[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

THIRD IN A SERIES OF THREE HEARINGS ON THE
PENDING, JOB-CREATING TRADE AGREEMENTS:
SOUTH KOREA TRADE AGREEMENT

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HEARING

before the

SUBCOMMITTEE ON TRADE

of the

COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

APRIL 7, 2011

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Serial No. 112-TR3

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Printed for the use of the Committee on Ways and Means

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COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON TRADE

KEVIN BRADY, Texas, Chairman

GEOFF DAVIS, Kentucky JIM MCDERMOTT, Washington
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
WALLY HERGER, California LLOYD DOGGETT, Texas
DEVIN NUNES, California JOSEPH CROWLEY, New York
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas

Jon Traub, Staff Director

Janice Mays, Minority Staff Director

C O N T E N T S

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Page

Advisory of April 7, 2011, announcing the hearing................ 2

WITNESSES

PANEL 1:
Ambassador Demetrios Marantis, Deputy U.S. Trade
Representative, Office of the United States Trade
Representative............................................... 9
PANEL 2:
William Rhodes, Chairman, U.S.-Korea Business Council;
President and Chief Executive Officer, William R. Rhodes
Global Advisors, LLC; Senior Advisor to Citigroup, on behalf
of the U.S.-Korea Business Council and the U.S.-Korea FTA
Business Coalition........................................... 37
John A. Schoch, Jr., President and Chief Executive Officer,
Profile Products LLC, on behalf of the United States Chamber
of Commerce.................................................. 45
Robert Holleyman, President and Chief Executive Officer,
Business Software Alliance................................... 55
Ambassador Thomas Hubbard, Senior Director for Asia, McLarty
Associates, Former Ambassador to South Korea................. 63

SUBMISSIONS FOR THE RECORD

Beam Global Spirits and Wine Inc................................. 74
Accuray Incorporated............................................. 79
California Chamber of Commerce................................... 85
U.S. Korea Business Council and U.S. Korea FTA Business Coalition 86
U.S. Chamber of Commerce......................................... 92
California Coalition for Free Trade.............................. 100
Wine Institute and Wine America.................................. 103
The Advanced Medical Technology Association...................... 107
American Manufacturing Trade Action Coalition.................... 115
American Apparel and Footwear Association........................ 120
U.S. Industrial Fabrics Institute................................ 121
California Association of Winegrape Growers...................... 124
National Cattlemens Beef Association............................. 125
International Trademark Association.............................. 127
National Skills Coalition........................................ 129

THIRD IN A SERIES OF
THREE HEARINGS ON THE PENDING,
JOB-CREATING TRADE AGREEMENTS:
SOUTH KOREA TRADE AGREEMENT

----------

THURSDAY, APRIL 7, 2011

U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:02 a.m., in
Room 1100, Longworth House Office Building, the Honorable Kevin
Brady [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]

HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

Brady Announces Third in a Series of Three

Hearings on the Pending, Job-Creating Trade Agreements: South Korea
Trade Agreement

March 31, 2011

Congressman Kevin Brady (R-TX), Chairman, Subcommittee on Trade of
the Committee on Ways and Means, today announced that the Subcommittee
will hold a hearing on the pending trade agreement with South Korea.
This hearing is the third in the series of hearings on the pending
trade agreements with Colombia, Panama, and South Korea. The hearing
will take place on Thursday, April 7, 2011, in the main Committee
hearing room, 1100 Longworth House Office Building, beginning at 10:00
A.M.

In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.

BACKGROUND:

On June 30, 2007, the United States concluded a trade agreement
with South Korea, which is still awaiting Congressional consideration.
On December 3, 2010, the United States and South Korea agreed to the
terms of a supplemental autos agreement that will foster greater market
access for U.S. automakers.

On January 25, 2011, the Ways and Means Committee held its first
hearing on this agreement, along with the pending trade agreements with
Colombia and Panama. The South Korea trade agreement was also discussed
at the Ways and Means Committee hearing with Ambassador Kirk, on
February 9, 2011. On March 7th, Chairman Camp agreed to Ambassador
Kirk's written request to begin technical discussions on the draft
implementing bill, noting that discussions between Congressional and
Administration staffs were scheduled for later that day. Technical
discussions are ongoing.

The U.S.-South Korea trade agreement would open new markets to U.S.
exports and, in turn, benefit American businesses, farmers, workers,
and consumers. The Obama Administration estimates that implementing the
agreement will support 70,000 jobs in the United States. The
independent U.S. International Trade Commission (ITC) has estimated
that implementing the agreement would increase U.S. exports by at least
$9.7 billion. In addition, the tariff cuts alone will add at least
$10.1 billion per year to U.S. GDP. The benefits of trade agreements
are also long-lasting. Since 2000, U.S. exports to the 13 countries
with which the United States has implemented trade agreements have
grown almost twice as fast as our worldwide exports.

South Korea has concluded trade agreements with major trading
partners and export competitors of the United States, so U.S. failure
to implement our own trade agreement with South Korea could severely
disadvantage U.S. exporters and jeopardize U.S. job creation. The EU-
South Korea trade agreement is expected to enter into force on July 1,
2011, removing significant South Korean tariffs for European exporters
while similar tariffs remain in place against U.S. exports. South Korea
currently has trade agreements in place with Chile, India, and the ten
countries of the Association of Southeast Asian Nations (ASEAN). South
Korea is also negotiating trade agreements with Canada, Australia, New
Zealand, and China.

In announcing this hearing, Chairman Brady said, ``South Korea is a
dynamic market and key ally in the Asia-Pacific region. Opening up the
South Korean market for American goods and services is a critical
priority for robust U.S. long-term growth. Passing the U.S.-South Korea
trade agreement, like our agreements with Colombia and Panama, will
create good U.S. jobs and increase the competitiveness of U.S.
exporters. In addition, it will preserve U.S. influence and leadership
on the Korean peninsula and in the broader Asia-Pacific region. We
cannot afford to lose these export opportunities by sitting on the
sidelines as South Korea moves forward on trade agreements with our
major competitors. American workers, farmers, ranchers, manufacturers,
service providers, and other exporters will simply be left behind. I
hope that the Administration will work with this Committee to allow
Congressional consideration of all three pending trade agreements by
July 1.''

FOCUS OF THE HEARING:

The focus of the hearing is on Congressional consideration of the
pending trade agreement with South Korea. The hearing will address the
economic benefits this agreement will bring to American businesses,
farmers, workers, consumers, and the U.S. economy. In addition, the
hearing will examine the national security and geopolitical
implications of the agreement and will explore developments within
South Korea that have occurred since the trade agreement was concluded.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
page of the Committee website and complete the informational forms.
From the Committee homepage, http://waysandmeans.house.gov, select
``Hearings.'' Select the hearing for which you would like to submit,
and click on the link entitled, ``Click here to provide a submission
for the record.'' Once you have followed the online instructions,
submit all requested information. ATTACH your submission as a Word or
WordPerfect document, in compliance with the formatting requirements
listed below, by the close of business on Thursday, April 7, 2011.
Finally, please note that due to the change in House mail policy, the
U.S. Capitol Police will refuse sealed-package deliveries to all House
Office Buildings. For questions, or if you encounter technical
problems, please call (202) 225-6649.

FORMATTING REQUIREMENTS:

The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
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written comments must conform to the guidelines listed below. Any
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guidelines will not be printed, but will be maintained in the Committee
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1. All submissions and supplementary materials must be provided in
Word or WordPerfect format and MUST NOT exceed a total of 10 pages,
including attachments. Witnesses and submitters are advised that the
Committee relies on electronic submissions for printing the official
hearing record.

2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
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3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental
sheet must accompany each submission listing the name, company,
address, telephone, and fax numbers of each witness.

The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
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materials in alternative formats) may be directed to the Committee as
noted above.

Note: All Committee advisories and news releases are available at
http://www.waysandmeans.house.gov/.

Chairman BRADY. Good morning, everyone. I would like to
welcome you all, especially South Korean Ambassador Han, to
today's Trade Subcommittee hearing on the U.S.-South Korea
trade agreement. Today's hearing is the third in our series of
hearings on each of the pending trade agreements: Colombia,
Panama, and South Korea.
As I have said at each of the previous hearings, I firmly
believe that we should consider all of the three agreements by
July 1st. I welcome the Administration's announcement yesterday
that it has reached agreement with Colombia. I look forward to
quick movement on the action plan and to working with the
Administration to ensure submission of all three agreements for
Congressional consideration by July 1st. All three pending
trade agreements are good agreements. The time to move forward
with all three is now.
I know that many Democrats share our sense of urgency. With
respect to the Korea-U.S. trade agreement, we all know that the
European Union South Korean trade agreement is expected to
enter into force by July 1st. Implementation of agreements by
other countries, and continued inaction on our agreement, will
result in further missed opportunities to create American jobs.
In fact, it will result in a decline in existing American jobs.
We either move forward or we fall backward; the choice is ours.
Staying still is just not an option.
The economic benefits of the pending trade agreements are
overwhelming. The ITC, International Trade Commission,
estimates that the three pending trade agreements together
would increase U.S. exports by at least $13 billion, and add
$10 billion to our GDP. And President Obama stated that such an
increase in U.S. exports could support 250,000 jobs.
These benefits are enjoyed broadly. For example, the
American Farm Bureau estimates that the U.S. farm exports to
South Korea could increase by more than $1.8 billion each year.
Moreover, 90 percent of all American companies exporting to
South Korea are small and medium-sized enterprises.
Implementation of the agreement will lead to an additional $2.8
billion in exports for small and medium-sized American
companies.
This agreement, like the Colombia and Panama deals, would
level the playing field for U.S. exporters. The average South
Korean tariff for U.S. exporters is more than four times the
average tariff that South Korean products face in the U.S.
market. The agreement would address this imbalance.
The state-of-the-art agreement, like Colombia and Panama,
will address key non-tariff and regulatory barriers, such as
sanitary and psytosanitary barriers, requiring strong
protection of intellectual property rights, requiring greater
regulatory transparency, and encouraging greater regulatory
harmonization and the use of international standards.
We cannot also overlook the fact that South Korea is a key
ally in a critical region of the world. The U.S.-South Korea
trade agreement is important not only for its economic
benefits, but also for our national security. Just today I
received a letter signed by a number of former senior officials
in trade and foreign policy, highlighting the key geostrategic
role that Korea plays, and urging Congress to pass all three
agreements as quickly as possible.
Without objection, I would like to enter that letter into
the record.
[The information follows, The Honorable Mr. Brady:]

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[GRAPHIC] [TIFF OMITTED] T0867A.002

