially the Joint Trade Action Plan.
With regard to the Transatlantic Business Dialogue, this is a rather unique concept. As I understand it, rather than having government officials establish their own work agenda, the idea is to have the business communities on both sides of the Atlantic work together in the first instance to identify problems complicating trade and investment flows and to suggest solutions to those problems to their respective governments. Governments would then follow up on these suggestions as appropriate. I am interested in hearing from our private sector witnesses how this process has worked to date.
Finally, while our current trade relationship with the EU is on balance very positive, it should be noted that we do have a number of ongoing bilateral trade disputes with the EU. We should use the hearing today as an opportunity to review the status of efforts to resolve these disputes, in the WTO and elsewhere.
In this regard, I am gratified by reports out of Brussels earlier today that, after successful last-minute negotiations with Boeing, the European Commission has given its blessing to Boeing's planned merger with McDonnell-Douglas. This averts what could have been a major trade dispute.
In closing, Mr. Chairman, let me join you in welcoming all of our witnesses to today's hearing.
Thank you.
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Opening Statement of Hon. Jim Ramstad
Mr. Chairman, thank you for calling today's hearing to discuss U.S. trade with the European Union and the New Transatlantic Agenda.
There has always been a special relationship between the U.S. and the E.U. Not only are the U.S. and E.U. the leading participants in the international marketplace, they also share the largest two-way trade (in goods and services combined) and investment relationship in the world.
This relationship translates into 3 million US jobs from E.U. investments alone, and we all know for every $1 billion of U.S. exports, there are 20,000 more better paying jobs created in the U.S.
That is why it is important that we continue to take the lead in many of the international trade agreements being negotiated under the WTO, OECD through other trade auspices. Of course, we should certainly lead through bilateral efforts like the NTA and initiatives like the New Transatlantic Marketplace. As I have stated many times, I am hopeful we will soon renew Fast-Track Authority so we can continue to push for trade liberalism for the sake of the American economy and workers.
I am very interested to learn more about the NTA and, in particular, the recently concluded Mutual Recognition Agreement to reduce regulatory burdens for six key U.S. industry sectors. Being from Minnesota and the Chair of the House Medical Technology Caucus, I am very glad the MRA addresses regulations and barriers for a very important industry in my state, the medical device industry.
Thank you again, Mr. Chairman, for calling this hearing. I look forward to hearing from today's witnesses about the importance and implications of U.S.–E.U. trade and the NTA.
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Mr. MATSUI. Again, Mr. Chairman, in closing, let me join with you, first of all congratulating you again, in welcoming all the witnesses at today's hearing.
Chairman CRANE. Thank you.
Today we will hear from a number of distinguished witnesses. In the interest of time, I would ask that you try and keep your oral testimony to 5 minutes, and we will include longer written statements in the record.
Our first panel today is made up of administration witnesses, Deputy U.S. Trade Representative Jeff Lang, for his second day in a row, and Timothy Hauser, Acting Under Secretary for International Trade Administration at the Department of Commerce.
You people may proceed in order.
STATEMENT OF AMBASSADOR JEFFREY M. LANG, DEPUTY U.S. TRADE REPRESENTATIVE
Mr. LANG. Thank you, Mr. Chairman. It's good to be here. I can think of a lot of other places I would rather not be. [Laughter.]
Much of what your statement said is in our statement, too, so that makes it easier, I think, to summarize what I was going to say.
I think it is important to emphasize that whatever differences we have with the European Union, if you assume they are a single player, they are a very large trading partner. That means it's safe to say that most U.S. efforts to further open markets and increase the rule of law in international trade, particularly on a multilateral basis, cannot advance without the positive participation of the European Union. I mean, the combined economic weight of trade and investment between the EU–15 and the United States is better than $1 trillion.
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In 1996, two-way trade in goods and services was $400 billion. If you compare that to U.S.-Canada trade, for example—often called our biggest trading partner—that's $362 billion last year. Our investment flows, by the way, are almost equal. In other words, each accounted for roughly half of the other's outward investment flows.
Now, turning to this New Transatlantic Agenda, there was a lot of discussion leading up to that meeting you mentioned, Mr. Chairman, in Madrid. I think what we opted for a pragmatic approach to the task of improving our economic relations, in this context we have created of the New Transatlantic Agenda.
The Joint Action Plan of the NTA includes commitments to further the evolution of the multilateral system, and it also lists commitments designed to deepen the transatlantic relationship. Those are the things that are together called the New Transatlantic Marketplace. The meeting in Madrid, the Madrid declaration, also sanctioned a deeper role for European and American business in, as you said, the New Transatlantic Business Dialogue.
Now, what's happened? From USTR's perspective, we have mixed results. But we always assumed that we would have mixed results by this point in the process. We have benefited from the process, which has helped in getting the information technology initiative done, and in getting the basic telecommunications services agreement done. Those milestones could not have been reached without the participation of the European Union.
Under the New Transatlantic Marketplace Initiative, we have concluded a customs cooperation agreement, we have a veterinary equivalence agreement—although we have a few loose ends there—and the one that's been the most noticed by the press and public, the mutual recognition agreements.
As your statement suggests, you can't have a big relationship like this without having some problems, and we do have some pretty serious problems in this case, some of them serious enough to involve millions, even tens of millions of dollars.
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We also have some concerns regarding EU approaches with respect to the WTO, particularly some of the disputes that have been taken to the WTO that really raise political issues rather than the kinds of commercial issues that the dispute settlement system was designed for. I think that when these trade-related U.S.–EU disagreements touch on sensitive areas of foreign policy and security, we raise a risk to the overall business climate. I think both sides have to be careful in those situations. I'm thinking here, for example, of the Cuba matter.
Now, if we look ahead, we're going to have a number of opportunities in the coming months to demonstrate the value of working together to solve problems and to advance the rule of law and market opening.
I met this morning with my counterparts from the EU about financial services, and that's clearly an area in which we are working well together. We have what appears to be many common objectives, if not almost identical objectives, and I think we can work well together in the coming months. That was evident also from our meetings in Geneva last week, and elsewhere in Europe.
One final comment. Europe has a number of internal issues to deal with in the coming years, and particularly as it prepares for its eventual enlargement toward the East. We hope that this necessary and appropriate focus on their internal concerns won't preclude a constructive role for Europe in the transatlantic environment and in the global environment, because they are such big players.
I was in Seville at the first Transatlantic Business Dialogue meeting. I was struck by how important the role the business community has been in this matter—and I know you have them appearing later today. But I think that in getting these businessmen to talk to each other—and we attend the meetings, but we are not running the meetings; we are simply there as observers and to help in a technical sense. Getting to talk with each other and arrive at a set of conclusions about where we need to be going to improve the lives of people in both Europe and the United States I think is a valuable contribution. I would say to them that it's a valuable process and we hope they keep up the good work.
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So I urge the Subcommittee to consider our economic relationship with Europe. It makes an enormous contribution to our national prosperity, great potential for future growth, but we have to continue through the NTA process, and any other appropriate forum, to explore what additional multilateral and bilateral things we can do to improve the system.
In this connection, I would say all of this is also relevant to fast track, not unlike our meeting yesterday. Ultimately, the two of us set the pace for the system as a whole, and I think being able to go forward together is very important.
At my elbow sits Tim Hauser, who has some remarks to make, but I would be remiss if I didn't reflect the role of other people in this new transatlantic process. One of them has since departed the Commerce Department for the State Department, Stu Eizenstat, who helped start this process as Ambassador to the European Union, and then pushed it along as Under Secretary of Commerce, and I'm sure is going to be helpful to both of us in his new role at the State Department. I would be remiss if I didn't mention at least Stu, not to speak of all the hundreds of other people who helped with this process.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Ambassador Jeffrey M. Lang, Deputy U.S. Trade Representative
Good afternoon, Mr. Chairman and Members of the Subcommittee. I appreciate very much the opportunity to bring before the Subcommittee USTR's views on the implications for our trade policy of the New Transatlantic Agenda Initiative and associated activities. I shall be brief so that I may respond to any questions Members of the Subcommittee may have.
At the outset, I would note that, as U.S. cooperation with Europe on security matters formed the bedrock on which the post-Second World War peace was built, the U.S.-European trade relationship has been an anchoring point for the international trading system since the General Agreement on Tariffs and Trade came into force in 1947. The United States and the European Communities, known since the Maastricht Treaty as the European Union (EU), are the two largest actors in the global economy and each has benefitted from successive efforts to liberalize multilateral trade. It is safe to say that U.S. efforts to further multilateral trade liberalization cannot advance without the positive participation of the EU.
