in the Pacific economy, and strengthen China's stake in prosperity and stability throughout Asia.

As such, together with our network of alliances and military commitments, trade policy has helped to strengthen guarantees of peace and security for us and for the world. And China's WTO accession will be the most significant step in this process for many years.

CONCLUSION

That is the fundamental meaning of this WTO accession.

It will create a new and fundamentally reformed trade relationship with the world's fastest-growing major economy, which offers practical, concrete benefits to cities and rural areas throughout America: stronger guarantees of fairness for our working people, farmers and businesses; new export opportunities that mean jobs and growth for Americans.

It will promote deeper and swifter reform within China, strengthening the rule of law and offering new opportunities and hope for a better life to hundreds of millions of Chinese.

And it will offer the prospect of a relationship with the world's largest nation which may have moments of tension and volatility, but in which we also act to find common ground and strengthen hopes for peace.

That is the opportunity before us; and it is one our country must not miss. I thus ask for the Committee's support as we seek permanent normal trade relations with China and its accession to the World Trade Organization.

Thank you, Mr. Chairman and Members of the Committee.

RESPONSES TO QUESTIONS FROM SENATOR BAUCUS

Question 1: The history of trade negotiations with many of our Asian trading partners demonstrates pretty clearly that trade agreements are not necessarily self-executing. We has seen over and over that persistent attention to monitoring of compliance and enforcement of obligations is absolutely necessary. That requires a Congress and an Administration fully committed to pursue our trade goals in these agreements. Yet, we have all too often seen, over the last twenty years, in both Democratic and Republican Administrations and in both Democratic and Republican Congresses, inadequate attention to enforcement. Our businesses, our workers, and our farmers have suffered. And our country's credibility has suffered. How can this Congress and this Administration ensure that future Congresses and future Administrations will take the necessary actions to enforce Chinese obligations? I believe there need to be new institutionalized mechanisms to make this happen. I would appreciate your comments.

Answer 1:

• While we agree that ensuring that China and our other Asian trading partners fully implement their commitments is critical, we believe that this Administration has a track record of doing just that, in particular with respect to China. Most importantly, however, is that China's accession to the World Trade Organization (WTO) will provide additional monitoring and enforcement tools in the international arena, while preserving access to U.S. trade laws.

• Our November bilateral Agreement with China has detailed, specific commitments so that China's implementation efforts can be objectively evaluated, thus enhancing our ability to monitor and enforce the commitments we negotiated. • China's membership in the WTO means that for the first time, China will have its laws, regulations and actions subject to impartial, international review through the WTO dispute settlement mechanism, and, potentially multilaterally approved trade sanctions.

• We are also working with our WTO trading partners to ensure that appropriate arrangements are put in place for multilateral monitoring of China's implementation of its commitments. China would thus be subject to continuing oversight and pressure from all 136 WTO members to comply with its WTO commit

ments.

• Domestic monitoring of China's implementation is equally important. The President in his FY2001 budget has requested additional funds and personnel dedicated to monitoring China's implementation of its commitments and enforcement of U.S. rights under the WTO agreement and accession package.

• In addition to these enforcement tools, U.S. trade laws-buttressed by the antiimport surge mechanism and continued use of non-market economy methodology in antidumping investigations-will be available to ensure that trade with China does not injure U.S. industries in any sector.

• Thus, we believe that this combination of domestic and international monitoring and enforcement mechanisms will provide a sound basis for enforcing our rights under this significant agreement.

Question 2: The Agricultural Co-operation Agreement went into effect when the Chinese language version was initialed in December in Seattle. Since then, a technical citrus team has visited the United States. This week and next, a wheat buying mission is here. Two weeks ago, I initiated a letter to President Jiang Zemin, signed by 53 Senators, insisting that immediate implementation of that agreement was critically important to the PNTR effort. We defined implementation not as technical investigations but as the commercial purchase of wheat, meat and citrus. What is the Administration doing to further this important goal?

Answer 2: The Administration has raised this issue at the highest levels in China at every opportunity, indicating our position that China not only make appropriate administrative changes to implement the agreement on citrus, wheat and meat, but that they also import all three commodities to demonstrate that the new import regimes are in place and effective. China has done both. On March 22, 2000 China announced final rules for the implementation of our bilateral agreement on agricultural cooperation as it relates to exports of citrus, wheat and meat. Since then, China has imported both U.S. citrus and meat according to the new rules, and has purchased U.S. wheat from the Pacific Northwest. Plans for the cooperative initiatives specified in the agreement for the study of TCK in grain from the PNW and medfly in U.S. citrus are also under discussion.