[GRAPHIC] [TIFF OMITTED] T0867A.003

Chairman BRADY. Now that I have highlighted some of the
benefits to the U.S.-Korea agreement, I would like to set the
record straight on a few points.
First, Republicans are very excited about moving forward on
the Korean agreement, just as we are excited to move forward
with the Panama and Colombia agreements. Our goal is simply to
speed up the Latin American agreements to catch up with the
Korean agreement! There is a sense of urgency for all them, as
these trading partners are moving ahead without us, to conclude
agreements with our competitors that do not include us.
Second, our view is that all three agreements must be
considered. It is simply not a Republican view. Key Democrats,
such as the chairman of the Senate Finance Committee,
explicitly agree with this view. Strong bipartisan support for
all three was also very clear from the strong statements of
support that were issued yesterday in response to the
Administration's welcome announcement about Colombia.
Third, despite what some are saying, we have already
started the bipartisan technical drafting work on the Korea
agreement with this Administration. On March 7th, Chairman Dave
Camp agreed to Ambassador Kirk's written request to begin
technical discussions on the draft implementing bill, noting
that discussions between Congressional and Administration
staffs were scheduled for later that day. Those technical
discussions are ongoing, and we are awaiting responses to
questions that staff on both sides of the aisle have raised
with USTR. We are working constructively together to move
forward in a timely manner to ensure that the draft
implementing bill is complete and thorough.
At the same time, I would urge the Administration to work
with us on this technical work for the Colombia and Panama
agreements, too. Both Ambassador Kirk and Ambassador Shapiro
have made clear that the resolution of any outstanding issues
will not require changes to the text of the agreement. I
believe we should start this technical work immediately to
ensure that the drafting is complete and thorough, and the
draft implementing bills are ready to go. We cannot waste any
more time.
I would like to welcome all of our witnesses today, and
thank them for being with us. I look forward to hearing the
testimony of both panels.
At this time I would yield to Ranking Member McDermott for
the purposes of an opening statement.
Mr. MCDERMOTT. Thank you very much, Chairman Brady, for
scheduling this hearing. Finally we are discussing a free trade
agreement that is ready for congressional consideration right
now, an FTA that will generate more than $10 billion in
increasing U.S. exports, $11 billion in increased GDP, and as
many as 277,000 new American jobs.
The Korean FTA brings economic benefits to each and every
state in this union. In Texas, where Chairman Brady and Mr.
Doggett live, estimates indicate that the FTA will increase
27,000 new jobs in a range of sectors from agriculture to
transportation.
In Washington, where Mr. Reichert and I reside, we catch a
lot of fish and produce a lot of agriculture and timber. The
Korean FTA is expected to create 1,500 new jobs in those
sectors alone.
In California, where Mr. Davis and Mr. Herger live, and
where unemployment is 12.3 percent, it is estimated that the
FTA will create 26,000 new jobs.
In Florida, Mr. Buchanan's state, the state's citrus
growers and processors support the FTA, which would phase out
steep tariffs on U.S. orange juice. And those additional
exports would go through the port in Manatee he talks about in
this committee.
In Illinois, where Mr. Schock lives, is the second-largest
soybean producer in the country. And under the FTA, soybean
production will increase by $565 million to $850 million.
And we know that Congresswoman Jenkins is very concerned
about beef. Nebraska, where Mr. Smith's district is located, is
another major producer. Well, under the Korean FTA, beef
exports are expected to increase by $633 million.
It is clear that the FTA with Korea would produce a real
economic boost, spurring economic growth all over the country.
The Administration has been ready to move on the FTA for more
than a month, and yet the Republican majority refuses to move,
putting all of the FTA potential economic gains in California,
Illinois, Florida, Texas, Kansas, Nebraska, and all over the
United States, on hold.
The EU-South Korea FTA goes into effect on July 1. Each day
that the congress delays passage of the U.S.-Korea FTA puts
U.S. businesses and workers at a greater disadvantage, compared
to their European counterparts. And the Republicans know this.
Back in 2009, they argued that we should pass the flawed
version of the FTA, even though the auto provisions weren't
fixed, to make sure that we did not fall behind the EU. The
Republicans' own estimates suggest that U.S. workers and
businesses would lose $1.1 billion in exports to Korea, once
the EU-Korea trade agreement is fully implemented. Well, it is
around the corner, my friends.
So, what is the hold up? Well, it cannot be Colombia any
more. The President announced yesterday exactly what the
Republicans have been demanding. If, despite the announcement,
the Republicans continue to dither on Korea, then their
motivation is just plain ugly politics. It is time to end that.
There is too much on the line.
So, here is what I suggest. USTR Ambassador Ron Kirk should
send the draft of implementing legislation to Congress
immediately, and request the Ways and Means Committee to do a
swift review and a mock mark-up. After a reasonable period of
consultation--let us say three weeks--the Administration should
then formally submit the FTA, implementing legislation so that
it could be introduced, and fast-track procedures, including
the specific time lines for consideration, initiated.
There is no reason that both the House and Senate cannot
pass this meaningful agreement by Memorial Day, before it is
too late for American families in business. It is time to get
moving. I yield back.
Chairman BRADY. Thank you, Ranking Member McDermott. Today
we have two panels of witnesses. On our first panel is a
witness from the Administration, Ambassador Demetrios Marantis,
deputy U.S. trade representative from the Office of the U.S.
Trade Representative. Ambassador, welcome. We look forward to
your testimony. I would ask that you keep your testimony to
five minutes, and your written statement will be made part of
the record.
I do want to take a moment to applaud the President,
Ambassador Kirk, and the USTR negotiating team for improving
what was a very solid agreement with Korea. But working with
then-Chairman Levin, Chairman Camp, and others in Congress in
close consultation improved the Korean agreement. That was a
significant achievement, and I very much appreciate your work
on that.
At this point I would recognize you for five minutes.

STATEMENT OF DEMETRIOS MARANTIS, DEPUTY U.S. TRADE
REPRESENTATIVE, OFFICE OF THE UNITED STATES TRADE
REPRESENTATIVE

Mr. MARANTIS. Thank you. Good morning, Chairman Brady,
Ranking Member McDermott, and Members of the Committee. It is a
really exciting time to be involved in international trade
right now, and it is a real honor for me to be here to testify
before you on the U.S.-Korea trade agreement.
Let me also welcome Ambassador Han, who is here. He has
been my partner in crime for the past couple of years, as we
have been trying to navigate the difficulties that we,
together, faced.
Congress has the singular opportunity to pass the most
economically significant trade agreement in nearly two decades.
The U.S.-Korea trade agreement will strengthen our trade and
investment ties to Korea's $1 trillion economy. It will bind a
key ally closer to us, anchor our economy to the dynamic Asia-
Pacific region, and help us keep our edge over international
competition. Most importantly, this agreement will create
substantial export opportunities, establish strong enforcement
provisions, and support tens of thousands of new export-
oriented jobs.
The Korea agreement is just the first example of how this
Administration has worked to make our trade agreements better.
The President has underscored his intention to present pending
trade agreements to Congress once we have adequately addressed
key outstanding concerns. In December we did so with Korea.
This week, Panama has taken steps to complete work on
outstanding tax and labor issues. And later today, the
President will announce an agreement with Colombia on an action
plan to address outstanding labor issues.
Congress must now work on passing a comprehensive trade
policy, one that includes the pending trade agreements, trade
adjustment assistance, our preference programs, and permanent
normal trade relations with Russia.
The U.S.-Korea trade agreement is ready to move today. The
President and many of you had serious concerns about the deal
signed in 2007. We heard you, and we took action. After
extensive consultations with members of this committee and a
wide range of stakeholders, the U.S. and Korea agreed last
December to make Korea's auto market more fair, open, and
transparent. We leveled the playing field by addressing key
non-tariff barriers in Korea's auto safety and environmental
regulations. We encouraged green technologies by immediately
cutting in half Korea's tariffs on electric cars, and
eliminating these tariffs within five years. We negotiated a
tariff structure that will give American auto companies and
their workers a chance to build more business in Korea before
U.S. tariffs come down. And we negotiated a new special motor
vehicle safeguard.
These commitments allow us to unlock the economic potential
of the 2007 agreement. Immediately upon entry into force, this
agreement eliminates tariffs on two-thirds of U.S. agricultural
exports to Korea. Within five years of entry into force, it
removes tariffs on over 95 percent of consumer goods exports.
And it provides significant market access to Korea's $580
billion services market.
Underpinning these new export opportunities are the Korea
agreement's state-of-the-art provisions to protect and enforce
intellectual property rights, reduce red tape, and eliminate
regulatory barriers to U.S. exports. This agreement contains
the highest standards for protecting labor rights, promoting
the environment, and ensuring that key domestic labor and
environmental laws are enforced.
Taken together, these additional export opportunities mean
more jobs for Americans. The tariff reductions on goods alone
will lead to significant increases in U.S. exports to Korea
that will support over 70,000 U.S. jobs. More services exports
to Korea will support tens of thousands of additional jobs. And
fewer non-tariff barriers and stronger rules will support even
more.
We remain committed to further opening beef markets across
Asia, including Korea, consistent with international science.
In the meantime, the U.S.-Korea agreement, when implemented,
will progressively reduce Korea's 40 percent beef tariff, and
enable U.S. beef producers to build upon the exponential growth
of exports to Korea.
Working with you, this Administration addressed outstanding
concerns with this agreement. Working with you, we made
significant improvements that will have real benefits to our
auto industry, its workers, and our economy. And working with
you, we can now move forward. Now is the time to act on this
agreement so American families can realize the many benefits of
the U.S. trade agreement. Working together, let us move this
agreement without further delay.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Marantis follows:]

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[GRAPHIC] [TIFF OMITTED] T0867A.006

