While the understandings covering services have broad scope, I will note just a few specific results: Enhanced telecommunications and computer services providers are assured of the development of an open and competitive market including access to and use of the basic telecommunications network. The financial services chapter of the FTA substantially The architects' professional organizations of each country will develop joint standards. The two federal governments will encourage adoption of necessary legal changes to effect mutual recognition by states and provinces once the joint standards have been agreed. In tourism, the agreement ensures continued open markets for tourists and tourism service providers. In automotive products, the two countries have agreed to expand on the Auto Pact of 1965 and to remove most remaining tariff and nontariff barriers to free trade. Under the Auto Pact, 95% of bilateral automotive trade already moves duty free. The FTA eliminates the remaining bilateral tariffs over five or ten years. Canada's export-based duty remission program will be eliminated as soon as the FTA takes effect for exports to the United States, and terminated in all cases by 1998. Canada's production-based duty remissions will end by 1996 or earlier as contracts with foreign assemblers expire. No longer will Canada be able to grant duty remission benefits which distort trade and investment patterns. The FTA does not change the Auto Pact in Canada but no new firms may qualify for its benefits there. Canada will also eliminate its longstanding embargo on the importation of used cars from the United States. A new, tougher rule of origin was included in the FTA for automotive products, using the concept of change of tariff heading to indicate "substantial transformation." The new rule also provides for 50 percent North American cost of materials and direct cost of manufacturing for all finished vehicles and many major components. This is a more stringent rule than the current 50 percent value added test under the Auto Pact. This means more North American content will be required in order to qualify for duty free treatment for all imports of motor vehicles and parts into the U.S. from Canada. This will encourage manufacturers to source more parts and components from U.S. and Canadian parts producers. U.S. auto parts sales to Canada also 5 should increase as the relatively high Canadian tariffs on original equipment and aftermarket parts are eliminated. All in all, the Free Trade Agreement provisions will ensure that most production, investment and sourcing decisions of private corporations are not distorted by government policy actions. Market conditions and investment climate will be the principal determinants of business decisions. American and Canadian consumers will benefit from lower prices. These are only a few of the more significant of its features. are also important provisions in alcoholic beverages, rules of origin, government procurement and dispute settlement. There There are of course some things our negotiators failed to get that we would have liked. We do not have an agreement on intellectual property protection in the agreement though we did obtain important improvements in some respects notably the retransmission of copyrighted programming. We also wanted a solid code of conduct on subsidies, and complete elimination of investment restrictions. But in none of these cases did we agree to a situation that is less attractive to the U.S. than what we now enjoy. One of Canada's concerns has been the application of U.S. antidumping and countervailing duty laws to Canadian imports. These laws, as you know, are sanctioned by the GATT and have been scrupulously administered by the International Trade Administration. Since 1980, U.S. plaintiffs have brought 31 such cases against Canadian imports. 17 have resulted in a positive finding leading to a duty or, alternatively, another resolution of the complaint. Similarly, Canadians have brought 43 cases against the U.S. over a similar period, with 22 resulting in a positive finding. We believe these laws are a necessary protection against unfair pricing whose effect is to export unemployment across national boundaries, and against targetted subsidies through which governments can favor specific industries in international competition. incorrectly I can Some Canadians, however, have been convinced assure you that the U.S. has used these laws capriciously as a protectionist device. Without addressing these Canadian concerns there could have been no FTA. Our solution has been to provide for binational review panels, chosen from nationals of both countries, to review those findings of dumping and subsidy. These reviews will apply the standards embodied in the laws and regulations of the country conducting the dumping or CVD investigation, and will be limited to a review of the evidence before the investigators. They will not "retry" the case, 6 nor will they substitute in any way for the present system of initiating and investigating cases. We are comfortable that our cases have been fairly investigated and adjudicated, and anticipate that panel review will confirm that. But the new system will resolve disagreements over dumping and subsidy cases quickly. This will save U.S. and Canadian companies money they now spend on lengthy court cases, create more certainty for business, and build confidence in how both countries deal with unfair trade. Obviously changes of the magnitude required by this historic agreement will require adjustments. Where these can be significant, as in case of tariffs, the FTA wisely provides a substantial amount of time for them to take effect. In practice, the cost of these adjustments should be small in relation to the overall benefits. We are sure, however, that some of those affected will be vocal in their concerns. Their parochial complaints must be weighed against the common good. A larger group has criticized the FTA not because it makes them temporarily worse off, but because it gives them less than they had hoped or expected. Unfortunately, that is the nature of negotiations neither side got all it would have liked. For those critics the question is whether to complain perhaps to oppose the FTA because it gives them a half filled glass less than the full one they hoped for but far better than the empty one they now hold. I think common sense suggests that you dismiss this type of complaint, concentrate on the benefits of the agreement for the United States, and support this agreement. The opportunity to do so will not reoccur soon. Thank you. Mr. WOLPE. Thank you very much, Mr. Laun. And now let us turn to Ambassador Holmer, Deputy U.S. Trade Representative. STATEMENT OF AMBASSADOR ALAN F. HOLMER, DEPUTY U.S. TRADE REPRESENTATIVE, OFFICE OF THE U.S. TRADE REPRESENTATIVE Ambassador HOLMER. Thank you, Mr. Chairman. First, and perhaps more importantly, I would like to join Chairman Bonker in publicly recognizing the U.S. negotiating team, many members of which are here today and particularly the lead U.S. negotiator, Ambassador Peter Murphy who is here today, for their efforts in bringing home this historic agreement. I indicated to Chairman Bonker before he left that I had a number of submissions to make for the record. We have all tried to keep our written testimony relatively short. And I would like to submit for the record, Mr. Chairman, a summary of the United States-Canada Free Trade Agreement that is somewhat more expansive than what we have done individually. Mr. WOLPE. Without objection, they will be entered in the record.1 Ambassador HOLMER. I would also like to submit for the record a list of, well, it is 10 or 12 or 15 pages, lists of U.S. companies throughout the United States that have indicated their support for the Free Trade Agreement.2 And I would also like if I could submit for the record the onepage resolution adopted by the National Governors Association the day before yesterday by a vote of 30 to 5 in favor of the United States-Canada Free Trade Agreement. I will be brief. Mr. WOLPE. Without objection, all of those documents will be entered in the record. [The resolution by the National Governors Association follows:] 1 The summary of the United States-Canada Free Trade Agreement is on file with the subcommittee. 2 This list is on file with the subcommittee. |