RESPONSES TO QUESTIONS FROM SENATOR HATCH

Question: An important part of the process for new country admission to the WTO is to ensure that the candidate has reposed with the WTO the regulatory and statutory reforms necessary to bring the candidate into conformance with WTO standards. As lawmakers, we are quite naturally concerned with this aspect of the process. Moreover, these reforms demonstrate the ability of the applicant country to implement its commitments in the critically important areas of national treatment market access, intellectual property protections and other trade sectors.

Is there some good reason that China has yet to present its proposed regulatory reforms to the WŤO? Also, when can we expect to see their proposals?

Answer:

• We share your concerns about ensuring that China fully implements its WTO commitments and that we know as much as possible about China's plans on implementation prior to accession.

• Chinese officials are now engaged in identifying various laws and regulations that will need to be amended to comply with its WTO obligations. Given the magnitude of the reforms China must undertake to meet their obligations under our bilateral agreement and more generally under the WTO Agreement, this will be a complex and formidable task-and one to which we will be paying close attention.

• We have already consulted with the relevant officials in areas, such as customs valuation and intellectual property, and proposed specific changes to China's current provisions. We expect China to provide updated information to the WTO on its current laws and needed changes, in the near future. We anticipate more intensive exchanges with Chinese officials in the coming months and we will be seeking additional information, as appropriate, in the Working Party on China's accession.

• It is important to note that China has already informed us and other members of the Working Party that under China's legal system, a ratified international agreement supercedes inconsistent domestic legislation. This situation is common to several countries with "civil law" systems. Thus, if this agreement is ratified by its National People's Congress, the commitments contained therein must be implemented and are fully enforceable.

RESPONSES TO QUESTIONS FROM SENATOR GRAHAM

Question: During April 1999, the U.S. and China signed an agricultural cooperation agreement as part of the U.S.-China WTO accession negotiations. As part of the implementation process, between January 15 and January 20, 2000, Chinese inspectors toured U.S. citrus production areas in Florida, Texas, Arizona, and California.

Based on the progress of the implementation process, when can U.S. growers anticipate exporting their first shipments of citrus to China?

Answer: China completed its assessment of the data collected during their inspection tour of citrusproducing regions in the United States and issued final rules on

March 22, 2000, notifying the public and relevant government agencies that imports of U.S. citrus would be permitted under the terms of our bilateral agreement. Since then, there have been several shipments of U.S. citrus from both Florida and California. The arrival of U.S. citrus in China generated significant attention from the local and international press, which should give a U.S. marketing efforts in China a good head-start.

Question: High tariffs will continue to be an impediment to U.S. citrus gaining significant market share in China over the next few years. Are you working to accelerate a reduction in Chinese tariffs on U.S. citrus imports beyond the schedule agreed upon during the April 1999 negotiations?

Answer: China agreed in our November 15, 1999 bilateral agreement to reduce tariffs on imports of U.S. citrus from the current rate of 40% to 12% by January 1, 2004. Duties on orange and grapefruit juice will drop from 35% to 15% over the same time period. These reductions will be made in equal annual installments. It is possible that other WTO members that have not yet concluded bilateral agreements with China could improve on these access commitments for citrus and citrus products.

RESPONSES TO QUESTIONS FROM SENATOR MOYNIHAN

Question: And I guess this began in Corning, New York, and in the general area photon research and optical development. And we understand that the Chinese government China's major market for our exports-we understand that the Chinese government has recently directed cable manufacturers and telephone companies to stop importing optical fiber and instead purchase it from local suppliers.

Do you know where this matter stands? And if you don't, will you find out?
Answer:

1. Our bilateral WTO accession agreement, when it becomes effective, would require China to eliminate and cease to enforce local content requirements, such as the one you describe, in its laws, regulations and other measures and to cease enforcing contracts containing such requirements.

2. China has also agreed that its state-owned and state-invested enterprises will make purchases and sales based solely on commercial considerations and that U.S. firms will have an adequate opportunity to compete for sales to these enterprises on non discriminatory terms and conditions. Moreover, China has agreed that the government will not influence, directly or indirectly, commercial decisions on the part of state-owned or state-invested enterprises, in particular with respect to the country of origin of products.