[GRAPHIC] [TIFF OMITTED] T0867A.007

Chairman BRADY. Ambassador, thank you very much. You have
set out your testimony, a very strong case for this agreement
for a number of reasons. There are--I would like to talk about
two concerns that I have heard raised by critics I would like
your help in addressing.
First, some folks are concerned about how the agreement
might affect the textile industry. I know this agreement
includes state-of-the-art provisions to address major concerns
such as trans-shipment, a surge in imports, and enforcement. It
also includes a strict rule of origin.
So, the first question is, does this agreement benefit
textile and apparel manufacturers in the U.S.? And how would
the provisions I mentioned address concerns raised by them?
And when you finish that, I would like to ask about the
Kaesong industrial area, and some of the provisions in the
bill, as well.
Mr. MARANTIS. Thanks, Mr. Chairman. Seventy-five percent of
U.S. textile and apparel exports to Korea would receive duty-
free treatment immediately upon implementation of the
agreement. That is really important, because Korea is becoming
a larger destination for U.S. textile and apparel exports.
Right now, Korea is our tenth largest market. Last year
alone, our textile and apparel exports to Korea increased by 45
percent. So, getting this agreement in force now is very
important, particularly when you think about the EU and its
textile exports, and the competition that we face in that
market.
But as you mentioned, Chairman Brady, textiles is a
sensitive sectors in the U.S., and there are very important
provisions in this agreement that address that.
First, we have delayed staging of certain sensitive
products, in terms of when the U.S. will reduce its tariffs. In
some cases, that staging extends as long as 10 years.
Second, as you mentioned, we have a very important rule of
origin that the industry supports strongly, which is the yarn
forward rule, which basically says products cannot receive
preferential treatment unless the yarn and the fabric is
produced in either South Korea or the United States.
Third, we have a special textile safeguard in the agreement
that allows us to address instances when increased imports may
cause serious damage to the industry producing like or directly
competitive products.
And, finally, as you mentioned, the agreement contains very
strong provisions on trans-shipment. It allows for increased
information sharing between U.S. and Korea customs authorities.
It allows U.S. customs authorities to conduct verification
activities in Korea. And if there is ever a problem, CBP, our
customs authority, has the authority to take penalty actions,
including denial of entry of goods. And that just builds upon
the provisions that CBP already does, in terms of post-import
verifications and other mechanisms it uses to prevent trans-
shipment.
Chairman BRADY. Thank you. Very helpful. Second, some have
expressed concerns that products produced in the Kaesong
industrial complex, which is located in North Korea but
operated jointly by North and South Korean workers, they are
concerned they would be treated as products originating from
South Korea under the agreement. I understand that the
agreement specifically requires legislative action--in other
words, an Act of Congress--before products from Kaesong are
permitted to enter the United States.
Please describe what the effect of this requirement is, and
please describe whether products from Kaesong could receive
benefits under the agreement.
Mr. MARANTIS. Thank you, Mr. Chairman. There has been a lot
of confusion on this issue. And let me be very clear. Goods
produced in Kaesong do not receive any benefits under the U.S.-
Korea trade agreement. Any change to how Kaesong is treated
under the agreement would require Congress to pass, and the
President to sign, legislation.
So there is nothing in this agreement that provides any
benefits to Kaesong. In fact, the word ``Kaesong'' does not
even appear in the agreement.
Chairman BRADY. And if there were to be any change that--
literally, Act of Congress, signed by a President, before----
Mr. MARANTIS. Yes. Any recommendations that--there is a
committee that is established under the agreement for outward
processing zones that can make recommendations. Any--if we
choose to act on those recommendations, the only way to do so
is to come here and seek legislative authority from Congress.
So Congress has the final word. It would have to pass a law,
and the President would have to sign that law into force.
Chairman BRADY. Thank you for putting that confusion to
rest. Appreciate it.
Ranking Member McDermott.
Mr. MCDERMOTT. Thank you. I want to begin by apology. I
moved Mr. Davis from Kentucky to California. That is a severe
insult to him, and I apologize publicly.
[Laughter.]
Mr. DAVIS. Well, I thank the gentleman for pointing that
out. I reminded folks that I live in the United States, not in
California. So I appreciate and thank him.
[Laughter.]
Mr. MCDERMOTT. I would like to ask you a question, because
I think there is a whole lot of misunderstanding about Kaesong.
And I have been there on one of my trips to Korea.
And I would like you to explain to the committee what
Kaesong is really all about and why the South Koreans have
created this. There is a lot of mythology floating around. It
would be nice to have somebody give some facts about why they
created it, what they are doing with it, what the intention is,
and so forth.
Mr. MARANTIS. Sure, I would be happy to. As you mentioned,
Mr. McDermott, there is a special industrial zone over the
border in North Korea called Kaesong, which South Korea
launched in 2003, as an effort to encourage reforms in North
Korea. And it is an industrial complex that produces, you know,
a wide variety of goods.
You know, ties between North and South Korea have
deteriorated, as we all know. And, as a result of that, South
Korea has banned new investment in Kaesong since May 2010.
Mr. MCDERMOTT. And the industries were from South Korea and
the workers were?
Mr. MARANTIS. North Korean workers.
Mr. MCDERMOTT. Who then went back into the community with
knowledge about how the free enterprise system might work.
Mr. MARANTIS. Correct. I mean the idea behind Kaesong, you
know, when it was originally launched, was to help to provide,
you know, new exposure for North Korean workers as to, you
know, business practices in South Korea and, you know, as part
of an effort to encourage reforms in North Korea.
Mr. MCDERMOTT. It was also in anticipation that at some
point there may be a reunification between North and South
Korea, and in having workers understand the situation they are
coming into. It is not like Germany, where there were three
West Germans for every East German. In this case, it is a huge
number of people coming into the economy, and they want to try
to transition, or at least begin the process of transitioning.
Is that correct?
Mr. MARANTIS. Yes, sir.
Mr. MCDERMOTT. I yield back the balance of my time.
Chairman BRADY. Thank you, sir. The gentleman from Kentucky
is recognized.
Mr. DAVIS. I thank you, Mr. Chairman. Ambassador, South
Korea is more than a key trading partner. It is also a key geo-
strategic ally in Asia. Currently, there are more than 28,000
American troops stationed in the country, and our militaries
regularly conduct joint exercises. Our geo-strategic
relationship is important, not only to counteract the threat
from North Korea, but also dealing with China's military
ambitions and security, in general, in the Pacific Rim.
Could you discuss the broader geo-strategic significance of
this agreement?
Mr. MARANTIS. Thank you, Mr. Davis. And Korea, as you
mentioned, is a critical strategic ally of the United States.
And what we are doing, as part of the free trade agreement, is
helping to bolster the economic pillar of the U.S. strategic
relationship.
A strong, prosperous South Korea is very much in the
strategic interest of the United States, which is why
negotiation, conclusion, and ratification, and entry into force
of this agreement is a win-win for both of us. It is good for
both the South Korean economy and the U.S. economy. And, as a
result, it is a good tool to help bolster a very important
ally.
Mr. DAVIS. Thank you. Just as a follow-up, given what you
have just said, I was wondering if you could also address how
this is any different from the geo-strategic considerations and
importance of our partnership with Colombia, particularly given
the fighting, its narcotrafficking, the influence of Hugo
Chavez in the region.
Mr. MARANTIS. Sure. I personally do not work on Latin
America and Colombia issues, so I do not have a lot to say. But
you know, in a very similar way, Mr. Davis, Colombia is a
very--an important strategic ally in the region. And, you know,
working on the free trade agreement is a way to help, again,
strengthen Colombia's economy in a volatile region.
Mr. DAVIS. Okay. Thank you very much. I yield back the
balance of my time.
Chairman BRADY. Thank you. The chair recognizes Mr.
Reichert.
Mr. REICHERT. Thank you, Mr. Chairman. I, first of all,
want to thank you, Ambassador, and Ambassador Kirk and the
entire USTR team. And also special recognition to Ambassador
Han, who we have been working closely with, too. And excited
about the upcoming vote to come soon.
I want to mention how much of an honor and a pleasure it
has been to work with the export initiative group, and their
commitment to doubling exports, and I think finally recognizing
the importance of passing trade agreements to accomplish that
goal. As I have said many times in our trade hearings, from
1995 through 2007, I think, is the last time we doubled our
exports, and we passed 9 trade agreements. So, I think everyone
is recognizing the value there, the possible loss of jobs if we
do not pass these agreements.
So, I really want to focus on the jobs issue, because
sometimes there is some misinformation that gets out there, and
some opponents, I think, may skew the numbers just a little
bit.
But just with the Korean Agreement, the first estimate was
70,000 jobs that could be created, as you mentioned in your
testimony. Senator Wyden has completed a study that estimates
the job gain would be almost 280,000, which includes our
services industry, which, as you know, is about 80 percent of
our economy now.
So, what is your view on some of the organizations that say
we are going to lose 160,000 jobs versus the 70,000, the
280,000, the loss of market share as the EU and Canada and
China and others come? We want to sell American. I mean that is
the goal, right? Sell American across the world. So what do you
say to those people who are saying that we are going to lose
jobs with these agreements?
Mr. MARANTIS. Thank you, Mr. Reichert. I mean, to start
off, the study that suggests that there is going to be 160,000
jobs lost is just plain wrong. That study does not even use the
Korea agreement as a model as it is examining the Korean
agreement. It extrapolates from other sources to draw
conclusions which we believe are not accurate. That study also
relies on, you know, what we think is not, you know,
appropriate methodology, in terms of linking an increase in
trade deficits to job losses.
First of all, the ITC has been very clear that the trade
deficit--it predicts that our trade deficit, our $4 billion
trade deficit that we currently have with Korea will be reduced
by the agreement by anywhere between $3.3 billion and $4
billion. And you know, assuming a link between trade deficits
and job losses is not really supported by historical evidence.
During the Great Depression, a time where we had very high
employment, we ran trade surpluses. In the 1990s, when we were
operating at very close to full employment, you know, we ran
large trade deficits.
But to your point, sir, is this agreement is all about
jobs. And the export opportunities, the $10 billion to $12
billion in annual exports that this agreement is going to
create in goods trade alone, will produce--a conservative
estimate on our part--70,000 jobs. And that is just goods
trade. That is not when you look at services trade and other
areas.
Mr. REICHERT. Well, I appreciate your recognition of that
falsehood on the loss of jobs. And one of the things I think
that the USTR and the export council is looking at is educating
people across the country as to the benefits of trade. Because
even, believe it or not, the longshoreman, whose paycheck is
100 percent dependent upon trade, is--or some are against
trade.
So, the last question I want to ask real quick, you know
the environment is very important to all of us, and especially
for those of us in Washington State it is very important to us.
The language in the Colombian agreement, Panama agreement, and
the Korean agreement, aren't they exactly the same, as it
relates to the environment?
Mr. MARANTIS. Yes, sir. We have the most high standard
environmental provisions in Korea, Colombia, Panama, as well as
in the Peru agreement. And I am happy to go into as much
agonizing detail as you want. But we are very proud of the text
of the environmental----
Mr. REICHERT. And Korea has made great progress there, am I
correct?
Mr. MARANTIS. Yes, sir.
Mr. REICHERT. Yes. Thank you, Mr. Chairman. I yield back.
Chairman BRADY. Thank you. Mr. Neal is recognized.
Mr. NEAL. Thank you, Mr. Chairman. Mr. Ambassador, it is
always easy to talk about the benefits or the shortcomings of
trade in the generic. It is more difficult, as you know, in the
specific.
But I do think one of the compelling parts of the argument,
obviously, is what our competitors are doing to establish free
trade agreements across the globe.
And would you comment, perhaps, on what would happen if
this were to fall by the wayside, given what European Union is
now doing, in seeking greater opportunities for growth through
these FTAs?
Mr. MARANTIS. Thank you, Mr. Neal. Yes, it is a--it would
be a big problem. I mean the EU trade agreement enters into
force on July 1st. The longer that agreement is in force with
the Korea agreement not being in force, the longer EU exporters
have a competitive edge over our exporters in that market. And
the EU is very competitive with us in all sectors:
manufacturing, agriculture, and services. And it is very hard
to regain market share once you lose it, or once another
competitor actually gets a leg up.
What is very disturbing, as well, are statistics. Our
market share in Korea has eroded over the past 10 years. In
2003 we were the largest--had the largest import share in Korea
at 21 percent. Now we are at nine percent. We are behind Japan
and China, and the EU is very quickly catching up. And if their
agreement goes into effect and ours does not, we will likely be
eclipsed by the EU.
So, now it is very important that we get this passed,
entered into force, so that our exporters can take advantage of
the huge competitive opportunities that the agreement provides.
Mr. NEAL. How does this help gain a stronger foothold for
the United States in Asian markets?
Mr. MARANTIS. Again, it is a question of, I think,
reversing a trend of erosion that we have seen, not just in
Korea but throughout the Asia-Pacific region. This agreement is
critical to that. The negotiations we are doing in the trans-
Pacific partnership, the nine-country regional trade agreement
that we are doing in the Asia-Pacific is critical to that goal.
We need to be in the game very seriously in Asia, in the Asia-
Pacific region. It is the most dynamic part of the world, and
it is the part of the world where we stand to gain competitive
export opportunities and the jobs that are supported by those
export opportunities.
Mr. NEAL. And lastly, I know that your portfolio does not
include South America. But might you speak to the issue of what
China is attempting to do in much of South America now,
particularly in Brazil and other countries?
Mr. MARANTIS. Sure. Again, we face, you know, in Latin
America, as we do in other parts of the world, the risk that
China and other economies are going to take advantage of
opportunities that should be ours. You know, we have seen an
erosion in market share in the Asia-Pacific, as an example, and
the potential for that is very real in Latin America, as well.
So, we need to seize, you know, the opportunities that are
in front of us, get our manufacturers, our service providers,
and our farmers and ranchers into those markets, so they can
sell their made-in-America and grown-in-America products.
Mr. NEAL. I thank you. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Herger is recognized.
Mr. HERGER. Thank you, Mr. Chairman. And again, I want to
thank you for representing a state and an area that is very
dependent--California--heavy agriculture. In an area that I
represent we are very grateful for the work that you are doing.
And I would like to follow up with my friend from
Massachusetts's question, if I could. Since our three pending
trade agreements were signed almost four years ago, our trading
partners have rushed ahead of us to negotiate bilateral and
regional agreements that benefit their exporters and workers to
the detriment of ours. The most obvious effect relates to
tariff advantages that our competitors enjoy over us, which we
have seen play out in Colombia, causing significant harm to our
agricultural exports.
But there are other effects, as well. For example, the
European Union has trade agreements that generally require its
trading partners to adopt protections for geographic
indications of origin, such as various cheese from the EU and
member states. This could prevent U.S. companies from producing
competing goods outside such EU regions from using those same
geographical terms when marketing or selling their products in
EU trading partner countries. This is a particular problem in
the South Korean market.
Mr. Ambassador, could you please discuss what the
Administration is going to address this geographic indication
market access barrier that will be imposed on us by the EU-
South Korea trade agreement, and more broadly, the effect on
our efforts to export certain products to these markets?
Mr. MARANTIS. Thanks, Mr. Herger. I had the pleasure of
visiting Sacramento a couple of months ago, and did a great
roundtable that your staff put together with agriculture
producers in your district on Korea and on the TPP agreement.
So thank you again for that.
Mr. HERGER. Thank you for coming.
Mr. MARANTIS. No, it was great. The dairy industry is a
great example of why this agreement is terrific. You know, the
dairy exporters will benefit from reduced tariffs and expanded
TRQs. They are concerned, as are we, about the geographic
indication issue that you raised.
You know, as you mentioned, in the Korea-EU agreement,
Korea has agreed to protect certain terms as geographic
indication, terms that, you know, are used in common parlance,
and terms that our dairy exporters either use now in Korea or
are planning to use in Korea. It is an issue. When the EU-Korea
agreement concluded--we have raised, you know, serious concerns
with Korea on that issue, and we continue to do so.
Mr. HERGER. Thank you. The American Farm Bureau estimates
that agricultural exports to South Korea could increase by $1.8
billion per year if the agreement were implemented. South Korea
is already the fifth largest export market of U.S. agricultural
products. Immediately upon implementation, almost two-thirds of
the U.S. farm products exports would become duty-free. The
agreement would also address non-tariff regulatory barriers to
agricultural trade by creating a specific committee to address
sanitary and psytosanitary matters, which would encourage
greater regulatory harmonization and the use of international
standards and guidelines.
Mr. Ambassador, could you please discuss how this
agreement, like the Colombia and Panama agreements, address
specific barriers to U.S. agricultural exports, and which
sectors might stand to benefit the most?
Mr. MARANTIS. Yes, sir, with pleasure. You know, as with
many provisions in this agreement, what is so important in the
agriculture sector is that the agreement levels the playing
field.
Right now we face average tariffs in Korea in the
agriculture sector of nearly 54 percent, whereas our average
tariff in the ag sector is 9 percent. So this agreement going
into force levels the playing field for our farmers and
ranchers, and does so in a way that provides incredible export
opportunities, you know, throughout the sector: beef, you know,
almonds, pistachios, cherries, asparagus, pork. You name it, it
is great for our ag sector.
But it is not just about tariff barriers. As you mentioned,
it is also about non-tariff measures. As you mentioned, there
is a committee to address sanitary and psytosanitary measures.
But another key non-tariff measure that this agreement will
work on is in the area of transparency. And it is often times
very difficult for small businesses, for small farmers and
small ranchers to really have a good sense of what the
regulatory environment is in a country, in a trading partner.
And that is often a deterrent to actually export there.
This agreement has unprecedented provisions on transparency
