Testimony of

Under Secretary of Commerce for International Trade

Grant D. Aldonas

"Vital Assets: Human Capital in the International Trade Administration"

U.S. Senate Committee on Governmental Affairs

Subcommittee on Oversight of Government Management, Restructuring

and the District of Columbia

April 23, 2001

Thank you, Mr. Chairman, Senator Voinovich, and Members of the Committee, for inviting me to testify today. I welcome the opportunity to address a critically important part of your Subcommittee's mandate: the human capital management challenges confronting the Federal Government. I have had the good fortune of working with the professionals in the International Trade Administration (ITA) throughout my career, while in government and in private life. They are an incredibly dedicated group of people.

Serving as the Under Secretary for International Trade at the Commerce Department has simply reinforced my view that, in public service, our most important assets are our people. The employees of ITA fill in the front lines in the battle to open overseas markets, promote economic growth at home, and sustain jobs in our export sector that are about 15 percent higher-paying than the national average. The work of our troops in ITA also helps deliver a wider range of higher-quality, lower-priced goods to American consumers. In fact, probably the most important effect of international trade is in lowering the cost of living for working families across America. For example, through their work on trade agreements, such as the Uruguay Round, ITA staff helped deliver what amounted to a tax cut for the average American family of between $1300 to $2000 every year.

President Bush's Trade Agenda

President Bush has set out an aggressive trade agenda. It has three parts. First, the President intends to open markets for American goods and services through the ongoing negotiations of the new round of World Trade Organization (WTO) talks launched in Doha this past year, together with completing the Free Trade Area of the Americas (FTAA) and bilateral agreements with select trading partners. Success in the WTO talks alone could amount to an additional $2500 in annual savings for the typical American family of four.

Second, President Bush has made clear that we must secure in the implementation of trade agreements what we won at the bargaining table. That requires a two-part effort - (1) consistent pressure for compliance by our trading partners and (2) reinforcement of our export promotion efforts in markets we have opened through negotiations.

Third, President Bush insists that we enforce the rules of trade in a way that ensures international competition is fair. The President's recent action on steel and lumber reflects that commitment. As Secretary of Commerce Don Evans has said many times, "there is nothing more disheartening to the American worker and entrepreneur than the sense that the playing field is not level." We do not intend to let that happen.

The President, however, lacks one very important tool to serve American workers, farmers, and small-businesses. That tool is the grant of negotiating authority embodied in the Trade Promotion Authority (TPA) which is awaiting Senate action. It is difficult to overstate the importance of the Senate's passage of TPA in securing the benefits of trade to the American public. What TPA represents is a joint commitment by Congress and the President to expand the economic horizons for all Americans. To seize the opportunities before us in the form of multilateral trade negotiations, the President must have the authority that every one of the past five presidents had.

I recognize that many question the need for TPA. Some have said that TPA is only needed at the end of negotiations, not at the beginning. That reflects a fundamental misunderstanding of what TPA represents. TPA represents more than a set of negotiating objectives and the procedural rules that will govern congressional consideration of an implementing bill.

Indeed, what TPA represents is a compact between Congress and the President on the agenda for U.S. trade policy. That consensus is critical to success at the negotiating table. I know from more than a decade in private practice that it is difficult to negotiate on behalf of your client unless his or her objectives are clear. Based on my prior service as a diplomat and a trade negotiator, I can say that the same holds true in international trade talks. Unless we state our objectives clearly, it is hard to know with any certainty what the final deal has to achieve. It also makes it hard to squeeze the best offer out of the other side because they are uncertain that the deal will stick.

It is time to move on TPA. It is time to restore American leadership on trade. It is time we got off the sidelines and back into the game. To do that, the Senate must pass Trade Promotion Authority. Delay hinders the ability of the President to deliver for the hard-working men and women across the country who want the opportunity to succeed and build the best possible future for their families. Ultimately, it is not only the President who needs TPA, it is the workers, farmers, and business people across America who need TPA.

