[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]
CREATING JOBS: ECONOMIC OPPORTUNITIES IN EUROPE AND EURASIA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPE AND EURASIA
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
MARCH 27, 2012
__________
Serial No. 112-143
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey HOWARD L. BERMAN, California
DAN BURTON, Indiana GARY L. ACKERMAN, New York
ELTON GALLEGLY, California ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
DONALD A. MANZULLO, Illinois DONALD M. PAYNE, New Jersey--
EDWARD R. ROYCE, California deceased 3/6/12 deg.
STEVE CHABOT, Ohio BRAD SHERMAN, California
RON PAUL, Texas ELIOT L. ENGEL, New York
MIKE PENCE, Indiana GREGORY W. MEEKS, New York
JOE WILSON, South Carolina RUSS CARNAHAN, Missouri
CONNIE MACK, Florida ALBIO SIRES, New Jersey
JEFF FORTENBERRY, Nebraska GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas THEODORE E. DEUTCH, Florida
TED POE, Texas DENNIS CARDOZA, California
GUS M. BILIRAKIS, Florida BEN CHANDLER, Kentucky
JEAN SCHMIDT, Ohio BRIAN HIGGINS, New York
BILL JOHNSON, Ohio ALLYSON SCHWARTZ, Pennsylvania
DAVID RIVERA, Florida CHRISTOPHER S. MURPHY, Connecticut
MIKE KELLY, Pennsylvania FREDERICA WILSON, Florida
TIM GRIFFIN, Arkansas KAREN BASS, California
TOM MARINO, Pennsylvania WILLIAM KEATING, Massachusetts
JEFF DUNCAN, South Carolina DAVID CICILLINE, Rhode Island
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
ROBERT TURNER, New York
Yleem D.S. Poblete, Staff Director
Richard J. Kessler, Democratic Staff Director
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Subcommittee on Europe and Eurasia
DAN BURTON, Indiana, Chairman
ELTON GALLEGLY, California GREGORY W. MEEKS, New York
GUS M. BILIRAKIS, Florida ELIOT L. ENGEL, New York
TIM GRIFFIN, Arkansas ALBIO SIRES, New Jersey
TOM MARINO, Pennsylvania THEODORE E. DEUTCH, Florida
JEAN SCHMIDT, Ohio
TED POE, Texas
C O N T E N T S
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Page
WITNESSES
The Honorable Robert D. Hormats, Under Secretary, Economic
Growth, Energy, and the Environment, U.S. Department of State.. 8
Mr. Peter Rashish, Vice President for Europe and Eurasia, U.S.
Chamber of Commerce............................................ 35
Dan Hamilton, Ph.D., director, Center for Transatlantic
Relations, The Paul H. Nitze School of Advanced International
Studies, The John Hopkins University........................... 48
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
The Honorable Dan Burton, a Representative in Congress from the
State of Indiana, and chairman, Subcommittee on Europe and
Eurasia: Prepared statement.................................... 3
The Honorable Robert D. Hormats: Prepared statement.............. 12
Mr. Peter Rashish: Prepared statement............................ 38
Dan Hamilton, Ph.D.: Prepared statement.......................... 50
APPENDIX
Hearing notice................................................... 74
Hearing minutes.................................................. 75
Question submitted for the record by the Honorable Gregory W.
Meeks, a Representative in Congress from the State of New York,
and response from the Honorable Robert D. Hormats.............. 76
Question submitted for the record by the Honorable Gus Bilirakis,
a Representative in Congress from the State of Florida, and
response from the Honorable Robert D. Hormats.................. 77
The Honorable Ted Poe, a Representative in Congress from the
State of Texas: Prepared statement............................. 79
The Honorable Dan Burton: Material submitted for the record...... 80
CREATING JOBS: ECONOMIC OPPORTUNITIES IN EUROPE AND EURASIA
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TUESDAY, MARCH 27, 2012
House of Representatives,
Subcommittee on Europe and Eurasia,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 o'clock
p.m., in room 2172 Rayburn House Office Building, Hon. Dan
Burton (chairman of the subcommittee) presiding.
Mr. Burton. The subcommittee will come to order. The title
of today's hearing is Creating Jobs: Economic Opportunities in
Europe and Eurasia. As I have made clear in the past hearings
and statements, I am concerned about the state of Europe's
economy and their financial markets. Giving this concern, you
may be surprised that I think there is a lot of opportunity in
Europe.
Despite the current financial crisis, the combined nations
of the European Union remain the United States' largest trading
partner. In addition, Turkey, Russia, Central Asia and emerging
eastern European markets each present additional opportunities
for American exporters.
The national tendency during tough economic and financial
times is to insulate one's self from the fluctuating global
markets. To some extent this makes sense. Some European
countries remain volatile, and I just talked to you about that.
And thus U.S. investors and exporters should remain cautious.
However, there are European nations who are weathering the
crisis and present opportunities for U.S. exporters and
investors to capitalize upon. My colleague just got here.
We must not forget that growth is an important component of
the solution to any economic crisis. The United States
Government can help its citizens create growth by making it
easier to do business at home and abroad. For example, a zero
tariff agreement with the European Union would substantially
increase the total trade and an enormous jump in our exports to
Europe.
It is true that tariffs between the U.S. and our European
partners are low. However, transatlantic trade is so important
to economies on both sides of the Atlantic that dropping
tariffs by just a few percentage points would allow U.S.
exports to increase by tens of billions of dollars.
Accordingly, some estimate that we could see upwards of 300,000
jobs created through just the goods portion of such an
agreement.
Opportunities exist outside the European Union as well.
Russia, my colleague and I are working on that. Russia might
present one such opportunity. From 2005 to 2010, my fellow
Hoosiers increased our exports of Russian goods by more than
two and a half times. Russia is going to join the WTO this
summer, and the increased trade that Russia's WTO membership
will allow could support here in the United States, 50,000 new
jobs within 5 years.
In the current economic climate we can't ignore such an
opportunity to create jobs. Boy, that is an understatement. At
the same time, we must preserve U.S. support for democracy and
human rights. As I am sure everyone in this room knows, it is
Congress' decision to graduate Russia from the Jackson-Vanik
amendment and grant Russia permanent normal trade relations.
Such action is required in order for U.S. companies to reap the
benefits of Russia's WTO membership. There is a great deal of
debate as to what action Congress should take. I am concerned
about the timing of a repeal and what an alternative to
Jackson-Vanik would involve.
However, we must also recognize that Jackson-Vanik is now
largely symbolic. For almost two decades, the President has
waived Jackson-Vanik anyhow, and granted Russia normal trade
relations under the full compliance provision of the amendment.
Regardless, if Congress decides to graduate Russia from
Jackson-Vanik, we must maintain our support for democracy and
human rights through a modern, functional replacement that
recognizes the current situation in Russia.
Turkey presents another opportunity for greater economic
cooperation. Between 2005 and 2010, Turkey's GDP grew an
average of 4 percent as the country's economy diversified. This
progress continues. In just a few weeks, Turkey will receive
final bids for a third bridge connecting Europe and Asia across
the Bosporus. This project is emblematic of the tens of
billions of dollars that Turkey is going to invest into
highways and other infrastructure in the coming years as its
economy continues to grow and diversify.
In addition to supporting further economic growth with
Turkey, such developments will leave Turkey better prepared to
serve as a gateway for Western companies who wish to do
business in the Middle East and Central Asia. Unfortunately, we
are often our own worst enemy when it comes to international
trade.
The U.S. must be able to move swiftly and decisively in a
fast-moving global market. We failed to do so recently. Trade
deals with Colombia, South Korea and Panama lingered for
several years. As Congress proved by changing the rules when
President Bush sent to Congress the Colombia agreement, fast
track authority is no longer viable. Currently the U.S. is only
participating in one ongoing negotiation, the Trans-Pacific
Partnership. The United States is not involved in any of the 26
regional trade agreements listed by the WTO as being under
negotiation, and we hope that will change. The people of the
United States deserve better.
This government, both the administration and Congress must
get serious. We must improve this government's capability to
help business and increase exports. If we can't outpace our
competitors we cede to them the enormous advantage that comes
with being the world's largest economic power, and this is just
not acceptable.
And now I yield to Mr. Meeks, my ranking Democrat.
[The prepared statement of Mr. Burton follows:]
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Mr. Meeks. Thank you, Chairman Burton. And I think, and I
am going to do this, I am sure again, but I think that since
the last hearing that we have had, this is the first time we
have been here after your announcement that you were not
seeking reelection. And I just wanted to say for the record
that I believe your district is going to miss you being here.
They may see you more because you are there, but they are going
to miss your representation here.
I want to go on record to say that you have been a very
good friend. And it may be a little quieter around here without
you here, but I am sure that you've contemplated and thought
about it and you will have time to spend more time with your
beautiful wife and family and maybe play a little golf or
something of that nature. But you will be missed around here,
that is for sure.
Mr. Burton. Well, I am glad you said that last sentence,
because you started off saying my constituents would miss me
but you didn't say you would miss me.
Mr. Meeks. Yes, I would miss you. But we have still got
some work to do and some time to spend together, and I look
forward to doing that.
And I should also say, Under Secretary, it is always good
to see you. Always good to see you and I look forward to
hearing your testimony.
The central question before us today is, how can we
leverage our commercial relationship with Europe to create jobs
in America? Trade and investments plays an important role in
the U.S. job creation efforts, and our biggest and most
successful commercial relationship is indeed with Europe. In
fact, this is the largest and most integrated economic
relationship between two areas in the world.
President Obama has committed his administration to
doubling U.S. exports during his first term, and according to
recent numbers we are within striking distance of that goal.
Exports are currently growing at an annual pace of about 16
percent, and this increase has been one of the central drivers
of the economic recovery, accounting for about half the
nation's economic growth since the recession ended. The
administration has bolstered both domestic and global demand
and pushed through three long-stalled free trade agreements
with Panama, Colombia and South Korea last year.
Commerce is a major instrument of foreign policy, and I
applaud Secretary Clinton for laying out a bold vision for
Economic Statecraft in her speech on that topic in October last
year. Free trade and international investment are cornerstones
of our nation's prosperity, significant generators of jobs in
America and a great asset for both U.S. workers and companies.
But trade also stimulates openness, transparency, efficiency
and accountability. Trade strengthens innovation and drives
reform on a global scale, and binds us together with other
nations to ultimately reduce the potential for conflict.
However, according to a recent report on U.S. trade and
investment policy by the Council on Foreign Relations, in
recent years public opinion toward the benefits of
international trade has declined significantly in the United
States. And I hope that our panel and the Secretary might
address ways for us to change this perception. Congress, of
course, must do its part to address the low-hanging fruit that
can facilitate trade, exports and investments, and create jobs
and growth in the transatlantic space.