3. Finally, China's laws, regulations and other measures that relate to procurement of goods and services by a state-owned or state-invested enterprise for commercial sale or the production of goods for commercial sale or for non-governmental purposes must comply with the national treatment and NTR/MFN requirements of the WTO.

4. Thus, we will have a means to address the "buy local" issue for enterprises that are engaged in commercial activities.

RESPONSES TO QUESTIONS FROM SENATOR ROBB

Question: It has been suggested that fertilizer trading rights might be covered by the EU-China bilateral, which is currently being negotiated. If it is covered by the EU-China bilateral, would that resolve the issue from the standpoint of the U.S. fertilizer interests?

Answer: We reached agreement with the Chinese that will effectively provide market access for U.S. fertilizer. The agreement sets up a TRQ system for fertilizer products of priority interest to the United States similar to the system agreed for sensitive agricultural products.

PREPARED STATEMENT OF HON. MAX BAUCUS

[MARCH 23, 2000]

I appreciate Chairman Roth's calling this hearing to discuss some of the non-trade aspects of our relations with China and the complex triangular relationship among Washington, Beijing, and Taiwan. Before I comment on that, I want to make sure that everyone understands why we are here.

The issue that will come before the Senate and before this committee is not whether China will be allowed to join the WTO. That will happen sometime this

year. The issue is not whether we approve of China's human rights abuses, or its missile proliferation policies, or its approach to Taiwan.

The issue that Congress will determine is whether we will grant permanent Normal Trade Relations status to China so that American farmers, workers, and businesses can take advantage of these new opportunities in the Chinese market.

If we don't grant China PNTR status, we will not be able to benefit from most of China's trade concessions. The result would be that our Japanese and European competitors get full access to China's markets, while Americans would be left outside.

As I speak to groups in Washington and around the country, I have been surprised by how few people understand this. Many continue to believe that the issue is whether the United States will allow China to join the WTO. The issue is about benefits we receive.

That said, let me talk about the situation across the Taiwan Strait. I am particularly concerned about a growing number of press reports indicating that this Senate may consider the Taiwan Security Enhancement Act, or try to attach it to the debate over PNTR. That would be a tremendous mistake.

On February 21, Beijing issued a very troubling White Paper that linked time and the possible use of force for reunification. This was a big step backwards. That action, combined with outgoing Taiwan President Lee Teng-hui's talk about state-tostate relations and Chen Shui-bian's victory last weekend in the Presidential election, adds to the uncertainty and danger.

I am pleased that the Clinton Administration immediately dispatched senior envoys to Beijing and Taipei to stress that the United States continues to favor a peaceful resolution across the Taiwan Strait, to caution both sides against taking any precipitous action, and to encourage renewal of the cross Strait dialogue. But I am quite concerned that, because of the White Paper and the Taiwan Presidential elections, there may be increased interest in the Taiwan Security Enhancement Act. I share the concern that proponents of this bill have with maintaining the security and stability of Taiwan. But, as a good friend and long-time supporter of Taiwan, I believe this is the wrong approach at the wrong time. I said that last summer when I testified before the Senate Foreign Relations Committee. And I am even more worried today about the likely results if this becomes law.

In the wake of Taiwan's recent elections, restraint and caution must remain the watchwords for the day, both on our part and for China and Taiwan. I am encouraged that, so far, Taipei and Beijing are addressing their concerns through constructive means.

But a change in leadership in Taiwan does not, and should not, constitute a change in US policy toward the region. The Taiwan Relations Act has guided us well through the better part of two decades. It has enjoyed the support of Republican and Democratic administrations, I see no need for an immediate change. And there is certainly no need to bring such legislation into the debate over a landmark trade deal for the United States.

Our message to Beijing and Taipei has always been that they must negotiate together to resolve their differences; settlement must be found by peaceful means; and there should be no unilateral steps taken to change the situation. What is needed now is dialogue across the Taiwan Strait-dialogue without Taiwan attempting to change the framework unilaterally, dialogue without the PRC's belligerent threats to taking military action, and dialogue without the United States passing provocative and unnecessary legislation.

