much integrated with foreign policy, and that we Americans were going to take strong action to enhance our domestic economy.

Second, I think it is not only in our best interest, but it is in the other country's best interest for the United States to pursue a more aggressive policy in the Special 301.

Let's take Thailand, for example. In the past, the State Department probably weighed in an opposition to potential U.S. action, some agreements it may or may not have had with, say, Thailand. But two wrongs do not make a right, that is, Thailand's failure to enforce its anti-narcotics actions, where the United States worked with Thailand to help Thailand enforce its narcotics enforcement actions, should not be an excuse for the United States not to be more aggressive, say, in intellectual property infringements.

In addition, it would very much help Thailand, as an example, if the United States were to enforce intellectual property infringements because then Thailand's business climate would be more favorable to international investment. And that would be very helpful to Thailand generally to have a more stable and more dependable economy.

So I would very strongly encourage the administration to be considerably more aggressive than past administrations, not only because it is in the United States best interest, but it is in Thailand's best interest as well.

Second, Mr. Shapiro, isn't it true that the deadlines in Special 301, the listing of offenders under Special 301, which essentially gives Special 301 its teeth?

Isn't it a fact that there are deadlines, they are specifically naming the countries' offenses that make Special 301 effective? Isn't that the case?

Mr. SHAPIRO. Mr. Chairman, I think it is undeniable that the deadlines of Special 301 and the identification of named countries do have that effect.

It is important that if, as I indicated, countries are designated time and again and they are able to take up sort of permanent residence on these lists without much fear of retribution, that will undermine the credibility of the statute. And we are trying to work on that.

Senator BAUCUS. You anticipated my next question, that is, if it works for Special 301, doesn't that also logically compel a strong argument for Super 301?

Mr. SHAPIRO. Mr. Chairman, as you know, the President has, when he was a candidate and since, endorsed Super 301, supported the concept of it, and continues to be supportive of that concept.

And we have indicated in our desire to get fast track renewal considered as quickly as possible for the Uruguay Round that we hope that legislation, even that legislation that we are supportive of, might be considered at a later time.

But the administration's position on the substance of Super 301 remains.

Senator BAUCUS. Well, I appreciate the President's very strong statement during the campaign in support of Super 301. In fact, during the campaign, he even said he supported enhanced Super 301.

And frankly, I think that now, as usually in life, if you are going to do something, you might as well do it now rather than later. Let us not put it off.

Thank you.

Senator Rockefeller.

Senator ROCKEFELLER. Thank you, Mr. Chairman.

Mr. Shapiro, you said the well documented success of Special 301 and its priority watch list and watch list demonstrate that they can be used as a negotiating tool, which implies that you are well satisfied with the present law as is, just as a matter of enforcement. I think that is what you said.

I do not understand what negotiating advantage you see to threatening to take in a sense threatening to take no action as opposed to saying, unless you, the other country, do take action, we will take action ourselves in the form of some kind of retaliation. In other words, you seem comfortable in the enforcement. And you seem uncomfortable in going further than the present statute. Mr. SHAPIRO. Senator, we have not taken a position on your legislation yet. And I would certainly like to have a little time to study it and to talk with you and your staff about it. I know others at USTR would as well.

The general question of discretion for negotiators as opposed to more automoticity is something that reasonable people, I think, can differ on.

I think that, as I tried to indicate, the statute has had successes. I think when it has been used aggressively, it has brought about a significant number of changes.

Whether it could be used better remains to be seen. I think that we will try in this cycle to demonstrate that the present law can be used aggressively.

If we do not use it to the satisfaction of those who rely on intellectual property and to the Congress, then we ought to talk about whether more automoticity is needed.

Having been here a sum total of 2 months and having reviewed the accomplishments that the statute has had in the past few years, I'm not yet convinced on that point.

Senator ROCKEFELLER. I understand that, but for you to be there for 2 months is like others to be there for 10 years.

Mr. SHAPIRO. It certainly feels that way. [Laughter.]

Senator ROCKEFELLER. You indicate that you do not have hesitation in taking-you expect a lot of frustration with countries that, as you say, take up permanent residence on the watch list. Mr. SHAPIRO. Right.

Senator ROCKEFELLER. And then you point in the appendix to a number of successfully negotiated results.

Mr. SHAPIRO. Right.

Senator ROCKEFELLER. But you still express the frustration about countries that take up permanent residence on the watch list area, the priority watch list area. Now, I mean, I hate to say it, but this is kind of like a replay of the early days of the Bush administration.

I mean, after all, Super 301, which the chairman champions, is not there because the USTR absolutely needs to have it.

I mean, you could argue for Super 301, as, indeed, one could argue for 301 that you do not need to have it if you enforce the laws that are already there.

But it is there as a very clear psychological statement.

It is there to say something more than enforcement. I mean, this has been my objection to U.S. trade policy and Japan policy-that we just keep saying we will enforce, but we never really make it clear that, in fact, we have a course of action that we are going to follow. And you can count on that.

So why do you hesitate to put countries that are on the statutory list, priority list, make them statutory instead of just warning them so to speak?

Mr. SHAPIRO. Well, Senator, I think it

Senator ROCKEFELLER. I will agree that my reference to the previous administration is going to get an altogether very good, sort of a specific clear emotional answer from you. But I am drawn to that. I mean, I have heard conversations like that in this room before.

Mr. SHAPIRO. It was harsh, Senator. [Laughter.]

I think that it may be a little too early to judge whether this administration's trade policy, even in this area, can be likened to the previous administration.

We do have some difference of opinion on whether the statute has been used successfully. I do think it has had more successes than you apparently give it credit for.