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The truth of that statement is evident if one but takes a quick look at the dimensions of the transatlantic economic relationship. If the EU were a nation-state, it and the United States would share the largest two-way trade and investment relationship in the world. The numbers are impressive by any measure. The combined economic weight of trade and investment between the United States and the 15 member states of the EU exceeds $1 trillion. The EU collectively is the U.S.'s largest market for goods and services and vice versa. In 1996, two way trade in goods and services amounted to nearly $400 billion. In 1996, U.S. merchandise exports to the EU were $127.5 billion, an increase of $3.9 billion, or 3.2 percent, from 1995 levels. Imports from the EU in 1996 were $142.7 billion. On average during the post-war period, two-way trade has remained in rough balance. The stock of U.S. foreign direct investment into the EU in 1996 was $315.4 billion. The United States and the EU in 1995 each accounted for roughly one-half of the other's outward investment flows. To put this into perspective, consider that two-way U.S.-Canada trade in goods and services in 1996 was $327 billion and that two-way U.S.-China trade in goods and services in 1995 amounted to $62 billion. One of the basic messages I wish to leave with you today is that the sheer extent of transatlantic economic interactions makes it imperative that, no matter what other opportunities we perceive in the world, we must continue to bear in mind that truly vital U.S. economic interests are at stake in our relations with Europe.
Recognizing the major advantages that could accrue to both sides from expanding economic relations between the two regions, President Clinton and European Union leaders at the U.S.–EU Summit in Madrid in December 1995 made initiatives in the trade and investment area an integral part of the New Transatlantic Agenda (NTA). The genesis of the NTA lay in the desire of leaders on both sides to reaffirm the strong historic relationship between the United States and Europe and to promote their vision of a post-Cold War Europe united around the principles of democracy and free markets. The maintenance and furtherance of transatlantic prosperity was seen as a key component of any effort to move the transatlantic relationship into the post-Cold War era and the 21st century.
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After much discussion both internally and across the Atlantic, the U.S. and the EU opted for a pragmatic approach to the task of improving economic relations. Cooperation being the key concept animating the NTA, we worked to construct a series of multilateral and transatlantic issues on which we could take positive joint steps, moving beyond the bickering and recrimination that have often accompanied our interactions on trade matters. The result was embodied in commitments laid out in the NTA ''Joint Action Plan.'' The plan's economic section expresses the two sides' intention to cooperate in furthering the continuing evolution of the multilateral trading system. It also lists commitments designed to deepen the transatlantic relationship—these actions are collectively termed the New Transatlantic Marketplace initiative. To supplement these government-to-government endeavors, the NTA also endorsed an enhanced role for European and American business through participation in the Transatlantic Business Dialogue (TABD). While I would defer to the State Department for overall analysis of the NTA process, let me say a few words about each of these three major components.
The Joint Action Plan's economic section includes both multilateral and transatlantic economic efforts, many of which were launched during 1996 and have continued into 1997 or will continue in the years ahead. Actions aimed at strengthening the multilateral trade and investment system include: consolidating the World Trade Organization; exploring ways to further reduce tariffs, which included an agreement to eliminate tariffs on information technology products (the Information Technology Agreement, or ITA); starting work on new international rules for intellectual property rights and government procurement; and agreeing to work together at the OECD to conclude a Multilateral Agreement on Investment.
New Transatlantic Marketplace actions designed to enhance U.S.–EU economic opportunities include: an ongoing joint study of remaining barriers to transatlantic trade and investment and ways to reduce them; implementation of a Customs Cooperation Agreement; reinforcing efforts to resolve outstanding trade disputes as part of a confidence-building process; and concluding Mutual Recognition Agreements (MRAs) to reduce regulatory burdens on business. Other New Transatlantic Marketplace commitments involve expanding an ongoing Information Society Dialogue to spur innovation and ensure interconnectivity and interoperability; and establishing a joint working group on employment and labor-related issues.
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The TABD is a forum in which top American and European business leaders can meet to discuss ways to reduce barriers to U.S.-European trade and investment. The 1995 TABD Conference in Seville kicked off a process of private sector evaluation of obstacles to business in both Europe and America. The result has been a series of business recommendations for governmental action to eliminate those obstacles.
What have the initiatives I have described above achieved in the year and a half since the NTA was announced? From USTR's point of view, I would say the results are mixed, but, then, we always suspected they would be by this point in the process. Certainly, the United States has benefitted from notable successes in the multilateral context. Conclusion of the Information Technology Agreement and the WTO Basic Telecommunications Services agreement are major steps forward for our high technology companies, which are among our most competitive. True to what I said earlier, such milestones could not have been reached without the participation of the European Union. At the Singapore WTO ministerial meeting last December, we achieved what we believe is a workable compromise with the EU on WTO treatment of the so-called ''new issues'' of trade and environment, trade and labor standards, trade and investment and trade and competition.
Under the rubric of the New Transatlantic Marketplace, we concluded the U.S.–EU Customs Cooperation Agreement, which will assist our customs services by streamlining their operations and boosting their enforcement efforts. We also concluded after great effort a Veterinary Equivalence Agreement that, while not as ambitious as we had hoped, still should do much to facilitate trade in live animals and animal products. We have launched our joint study of ways to reduce barriers to transatlantic trade by agreeing on a select group of sectors for initial examination. Of course, the New Transatlantic Marketplace action item receiving by far the most attention, from the private sector as well as from governments, has been the effort to complete negotiations on Mutual Recognition Agreements. This exercise was deemed the number one priority on the transatlantic agenda by both American and European companies participating in the TABD and became a key trade concern of President Clinton and EU leaders. The negotiated result we achieved just last month after three long years of talks sets a precedent in government-to-government cooperation on regulatory reform which should considerably ease burdens on businesses.
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No international economic relationship as vast and intricate as that binding the United States and Europe could operate without problems. The very dynamism which propels this machinery inevitably results in a certain amount of friction, especially as the pace of innovation and adaption in the business world continues to accelerate. And indeed, we face a variety of problems associated with our relations with the EU. These disagreements can be serious. Sometimes, as with certain EU attitudes toward the regulation of trade in bioengineered foodstuffs, tens or hundreds of millions of dollars in trade can be at stake.
Many of our disagreements are long standing and are connected in one way or another to the EU's Common Agricultural Policy. Some agricultural disputes also stem from popular attitudes in Europe toward protection of the environment and of human health. European views on animal welfare have resulted in an EU threat to cut off U.S. fur exports. We frequently receive complaints from U.S. businesses related to European standards-setting practices, both at the EU and member state level—hence the substantial business interest in the MRAs. European industrial subsidies, particularly to the aircraft and shipbuilding industries, have long been a source of frustration for U.S. firms.
In the multilateral arena, we are concerned by certain signs that the EU, having repeatedly expressed its commitment to the successful implementation of the Uruguay Round and the smooth functioning of the WTO, is through its actions putting stresses on the international trading system that the system might not bear. We find particularly disturbing recent EU moves to bring to WTO dispute settlement cases which are more political in nature than commercial. This sets a bad precedent which could undermine the hard work all sides put into creating in the WTO an objective, rules-based system for managing global trade.
When trade-related U.S.–EU disagreements touch on other sensitive areas of foreign policy, we risk souring the overall business climate. We fortunately reached an understanding in the spring of this year with the Europeans regarding their concerns with the our sanctions against Cuba and Iran/Libya, but only after months of often harsh EU criticism. We remain hopeful that the issue of the Boeing/McDonnell-Douglas merger can be resolved as expeditiously as possible.
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In coming months, we will have many opportunities to demonstrate our ability jointly to solve problems and advance trade liberalization. The WTO negotiations on financial services have now been relaunched and, if we work together, the United States and the EU can in December repeat for financial services the success of the basic telecommunications services agreement. We must pool our efforts to conclude the Multilateral Agreement on Investment in the OECD by next spring's deadline. Likewise, we look to Europe to join us in advancing the proposed OECD convention on bribery and official corruption. In the WTO, there are a variety of areas where joint U.S.–EU approaches can make the difference in terms of bringing in other members, from government procurement to new market access initiatives to the unfinished agenda from the Uruguay Round. I particularly note in this regard the upcoming commencement of new WTO agricultural trade negotiations. As in the past, EU cooperation in the agricultural area will clearly spell the difference between success and failure.