This agenda includes granting permanent normal trade
relations to Russia and Moldova. As Chairman Burton here said,
Russia will accede to the WTO this summer, while Moldova has
been a member since 2001. Congress has simply been asleep at
the switch when it comes to giving U.S. companies the same
benefits available to other WTO members.
For more than a decade the United States has been non-
compliant with WTO rules because we have failed to repeal the
Jackon-Vanik amendment from Moldova, and I fear that we are
about to commit the same mistake for Russia. If Congress is
truly serious about creating jobs, growth and export
opportunities, this is the obvious place to start.
Bringing Poland and other European countries into the Visa
Waiver Program. Poland is one of our strongest allies, and has
emerged as one of the most dynamic economies in Europe. We
should take advantage of this dynamism by expanding the
opportunities for U.S.-Polish business relations and tourism.
U.S. citizens can easily travel to Poland for up to 90 days
without obtaining a visa, but we have not extended the same
privilege to Polish citizens. Bringing Poland into the Visa
Waiver Program will strengthen both our economy and our
national security, and Congress should act without delay to
pass the necessary legislation.
We should update export control legislation. Congress must
pass and update legislation in order to stay in our cutting
edge techonology sectors and create new, high quality jobs. The
current export control statute is anachronistic, a relic that
fails to recognize the reality of high tech products and
components that are freely traded on global markets. U.S.
developers and manufacturers are being excluded from these
markets for no apparent reason.
Congress should also fulfill its advisory role to the
Transatlantic Economic Council. When the Transatlantic Economic
Council, the TEC for short, was created in 2007, Congress was
given an advisory role in the TEC's work. This role was
assigned to the Transatlantic Legislators Dialogue, which
brings Members of Congress and the European Parliament together
to resolve regulatory issues at the legislative level. I think
the TLD's work could provide valuable input to the High Level
Working Group on jobs and growth, and I suggest we find a way
to integrate Congress and the EU Parliament input into this
process.
And let me just end on this because I think the executive
branch also has the responsibility to facilitate the jobs and
agenda growth. One, eliminate or reduce remaining tariffs on
both sides of the Atlantic. Two, work together with our
European partners to establish international regulatory rules
and standards.
And I know that Chairman Burton would agree on the
importance of expanding U.S. trade with Russia, and I want to
conclude on that. On December 16th of last year, Russia
received an invitation to join the WTO which would
significantly enhance our opportunities to export goods and
services to a booming Russian market. However, if U.S.
businesses are to have the same benefits of Russia's WTO
membership as all other WTO member countries, Congress must
extend permanent normal trade relations to Russia and repeal
the Cold War era legislation that has become redundant. Doing
so will empower the reformers and innovators that represent the
future of Russian society, and in fact the leading Russion
opposition figures have recently called on Congress to do just
that. Repeal the Jackson-Vanik amendment for precisely that
reason.
So I will love and wait to hear the testimony of the Under
Secretary and our other panelists, and again I thank my friend,
the chairman of this subcommittee, Dan Burton, for this timely,
timely hearing.
Mr. Burton. Very good. Jean, I think you were here next. I
will get to our vice chairman here in just a minute. But before
we do, I want to say since they mentioned that I am going to be
retiring, we are going to miss you too.
Ms. Schmidt. Well, thank you. And basically I am here to
just listen and learn. It is very apparent that Eurasia is
becoming an emerging market that the United States must pay
attention to. Most importantly, the region of Turkey, because
it truly is the place where East meets West. And really
continue to look at Russia as a trading partner. I think that
in the next 50 years, the ability for Russia to continue to try
to be a player of both economically and militarily will
continue to decrease, but the emerging area will be Eurasia,
most importantly Turkey. So looking forward to your views on
that. Thank you.
Mr. Burton. Our vice chairman from the great State of
Arkansas, Mr. Griffin.
Mr. Griffin. Thank you, Mr. Chairman. Just quickly I would
like to point out that I was a staffer for Chairman Burton on
the Government Reform Committee in 1997, 1998 and 1999, and
appreciate his service and appreciate your service as well.
I have a particular interest in our trading with Europe. In
the 2nd congressional district of Arkansas, which is my
district, Little Rock is the biggest population center, but it
is broader than that. It is about eight counties. We have a
number of European companies that do business and employ
hundreds of Arkansans, and so I will be real interested to hear
how we can do more business with Europe.
Some of the ones that spring to mind are Unilever, which is
a British/Dutch company. We have, what I understand to be, the
only Skippy peanut butter producer in the United States. Also,
L'Oreal makeup, Maybelline, a French company. They have a plant
east of Little Rock. Dassault Falcon Jets from France. They
bring jets over from, I think, their headquarters in Bordeaux.
They don't bring any Bordeaux wine with them as far as I know,
but they do bring their jets from Bordeaux and they are fitted
with the interior in Little Rock. And then we have LM Wind
Power, which is a leader in alternative energy that make the
big blades for windmills. I have toured that plant.
And so the European businesses have a large footprint in my
district. And so when we talk about increased trade and we talk
about getting more businesses to have a direct investment in
the United States, for me it is not some academic exercise. I
mean, we are talking about people who get up in the morning and
drive to work or they don't. And when we can have more of these
companies investing directly in the United States either
because they find a skilled workforce, or the infrastructure or
they believe in the stability of the United States, whatever
the reason, we need to be pursuing policies that encourage that
further.
And I look forward to hearing your testimony and anything
that you can advise us on what we can do to increase that. The
chairman already mentioned that it took us as a country a long
time to get the three trade agreements that we recently passed.
They had been languishing for a long time. We need to do
better. And so I am here to hear your opinions on how we can do
better. Thank you very much.
Mr. Burton. Thank you, Mr. Griffin. Mr. Sires?
Mr. Sires. Thank you. I apologize for being late. Typical
Hispanic, I am always late. But thank you for being here, and I
just want to hear what you have to say. I am very interested in
this part of the law.
Mr. Meeks. Mr. Chairman, before we go to questions, I just
want to join you in saying that we are going to miss Jean
Schmidt. I have had the opportunity to travel with her and she
is very enlightened on world issues. And I have just got to
tell you, in getting to know her is getting to like her and
love her and her whole passion for the world and opening up to
the world. And so I just wanted to join you. Jean, you will be
missed here also.
Mr. Burton. I would just like to say before I introduce our
first guest that you should get out there and run a marathon
with her.
Mr. Meeks. Oh no, I can't compete.
Mr. Burton. What do you run, about five miles every
morning?
Ms. Schmidt. Yes.
Mr. Burton. Yes, my goodness.
Mr. Meeks. Even when we are abroad, every morning she still
gets up, whatever country that we are in, and she will run in
the morning. I mean it is a routine that she will follow even
in the highest altitudes. I couldn't believe it.
Ms. Schmidt. We really need to listen to this testimony,
but I have just got to say if you want to learn what the world
is like, get up when the world gets up and see how they
operate. You really get the best footprint of how a world
operates.
Mr. Burton. Mr. Meeks will never get up that early.
Testifying on the first panel is the Department of State's
Under Secretary for Economic Growth, Energy and Environment,
Robert Hormats. Secretary Hormats served in his current
position since September 2009. Prior to that position at the
State Department, the Under Secretary was vice chairman of
Goldman Sachs. Earlier in his career, the Under Secretary
served as the Assistant Secretary of State for the Economic and
Business Affairs, as Deputy U.S. Trade Representative, and as a
senior staff member for the National Security Council. Pretty
impressive credentialing. And with that we will listen to what
you have to say.
STATEMENT OF THE HONORABLE ROBERT D. HORMATS, UNDER SECRETARY,
ECONOMIC GROWTH, ENERGY, AND THE ENVIRONMENT, U.S. DEPARTMENT
OF STATE
Mr. Hormats. Well, thank you very much, Mr. Chairman and
Ranking Member Meeks and members of the committee. It is a
great pleasure to be here today, and I just wanted to before I
start, just identify a couple of issues that you have mentioned
in your opening statements.
One, I totally agree that there is opportunity in Europe
and in Russia, Turkey and Eurasia. I think that you, Mr.
Chairman, pointed out that the worst thing we can do in the
current environment is turn inward. The best thing we can do as
all of you have indicated is turn outward and look for new
opportunities all around the world.
And Turkey is certainly a growing market. It has certainly
come on to its own from having a major crisis 10 years ago. It
is now one of the preemiment emerging economies of the world.
Russia is a country that now as a member of the WTO, affords
us, if we take advantage of them, opportunities to sell in a
growing market that is going to be diversifying. It is a big
energy market, but it is going to be diversifying into other
things. So there are really great opportunities here, and the
question is, how do we take advantage of them? So I really
appreciate the opportunity. It is very timely in this
environment to discuss these kinds of issues.
Let me just discuss for a moment the importance of the
U.S.-European economic relationship. U.S.-EU bilateral economic
relations are really one of the central drivers of the global
economy. Roughly 50 percent of global GDP is accounted for by
the U.S. and Europe combined. Europe itself is about 18 percent
of global GDP. Europe is also vital to American exporters. The
value of American goods and services exports to the European
Union is actually several times that of our exports to China.
While China gets a lot of publicity and is a growing market,
Europe is still a much bigger market for American exports.
The same is true with foreign investment. Foreign direct
investment has created millions of jobs on both sides of the
Atlantic. At last measure in 2010, U.S. foreign direct
investment in the EU had reached nearly $2 trillion. EU
investment in the United States is also enormous, $1.5 trillion
in 2011, creating a lot of jobs in virtually every district,
every state in this country. We look to Europe to attract more
foreign investment in the United States over a period of time.
And we are going to be energizing our Embassies and our
ambassadors as part of Secretary Clinton's Economic Statecraft
to be more proactive, working with governors and mayors who are
already very proactive in attracting foreign investment.
We look to Europe also for new opportunities for exporters,
for industrial products, for consumer goods, for agricultural
goods as well. I mean the area around Little Rock is a big
exporter of agricultural products, poultry and such things, and
virtually every state exports agricultural goods, and saying it
is also a place where a large number of American companies have
been operating successfully for many decades and seek more
opportunities there.
We are also working with Europe to improve the climate for
trade and investment in third country markets. This is very
important because there are a number of countries who don't
share the same notion of rules and obligations under the WTO
and elsewhere, so we are working with Europe on intellectual
property and in other areas as well. And of course, Europe has
been a strong ally as we see in Afghanistan and elsewhere.
