you deal with the world. And that is a difficult situation.

Let me talk to you now, though, about the substance of what we
are here for today. There are many members here, so I am going
to try to keep myself down to the 5 minutes.

You want a brief extension of fast track unincumbered iust to
complete the Uruguay round. When will you actually send that up
for introduction so we can work a schedule out on it?

Ambassador Kantor. Our request is presently at the Office of
Management and Budget. As soon as it has been cleared by that
agency, the administration will submit it. Obviously, we would like
as quick action as possible, working of course with the Congress.

Chairman Gibbons. Thank you.

Secondly, GSP expiring this year. I would imagine that you won't
have time to make any substantive changes in it or perhaps only
small substantive changes. Would you would just like a brief exten-
sion of GSP?

Ambassador Kantor. We are going to ask for a 1-year extension
and we will not ask for any substantive changes in GSP.

Chairman Gibbons. Fine. That is a good way to handle it. We
all have such a big trade agenda.

I am glad you pointed out the great market opportunities that
we have in Asia. I have just come from a meeting with the New
Zealanders. This committee is going to meet with the Australians
on the second for breakfast, looking at the Asian region from their
point of view. And we plan to visit Asia this August, as many of
us as can get away. We need to pay attention to Asia, because
there is an awful lot of trade opportunities and trade problems that
arise there. In a macro sense, it is our biggest market and biggest
potential market.

I noticed in your statement that you said you were going to later
on ask for fast track authority on, I think, Chile, as I recall. I
would urge you to go ahead on that, if you can. Get clearance
throughout the agency. I don't think there would be any trouble in
negotiating a free trade arrangement with Chile.

Ambassador Kantor. We are deeply committed, this adminis-
tration, as soon as the NAFTA is initiated, to begin negotiations
with Chile in hopes and in expectation that they would join what
then would become the Free Trade Agreement for the Americas.
The President is committed to that and we believe that would be
proper.



16

Chairman Gibbons. Yes, there is a whole market there that we
tend to overlook all the time. That brings me to the Caribbean. And
I know that the Caribbean together is about 40 million people in
23 countries with whom we have a free trade agreement now. And
they are concerned about the possibility of NAFTA discriminating
against them.

I would call to your attention that I have introduced some legis-
lation that I would ask you all to look over that would grant on
a temporary basis, only for 3 years, to the Caribbean the same
privileges that come out of NAFTA to Mexico and then after that
if they wanted to renew those or you wanted to, they would have
to come in and negotiate those out with you. I would nope that you
would give that consideration because I think we owe a special ob-
ligation to the Caribbean. They are so small and so poor and so de-
pendent upon us and we have a very favorable balance of trade
with them. In spite of the fact that we have a one-way preferential
trtade arrangement with CBI — I ask to you cast your eyes down
there in a sympathetic manner.

When do you think you will have a conclusion of your supple-
mental NAFTA agreements? Can you give us any timetable to
think about?

Ambassador Kantor. Well, of course that is dependent on many
factors. I believe we will be finished in the midsummer in time to
get the full package of implementation legislation plus the
supplementals to the Congress either right before or right after
your break in hopes that in the early fall we can have it passed.
That would be in time, of course, for the January 1, 1994, imple-
mentation date.

Chairman Gibbons. And then if the Uruguay round fast track is
successful and the negotiations are successful, we will be deep into
the Uruguay round this time next year.

Ambassador Kantor. We would hope and expect that would be
true, Mr. Chairman. As you can see, we have quite an agenda to-
gether.

Chairman Gibbons. I want to commend you for our success in
negotiation with, certainly, Britain and I support what you have
been doing. Keep up the good work.

Ambassador Kantor. Thank you, Mr. Chairman. I appreciate it.

Chairman Gibbons. Mr. Matsui.

Mr. Matsui. Thank you, Mr. Chairman, for holding this hear-
ing,and how wonderful that it falls on a very timely day in particu-
lar.