The Taiwan Security Enhancement Act does not give the President or the Pentagon any authority or capability that they do not now have. The Commander in Chief of our Pacific Forces has said that he sees no need for this legislation. It would add to the level of tension and rhetoric across the Taiwan Strait and hamper our efforts to pass PNTR for China. Above all, I believe it would diminish the likelihood of a peaceful resolution between China and Taiwan.

We are a Pacific power. We fought three wars in Asia in the last 60 years. We are not, and cannot, walk away from this problem across the Strait. But this legislation is not the answer. And injecting it into the debate over permanent Normal Trade Relations with China would be inappropriate.

PREPARED STATEMENT OF HON. MAX BAUCUS

[APRIL 6, 2000]

Over the years, we have had serious compliance problems with trade agreements with China, Japan, the EU, and others. When the Congress and the Administration are resolutely committed to monitoring and enforcement, trade agreements bring re

sults. Inattention leads to inaction and to a failure to achieve market opening objectives. We have seen this happen over and over again. Trade agreements are simply not self-executing.

The American Chamber of Commerce in Japan just issued a comprehensive report evaluating all US-Japan trade agreements reached since 1980. Their conclusion was that 47 percent of those agreements were unsuccessful or only partially successful. What a shameful indictment!

I recently introduced a bill designed to ensure that we don't have a similar experience with China. My bill requires continuing monitoring of China's WTO commitments. It creates new procedures in the Congress and in the Executive Branch to make sure that China complies with those commitments.

I'm not trying to set conditions for PNTR. But, many of us in Congress are concerned with China's spotty record in the past. We need to be confident that China will meet its WTO commitments. And that just won't happen by itself.

My proposal has several elements. It requires that the President submit an annual plan to Congress for monitoring Chinese compliance and an annual report on the results of that monitoring. The GAO will supplement that information by surveying the top American firms doing business with China. They will get the companies' views about whether China is abiding by its commitments and detailed information about problems.

Under my proposal, the Finance Committee or Ways and Means can require that USTR initiate a Section 301 investigation of Chinese practices that we believe violate WTO commitments. If the violation is particularly egregious, the Committees could require the immediate initiation of dispute settlement at the WTO.

The Administration must secure agreement at the WTO for a comprehensive annual review of Chinese compliance. And, finally, we have to recognize that China needs help in building the institutions to carry out fully its WTO obligations. My bill requires the President to submit a plan on such institution-building.

Without these kinds of measures, I don't know how we can be confident that Chinese commitments will be met. I plan to pursue this vigorously during the coming PNTR debate.

PREPARED STATEMENT OF DOUG ELLIS

Mr. Chairman, members of the committee. My name is Doug Ellis. I am Chairman and CEO of Southern Mills in Atlanta, Georgia. I am here before you today as President of the American Textile Manufacturers Institute. ATMI is the national trade association for the U.S. textile industry, with member company facilities in approximately 30 states. The entire textile complex, including fiber and apparel manufacturers, employs approximately 1.3 million workers throughout all fifty

states.

We applaud the committee for your good work on the Caribbean Basin and SubSaharan Africa bills. ATMI strongly supports the Senate versions of these measures. We believe they will create a thriving economic partnership between those two regions and our industry, and we urge you to maintain your position in conference. Let me emphasize, ATMI is not opposed to fair and open trade-we support your versions of CBI and Africa, and we supported NAFTA. But we do have serious concerns about China.

By way of background, the U.S. textile industry has seen difficult times of late. Not long ago, in 1997, we had a record year in terms of shipments and fiber consumed. However, despite our use of state-of-the-art technology to become the most productive and high-tech textile industry in the world, we have been badly hurt by the Asian financial crisis. Devaluation of Asian currencies and reduced demand in the Far East led those nations to begin flooding world markets with textile products. As a result, the U.S. textile industry has seen a sharp downturn, leading to numerous plant layoffs and shutdowns.

With enactment of your versions of the CBI and Africa bills, we would have a chance to regain our competitive footing. However, this could all be negated by allowing China to enter the WTO under the terms agreed to last November and the granting of permanent normal trade relations status to that nation. In fact, not only would the U.S. textile industry be harmed, but the potential benefits to the nations of Africa and the Caribbean would be lost as well.

In theory, the world might be better off if China joined the WTO because, theoretically, that would mean that China would open its markets to our exports and play by WTO's rules of fair trade. Our experience has shown, however, that this is highly unlikely. Just look at China's behavior between 1995-2000. During that time, China: