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committee has offered interested parties in the private sector an opportunity to give our views.
I am Paul H. DeLaney, Jr., international trade counsel to the Washington law firm of Mason, Fenwick & Lawrence. I am appearing today on behalf of the U.S. Chamber of Commerce.
I have with me Beth Perkins who is the executive director of the Multilateral Trade Negotiations Task Force; also Mr. Gordon Crony, executive director of the Chamber's International Services Committee.
We wish to stress that our testimony, of course, is based on the interest of a large group of companies that comprise the U.S. Chamber of Commerce.
The National Chamber supports this legislation and urges the committee to proceed with the approval of the Trade Agreements Act of 1979. We request that our full statement be included in the record, Mr. Chairman, and, of course, I will only summarize our points today.
Our principal message today is that the passage of S. 1376 is essential to the maintenance of an open world trading system in which the U.S. economy can prosper. We wish to stress, however, that the Tokyo round and the multilateral trade negotiations trade agreement package as presented to the committee is essentially an opportunity, as the chairman has stressed earlier today, without adequate implementation of these agreements, without the necessary reorganization of the Government from a trade policy perspective.
It is to be expected that the United States will not obtain many of the benefits that otherwise would derive under these trade agreements.
We have a few specific suggestions regarding the legislative history on the bill. Under the codes as fully implemented in terms of price and benefits to the United States, we can expect new opportunities for foreign government procurement, further stringency in terms of international bills, governing subsidies under the subsidies code; greater certainty regarding the subsidies evaluation code; procedures that would assist in removing discriminatory aspects on technical standards; reduction of industrial tariffs; overall entry of 30 percent greater access to foreign markets for agricultural products, and overdue improvements in the GATT machinery for dispute settlement.
I wish to stress again as the committee has raised these points, how strongly the chamber and all of its members feel about implementation. Although we do not have a specific recommendation for you, we do wish to stress the importance of having an office in the Office of the President and to have the necessary resources to carry out his responsibilities.
Furthermore, we think there should be continued private sector involvement in this process and on the matter of advisory committees, we wish to point out to the committee, we think that it is extremely important that these advisory committees remain as representative as possible of the entire economy and that would include consumer wholesale distribution and retail interest as well.
On the matter of injury and the question of material injury that was such an issue before this committee and the House Ways and
Means Committee, we support the present language in the bill, but if there is to be any further implementation in the legislative history, we urge you to adopt the language that we understand will appear in the House Ways and Means Committee report.
On the matter of tax practices that have been mentioned today, we think it is unfortunate that the Congress was unable to deal with questions of indirect taxes, particularly the subsidies code. We think the Congress should direct the administration further negotiations on these issues. This would include the questions involving domestic international sales corporations and tax practices of the Dutch, the Belgians, and the French under the GATT panel determinations. We think it is important for the committee to document that the subsidies code in no way impairs or affects the U.S. international domestic sales operations.
On other issues that we think are important, there will be testimony later in the day by the joint industry working group on customs reform and the chamber supports these remarks.
There is a separate topic that we wish to have included in the testimony today. We have a prepared testimony on services.
Senator RIBICOFF. Mr. DeLaney, your entire statement will go into the record as if read. We are going to have to be strict on the 5-minute rule because we have a long list and the committee members have conflicts with the excess profits tax that will be coming up, so your statement will go in as read.
Mr. DELANEY. Fine.
Senator RIBICOFF. Senator Roth?
[The prepared statement of Mr. DeLaney follows:]
PREPARED STATEMENT OF PAUL H. DELANEY
I am Paul DeLaney, International Tax and Trade Counsel to the Washington, D.C. firm of Mason, Fenwick & Lawrence. I am appearing on behalf of the Chamber of Commerce of the United States, as a member of the International Trade Subcommittee. With me is Beth Perkins, Director of the National Chamber's Trade Negotiation Information Service. The National Chamber represents a membership of over 81,000 small, medium and large businesses, 1,275 trade associations, over 2,600 state and local chambers of commerce and 42 American chambers of commerce overseas.
The National Chamber is pleased to have the opportunity to express its support of S. 1376, a bill to approve and implement the trade agreements negotiated under the Trade Act of 1974, and for other purposes. Our principal message to you today is that passage of S. 1376 is essential to the maintenance of an open world trading system in which the U.S. economy can prosper, and that the agreements offer significant potential benefits to all sectors of our economy-producers as well as consumers; employers, as well as employees.
However, the ultimate value of the agreements will depend entirely on how they are implemented, both at home and abroad. We urge the U.S. government to take the lead in pursuing vigorously international observance of the agreements which have been so painstakingly negotiated.