that will help us really get at non-tariff measures that have,
in the past, impeded our exports.
Mr. HERGER. Again, thank you.
Chairman BRADY. Thank you. Mr. Buchanan is recognized.
Mr. BUCHANAN. Yes. Thank you, Mr. Chairman, for holding
this important hearing. And thank you, Ambassador, for being
here today.
Let me just--I was looking at a letter that--I guess from
former Secretaries of States, Defense, Commerce, as well as
USTA, that was placed in the file earlier by Mr. Brady, our
chairman. They were pointing out a couple of things.
One, they said the movement ahead would help us to have a
leadership position in trade in Asia, but also be a positive
effect that would go beyond the Korean Peninsula. And what they
were referring to, they said passage of this could also relieve
some of the growing concerns that we have about China's growing
influence in the region. And I think they are absolutely right.
Could you give us your thoughts and ideas from that standpoint?
Mr. MARANTIS. Yes. What a great letter, by the way, you
know, supported by a whole array of various former officials in
different communities.
The issue that you raise with respect to China really deals
with the importance of our being in the game in the Asia-
Pacific region, and assuring that we maintain a competitive
edge over our competitors. And that is exactly what this
agreement does. By leveling the playing field in the
manufacturing, agriculture, and services sector, it allows us
to participate more in the Korean market, and to reverse the
erosion of market share that we have seen in Korea, where China
has eclipsed us and Japan has eclipsed us as, you know, top
importers.
So, this is part and parcel of an overall strategy to
increase U.S. engagement in the Asia-Pacific region to the
benefit of all of us.
Mr. BUCHANAN. My second point is I was looking at the U.S.
Chamber. They said that the United States, if we did not--not
just this, but the others we could lose up to 380,000 jobs and
40 billion export sales. And I think they were looking at all
three of the trade agreements. But what is--a state like--that
I represent, Florida, one of the positive things in Florida--we
have 14 ports--is exports. And I think we are up 15 or 20
percent and that continues to grow, and people are very
concerned about these agreements not getting done quickly,
because it is going on.
But what is the net effect, in terms of jobs, or from the
Administration's standpoint, with this new agreement being put
in place, the Korean Agreement?
Mr. MARANTIS. This agreement, as you mentioned, it is all
about jobs, it is all about creating new export opportunities
and those jobs that are supported by those export
opportunities. In Florida we are going to see, you know,
tremendous benefits in the agriculture sector, fruits,
vegetables, we are going to see key benefits in the logistics
sector, in the transportation sector. We are going to see key
benefits in the area of machinery, electrical equipment,
chemicals, all exports that are important to Florida's economy.
So, for Florida, as for other states in the United States,
this agreement is going to be a huge export boon. And, as a
result, it is going to be a huge job boon.
Mr. BUCHANAN. But do you have any numbers that you have put
together, in terms of the country, the impact it will have,
overall, on new jobs or new job opportunities, as a result of
getting this agreement done?
Mr. MARANTIS. Yes, sir. We have specific numbers for
Florida. I do not have them in my head, but we will get them to
you right after the hearing.
Mr. BUCHANAN. I am looking for the U.S. Do you have a
number----
Mr. MARANTIS. Yes.
Mr. BUCHANAN [continuing]. Off the top for the U.S.?
Mr. MARANTIS. For the U.S., for goods alone, a conservative
estimate is it will create 70,000 new jobs. It is harder to
have a specific number on services, just because the economic
data is more difficult to analyze. But we estimate that the--
that access to Korea's $580 billion services market, and the
new export opportunities that this agreement will create, will
produce an additional tens of thousands of jobs in the services
sector.
And then there are other job gains to be had by reduction
of regulatory barriers and other non-tariff barriers. So there
is a significant job----
Mr. BUCHANAN. So, Korea alone, we are looking at 100,000-
plus jobs that this agreement will mean to America.
Mr. MARANTIS. Yes, sir. And again, we are being
conservative. Senator Wyden worked with the ITC on a study. The
ITC did technical assistance for Senator Wyden. And that study
estimates a 230,000-job benefit from the agreement.
You know, we are being a little bit more conservative, but
our number is a minimum.
Mr. BUCHANAN. Thank you. And I yield back.
Chairman BRADY. Thank you. Mr. Doggett?
Mr. DOGGETT. Well, thank you very much. Just on the ITC
issue that you were just mentioning, so has the ITC done a new
estimate in contrast with its 2007 estimate concerning the job
growth that can be expected under this agreement?
Mr. MARANTIS. No, sir. The ITC----
Mr. DOGGETT. Are you requesting them to do so?
Mr. MARANTIS. We are not, largely because many of the trade
statistics are basically the same that they were in 2007.
Mr. DOGGETT. But you do not accept their conclusion that it
would have a negligible effect on jobs.
Mr. MARANTIS. Oh, no. We have taken their conclusion that
it will grow our exports by $10 billion to $12 billion to have
the figure that the agreement will produce, at a minimum,
70,000 jobs.
Mr. DOGGETT. Well, I understand, having written this, you
believe it will create many jobs. I am just a little confused
about what part of the ITC you are accepting and what you are
not.
They concluded, before you made these changes in the
agreement, that it would have negligible effect on jobs, and it
would actually cause a U.S. goods trade deficit. You do not
agree with either of those conclusions, do you?
Mr. MARANTIS. Sir, I believe that the ITC report said that
on the--our bilateral trade deficit, which is a $4.4 billion
trade deficit now, would be reduced by $3.3 billion to $4
billion, which is consistent with our analysis.
Mr. DOGGETT. You do not expect to ask the ITC for any re-
evaluation or updating of their data?
Mr. MARANTIS. We do not.
Mr. DOGGETT. Okay. When do you think we will get the Korea
trade agreement?
Mr. MARANTIS. We are ready, as Ambassador Kirk has
mentioned. I actually have a draft copy of the implementing
bill with me. We are ready to engage. We have started engaging
in technical discussions. We are ready to engage in technical
discussions on the actual text.
Mr. DOGGETT. Is it your testimony that without the changes
that were secured that you have testified about with some pride
today, that it would have been a mistake for Congress to ratify
the Korean trade agreement as originally authored?
Mr. MARANTIS. I think the changes that we made have enabled
us to be able to present this to you and unlock the potential
of the 2007 agreement.
Mr. DOGGETT. So you think that without them it would have
been a mistake to ratify it?
Mr. MARANTIS. I think we have made a very good agreement
better.
Mr. DOGGETT. So you were for it before you made the
changes.
Mr. MARANTIS. The--I mean there were key outstanding
concerns that many members of this committee had. And in order
for us to be able to go forward, you know, we worked very
closely with members of this committee and stakeholders
throughout the country to address those concerns that----
Mr. DOGGETT. And any time during those negotiations of the
agreement did USTR seek any changes in the investor provisions?
Mr. MARANTIS. No, we did not.
Mr. DOGGETT. And the investor provisions are, therefore,
exactly as they were negotiated by the Bush administration?
Mr. MARANTIS. They are very strong and solid investor
provisions.
Mr. DOGGETT. I understand you think they are good, and that
is why you did not change them. But they are exactly, verbatim,
what the Bush administration negotiated?
Mr. MARANTIS. Yes.
Mr. DOGGETT. And with reference to the comments that
President Obama made back during the campaign about seeking to
ensure that those provisions were not used to undermine public
safety or public interest in forums outside U.S. courts, there
are no changes that have been made as a result of those policy
statements. It is still possible for U.S. health and safety and
environmental laws to be challenged in arbitration panels, is
it not?
Mr. MARANTIS. Sir, when this Administration came into
office, we did an exhaustive review of this agreement,
including the investment provisions.
Mr. DOGGETT. And----
Mr. MARANTIS. And based on that review, we are confident
that we can----
Mr. DOGGETT. I understand you have testified you are
satisfied with it. You have made no changes in it from the Bush
era. But it is possible to challenge U.S. health and safety
laws by a foreign investor who thinks that it constitutes a
taking--not in our courts, but in an arbitration panel. Isn't
that correct? It may not prevail, but it is possible for them
to do that.
Mr. MARANTIS. It is possible. We have been subject to very
few challenges in the past, and we have never lost.
Mr. DOGGETT. Thank you very much.
Mr. MARANTIS. Thank you, sir.
Chairman BRADY. Thank you. The chair recognizes Ms.
Jenkins.
Ms. JENKINS. Thank you, Mr. Chair. Thank you for holding
this hearing.
Thank you for being here. I so appreciate your energy and
enthusiasm this morning. Mr. Ambassador, it is clear that the
U.S. agriculture producers and exporters will lose valuable
markets if these trade agreements are not passed, certainly
hurting farmers, ranchers, and other workers in the agriculture
sector.
But I think it is also important to focus on all of the
businesses that support our agriculture sector, ranging from
the companies that provide machinery, fertilizer, seed, and
other supplies to farmers and ranchers, as well as small, local
companies that build the farmer's silo and cut his or her hair.
How do you see these agreements affecting all of these
businesses, and really, the entire community in rural America?
Mr. MARANTIS. That is a great question. I mean this is--
this issue--we are--by creating the export opportunities that
we do in this agreement, whether it is in the ag sector or the
manufacturing sector, we are creating demand for the finished
product. And by creating demand for the finished product, we
are creating demand for the downstream product, the small and
medium-sized enterprises that supply, you know, large airplanes
that we sell to Korea, or the suppliers, like you were saying,
the feed suppliers that will supply our farmers and ranchers.
So, by creating new export opportunities for the finished
product, we are creating new opportunities for suppliers and
the jobs that those suppliers create.
Ms. JENKINS. Great, thank you. Along that same line, it is
abundantly clear that the three pending agreements will
increase exports of U.S. ag products, greatly helping our
farmers and ranchers. However, I understand that these
agreements will also open up markets for processed food
products and other goods that incorporate the bounty of
America's farmers and ranchers, and reflect the real value
added in the United States.
Could you just please comment on how passing these
agreements will help these important businesses and their
workers, and how passing the three pending agreements would
help meet the goal of the President's national export
initiative to double U.S. exports?
Mr. MARANTIS. That is a very important point, as well. This
is--this agreement benefits our raw agricultural exporters, as
well as exporters of processed products, as well. And the key
thing it does is that it levels the playing field, so that we
have more opportunities to sell to Korea's $1 trillion market
across the board.
You know, in your state, wheat, soybeans, beef, feed corn,
those are all products that are going to benefit tremendously
from this agreement, and will allow us to really boost our
relationship and our exports to Korea's gigantic market.
We are really excited about the opportunities that this
presents in all of your states and in all of your districts.
And to the extent to which anyone wants any really specific
information on how this will benefit your district, your state,
you know, sort of down to, you know, the most specific level,
we are very happy to provide that.
Ms. JENKINS. Excellent. Thank you. Mr. Chairman, I yield
back.
Chairman BRADY. Thank you. Mr. Crowley is recognized.
Mr. CROWLEY. Ambassador, welcome. Thank you, Mr. Chairman,
and thank you, Mr. McDermott, as well. Let me also thank
Chairman Camp and Ranking Member Levin for their work on the
Korean free trade agreement and bringing us to where we are
today.
Ambassador, you say you have the draft with you, or a draft
with you. Has that been issued to the subcommittee?
Mr. MARANTIS. Not yet. We have been dotting our I's and
crossing our T's. And we have done that, and we have got a----
Mr. CROWLEY. It has not been given to the full committee
either, then, if the subcommittee has not got it.
Mr. MARANTIS. Correct.
Mr. CROWLEY. What is the intention, in terms of--you
brought it with you today. Is it going to be shared with the
committee today?
Mr. MARANTIS. We are ready to do so whenever the
committee----
Mr. CROWLEY. Has the committee asked for it? Has the
chairman asked for it, or has the chairman of the committee
asked for it yet, or the leadership of the House asked for it
yet?
Mr. MARANTIS. There have been a number of questions that we
have been going back and forth on, in terms of how certain
provisions will work with both staffs. And I think we have
answered those questions in the text, and we are ready to share
it, you know.
Mr. CROWLEY. Has anyone asked for it yet?
Mr. MARANTIS. Not yet.
Mr. CROWLEY. No one from the House of Representatives has
asked for the draft?
Mr. MARANTIS. Not yet. We have been continuing our work on
it, and we are proud to have it here with us today.
Mr. CROWLEY. I appreciate that. I just would note that no
one has asked for it at this point, and it is still out there.
So thank you for that.
In terms of--I come from New York City. So, if you could,
just give me a sense of the financial services end. You talked
broadly about services. But if you could, specifically talk
about the opportunities that this agreement will present for
that specific sector, financial services, in Korea. Can you
comment on that?
Mr. MARANTIS. Sure. I mean this agreement provides new
market access opportunities in the financial service sector in
eliminating many restrictions to supplying those services in
Korea that existed, whether those restrictions were in the form
of capital requirements or a certain percentage that you needed
to hold.
But also in your district, you know, this is a great win
for the chemical sector, the machinery sector, and the electric
equipment sector as well, where current tariffs in those
areas--I think 80 percent of them--will be eliminated
immediately upon entry into force. And for your chemicals
exporters, they are facing tariffs as high as 50 percent.
So, in terms of, you know, on the manufacturing side, there
is a huge benefit for your district, as well as in the
financial services sector.
Mr. CROWLEY. I appreciate it. I wish there was more
manufacturing going on in my district than services at this
point. But clearly, the services end is very, very important to
the city of New York, and obviously to the state of New York,
as well.
There has been a great deal of discussion about the lack of
movement on trade by the Administration. But we really are in
the midst of a major trade agenda right now. Would you agree
with that?
Mr. MARANTIS. This is an unbelievably exciting time to be
involved in international trade. We have got so much going on,
whether it is in the context of these trade agreements, whether
it is the trans-Pacific partnership, whether it is the work we
are doing on enforcement, whether it is the work we are doing
to address a lot of the problems we have in our relationship
with China. You know, there is so much going on that I think
everybody at USTR's head is spinning.
Mr. CROWLEY. So maybe you can dispel some of the rumors
that there is kind of a quagmire here, we are not moving out,
and we are stuck in the mud, we are not moving out of this.
That is kind of not really true. Is that correct?
Mr. MARANTIS. No, that is incorrect. We have got a lot
going on in all regions of the world, on all issues from, you
know, trade expansion to enforcement.
Mr. CROWLEY. One aspect of trade that I would like to know
if you have a comment on is the issue of trade adjust--
assistance, and the lack of movement here. Can you make any
comment on that?
Mr. MARANTIS. Yes. We need to engage in a conversation with
Congress about how we are going to move a comprehensive trade
agenda forward. You know, that includes the FTAs, but that also
includes, as you said, trade adjustment assistance, it includes
renewal of our preference programs, and it includes securing
PNTR for Russia.
Mr. CROWLEY. Do you have any observation about why you
think TAA has stalled here?
Mr. MARANTIS. I mean TAA has been a critical component of
our trade policy for years, and we----
Mr. CROWLEY. I know that. But you won't make any comment as
to why you think it may have stalled here?
Mr. MARANTIS. Well, we are looking forward to getting it
renewed as quickly as possible.
Mr. CROWLEY. I thank you, and I yield back the balance of
my time.
Mr. MARANTIS. Thank you, Ambassador. Let me understand the
process. With a trade agreement like this, before the text is
sent to Capitol Hill, you engage in technical discussions with
the key committees, where members of both the majority and
minority party go through, word for word, the agreement, ask
questions.
And, as I understand it--for example, the discussions today
from both the majority and minority--ask questions, inquire as
to how the supplemental agreement, you know, coincides with the
original text. That is the normal process, isn't it, before the
actual text is sent to the Hill?
Mr. MARANTIS. Yes. I mean the great thing about this is
this is a congressional-executive partnership. And so we will
sit down together have drafting sessions on what the
implementing bill will look like. I mean, again, we have a
draft of that here that we are looking forward to going through
with you, you know, which will then lead towards the mock mark-
up that this--that the committee will have.
But there are a lot of questions. You know, we, I think,
have answers to all of them, and are eager to get rolling.
Chairman BRADY. Great----
Mr. CROWLEY. Will the chairman yield for a moment, Mr.
Chairman?
Chairman BRADY. Absolutely.
Mr. CROWLEY. Just--I brought that subject up because the
notion that the Administration is dragging its heels, I wanted
to clarify that the Administration is not holding back this
agreement, and that the House has not yet asked for it. That
was the point I was trying to make, that the House--that the
President and the Administration are not dragging their heels
on this.
Chairman BRADY. Great, and I agree and appreciate that. We
simply want thorough, complete technical discussions, and
follow--again, the consultation is very important. Thank you.
Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman, and thank you,
Ambassador, for sharing your expertise and insight with us
today. And I guess I would--reflecting on the prior statement,
it is quite obvious that the Administration is advocating for
this trade agreement, so much so that it leaves a lot of us to
wonder exactly what the status is, perhaps, of the other two,
although there is progress with the Colombia trade agreement
and I am grateful for that.
But let me also say that I appreciate USTR. That operation
is very impressive, in terms of engaging on the issues, and
responsive. And I am grateful.
But if we could look at this issue, I think we have to, in
terms of looking at all three trade agreements and the synergy
that can be created, as we speak. As you said, this is an
exciting time for trade. Let us take advantage of that.
And it is not just--although I appreciate your speaking to
the advantages for American agriculture, and the opportunities
associated with this particular trade agreement, as well as the
others--but, you know, there are other sectors that can
benefit, as well.
Can you speak to the synergy at all, though, about all
three trade agreements that we are looking at right now? It is
not always that we have an opportunity like this to send, I
think, a terrific message, geopolitically or geostrategically,
around the world of how we can engage, and we appreciate our
friends in, often times, hostile regions of the world. Can you
speak to that synergy that can exist?
Mr. MARANTIS. Yes. I mean all of these trade agreements are
about, you know, two primary things: economic growth and job
creation. And, you know, I think people think it is trite to
say, but it is very true: 95 percent of the world's consumers
live outside of the United States. And in order for our economy
to grow, we have got to export to them. And in order for us to
be able to create jobs, we need to take advantage of those
