[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SMALL BUSINESS TRADE AGENDA: STATUS AND IMPACT OF INTERNATIONAL
AGREEMENTS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JANUARY 28, 2014
__________
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Small Business Committee Document Number 113-052
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMEYER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Richard Hanna............................................... 1
Hon. Patrick Murphy.............................................. 2
WITNESS
Mr. James Sanford, Assistant United States Trade Representative
for Small Business, Market Access and Industrial
Competitiveness, Office of the United States Trade
Representative, Washington, DC................................. 4
APPENDIX
Prepared Statements:
Mr. James Sanford, Assistant United States Trade
Representative for Small Business, Market Access and
Industrial Competitiveness, Office of the United States
Trade Representative, Washington, DC....................... 20
Questions and Answers for the Record:
Questions and Answers to Mr. Sanford from Representative
Tipton..................................................... 24
Questions and Answers to Mr Sanford from Representative
Mulvaney................................................... 26
Additional Material for the Record:
Statement for the Record of Terence P. Stewart, Managing
Partner, Law Offices of Stewart and Stewart................ 29
SMALL BUSINESS TRADE AGENDA: STATUS AND IMPACT OF INTERNATIONAL
AGREEMENTS
----------
TUESDAY, JANUARY 28, 2014
House of Representatives,
Committee on Small Business,
Subcommittee on Agriculture, Energy and Trade
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2360, Rayburn House Office Building. Hon. Richard Hanna
[chairman of the subcommittee] presiding.
Present: Representatives Hanna, Mulvaney, Luetkemeyer,
Huelskamp, and Murphy.
Chairman HANNA. Good morning, everyone. Mr. Murphy is on
his way, but in the interest of time I think we will just
proceed, at least with my opening statement and then the
ranking member will have an opportunity when he gets here to
read his own.
Mr. Tipton is the normal chairman of this Committee. He has
a family situation and is home in his district. I agreed to
take his place, which I am pleased to do, but I know he wished
he could be here. It is a subject that he is very familiar with
and feels strongly about.
I want to thank the assistant trade representative for
taking the time to participate in today's hearing. Mr. Sanford,
thanks for being here.
This hearing comes at a point in time when we have a number
of trade policy initiatives in the pipeline, including the
possible renewal of the Trade Promotion Authority (TPA). In
addition, later on today the president will deliver his State
of the Union Address outlining his vision and priorities for
the upcoming year. I know many businesses are interested to
hear if the president will make trade a priority.
Last year, our Committee held a hearing with a diverse
panel of small businesses on their international trade policy
priorities and how to best increase exports and create new jobs
here in the United States. All of our witnesses stress the
importance of international trade agreements to help grow their
exporting capacity and better compete in the global market.
They pointed to various multilateral and bilateral agreements
as opportunities to open new markets for their products and
services. These agreements will help remove complex trade
barriers, protect their intellectual property, and streamline
the trade process. As you know, the administration has
estimated the Trans-Pacific Partnership (TPP) will help spur
our exports, rapidly growing the Asian market, and create an
estimate 3.5 million jobs right here in the United States.
Our Committee understands the importance of these trade
agreements and the opportunities they could provide for small
firms. In 2012, my home state of New York exported over $81
billion in goods which helps to support thousands of good-
paying jobs.
This brings me to a couple of key points. First, when
conducting trade negotiations, the USTR needs to work in close
coordination with Congress and small business to ensure that
the stakeholders are prepared to take advantage of such
agreements. If the administration seeks to renew trade
promotion authority, they need to build and gain the trust of
Congress and the private sector to ensure that their issues and
concerns are being addressed. And second, I encourage the USTR
to work more closely with federal and state trade agencies to
communicate those opportunities to domestic exporters and to
help address their current export barriers. Increasing agency
coordination will help support small business firms increase
their exports to those countries and therefore create new jobs
and hopefully good paying jobs.
Today we will hear directly from the Office of the United
States Trade Representative on the status of current
negotiations and how they are working to help small firms
export. And as I have said before, we need leadership from the
administration to make these agreements a priority. We cannot
sit on the sidelines while other countries negotiate trade
agreements that put our businesses and our competitiveness at a
disadvantage.
Again, I want to thank our witness today for his
participation. I now yield to Ranking Member Murphy for his
opening remarks.
Mr. MURPHY. I would like to thank the acting chair, Mr.
Hanna, for your opening statement, and I want to wish you a
Happy Birthday. We know you just celebrated that.
I appreciate the honorable assistant USTR for his presence
here today. I am looking forward to hearing and making sense of
what this administration's ambitious trade agenda means for
small businesses.
With three-quarters of the world's purchasing power located
outside the United States, access to foreign markets is no
longer optional but essential for businesses of all sizes to
grow and create jobs. Studies consistently demonstrate that
when given a fair chance, small business can benefit
significantly from trade. Indeed, 98 percent of U.S. firms that
export have fewer than $500 employees. These companies are
responsible for fully one-third of American-made products that
are sold abroad. When small and medium sized firms are able to
take the leap and begin selling their products abroad, there
are important tangible economic benefits here at home.
Businesses that export their products abroad create twice as
many jobs as those that do not. Workers at globally engaged
firms make wages 15 percent higher than employees of companies
that have not reached into foreign markets.
In Florida, international trade has long been an important
component of our economy. The Port of Palm Beach, just next
door to my district, Florida's 18th District, generates over
$261 million in economic activity for the greater region. This
includes 2,500 direct and indirect jobs related to the port and
shipping industries and more than $12 million in local and
state taxes. Statewide, cargo activity associated with Florida
seaports accounts for nearly 100,000 port-related jobs,
supports more than 454,000 other jobs, while generating $24
billion in personal income and $66 billion in business
activity.
While small businesses are increasingly looking to foreign
markets as a growth opportunity, there remain a number of
hurdles. The vast majority of small businesses that do export
send their products to only one market, often, our Canadian
neighbors. For small companies to fully reap the benefits of
trade, it is important they diversify and tap into rapidly
emerging economies in Latin America, Asia, and other parts of
the world. Small firms that have not yet begun exporting spend
months preparing before they start and make significant
expenditures, often more than 8 percent of their operating
budget laying the groundwork. Without the scale and resources
of their larger competitors, entrepreneurs often turn to
government technical assistance and other guidance when
determining how to best capitalize on trade opportunities.
In that regard, it is important this Committee fully
understand how government-managed programs are meeting small
business owners' needs. Also, it is important to understand
where government falls short or is counterproductive. Whether
it is access to capital, research on foreign markets, or
similar services, these initiatives must be efficient and
effective in helping entrepreneurs compete abroad. With a range
of export assistance initiatives scattered throughout different
agencies, including the SBA, it is vital that we ensure they
are functioning and complementary and not duplicative manner.
Likewise, this Committee has an important role to play in
examining how various free trade agreements impact small firms'
export efforts. Too often, trade agreements have made small
businesses' needs an afterthought rather than a central pillar
of discussion. While small firms stand to benefit from trade
agreements that open new markets, an influx of new imports can
serve to undermine local manufacturers and producers. Likewise,
foreign markets often present a maze of new regulations that
are difficult to navigate for smaller companies. It is critical
that future trade agreements take into account these
difficulties.
In a global economy, companies can no longer afford to
think only locally. With job creation remaining the top
priority for American people, trade and exporting of U.S. goods
remains a promising avenue for spurring growth and creating
good-paying jobs right here at home.
To achieve that goal, export assistance programs need to
function smoothly, and any future trade agreements are
cognizant of the unique challenges small firms face as they
work to sell their products abroad. It is my hope that today's
hearing can shed important light on these topics.
Thank you again for being here, and I yield the balance of
my time.
Chairman HANNA. Thank you.
I want to take a moment and welcome some young people and
their professors from Colgate University, one of our country's
premier universities in my district. Thank you guys for being
here.
Our first and only witness today is Jim Sanford, Assistant
U.S. Trade Representative for Small Business, Market Access,
and Industrial Competitiveness. In his role, he manages U.S.
trade policy activities relating to small exporters. Mr.
Sanford has 17 years of experience working for the U.S.
government on trade policy.
Thank you, sir, for being here. We look forward to your
testimony. You may begin.