In the transatlantic context, we can continue the search for new opportunities to enhance economic interrelationships. We intend to pursue actively the joint study on eliminating barriers to trade and investment and expect to have preliminary recommendations for government action available by the end of this year. The success of the MRA negotiations has resulted already in joint commitments to look at additional sectors that could benefit from this sort of regulatory cooperation.
I hope the United States and Europe can look beyond their differences and keep in mind the broader objective of enhancing transatlantic, and global, prosperity. Europe has much to ponder as it deals with internal issues during the coming years. Our sincere wish is that this focus on the internal will not preclude a constructive role for Europe in the transatlantic and global contexts. We on the U.S. side will continue to pursue resolution of outstanding disputes, searching wherever possible to defuse situations before they become crises. No one, least of all businesses and workers, benefits from an atmosphere of tension. We shall of course seek resolution of disagreements in the WTO where appropriate—this is what we constructed the WTO system for and we will do what we can to ensure that it does the job it was meant to do.
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In addition, we must persist in looking beyond the series of disputes to the opportunities Europe presents for our companies. This is especially true as the EU contemplates accession negotiations with Central and Eastern Europe and the internal EU reforms that will be necessary to complete that process. Expansion of the EU to include many of the Central and Eastern European states should lead to significant new market opportunities for U.S. firms.
One can contemplate other possibilities for the U.S. and the EU, working together, to move the rest of the world toward the openness and transparency generally existing in transatlantic business relations today. We have many interests in common in third countries, for example. A clear instance where the U.S. and the EU can accomplish a great deal through adoption of a united stance is the accession to the WTO of new members, particularly China, Russia and Ukraine.
I should like before closing to say some additional words about the TABD. I came away from attending the initial TABD Conference in Seville very impressed with the potential of this process for channeling business concerns and ideas to government officials on both sides of the Atlantic. I was particularly struck by the involvement of European companies, which have traditionally not enjoyed the ability to provide input into the official decision-making process that U.S. companies have come to expect as a matter of course.
The TABD proved how significant a force for liberalization it can be in the course of the MRA negotiations. Were it not for the good advice and strong, timely intervention of the TABD, it is fair to say that the MRA talks could not have succeeded. The TABD is first and foremost a forum for debate between businesses. That is as it should be. Governments may not always be able to do everything the TABD asks. I want only to note the U.S. Government's keen appreciation of the great potential for constructive participation by the TABD and the private sectors of both continents in advancing transatlantic and global market liberalization. To the TABD I say: you have been valuable and we hope you keep up the good work.
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In sum, I would urge the Subcommittee to consider that our huge and, for the most part, highly successful economic relationship with Europe makes an enormous contribution to our national prosperity and offers great potential for future growth. In order to fully realize this potential, I believe we should continue, through the NTA process and any other appropriate forum, to explore with the EU additional multilateral and transatlantic trade liberalization goals. The approval by Congress of new fast-track authority would, of course, expand considerably the scope of the areas we could jointly investigate. Ultimately, it is up to the United States and Europe to set the pace for the international economy and we should not shrink from this responsibility.
I will be happy to respond to any questions Members may wish to pose. Thank you very much.
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Chairman CRANE. Thank you, Jeff.
Mr. Hauser.
STATEMENT OF TIMOTHY J. HAUSER, ACTING UNDER SECRETARY, INTERNATIONAL TRADE ADMINISTRATION, U.S. DEPARTMENT OF COMMERCE
Mr. HAUSER. Thank you, Mr. Chairman. Let me also commend you and the Subcommittee for focusing attention on this very important commercial relationship, one in which the Commerce Department has been particularly active, particularly with respect to the Transatlantic Business Dialogue and the Mutual Recognition Agreement process.
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Let me take a minute to elaborate on the size of the relationship. The European Union's $8.6 trillion economy is the world's largest. Its huge size translates relatively small percentage growth increases into large dollar increases and accompanying opportunities for expanded trade with America. For example, if the European Union grows by 2.7 percent next year, its economy will grow by over $230 billion. This is almost like discovering a new market the size of Taiwan every year.
Our trade with Europe, in addition to growing, is generally balanced over time. With surpluses in some years and deficits in others, our trade balances with Europe over the past 25 years or so have netted out almost to zero. By way of comparison, over that same period, our trade with Asia has cumulated a deficit of over $1.5 trillion.
Our balanced position extends to investment as well. Some 3 million Europeans work for U.S.-owned companies, and some 3 million Americans work for European-owned firms. In fact, one in every 12 U.S. factory workers is now employed in a European-owned firm.
Europe, as Jeff has mentioned, is very important to us as a global partner in opening world markets. Next to the United States, no one has been as supportive of improving the global trading system as has Europe. To broaden and deepen this relationship, the administration created the New Transatlantic Agenda, which is both a blueprint for both cooperation into the 21st century and a mechanism for solving problems and agreeing for joint action on common goals.
The New Transatlantic Marketplace is that part of the New Transatlantic Agenda where we, in Commerce, have been most active. The intent of the NTM is simple: To create a barrier-free marketplace for trade and investment across the Atlantic, working on a pragmatic basis to identify and eliminate the remaining commercial obstacles in the region.
Jeff went through a number of the specific accomplishments of the NTM. I won't reiterate them. Let me say that, in our view, the success in building the New Transatlantic Marketplace is largely due to the close working relationship with U.S. and European business, through the Transatlantic Business Dialogue. Bringing the U.S. and European chief executive officers into a dialog with top U.S. and EU trade officials, this unprecedented process has contributed immensely to the reduction of barriers across the Atlantic.
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The Mutual Recognition Agreement affects some 60 billion dollars' worth of bilateral U.S.–EU trade, and it would not have become a reality without the TABD. As Jeff mentioned, TABD, and working with the Europeans, was critical in concluding the information technology agreement affecting something like $600 billion in global trade.
The late Secretary of Commerce Ron Brown proposed the TABD in a December 1994 speech before the American Chamber of Commerce in Belgium. Commissioner Brittan, and Industry Commissioner Bangemann from the European side, joined him and started the dialog moving. Two annual TABD conferences were held in Seville, Spain, in November 1995, and in Chicago in November 1996. Secretary Bill Daley will be leading the U.S. Government delegation to the third TABD conference this November in Rome. We have been honored to have Tenneco chief executive officer Dana Mead serving over the current year as the U.S. cochairman of the TABD.
TABD is not, however, limited to large, multinational companies, Mr. Chairman. About one-third of the U.S. chief executive officers in the process have been from small- and medium-size companies, and an important part of the Dialogue's work has been the creation of a Transatlantic Small Business Initiative, aimed at helping smaller firms penetrate these markets.
Perhaps the key role played by the TABD was the effort to convince governments to finish work this past spring on what was identified as the TABD's highest priority, the Mutual Recognition Agreements. The MRAs recently initiated between the United States and the European Union represent a groundbreaking step in reducing trade barriers and have cut the cost of market entry across the Atlantic by eliminating redundant product testing and certification requirements. The MRAs liberalized market access for more than 30 billion dollars' worth of U.S. exports, and close to 60 billion dollars' worth of two-way trade.
Industry estimates the overall cost of market entry across the Atlantic will fall by about $1 billion, about $500 million of which will accrue to U.S. exporters. Again, the main beneficiaries will be small businesses, who cannot afford the high cost of international labs and testing. Many smaller U.S. companies will now be able to enter the European market, where they were unable to do so before.
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The agreement is a real breakthrough. Importantly, the agreement provides all the necessary health and safety protections, including the key ability of our regulatory agencies to take all appropriate and immediate measures to protect health and safety. We worked closely on this issue with the U.S. Trade Representative, U.S. regulatory agencies, and the European Union, to bring these MRAs into reality.
The extraordinary difficulties, because of the different regulatory systems involved, made progress very slow and, indeed, at midpoint last year the agreement appeared to be doomed. At the November 1996 TABD conference in Chicago, however, the business community rejected the idea that we in government could not find a way to make the agreements work and they, themselves, entered into spirited discussions with the U.S. and European negotiating teams. Lodewijk de Vink, president and chief executive officer of Warner-Lambert, who will be testifying later, led this business charge, and his personal efforts led to the breakthrough which was accepted by the U.S. and EU trade leadership.
