Lawmakers question impact of free trade pacts on IT

The Office of the U.S. Trade Representative and three representatives of the U.S. IT industry Thursday called on Congress to pass free trade agreements with Singapore and Chile, but lawmakers asked whether current trade agreements were hurting the U.S. tech industry.

The deals also might handicap Congress' ability to change the much-criticized Digital Millennium Copyright Act (DMCA), one lawmaker warned.

Representatives of the trade office promoted the two proposed agreements as good for the U.S. IT industry and the economy as a whole during a hearing Thursday before the U.S. House Committee on Energy and Commerce's Subcommittee on Commerce, Trade and Consumer Protection.

Subcommittee chairman Cliff Stearns, a Republican from Florida, said the two proposals will "serve as blueprints" for future U.S. trade agreements, with the two agreements taking new approaches on e-commerce and intellectual property.

Both the Business Software Alliance and the Software and Information Industry Association urged Congress to approve the agreements quickly. Robert Holleyman, president and chief executive officer of the BSA, said the large software companies that make up the group's membership "unequivocally support" both trade agreements because they would impose tough penalties for software piracy in the two countries and would allow software and services to be delivered online without tariffs.

"In these agreements, new baselines have been set that should lead to significant market opportunities for the U.S. IT and software industries in the years ahead," Holleyman said.

Free trade agreements are designed to allow countries to trade goods and services with minimal tariffs and other barriers. Trade agreements, including the Chile and Singapore agreements, often define acceptable behavior for protecting intellectual property, defining human rights and protecting workers and the environment.

Michelle O'Neill, deputy assistant security for information technology industries at the U.S. Department of Commerce, called both agreements "ground-breaking" in their approaches to preventing tariffs on electronic commerce. Provisions in both agreements will "make the Singapore and Chile markets more predictable for U.S. (IT) and content exporters," she said.

But other lawmakers, both Democrats and Republicans, questioned provisions in both agreements.

Representative Hilda Solis, a Democrat from California, questioned whether the agreements' copyright protection provisions, similar to the U.S. DMCA, would handcuff Congress from making changes to that law. The DMCA, passed in 1998, has drawn criticism from some programmers and civil rights groups for provisions that outlaw any attempt to circumvent technologies designed to protect copyrighted materials. Opponents of the DMCA argue there are legitimate reasons for bypassing copyright controls, including scientific research and reviews of products, and three bills have been introduced in Congress this year to define consumer rights under digital copyright law.

"This is a controversial law that is currently being litigated," Solis said of the DMCA. "I'm concerned that the U.S. trade representative may have advocated for provisions that would tie our hands ... by preventing us from fixing the law." Solis wanted to know if changes to the DMCA would jeopardize these treaties.

Ralph Ives, assistant U.S. trade representative for Asia-Pacific, said his office believes the agreements would allow Congress flexibility in making some changes to the DMCA. "We'd have to see which specific provisions you had in mind," he told Solis.

Solis also raised concerns about the numbers of skilled worker immigration papers -- H1B visas -- allowed in both agreements, saying immigration policy should be set by Congress, not the trade office.

Representative C.L. Otter, a Republican from Idaho, also questioned whether the agreements would protect U.S. IT jobs. Otter used the example of South Korean RAM maker Hynix Semiconductor Inc., a competitor of Idaho company Micron Technology Inc., saying Hynix's RAM dumping had cost Micron 1,500 jobs even though the U.S. has a trade agreement with South Korea. In early April, the U.S. Department of Commerce preliminarily concluded that imports of some RAM chips from Hynix were unfairly subsidized by the South Korean government.

Otter criticized the pace of the Hynix investigation. "Americans need to know that the federal government is working for them, not against them," he said. "We intend to ensure that the (President George W. Bush) administration insists on full enforcement of our current trade agreements before we expand into new agreements."

Otter asked trade representatives whether they believed current trade agreements have been adequately enforced.

"Do you think we that we've enforced our trade agreements with South Korea sufficiently enough to have balance between the United States and South Korea on high tech?" he asked.

O'Neill, from the Department of Commerce, declined to answer the South Korea question directly. "We've made a concerned effort to review agreements (and) work closely with industry ... to address some of the concerns that have been raised," she said.

Other witnesses at the hearing raised environmental and worker rights concerns about the two proposed agreements, and three subcommittee members criticized a provision in the Singapore proposal that would allow electronics components produced in parts of Indonesia to be treated as Singapore imports to the U.S.

Representative Sherrod Brown, an Ohio Democrat, said part of the Singapore agreement would allow components produced in "sweat shops" in Indonesia to enjoy free trade protections. He countered the argument that this move would encourage economic reform in Indonesia and allow the government there to focus on antiterrorism measures.

"It's hard to see how running low-wage sweat shops would secure peace in the United States," Brown said.

Representative Edward Markey, a Massachusetts Democrat, also questioned the Singapore government's financial stake in Singapore Technologies Telemedia Pte. Ltd. and the company's attempt to buy a majority piece of U.S. telecommunications company Global Crossing Holdings Ltd.

"My concern is that we may end up in a situation where U.S. companies, which are not controlled by the government, end up having to compete with companies that are owned by the government of Singapore," he said. "That is not fair trade, because the foreign competitor is both the owner and the regulator of the same company."

Ives said the Singapore government has agreed to eventually end its ownership of Singapore Technologies Telemedia.

Despite the criticism, Ronald Monford, the president and chief executive officer of software company Mind Over Machines Inc., asked the lawmakers to approve the agreements.

"Both the Singapore and Chile free trade agreements provide tremendous opportunity for small businesses like mine to expand our markets internationally and create jobs in this country," said Monford, whose Baltimore company employs about 30 people. "(The IT) provisions will ensure that we have access to new markets by knocking down the artificial barriers that have locked us out."