Senate Finance and House Ways and Means Trade Hearings
Senate Finance Committee
House Ways and Means Committee
Hearings on the US Trade Policy Agenda
Tuesday, January 27, 2015
Key Topics & Takeaways
- Trade Promotion Authority: Republicans were supportive of passing TPA, while Rep. Levin (D-Mich.) said TPA should not be passed until Congress is “fully confident” USTR can accomplish the desired outcomes.
- TTIP and Financial Services: Sen. Hatch (R-Utah) said financial services, including regulatory cooperation, must be included the Transatlantic Trade and Investment Partnership.
- Currency Manipulation: Republicans and Democrats insisted on the inclusion of currency manipulation provisions in TPP, with Sen. Schumer (D-N.Y.) stating he could not support an agreement without such language.
- Cross-Border Data Flows: Froman said USTR is working against localization of data so that American companies do not need to build “redundant infrastructure” in each country.
Speakers
- Michael Froman, U.S. Trade Representative
Opening Statements
In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) warned that closing the Trans-Pacific Partnership (TPP) without first getting Trade Promotion Authority (TPA) from Congress would be a grave mistake. TPA, he explained, would result in a higher-quality agreement and remains an essential element of trade endeavors. He said the renewal of TPA would help bring about a successful TPP, which must include high standards for intellectual property, address the theft of trade secrets, and ensure market access for U.S. exports.
Ranking Member Ron Wyden (D-Kan.) stressed that trade agreements must “bulldoze barriers” and open new markets for U.S. exports, and that if done properly, they can create high-paying jobs at home. He listed his three key issues for trade negotiations: 1) trade law enforcement; 2) recognition of changing technology and promotion of a free and fair internet; and 3) transparent negotiations.
House Ways and Means Committee Chairman Paul Ryan (R-Wis.) insisted that Congress must be “proactive, not reactive” on trade policy, and that TPA must be approved before TPP can be concluded. He reminded that TPA requires the Administration to consult with Congress, and let it read documents and attend negotiations.
Ranking Member Sander Levin (D-Mich.) said TPP “is potentially a trade package of historical significance,” but that the resolution of remaining issues will determine the agreement’s merits. He said TPP has to be done properly, and argued that Congress must not past TPA until it is fully confident that the U.S. Trade Representative (USTR) can accomplish Congress’ desired outcomes.
Within TPP, Levin stated that provisions on currency manipulation must be included, but lamented that to date the Administration has not broached the subject in negotiations. He also questioned whether ISDS language might unjustly interfere with a country’s ability to regulate within its borders.
Testimony
In histestimony, U.S. Trade Representative Michael Froman said the trade agenda is central to President Obama’s overall economic agenda, and that USTR is working to knock down barriers to exports and level the playing field for American workers. He dismissed criticism of TPP, arguing that if the U.S. “sits on the sidelines” and fails to push high-standard agreements then the world will see a “race to the bottom” on trade standards.
Froman said 2015 would be a critical year for trade. He explained that the U.S. and the European Union (EU) are “moving forward with a fresh start” under the new European Commission, that the U.S. is working to conclude an information technology deal through the World Trade Organization, and that work is continuing toward the Trade in Services Agreement (TISA). Throughout these negotiations, he said USTR is committed to providing maximum transparency and working with Congress.
Froman further argued that bipartisan TPA is needed as it puts Congress “in the driver’s seat” and strengthens oversight. He added that shared goals and priorities can only be accomplished through cooperation between the Administration and Congress.
Question and Answer
TPA
Sen. Chuck Grassley (R-Iowa) urged Froman to tell President Obama that to get TPA done, he would have to “work the phones” with Congress.
Sen. Ben Cardin (D-Md.) said it is “awkward” to begin serious discussions of TPA now with TPP so far along already.
Sen. Dan Coats (R-Ind.) noted that the president’s mention of pushing for TPA during the State of the Union address was one of the few items that brought Republicans to their feet, and added that the fast-track authority must be accomplished in a bipartisan way.
