*EPF305 06/25/2003
Text: Trade Promotion Authority Helps Bush Administration Get Trade Deals
(Assistant USTR's June 25 testimony to House panel) (3000)

Critical to the successful implementation of the Bush administration's trade strategy has been the Trade Promotion Authority (TPA) the Congress has granted the executive branch, according to Ralph Ives, Assistant United States Trade Representative for Asia-Pacific and APEC Affairs.

In prepared testimony June 25 at the House International Relations Subcommittee on Asia and the Pacific, Ives noted that during the past two years, the Bush administration has worked to "regain" U.S. leadership on global trade issues, and has successfully negotiated Free Trade Agreements (FTA) with Chile and Singapore.

"The passage of the Trade Act of 2002, including Trade Promotion Authority, provided us the credibility to make that happen," Ives told the subcommittee.

"Using TPA procedures, we hope to secure Congressional approval of the agreements and legislation needed to implement both the U.S.-Singapore FTA and the U.S.-Chile FTA," said Ives, "We are working with Members of Congress to try to achieve this in the near future."

The Bush administration, Ives added, "has also launched or revitalized other major trade initiatives designed to expand trade and open markets globally, regionally and bilaterally."

The USTR official cited the World Trade Organization (WTO) negotiations on the Doha Development Agenda, the Free Trade Area of the Americas, and FTA negotiations with Australia, Central America, Morocco, and the South African Customs Union.

"The President recently announced a Middle East Free Trade Area Initiative," said Ives, while within the Asian region, Bush has also announced the Enterprise for ASEAN Initiative.

Following is the text of the prepared testimony of Assistant U.S. Trade Representative for Asia-Pacific and APEC Affairs Ralph Ives to the House International Relations Subcommittee on Asia and the Pacific June 25:

(begin text)

Committee on International Relations
U.S. House of Representatives
Washington, D.C. 20515-0128

U.S. Trade Policy with Southeast Asia and Oceania

Testimony of Ralph F. Ives
Assistant U.S. Trade Representative for Asia-Pacific and APEC Affairs
Subcommittee on Asia and the Pacific
Committee on International Relations
U.S. House of Representatives
Washington, D.C.
June 25, 2003

INTRODUCTION

Thank you Mr. Chairman, Mr. Faleomavaega, and members of this Subcommittee, for inviting me to testify today on the Administration's trade policy toward Southeast Asia and the Pacific. I welcome this opportunity to describe our approach to engage this important region in opening markets for our mutual benefit.

Without the support of Congress, the Administration could not begin to achieve its ambitious trade objectives. During the past two years, we have worked to regain U.S. leadership on global trade issues. The passage of the Trade Act of 2002, including Trade Promotion Authority (TPA), provided us the credibility to make that happen.

Using TPA procedures, we hope to secure Congressional approval of the agreements and legislation needed to implement both the U.S.-Singapore FTA and the U.S.-Chile FTA. We are working with Members of Congress to try to achieve this in the near future.

The Administration has also launched or revitalized other major trade initiatives designed to expand trade and open markets globally, regionally and bilaterally. These include the World Trade Organization (WTO) negotiations on the Doha Development Agenda, the Free Trade Area of the Americas, and FTA negotiations with Australia, Central America, Morocco, and the South African Customs Union. The President recently announced a Middle East Free Trade Area Initiative. Within Asia region, the President announced the Enterprise for ASEAN Initiative.

Ambassador Zoellick has described the Administration's trade strategy as "competitive liberalization," i.e., pursuing trade liberalization initiatives on multiple fronts as the most effective way to achieve open markets for U.S. farmers, ranchers, manufacturers, and create high-paying jobs for Americans. Open markets also provide U.S. consumers and manufacturers with access to imports that stretch family budgets and improve the competitiveness of U.S. firms. Our bilateral, regional and global negotiations are mutually reinforcing. Countries that resist trade liberalization risk being left behind as more and more countries, including the United States, keep the pressure on by opening markets through bilateral or regional trade agreements.

The Administration's trade strategy is already creating a competitive dynamic in favor of further trade liberalization among the countries of Southeast Asia. Let me describe the Administration's efforts in this region.

ASEAN

The member countries of the Association of Southeast Asian Nations (ASEAN) form an important group of trading nations. Two-way trade in goods between the United States and ASEAN was over $120 billion in 2002, making this combined group of countries our 5th largest trading partner. Trade in services would add another $14 billion. The stock of U.S. direct investment in ASEAN was over $50 billion in 2001.

What these aggregate figures do not reveal is how widely U.S. trade varies with individual members of ASEAN and the levels of their economic development. U.S. two-way trade in goods with each of our largest ASEAN trading partners, Malaysia and Singapore, was over $30 billion as compared to U.S. trade with Laos of about $6 million. Similarly, Singapore is one of the wealthiest countries in the world, and Cambodia and Laos are two of the poorest.