Mr. Ambassador, I would like to thank you and congratulate you
on the agreement reached today with the Europeans. I think the
fact that you raised this issue, threatened that title VII sanctions
would be taken, and then the fact that you reached at least a ten-
tative agreement with the Europeans at this time is commendable
and indicates the negotiating skills that you have. The President
clearly snowed good judgment when he selected you as our USTR.

The tentative agreement you made deals with the heavy elec-
trical equipment. But the issue of telecommunications is of course
still outstanding. I recall back, I believe it was 1986, when the
courts mandated the split up of the telephone industry in the seven
operating companies, we virtually opened up our entire tele-



17

communications industry to whomever wanted to come in. Unfortu-
nately, at that time then-Attorney General William French Smith,
did not save U.S. market access for the purpose of negotiating to
try to open up other markets. It was a mistake that obviously some
6 or 7 years later we have come to really regret. We have not been
successful, in your negotiations, in terms of the telecommunications
issue.

You have indicated that you will continue on at least proportion-
ally with the title VII sanctions in that particular area. I would
just wish you to know for whatever it is worth that many of us who
are considered free traders are strongly behind your efforts, and we
want to commend you and urge you, to continue your actions be-
cause certainly there is no reason why our markets should be open
to European, Japanese, and other telecommunications products
while at the same time the European market is closed and some
of the other markets are closed as well. We want you to know that
we are fully behind your efforts in this area.

I would just like to ask, if I may, one question with respect to
this. Will these discussions that you are having, in your opinion,
have any bearing on the negotiations going on regarding the Uru-
guay round?

Ambassador Kantor. Thank you, first of all, Congressman Mat-
sui, for those kind words. This is only, as they say, the first inning,
I have a long way to go, but I appreciate that.

Let me note the telecommunications market in this country is
wide open. There is no discrimination whatsoever. In fact, 54 per-
cent of our central switch market, the most expensive goods pur-
chased by telecommunications companies, is held by foreign compa-
nies. We have a tiny percentage in Europe by comparison and that
is why the sanctions are going to be invoked in this area with the
hope that we can persuade the Europeans to open that market. It
is an important market and we need to do that.

Let me address your question on the Uruguay round. I think that
in light of that, the fact that we could open the heavy electrical
equipment market which historically has been closed is encourag-
ing. We haven't sold a steam turbine since the Marshall Plan in
Europe, or a gas turbine in 10 or 11 years now; 10 years, 1983.

I believe our ability is to reach this agreement and to move onto
category A procurement bodes well for our ability to achieve a mar-
ket access package in order to grow our economy and the global
economy. We also seek to reach some agreement on intellectual
property protection, service protection, audio visual and to resolve
other problems with the Dunkel text by December 15.

I am encouraged by what happened today.

Mr. Matsui. Thank you very much, Mr. Ambassador.

Chairman Gibbons. Mr. Crane.

Mr. Crane. Thank you, Mr. Chairman.

I am encouraged by your response on the issue of Chile and a
free trade agreement with them. I am curious after we get the Uru-
guay round and the North American Free Trade Agreement behind
us and your dish is full already, but looking to fiscal year 1994, are
you giving any thought to exploring the possibility of free trade
agreements with, say, Korea, Taiwan, any of the Pacific Rim coun-



18

tries? And if so, do you have the budgetary resources necessary to
contemplate that in fiscal year 1994?

Ambassador Kantor. Without getting too far out in front of the
President for whom I work, let me indicate that the Pacific basin —
the Asia Pacific area — is critical to us. We would like to use your
chairmanship of APEC to begin to address trade issues. We nope
that will lead to more open trade with all the nations of the Asian
Pacific region.

We willalso have bilateral discussions whether it be with Japan,
China, Korea, Taiwan, Singapore, or others to continue to open
those markets. We will commit the requisite amount of resources
to make that happen.

I might note, this office, even with the small staff, has been able
to work on both the NAFTA and the Uruguay round. I believe we
do have the resources to make that happen.

Mr. Crane. Do you have any estimated costs of the commissions
for these side bar agreements? What is your estimate of the costs
of that?

Ambassador Kantor. The current negotiations indicate it will be
fairly small. We can handle those costs within the proposed budget.
Of course, we will expect the other two countries to share any
costs.