Wyden asked about the relationship of TPA to TPP. Froman answered that USTR has worked with Congress to ensure consultations throughout the TPP negotiation process to highlight objectives. He said that as TPP is concluded and TPA is pursued, he has full confidence that the objectives of Congress could be achieved.
Sen. Robert Menendez (D-N.J.) asked how TPA can put Congress in the driver’s seat when TPP negotiations are close to completion. Froman said TPA is far broader than just TPP, also encapsulating TTIP, TISA and other possible deals.
Ryan asked what the Administration is doing to build support for TPA among Democrats. Froman replied that the Administration is “fully mobilized” and the whole cabinet is involved in the effort to convince Congress of the importance of TPA.
Grassley asked if currency manipulation has been raised either in TPP negotiations or in talks with individual countries. Froman answered that the Administration is encouraging countries to move towards market-determined exchange rates, and Treasury Secretary Jacob Lew is having such conversations through bilateral mechanisms and within institutions such as the G20, G7, and International Monetary Fund (IMF).
Sen. Charles Schumer (D-N.Y.) said there is a bipartisan consensus that wants currency manipulation language within TPP because it has real consequences for middle class jobs. While acknowledging that the Administration has insisted that the issue can be dealt in country-to-country talks, he firmly stated that he could not support a TPP agreement without the inclusion of currency provisions.
Sen. Rob Portman asked what can be done to address currency manipulation. Froman repeated that it is a top priority on which the U.S. has engaged through international institutions, and that the Administration looks forward to continuing dialogue with Congress.
Sen. Debbie Stabenow again stated that Congress would like to see internationally-recognized principles on currency that are enforceable through trade agreements.
Levin stressed that currency manipulation has much to do with the livelihoods of Americans that that the issue must be included in TPP.
Rep. Kevin Brady (R-Texas) said defining currency manipulation is about identifying the intent of the country, suggesting that the Federal Reserve’s quantitative easing could be argued to be a method of reducing the value of the dollar. He questioned whether the Obama Administration is committed to ending manipulation. Froman again said manipulation is a top priority and the Administration is encouraging other countries to move to market-determined rates.
Hatch noted that in June of 2014, Froman highlighted data localization requirements as a major problem and that some countries require U.S. financial services companies to establish local data centers as a condition for doing business. He asked Froman if he agrees that American companies need protection against such requirements within the framework of trade agreements. Froman agreed, calling this a “key area right now” in TPP negotiations and explaining that protection of cross-border data flows is important so that companies do not need to build redundant infrastructure.
Sen. John Thune expressed concern that TPP does not fully address data localization requirements and asked Froman to “correct this oversight” in future agreements such as TTIP and TISA. Froman answered that he would be happy to work with Thune’s office on the matter.
Rep. Dave Reichert (R-Wash.) asked about localization requirements, and Froman again said USTR is pushing against requirements for redundant infrastructure. When Rep. Patrick Meehan (R-Pa.) brought the issue up once more, Froman reiterated USTR’s insistence that data localization is redundant and that this is the general position of USTR across industry sectors.
Trade Enforcement
Schumer expressed skepticism of enforcement measures in previous trade agreements, saying that while the U.S. follows WTO rules other nations “thumb their nose.” He stated that if TPP is to have any hope of wide Democratic support, the Administration has to prove that it will start “fighting back” and needs “concrete, predictable, unilaterally-enforceable enforcement mechanisms.”
Rep. Mike Kelly (R-Pa.) asked what mechanisms exist for enforcement in trade negotiations. Froman answered that trade agreements need strong dispute settlement systems and arbitration panels to determine if a country is in violation and assess penalties. Such arrangements, he continued, tend to get countries to abide by their commitments. Aside from this, Froman highlighted that the engagement with the U.S. in itself shows that countries want to be American partners and are willing to negotiate.
Transparency
Wyden asked Froman if he expects President Obama to sign a TPP deal before it is made public. Froman replied that in the past, general practice has been to make any trade deals public before signing.