STATEMENT OF JIM SANFORD, ASSISTANT U.S. TRADE REPRESENTATIVE
FOR SMALL BUSINESS, MARKET ACCESS, AND INDUSTRIAL
COMPETITIVENESS, OFFICE OF THE UNITED STATES TRADE
REPRESENTATIVE
Mr. SANFORD. Thank you. Representative Hanna, Ranking
Member Murphy and members of the Subcommittee, thank you for
convening this hearing and for the opportunity to testify on
the work of the Office of U.S. Trade Representative to expand
exports for U.S. small businesses.
Under President Obama's leadership, USTR is working closely
with our interagency partners to help American businesses of
all sizes seize export opportunities and acquire the resources
necessary to succeed in the global marketplace. USTR is
pursuing a robust trade agenda that supports small businesses
and broader economic growth by tearing down barriers and
creating overseas opportunities for U.S. farmers, ranchers,
manufacturers, and services providers of all sizes. We are
working to level the playing field so that our workers and
businesses can compete and prosper in the global economy, and
we are also vigorously enforcing our trade rights and insisting
that countries fulfill their commitments.
First, the United States currently has in place free trade
agreements with 20 countries. These trade deals have broken
down barriers and pried open markets for U.S. products from
agriculture to manufacturing to services.
Secondly, USTR is pursuing new trade agreements that, when
combined with existing FTAs, will represent two-thirds of
global trade. In the Asia-Pacific region, USTR is negotiating
the Trans-Pacific Partnership (TPP) with 11 other countries--
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore, and Vietnam. The TPP will cut tariffs
and break down non-tariff barriers, resulting in significant
economic benefits for the United States. In fact, the Peterson
Institute projects that the TPP will generate an additional
$123 billion in U.S. exports. The TPP will provide new market
access, streamline customs procedures, increase regulatory
transparency, and strengthen intellectual property rights
protections. These outcomes will be of particular benefit to
small businesses.
USTR is also negotiating the Transatlantic Trade and
Investment Partnership (T-TIP). This is an agreement with the
European Union. T-TIP will be a high standard, comprehensive
trade agreement aimed at strengthening a partnership that
already supports $1 trillion in two-way annual trade, $4
trillion in investment, and 13 million jobs on both sides of
the Atlantic.
In the WTO, we are working to expand U.S. export
opportunities around the globe. The recently concluded WTO
Trade Facilitation Agreement, once implemented, will reduce red
tape and bureaucratic delay for goods shipped around the world.
Again, U.S. small businesses will be among the biggest
beneficiaries of this deal. USTR is also leading efforts in
Geneva to advance negotiations to substantially liberalize
trade in information technology products, services, and
environmental goods. These plurilateral agreements, once
implemented and completed, will help level the playing field
and significantly expand opportunities for American technology
and services firms of all sizes.
Of course, to actively and effectively pursue these
initiatives, the Administration will need trade promotion
authority. We welcome the introduction of the bipartisan
Congressional Trade Priorities Act of 2014 as an important step
towards Congress updating its important role in trade
negotiations. We look forward to working with Democrats and
Republicans in Congress throughout the legislative process to
pass TPA legislation with as broad bipartisan support as
possible.
Third, USTR is pursuing important initiatives in regional
fora to address challenges that face small business exporters.
In the Asia-Pacific Economic Cooperation or APEC forum, for
example, the United States and other members are advancing
initiatives to assist U.S. companies to participate in global
supply chains, address localization barriers, and promote
greater regulatory coherence. In the Western Hemisphere, USTR
is collaborating with other agencies, including Departments of
Commerce and, State, and the Small Business Administration to
connect more small businesses to regional partners and to
foster entrepreneurship.
Fourth, USTR is also vigorously enforcing our trade
agreements. The Interagency Trade Enforcement Center (ITEC)
significantly enhances the Administration's capabilities to
aggressively challenge unfair trade practices around the world.
And finally, we are working to communicate more effectively
how our trade policy initiatives can benefit U.S. small
businesses. Ambassador Froman and the entire USTR team continue
outreach to small businesses around the country to highlight
export opportunities that we have created and to learn more
about the new trade challenges and how we may help. USTR is
committed to partnership with other federal agencies to help
small businesses compete and succeed in the global economy.
Thank you for this opportunity to testify about USTR's
efforts.
Chairman HANNA. Both Mr. Mulvaney and Mr. Luetkemeyer and
Mr. Huelskamp, I know that at least two of them have
engagements, and I am grateful that they are here. So in the
interest of time I am going to ask Mr. Mulvaney to ask whatever
question he may have first.
Mr. MULVANEY. Thank you, Mr. Chairman. I appreciate that
accommodation.
Thank you, Mr. Sanford. Let us skip over TPA and talk about
the Trans-Pacific Partnership for a little bit. And I am
satisfied that generally speaking it is going to benefit small
businesses, not only in my district but across the nation. I
generally favor most of the concepts that are contained in the
Trans-Pacific Partnership, but I want to talk specifically
about Vietnam. Because when you go down the list of countries
that are in this discussion, I do not know much about Brunei, I
fully admit that, but I know a little bit about Vietnam, and it
seems like this is probably the most closed economy in the T-
TIP, and perhaps that we have discussed having a large trade
agreement with in a long time.
Tell me how you intend to deal with, number one, currency
manipulation in Vietnam in relationship to the Trans-Pacific
Partnership, and number two, with the large number of state-
owned enterprises in this communist nation.
Mr. SANFORD. Thank you, Congressman.
This TPP is obviously a major priority for Ambassador
Froman and USTR right now. We are working very hard to conclude
that negotiation. Currency is an important issue. We appreciate
the interest the Congress and many stakeholders have in this
particular issue. This is an issue that we continue to consult
with Congress about how we possibly address this within the
context of TPP.
Mr. MULVANEY. Give me some ideas. One of the questions I
get back home from the folks who are going to now be competing
for business in Vietnam, which they like, and they will be
competing with firms from Vietnam, which they believe will make
them better, but they keep asking me, Mr. Mulvaney, how are you
all going to deal with the fact that these currencies do not
freely trade? How do you all propose to address that?
Mr. SANFORD. Let me say, this is an issue that the Treasury
is the lead on, so I defer to Treasury. They are part of this
discussion that we are having about how we may try to address
this. But unlike USTR where we are developing the trade policy,
when it comes to currency manipulation and currencies issues--
--
Mr. MULVANEY. Is there any language in the drafts that you
have seen that specifically address this currency manipulation
in the Trans-Pacific Partnership?
Mr. SANFORD. Not with which I am familiar, but that is not
something I am working on to be candid with you.
Mr. MULVANEY. Okay. Secondly, the number of state-owned
enterprises, again, many of my businesses are happy to compete
with other folk who are trying to make a profit. It sort of
changes the analysis when you are starting to compete with a
company that is owned by the government and is not driven by
that same profit motive. What protections, if any, are you all
providing for in the Trans-Pacific Partnership to deal with
state-owned enterprises generally, or specifically, in Vietnam?
Mr. SANFORD. Well, Congressman, as you probably know, there
is an ongoing discussion or negotiation on provisions that
would apply to state-owned enterprises, disciplines that would
in effect constrain the activities of these state-owned
enterprises. That is ongoing negotiation. But this is clearly a
priority for us in the context of TPP with countries like
Vietnam, and frankly it will be a priority for us even in
negotiations with T-TIP because our interest is in ensuring
that throughin negotiations we do in the future vis-a-vis third
countries have these disciplines that we are building up.
Mr. MULVANEY. Would you agree with me generally, Mr.
Sanford, that competing with another profit-based business is
different than competing with a state-owned enterprise?
Mr. SANFORD. I would agree, and that is why we are putting
a premium on developing some strong provisions in TTP that
could help discipline the activities----
Mr. MULVANEY. I am going to ask you a brief question about
a local issue which is textiles in Vietnam. I do not know if
you are familiar with it. If you are not, please just tell me.
But we are dealing with a situation here where Vietnam wants to
institute a new rule called the Single Transformation rule,
which essentially says that they can bring something in from
China, possibly heavily subsidized, make a very small change to
it, and then export it into the United States under the terms
of the Trans-Pacific Partnership. Are you concerned about that
backdoor to cheap Chinese imports, subsidized imports? And if
so, what are you doing about it?
Mr. SANFORD. Obviously, textiles is a particularly
sensitive negotiation that we are having with Vietnam in terms
of the market access. I am not intimately involved with the
textiles negotiations. I have a colleague who is the chief
textile negotiator.
