If that is indee+d the case, I would appreciate the administration's views on whether additional legislation is necessary in this area, and whether the issue might be appropriately discussed as part of the GATT financial services negotiations.

[The prepared statement of Chairman LaFalce can be found in the appendix.]

Chairman LAFALCE. Ladies and gentlemen, the task force thanks you for your appearance here today and looks forward to your testimony.

Our first witness will be Mr. Bruce Wilson, the Assistant U.S. Trade Representative for Services, Office of the U.S. Trade Representative.

Mr. Wilson does not have a prepared testimony at this time because he has very recently returned from Geneva.

Mr. Wilson.

STATEMENT OF BRUCE WILSON, ASSISTANT U.S. TRADE REPRESENTATIVE FOR SERVICES, OFFICE OF THE U.S. TRADE REPRESENTATIVE

Mr. WILSON. Thank you, Mr. Chairman.

If it is acceptable to you, I will prepare something in writing and submit it to the task force subsequent to this hearing. Chairman LAFALCE. That is acceptable.

Mr. WILSON. Thank you.

I have just recently returned from Geneva, as you indicated, where I have been working not only on services negotiations, but also on negotiations affecting the other so-called new issues before us in the Uruguay Round of trade negotiations; that is, trade-related investment issues and trade-related intellectual property.

I thought that in my introductory remarks today it would be most appropriate to give the task force a bit of an overview of the Uruguay Round negotiations, where general services negotiations fit within the overall Uruguay Round negotiations, and then I would present a few initial comments about how from the USTR perspective financial services negotiations fit into the overall services negotiations.

With respect to the Uruguay Round as a whole, these negotiations were launched back in 1986 and this is the eighth round of international trade negotiations that we have held under the auspices of the GATT, the General Agreement on Tariffs and Trade located in Geneva which was formed in 1947.

This eighth round of international trade negotiations is by far the most comprehensive multilateral trade negotiations that has ever been undertaken.

In terms of the breadth and complexity of subject matter that this negotiation addresses, the Uruguay Round dwarfs the last round of such negotiations, the so-called Tokyo Round, which concluded in 1979; and I can speak from personal experience, having participated in those negotiations in the Office of the U.S. Trade Representative as well.

The Uruguay Round negotiations are being conducted in 15 different negotiating groups that cover both traditional and nontraditional subjects.

In trade parlance, traditional subjects would include such things as tariffs, nontariff measures, subsidies and counterveiling duties, anti-dumping duties, safeguards, that is, temporary import relief measures, tropical products, textiles, and there are several other categories of issues that fall into the so-called traditional area of trade issues.

The Uruguay Round also has embarked on nontraditional areas, that is, non-traditional to the GATT and these are the areas of trade-related investment measures, trade-related intellectual property, that is, things such as patents and copyrights and trademarks; and then, of course, services.

These are so-called new areas because as I indicated, this is the first time ever we have undertaken a negotiation on subjects of this type in the context of the GATT and in the context of the world trading system as we know it.

The United States priorities in the Uruguay Round in the traditional areas are in agriculture, market access, industrial subsidies and dispute settlement most of all, and in all three of the so-called new issue areas, including services.

These negotiations are now scheduled to conclude in December of this year with a concluding ministerial in Brussels scheduled for that time.

In order to meet this deadline, negotiations have accelerated in all 15 of these negotiating groups since the beginning of this year, and especially over the past several months as all 15 negotiating groups have been preparing the outlines or profiles of final agreements to present next week to the Trade Negotiating Committee, the body which oversees the negotiation as a whole.

The Trade Negotiations Committee will review these profiles and then provide any necessary political guidance to the negotiating groups for the final negotiations in the fall before the Brussels conference in December.

As you know, Mr. Chairman, the Office of the U.S. Trade Representative and Ambassador Carla Hills has overall responsibility within the Executive Branch for coordinating the development and execution of U.S. negotiating positions in the Uruguay Round.

Because of the natures of the subject matter particularly in the new areas, we at the Trade Representative Office rely heavily on the resources and technical expertise of other agencies. For example, in intellectual property, we have to rely on the Patent and Trademark Office and the Copyright Office.

In the field of telecommunications, we have to rely on the Federal Communications Commission, and, of course, in financial services, we have to rely on the expertise and resources of the Treasury Department and the Commerce Department.

We also rely heavily on our private sector Advisory Committees at the Trade Representative Office and we have two advisory committees which advise us on so-called services issues, one of which, the Services Policy Advisory Committee, is chaired by Mr. John Reed, who is the CEO of Citicorp.

With respect to where services negotiations, one of these 15 negotiating groups, fits into the overall negotiations, let me just say a few words.

First of all, as I indicated, services negotiations in the Uruguay Round is one of the top priorities for the United States in the Round.

It has been estimated that U.S. companies-

Chairman LAFALCE. This is the first time, is it not, pursuant to the GATT, that we have made an effort to negotiate with respect to services?

Mr. WILSON. It is. It is the first time.

We have estimates that U.S. companies sell between $150 billion and $200 billion worth of services each year to foreign customers and it is our assessment that if we could bring down foreign barriers to U.S. services trade, because of the competitiveness of U.S. service sectors, this figure could rise much, much higher.

Of course, services are very important in our overall economic profile in the United States because approximately 70 percent of our GNP comes from services.

All services activities, that is.