export opportunities.
And that is what our trade policy is about, it is about
fostering economic growth. It is about creating opportunities,
and it is about creating jobs.
Mr. SMITH. Thank you. Also, you know, it is interesting--
and, as I am sure you are aware--and we have heard a little bit
earlier this morning that often times there is kind of a
twisting of information out there of what can be accomplished
with various trade agreements.
And we know that we have a global economy, for obvious
reasons. And we see U.S. companies perhaps expanding to
countries overseas, closer to some of those markets that you
just highlighted. Do you see any of those changes?
Now, companies are often times criticized for doing so,
which is unfortunate, because that makes U.S. companies
stronger, when they can expand closer to various markets
worldwide. Can you speak to whether or not that would be
changed, or viewed any different, with respect to expansion?
Mr. MARANTIS. No. Thanks for raising that point. I mean I
think it is important to remember that our investment, U.S.
investment in foreign markets is job-creating. Forty-five
percent of U.S. exports are associated with our firms who are
investing overseas. Twenty-two million American jobs depend on
U.S. firms who have investments overseas. That is why the
investment provisions of our agreements are important, because
they level the playing field for our investors, who often times
face very difficult challenges in the legal regimes of foreign
markets.
So, through our investment provisions in these agreements,
it actually brings our trading partners up to the very high
level of investment protection that we provide domestically for
ourselves and for foreign investors.
Mr. SMITH. Okay. Also we have heard a lot about agriculture
already. Could you perhaps highlight some of the opportunities
in the manufacturing sector, if you could?
Mr. MARANTIS. Absolutely. As--generally, speaking broadly,
you know, the agreement levels the playing field in the
manufacturing sector, as it does in the ag sector. Korea's
average tariff in the manufacturing sector is around 6.8
percent. You know, ours is about two percent--ours is about
three percent. So, once the agreement goes into force, you
know, 95 percent of Korea's tariffs will be eliminated in the
first 5 years of this agreement. And that is going to be a huge
boon for our manufacturing sector, including in the area--you
know, our chemicals exporters, our machinery exporters.
And now that we have been able to do what we did in
December, this agreement is now better for our auto exporters,
who are going to have new opportunities to sell, you know, our
high-quality U.S. cars in Korea's market.
Mr. SMITH. Okay. Thank you. And I appreciate those numbers
that you mentioned, because I think it also points to the fact
that when tariffs that our companies face there are higher than
what their companies face here, actually we gain more. So thank
you, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Rangel is recognized.
Mr. RANGEL. Thank you so much, Mr. Chairman, and thank you,
Mr. Ambassador. I am so pleased to see that the strong
objections that some of us had under previous agreements have
been adjusted.
And I think you are saying in your testimony that there is
no outstanding issue now that you know of that could cause a
large number of Members to be critical of it?
Mr. MARANTIS. Yes, sir. We worked very hard with you, with
Mr. Levin, Mr. Camp, Mr. Brady, your staffs, to address, you
know, the key outstanding--one of the key outstanding concerns
that was out there in the auto sector. And we are so grateful
for the work that we were able to do together to make this
better, and to allow for us to be sitting here today, you know,
together, urging for passage of this agreement.
Mr. RANGEL. One of the feelings that a lot Americans have--
and it is reflected by their representative--is that when you
say ``trade'' you mean loss of jobs. And I do not think we have
done a pretty good job, in terms of showing that jobs can and
are being created.
You made a very generous offer to the gentlelady from the
majority that you would share with her the impact in her
district. And, as Mr. Crowley said, even though we are from New
York City, we are concerned with the whole state.
For the life of me, I do not know why, especially with the
Colombian agreement, where there is just so many arguments for
the jobs that would be created, why none of that is shared with
us. Are you familiar at all with the Colombian agreement, and
where the manufactured goods that are needed would be coming
from? We know the companies names, and of course I do not know
where they are located. But I have been impressed by the names
of the manufacturing companies. Wish they were in New York, but
nevertheless, if it is the United States, that helps me.
Do you go through anything like that in your office?
Mr. MARANTIS. Yes, sir. We are developing--we have,
complete for Korea, an analysis on a state-by-state, on a
sector-by-sector basis, that really goes into great detail. We
are in the process of developing those for Colombia and Panama
as well, but they are extremely helpful documents. I actually
think, for Korea purposes today, USTR's website now has a
special page on it, on the Korea agreement, that has all of
these specific facts on--again, on a sector-by-sector and a
state-by-state basis.
Mr. RANGEL. And the environmental concerns that the
Government of Korea--we are satisfied that our automobiles are
just as safe and environmentally approved as anything that the
Koreans are producing. Is that right?
Mr. MARANTIS. Yes, sir. We have very strong--our federal
motor vehicle safety standards have the highest safety
standards, you know, in the world. Our environmental
regulations are the highest standards in the world. And what we
have done, in terms of safety and environment, is we have
ensured that Korea's regulations do not place a
disproportionate burden on our exporters, while at the same
time ensuring the highest level of safety and environmental
protection.
Mr. RANGEL. Did you answer the question whether or not we
can expect the Korean free trade agreement to come by itself,
or whether it is going to be included with a whole group of
agreements?
Mr. MARANTIS. That is a conversation we need to have with
Congress, in terms of how we move forward on the President's
comprehensive trade agenda, which includes the pending FTAs,
which includes trade adjustment assistance, renewal of our
preference programs, as well as securing PNTR for Russia.
Mr. RANGEL. Are beef exporters satisfied with the changes
in the provision, as it relates to exporting of beef?
Mr. MARANTIS. The Korea agreement addresses the key barrier
that our beef exporters have faced, which is the 40 percent
tariff on U.S. beef. You know, implementation of the agreement
will allow our exporters to build on the phenomenal growth in
their sales that they have seen over the past few years. Last
year I think exports increased by 140 percent.
We still have concerns with respect to beef that Korea has
not fully opened its market to beef from cattle over 30 months.
It is something that we are going to continue our work with the
Koreans on.
Mr. RANGEL. Take my word for it. All the work that you
could possibly do in identifying potential jobs in our
communities, in our state, and more specifically, in our
congressional district, it works, and it is needed.
Thank you so much, Mr. Chairman.
Chairman BRADY. Thank you, Chairman. Mr. Larson.
Mr. LARSON. Thank you, Chairman Brady. Ambassador, in your
testimony you state that the U.S.-Korea trade agreement will
result in the removal of tariffs on over 95 percent of made-in-
America industrial and consumer good exports. Specifically, you
cite the benefits to the U.S. aerospace industry and its
workers. This is especially important to my district, in East
Hartford, Connecticut, which is the home of a number of
aerospace-related companies, including Pratt & Whitney,
Hamilton Sundstrand, Command, Aero Gear, to name just a few.
Can you please provide a bit more clarity on how this deal
would benefit American aerospace industry, and the skilled
workers employed in these companies? And further, can you
discuss how a delay in enacting the deal would impact these
aerospace companies? I ask, because the EU's agreement with
Korea will be going into place shortly, and many of the world's
top aerospace companies are headquartered in Europe.
Mr. MARANTIS. Thank you, Mr. Larson. I had the pleasure of
visiting Pratt & Whitney with your staff about six months ago,
and so thank you for that opportunity.
Aerospace is a great example; 92 percent of our aerospace
exports will go duty free, upon implementation of the
agreement. The remaining eight percent will phase out in three
years. This is very important, as you mentioned, for EU
purposes, as well. The EU has a very competitive aerospace
industry with ours. If their agreement goes into effect in
July, as it does, as it is, and ours does not go into effect
for, you know, a long time thereafter, we are going to lose a
competitive advantage. And EU exporters of aerospace and other
products will have a competitive advantage over ours, and will
get a foothold in Korea's market.
That is why it is critically important that we move this
agreement to conclusion as quickly as possible to make sure
that exporters of aerospace and, you know, all other products
are able to really get that competitive leg up in Korea's
market before too much time passes.
Mr. LARSON. Thank you, sir.
Chairman BRADY. The gentleman yields back? Mr. Kind.
Mr. LARSON. I yield back.
Mr. KIND. Thank you, Mr. Chairman. Thank you for having
this hearing. Mr. Ambassador, thank you. And I would like to
just commend you and Ambassador Kirk, the entire U.S. TR team,
as well as the Obama Administration, for slowing the process
down a little bit with these important trade agreements, and
seeing if we can get a better deal. And, from my perspective,
the additional work that went in to some of the, shall we say,
loose ends in regards to Korea, there was significant progress
to where it was and where we are today. The same thing is
occurring with Colombia and Panama as well, and I think that
was exactly what was necessary, in order to make, as you
describe, good agreements even better. And that is how I view
this.
But we also need to be clear that, you know, trade right
now in a time of tough economic times, in an economy that is
under-performing here in the United States, it is a tough sell.
I just met with numerous labor leaders back in Wisconsin last
week who are adamantly opposed to the Korean trade agreement,
under the impression that it does not go far enough when it
comes to labor standards, environmental standards, those type
of things, and they are afraid this might result in a race to
the bottom.
If you had an opportunity to address them, what can you
point to specifically in regards to the Korea trade agreement,
as it relates to labor and environment, to try to dispel them
of this notion that it is not as tight or not as good as we
could hope to see?
Mr. MARANTIS. Thank you. This agreement provides the
highest level of labor and environmental protection that we
have had in the history of trade agreements, as does Colombia
and Panama, as well.
This agreement requires both parties to adopt and maintain
laws that are consistent with the five core ILO labor
standards. It requires the parties to effectively enforce those
laws, as well as laws that relate to acceptable conditions of
work, like minimum wage. It requires parties not to waive or
derogate from the provisions to achieve a trade or investment
advantage. And the standards on the environmental side are
equally as high.
We are very proud on what we have done on labor and
environment in these provisions. And, you know, working
specifically with a partner like Korea, who, you know, with an
advanced economy and advanced labor relations regime, a GDP per
capita of $20,000, we have got a good partner on this. And, you
know, we are looking forward to putting these provisions into
place, because they provide us--when in place, they will
provide us with a further mechanism to address any labor or
environmental-related concerns that should arise.
Mr. KIND. And I know your office has been responsive to our
request, too, as far as more detailed information in this
regard. And we are trying to do our own economic analysis, as
far as the impact in Wisconsin. Still a large manufacturing
state. We have got many large manufacturers in my congressional
district, from 3M to train company, to Hutchinson Cummins, who
all view this as a real net positive for them, and the products
that are being right in--also agriculture production is key to
our state.
But there is one sector that has really been struggling the
last couple of years, and that is dairy production, our dairy
farmers. Is there something here in Korea that we can offer the
dairy industry of America, too, as----
Mr. MARANTIS. Yes. It is a great agreement for dairy, in
that it reduces tariffs and expands tariff rate quotas. For
instance, upon implementation, our dairy exporters will see
duty-free tariff rate quotas for a number of products: cheese,
butter, certain milk powders. This is a great agreement for
dairy.
And again, like, you know, for other sectors, the sooner we
get it into force, the sooner they will be able to benefit.
Mr. KIND. And you said there is--still, hopefully, some
progress is going to be made on beef. Is there something more
tangible you can----
Mr. MARANTIS. Yes. I mean, on beef, the key thing is when--
as soon as the agreement goes into force, we begin to eliminate
the 40 percent tariff on beef. And that has really been--that
is really important, particularly as Australia is in the
process of negotiating an FTA with Korea. We do not want to
have our beef exporters put at a competitive disadvantage to
Australia. Korea's tariff is high, 40 percent. And as it lowers
for us before Australia, we are going to get a competitive leg
up in the market.
We do continue to have concerns, though, with lingering
restrictions on beef and cattle over 30 months. It is something
we are working on, you know, with Korea, as well as with our
other Asian trading partners, Japan and China, as well. And we
expect to make progress.
Mr. KIND. Let me ask you one final question. We are running
out of time, but I think in order to have an honest
conversation with the American people, trade is a two-way
street. There are going to be benefits flowing the other way.
Let me ask you a question that you do not hear from many
Members of Congress in that, when we are looking at these trade
agreements. But what is in it for Korea? Why is Korea
interested in entering into this trade agreement when we
already have pretty low tariffs and pretty easy market access
to what they are producing?
Mr. MARANTIS. We are a very important market for, you know,
for countries around the world. We are the biggest consumer
market.
What this agreement does for Korea, it really locks in a
preferential regime for Korea, for Korean exporters to be able
to benefit from, you know, the wide consumer market that we
have here. So we like to call it--again, it is a trite
expression to say it is a win-win, but it really is.
You know, we get significant benefits in Korea, and Korea
gets significant benefits, being able to access our huge market
more competitively than some of its competitors.
Mr. KIND. Thank you. Thank you, Mr. Chairman.
Chairman BRADY. Thank you. Mr. Paulsen is recognized.
Mr. PAULSEN. Well, thank you, Mr. Chairman. And, Mr.
Ambassador, let me just start by thanking you and Ambassador
Kirk and Ambassador Han for all of the success in moving this
outstanding opportunity for job growth, which is really what it
is about, is about jobs and economic growth, but also new
sales, new customers. And that is the message we all need to
communicate bipartisanly, to really see this successfully move
forward. And I know the votes are there. It is going to happen,
as well as the opportunity for all three trade agreements.
Let me just ask you a question really quick, because we
focused a lot about manufacturing and the services industry, as
well. I know that U.S. industries that depend on intellectual
property rights employ millions of American workers and they
support very high-paying jobs. And it is absolutely estimated
now that there is a broad range of U.S. industries that depend
on intellectual property rights. They count for about 60
percent of U.S. exports and drive nearly 40 percent of U.S.
economic growth.
And our trade agreements, including the pending ones now
before us, set very high standards for protecting United States
intellectual property rights abroad that help support U.S.
innovations, U.S. entrepreneurship, U.S. competitiveness and
jobs. Do you agree with this assessment, and could you please
give a couple of examples maybe of how these pending trade
agreements with South Korea and the other agreements protect
our intellectual property rights to the benefit of U.S. workers
and the U.S. economy?
Mr. MARANTIS. Thanks for raising that. I mean IP is a
critical chapter of this agreement, as it is with Panama and
Colombia, and we have some pretty incredible IP protections in
this, across industry, you know, in the area of copyrights,
trademark patents, as well.
It is--you know, the agreement strengthened deterrents
against criminal acts of commercial scale piracy. It really
beefs up our ability to enforce provisions against piracy,
against counterfeiting. It goes much farther in the area of
combating Internet piracy, as well. In the area of trademarks
these agreements have state-of-the-art provisions that, you
know, recognize sound marks and scent marks, and also have,
again, very strong deterrent and enforcement provisions. It
extends the term of protection for certain copyrighted works,
consistent with U.S. law and emerging international standards.
I mean I can go on and on. It streamlines and strengthens
customs procedures to increase the efficiency of border
enforcement, to deter, you know, counterfeit products, you
know, at our border.
So these--the intellectual property provisions in the Korea
agreement in particular, which I know best, but also in
Colombia and Panama, are really state of the art.
Mr. PAULSEN. Well, thank you. And I just raise that because
that is an issue I often hear from my small manufacturing and
medium manufacturing companies back home, not to mention
others, that really are concerned about protecting our
innovative ideas here in the United States. And so this is
something that sort of gets glossed over. And it is an
opportunity to really enhance and protect that. So I just want
to thank you for that.
And we heard a lot of examples here from the Members on the
Committee of how our own individual districts or states will
benefit under this agreement. And I just know that is going to
be the continued case, Mr. Chairman, as you work with the
Administration on bringing the other agreements forward, as
well. Thank you. I yield back.
Chairman BRADY. Thank you. Mr. McDermott is recognized.
Mr. MCDERMOTT. Thank you, Mr. Chairman. I would like to
reclaim just a moment of my time to clarify something.
If I understand correctly, we have the Korean FTA draft
implementing legislation here. I just want to make it clear the
Democrats want you to send it up here today. It is time to move
the ball and get the FTA moving with this. Let us not play this
game about who asked who play back and forth. If you have got
it, send it. Let us move it.
Chairman BRADY. The excitement is mounting, Ambassador.
[Laughter.]
Chairman BRADY. Thank you for being here. I want to thank
you for your testimony. And thank the Members for their
thoughtful questions on both sides of the aisle. And let me
note, as well--Ambassador knows this--the Members may submit
questions for the record. And if they do, I hope you will
respond promptly. And again, thank you for the insight today,
and your time.
I would like to welcome our second panel to step forward
today. We are joined by four witnesses.
Our first witness will be Mr. Bill Rhodes, Chairman of the
U.S.-Korea Business Council. He is also Chairman and CEO of
William R. Rhodes Global Advisors, and Senior Advisor to
Citigroup. He is testifying on behalf of the U.S.-Korea
Business Council and the U.S.-Korea FTA Business Coalition.
After him we will hear from Dr. John Schoch, President and
CEO of Profile Products, LLP, who is also testifying on behalf
of the U.S. Chamber of Commerce.
Our third witness will be Mr. Robert Holleyman, president
and CEO of the Business Software Alliance.
And last we will hear from Ambassador Thomas Hubbard, who
served as the U.S. Ambassador to South Korea from 2001 through
2004, and now is Senior Director for Asia at McLarty
Associates.
We welcome all of you, and we look forward to your
testimony. I would also ask that our witnesses keep their
testimony to five minutes.
Mr. Rhodes, your written statement, like those and all the
witnesses, will be made part of the record, and you are
recognized for five minutes. Welcome.