Let me discuss the eurozone crisis briefly. We have
continued to collaborate closely through the global financial
crisis, and more recently the current eurozone crisis. We have
seen a commitment by the EU to address current economic
challenges not only through fiscal consolidation, which is a
major priority for some countries to improve their debt
sustainability, but also by facilitating job creation and
structural improvements and putting in place measures to assist
member states in finding a path back to economic growth. We
know from our own expertise that moving from crisis to recovery
depends on swift, aggressive action to restore market
confidence.
I would also like to outline some of the things that we are
actually doing in the State Department to promote the
Secretary's Statecraft agenda. In the written testimony, I
won't go through this now, I highlight ways in which our
Embassies and our missions are very actively involved in
promoting American exports, supporting American companies, and
attracting investment.
One example is Boeing's sale of 50 aircraft to Russia's
Aeroflot. We also worked in Germany with Volkswagen to
encourage them to build a $1 billion manufacturing plant in
Chattanooga. This helps U.S. exports, but as Mr. Griffin
pointed out, there are a lot of opportunities for investment
all over. And in Indiana, as you have said, Mr. Chairman, there
is a lot of foreign investment and we are aiming to get a lot
more. And yes, I think it is a big job creator and I think it
is underestimated. But Indiana is so so central that, you know,
it is a great place to invest. You can go anywhere from
Indianapolis, and it is a relatively short distance. And of
course Kennedy Airport is a big hub, and your district is
really very important. It is really the air gateway to Europe,
so it is an opportunity.
The volume of U.S. agricultural exports, let me just talk
about that briefly. In our 2011 statistics, agricultural
exports to the EU were valued at $9.5 billion, up 8.2 percent
from the prior year. USDA estimates that for every billion in
U.S. ag exports there are about 7,800 jobs supported in the
United States.
We also have been very active, we have got for the first
time, Secretary Clinton invited representatives from 200
institutions, like Chambers of Commerce, from around the world
to our global business conference to find out how we could do a
better job. So we are constantly learning and trying to be more
proactive.
We also have the Transatlantic Economic Council, which was
established in 2007, led by the White House and the European
Commission. We are trying to use that to reduce regulations and
improve cooperation in a variety of areas. One of the
highlights of the TEC is the new work program that has been
announced, which is designed to see if we can find ways of
strengthening jobs and growth through a working group that has
been created between the U.S. and the EU. Ron Kirk is our
representative and Karel De Gucht, the European Commissioner
for trade, is theirs.
Let me just mention a few things about trade with Turkey
and Russia. I know I am out of time. I will just go very
quickly. First with Russia, I think eliminating the Jackson-
Vanik restrictions as they apply to Russia is critically
important and providing them with PNTR is very, very important.
Russia only takes about \1/2\ of 1 percent of American exports
today. It has the potential to enable American exports to grow,
if we have the same opportunities as other countries in the WTO
will have, once Russia accedes to membership in the WTO. If
PNTR is not provided, if Jackson-Vanik is not lifted with
respect to Russia, we will be at a disadvantage vis-a-vis our
trading partners, and we will also not be able to enjoy the
full benefits of the commitments that Russia has made when it
joins the WTO. So it is a double negative for us.
It is also worth pointing out that in the WTO negotiations,
the United States gave up nothing. All the concessions, all the
commitments were made by Russia. We have made no concessions to
them or to any other country. They made concessions in order to
join the WTO. So this is an enormous opportunity for American
exporters and American business to take advantage of one of the
big markets of the world with energy and a lot of other things
that can enable companies in the United States to do better.
The other point is Turkey. I totally agree that Turkey is a
growing market, and a country that has undertaken a lot of very
important reforms. And lastly, Eurasia, Central Asia, very
important countries like Kazakhstan, Azerbaijan--we are working
with these countries. They have a lot of raw materials and a
lot of growth potential so we should be developing our
relations with them, and we will be doing that. I have met with
the President of Azerbaijan, which as you know has a lot of
energy, and we are going to have a bilateral commission with
them to try to reduce barriers and increase opportunities.
So there is a wonderful menu of opportunities here. It is
up to us to work together, the executive branch, the Members of
Congress together to find ways of taking advantage of these
opportunities for American workers and the American people and
American business.
So thank you very much, Mr. Chairman. Sorry I went over.
[The prepared statement of Mr. Hormats follows:]
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Mr. Burton. No, that is okay. Thank you very much. You
mentioned a couple of things that concern me. This Trans-
Pacific Partnership that is already in force has been, I think,
pretty beneficial. But we haven't had any trade deals with many
nations over there in recent times. Why is that?
Mr. Hormats. In the Pacific, you mean in the----
Mr. Burton. No, I am talking about that we are not seeking
any trade deals with any other nation right now that I know of.
You mentioned Colombia.
Mr. Hormats. Yes.
Mr. Burton. You mentioned Panama. You mentioned Korea,
North Korea or South Korea?
Mr. Hormats. South Korea.
Mr. Burton. But there is 25 or 30 other opportunities out
there and we are not taking advantage of them, and I just was
wondering why.
Mr. Hormats. Well, the current objective now and where we
are really devoting most of our attention, Mr. Chairman, is on
the Trans-Pacific Partnership. Actually I just got back a
couple of days ago and I have got the voice to attest to this
from a long trip to Vietnam and to Thailand. Vietnam is a
partner in these TPP, Trans-Pacific Partnership negotiations.
So our goal is to really move those along.
That is the fastest growing area of the world, so what we
are trying to do is focus our negotiating energies on this as a
top priority. But we also see the lifting of Jackson-Vanik
restrictions to Russia as expanding trade opportunities as
well. So if you combine what we hope will be a success in
expanding trade opportunities in East Asia and the Pacific
through TPP and then moving along on Russia as we have both, I
think all of us have agreed this would be a good idea, that can
actually boost trade quite substantially.
Mr. Burton. During your comments, you mentioned the
European Union and the fiscal problems that they are having.
One of the concerns that I have had for a long time, and that
is one of the reasons we were in Brussels and a number of those
countries over there, is that we don't know exactly how
involved the United States is financially. I know in the
International Monetary Fund we have put up about 18 percent.
But I have been told by some people that the Fed has been
printing money and they have been investing in bonds over there
with the European Central Bank, and I don't think anybody
really knows how deeply we are involved and what kind of risk
there is in the event that a number of countries go belly up.
I think Greece is in real, real trouble. I don't see how
they are going to survive. I know everybody is trying to keep
them afloat, but it is going to be tough. And then you have got
Italy, and you have got Spain and Portugal. And if we are
deeply involved and some of those countries start going belly
up, they can't make good on their bond payments or the interest
even, how is that going to affect the United States and our
investments over there?
Mr. Hormats. Okay. Well, first the IMF, the first point you
made. We are a major supporter of the IMF as you correctly
point out, and the IMF has actually provided a substantial
amount of money to Europe. But our obligations are really to
the IMF, and the IMF balance sheet is still very strong.
Whenever there is a repayment of a loan, the IMF gets first
preference from whoever the borrower is. So the IMF has really
never run into, or even come close to, running into any
financial difficulties. So the contributions we have made or
what we provide to the IMF----
Mr. Burton. Let me interrupt because I am running out of
time. The European Central Bank is doing the same thing that we
did with QE1 and QE2. They are printing money. And that money
is going into these countries to help bail them out at a very
low interest rate, and then a lot of the financial institutions
are trying to loan it out at a much higher rate so they can try
to get well of those governments. My main concern is what
impact, and if you can be concise about this, what impact is it
going to be if these countries do start going south?
Mr. Hormats. Well, it is hard to speculate on that because
I think there is a very good chance that things will get
better. But there are always risks in any financial environment
as we have seen. But I think that from an American point of
view, our money in the IMF is safe. The money that the Fed has
provided is through swap agreements with central banks, which I
think are very safe as well.
I think the big problem that we face for the moment is that
a weaker Europe, economically, can have very negative
implications for our trade, and that I think is what you are
getting at, and I do think that is a concern. And one of the
reasons we are trying to support Europe is to avoid a
deterioration financially and from a trade perspective.
Mr. Burton. No, I understand that and that is one of the
reasons, I think, that Germany and Merkel over there is trying
to keep some of these countries afloat, because they are such a
big trading partner. But I understand the Gordian knot that we
are in, but I wish somebody could tell me what our exposure
really is.
And with that I will yield to Mr. Meeks.
Mr. Meeks. Thank you, Mr. Chairman. Mr. Secretary, I was
glad to hear you say, and I was going to include that even in
my opening remarks, about the other opportunities that lie
before us as far as the trade with Turkey and the Caucasus in
Central Asia, because these are also emerging markets
representing great opportunities for expanded U.S. exports and
investments.
Now I also sit as the co-chair of the Services Committee
and a co-founder of the Services Caucus, I should say, and I
believe that there are immense possibilities for increased
trade in the service sectors such as the airline industry and
telecom and health care and capital markets that will provide a
significant economic boost to the transatlantic economy.
And with the failure of Doha, et cetera, what do you think
about a plurilateral agreement with a number of the
participants on services where maybe we can agree on the
services because where we can expand? Because as you know, Dr.
Hamilton, for example, calls services the sleeping giant of the
transatlantic economy in some of his previous publications.
So my first question is, what do you think about the
services in that regard? I would like to hear your opinion in
that regard.
Mr. Hormats. Well, first of all, I agree with Dr. Hamilton
that services represent an enormous opportunity. A large
portion of our economy is services. I think manufacturing is
very important, but services represent a potential opportunity
that we ought to be developing.
The second point I would make is, one of the things we are
doing under this working group on jobs and growth with Europe
that has been set up with Ambassador Kirk being the American
co-chair, is to try to find ways of expanding opportunities
with Europe. And while they are looking at all options, one
option that lends itself to real progress would be the services
sector.
And the other thing is that we are looking, and as you
pointed out, the WTO is sort of at the moment in a quiescent
state, but there may be opportunties for groups of countries to
move ahead on certain aspects of trade liberalization even
without a complete new success of the Doha Round. So
identifying opportunities for expanding trade and services
either with the Europeans through this working group or through
a group of countries within the WTO who see this as being in
their common interest would be a very positive thing. And I
think we ought to look for opportunities to do that because he
is absolutely right. This is a sector where growth is possible
and where job creation would be quite substantial of both.
Mr. Meeks. I would love to continue to talk and work on
that with the Caucus. I couldn't agree more with you in talking
about, and what Jean has indicated also with Turkey, in opening
up that market. I have been talking a lot about Russia and
Turkey which are tremendously important, huge markets.
And as a result I have had though, a number of our U.S.
pharmaceutical companies come to me asking about their access
to the Turkish market and that issue. So I was wondering, do
you know what the Government of Turkey is going to do or can do
to ensure full market access for innovative U.S. medicines,
because that is also important to get our products out like
services and medicines.
