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51–833 CC








MARCH 30, 1998

Printed for the use of the Committee on International Relations

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BENJAMIN A. GILMAN, New York, Chairman
HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
EDWARD R. ROYCE, California
JAY KIM, California
TOM CAMPBELL, California
JON FOX, Pennsylvania
LINDSEY GRAHAM, South Carolina
ROY BLUNT, Missouri
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RICHARD BURR, North Carolina
SAM GEJDENSON, Connecticut
TOM LANTOS, California
PAT DANNER, Missouri
BRAD SHERMAN, California
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
LOIS CAPPS, California
RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff
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Subcommittee on International Economic Policy and Trade
ILEANA ROS-LEHTINEN, Florida, Chairperson
TOM CAMPBELL, California
LINDSEY O. GRAHAM, South Carolina
ROY BLUNT, Missouri
SAM GEJDENSON, Connecticut
PAT DANNER, Missouri
BRAD SHERMAN, California
BOB CLEMENT, Tennessee
TOM LANTOS, California
BILL LUTHER, Minnesota
YLEEM D.S. POBLETE, Professional Staff Member
AMOS HOCHSTEIN, Democratic Professional Staff Member
JOSE FUENTES, Staff Associate

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    Ms. Susan G. Esserman, General Counsel, U.S. Trade Representative
    Hon. Alan Larson, Assistant Secretary of State, Bureau of Economic and Business Affairs, U.S. Department of State
    Mr. Dale Moore, Executive Director of Legislative Affairs, National Cattlemen's Beef Association
    Mr. Jesus A. Permuy, A.I.C.P., Director of Human Rights and International Relations, Unidad Cubana
Prepared statements:
Hon. Ileana Ros-Lehtinen, a Representative in Congress from Florida
Ms. Susan Esserman
Hon. Alan Larson
Mr. Dale Moore
Mr. James A. Permuy
Additional material submitted for the record:
Statement of Professor William H. Lash, III

MONDAY, MARCH 30, 1998
House of Representatives,
Subcommittee on International Economic Policy and Trade,
Committee on International Relations,
Washington, DC.
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    The Subcommittee met, pursuant to notice, at 12:40 p.m., in room 2172, Rayburn House Office Building, Hon. Ileana Ros-Lehtinen (chairman of the Subcommittee) presiding.
    Ms. ROS-LEHTINEN. [presiding] The Subcommittee will please come to order.
    Since this Subcommittee began to consider the issue of the dispute settlement process of the World Trade Organization as a hearing topic, it has been flooded with calls asking about the timing of the hearing. The fact is that today's session comes in the midst of discussions about the jurisdiction of the WTO, questions of national sovereignty versus multinational agreements, negotiations on the multilateral agreement on investment, and intensified talks between the United States and the European Union on Helms-Burton. It has been preceded by resolution of disputes concerning the European Community's banana import system, Japan's taxes on imported alcoholic beverages, discussions on the challenge to the EC ban on imports of meat products from cattle treated with hormones, and by the decision of the WTO panel on the highly publicized Kodak/Fuji film case.
    This U.S. complaint against Japan's discriminatory practices regarding consumer photographic film and paper perhaps better than any other, underscores the overriding questions this hearing hopes to answer. Can or should the United States accept foreign arbitration? How does the United States benefit from the WTO dispute settlement process? These issues will necessarily be addressed within the reality that as of November 1997, reports showed that no country had filed more complaints than the United States, but predicted that the United States was likely to win 80 and 85 percent of them, roughly the same percentage as under the GATT.
    The dispute settlement system is credited with being a central element in providing security and predictability to the global trading system. Supporters argue that it provides an opportunity to test the practices of member countries and remove barriers and discrimination from international trade. It serves to ensure that WTO members are fully and truly committed to an open economy based on free market principles and allowing for equal access for all.
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    This can only be achieved if there are enforcement mechanisms and if the integrity of the system is maintained. The dispute settlement process is not there to be abused or to open the door to frivolous litigation. Further, the system must provide for a definitive and prompt resolution of trade disputes. It must build on global cooperation without endangering national security and sovereign independence.
    The European Union has failed to learn this lesson. It has crippled the WTO dispute settlement system through the complaint against the United States on Helms-Burton. As a means of securing a favorable environment in Cuba, which would render them substantial returns on their investments, the European Union continues to use international settings to attack U.S. policy toward the Castro regime. It does not matter whether their complaint is appropriate or legal according to WTO guidelines. The only thing that is of significance to them is what their account ledger shows.
    In challenging the Helms-Burton law at the WTO, they are forcing the WTO dispute panel to rule on a matter that clearly falls beyond the scope of the organization. The WTO is exclusively designed to settle trade policy differences among its member nations. Yet the Helms-Burton Act is a foreign policy instrument used to protect American national security interests.
    There are rumors and unconfirmed reports that just before the April 25 deadline when the EU case will lapse, the United States is expected to offer a waiver of Title IV of Helms-Burton to appease the Europeans and persuade them to drop their WTO challenge. My colleagues and I have made this perfectly clear in previous statements, but I should say it again so that there are no misunderstandings. We will oppose any waiver of Title IV of Helms-Burton.
    But the complaint against Helms-Burton is not the only example of the EU's disregard toward national security issues affecting not just the United States, but the global economy and the global community. The member states of the EU continue to negotiate with the Iranian regime, despite Iran's support and involvement in international terrorism and despite the threat of weapons of mass destruction.
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    For example, the French energy company, TOTAL, is one of three who are engaged in a proposed $2 billion investment in the Iranian South Pars Field. This offense could be sanctionable under the Iran-Libya Sanctions Act. The Europeans have already threatened to challenge this foreign policy measure and launch a WTO complaint against the Iran-Libya Sanctions Act. Again, questions have been raised about how effectively this law will be implemented against the threats launched by the EU. However, the EU manipulation of the WTO goes beyond blurring the lines between foreign and trade policy. The chorus of EU critics charge the EU has perfected the stall and delay tactic and is proceeding with immunity.
    We will hear some of our witnesses today explain that there is a growing perception that the United States lacks the will to press the European members on contentious issues and on enforcement of recommendations. The view is that fears of possible retaliation is weakening American resolve to defend its position to the fullest extent and is negatively affecting the outcome of EU-U.S. cases before dispute settlement panels. This raises a myriad of issues which merit further examination, including questions concerning fairness and due process, compliance, enforcement, predictability, transparency, and the binding nature of agreements. We hope that this hearing will take us closer to an answer for all of these questions.
    We thank the panelists for being here. I would like to recognize Mr. Brad Sherman of California who is here today for opening statements.
    Mr. SHERMAN. Thank you, Madam Chair. You can count on me for the calm, delicate, and diplomatic style that I have come to show on these trade issues. We are here today to discuss the WTO process, a process that I think distracts the United States from the sub-terranean trade tactics that can be used by some countries. For over a decade, American working men and women were told that our trade deficit was the result of our Federal budget deficit. In fact, the two numbers seem to be relatively the same size. We were told blame America, it's our fault. We eliminated the budget deficit. The trade deficit continues to grow.
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    But perhaps we should blame America, not the American people, not in this case even the American Congress, but rather our approach to international trade, which says that anything you can do to us under the table is just fine. For example, if a Chinese company is instructed in a telephone call from political leaders in Beijing to not purchase American goods, we never find out about it except by looking at the results. The one thing that is critical to our present trade policy is never look at results. That is to say we would only look through the regulations published in Beijing. We would find no discrimination in this particular instance, we would bring no urge for corrective action.