Levin insisted that in order to effectively frame a TPP worthy of Congress’ support, members need access to the negotiations’ specifics. Froman agreed that consultation with Congress is important and asserted that all members have access to negotiation texts.
Reps. Lloyd Doggett (D-Texas) and John Larson (D-Conn.) repeated concerns about transparency, with Doggett suggesting that negotiation documents be made available in the Capitol to members and staff with security clearance.
China
Wyden noted that President Obama warned that if the U.S. does not lead through trade agreements, then China would. He asked what countries China has trade agreements with, and how this disadvantages American workers. Froman answered that China has negotiated 14 trade agreements and that it is important to understand that the Asia-Pacific region is the fastest growing in the world. He posed the question of who would step up to serve this market and set the rules of the road. Without U.S. leadership, he continued, this region would not develop strong environmental and labor standards, nor would it address other areas of American interest such as reform of state-owned enterprises.
Rep. Charles Boustany, Jr. (R-La.) asked about the Administration’s strategy to deal with China to push it to continue economic liberalization. Froman said issues such as anti-monopoly reform, forced localization and liberalization of a range of sectors are very much on the table, and the Administration is pressing the Chinese government to take actions consistent with their stated commitments to reform. He said USTR expects to receive China’s negative list with respect to the bilateral investment treaty being discussed, and the length of the list will show how serious Beijing is about opening its economy.
TTIP
Hatch called TTIP an opportunity to improve upon the already deep relationship between the U.S. and the EU and asked if Froman agreed that the inclusion of a financial services framework, including regulatory cooperation, is key to a comprehensive agreement. Froman responded that financial services are central to the relationship and should be part of the agreement in terms of market access. However, he noted that regulatory cooperation in this space has seen “an explosion of activity” since the financial crisis with the Financial Stability Board, the Basel Committee and the G20. He added that a bilateral dialogue with the EU already exists, and that the position of USTR is that these forums are where progress on regulatory cooperation could be made alongside TTIP.
For more information on Senate hearing, please click here.
For more information on House hearing, please click here.
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Senate Finance Committee
House Ways and Means Committee
Hearings on the US Trade Policy Agenda
Tuesday, January 27, 2015
Key Topics & Takeaways
- Trade Promotion Authority: Republicans were supportive of passing TPA, while Rep. Levin (D-Mich.) said TPA should not be passed until Congress is “fully confident” USTR can accomplish the desired outcomes.
- TTIP and Financial Services: Sen. Hatch (R-Utah) said financial services, including regulatory cooperation, must be included the Transatlantic Trade and Investment Partnership.
- Currency Manipulation: Republicans and Democrats insisted on the inclusion of currency manipulation provisions in TPP, with Sen. Schumer (D-N.Y.) stating he could not support an agreement without such language.
- Cross-Border Data Flows: Froman said USTR is working against localization of data so that American companies do not need to build “redundant infrastructure” in each country.
Speakers
- Michael Froman, U.S. Trade Representative
Opening Statements
In his opening statement, Senate Finance Committee Chairman Orrin Hatch (R-Utah) warned that closing the Trans-Pacific Partnership (TPP) without first getting Trade Promotion Authority (TPA) from Congress would be a grave mistake. TPA, he explained, would result in a higher-quality agreement and remains an essential element of trade endeavors. He said the renewal of TPA would help bring about a successful TPP, which must include high standards for intellectual property, address the theft of trade secrets, and ensure market access for U.S. exports.
Ranking Member Ron Wyden (D-Kan.) stressed that trade agreements must “bulldoze barriers” and open new markets for U.S. exports, and that if done properly, they can create high-paying jobs at home. He listed his three key issues for trade negotiations: 1) trade law enforcement; 2) recognition of changing technology and promotion of a free and fair internet; and 3) transparent negotiations.
House Ways and Means Committee Chairman Paul Ryan (R-Wis.) insisted that Congress must be “proactive, not reactive” on trade policy, and that TPA must be approved before TPP can be concluded. He reminded that TPA requires the Administration to consult with Congress, and let it read documents and attend negotiations.