Mr. Hormats. Yes. Well, this is an issue with Turkey, there
is no question about it. We have made a little bit of progress,
but there are still major problems that need to be resolved
with respect to Turkey's policies as they relate to the
pharmaceutical industry that impede access of products into
Turkey and the ability of some American companies that may want
to invest in Turkey as well.
We have had conversations with the Turkish Government at
very high levels. I, myself, have had several conversations
with Turkish officials on this. This is something that we work
with PhRMA on a very regular basis to look for opportunities.
This is a very high priority for us, I think, and actually over
a period of time will be for the Turks as well, because they
need the very best, and they want the very best medicines for
their people. American companies have, I think, the best
medicines in the world, the best pharmaceuticals in the world,
so there should be a match. We just have to keep working at it
and we still have a way to go.
Mr. Meeks. One more question, but I agree with you. And I
should hope that Turkey does want the best, because part of our
idea is to make sure that we get the products that we export,
and the U.S. pharmaceutical companies are very important to
helping with that export initiative and we want to make sure we
can move it forward.
Mr. Hormats. Absolutely.
Mr. Meeks. But let me ask you, what is your position on
bringing Poland, for example, into the Visa Waiver Program? And
what explains, if you could, Poland's consistently high visa
refusal rate despite the fact that it has this booming economy?
Mr. Hormats. Well, I will have to check with the consular
affairs people in the State Department on that. But in general,
if countries meet our criteria for Visa Waiver, we are happy to
do it. I will certainly check out Poland and get back to you on
that. But in general, where we can do it and where the criteria
are met we are happy to do it. We have a number of countries as
you know that do have it. There are only four, I think, in
Europe that don't, if I am not mistaken, but relatively few
anyway. So I will check Poland out. And there are a couple of
other countries that are in that category that I know you are
also focused on. So we will get back to you on that right away.
Mr. Meeks. Thank you.
Mr. Hormats. Thank you.
Mr. Burton. Ms. Schmidt?
Ms. Schmidt. Thank you. I have several questions. The
first, Congress' role with the Transatlantic Economic Council.
As you know it was created in 2007, and Congress was given an
advisory role. That role is specifically assigned to the
Transatlantic Legislators Dialogue.
Apart from granting fast track authority, in your opinion
what role should Congress be playing, and is there legislation
that we should consider to benefit trade especially in Europe
and Eurasia?
Mr. Hormats. Yes, thank you. I have been very actively
involved in the TEC, and I regard it very important for a
number of reasons. One of which is that it is focused, as you
correctly pointed out, on creating new opportunities. A lot of
those opportunities for the moment are focused on differences
in regulations and standards, and it has mostly been in the
realm of the standard setting bodies on both sides. And some of
them have traditional ways of looking at these things, and the
flexibility in some cases has not been as great as I personally
would like it to be.
On the other hand, they are working at it and we have been
taking a fresh look at various regulations and standards to see
where there is an opportunity for some sort of commonality or
mutual recognition or actually an agreement in terms of
standards between the U.S. and Europe.
We have found a few areas where we think we can make real
progress that probably won't require legislation, at least not
at the moment. One is on electronic vehicles, e-cars, e-
mobility. And that is, if we can get interoperability and
interconnections and standards agreed to between the United
States and Europe, and also standards for smart grids which are
needed for these cars, then first of all, we can reduce
barriers between the U.S. and Europe. And second, very
important, that we can set standards that we and Europe agree
to and then encourage other countries to apply those standards.
The role both the U.S. and Europe have now is that we will
develop high standards, but then other countries like China
will have more nationalistic or restrictive standards that keep
American and European cars out of the market. Not just China,
other countries as well. So these probably won't require
legislation at the moment, but they will require a lot of work.
And we have actually made some progress on electric cars. We
are thinking of moving, do the same thing on electronic health
records which as you know American doctors and hospitals are
going to have to comply with. Nanotechnology, a number of
things where we can actually develop some harmony among our
regulatory proceedings and have as a result reduced barriers to
trade across the Atlantic in these areas.
Ms. Schmidt. Thank you. Speaking of trade barriers, some
have expressed the fact that our current tax structure can be a
hindrance to companies trading on an equal and fair level with
other countries. Regarding the EU and Eurasia and Russia, do
you see that as part of a trade barrier problem?
Mr. Hormats. Our companies do express exactly the
sentiments that you have mentioned. I don't think they are a
big part of the trade problem with those countries. I think the
bigger part of the trade problem with Europe, the EU, is
differences in regulations and standard setting procedures, and
then differences in things like----
Ms. Schmidt. Let us go back with that, with standards and
regulations, et cetera. Europe in some cases is more
restrictive than the United States, and then there is the
general fear in the United States that if we apply those
standards in the United States it will impede our growth as
well. How do we get around that?
Mr. Hormats. That is a very good question. We each, in
Europe and the U.S., want to have standards that are protecting
the health and safety and well being of our people, but not
standards that are restrictive and restrict opportunity and
commerce. One area that I think is very useful to focus on and
we are seeing it as a high priority is in the area of biotech
as it relates to agricultural products. Europe has a very, I
would say restrictive----
Ms. Schmidt. Restrictive, backward thinking.
Mr. Hormats. Yes, restricted standards that are not based
on, in our judgment, good science. And what we are trying to do
is when there are regulations needed they should be based on
scientific evidence of their necessity as opposed to political
pressures.
Ms. Schmidt. Before I run out of time, do you see Eurasia
as a little more lenient, the Eurasian countries than the
European countries or is it a wash?
Mr. Hormats. Well, Turkey has a number of provisions that,
when we were talking a little on pharmaceuticals, that are
again procedures or standards that we think impede, for
instance, the pharmaceutical goods that we would like to sell,
medicines that we would like to sell. So our goal again is to
encourage them when they set standards or when they set
procedures to do it on the basis of scientific evidence, not on
the basis of either political pressures or more arbitrary kinds
of judements.
So we have no objection and other countries don't to, I
think, good standards, but what we are concerned about with
Europe and Turkey in some cases, is that some of those
standards are not based on scientific evidence of the necessity
of the standards, but are based on other criteria which are not
in our judgment appropriate. So that is why most of these
things are not necessarily tariff barriers, they are more
regulatory barriers, standard setting barriers or other kinds
of within-the-border impediments to trade.
And we think, over a period of time, through negotiations
and through contact between our regulators things can be
resolved or at least the barriers can be reduced. For instance,
with Turkey we have actually had some very good meetings
between Turkish pharmaceutical regulators and experts in
various parts of biotechnology with American companies, and a
lot of exchange of experts and scientists. So we think there
are opportunities for constructive dialogue on all these areas.
We are not making as much progress as quickly as we would like,
but we think there are opportunities.
And countries want to do right by their people, they just
in some cases have different philosophies, and we have got to
continue to keep working on them to get it right as we see it.
Thank you.
Mr. Burton. Mr. Sires?
Mr. Sires. Thank you, Mr. Chairman, for holding this
meeting. Thank you for being here, Mr. Under Secretary. Over
the years I read a lot about Russia and how the opportunities
are in Russia, so a couple of years ago we took a trip and we
met with, we went to Moscow. Chairman Berman put it together.
And one of the things that struck me was a couple of things.
First of all, when we were there, IKEA had spent 3 years in
Russia. They have made a significant investment. They couldn't
open up the store because of the corruption. They were being
shaken down by the local officials. So they had the store open
for 3 years, they couldn't even open it. So I am thinking in
terms of investment by us there.
Secondly, there was a poll by the BBC taken a couple of
years ago where it said that two-thirds of the Russian people
do not like or trust the Americans. I mean with things like
this, how are we going to go over there and invest when all I
hear is about corruption and about how they don't like
Americans? Would you just----
Mr. Hormats. Well, let me just----
Mr. Sires. This was done by the BBC. It wasn't one of these
pollings that we do here in America.
Mr. Hormats. I take your point. First of all, on the second
half, the popularity of the United States has actually
increased substantially over the last year or so. But the point
of corruption, I think the Russian officials also understand
this is a big issue. One of the things that the Russians have
done recently is accede to the OECD Anti-Bribery Convention,
which is a real step forward, which first of all, commits them
to very high standards on anti-bribery. And second, also
requires that their laws and their practices be reviewed by a
committee that includes the United States and other countries.
So I think they, themselves, understand the point that the BBC
was making and that you are making, and that this is, if they
want to progress as a modern economy they have to deal with
some of these issues that you've mentioned and the BBC
mentions.
So these are certainly legitimate issues that we are
discussing with them, and that I think they, themselves, need
to get at. Because for the same reason that you mentioned, if
they want more foreign investment they have to protect
intellectual property, and they have to make sure that their
standards, their legal standards and their protection against
bribery and other things is dealt with in a way that other
modern countries that want to attract investment are doing,
otherwise they will lose out on the opportunity to get
investment.
Mr. Sires. That was my next issue, regarding intellectual
properties. They have no regards for intellectual properties.
That is how I see it. And secondly, this election that Putin
just won, I mean we were made the bad boys throughout the
election. His whole campaign was based basically on bashing
America. So I don't understand why any American companies would
want to go there knowing there is corruption. They don't like
us. They bashed us. I mean what is the incentive for us to
invest in Russia when we have other places?
Like I have said, I believe we should be investing more in
South America. We are close. We basically ignore South America
and Central America. I mean they are our closest neighbors.
Mr. Hormats. Well, first of all, I agree. We should be
investing more and trading more with Latin America too, I agree
with that.
But with Russia, first of all, there were some remarks that
Putin made about the United States, but also it is true that
the Russians have worked with us on a new START agreement. They
have been very helpful to us in allowing access across Russia
to Afghanistan. They have agreed to make a number of changes to
be able to be members of the WTO. They have done a number of
other things where they have actually been quite cooperative
with us. We have a bilateral presidential commission with 20
groups that are aimed at improving relations between us. And I
think that that is a positive part of the relationship.
The other part of it is that I think it is useful to bear
in mind that providing Russia with permanent normal trade
relations or lifting the restrictions on Jackson-Vanik, which
are part of the same, is really not done for the benefit of
Russia. It is done for the benefit of American workers and
American companies. The business community of the United
States, which share some concerns that you have mentioned, is
overwhelmingly in favor of eliminating these Jackson-Vanik
restrictions as they relate to Russia, because they see two
things.
One, they see it as a growth opportunity for them which
means they will sell more, they will create more jobs in the
United States and they will be able to produce more revenues
which they will reinvest here. The second thing is that they
also see Russia as changing. There is a lot going on in Russia
that is aimed at improving the Russian economy and modernizing
the Russian economy. They have been an economy very heavily
dependent on oil and gas, and now they want to diversify. And
they know if they want to diversify they have to get other
companies in there in order to help them do it. And that means
they have to protect intellectual property, they have to deal
with issues of corruption, and they have to work within the WTO
to help diversify.
So I think that while there are certain good things that we
have seen going on with Russia, and there are certain negative
things as you have pointed out, it is important to put those,
for the moment when we deal with the Jackson-Vanik issue, to
the side. Not ignore them, but recognizing what Jackson-Vanik
is, is really if it is sustained and if we don't give them PNTR
it is just hurting jobs in your district, your district,
everyone's district, and it reduces an opportunity for us to
sell. But it also gives other countries, it gives the EU, it
gives China, it gives every other member of the WTO an
advantage over our companies in selling to Russia.
Mr. Sires. Thank you. My time is up. Thank you, Mr.
Chairman.
Mr. Burton. Before we go to the next panel I just have one
question. This relates to what Mr. Sires just asked you.
Obviously, Congressman Meeks and I and others want to see us
expand trade and have better relations with Russia, but there
are a lot of people who invested in Russia's Yukos oil, and a
dozen Members of Congress, myself included, sent a letter. You
probably got this letter.
Mr. Hormats. Yes, I have.
Mr. Burton. And Russia nationalized it, and as I understand
it there is $12 billion in U.S. investment that is out the
window, $12 billion. And people that invested in it just got
killed. Is Russia willing to make restitution?
Mr. Hormats. Well, I am glad you raised that because I did
read the letter, and Secretary Clinton sent back, we have tried
to respond to this.
But let me make a few key points. One, there is an effort
underway now to adjudicate some of the claims. Some countries
have bilateral investment treaties with Russia and there is an
adjudication process for their claims. We are watching this
very carefully, because once we see how those adjudication
procedures work out, then we can decide how and whether to move
into a formal process of defending interests----
Mr. Burton. You don't need to give a real long answer to
this. The bottom line is there is no indication whatsoever that
they are going to make good that $12 billion that was invested
by the U.S. And the thing that concerns me is that I want us to
expand. Mr. Meeks and I are co-chairing the Russia-America
business approach.
But I don't see how we can push forward in the Congress if
they are going to nationalize companies and then not make good
the investment that Americans have put into these companies. I
mean let us say that Mr. Sires has a company that comes in, or
people that invest from New Jersey who put in a couple billion
dollars into a company and Russia decides, Putin decides that
he wants to nationalize it because it is going to be beneficial
for the government. There has got to be some kind of commitment
by Russia that they are going to make good on those things. And
as far as adjudicating is concerned, that is baloney. I mean if
they owe the money they ought to pay the money.
Mr. Hormats. We have not given up on this issue. We have
not decided at this point what course to take.
Mr. Burton. Let me just end by saying this. When you
negotiate and talk to those people over there, they want to do
business with us because we are a big market. I know they want
to expand their trade with us. Please tell them that that is a
thorn in the side of the Congress of the United States, and
tell them the people who want to work with them are very upset
that there is American investors that are getting taken to the
cleaners by that.
Mr. Hormats. Mr. Chairman, I agree with you. And I think
that it is imperative for us as the government, the government
officials that work with the Russians and are working trying to
expand opportunities for the American business community and
American workers to point out to the Russians where we think
their conduct is inconsistent with the broader rules of the
international system.
And these kinds of things do present a problem. Certainly
they present a set of concerns to American businesses that are
interested in investing or trading. But one of the reasons
their joining the WTO is a positive thing is because it does
suggest that they want to play by international rules.
Mr. Burton. I understand that.
Mr. Hormats. But we have got to make sure that they play by
international rules across the board. So I have no problem at
all with what you are saying.
Mr. Burton. Just carry the message to them, would you? I
mean and tell Secretary Clinton to do that too.
Mr. Hormats. I will certainly, and your letter was very
compelling and I do think there are a lot of important points
to be made that you mentioned.
Mr. Burton. And the next letter will be accompanied by the
ball bat.
Mr. Hormats. Okay.
Mr. Burton. Thank you very much.
Mr. Hormats. Thank you very much for having me, Mr.
Chairman, members of the committee, and I just want to say it
is a privilege testifying. Your message about our taking a very
firm role where we think American interests are not being
honored by the Russians, is very important.
I would make the point that passing PNTR gives us an
opportunity in Russia and will help American business and help
American companies, but we also have to be very firm on a
number of other issues and investment would be one of them.
Intellectual property is another, the kind of things that you
have mentioned. We have to have a dialogue. We agree with them
on some things, we disagree with them on others. But where
American economic interests are at stake, then the Secretary's
Statecraft initiative and agenda is going to mean that our
ambassadors and our officials here are going to take very firm
positions in favor of American workers and businesses and
adherence to global rules.
Mr. Burton. Thank you.
Mr. Hormats. Thank you very much.
Mr. Burton. We appreciate you being here today.
Our next panel, we have two distinguished guests. First we
have Peter Rashish. He is the Vice President for Europe and
Eurasia for the U.S. Chamber of Commerce, and maybe you can
answer some of the questions that we raise as well. Prior to
coming to the Chamber, he worked as a senior advisor for Europe
at the McLarty Associates, and has consulted for organizations
such as the World Bank, Atlantic Council and the German
Marshall Fund.
We are also joined by Daniel Hamilton, director of the
Center for Transatlantic Relations at The Paul H. Nitze School
of Advanced International Studies at Johns Hopkins University.
He has also held a variety of senior positions in the U.S.
Department of State, including Deputy Assistant Secretary for
European Affairs and associate director for the policy planning
staff for two Secretaries of State.
And we welcome you both, and we are sorry that this ran a
little longer than we thought but we do appreciate very much
you being so patient with us.
So we will start with you, Mr. Rashish.
STATEMENT OF MR. PETER RASHISH, VICE PRESIDENT FOR EUROPE AND
EURASIA, U.S. CHAMBER OF COMMERCE
Mr. Rashish. Thank you very much, Chairman Burton, and
Ranking Member Meeks and members of the committee. I am pleased
to have this chance to testify today on behalf of the U.S.
Chamber of Commerce, on proposals to create American jobs
through closer economic ties to Europe and Eurasia.
With more than 12 million Americans unemployed, no priority
facing our nation is more important than putting our people
back to work. While both fiscal and monetary policy can
contribute to creating jobs and the conditions for economic
growth, let us not forget the vital role that trade policy can
also play in overcoming our jobs crisis. After all, we should
remember that outside our borders we find the markets represent
80 percent of the world's purchasing power, 92 percent of its
economic growth and 95 percent of its consumers. The resulting
opportunities are immense.
The question is where shall we focus? The Chamber believes
that exactly 50 years after the passage of the Trade Expansion
Act under the administration of President Kennedy, which paved
the way for free trade between the U.S. and the European
Union's precursor, the Common Market, it is time again to make
Europe a priority in U.S. trade policy. The U.S-EU economic
relationship is the world's largest and most robust. Together
we generate half of the global GDP, and according to a CRS
study more than $1.5 trillion in goods, services and income
receipts flowed between the U.S. and the EU in 2010 alone.
U.S. firms have direct investments of nearly $2 trillion in
the EU, 20 times what they have invested in China. The Chamber
welcomed the creation of the High-Level Working Group on Jobs
and Growth which the leaders set up at the U.S.-EU summit in
November, and we are pleased to see that the Working Group is
considering ideas that closely reflect some proposals that the
Chamber has made for transatlantic trade.
The Chamber believes we should seek a transatlantic
economic and trade pact by means of negotiations in five areas.
Tariffs, services, investment, regulation and public
procurement. First, on tariffs, one study has shown that
eliminating all of them would increase trade by more than $120
billion, and GDP by $180 billion over 5 years. And while it is
true that the tariffs between U.S. and Europe are low, because
of the sheer volume of the trade between the two sides, it is a
fact that fully one-third of all tariffs that the U.S. pays are
paid to the EU.
Second, on regulatory cooperation we think the U.S. and the
EU should create a legal mechanism that would allow both of our
regulators with appropriate legislative oversight to determine
that the transatlantic counterpart on the other side has a
compatible regulatory regime whose health and safety
determinations they can generally accept. Doing so could help
overcome the unnecessary regulatory barriers that we face,
which are estimated to cost about $300 billion a year to our
companies.
Third, a high standard investment agreement could
capitalize on the unique $3.4 trillion relationship we have
with the U.S.-EU in investment. Right now the investment is
facilitated by a series of bilateral treaties, but we now have
the chance to have a first class EU-wide agreement with
commitments to allow capital to move freely and to avoid
discriminating against transatlantic investors in establishing
and operating investments.
Fourth, on services, despite the fact that the U.S. and the
EU dominate the global services trade, unnecessary barriers
still thwart our global competitiveness and are now fracturing
the transatlantic capital market. We should place particular
emphasis on creating a single digital services market across
the Atlantic and on facilitating the free movement of workers
through an approach to visa policy that responds to the needs
of today's transatlantic businesses.
Finally, on procurement, we welcome the new U.S.-EU
Government Procurement Forum and urge that it be leveraged to
fully open markets at all levels of the government and public
entities. Each of these steps would bring significant economic
benefits, potentially dwarfing the value of all other U.S.
bilateral free trade agreements that we have entered into, and
with our shared values, similar legal systems and high
standards of labor and environmental protection, an agreement
with the EU should be easier than many people think. Also, a
recent PEW poll found that Americans support trade with Europe
by a very healthy 58 percent to 28 percent margin.
Now the idea of launching an ambitious transatlantic trade
and economic initiative is gaining momentum partly, I think,
owing to a number of efforts the Chamber has made advocating
for it both here and in Europe.
Chancellor Merkel of Germany and British Prime Minister
Cameron both called for a U.S.-EU trade initiative in their
remarks at the World Economic Forum in January. President
Sarkozy and Chancellor Merkel urged the EU heads of state in
government that met at the end of January, to make
transatlantic economic relations a key part of the EU's reform
agenda. And then a letter signed by 12 of the EU heads of
government, including the U.K. Prime Minister and Italian Prime
Minister Monti ahead of the most recent summit the EU held on
March 1st, also signaled their support for a transatlantic
trade deal.
On the U.S. side, Secretary of State Clinton declared in
early February that the new U.S.-EU High-Level Working Group on
jobs and growth should be at the forefront of our efforts to
put our people back to work and that America and Europe can and
should be trading more with each other.
European business groups have also endorsed it including
our partners at BUSINESSEUROPE, the umbrella federation of
European business, and just last week, the Chamber and
BUSINESSEUROPE and ten other U.S. and European business
federations issued a joint statement calling on President Obama
and his European counterparts, when they next meet on the
margins of the G8 summit at Camp David, to commit to launching
ambitious transatlantic talks by the end of the year.