    Now clearly companies in Japan have more independence from the government than those in China. But they are still dependent upon powerful government ministries. If the similar telephone call were to originate in a Japanese ministry, all we would see is the results. We might hear about it indirectly. We would bring no case to the WTO. We would continue to run a huge trade deficit.
    It is perhaps the cause of this that the articulate class in America, the lawyers, the MBAs, others, benefit from trade regardless of which direction the trade goes, regardless of whether the trade is balanced. In previous hearings, we have been told that if our imports increase by $200 billion and our exports increase by $50 billion, that's a $250 billion increase in trade, a cause for celebration. But when it comes to the interests of working men and women, it is a $150 billion trade deficit increase.
    Every time we are told of opportunities to export, we are told that each billion dollars in exports is 10,000 or 15,000 new jobs. Every time three are imports, we are told that imports have nothing to do with losing jobs. Clearly this is a one-sided approach that is pro-trade, regardless of whether that trade is balanced.
    We have heard from Madam Chairman of the threats of European retaliation. Keep in mind that we are going to risk our sons and daughters, not only to defend NATO as it exists today, but to provide additional security to EU members by expanding NATO and ringing Germany with NATO member countries. We do this without a single request that they who are benefiting from additional security in Europe help us achieve additional security in the Middle East. We do so providing tremendous additional security and a foundation for international investment to the countries of Poland, the Czech Republic, and Hungary, without gaining their support for our sanctions against all economic activity with Iran or even their public support for our efforts against TOTAL and others that would expand the power of the Iranian rogue state.
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    It is disappointing that we are here to learn about the details to see how we could bring this case which will languish for a few years or that case which will languish for even longer. If we win the case, what happens? They sin no more and have to find a new sin. Whatever device is being used to exclude our film from Japan might have to be abandoned some day, without any compensation to us, without us ever discriminating against their film. I doubt that it will actually lead to a change in result. It will just lead to a change in Japanese laws and regulations in which they would again be forced to find a new mechanism for discrimination.
    It is time for the United States to start playing hardball in the area of trade. Otherwise, we are nothing more than a pitiful giant with the most powerful two assets in the world. We control access to the world's essential market, our own, and we are the world's only superpower. In spite of all this power, a giant can be pitiful if it does not summon the strength to even move a little finger. For us to go year after year with these trade deficits without even stating the goal that we should be running a trade surplus so as to pay back the trade deficits that have occurred over the last 10 and 20 years, shows that we will serve the interests of the articulate class. We will do everything possible to increase the safety of foreign investment, for that produces profits. We will do everything possible to increase total trade, because you can make money by exporting or by importing, regardless of whether those two amounts are balanced. We will wake up 10 or 20 years from now writing the history of how the world's only superpower allowed itself to be bled to death chiefly underneath the table.
    So I look forward to hearing how we are getting infinitesimally tougher in our efforts with the WTO, but I would really hope that something would emerge from the Administration along the lines of a dedicated policy of erasing the trade deficit in the next 5 to 10 years, of demanding that those countries that benefit from security arrangements with the United States in one region of the world assist us in achieving security in other regions of the world, and that in those countries that are not transparent, where things are done to us underneath the table, that we will focus not only on what goes on above the table, but on results as well.
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    Madam Chairman, thank you.
    Ms. ROS-LEHTINEN. Thank you so much, Mr. Sherman, for your opening statement. We are very pleased and honored to have with us a Member who is although not a Member of our Subcommittee, has a lot to say on this subject. Bernie Sanders of Vermont has been vocal and very proactive on the issue of WTO jurisdiction. Along with Congressman Cliff Stearns, who proposed an amendment that got quite a lot of support in our Congress just a few weeks or months ago. So we welcome him to make an opening statement on his legislation or else on the general issue of the WTO jurisdiction.
    Welcome, Bernie.
    Mr. SANDERS. Thank you very much, Madam Chair. I applaud you for holding this hearing on an issue of enormous consequence which I fear does not quite get the kind of understanding on the part of the American people that it should. My remarks will be brief.
    We all are told every single day that we are in a global economy and therefore we must do A, B, and C. Yet sometimes I think we should take a deep breath and analyze what is happening in the global economy. The function of trade is not an end in itself. The function of trade is to improve human life, presumably for people in our own country and people throughout the world.
    So I think when we look at the WTO, when we look at our trade policies, Mr. Sherman just indicated a moment ago, we have to see how are we doing. First, of course in this country we are running up a huge trade deficit, which translates into the loss of millions of jobs. I know that it is now in vogue because we have a huge trade deficit for people to say, well, the trade deficit is not of significance. I happen to think it is of significance.
    Second of all, of equal importance, and this is an area that is very rarely talked about, is the issue of our trade policy and the WTO in terms of democracy in the United States of America. Madam Chair, I would argue that one of the great problems facing this country is that more and more people are giving up on the political process, don't participate, don't vote, don't believe that what happens here in Washington or in their state capitals has any importance to their lives. They are giving up on the political process.
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    What the WTO is doing is, in my view, a manifestation of why people feel increasingly powerless.
    Mr. SANDERS. Here is a quote from an article that appeared in a very recent edition of The Nation magazine. This is what it says. It deals with a representative of the State Department going to Annapolis, the capital of Maryland, where the Maryland state legislature was looking at action that they wanted to take against the dictatorship in Nigeria. Let me quote from the article. ''As to illustrate Jackson's point, the brutal military dictatorship governing Nigeria recently found itself with a new Washington lobbyist, the State Department. The same day as the vote on the Africa trade bill, Deputy Assistant Secretary of State, Leon Ramsey, showed up in the Maryland State capital to strong-arm the legislature into voting down a State boycott of Nigerian business.''
    Now what was the State Department doing in the State capital of Annapolis? The article continues. ''Maryland legislators backed by the Sierra Club and Randall Robinson's TransAfrica have proposed legislation modeled on the successful South Africa divestiture campaigns of the early 1980's. Their bill would bar Maryland from signing any contracts with the Nigerian regime or with companies doing business there.''
    Now it seems to me, based on my understanding of American history, based on the fact that I was the mayor of the largest city in Vermont for 8 years, that the local folks, people in a city, people in a state have a right to get involved in the political process. If they are concerned about apartheid in South Africa, dictatorship in Burma, dictatorship in Nigeria, whether one agrees with them or not, it would seem to me that those folks have the right to be involved in the political process and use their legal, political functioning to deal with those issues. This is what the article contains.
    It continues. This is from The Nation. ''So what was a Deputy Assistant Secretary of State doing in Maryland opposing a Nigeria divestiture campaign? Simple. Ramsey warned—'' and here is the key point that I think all of us should pay a lot of attention to, ''Ramsey warned Maryland legislative leaders that their bill would run counter to the free trade provisions of GATT. Thus, the claims of trade trump human rights abroad and free speech and political protest at home.'' Here's the important quote, very important quote. ''Had we been bound by trade rules during our struggle to free South Africa,'' notes Randall Robinson, ''Nelson Mandela might still be imprisoned.''