Ranking Member Sander Levin (D-Mich.) said TPP “is potentially a trade package of historical significance,” but that the resolution of remaining issues will determine the agreement’s merits. He said TPP has to be done properly, and argued that Congress must not past TPA until it is fully confident that the U.S. Trade Representative (USTR) can accomplish Congress’ desired outcomes.
Within TPP, Levin stated that provisions on currency manipulation must be included, but lamented that to date the Administration has not broached the subject in negotiations. He also questioned whether ISDS language might unjustly interfere with a country’s ability to regulate within its borders.
Testimony
In histestimony, U.S. Trade Representative Michael Froman said the trade agenda is central to President Obama’s overall economic agenda, and that USTR is working to knock down barriers to exports and level the playing field for American workers. He dismissed criticism of TPP, arguing that if the U.S. “sits on the sidelines” and fails to push high-standard agreements then the world will see a “race to the bottom” on trade standards.
Froman said 2015 would be a critical year for trade. He explained that the U.S. and the European Union (EU) are “moving forward with a fresh start” under the new European Commission, that the U.S. is working to conclude an information technology deal through the World Trade Organization, and that work is continuing toward the Trade in Services Agreement (TISA). Throughout these negotiations, he said USTR is committed to providing maximum transparency and working with Congress.
Froman further argued that bipartisan TPA is needed as it puts Congress “in the driver’s seat” and strengthens oversight. He added that shared goals and priorities can only be accomplished through cooperation between the Administration and Congress.
Question and Answer
TPA
Sen. Chuck Grassley (R-Iowa) urged Froman to tell President Obama that to get TPA done, he would have to “work the phones” with Congress.
Sen. Ben Cardin (D-Md.) said it is “awkward” to begin serious discussions of TPA now with TPP so far along already.
Sen. Dan Coats (R-Ind.) noted that the president’s mention of pushing for TPA during the State of the Union address was one of the few items that brought Republicans to their feet, and added that the fast-track authority must be accomplished in a bipartisan way.
Wyden asked about the relationship of TPA to TPP. Froman answered that USTR has worked with Congress to ensure consultations throughout the TPP negotiation process to highlight objectives. He said that as TPP is concluded and TPA is pursued, he has full confidence that the objectives of Congress could be achieved.
Sen. Robert Menendez (D-N.J.) asked how TPA can put Congress in the driver’s seat when TPP negotiations are close to completion. Froman said TPA is far broader than just TPP, also encapsulating TTIP, TISA and other possible deals.
Ryan asked what the Administration is doing to build support for TPA among Democrats. Froman replied that the Administration is “fully mobilized” and the whole cabinet is involved in the effort to convince Congress of the importance of TPA.
Grassley asked if currency manipulation has been raised either in TPP negotiations or in talks with individual countries. Froman answered that the Administration is encouraging countries to move towards market-determined exchange rates, and Treasury Secretary Jacob Lew is having such conversations through bilateral mechanisms and within institutions such as the G20, G7, and International Monetary Fund (IMF).
Sen. Charles Schumer (D-N.Y.) said there is a bipartisan consensus that wants currency manipulation language within TPP because it has real consequences for middle class jobs. While acknowledging that the Administration has insisted that the issue can be dealt in country-to-country talks, he firmly stated that he could not support a TPP agreement without the inclusion of currency provisions.
Sen. Rob Portman asked what can be done to address currency manipulation. Froman repeated that it is a top priority on which the U.S. has engaged through international institutions, and that the Administration looks forward to continuing dialogue with Congress.
Sen. Debbie Stabenow again stated that Congress would like to see internationally-recognized principles on currency that are enforceable through trade agreements.
Levin stressed that currency manipulation has much to do with the livelihoods of Americans that that the issue must be included in TPP.
Rep. Kevin Brady (R-Texas) said defining currency manipulation is about identifying the intent of the country, suggesting that the Federal Reserve’s quantitative easing could be argued to be a method of reducing the value of the dollar. He questioned whether the Obama Administration is committed to ending manipulation. Froman again said manipulation is a top priority and the Administration is encouraging other countries to move to market-determined rates.