Finally, the National Chamber has some specific suggestions for clarifications and expressions of congressional intent that we believe should be included in the legislative history of this bill.
BENEFITS TO THE UNITED STATES
Too often U.S. firms have encountered an array of formidable tariff and nontariff barriers to their products in international markets. The far-reaching multilateral trade negotiation (MTN) agreements will reduce these barriers. Once they are fully implemented, the agreements will provide a number of advantages to U.Š. business and agriculture, including:
The opportunity to compete on a nondiscriminatory basis for potentially lucrative foreign government procurement contracts;
A stronger competitive position through international rules limiting government export subsidies;
Greater certainty in exporting, resulting from the establishment of uniform and less arbitrary customs valuation systems;
Procedures to minimize the negative effect on trade of discriminatory health, safety and technical standards;
An average reduction in foreign industrial tariffs of around 30 percent; and Greater access to foreign markets for farm products from reduced agricultural tariffs and increased quotas.
The agreements will also make long overdue improvements in the GATT machinery to settle international trade disputes and protect U.S. rights.
While the National Chamber is pleased with the results of the Tokyo Round of multilateral trade negotiations, and firmly convinced that the national interest requires speedy congressional approval of the nontariff agreements, it is important to recognize that the United States did not get everything it wanted out of the negotiations and that the agreements that were reached are not a panacea for our international trade problems. This is why it is important that passage of the Trade Agreements Act of 1979 be accompanied by a reorganization of the U.S. government to administer trade policy effectively.
Effective administration will require a firm commitment from the President to make international trade and improved U.S. export performance a national priority. At a minimum, there must be a central coordinating function within the Executive Office of the President. Adequate staff and other resources must be reallocated to ensure vigorous protection of U.S. rights under the MTN agreements. In this connection, private sector involvement in monitoring implementation of the agreements by other countries will be essential. The National Chamber pledges to use its network of business contacts around the world to assist in this effort.
PRIVATE SECTOR ADVISORY COMMITTEES
We welcome the provisions of S. 1376 that grant the President authority to continue a system of private sector committees to advise the government on trade policy. The advisory committees proved extremely useful during the Tokyo Round negotiations in providing our negotiators with essential information to evaluate the likely impact of various measures on different sectors of the economy. While the post-MTN advisory system will need to be consolidated and streamlined somewhat, it is important that the advisory committees remain as representative of the entire economy as possible.
Section 1105 of S. 1376 provides that any sectoral, functional or general policy advisory committees should "be representative of all industry, labor, agricultural, or service interests (including small business interests)." Notably lacking from this list are consumer, wholesale, distribution and retail interests. The Finance Committee should remedy this oversight in its report on the bill by clarifying that Congress expects all interests, including consumers, wholesalers, distributors and retailers, to be represented on all relevant committees of the new advisory structure.
As this committee is well aware, defining the "material injury" requirement for imposing countervailing or antidumping duties was one of the most difficult tasks in drafting the MTN implementing legislation. The National Chamber is satisfied with the language in the bill, which we believe needs no further elaboration. If, however, the Committee feels that additional clarification of the definition is necessary in the legislative history, we would recommend adoption of the language we understand was agreed to in the House Ways and Means Committee report on H.R. 4537: Under the agreements and in the implementing legislation injury that is inconsequential, unimportant, or immaterial would not constitute 'material injury.' In the Committee's view, the Commission's decisions from January 3, 1975 to the
present have, on the whole, been consistent with the material injury test of the legislation and the agreement. The Committee intends for that standard to continue.
"However, this statement does not indicate approval of all the affirmative or negative decisions of the Commission with respect to the issue of injury, as judgements as to whether the facts in a particular case actually support a finding of injury are for the Commission and the courts to determine."
CERTAIN TAX PRACTICES
It is unfortunate that in the Tokyo Round, U.S. negotiators were not successful in dealing with a variety of direct and indirect tax measures used by various GATT member states. Congress should direct the administration to engage promptly in further negotiations to resolve these issues. The tax systems of various countries will undoubtedly be involved in any such discussions, including the U.S. Domestic International Sales Corporation (DISC) and the tax practices of France, Belgium and the Netherlands, which were held by GATT panels to be in violation of GATT obligations. U.S. negotiators have not been able to obtain any action or changes from these European countries on the GATT panel determinations.
Although a footnote in the subsidy code specifically provides that the status of DISC is not affected by the code, certain administration officials have suggested that DISC violates the new code. The implementing legislative history should ke it clear that, pending successful conclusion of such negotiations, it is the understanding of the United States that the subsidy code does not prejudge certain direct tax practices, including DISC, which are the subject of the pending cases under GATT.