I can state flatly that, without this private sector leadership, we would not have MRAs. The pressure we on the government side of the table felt from the business leadership kept us there until an agreement was reached. The success showed what we can get through a true public/private partnership.
Looking to the future, Mr. Chairman, though much has been achieved through the efforts of the TABD and the New Transatlantic Agenda process, we are still far from having the barrier-free marketplace that we want. From Commerce's perspective, our first priority, in addition to addressing current issues like the Boeing/McDonnell-Douglas merger, is to implement the MRA. This will be a formidable task in itself. We also look forward to looking at additional sectors where we might broaden the scope of the MRAs.
Other important initiatives we are pressing with business community support include obtaining mechanisms for harmonizing standard for automobiles and recreational marine engines. We also seek a focus on electronic commerce and the need for effective market-driven rules that will encourage rather than stifle continued technical advances.
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Tariff reductions in areas like paper and other important sectors, that were not fully liberalized in the Uruguay round, are other areas where we expect progress could be made rapidly.
These, Mr. Chairman, are just some of the priorities we see for the future. We look forward to continued cooperation through the New Transatlantic Agenda, working closely with our partners in the TABD to improve our trading relationship with Europe.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Timothy J. Hauser, Acting Under Secretary, International Trade Administration, U.S. Department of Commerce
Mr. Chairman, I would like to begin my statement by commending you for holding this hearing. Europe is our largest commercial partner, yet its significance is frequently overlooked. This hearing will do much to help elevate the visibility of the transatlantic commercial relationship and its potential for further U.S. exports. This hearing also provides a well-deserved focus on the unique business-government partnership in the Transatlantic Business Dialogue, which is one of the most important innovations in international trade.
Out of the devastation of World War II the United States and Europe forged a strong partnership that has been the cornerstone of both global security and the global economic system. This year marks the 50th anniversary of the Marshall Plan, and the peace and prosperity that the Atlantic Alliance has produced are indeed worth celebrating. The Cold War is now history. Today, our former adversaries in Central and Eastern Europe are beginning to be integrated into NATO and the OECD, and are being considered for full membership in the European Union.
The U.S.-European partnership has never been one only of military and security concerns, but has also has developed common ground in trade and economic interests. With the end of the Cold War, the commercial aspect of our relationship has taken on greater importance, and trade and economic growth are the focus at the top levels of our bilateral meetings and institutions.
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I am very pleased to represent the Commerce Department at this hearing, for Commerce has played a leading role in expanding transatlantic trade, both in working to reduce trade barriers and to promote more trade. One of the most innovative and important new developments, Mr. Chairman, is the Transatlantic Business Dialogue, the TABD, which is one of the focal points of your hearing today. I am proud to say that the TABD was initiated by the Department of Commerce. The Department of Commerce has also been the driving force within the U.S. government for the Mutual Recognition Agreements (MRA's) between the United States and Europe that will eliminate much of the duplicate testing and certification requirements across the Atlantic and substantially reduce the time and cost of market entry into Europe. Small companies will particularly benefit from these MRA's.
Both of these initiatives, and others as well, were made possible by Commerce's small but extremely effective Market Access and Compliance Unit (MAC). MAC effectively worked with the private sector to address trade concerns. These efforts have been consistently supported by an aggressive program of export promotion in Europe through our U.S. and Foreign Commercial Service, particularly aimed at assisting small and medium-sized companies increase their exports to this important market.
In these and other ways, the Commerce Department is making a major contribution toward the important goal of a barrier free New Transatlantic Marketplace envisioned by President Clinton when he and European Commission President Santer initiated the New Transatlantic Agenda in December 1995 as an unprecedented expansion of economic and political cooperation between the United States and the European Union.
Importance of Transatlantic Trade
Much attention is paid to the Big Emerging Markets of the world, and indeed they are of enormous importance for their growth potential. Much attention, properly so, is also focused on Japan, China, and the other countries of Asia, for this is where we find most of our trade differences and most of our trade policy attention is devoted. NAFTA and the countries of Latin America are also areas of trade attention and interest.
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Europe generally attracts less attention in the press and in the public eye, and, this being aside, relatively little in the Congress as well. This lack of attention Mr. Chairman, is not because Europe is unimportant, but rather is because our trade has been relatively smooth and for the most part trouble free. Tariffs across the Atlantic have also been quite low and trade is relatively barrier free, though there are important exceptions in areas such as agriculture and paper. We have certainly had our differences in trade with Europe, and we are having a major one now with the approach the European Commission has taken to the proposed Boeing-McDonnell Douglas merger, but for the most part the huge amount of transatlantic trade takes place almost unnoticed.
There seems to be a widespread belief that since our transpacific trade is now significantly larger than transatlantic trade, and since the Asian countries have much more rapid rates of real GDP growth, Europe has become relatively unimportant to us commercially. Nothing could be further from the truth.
To begin with, the EU is the world's largest economy. Its $8.6 trillion economy exceeds the size of the U.S. economy, and even NAFTA. In fact, the EU produces about one-third of all the goods and services outside the United States. While the mature EU economy grows more slowly than Asian countries for example, its huge size translates relatively small percentage increases into large dollar increases. For example, if the EU grows 2.7 percent next year, which is a reasonable assumption at this point, its economy will grow by over $230 billion. That is almost like discovering a new market the size of Taiwan every year.
The EU is our largest commercial partner, each year buying over $1 trillion of goods and services made by U.S. companies. This makes the European Union twice as large a market for American companies as Canada, and three times as large a market as Japan. While the EU is our second largest export market, closely following Canada, it is by far our largest market for U.S. affiliate production and sales. In fact Europe accounts for over half of the global production of U.S. firms outside the United States.
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America's commerce with Europe is quite balanced. With trade surpluses in some years and deficits in others, the cumulated trade of the United States with the EU over the past quarter century has netted out to being almost in balance. During the same period, however, our trade with Asia cumulated a trade deficit amounting to $1.5 trillion. Our balanced position in Europe extends to investment as well. While three million Europeans work for U.S.-owned companies, three million Americans work for European-owned firms. In fact, one in every 12 U.S. factory workers is now employed by a European-owned firm.
Europe As A Partner
Europe's commercial importance to us, however, is not limited to its significance as a market for U.S. goods and services and as a supplier of excellent products and services in return. Of at least equal importance is Europe's role as a global partner with America in opening world markets and in developing the multilateral trading system. Since the end of World War II Europe and the United States have shared a vision of an increasingly open world trading system, and have worked together to achieve that goal. Next to the United States, no one has been as supportive of improving the global trading system as has Europe, and it is a fact that Europe has been our strong and consistent partner in every trade round, starting in 1947 and continuing today.
No trade round or other major multilateral initiative has been achieved without the joint leadership of the United States and Europe. This has required the United States and the European Union to first reach agreement with each other prior to working jointly to convince the rest of the world to participate. Obtaining transatlantic agreement has not always been easy, and there have been times that the United States and Europe have been unable to agree. The Uruguay Round, for example, was stalled for several years while the United States and the EU worked out their differences on agricultural trade.
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However, when we agree on objectives, we achieve results. Look what we have accomplished together in terms of multilateral agreements just in the past few years: the Uruguay Round, the Information Technology Agreement, the Telecommunications Services Agreement, and the OECD agreement to criminalize bribery of foreign officials.
New Transatlantic Agenda
Given the extreme importance of Europe both as a market and as a partner, the Clinton Administration worked with the European Union to create the New Transatlantic Agenda (NTA) to broaden and deepen the relationship and to ensure strong ties curity to economic cooperation. The NTA is a blueprint for U.S.–EU cooperation into the 21st century and expands our relationship, not just in trade and commerce, but across the board, including many areas that were previously untouched. The NTA seeks not only to ''look beyond the next row of trees'' to define common goals and joint approaches, but also to provide the most comprehensive mechanism yet to allow us to address and resolve the problems that inevitably occur in any relationship.
The NTA and the accompanying U.S.–EU Joint Action Plan were signed by President Clinton, EU Commission President Santer, and Spanish Prime Minister Gonzalez (who was then President of the EU Council) at the Madrid U.S.–EU Summit in December 1995. The NTA is certainly one of the most significant steps in U.S.–EU relations since the founding of the European integration movement in 1957. It is the first time that we have dealt with the EU as a political institution on a large scale, and the initiative moves our already considerable relationship into a new action phase. It seeks to expand our economic and commercial relationship, highlights the cooperation that already exists, and seeks to make progress in a wide range of specific economic, political and social areas.