Hatch noted that in June of 2014, Froman highlighted data localization requirements as a major problem and that some countries require U.S. financial services companies to establish local data centers as a condition for doing business. He asked Froman if he agrees that American companies need protection against such requirements within the framework of trade agreements. Froman agreed, calling this a “key area right now” in TPP negotiations and explaining that protection of cross-border data flows is important so that companies do not need to build redundant infrastructure.
Sen. John Thune expressed concern that TPP does not fully address data localization requirements and asked Froman to “correct this oversight” in future agreements such as TTIP and TISA. Froman answered that he would be happy to work with Thune’s office on the matter.
Rep. Dave Reichert (R-Wash.) asked about localization requirements, and Froman again said USTR is pushing against requirements for redundant infrastructure. When Rep. Patrick Meehan (R-Pa.) brought the issue up once more, Froman reiterated USTR’s insistence that data localization is redundant and that this is the general position of USTR across industry sectors.
Trade Enforcement
Schumer expressed skepticism of enforcement measures in previous trade agreements, saying that while the U.S. follows WTO rules other nations “thumb their nose.” He stated that if TPP is to have any hope of wide Democratic support, the Administration has to prove that it will start “fighting back” and needs “concrete, predictable, unilaterally-enforceable enforcement mechanisms.”
Rep. Mike Kelly (R-Pa.) asked what mechanisms exist for enforcement in trade negotiations. Froman answered that trade agreements need strong dispute settlement systems and arbitration panels to determine if a country is in violation and assess penalties. Such arrangements, he continued, tend to get countries to abide by their commitments. Aside from this, Froman highlighted that the engagement with the U.S. in itself shows that countries want to be American partners and are willing to negotiate.
Transparency
Wyden asked Froman if he expects President Obama to sign a TPP deal before it is made public. Froman replied that in the past, general practice has been to make any trade deals public before signing.
Levin insisted that in order to effectively frame a TPP worthy of Congress’ support, members need access to the negotiations’ specifics. Froman agreed that consultation with Congress is important and asserted that all members have access to negotiation texts.
Reps. Lloyd Doggett (D-Texas) and John Larson (D-Conn.) repeated concerns about transparency, with Doggett suggesting that negotiation documents be made available in the Capitol to members and staff with security clearance.
China
Wyden noted that President Obama warned that if the U.S. does not lead through trade agreements, then China would. He asked what countries China has trade agreements with, and how this disadvantages American workers. Froman answered that China has negotiated 14 trade agreements and that it is important to understand that the Asia-Pacific region is the fastest growing in the world. He posed the question of who would step up to serve this market and set the rules of the road. Without U.S. leadership, he continued, this region would not develop strong environmental and labor standards, nor would it address other areas of American interest such as reform of state-owned enterprises.
Rep. Charles Boustany, Jr. (R-La.) asked about the Administration’s strategy to deal with China to push it to continue economic liberalization. Froman said issues such as anti-monopoly reform, forced localization and liberalization of a range of sectors are very much on the table, and the Administration is pressing the Chinese government to take actions consistent with their stated commitments to reform. He said USTR expects to receive China’s negative list with respect to the bilateral investment treaty being discussed, and the length of the list will show how serious Beijing is about opening its economy.
TTIP
Hatch called TTIP an opportunity to improve upon the already deep relationship between the U.S. and the EU and asked if Froman agreed that the inclusion of a financial services framework, including regulatory cooperation, is key to a comprehensive agreement. Froman responded that financial services are central to the relationship and should be part of the agreement in terms of market access. However, he noted that regulatory cooperation in this space has seen “an explosion of activity” since the financial crisis with the Financial Stability Board, the Basel Committee and the G20. He added that a bilateral dialogue with the EU already exists, and that the position of USTR is that these forums are where progress on regulatory cooperation could be made alongside TTIP.
For more information on Senate hearing, please click here.
For more information on House hearing, please click here.