Securing the Benefits of an Open Trading System

As I noted at the outset, the work of ITA does not stop with the conclusion of trade negotiations. In fact, that is when the real work begins. Both the President and Secretary Evans have made the point that, unless we can demonstrate that our trading partners are living up to their end of the bargain, it will be hard to ask the American people to support an aggressive, trade-liberalizing agenda. Both the President and Secretary Evans firmly believe that promises made must be promises kept.

In recent testimony before the Senate Finance Committee, I made clear the Administration's willingness to accept the responsibility of keeping the bargain with the American people on trade. Good government, as both you, Mr. Chairman, and the Ranking Member understand best of all, depends on accountability. Unless government is accountable, the welfare of our citizens suffers. We do not intend to let that happen.

When it comes to accountability, there is only one way to judge us and that is by our actions. What that means in a trade context is judging whether this Administration is willing to make the tough decisions in defense of American economic interests that American workers, farmers and business-owners have a right to expect. The Committee, in its oversight responsibility, needs to judge whether the Administration is carrying the interests of the American people to the negotiation table and then ensuring that we secure the benefits of an open trading system once the deals are done.

We are committed to that goal. A good example is how we intend to follow up on the agreement we concluded with China on its accession to the WTO. That agreement is a tribute to the hard work of many, both in Congress and the Executive Branch, over a period of 15 years. From the perspective of American exporters, China's accession to the WTO represents the most significant market-opening initiative since the North American Free Trade Agreement (NAFTA) and the Uruguay Round. But, the agreement will only be as good as its implementation and our willingness to promote the interests of American exporters aggressively in the Chinese market.

Mr. Chairman, our actions on the implementation of China's WTO accession offer an example of our approach, which is (1) to highlight the importance of China's implementation of its WTO obligations as the key issue in our bilateral trade relations and (2) to ensure that we are finding and resolving problems at the earliest stage possible in order to avoid the need for protracted disputes within the WTO dispute settlement process whenever possible. On the first point, Secretary Evans is in China at this moment, leading a business development mission to Beijing and Shanghai to help American companies take advantage of the opportunities that China's membership in the WTO will bring. He also is meeting his Chinese counterparts as part of the Joint Commission on Commerce and Trade, which he chairs for the U.S. side, to drive home the message about the importance of timely and transparent implementation of each of China's commitments under the WTO.

Three weeks prior to Secretary Evans' trip, I was in China myself leading a delegation of senior professional staff from the House and Senate who were a part of the Congressional passage of Permanent Normal Trade Relations (PNTR) and are experts on trade matters. The goal of that trip was to prepare the way for Secretary Evans and to underscore for the Chinese the oversight role that Congress will continue to play throughout the WTO implementation process. The subtext -- and an equally important point to have made -- was that there is no daylight between the Administration and the Congress when it comes to China's implementation of its WTO obligations.

I believe it was useful for Chinese officials to understand the importance that both the executive and legislative branches of our government place on implementation. The Ministry of Foreign Trade and Economic Cooperation - our counterpart agency - appears to have the best of intentions for tackling a very tough job. We need to do what we can to help them - especially in terms of our work with other central government agencies as well as with provincial authorities. Our meetings in China were extremely productive in getting this process started, and I plan to travel to China roughly every six months until the majority of China's WTO obligations fall due, and I hope to take a delegation of Members of Congress or staff with me as frequently as possible.

As to the second prong of our compliance strategy, the Administration's enforcement efforts start with outreach by our Foreign Commercial Service officers on the ground in China - working with their counterparts from the Departments of State and Agriculture and U.S. Customs - and our officials in ITA's Market Access and Compliance unit. Their job is ensure that they maintain close contact with American firms doing business in China and with Chinese officials in order to intervene as quickly as possible when a problem arises. Many trade disputes start as a misunderstanding that can be resolved at the local level without it becoming a point of principle on one side or another. Our early warning system is designed to facilitate that approach.

In addition, the Department of Commerce has developed a China compliance working group that meets weekly to coordinate action on China's implementation of its WTO commitments. This group serves as a clearinghouse for all information received by the various agencies with roles in the process, from Commerce and the Office of the United States Trade Representative to the Departments of Agriculture, State, and Treasury. The goal at this stage is to make judgments as to whether and when we need to raise the issues directly at a political level with our Chinese counterparts to get appropriate action.

Beyond those standing functions, Secretary Evans has committed to send one senior Commerce official to China every month for the foreseeable future to check up on our implementation and trade promotion efforts. I will be leading that effort with help from the Assistant and Deputy Assistant Secretaries at the Department. But, the commitment of those senior resources to the fight further reflects the priority we place on China's implementation of its commitments.

Compliance, of course, is not just the threat of retaliation for the failure to implement trade agreements. In many instances, compliance has as much to do with encouraging a greater understanding of the WTO rules and their purpose. Toward that end, the Commerce Department, together with help from a variety of other agencies, has conducted a series of WTO compliance seminars in China that are designed to disseminate as much information as possible regarding the practical implications of the WTO agreements to Chinese officials both in the central government and in the provinces. The seminars to date have focused on those areas, such as intellectual property and standards, in which we have had particular problems in the China market in the past. My recent trip helped me assess what more we could be doing and where we need to focus our training efforts in the future.

The Commerce Department's efforts on WTO compliance, both in terms of monitoring and raising issues with the Chinese and in terms of training, have been greatly facilitated by the Congress' authorization and appropriation of funds for a number of new positions attached to the compliance function. Recognizing the importance of ensuring China's compliance with its WTO obligations, a significant expansion of resources was proposed as part of its overall approach to China's WTO accession and the Congressional action on PNTR. Those resources, which have now been fully implemented with minor exceptions, have proved instrumental in this Administration's compliance efforts, as has the continuing support from Congress.

Outreach on Compliance

While our effort on China is a solid example of our commitment to compliance, that commitment extends well beyond that single case. For example, following my visit to China, I traveled to Taiwan to discuss WTO implementation and compliance issues there as well. Taiwan remains a particular problem with respect to intellectual property protection, and the trip offered the opportunity to bring the message home to our Taiwanese counterparts that we need to see significant progress on that and other fronts before we will be satisfied with the effort on implementation of Taiwan's commitments.

Following my trip to Taiwan, I visited Japan. There, we pressed our Japanese counterparts on a variety of market-opening issues. Those talks forged the way for a new market-promotion effort between Secretary Evans and Minister Hiranuma, the head of the Ministry of Economy, Industry and Trade (METI), and a joint effort to expand tourism and travel, signed just this past week between Secretary Evans and Minister of Land, Infrastructure and Transportation (MLIT) Ogi. But, in addition, we began the process of coordinating our compliance efforts on China. It is important from both Japan's and our perspective that we are consistent in a friendly but firm message to our Chinese counterparts regarding our expectations on implementation.

From Tokyo, I traveled to join Assistant Secretary for Import Administration (IA) Faryar Shirzad for the fourth high-level meeting on steel at the Organization for Economic Cooperation and Development (OECD). There, we continued an effort that I know is important to both the Chair and Ranking Member -- working to eliminate the vestiges of a 50-year legacy of foreign government intervention in the steel market. I view those talks as a fundamental part of the Administration's compliance efforts. The actions of other governments for years violated the spirit, and often the letter, of international trade rules by heavily subsidizing their steel industries, providing protected home markets, and by turning a blind eye to the anti-competitive actions of the industry in its home market. My point is that, from the perspective of the Administration, the notion of compliance reaches beyond ensuring the implementation of the letter of trade agreements - it goes to the fundamental fairness that must prevail in the international marketplace if we are to ask the American public to support a trade-liberalizing trade agenda.

My partner in our compliance outreach efforts, and the leader of our troops in Market Access and Compliance (MAC), is Assistant Secretary Bill Lash. Bill, the Secretary and I discussed the Assistant Secretary's role in the compliance effort before Bill took the job. I can honestly say that at least Bill was forewarned. Assistant Secretary Lash has been on the road almost non-stop since he arrived, visiting virtually all of our major trading partners, and many of our smaller trading partners, preaching the gospel of trade compliance. Bill is on a mission to have MAC reach out to each of the 50 states to meet with American exporters to identify their trade expansion and compliance priorities. Senior officials from MAC have already visited your state, Mr. Chairman, that of the Ranking Member, and other members of the Committee, including Senator Carnahan.

The point of all of those efforts is to improve our outreach to American business. Secretary Evans has focused on outreach because it is instrumental to our problem-solving approach to compliance. That means that our outreach efforts have gone well beyond the travel of senior officials. Instead, we have made it a core part of our entire approach, using the resources we have in Washington and the resources we have throughout the United States and abroad via the tremendously talented individuals in the U.S. and Foreign Commercial Service.

In other words, we have cast a wide "net" in terms of our compliance efforts. Rather than simply waiting for problems to come to us, we conduct extensive public outreach programs to ensure that American business understands the benefits of trade agreements and the resources available through the Commerce Department and other governmental agencies to enforce them. We have a Compliance Liaison Program with trade associations and local business export councils to facilitate communication and prompt action on compliance issues. We also conduct routine surveys of our private sector Compliance Liaisons to learn about trade barriers and compliance problems their industries are facing. We continue to work with our Industry Sector Advisory Committee and Industry Function Advisory Committee members in this regard as well.

MAC tracks cases in a consolidated database of compliance and market access cases. This centrally administered database is the product of extensive consultations with users. It is operational at our posts in China and Brussels, and we will continue to roll it out to other posts throughout the year. MAC continuously seeks out information on specific compliance work that has not yet been reported.

I would be remiss if I didn't mention one other critical facet of our outreach efforts. As one of his first actions in office, Secretary Evans expanded our compliance liaison outreach to include the Congress. He asked all Members of Congress to identify a staff person to work with our Compliance Center to refer constituent market access or compliance problems. If your staffs are not already working with us on this effort, I hope they will. In addition, in MAC, we have dedicated a full-time staff person traveling state-to-state meeting with American workers and businesses and we are deploying members of our NAFTA office to the border states, in part to provide a means to follow up on issues raised in our discussions with individual Senate and House offices. Our EU rapid deployment team also is being sent to the states with the greatest number of exporters to the EU.

ITA's Human Capital -- The People Who Get the Job Done

As I indicated earlier, Congress has recognized the importance of compliance and has fully funded increases for us over the last couple of years. I applaud your leadership and foresight and hope to have your continued support for the President's FY 2003 budget request, which is essential to ensure a level-playing field for U.S. businesses and workers. Congress provided funding for 62 new full-time equivalent (FTE) positions in FY 2001 and 27 additional FTEs in FY 2002 as part of the FY 2001 Trade Compliance Initiative. We are using these positions in MAC and IA to:

(1) monitor U.S. trade laws and international agreements;

(2) monitor the accessions of China and Taiwan and the expected accessions of Russia, Saudi Arabia and the Central Asian Republics to the WTO;

(3) address the increase of cases coming from Asia and the EU; and

(4) prepare for a growing number of compliance cases

These positions are based abroad, as well as here at home. To address the growing number of market access cases we have in the EU, we have hired a compliance expert to serve on-the-ground in Brussels, and we have created the EU rapid deployment team. We are placing an IA officer in Geneva to work on compliance with World Trade Organization commitments on subsidies and trade remedies. In Asia, we have created several positions to be placed in China, Japan and Korea.

Our MAC unit saw 64 cases valued at $2.9 million in FY 2000 and 106 cases valued at $16.79 million in FY 2001. To date in FY 2002, MAC worked on 90 cases valued at over $7.6 billion. This caseload represents an increase of an average of 67 percent per year. In 1995, IA conducted 159 antidumping and countervailing duty cases. From 1999 through 2000, IA conducted on average 280 cases per year, representing an increase of more than 75 percent. In addition, IA has worked with USTR to participate in 20 cases in the WTO, holding other countries to their commitments in the WTO and defending our right to utilize unfair trade remedies. We expect to continue to see caseload increases as we ramp up our compliance outreach efforts.

I believe that, with the recent increases in staffing, ITA currently has the resources to monitor and enforce trade agreements effectively. That said, I very much appreciate the Committee's interest in regularly reassessing the resources needed to meet new challenges in the enforcement arena, including new agreements which will in turn require additional monitoring and enforcement. If our outreach efforts continue to be successful, more people will learn about our work, and we will receive more compliance cases.

To address these growing needs, for FY 2003, the President's budget contains a request for an additional $5 million and 33 FTEs for MAC, and more than $6 million and 40 new FTEs for IA. What that means in practical terms is that MAC will be able to add enough trade specialists to support the recently launched WTO talks and the continuing FTAA negotiations and other bilateral talks as they enter the most critical phase. Over the next three years, negotiations will focus on the important details of trade analysis and building consensus on the most contentious issues. Once the agreements are complete, our staff will shift their focus to intensive monitoring and continued outreach with the public to ensure that our trading partners are upholding their obligations under these new agreements.

ACTUAL FTE POSITIONS

At the direction of the National Security Council, the Departments of State and Commerce co-chair an interagency committee on trade agreement compliance and monitoring. The committee also includes representatives from USTR, Treasury and Agriculture and serves to reduce duplication of efforts as well as coordinate overall U.S. policy. We also have created a similar working group to focus on the significant issue of textile compliance.

IA also monitors several agreements relating to imports of steel, including 10 suspension agreements, and an Executive Agreement with Russia that sets quota restrictions on 15 categories of steel products. In addition, as part of the President's steel initiative, IA is in the process of implementing an import monitoring program that will guard against surges of imports from countries excluded from the recently imposed Section 201 relief. IA will review data on imports from excluded countries on a quarterly basis. If the Administration determines that the increased imports threaten to undermine the goals of the relief, then those imports will no longer be excluded.

Simply increasing staff, however, is not enough. We are very focused on ensuring our folks are properly trained in foreign languages, economics and international relations, and we have requested $1.2 million in FY 2003 for training them to have all the necessary tools. We are proud of the compliance training course that we have developed with the State Department's Foreign Service Institute, which has helped specialists from ITA as well as other agencies.

We will not rest on those efforts to date. One of the benefits of the management expertise that the President and Secretary Evans bring to the government as a whole and the Commerce Department in particular is a commitment to constant improvement. That principle is at the core of the President's Management Agenda and is, as a consequence, at the top of the Department's management agenda as well. What that means in practical terms is reflected in the new initiative Secretary Evans launched this past year in the inter-agency Trade Promotion Coordinating Committee (TPCC), which he chairs. That initiative is intended to establish benchmarks against which we could assess our performance in the trade promotion arena. One of the items we will be looking at this coming year as a part of that ongoing benchmarking exercise is the training needs of all ITA employees. We will determine how best to ensure that our training helps us accomplish the goals Congress has set out for us in our authorizing legislation. Compliance is on top of that list.

Conclusion

In conclusion, I want to stress that we stand ready to tackle the enforcement and compliance challenges ahead. If the Senate acts quickly to pass Trade Promotion Authority, we will begin with our efforts at the negotiating table, where we must insist that market access concessions are reciprocal and that the agreements offer enforcement tools that will assist our efforts in securing the benefits of an open trading system. Once agreements are in place, we will ensure that parties comply with agreements, and, in the event that parties fail to honor their agreements, we are fully prepared to enforce our rights through bilateral and regional dispute settlement procedures, the multilateral trading system, and U.S. trade remedy laws. In order to realize the benefits of the global free market system, we must keep the bargain on trade.

Thank you for giving me this opportunity to testify on a topic that is always relevant - but especially timely in the lead-up to the Senate's consideration of TPA. I appreciate your support for our efforts and welcome your questions.