STATEMENT OF WILLIAM RHODES, CHAIRMAN, U.S.-KOREA BUSINESS
COUNCIL, PRESIDENT AND CHIEF EXECUTIVE OFFICER, WILLIAM R.
RHODES GLOBAL ADVISORS, LLC, SENIOR ADVISOR TO CITIGROUP, ON
BEHALF OF THE U.S.-KOREA BUSINESS COUNCIL AND THE U.S.-KOREA
FTA BUSINESS COALITION

Mr. RHODES. Thank you, Chairman Brady, Ranking Member
McDermott, and Members of the Subcommittee, for giving me this
opportunity to talk to you and testify on the KORUS FTA, which
I will refer to as KORUS, going forward.
I serve as the chairman of the U.S.-Korea Business Council,
which is an affiliate of the U.S. Chamber of Commerce, and is a
leading business organization promoting the bilateral U.S.-
Korea commercial relationship. The Council is secretariat for
the U.S.-Korea FTA business coalition, which represents nearly
1,000 companies, businesses, and agricultural organizations and
chambers of commerce that support the approval of the pending
trade agreement with Korea.
I am also senior advisor to Citigroup and president and CEO
of William R. Rhodes Global Advisors. I am chairman emeritus of
the Council of the Americas, the Americas Society, and a
professor at large at Brown University. In wearing all these
hats, I am a vigorous proponent of trade liberalization and, in
fact, was one of those early on who urged the U.S. and Korean
governments to launch the negotiation of a free trade
agreement.
The approval and implementation of the U.S. economy
agreement with South Korea, along with agreements with Colombia
and Panama are among the most important actions that the U.S.
Congress can take to achieve President Obama's goal of doubling
U.S. exports in five years, and creating new jobs and economic
opportunities in communities across the country, and in
building an infrastructure that promotes regional prosperity
and stability.
On that note, I want to applaud the action of the Obama and
Santos administrations for having reached agreement on the
labor action plan which will also allow the Colombia FTA to
move forward and be considered by Congress. We have also seen
important progress which has been made on Panama so that
agreement can also be moved forward in the future. All of these
agreements are important for American growth and job creation.
But given the specific hearing today, I want to talk about
the U.S. business community, and how it sees the Korean
agreement, specifically, and especially the benefits to U.S.
economic and geostrategic goals.
This groundbreaking agreement will bring significant
benefits to American workers, business, farmers, consumers, and
U.S. economy. The scale and breadth of U.S. trade with South
Korea, 1 trillion economy with 49 million consumers, that is
already the seventh largest U.S. export market and trading
partner--this makes KORUS the most commercially significant
bilateral U.S. trade agreement in nearly 2 decades.
I believe we are close to the finish line on KORUS, but I
think we can all agree it has been a long and winding course.
We recognize that concerns raised by U.S. stakeholders, with
respect to certain measures, and KORUS needed to be addressed
in order for the agreement to move forward.
We applaud the tireless efforts of the White House and Blue
House, the office of, U.S. Trade Representative, and I must say
Ambassadors Kirk, Marantis, and Wendy Cutler have done a first
rate job here, and Members of Congress and the Korean trade
negotiator counterparts, for identifying the solutions that we
have finally come to.
The new provisions reached in December added powerful new
momentum for moving the KORUS agreement forward. KORUS is the
centerpiece of America's international economic engagement. The
United States International Trade Commission, USITC, estimated
in September 2007 that the agreement could increase U.S.
exports to $10 billion to $11 billion annually. President Obama
has said on many occasions that it would add 70,000 U.S. jobs
if this--when this agreement is approved.
An updated statement of potential economic effects of the
agreement prepared in January of this year, January 2011, by
the USITC economic staff, at the request of the Senate Finance
Committee Trade Subcommittee estimated that the agreement could
generate as many as 280,000 jobs. Moreover, Korean companies
are expanding their investment in the United States, and have
created thousands of American jobs in manufacturing, as well as
distribution and supplier networks across our country.
By reaffirming the openness of the U.S. market and the
attractiveness of the United States as a destination for
investment, and by lowering barriers to U.S. exports in the
Korean market, Korea has the potential to accelerate all these
job-creating opportunities that I have mentioned.
But the agreement cannot solely be quantified in terms of
bilateral economic impact. KORUS also has significant
implications for the U.S. national economic security and
geostrategic priorities, both in Asia-Pacific and globally.
[The prepared statement of Mr. Rhodes follows:]

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Chairman BRADY. Mr. Rhodes, if I may, we are going to
adhere to the five-minute limit on initial statements. I do
have questions I would like to ask you when we conclude.
And, just for the panel's information, we have been called
to vote. I would like to work through Mr. Schoch's testimony,
break for the three votes, and then we will reconvene
immediately after the last vote is taken.
So, Mr. Rhodes, thank you very much for your testimony. Mr.
Schoch, you are recognized.