Mr. Crane. And finally, is there a possibility that there may be
imposition of a small border fee to pay for the cost of NAFTA im-
plementation? Is that under serious consideration?

Ambassador Kantor. We have not yet discussed border cleanup.
When we do, of course, the funding of that becomes an important
issue. Frankly, we are looking for some creative ways to handle
this problem. This must be dealt with without having a major
budgetary impact or inhibiting trade or putting an unusual burden
on business.

As you know, we have taken this country from a multibillion dol-
lar deficit with Mexico in trade to a $4 billion surplus. This is fa-
vorable to American workers. We would rather not put any burden
on trade because the opening of these borders has been so helpful
to us.

Mr. Crane. I would hope that you would adhere to that position
because of the potential for a German firm or Japanese firm open-
ing up a facility in Mexico and then importing parts into the coun-
try and putting American exporters into Mexico at a disadvantage.
So I am happy to hear your response to that. Thank you for your
testimony.

Ambassador Kantor. Thank you. I appreciate it.

Mr. Gibbons. Mrs. Kennelly.

Mrs. Kennelly. Thank you, Mr. Chairman.

And thank you, Mr. Kantor for coming. We have been very fortu-
nate in this country in having remarkably bright USTRs in modern
history, and yet some of us on this committee have been dis-
appointed that we have not used the availability of some of our
tools to be a bit more aggressive. One of the areas that I am refer-
ring to is the Special 301 provision.

And I know as recently as today that you have announced that
you are going to be more attentive to this provision. First, what is
your vision of the new 301, using it as I always thought it should



19

be used and could be used, but hasn't been used? And the other
question is how does enforcement of intellectual property and pat-
ents play a role? This is an area where we perform significant re-
search and development. We have the intellectual property and we
should be able to export it but if we can't protect it, we are going
to be left, as in many other areas, being out competed. So I would
ask you how you intend to use the 301 provision more effectively?

Ambassador Kantor. First of all, thank you, Congresswoman
Kennelly, for that question. No one ever accused me of not being
aggressive. I have been accused of a lot of things but that is not
one.

We are now reviewing Special 301. We are serious about enforc-
ing Special 301. I believe you will be interested in our announce-
ment on 30 April.

Mrs. Kennelly. Do I understand this is a list that will be

Ambassador Kantor. It will be a list. Let me just say that we
are not going to be shy about making sure that countries adhere
to their responsibilities for intellectual property protection. The
huge cost to this country in intellectual property violations is a
major concern of this administration. I have raised this concern
with Ambassadors, Trade Ministers, and prime ministers when
they have been here in Washington. We have made it clear to them
that we are not going to stand by and have intellectual property
in any way offended or taken away.

As you know, intellectual property protection is essential for the
cutting edge technologies that will be the fuel, I hope, for the
growth of this economy and the growth of many more jobs for U.S.
workers.

And so we are dead serious about enforcing Special 301, and I
hope you will be satisfied with what we announce on the 30th of
April.

Mrs. Kennelly. Thank you very much. Thank you, Mr. Chair-
man.

Chairman Gibbons. Mr. Thomas.

Mr. Thomas. Thank you, Mr. Chairman.

Mr. Ambassador, welcome. Once again, I want to underscore all
of the comments that the chairman made. This particular season
when partisanship unfortunately seems to be the mode on a num-
ber of issues, in the area of trade we have had an unusual degree
of bipartisan support for whichever administration, and to a very
great extent I believe it is because of the reason that my colleague
from Connecticut indicated; that whoever has occupied this posi-
tion, they have been extremely talented people with very dedicated
and talented staffs.

Having said that, I am somewhat concerned about folks already
working on weekends, given the number of staff that you have in
regard to the chairman's comments. If every department and agen-
cy asked for only a 1.26 percent increase and they had the produc-
tivity of USTR we would not be in some of the problems that we
are today from the deficit.