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    Now that's interesting. Just a few days ago, the President of the United States was with Nelson Mandela. He was praising a man who I believe was one of the extraordinary men of the 20th century, a great man. Now when Nelson Mandela was in jail, cities like Burlington, Vermont, States like the State of Vermont and many other States throughout the country and the U.S. Congress finally got involved. They put pressure on the private sector and said do not invest in apartheid South Africa. Everybody acknowledges that as a result of the economic pressure placed by the U.S. Government and by governments in States and cities throughout this country, it was an important factor in forcing the racist South African government to come to the table.
    Now I find it extraordinary that representatives of the State Department today are going to a sovereign state of the United States of America, the State of Maryland, and saying you can not move to deal with a dictatorship in Nigeria. The same process as you know, Madam Chair, took place in Massachusetts where the good folks of Massachusetts have passed legislation that they believe is in the best interest of their State. Now somebody else may disagree with them. That's fine. But it seems to me in the United States, Massachusetts has the right to do what it feels right. Maryland has the right to do what it feels right. The State of Vermont which is moving on a Burma type bill has the right to do what it believes right.
    So I am enormously concerned that in the name of so-called free trade the people of cities, towns, states, and the U.S. Government are seeing their legislative decisions over-ridden in the so-called name of free trade. That is not what democracy is about. That concerns me very very much.
    So Madam Chair, thank you very much for holding this hearing.
    Ms. ROS-LEHTINEN. Thank you so much for your participation. You are free to stay, Bernie, and ask questions as well. Thank you.
    I would like to introduce our first panel. We thank them for being here with us. Our first panel is a frequent guest of our Subcommittee. Ambassador Alan Larson serves as Assistant Secretary of State for Economic and Business Affairs. He has held that post since 1996. Previously he served as Deputy Assistant Secretary for International Financial and Development and as American ambassador to the Organization for Economic Cooperation and Development in Paris, always a tough tour. From 1987 until 1990, he was principle Deputy Assistant Secretary of State for Economic and Business Affairs. We welcome you, Alan for being here with us.
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    Joining Ambassador Larson on the first panel is Ms. Susan Esserman who serves as General Counsel to the Office of the U.S. Trade Representative, having held that position since April 1997. Before serving as General Counsel to the USTR, Ms. Esserman served at the Department of Commerce's Acting General Counsel and as Assistant Secretary for Import Administration. Prior to entering the government, Ms. Esserman was a partner at a Washington DC law firm where she specialized in international trade law. But the best part about Susan is that she is a Miamian.
    So we welcome both of you today. Alan, if we can begin with you.
    Susan, you had won the coin toss and you were going to go first?
    Ms. ESSERMAN. Yes.
    Ms. ROS-LEHTINEN. OK. Or is that losing the coin toss?
    Ms. ESSERMAN. I hope it's winning the coin toss.
    Ms. ROS-LEHTINEN. Thank you.
    Ms. ESSERMAN. Thank you, Madam Chairman and Members of the Committee for this opportunity today to review the benefits of the WTO and WTO dispute settlement and all the benefits that they bring to the American economy, to American workers, companies, farmers, and consumers.
    Today the United States is the world's strongest economy and the role that international trade has played in our economic expansion can not be overstated. Since 1992, exports have accounted for over one-third of U.S. economic growth and we're the world's leading exporter. While in 1970, exports accounted for only 5 percent of our GDP, today the share has more than doubled to 13 percent. Between 1992 and 1996, exports accounted for one in six new jobs. Now over 12 million jobs depend on U.S. exports. Jobs supported by exports pay an average of 13 to 16 percent higher than the U.S. national average.
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    We are more prosperous today than at any time in our history. Much credit is due to increased U.S. trade facilitated by the trade agreements we have negotiated over the years, the most significant of which are the WTO agreements.
    Enhanced trade is also facilitated by the Administration's trade agenda which serves the interests of all Americans. It consists basically of three elements. First, we are working to expand export opportunities through multilateral, regional, and bilateral negotiations and through export promotion. Second, to ensure that Americans receive the benefits we bargained for, we place great emphasis on monitoring and enforcing trade agreements. Third, we enforce our domestic trade laws vigorously to safeguard the interests of U.S. workers and businesses from unfair trade practices at home and abroad.
    Our agenda builds on the strong foundation established by the WTO agreements. These agreements significantly reduce the level of discriminatory duties and taxes, quotas, regulations, and unfair subsidies that limit our exports. They extended new market opening disciplines to areas that had never been addressed before, trade in services, agriculture, and intellectual property, that are of vital importance to the American economy.
    To ensure that the United States secure the full benefit of these agreements, the United States insisted on a strong binding and expeditious dispute settlement system for the new World Trade Organization. With the advice and support of Congress, we have developed a WTO dispute settlement system that provides greater certainty for American businesses and workers that they can achieve a result on a timetable that will be relevant in a business sense. This dispute settlement system has proven valuable not only in terms of achieving tangible gains for American companies and workers in specific cases, but also as a deterrent. Our trading partners know that this mechanism is ready and available to us if they are not fulfilling their obligations.
    Since the system came into effect in 1995, USTR, which represents the United States in the WTO, has aggressively used WTO dispute settlement procedures to enforce our trading partners' compliance with WTO obligations. To date, we have been the most active user of the dispute settlement procedures, initiating more than 35 complaints against 22 different governments. These complaints cover a number of agreements and a wide range of sectors in the U.S. economy.
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    So far, the United States has achieved a successful result in 19 cases taken to the WTO, obtaining important results for American companies and workers in a wide range of sectors, from agriculture to sophisticated computer equipment, to protection of creative works. In ten of these cases, the panel has ruled in favor of the U.S. position; in nine others we were fortunate to reach favorable settlements. In fact, the most efficient use of dispute settlement is when the threat of a panel or the mere filing of a complaint leads to early settlement. When our trading partners know that the WTO rules provide strong enforcement and that we are prepared to use those rules, we don't have to go all the way to the panel process to achieve the results that our exporters want.
    Let me give you a few brief examples of the kind of wide ranging benefits that our system has yielded. In a recent victory, a WTO panel agreed with us that the EU, Ireland, and the United Kingdom had violated their tariff obligations by raising tariffs on computer networking equipment. This equipment, which enables computers to network with each other, is made in the USA by California and New England companies with American technology. We are the world's technology leaders.
    For our creative artists and intellectual property holders, we have won significant victories or settlements, including for our motion picture industry, our sound recording industry, and our magazine industry, specifically Sports Illustrated. An example in this area is a case we brought against Japan for its failure to protect intellectual property rights in sound recordings from 1946 through 1971. Before the case, U.S. industry estimated that Japanese firms were repackaging this material from a rich and creative period in American popular music into 6 million recordings a year of greatest hits collections with no compensation paid to American artists. Japan agreed to change its law and enacted legislation a few months later providing full protection. What was affected here was one of the most vibrant and popular periods in the history of American music, from the swing music of Duke Ellington, the Bee Bop jazz of John Coultraine, the rock and roll of Elvis Presley, Chuck Berry, and the 1960's sounds of Bob Dylan, the Beach Boys, and Otis Redding.
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    In a completely different area, agriculture, we have——
    Ms. ROS-LEHTINEN. Are the Singing Senators included in that greatest hits collection?
    Ms. ESSERMAN. Pardon me?
    Ms. ROS-LEHTINEN. The Singing Senators?
    Ms. ESSERMAN. I assume so. I hope so.