One of the major benefits of the MTN agreements will be the establishment of a uniform international customs valuation system. While S. 1376 does a generally good job of providing for implementation of the customs valuation code in the United States, there are a few minor points which need to be clarified in the legislative history. Our recommendations on these matters are incorporated in the testimony of the Joint Industry Working Group on Customs Reform, with which the National Chamber is associated.
Another topic for which both further negotiations and clarification in legislative history are needed is the whole area of service industries. The Tokyo Round unfortunately was unable to make any real progress in reducing barriers to trade in services, an increasingly important sector for the United States in international trade. I refer the Committee to a separate statement on services by Ronald K. Shelp, which the national Chamber is submitting for the record of these hearings. Finally, it is regrettable that it was not possible to complete codes on safeguards and commercial counterfeiting in time to be included as part of the MTN package. Congress should encourage the administration to redouble its efforts to conclude satisfactory negotiations on both codes. In particular, a more comprehensive safeguards code, which covers intra-industry voluntary restraint agreements and provides protection against unwarranted use of selective safeguard actions, will be essential to controlling protectionist pressures in the future.
It is clear that the MTN agreements will generate business and create jobs in U.S. industries that are directly involved in exporting. But the fact that smaller companies that supply materials, services or components to exporting companies will also gain from improved export opportunities is often overlooked. Consumers and industries which depend on foreign raw materials and imported components will benefit from the greater availability and lower prices that reduced trade barriers bring. Finally, we all have a stake in the healthier U.S. economy that will result from a more open and expanding world economy.
Swift passage of S. 1376 is essential, however, not only because of the potential benefits that the nontariff MTN agreements offer, but also because of what failure to pass the legislation would mean. Reaching agreement among the world's major trading partners on such sensitive issues in a time of serious world economic problems and mounting protectionist pressures was not easy. The agreements to reduce trade barriers are precarious. A rejection of the package by the United States, the first country to go through the formal approval process, would destroy the delicate international consensus that has been achieved and induce each country to resort to its own unilateral trade policies. The inevitable result would be a significant increase in trade barriers with adverse social and economic consequences for the U.S. and other nations.
We stress again the need for the United States to take the lead in implementing these new international trade agreements, and we urge the Congress to direct the administration to press on with the reorganization of the U.S. government to effectively administer trade policy.
There will be those who are not content with one part or another of the agreements. Certain interests may urge Congress to reject the nontariff agreements because they do not want their own tariff protection reduced and would prefer to see the whole package fail. However, it is important to remember that the MTN agreements must be taken as a whole. There can be no amendments. During the course of the negotiations, U.S. negotiators made a substantial effort to take all sectors of the economy into account. This has produced a generally balanced result which offers major potential advantages to the entire economy. For these reasons, we respectfully urge you to support S. 1376 and to push for its enactment as soon as possible.
Senator RIBICOFF. Mr. Robert Hampton?
STATEMENT OF ROBERT N. HAMPTON, VICE PRESIDENT FOR MARKETING AND INTERNATIONAL TRADE, NATIONAL COUNCIL OF FARMERS COOPERATIVES
Mr. HAMPTON. Thank you.
Senator RIBICOFF. Your statement will be inserted into the record as if read.
Mr. HAMPTON. I would like to preface my comments in support of the Trade Agreements Act and the bill before the subcommittee by emphasizing our judgments regarding the effectiveness and importance of this bill are based not upon the limited short-term gains that we see for American agriculture from the results of the round but far more importantly on the matter of the potential benefits which you, Mr. Chairman, pointed out here that we can hope for through the new trading companies and other accomplishments of the round if this matter can be implemented and enforced effectively.
And we strongly support your comments and that of Mr. Roth and other members of the subcommittee earlier to the effect that we must have better coordination than we have had in recent years. We certainly emphasize the lack of adequate attention for trade policy issues over a period of years, even though we have been in the midst of important multilateral negotiations. We believe we must have this important added coordination.
Our concerns with the reorganization that may be necessary to accomplish that is that we maintain the role of the U.S. Department of Agriculture in its very good programs of promotion for exports of agricultural products and we want to be sure that in the process of reorganizing and becoming better coordinated to implement the results of this round, that we keep before us always the need for avoiding some major new Cabinet bureaucracy.
So we are going to be prepared to comment at more length on that in further hearings, as you know, that will be coming up within the next 2 or 3 weeks.
Again I want to emphasize that we believe that there are some substantial accomplishments that will result from the round through the continued implementation and improvement of the trading codes that we have started. Subsidies are a matter of great
I would just like to simply add a quick note from the formal statement I have here indicating that our support for this Geneva