It is important to stress that the NTA is not simply a statement of good intentions. It is a living agreement with active implementation mechanisms that provide a richness of contact and understanding among our governments unparalleled in the past. The semi-annual U.S.–EU Summits provide impetus to keep the relationship moving forward and provide an incentive to both U.S. and European officials to deliver results on a timely basis. The Summits are supplemented by meetings several times a year of the ''Senior Level Group'' at the Under Secretary level to provide a focus for issues and to ensure that decisions are actually made. This group is supported by the ''NTA Task Force'' of working level officials who meet frequently either in person or by video conference to resolve problems and find solutions. These mechanisms, it is important to note, have broadened the agenda to include the energies of U.S. agencies that have not previously been directly involved in U.S.–EU affairs: the Environmental Protection Agency, the FBI, Health and Human Services, the President's Science Office, and many others.
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Through the NTA the United States and the EU are committing themselves to joint leadership and action to preserve and promote peace and stability throughout the world and to further open markets to international commerce bilaterally and multilaterally. The breadth of the agenda encompasses political cooperation such as in Bosnia and the Middle East, humanitarian assistance, combating international crime and narcotics flows, steps to combat nuclear proliferation, cooperation in health and science, joint efforts in the environmental area, and building ''people-to-people'' bridges to foster an increasingly vibrant transatlantic community, and of course working together to further open trade and commerce—in what is called the ''New Transatlantic Marketplace'' (NTM).
The NTM is the part of the New Transatlantic Agenda in which the Commerce Department has been most active. The intent of the NTM is to create a barrier-free Transatlantic marketplace for trade and investment, working on a pragmatic basis to take step by step action to identify and eliminate remaining commercial obstacles across the Atlantic. Though it is not yet two years old, the NTA process can point to a considerable number of successes in reducing transatlantic barriers. The process, through its constant communication among U.S. and European officials, has contributed greatly to the resolution of problems and the implementation of a common trade agenda. In the space of about 18 months, it has: generated a bilateral customs agreement, resolved differences that had prevented a veterinary equivalence agreement, solved obstacles that had prevented U.S. exports of genetically engineered ''BT corn,'' agreed on an Information Technology Agreement and on the need to work jointly to obtain its acceptance globally, enabled a joint Science and Technology Agreement, and provided the impetus for finalizing the unprecedented U.S.–EU Mutual Recognition Agreement.
Transatlantic Business Dialogue
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In large part, this amazing success is due to the contribution of another important new U.S.–EU mechanism, the Transatlantic Business Dialogue—the TABD. This unique government-business dialogue has contributed immensely to the reduction of trade barriers across the Atlantic. It is difficult to overstate the effect the TABD has had on trade liberalization. The Mutual Recognition Agreement affecting 50 billion dollars' worth of bilateral U.S.–EU trade would not have become reality without the TABD. TABD was also very important to the Information Technology Agreement, affecting nearly 600 billion dollars' worth of global trade. These are not, however, the TABD's only successes. The TABD has developed a broad menu of specific and pragmatic recommendations. In fact virtually every market-opening move undertaken by the United States and the EU in the last couple of years has been suggested by the TABD.
The TABD is a business-driven forum, but I am pleased to say that the inspiration for the TABD came from the U.S. Department of Commerce. In December 1994, the late Secretary of Commerce Ron Brown proposed the formation of a Transatlantic Business Dialogue in a speech before the American Chamber of Commerce in Belgium. He proposed that U.S. and European business join together to develop a business-driven vision of Transatlantic trade and specific recommendations for removing barriers, and that they engage in dialogue with the U.S. Government and the European Commission to find the ways to implement those recommendations.
The idea was simple: to identify those barriers to trade or opportunities for liberalization on which both business communities could agree as targets for government action. We should put the business ''horse'' before the government ''cart.'' We believed that, given the enormous cross-investment by U.S. and European firms in each others's markets, a single Transatlantic business community already existed that faced similar problems and could agree jointly on common solutions which would benefit both the U.S. and European economies.
Businesses on both sides of the Atlantic reacted enthusiastically, as did the European Commission. The first TABD conference was held in November 1995 in Seville Spain, with about 50 U.S. and 50 European CEOs led by Xerox CEO Paul Allaire and Ford CEO Alex Trotman on the U.S. side and BASF CEO Jurgen Strube and Goldman Sachs International CEO Peter Sutherland on the European side. They met with Secretary Brown, European Commission Vice President Sir Leon Brittan, Commissioner Bangemann, and other leading U.S. and European trade officials, and presented an agenda that grew to about 170 specific recommendations.
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The main impediments to trade across the Atlantic, they told the government officials, were not tariffs—although there were some important objectives in lowering tariffs—but were in differing standards, testing and certification requirements, and other regulatory differences. The EU was particularly surprised by the emphasis the European business community placed on reducing testing and certification costs, which provided a major impetus to the Mutual Recognition Agreement the U.S. and the EU had been discussing for about two years.
The joint business community also pressed governments to move forward on eliminating tariffs on all information technology products and to work together to multilateralize this reduction in the form of the Information Technology Agreement. This agreement was negotiated at the Singapore WTO Ministerial in December 1996 and finalized in March 1997—barely more than a year after the TABD made it a priority. As Deputy U.S. Trade Representative Jeff Lang, who is also testifying today, said—this agreement broke all records for a major negotiation. Former Commerce Secretary Kantor remarked at the Chicago Conference that working with the TABD, we had discovered ''an entirely new way of speeding trade negotiations.''
The TABD has been an ongoing process, generating new recommendations as governments examine and implement their earlier ones. In this way, the TABD helps keep a constant focus on those trade impediments that are most important, and it also provides a strong incentive to governments on both sides of the Atlantic to keep working at TABD recommendations rather than simply acknowledging them and putting them in file cabinets. The most important part of this process is the annual CEO-level meetings with top U.S. and EU trade officials. This was demonstrated dramatically in the second TABD conference, in November 1996, where under the leadership of Ford CEO Alex Trotman and BASF CEO Juergen Struebe, the TABD engineered the breakthrough that enabled governments to conclude the Mutual Recognition Agreement a few months later.
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It is important to point out that the TABD is not a vehicle limited to America's and Europe's largest companies. In fact, about one-third of the CEO's on the U.S. business delegations have been smaller and medium-sized firms. These firms are no novices in international trade, and many of them are proportionately more dependent upon international trade than Fortune 500 firms. Generally we have found that smaller and medium-sized firms are more affected by cost factors such as those in product testing and certification than large firms, and should benefit greatly from the MRA's, from streamlined customs practices, and other reductions in the cost of doing business across the Atlantic. Smaller and medium-sized firms also have a greater need for information about finding customers and complying with trade rules. Recognizing this, the TABD has set up a ''Transatlantic Small Business Initiative'' (TASBI), in which the Commerce Department's U.S. and Foreign Commercial Service is cooperating closely, as is the small business part of the European Commission.
We are looking forward to the third TABD conference, which is being planned by Tenneco CEO Dana Mead and former Philips CEO Jan Timmer. At this conference, which will be held in Rome this November, we anticipate working on implementing more forward-looking recommendations that will continue to move us toward the goal of a barrier-free Transatlantic marketplace. Secretary of Commerce Daley will lead the U.S. government delegation to this conference.
From the U.S. government's perspective, though, another extremely valuable aspect of the TABD is its working level structure. The TABD has no secretariat or permanent staff. By design, the TABD was set up to utilize existing business mechanisms, such as the National Association of Manufacturers, the Chamber of Commerce, the various industry sector associations and the interests of individual companies. The chairing company provides the leadership for frequent meetings to consider recommendations and to work with government officials in a cooperative fashion to help move forward consideration of their recommendations. Commerce's Market Access and Compliance unit (MAC) leads the U.S. Government's relationship with the TABD, and chairs an interagency working group that focuses on the TABD's recommendations. This lean and efficient structure works well, both in the United States and Europe, as can be seen in the results.
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Finally, the TABD inter-relates with the formulation of trade policy by direct links into the NTA process and the semi-annual U.S.–EU Summits. The TABD is a major source of analysis and input to the Joint U.S.–EU study of trade barriers which is being conducted for the NTA under the leadership of USTR and the European Commission. Additionally, the TABD prepares a special report for each Summit, in which the U.S. and European business participants explain their joint recommendations to the Presidents. The TABD CEO leadership meets briefly with the Summit leaders to underscore the key priorities. This process has given the private sector a strong voice in shaping trade priorities, and has benefitted the NTA process by enabling it to work on pragmatic steps in the knowledge they reflect the agreed priorities of businesses on both sides of the Atlantic. In fact, at the Madrid Summit, which began the NTA process, the United States and the European Commission agreed to 60 percent of the recommendations made at the TABD's Seville conference, and the proportion has continued to increase since then.