With both the U.S. and European Union facing fiscal and
macroeconomic challenges at home and new economic powers around
the globe, the declaration states that a transatlantic trade
investment and regulatory initiative can provide an
unparalleled opportunity to instill confidence in our
economies, enhance the global competitiveness of our firms and
in so doing, reinforce our joint capacity to maintain and
modernize the rules based international trading system which
has benefited the global economy for over 60 years.
Let me conclude by saying that at a time when jobs and
growth are our top priorities, it is gratifying that a possible
transatlantic economic trade pact is on the agenda, and the
U.S. Chamber of Commerce looks forward to working with members
of the committee on these issues as well as on issues of Russia
and its membership in the WTO, which the Chamber strongly
supports, as well as Turkey, where we believe that there are
strong economic opportunities given the size of both of our
economies. Thank you very much.
[The prepared statement of Mr. Rashish follows:]
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Mr. Burton. Thank you.
Mr. Hamilton?
STATEMENT OF DAN HAMILTON, PH.D., DIRECTOR, CENTER FOR
TRANSATLANTIC RELATIONS, THE PAUL H. NITZE SCHOOL OF ADVANCED
INTERNATIONAL STUDIES, THE JOHN HOPKINS UNIVERSITY
Mr. Hamilton. Thank you, Mr. Chairman. It is a pleasure to
be here before the committee. I have submitted a testimony for
the record, and I have also provided a one-page handout of some
facts about the transatlantic economy you might have as an
addendum there. It is based on a survey we just released this
week called The Tranatlantic Economy 2012, so I do believe it
is the latest data that you might have about the state of the
relationship.
I believe the opportunity for a U.S.-European transatlantic
partnership for jobs and growth is actually quite considerable.
It also gives us both, the U.S. and Europe, an opportunity to
leverage growth markets elsewhere. And I believe that if one
thinks about this initiative not only in a transatlantic
context but how both economies can reposition themselves vis-a-
vis other growth markets that is what really opens up a lot of
potential.
We have had a lot of the data here for you so I won't
repeat it all, but simply to say we are still each other's most
important markets. We are each other's most profitable markets
for our companies as well, and the largest source of onshored
jobs for each other in the world. A $5 trillion transatlantic
economy, employing up to 15 million workers on both sides of
the Atlantic, truly dwarfing most other real relationships. And
that investment is what drives the transatlantic economy.
Whereas our relations with Asia and Europe's relation with
Asia are trade driven, our relations across the Atlantic are
investment driven. It is a simple but really profound
difference to understand. Much of the media equate just trade
with commerce, but trade is a very misleading benchmark of
commerce. You have to include the investment flows to get a
full picture. And if you do that you see where the jobs are and
where the growth can be.
There is more European investment, for instance, in the
State of Indiana than all of U.S. investment in China and Japan
and India put together, just Indiana. And the same is true for
Ohio and the same is true for New Jersey and New York. These
investments really create jobs. Our estimate is, direct
investment of European companies in the State of Indiana
provide about 70,000 jobs just directly. If you include trade
and you include the indirect effects of such trade and
investment, I would estimate about 200,000 Indiana jobs are
related to commerce with Europe. And if you take Ohio, we
estimate 106,000 jobs directly from European FDI into Ohio, and
if you do all of the numbers again and extrapolate, I estimate
300,000 Ohio jobs related to commerce with Europe. If you take
New Jersey, 136,000 jobs directly supported by European FDI in
New Jersey, and if you do the trade numbers and then the
indirect, my estimate would be 350,000 jobs in New Jersey
directly tied to commerce with Europe. These are where the jobs
are, and if one can expand the opportunities in that way, it is
really a direct impact on our jobs.
So we are the most deeply integrated economies in the
world. We have probably the freest economic relationship in the
world, but our economic relationship is not free. There are
still many barriers. So it seems to me that we have an
opportunity to advance a three-point agenda. One point is what
we have focused on, which is to open up the transatlantic
markets. I agree with Peter's points and Secretary Hormat's
points about the basic issues. Zero tariff on goods. Services,
major services, are the sleeping giant of the economy.
Regulatory cooperation, because most barriers are not trade
barriers, they are non-tariff barriers. A transatlantic
investment pact, because investment drives the economy. And the
Smart Visa element, which is quite critical.
But the point I am trying to make is that if we only think
about it in the narrow transatlantic context, we are missing
actually the real potential of this initiative, which is to
reposition the United States and Europe vis-a-vis other growth
markets. So it seems to be a second point of our agenda must
not just be a standard, normal economic negotiation. It must be
that the U.S. and EU say together that we believe in and will
act on certain core principles of the international economic
order that we believe in.
These principles are under some attack today. There are
many rising powers that have been chosen whether they agree to
them or not, and we have issues with some rising powers that
haven't agreed to them. If the U.S. and the EU as the major
force in the global economy can say we are acting together and
reinforce our belief in these principles, that will send a very
strong message to third countries. And these are not
necessarily contentious principles across the Atlantic.
My last point is that we should also use the transatlantic
relationship to strengthen the multilateral system. Many
critics would argue that a large transatlantic initiative would
subvert the multilateral system because we are so big. I think
one has to address that by saying, Mr. Meeks mentioned that
before, take areas where we basically agree across the
Atlantic, but because we can't get everybody in the world to
agree, we don't agree, and let us just move forward with those.
Let us open those markets.
Trade faciliation is a good example. In the Doha Round we
had basically agreed, but because everybody didn't agree there
is no agreement. But why don't we just move forward, say others
can join us but we are moving ahead. We could be pioneers in
free markets and open trade just as we always have been.
And so it seems to me, to conclude, that the real
opportunity here is to open transatlantic markets, to act on
the defined, the ground rules of international economic order,
and to take the multilateral system into new areas where it
hasn't gone before. Thank you.
[The prepared statement of Mr. Hamilton follows:]
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Mr. Burton. Thank you. You didn't mention, since Mr. Meeks
wasn't here you didn't mention how many jobs would be impacted
by trade. Yes, sure, go ahead real quick. I think he needs to
know that.
Mr. Hamilton. We do a survey of the transatlantic economy
by jobs trade investment for each U.S. State. My estimate at
the moment for New York, European FDI, that is direct
investment in the State of New York provides about 230,000
jobs. And if you take trade and you take the indirect effects
of that with distributors, suppliers, all of that, my estimate
would be 700,000 jobs in New York State are directly related to
commerce with Europe.
Mr. Burton. Let me start the questioning by asking about
the economic problems in Europe. I think you have made, both of
you have made a very, very strong point that we are locked
together with Europe whether we would like it or not. And if
many of the countries in Europe go south, belly up, it is going
to have a devastating impact not only on them but on us as
well.
And I would like to know from your perspective, since you
are with the Chamber, and you have expertise, Dr. Hamilton,
what is the situation right now? Prime Minister Merkel can't
keep all those countries afloat, and almost all those countries
are in debt. Even France, I think they are about 100 percent of
GDP as far as their debt is concerned. Greece is way, way up
there. Italy is up there. Portugal, Spain, Ireland has still
got problems although they are working pretty hard on that.
So what is the answer and should we be doing what we are
doing? I mean we are increasing our investment in Europe by
leaps and bounds, not just the International Monetary Fund, but
by currency swaps. So I know this is a tough question for you,
but I would like to know where we are and what we are going to
be able to do about that because it has a direct bearing on
investment in Europe and trade.
Mr. Rashish. Thank you, Mr. Chairman, for that question.
First, let me say I think you are right that we do find
ourselves in this relationship of interconnectiveness with
Europe, and so in many ways their fate is our fate. And so
given the existing stock of investment that we have put into
Europe up until now, you know, putting aside anything we might
put in there in the future, we certainly want to make good on
what we have as best we can. And I think so it is in our
interest that the Europeans manage their debt crisis in the
right way. And I think it is also at the same time, important
that we think of initiatives like a trade and economic policy
liberalization which can help make the most of what we have got
in Europe up until now and would also make Europe a much more
attractive place to invest in the future.
And I think there are some reasons to be optimistic that
Europe will continue to be a good trade and investment partner
for the United States, even just looking at it through the lens
of the current debt crisis. First, they have had this crisis
and they have had to create a lot of institutions on the fly
that have not done a bad job of coming up with some financial
packages to not only assist indebted countries, but also to
help ward off future crises.
But perhaps even more important, I think, is what a number
of the individual countries have done themselves. If you look
at some of the policies undertaken in Ireland, okay, that is a
small country, but if you look at Italy. Italy was talked about
even less than 1 year ago as a possible risk to the whole
system. You are hearing a lot less about that now because Prime
Minister Monti has really had the courage to engage in a lot of
not just fiscal consolidation, but also he is trying to get to
do some things which are going to lead to economic growth. And
you see that is common in the bond markets now significantly.
There are still challenges, but he is already feeling, and I
think somewhat deservedly, so confident that he just recently
gave a little talking-to to the Spanish Prime Minister saying,
you know, why aren't you guys keeping your deficit under
control?
So I think that if you combine some things admitted on the
EU level with some of the things that are being done in some of
the important member states, and I don't mean to say that the
Spanish Government, the new Spanish Government, I think, does
have a strong reform package and I think has a good chance of
success. I think that there is reason to be optimistic. I think
the Greeks, they have recently had a renegotiation of the Greek
debt. Certainly Greece is perhaps more challenging from a
growth perspective than some of the other markets, but it is
also a small country.
So I think that given all we have got invested in Europe
and given the fact that you also have a lot of very strongly
performing countries in Europe and in the eurozone, certainly
there are some that are in crisis, but if you look at Germany,
The Netherlands, Austria, Sweden, Finland, there are a number
of very strong economies that are good partners for us, and I
think over time the eurozone will work out its problems. I
think growth may not be as high as they want, but I think the
more we trade with them the more the chance is that that growth
will be at the level we want.
Mr. Burton. Mr. Hamilton, do you want to make a quick
comment? Let me just say that I will submit, if you don't mind,
some questions for the record because I don't want to take the
time of my colleagues. Mr. Hamilton?
Mr. Hamilton. Thank you so much. Yes, I believe that while
Greece is still in trouble and basically has defaulted, they
have done what they can to construct a firewall so that
whatever happens to Greece should not ripple back through the
rest of the other European economies. And I think the efforts
they have put together in terms of a very, very big facility to
make sure these other economies don't go anywhere, coupled with
reforms that Peter mentioned, and the Chancellor's decision
that they really do have to support this no matter what it
takes, will move forward.
