exception of the Philippines (which has already made bilateral
commitments) , IIPA will continue to track developments in the
other six countries through the end of May 1993. We believe
this impending threat will make a difference to these
countries — but only if the GSP Program is renewed.

A new problem has cropped up in C yprus which may demand
swift action under GSP. The U.S. copyright industries have
been totally frustrated by problems in Cyprus. On June 1,
1991, the MPEAA filed a petition to deny GSP benefits to
Cyprus because of the widespread video piracy and unauthorized
public performances taking place on the island and the export
of pirate videocassettes into Europe and the Middle East.
Again, at the request of USTR, MPEAA later conditionally
withdrew its petition based on Cyprus' public acknowledgement
of its role as a major transshipping center for pirate
videocassettes and its commitment to confiscate pirate



137



materials and adopt new copyright legislation by January 1992.
This date passed by. IIPA and USTR have been very concerned
when public discussions in Cyprus focussed on establishing a
possible "grace" period of up to one year — this would permit
the pirates to sell off their illegal stock. IIPA had urged
that no period of transition be permitted, given the already
long delays in passing the copyright law.

IIPA just learned that Cyprus finally passed these
amendments to its copyright law just last week.
Unfortunately, a 9-month grace period was also adopted. To
make matters worse, reports indicate that the Cypriot
government has suspended application of criminal provisions
for infringement under its current law during this grace
period. This is an outrage. IIPA is considering asking USTR
to accept an emergency GSP petition to de-designate Cyprus as
a GSP-eligible country. Again, this effort will depend upon
prompt extension of the GSP Program.

In an April 19, 1993, hearing before the Subcommittee on
International Trade of the Senate Committee on Foreign
Affairs, USTR General Counsel Ira Shapiro indicated the
Clinton Administration's intention to move swiftly with all
available tools, including GSP , to use against countries which
do not provide adequate and effective copyright protection and
enforcement. IIPA strongly approves of this goal. The
members of the IIPA intend to press the Administration on its
resolve to use the GSP trade remedy.

But first things first — renewal of the GSP program
before July 4, 1993 is the most important order of business.
IIPA respectfully requests that this Subcommittee support the
one-year renewal of the GSP program.



Conclusion

The GSP Program is a critical element of the U.S.
bilateral trade program. IIPA strongly supports the short-
term renewal of the GSP Program. IIPA also advocates the
vigorous application of GSP in the intellectual property
realm, consistent with the position articulated by the Clinton
Administration .




Executive Director
and General Counsel



138

(BY PERMISSION OF THE CHAIRMAN:)



EMBASSY OF ISRAEL f«5 ■VJi\ ^RIB' riTIJO

Before

The

Subcommittee on Trade, Committee on Ways and Means

United States House of Representatives



April 27, 1993

Hearing on Renewal of the

Generalized System of Preferences



WRITTEN COMMENTS OF

THE GOVERNMENT OF ISRAEL

through Amnon Neubach,

Minister of Economic Affairs,

Embassy of Israel

Washington, D.C.



The Government of Israel is pleased to submit these brief
comments in connection with the Committee's deliberations
regarding renewal of the Generalized System of Preferences.

The Government of Israel supports the renewal of the
Generalized System of Preferences (GSP) . Over the years that
the GSP has been in effect, Israel has benefitted
substantially from this program. Under the program, Israel
secured its position as an important trading partner with the
United States.

Even from the very beginning, however, Israel had no
"free ride" under the GSP. In exchange for GSP benefits,
Israel made substantial tariff concessions to the United
States, which provided better access to Israel's markets for
U.S. products. These concessions proved worthwhile to Israel
as well since the GSP allowed Israeli producers to continue to
compete with other nations for sales in the United States,
without GSP benefits, Israel likely would have lost a
substantial share of the U.S. market to other countries.