STATEMENT OF JOHN A. SCHOCH, JR., PRESIDENT AND CHIEF EXECUTIVE
OFFICER, PROFILE PRODUCTS, LLC, ON BEHALF OF THE U.S. CHAMBER
OF COMMERCE

Mr. SCHOCH. Thank you, Chairman Brady, Ranking Member
McDermott, and distinguished members of the Ways and Means
Committee on Trade. My name is John Schoch, and I am president
and CEO of Profile Products LLC, headquartered in Buffalo
Grove, Illinois. I am testifying today on behalf of the U.S.
Chamber of Commerce, the world's largest business federation,
representing the interests of more than three million
businesses of all size, sectors, regions, as well as state and
local chambers and industry associations.
I am pleased to have this opportunity to talk about the
important benefits of passing the pending free trade agreements
for American jobs and U.S. economic growth and, specifically,
how the U.S.-Korea free trade agreement, known as KORUS, will
boost Profile's exports and generate greater employment
opportunities for our company's manufacturing facilities around
the country.
For over 50 years, Profile Products has been a leading
producer of the market's broadest line of erosion and sediment
control products, turf establishment products, and
complementary accessories to control erosion and accelerate
seed germination. We also manufacture the industry's best-
selling inorganic soil amendments for sports field, golf
course, and landscape applications. With approximately 200
employees and 4 manufacturing facilities, 2 sales offices, and
personnel domiciled around the country, Profile is able to
manufacture and market its entire line of products from the
United States.
Profile manufacturer its products in four rural towns
throughout the country: Blue Mountain, Mississippi; Conover,
North Carolina; Limestone, Tennessee; and Sanger, California.
These communities understand that the number of people that we
employ is directly related to the volume of orders our company
receives. So, as our exports grow, so will the hours of
production, and the number of employee shifts we need to
operate in order to complete those orders. Today I am proud to
say that our products are represented in more than 50 countries
around the world.
While many Americans believe that trade only benefits
large, multi-national corporations, the reality is that more
than 97 percent of U.S. exporters are small and medium-sized
enterprises, or SMEs. In 2008, almost 21,000 U.S. companies
exported $34.8 billion worth of merchandise to Korea alone. Of
the total exporters, 18,500, or over 89 percent, were SMEs.
Profile is one of the many U.S. SMEs that benefitted from
exporting to Korea's dynamic market. In fact, Korea is our
single largest export market, making up 12 percent of our total
international sales revenue. Since 2009, Profile has sold more
than 2,000 tons of our products into Korea. Several golf
courses in Korea, including the prestigious Jack Nicklaus
Signature Golf Club, feature Profile's products.
As global demand for Profile's innovative solutions has
increased, so too has the effect of global sales on our
company's workforce. In 2010, 13 to 14 percent of our sales
came from overseas orders. We anticipate that number to grow to
15 to 17 percent of our total sales in 2011. If you do the
calculation, that means approximately 28 of our 200 employees
are employed as a direct result of the company's exports.
While our company has achieved considerable success in
Korea and other markets, one of the greatest challenges we face
is the complex array of foreign barriers to American exports.
These include both tariff and non-tariff barriers. Free trade
agreements like the pending trade deal with Korea will remove
these barriers and create new opportunities and economic
benefits for U.S. businesses through tariff elimination,
greater market access, more efficient customs regimes, stronger
intellectual property protections, and other market-opening
provisions. For Profile, this would mean being able to sell our
products to Korea at a significantly lower-landed price.
Tariffs on our products currently range from three to eight
percent. With passage of KORUS, those tariffs would be
eliminated immediately.
In addition, Korea has been a particularly challenging
market for Profile, in terms of trademark and patent
infringement. KORUS will provide protections for intellectual
property, similar to those in the U.S.
So, in conclusion, in support of the job-creating market-
opening deal with Korea and our other trading partners, I
respectfully urge Congress to boost exports and generate jobs
through swift approval of the U.S.-Korea free trade agreement,
and the pending trade deals with Colombia and Panama. The time
for action is now.
Thank you very much for the opportunity to speak today.
[The prepared statement of Mr. Schoch follows:]

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Chairman BRADY. Thank you, Mr. Schoch. Mr. Holleyman,
Ambassador, if you will hang tight with these votes, I
apologize, we will be back just as soon as it is over. And the
committee is recessed until then. Thanks.
[Recess.]
Chairman BRADY. The Subcommittee on Trade will reconvene.
Thank you again for your patience, all of you.
Mr. Holleyman, you are recognized for five minutes.

STATEMENT OF ROBERT HOLLEYMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, BUSINESS SOFTWARE ALLIANCE

Mr. HOLLEYMAN. Mr. Chairman, Ranking Member McDermott,
thank you for holding this hearing today and inviting the
Business Software Alliance to testify. I am pleased to have
this opportunity to express BSA's strong support for speedy
approval of the U.S.-Korea free trade agreement.
Reducing software theft and ensuring fair and open access
to overseas markets are essential to the software industry. We
support the KORUS FTA because it advances both of these goals.
Korea has already demonstrated the capacity and the will to
reduce software piracy through sustained high levels of
enforcement. We expect that once KORUS is implemented fully,
these efforts will continue and improve, as long as Korea's
implementation of one element of KORUS, which I will discuss in
a moment, does not disrupt our current effective anti-piracy
efforts.
Mr. Chairman and members of this subcommittee, the U.S. is
just emerging from a deep economic crisis. Our country's
ability to export and create jobs is going to be a key factor
in our growth. The software industry in the U.S. already enjoys
a $39 billion trade surplus with the rest of the world. And
that is not surprising, when you consider that $.60 of every
dollar spent on software around the world comes back to U.S.-
based software companies. Our industry is well-positioned to
contribute even more to the positive side of our trade balance
for this country.
The biggest barrier we face today in markets is end user
piracy, when otherwise legal businesses use software as a tool
of production, but do not pay for it. It is vitally important
to have strong copyright and enforcement provisions in all
FTAs. And a number of provisions in KORUS help protect the
intellectual property of U.S. businesses operating in Korea.
They include: requiring that government agencies use only legal
software; protection for temporary reproductions; protection
against circumvention of technological measures; and the
exclusive right to make works available online.
The KORUS FTA also includes numerous obligations that
provide for strong enforcement of intellectual property rights,
including statutory damages and service provider liability.
Each of these elements is also included in the pending
agreements with Panama and Colombia, which is why we support
those agreements as well.
Korea is a story of progress. Let me take a moment to share
a little of that story. The BSA and I have been fighting
software theft in Korea for 20 years. About 10 years ago Korea
made an explicit commitment to the U.S. that it would conduct a
high volume of actions against businesses who use illegal
software on a sustained basis. Korea's efforts, as a result of
that commitment to the U.S., have driven the piracy rate down
by nearly 10 points over the past decade, while software sales
have increased by more than 40 percent.
A key factor of this progress has been the element of
Korean law that permits rights holders to bring criminal
complaints against end user piracy, and withdraw those
complaints when there is an agreement reached with the
offending party. And that element may be repealed as part of
FTA implementation in Korea.
Software piracy remains a substantial problem in Korea,
with rates double those here in the U.S. The KORUS FTA must
build on the successful efforts taking place today under
existing law, and expand upon those in ways that will continue
to bring software theft down. Most importantly, Korea must
continue to commit to maintain vigorous and undiminished
criminal enforcement efforts against business end user piracy.
We urge this committee to help ensure that happens.
In conclusion, the KORUS FTA is an important agreement with
a major trading partner. It includes world class IPR
protections and ensures open markets for IT services and
Commerce. We urge the Congress to approve the KORUS FTA, and
also to play a role in its successful implementation. Thank
you.
[The prepared statement of Mr. Holleyman follows:]

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Chairman BRADY. Thank you, Mr. Holleyman.
Ambassador Hubbard.

STATEMENT OF THOMAS HUBBARD, SENIOR DIRECTOR FOR ASIA, MCLARTY
ASSOCIATES, FORMER AMBASSADOR TO SOUTH KOREA

Mr. HUBBARD. Thank you, Mr. Chairman. It is indeed an honor
for me to be here today, and I appreciate your inviting me
here.
As a career foreign service officer for nearly 40 years, I
spent a lot of time in the various foreign affairs and armed
services committees. This is the first time I have testified to
the Ways and Means Committee, and I am honored to be in the big
time.
Chairman BRADY. Well, we are honored to have you here.
Mr. HUBBARD. My colleagues here today have made very clear
that the Korea-U.S. free trade agreement is a critical step
forward for American job creation and ensuring U.S. economic
competitiveness in Asia. I would like to stress that this trade
agreement is also an important investment in the overall U.S.-
South Korea alliance at a time when heightened tensions on the
Korean Peninsula require our solidarity with our allies in the
south, and it will also be a strong manifestation of the U.S.
commitment to remain a major presence in Asia.
Sixty years ago the U.S. stood with the Republic of Korea
in countering aggression from the Communist north. That bloody
conflict, which cost the lives of more than 35,000 Americans,
has yet to result in a permanent peace. North Korea continues
to challenge the world through its nuclear weapons programs,
and its recent attacks on the south have reminded us of the
military threat and raised deep concerns throughout northeast
Asia.
The Korean Peninsula remains a very dangerous place.
However, there has been a successful spectacular success story
amidst ongoing tensions. South Korea has risen to be the
world's 14th largest economy, a vibrant democracy, and a valued
ally for the United States in a critical region.
Moving ahead with KORUS will also be a concrete
demonstration that the United States is prepared more broadly
to lead on trade in Asia. This is a signal that all of our
partners in the region want to see. The economies of Asia are
in the process of integration and are now trading more with
each other than they are with the United States. Bilateral and
regional free trade agreements are proliferating, and the ROK
is in the vanguard. We cannot afford to wait on the sidelines
while the region pursues agreements that leave us out.
KORUS will give us special access to the Korean market,
enhancing our ability to compete with China, Japan, and India,
and Europe, even as it strengthens Korea's ties to the United
States. And I think KORUS may also provoke wider
liberalization. Approval of KORUS will lend impetus, among
other things, to the effort to develop the trans-Pacific
partnership and move beyond that to an Asia--a free trade zone
of the Asia-Pacific.
But the economic benefits are just part of the equation.
Strategic interests are also overwhelming at a time when the
U.S. is dealing with a host of new security threats, including
North Korea's nuclear weapons program.
This free trade agreement will strengthen our strategic
partnership with an important Asian ally that shares our belief
in democracy, and has stepped up to the plate with military
contributions in various places in the world. One of South
Korea's primary goals in seeking the free trade agreement with
the United States is to broaden and strengthen its relationship
with its ally at a time when rapid changes in East Asia,
including China's rapid rise, have provoked significant changes
in power relationships in Asia.
We strongly share the Republic of Korea's interest in
solidifying and broadening this critical alliance. And a
failure to approve KORUS would be exactly the wrong signal to
North Korea and to our allies and friends in Asia, who want us
to remain strongly engaged.
As Chairman Rangel knows as well as any of us, Americans
and South Koreans shared blood together to prevent a Communist
takeover of the entire peninsula 60 years ago. We still stand
together in facing the many challenges from the north. The FTA
with Korea will strengthen America's relationship with our
long-time ally, and enhance our presence and influence in a
very critical region. Thank you.
[The prepared statement of Mr. Hubbard follows:]