I would say that part of enforcing the trade laws and furthering our objectives here is in having priorities and focusing on those priorities and not backing off on those that you have deemed to be priorities.

I would like to raise intellectual property protection in 60 or 70 countries simultaneously. It is difficult to do that realistically when you have to negotiate over those intellectual property regimes and keep pressure on many nations at the same time.

If you look at the list of accomplishments for the past 4 years, there have been a large number of nations that have upgraded protection they have given to intellectual property, not enough, but I think that it shows that the statute does work.

And the statute in the hands of an aggressive U.S. Trade Representative who is ready to take on some of the leading offenders in this area, I think will have some successes.

I share your frustration about questions like the Japanese patent system which the last administration did not make particular progress on, but I think that the statute can be workable and strong in this administration.

If we have not satisfied you or other Congressional critics by the time this cycle is over, we ought to talk about whether more automoticity is needed.

Senator ROCKEFELLER. Thank you.

Senator BAUCUS. Thank you, Senator.

Senator Hatch.

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S.

SENATOR FROM UTAH

Senator HATCH. Thank you, Senator Baucus, Mr. Chairman.

I welcome you, Mr. Shapiro, and the other distinguished panel of business representatives as well today.

We talk too often of the macro-policy effects of trade agreement violations, but it is the micro-economic effects of these policies and practices that can destroy jobs, investments, and whole industrial sectors.

These concerns are found throughout the legislative history of Section 1303 of the Omnibus Trade Act of 1988, the so-called Special 301 provision of the law.

I supported Special 301 then, as I do now. And as the senior Senator from Utah, which Business Week has called the nation's software valley, I have seen the information technology industry of my State suffer great losses.

This industry in Utah numbers over 800 companies, producing a payroll almost equal to that of our Utah defense sector, for which Utah has long been well known.

Despite my obvious commitment to rigorous overseas protection of intellectual property and assured access to foreign markets, the twin objectives of Special 301, I have been a cautious proponent of its use.

In my article in the latest issue of Computer Law Reporter, entitled "Protecting Intellectual Property Rights in China," I argue that Special 301 almost certainly induced China's adherence to the January 1992 Memorandum of Understanding with the United States.

China simply could not afford being returned to the Special 301 priority watch list, and the impending retaliation then being held over its head.

However, I also warned that the reckless use of Special 301 could ignite mutual retaliatory measures, which is, of course, a euphemism for trade wars.

I would like to invite the committee to take note of these arguments, Mr. Chairman, and submit the article along with the balance of my remarks for the record.

Senator BAUCUS. It will be included.

[The information referred to above along with the prepared statement of Senator Hatch appear in the appendix.]

Senator HATCH. Thank you.

And I was encouraged, Mr. Shapiro, by the action late last year of the U.S. Supreme Court, which reaffirmed the validity of the Taiwan Relations Act and the continued validity of the United States-Republic of China Treaty of Friendship, Commerce, and Navigation, the FCN Treaty of 1948.

Professor Lawrence Tribe of Harvard argued that the Second Circuit Federal Court of Appeals found the defendants, Healy Enterprises, in violation of the FCN Treaty for selling materials in the United States that had been pirated, that is, the copyrights had been infringed upon.

Professor Tribe said that since Taiwan is no longer a "nation,” the FCN Treaty was nullified.

The Supreme Court disagreed, referring to the effect of the TRA, the Taiwan Relations Act, which shows Taiwan to be treated as if it were a nation.

For obvious reasons, the Government of Taiwan was pleased with the ruling. Now, why hasn't this enthusiasm spilled over into more aggressive enforcement of its intellectual property laws?

Mr. SHAPIRO. Well, Senator, I think in focusing on Taiwan, you have raised a question of a country that has been right at the top in terms of piracy, counterfeiting, and other violations of U.S. intellectual property.

Our Customs service tells us that Taiwan is the leading nation in terms of products coming into this country that are counterfeited or pirated.

And there is no question that the performance of Taiwan in this regard casts a real cloud over its economic accomplishments otherwise.

We have made some progress in discussions with Taiwan in the implementation of the 1992 IPR Understanding, but we still have significant remaining concerns with Taiwan.

Those issues that concern us most include the need for the approval of a strong bilateral copyright agreement, and the passage of a cable TV law because frankly, they have cable stations now that basically just play pirated material from the United States. We ask from Taiwan a much stronger examination of their exports and a monitoring of trademarked and copyrighted products going out of the country.

I have been struck, and I know Ambassador Kantor has been struck, by the unanimity of view that Taiwan is a serious problem in the copyright and trademark area, less so in the patent area. But in copyrights and trademarks, they have been right at the top. Senator HATCH. The IPA estimates that Taiwan's piracy cost U.S. companies something like $669 million in 1992. PMA, the Pharmaceutical Manufacturers Association, estimates their losses last year at somewhere between $25 and $100 million.

I would say that any promises from Taiwan need to be compared with these numbers. And I think in Taiwan, they have to realize the imminence of retaliatory measures and even the loss of support from long-time friends on Capital Hill, including my own because this is simply unacceptable.

I have a lot of regard and friendship for people there, but this just isn't right. They should have to come into the order of nations here.

I appreciate the work that you are doing.

Senator BAUCUS. Thank you, Senator.

Senator HATCH. Thank you, Mr. Chairman.

Senator BAUCUS. Senator Daschle.

Senator DASCHLE. Mr. Chairman, other than to compliment Mr. Shapiro on his testimony today, I have no questions.

Senator BAUCUS. Thank you, Senator.

Mr. Shapiro, I have a question about the standard that the United States should use under Special 301. As you well know, the administration, under current law, has a lot of discretion.

And the question therefore arises obviously is to what degree the administration should properly enforce and bring retaliatory action when the requisite time expires.