As the Committee well knows, Israel and the United States
signed a Free Trade Area Agreement in 1985, the first such
agreement for the United States. Although that agreement has
been in effect since 1985, not all products entering the
United States from Israel are as yet duty-free. The U.S.-
Israel FTA completes its phase-in period on January 1, 1995.
Until that time, several products from Israel are currently on
the GSP, but are not yet duty-free under the FTA. During the
FTA negotiations, it was Israel's understanding that certain
items that would not be duty-free under the FTA until 1995
would, nonetheless, continue to receive duty-free access to
the United States under the GSP so long as the imports did not
exceed the 50% or dollar value competitive-need limits. As a
consequence, Israel accepted the placement of these items on
so-called "List C" , which list provides for FTA duty-free
treatment only in 1995. Had Israel been apprised at the time
that these products might not continue to be duty-free because
the GSP might be allowed to expire, Israel would not have
agreed as readily to the placement of these items on the "C"
list. Instead, Israel would have considered seeking further
concessions.



139



In consequence, the GSP program is still important to
Israel as part of its on-going free trade relationship with
the United States. Therefore, Israel hopes the program will
be renewed prior to expiration in July of this year.

Thank you.

Respectfully submitted



A MuA



Amnon Neubach

Minister (Economic Affairs)
Embassy of Israel
3514 International Drive, N.W.
Washington, D.C. 20008
(202) 364-5693



140



BEFORE THE SUBCOMMITTEE ON TRADE

COMMITTEE ON NAYS AND MEANS

U.S. HOUSE OF REPRESENTATIVES



COMMENTS OF THE LACKAWANNA LEATHER COMPANY

IN SUPPORT OF THE RENEWAL OF THE UNITED STATES'

GENERALIZED SYSTEM OF PREFERENCES PROGRAM



These comments are submitted on behalf of The Lackawanna
Leather Company ("Lackawanna Leather") in support of the
anticipated request by the Clinton Administration to the Congress
for a "short-term" extension (either twelve or eighteen months)
of the United States' Generalized System of Preferences ("GSP")
program, which is due to expire on July 4, 1993. Lackawanna
Leather enjoys a global reputation as an innovative leather
processor, using both domestically- sourced hides and imported
hides. The company is headquartered in Conover, North Carolina,
where it also has a substantial processing facility, and has
three processing facilities in Omaha, Nebraska. The company
employs over 600 people in its Conover and Omaha facilities.
Lackawanna Leather is one of four companies comprising United
States Leather Holdings, Inc., which is headquartered in
Milwaukee, Wisconsin.

Lackawanna Leather imports leather from all over the world
into the United States, and then processes the leather for a wide
variety of uses. Global sourcing has permitted Lackawanna
Leather to remain competitive in the highly competitive U.S. and
world leather markets. The company seeks quality hides at the
best possible prices, and has sourced imports from many
Beneficiary Developing Countries ("BDCs") under the GSP program.
At times, the benefits conferred by the GSP program have been a
determining factor in sourcing decisions. This has not only
permitted Lackawanna Leather to obtain quality product at
competitive prices, but has helped generate employment and
economic growth in the BDC from which it is sourcing product.
The termination of the GSP program would have an adverse effect
on Lackawanna Leather, its customers in the U.S. furniture
industry, and the BDCs from which it currently sources product.

The potential adverse impact resulting from the termination
of the GSP program on Lackawanna Leather is significant. In
fact, Lackawanna Leather has already experienced, on a smaller
scale, the effect of the loss of GSP eligibility on one of its
product lines - buffalo (water buffalo) leather imported from
Thailand - and has seen first-hand the significant adverse
effect the loss of GSP eligibility (even for a single product)
can have on a company's operations. If GSP eligibility is not
restored to buffalo leather from Thailand, not only Lackawanna
Leather, but also its customers in the already severely depressed
U.S. furniture industry, and its suppliers (and their employees)
in Thailand, will be adversely affected.

Lackawanna Leather was instrumental in developing a market
for buffalo leather in the United States by processing it in such
a way to make it comparable to the quality of Italian split
leather. Italian -produced furniture of split leather dominated
the lower end of the U.S. leather furniture market up until the
late 1980s. Lackawanna Leather was able to develop this product,
and the market for this product, in part because buffalo leather



141



from Thailand was entitled to duty-free treatment under the GSP
program. The ability to enter this leather free of duty (the MFN
rate of duty on buffalo leather is 3.7 percent) made Lackawanna
Leather's buffalo leather operation economically viable.