    We have also achieved very successful settlements in the agriculture area in response to a complaint against the Government of the Philippines. They eliminated measures that were hampering our pork and poultry exporters. We also settled an important case on behalf of beef and pork exporters involving Korea shelf-life restrictions. Successful settlements like these, again, demonstrate one of the major benefits of our new system.
    Building on our success, we will continue to pursue an aggressive enforcement strategy to ensure that we achieve the full value of the WTO agreements as well as our other trade agreements. It is important though to recognize that the WTO dispute settlement system is additive. It does not detract from our bilateral, regional and other multilateral initiatives. Nor does it detract from our proceedings under U.S. trade laws, including anti-dumping duties, countervailing duties, and section 301. In fact, in the last 5 years, USTR has achieved meaningful results on more than 75 occasions using U.S. trade laws. We will continue to use the leverage of our trade laws as a critical part of our enforcement strategy.
    In closing, I would like to emphasize that this Administration has not hesitated to bring difficult cases to ensure that we reap the full advantage of the new benefits that we fought so hard to achieve. Indeed, as I have said earlier, we have used the system more than any other government, accounting for more than one-third of all proceedings initiated since the WTO was established. Most importantly however, with 19 successful challenges to date, the United States has also reaped more benefits from the WTO dispute settlement system than any other country. Thank you.
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    [The prepared statement of Ms. Esserman appears in the appendix.]
    Ms. ROS-LEHTINEN. Thank you so much. Ambassador Larson.
    Mr. LARSON. Thank you very much, Madam Chairperson. I also have a prepared statement that I would like to submit for the record.
    Ms. ROS-LEHTINEN. Thank you. We will put both of the prepared statements in the record, without objection.
    Mr. LARSON. Thank you. With your permission, I would like to make five points in outlining why we believe that the WTO and the world trading system benefits American workers, businesses, and consumers.
    The first point is that enforcement of trade rights matters. The Administration, with bipartisan cooperation and support from the Congress, including this Committee, has sought to enhance opportunities for us to sell U.S. goods and services in foreign markets. One of the most important ways we do this is through trade agreements. To guarantee that the full benefits of these agreements are realized, the Administration has taken an aggressive approach to monitoring, compliance. The Administration is committed to ensuring enforcement of U.S. trade rights in the multilateral trading system.
    The WTO, and this is my second point, the WTO's new rules-based dispute settlement system is a vital part of a compliance and enforcement policy. The system is a more sure and more effective means of resolving trade disputes. As has been pointed out, we have used the dispute settlement system more than any other nation. We have a strong record of success. As the world's largest exporter, we stand to benefit greatly from an improved dispute settlement mechanism. As you will recall, the old system allowed one country acting alone to block adverse panel reports. I happen to be from Iowa and I can remember how many times in the past the European Union blocked adoption of panel reports in cases that we brought, attacking trade-distorting European agricultural policies. Now countries can no longer block negative rulings. We believe that the improved and expedited dispute settlement process has contributed to greater predictability in the multilateral trading system, a change that's deeply in our interest.
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    Third, like anything new, the DSB will need to be reviewed to ensure that it is operating the way that it is supposed to and to identify areas for possible improvement. The Administration, for example, advocates speedier deliberations, improved transparency, and more public participation. We all recognize that we'll win cases and lose cases in the WTO, but the more than 50 cases in which we have been involved have shown clearly that this dispute settlement system strengthens our hand internationally, permits us to enforce our rights under the Uruguay Round agreement, and at the same time, preserve our rights to apply our own trade laws.
    Fourth, Madam Chairperson, I would like to respond very briefly to some of the issues that you and Congressman Sherman and Congressman Sanders have raised because they are important. We recognize that the current WTO system doesn't handle all of the trade-related problems that we have. Congressman Sherman mentioned under-the-cover arrangements. One such type of under-the-cover arrangement is commercial bribery. We'll be coming forward in the next month with a proposal for support for an international agreement that for the first time in 20 years will commit more than 30 other countries to enforce criminal penalties and to prosecute business persons that commit overseas bribery in order to gain or retain business. We followed a policy like this for more than 20 years under the Foreign Practices Act. The Congress has urged administrations to try to get international support for these type of disciplines. We have achieved that now for the first time.
    Fifth, I do want to respond to the important points that Congressman Sanders raised about State and local sanctions. We were invited to Annapolis. We were invited there because I believe that leadership there wanted the opinion of the State Department. When we went up to testify, one of the first things that we said was that we were in agreement with those who expressed deep concerns about the Nigerian regime, about the policies that they are pursuing. We said that we wanted to cooperate with the legislators in thinking through an approach that would be effective.
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    We do know that it is possible for sanctions or measures to be introduced in such a way that they, rather than hitting the intended target, they distract attention for that, that they result in big disputes with trading partners or investment partners. We did talk through with them some of those types of considerations.
    I think it's quite right to point out that measures that this country took, including measures at the State and local level, had an important effect in the 1980's against apartheid. One of the reasons I believe that they did was that they were swimming with the tide of international public opinion against apartheid. They were not seen as cutting across either the international trading rights or the political prerogatives of our major trading partners.
    We did not, Congressman, I want to assure you, approach these consultations in Annapolis in any type of heavy-handed manner. We were pleased that we were invited to talk through these issues with the legislators there. I think that the result of those consultations was something that was very beneficial to their deliberations. It certainly was beneficial to us. We even invited them to come forward for further consultations if they wish, with those who are more directly involved in making Africa policy in the Administration. Thank you.
    [The prepared statement of Mr. Larson appears in the appendix.]
    Ms. ROS-LEHTINEN. Thank you so much, both of you, for your testimony today.
    Ambassador Larson, if I could begin with you, just a few questions that I had on the specific subject of Helms-Burton, although the questions are general in nature. I know that you will be giving us a more private briefing at a later time in 2 weeks, so we appreciate that opportunity as well.
    Could you tell us what is the Administration's general attitude about the European challenge in the WTO to Helms-Burton legislation?
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    Mr. LARSON. Thank you. We viewed with great disappointment the decision by the European Union to request a panel and to pursue a WTO case. We recognize that the EU was challenging key aspects of our Cuba policy including measures that were first taken in the Kennedy Administration. We believe profoundly that the WTO is not the appropriate forum for resolving differences about what is essentially a foreign policy matter. We believe that the measures that were challenged by the Europeans reflect abiding U.S. foreign policy and security concerns with respect to Cuba. These policies have been pursued by eight U.S. Presidents from both parties for more than three decades. We believe the WTO was not created to decide foreign policy and national security issues.
    Ms. ROS-LEHTINEN. What are the Administration's objectives in the negotiations with the European Union on items to inhibit investments in illegally expropriated properties in Cuba or elsewhere?
    Mr. LARSON. Madam Chairperson, last April, Under Secretary Eizenstat and Commissioner Sir Leon Britton of the European Union, negotiated an understanding. As part of that understanding, Europeans and we agreed that we would work together to try to develop disciplines that would inhibit and deter future acquisition of investments from any state that had expropriated such investments and contravention and other international law in any subsequent dealings in those types of investments. As a result of this entire package of understandings, the European Union agreed to suspend proceedings in the WTO panel case against the Helms-Burton legislation.