Now, for the purposes of the Uruguay Round negotiations, the major services activities that receive the most attention in the negotiations in addition to the financial services are telecommunications services, tourism, transportation, professional servicesthings like lawyers, accountants, advertising-architectural, engineering and construction services.

Of course, there are a myriad of other services, but the particular sectors I just mentioned receive particular emphasis because these are the service sectors in which we have determined there is currently and potentially, the greatest amount of international commerce, whether through cross-border sales or through establishment of U.S. firms in foreign markets directly.

Despite the diversity of service sectors that we are dealing with, however, we believe that there are certain cross-cutting trade principles that are potentially applicable to all of these services, including such notions as the right to market access, or the right to national treatment after you are in a market and are operating there. For that reason, because we do have these cross-cutting principles we believe that we can achieve the greatest level of liberalization for all U.S. service industries by attempting to negotiate a comprehensive and rather broad set of international rules applicable to the broadest possible range of service activities.

These rules would govern what governments can and cannot do vis-a-vis foreign services and foreign service providers.

Now, in this regard, the United States tabled a comprehensive proposal for a general services agreement back in October 1989 and I would be happy to make that available.

That general proposal that we tabled would be made available to the subcommittee as part of my written comments that I will submit for the record.

Chairman LAFALCE. What do you mean the United States tabled?

Mr. WILSON. That means we formally put before the negotiating group on services a proposal that laid out specifically what we believed should be the international obligations to which government would adhere and that they would apply when they regulate service activities within their borders.

This was

Chairman LAFALCE. In parliamentary procedure, to table usually

means to

Mr. WILSON. Oh-

Chairman LAFALCE. Deep six it.

Mr. WILSON. In international negotiating parlance to table means to bring forward a proposal.

Services has its own terminology as do international negotiations.

So, sorry for any confusion there.

Chairman LAFALCE. No problem.

Mr. WILSON. We tabled our proposal in October 1989 and that really got the negotiations moving with respect to this broad set of rules.

We think that the negotiation on the broad set of rules is progressing very well at this stage and we are generally optimistic about a positive result with respect to the general rules on services trade by the end of this year.

I think that the rules ultimately negotiated will draw heavily on the U.S. proposal that was put before the negotiating group last October.

However, in addition to this broad set of rules that we are seeking in the Uruguay Round, we have――

Chairman LAFALCE. On the broad set of rules, have there been any other counter proposals?

Mr. WILSON. There have been a number of proposals, including one from the European Community and one from the developing countries. The overall negotiations in services in many respects is a negotiation both as between developed countries and between developed and developing countries.

Most other developed countries are very interested in

Chairman LAFALCE. Are you going to give us a peek at the thrust of the United States proposals and a peek at the thrust of the other counterproposals so that we might understand what we are suggesting, what they are suggesting, and what our differences are?

Mr. WILSON. I would be happy to do that if you would like to talk about that in the context of the general rules, Mr. Barreda is going to get into that in the context of the negotiations on the financial services.

Chairman LAFALCE. Why don't you paint with a very broad brush with respect to overall services and we will let Mr. Barreda do it with much greater specificity with respect to financial services.

Mr. WILSON. OK.

Basically, what we are seeking in the overall rules on services are rules, most importantly on market access.

That is, countries would be required to allow foreign service providers access to their markets either through establishing enterprises or other commercial activities within their borders or by allowing for cross-border sales of services, or by allowing personnel to temporarily enter their borders to provide services.

Those are the so-called market access provisions. Then we have rules on national treatment in which countries would generally

provide treatment to foreign service providers that is no less favorable than the treatment that they provide to their own service providers.

These are the two basic rules that we are seeking in general for service activities and when Mr. Barreda talks about financial services, the same concepts apply there with respect to financial services.

We would also have other principles that would be part of the agreement such as the way monopolies would be required to behave in terms of providing services and in competing in nonmonopolistic sectors when they do provide services, for example, in the telecommunications realm.

There are provisions governing the transfer of payments of services across borders.

There are provisions with respect to most favored nation, that is, if you treat a service provider from country X one way you have to treat the service provider from country Y the same way-this is a classic trade principle of most favored nations.

Those are the primary types of rules we are seeking to apply across the board.

As we have gotten in and attempted to develop these general rules, we have determined that, at least for two key sectors from the U.S. perspective, it would be advantageous to try to tailor more specific additional provisions because of the strategic economic nature and unique feature of these two sectors these are telecommunication services and financial services.

So in addition to the general rules that we are attempting to elaborate on, at least from the U.S. perspective, we are trying to get more specific provisions on telecommunications and financial services.

Now, with respect to financial services, we look to our Treasury to head up our negotiating efforts in this sector because of their technical expertise and their institutional responsibilities in this

area.

However, we have coordinated very closely with Treasury on both the development and execution of our negotiating position and, as I indicated, generally speaking many of the key provisions that we are seeking to elaborate in financial services track the general provisions that we are seeking to elaborate for all services sectors.

My own assessment on financial services is that as a result of the intensive discussions that have taken place on financial services over the past several months and the circulation of some U.S. proposals in this area, these negotiations have really begun to take off

now.

We have really begun to generate substantial momentum in the negotiations on financial services that, I think, places us in a good position to carry through and elaborate specific provisions of the financial services in addition to the general rules for services trade by December.

Although the round as a whole is very complex, there are many controversial features to the round.

You probably read about the attention given at the summit to agriculture and agricultural trade are a key element of the Uru