Buffalo leather is not produced in, or available from
sources in, the United States. It is available to U.S. companies
in commercial quantities only from Thailand (Vietnam is the other
potential source). It is used by U.S. furniture manufacturers to
produce inexpensive leather furniture, a segment of the leather
furniture market which has been dominated by low-priced Italian
imports. Until the introduction of buffalo upholstery leather
into the U.S. market in the late 1980s, the U.S. furniture
manufacturers had to compete against the imported product by
using either vinyl, which was cost competitive but of a much
lesser quality, or low- cost bovine leather, which was of a
similar quality but much more expensive than the leather used by
the Italian furniture manufacturers. With the introduction of
buffalo leather into the United States in the late 1980s, U.S.
furniture manufacturers were able to compete on both a price and
quality basis with less expensive imported Italian leather
furniture. The importation of the buffalo hides for processing
created additional employment at Lackawanna, and maintained
and/or created employment in the U.S. furniture industry, which
for the first time was given an upholstery material which could
compete again low-priced leather furniture from Italy. Further,
not forgetting the original purpose of the GSP program,
significant employment was generated in Thailand by Lackawanna
Leather' 8 growing demand for buffalo hides.

Buffalo upholstery leather from Thailand had been eligible
for duty-free entry into the United States under the GSP program
up until July 1, 1991. GSP eligibility was lost at this time not
because of any complaint from the U.S. leather industry, but
because of the automatic operation of the competitive need limit
of the GSP law. Lackawanna Leather has expended a great deal of
time and effort to have GSP eligibility restored to buffalo
leather from Thailand in order to try to save its buffalo leather
operations. (A decision on the Petition to restore buffalo
leather from Thailand to GSP eligibility filed by Lackawanna
Leather in the 1992 GSP Annual Product Review has not yet been
announced.)

The loss of GSP eligibility for buffalo leather from
Thailand has severely affected the commercial viability of
Lackawanna Leather's buffalo leather import operations. Given
the precarious financial position of most of its customers in the
U.S. furniture industry, Lackawanna Leather was unable to pass
along the additional cost of the 3.7 percent import duty. The
company cannot continue to absorb this cost for much longer. If
its effort to restore GSP eligibility to the product in the 1992
GSP Annual Product Review does not succeed, Lackawanna Leather
may have to discontinue its buffalo leather operations. This
would hurt Lackawanna Leather's customers in the U.S. furniture
industry, which would no longer have access to the upholstery
material which allowed it to manufacture leather furniture which
could compete against imported low-cost Italian split leather
furniture. Further, it would seriously undermine the Thai
industry supplying buffalo hides to Lackawanna Leather, which has
expanded greatly as a result of the demand for buffalo leather
generated by Lackawanna Leather in the U.S. market.

The effect of the loss of GSP eligibility on only one of its
product lines has had a significant detrimental effect on
Lackawanna Leather. Were the entire GSP program to be
discontinued, this effect would not be limited to a single
product line, but would affect a large segment of the company's



142



operations. Having already experienced the disruption caused by
the loss of GSP eligibility on a limited scale, the company does
not wish to experience the loss of GSP eligibility on all of the
articles it imports which currently receive benefits under the
program.

Lackawanna leather would strongly urge that Congress
favorably consider the Administration's anticipated request for a
"short-term" extension of the GSP program. Lackawanna Leather
also urges that the program be extended in a timely fashion,
i.e. . that an extended GSP program goes into effect on July 5,
1993, immediately following the expiration of the current
program. Any "gap" between the expiration of the current program
and the effective date of legislation extending the program would
seriously disrupt Lackawanna Leather's operations.

Lackawanna Leather has already seen an important segment of
its business operations adversely affected by the loss of GSP
eligibility. The cost to the company has been significant, but
would be minimal compared to the cost to the company, and
resulting disruption of its operations, were the GSP program not
extended. For this reason, Lackawanna Leather strongly urges
that the GSP program be extended in accordance with the
Administration's request.



143



LIBERTY f WOODS INTERNATIONAL, INC.