ASEAN also includes Burma. The Administration is outraged by recent events in Burma. The regime's renewed campaign of violence and repression against the National League for Democracy and Aung Sun Suu Kyi illustrate its blatant disregard for the basic rights of the Burmese people and the path towards reconciliation and democracy. The Administration is now taking measures to increase pressure on the regime. While we commend ASEAN for its recent steps, we encourage ASEAN to act decisively to address the problems in Burma that affect the region. We will continue to work with you and others in Congress on legislation that will send a strong message to the regime controlling that country.

Despite vast differences, the ASEAN countries have been attempting to integrate their economies into a regional free trade area - the ASEAN Free Trade Area (AFTA). The ASEAN countries set the goal of achieving tariffs of under 5 percent for trade among them by 2002 for the more advanced members and by 2010 for the least advanced, with some sensitive products being subject to an even longer time frame. They have largely met that goal. The schedule for complete duty elimination is 2010 for the six advanced members and by 2015 for the other four members.

The Administration supports the AFTA process. U.S. industry and farmers see the ASEAN countries as an attractive regional market, which would become even more so as the ASEAN integrate their commercial policies. Increased trade among the ASEAN countries can contribute to the region's economic development, making the region an even more attractive market for U.S. goods and services.

President Bush recognized this potential of ASEAN when he announced the EAI at the meeting of Leaders of the Asia Pacific Economic Cooperation (APEC) forum in Los Cabos, Mexico last October. In brief, the EAI offers the prospect of an FTA to individual ASEAN members that are committed to the economic reforms and market openness inherent in a comprehensive FTA with the United States. The ultimate goal of the EAI is a network of bilateral FTAs in the ASEAN region.

The EAI addresses the ASEAN countries' differing levels of development and the need to proceed at different speeds with each of these countries - thereby allowing the United States and ASEAN countries the necessary flexibility in timing and preparation. The U.S. offer was made in a spirit of cooperation and engagement with the region, and was received as such. We have been working with the ASEAN to fulfill the President's vision for this region.

We have already signed an FTA with Singapore. This FTA is a state-of-the art comprehensive agreement, building on the basic foundation of the NAFTA and the WTO agreements, and improves upon them in a number of ways. The U.S.-Singapore FTA can serve as the basis for other possible FTAs in Southeast Asia.

The President imposed two minimum conditions that must be met to consider launching an FTA negotiation with an ASEAN member under the EAI. First, the country must be a member of the WTO. WTO membership ensures that a potential FTA partner has undertaken and implemented a broad range of trade obligations that constitute baseline standards.

Second, the United States and our trading partner must have concluded and strengthened their commercial relationship under a Trade and Investment Framework Agreement (TIFA).

Dialogue under the TIFA allows us to resolve key outstanding trade issues and to prepare the groundwork for possible FTA negotiations. For example, we may seek improvements in our trading partners' protection and enforcement of intellectual property rights (IPR), mitigation of customs-related problems, and resolution of specific market access issues. Of course, because the discussions are intended to be mutually beneficial, we try to address issues identified by our trading partners. This work under the TIFA builds confidence and helps prepare for an even stronger commercial relationship.

The President considers other factors, in addition to the two pre-conditions, when deciding whether to actually initiate FTA negotiations. Thailand, the Philippines, Indonesia and Brunei have met both EAI conditions - i.e., they are WTO members and have concluded TIFAs with us. We have also offered under the EAI to negotiate a TIFA with Malaysia, which is a WTO member.

Thailand has expressed an interest in an FTA. When they met on June 10th, President Bush and Thai Prime Minister Thaksin agreed to make tangible progress on existing commitments under the TIFA, including in the areas of intellectual property rights, investment, and customs, as a necessary first step towards a possible FTA. Both leaders also committed to work together on the WTO's Doha Development Agenda negotiations. Ambassador Zoellick and Commerce Minister Adisai met later that day to discuss how both sides could achieve these commitments.

Ambassador Zoellick has also held several ministerial-level sessions under the TIFA with his counterparts in Indonesia and the Philippines. We have strong trade relations with both countries and want to develop these relationships even further.

We are also working with the three ASEAN members that have not yet joined the WTO. Cambodia's accession process appears nearly complete, and we hope it can become a WTO member this year.

Vietnam's WTO accession process will require some additional time and effort. While entry into force of the U.S.-Vietnam Bilateral Trade Agreement (BTA) in December 2001 provided a solid foundation upon which to build, WTO membership carries a broader range of obligations and deeper commitments to146 nations - i.e., greater trade and investment liberalization -- than in the BTA. We believe, however, the assistance the United States is providing Vietnam to implement the BTA is helping it prepare for WTO membership.

Laos is one of only a few countries with which we do not trade on a Normal Trade Relations (NTR) status. As a result, U.S. tariffs on imports from Laos are very high, and the trade data reflects this. Two-way trade with Laos was only $6 million last year. By way of comparison, U.S. two-way trade with Vietnam roughly doubled during the year following entry into force of the BTA, which allowed us to provide NTR status to Vietnam, and was nearly $3 billion in 2002. The Administration supports granting NTR status to Laos and implementing the Bilateral Trade Agreement negotiated between Laos and the United States in 1997.