I think the point for the United States though is that
because of this deep integration I have talked about, we have
never had a greater stake in each other's economic success than
we do today because of these transmission belts that I
mentioned. One consequence right now of the problems that
Europe has is that this flow of FDI, of investment from Europe
into the United States, to American States and cities, has
slowed down. So that of course accentuates our own problems,
because this source of onshore jobs is not as strong as it has
been. That has some problems for us.
I think in Europe, the problem is that the competitive
ability of many of these countries is starting to break apart.
Some countries in Europe are world-class innovators and
competitors, and others are having significant challenges, and
that is going to be their challenge.
But for American companies, a single pan-continental market
of 500 million people is a big, big boon for American companies
who know how to work in the big continental market. And you see
that American companies are not withdrawing from Europe, in
fact, they are investing more. Even in Ireland, which you would
think given its troubles people would have left, they have not.
American companies have sort of doubled down on Ireland and
invested even more, and is a primary source of the Irish
economy these days.
And even 2 percent growth, even small growth in a market of
500 million people could be much more important to American
companies than 10 percent growth in a very tiny market. Just 2
percent growth in Europe would create a market every year the
size of the country of Argentina. It is not 10 percent growth
in Argentina, it is Argentina. And that is what we are talking
about. So even small growth in a very big market could be more
important to American companies than big growth in a very tiny
market.
Mr. Burton. Thank you very much. Mr. Meeks?
Mr. Meeks. Thank you, Mr. Chairman. Let me ask just a
couple of general questions which I am concerned about. I have
voted for just about every trade agreement that we have come up
with, but it seems as though from 1999 to 2010, positive
sentiments in regards to free trade agreements, and this is
according to a Wall Street Journal/NBC News survey, declined
from 39 percent to 17 percent, while negative sentiments grew
from 30 percent to 53 percent of those respondents. And I have
difficulty sometimes, but I am just wondering by asking you,
how do you think we should explain this shift in Americans and
their thought with reference to international trade agreements?
Mr. Rashish. Thank you, Congressman. I think that when we
look at trade, Europe is a great asset in that sense. I think
trade with Europe is a very good place let us say to start if
you want to try to get those numbers up a little bit. Europe is
a large regional economy like ours, a population even bigger
than ours, of GDP roughly the same size of ours, has a very
similar standard of living on average. It has very similar
approaches to regulation and to policy making. And so I think
that if we want to try to convince Americans about the benefits
of trade that Europe is an attractive place to start. It
doesn't present the kind of challenges that a number of other
of our free trade agreements have posed because of the
differing levels of development, for example, between us and
our trading partners.
Now it is also true though that because Europe is large and
advanced and is mature also politically in many senses, it is
going to be much more even handed kind of negotiation. We are
not going to be able to tell the Europeans what to do and they
aren't going to be able to tell us what to do. But I do think
that it is a good place to start if we want to have a campaign
to say why trade can be beneficial to Americans and can create
jobs.
Mr. Hamilton. I have been struck by the submissions that
have been presented to the government in the consultation
process for the High-Level Working Group on this initiative. If
you look at it, across the board there is support for this,
across what have been in other trade negotiations maybe some
problem. The AFL-CIO, for instance, has submitted a very
positive statement about the potential of a transatlantic
agreement, as has the Chamber. So from business across the
board, different political actors, you see some agreement here.
I think the other thing to think about is that, you know,
many of our other trade agreements are trying to essentially
bring our relations with other countries up to the standard we
already have with Europe. We don't have really many trade
barriers with Europe. And so if we limit this initiative to a
standard free trade agreement, with all the caveats I mentioned
that trade really isn't the problem, we are not really moving
things very much forward. We should think of a 21st century
type of new initiative that takes the entire system forward.
And because we are half the global economy that is what we can
do. And that is rooted in areas where it is distinctively
transatlantic, like services, where we really have an
opportunity here to change the whole playing field for the
globe if we can move ahead with the Europeans.
Mr. Meeks. I agree. But I tell you what my further concern
is. For example, are we trailing the European nations? Even
with some of the lesser developed nations, Europe has now done
some 36 free trade agreements in comparison to our what, 14? So
it seems as though whether it is less developed countries, et
cetera, it seems as though it is a difference of opinion over
there. They are moving forward on free trade and we are half
stepping in one sense. What is your thoughts on that?
Mr. Rashish. Thank you, Congressman. It is very true that I
think the EU has what you could call the more activist trade
agenda than we do right now. First, you have to remember that
trade is, it has grown, but trade is a smaller percentage of
our economy than it is in the EU where the Europeans are used
to trading with each other for hundreds of years. So I think in
most European countries at least, particularly in the smaller
ones which are more exposed, but in most European, the idea of
trade is something very natural. So they have that starting
point that I think we don't have as a big continental country
with only two neighbors.
And the other thing I think to remember is that trade is a
very powerful policy tool, almost foreign policy tool for the
European Union. Trade is where the EU really has the most
confidence of all areas to pursue policies, you know, where the
European Commission has the confidence to pursue policies on
behalf of all of the 27 member states. And so I think a lot of
energy is put into trade policy, whereas the United States, we
are a mature nation with full institutions, full Federal
institutions and we have a lot of ways to pursue our interests,
economic or foreign.
But in Europe, a lot of that is put into trade policy and I
think that partly also accounts for why they have many more
FTAs they are negotiating compared to the United States.
Mr. Hamilton. One example of that is the EU and Canada are
close to concluding a comprehensive agreement. It is not
getting much attention in the United States, but when it
happens some people are going to start to look. And if you look
at some of the provisions of that agreement, it goes much
further than normal free trade agreements because it is with
another major industrialized country. And that is going to
happen soon. And it reinforces your point, the EU is going
around doing all of these sorts of trade deals. They are
probably going to do some more with Japan also. We have done
some, and much of it overlaps actually when you come down to
it.
So one of the proposals I would make for a transatlantic
partnership is that we align and codify all of those bilateral
free trade agreements we have with all those other countries
and simply put them together. That itself would open up huge
amounts of new opportunities with us being the drivers again,
and that is my point. We can take the initiative here, we just
need some political will on both sides to do that.
Mr. Meeks. Thank you.
Mr. Burton. Ms. Schmidt?
Ms. Schmidt. Thank you. Mr. Rashish, in your testimony you
highlighted the fact that small and medium size businesses are
often overlooked in trade debates despite the fact that such
businesses are increasinly engaged in the export market.
Can you discuss the impact that elimination of tariffs and
greater regulatory cooperation will have on small businesses? I
know we look at the large conglomerates, but what about the
small businesses?
Mr. Rashish. Thank you, Congresswoman. Well, I would say
that in general, smaller companies have more of a challenging
time reaching foreign markets than the larger companies and
that particularly, smaller companies have a harder time dealing
with regulatory barriers. It is very expensive for a small
company to have to comply with two or more series of regulatory
regimes to get their products certified and tested and
certified.
So I think the more we can make progress particularly on
the regulatory side to be able to deem the U.S. and European
approaches to regulation as equivalent so that small companies
would only have to get their products tested and approved in
one market that would particularly be a boon to smaller
companies.
Ms. Schmidt. Thank you. Mr. Hamilton, the U.S. as we know
is pursuing trade agreements at a slow or snail's pace, and my
concern is that it can cost us market share in the global
community. I understand that the transatlantic relationship in
trade and investment eclipses any other relationship, but the
loss of market share can be such a slow leak that it only is
noticed over time.
You just mentioned the issue with the EU and Canada. Can
you elaborate a little bit more on that and as well as our lack
of moving forward, not maybe as quickly as the EU is with
trade, but a little more quicker paced than we are right now?
Mr. Hamilton. Yes. The EU-Canada comprehensive agreement
will start to address a number of the issues that we have been
mentioning. It goes into investment, for instance, which is a
significant element also in the Canadian-EU relationship, and
it starts to establish certain principles by which they will
act. And I think it is interesting that they might be ahead of
the U.S.-EU relationship in some of these areas even though our
economic relationship is so much bigger. And it has some
implications probably for NAFTA that have not been addressed
very much, because obviously Canada is a key part of NAFTA. The
EU has already a economic agreement with Mexico, they just
don't have one with us.
And if you go back to the point that was being made, all
around the world both the U.S. and the EU have been trying all
of these bilateral agreements or regional types of efforts, but
we haven't done it with each other. This is the big hole in the
trade picture. But it is also the big hole in these 21st
century issues where in services, in investment, in regulatory
cooperation, we have the opportunity to set the standards in
ways that could be the core of much higher and better global
standards across the board and could open up third markets.
We are the biggest service economies in the world. We are
each other's most important services markets, and most people
in the U.S. and Europe work in the services economy. So if we
could open up the next 20 percent of that market, it would also
have a significant impact not only for us but on other
protected markets. Brazil, for instance, is a big services
economy but it is very protected. And if we are going to go
forward and open up that will exert a bit of pressure on third
countries.
Ms. Schmidt. And my last question is regarding Russia.
Trade with Russia has been mentioned. There is some concern
about nationalization with foreign investment. How concerned is
the Chamber and its members with those issues?
Mr. Rashish. Thank you. I think the Chamber is concerned
about those developments, but I think that we do believe that
granting permanent normal trade relations to Russia and
allowing our companies to fully benefit from Russia's
membership in the World Trade Organization is one way to help
with those and other challenges of operating in the Russian
market. WTO membership including the participation by our
companies in the Russian economy will create more competition
in the Russian economy. It will bring new ways of doing
business to the Russian economy. It creates new interdependence
between the Russian economy and the U.S. and other economies
around the globe. And I think the more that that happens the
more we can be optimistic that these kinds of issues that you
mentioned will present a decreasing challenge in the years to
come.
Ms. Schmidt. Thank you.
Mr. Burton. Mr. Sires?
Mr. Sires. Thank you, Mr. Chairman. As I look at this whole
picture I have to somehow partition the EU and then Russia and
then Turkey, because I guess when you talk about the EU the
risk is less when you make a deal. We have a lot more things in
common obviously. But when we talk about Russia and Turkey, I
mean the risk/reward there, the risk is just much, much higher
to cut some of these deals.
So my concern is, we talk about Turkey and we keep pushing
Russia and everything else, but to me the risk is just an awful
lot for us when we can actually do a deal with people that we
have certainly, I don't want to say more in common, but just a
more common way of thinking. To me, Russia joining the WTO, I
just wonder how much they are going to abide by the changes
that they had to make. Because I mean China does whatever it
wants basically. There is very little intelluctual properties
concern and so forth.
So I guess what I am saying is, do we partition it? I mean
there seems to be a whole menu here, and even within the
European Union there is a whole menu. Italy certainly can
withstand a lot more changes than some of these other countries
because I think they have more liquidity, is that the right
word I am using, than Portugal or Spain. So I mean how do you
pursue when you have such a menu, a trade agreement?