But my concern is this: When you look at our aggressive trade
policy on a worldwide basis and view it as a military campaign in
terms of a European front, an Asian front, a Western Hemisphere
front, both North and South, the troops that you have get stretched



20

very thin, especially when you look at a calendar and there are in-
evitably skirmishes going on at the same time in several different
theaters. I think in trie past there has been an attempt to augment
the staff through detailees or contract people in particular areas.

Has there been any consideration or have you discussed that con-
cept? If you aren't going to be able to beef up your full-time staff
necessarily, do you have some contingency plans or have you talked
at all about making sure that there are enough bodies when there
are multiple fronts that have been opened on the trade negotiation
front?

Ambassador Kantor. First of all — I appreciate your kind re-
marks. I will hope to live up to the high standards that my prede-
cessors have set. You are right and they have acted in a non-
partisan manner and I hope to carry on that tradition. I have tried
to do it thus far and I will continue to try to do that.

I will note that we have on board right now 50 detailees. It will
be cut to 42, but that is not really descriptive of the entire story,
Mr. Thomas. We have had tremendous cooperation from the De-
partments of Commerce, Treasury, and State, as weak as the
Council of Economic Advisers on various discrete issues within
their area of expertise. I am pleased by the kind of cooperation that
has been afforded this office. This has helped tremendously.

I don't think we need more than we have asked for. If I find that
it is impossible to carry out these tasks in this situation under this
budget, then I would go to the President and ask for more. We do
need to deal with the structural budget deficit — and I understand
we're not going to end the deficit on the back of the United States
Trade Representative's office. It is symbolically important and we
are part of this commitment.

Mr. Thomas. I would urge you as you continue to use detailees
or contract people if you notice a continuing dipping into the same
well, that would indicate that you need to add someone in that
area. And I think you would find unanimity on this committee to
augment the staff rather than to continue to borrow from Com-
merce or other areas.

In review of the subject matter, in terms of GSP, there are some
of us who have been watching that over the years and have made
suggestions which were adopted into the statute over the years,
and if you are going to ask for a 1-year extension with no statutory
changes, we may want to visit with you in terms of some of the dis-
cretionary power that the administration has and the way it has
been exercised in the past and perhaps we could get substantive
changes in the administrative application rather than statutory
changes.

In regard to the discussion of bilaterals, I think there is a role
for bilaterals. I would prefer it to be seen on a multilateral basis
in terms of a world trade structure, but if you are talking about
additional nations in the Western Hemisphere like Chile, it be-
comes doubly important that we get NAFTA right because it will
be a model for using in other areas.

And last, let me say that there is already a watch begun in terms
of our relationships with Mexico because it appears as though there
may be some nontariff barriers that are appearing even before
'NAFTA is put in place so that the agreed upon tariff reductions in



21

the North American Free Trade Agreement may, in essence, be
meaningless if Mexico is beginning to institute nontariff barriers.

I submitted a series of questions to you on March 11. We re-
ceived a copy of them on April 21. A number of them are single
paragraphs which, in essence, Mr. Ambassador, I could have writ-
ten myself. I don't ask questions that I already know the answer
to for the sake of asking questions, nor do I want to occupy your
staffs time in terms of giving me one paragraph answers that have
no content. So we are going to have to work out a timeframe in
some sort of a prioritizing. I only ask questions because I need an
answer. And I would rather have you tell me that you are not
going to tell me because you don't know or don't want to tell me
rather than having someone sit down and link a group of words to-
gether that don't really mean or say anything. But thank you for
your continuing

Ambassador Kantor. Congressman, I will take a look at those
questions and I will sit down and write the answers myself.

Mr. Thomas. If you don't understand it, there was a reason for
asking it. And if we were inarticulate in asking it, perhaps a
reasking of the question would be helpful. I am not in the practice
of asking questions that I don't need the answer to.

Ambassador Kantor. Congressman, I have known you for a long
time and you are not inarticulate.

Mr. Thomas. I appreciate that. The job you are doing is as im-
portant as anyone else in this or any other administration, laying
the ground work for not just us but future Americans. So I really
do appreciate the work that you are doing.

Chairman Gibbons. Mr. Coyne.