    What we are trying to achieve in the negotiations that have been underway since then is effective disciplines, ones that would fully achieve the objective of inhibiting and deterring investment in illegally expropriated property. We have made clear that while we are talking about a global set of disciplines, as I think is appropriate, that it will be absolutely necessary for us for those disciplines to cover American property in Cuba that was expropriated illegally without compensation. We hope through these negotiations to end up with a regime that will provide stronger protection for our claimants than they now have and that would make a very strong case for the Congress to consider a waiver provision of Title IV.
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    We understand very clearly the position, Madam Chairperson, that you reminded us of in your opening statement. I recognize that I will have no business coming back to talk with you or other Members of the Congress unless we have been able to negotiate a package that will better serve our claimants and our interests than Title IV does now. Thank you.
    Ms. ROS-LEHTINEN. Thank you. So when you talk about the negotiations that are taking place, they are still ongoing. Based on that, you will then be presenting to the Congress recommendations to change Helms-Burton?
    Mr. LARSON. Consistent with the understanding that was negotiated last year, we are continuing to try to develop the appropriate disciplines to inhibit and deter investment in expropriated property. If we come up with something that we are prepared to stand behind that we think is meaningful and effective, and will be an improvement on the current situation, then we will, consistent with that understanding, come forward to the Congress and talk about a waiver of Title IV on the grounds that we would have achieved something that will better protect our claimants and will better impose appropriate disciplines on illegally expropriated property in Cuba and elsewhere around the world.
    Ms. ROS-LEHTINEN. We look forward to continuing that discussion with you as I had said in my statement and many other times publicly and privately. We see no real movement on the part of our European allies in helping the Cuban people at all except for passing resolutions which do not help them in any way, as long as they continue with their trade, using illegally confiscated property, and we see no real movement in that direction for them to stop it, I don't see that the U.S. Congress, right or left, will be changing our U.S. laws just because this multinational organization that we have set up wishes for us to weaken our resolve. But we can continue that discussion at a later time.
    I'll have some questions for Ms. Esserman, but I would like to now defer to my colleague, Mr. Sanders from Vermont. Bernie?
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    Mr. SANDERS. Thank you very much, Madam Chair. Interestingly enough, while the Chair and I disagree on Helms-Burton very strongly, I think what we do agree on is that those decisions should be made by the people of the United States through the U.S. Congress, not by the WTO.
    I just have a few questions. Let me just start off on a little peripheral note. Ms. Esserman, you mentioned that the economy of the United States is doing very very well today, and one of the reasons is because of our trade policy. How much are workers in the United States making today compared to what they made 25 years ago? Do you have an understanding? Do you have any information on that?
    Ms. ESSERMAN. I don't have the specific figures here.
    Mr. SANDERS. If I were to tell you that the average wage of the American worker is today substantially lower than it was 25 years ago, how would that affect your determination that the economy is doing so very well?
    Ms. ESSERMAN. Well let me just say in terms of our trade policy, and the point that I was trying to make is that our international—today we do have a strong economy. We have a very low unemployment rate. In recent period of time, wages I believe have——
    Mr. SANDERS. In the last several months, wages have gone up——
    Ms. ESSERMAN. Have begun to rise. Of course the question is, you know, the disparity in wage rates is attributable to a number of factors. As you know, the largest of which is technology.
    I think the important thing is that certain forces are there, certainly international trade is there. What our international trade policy seeks to achieve is to try to maximize the benefits for Americans. That's why again, I wanted to really make the point is that given the subject of this hearing, WTO dispute settlement is only one part of it. There are many other ways to deal with the issues there.
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    Mr. SANDERS. I understand that. You said in your statement we are more prosperous today than at any time in history. What I am suggesting to you that while the wealthiest people in this country may be far wealthier than they have ever been in the last 7 years, for the middle class, for the average American worker, that person's standard of living is in decline. So I would suggest not going around suggesting that we are more prosperous than at any time in our history when tens of millions of workers today are working longer hours for lower wages than they did 25 years ago.
    I would now like to ask Mr. Larson or Ms. Esserman a question. I thank you for commenting on your trip to Annapolis, but I don't think it answered the pivotal question. The article from the editorial from The Nation says that Mr. Ramsey warned Maryland legislative leaders that their bill would run counter to the free trade provisions of GATT. So the question, not whether it's a good idea or a bad idea or how effective it might be, do the good folks of Maryland have the legal right to do what they wanted to do? Is the article correct or is it not correct?
    Mr. LARSON. The article doesn't quote correctly what Ambassador Ramsey or Mr. Marchek had to say when they visited Annapolis. I think the basic point, the basic approach of the State Department is that one that I outlined for you. We have an interest in working with State and local governments that feel they would like to speak out on these types of issues and talk through with them the ways in which they can do that that would be most effective and most likely to have the intended result on the country whose behavior is being targeted. This is a broader issue for us as well.
    Mr. SANDERS. You are still not answering my question. Is what they are proposing to do legal or not legal under GATT rules?
    Mr. LARSON. Your question was what did Ambassador Ramsey have to say. I said that we did not go there to tell them that——
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    Mr. SANDERS. But you still are not answering the question. Is it legal, can the folks of Maryland pass that legislation or is that in violation of GATT rules?
    Mr. LARSON. There are GATT rules that govern procurement. I am not a trade lawyer, Congressman. I am not the right person. I am not competent to give you a legal judgment on the question in which you are asking advice.
    Mr. SANDERS. You have no answer to that question. What you are suggesting to the Committee now is you don't know whether the proposed law in Maryland is legal or illegal based on GATT law. Is that what you are saying?
    Mr. LARSON. I am saying, yes, I have not taken a position on that. The State Department hasn't taken a position on that.
    Mr. SANDERS. So let the record show——
    Mr. LARSON. But we have——
    Mr. SANDERS. Interrupt me if I'm wrong here, but let the record show that you are not telling us clearly that Maryland has the right to go forward and do what it proposed. You are not saying that. You are saying they may, they may not, you're not sure.
    Mr. LARSON. The general counsel may want to give a legal opinion.
    Mr. SANDERS. Please.
    Mr. LARSON. Because that's what she is better at. What I am saying is that we simply did not approach the issue with the legislators in that way.
    Mr. SANDERS. But that's not the question that I asked.
    Ms. Esserman.
    Ms. ESSERMAN. Let me just say, Congressman, that I am not familiar with the specific legislation here. But let me just make a general point. First of all, states have a right to express their views as they have always had a right to express their views. In any event, regardless of what a WTO panel finds, it is very important to take into account that we carefully structured the WTO dispute settlement system so that we, the United States, would decide how to respond. No WTO dispute settlement system can tell us to change our laws, regardless of whether or not there would be a violation of those laws. Again, I am not opining on that. I am not familiar with the specifics. But I want just to make sure——
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    Mr. SANDERS. Let me just see if I understand you. So in other words what you are saying is Maryland can go forward and do what it wants but it may be held in violation of GATT law.
    Ms. ESSERMAN. First of all, I would be loathe to comment in any way that they would be held in violation of the WTO. Let me just say as a general matter, the WTO can not tell us to change our laws. Only we the United States have a right to decide how to respond. It was critical to us in fashioning the dispute settlement system.
    Mr. SANDERS. But the United States has changed its laws as a result of WTO decisions.
    Ms. ESSERMAN. In a most minimal fashion, sir. Let me just say that I think when you look at the balance of cases, the 19 cases that have been resolved, they have been very very favorable. There have been only a few cases against the United States. They have had virtually no impact on our domestic programs today.