K



S00 N. Sute College Blvd . Suite 1260. Oranje. CA 92668
714 634-4226 • telex 211-059 LBWD • FAX 714 634-8573



April 19, 1993



The Honorable Sam Gibbons

Chairman, Trade Subcommittee on

International Trade, Senate Finance Committee

United States Senate

205 Dirksen Senate Office Building

Washington, D.C. 20510

SUBJECT: Extension and Renewal of

Generalized System of Preferences

Your Honor,

Liberty Woods International, Inc. is a California corporation employing 21 people in its
office in Orange, California. The company is involved in the importation of wood
products from Malaysia and other countries currently qualifying for the Generalized
System of Preferences (GSP).

It is our understanding that the GSP Program will be discontinued as of July 4, 1993,
unless Congress enacts legislation to renew or extend the Program. The purpose of this
letter is to notify you of the adverse impact of the discontinuance of the GSP Program on
our company, our employees, our industry, and business in Southern California.

A substantial portion of the product which is purchased for sale in the United States by
Liberty Woods comes from Malaysia. Malaysia currently participates in the GSP
Program, and their products enter this country without duty. The Program was instituted
for the puipose of encouraging the development of third world countries by giving them
assistance in competing with other countries more advanced in various industrial
activities and international trade The Program has assisted in the development of
industrial facilities and new jobs in Malaysia an J other third world countries, and has
encouraged competition and international trade in general.

Based on our information of the market and the business strategies of the various
Malaysian businessmen, we are convinced that if the GSP Program is discontinued, those



144



for U.S. citizens, and the loss of jobs for those employees depending on the supply of
product from countries qualifying for GSP.

Therefore, Liberty Woods and its employees implore you as a person involved in
legislative decisions to actively pursue the reinstatement, extension, or renewal of the
GSP Program. We further urge that a proposal be presented for an 18 month GSP
rollover program that would keep in place the current system, and allow for further study
and discussion about the adverse impacts of doing away with GSP. Any steps that can be
taken to improve the business climate in California and the United States, and to
encourage international trade for the benefit of retaining existing jobs should be taken.

Please contact members of the House Ways and Means Committee and the Senate
Finance Committee who are currently considering this Program. Please express the
interest of your constituents for the continuation of GSP. Please also take whatever other
action can be taken by your office in encouraging and urging Congress, the Treasury, or
the Commerce Department to support re-enactment of the Program.

Liberty Woods is a small company employing a small group of people, and our business
relies to a very large degree on die existence of GSP. We are certain there are other
companies similarly situated and the termination of the GSP Program will certainly work
a hardship on many people in Southern California.

Please respond by advising your position on this issue. Please also make note that we
are available to provide further information and testimony if invited to do so.

If there are any questions or further information we may provide, please advise. Your
best efforts in this endeavor are appreciated.



Sincerelv.




<




John E. Chaffin
Vice President

JECslo

69-455 86



145

Mattellbys



333 Canme-i:* Bomevwa
EiSegunco CA 90245-5012
Tewpnone 310 524 2000

TELEX IW55 c 188170



April 12, 1993



The Honorable Saa Gibbons

United States House of Representatives

Washington, DC 20515

Dear Congressman Gibbons:

I as writing to urge you to support the continuation of the U.S.
Generalized System of Preferences (GSP) and to ensure that
Congress passes legislation renewing the program before its
expiration on July 4. As reviewed below, this is a setter of
critical importance to Mattel and our 2 , 194 employees in
California.

To help explain the importance of the GSP program to our company,
let ae first review Mattel's sourcing profile. Mattel supplies
the U.S. and foreign markets primarily from overseas subsidiaries
in China, Malaysia, Indonesia and Mexico.

An unfortunate convergence of U.S. trade policy developments now
threatens to undermine the competitiveness of Mattel. First, our
ability to maximize cost-of-production efficiencies has been
severely dampened by the uncertainty created by our government's
continuing threat to revoke China's NFN status. This would place
a prohibitive 70 percent duty on Chinese-made toys.

Next, on January 1, 1993, the toy industry lost the benefit of
duty suspension legislation that for the last decade had been
extended by successive Congresses— —until the last one. As a
result, we are now paying a 12 percent duty on some products from
China that previously entered free of duty. Fortunately, the GSP
program is allowing us to continue importing these articles free
of duty from most of the other countries of principal interest to
our industry.



