*EPF407 03/11/2004
Zoellick, Legislators Debate U.S. Trade Policies, Enforcement
(House hearing punctuated by sharp exchanges on China) (820)

By Berta Gomez
Washington File Staff Writer

Washington -- Sharp exchanges punctuated U.S. Trade Representative (USTR) Robert Zoellick's March 11 appearance before a panel of the House of Representatives on the politically charged issue of existing and future U.S. trade agreements with the rest of the world.

Issues raised by members of the House Ways and Means Committee included the Bush administration's enforcement of U.S. trade agreements with China and its leadership on a trade dispute with the European Union (EU) that has led to sanctions against U.S. exports.

Zoellick outlined the administration's strategy for promoting freer trade and fielded questions on a range of issues, including President Bush's March 3 decision not to impose safeguard curbs on imports of waterworks fittings from China.

Representative Sander Levin, a Michigan Democrat, joined other legislators in sharply questioning the decision, arguing that Bush did not adequately justify his rejecting the U.S. International Trade Commission's (USITC) unanimous recommendation in favor of import relief for the U.S. pipefittings industry.

Under a safeguard provision of the U.S. trade law implementing Chinese accession to the World Trade Organization (WTO), domestic producers can receive import relief if the USITC finds that Chinese products are being imported in such quantities or under such conditions as to cause, or threaten to cause, market disruption to the domestic producers.

The waterworks case marked the third time the president had rejected the USITC's recommendation of safeguard relief for U.S. industry from a surge of imports from China.

"What is the rationale?" Levin asked. "I want the exact reason for each of these decisions."

Zoellick said that in the pipefittings case the president concluded that the USITC's recommended tariff-rate quota remedy would be "ineffective," in part because imports from third countries such as India, Brazil, Korea and Mexico would likely replace curtailed Chinese imports. The trade representative also cited Bush's argument that import relief would cost U.S. consumers more than the increased income that could be realized by domestic producers.

Levin made clear through repeated interruptions of Zoellick's response that he was dissatisfied with the answer. He requested a written explanation from Zoellick's office for all three China safeguard decisions.

Levin also called for better leadership from the Bush administration in resolving disagreements in Congress over how best to repeal U.S. export tax breaks that have been ruled illegal by the World Trade Organization (WTO).

The WTO has authorized the European Union (EU) to impose sanctions on U.S. exports of up to $4 billion a year. The EU on March 1 began imposing tariffs worth 5 percent of the authorized level and is prepared to increase the level by one percentage point a month up to 17 percent.

Competing versions of legislation to repeal the tax breaks are pending in Congress, but movement has been slow and neither the Senate nor the House has managed to reach agreement on a single measure that would pass both chambers.

Levin said presidential leadership will be necessary to resolve the stalemate. Unless the administration steps in and supports a specific tax overhaul measure, "it's just not likely to happen," he said.

Throughout the hearing, some legislators -- both Republican and Democrat -- suggested that administration trade policy is not fully taking into account U.S. economic interests and fails to acknowledge domestic workers' anxiety over job losses.

"It's hard to convince unemployed Americans of the value of free trade," said Representative Charles Rangel of New York, the senior Democrat on the committee.

Republican Representative Mac Collins of Georgia disputed Zoellick's assertion that lower overseas wages do not in themselves cause changes in the U.S. job market. He recalled conversations with businessmen who claim that low-wage countries are indeed very attractive to foreign investors.

For his part, Zoellick maintained that wages are only one of the factors that investors take into account and argued that if wages alone were sufficient to move jobs, Haiti would be attracting jobs from around the globe.

"Wages are not the sole determinant of where jobs go," Zoellick said. "Wages reflect what people produce."

On a separate issue, Representatives Jim Ramstad of Minnesota and Phil Crane of Illinois said they had introduced legislation to repeal a trade law known as the Byrd Amendment that has also been ruled illegal by the WTO.

Under the amendment, revenue from antidumping and anti-subsidy duties goes to the companies that successfully brought the dumping and subsidy cases. The WTO ruled that the Byrd Amendment itself amounted to an illegal subsidy.

Zoellick told legislators that the Bush administration continues to support repeal of the Byrd Amendment, but did not comment on the content of the Ramstad-Crane bill. WTO arbitration over the level of sanctions that countries can impose should be completed by June, he said.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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