North America and throughout the world.

Also for the first time, the United States and Canada have agreed to rules governing bilateral investment activities. The Agreement reduces the screening of U.S. investment in Canada, and moves Canada towards a more open, market-oriented investment environment.

The question of how to apply countervailing duty and antidumping laws was one of the most difficult to settle. We finally agreed to retain existing national laws and procedures dealing with subsidies and dumping. But final decisions taken under those laws may be appealed to binational dispute settlement panels upon the request of either party.

There are also provisions covering automotive trade, agriculture, alcoholic beverages, customs matters, government procurement, product standards, personnel movement, and many other areas. These are all described in detail in the summary we submitted to the Subcommittee today.

The proposed Agreement spans many sectors of our economies. We expect numerous industries and groups to mobilize strong support. Nonetheless, wè recognize that, despite widespread enthusiasm for this Agreement, some may disagree. For some, there may be too much free trade in this Free Trade Agreement. Some special interests will see themselves as vulnerable to increased competition

in a free trade area.

5

Others may be timid, afraid to try a

creative approach to the future, fearful of the unknown, thinking that no change means no risk. Yet in this dynamic, interdependent world of ours, the future inevitably holds risks, and the status quo is never sustainable. To do nothing is to retrogress.

Then there are those who are disappointed because they wanted more and wanted it now. Unfortunately, some entered these negotiations with unrealistic expectations that the negotiations This Agreement is not a panacea for

would cure all their ills. every ill. It will reduce, but not end, trade frictions. It will minimize, but not eliminate, trade distortions. There never has been, and likely never will be, perfectly free trade between any two independent sovereign countries. This Agreement was never intended to solve all our bilateral trade problems and should not be expected to do so. By establishing dispute resolution and consultation mechanisms, the agreement explicitly recognizes this fact. It is a vast improvement over the prevailing situation, and a bold step toward significantly freer trade between our countries. It is a massive advancement over the status quo.

Failure to

would have

implement this Agreement devastating repercussions for both countries. The United States and Canada would clearly miss out on a once-in-a-century opportunity. We would be deprived of the enormous economic gains which will come from this Agreement as well as the intangible benefits of developing an

even closer relationship with our friendly neighbors to the north.

We would also lose the impetus it gives to the new GATT round. If the United States and Canada the two largest trading partners in the world, next door neighbors, the closest of friends and allies cannot liberalize their trading relation

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ship, what hope do we have of success in Geneva?

The question on both sides of the border should be "will this Agreement make my country a better and more prosperous place to live a decade or a half century from now?" The objective answer to that question will be a resounding yes!

We must keep our eyes squarely on the long-range benefits for each nation as a whole. This Agreement will help both Americans and Canadians enter the 21st century more competitive and better prepared for the future.

We should approve this Agreement and then build on it in the future. It will, without doubt, be the most significant bilateral trade agreement either country has ever negotiated.

Mr. WOLPE. Thank you very much, Mr. Ambassador. And now we turn to Deputy Secretary of Energy, Mr. Martin.

STATEMENT OF HON. WILLIAM F. MARTIN, DEPUTY SECRETARY OF ENERGY, DEPARTMENT OF ENERGY

Mr. MARTIN. Thank you, Mr. Chairman.

I have a longer statement I would like to submit for the record if I may and I will summarize briefly.

Mr. Chairman, as Ambassador Holmer and others have said, we believe this is a very important agreement, and I believe the energy chapter is perhaps one of the most important parts of the Agreement.

To put this in perspective, you have to think about where we were with the Canadians in energy over the last 15 years. Indeed it has been a rocky road.

REVIEW OF UNITED STATES AND CANADIAN ENERGY POLICIES

In the 1970s, both of our countries had protectionist and nationalistic policies that emphasized regulation. The Canadians had the National Energy Program (NEP) and the Foreign Investment Review Agency (FIRA). We controlled oil. We controlled gas. We had price and allocation controls.

As we turned from the '70s to the '80s, we recognized in both Canada and in the United States that these were harmful policies. Both countries over the last five years have been moving away from regulated protectionist markets towards a free market.

The Canadians have liberalized NEP and FIRA, and we have taken steps to free-up oil and also have more deregulation of gas markets.

The net result of this is that energy trade today is quite prosperous between our countries. It is on the order of $10 billion entering the United States, and in fact today, we actually ship about $1 billion worth of United States coal to Canada.

What the Free Trade Agreement does in energy is to consolidate for the future the gains of the last five years.

So we do not expect a surge of imports into the United States, because right now we do have relatively free trade. But the Agreement protects free trade for the future.

MAJOR ENERGY PROVISIONS OF THE TRADE AGREEMENT

There are five major provisions in the energy area which are worth noting.

Number one, it removes tariffs and barriers to the free exchange of energy.

Number two, it eliminates price discrimination.

Our consumers generally are going to get the same prices Canadian consumers get from Canadian producers.

Number three, it has very important assurances of supply. It protects our consumers from cut-offs from Canada.

If Canada wants to cut off oil for whatever reason, they have to do it proportionally at home and for their export market.

And I might add, the Agreement goes way beyond GATT definitions of national security. It is a major step forward.

Number four, it allows us to sell 50,000 barrels a day of Alaskan North Slope oil to Canada, shipped on U.S. bottoms.

It maintains free trade in uranium.

And lastly, it provides for retention of oil and gas incentives in both countries. But I want to emphasize that it does protect our producers from unfair subsidies since we can still impose countervailing measures.

Well, I would just like to ask, who wins in this Agreement?

First, the consumer wins big. There are 87 million households in the United States and just about every one of them uses electricity and gas. They are going to get lower prices, and they are going to get assured supplies. So the consumer wins.

Utilities win, because they are going to be able to import more Canadian electricity-not a large amount, but some.

And I note for the record that, since 1973, our utilities have paid $7 billion less for Canadian hydro electric power than they would have had they generated electricity with imported oil. And the Agreement provides us a very important option for filling what I predict will be some electric power problems in the 1990s.

Also, I might add, it does not harm our coal or nuclear interests because we are going to need all of our fuels to meet our energy needs.

It also is very important to our energy-intensive industries. In the petrochemicals industry half of their costs are in energy feedstock. Because they are going to be getting lower prices, they are going to be getting a better deal.

And indeed, industries in both Canada and the United States will be more competitive compared to other international competitors.

Some have said that this hurts our energy producers. I would like to briefly respond to that point.

NATURAL GAS, COAL AND URANIUM INDUSTRIES

Some have said it hurts our gas producers. The argument is made that perhaps by allowing more gas imports into the United States, the surplus problem for U.S. gas producers will be exacerbated.

Well, I do not buy that argument. I think the Agreement gives consumers confidence that they can turn to natural gas, both from Canada and from the United States. And we will be seeing greater use of gas in our energy markets.

The only loser here will be imported oil, which it will displace. Some of the coal producers are concerned that perhaps some of that electricity coming in from Canada will diminish their opportunities.

Well, I do not think that is going to happen either. It is such a small percentage of the total. We are going to need more coal. The key issue in coal use is clean coal technology, and I think we are making the right steps in that direction.

I might add, we already ship Canada 16 million tons of coal. United States coal producers could be hurt if Canada put tariffs on coal imports.

Some have said that the uranium industry is hurt.