146



We now face the possible expiration of the GSP program's
statutory authority on July 4. To date, Mattel has relied on the
GSP's duty-free treatment to reduce costs by well over $10
million annually, thereby buttressing the competitiveness of the
Barbie, Disney, Hot Wheels and other products that we ship from
subsidiaries in Malaysia, Indonesia and Mexico to toy markets in
the United States and around the world.

At Mattel, we employ thousands of U.S. workers in jobs that are
directly tied to the products' creation and bringing them to the
market. These U.S. jobs, which range from preliminary product
design to design and development engineering, are not only
integral to the task of producing the toy, they are the very
types of technologically advanced and high-value-added jobs that
we believe our government should be promoting. The GSP programs
maintained by the United States and other industrialized
countries play a key role in supporting these U.S. jobs by
enabling us to offer affordable prices to consumers in our most
important global markets.

I urge you to contact Representative Dan Rostenkowski, Chairman
of the Ways & Means Committee, and Senator Daniel Patrick
Moynihan, Chairman of the Finance Committee, and seek their
commitment to move GSP renewal legislation through their
committees early enough to ensure that the legislation can be
passed by Congress before the July 4 expiration date.



Sincerely,

el, inc. /y

W . Amerman
irman and
Chief Executive Officer




147



STATEMENT BY MOTOROLA, INC.
IN SUPPORT OF RENEWING THE U.S. GSP PROGRAM



April 27, 1993



This statement is presented by Motorola, Inc. in response to the Committee
on Ways & Means Subcommittee on Trade's announcement of April IS, 1993, as
amended by its announcement of April 21, inviting testimony on, inter alia, an
extension of the U.S. Generalized System of Preferences (GSP).

The U.S. GSP program has made an important contribution to Motorola's
competitiveness and, as such, we urge that the program be renewed. The program
has buttressed the interrelationship between Motorola's extensive high-value manu-
facturing in the United States and its low-cost assembly operations in beneficiary
countries.

A prime example of this interrelationship concerns the transceivers assembled
by Motorola in Malaysia. As detailed in this submission. Motorola has substantial
U.S. -based operations - including several thousand American employees - that are
directly related to its Malaysian operations.

Headquartered in Schaumburg, Illinois, Motorola is a major manufacturer of
electronic equipment, systems and components for the U.S. and overseas markets.
Motorola has been a frequent participant in the Annual Review process established
by the Office of the U.S. Trade Representative for considering changes in GSP
eligibility. In recent years, the company has filed a product-specific petition as
detailed in the following case study, and has actively participated in country practice
cases concerning beneficiary countries' worker rights and intellectual property
practices.



148



Malaysian Transceivers: A Case Study in How
the GSP Promotes U.S. Manufacturing

Motorola assembles transceivers in Malaysia primarily for export to the United
States, where they are sold as part of the broader Motorola transceiver line. The
Malaysian transceivers compete primarily against imports from non-GSP countries
such as Japan and Taiwan. As shown below, Malaysia is the only GSP beneficiary
among the United States' leading foreign suppliers of this product

U.S. Imports of Transceivers (HTS 8525.20.30)
($000)

1990 1991 1992



Japan


$122,760


$154,709


$177,322


Malaysia


99,839


116,894


120,040


European Community


38,781


58,286


74,444


Israel


30,431


30,401


37,027


Sweden


36,678


31,267


21,684


Korea


10,251


11,070


13,518


Canada


15,624


7,748


13,198


Taiwan


26,662


17,644


8,252


Singapore


68,384


8,213


5,557


Other


11.708


19.758


46.580


Total


$461,118


$455,990


$517,622



Source: Compiled from official statistics of the U.S. Department of
Commerce.

In 1989, Motorola availed itself of the GSP's Annual Review procedures and
filed a petition requesting a competitive need waiver for the transceivers it assembled
in Malaysia- The company's sales forecasts indicated that the value of its imports of
transceivers from Malaysia was about to exceed the GSP's value competitive need
limit, whereupon the product automatically would lose duty-free treatment and be
assessed the MFN duty of 6.0 percent ad valorem. Such an action would have sharply
curtailed the competitiveness of Motorola's product.

Motorola's petition was granted in April 1990, following completion of the