No other forum has risen so rapidly to become as effective as the TABD. It has become the single most important channel through which business can influence the bilateral trade and commercial agenda of the U.S. Government and the European Commission. The European Commission's Vice President Sir Leon Brittan summed up the process well when he said, ''whenever our two business communities can agree jointly that an action is in the mutual interest of our two economies, it is incumbent upon us to seek to implement their recommendation—or at the very least to sit down with them and explain why we cannot, and to try to work out another approach.'' This was perhaps best reflected in the TABD's role in convincing governments to finish work on the TABD's highest priority—the Mutual Recognition Agreements (MRA).
Mutual Recognition Agreements
The Mutual Recognition Agreements (MRAs) recently initialed between the United States and the European Union represent a ground breaking step in our efforts to reduce trade barriers. These agreements reduce the cost of market entry across the Atlantic by seeking to eliminate redundant product testing and certification requirements. The agreements cover telecommunications, pharmaceuticals, medical devices, electrical safety, electromagnetic compatibility, and recreational boats. Reaching these agreements was extraordinarily difficult because of the complex nature of product testing and certification, the differences in the U.S. and European regulatory systems, and the need to ensure there was no compromise in health or safety.
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The agreements allow EU-required product testing and evaluation in key areas like information technology products and medical devices or good manufacturing practice inspections in pharmaceuticals to be conducted in the United States with the results being recognized in the EU—and vice versa. While MRA's do not require changing legislation nor harmonizing national requirements, they do reduce the cost of submitting to government requirements carried out 4,000 miles away from the manufacturer in another language and open to the biases introduced by another technical culture. The main beneficiaries are small businesses who usually rely on third party testing, since they have no in-house labs themselves, and cannot afford the high cost of international labs. Many smaller U.S. companies will now be able to enter the European market where they were unable to do so before. This agreement is a real breakthrough.
The agreement achieves regulatory cost reductions that are of real and significant benefit to industry, consumers and regulators while still meeting the legal and policy requirements. The MRAs liberalize market access for more than $30 billion of U.S. exports and close to $50 billion of two-way trade and go a long way to achieving the business communities' goal of reducing the exploding costs of meeting worldwide costs of product certification. Industry estimates the overall cost of market entry across the Atlantic will fall by $1 billion, about $500 million of which will accrue to U.S. exporters. It has been estimated that this reduction in market entry cost is equivalent to a 2–3 percent tariff cut—a very impressive achievement. Importantly, the agreement provides all necessary health and safety protections, including the key ability of regulatory agencies ''to take all appropriate and immediate measures'' to protect health and safety.
Commerce's Market Access and Compliance Unit (MAC) conceived the idea of MRA's about four years ago and worked with USTR, U.S. regulatory agencies, the European Commission, and European governments to bring MRA's to reality. Progress, though, was very slow due to the difficulties of attempting to mesh the different U.S. and European regulatory systems. The MRA negotiations got a huge boost from the TABD's 1995 Seville conference, in which U.S. and European industry made it plain that MRA's were their highest priority. Even so, we were unable to agree on the details, and by late 1996 the negotiations were on the verge of permanent collapse.
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At the November 1996 TABD conference in Chicago, business made it plain that they did not want to see the talks fail, and the Commerce negotiators encouraged TABD to enter into spirited joint discussions with the U.S. and European negotiating teams in order to find solutions that had eluded the government negotiators. Lodwijk DeVink, President and Chief Operating Officer of Warner Lambert, and Ian Leschly of Smith Kline Beecham led the U.S. pharmaceutical business participation in MRA discussions at Chicago, and their personal efforts led to the breakthrough that business proposed to the government negotiators, and which was accepted on the spot by the U.S. and European trade leadership participating at the Conference. The importance of Mr. DeVink's and Mr. Leschly's strong personal determination and that of the other business leaders cannot be overstated. Industry truly motivated government to achieve an agreement that would meet regulatory objectives and yet provide valuable market access for U.S. and EU companies.
Governments announced a January 1997 goal for finalizing the MRA's, but once again were unable to come to closure on some of the key details. Agreement was finally reached with the personal involvement of Secretary of Commerce Daley and Ambassador Barshefsky in the final negotiations with Sir Leon Brittan on the fringes of both the OECD Ministerial in Paris and the U.S.–EU Summit at The Hague at the end of May. The pressure that both sides felt from the business leadership was the critical ingredient that kept everyone at the negotiating table until an agreement that cut the costs of market entry with no compromise of health or safety could actually be reached. This was a stunning success and showed what can be achieved through an effective public/private partnership.
Further Trade Liberalization
The U.S.-European commercial relationship is already one of the most open in the world, and the NTA process, ably assisted by the TABD, has made great progress in opening it further. We still, however, have much to do to achieve our goal of a completely barrier-free Transatlantic marketplace. We have an agenda of priorities to work on, and we look forward to more; both from the U.S.–EU Joint Study and from the TABD—as well as from other sources.
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Certainly our near-term priorities must include implementing the agreements we have recently reached—particularly the MRA's, which have ''confidence building'' periods and other complex implementation aspects. Additionally, we look forward to broadening the scope of the MRA's by expanding them into new sectors that determined to be of priority by the business community and to be of mutual interest to U.S. and European regulators. The TABD can play an important role in identifying the best sectors for new agreements and to work with us for their speedy negotiation.
A global agreement on financial services is another key priority. While this agreement comes under the WTO, it is the United States and the European Union that must take the leadership both in tabling pace-setting offers and in working jointly to ensure that at least a critical mass of other countries participate with attractive offers so that U.S. financial service providers will receive beneficial access to foreign markets from an agreement. This is a necessity before the United States can agree to a final deal.
Electronic commerce also deserves immediate attention. The Administration has taken a leading role in bringing discussion and proposals to the fore, and the TABD views electronic commerce as one of the key areas for the forthcoming Rome conference this November. If electronic commerce is to achieve the scope that many believe it can, it must be fostered with global rules that encourage continued technical improvements while still providing the legal framework for such vital aspects as digital signatures.
Tariff reduction should be another priority. While tariffs across the Atlantic will average about three percent or less after full implementation of the Uruguay Round and the Information Technology Agreement, there are still product sectors in which European tariffs are keeping out U.S. products—including paper products. The United States still has residual tariff cutting or tariff cut accelerating authority in sectors such as wood products, electronics, medical equipment, and paper and paper products to accelerate certain Uruguay Round tariff reductions. We look forward to working with USTR to help focus on these tariffs and find ways to reach agreement with the European Union to bring them down.
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Additionally, we should begin to focus not just on mutual recognition of product testing and certification, but also on the development of harmonized standards for the future. The TABD held a very successful automobile standards conference last year, and recommended the development of a new global forum to develop common automotive standards for the future—an approach that would cut the cost of auto production and benefit consumers. Led by the National Highway Traffic Safety Administration (NHTSA), the United States has been actively pursuing the development of a new global auto standards forum. The European Commission has not yet agreed, but we are hopeful that they will see a sufficient consensus in the European auto industry and that they will join with us in this new endeavor. Success here could lead to similar efforts in other sectors.
Finally, let me point out that regulatory differences remain the most significant barriers to transatlantic trade. These differences stem not from a desire to build protective devices against imports, but from genuine differences in approaches to health and safety and other questions of public interest. Nevertheless, their effect can be to reduce trade. We are very concerned, for example, on the approach the European Union has taken on eco-labeling, and see this as a fruitful area for discussion and cooperation to see that the environmental objectives are met without having negative trade effects.
These, Mr. Chairman, are some of the priorities that we see for the near term. There will be others as well. There is no question that through the governmental cooperation in the NTA, the business cooperation through the TABD, and the linkage of these two processes, we have a very effective mechanism for moving ahead.
Thank you, Mr. Chairman.
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—————
Chairman CRANE. Thank you, Mr. Hauser.
Ambassador Lang, you mentioned in your testimony that you find ''particularly disturbing recent EU moves to use the WTO dispute settlement process to bring cases that are more political in nature than commercial.''