Mr. Rashish. Congressman, thank you for the question. I
mean I do share your inclination to want to have an agreement
between the United States and the EU because I think it is
something we could actually do pretty quickly for the reasons
you state, because we are so similar. And I think even though
we are already very integrated as to economies, because the
relationship is so big there are definitely still huge gains we
can tap and should tap.
At the same time, let me talk about Turkey, because I think
we can and should do both. Turkey is an incredibly important
country from the strategic point of view for the United States,
and I think it is more broadly given its location. It has also
been experiencing very dynamic growth and a very active
international economic diplomacy. It is reaching out into new
markets.
But given the importance of our bilateral political
relationship and given the size of our two economies, the trade
investment relationship between the United States and Turkey is
seriously underdeveloped. And I think that that means there are
important opportunities for our firms. I think it means that if
we were to increase our trading investment relationship with
Turkey that we would even have a more robust relationship with
them and they with us. And I think that given where the kinds
of both economic and political challenges are and are likely to
be, a strong commercial relationship with Turkey could really
yield many benefits for us.
Now it is true that there a number of challenges that we
face. The U.S. faces a number of policy and regulatory
challenges in terms of market access, and on the Turkish side
they face a number of more market based challenges because it
is not a good match up between their companies and the U.S.
market. But the U.S. Chamber has recently issued a report which
I am happy to send you, to the member and you and your
colleagues separately, which takes stock of where this
relationship is and points to a number of both policy and
business community actions we can take to increase the size of
this relationship.
Turkey wants to be one of the ten largest economies by the
year 2023, which is the 100th anniversary of their founding as
a republic. It is challenging, but given that they have tripled
their economy over the last 10 years it is not impossible. To
get there they are going to need to make a lot of policy and
regulatory reform,s and so I think that gives us an opportunity
to say to them, we want to be part of that but we also want to
make sure that our companies have the access we need to help
you achieve what is your goal.
Mr. Hamilton. I agree with that on Turkey, and so let me
leave that. But the point of your question leads me to sort of
make this statement. I think the international economic order
as we have built it over the last six decades is in danger of
being eroded because a lot of rising powers don't necessarily
agree with some of the basic principles that we have put in
place.
And it seems to me that over time, the West if you will,
U.S. and Europe, we have become hesitant, a bit divided and
really less assertive about the need for those types of
principles. And we tend to go to these countries, each of us,
through one door or the other trying to get them to buy into
our or their principles, U.S. or European. In the end we say,
take this standard, take that standard. We end up with the
Chinese standard that way. And I think we need to be aware of
that. That is why I say we are competitors, but if we could
agree across the Atlantic that there are still basic principles
of the international economic order that we will both act on
also vis-a-vis third countries, I think it is a much more
assertive statement that will sort of deal with this. It is
like termites in the woodwork, you know, it is like an erosion
constantly whether it is corruption or some of these other
issues. And so having a robust new transatlantic partnership, I
think, helps us deal with third country problems in Russia or
in China.
When the U.S. and the EU do get together, for instance, we
had on consumer safety, many problems a few years ago, if you
remember. The U.S. and the EU finally decided, let's go to
Beijing together about consumer safety issues. And actually
they did produce more progress with the Chinese on that issue
than we have on a lot of other issues. But if we don't sort of
stand up for that as I say we will have the Chinese standard.
We will have the lowest common denominator type of world, and I
don't think that is in either the U.S. or the European
interest.
Mr. Sires. I haven't raised the issue of security yet.
Because I had people from the EU come see because I represent
the Port of Newark and the Port of Elizabeth, which entries,
you know, to a great deal of commerce. And we are talking about
who should secure the containers that are coming in from
Europe, whether it should be in Europe or it should be us. And
I think that is something that has to be addressed eventually
if we are going to have any kind of a deal.
Right now I visit the ports, and I think we do a fairly
good job of trying to see what is in these containers, and I
often ask this question to the port people who handle it. But I
think eventually that is going to be a big issue, whether they
do it at port of departure or we do it at port of entry. And
that will cost us money, but I think it is going to have to be
done with just about every country that we deal with,
especially if it is not the European Union but some of these
other countries where there are still active people who want to
do harm to our country. So I was just wondering how you feel
about that.
Mr. Rashish. Well, Congressman, thank you. The U.S. and the
EU have recently arrived at an agreement on certain aspects of
this issue to recognize the way each does look at cargo coming
into our ports. And I think that is a great example of the kind
of progress on an important regulatory issue, and I think we
can certainly make further progress within the context of a
trade negotiation and on this issue and others. But I fully
agree that that should remain at the top of the agenda of our
bilateral cooperation.
Mr. Hamilton. There is disagreement on secure trade these
days. I think the premise of your question is, on what basis
will we come to these agreements? Will we come together again,
lowest common denominator or high standards? If we can't agree
on some basic principles governing secure trade with those
countries most like ourselves, how would we possibly think we
are going to have arrangements with many, many others who don't
share some of the basic premises?
So an agreement across the Atlantic in these areas can
serve as the core for a much broader global effort. If we don't
get that we get nothing. And so I think that is maybe one way
to think about it. I would just take this to say it is not only
about secure trade. It is really about all the flows that
connect us, it is goods, it is services, it is ideas, it is
people, again, and we need to have more resilient free
societies today.
Cyber tends to be kind of the issue everyone focuses on
but, you know, if the electrical industry is attacked it
doesn't matter how many cyber programs you have in place
because they are all related. And again, if we and the
Europeans can't come to some basic terms about how we will
build resilient societies together to keep everything flowing
so free societies work but that people feel safe, I don't
believe we are going to have any global agreements, because
they have to be built on certain principles. And we should
establish those principles with our closest partners, most of
whom are our core allies as well.
So I would begin with the transatlantic, what I would call
the resilience initiative as well, it is a little different now
than what we have been talking about, but I think it is equally
important because it actually is what people worry about. All
of those flows that keep our societies moving are susceptible
to disruption, either man-made or from Mother Nature. And if
there was a massive disaster in Europe or here that taxed our
societies, we should say to each other, let's come to each
other's assistance and let's put in place the modalities to do
that. We haven't thought that in the United States that we
might have to need that help, but we had Hurricane Katrina. We
have had other kinds of disasters where we have needed that
help, also in New York.
Mr. Sires. Sounds to me like John Lennon in his song. Thank
you very much.
Mr. Burton. He has ports in his district. I think you might
have gathered that.
Ms. Schmidt, did you have any other questions?
Ms. Schmidt. Yes, I have a follow-up for you gentlemen. One
of the concerns that has been raised are some of the barriers
that our foreign allies have with our own products, basically
Turkey and the whole pharmaceutical industry. And my question
is, are the barriers there because of the fear of our products
or because of a fear of the economic impact to Turkey?
And I look at the agroscience that we do in the United
States and the reluctance of the EU for our products, not built
out of fear of the kind of agriculture that we are growing
here, the products that we are growing here, but basically that
if they allow our products over there it will create an
economic, they will lose market share because we grow more
quantity at a cheaper price over here. So looking at that model
in Europe's reluctance with our agricultural products, is that
the same kind of issue with Turkey? Is it a fear that they are
going to lose their market share of their own drugs, or is it
truly a fear of our product quality?
Mr. Rashish. Thank you. I think when you look at the issues
that the U.S. pharmaceutical and other foreign research based
pharmaceutical sectors face in Turkey, there are two sorts of
challenges they find. One is a challenge that is not particular
to Turkey, but what I think the pharmaceutical companies in the
U.S. would say is particularly challenging, and that is
Turkey's pricing policies there which they are the government
pricing policy, how much they will pay and reimburse for
medicines which makes it challenging for them to operate there.
But again it is not----
Ms. Schmidt. I take it then, more than what the actual
product is.
Mr. Rashish. Yes, that they are concerned about. Yes, about
the level. And again, it is not an issue that you only have in
Turkey. You have this issue in a number of EU countries where
these policies are still national and not at an EU level.
You also have an issue in Turkey about the way the Turkish
Government wants to certify the safety of pharmaceutical
products. That I do not think is really because of a concern
about the quality of our products, but I think our companies'
products are getting caught up in that net. So it may be
inadvertent but it is still a very strong concern.
Mr. Burton. And now for our last questioner of the day, my
good buddy.
Mr. Meeks. My quick question is this because I am, along
with Mr. Burton have been a strong advocate for removing
Jackson-Vanik, and we have been talking regularly about Russia.
But what about Moldova? They have been a part of the WTO for
awhile, do you see any reason why we shouldn't lift, and grant
PNTR standards to Moldova?
Mr. Rashish. Congressman, I am sorry to have to say this in
what is your last question, but I would like to check with
colleagues and get back to you on that if I could.
Mr. Meeks. Okay.
Mr. Hamilton. If I could just briefly, I believe there have
been some recent changes in Moldova which are encouraging in
terms of the political process there. And it is probably in the
United States interest to look hard at those changes and try to
support them, because Moldova, the poorest country in Europe,
is also part of what I would call a festering conflict. People
call them frozen conflicts in Europe, I call them festering,
because they are not frozen. They are bringing these people
down because you can't resolve them. The Transnistria conflict,
there is the conflicts with Georgia, South Ossetia and so on,
Nagorno-Karabakh. These are still turbulent areas of Europe and
Moldova is right there.
So anything that can be done to either commercially or
otherwise to try to alleviate some of that problem would be in
U.S. interest, European interest, far beyond just trade. And so
I think because of these political developments recently with
the President and so on, one should take a closer look at that
and see how one could encourage this development.
Mr. Burton. Well, as I thank you very much for your
patience and for being here today, I would like to make just
one comment about Jackson-Vanik. There are some people who are
leaders in the Congress who still don't want to remove Jackson-
Vanik from Russia. And if you have any ideas on what we could
replace that with that would not be as onerous that you could
recommend to us, we will present that to some of those folks so
that maybe we can move in the direction of removing Jackson-
Vanik and yet still deal with the problem.
With that thank you very much. I really appreciate you
being here today. You guys did a great job. Thanks a lot.
[Whereupon, at 4:18 p.m. the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
[GRAPHIC(S)] [NOT AVAILABLE IN TIFF FORMAT]
__________
[Note: ``A New Era for Transatlantic Trade Leadership,'' a Report from
the Transatlantic Task Force on Trade and Investment dated February
2012, and a ``A Bull in Bear's Clothing: Russia, WTO and Jackson-
Vanik,'' a Task Force Paper dated January 2012 by the Bipartisan Policy
Center, are not reprinted here but are available in committee records.]
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