Mr. MULVANEY. Then let me cut you off, Mr. Sanford, and I
appreciate that. If you do not know, you do not know. I accept
that answer.
Let me deal with something maybe you do know more about,
which is one of the largest complaints I get from small
businesses back home when they deal with exporting is something
you mentioned in your written testimony, which is the
difficulty of dealing with non-tariff barriers. Their stuff
gets stuck at the border, and you speak a couple different
places in your testimony about what you are doing to help sort
of level the playing field, increase transparency. Can you take
the last minute of your time, please, and tell us a little bit
more about what you are doing to help small businesses in that
realm?
Mr. SANFORD. Yeah, I think this is something we are trying
to tackle in a number of different forums, whether it is TPP.
In APEC we have done some work in terms of trying to come up
with uniform documentation, for instance. The WTO Trade
Facilitation Agreement, which was just done to provide more
transparency in terms of documentation requirements, sets
certain timeframes in which materials need to be--your exports
need to be released. So I think what I would say is this is a
topic that we recognize as particularly disadvantageous for
small businesses, and whatever policy vehicles we may be able
to address this in, whether it is a formal negotiation like the
WTO Trade Facilitation Agreement or TPP, we are pursuing it
there, but also in contexts like APEC.
Mr. MULVANEY. At the risk of overstaying my time, I would
simply encourage you on behalf of many members who have spoken
to me, make sure that those efforts are real and they have
teeth. I recognize the fact we pay lip service to it, and I
think that is a good first step. But if we are not actively
enforcing the rules on non-tariff barriers, our small
businesses will continue to struggle. One of the reasons they
do not export to many countries or many businesses within a
specific country is it is just too hard to do.
Mr. SANFORD. Yes. I was focusing more on the customs angle,
but I think the bigger issue is the non-tariff barriers and
that is something, especially when you look at something like
the regulatory requirements that countries may have, we
recognize this as a fundamental challenge for small businesses
where they may lack the in-house resources to fully understand
what is required in terms of complying with the foreign
regulations, let alone getting the product tested. If they do
not have guaranteed future exports, there is some cost up front
that can deter them from making those kinds of sales. So I just
want to emphasize that this is a particular priority for us. We
understand that these are challenges for all firms, but things
like the customs challenges or a lot of these non-tariff
barriers, we recognize these are particularly
disproportionately impacting small businesses, and whatever we
can do is most helpful for them.
Mr. MULVANEY. Thank you, Mr. Sanford.
Mr. Chairman, thank you again. I apologize for going over
time.
Chairman HANNA. No, you are fine.
Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Mr. Chairman, for your
indulgence.
Mr. Sanford, following up on Mr. Mulvaney's questions, to
me one of the concerns I have is the enforcement. I mean, we
can do great things with the--and I will get into some
questions in a minute with regards to some of the treaties that
we negotiate--but at the end of the day, if we do not enforce
the provisions of that to protect our people, our companies,
especially small businesses who do not have the resources to go
out there and take some of the things that are hurting our
small businesses, like dumping, for instance, or the currency
manipulation, what are you doing specifically to enforce some
of the contracts, some of the treaties that are out here to be
able to allow the contracts that go on between the small
businesses and their suppliers or their purchasers to make sure
that there is an even playing field, they do not become taken
advantage of, and that the treaty is worthwhile?
Mr. SANFORD. Congressman, I fully agree. This has certainly
been a priority for us to focus more resources on enforcement
activities. And I think in the last four years or so there has
certainly been an uptick in terms of enforcement activities at
USTR.
One thing I would particularly point to, because again, we
recognize many small businesses lack the resources to put
together the information that is required to bring a case, for
instance, is the ITEC or the Interagency Trade Enforcement
Center that was established a couple of years ago, it is housed
at USTR. It is largely staffed by interagency detailees, and we
are continuing to expand its resources. The staffing and
resources that they have are particularly helpful in putting
together cases. And I think this is a resource that can be
tapped more for small businesses that are not able to sort of
formulate the cases themselves.
Mr. LUETKEMEYER. Okay. How many cases have you brought?
Mr. SANFORD. Off the top of my head I cannot----
Mr. LUETKEMEYER. One? Ten?
Mr. SANFORD. No. USTR brings a number of cases. I do not
know what the count may be.
Mr. LUETKEMEYER. We are getting a lot of generalities here
this morning, Mr. Sanford. I would like some specifics. I
really am concerned about this enforcement part because I
think--I have got a company that I am very familiar with and we
have a dumping problem and we cannot get it solved. And so
there has to be an enforcement mechanism here to be able to
allow fair trade that has been negotiated through this treaty,
and yet it is not happening. And so what are we doing?
Mr. SANFORD. Let me make an distinction.
Mr. LUETKEMEYER. Give me an example of a case that you have
taken to whatever court or whatever mitigation group there is?
Mr. SANFORD. I am happy to follow up with you, Congressman,
with more details. One thing I would make a distinction is I
think you are talking about dumping cases and I have been
talking about disputes under say WTO provisions that----
Mr. LUETKEMEYER. Well, we will take intellectual property
then. That is another area that is a grave, grave concern. I
mean, the Chinese are going all over the place with this and
there are a lot of other countries that are getting involved in
it as well. I mean, we get information in this Committee about
the number of attacks on the computer systems of the various
companies, and now the large companies, their credit card
divisions are being broken into.
So IPR is an extremely important thing. What are we doing
to protect--to pushback on some of the countries that are doing
these things?
Mr. SANFORD. Well, we have the special 301 provision that
is a trade tool that is available to us.
Mr. LUETKEMEYER. Are you executing it? Are you following up
on it?
Mr. SANFORD. Yes. Right now there is a process going
forward looking at Ukraine. And there are very strong concerns
about their lack of intellectual property protections.
Mr. LUETKEMEYER. Are you pursuing a case against them or
are we----
Mr. SANFORD. Well, yeah, I mean, there is a possibility of
taking some trade actions. I do not want to get into the
details because decisions have not been made, but yes.
Mr. LUETKEMEYER. Are we taking action against anybody? Do
you have any actions pending?
Mr. SANFORD. Congressman, I am not the expert on IPR. I am
more than happy to take questions you may have and follow up.
Mr. LUETKEMEYER. Can you point to any enforcement action,
sir, under anything that you are aware of? Are we taking any
enforcement action?
Mr. SANFORD. Congressman, we have a number of disputes in
the WTO. They are ongoing right now, in IP and outside of IP.
Mr. LUETKEMEYER. Okay. One more quick question.
One of the things that if the president does not have trade
promotion authority, sometimes I am wondering are we playing on
the same field when we negotiate contracts, negotiate treaties
with other countries because if he does not have authority and
the other country knows he does not, are they taking advantage
of that from a standpoint that they have got our country over a
barrel from a negotiating standpoint?
Mr. SANFORD. Well, we certainly can continue to negotiate.
We will need the TPA to do the deal at the end of the day. I
think that having TPA does strengthen our hand as trade
negotiators so that there is less risk that our trade partners
are withholding the final movements they can make subject to us
being able to demonstrate we can complete a deal.
Mr. LUETKEMEYER. One more quick question. Well, my time is
already expired here. I appreciate the indulgence of the
chairman.
You have a number of priorities with regards to things that
you try and push with regards to small business. Where does ag
figure in that list of priorities?
Mr. SANFORD. That is part of what we are trying to do.
Mr. LUETKEMEYER. Is it number one? Number five? Number 10?
Where on the list would ag fall within your list of priorities?
Mr. SANFORD. I am not making a differentiation on that. One
of the things we are trying to do is that we are ensuring that
small business interests, whether it is in manufacturing,
services, or agriculture is being reflected in our trade policy
activities. And as has been pointed out by the acting chair or
ranking member, you know, 98 percent of our exporters right now
are small businesses. So much of what we are focused on is of
great benefit to small businesses. We are looking at how we can
ensure that we are doing even a better job at that.
Mr. LUETKEMEYER. Thank you, Mr. Chair.
Chairman HANNA. Mr. Murphy.
Mr. MURPHY. Thank you. Again, thank you for your time.