Is not the United States to blame as well for using trade sanctions, in the first place, in an attempt to influence political issues?
Mr. LANG. Well, I don't think so. I mean, there is a legitimate debate, I suppose, about whether the laws that are in effect are in our National interest or not. I'm not in a position to get into that issue.
But my point was that when we have these issues that are driven primarily by political interests, and by foreign policy and security concerns, the system in Geneva is just not designed to handle those kinds of matters. Whether the legislation was advisable or not is not an issue for me. We're going to enforce the law that Congress has enacted. The question for me is whether the best way to resolve the difference of opinion between the European Union and the United States about the law we are required to administer was to take the matter to the WTO.
As it turned out, Ambassador Eizenstat was able to work with the EU on that matter, and I think we will be able to work out the problems between us, and the result will be consistent with the objectives of the law—at least that's what I hope.
I take your point, but I'm just don't want to speak to the merits of the law, so much as the more technical issue about whether the WTO system can handle this kind of thing.
Chairman CRANE. In your view, how has the enactment of Helms-Burton and Iran, Libya and other sanctions affected the NTA and TABD discussions and the overall U.S.–EU relationship?
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Mr. LANG. Well, first, with respect to the TABD, my impression is that the business communities continue to be involved and active. I think the individual members, individual businessmen, may be concerned about these issues, but they continue to be substantively engaged on things like the MRAs, for example, and I assume they will continue to be in Rome.
With respect to the NTA, again, if you look at the actual results, I think things are moving forward reasonably well. We do have an ITA that's in effect today. We have a good telecommunications services agreement. This MRA was an incredibly detailed and difficult negotiation, but it will now be in effect about a year from now. So I think we're able to work through these commercial issues, in spite of these rather high profile, if you will, somewhat political disputes. I think there is some tension about these matters, as there are on our side, with some of the actions that Europe takes or threatens to take, including its pronounce——
[Electrical blackout in hearing room.]
Chairman CRANE. You didn't anticipate the threat of thunderstorms passing through, but it targeted, I think, just our Committee room.
[Recess.]
Mr. RAMSTAD [presiding]. Now that the second coup has failed, we're ready to resume the hearing.
The Chair has one more question, before I defer to my distinguished colleague from Massachusetts, of Ambassador Lang and Under Secretary Hauser, and either or both can address the question.
How far do you gentlemen feel we can press the NTA agenda without fast track authority, and do we need fast track authority for legal or symbolic purposes, or both?
Mr. LANG. Well, from our perspective, we will potentially need it for both. It's certainly important that the United States is seen as speaking with one voice and moving forward on trade, engaging with the rest of the world and all that kind of thing.
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In specific situations, I don't have anything specific in mind. But I suppose it is possible in the future that we would come up with some matter that would require a change in U.S. law, other than a tariff change, that would require the use of fast track.
Now, I might say that a number of things that we have moved forward on in the last, say, 6 months, like the information technology agreement and the Mutual Recognition Agreements, required no change in U.S. law. In the mutual recognition area, for example, it was terribly important that we assure everybody in this country that U.S. standards of safety and health and so on would not change at all as a result of this agreement. That was a foundation stone.
But we are studying other areas. There is a joint study process with the EU. We're studying other areas. I don't know what the business community will suggest. I think it's conceivable that it would have a practical utility in the future. But again, I have nothing specific in mind.
Mr. RAMSTAD. Under Secretary Hauser.
Mr. HAUSER. I have nothing to add to what the Ambassador said, Mr. Chairman.
Mr. RAMSTAD. The gentleman from Massachusetts.
Mr. NEAL. Thanks, Mr. Chairman.
Mr. Ambassador, I will direct a question to you, and perhaps Mr. Hauser could follow up on it.
Given the IRA cease fire that was announced last Friday, and President Clinton's interest in Northern Ireland, the new Labor Prime Minister, Tony Blair, in Great Britain, and new Irish Prime Minister, Verdia Hearn, how might the transatlantic union help build some confidence on all sides of the equation in the north of Ireland?
Mr. LANG. Well, of course——
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Mr. NEAL. The European Union has been very helpful to the Republic of Ireland.
Mr. LANG. Yes, that's true. That's true.
I would like to think about this a little bit, but my initial reaction is——
Mr. NEAL. We've had 300 years.
Mr. LANG. That's true. There is certainly a set of incentives that—there's a relationship between commercial development and higher standards of living and peace and progress. I think that runs through everything we do in trade, even though it's not our main objective. Our main objective is deals that are of mutual benefit to both sides. So I think there probably is a relationship there.
Now, I don't work on the Northern Ireland matter, as such. I negotiate these trade deals. But I do know that the Republic of Ireland has had significant growth and has even encouraged Irish immigration to reverse because of their development recently, due in part to their further integration to the community. But I think also because American business has gotten involved there. We're responsible for something like 40,000 jobs in the Republic of Ireland, and many of our high technology companies have facilities there. Maybe something like that can be expanded into this area, if we can get peace and security.
I think I had better not go any further, but maybe we can get back to you with a few more ideas, if we consult with our colleagues who work on this issue full time. I expect there is a relationship. I just don't know enough about the situation to respond fully.
Mr. HAUSER. Congressman, if I might add, I think we have taken some steps over the past couple of years to use our commercial efforts as a way to bolster the peace process. Shortly afterward the President asked Secretary Brown to go over to Northern Ireland to take a look at whether, through a process of fostering trade and investment ties, we might give some economic underpinning to the peace process.
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We have followed up on that. Last October, I believe, in Pittsburgh, then Secretary Kantor chaired a conference on opportunity for trade and investment in Northern Ireland. We brought over about a hundred firms from the border counties of Ireland and Northern Ireland, got about 350 firms from across the United States in what we call a matchmaker surrounding, to try to build trade and investment ties.
I think that's a notion that, as a new peace process, a new cease fire seems to be in place that Secretary Daley is very interested in following up on. We have already scheduled some promotional events, trade missions, into the region in the fall, but I think this is all aimed at the nexus between economic opportunity, and the stability required to maintain the peace.
Mr. NEAL. The recruits on both sides come from the Falls Road and the Shankle Road. They generally are those that are in the midst of grand poverty. I think there's a tendency on this side of the Atlantic not to view this as a flash point in American diplomacy. But it is the longest standing political dispute in the history of the western world. I think that these sorts of initiatives can go a long way toward building confidence and building some esteem for all parties in these negotiations.
So I would hope, Mr. Ambassador, that you could get back to me with some specific recommendations or suggestions.
Mr. LANG. Yes, sir.
Mr. NEAL. Thank you.
Chairman CRANE [presiding]. Mr. Jefferson.
Mr. JEFFERSON. Let me ask a question, Mr. Lang, about steel and agriculture. My State is mostly concerned with agriculture as a result of our ports and our steel capacity. These have been sticking points in the negotiations between the EU and the United States.
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Can you tell me what plan the administration has in your negotiations on these questions?
Mr. LANG. Yes, sir. For one thing, steel was the subject of a zero tariff commitment in the Uruguay round, which is being staged in now. We have had occasional conversations with the European Union about some kind of arrangement on steel that would gain the support of the domestic industry in this country, to eliminate subsidies and dumping.
So far, those have not resulted in a negotiation, let alone an agreement, although we have tried to move forward in the area of specialty steel. Those discussions are underway now. I don't want to predict how they will come out, but there are discussions underway on that subject.
We also have some consultations occasionally with Europe about the effect of their steel trade decisions in the antidumping area on our market—that is, their decisions with respect to steel that flows into the community from the east, from Russia, that sort of thing. So that's kind of the level of conversation we have had about that.
Now, agriculture I could go on for days about. It's a very difficult area with the community. But I guess there are about three levels of this.
At one level there is already agreed a schedule for further negotiations in agriculture under the auspices of the WTO, beginning in 1999, in various forms, preparing for that, including the WTO Agriculture Committee, but other kinds of consultations, like the quad.
The EU, I must say, has continued to agree with that start date. That's very important because we need to work now in the context of the WTO to prepare for those negotiations, so that when the start date hits, we're not talking about the shape of the table; we're substantively working to improve WTO disciplines in the area of agriculture because that's the big deal that will move us forward on opening agriculture markets.
Of course, we're enormously productive in agriculture. It's 10 percent of our exports. We need Europe to be working with us on that subject. That's one level.
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At a second level we have some serious problems with the EU on the administration of their domestic programs with respect to a number of very serious issues involving mainly, I think, from their perspective at least, issues about health, and maybe the environment.