    Mr. SANDERS. Well the WTO through the urging of Venezuela forced the United States to change the Clean Air Act or face trade sanctions. Is that true?
    Ms. ESSERMAN. Sir, we changed our regulations in a way that it enabled us to achieve our environmental objectives in that matter.
    Mr. SANDERS. In your opinion. Not in the opinion of everybody in the U.S. Congress.
    Ms. ESSERMAN. But I think a lot of people share our opinion.
    Mr. SANDERS. The point that I am making, Madam Chair, which I think is an important point is while you and I disagree on certain issues, you and I may or may not agree on what Maryland wants to do or what Massachusetts, I suspect we agree that those are decisions that the States and the U.S. Congress should be able to make. I have real concerns about the role of the WTO.
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    Last I would ask you to comment. This is of enormous consequence. Some would argue that if Adolf Hitler reappeared in Europe today and was trading with the United States of America, that we would have lawyers here telling us that we could not use the political and economic power of the United States against them. That's free trade. I think when Randall Robinson, who is one of the experts in this country on Africa, tells us that under current law we would not be able to do what we could to support the African National Congress and Nelson Mandela, I think we should have real concerns. Would you like to respond to that?
    Ms. ESSERMAN. Let me just cite you our approach in Helms-Burton. We made it very clear in the strongest possible terms that we thought it was very inappropriate for the WTO to address those issues. In the strongest possible way we told them that we were not going to show up——
    Ms. ROS-LEHTINEN. But if I may interrupt. If you bring up Helms-Burton as a rebuttal to his argument, I think Helms-Burton is an exact wonderful example of why Congressman Sanders is so correct. As we have just heard, after all of these delicate negotiations the Clinton Administration is going to come back to us to ask for legislation changes in Helms-Burton. We think we just heard it quite clearly that that's certainly on the table. If that's not as a direct result of the WTO challenge, and I think it proves Bernie's point that we will be actually changing U.S. laws because of this WTO dispute panel, and you are saying the opposite. Yet the facts speak very loudly.
    Are you or are you not going to come back to the U.S. Congress to ask a change in Helms-Burton as a direct result of the negotiations that are taking place with the EU because of the EU challenge in the WTO? I think you have said it very clearly. The answer is yes. Are you now saying no? How then can you then say that we will not be changing U.S. laws as a direct result of the WTO dispute panel? Both things can not be correct.
    Mr. LARSON. Thank you for posing the question directly. Let me try to give you a response that's direct. We will come back if we believe that we have negotiated an arrangement with the European Union that will accomplish in a way better than Title IV in Helms-Burton can or does, the objectives that we have had in pursuing Helms-Burton.
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    We don't agree with the European critique on Helms-Burton. We are not going to come back and ask Congress to consider a waiver of Title IV unless we are able to develop an arrangement that is going to better advance our national interest than the legislation currently does. If we think we have done that, then we will come forward to the Congress. We'll consult closely. We will present our case. We will listen to your comments, try to answer your questions. If at that time the Congress agrees with us, then we can move forward. If not, there will be no question of changing our laws.
    Mr. SANDERS. I appreciate your comments very much. I agree with what you said.
    My last question would be the following. You are probably not familiar with this, but in New England we have family farmers do dairy. They are going out of business, really hurting. We passed the Northeast Dairy Compact, which basically through government action in a compact, raises the price that farmers in New England get for their milk, supported by all six States in New England, et cetera, et cetera.
    Now it seems to me frankly, that that is in violation of free trade. That if I was from New Zealand or Mexico and I wanted to sell my product in New England, I might stand up and yell hey, these farmers are getting an unfair advantage. They are. I happen to believe that legislation is exactly right. Do you have an opinion as to whether or not Mexico and New Zealand who produce milk can override the Northeast Dairy Compact? Have you heard any discussion on that?
    Ms. Esserman.
    Ms. ESSERMAN. I have heard no discussion of it. I don't have enough information. I haven't any information to suggest that there would be a problem under international trading rules.
    Mr. SANDERS. If six states came together or in Florida if the good folks of Florida wanted to protect one of their local industries, maybe they are right, maybe they are wrong, that's a decision they want to make. We want to protect our family farmers. We have used government, underlined, action to artificially raise their prices. It sounds to me like it's a violation of international free trade.
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    Ms. ESSERMAN. Congressman Sanders, I am not familiar with the facts there, but I am——
    Mr. SANDERS. Hypothetically if everything I am telling you was correct. If government came together to provide artificially high prices to farmers, forget the Northeast Dairy Compact, if that's what they did, and a foreign country that wanted to sell milk into the United States at a cheaper price said hey, this is a violation of fair trade, free trade. What do you think?
    Mr. LARSON. I think the first point I would make, Congressman, is that the WTO rules on agriculture do not prescribe free trade. They are a very complicated set of arrangements. We have been generally in the posture of urging a reduction of subsidies and a reduction of government interventions. But the type of dairy programs that you referred to were in effect at the time that we negotiated the last WTO agriculture arrangements. I don't think there is any reason to be concerned that those arrangements are violative of WTO commitments in agriculture because WTO commitments on agriculture don't say free trade or else. What they do do is impose some disciplines on the extent to which countries can support agriculture through subsidies.
    Mr. SANDERS. I would just conclude, Madam Chair, thank you very much for your indulgence in suggesting that this is an issue that really needs to be explored, not only from an economic point of view but from the point of view of grassroots democracy and the ability of the American people to participate in the political process. It's a very serious issue. I thank you.
    Ms. ROS-LEHTINEN. Thank you. Mr. Sanders, the legislation that you had on the floor, that was an amendment on which bill and what did it say and what was the vote that you got in that on the floor?
    Mr. SANDERS. That was an amendment on Commerce, State, Justice appropriations.
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    Ms. ROS-LEHTINEN. What did the amendment say?
    Mr. SANDERS. What the amendment said is——
    Ms. ROS-LEHTINEN. I think it was the basis of what your discussion is about not changing the United States laws based——
    Mr. SANDERS. That's right. The amendment, what we did is provided the USTR with $1 million from the President's request, not a lot of money, but we did that, the best that we could do, was to use that million dollars to have the USTR tell local and State governments when any legislation currently in existence or legislation being proposed would be threatened by the WTO.
    Ms. ROS-LEHTINEN. What was the vote on that?
    Mr. SANDERS. Madam Chair, the vote was overwhelming. I think we were somewhere around 350. We had widespread progressive support, conservative support, and the support of a lot of people in between who are concerned.
    Ms. ROS-LEHTINEN. Just to see you and Cliff Stearns in one ''Dear colleague'' that's kind of a frightening thought in and of itself. So it does have strong bipartisan support.
    Mr. SANDERS. Yes it does.
    Ms. ROS-LEHTINEN. We thank you so much, Mr. Sanders. Feel free to continue to participate.
    I am very pleased to have with us Mr. Steve Chabot of Ohio, who has joined us as well. Steve.
    Mr. CHABOT. I thank the chairlady. I just have a couple of questions.
    Ms. Esserman, the WTO banana case is the first adverse ruling against the EC and is therefore the first real test case of EC commitment to the WTO system. I understand that so far the EC has resisted its compliance obligations. Since other major WTO members, the United States, Canada, Japan, have all been willing to come into full compliance when adverse WTO rulings have been made against them, what happens if the EC fails to do likewise?