I just want to talk just for a minute about some of the
barriers to entry for these small businesses, because after the
recent trade deals it seems pretty obvious that the big
corporations have the infrastructure, that they can easily take
advantage of some of the free trade agreements. But sadly, it
seems that it is our government that has actually become a
burden for a lot of the small businesses. And I do not want to
argue against the valid role that our government should play in
supporting and guiding and even cheerleading for American
companies. But what happens when this sort of patchwork of
export programs and agencies becomes too burdensome for the
small businesses and what are your suggestions and ideas for
how we could perhaps streamline that going forward?
Mr. SANFORD. Well, I think, obviously, we do not have an
export promotion program at USTR. I think our interest is in
ensuring that we are linking the trade policy work we are doing
with the other federal agencies that have export financing or
trade promotion programs, and then doing a better job linking,
as you noted, at the state level or local level to various
programs they may have.
Mr. MURPHY. So does that happen before the trade agreement
is finalized? Does it happen during negotiations? After an
agreement has been approved? Are you looking back on some of
our previous deals saying, ``Oh, here is how we can improve,''
and perhaps what are some of those things you have learned?
Mr. SANFORD. Yeah. I mean, it is an ongoing process with
consultations with various advisory committees that we have,
both from industry as well as state and local representatives.
Mr. MURPHY. Do you have a monthly meeting where you get all
the agencies together or every six months?
Mr. SANFORD. Well, we have an active interagency trade
policy staff committee that is our full interagency. There is
also an interagency that is led by Commerce--the Trade
Promotion Coordinating Committee, which is more on the
promotion side rather than the policy side for part of that as
well. And they interface with the states and some of their
organizations.
So I think there are two steps. One is during our
formulation of our negotiating priorities and our negotiation,
we need that active engagement and input from the various
stakeholders we have. And then further down the road in terms
of the outreach to make stakeholders aware of the opportunities
that these agreements provide, that is another area where we
really need to be able to tap into the state and local.
Mr. MURPHY. Most committees talk about burdensome
regulations and I agree with that in most cases, but one of the
things that I really noticed in my one year here is that a lot
of the agencies are not even communicating; that they do not
talk. So I think we would all be open, Republican or Democrat,
to hearing any suggestions you have if we could facilitate
those meetings, or any ideas you have to improve
communications. I think that would really help a lot of the
small businesses.
Mr. SANFORD. Yeah. Let me point back to the Trade Promotion
Coordinating Committee, which has been an interagency process
that was established some years ago and then has had a greater
role in recent years after the National Export Initiative was
launched four or five years ago. And I want to stress that is
an active interagency process where you have OPEC and Ex-Im
Bank and SBA, so you have got various finance elements. You
have also got the Department of Commerce and its export
promotion activities, both domestically and overseas. And there
has been a lot of effort to better coordinate those activities.
And then I would say from a USTR standpoint, figure out how we
can, you know, if these FTAs are providing the new
opportunities, we would like to see the finance agencies and
the promotion agencies essentially promoting those new
opportunities as part of this process.
Mr. MURPHY. I want to talk just briefly about that Colombia
Free Trade Agreement. We were told that this was going to
improve labor practices, labor rights in Colombia, but from
what I can tell that has not happened to the extent that we
were told. What is different about this deal? What are we going
to do to improve it so we can actually enforce it? Is it an
enforcement issue? Is it because the labor provisions were
written too weakly or there are exploitable loopholes? Was it
sequestration that underfunded some of the agencies that could
not actually go after them? What can we learn and what can we
improve in TPP so labor practices are improved everywhere; that
it is not a race to the bottom?
Mr. SANFORD. Well, certainly the labor provisions in any of
our FTAs is a priority for us. I mean, Colombia is a relatively
very recent FTA and folks are still working on the
implementation of these, ensuring the provisions are being
applied. I am not familiar with what the issues may be there,
if things are being investigated or not. But happy to follow up
if you have specific questions on that.
Mr. MURPHY. Switching over to Ag. It is a very important
part of my district, and really, our country. And while I will
continue to review TPA, I am interested in whether some of the
agricultural provisions have been improved since 2002, and what
are the key differences that would mean for some of the Florida
farmers? We have a lot of specialty crops, especially citrus.
Mr. SANFORD. Are you speaking in terms of our active
negotiations?
Mr. MURPHY. What has improved since the 2002 Trade
Promotion Authority?
Mr. SANFORD. Well, I mean, obviously this is a particular
export priority for us, this whole area of agriculture. We are
working hard to eliminate duties on all agricultural items in
our trade deals. That is certainly what we are doing at TPP and
we will be working to do in T-TIP, for instance. What I would
stress is that there is even more attention being paid to sort
of the non-tariff barriers, the SPS barriers that present some
bigger challenges. As you know, even when we can eliminate the
duties, it does not necessarily mean our products have access
to that market.
So that is where I think we are trying to come up with ways
that, for instance, if you look at T-TIP, which is earlier on
in terms of the negotiation, one of our big challenges there
was needing to find science-based decision-making; that as you
probably know, we have major products that have been banned
from that market. So this is not simply an issue of eliminating
the duties but figuring out ways to discipline the SPS
provisions, ensuring there is transparency in the development
of these, that we have input into them, that they are science-
based. That is a major focus of us right now.
Mr. MURPHY. A lot of my farmers are worried about some of
their seasonal crops and the perishability of goods like
tomatoes, and other specialty crops. Has perishability been
brought up and how has this improved for American farmers?
Mr. SANFORD. Not specifically because I do not work on the
agricultural items, but I think this is something, perhaps the
WTO Trade Facilitation Agreement can help as well speeding up
customs clearance and things like this.
Mr. MURPHY. How can TPP open up some Asian markets for
citrus specifically?
Mr. SANFORD. Well, the WTOTF was just done, so that is not
even implemented at this point. But no, I do not. Sorry.
Mr. MURPHY. We constantly talk about infrastructure, and I
think we all agree we need to improve it. And one of the
obstacles for our exports is our aging infrastructure. We talk
continually about how we need to better use our harbor
maintenance trust fund to maintain our ports and our highway
trust fund will soon be unable to meet the demand for road
maintenance. Can you talk briefly about the impact of
infrastructure and the importance of maintaining it and
improving it as far as that relates specifically to trade?
Mr. SANFORD. Yeah, I think having a strong infrastructure
is fundamental to being competitive when it comes to exports.
So I think this is something that is important for us if we are
looking to be expanding our exports, that our ports have the
facilities to export; that we have the transportation systems
in place to be able to transport product from field or factory
to port; that we have the infrastructure that allows products
to clear customs quickly so things do not get stuck on the
dock. I think that this is a consideration when foreign firms
are looking to build plants here in terms of judgment of how
competitive the place is. Do you have the adequate
infrastructure to support the export of products in the United
States? So I think this is tied up in our ability to fully take
advantage of the new trade opportunities that our trade
agreements yield.
Mr. MURPHY. All right. Thank you.
Chairman HANNA. Mr. Huelskamp.
Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the
opportunity to visit. I am from Western Kansas where
agriculture is a main export industry, and I want to follow up
on a few questions from my colleagues about your list of
priorities as the office of USTR. How do you put together a
list of priorities? I mean, these are multi-faceted agreements
that deal with a wide range of exports and sometimes certain
industries feel like they may or may not be at the top of the
list of your priorities. So can you describe that
prioritization process and then where agriculture might fit in
that list?
Mr. SANFORD. Sure. I mean, I think if you step back, when
we are formulating an approach we are going to take in a trade
agreement, we have an extensive consultation with the public.
You know, put out a Federal Register. Get a sense of what the
challenge is, what issues our stakeholders feel we should
address. We have congressional mandated advisory committee
systems that we consult with or advisors in terms of
priorities. There is an interagency process, of course, and
very importantly consulting with Congress in terms of
priorities and views and things that you would like to see
addressed in this. And then obviously, I have got my political
leadership who have guidance they want to provide in this
process as well. So it is an active and ongoing consultation
process with a variety of different stakeholders of which
Congress is a very important part.
Mr. HUELSKAMP. But when we look back over actual historical
statements from your political leadership and those in the
party, there is a real concern that perhaps agriculture is not
a main or a top priority. You know, if you are going to pick
and choose, let us deal with barriers to other districts that
might have more political access. I am just trying to have you
describe exactly where is the biggest potential for export
growth? And where do you expect that this would have the
biggest bang for the buck in terms of the agreements you are
proposing that we move forward on?
Mr. SANFORD. Well, I think we are not looking at singling
out specific areas.
Mr. HUELSKAMP. When you negotiate these agreements, that is
exactly what you do. These are not free trade agreements in
which there are no barriers.
Mr. SANFORD. Right.
Mr. HUELSKAMP. There are thousands of pages of restrictions
and lowering of restrictions. There are winners and losers in
each of these agreements. My question is how do you decide and
where does our culture fit in that? Because if you look at the
export growth, we can talk about a lot of industries but it is
an absolute fact that the export growth that is happening, our
surplus is because of agriculture. That is the number one
arena, and I see it as the number one potential. So what you
see as the potential, obviously maybe that is a political
calculation. I am just curious. How do you prioritize? And you
are asking us, Congress, you want this input. I am asking what
is your thought process and where does agriculture fit in that
prioritization process.
Mr. SANFORD. You are absolutely right. I mean, we are a
powerhouse. The United States is a powerhouse when it comes to
exports of agricultural products. We have a comparative
advantage and we negotiate these comprehensive agreements.
So I think to touch on something I was touching on earlier,
you know, we are getting to the point where we have eliminated
or continue to eliminate many of these duties and the problems
we are facing are really on the regulatory side in many cases.
It is the SPS barriers that we are trying to tackle. So the big
challenge we have there is how do we come up with new
provisions that can constrain the mischief that some of our
trading partners may come up with that are keeping our products
out of the market.
Mr. HUELSKAMP. I agree. Let me give some specific examples.
We had issues with Japan for a number of years.
Mr. SANFORD. Sure.
Mr. HUELSKAMP. And finally we reached an agreement I think
successfully, but I am worried about South Korea restricting
imports of our beef, current restrictions on meat going into
Russia. Can you describe a little bit more of what is going on
in those arenas? And certainly there are non-tariff barriers
and they are not based on scientific standards, world
standards, but they continue to fester out there and restrict
the ability of American farmers and ranchers to get into places
that want to buy our stuff. So what are we doing about these
two particular countries and how does that play into these
agreements in the future?
Mr. SANFORD. Yeah. I am not intimately familiar. I do not
work on agriculture, but obviously now we have Russia in the
WTO and they are subject to those new disciplines. It is early
on in that process. I know we had some challenges in getting
some, I think, beef and some other poultry with Russia in
recent years. I believe some of that may have gotten cleaned up
as far as their accession process, but in fact, if there are
unjustified measures they are taking then it is maybe something
we need to take a look at in terms of the WTO commitments that
they have made. Likewise, we now have in place an FTA with
Korea, and if, in fact, experts need to take a look at these
actions or these measures they have taken, but are they
consistent with the WTO? Are they consistent with the FTA
commitments? That is something, you know, we have a tool, and
it may be something we need to look at.
Mr. HUELSKAMP. I agree. We do have a tool--frustration from
folks that actually raise our ag exports as how long it takes.
We are expected to open our markets up to their stuff and then
we spend years trying to sell what is the safest product in the
world, and everybody knows the games that are being played
there. And my concern is as we move forward because again, that
is where the potential is.
And what I have not heard from you though is the answer to
that first question. So what is the number one priority? When
you look at these, and again, you are going in a room, you are
negotiating hundreds and hundreds of different industries, and
if you give for one industry, you take from another perhaps. I
mean, that is the agreement. So I am just trying to figure what
the thought process is as we move forward and say, hey, I want
this authority, and I understand that. I am a supporter of
that. But I do not understand how you prioritize and decide,
for instance in my case agriculture, but in other cases how you
prioritize those negotiations.
Mr. SANFORD. Well, I guess we have objectives we are trying
to achieve. They are quite broad. As part of a negotiation,
obviously there are challenges and choices and compromises one
must make as you are going forward. But up front we formulate
what our negotiating objectives are and, in fact, that is
something we do communicate with the Hill. So there is not some
sense of a master list that says ag is here and IPR is here. I
think to your point, I am trying to be responsive, is that
during the negotiation, obviously it is going to depend on the
context, and there may be some compromises that one needs to
make.
Mr. HUELSKAMP. I think, Mr. Chairman, if we might have time
at the end I would like to ask a couple more follow-up
questions.
I would like to see that list of objectives, and I have not
heard those here. I think Mr. Luetkemeyer asked a number of
questions trying to get a sense of what the goals were, where
the greatest potential was. The president announces he is going
to double exports, but of course, every president says that.
They all say that. This is what you are all going to agree on
that, but again, there is a lot of hard work there. I have not
seen the objectives. I mean, do you have a list of those? Have
those been formulated by the administration? And where are
those at?
Mr. SANFORD. Well, I guess what I am thinking of is when
we, for instance, that we launched negotiations to T-TIP, we
sent a letter to the Hill which laid out what our negotiating
objectives were comprehensively, and so that is what I am
thinking of. And that came through.
Mr. HUELSKAMP. How did agriculture fit in that? Was
agriculture mentioned at all in the objectives?
Mr. SANFORD. Of course it was. I do not have the language
in front of me, but our objectives would be to eliminate duties
on agricultural products and address all of these SPS problems
we may be facing.
Mr. HUELSKAMP. These have been facing for decades with the
EU.
Mr. SANFORD. Sure.
Mr. HUELSKAMP. And they continue to grow every day and they
are nonscientific. I mean, we had this battle with Japan and
beef, and we are still, I think, and we have another issue
coming with Brazil.
Mr. SANFORD. Right.
Mr. HUELSKAMP. When the department announced on December
23rd we are going to start importing beef from areas of Brazil
that have foot-and-mouth disease, very little discussion on
that. And so folks in agriculture are wondering where they fit
in the prioritization scheme because, again, there are winners
and losers, and I am a big supporter of open and free trade.
But again, there are losers. I mean, you heard from some of my
colleagues, and they want assurances of how you determine who
the winners and losers are on these agreements.
Mr. SANFORD. Right. I totally agree. We have, you
mentioned, the challenges in Europe. This has been going on for
some time. I am well aware of that. That is why I think T-TIP
provides this new opportunity. If we are able to come up with
some new provisions, new disciplines that we can extract and
impose on the Europeans, then it helps provide more access for
U.S. agricultural products and do away with some of the
barriers you are facing right now. It would be more leverage
than we have right now.
Mr. HUELSKAMP. Okay. Thank you, Mr. Chairman. I yield back.
Chairman HANNA. Do you get the message?
Mr. SANFORD. Got the message. Yes. I appreciate that.
Chairman HANNA. There are deep concerns in agriculture. A
number of the questions, which I will not repeat, are
associated with that.
In my own district, we hear daily about the TPP. It would
be easy to be dismissive and say it is misinformation or
wrongheaded, but in the absence of real information about it,
we do not really do that. The Trans-Pacific Partnership
Agreement estimates 3.5 million new jobs. However, as I just
said, so many of my constituents believe just the opposite.
They look at other agreements and they have their opinions
about them. Part of the job of the administration is going to
be to sell this. Right? I mean, that is kind of why it is done
the way it is done because if you open it up to the light of
day on a regular basis you would probably get nowhere but take
a long time to do it.
So if you agree with that, how do you unwind all that? What
is your plan to sell this plan, not just to Congress, but to
small business unions and the American public? That is an
enormous part of this problem.
Mr. SANFORD. Right. No, I think there is an enormous
education process that is necessary in terms of outreach, and I
think that is something that we will need to leverage all
resources to communicate that. As you know, it is an active
negotiation. You cannot negotiate this in public, so there are
always things that people do not know. But there are enormous
benefits to this agreement, and we need to continue consulting
with Congress as I think Ambassador Froman has been stepping up
and doing more of that, but to work with the stakeholders more
broadly. It has been a while since we had a big trade agreement
completed, and these agreements tend to go on for a while. I
think part of this is people are not quite sure when this is
going to end and when they are going to see some concrete
benefits from this. But one of the things we need to do is
working with the Hill more, work with our interagency process,
work with the stakeholders, and get the proponents or the
beneficiaries of these agreements to be more vocal and to sort
of get their views out there as well, so it is not simply those
that may be critical of the agreement.
Chairman HANNA. You have seen some of the information out
there that we get that we cannot find a basis in reality but
people--and I would suggest to you that this is building
momentum. You probably sense that yourself. Is that right?
Mr. SANFORD. Yeah. I think it varies from negotiation to
negotiation. I think there has been much more focus on TPP
because that has been outstanding for some time, but we have
seen this in the past in WTO in Seattle if you go back that
far. So, yes.
Chairman HANNA. You made mention earlier about labor
conditions in Colombia. This might be somewhat of a practical
and a little bit of a philosophical question, too. How
realistic is it for us to expect countries to honor our view of
what that means? And how realistic is it for us to actually set
out to enforce our notion of what right and wrong is in these
countries? Is it a practical expectation? I mean, whether you
approve of it or not, is it a reasonable thing to attempt to do
in these kinds of negotiations or you just set out guidelines
and hope for the best?
Mr. SANFORD. Well, I think it is back to what our
negotiating objectives are. And so we are going to continue
pursuing environmental and labor provisions in the agreements
that we negotiate. Where we end up on that is a matter of
negotiation with our trade partners, but that is our objective
going in and we have certain expectations on being able to
deliver on that.
Chairman HANNA. How much do they conflict with one another?
I mean, let us be honest. We know that 95 percent of the
world's population, et cetera, you know, China's middle class
is growing. At some point they are going to demand a lot more
of what we do. Of course, they are the world's largest
polluter. They have a reputation, as Mr. Mulvaney indicated,
this kind of backdoor deals and defiance of intellectual
property rules. How do you balance those social issues in the
environment which is also important? How do you go about doing
that in a world where I guess our main goal is to sell goods
and services? How do you manage that leverage?
Mr. SANFORD. Well, you mentioned China, for instance. China
may have an interest in joining TPP at some point, so if they
were to join TPP, they would be buying into provisions that
have been negotiated beforehand. That would provide a fair
amount of leverage in getting what we want from them. It would
help level the playing field.
Chairman HANNA. So you do think you have some opportunities
to make some differences on issues that might be more nuanced
or at least you have less direct labor or less direct leverage
because it is not necessarily dollars and sense we are talking
about but only indirectly that?
Mr. SANFORD. Yes, I think so, and I think the kinds of
agreements we are conducting or negotiating, it is not static.
We talked about SOEs earlier. Well, that is not something we
talked about developing disciplines in the past on. So there is
continuing to be more effort on some of these newer issues, I
guess. In environment we are doing more. And I think the other
thing is that simply rather than just these bilateral deals,
when people are looking at potentially joining larger deals,
like joining TPP or something, then there potentially is more
leverage to have them sign on to provisions they would not have
been willing to do bilaterally with us.
Chairman HANNA. Sure.
One last question. In your experience, and this Committee
is all about small business and the opportunities that you are
going to present with these agreements and that lie therein,
what are the three barriers for small business exporters that
you see that you can work out and address through the USTR?
Mr. SANFORD. Well, I think it is sort of probably themes.
One of the biggest sets of issues that we hear from
stakeholders is sort of non-tariff issues, many of which are
regulatory. Not understanding what the foreign regulations are,
not understanding necessarily how they can demonstrate their
products comply with those regulations, not having the in-house
resources to figure these issues out, and therefore, perhaps
passing up sales that they would otherwise have. Just not
willing to pursue that. That in general is a very large topic
and that is something that we are trying to address in our
trade negotiations.
Another big issue is simply the SMEs. Small businesses
often simply do not know how to take advantage of the
opportunities that our agreements provide.
Chairman HANNA. Do you have a plan for that?
Mr. SANFORD. Well, this gets back a bit to the discussions
we were having about the TPCC and the interagency process. I
mean, I think there is more scope for directing a lot of the
finance programs and the export promotion programs, direct SMEs
to take advantage of these countries in which we have FTAs
with, for instance. The FTAs provide opportunities that are
particularly beneficial to small businesses, and I think many
small businesses are not making differentiation between
countries in which we have FTAs and we do not. And there may be
very big differences in terms of their ability to sell in those
markets. And again, I think that is how having a better
interface between the policy outcomes and the promotion works;
they are working in concert.
Chairman HANNA. When do you think we will see this
agreement?
Mr. SANFORD. The TPP?
Chairman HANNA. Yes.
Mr. SANFORD. Well, we are certainly trying to get it done
in the very near term this year, but I guess what I would
stress is that substance is going to drive the timetable rather
than otherwise. And so it is more important that we get the
agreement right, get the provisions we are pressing for, but we
are very hopeful to get this done early this year.
Chairman HANNA. Thank you. It is interesting how at a
meeting like this you can carry on for four or five minutes and
you use nothing but acronyms.
Thank you, sir, for being here.
As we start to consider various trade legislation and
agreements, it is important that the administration keeps our
Committee updated on the status and impact of small businesses.
Will the USTR and the administration commit to periodically
updating our Committee and how businesses are advancing in
trade negotiations? I am assuming that is a yes answer?
Mr. SANFORD. Happy to do that. Yes.
Chairman HANNA. We appreciate that.
Again, I look forward to working with you and my colleagues
in Washington of identifying new solutions to assist small
exporters. As we have said before, more exports should equal
more and better jobs for this country. That is all our goals.
I ask unanimous consent that members have five legislative
days to submit statements and supporting materials for the
record. Hearing no objection, so ordered.
This hearing is now adjourned. And thank you very much,
sir.
Mr. SANFORD. Thank you.
[Whereupon, at 11:01 a.m., the Subcommittee was adjourned.]
A P P E N D I X
Testimony of James Sanford
Assistant U.S. Trade Representative
for Small Business, Market Access and Industrial Competitiveness
Before the Small Business Subcommittee on Agriculture, Energy, and
Trade
January 28, 2014
Chairman Hanna, Ranking Member Murphy, and Members of the
Subcommittee, thank you for convening this hearing, and for the
opportunity to testify on the work of the Office of the U.S.
Trade Representative (USTR) to expand exports for U.S. small
businesses.
Under President Obama's leadership, USTR is working closely
with our interagency partners to help American businesses of
all sizes seize export opportunities and acquire the resources
necessary to succeed in the global marketplace.
America's small businesses are key engines of our nation's
economic growth, job creation, and innovation. Our small
businesses already play a major role in international trade--
accounting for nearly 98 percent of all U.S. exporters. Direct
and indirect exports by U.S. small businesses support millions
of American jobs and account for nearly 40 percent of the total
value of U.S. exports of goods and services. Nearly 300,000
U.S. small businesses exported in 2011--with exports of $440
billion, an increase of 14 percent from 2010.
While these trends are encouraging, we can help our small
businesses do more. There is still significant potential for
export growth. Only a small fraction of U.S. small businesses
are currently exporting. In fact, the United States lags behind
many economies in this regard. And, most small exporters sell
their goods to only one foreign country and to only one
customer in that country.
To expand export opportunities for small businesses and
make it easier for them to take advantage of these
opportunities, USTR is pursuing a robust trade agenda that
supports small businesses and broader economic growth by
tearing down barriers and creating new overseas opportunities
for U.S. farmers, ranchers, manufacturers, and service
providers of all sizes. We are working to level the playing
field so that our workers and businesses can compete and win in
a global economy. And, we are also vigorously enforcing our
trade rights and insisting that countries fulfill their
commitments.
First, the United States currently has in place free trade
agreements (FTAs) with 20 other countries. These trade deals
have broken down barriers and pried open markets for U.S.
products from agriculture to manufacturing to services. This
helps all our small businesses--including those that export
directly, as well as those that add value throughout the supply
chain--by eliminating tariffs, increasing transparency in
customs procedures, creating more predictable regulatory and
legal frameworks, and promoting stronger intellectual property
rights protection and enforcement. In addition, we are using
the bilateral committees established under these FTAs to engage
on ways we can help small businesses to take advantage of the
export opportunities they provide.
Second, USTR is pursing new trade agreements that when
combined with existing FTAs, will represent two-thirds of
global trade. We are also working on key multilateral deals
that will have important benefits for small services providers
and clean technology companies.
In the Asia-Pacific region, USTR is negotiating
the Trans-Pacific Partnership (TPP) with eleven other countries
(Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New
Zealand, Peru, Singapore and Vietnam). The TPP will have
significant economic benefits for the United States. It will
cut tariffs and break down non-tariff barriers--resulting in an
increase in U.S. exports. In fact, according to a study funded
by the Peterson Institute, the TPP would generate an additional
$123.5 billion in U.S. exports. These exports will support
thousands of additional U.S. jobs. Just as importantly, the TPP
will also open the region's services market to highly-
competitive American companies--supporting even more American
jobs in sectors from express delivery and telecommunications to
education and healthcare services. For small businesses, the
TPP will provide new access to Asia-Pacific markets, streamline
customs procedures, increase transparency and due process in
the regulatory environment in the region, prevent barriers to
the free flow of information and requirements to localize
servers and other internet infrastructure, and ensure
intellectual property rights protection and enforcement. These
outcomes will be of particular benefit to small businesses. We
hear from small businesses that they often lack the in-house
resources to understand and comply with foreign regulatory or
documentation requirements or to establish facilities in other
countries.
USTR is also working to help small businesses take
advantage of the new opportunities that will be provided by the
TPP, including by expanding web-based TPP information and
resources for small businesses, and establishing a new
mechanism to do this in the TPP.
USTR is also negotiating the Transatlantic Trade
and Investment Partnership (T-TIP) agreement with the EU. T-TIP
will be high-standard, comprehensive trade and investment
agreement aimed at strengthening a partnership that already
supports $1 trillion in annual two-way trade, $4 trillion in
investment, and 13 million jobs in both economies.
We are working closely with stakeholders to identify EU
trade barriers that may disproportionately impact American
small businesses, so that we can address them in the T-TIP
negotiations. To aid in this effort, the U.S.-International
Trade Commission will be issuing a report to USTR on these
barriers next month, drawing on input received from a public
hearing and small business roundtables held around the United
States.
T-TIP provisions on small business will build on the
existing U.S.-EU cooperation in this area. Since 2011, USTR has
engaged in a series of U.S.-EU workshops organized to bring
together small business stakeholders and government officials
on both sides of the Atlantic to discuss common trade issues of
specific interest to small businesses and identify areas for
strengthening U.S.-EU cooperation. Through this effort, not
only have we been able to better understand challenges small
businesses face, we have also taken steps to enhance U.S.-EU
cooperation on small business trade promotion activities.
We are working in the WTO to expand U.S. export
opportunities around the globe. The recently concluded WTO
Trade Facilitation Agreement is the first major multilateral
trade agreement in two decades. Once implemented, the agreement
will reduce red tape and bureaucratic delay for goods shipped
around the world. Small businesses will be among the biggest
beneficiaries of this deal, since they encounter the greatest
difficulties in navigating complex customs systems.
USTR is leading efforts in Geneva to advance
negotiations to substantially expand the scope of high-tech
products subject to duty elimination under the Information
Technology Agreement (ITA). And USTR is also leading
negotiations in Geneva on a free trade agreement focused
exclusively on services. The Trade in Services Agreement (TiSA)
will encompass state-of-the-art trade rules aimed at promoting
fair and open competition across a broad spectrum of service
sectors. And we have just launched an initiative in Geneva
seeking to liberalize trade in environmental goods. These
plurilateral agreements, once completed, will help level the
playing field and significantly expand export opportunities for
American technology and services firms of all sizes.
Of course, to actively and effectively pursue these
initiatives, the Administration will need Trade Promotion
Authority (TPA). We welcome the introduction of the Bipartisan
Congressional Trade Priorities Act of 2014 as an important step
towards Congress updating its important role in trade
negotiations. We look forward to working with Democrats and
Republicans in Congress throughout the legislative process to
pass Trade Promotion Authority legislation with as broad
bipartisan support as possible.
The United States has the most open markets in the world,
but our products and services still face barriers abroad. The
high tariffs and barriers faced by our exporters are
essentially high taxes that U.S. citizens pay to foreign
governments. Such high taxes distort patterns of trade that
benefit consumers and producers, which is why the United States
does not charge them. We need every tool we have to knock down
the barriers still maintained by other governments. If we do
not engage, we will continue to bear the tax imposed by the
higher barriers maintained against us by other countries.
Third, USTR is pursuing important initiatives in regional
fora to address challenges that face small business exporters.
In the Asia-Pacific Economic Cooperation (APEC) forum, for
example, the United States and other members are advancing
initiatives to: assist U.S. companies, including small
businesses, enter and participate in global supply chains;
address local content requirements and other localization
barriers to trade; and promote greater regulatory coherence to
prevent regulatory divergences from turning into non-tariff
barriers.
In the Western Hemisphere, USTR is collaborating with other
agencies, including the Departments of Commerce and State and
the Small Business Administration, to connect more U.S. small
businesses to regional partners and to foster entrepreneurship.
The Small Business Network of the Americas is helping SBA-
supported U.S. Small Business Development Centers (SBDCs) and
the companies they serve connect to counterparts in Central and
Latin America in order to build further trade links and
networks, including with major markets such as Canada, Mexico,
and Brazil.
Fourth, USTR is also vigorously enforcing our trade
agreements. The Interagency Trade Enforcement Center (ITEC)
significantly enhances the Administration's capabilities to
challenge aggressively unfair trade practices around the world.
Small businesses typically have fewer resources than larger
companies to prepare information to enable us to coordinate
potential enforcement actions. ITEC enhances the
Administration's ability to investigate and pursue enforcement
cases critical to U.S. companies, regardless of their size.
Finally, we are working to communicate more effectively how
our trade policy initiatives can benefit U.S. small businesses.
Ambassador Froman and the USTR team continue outreach to small
businesses across the country to highlight export opportunities
we have created, and to learn more about new trade challenges
and how we might help. In response, USTR is collaborating with
other agencies to provide more on-line tools and information to
make it easier for small businesses to do market research and
identify tariff rates for specific products under existing U.S.
FTAs.
USTR is committed in partnership with other federal
agencies to helping U.S. small businesses compete and succeed
in the global economy. Thank you for this opportunity to
testify about USTR's efforts to expand export opportunities for
this critical segment of the U.S. economy.
Small Business Trade Agenda: Status and Impact of International
Agreements
January 28, 2014
Questions for the Record (QFRs)
Rep. Tipton
1. Regarding Trade Promotion Authority (TPA), can you
explain how USTR works with members of Congress to
ensure that our issues and concerns are being
addressed? How often do you reach out to Congress?
a. On the same subject of TPA, can you
explain how you work with small business to
gather their input on the trade agreements?
b. And what is the process for communicating
the trade text to interested businesses in my
district?
We think it is critical that Congress, stakeholders,
advisers, and the public have a robust opportunity for
engagement to ensure that we're getting the best
input--and that we are also explaining what we are
doing, how we are doing it, and why we are doing it.
That is why during trade negotiations, we engage in
hundreds of Hill consultations with Congressional
Members and staff on all chapters of the agreement,
consistently requesting input on the direction, focus,
and content of ongoing negotiations. Any Member of
Congress can see text upon request, with USTR staff
available to provide explanations, answer questions,
and receive Congressional guidance.
We are negotiating these agreements with an eye
toward helping small businesses benefit from new trade
and investment opportunities. That's why USTR, the
Small Business Administration, and the U.S.
International Trade Commission recently teamed up to
convene a nationwide series of roundtables with small
firms in over 20 cities from coast to coast this fall,
along with a hearing in Washington DC. USTR has also
worked with our colleagues at Department of Commerce
and the Small Business Administration to speak with the
U.S. Export Assistance Centers and Small Business
Administration Regional Offices regarding what they are
hearing from small businesses across the country.
We also work closely with our Congressionally-
mandated advisory committee system, including members
from businesses large and small, labor unions,
environmental groups, consumer groups, health groups,
state and local government, and academia to obtain
input on our trade agreements. Among the sixteen
Industry Advisory Committees (ITACs), the ITAC for
Small and Minority Business is one specifically
designed to provide policy and technical advice and
recommendations to the USTR and to the Secretary of
Commerce regarding trade barriers, negotiations of
trade agreements, and implementation of existing trade
agreements affecting small business.
We also publish a notice in the Federal Register
seeking comments from the public, including small
businesses, and hold a public hearing before initiating
negotiations. During the negotiations of agreements
such as the Trans-Pacific Partnership Agreement, USTR
conducts stakeholder events at which interested members
of the public have the opportunity to present views to
negotiators and receive updates on the negotiations.