This approach of working bilaterally with each ASEAN member allows each to proceed at a pace comfortable and appropriate to each relationship. Those countries that want to advance faster can do so; those that need to liberalize more slowly can take their time. The result has been the unleashing of a competitive liberalization dynamic, in which several of the ASEAN countries have expressed an interest in exploring an FTA, and those members of ASEAN not yet in the WTO are striving mightily to join.

The EAI also calls for working with the ASEAN nations together. Trade Ministers endorsed a joint action program covering a number of areas, and the United States has made specific proposals in some - such as IPR and customs - on which to begin work. The basic idea of working with ASEAN countries as a group is to reinforce their integration efforts and to bring along countries that are not yet ready for FTAs. The work program can help generate progress in areas critical to ASEAN integration and that will help ASEAN members meet the challenges of greater trade liberalization.

The EAI comes at an opportune time with respect to our trade initiatives. Ambassador Zoellick has participated in several meetings of ASEAN ministers to discuss progress on the EAI and to advance the WTO Doha Development Agenda. As the United States pursues the EAI, the Administration wants to make concurrent progress on multilateral negotiations in the WTO. This approach demonstrates the Administration's strategy of competitive liberalization - moving on a global, regional and bilateral basis encourages more open markets than focusing on only a single vehicle.

The EAI also comes at the right time to advance U.S. commercial interests. The members of ASEAN are engaged in FTA negotiations with a number of other countries. As a group, the ASEAN have FTA negotiations under way with China, India and Japan, as well as discussions of an ASEAN plus 3 arrangement, involving China, Japan and Korean.

Singapore has been the most prolific FTA negotiator in ASEAN. Singapore has concluded FTAs with Australia, Japan and New Zealand and has on-going negotiations with Canada, India, Korea, and Mexico, and a trilateral negotiation involving New Zealand and Chile.

Thailand is also beginning its own active FTA process. It has conducted a serious examination of a FTA with Japan, recently began FTA negotiations with China, is well along in its FTA negotiations with Australia, is finalizing a trade agreement with India, and recently completed an FTA with Bahrain.

AUSTRALIA AND NEW ZEALAND

The United States is also engaged in FTA negotiations with Australia. President Bush launched these negotiations last November, and the first session took place in mid-March in Canberra. The FTA with Australia will be comprehensive. U.S. proposals are largely modeled after our FTAs with Singapore and Chile. President Bush and Prime Minister Howard have given us a very ambitious goal of completing these negotiations by the end of 2003, and both teams are working hard to achieve the objective of a strong FTA that is in our economic interest by that date.

The U.S.-Australia FTA negotiations have strengthened even further our coordination with Australia in the WTO. Both the United States and Australia remain firmly committed to successful completion of the WTO negotiations by the agreed deadline of 2005. Both are seeking ambitious results for agriculture, market access in goods, and services. And, both see the wisdom of engaging in bilateral trade negotiations while pursuing global trade liberalization.

We are also working closely with New Zealand in the WTO negotiations, where we share many common objectives. In addition, we have a TIFA with New Zealand and have met recently under its auspices. Just this week, we conducted detailed consultations with New Zealand on our FTAs with Chile and Singapore. We also agreed to keep New Zealand informed of progress on the U.S.-Australia FTA negotiations. The purpose of this dialogue is to ensure that New Zealand is familiar with the type of FTAs the United States has negotiated with other trading partners in the event a decision is made to proceed to FTA negotiations

IMPLICATIONS OF REGIONAL TRADE AGREEMENTS

As you can see, interest in FTAs has increased substantially among countries in the Asia-Pacific region, but this is not unique to this region. By one count, about 150 FTAs are currently in operation around the world. The European Union alone has 30 free trade or special customs agreements and is negotiating more. The number of regional or free trade agreements in which at least one WTO member participates has roughly doubled in the past decade.

This trend of more FTAs is expected to continue. According to the OECD, the percentage of world trade accounted for by preferential trade agreements is expected to grow from 43 percent at present to 55 percent by 2005.

We are closely monitoring these FTAs. The U.S. policy is that FTAs should be consistent with WTO provisions. That is, they should cover substantially all trade in goods and include substantial sectoral coverage of services. Several other requirements relating to trade in goods must be met as well.

While most WTO oversight of FTAs occurs in the Committee on Regional Trade Agreements, the United States was instrumental in convening a senior officials' review of trade agreements in APEC this May. The main purpose of this initial exercise was transparency. We wanted APEC members to discuss the contents of their FTAs in a setting that offered the prospect of frank exchanges without the worry of possible dispute settlement. This initial meeting was so successful that APEC Trade Ministers called for further APEC work in this area.

FTAs have become a fact of international trade. The United States, which is currently only a member of 3 such arrangements - NAFTA, Israel, and Jordan - with two more awaiting Congressional approval, has some catching up to do.

CONCLUSION

As Ambassador Zoellick remarked "...follow the FTAs. We will launch them, negotiate them, pass them, and then launch some more. Our aim is to use FTAs - in conjunction with our global and regional negotiations - to create a new, on-going momentum for trade policy."

That is U.S. trade policy with the Southeast Asia and the Pacific region, and the rest of the world.

Thank you, Mr. Chairman. I would be pleased to respond to any questions.

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(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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