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    Ms. ESSERMAN. Well, let me say that the banana case is an important case, as all our cases are. What we are doing is making clear our views to the Europeans that we expect full compliance with the WTO decision. We do not think their current proposal meets that test. We will be considering all appropriate options to ensure that we get an effective result.
    Mr. CHABOT. I trust the United States is committed to using all available WTO recourse in order to ensure full EC compliance in this important test case so that the integrity of the overall system can be upheld?
    Ms. ESSERMAN. Yes. We will review all options available to us in determining the appropriate way to proceed.
    Mr. CHABOT. Thank you. I yield back the balance of my time.
    Ms. ROS-LEHTINEN. Following up on that, Ms. Esserman, in what cases and under what circumstances do you believe that the security exemption should be used? Do you believe that national security should be better defined or kept broad for subjective interpretation? Please give us your thoughts on the security dimension.
    Ms. ESSERMAN. I would be happy to have further discussions with you on a private basis on this matter. But let me just say that we think that——
    Ms. ROS-LEHTINEN. Answer it in general terms then.
    Ms. ESSERMAN. Citing the language of the WTO which gives broad license to parties to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.
    Ms. ROS-LEHTINEN. Thank you. We look forward to following up on that question with you.
    Just one more, Ms. Esserman. There have been some charges that WTO, the process involved favors big industrialized nations at the expense of smaller and developing countries. I am sure that you have dealt a lot with that accusation. What is your response to that charge?
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    Ms. ESSERMAN. I think that the great advantage of the WTO system is that it provides for a clear, swift, and enforceable dispute settlement which is something that is to the benefit of all countries.
    Ms. ROS-LEHTINEN. Thank you. We look forward to having both of you in that private meeting. We appreciate your flexibility in rearranging the schedule. Last time because of votes of the Full Committee, we had to hold it over. We thank you so much for being accommodating to the congressional schedule. Thanks both of you for being here today.
    If I could introduce the second set of panelists. Leading off the second panel will be Mr. Dale Moore, who serves as executive director for legislative affairs of the National Cattlemen's Beef Association. Before that, he served in various capacities in Congress, having served in Congressman Pat Roberts' office and the House Agricultural Committee. We won't hold that too much against him.
    He will be followed by Mr. Jesus Permuy, director of human rights and international relations for UNIDAD Cubana. UNIDAD Cubana is a Cuban-American organization dedicated to promoting democracy and human rights in the island of Cuba. Mr. Permuy is a member of the American Institute of Certified Planners and numerous pro human rights organizations.
    Our third witness, Professor William Lash and his alternate were both unable to be with us today. As I had mentioned we had scheduling conflicts from last week. So that prevented them from being here today. So we thank both Mr. Moore and Mr. Permuy for being with us today.
    Dale, if you could begin.
    Mr. MOORE. Yes, ma'am. Thank you, Madam Chairman and the Subcommittee for holding the hearings regarding the WTO dispute settlement process. NCBA commends your efforts to improve the export outlook for all U.S. products, particularly U.S. agricultural products.
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    I will make some brief remarks and submit my full statement.
    Ms. ROS-LEHTINEN. We will put both of your testimonies on the record and feel free to make any remarks off that or use your own. Thank you.
    Mr. MOORE. 1997 beef exports accounted for approximately 8 percent of total U.S. production and 12 percent of beef's total wholesale value of $26.1 billion. The European Union is a market of developed countries representing approximately 350 million consumers with middle class lifestyles and sizable disposable consumer incomes. Still the EU persists in maintaining a protectionist attitude relative to its agricultural sector. It is our hope that the 1999 round of negotiations will help the EU approach agricultural trade in a manner consistent with its standing as a group of developed nations. We appreciate the efforts of those Members of this Committee and others in Congress who worked hard to secure the adoption of fast track, and look forward to working with the leadership of this Committee to expand its support in the coming months.
    The primary purpose of this testimony is not to question whether the Europeans are protectionists relative to agriculture. They are. It is not to debate whether fast track negotiation authority is critical to U.S. leadership in the 1999 round. We know that it is. The primary focus of my testimony is, ''Will the WTO dispute settlement process survive?''
    NCBA supports WTO and free trade. The frustration among many cattlemen is that the EU is undermining the current system using stall and delay tactics and that the United States is not being aggressive enough in pursuing enforcement actions, including retaliatory measures that ensure compliance with dispute settlement decisions. Many of our Members are asking why the United States continues to participate in a system that does not provide a clear and prompt resolution of trade disputes. This growing loss of confidence, increasing distrust, and dissatisfaction has resulted in declining grassroots support for trade and trade negotiations in general.
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    The EU's commitment to the WTO is being tested by their reactions to the recent WTO ruling on the EU beef hormone ban. A WTO dispute settlement panel in the appellate body ruled that the hormone ban is in violation of the WTO agreement. The EU's response has been to announce its intentions to initiate yet another risk assessment. This blatant stonewalling which has been going on for over a decade is unacceptable and begs for aggressive and decisive action, especially since the EU is quick to insist on compliance with WTO rulings when they fall in their favor.
    Some in the EU have suggested they would rather pay compensation than permit access to their markets by U.S. beef producers. This too is not acceptable. We want the opportunity to market our product in the EU and we need that access to ensure continued grassroots support for international trade agreements. The EU must bring its policies regarding beef hormones into compliance with science-based WTO guidelines by eliminating the ban or face the full force of WTO's enforcement measures.
    The picture is not entirely negative. We are encouraged that some progress has been made in settling another dispute with the EU. On March 16 of this year, the EU adopted the Veterinary Equivalence Agreement relative to meat inspection. NCBA urges the Congress and the Administration to closely monitor this development to assure that it is completely implemented within the 90-day timeline.
    In addition, we are encouraging the Administration to closely monitor the regionalization negotiations that are also tied in with the Veterinary Equivalence Agreements. NCBA looks forward to providing additional input as this Committee and others pursue trade issues. We look forward to the opportunity to provide any resource or background material that we can.
    [The prepared statement of Mr. Moore appears in the appendix.]
    Ms. ROS-LEHTINEN. Thank you so much, Mr. Moore.
    Mr. Permuy.
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    Mr. PERMUY. Madam Chairlady, I would like to thank you for the opportunity to testify before this Subcommittee about the World Trade Organization's dispute settlement process and the Cuban Liberty and Democratic Solidarity Act known as the Libertad Act.
    Two months after the Libertad Act was passed, the European Union asked for a dispute panel to be established to look at their complaint against the United States. Their argument was that the Libertad Act violated global trade rules and that it was extraterritorial. The 15-member organization had failed to condemn the killing of four innocent victims by the Castro regime over international air space, the 41 victims of the deliberate sinking of a tug boat and many other instances. Unlike the response to crimes committed by other brutal leaders, the European Union turned their heads away and continued to practice the right of indifference.
    According to legal, trade, and foreign policy experts, this complaint should never have been brought up to the WTO. Why? Because the Libertad Act relates to U.S. national interest with the Cuban Government. The government has been an anti-American aggressor exercising a political, ideological and strategic confrontation. This is foreign policy. It is a policy related to a terrorist state which is desperately looking for economic resources. Castro's regime continues to be identified by the U.N. Human Rights Commission as one of the worst violators of human rights in the world. It is simply not trade policy. As a result, it is not covered by the WTO rules.
    Additionally, the law does not discriminate against European companies in favor of U.S. businesses. There is no unfair advantage to the United States. It does not restrict foreign commerce. The trade limitation it has are on U.S. activities. Other countries can still invest in Cuba. Their pleasure-seeking tourists can still vacation there, enjoying the warm Caribbean sun and the young prostitutes who feel they have no choice but to sell their bodies so that their families can eat while the Cuban people continue to suffer inhumane conditions, to say the least.
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    But what does it all have to do with the subject of this hearing? The European challenge to the Libertad Act brought to the WTO raises questions about national sovereignty. It is an attempt to involve this trade organization in issues of national interest and foreign policy. It is not unreasonable to view this as a transparent ploy to compel the United States into changing its position on Castro's regime. It is another way for some Europeans to condone and promote Castro's agenda instead of promoting the interest of the Cuban people in their struggle for freedom and democracy.
    In April of last year, a compromise was reached between the European Union and the United States. The agreement itself is a problem. The terms were a problem because they incorrectly linked property rights and foreign investment trade issues with a law that seeks to promote a transition to democracy in Cuba. The agreement links trade issues to a law that focuses on human rights, civil liberties, and fundamental freedoms. During this time, the Administration has not implemented parts of the Libertad Act. Many in my community believe that this is intended to keep the Europeans happy. I suggest that you distinguished Members of Congress ask what have the Europeans done to meet their end of the bargain. Yes, they say all the right things. They issued a common position calling for changes in Cuba. Yet they continue to fill Castro's pockets. What specific actions have the Europeans taken to let the Castro regime know that they are serious on human rights and democracy? I am not aware of any. Additionally, has Castro made any positive changes following the Pope's recent visit to Cuba? I am not aware of any.
    It must be clear that the WTO is no place for foreign policy disputes. The fact that none of the economic arguments raised by the Europeans against the Libertad Act fit, is a clear example of the wide gap between global trade rules and the WTO on one side and foreign policy and national interest on the other side.
    Madam Chairlady, let me end my remarks by issuing a challenge to the economically powerful democracies. The European Union and the United States are stable democracies. Castro's regime, however, is a dictatorship that oppresses its people. Let the powerful democracies settle disputes more in terms of promotion of freedom and democracy for the Cuban people and less in favor of exploitative and unscrupulous economic interests. Policies ought to be based upon two basic factors, ethical values and the political realities. Let us dare to make these two factors the primary factors in the policymaking process. Ethical values internationally are clearly articulated in the Universal Declaration of Human Rights. Let the powerful democracies exercise a humanitarian right, bringing those values into the political and economic decisions, moving toward a democratic solidarity and liberty for the Cuban people. Thank you.
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    [The prepared statement of Mr. Permuy appears in the appendix.]
    Mr. CHABOT. [presiding] Thank you very much for both of your very good testimony. I just have a couple of questions. I'll probably be relatively brief because we're pretty low on Members right now.
    Mr. Moore, first, what recommendations would you provide to improve the dispute settlement system of the WTO?
    Mr. MOORE. Throughout the process we have seen relatively aggressive action. Secretary Glickman and Ambassador Sheer have worked closely with us in terms of sitting down and talking through. On the Veterinary Equivalence Agreement, for example, there was a lot of assistance provided by Congress in raising the fires up so that the EU saw clearly that if action was not taken through the dispute settlement process, that Congress was most likely to start legislating a fix.
    What we are encouraging is to keep the pressure on the Administration through efforts both here on the Hill and in our own efforts among our grassroots to show some wins. The 90-day clock is ticking on implementation of the veterinary agreement, which ties back to equivalency on meat inspection processes. There are some regionalization questions. Fast track negotiating authority, we believe, is critical. It's the right time now to work on a lot of other veterinary agreements that deal with controlling animal diseases and preventing export from those areas to this country and vice versa. We have run into some problems where the Canadians, where other European countries have set up agreements already with Central and Eastern European countries. We would encourage both Congress and the Administration to move forward in that direction.
    Mr. CHABOT. Thank you. Could you give us a few examples of how the United States you feel has not been aggressive enough, maybe using a few cases as examples?
    Mr. MOORE. In our specific situation, we believe the hormone ban is probably the best example in the dispute settlement process, one of the reasons that NCBA was so strongly supportive of the WTO. The EU and the United States generally agree that science is what these decisions should be based on. Yet time and again we have had our science ignored in the process. Finally, we had a victory both at the WTO dispute settlement level and the appellate body when they agreed with our science and disagreed with the European science.
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    That single example is coloring the judgment, at least in the beef industry, as to how difficult it is to get the Europeans to play with us. Their response to that, yet another problem but tied to the same issue, is that they would rather pay the compensation, again keeping our beef products out of European markets. The Veterinary Equivalency Agreement for years drug on. That kept not only beef, but pork and poultry products out. Those are the kinds of barriers that we are trying to get down.
    Mr. CHABOT. OK. Thank you. Mr. Permuy, just a couple of questions.
    If not at the WTO, how and where do you think issues such as the Helms-Burton law should be discussed or negotiated with foreign governments?
    Mr. PERMUY. Yes. The how is very important. The objective of the act is the transition from a dictatorship to a democracy. So this as a frame of reference should be implemented by the Administration through the channels they have to exercise—the executive branch of government through the diplomatic channels. Also one aspect that is very important, in the United Nations. Repeatedly this has been put to a vote in the United Nations and objectively the United States has done nothing really to make the people understand the objective of the law and to promote this freedom and democracy.
    I think when we understand the situation where the Cuban people are struggling for freedom and democracy and they are not receiving it, the humanitarian and the specific advice that is identified in the law, really there is a vacuum there. So I think the executive branch should make an effort to not only provide the funds as identified in the law, but also to explain this very clearly through all the channels internationally. I think this is a vacuum, a misunderstanding of the law. Make believe that it's just in terms of the American interest in Cuba really is the cause for so many confusions.
    Mr. CHABOT. Thank you. Do you believe that it's possible for the United States and other countries to promote freedom and democracy and commercial interests or do you think that democracy must come first in order for trade to follow?
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    Mr. PERMUY. That's a very important question. In reality, we have a fait accomplis. The dictatorship in Cuba has been there for almost 40 years. I think we should exercise all the power that the most powerful democracies have, combining the European Union and the United States, to promote democracy in Cuba. That is why we mentioned that they are not serious in letting the Cuban Government know and all the rest of the countries that they are not going to support the Castro regime.
    Once Castro has been removed from power, is out of there, then the situation changes. So in reality we can not wait, for democracy is not going to happen by itself. It doesn't grow on trees. It is simply that somebody has to exercise a humanitarian right. It's not intervention. It's like turning your heads away when you see a crime being committed. Something is happening, has been identified by the human rights commission for years and years, one after another, and is completely disregarded.
    At the last Congress in October, the fifth Congress of the Communist party in Cuba, they said, we will continue in power in the 21st century to make the socialist government to become a Communist government and so forth. So there is explicit definition of what they want and what they expect. It's simply an oppressive government.
    Mr. CHABOT. OK. Thank you very much for your answer. I want to thank both witnesses for their excellent testimony this afternoon. Your statements will be made available to all the other Members of the Committee so that they can peruse that at their convenience. Again, thank you very much. With that, we are adjourned.
    [Whereupon, at 2 p.m., the Subcommittee was adjourned, subject to the call of the Chair.]


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