2. One of the top trade barriers we hear from small
firms is the ability to understand changes in foreign
regulations--mainly non-tariff barriers. That's why I
introduced H.R. 1916, the Transparent Rules Allow
Direct Exporting (TRADE) for Small Business Act, which
would require the Department of Commerce to work with
USTR to clearly publish changes in foreign regulations
on export.gov or a substitute website. This will
provide a one-stop source for small firms to stay
current on changing foreign regulations. Would the
Administration support this initiative? And what are
you doing to currently help small firms in navigating
foreign barriers?
USTR is working with other agencies to help small
businesses take advantage of the opportunities that our
trade agreements provide, including by expanding web-
based information and resources for small businesses.
For example, USTR, the Department of Commerce, and the
Small Business Administration launched the FTA Tariff
Tool. This free, online tool (http://export/FTA/
ftatarifftool/index.asp) can help small businesses take
better advantage of the reduction and elimination of
tariffs under U.S. free trade agreements (FTAs). The
FTA Tariff Tool was expanded to include tariff
information on textiles and apparel products, as well
as rules of origin under U.S. FTAs, and will eventually
be expanded to include these provisions drawn from new
regional free trade agreements such as the TPP
agreement.
U.S. businesses that would like to be notified of
changes to foreign technical regulations that can
affect their business and access to international
markets can register for Notify U.S., a free, web-based
email registration service provided by the National
Institute of Standards and Technology (NIST) of the
U.S. Department of Commerce (https://tsapps.nist.gov/
notifyus/data/index/index.cfm).
3. Last August the Government Accountability Office
(GAO) issued a report, requested by our Committee,
which showed the federal government needs to better
manage, collaborate and promote trade programs so that
export resources can be more efficient. Our Committee
has been focused on reducing duplication in government
agencies to help small firms understand where to access
the appropriate information. How are you working with
the trade agencies to reduce duplication, and to help
prepare small firms for new export opportunities?
USTR is committed to working in partnership with
other federal agencies to help U.S. small businesses
compete and succeed in the global economy. In addition
to USTR's formal interagency trade policy process, we
work closely with interagency partners to promote small
business exports through the Trade Promotion
Coordinating Committee's (TPCC) Small Business Working
Group, members of which also include the Departments of
Commerce, State, and Agriculture, the Small Business
Administration (SBA), the U.S. Export-Import Bank, and
others across the Government. The TPCC Small Business
Working Group connects U.S. small businesses to trade
information and resources to help them begin or expand
their exports and take advantage of existing trade
agreements. Moreover, our newest FTAs, such as the
Transatlantic Trade and Investment Partnership (T-TIP)
and Trans-Pacific Partnership (TPP), will include
chapters specifically designed to promote information
sharing and cooperative activities to benefit small-
and medium-sized enterprises (SMEs). This will allow
U.S. SMEs to leverage the full benefits and
opportunities provided by the agreements.
4. Another report issued by the Government
Accountability Office (GA), and appropriately titled,
``Small Business Administration Needs to Improve
Collaboration to Implement Its Expanded Role,''
explains the duplication and lack of coordination from
the SBA. In your opinion, what role should SBA play in
the overall trade promotion function?
USTR is engaged with SBA on a range of activities to
communicate more effectively how our trade policy
initiatives can benefit U.S. small businesses. For
example, SBA has been a key partner in reaching out to
small businesses through roundtables around the United
States to obtain their input on Trans-Atlantic Trade
and Investment Partnership negotiations (T-TIP) and
trade barriers that may disproportionately impact small
businesses exporting to the European Union. SBA is also
a key partner, along with other agencies, to provide
more on-line tools and information to make it easier
for small businesses to do market research and identify
tariff rates for specific products under existing U.S.
FTAs.
Rep. Mulvaney
1. Some countries participating in the Trans-pacific
Partnership (TPP) Agreement have a vast number of SOEs
that have the financial backing and support of their
national government and may have goals other than
achieving a profit. Naturally, many small firms cannot
compete with a SOE over the long term. How is USTR
working to ensure that the small businesses in my
district will not face unfair competition against a
state owned enterprise? Please provide information
specific to the TPP negotiations and draft language, as
well as any other initiatives USTR is undertaking with
respect to SOEs generally.
The goal of the TPP agreement is to level the playing
field for U.S. workers and companies, including small
businesses. That is why the TPP agreement includes new
disciplines to address unfair competition from State-
owned enterprises (SOEs). These issues have become
increasingly serious concerns for U.S. industry and
workers. We are seeking for the first time ever to
establish clear rules through the TPP agreement that
ensure that SOEs that are engaged in commercial
activities that are competing with commercial firms are
not receiving unfair advantages from the governments
that own them. We are also working to increase
transparency, so we know the extent of government
participation in and support of SOEs. At the same time,
we are drafting the obligations in a way that does not
limit our own ability--or that of other TPP countries--
to provide essential public services through SOEs.
2. How is USTR addressing currency manipulation in
Vietnam in regard to the TPP?
Currency is an issue we care a great deal about and
we understand Members of Congress in both the House and
Senate do as well. The Treasury Department has the
lead, but we are consulting with Congress and other TPP
partners on the best way to address the issue of
currency.
3. Vietnam is insisting on a flexible rule of
origin--or ``single transformation''--for textiles in
TPP. This would allow Vietnam to continue to buy
Chinese government-subsidized components for its
apparel for duty free export to the U.S. The U.S. has
insisted on the yarn forward rule of origin, which has
governed the U.S.'s free trade agreements for the past
25 years.
a. Is USTR concerned that adopting a flexible rule of
origin could allow China to use Vietnam as a
``backdoor'' to sell its textile products to the U.S.
market? Why or why not?
b. With respect to the U.S.'s proposed rule of
origin, which USTR has advised us will include a
``short supply'' list, what is USTR doing to ensure
that that list of exceptions does not swallow the rule
and leave open an avenue for Chinese components?
c. How does the USTR plan to address enforcement of
the textiles provisions of the TPP, both generally and
with respect to China specifically?
Overall, our objectives for the TPP agreement on
textiles and apparel are to encourage and promote
regional production and trade for the textile sector,
to advance regional economic integration, and to obtain
significant market access opportunities for our
industries. We are also seeking special customs
enforcement procedures and commitments, as we have in
past agreements, so that we can ensure the integrity of
the agreement. We recognize that this requires a
careful balancing of interests in the sector.
In the TPP agreement, we are seeking a high-standard
rule of origin, and the ``yarn-forward'' approach is at
the core of our proposal. In order to ensure the yarn-
forward approach works effectively, we are considering
categories where limited exceptions would be
appropriate in cases of insufficient production of
inputs in the TPP countries. These products, found to
be in ``short supply'', have been vetted with our
domestic industry and our import community, as well as
those of our TPP partners, to assure that these rules
navigate a deliberate and careful space where they
provide opportunities for apparel production while
encouraging opportunities for yarn and textile
producers to export. In addition, we are seeking to
ensure that the benefits of the TPP agreement are
limited to the countries that will be party to the
agreement through carefully crafted rules of origin and
the inclusion of special customs procedures to ensure
the proper enforcement of those rules and other related
commitments.
4. Most of our prior free trade agreements have
included extended duty phase-out periods of 10 years or
longer for sensitive textile products to ensure
appropriate transition times for U.S. textile producers
and workers. What is USTR's negotiating position with
respect to phase out periods for sensitive textiles in
the TPP and what is USTR doing to achieve these
extended phase out periods? If extended phase-outs are
not achieved, I have concerns about the impact that may
have on industry my district and state.
We worked in close consultation with the U.S.
industry and other stakeholders as we developed our
proposal for tariff elimination for textiles and
apparel in the TPP agreement. Our approach to tariff
elimination in the TPP agreement provides meaningful
access to our TPP partners while providing sufficient
time for our domestic industry and existing global
partners to adapt. This proposal specifically addresses
transition periods and the need to appropriately
consider sensitive textile and apparel products. We
will continue to consult with interested stakeholders
on these issues, and will follow-up with you on matters
of concern.
Our proposal in the TPP agreement also contains textile-
specific commitments to ensure strong and effective customs
cooperation and enforcement, as well as a textile-specific
safeguard mechanism that would allow parties to respond quickly
to any damaging increases in imports under the TPP agreement by
providing temporary tariff relief to domestic producers. Both
of these provisions were developed in response to domestic
textile industry concerns and have been an integral part of our
recent free trade agreements.
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