Hearing of the House Small Business Committee - Impact of Pending Free Trade Agreements on U.S. Small Business Panel I

Interview

Hearing of the House Small Business Committee - Impact of Pending Free Trade Agreements on U.S. Small Business Panel I

BREAK IN TRANSCRIPT

REP. JOE SESTAK (D-PA): Thanks, Madam Chair.

Sir, the -- I thought what you said about President Clinton was true, and I worked in the White House during that period of time on the NSE. But I worked closely with the NEC, and I thought his principles approach to free trade were spot on. But it always came down to the enforceability as has kind of been raised a bit here, and I always thought the Jordanian FTA was a quite a model except, as I remember in '99 or whatever -- except for the enforceability of it. And the reason I bring that up is I do think this bodes something for small businesses, but ultimately business is about jobs and wages. And while we may have lost -- I think it's 3.2 million jobs -- manufacturing jobs in the first three years of the Bush administration, he regained those back recently. But the real wages -- median level of income came down almost 18 percent. So while the guy might have gotten his job back, it wasn't in the same amount of real income as he had before.

So three quick questions from me on the enforceability is -- we're supposed to have this enforceable, reciprocal obligation on both Peru's side and our side to have within law the ILO standards. And I guess the second part of that one would be -- so my second question is we're all supposed to enforce not just domestic law, but also have to have and maintain within law the WTO environmental standards. And my third question, which I'll just hold off for a moment, has to do more with cooperation on the regulatory issues. But can you talk a bit about -- is it in law in Peru? And if it is in law, how are we to enforce it in this case? What's different about this than the Jordanian one? Because of the WTO cases you brought -- 23 -- how many have been successful? Not just that you brought them, but they've been successful?

And so those are my two overarching questions of the enforceability even if it's in law.

MR. VERONEAU: Thank you.

The number of manufacturing jobs has clearly declined over the past 20 years, but I would --

REP. SESTAK: It's due to different reasons.

MR. VERONEAU: Yes.

REP. SESTAK: My only point of that was real wages. If we could get to the question, though, because I only have five minutes --

MR. VERONEAU: The enforceability -- the key difference is in the Jordan agreement, it -- the essence of the labor and environment commitment was that each country agreed to enforce its own laws. So regardless of what those laws were, as long as you were enforcing your own laws, you were fine. This is a -- what is historic about these agreements and -- that were reflected in the May 10 bipartisan agreement that we reached was that for the first time, we established an objective standard. Not a subjective standard, but objective standard on labor revolving around the International Labor Organization core principles. So that is really what's new -- is it's not enough to enforce your own. You've got to meet this objective standard.

And on the environment similarly, there is no global standard on environment in the way that there is for ILO for labor. But the agreement does require you to enforce your own labor laws and follow through and abide by the multilateral environment agreements that you do have.

REP. SESTAK: Of the WTO.

MR. VERONEAU: Well, it's not of the WTO.

REP. SESTAK: I thought it was.

MR. VERONEAU: No.

REP. SESTAK: You sure?

MR. VERONEAU: Yes.

REP. SESTAK: All right. So how do you enforce them?

MR. VERONEAU: Well --

REP. SESTAK: I mean, that's good. It's a nice mechanism. How do you enforce them?

MR. VERONEAU: Well, you know, there's an enforcement measure --

REP. SESTAK: I mean, you set an objective, now the enforcement?

MR. VERONEAU: On the enforcement, you bring a dispute. I mean, we bring --

REP. SESTAK: So it's back to bringing it up.

MR. VERONEAU: It's back to bringing a dispute.

REP. SESTAK: So really, we've set a nice objective but now what we have to do is if they don't bring it up to an international body.

MR. VERONEAU: Yeah. We bring it up to a bilateral body.

REP. SESTAK: To a bilateral body. And if they disagree?

MR. VERONEAU: Well, a panel will -- a panel adjudicates it. We appoint a panel and they adjudicate it. But I would say that --

REP. SESTAK: And that's enforceable, then? The agreement says that the adjudication is what will be followed?

MR. VERONEAU: Yes.

REP. SESTAK: But --

MR. VERONEAU: I mean, there are -- I mean, there's -- there are remedies -- you know, there's a panel. There's a finding -- finding, let's say, is -- the country is not living up to its obligations, then we have rights to withdraw some of the benefits that we have extended --

REP. SESTAK: Understood. But if the arbitration panel -- it says U.S. was right, does Peru have to follow that? Or if it doesn't, we then have the right to withdraw benefits and all?

MR. VERONEAU: That's right.

REP. SESTAK: I see. All right.

MR. VERONEAU: If it doesn't, we withdraw benefits.

REP. SESTAK: Got it.

And the last question is regulatory issues. My understanding is ours and Peru's are supposed to converge, but there's no adherence to any international standards. Have we left that all by itself our there, sanitary and all that? In other words, it's kind of their domestic interpretation of what sanitary or health is. That's my understanding in perusing this agreement. There's no objective standard. There's no international standard set for this area.

MR. VERONEAU: The -- I would say the core commitment is that these regulations have to be science-based. In the food safety area, as you can imagine, every country want including ours obviously we have a strong right that we want to say, "Look, we want to be able to decide what -- when is safe safe." But we have to balance that with the reality that a lot of countries use these safety regulations as protectionist measures.

So the core -- the essence of what we achieve in these agreements is a requirement that if you want to have a food safety regulation it has to be science-based and you -- and we have the right to challenge whether that is science-based. That's -- that is I think a critical benefit of these agreements that that commitment exists in principle in the WTO agreements but it's very difficult to --

REP. SESTAK: So if we do disagree on this area we can bring it up to this arbitration panel?

MR. VERONEAU: Yes.

REP. SESTAK: Thank you. My time's up. Thank you.

BREAK IN TRANSCRIPT

Source