Mr. Coyne. Thank you, Mr. Chairman.

Mr. Ambassador, I wonder if you would give me your assessment
of what a successful completion of the Uruguay round would mean
to the manufacturing sector of the U.S. economy.

Ambassador Kantor. Mr. Coyne, in general we will have a net
increase of employment even above the kinds of increases we have
already had as a result of the incredible increase in exports into
Mexico. As you know, they have increased from $12 to $40 billion;
by three and a half times.

Much of that increase in employment — and it has been estimated
from 125,000 to a 500,000 increase — will be in the manufacturing
sector. This is the most studied treaty with 24 different studies in
the history of this country. Every study except one indicates more
than nominal growth in the manufacturing sector.

NAFTA will also add to ourgross domestic product and to in-
come growth in the country. This is in addition to the current
growth because the Mexican Government has opened up its bor-
ders. As I mentioned before the United States now has a trade sur-
plus rather than a trade deficit with Mexico.

Mr. Coyne. So as a result of the Uruguay round, you expect a
dramatic increase in manufacturing employment with the success-
ful completion of it?

Ambassador Kantor. NAFTA and the Uruguay round. The Uru-
guay round will have a more dramatic increase in employment in
the manufacturing sector, especially if we attain our goals with re-
spect to nonferrous metal, paper, wood, electronics, construction



22

equipment, agricultural equipment and others. We have a long list
we have been discussing over the last 48 hours with the European
Community. If we can reach agreement on a bilateral basis and
there multilateralize the agreement, it will have a huge impact on
the manufacturing sector.

Mr. Coyne. Do you intend to pursue a sectoral agreement in
steel at the same time that you are negotiating the Uruguay
round?

Ambassador Kantor. We are attempting to deal with the prob-
lem of overcapacity in the steel industry through the multilateral
process, not through the round itself. The round will, however,
touch upon some concerns in the steel area like subsidies.

Let me give you an example: The European Community has $75
billion in steel subsidies. This makes it difficult for the U.S. indus-
try and has led to the countervailing duty and dumping cases and
the preliminary decision of which you are well aware. We will con-
tinue to try to reach an agreement on steel through that process.
We will not do anything with the regard to the normal progression
of the cases that are going through the process and will be finalized
this summer at the Department of Commerce.

Mr. Coyne. As you know, when President Yeltsin was in the
country a couple of weeks ago, he and the President discussed most
favored nation status for Russia. What is the status of those delib-
erations?

Ambassador Kantor. They are under discussion in the adminis-
tration. As you know, there are some particular problems that are
being discussed with the President, the National Security Council,
and the State Department regarding continuing problems of inte-
gration with Russia, the Confederation of States and the former So-
viet Union. Those discussions are ongoing.

Mr. Coyne. Thank you very much.

Chairman Gibbons. Mr. Payne.

Mr. Payne. Thank you, Mr. Chairman.

Mr. Ambassador, I would like to echo the words of my colleagues
as I express my appreciation for the good job that you and your
staff are already doing, in particularly the success you have just
had in the negotiations with the European Community. Thank you
for that and I look forward to working with you and hopefully we
will have many more successes.

I would like to spend a minute and talk about the fast track ex-
tension and an issue that is of real importance to my people back
home. I voted against the fast track extension in 1991, and at that
time I was concerned about the impact of phasing out the
multifiber arrangement and the across-the-board tariff reductions
and the impact that they might have had on the communities and
families that rely on the textile industry.

In my district, I have 20,000 workers in the textile industry
alone and others in apparel and fiber. With the emphasis of this
administration on jobs and on the economy, I would hope that we
might also take another look, and a serious look, at the proposed
agreement on textiles and how we might improve it. For instance,
we have talked about the fact that the United States must take a
strong stand on opening markets.



23

Here are some examples of where we might look at opening mar-
kets: India exports into the United States roughly $1 billion in tex-
tiles and apparel goods. India imports from the United States zero
in those areas; Pakistan, $586 million and imports zero. There are
many other examples in China and Thailand, et cetera. It seems
with these kinds of figures around the world, that any phaseout of