This arises, for example, in the biotechnology context. The process for approving food products, or products that might enter the food chains in Europe, we think is flawed. It's not as transparent as we think it ought to be. It is more politicized than the process here in the United States and that makes it difficult for business to plan. We don't think it's good for Europe, and it certainly isn't good for us, notwithstanding the fact that in most cases we have been able to work with the Europeans and get these products approved.
This affects a lot of products that are not biotechnological products but are nonetheless important. So we are trying to work with the Europeans to improve those internal processes in this area. That involves, of course, bringing to their attention the provisions of the sanitary and phytosanitary agreements in the WTO which were intended to bear on this issue of food safety, which has turned out to be a very important issue in Europe. That's the second level.
The third level are the disputes. For example, we have a longstanding dispute with Europe on the use of hormone-treated beef. We find no scientific evidence to support a ban on that product, and nonetheless they continue to ban the product. There, as in many of these disputes, we have put our faith, if you will, in the WTO, because previous to the WTO Europe was able to stall those decisions and we were forced to retaliate on a unilateral basis, or bilateral basis.
But starting last summer, we began to take these disputes through the WTO system. Now, some of them in the grains area, for example, in wheat, rice, barley, we have been able to settle these disputes before they went to a disputes settlement panel on a basis that our industry was able to accept and find favorable. But others, like the beef hormone matter, are going through the process now. We are concerned that some Europeans have said that, no matter what the outcome of the process, they can't comply with it.
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I don't know what ultimately the outcome of the process will be, let alone how they will react. But there has been concern expressed in U.S. Government circles, and obviously by our industry, that the process relating to a commercial dispute would not be resolved by the WTO.
So those are the three levels on agriculture, and we could literally have a separate hearing, if not several days of discussion, about the details. But it's a very difficult area.
Mr. JEFFERSON. Thank you very much.
I won't pursue this any further, Mr. Chairman. Perhaps I can ask Mr. Lang some other questions outside of the hearing about this particular set of issues, and to have further responses.
Chairman CRANE. Without objection.
One quicky question before you folks depart. It has to do with the potential for creating a body maybe a unit within the WTO, where you get some degree of international cooperation in establishing these standards—I mean, an international FDA, if you will, so as to eliminate conflicting standards, because this problem is not confined to the EU.
Mr. LANG. That's true. Actually, we have, I think, some of the beginnings of what you're talking about. I would like to talk in more detail with you about it.
But just to respond to that idea, I have two thoughts. One is, within the WTO, I have noticed a lack of attention on the value of the committee process. It used to be that old GATT committees were just talk shops. But the committees in the WTO turn out to be an important part of the process of reaching consensus on what these rules mean. They have a large multiplier, because everybody is at the table and you can move countries off of positions that we think are inconsistent with our obligations into a more mainstream position through the active use of the committee process.
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It chews up resources and it's very difficult for us to field the necessary resources to get to all these committees. But I think that's important in this agriculture area and in the sanitary and phytosanitary area, and in the standards area. All those committees need to be areas where the United States is present every single time.
Beyond that, both the standards agreement and the sanitary and phytosanitary agreement encourage agreement on international standards. Working with APHIS and USDA and Commerce in a variety of areas, we have tried to move toward some of those international standards.
Now, sometimes it's very difficult for us because in many areas in the industry, for example, we don't have a federally set standard. We may only have privately established standards. But nonetheless, I think the process is useful.
I would just say that I think some of your question relates to the technical difficulties we had in getting this Mutual Recognition Agreement, because I think we need to keep in mind not only the trade interest in this but the profound interest our public has in confidence in these health and safety systems. Right now in America, we are actually improving our health and safety standards in agriculture, but in a lot of other areas, and I think this helps avoid crises of confidence such as they've had, frankly, in Europe. I think we need to maintain that confidence in our systems and, nonetheless, try and move forward on the acceptability of common standards.
I would say that clarifying the process in Europe a little bit, making it a little more transparent and a little less politicized, would greatly help, because I think when our businessmen go in there, they want to prove the case that they make to the FDA or APHIS or whatever on the merits. That's basically what they tell us they need. So we are obviously negotiating on that basis.
Mr. HAUSER. If I might add a little bit, Mr. Chairman, I agree with what Ambassador Lang said. I would stress a couple of points.
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One, the fact that the systems are different. In many of our trading partners, there is a centralized government standards entity as opposed to our system, where it is private sector led. That being said, other countries—and this gets to the resource issue, that these things are terribly complex, extremely resource intensive to negotiate—other countries have raised the possibility of bilateral MRAs. Switzerland and Norway have asked us about it. We've had soundings from Asian companies, countries like Taiwan, Japan, Australia. Our friends at the FDA are, I believe, talking to their Canadian colleagues about this possibility.
I think the thing would be to, one, look at where the opportunities are, and two, because of the complexity of doing these things, it would be useful to look at whether there is some broader way to address this than a series of very intensive bilateral talks. I think your notion of looking at it more broadly is one that deserves some study.
Chairman CRANE. Well, gentlemen, we thank you. We apologize for the inconvenience of sitting in the dark.
With that, I would like to ask our next panel of witnesses to come up here. But before they do, let me tell some of the folks in the room here who are standing, we have chairs over here, if you would like to come over here and get comfortable.
Our next panel of witnesses includes Lodewijk de Vink, president and chief operating officer, Warner-Lambert Co., and U.S. chairman of the Transatlantic Advisory Committee on Standards, Transatlantic Business Dialogue; Janet Wells, chief executive officer of Insta Graphic Systems, and the U.S. chair of the Small and Medium-Sized Enterprise Group of the Transatlantic Business Dialogue; Patrick Yanahan, president and chief executive officer of USA Chicago, on behalf of the American Electronics Association; and Will Berry, president of the European-American Business Council.
I would ask you folks to also try and confine oral testimony to about 5 minutes, but your printed statements will be made a matter of the permanent record.
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We will proceed in order, Mr. de Vink.
STATEMENT OF LODEWIJK J.R. DE VINK, PRESIDENT AND CHIEF OPERATING OFFICER, WARNER-LAMBERT CO.; ON BEHALF OF THE TRANSATLANTIC BUSINESS DIALOGUE
Mr. DE VINK. OK. Thank you, Mr. Chairman, Representative Neal.
I am very pleased to have the opportunity to testify today about the New Transatlantic Agenda and the efforts to facilitate it through the Transatlantic Business Dialogue. I am Lodewijk de Vink of Warner-Lambert Co.
The focus of this hearing is on the New Transatlantic Agenda. I want to address one pillar of it, which is strengthening the commercial relations between the United States and Europe.
First, we do applaud President Clinton and Congress' intentions to adopt a bipartisan NTA as the basis for the relations with Europe. It rightly identifies commerce as a principal driver, and our efforts in the TABD are founded in that view and serve as the foundation of that part of the NTA.
The Transatlantic Business Dialogue was created to provide private sector input to government as the NTA was developed in 1995. Since then, the TABD has evolved into a refreshing approach to trade. It allows business leaders to identify problems and solutions with government as partners rather than antagonists.
There are two primary objectives of the TABD. First, to achieve meaningful and measurable improvements in the transatlantic regulatory environment. Our goal is that products be approved once and accepted everywhere in the transatlantic marketplace.
The second objective is to grow the Transatlantic Business Dialogue as a new paradigm for private-public problem solving, and to demonstrate that partnership, rather than confrontation, is a superior approach to meeting challenges. The underpinnings are dialog and trust.
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In its short life of about 2 years, the Transatlantic Business Dialogue has numerous achievements. In my written testimony are many examples, especially the role of TABD and the breakthrough package of Mutual Recognition Agreements that are listed.
Why has the Transatlantic Business Dialogue been so successful? I think there are several keys. First of all, the engagement of top level government officials and corporate management are essential. Our work matters because decisionmakers make decisions.
It has also been successful because the four sides of the table—government and business from both sides of the Atlantic—are realistic about expectations. We undertake to solve only solvable problems.
As importantly, the word dialog is not a slogan but a defining characteristic. Look at the MRAs, when there was a dialog, there was progress.
And finally, trust. Regulators and industry have and always will disagree on some issues. Europeans and Americans will disagree as well. But as long as the Transatlantic Business Dialogue is founded on trust, solving problems for an open marketplace can work.
The TABD leadership is presently surveying n