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Chairman BRADY. Ambassador Hubbard, thank you so much.
Appreciate the testimony.
Mr. Schoch, you are a real-life example of how small
business can compete and win in these growing markets, and how
removing those barriers can help make those sales----
Mr. SCHOCH. Yes, sir.
Chairman BRADY.--at a time when every sale counts.
Mr. SCHOCH. Yes, sir.
Chairman BRADY. Mr. Holleyman, you laid out both the
progress that has been made, but also how that has expanded in
this agreement with intellectual property protections, key to
millions of jobs in one of our most dynamic industries growing
in America. Thank you for that testimony.
I wanted to ask Mr. Rhodes and Ambassador Hubbard to--both
of those testimonies build up to the bigger picture on this
trade agreement. I would like Mr. Rhodes and Mr. Hubbard to
sort of expand on the geostrategic benefits of this. Clearly,
South Korea is a critical ally. This strengthens the
agreement--strengthens that relationship. But it also
strengthens America as a counterweight to China in that region,
both in trade and other areas.
Clearly, Asia-Pacific region is blowing and going. They are
moving ahead, whether we are engaged or not. They would like us
there as a counterweight to China in many areas. But, frankly,
they are not waiting for us to engage. They are moving ahead
without us.
So, I would like, Mr. Rhodes, Ambassador Hubbard, expand
upon those--well, how critical it is that this not fail, as an
agreement. More critically, what the benefits are for us as we
move ahead.
Mr. RHODES. Thank you, Chairman Brady. I think it is
critical. I think that, given the situation in North Korea, as
we have seen by the Cheonan and the shelling of the island over
the last months and the problem of the nuclear situation there,
it is critical for that.
Also, I think you pointed out very correctly, China is
watching this agreement very, very carefully. And so, I think,
as a demonstration in that area, I think our allies all over
Asia are watching this. And, as you know, there was a thought
at one time of putting a northeast Asian economic group
together--Japan, China, and Korea--which would have left the
U.S. out. And so I think it is very important, along with this
EU Agreement that is coming on board, that we stand up with
Korea and all the benefits that we have all talked about on
U.S. exports to Korea.
So, it is a win-win on both strategic, as well as economic.
Thank you.
Chairman BRADY. Thank you, Mr. Rhodes. Ambassador.
Mr. HUBBARD. Well, Mr. Chairman, several people today have
mentioned that the United States in 2003 was South Korea's
leading trading partner in the world. Now it is number four,
with China in the lead. If you go around the East Asia region,
you will find that China has moved into first place almost
everywhere you look. And they are uncomfortable with that.
The other countries of Asia are looking to this agreement
as an indication of whether the United States is committed to
the region, whether we are committed to lead on trade
liberalization in the region. And they are all hopeful that we
will approve KORUS as quickly as possible, as a sign of our
continued commitment there.
Chairman BRADY. Right. Great point. Thank you, Ambassador.
Ranking Member McDermott.
Mr. MCDERMOTT. Thank you, Mr. President. Mr. Holleyman, I
do not have any real questions, because we all agree on the
need to move this thing. But since I have got you sitting here,
I have got a question.
I know that you are interested in Korea today, but I am
going to ask you a question about China. At the end of last
year, as part of the joint commission on commerce and trade,
China's committed to a number of things to address software
piracy in China. Just before that meeting, almost every member
of the Ways and Means, including all the current subcommittee
members on the Democratic side, wrote a letter expressing the
need to ``measure progress on greater U.S. market access into
China, and protection of U.S. intellectual property rights by
objective criteria,'' such as increased exports to and sales in
China.
And almost four months have passed since then. Is there any
measurable criteria or any statistics you can give us that will
help us understand if this had any impact whatsoever?
Mr. HOLLEYMAN. Thank you, Mr. McDermott, for that question.
Unfortunately, as of today, there is nothing that I can say, in
terms of measurements of increased sales from my members that I
have learned that would tell me that there has been any market
improvement on the status that existed when Members of the
committee sent that letter.
And I want to thank you for doing that, because that was
enormously important. I know that the White House has made this
an important issue. Your colleagues in the Senate have as well.
But we have not seen the kind of measurable progress that was
expected, I know, by members of this committee, and that was
hoped for by our industry.
Mr. MCDERMOTT. Is there anything at all hopeful you can say
about the relationship with respect to China in this area?
Mr. HOLLEYMAN. Well, I think the hopeful thing I can say is
that the nature of the commitments, if fulfilled, should result
in the kind of increased sales where we are happy for sales.
So, this is a case where we do not need additional commitments.
In fact, the commitments around business software are quite
specific. What we need is full implementation.
I will also mention one thing in contrast with Korea. Korea
has undertaken 40 to 50 criminal cases a month on a sustained
basis against businesses using illegal software, and that has
helped bring the piracy rate down, and we want to continue to
do that. By contrast there has never been a criminal action in
Korea--I'm sorry, in China--against a commercial enterprise
using pirated software. China would indicate that that is not
permitted under their law. And so it is not a surprise that the
piracy rates in China, in terms of percentage of market, are
double what they are in Korea. And, of course, the value keeps
rising as the Chinese market grows.
So, I think that the continued interest and pressure from
this committee and from the Administration--I know President
Obama has personally engaged on this--but to show concrete
results from China, not just commitments, will be critical.
Mr. MCDERMOTT. I think it is important for people to
understand the Koreans keep their promise and work at it and
bring cases. And, unfortunately, that is not happening in
China.
I try to understand what their thinking is. Can you
explain? Do they do it just more slowly, and some day they will
do it? Or is it simply they make a commitment and then throw it
in the waste basket and walk out of the room?
Mr. HOLLEYMAN. Yes, I mean we have certainly seen some
efforts around creating budgets for purchase of legal software
by the government, some administrative enforcement. But there
is nothing that is of sufficient magnitude to provide a
deterrence in the marketplace against businesses using illegal
software or, indeed, for the government to use only legal
software.
By contrast, Korea, which used to have periodic campaigns--
2 or 3 months of a crackdown and then they would stop--about 10
years ago committed to the U.S. Government that they would do
40 to 50 end-user software cases a month, and that was
sustained. And that has been the key to bringing piracy down in
Korea, what we think is key, going forward, to future progress.
We see periodic minor campaigns in China, but nothing on a
sustained basis.
And so, Korea, I think, really is the model for what China
should be doing.
Mr. MCDERMOTT. Thank you very much.
Chairman BRADY. Thank you. Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. Ambassador Hubbard,
KORUS has been strongly endorsed by many experts as a means of
enhancing our economic and national security relationships
between the two countries. President Obama has referred to our
relationship with Korea as the lynch pin of a security in Asia
policy.
Considering the United States maintains over 28,000 troops
on the Peninsula right now, Ambassador, I was wondering if you
could discuss, from your personal perspective and experience,
how the passenger of KORUS will strengthen our relationship
with this key ally, and how trade agreements more broadly--like
Colombia and Panama--will have significant geostrategic impact,
as well.
Mr. HUBBARD. Thank you, Mr. Davis. I--basically, this
agreement, this trade agreement, in my view, will both broaden
and strengthen the alliance that we have had for the last 60
years.
You know, military arrangements, military alliances, do not
stand alone, even when you face a threat as palpable as the
North Korean threat is to South Korea. They need to be given
content through people-to-people ties, and we do have wonderful
people-to-people ties with Korea. They need to be given content
through trade relations. They need to be given content through
special relationships of all kinds. For example, one of the
things that was very, very important to Korea in recent years
was to get on the visa waiver program, as kind of a symbol of
their relationship with us.
Koreans, like other countries, need constant assurances
that we are with them, that we understand their issues, their
problems, we value the relationship. And at this stage, passage
of this FTA, I think, is the best way we can give those
assurances. And this is really a time when we need it, after
the attacks on South Korea and the other issues that are
concerning them.
Mr. DAVIS. Would you say that when the United States delays
on passing agreements after they have been largely negotiated,
that that can have an adverse effect on our long-term national
security and geostrategic goals in a region of the world?
Mr. HUBBARD. Yes, indeed. I think the Koreans have
disappointed in the delays in passing this agreement. Korea is
a democracy, a functioning democracy, and I think they
understand democracy in our country, and why it has been
delayed. But over time, you know, a failure to fulfill
governmental commitments of this kind does have a negative
impact on the broader relationship, and we should get moving on
this.
Mr. DAVIS. Would you agree that same principle applies in
the--with the Colombia agreement, as well?
Mr. HUBBARD. Yes, indeed.
Mr. DAVIS. Okay, thank you.
Mr. HUBBARD. I strongly support that agreement.
Chairman BRADY. Thank you. The chair recognizes Chairman
Rangel.
Mr. RANGEL. Thank you, Mr. Chairman. I do not want to beat
a dead horse, but no one works more closely with the Koreans
than I do. And I am certain that they would rather have an
agreement where they have the votes for it, no matter how long
it takes, rather than not to have it.
Having said that, I think we all agree that it is good for
our country, it is good for Korea, has all types of economic,
political, national security reasons why we should support this
agreement, especially after certain provisions were improved so
that we can get the votes that are necessary in order to get it
passed.
Having said all that, I think all of you would agree with
me that the major obstacle that we have in the country and in
the Congress is the belief that this agreement, as all trade
agreements, will lose jobs. And, of course, most of us believe
that the evidence would support otherwise. But it is difficult
to explain to people without showing them what it means to our
country, our region, our industries, and of course, our
congressional districts.
So, if I could just say if someone challenged you, Dr.
Rhodes--and we go down the line--and said that they knew
specifically that we would lose jobs here, besides saying they
are wrong, are you able to tell where these jobs will be
located to any degree that the person walking away--say,
``Well, I will check that tomorrow and I will get back to
you?''
Mr. RHODES. I think--and you and I have discussed this
before--I think at the Chamber we have been very specific on
making trips throughout the United States to various areas,
pointing out where job growth will take place. And I think that
we could do a better job--you can always do a better job--but I
think we have made a real effort to do so.
And I was just in Dallas last night, giving a talk to a
group. And the question came up exactly on that. And so, I
think we do have facts and figures in areas where these jobs
are being created. And so, I think our job is to get out there
and sell it even more, as you and I have discussed in the past.
Mr. RANGEL. But you would not be able to tell, say, a guy
from New York exactly where to go for--so that I can go to the
recipients of this agreement and tell them, ``Look for an
increase in jobs in this area.''
Mr. RHODES. We will give you a list. Yes, we do. I will
give you a list. We will make sure you get a list today.
Mr. RANGEL. That is great. Is there anyone that can give a
little more specifics? Or generally, would you accept what Dr.
Rhodes has said is the general answer?
Mr. HUBBARD. I agree with Mr. Rhodes, and will help him put
that together.
Mr. RANGEL. You know, I have been impressed with the number
of jobs that are going to be made available under the Colombian
free trade agreement.
And just to test the knowledge of the Members of Congress,
I asked them, ``Do you really believe that Caterpillar and
other earth-moving machinery will be one of our greatest
exports?'' They said there is no question about it. It is a
mining country, and there is growth there, and they really want
to buy from us.
Then I ask the next question, ``Do you know where
Caterpillars are made?'' Nobody knows. It just seems to me that
there is a big gap. Because if they were made in my district,
you would have heard from me, loud and clear, ``Give us a
break, give us jobs, let us expand.'' And yet I do not remember
anyone ever going to the floor, saying--with the exception of
those from Michigan with the Korean agreement, which took a
little time to reach, but we did--but I do not remember people
saying, ``I do not like trade generally, but this agreement is
going to help my people in my district.'' And if you have any
of those clippings around your office, you can send those in to
me, as well.
Mr. Chairman, thank you so much.
Chairman BRADY. Thank you, Chairman, very much. Mr.
Reichert, to close this out?
Mr. REICHERT. Thank you, Mr. Chairman. I want to touch on
some of Mr. Rangel's comments. I totally agree with the
gentleman in his observation that there really needs to be a
concerted effort regarding education about the number of jobs
that are created through these agreements.
And again, as I said earlier in--during the first panel
discussion, this is all about selling American products. And
so, we should all in America be about selling American. And, as
was also stated earlier, 95 percent of our market is outside
our borders.
So, we should really work hard. And again, this export
council is looking at ways that we might be able to help in
really beating the drum on the number of jobs that are created
by these trade agreements and, of course, the other obvious
benefits.
I would like to touch on with Ambassador Hubbard, first of
all, thank you for your years of service to our country. And
happy to have you here today. I am interested in your views on
the importance of approving the Korean agreement and
solidifying America's presence in the Asia-Pacific region. Mr.
Davis touched on it just a little bit, as far as security goes.
But how does finally coming to an agreement with Korea impact
our ability to negotiate further trade agreements with other
countries around the world?
Mr. HUBBARD. First and foremost, Mr. Reichert, it
establishes a very good precedent and standard. This is a very
high-quality agreement. Frankly, it is of higher quality than
most of the agreements that have been reached within Asia and
within the Asia-Pacific. And so this will be a standard that
all other agreements can be measured----
Mr. REICHERT. Would it also--would this affect our ability
in the TPP efforts, also?
Mr. HUBBARD. Yes. Very much so. I think this--you know, I
think it relates to TPP in a couple of ways. One, our partners
in the TPP are looking at KORUS as a signal of whether the
United States can be counted on to do the sensible thing in its
own interest. And that will have its impact.
Secondly, it will help improve the standards of the TPP. I
think eventually, based on KORUS, that Korea will probably also
want to join TPP at a later time, as might Japan.
Mr. REICHERT. Sure.
Mr. HUBBARD. And that will all strengthen our posture in
Asia.
Mr. REICHERT. So there is a bright light shining on us
right now, as to our success, right?
Mr. HUBBARD. Exactly.
Mr. REICHERT. Yes, sir.
Mr. HUBBARD. Exactly.
Mr. REICHERT. What about intellectual property rights in
the region? How do you think the Korean agreement might affect
those as we look at--of course everyone mentions China, it is
the most obvious offender.
Mr. HUBBARD. Well, Mr. Holleyman obviously knows more about
that than I do. But, again, it sets a very good standard.
Korea's enforcement sets a good standard. And you know, I think
other countries are going to bear that in mind as we move
forward.
Mr. REICHERT. Mr. Holleyman, would you like to respond to
that, please?
Mr. HOLLEYMAN. Certainly. The KORUS really provides the
strongest levels of protection of intellectual property of any
U.S. free trade agreements. Those are mirrored in substantial
part in Colombia and Panama. Locking those in place will ensure
not only tools against fighting piracy, but as new Commerce and
services come aboard like software as a service and cloud
computing, it will ensure that that next wave of computing
technology has unfettered access to the Korean market.
So, it is critical. What we need on the IP side is to
ensure that existing practices of high-volume sustained
criminal actions against the enterprise end users of pirated
software, will be maintained in Korea going forward, and that
existing procedures that allow right holders to successfully
resolve actions against those corporations when they become
legal customers can be maintained. And that is a key element in
implementation, where we urge this committee's continued
attention.
Mr. REICHERT. Great. Thank you. I yield back, Mr. Chairman.
Chairman BRADY. Thank you, Mr. Reichert. I want to thank
the Members for their thoughtful questions.
And let me note for our witnesses how much we appreciate
your testimony. Members may submit questions for the record.
And if they do, I hope you will respond promptly. I know you
will.
And our witnesses today, who come from all parts of
industry and job creation, as well as our geopolitical role,
made clear the pending trade agreement with South Korea, as
well as with the pending agreements with Colombia and Panama,
offer significant benefits. Not moving forward will only harm
American interests and the ability of American workers,
businesses, and farmers to compete in these markets as our
competitors move ahead.
As I said earlier, I am excited about moving forward on the
South Korea Agreement. And just as I am excited to move forward
with Panama and Colombia, I hope we will continue the
constructive bipartisan technical work on the Korean agreement,
and begin the work on the Latin agreements, to ensure that
these draft implementing bills are complete and thorough, and
ready to move forward in a timely manner. I strong believe we
should consider all three agreements by July 1st, and I hope we
will continue to work together to make that happen.
But for now, the committee is adjourned.
[Whereupon, at 12:45 p.m., the subcommittee was adjourned.]
[Submissions for the Record follow:]

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